Texas bank sued over ‘fraudulent’ debt collection

Michael Pruneda, center, an attorney for the San Benito Economic Development Corporation, announces a new lawsuit the EDC filed against VARCO Real Estate during a news conference on Thursday, March 27, 2025. Also shown are San Benito City Manager Fred Sandoval, left, and San Benito Mayor Ricardo “Rick” Guerra, right.
Michael Pruneda, center, an attorney for the San Benito Economic Development Corporation, announces a new lawsuit the EDC filed against VARCO Real Estate during a news conference on Thursday, March 27, 2025. Also shown are San Benito City Manager Fred Sandoval, left, and San Benito Mayor Ricardo “Rick” Guerra, right.
Dina Arevalo

“The debt is allegedly from the construction activities that has (sic) taken place over the course of seven years, since 2018, by the VARCO Real Estate Group,” EDC attorney Michael Pruneda said before a small gaggle of media who had gathered at the EDC’s headquarters.
But the EDC is balking at the lien, which has now spawned yet more litigation related to the proposed retail plaza, which has gone from a place where people could one day gather to a pipe dream.

Michael Pruneda, center, an attorney for the San Benito Economic Development Corporation, announces a new lawsuit the EDC filed against VARCO Real Estate during a news conference on Thursday, March 27, 2025. Also shown are San Benito City Manager Fred Sandoval, left, and San Benito Mayor Ricardo “Rick” Guerra, right.
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“A few days ago the city of San Benito — the EDC — filed a lawsuit against Texas Regional Bank for that second lien,” Pruneda said.

“There was (sic) numerous fiduciary breaches made by the bank. They had numerous fiduciary responsibilities to both the city of San Benito and the San Benito EDC as our depository bank,” Pruneda added.
Pruneda was referring to how Texas Regional Bank has not only been integral to the development project’s funding but had for several years also served as the economic development corporation’s bank of record for its other financial needs.
According to the EDC’s lawsuit, that relationship began in September 2021 and officially ended in October 2023 — but not before the bank placed a secondary lien on the Resaca Village property, unbeknownst to the EDC or city officials.
The bank — which maintains a branch on the most prominent corner of the Resaca Village property — already had a “first lien” on the property for $2.5 million, Pruneda said.

In June 2023 — about four months before the San Benito EDC stopped using Texas Regional as its depository — the bank recorded a second lien for $3.4 million.
But it wasn’t until about two weeks ago that the bank’s attorneys notified the EDC of the second lien — something city officials say should have been brought to their attention for a formal discussion and vote.

WHAT IS RESACA VILLAGE?
Years ago, San Benito city leaders dreamed of creating a thriving retail and cultural space near its most picturesque landmark — the meandering oxbow lake that wends its way through the heart of the town and lends the city its namesake as “The Resaca City.”

To that end, in 2018, San Benito partnered with VARCO Real Estate Development, a Brownsville-based commercial real estate development firm, to construct the Resaca Village project along U.S. Business Highway 77 on a nearly 10-acre property owned by the EDC.
The project was slated to be built over the course of four phases. It was further expected to create hundreds of jobs and generate tens of millions in revenue.
Project planners also floated the idea of constructing a boardwalk leading to the banks of the resaca.
In exchange for reaching certain project milestones outlined as part of a performance agreement, San Benito would allow VARCO to lease the property for 15 years before being able to purchase it outright in 2033 for just $1, according to documents obtained by MySA.

The expansive retail plaza project had been the property’s “plan B” — one city officials turned to after plans to build a cultural museum and other amenities using $1.3 million in funding from the U.S. Economic Development Administration fell through.
But numerous delays stalled VARCO’s progress. To date, the project remains incomplete.
San Benito has since terminated the performance service agreement with VARCO and is seeking back rent from the company.
ACRIMONY LEADS TO LITIGATION
The end of the performance agreement marked just the beginning of heightened tensions — and numerous lawsuits — between the city and VARCO.
San Benito tried to evict the company from the still-under construction property.

That led to a lawsuit in which San Benito began demanding back rent from the company, which it alleges breached its contractual obligations.
At another point, the city’s public works department cut off VARCO’s access to water after alleging the company had been stealing it. The company maintains it tapped into the city’s water supply by mistake on just one occasion.
VARCO sued the city last year after the EDC denied one in a string of deadline extensions on the project. The city filed a counterclaim.
In February, the San Benito News reported that VARCO had filed a criminal complaint against San Benito City Manager Fred Sandoval, alleging he had been unlawfully using his position of power to commit “official oppression.”

The two sides are also embroiled in litigation over the valuation of the property and other disputes.
And earlier this year, a Cameron County judge handed down an injunction preventing San Benito from trying to collect rent from VARCO after the city had notified the company that it would begin considering rent due as of Jan. 1, 2025.
The EDC has appealed the injunction.
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Complicating matters further, public business records show that the principal agent of VARCO is Carlos Varela, who also happens to be a member of the Texas Regional Bank board of directors, according to the board’s website.