Texas Regional Bank sues San Benito over Resaca Village development

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SAN BENITO — As a legal battle with a developer enters its second year, a dispute is widening between the city’s Economic Development Corporation and Texas Regional Bank.

After the EDC filed a lawsuit against the bank last month, Texas Regional Bank is now claiming the agency broke agreements which stood as a basis of its loans to VARCO, the developer of the Resaca Village plaza, San Benito’s first resaca-side commercial development.

In a lawsuit filed in Cameron County’s 197th state District Court, the bank’s demanding $1 million in damages stemming from what it describes as the EDC’s failure to comply with agreements it entered with VARCO, a Brownsville-based real estate company.

In 2019 and 2023, Texas Regional Bank gave VARCO loans based in part on the EDC’s agreements extending Resaca Village’s construction deadlines.

The bank “relied on such promises in making and securing the 2019 loan and the 2023 loan,” the lawsuit states.

In June 2019, the bank gave VARCO a $2.5 million loan to fund Resaca Village’s construction.

In its lawsuit, the bank states the agreement “provides that VARCO may pledge its interests in the leasehold property and grant deed of trust liens and/or security interests in to a lender which provides it financing or refinancing for the development, operation or management of the property.”

After the COVID-19 pandemic’s outbreak in March 2020 sparked construction delays resulting from labor and material shortages, the EDC and VARCO entered into agreements extending Resaca Village’s completion deadlines by 12 months.

In May 2023, the bank granted VARCO a second $3.4 million lien, securing it with a deed of trust against VARCO’s leasehold interest in the property, the bank states in the lawsuit.

The EDC “consented to the encumbrance of VARCO’s interest under the lease pursuant to the second lien deed of trust,” the lawsuit claims.

Then in February, the EDC terminated VARCO’s lease, the lawsuit states.

“SBEDC’s actions in executing and filing the notice of termination failed to comply with the terms of the 2019 consent and 2023 consent and are wholly improper,” the lawsuit claims. “The notice of termination is void and/or voidable and of no force or effect. Even if the lease terminated, SBEDC must issue a new lease on the same terms.”

Late last month, the EDC filed a lawsuit against Texas Regional Bank, arguing the bank placed a “fraudulent” $3.4 million lien on the 9.8-acre tract of city-owned land on which sits the Resaca Village development.

In the lawsuit filed in Hidalgo County, the EDC claimed the bank did not receive the agency’s approval when it placed the lien on city-owned land.

The EDC argues the bank placed the lien on the property “without the lawful consent of the SBEDC’s board of directors and the elected governing body, resulting in a breach of its fiduciary duties” and “against the interests, financial and otherwise, of SBEDC.”

On Tuesday, Michael Pruneda, the EDC’s attorney, said Texas Regional Bank’s lawsuit “cannot make the issue of the fraudulent lien go away.”

“Before the San Benito EDC authorized filing a lawsuit, a request was made that the unauthorized $3.4 million second lien be ‘immediately released,’” he said. “The bank decided to ignore the San Benito EDC, resulting in the filing of a lawsuit. The bank has chosen sides and refused to acknowledge that authorized city leaders never approved their lien. We will let a jury decide.”

Last week in Hidalgo County’s 464th state District Court, Texas Regional Bank filed a request to move the case to Cameron County, arguing the county serves as the primary place of business for both the bank and the EDC.

“The court must reject this blatant forum-shopping attempt and transfer this case to Cameron County, where mandatory venue lies,” the bank argued.

“Cameron County is the county in which all of the events or omissions giving rise to SBEDC’s claims occurred,” the bank states. “Dissatisfied with its losses and lack of progress in the Cameron County case, SBEDC now seeks another bite at the apple by filing this action against TRB in Hidalgo County.”

In response to Texas Regional Bank’s filing, Pruneda called the request “classic venue shopping.”

“Texas Regional Bank suspiciously wants to move the lawsuit from Hidalgo to Cameron County,” he said. “They must feel they have an advantage in Cameron. Their depository contract with San Benito stipulates that any disputes would be considered in Hidalgo County.”

In its request for a change of venue, the bank argues it doesn’t have a depository contract with the EDC.

“The agreement that SBEDC relies upon is a depository contract between the city of San Benito and TRB,” the bank states in its request. “SBEDC is not a party to that agreement. As a result, SBEDC’s sole claim to venue in Hidalgo County fails on its face.”

The bank’s lawsuit widens the city’s legal battle surrounding Resaca Village.

For more than a year, the city and VARCO have been disputing the resaca-side development’s ownership.

In April 2024, VARCO filed a lawsuit against the city, claiming the EDC breached the parties’ contracts surrounding the development of Resaca Village, failing to “honor its obligations” under an agreement extending its construction timeline while claiming its amendments “void” because city commissioners had not approved them.

In response, the city filed a counter suit, claiming VARCO breached its contract when the company failed to comply with the city’s agreements granting extensions on the project’s completion, originally set for 2022.