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LLC v. Invesco Commercial Enterprises, LLC

Court of Appeals of Texas, First District

August 15, 2019

8-PLUS PROPERTIES, LLC, Appellant
v.
INVESCO COMMERCIAL ENTERPRISES, LLC, Appellee

          On Appeal from the 133rd District Court Harris County, Texas Trial Court Case No. 2015-39745

          Panel consists of Chief Justice Radack and Justices Goodman and Countiss.

          MEMORANDUM OPINION

          Julie Countiss Justice.

         Appellant, 8-Plus Properties, LLC ("8-Plus"), challenges the trial court's judgment, entered after a jury trial, in favor of appellee, Invesco Commercial Enterprises, LLC ("Invesco"), on its claim against 8-Plus for specific performance under a contract to sell commercial property. In three issues, 8-Plus contends that the evidence is legally and factually insufficient to support the jury's finding that 8-Plus agreed to sell the property at issue to Invesco and the trial court erred in instructing the jury.

         We reverse and remand.

         Background

         In its amended petition, Invesco alleged that, on January 19, 2015, it executed a written agreement (the "Contract") with 8-Plus to purchase a property located at 8600 Cullen Boulevard, Houston, Harris County, Texas (the "Property") for $62, 500. On February 11, 2015, Invesco and 8-Plus executed an amended version of the Contract, which added an "as is" clause to section 7A.

         Invesco delivered the executed Contract and $1, 000 in earnest money to First American Title Company, the escrow agent designated in the Contract. First American Title Company issued a commitment for title insurance, which contained a schedule listing various documents 8-Plus was required to provide at or before closing, including a "Resolution of the Managers," the purpose of which was to "confirm who [was] authorized to execute documents on behalf of [8-Plus]." On March 4, 2015, First American Title Company's escrow officer sent an email to 8-Plus requesting the Resolution of Managers document, explaining it was the only thing the officer needed from 8-Plus before the closing on the Property. The officer further advised 8-Plus that "closing could not be scheduled and a closing statement would not be prepared until the Resolution [of the Managers document] was provided."

         As the scheduled closing date approached, Johnny Carroll, a "managing member" of 8-Plus, advised Invesco and First American Title Company that he was having trouble obtaining the Resolution of the Managers document because "his brother decided he no longer want[ed] to sell" the Property. But Johnny, nevertheless, assured Invesco and First American Title Company that the Resolution of the Managers document was "forthcoming." Ultimately, 8-Plus never provided a Resolution of the Managers document. After the scheduled closing date had passed, Johnny again assured Invesco that the document was "forthcoming." "Relying upon [Johnny's] promises and representations, [Invesco] allowed [8-Plus] additional time to perform its obligations under the [C]ontract." However, 8-Plus never furnished the Resolution of the Managers document and, thus, the parties were never able to close on the Property with First American Title Company pursuant to the Contract.

         On May 29, 2015, Invesco sent an email to 8-Plus demanding performance pursuant to the Contract. 8-Plus did not respond. Thus, on June 10, 2015, Invesco sent 8-Plus a written notice of default and a demand for performance. In response to the notice and demand, Johnny called Invesco and stated that his family did not wish to sell the Property. Invesco reiterated its demand for 8-Plus to perform pursuant to the Contract, but 8-Plus "repudiate[d] the [C]ontract and refused to perform." On July 2, 2015, Invesco tendered performance of its obligations pursuant to the Contract at First American Title Company, "including but not limited to, payment of the purchase price via wire transfer." However, "[d]espite numerous demands by [Invesco]," 8-Plus "continues to fail and refuse to sell the Property" pursuant to the parties' Contract.

         Invesco brought claims against 8-Plus for specific performance, trespass to try title, breach of contract, and a declaratory judgment. 8-Plus filed a general denial and specific denial, asserting, among other things, that enforceability of the Contract was "conditioned upon 8-Plus's [other] member-managers approving the sale" and that 8-Plus's obligations to perform under the Contract were "conditional [on] a resolution to sell the Property being approved by 8-Plus's member[-]managers." It also asserted various affirmative defenses.

         The parties filed cross-motions for summary judgment as a matter of law. Invesco argued, among other things, that Johnny had actual authority to execute the Contract on behalf of 8-Plus because he was designated as a "governing person" and "managing member" in 8-Plus's certificate of formation filed with the Texas Secretary of State. In contrast, 8-Plus argued that Johnny lacked authority to execute the Contract on behalf of 8-Plus without unanimous approval from the other seven members of 8-Plus and, thus, no enforceable contract was formed. The trial court denied summary-judgment on all of Invesco's substantive claims, including the issue of Johnny's authority, and the case proceeded to trial before a jury.

         At trial, Johnny testified that he is a member of 8-Plus, a limited liability company, and designated as its registered agent under the certificate of formation on file with the Texas Secretary of State. He also explained that 8-Plus, in its certificate of formation, elected to not have managers and to, instead, be governed by its members. The governing persons listed in the certificate of formation are Johnny and his siblings, who are the remaining members of 8-Plus. Johnny testified that 8-Plus was formed to "manage real estate that [his] dad left" the family when he passed away. Although 8-Plus had begun drafting a proposed company agreement to govern the affairs of the company, it was never completed so there was not one in place at the time the Contract was signed. However, Johnny testified that the members of 8-Plus 'verbally" agreed that "to have anything . . . approved" required "all members [to] approve it, all the members."

         Johnny further testified that he first learned that Invesco was interested in purchasing the Property when he received a phone call from his sister, Glory, who had spoken with a representative of Invesco named Matt Abdallah. Johnny explained that Glory forwarded Invesco's inquiry to him because he "handle[s] contracts" for 8-Plus. He further explained that he has a lot of experience in "negotiating" government contracts, but not necessarily in negotiating commercial contracts such as the one at issue in this case.

         When Johnny later called Abdallah about Invesco's interest in the Property, Abdallah asked him what 8-Plus would "want for the [P]roperty," and Johnny told him to "make [them] an offer" in writing. Johnny later received a written offer from Invesco to purchase the Property for $50, 000. Johnny told Abdallah that $50, 000 would not "even start" negotiations if he were to take that offer to his siblings. Johnny and Abdallah "negotiated a couple of times" and eventually agreed upon $62, 500 as a "good price to submit to the company for approval from other members."

         According to Johnny, he received a written contract from Invesco to purchase the Property for $62, 500, and the Contract included a closing date of March 31, 2015. Johnny reviewed the Contract, proposed revisions, initialed pages where required, and signed the Contract on behalf of 8-Plus as a Limited Liability Company ("LLC") "member" on January 19, 2015. Johnny testified, however, that as far as he was concerned "[they] were still negotiating"; the Contract was was "a negotiating document," an "offer of negotiation" and "not a contract" because all of his siblings had not yet signed it. He further testified that, before the sale could close, "all [of his siblings'] signatures [needed to be] included on the closing documents." Johnny explained that he communicated to Abdallah that he did not intend to sign any offers from Abdallah on behalf of the other members of 8-Plus. Nevertheless, Johnny did not propose a provision preventing the Contract from becoming binding unless and until all members of 8-Plus approve the transaction. Although he maintained that the Contract was "not a binding contract," Johnny admitted that he had read and understood the entire Contract before signing it, including the provision that stated, "[t]his [C]ontract is binding on the parties."

         Further, on February 11, 2015, Johnny and Abdallah agreed to an "as is" amendment to the Contract. Regarding the addition of the "as is" clause, Johnny testified that "some of the members suggested [that he] do it." Johnny and Abdallah also decided to "clean up" the Contract, incorporating Johnny's handwritten revisions from January 19, 2015. Abdallah signed the Contract, again, for Invesco. And Johnny signed the Contract on behalf of 8-Plus as an "LLC member." However, Johnny testified that he told Abdallah at that time that he had "concerns" about his "family members not signing" because "not everybody [had] agreed to it." Even though he signed the amended Contract on February 11, 2015, he testified that he told Abdallah that he still needed his "other seven members to agree."

         Johnny also explained that on both occasions that he signed the Contract, he told Abdallah that he needed him to "[s]end the offer back" with "signature lines for [his] siblings" "so [that] they can sign off on it" because he could "negotiate," but could not "sign for them." He further testified that, regarding the additional signatures from his siblings, Abdallah had told him "don't worry about it, do it at closing." Nevertheless, Johnny admitted that he did not attend the March 31, 2015 closing because he did not believe there was a "binding contract" to sell the Property.

         Abdallah, an asset property manager for Invesco, testified that Invesco became interested in the Property because it is a parking lot adjacent to Farmer's Fresh Meat, which needed more parking spaces for its business. The owner of the Property was listed on the Harris County Appraisal District's website as Orenzer Carroll. He called Orenzer, who told him that she did not "handle these things," but she then put her daughter, Glory, on the phone. Abdallah spoke with Glory and told her that he was interested in purchasing the Property. Glory told him that she would pass along his information to her brother, Johnny, who was "the one who handle[d] all of [their] properties" and "the one in charge."

         A few days later Johnny called Abdallah and introduced himself as calling on "behalf of 8-Plus Properties." Abdallah offered 8-Plus $50, 000 for the Property, which, according to Abdallah, was twenty-five percent above fair market value. Johnny told him that was "something that [they] could work with" and asked Abdallah to put the offer in writing.

         Abdallah used a standardized form promulgated by the Texas Association of Realtors and "simply filled in the blanks" for the names of the seller and buyer, the purchase price, and the closing date. Abdallah also indicated the purchase was for "all cash." A few days after their conversation, on January 8, 2015, Abdallah emailed a completed form to Johnny as Invesco's offer to 8-Plus for the purchase of the Property.

         Upon receiving the email, Johnny called Abdallah to tell him "that price [was] not going to cut it" because it was "too low." When Abdallah asked him what price would be enough to "get the deal done" for him and his family, Johnny told him $70, 000. Eventually, they settled on a purchase price of $62, 500. Abdallah testified that he understood that he and Johnny had reached "a formal agreement." And according to Abdallah, at no point during their conversations did Johnny tell Abdallah that the other members of 8-Plus were not willing to sell. Abdallah understood that Johnny to have been negotiating "on behalf of 8-Plus." Abdallah testified that he revised the Contract to reflect the new agreed-upon purchase price for the Property and sent the revised Contract to Johnny by email. About eleven days later, Johnny returned a signed copy of the Contract to Abdallah, after removing "basically [sixty] percent of the [C]ontract" and also adding some additional language that he wanted included in the Contract.

         Abdallah testified that he took the Contract to Abdullah Kamal, an owner and member of Invesco, for his review. Kamal ultimately initialed Johnny's changes and signed the Contract on behalf of Invesco. Abdallah believed this to be "the absolute final agreement" between Invesco and 8-Plus for the purchase of the Property. He took it, along with a check for the earnest money in the amount of $1, 000 to First American Title Company. He further testified that he would not have "performed" these, and other, [1] "obligations as buyer" if he did not think there was a binding contract in place.

         A couple of weeks later, Johnny called Abdallah "out of the blue" and asked him to meet in person on a 'very urgent matter." At their meeting, Johnny disclosed to Abdallah that there had previously been a gas station on the Property and he requested that Invesco agree to an amendment to purchase the property "as is." At no point during their conversation did Johnny ever tell Abdallah that he needed approval from the other members of 8-Plus to sell the Property.

         According to Abdallah, at all times during their discussions and negotiations, Johnny never mentioned that he needed approval from all of the members of 8-Plus to sell the Property. As Abdallah explained, "[i]t never even came up. He was acting under the official capacity of 8-Plus Properties as the managing member. He was the boss." And there was nothing in the Contract that conditioned the sale of the Property upon the approval from the other members of 8-Plus. Abdallah further testified that Johnny never told him that he needed to add all eight members of 8-Plus to the signature page. However, Abdallah also testified that "of course [he] knew [that Johnny] was consulting [with] his family members and LLC members" and Abdallah agreed that he knew that Johnny's family would have a say in whether or not the property could be sold.

         Abdallah additionally explained that, as the closing date approached, Johnny called him "many times" asking when they were "going to close" because he was 'very eager to sell this piece of property." But Abdallah admitted he had never seen any signed document saying Johnny alone had the authority to sell the Property.

         Kamal, an attorney and member of Invesco, testified that by the time he received the Contract for Invesco to review and sign, it had already been signed by "the seller." Before signing the Contract on behalf of Invesco, he performed due diligence to determine whether 8-Plus was a "real entity," whether the "person representing the entity ha[d] authority to do so," and whether "the nature of the agreement that they are agreeing to [was] within the scope of that entity." He said he visited the Texas Secretary of State's website and spoke with a representative of the office to confirm that 8-Plus was a member-managed LLC and that Johnny was a member-manager. He also confirmed that it was organized "for any lawful purpose." Kamal further testified that he accepted and initialed all changes proposed by Johnny and signed the Contract on behalf of Invesco and as a member of that LLC.

         Milton Carroll, Johnny's brother and another member of 8-Plus, testified that he had seen the certificate of formation for 8-Plus and was not aware of another agreement that governed the LLC. He further testified that Johnny told him about Invesco's offer to purchase the Property, but he and at least two other member-siblings were opposed to the sale. He testified that Johnny did not have the authority to execute the Contract on behalf of 8-Plus because all eight of the member-siblings must agree to sell any of 8-Plus's properties and "no one person can obligate the other seven [siblings] to anything." When asked if the certificate of formation limited Johnny's authority to act on behalf of 8-Plus, Milton answered that it "says what it says."

         The trial court provided the parties with its proposed charge, which included the following question and instruction:

QUESTION NO. 1
Did 8-Plus agree to sell the real property located at 8600 Cullen Blvd., Houston, Texas, to Invesco?
In deciding whether the parties reached an agreement, you may consider what they said and did in light of the surrounding circumstances, including any earlier course of dealing. You may not consider the parties' unexpressed thoughts or intentions.
A party's conduct includes the conduct of another who acts with the party's authority or apparent authority.
Authority for another to act for a party must arise from the party's agreement that the other act on behalf and for the benefit of the party. If a party so authorizes another to perform an act, that other party is also authorized to do whatever else is proper, usual, and necessary to perform the act expressly authorized.
Apparent authority exists if a party (1) knowingly permits another to hold himself out as having authority or, (2) through lack of ordinary care, bestows on another such indications of authority that lead a reasonably prudent person to rely on the apparent existence of authority to his detriment. Only the acts of the party sought to be charged with responsibility ...

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