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Date: 09-17-2022
Case Style:
Sunil Kumar Mehta and Mehta Investments, Ltd. v. Mohammed Ahmed
Case Number: 01-20-00568-CV
Judge: Julie Countiss
Court:
Court of Appeals For The First District of Texas
On appeal from the 295th District Court
Harris County, Texas
Plaintiff's Attorney:
Houston, TX - Best Fraud Lawyer Directory
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Defendant's Attorney: Peter Scaff
Mary Frazier
Philip Morgan
Marc James Ayers
Description:
Houston, Texas – Fraud lawyer represented Appellants with suing for for breach of fiduciary duty, unjust enrichment, and fraud.
In his fourth amended petition, Ahmed alleged that in June 2017, the West
Oaks Mall, a 60-acre property in a prime west Houston location, was listed for sale.
Mehta, a Houston-area businessman with experience in real estate development, was
interested in acquiring the West Oaks Mall. On June 22, 2017, Mehta submitted a
letter of intent to the seller of the West Oaks Mall, expressing an interest in
purchasing the property. In response, the seller’s broker at Allied Advisors
suggested that Mehta submit a “refined offer,” with a target price of $10,000,000
and a thirty-day closing period. (Internal quotations omitted.) Mehta “then set out
to secure financing for the [purchase].” On June 28, 2017, Mehta submitted a revised
offer to the West Oaks Mall seller of $10,000,000, which “contemplate[d]
considerable financing from a bank” and a sixty-day closing period.1
At some point,
Mehta then spoke with the seller’s broker about the revised offer, and he was
informed that “if he wanted to be the successful bidder, he should strive to submit a
cash offer with a much shorter closing period.”
1 Ahmed attached a copy of Mehta’s communication with the seller’s broker and a
copy of the revised offer to his fourth amended petition.
3
The response from the seller’s broker was problematic for Mehta because “he
did not have anywhere close to $10,000,000 in immediately-available cash.” Mehta
spoke with a banker, Morag McInnes, at Community Bank of Texas, N.A.
(“Community Bank”), with whom Mehta had a banking history. Because Mehta
needed to “quickly borrow $10,000,000,” McInnes contacted Ahmed, a
long-standing customer of Community Bank, to see if he had any interest in lending
Mehta the money. Although Ahmed had an interest in acquiring the West Oaks
Mall, he had “no interest in being a lender”; thus, he told McInnes “that he would
only be interested in a deal if it involved some form of equity or ownership position
in” the West Oaks Mall. McInnes relayed this information to Mehta.
According to Ahmed, Mehta “quickly called [him] to discuss the deal.” On
the telephone call, they agreed to “jointly acquire” the West Oaks Mall. Later, when
Mehta and Ahmed each had separate conversations with McInnes about their
telephone call, both told her that “there would be some form of equity
split/partnership.”
“Although Mehta told Ahmed that he wanted to jointly acquire” the West
Oaks Mall and “be partners,” Mehta continued to search for “other sources of
funding so that he could acquire” the West Oaks Mall “for himself.” On June 29,
2017, “after receiving the verbal commitment from Ahmed,” Mehta told the seller’s
broker that he had “just spoken with [his] son, and together [they] ha[d] enough cash
4
access to bid for cash.” (First alteration in original.) (Internal quotations omitted.)
Mehta then submitted “a cash offer” for $10,000,000 with a twenty-day closing
period. Neither Mehta’s communication with the seller’s broker nor his offer
mentioned Ahmed.
On June 30, 2017, Mehta met with Ahmed “to further discuss the deal and
tour” the West Oaks Mall. Before the meeting, Mehta had told Ahmed that the seller
had “accepted their offer.” During the meeting, Ahmed made clear that “he had no
interest in acting as a lender, but instead was entering into a joint venture to acquire”
the West Oaks Mall with Mehta. Mehta agreed. As they toured the West Oaks Mall,
Mehta and Ahmed “discussed how Ahmed’s extensive experience in the fast-food
industry would be beneficial to the joint venture.” They also “talked about
attempting to acquire the Macy’s [department store] that was not part of th[e]” West
Oaks Mall sale. During their meeting, Mehta and Ahmed agreed to “a 65/35 split”
in the West Oaks Mall “with Mehta having the majority stake.” And they agreed
that “if they later acquired the Macy’s [department store] the split would be 65/35
with Ahmed having the majority interest.” Mehta did not tell Ahmed that he had
submitted the offer for the West Oaks Mall stating that he was receiving funding
from his son or that Mehta’s offer “did not mention Ahmed in any way.”
5
On June 30, 2017, Mehta’s “cash offer was preliminarily accepted by the
seller” of the West Oaks Mall. To proceed, the seller requested proof that Mehta
had “available cash.”
On July 1, 2017, Mehta and Ahmed met again to discuss “the joint acquisition
and development” of the West Oaks Mall and the Macy’s department store.
According to Ahmed, Mehta “never indicated that he had no intention of acquiring
the” West Oaks Mall with Ahmed, that “he did not intend to be partners with
Ahmed,” or that “Mehta was still looking for other sources of funding.” Instead,
Mehta “affirmatively represented his intent to enter into a joint venture with Ahmed
and deliberately let Ahmed believe that they were going to jointly acquire the” West
Oaks Mall and that “their offer had been accepted.”
On July 5, 2017, Mehta went to Community Bank to speak with McInnes and
requested that she “give him a letter stating that [he] personally had $10,000,000 in
cash available at Community Bank.” McInnes refused to do so “because that would
be untrue.” Because McInnes believed that Mehta and Ahmed “were entering into
a partnership and would be jointly acquiring” the West Oaks Mall, she “suggested
that she draft [a] proof-of-funds letter on behalf of the ‘Mehta Group,’ to reflect that
the available cash was not solely Mehta’s but rather showed that the source of funds
was Mehta and Ahmed, collectively.” Mehta agreed, and did not tell McInnes “that
he did not intend to jointly acquire” the West Oaks Mall with Ahmed, that he had
6
told the seller’s broker “that [his] cash offer would involve [him] and his son,” that
he intended to conceal from the seller’s broker “any reliance upon Ahmed’s assets
and his involvement,” or that “he was still pursuing . . . other financing not involving
Ahmed.” (Internal quotations omitted.)
Mehta then sent the Community Bank proof-of-funds letter, drafted by
McInnes, to the seller’s broker,” stating: “Please find attached the Bank letter for the
cash available in one of our banks.”2
(Internal quotations omitted.) In doing so,
Mehta omitted the fact that the “proof-of-funds letter [was] based almost entirely on
Ahmed’s available cash.” After submitting the letter, Mehta “secretly proceeded to
seek alternative financing so that he could usurp the opportunity for himself.”
Ahmed attempted to contact Mehta about “the status of the deal,” but Mehta did not
respond.
On July 17, 2017, Mehta told Ahmed that he no longer wanted to be partners
or jointly acquire the West Oaks Mall with Ahmed. After Mehta told Ahmed that
he would not proceed to acquire the West Oaks Mall with him, Ahmed attempted to
acquire the Macy’s department store independent of Mehta, but the seller of the
Macy’s department store chose to sell to Mehta because he already owned the West
Oaks Mall. Thus, based on Mehta’s actions, Ahmed was deprived of the opportunity
2 Ahmed attached a copy of Mehta’s communication to the seller’s broker and a copy
of the Community Bank proof-of-funds letter from McInnes to his fourth amended
petition.
7
of benefits of ownership of the West Oaks Mall and Mehta improperly benefitted by
acquiring the West Oaks Mall and the Macy’s department store.
Ahmed brought claims against Mehta for breach of fiduciary duty, unjust
enrichment, and fraud. As to his breach-of-fiduciary-duty claim, Ahmed alleged that
a fiduciary relationship was created when he and Mehta “agreed to form a
partnership for the purpose of buying and developing” the West Oaks Mall. And
Mehta owed Ahmed the duties of candor, to refrain from self-dealing, fair and honest
dealing, and full disclosure. According to Ahmed, Mehta breached those duties, and
Ahmed was injured.
As to his claim for unjust enrichment, Ahmed alleged that Mehta “wrongfully
obtained the benefit of acquiring” the West Oaks Mall and the Macy’s department
store “through fraud and taking an undue advantage” and had been “unjustly
enriched.” As to his fraud claim, Ahmed alleged that Mehta “committed actual and
constructive fraud which proximately caused injury to Ahmed.” Mehta “made
numerous misstatements, misrepresentations[,] and material omissions” on which
Ahmed reasonably and justifiably relied.
Mehta answered, generally denying the allegations in Ahmed’s petition and
asserting certain affirmative defenses.
At trial, the West Oaks Mall seller’s broker, Mary Carolan, from Allied
Advisors, testified that she had prepared a confidential offering memorandum about
8
the West Oaks Mall and its tenants and solicited bids from select potential buyers,
including Mehta, in early June 2017. Mehta made an initial offer to buy the West
Oaks Mall, which Carolan testified fell “short of market guidance” because it was
too low and the proposed closing period was too long. Still, the West Oaks Mall
seller selected Mehta to continue the bidding process and submit a “refined offer”
more in line with the seller’s price and timing expectations—$10,000,000 and a
thirty-day closing period. By letter dated June 26, 2017, Carolan informed Mehta
that the West Oaks Mall seller wanted to “better understand the source of funding
for [Mehta’s] proposed purchase” and requested, among other things: (1) “financials
for the acquiring entity in the form of personal bank statements or audited financial
statements” and (2) “three professional references,” preferably for purchases similar
in size or type.3
Carolan explained that the purpose of the refinement letter was to
get a better-quality offer from Mehta and others also selected to continue in the
bidding process. The deadline for Mehta to submit a refined offer was 12:00 p.m.
on June 28, 2017.
At 12:33 p.m. on June 28, 2017, Mehta emailed Carolan a refined offer for
the West Oaks Mall. Carolan testified that Mehta proposed to purchase the West
Oaks Mall with $3,000,000 in cash and a $7,000,000 loan, and he provided a term
3 The trial court admitted into evidence a copy of the June 26, 2017 refinement letter
from the seller’s broker.
9
sheet for the financed portion from Community Bank. Mehta also claimed that a
second lender, Prosperity Bank, was “very interested to underwrite [his] loan.” He
told Carolan that the purchaser would be himself, “Mehta commercial,” or “an entity
owned by Mehta[].” He also provided professional references and a personal
financial statement showing about $1,200,000 in available cash. The financial
statement Mehta provided to Carolan was not audited, and he did not provide bank
statements. Because his second offer relied on bank financing and banks require
appraisals, surveys, and other documentation that take time to prepare, Mehta again
proposed a sixty-day closing period. Carolan told Mehta that a long closing period
“would likely lose him” the opportunity to buy the West Oaks Mall.
Carolan explained that Mehta revised his offer the next day, on June 29, 2017,
to an all-cash offer with a twenty-day closing period. Mehta’s June 29, 2017 offer
did not make any reference to the source of his funds, but Mehta stated in a same-day
email to Carolan that he had spoken with his son and, together, they had “enough
cash access to bid for cash.” Carolan understood from Mehta’s correspondence that
he or someone in his family would fund the purchase of the West Oaks Mall.
Carolan conducted due diligence on behalf of the West Oaks Mall seller,
which included researching Mehta’s family. She testified that she learned from her
due diligence that Mehta’s family were “successful entrepreneurs.” She also vetted
Mehta’s professional references, two of whom she already knew personally and who
10
were both eager to recommend Mehta and described him favorably as a “man of his
word.” That Mehta also had a good reference from Chase Bank—one of three “top”
banks in the United States—weighed in his favor.
According to Carolan, the West Oaks Mall seller selected Mehta as the
winning bidder on June 30, 2017, and, on that same day, she informally notified
Mehta that his offer was accepted on one condition. Carolan testified as follows:
Q. As of June 30th, 2017, had the seller of the West Oaks Mall
decided to go with . . . Mehta?
A. We had conditionally decided to go ahead with . . . Mehta.
Q. And what was the remaining condition that needed to be
satisfied?
A. The -- largely, the property tour.
Q. Were you satisfied that [Mehta] had provided sufficient
information as called for in the refinement period letter as far as
financial information?
A. We felt that given the timing in his offer, yes. We had seen
documentation that we thought supported awarding -- with the
proper -- the formal property tour awarding the asset, yes.
Q. So the seller was not waiting for any other financial information
regarding . . . Mehta before determining -- deciding to go with
him as the buyer?
A. Correct.
Carolan further stated that Mehta completed the formal property tour of the
West Oaks Mall on July 3, 2017. Thereafter, the West Oaks Mall seller formally
accepted Mehta’s offer on July 5, 2017. The same day, Mehta gave Carolan a
11
proof-of-funds letter issued from Community Bank, and she passed the
proof-of-funds letter on to the seller.
McInnes testified that Mehta was her customer at Community Bank in 2017.
He approached her about financing the $10,000,000 purchase price for the West
Oaks Mall. After reviewing Carolan’s offering memorandum and touring the West
Oaks Mall, McInnes prepared a term sheet reflecting Community Bank’s interest in
providing Mehta with a $7,000,000 loan. Ultimately however, Community Bank
declined to grant Mehta the loan for the West Oaks Mall purchase because he did
not have “sufficient cash flow.”
According to McInnes, Mehta asked her if she knew anyone who might lend
him the money to purchase the West Oaks Mall. She volunteered the name of
another customer, Ahmed, who held a $10,000,000 line of credit at Community
Bank. And at Mehta’s request, she called Ahmed to gauge his interest. Ahmed told
McInnes: “I’m happy to talk to [Mehta]” but “I don’t want to be a hard money
lender.”4
McInnes put the two men in touch on June 29, 2017.
McInnes heard from Mehta again on July 5, 2017, when he asked her for a
proof-of-funds letter for the West Oaks Mall purchase. McInnes testified that Mehta
initially asked her to place the proof-of-funds letter in his name alone, but she refused
4 During his testimony, Ahmed described a “hard money lender” as someone who
“give[s] money and then get[s] . . . [a] very high interest rate.”
12
because Mehta did not have $10,000,000 in cash available at Community Bank to
purchase the West Oaks Mall. McInnes obtained permission from Ahmed to
reference his funds in the letter. But Mehta did not want Ahmed’s name on the letter
because, according to McInnes, the seller’s broker “thought it was [Mehta] [who]
was buying the West Oaks Mall[.]” Mehta asked McInnes to use the name the
“Mehta Group” instead. McInnes agreed, based on her understanding that Mehta
and Ahmed were talking about a partnership. She acknowledged in her testimony,
however, that she issued the proof-of-funds letter when Ahmed and Mehta were
“still in discussions” and “nothing had been decided.”
The proof-of-funds letter McInnes gave Mehta read:
This letter will serve to confirm that Mehta Group has a good
depository and loan relationships with the Bank. Currently they have
cash of $10,000,000 available.[5]
McInnes explained that she used the plural terms in the letter—“Mehta Group,”
“loan relationships,” and “they”—to reflect that Ahmed and Mehta, collectively, had
sufficient funds at Community Bank.6
Ahmed testified that he did not know Mehta before McInnes introduced them.
The two men spoke for the first time when Mehta called Ahmed on June 29, 2017,
5 The trial court admitted into evidence a copy of the proof-of-funds letter.
6 McInnes testified that when Ahmed later filed suit against Mehta, Mehta asked her
not to disclose the proof-of-funds letter.
13
and a series of telephone calls and meetings followed over the next couple of weeks.
According to Ahmed, he told Mehta in their first conversation on June 29, 2017 that
he was interested in pursuing the West Oaks Mall opportunity only as a partner, not
as a lender.
Ahmed explained that “Mehta called [him] on [sic] June somewhere before
lunch. And then, [Mehta] asked [him] . . . ‘You have a $10 million facility,’”
meaning Mehta “want[ed] to borrow $10 million to buy the [West Oaks] [M]all.”
Ahmed told Mehta, “Yes, yes, I do have,” and Mehta asked Ahmed, “Do you have
cash available?” When Ahmed responded, “Yes, I have cash available,” Mehta said,
“Would you lend the money?” Ahmed then told Mehta, “I have already discussed
with [McInnes]. I’m not interested in lending money. I told [McInnes] I’m only
interested -- and if you are interested too . . . to have a partnership or agreement to
do the venture.” Mehta then said, “So you can do the partnership?” and Ahmed
responded, “Yes, we can [sic] that. The only way . . . I can give you $10 million
unless we do the partnership together.” Again, Mehta asked Ahmed, “Do you have
the money?” and Ahmed told him, “Yes, I do. If you want to confirm that, call the
bank and confirm with the bank I have the money.” Mehta said, “Shall I go and send
an offer to the [West Oaks Mall] seller?” and Ahmed replied, “Sure. . . . My word[]
is my bond. I’m telling you if you do the joint venture, if you do a partnership
agreement with me to acquire the [West Oaks Mall], my money is available.”
14
The next day, on June 30, 2017 Mehta told Ahmed that the West Oaks Mall
seller had accepted Mehta’s cash offer. Ahmed visited Mehta’s office the same day,
and then together, he and Mehta visited the West Oaks Mall. According to Ahmed,
he and Mehta talked about ways to stop the West Oak Mall’s declining performance
and maximize its value, including by acquiring the vacant Macy’s department store
when it became available.
Ahmed stated that while speaking with Mehta in the West Oaks Mall parking
lot on June 30, 2017, he proposed a “50/50 split,” which Mehta rejected, before they
settled on (1) a “65/35 split” favoring Mehta for the West Oaks Mall and (2) a “65/35
split” favoring Ahmed for the Macy’s department store, once it was acquired.
Ahmed asked to put his agreement with Mehta in writing, telling Mehta: “Whatever
we have agreed, it has to be on the paper so that nobody can have any conflict.” But
Mehta delayed, telling Ahmed: “[O]nce they start sending me some information
about the purchase agreement, at that time . . . we can form . . . a[n] agreement.”
Ahmed testified that he and Mehta continued to talk about the West Oaks Mall
over the next few days, including when Ahmed and his nephews visited Mehta’s
home and then drove with Mehta to an “ITZ” entertainment center that Ahmed
thought might be a good fit for the redevelopment of the West Oaks Mall and the
Macy’s department store. According to Ahmed, Mehta never denied his intention
to enter a partnership in their conversations, though he continued to stall Ahmed’s
15
effort to obtain a written partnership agreement. Mehta told Ahmed more than once
that they would have an agreement done “soon.”
Ahmed further testified that Mehta asked him for a proof-of-funds letter on
July 3, 2017, which Ahmed agreed to because it was something he considered
“normal” in a real-estate deal. According to Ahmed, he and Mehta discussed how
the letter should read:
[Mehta] said that [he] want[ed] to have under his name, under his
corporation name. Proof of fund[s] to be addressed to his company.
That’s what he was insisting on . . . .
I said: . . . Mehta, we are partners. How can you have a letter under
your name and hav[e] a proof coming -- money that is coming out from
me and not having together’s [sic] name.
I said: I have a corporation also. I can get under my corporation
letter . . . . Your name and my name [have] to be together and we can
give this letter . . . to the [West Oaks Mall] seller.
Not long after Mehta obtained the proof-of-funds letter from McInnes, Ahmed
began to feel that Mehta did not intend to be partners.7
Mehta kept declining
Ahmed’s requests to have a lawyer draft a partnership agreement, and his
relationship with Mehta deteriorated. Ahmed testified that, as of July 17, 2017, he
understood there would be no partnership:
7 Mehta testified that, around this same time and unbeknownst to Ahmed, he had
contacted other potential lenders, including Grand Bridge Realty and AskZeus.com,
about financing the West Oaks Mall purchase.
16
Q. Just so we’re very clear, as of July 17th, 2017, you understood
unequivocally that you would not be going forward with any type
of partnership with . . . Mehta, true?
A. That is true.
Q. And since that date, you had -- you’ve had no further dealings
with [Mehta]?
A. No.
Ahmed agreed on cross-examination that the real complaint in his suit against
Mehta was “the fact that [he] never actually formed a partnership with . . . Mehta.”
And in his deposition testimony, which the jury heard, Ahmed conceded that he was
motivated to “teach[] [Mehta] a lesson by putting him through th[e] litigation.”
After his involvement with the West Oaks Mall purchase fell apart, Ahmed,
acting separately through his company Rankin Road Investments (“Rankin Road”),
bid on the Macy’s department store, which was separately owned by Macy’s parent
corporation, when it was listed for sale in October 2017. Ahmed acknowledged that
he tried to buy the Macy’s department store on his own, not as part of any partnership
with Mehta. Rankin Road was outbid for the Macy’s department store by Mehta.
Mehta testified that he never agreed to enter a partnership with Ahmed to
acquire or develop the West Oaks Mall. He also denied that he had agreed to any
split of the West Oaks Mall with Ahmed, even if his communication with Ahmed
was less than clear. According to Mehta, he emphasized to Ahmed that he only
wanted to borrow money and desired to pursue the West Oaks Mall venture without
17
a partner. None of Mehta’s other business ventures involved partners outside of his
family. Mehta stated that he was particularly uninterested in partnering with Ahmed
after learning from Ahmed in their early conversations that Ahmed was involved in
“big lawsuits” against his previous business partners. Mehta viewed this as a “red
flag.”
Mehta acknowledged that he gave Carolan, the seller’s broker, the
proof-of-funds letter and claimed it represented “the cash available in one of our
banks.” But he did not otherwise disclose to Carolan that the proof-of-funds letter
rested on Ahmed’s access to cash at Community Bank. Mehta testified that he
ultimately decided not to work with Ahmed or to use Ahmed’s line of credit to buy
the West Oaks Mall. Instead, he purchased the West Oaks Mall using cash from
various sources, including a home-equity loan on his residence, lines of credit for
his other businesses, and loans from his family and a friend. Mehta explained that
Ahmed did not contribute any money toward the acquisition of the West Oaks Mall.
Since the closing of the West Oaks Mall purchase on August 15, 2017, the West
Oaks Mall has been owned by Mehta Investments.
Because Mehta believed that he could improve the West Oaks Mall’s financial
outlook by acquiring the Macy’s department store, he also obtained that property
when it was listed for sale in October 2017. Mehta did not know of Ahmed’s
competing bid before the Macy’s department store owner made its decision.
18
The jury found in favor of Ahmed on his breach-of-fiduciary-duty,
unjust-enrichment, and fraud claims. As to the breach-of-fiduciary-duty claim, the
jury found that Mehta and Ahmed had “form[ed] a partnership to acquire and
develop the West Oaks Mall” and Mehta had “fail[ed] to comply with his fiduciary
duty to Ahmed as to the West Oaks Mall.” Further, the jury found that Mehta’s
“breach of fiduciary duty [was not] excused,” and the jury awarded Ahmed
$1,000,000 in damages on his breach-of-fiduciary-duty claim.
As to the unjust-enrichment claim, the jury found that Mehta was “unjustly
enriched by his actions . . . against Ahmed,” and it awarded Ahmed $586,000 in
damages on that claim. As to the fraud claim, the jury found that “Mehta
commit[ted] fraud against Ahmed,” based on either a fraudulent misrepresentation
or nondisclosure, as to the West Oaks Mall, and it awarded Ahmed $586,000 in
damages “for fraud related to the West Oaks Mall.”
Ahmed elected to recover on his breach-of-fiduciary-duty and
unjust-enrichment claims. The trial court entered judgment based on the jury’s
findings, awarding Ahmed $1,586,000 on the breach-of-fiduciary-duty and
unjust-enrichment claims, plus interest and court costs.
Standard of Review
When, as here, an appellant attacks the legal sufficiency of an adverse jury
finding on which he did not have the burden of proof, he must show that no evidence
19
supports the finding. Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 215
(Tex. 2011); Eagle Oil & Gas Co. v. Shale Exploration, LLC, 549 S.W.3d 256, 269
(Tex. App.—Houston [1st Dist.] 2018, pet. dism’d). Under such circumstances, we
will sustain a legal sufficiency or “no-evidence” challenge if the record shows any
one of the following: (1) a complete absence of evidence of a vital fact, (2) rules of
law or evidence bar the court from giving weight to the only evidence offered to
prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a
scintilla, or (4) the evidence establishes conclusively the opposite of the vital fact.
City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005).
If there is more than a scintilla of evidence to support the challenged finding,
we must uphold it. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors,
Inc., 960 S.W.2d 41, 48 (Tex. 1998). “[W]hen the evidence offered to prove a vital
fact is so weak as to do no more than create a mere surmise or suspicion of its
existence, the evidence is no more than a scintilla and, in legal effect, is no
evidence.” Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004) (internal
quotations omitted). However, if the evidence at trial would enable reasonable and
fair-minded people to differ in their conclusions, then jurors must be allowed to do
so. City of Keller, 168 S.W.3d at 822. “A reviewing court cannot substitute its
judgment for that of the trier-of-fact, so long as the evidence falls within th[e] zone
of reasonable disagreement.” Id. The jury, as the fact finder, is the sole judge of the
20
credibility of the witnesses and the weight to give their testimony. Id. at 819. It may
choose to believe one witness over another. Id.
Breach of Fiduciary Duty
In a portion of his first issue, Mehta argues that the trial court erred in entering
judgment in favor of Ahmed on Ahmed’s breach-of-fiduciary-duty claim because
the evidence is legally insufficient to show the existence of a partnership between
Mehta and Ahmed to jointly acquire and develop the West Oaks Mall.
To recover on a breach-of-fiduciary-duty claim, a plaintiff must first establish
the existence of a fiduciary relationship. See Meyer v. Cathey, 167 S.W.3d 327,
330–31 (Tex. 2005); Gregan v. Kelly, 355 S.W.3d 223, 227 (Tex. App.—Houston
[1st Dist.] 2011, no pet.). The Texas Supreme Court has recognized that in certain
formal relationships, including partnerships, a fiduciary duty arises as a matter of
law. Ins Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998); Bohatch v.
Butler & Binion, 977 S.W.2d 543, 545 (Tex. 1998). As the supreme court has
explained, the relationship between partners “is fiduciary in character, and imposes
upon all the participants the obligation of loyalty to the joint concern and of the
utmost good faith, fairness, and honesty in their dealings with each other with respect
to matters pertaining to the enterprise.” Fitz-Gerald v. Hull, 237 S.W.2d 256, 264
(Tex. 1951); see also Home Comfortable Supplies, Inc. v. Cooper, 544 S.W.3d 899,
907 (Tex. App.—Houston [14th Dist.] 2018, no pet.).
21
In his fourth amended petition, Ahmed alleged that he formed a partnership
with Mehta to jointly acquire and develop the West Oaks Mall. Under long-standing
common-law principles, which have since been codified, a partnership may be either
express or implied from the parties’ conduct. See Ingram v. Deere, 288 S.W.3d 886,
893–94 (Tex. 2009). Under the Texas Business Organizations Code, “an association
of two or more persons to carry on a business for profit as owners creates a
partnership, regardless of whether: (1) the persons intend to create a partnership; or
(2) the association is called a ‘partnership,’ ‘joint venture,’ or other name.” TEX.
BUS. ORGS. CODE ANN. § 152.051(b).
Five statutory factors guide the question of partnership formation:
(1) receipt or right to receive a share of profits of the business;
(2) expression of an intent to be partners in the business;
(3) participation or right to participate in control of the business;
(4) agreement to share or sharing:
(A) losses of the business; or
(B) liability for claims by third parties against the business;
and
(5) agreement to contribute or contributing money or property to the
business.
Id. § 152.052(a); see also Ingram, 288 S.W.3d at 894–95.
22
With some minor deviation, in this case, the trial court’s charge instructed the
jury on these factors that “indicat[e] that [the] parties ha[d] formed a partnership”
and asked the jury whether “Ahmed and Mehta form[ed] a partnership to acquire
and develop the West Oaks Mall.” The trial court’s charge instructed the jury that
“[a] written agreement to form a partnership [was] not required” and “[t]he parties’
intent to engage in the conduct that create[d] a partnership determine[d] if a
partnership exist[ed] between the parties.” The factors the trial court’s charge
identified as indicating the formation of a partnership included:
(1) right to receive a share of profits of the business;[8]
(2) expression of an intent to be partners in the business;
(3) participation or right to participate in control of the business;
(4) agreement to share losses of the business;[9] [and]
(5) agreement to contribute or contributing money or property to the
business.
8 The trial court’s instruction on this partnership factor varied from the language in
the Texas Business Organizations Code in that it omitted the word “receipt” of a
share of profits of the business in favor of only the “right to receive” a share of the
profits. See TEX. BUS. ORGS. CODE ANN. § 152.052(a)(1) (listing as factor
“indicating that persons have created a partnership,” “receipt or right to receive a
share of profits of the business”).
9 The trial court’s instruction on this partnership factor also varied from the language
in the Texas Business Organizations Code in that it omitted the phrase “agreement
to share . . . liability” for third-party claims against the business in favor of only an
agreement to share in “losses of the business.” See id. § 152.052(a)(4) (listing as
factor “indicating that persons have created a partnership,” “agreement to share or
sharing: (A) losses of the business; or (B) liability for claims by third parties against
the business”).
23
We assess the legal sufficiency of the evidence of partnership formation according
to the trial court’s charge to the jury. See Romero v. KPH Consolidation, Inc., 166
S.W.3d 212, 221 (Tex. 2005); Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000).
As the trial court’s charge instructed and the Texas Supreme Court has
determined, a party seeking to establish the existence of a partnership is not required
to provide evidence of all five factors.10
See Ingram, 288 S.W.3d at 896. Rather,
the Texas Business Organizations Code “contemplates a less formalistic and more
practical approach to recognizing the formation of a partnership.” See id. at 895.
We apply a totality-of-the-circumstances test, considering all the evidence bearing
on the partnership factors together on a continuum. Id. at 896 (“No single fact may
be stated as a complete and final test of partnership.”); Nguyen v. Hoang, 507 S.W.3d
360, 371–72 (Tex. App.—Houston [1st Dist.] 2016, no pet.). At one end of the
continuum, “a partnership exists as a matter of law when conclusive evidence
supports all five statutory factors.” Nguyen, 507 S.W.3d at 372. At the other end,
10 In Ingram v. Deere, the Texas Supreme Court discussed the statutory factors for
partnership formation under a predecessor statute, the Texas Revised Partnership
Act (“TRPA”); however, as the court noted, the provisions relating to the definition
of a partnership and the factors to be used in determining whether a partnership
exists are virtually identical under the TRPA and the Texas Business Organizations
Code. 288 S.W.3d 886, 894 n.4 (Tex. 2009). Texas courts, including this one, have
used the Ingram analysis when considering partnership formation under the Texas
Business Organizations Code. See, e.g., Nguyen v. Hoang, 507 S.W.3d 360, 371–
72 (Tex. App.—Houston [1st Dist.] 2016, no pet.). Consequently, we rely on the
Ingram analysis here, when applicable.
24
“a partnership does not exist as a matter of law when there is no evidence as to any
of the five factors.” Id. “Even conclusive evidence of only one factor normally will
be insufficient to establish the existence of a partnership.” Ingram, 288 S.W.3d at
898 (to hold otherwise would create probability that some business owners would
be legally required to share profits with or be held liable for actions of individuals
who were neither treated as nor intended to be partners). The challenge of the
totality-of-the-circumstances test is its application between these points on the
continuum. Id.
A. Profit Sharing
Mehta asserts that the parties never agreed to share profits and Ahmed only
presented “vague to non-existent” testimony on the subject. Thus, we first consider
whether there was legally sufficient evidence of the first factor indicating a
partnership—the “right to receive a share of the profits of the business.” See TEX.
BUS. ORGS. CODE ANN. § 152.052(a)(1).
“Shared rights to profits and to control the business are generally considered
the most important factors in establishing the existence of a partnership.” Westside
Wrecker Serv., Inc. v. Skafi, 361 S.W.3d 153, 166 (Tex. App.—Houston [1st Dist.]
2011, pet. denied); see also Nguyen, 507 S.W.3d at 372 (right to control business
and sharing profits most important factors in determining existence of partnership
under Texas Business Organizations Code).
25
Here, because there is no written agreement memorializing the terms of any
partnership and the purported partnership never earned profits, whether Ahmed had
a right to receive a share of the profits of the West Oaks Mall must be discerned from
the testimony about the parties’ conduct and any oral agreement between them. See
Malone v. Patel, 397 S.W.3d 658, 674–75 (Tex. App.—Houston [1st Dist.] 2012,
pet. denied) (lack of written partnership agreement is not dispositive of question on
partnership formation because law recognizes existence of oral partnership
agreements).
In his briefing, Ahmed identifies his testimony that the parties orally agreed
to a “65/35 split” for the West Oaks Mall as the evidence of his right to receive a
share of the profits, once earned. Regarding the “65/35 split,” Ahmed testified:
Q. . . . [Y]ou had asked . . . Mehta whether he wanted to do this
50/50. What did . . . Mehta have to say about that?
A. I don’t want to do 50/50.
Q. Who said that?
A. . . . Mehta.
Q. . . . [W]hat else did he say?
A. He [said]: . . . I can get 35 and he can get 65, 65 percent of the
[West Oaks] [M]all once we refinance that.
. . . .
Q. Was there discussion about the percentage splits with regard to
the Macy’s [department store]?
A. Yes.
26
Q. And what was that discussion?
A. He will get 65 percent on the [West Oaks] [M]all. I’ll get 65
percent on the Macy’s [department store]. And then on the mall,
I would have 35 percent, and Macy’s [department store], he
would have 35 percent.
. . . .
Q. What was . . . Mehta’s response?
A. Yes. He will give me 35 percent on the [West Oaks] [M]all.
Q. On the mall.
A. He will keep 65 percent.
Q. All right. And what was Mr. Mehta’s response with regard to the
Macy’s [department store]?
A. He agreed I will have 65 percent and he will have 35 percent.
Viewed in the light most favorable to the jury’s verdict, this testimony is some
evidence that Mehta expressed an agreement to give Ahmed “35 percent on the mall”
once they refinanced the property, but it does no more than create a mere surmise or
suspicion of Ahmed’s right to receive a share of the profits of the West Oaks Mall
even assuming the refinancing was achieved. The testimony does not specifically
reference profits. Nor does it reveal what the parties agreed to split—that is, whether
the split regarded profits relevant to the formation inquiry or something different,
such as co-ownership of the real property or gross revenue from the tenants’ rental
payments. By statute, neither of those arrangements, by themselves, would indicate
a partnership. See TEX. BUS. ORGS. CODE ANN. § 152.052(b)(2) (co-ownership of
27
property, whether combined with sharing of profits, by itself, does not indicate
person is partner); id. § 152.052(b)(3) (right to share or sharing gross returns or
revenues, regardless of whether persons sharing gross returns or revenues have
common or joint interest in the property from which returns or revenues are derived,
by itself, does not indicate person is partner); see also Ingram, 288 S.W.3d at 898–
99 (profit-sharing factor is not satisfied by agreement to share gross revenues);
Stephens v. Three Fingers Black Shale P’ship, 580 S.W.3d 687, 710 (Tex. App.—
Eastland 2019, pet. denied) (party claiming partnership existed must show parties
were to participate in profits and share them as principals of business, rather than
under profit-sharing agreement). No evidence in the record supplies this missing
detail.11
Ahmed also asserts that he should not be faulted on this factor simply because
the partnership had not earned any profits and, thus, there was no demonstration of
11 At oral argument, Ahmed disagreed with Mehta that the conclusory nature of his
testimony on the “65/35 split” prevented any inference about whether the split was
of shared profits or something else that would not indicate a partnership. He
asserted that his testimony supported only one inference: that the parties’
contemplated a 65/35 ownership split of the asset itself, i.e., the West Oaks Mall,
from which the shared profits would derive. But, as we have stated, joint ownership
of the property, even combined with shared profits, does not necessarily indicate a
partnership. See TEX. BUS. ORGS. CODE ANN. § 152.052(b)(2). And notably,
Ahmed’s asserted position of a joint ownership of the West Oaks Mall according to
a “65/35 split” favoring Mehta undercuts Ahmed’s partnership theory because he
also testified that the parties agreed to a different split on the Macy’s department
store. That raises additional questions about the nature of the parties’ agreement
that are not answered in the record and highlights the conclusory nature of Ahmed’s
testimony on the “65/35 split.”
28
the parties’ profit-sharing agreement, relying on our sister court’s opinion in Houle
v. Casillas, 594 S.W.3d 524 (Tex. App.—El Paso 2019, no pet.). Houle is another
case involving a real estate investment and renovation project that “failed to pan out
as planned.” Id. at 532. There, Houle learned of a home for sale that had been
divided into apartment units. Id. at 532–33. He and Casillas, an investor, orally
agreed to purchase the property. Id. at 533. They initially intended to renovate the
property for resale but later decided to keep it and lease the apartment units after
renovating them. Id. The parties agreed that Casillas would provide financing for
the purchasing and renovating of the property while Houle would apply his expertise
to oversee the renovations; thereafter, once Casillas was reimbursed for his initial
investment, the parties would split profits equally regardless of whether the profits
arose from selling the property, or from rental income generated from leasing
apartment units. Id.
After the project fell apart, Houle asserted that Casillas owed him a fiduciary
duty based on the partnership that they had formed by orally agreeing to purchase
and renovate the property. Id. at 546. In considering whether the trial court’s
summary judgment dismissing Houle’s breach-of-fiduciary-duty claim was
erroneous because a fact issue existed as to whether a partnership had been formed,
the appellate court noted that “[a]lthough the partnership ended before any profits
were shared, . . . the undisputed summary[-]judgment evidence demonstrated that
29
the parties would share profits when profits were earned.” Id. at 548. Unlike here,
however, there was direct evidence in Houle of an intention to split profits from rent
or a sale of the property after the reimbursement of Casillas. Id. The appellate court
observed: “With his affidavit supported by the memo dated July 6, 2010, Houle
presented evidence indicating that the parties had an agreement to share equally in
profits after renovations were completed and after Casillas was reimbursed for his
investment.” Id. Again, no evidence in the record supplies this missing detail in the
instant case.
We therefore conclude that Ahmed’s testimony about the “65/35 split” is
conclusory and no evidence of a right to receive a share of the profits of the West
Oaks Mall. See generally Windrum v. Kareh, 581 S.W.3d 761, 770 (Tex. 2019)
(“When the evidence presented to the jury is conclusory, it is considered no
evidence.”); Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983) (“When the
evidence offered to prove a vital fact is so weak as to do no more than create a mere
surmise or suspicion of its existence, the evidence is no more than a scintilla and, in
legal effect, is no evidence.”).
B. Expression of Intent to be Partners
Mehta argues that “[t]here was no mutual intention to be in an existing
partnership” because Mehta only wanted Ahmed to “lend him the money with which
to buy” the West Oaks Mall and “Ahmed admitted that he anticipated only that th[e]
30
[parties] would eventually form a partnership” and he testified that “the parties had
never actually formed a partnership.” (Emphasis and internal quotations omitted.)
Thus, we next consider whether there was legally sufficient evidence of the second
factor indicating a partnership.
The second factor indicating that the parties formed a partnership is the
“expression of an intent to be partners in the business.” TEX.BUS. ORGS.CODE ANN.
§ 152.052(a)(2). Ingram is instructive of the boundaries we must observe in our
review of this factor. Those boundaries are: (1) the question is separate and apart
from a review of the other factors; (2) we are to consider only that evidence which
is not specifically probative of other factors; and (3) the terms used by the parties do
not control—except that we consider the terminology used by “the putative
partners,” and the context in which any statements were made, as well as who made
the statements and to whom they were made. Ingram, 288 S.W.3d at 899–900; see,
e.g., Reagan v. Lyberger, 156 S.W.3d 925, 928 (Tex. App.—Dallas 2005, no pet.)
(evidence was sufficient to show expression of intent to be partners where, among
other things, plaintiff testified he referred to defendant as his business partner and
other witnesses stated that defendant identified himself as plaintiff’s partner);
Brewer v. Big Lake State Bank, 378 S.W.2d 948, 951 (Tex. App.—El Paso 1964, no
writ) (party’s introduction to bank as party’s partner was some evidence of
expression of intent to be partners). There must also be “evidence that both parties
31
expressed their intent to be partners.” Ingram, 288 S.W.3d at 900; see also Reagan,
156 S.W.3d at 928 (evidence both putative partners referred to themselves as
partners was some evidence of second factor).
Much of the evidence identified by Ahmed in his briefing to support the
second factor concerns his own understanding that the parties had become
“partners.” That is, Ahmed’s testimony included multiple conclusory references to
Mehta being his “partner” and to their “partnership.” However, such conclusory
statements are not a legally sufficient expression of an intent to form a business
partnership, and Ahmed’s mere belief there may be a partnership is not probative
evidence of a partnership. See Ben Fitzgerald Realty Co. v. Muller, 846 S.W.2d 110,
121 (Tex. App.—Tyler 1993, writ denied) (mere legal conclusions by lay witness do
not prove existence of partnership); Murphy v. McDermott, Inc., 807 S.W.2d 606,
613 (Tex. App.—Houston [14th Dist.] 1991, writ denied) (although one party
referred to other party as his partner, this alone did not create partnership); see also
Westside Wrecker Serv., 361 S.W.3d at 170 (“Mere personal belief there may be a
partnership is not probative evidence.”). As noted in Ingram, the term “partner” is
a term that “is regularly used in common vernacular and may be used in a variety of
ways.” Ingram, 288 S.W.3d at 900 (internal quotations omitted). When a person
refers to another as “partner,” that fact alone does not signal the expression of an
intent to form a partnership. See id. (internal quotations omitted); see also Hoss v.
32
Alardin, 338 S.W.3d 635, 644 (Tex. App.—Dallas 2011, no pet.) (“Alardin’s
testimony that he and Hoss ‘specifically agree[d] to be partners’ is conclusory and
thus no evidence of an expression of intent to be partners in a partnership under the
TRPA.”).
Because Mehta is the party denying the existence of a partnership, an
expression of intent to be partners by Mehta would be of particular importance. See
TEX. BUS. ORGS. CODE ANN. § 152.052(a)(2) (“Factors indicating that persons have
created a partnership include the persons’ . . . expression of an intent to be partners
in the business.” (emphasis added)); see also Ingram, 288 S.W.3d at 900–01. Mehta
denied expressing any intention to form a partnership with Ahmed. He testified that
he told Ahmed that his interest in a deal extended only to a loan. Ahmed, on the
other hand, testified that he told McInnes that he was interested in a partnership with
Mehta. And he testified that he told Mehta in their first conversation that he would
not give Mehta any money unless they became partners, to which Mehta responded:
“So you can do the partnership?” and “Shall I go and send an offer to the [West Oaks
mall] seller?” Ahmed asserts that these responses and Mehta’s decision to continue
discussions with Ahmed after he expressed his intention to be partners indicated
Mehta’s agreement to form a partnership. Certainly, the jury was free to disbelieve
Mehta and believe Ahmed in resolving the disagreements in their testimony. See
City of Keller, 168 S.W.3d at 819. But even crediting Ahmed’s version of the
33
parties’ conversations, his testimony does not reflect a mutual expression of intent
to be partners.
Considering Ingram’s instruction against an approach focusing on the terms
used by the parties in referring to their arrangement, we look to Mehta’s statements
to third parties or other evidence that he held Ahmed out as a partner. See Ingram,
288 S.W.3d at 900 (context of statements is important in assessing evidence of legal
partnership; “merely referring to another person as ‘partner’ in a situation where the
recipient of the message would not expect the declarant to make a statement of legal
significance is not enough”). We find Carolan’s and McInnes’s testimony relevant
to this factor.
There was no evidence presented at trial indicating that Carolan, the West
Oaks Mall seller’s broker, ever spoke to Ahmed. Ahmed emailed her on July 9,
2017, after Mehta was selected as the winning bidder to buy the West Oaks Mall,
but she did not respond. Her communication about the West Oaks Mall was with
Mehta only. And her testimony contained no evidence that Mehta expressed to her
any intention to acquire the West Oaks Mall in partnership with Ahmed or that
Mehta otherwise held Ahmed out as his partner. To the contrary, Carolan’s
testimony established that Mehta did not even mention Ahmed in Mehta’s dealings
with Carolan. Consequently, she did not know Ahmed or of any connection between
34
Ahmed and Mehta when Ahmed reached out to her by email in July 2017. She
testified:
Q. At any time did . . . Mehta mention a gentleman by the name
of . . . Ahmed?
A. No, sir.
Q. At any time did he mention that a partnership would be acquiring
West Oaks Mall or something other than him or his family?
A. No, sir.
In his briefing, Ahmed points to Mehta’s use of Ahmed’s “access to cash” at
Community Bank to secure a proof-of-funds letter from McInnes and to the plural
terms used in the proof-of-funds letter as evidence of Mehta’s expression of his
intention to acquire the West Oaks Mall in partnership with Ahmed. Viewed in the
light most favorable to the jury’s finding, Mehta’s act of obtaining the
proof-of-funds letter based on Ahmed’s “access to cash” at Community Bank is
some evidence of an expression of intent relevant to partnership formation, but it is
weak and self-contradictory when considered in context.
For instance, the plural expressions in the proof-of-funds letter do not
expressly reference Ahmed. In fact, Ahmed’s name does not appear anywhere on
the proof-of-funds letter. The proof-of-funds letter identifies only the Mehta Group.
And there was no evidence that Ahmed and Mehta agreed to the formation of an
entity called the Mehta Group. According to the testimony of McInnes, she included
the plural terms in the proof-of-funds letter based on her understanding that Ahmed
35
and Mehta were discussing partnership. But she also testified that Mehta asked her
not to include Ahmed’s name on the letter. She explained:
Q. Typically[,] when you do issue a proof-of-funds letter, would it
be in that actual entity’s name or an individual’s name?
A. Yes.
Q. And that entity would probably be like an LLC or a partnership
or a corporation, correct?
A. Yes.
Q. But . . . this Mehta Group that you wrote for this letter, that
wasn’t an actual entity, correct?
A. No.
Q. So . . . you have no knowledge of any actual entity being
formed?
A. No.
Q. Okay. In fact, at the time you wrote the letter, you understood
they were still in discussions, correct?
A. That’s correct, yes.
Q. And you understood that absolutely nothing had been decided?
A. That’s correct.
Q. Okay. At any point did you learn from either party that a
partnership had been formed?
A. No.
Q. In fact, did you learn the opposite, that a partnership had not been
formed?
A. I didn’t learn either way.
36
Ahmed further asserts that the jury could have reasonably inferred the
expression of Mehta’s intent to be partners based on his continued participation in
telephone calls and meetings with Ahmed after Ahmed insisted on a partnership over
a loan in their first conversation. But the evidence on which Ahmed relies is equally
susceptible to an inference that the parties merely continued discussions about a
potential partnership that never came to fruition. See generally Hancock v. Variyam,
400 S.W.3d 59, 70–71 (Tex. 2013) (jury may not reasonably infer ultimate fact from
meager circumstantial evidence which could give rise to any number of inferences,
none more plausible than other).
At trial, Mehta testified that during this time he was exploring other financing
options independent of Ahmed. And more than once on cross-examination, Ahmed
acknowledged that although he thought the parties would eventually form a
partnership, they did not actually form one before Mehta acquired the West Oaks
Mall. For instance, when asked whether his real complaint in his suit against Mehta
was “the fact that [he] never actually formed a partnership with . . . Mehta,” Ahmed
answered, “Yes.” And Ahmed confirmed that he understood before Mehta acquired
the West Oaks Mall that there would be no partnership:
Q. Just so we’re very clear, as of July 17th, 2017, you understood
unequivocally that you would not be going forward with any type
of partnership with . . . Mehta, true?
A. That is true.
37
Q. And since that date, . . . you’ve had no further dealings with him?
A. No.
Ahmed also agreed that a “partnership was never created in the first place.”
Based on the foregoing, we conclude that Ahmed presented only weak and
self-contradictory evidence of the parties’ mutual expression of intent to be partners.
C. Control
Mehta asserts that “Ahmed admitted that he never had any control” over the
West Oaks Mall. Thus, we consider whether there was legally sufficient evidence
of the third factor indicating a partnership.
The third factor indicating that the parties formed a partnership is
“participation or [a] right to participate in control of the business.” TEX. BUS. ORGS.
CODE ANN. § 152.052(a)(3). As previously stated, this and the sharing of profits are
the “most important factors” in determining the existence of a partnership. See
Westside Wrecker Serv., 361 S.W.3d at 166. “The right to control a business is the
right to make executive decisions.” Ingram, 288 S.W.3d at 901. Texas courts have
held that various facts can be relevant to this factor, such as exercising authority over
the business’s operations, the right to write checks on the business’s checking
account, control over and access to the business’s books, and receiving and
managing the business’s assets and monies. See, e.g., id. at 901–02; Nguyen, 507
S.W.3d at 373. Evidence relevant to this factor also includes whether a putative
38
partner only has “input” over business decisions and whether another person
“retain[s] ultimate control over business decisions.” Knowles v. Wright, 288 S.W.3d
136, 147 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (no partnership existed
as matter of law, because “[a]lthough Knowles subsequently testified that he and
Wright made decisions together, Knowles’s testimony made clear that he had no
control over the purported partnership and that Wright retained ultimate control over
business decisions”).
Here, it is undisputed that Ahmed did not actually participate in control of the
West Oaks Mall. When asked whether it was “true that [he] never had any control
over [the] West Oaks Mall,” Ahmed answered: “I don’t have any control. Yes.”
And Mehta’s testimony, which Ahmed did not dispute or rebut, confirmed that
Ahmed had not actually exercised any executive authority or control over Mehta’s
business related to the West Oaks Mall and he was not requested to do so:
Q. Did . . . Ahmed have the authority to write checks or make
deposits on behalf of Mehta Investments[, the entity that acquired
the West Oaks Mall]?
A. No, sir.
Q. Does he have that authority on behalf of any of your companies?
A. No, sir.
Q. Has he ever asked for that?
A. No, sir.
Q. Does . . . Ahmed have any control over your businesses?
39
A. No, sir.
Q. Including Mehta Investments?
A. No, sir, none[.]
Q. Has he ever tried to assert that he has control over any of your
businesses?
A. No, sir.
Q. Does . . . Ahmed manage [the] West Oaks Mall or [the] Macy’s
[department store] in any way?
A. No, sir.
Q. Has he ever told you that he thinks he should be able to do it?
A. No. No, sir.
The relevant inquiry therefore is whether Ahmed had a “right to participate in control
of the” the West Oaks Mall. See TEX. BUS. ORGS. CODE ANN. § 152.052(a)(3).
In his briefing, Ahmed asserts that there was legally sufficient evidence of his
“right to participate in control of the business” based on his testimony that the parties
had agreed to acquire the West Oaks Mall and to a “65/35 split” thereof. He also
relies on the parties’ discussions wherein Mehta agreed that Ahmed could do
“whatever [he] want[ed] with the food business at the mall” because he had
experience in franchising restaurants. This evidence is no more than a scintilla of
evidence of the right to make executive decisions. It is not clear from Ahmed’s
testimony establishing his interest in developing a food and entertainment business
whether that interest concerned the West Oaks Mall or repurposing the Macy’s
40
department store as a pizza restaurant or family entertainment center. The jury did
not find a partnership as to the Macy’s department store, and Ahmed has not
appealed that finding.
Moreover, the testimony relied on by Ahmed calls into question whether a
“65/35 split” in a putative partnership would have given him a “right to participate
in control of the business.” See Knowles, 288 S.W.3d at 147 (distinguishing between
control of business and input into business operations). Because both Ahmed and
Mehta had worked in the merchant marines, Ahmed analogized the control
relationship to that of a ship captain and first mate. Ahmed testified:
So I said: You[, Mehta,] take the lead, since he was 65 percent
ownership in the [West Oaks] [M]all. So you -- when you have a 65
percent, is a majority of the stocks, so he controlled . . . the business.
So you become the captain of . . . this and I will be the chief mate of
[the] West Oaks Mall. I’ll help you. You do the deed, and I’ll help
you . . . take it to the next level.
There was no testimony presented at trial about whether the putative partnership
would have been a general or limited partnership, or a limited liability partnership.
Given that the split favored Mehta and Ahmed testified that Mehta would be the
“captain,” such testimony would have been meaningful on the right of control.
Compare TEX. BUS. ORGS. CODE ANN. § 152.203(a) (“Each partner has equal rights
in the management and conduct of the business of a partnership.”), with id. § 153.103
(“[A] limited partner does not participate in the control of the business . . . .”). In its
41
absence, we conclude that there is no more than a scintilla of evidence of Ahmed’s
“right to participate in control of the business.”
D. Sharing of Losses
Mehta asserts that “[t]he parties never agreed on sharing losses and third-party
liabilities” and “[t]here were no discussions about liabilities.” Thus, we consider
whether there was legally sufficient evidence of the fourth factor indicating a
partnership—“agreement to share . . . [the] losses of the business[.]” See id.
§ 152.052(a)(4).
In examining the fourth factor, we note that “[a]n agreement by the owners of
a business to share losses is not necessary to create a partnership,” but the existence
of such an agreement can support a contention that a partnership exists. See id.
§ 152.052(c); see also Ingram, 288 S.W.3d at 902; Sewing v. Bowman, 371 S.W.3d
321, 334 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d). The inquiry for this
factor is not whether evidence exists that the business ever lost money, but whether
the putative partners shared or agreed to share losses or liabilities. Rojas v. Duarte,
393 S.W.3d 837, 843–44 (Tex. App.—El Paso 2012, pet. denied). Ahmed, in his
briefing, acknowledges that the evidence of this factor may be slight, but he again
points to his testimony that the parties orally agreed to a “65/35 split” in the West
Oaks Mall as supportive evidence. Ahmed asserts that, “[b]y agreeing to be partners
and agreeing to their interests, the parties agreed to share losses.” For the same
42
reason that we have concluded that Ahmed’s testimony about a “65/35 split” is no
evidence of an agreement to share the West Oaks Mall profits, we conclude that it is
also no evidence of an agreement to share losses. See Windrum, 581 S.W.3d at 770
(conclusory evidence is no evidence).
E. Contribution of Money or Property
Mehta argues that there was no evidence presented to satisfy the fifth factor
because Ahmed did not actually contribute any money or property toward the
acquisition and development of the West Oaks Mall. Thus, we consider whether
there was legally sufficient evidence of the fifth factor indicating a partnership—an
“agreement to contribute” or the contribution of “money or property to the business.”
See TEX. BUS. ORGS. CODE ANN. § 152.052(a)(5).
In support for his argument, Mehta cites a decision of the Beaumont Court of
Appeals for the proposition that a putative partner’s failure to contribute money
prevents the formation of a partnership. See Meeker v. Meyer, 391 S.W.2d 787, 789
(Tex. App.—Beaumont 1965, writ ref’d n.r.e.). However, that opinion predates the
codification of the statutory factors for partnership formation in the Texas Business
Organizations Code. See id. And as Ahmed correctly points out, the fifth factor
regarding the contribution of money or property, as codified, is not limited to actual
contributions of money or property; it also concerns “agreement[s] to
contribute . . . money or property to the business.” See TEX. BUS. ORGS. CODE ANN.
43
§ 152.052(a)(5) (factors indicating that persons have created partnership include
“agreement to contribute or contributing money or property to the business”
(emphasis added)); Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578, 581 (Tex.
2000) (Legislature’s use of disjunctive term “or” typically signifies separation
between two distinct ideas).
Here, the evidence presented at trial included testimony that Ahmed allowed
Mehta to use his financial standing with Community Bank to obtain the
proof-of-funds letter and Ahmed had agreed to contribute money to fund the
acquisition of the West Oaks Mall. We conclude that this is some evidence that
Ahmed agreed to contribute money or property to the business. See TEX.BUS. ORGS.
CODE ANN. § 152.052(a)(5).
F. Conclusion
“Whether a partnership exists must be determined by an examination of the
totality of the circumstances.” Ingram, 288 S.W.3d at 903–04. The Texas Supreme
Court in Ingram opined that conclusive evidence of all five statutory factors supports
the recognition of a partnership as a matter of law, while the absence of evidence as
to all five factors will preclude it. See id. As this case demonstrates, the challenge
is when the evidence falls somewhere between these two points on the continuum.
See id. We cannot say that Ahmed put on conclusive evidence of any of the statutory
factors. When viewed in the appropriate light, there is some evidence, albeit it weak
44
and self-contradictory, of the parties’ expression of intent to be partners and some
evidence that Ahmed agreed to contribute his line of credit to acquire the West Oaks
Mall, at least until the property could be refinanced. But this alone is not enough to
hold that the jury’s finding of a partnership is supported by legally sufficient
evidence. There is no evidence that the parties agreed to share profits or that Ahmed
controlled or possessed a right to control the business, the two most important
factors, and no evidence that the parties agreed to share losses. See TEX. BUS. ORGS.
CODE ANN. § 152.052(a); see also Westside Wrecker Serv., 361 S.W.3d at 166.
Moreover, Ahmed’s assertion of the existence of a partnership was contradicted by
his own acknowledgment that a “partnership weas never created in the first place,”
which is evidence we conclude the jury could not reasonably disregard. See City of
Keller, 168 S.W.3d at 827 (courts must “disregard contrary evidence unless
reasonable jurors could not”). We therefore hold that the evidence is legally
insufficient to support the jury’s finding that the parties formed a partnership to
acquire and develop the West Oaks Mall.
We sustain the portion of Mehta’s first issue challenging the legal sufficiency
of the evidence supporting the existence of a partnership. Absent an existing
partnership, the jury’s findings that Mehta breached his fiduciary duties and the
resulting damages are immaterial because Mehta owed Ahmed no fiduciary duty.
See Westside Wrecker Serv., 361 S.W.3d at 173 (“This conclusion [that the evidence
45
was legally insufficient to support the partnership finding] negates the predicate for
Skafi’s and Cannon’s claims for breach of fiduciary duty and breach of the duties of
care and loyalty.”); Hoss, 338 S.W.3d at 650 (“Our conclusion that the jury’s finding
of a partnership between Hoss and Alardin was supported by legally insufficient
evidence negates the predicate for Alardin’s recovery for breach of fiduciary duty,
so we need not consider Hoss’s remaining issues on appeal.”). Consequently, we
need not address the remainder of Mehta’s issues challenging the trial court’s
judgment on Ahmed’s breach-of-fiduciary-duty claim. See TEX. R. APP. P. 47.1.
Unjust Enrichment
In his fourth issue, Mehta argues that the trial court erred in entering judgment
in favor of Ahmed on Ahmed’s unjust-enrichment claim because there was legally
insufficient evidence that Mehta received a benefit from Ahmed.
“Unjust enrichment is an equitable principle holding that one who receives
benefits unjustly should make restitution for those benefits.” Villareal v. Grant
Geophysical, Inc., 136 S.W.3d 265, 270 (Tex. App.—San Antonio 2004, pet.
denied). Consequently, a key element of unjust enrichment is that the defendant
wrongly secured or passively received a benefit from the plaintiff that would be
unconscionable to retain. See Ahmed v. Shah, No. 01-13-00995-CV, 2015 WL
222171, at *5 (Tex. App.—Houston [1st Dist.] Jan. 15, 2015, no pet.) (mem. op.);
Mary E. Bivins Found. v. Highland Cap. Mgmt. L.P., 451 S.W.3d 104, 111–12 (Tex.
46
App.—Dallas 2014, no pet.). “It is not enough that the person sought to be charged
received some incidental benefit.” Ahmed, 2015 WL 222171, at *5.
Although he did not contribute any money to buy the West Oaks Mall,
Ahmed, in his briefing, asserts that he provided Mehta a benefit because the
proof-of-funds letter, which McInnes issued based on Ahmed’s access to cash at
Community Bank, allowed Mehta to show the seller of the West Oaks Mall “a
committed source of financing” to close the transaction. Ahmed’s theory of unjust
enrichment thus rests on inferences drawn from the timing of the proof-of-funds
letter in relation to the West Oaks Mall seller’s formal acceptance of Mehta’s offer
to buy the West Oaks Mall. Ahmed points to the evidence that Mehta submitted the
proof-of-funds letter to Carolan at Allied Advisors, the seller’s broker, who in turn
provided it to the seller, on July 5, 2017 and that Mehta was formally awarded the
property only after he submitted the proof-of-funds letter. According to Ahmed,
given that the seller of the West Oaks Mall “did not inform Mehta that he had won
the bid until after receiving the [proof-of-funds] letter, the jury could [have]
reasonably infer[red] and conclude[d] that the letter had some impact on the deal and
benefitted Mehta.”
In contrast, Mehta asserts that the timing of the proof-of-funds letter alone is
legally insufficient to prove that Mehta unjustly received a benefit because it does
not transcend mere suspicion. See Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925,
47
928 (Tex. 1993); cf. Jelinek v. Casas, 328 S.W.3d 526, 533 (Tex. 2010) (“Care must
be taken to avoid the post hoc ergo propter hoc fallacy, that is, finding an earlier
event caused a later event merely because it occurred first. Stated simply, correlation
does not necessarily imply causation.”); Guevara v. Ferrer, 247 S.W.3d 662, 668
(Tex. 2007) (“[S]uspicion has not been and is not legally sufficient to support a
finding of legal causation.”). Even considering the evidence in the light most
favorable to the jury’s finding of unjust enrichment, we agree with Mehta.
Carolan, the seller’s broker, testified that the proof-of-funds letter did not
influence the West Oaks Mall seller’s decision to sell the property to Mehta because
a decision to sell the West Oaks Mall to Mehta upon the condition that he tour the
property was made on June 30, 2017—before the proof-of-funds letter was
submitted by Mehta. Specifically, she testified that she solicited an offer on the West
Oaks Mall from Mehta. Even though Mehta’s initial offer on the West Oaks Mall
was rejected, he was invited by letter to refine his offer to achieve the seller’s price
and timing objectives and he was asked to provide “financials for the acquiring entity
in the form of personal bank statements or audited financial statements.” Per the
refinement letter, Mehta submitted a second bid on June 28, 2017 and then revised
his bid again on June 29, 2017. With his second bid, Mehta provided a personal
financial statement and professional references, which the West Oaks Mall seller
found satisfactory. Carolan testified that based on this information and her own
48
due-diligence review of Mehta and his family, the seller picked Mehta as the winning
bidder five days before McInnes gave Mehta the proof-of-funds letter. Specifically,
Carolan testified:
Q. As of June 30th, 2017, had the seller of the West Oaks Mall
decided to go with . . . Mehta?
A. We had conditionally decided to go ahead with . . . Mehta.
Q. And what was the remaining condition that needed to be
satisfied?
A. The -- largely, the property tour.
Q. Were you satisfied that [Mehta] had provided sufficient
information as called for in the refinement period letter as far as
financial information?
A. We felt that given the timing in his offer, yes. We had seen
documentation that we thought supported awarding -- with the
proper -- the formal property tour awarding the asset, yes.
Q. So the seller was not waiting for any other financial information
regarding . . . Mehta before determining -- deciding to go with
him as the buyer?
A. Correct.
Mehta completed the only remaining condition to his selection as the winning
bidder—the property tour—on July 3, 2017. According to Carolan, the West Oaks
Mall seller was not waiting for any other financial information from Mehta before
selecting him as the buyer and, thus, the seller’s receipt of the proof-of-funds letter
two days later did not influence the decision to sell to Mehta.
49
Even if, as Ahmed asserts, the jury could have disbelieved Carolan’s
testimony that the proof-of-funds letter did not influence the West Oaks Mall seller’s
decision, the jury’s disbelief does not establish the opposite of what it imports. Cf.
Tex. & N.O.R. Co. v. Grace, 188 S.W.2d 378, 375 (Tex. 1945) (disregarding witness
testimony does not authorize court to believe opposite of what it imports). The
reasonableness of any inference that the proof-of-funds letter positively influenced
the West Oaks Mall seller’s decision to sell the property to Mehta is undermined by
Ahmed’s own testimony agreeing with Carolan’s version of events. At trial, he
testified that Mehta told him that his offer to purchase the West Oaks Mall had been
accepted on June 30, 2017, five days before the proof-of-funds letter was received.
See City of Keller, 168 S.W.3d at 815 (undisputed contrary evidence may become
conclusive when party admits it is true).
But even if the timing of the proof-of-funds letter was some evidence of its
influence in the decision of the West Oaks Mall seller to sell the West Oaks Mall to
Mehta, it is not evidence of anything more than an incidental benefit. Carolan’s
undisputed testimony established that the West Oaks Mall seller was satisfied by the
financial information Mehta provided in tandem with Carolan’s independent
due-diligence review of his financial wherewithal, which confirmed Mehta’s
entrepreneurial success, experience with similar transactions, and good reputation.
We therefore hold that the evidence is legally insufficient to establish Mehta wrongly
50
secured or passively received a benefit—an element necessary to Ahmed’s
unjust-enrichment claim. See Ahmed, 2015 WL 222171, at *5–6.
We sustain the portion of Mehta’s fourth issue challenging the legal
sufficiency of the evidence supporting Ahmed’s claim for unjust enrichment. Thus,
we need not address the remainder of Mehta’s issues challenging the trial court’s
judgment on Ahmed’s unjust-enrichment claim. See TEX. R. APP. P. 47.1.
Fraud
In a portion of his sixth issue, Mehta argues that the jury erred in finding that
“Mehta commit[ted] fraud” because the evidence supporting the jury’s fraud finding
was legally insufficient.
Although the trial court did not render judgment based on Ahmed’s fraud
claim, this Court may still address the fraud claim as a basis for affirming the trial
court’s judgment on original submission because the parties have briefed this theory
on appeal. See Boyce Iron Works, Inc. v. Sw. Bell Tel. Co., 747 S.W.2d 785, 787
(Tex. 1988) (“When the jury returns favorable findings on two or more alternative
theories, the prevailing party need not formally waive the alternative findings. That
party may seek recovery under an alternative theory if the judgment is reversed on
appeal.”); Hatfield v. Solomon, 316 S.W.3d 50, 60 n.3 (Tex. App.—Houston [14th
Dist.] 2010, no pet.) (election of alternative theory of recovery may be addressed on
51
original submission if briefed by the parties). Consequently, we will consider
Mehta’s legal-sufficiency challenge to the jury’s fraud finding.
Among other things, Mehta challenges the detrimental reliance element of
Ahmed’s fraud claim.12
More specifically, Mehta argues that a judgment in
Ahmed’s favor cannot be affirmed based on the jury’s finding of fraud because there
was no evidence that Ahmed’s reliance on any misrepresented or undisclosed
material fact caused Ahmed injury. We agree.
As noted, the broad-form question submitted to the jury on Ahmed’s fraud
claim in this case included theories of fraudulent misrepresentation and
nondisclosure. To prevail on his theory of fraudulent misrepresentation, Ahmed had
to demonstrate that he justifiably relied upon a false and material misrepresentation
to his detriment. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001) (“[P]roof that
a party relied to its detriment on an alleged misrepresentation is an essential element
of a fraud claim.”); see also Johnson & Higgins of Tex., Inc. v. Kenneco Energy,
Inc., 962 S.W.2d 507, 524 (Tex. 1998). Likewise, reliance and causation are
necessary elements of a claim of fraud by nondisclosure. Schlumberger Tech. Co.
v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997); BP Am. Prod. Co. v. Zaffirini, 419
12 “Detrimental reliance combines elements of reliance and injury.” Shafaii
Children’s Tr. & Party & Reception Ctr., Inc. v. W. Am. Ins. Co., 417 S.W.3d 614,
623 n.8 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). These are often listed
as separate elements in case law, although combined into one element in the pattern
jury charge and in the trial court’s charge to the jury in this case.
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S.W.3d 485, 506 (Tex. App.—San Antonio 2013, pet. denied) (“Like common-law
fraud, fraud by nondisclosure includes the elements of justifiable reliance and
damage.”).
Ahmed’s fraud theories rest on the evidence that he agreed to let his
Community Bank assets be considered for the proof-of-funds letter because Mehta
misrepresented, or failed to disclose, his intention regarding partnership. Ahmed, in
his briefing, asserts: “Mehta deceived [him] about being partners, wrongfully
acquired the [proof-of-funds] letter based on those lies, and [then] dumped [him]
when convenient.” Viewed in the light most favorable to the jury’s fraud finding,
the evidence that Ahmed allowed McInnes to consider his access to cash at
Community Bank for the proof-of-funds letter may be some evidence that he relied
upon a mispresented or undisclosed material fact. But it is no evidence that he
suffered injury as a result. Ahmed’s own testimony unequivocally established that
he did not contribute any money to the purchase of the West Oaks Mall, that none
of his assets were tied up during the negotiation and closing of the West Oaks Mall
purchase, and that he could have bid to purchase the West Oaks Mall himself but
chose not to. Thus, we hold that there was no evidence presented at trial that Ahmed
relied upon any misrepresented or undisclosed material fact to his detriment and the
evidence is legally insufficient to support the jury’s fraud finding.
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We sustain the portion of Mehta’s sixth issue challenging the legal sufficiency
of the evidence supporting the jury’s finding of fraud.13
Consequently, we need not
address the remainder of Mehta’s issues challenging the jury’s finding on Ahmed’s
fraud claim.14
Outcome: We reverse the trial court’s judgment and render judgment that Ahmed take
nothing against Mehta and Mehta Investments.
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