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Basic Capital Management, Inc. v. Dynex Commercial, Inc.

Supreme Court of Texas
348 S.W.3d 894 (Tex. 2011)


Basic Capital Management, Inc. (Basic) (plaintiff) manages and owns stock in real estate investment trusts. Two such trusts are American Realty Trust, Inc. (ART) and Transcontinental Realty Investors, Inc. (TCI). ART and TCI hold investment property through single-asset, bankruptcy-remote entities (SABREs). TCI entered a loan agreement (the Agreement) with Dynex Commercial, Inc. (Dynex) (defendant), a lender, wherein Dynex agreed to loan three TCI-owned SABREs $37 million for real estate investments in New Orleans. Dynex agreed to lend money only to SABREs because recovery is more easily obtained from SABREs in case of a default. Pursuant to the Agreement, Basic pledged, in a separate agreement with Dynex, to propose additional TCI- and ART-owned SABREs to borrow a total of $160 million dollars from Dynex in a two-year period (the Commitment). Dynex loaned the three TCI-owned SABREs funds for the New Orleans investments. However, once market interest rates rose, Dynex refused to provide further funding for the New Orleans investments and refused to make any additional loans pursuant to the Commitment. The defendants sued Dynex for breach of the Commitment.

Rule of Law


Holding and Reasoning (Hecht, J.)

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