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Metromarke Multifamily Development Fund I, L.P. v. Rrac Development GP, LLC

Court of Appeals of Texas, Fifth District, Dallas

December 4, 2019


          On Appeal from the 192nd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-16-08666

          Before Justices Pedersen, III, Reichek, and Carlyle



         This is a dispute over the transfer of an interest in a limited partnership (the "Partnership"). Both sides asserted competing claims for breach of contract and declaratory judgment. Following a bench trial, the trial court (1) ruled in favor of appellees RRAC Development GP, LLC and GFD Market Rate Group I, LLC; (2) awarded appellees damages and appellate attorney's fees; and (3) ordered appellant MetroMarke Multifamily Development Fund I, L.P. to convey its Partnership interest to RRAC with an indemnity containing certain specified terms.

         On appeal, MetroMarke contends (1) the trial court erred by concluding MetroMarke "had to release its legal claims relating to management under the indemnity for conveyance of its partnership interest" and (2) there is legally insufficient evidence of MetroMarke "causing damages to RRAC and GFD."[1] We affirm in this memorandum opinion. See Tex. R. App. P. 47.4.

         I. Background

         In 2015, the Partnership had three owners: general partner RRAC owned .1%; limited partner MetroMarke owned 90%; and limited partner GFD owned 9.9%. During that year, the Partnership acquired land in Round Rock, Texas, on which it planned to develop an apartment complex (the "Project").

         Under section 13.1 of the Partnership Agreement, each partner had the right, under certain circumstances, to issue a "Buy-Out Notice" to any other partner requiring that partner to either (1) sell its partnership interest to the issuing partner, or (2) buy out the issuing partner's interest. Upon receiving a Buy-Out Notice, the responding partner had thirty days to elect one of those choices. The Partnership Agreement (1) required that the closing date for any buy-out be within sixty days of the responding partner's election and (2) set the purchase price based on the selling partner's total capital contributions. Further, section 13.1 stated, "The interest being conveyed shall be transferred free and clear [of] any and all Claims, and shall include an indemnity from the Partner conveying its interest in a form acceptable to the Partner acquiring such interest."[2]

         In July 2016, MetroMarke filed this lawsuit against RRAC, alleging Partnership Agreement violations and requesting a declaratory judgment regarding its rights to remove RRAC as general partner.[3] While the lawsuit was pending, MetroMarke issued a Buy-Out Notice to RRAC. RRAC elected on March 30, 2017, to buy out MetroMarke's Partnership interest and sent MetroMarke a proposed buy-out agreement that contained an indemnity. MetroMarke responded by sending RRAC its own proposed buy-out agreement, which contained a differently-worded indemnity.[4]

         RRAC rejected MetroMarke's proposed buy-out agreement, stating (1) RRAC "has been categorically informed by its lenders that [MetroMarke's proposed buy-out agreement] renders them unable and unwilling to proceed to provide the necessary funds to close the transaction" and (2) by insisting on the terms in its proposed buy-out agreement, MetroMarke is "in default of its obligations under the Partnership Agreement including section 13.1 thereof," and has caused the buy-out "to be impossible to consummate."

         RRAC and GFD then asserted counterclaims against MetroMarke for breach of contract- for failing, in essence, to provide an indemnity "in a form acceptable to" RRAC-and for declaratory judgment-again, in essence, that section 13.1 required MetroMarke to provide RRAC an indemnity acceptable to it and allowed RRAC to reject an indemnity that did not indemnify it against those claims or causes of action MetroMarke had brought against RRAC in the lawsuit. RRAC and GFD also requested an order specifically enforcing RRAC's right to acquire MetroMarke's interest in the Partnership for the agreed price, $3, 311, 468.01, and requiring an indemnity in a form acceptable to RRAC.

         MetroMarke filed an amended petition, asserting (1) it "timely and properly" delivered its indemnity "in strict accordance with the Partnership Agreement" and (2) RRAC "wrongfully rejected" MetroMarke's indemnity and "unlawfully demanded that MetroMarke end this lawsuit and waive all claims of whatever nature that MetroMarke has against RRAC and the other defendants," which "is not required by the Partnership Agreement."

         Following a four-day bench trial, the trial court signed a judgment in which it (1) declared that under section 13.1, "MetroMarke was required to agree to indemnify RRAC against any and all claims or causes of action MetroMarke had brought against RRAC in this lawsuit" and "RRAC had the contractual right to reject as unsatisfactory an indemnification that did not indemnify it against those claims or causes of action and to insist on an indemnification that protected it from those claims or causes of action"; (2) awarded RRAC and GFD $2, 764, 555.00 in damages against MetroMarke; (3) ordered that MetroMarke transfer its Partnership interest to RRAC "for the price of $3, 311, 468.01 (less offsets for any amounts adjudged against [MetroMarke] in this Judgment)" and provide RRAC with "an indemnity in form acceptable to [RRAC]"; and (4) provided for attorney's fees to RRAC in the event of an unsuccessful appeal by MetroMarke.

         II. The indemnity obligation

         In reviewing declaratory judgments, we look to the procedure used to resolve the issue at trial to determine the appropriate standard of review. See Tex. Civ. Prac. & Rem. Code § 37.010; Castille v. Serv. Datsun, Inc., No. 01-16-00082-CV, 2017 WL 3910918, at *13 (Tex. App.- Houston [1st Dist.] Sept. 7, 2017, no pet.) (mem. op.). Thus, in this case, we review the trial court's declarations under the standard applicable to contract interpretation, which is de novo. See Compass Bank v. Calleja-Ahedo, 569 S.W.3d 104, 108 (Tex. 2018).

         Our primary objective in construing contracts is to give effect to the written expression of the parties' intent. Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 888 (Tex. 2019). "[A] contract's plain language controls, not what one side or the other alleges they intended to say but did not." Id. We therefore look to "[o]bjective manifestations of intent" and, in doing so, we must "'presume parties intend what the words of their contract say' and interpret contract language according to its 'plain, ordinary, and generally accepted meaning' unless the instrument directs otherwise." Id. If the contract's language can be given a definite legal meaning or interpretation, then it is not ambiguous, and we will construe the contract as a matter of law. See El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 806 (Tex. 2012); see also E.I. DuPont Nemours & Co. v. Shell Oil Co., 259 S.W.3d 800, 805 (Tex. App.-Houston [1st ...

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