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Alahmad v. Abukhdair

Court of Appeals of Texas, Second District, Fort Worth

January 30, 2014






I. Introduction

Appellant Mamoon N. Alahmad (hereinafter Mike) and Appellee Ismail "Sam" Abukhdair created a business together for the purpose of purchasing a convenience store; they subsequently decided to dissolve their business relationship and entered into a "buyout" transaction concerning the convenience store; the buyout transaction involved several documents, including a dissolution agreement, a deed of trust, and a security agreement. Sam sued Mike, alleging fraud by material misrepresentation and by omission concerning the buyout transaction and the associated documents. Mike counterclaimed for breach of the various aspects of the buyout transaction. A jury found for Sam on the fraud claims and awarded actual damages to Sam; the jury also found by clear and convincing evidence that the harm to Sam resulted from intentional fraud and awarded exemplary damages to Sam. The jury found for Mike on his counterclaim against Sam and awarded Mike actual damages in the same amount as the exemplary damages that it awarded to Sam. The trial court signed a judgment on the jury's verdict, crediting the jury's award to Mike against the total amount Mike owed to Sam based on the jury's award to Sam.

Mike perfected this appeal and in six issues argues that the trial court erred by not granting him a new trial because the evidence is legally and factually insufficient to support the jury's findings. Mike also contends that the trial court erred by offsetting the damage awards. We will affirm.

II. Factual and Procedural Background

Mike and Sam were the only two witnesses at trial. They gave divergent testimony on the facts surrounding the lawsuit, as set forth below.

A. Relationship Between Mike and Sam

1. Mike's Testimony

Mike testified that he and Sam met at a social event in California in 2004 while Mike was a branch manager at U.S. Bank. Sam came to the bank where Mike worked. At the meeting, Sam talked with Mike about Sam's portfolios and real estate transactions. U.S. Bank later fired Mike; Mike testified that they used the excuse that he had allegedly looked at a family member's account, which was a violation of U.S. Bank's policies, but Mike believed that he was fired because there had been a change in upper management.

Mike testified that he did not tell Sam anything about his business background before he went into business with Sam. Mike denied giving Sam a copy of his résumé[2] but admitted telling Sam that he had an MBA.[3] Mike testified that he had disclosed to Sam that he had some financial problems in his past and that he had filed bankruptcy.

2. Sam's Testimony

Sam also testified that he and Mike met in California in 2004 at a social event. Mike told Sam that he was a "banker, investment expert-; that he had worked for Morgan Stanley, Wells Fargo, and the Meyers Group; and that he was working for U.S. Bank. Mike solicited Sam's banking and investment business, and Sam opened two accounts—a business checking account, in which he deposited $15, 000, and an investment account, in which he deposited $100, 000—with Mike's bank. Sam said that Mike provided him with investment advice regarding his funds.

After Mike was terminated from U.S. Bank, he hand-delivered his résumé to Sam at Sam's business in Sacramento.[4] At that point, Mike was looking for a job, and Sam wanted to know his qualifications. Sam testified that he felt like Mike was qualified to purchase a convenience store based on his résumé and his knowledge about businesses. Mike did not tell Sam that he had filed for bankruptcy. Sam testified that would have made a difference in his decision to partner with Mike.

B. Purchase of the Convenience Store

1. Mike's Testimony

Mike said that he originally looked for a convenience store in Arizona and that Sam told him that they should look in Texas because Sam has relatives in Texas. Mike responded, "Sure, great, great. Great friend of mine, a guy with 29 years plus experience in the convenience stores and the real estate, I said, [']Why not.[']" Mike testified that they decided on a convenience store in Arlington known as LD's Shortstop and that they both participated in the negotiations.[5] Mike testified that both he and Sam did the due diligence prior to the purchase; they reviewed the store's financial statements, visited the store multiple times, met with the owner, looked at the taxes and sales reports, and "watched inventories and traffic." When asked whether he had investigated the taxes or researched what was done on the liens against the property, Mike testified that was why they had hired attorneys. Mike said he followed Sam's lead on the purchase because Sam had over two decades of experience. Mike denied providing Sam with his opinion of what the store was worth.

In August 2006 during the negotiations to purchase LD's Shortstop, Mike sent an email[6] to Laurie D'Alleva, the owner of LD's Shortstop, stating that they needed to find a way not to flag the 2003 property tax lien;[7] otherwise, it would raise "so many red flags." Mike explained to Laurie that he was worried about raising red flags to the attorneys, specifically Legacy Bank's attorneys and the broker's attorneys. At trial, Mike denied that he was hiding tax liens from Sam and that he had signed a side agreement with Laurie to hide from Sam the problem with the unpaid 2003 property taxes. When Plaintiff's Exhibit 7 was admitted, showing a September 6, 2006 agreement between Mike and Laurie that required Laurie to pay a portion of the unpaid 2003 property taxes and that required Mike to pay the remainder, Mike testified that the signature on the document was not his.

Victor Waid, Sam's attorney in Sacramento, hired Jeff Hacker to represent Mike and Sam in the transaction to purchase LD's Shortstop. Mike testified that they entered into a partnership agreement in September 2006 to form SAMIK, LLC and that he owned 49.5%. To make sure that the store could continue to sell beer and wine, Mike testified that they held on to the seller as a one-percent owner. Mike testified that he and Sam bought LD's Shortstop and the real estate on which it was located. He said that they bought the corporation "as is" in order to "hold on to everything the way that it was, the [Texas Alcoholic Beverage Commission] license, the lottery, and the tobacco license."

When Legacy Bank—which was the holder on the note for LD's Shortstop—found out there was a change in ownership, it called the note, and Mike and Sam had to pay it off; Mike loaned Sam $300, 000, and Sam paid the remaining $888, 000. When Mike loaned Sam $300, 000 for the Legacy Bank note, Mike said that he and Sam had an oral agreement that Mike's payment included his half of the attorney's fees to Legacy Bank.

After the purchase, Mike ran the day-to-day operations of the convenience store. Early in November 2006, Mike sent Sam $12, 000, which represented his share of the net profit. In December 2006, Mike sent Sam more money because the store was continuing to show a profit. Mike testified that he did not remember the amount of sales taxes that he had paid during the period that he was at the store. Plaintiff's Exhibit 29 was thereafter admitted, which contained sales tax reports for the time period covering October 10, 2006 through April 2, 2007. Mike testified that the reports show total sales of zero and total taxes due of zero, that Laurie had filed the reports in October 2006 and January 2007, that Mike had filed the reports in November and December 2006 and February 2007, and that Sam had filed the report dated April 2, 2007.[8] Sam's last name is misspelled in the April sales tax filing; Mike denied that he had filed that return. Despite showing zero sales and zero sales tax due, Mike testified that the sales tax that he had paid could have been in excess of $5, 000 but was less than $10, 000.

Although Mike had testified previously in his deposition that he did not remember any problems after they bought the store, he testified at trial regarding numerous problems with the store. Mike found out in early 2007 that there was a problem with TABC. Mike immediately contacted Sam. The problem was not fixed while Mike was there, but Mike testified that the store did not lose its liquor license. Mike testified that from day one, there were problems with issuing money orders. Mike denied writing money orders for himself for personal reasons without reimbursing the store. Sam completed paperwork to obtain a new permit to sell money orders, but it never got approved. Mike testified that they lost the tobacco license in early March 2007 because he had purchased cigarettes from a person who was working for Sam's Club. Mike testified that the tobacco license was re-obtained two weeks later while he was still at the store.

2. Sam's Testimony

Sam and Mike began discussing the idea of purchasing a convenience store early in 2006 after Mike mentioned that he had worked at a Shell gas station in Roosevelt and was familiar with the business. Mike mentioned to Sam that he was researching the internet for business locations in Arizona and Texas. Mike told Sam that he had a friend and some uncles who had bought convenience stores in Dallas and were making good money, so he was going to explore that area for a location.

Mike invited Sam to come to Texas to look at some stores and give him advice on different locations. Sam came to Texas twice with ...

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