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Abdullatif v. Choudhri

Court of Appeals of Texas, Fourteenth District

March 30, 2018

OSAMA ABDULLATIF AND ALI MOKARAM, Appellants
v.
ALI CHOUDHRI AND MOKARAM LATIF WEST LOOP, LTD., Appellees

          On Appeal from the 190th District Court Harris County, Texas Trial Court Cause No. 2012-27197

          Panel consists of Chief Justice Frost and Justices Busby and Wise

          MAJORITY OPINION

          KEM THOMPSON FROST CHIEF JUSTICE.

         This appeal arises out of a dispute among the parties concerning the percentage of interest, if any, a purported assignee owns in a limited partnership and in the limited partnership's general partner. Following a jury trial, the trial court disregarded the jury's finding in response to one question, signed a judgment making various declarations as to the purported assignee's interests in the two entities, and awarded trial and appellate attorney's fees to the purported assignee. We conclude that the trial court did not err in disregarding the jury finding. As for the declarations, we conclude that the trial court erred in making some and did not err in making others. We reverse the trial court's judgment and remand for rendition of a new judgment containing declarations consistent with today's opinion. Because our disposition on appeal substantially affects the trial court's judgment, we also reverse and remand the attorney's-fees awards.

         I. Factual and Procedural Background

         Appellant Ali Mokaram is an attorney who sometimes invests in real estate. Appellant Osama Abdullatif ("Latif") is involved in commercial-real-estate investment and other ventures. Mokaram and Latif knew each other through friends and family. Mokaram asked Latif to join him in investing in the Beal Bank Building located at 2500 West Loop South in Houston, and Latif agreed. Mokaram and Latif became equal limited partners in appellee Mokaram Latif West Loop, Ltd. ("ML Partnership"), a limited partnership. The general partner in ML Partnership is Mokaram-Latif General, LLC ("ML General"). Mokaram and Latif signed the Company Agreement for ML General, under which Mokaram and Latif are equal members and managers of the limited liability company. ML General, Mokaram, and Latif signed ML Partnership's Agreement of Limited Partnership. Each agreement places restrictions on the transfer of ownership interests and sets forth procedures for admitting new members or limited partners.

         ML General owned 1% of ML Partnership and managed ML Partnership. Originally, Mokaram and Latif each owned 49.5% of ML Partnership, and each was a limited partner. Originally, Mokaram and Latif each held a 50% interest in ML General, and they were the only members and only managers of ML General.

         Though Mokaram stated that ML Partnership "bought the Beal Bank Building, " Mokaram also indicated in his testimony that ML Partnership actually bought an assignment of a 99-year ground lease of the real property on which the Beal Bank Building was constructed.[1] Because Latif lacked cash to fund the down payment for this purchase, Mokaram funded the full down payment.[2] At the time of the purchase, appellee Ali Choudhri leased office space in the Beal Bank Building. Latif introduced Mokaram to Choudhri. Mokaram and Choudhri became friends. They also loaned each other money and engaged in business transactions. Mokaram and Choudhri handled business in an imprecise way.

         A. The 2008 Transaction

         In 2008, Choudhri purchased a shopping center through Texas REIT, LLC. Choudhri testified that he understood Mokaram and Choudhri to have agreed that Choudhri would give Mokaram a 30% interest in the shopping center owned by Texas REIT in exchange for the following from Mokaram: (1) a 12.5% interest in another real estate venture called 2606 Fannin, LLC ("2606 Fannin"), which allegedly was half of Mokaram's interest in 2606 Fannin, (2) a 25% interest in another property located at 7115 Clarewood Drive (the "Clarewood Property"), which allegedly was half of Mokaram's interest in that property, (3) a 15% interest in the Beal Bank Building, (4) $400, 000 in cash, and (4) a one-half interest in Mokaram's Lamborghini Murcielago, an expensive automobile. They sketched out the exchange on a piece of paper that Mokaram and Choudhri each signed on the same day they signed the documents for the transaction:

         (Image Omitted)

         At Choudhri's instruction, Choudhri's attorney, Bruce Merwin, prepared formal documents for the deal. Merwin created four separate purchase agreements: (1) an agreement under which Mokaram purports to assign, sell, and convey to Choudhri a limited partnership interest in ML Partnership; (2) an agreement under which Mokaram purports to assign, sell, and convey to Choudhri a 12.5% membership interest in 2606 Fannin; (3) an agreement under which Choudhri purports to assign, sell, and convey to Mokaram a 15% membership interest in Texas REIT, LLC; and (4) another agreement under which Choudhri purports to assign, sell, and convey to Mokaram a 15% membership interest in Texas REIT, LLC. Each document contains a merger clause. Mokaram, who did not retain an attorney to represent him in this matter, signed the documents on June 18, 2008. Choudhri also signed the four agreements.

         In the agreement under which Mokaram purports to assign, sell, and convey to Choudhri a limited partnership interest in ML Partnership, the parties do not specify how much of a limited partnership interest is being conveyed, but they state that the interests assigned, sold, and conveyed "equal to" the following:

the ownership of 15% of the [the land and improvements located at 2500 West Loop South, Houston, Texas], out of the 30%[3] limited partnership interest in [ML Partnership] owned by [Mokaram], and said [i]nterests equal to the ownership of 25% of the "Clarewood Property" (hereafter defined) out of the 30% limited partnership interest in [ML Partnership] owned by [Mokaram].

         The document further recites that the "intended economic effect of this transaction is that the interest owned by [Choudhri] in [ML Partnership] provides for a 15% ownership in [the land and improvements located at 2500 West Loop South, Houston, Texas] and a 25% ownership interest in the Clarewood Property. By way of example, the document illustrates the intended economic effect using a hypothetical sale of the Clarewood Property: "[I]f the Clarewood Property sells for $1 million with debt of $500, 000 and closing costs and expenses of $100, 000, then the funds distributable to [Choudhri] from the sale would be $100, 000 (25% of $400, 000)."

         B. The 2010 Transaction

         By October 2010, the relationship between Latif and Choudhri had deteriorated due to a dispute about a different matter. Latif testified that he did not learn about the 2008 transaction until the fall of 2009 (which Choudhri disputed). Latif refused to acknowledge Mokaram's alleged sale and conveyance of an interest in the ML Partnership to Choudhri in 2008.

         Mokaram testified at trial to the events outlined in this paragraph. According to Mokaram, Latif presented Mokaram with an offer to either buy Mokaram's and Choudhri's interests in ML Partnership for $750, 000 or sell his own 49.5% interest to Mokaram and Choudhri for $750, 000. Mokaram discussed Latif's offer with Choudhri. Mokaram and Choudhri agreed that $750, 000 for 50% of the partnership was a good deal because they believed that the Beal Bank Building was worth more than $1.5 million. But, Mokaram lacked the cash to fund the purchase, and Choudhri could not deal with Latif because their relationship was so poor. Mokaram testified that he and Choudhri agreed that Choudhri would give Mokaram $750, 000, Mokaram would use the money to buy Latif's 50% interest in ML Partnership, and then they would divide the interest between them (35% to Choudhri and 15% to Mokaram) so that Choudhri and Mokaram would become 50/50 partners.[4] Choudhri would not give Mokaram the cashier's check for $750, 000, however, unless Mokaram provided "collateral" by signing four assignments to Choudhri of Mokaram's interests in ML Partnership and ML General.

         Choudhri presented Mokaram with four one-page documents (prepared by Merwin) purporting to sell, assign, and transfer to Choudhri the following percentages of Mokaram's interests in ML Partnership and ML General: (1) a 35% limited-partnership interest in ML Partnership; (2) a 35% interest in ML General; (3) a 15% limited-partnership interest in ML Partnership; and (4) a 15% interest in ML General.[5] In each document, Mokaram represents and warrants to Choudhri that the interest "shall be fully and completely transferred to [Choudhri] upon execution of [the assignment], and [Choudhri] shall hereinafter have and possess all beneficial rights and interests incident to the [i]nterest." Each document contains a statement that [a]ll requirements applicable to the transfer of the [i]nterest have been satisfied or, if not satisfied, waived." None of the documents mention any condition precedent. Mokaram signed these four assignment documents on October 29, 2010, as assignor. Mokaram also signed the two assignments of interests in ML Partnership on behalf of ML General, consenting to these two assignments as the general partner of ML Partnership. Mokaram testified that the four assignments (collectively the "Four Assignments") were contingent on Mokaram buying Latif's entire interest in ML Partnership.

         According to Mokaram, he communicated the offer to buy Latif's entire interest in ML Partnership for $750, 000 to Latif on Sunday, October 31, and Latif said he would get back to them. The next day, Monday, November 1, Mokaram deposited the $750, 000 cashier's check from Choudhri into his account. Mokaram claims that, on November 1, Latif told him that he had decided to work things out with Choudhri, that he had changed his mind, and that he did not want to sell his interest in ML Partnership.

         Mokaram testified that he returned to Choudhri and told him they did not have a deal with Latif. Mokaram claims that he and Choudhri agreed the Four Assignments were "null and void" and that there were no assignments. Mokaram claims that, at Choudhri's request, Mokaram returned the $750, 000 by three checks for $400, 000, $225, 000, and $125, 000. But, Mokaram did not take back the Four Assignments he had signed, have them destroyed, or have Choudhri sign a document confirming that the Four Assignments were void or no longer valid. Choudhri later cashed the first two checks, totaling $625, 000, but never cashed the remaining $125, 000 check.

         Choudhri's version of events differed sharply from Mokaram's, and this paragraph relates Choudhri's testimony regarding the 2010 transaction. According to Choudhri, Latif communicated to Mokaram an offer to pay $750, 000 for the interests of Mokaram and Choudhri in ML Partnership, or alternatively, to have Mokaram and Choudhri buy Latif's entire interest in ML Partnership for $750, 000. When Mokaram discussed Latif's offer with Choudhri, Mokaram recommended that the two of them accept Latif's offer to sell their interests to Latif and exit the partnership. Mokaram said that he was no longer interested in being in business with Latif and needed the money. Choudhri then decided not to sell, however, and instead offered to buy Mokaram's 35% interest in ML Partnership for $750, 000, which would make Choudhri a 50% owner with Latif.[6] According to Choudhri, Mokaram agreed and suggested that Merwin prepare the documents so that Mokaram could obtain the money right away. Mokaram also asked that Choudhri pay him the $750, 000 by cashier's check for his interests. Choudhri claimed that the two checks totaling $625, 000 that Mokaram later gave him were not related to the Four Assignments. Choudhri denied receiving a $125, 000 check from Mokaram. Choudhri maintained that $575, 000 of the $625, 000 was to settle a fraud claim that Choudhri had against Mokaram regarding 2606 Fannin, and that the remaining $50, 000 was to repay Choudhri what Mokaram owed him from the 2008 transaction.

         Choudhri testified that he learned about the fraud claim regarding 2606 Fannin after October 29, 2010, the date on which he gave Mokaram the cashier's check for $750, 000, so there would have been no way to deduct the alleged settlement amount from the $750, 000 he gave to Mokaram. There was no written agreement documenting a $575, 000 settlement between them. The only supporting evidence for a $575, 000 transaction appeared in Choudhri's 2010 tax return-filed in 2012 after this lawsuit had begun-reflecting a gross sale price of $575, 000 for the "2606 Fannin Properti[es]." Before that, however, Choudhri had sought loans from two different banks, and in connection with the loan applications he had submitted unfiled tax returns prepared in 2011 and 2012 that did not reflect any such transaction.

         Sometime after Choudhri cashed the two checks totaling $625, 000 in November 2010, John Leontaritis, a mutual friend of Choudhri and Mokaram, met with Choudhri and Mokaram in an effort to get them to resolve their disputes. Leontaritis testified that during the meeting, Choudhri was still upset about 2606 Fannin and that Choudhri said Mokaram still owed Choudhri money based on 2606 Fannin. Leontaritis also testified that before this meeting, Choudhri told him that Mokaram had given Choudhri three checks, that Choudhri had cashed two of the checks, and that Choudhri did not cash the other check (for $125, 000) because the check "got lost."

         C. Execution of the Consent

         In January 2011, Choudhri and his father met with Latif in an attempt to settle a dispute about a different matter. Choudhri brought a proposed "Consent to Transfer" document with him. The document, which Merwin had drafted, did not specify what interest Mokaram had sold to Choudhri, but provided for Latif's irrevocable consent to "any transfers heretofore made by [Mokaram] to [Choudhri] and/or an entity owned by [Choudhri] of a limited partnership interest in [ML Partnership] and a membership interest in [ML General]." Under the terms of the consent, Latif confirmed that, "with respect to any of his rights under the organizational documents relating to [ML General] and [ML Partnership], all requirements to the above-described transfers from [Mokaram] to [Choudhri] have been satisfied or, if not satisfied, waived." Latif signed the consent on January 22, 2011, individually "and in the capacity of a manager and member of [ML General] . . . and "as a limited partner in [ML Partnership]" with the handwritten notation "subject to the agre[e]ment between [Mokaram] and [Choudhri]."

         Latif testified that he understood he was consenting to the 2008 transaction and waiving his right of first refusal. He testified that at that time, he was relying on Choudhri's statement that Choudhri had acquired only 15% of ML Partnership. Latif denied knowing that Mokaram had signed the Four Assignments. Choudhri asserts that the consent covers the 2008 transaction and the 2010 transaction.

         D. The Litigation

         In May 2012, a dispute arose regarding the attempt by Choudhri's sister's medical group to rent space and move the group's office to the Beal Bank Building. ML Partnership filed this lawsuit against Choudhri and a construction contractor, seeking a temporary restraining order, a temporary injunction, and a permanent injunction to prevent these defendants from demolishing or otherwise remodeling any part of the Beal Bank Building, claiming an interest in the building, ML Partnership, or ML General, and transacting business on behalf of ML Partnership or on behalf of ML General. The partnership also sought a declaratory judgment that (1) Mokaram and Latif are both 49.5% limited partners in ML Partnership, and ML General is a 1% general partner in ML Partnership, and (2) Mokaram and Latif both own a 50% membership interest in ML General and are members in that company.[7]

         Choudhri answered the suit, asserted a counterclaim, and joined Latif as a third-party defendant. Choudhri sought a constructive trust, a receivership, and an accounting. He also asserted a claim against Latif for breach of fiduciary duty, and requested declaratory relief, including a declaratory judgment that he is a limited partner of ML Partnership and a member of ML General.

         Mokaram intervened in the lawsuit, seeking declaratory relief concerning his ownership interests in ML Partnership and ML General. He also sought a declaration that the Four Assignments in 2010 were contingent on a condition precedent that never occurred-the purchase of Latif's interest in ML Partnership and ML General. In his original petition in intervention, Mokaram acknowledged assigning Choudhri a 15% interest in the ML Partnership in 2008.

         Mokaram later amended his intervention pleading to seek rescission of the 2008 transaction based on Choudhri's alleged intentional misrepresentation of the value of Texas REIT to induce Mokaram to enter into the 2008 transaction. Mokaram also asserted claims against Choudhri for common-law fraud, statutory fraud, breach of fiduciary duty, and securities fraud in violation of the Texas Securities Act.

         Choudhri counterclaimed against Mokaram, alleging that he conspired with Latif to divert partnership funds and breached fiduciary duties. Choudhri later amended his pleadings to assert additional claims against Latif and Mokaram.

         Latif's Acquisition of Mokaram's Claims and Interests

         In December 2012, Latif purchased all of Mokaram's right, title, and interest in and to ML Partnership and ML General, along with all of Mokaram's rights relating to these ownership interests, including Mokaram's claims in this lawsuit against Choudhri relating to these interests. Mokaram agreed to prosecute his claims against Choudhri in this lawsuit, and Latif agreed to pay the reasonable attorney's fees, costs, and expenses incurred by Mokaram to prosecute these claims. Mokaram also agreed to resign immediately as a manager of ML General. Latif agreed that the assignments of interests by Mokaram to Latif are subject to Choudhri's contentions in this lawsuit that Choudhri owns all of the interests in ML Partnership and ML General originally owned by Mokaram.

         Pretrial Orders

         The trial court signed an agreed order on December 5, 2012, (1) appointing a master in chancery, (2) prohibiting ML Partnership and its agents and partners from engaging in certain actions before rendition of the trial court's final judgment, and (3) ordering that the claims designated as Phase I claims be tried first and separately from the other claims. The trial court later amended the definitions of Phase I claims and the other claims.

         The Phase I Trial

         Shortly before the Phase I trial, the trial court signed an order aligning Choudhri as the plaintiff and Latif and Mokaram (collectively the "Latif Parties") as the defendants for the Phase I trial. The Phase I trial lasted over two weeks. The trial court submitted questions to the jury concerning Choudhri's claim that Mokaram converted Choudhri's interest in the Lamborghini, and Mokaram's claim that Choudhri committed securities fraud in the 2008 transaction, upon which Mokaram sought rescission of the 2008 transaction. The court also submitted the following question concerning the 2010 transaction:

QUESTION NO. 3
Did Mokaram and Choudhri agree that the 2010 assignment was not effective and that Mokaram would return the $750, 000.00 paid by Choudhri?

         The jury answered "yes" to Question 3. The jury found against Mokaram on his securities-fraud claim and failed to find any damages as to Choudhri's conversion claim.

         The trial court signed an interlocutory judgment on the Phase I claims. The trial court's interlocutory judgment deferred trial of attorney's fees and other issues until a later date.

         The Phase I Final Judgment

         After a hearing on attorney's fees, the trial court signed a Phase I final judgment in which the trial court ruled as follows:

(1) The trial court adjudged that Choudhri recover $50, 000 plus prejudgment interest from Mokaram based on a thirty-day loan Mokaram had not repaid.
(2) The trial court ordered that Mokaram take nothing against Choudhri based on Mokaram's Phase I claims.
(3) The trial court decreed that Latif take nothing against Choudhri based on Latif s Phase I claims.
(4) The trial court granted Choudhri's motion to disregard the jury's answer to Question 3.
(5) The trial court denied Latif s motion for directed verdict.
(6) The trial court awarded Choudhri judgment against the Latif Parties, jointly and severally for Phase I attorney's fees and expenses for work in the trial court as well as conditional awards for work on appeal.
(7) The trial court ordered that attorney's fees relating to receivership applications and the defense of such applications be reserved for determination in Phase II, but otherwise, the trial court denied any relief requested by the parties in their Phase I claims to the extent the relief was not granted in the final judgment.
(8) The trial court severed all remaining issues into a separate case to make the Phase I judgment final.
(9) The trial court taxed all court costs against the Latif Parties.

         In its final judgment, the trial court also made the following declarations:

• "[S]ince June 18, 2008, Choudhri has owned 15% [of] [ML Partnership] and 15% of [ML General] [.]"
• "[A]s of October 29, 2010, Choudhri has owned a total (not additional) 49.5% of [ML Partnership] and a total (not additional) 50% of [ML General], with all beneficial rights and interest in the Beal Bank Entities [ML Partnership and ML General] that flow from such ownership, including Choudhri's status as a manager of [ML General] from and after October 10, 2010."
• "The only other owner of interest in [ML Partnership and ML General] from and after October 29, 2010 is [Latif], whose ownership interest in these entities is equal to that of Choudhri from and after October 29, 2010."
• "The October 29, 2010 assignments of interest in these entitles from Mokaram to Choudhri and [Latif s] consent to any transfer of interest in these entities from Mokaram to Choudhri are valid and enforceable."

         The trial court denied Mokaram's and Latif s post-judgment motions. They now challenge the judgment in this appeal.

         II. Issues and Analysis

         Latif and Mokaram contend that the trial court erred by (1) disregarding the jury's finding in response to Question 3, (2) rendering judgment for Choudhri on his declaratory-judgment claim, (3) rendering judgment that Choudhri is a manager of ML General, (4) refusing to clarify what ownership rights Choudhri has in ML Partnership and ML General, (5) misstating the amount ...


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