Bank claims company blocking $1.4 M in settlement proceeds, attorneys' fees

A bank claims a company's actions are stalling its share of a distribution of a $1.49 million settlement.

Compass Bank claims it and defendants Quality Contract Services and the Reaud, Morgan and Quinn law firm reached an agreement as to how proceeds from a $1.49 million settlement should be distributed from a lawsuit pending in Harris County District Court.

However, the actions of defendant Louisiana Crane Co. are preventing the completion and funding of the settlement, according to the complaint filed May 17 in Jefferson County District Court.

"Louisiana Crane wrongly contends that its rights in such settlement proceeds are superior to those of Compass and RMQ, even though the accounts made the basis of the lawsuit were either assigned or pledged to Compass well before any alleged right of Louisiana Crane to such funds arose," the suit states.

The debacle began after Quality executed a commercial real estate lien revolving credit note on Dec. 30, 2004, payable to Compass for $1.5 million, the complaint says.

The note was later modified on June 19, 2006, and made payable to Compass for the unpaid balance of $1,492,496.27 and again modified on June 19, 2008, for the unpaid principal balance of $1,231,308.76, Compass claims.

Quality also executed a promissory note on Oct. 18, 2005, payable to Compass for $1.3 million; one on June 16, 2006 for $1,116,000; and another on June 18, 2006, for $5 million, according to the complaint.

Quality and Compass are parties to a merchant services agreement dated Dec. 18, 2007, in which Quality assigned all of its accounts receivable to Compass, the suit states. Pursuant to its various notes, Quality also executed various security agreements to secure its debt. Under the security agreements, Compass obtained an interest in all of Quality's personal property, the complaint says.

Since then, the notes with Compass have matured, but Quality has failed to pay the outstanding principal and interest owed on them, Compass claims.

"Compass foreclosed its lien on virtually all of the personal property of Quality pursuant to a public sale conducted on March 2, 2010 at which sale Compass was the successful bidder," the suit states. "As a result, Compass is the owner of all accounts receivables generated by Quality."

Before its default on the notes, Quality agreed to construct certain additions to Westlake Styrene's plant located in Lake Charles, La. Quality performed the work, but Westlake still owes it more than $6 million for its job, the complaint says.

However, Westlake disputes the allegation that it owes Quality additional money, and instead contends that Quality owes it $900,000 for work that was removed from Quality's scope of work and assigned to subcontractors, according to the complaint.

The disagreement between Quality and Westlake erupted into the filing of multiple lawsuits -- Westlake filed suit in Harris County against Quality on May 28, 2008, and Quality filed a lawsuit against Westlake in Louisiana on June 27, 2008, Compass claims.

Louisiana Crane has since seized the proceeds of Quality's claims against Westlake by virtue of a writ of fieri facias, according to the complaint.

After the Texas lawsuit Westlake filed against Quality was meditated, Quality, Compass and RMQ negotiated a settlement with Westlake, which provides that Westlake is supposed to interplead $1.49 million into an action to be filed in Harris County, the suit states.

"However, Louisiana Crane wrongfully continues to assert that its interests in the Settlement Funds are superior to that of Compass and will not consent to the interpleading of the Settlement Funds in the Interpleader Lawsuit," the complaint says. "As a result, Westlake will not fund the settlement, and the settlement is in serious jeopardy unless the priority dispute between Compass/RMQ and Louisiana Crane is resolved immediately."

In its complaint, Compass is seeking a declaratory judgment that it is entitled to receive $750,000 of the settlement funds, a declaratory judgment that $750,000 of the settlement funds are superior to the rights of Louisiana Crane, a declaratory judgment that RMQ is entitled to $740,000 of the settlement funds, a declaratory judgment that the ownership rights of RMQ in $740,000 of the funds are derived from Compass and are superior to Louisiana Crane and a declaratory judgment that Louisiana Crane is not entitled to recover any of the settlement funds.

In addition, Compass is seeking actual and exemplary damages, plus pre- and post-judgment interest, court costs, attorneys' fees and other relief the court deems just.

Lisa A. Powell and Bruce J. Ruzinsky of Jackson Walker in Houston will be representing Compass.

The case has been assigned to Judge Milton Shuffield, 136th District Court.

Jefferson County District Court case number: D186-880.