Appeal from the 53rd District Court Travis County, Texas
Trial Court Cause No. D-1-GN-15-000558
consists of Chief Justice Frost and Justices Wise and Hassan.
ACSWD, LP sued appellant Great Southwest Regional Center, LLC
asserting claims arising from an investment venture. After a
bench trial, the trial court signed a judgment in favor of
ACSWD awarding it $500, 000 in damages. Great Southwest
appealed and raises issues challenging (1) ACSWD's
standing to pursue its claims; (2) the trial court's
interpretation of ACSWD's partnership agreement; (3) the
sufficiency of the evidence supporting certain findings of
fact; and (4) the trial court's awards for damages,
attorney's fees, and prejudgment interest. For the
reasons below, we affirm.
Overview of the EB-5 Investment Program and the
Parties Involved in the Underlying
investment venture at issue sought to capitalize on the EB-5
immigrant investor program administered by the U.S.
Citizenship and Immigration Services ("USCIS"). The
EB-5 program permits foreign investors to obtain a green card
by investing in a U.S. business that creates 10 jobs. To
accomplish this objective, the foreign investor's funds
are invested in a new commercial enterprise which, in turn,
deploys the funds to a job-creating entity. This process is
administered by a regional center approved by the USCIS.
as a regional center, Great Southwest sponsored an EB-5
project involving salt water disposal wells in west Texas.
Great Southwest is 100% owned by Frost Rains Holdings, LLC.
Robert Frost is the Chief Executive Officer of Frost Rains
Holdings and owns 66% of the company; his brother, Kenneth
Frost, serves as the company's president.
Southwest organized ACSWD as a limited partnership to serve
as the new commercial enterprise for the salt water disposal
project, with Great Southwest serving as ACSWD's general
partner. Great Southwest contracted with Atlantic Investment
International Group, Ltd. to locate immigrant investors for
ACSWD. ACSWD was advertised to potential investors as a $500,
000 investment in exchange for a limited partnership interest
in ACSWD. The partnership interests were offered pursuant to
the terms of ACSWD's partnership agreement and private
placement offering memorandum (the "Memorandum").
In relevant part, these documents state:
â¢ ACSWD was organized solely for the purpose of operating as
an investment limited partnership for EB-5 immigrant
â¢ ACSWD would loan 100% of its EB-5 investments to 3:16
Disposal Systems, Series LLC, which would manage the EB-5
project's salt water disposal facilities.
is a Chinese citizen who sought to obtain a green card
through the EB-5 program. Working with Atlantic Investment,
Jun agreed to invest in ACSWD and, in November 2014, wired
Great Southwest $575, 550 for the project: $500, 000 for the
EB-5 investment, $45, 000 for an administration fee, $15, 000
for attorney's fees, and $1, 550 for miscellaneous fees.
Jun signed ACSWD's "Subscription Agreement,"
which stated her limited partnership interest in the entity
was obtained pursuant to the Memorandum. Jun also signed
ACSWD's partnership agreement. No other EB-5 investors
were secured for the ACSWD limited partnership and Jun served
as the sole limited partner with a 99% interest.
January 2015, Jun mailed a letter to Robert Frost requesting
a refund of the $575, 550 she wired for the EB-5 project. Her
money was not returned.
Underlying Proceedings and Bench Trial
Southwest sued Atlantic Investment in February 2015,
asserting Atlantic Investment failed to secure the required
number of EB-5 investors for the ACSWD project. Jun filed a
plea in intervention, asserting claims against ACSWD, Great
Southwest, and Robert Frost. Jun sought a return of the money
wired to ACSWD for the EB-5 salt water disposal project.
Southwest's claims against Atlantic Investment were
severed and referred to arbitration. With respect to
Jun's claims, Great Southwest, Frost Rains Holdings, and
Robert Frost filed a motion to dismiss for lack of
jurisdiction, asserting Jun lacked standing to pursue her
lawsuit because she had executed an assignment of her claims
to a separate entity: SWD Investment Recovery Fund, LLC.
filed a third amended petition in intervention, stating that
she, in her capacity as ACSWD's sole limited partner,
removed Great Southwest as ACSWD's general partner and
appointed SWD Investment Recovery Fund to the role. Jun
nonsuited her claims against ACSWD and, in February 2017,
ACSWD filed a plea in intervention asserting against Great
Southwest, Frost Rains Holdings, Robert Frost, and Kenneth
Frost claims for breach of contract, breach of fiduciary
duties, and fraudulent transfer. ACSWD also requested a
declaratory judgment regarding the status of ACSWD's
general and limited partners.
trial court signed an agreed order to "Realign Parties
and Style of the Case". Following the realignment, ACSWD
was the sole plaintiff asserting claims against Great
Southwest, Frost Rains Holdings, Robert Frost, and Kenneth
Frost. The parties proceeded to a bench trial in January
2018. Kenneth Frost and Jun testified at trial regarding the
transactions at issue; Kenneth Lehrer, an economist,
testified for Great Southwest with respect to ACSWD's
Kenneth Frost's testimony discussed two different loans
from ACSWD: one to 3:16 Disposal Systems, Series LLC (the
"3:16 loan") and a later loan to Frost Rains
Holdings (the "Frost Rains loan"). According to
Kenneth Frost, the 3:16 loan was not "consummated"
and documents evidencing the loan were signed as an
"exemplar" of how the loan to 3:16 Disposal
Systems, Series LLC would be undertaken. The promissory note
for the Frost Rains loan was dated approximately four months
after the 3:16 loan and contained less favorable terms.
Kenneth Frost said the Frost Rains loan was undertaken when
it became clear that the company intended to supervise
operations under the 3:16 loan would be unable to complete
its obligations. The proceeds from the Frost Rains loan were
deposited into Frost Rains Holdings' general bank account
and used to pay expenses incurred by Frost Rains Holdings,
including car loans and credit card bills.
the parties rested, the trial court signed a final judgment
in favor of ACSWD and against Great Southwest, Frost Rains
Holdings, Kenneth Frost, and Robert Frost. The trial court
awarded ACSWD $500, 000 in damages, pre- and post-judgment
interest, and attorney's fees. The trial court's
final judgment also included a declaratory judgment stating:
1. Great Southwest was removed as ACSWD's general partner
and became a limited partner without the right to vote owning
a .99% interest.
2. SWD Investment Recovery Fund became the general partner
of ACSWD with a 1% interest.
3. Jun's limited partnership interest was reduced from
99% to 98.01%.
eight weeks after signing the final judgment, the trial court
issued findings of fact and conclusions of law. The trial
court concluded Great Southwest breached the fiduciary duties
it owed to ACSWD and, through the execution of the Frost
Rains loan, engaged in a "self-dealing, interested
transaction." The trial court determined the Frost Rains
loan benefited Great Southwest "at the expense and to
the detriment of ACSWD." The trial court stated that,
because of these breaches, ACSWD suffered $500, 000 in
trial court also concluded that the Frost Rains loan
constituted a breach of ACSWD's partnership agreement and
the Memorandum. The trial court determined these breaches of
contract caused ACSWD to suffer $500, 000 in damages.
Southwest timely appealed.
Southwest asserts six issues on appeal:
1. The trial court lacked jurisdiction to hear ACSWD's
2. The trial court misapplied ACSWD's partnership
agreement when it declared that SWD Investment Recovery
Fund was ACSWD's general partner.
3. Insufficient evidence supports certain findings of
4. The trial court erred in awarding damages against Great
Southwest on the basis of the Memorandum.
5. The trial court's attorney's fee award
improperly includes fees incurred for claims on which ACSWD
did not prevail.
6. The trial court's pre-judgment interest award is
improperly computed as compound interest and commences on
the wrong date.
address these issues below.
Jurisdiction Over ACSWD's Claims
the trial court lacked subject matter jurisdiction over
ACSWD's breach of contract and breach of fiduciary duty
claims, Great Southwest contends the claims are not ripe for
adjudication because, "until the time for payment has
passed, it is pure speculation whether ACSWD will suffer any
damage" from the differences between the 3:16 loan and
the Frost Rains loan. Therefore, Great Southwest argues,
there is "no evidence" ACSWD was injured as
necessary to pursue its claims.
Governing Law and Standard of Review
is a threshold issue that implicates the trial court's
subject matter jurisdiction. Waco Indep. Sch. Dist. v.
Gibson, 22 S.W.3d 849, 851 (Tex. 2000); Rea v.
State, 297 S.W.3d 379, 383 (Tex. App.-Austin 2009, no
pet.). A claim is ripe if, at the time the lawsuit was filed,
the facts involved show that "'an injury has
occurred or is likely to occur.'" City of Austin
v. Whittington, 385 S.W.3d 28, 33 (Tex. App.-Austin
2007, no pet.) (quoting Patterson v. Planned Parenthood
of Houston & Se. Tex., Inc., 971 S.W.2d 439, 442
(Tex. 1998)). In other words, there must be a concrete injury
for the claim to be ripe. See Atmos Energy Corp. v.
Abbott, 127 S.W.3d 852, 857 (Tex. App.-Austin 2004, no