Shawn Ibrahim, Inc., Mahmood Akhtar and Muhammad Amin v. Houston- Galveston Area Local Development Corporation ( 2019 )

Opinion issued July 25, 2019
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-18-00195-CV
———————————
SHAWN IBRAHIM, INC., MAHMOOD AKHTAR AND MUHAMMAD
AMIN, Appellants
V.
HOUSTON- GALVESTON AREA LOCAL DEVELOPMENT
CORPORATION AND SUNNYLAND DEVELOPMENT, INC., Appellees
On Appeal from the 113th District Court
Harris County, Texas
Trial Court Case No. 2016-40070
OPINION
Appellees Houston-Galveston Area Local Development Corporation (CDC)
and Sunnyland Development, Inc. (Sunnyland) were both involved in financing a
construction project undertaken by appellants Shawn Ibrahim, Inc., Mahmood
Akhtar, Ibrahim’s president, and Muhammad Amin, another individual associated
with Ibrahim (collectively, Ibrahim). Ibrahim sued both CDC and Sunnyland for
breach of contract, fraud, and other causes of action, and the trial court granted
summary judgment dismissing all of Ibrahim’s claims. In two issues on appeal,
Ibrahim argues that the trial court erred in granting summary judgment in favor of
CDC and Sunnyland. We affirm.
Background
This case arises out of business relationships among Ibrahim, Sunnyland,
and CDC entered into for the purpose of financing a construction project.
A. The Project
Starting in 2004, Ibrahim initiated a project to build a truck stop and
restaurant complex in La Porte, Texas (the Project). Sunnyland was the Project
developer, and a related company, Suncoast Environmental and Construction, Inc.
(Suncoast), was the contractor. The total estimated cost of the Project was
$3,711,000.
As a small business, Ibrahim sought to take advantage of special financing
available through the U.S. Small Business Association (SBA) pursuant to the
Small Business Investment Act, which provides for a special loan program for the
financing of fixed assets by small businesses made through local development
companies (the 504 Loan Program). See 15 U.S.C. §§ 695–697g. As part of this
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program, the SBA identifies and approves certified development companies to
participate in its lending program. Id. § 697e. Here, CDC was the certified
development company that facilitated Ibrahim’s SBA loan.
The SBA agreed to provide $1,012,000 in secured funding for the Project
through CDC. Ibrahim obtained private funding through Sterling Bank, which
provided a loan for fifty percent of the Project costs and also provided a smaller
“interim” loan to allow Ibrahim to complete construction on the Project until the
loan through the SBA could close and be used to repay the interim loan.
Additionally, Ibrahim itself was required to contribute more than $800,000 to the
funding of the Project. Ibrahim needed a “gap” loan of $200,000 to cover its
portion of the Project funding, and it obtained this loan from Sunnyland.
The exact nature of the agreements and relationships between the parties is
set out in the documents executed with regard to the Project and its funding.
B. The Debenture Guarantee
On July 28, 2005, the SBA executed its “Authorization for Debenture
Guarantee (SBA 504 Loan),” guaranteeing, subject to certain conditions, “a 20
year Debenture (‘Debenture’) in the amount of $1,012,000.00 to be issued by CDC
and used to fund a loan (‘504 Loan’) to assist” Ibrahim in its completion of the
Project (Debenture Guarantee). The Debenture Guarantee identified the Project
costs as totaling $3,711,000, and it stated that the SBA would provide a loan
3
accounting for 26.45% of the Project costs plus certain administrative costs for a
total “Debenture Amount” of $1,012,000.
The Debenture Guarantee also identified several other sources of funding. It
stated that Sterling Bank would provide $981,652 in interim financing, to be “paid
off by the Debenture” following completion of construction and closing on the 504
Loan through the CDC. It also contemplated that Sterling Bank would provide fifth
percent of the Project costs, or $1,855,348, in “permanent project financing,” and it
placed certain conditions on Sterling Bank’s note and loan documents, such as
providing that Sterling Bank’s loan could not “be cross-collateralized with other
financing” and requiring Sterling Bank to execute an agreement confirming that its
note and loan documents “do or will comply” with the SBA conditions.
As a condition of authorizing the funds, the SBA required in the Debenture
Guarantee that Ibrahim contribute 23.55% of the Project’s costs, or approximately
$874,000, and it provided that the:
(1) Contribution may be in cash, land or other property acceptable to
SBA;
(2) Contribution may come from [Ibrahim’s] own resources, CDC, or
another source;
(3) If any of the contribution is borrowed and secured by any of the
Project Property, the resulting obligation must be expressly
subordinate to the liens securing the Promissory Note (“Note”) in
favor of CDC and may not be repaid at a faster rate than the Note
unless prior written approval is obtained from SBA. A copy of any
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debt instrument evidencing the obligation must be supplied to CDC at
or prior to 504 Loan Closing.
The Debenture Guarantee further provided, “At or prior to the 504 Loan
Closing, the Borrower [Ibrahim] must execute a Note in favor of CDC. The CDC
must assign the Note to SBA.” The Debenture Guarantee also stated, “CDC must
execute a satisfactory written assignment to SBA of its interest in the Note, lease
and all collateral documents executed by the Borrower and guarantors.”
The Debenture Guarantee also anticipated the need for Ibrahim to obtain
“gap” or “standby” financing from Sunnyland for a portion of its required
contribution to the Project costs, providing:
At or prior to 504 Closing, CDC [is] to obtain Standby Creditor’s
Agreement from Sunnyland Development, Inc., for $200,000.00, plus
all accrued and future interest (Standby Debt). No payment of
principal or interest is to be made on the Standby Debt during the term
of the Loan. Standby Creditor [Sunnyland] must subordinate any lien
rights in collateral securing the Loan to CDC’s right in the collateral,
and take no action against Borrower or any collateral securing the
Standby Debt without CDC’s consent. CDC must attach a copy of the
Standby Note evidencing the Standby Debt to the Standby Creditor’s
Agreement.
In August 2005, both CDC and Ibrahim executed an “Acceptance by
Borrower and CDC” agreeing to fully comply with the terms and conditions of the
Debenture Guarantee.
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C. Sunnyland Note
As anticipated by the Debenture Guarantee, Ibrahim borrowed $200,000
from Sunnyland as “standby” financing. Ibrahim executed the promissory note in
favor of Sunnyland for the $200,000 “Standby Debt” on December 19, 2005
(Sunnyland Note). The Sunnyland Note was personally guaranteed by Akhtar and
Amin.
The Sunnyland Note provided that “[t]he Principal Amount and interest are
due and payable in equal monthly installments of TWO THOUSAND NINE
HUNDRED THIRTY AND 04/100 DOLLARS ($2,930.04), on the first day of
each month, beginning July 1, 2006 and continuing until the unpaid principal and
accrued, unpaid interest have been paid in full.” The Sunnyland Note was secured
by a deed of trust on a portion of the real property involved in the Project. The
Sunnyland Note further provided that “[t]he liens securing this note are subordinate
to the 2 liens securing two notes in the original principal amounts of [$1,855,000]
and [$982,000], respectively, both being of even date herewith, and executed by
Shawn Ibrahim, Inc., payable to the order of Sterling Bank.” The Sunnyland Note
further enumerated conditions in which default would occur, including if Ibrahim
failed to make a payment, and it provided for acceleration of the amount due and
certain late fees and interest in the event of default.
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Thus, under the terms of the Sunnyland Note, Ibrahim’s first payment to
Sunnyland was due July 1, 2006. However, Ibrahim failed to make any monthly
payments, beginning in July 2006.1
D. 504 Loan Agreement & Standby Creditor’s Agreement
Construction of the Project was completed by January 2008, and, on January
24, 2008, the parties moved forward with closing the 504 Loan as contemplated by
the Debenture Guarantee.
The “504 Loan Agreement” was entered into between CDC as the lender
and Ibrahim as the borrower “in participation with and for the benefit of the
[SBA].” The recitals at the beginning of the 504 Loan Agreement stated, in
relevant part:
Borrower [Ibrahim] applied to Lender [CDC] for a $1,128,000 loan
(the “Loan”) under the SBA 504 Loan Program. Lender has
conditionally agreed to extend the Loan to the Borrower. The Loan
will be used to finance or refinance a project described in the
[Debenture Guarantee]. The Loan will be evidenced by the Note 2 and
by the books and records of Lender and the [Central Servicing Agent
appointed by Lender and accepted by Borrower in the Servicing
Agent Agreement accompanying the closing documents]. The Loan
1
Instead, Ibrahim made only seven payments on the Sunnyland Note, totaling
$57,000, between August 2008 and October 2010.
2
The 504 Loan Agreement expressly identified the “Note” as being “SBA Form
1505,” executed with the other loan closing documents, and evidencing the Loan
in the amount of $1,128,000 executed by Ibrahim, payable to CDC, and “assigned
to the SBA.”
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will be secured by this Agreement and the other Loan Documents.3
Lender will issue a debenture to fund the Loan. The debenture will be
guaranteed by the SBA. The Note and all liens securing the Note will
be transferred from Lender to the SBA to secure the SBA’s guarantee
of Lender’s Debenture.
Like the Debenture Guarantee, the 504 Loan Agreement provided that the Note
and accompanying liens would be assigned by CDC to the SBA and that, “[a]fter
said assignment, the SBA will be entitled to enforce the terms of the Note, this
Agreement, and the rest of the Loan Documents.” It further provided that CDC
“will remain as a servicing agent for the Loan and will serve as such at the pleasure
of the SBA.”
The 504 Loan Agreement further provided for the disbursement of loan
proceeds, stating that the main portion of the loan would be disbursed to Sterling
Bank to refinance the interim funding, and the remainder would be disbursed to
cover the enumerated administrative costs. The 504 Loan Agreement provided for
repayment of the loan over the next twenty years in monthly installments.
The 504 Loan Agreement also identified conditions that would constitute a
default, including that “[a] default will have occurred if Borrower [Ibrahim] does
not make a payment when due under the Note [securing the 504 Loan],” if Ibrahim
3
The 504 Loan Agreement defined “Loan Documents” as “the documents, as
modified, that are now or hereafter executed in connection with or as security for
the Note, including without limitation, this Agreement and any servicing agent
agreements, guarantees, deeds of trust, security agreements, certifications, and
affidavits.”
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“[d]oes not disclose . . . any material fact to Lender [CDC] or SBA,” or if Ibrahim
“[b]ecomes the subject of a civil or criminal action that Lender believes may
materially affect Borrower’s ability to pay the [504] Note.” The 504 Loan
Agreement expressly referenced the Debenture Guarantee, stating, “It is the
intention of the Borrower and Lender that this Agreement mirror the terms
contained in the [Debenture Guarantee]. In the event of a conflict between the
terms of this Agreement and the [Debenture Guarantee], the [Debenture
Guarantee] will control.”
At the same time that the 504 Loan Agreement was executed, CDC and
Sunnyland likewise executed the Standby Creditor’s Agreement required by the
Debenture Guarantee for the 504 Loan to close. The Standby Creditor’s Agreement
was signed by Ajaz Siddiqui, as the president of Sunnyland, and James Walsh as
the CDC loan officer. Neither Ibrahim nor Akhtar or Amin personally was a party
to this Agreement.
The Standby Creditor’s Agreement expressly referenced the 504 Loan made
to Ibrahim, and it cited the “authorization” for the loan: “the Authorization for
Debenture Guarant[ee], as amended, issued by the SBA in connection with the”
504 Loan made through CDC. The Standby Creditor’s Agreement identified
Shawn Ibrahim, Inc., as the “borrower” and “Standby Debtor”; it identified
Sunnyland as the “Standby Creditor”; and it recognized CDC as the lender and
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certified development company authorized by the SBA. The Standby Creditor’s
Agreement also identified the “Standby Debt” as being the “$200,000 promissory
note attached (Sunnyland Note).” It further provided:
To induce CDC to make the CDC Loan to Borrower, and in
consideration of the making by CDC of the CDC Loan, Standby
Creditor hereby represents, warrants and covenants to and with CDC,
its successors and assigns, as follows:
1. There is owing by Standby Debtor to Standby Creditor the amount
of the Standby Debt.
2. Standby Creditor agrees:
a. To accept no further payments on the Standby Debt except as
permitted in the [Debenture Guarantee].
b. To turn over to CDC, within 15 days of receipt, payments
received by Standby Creditor from Standby Debtor in violation
of this Agreement.
c. To take no action to enforce claims against Standby Debtor
on the Standby Debt, without written consent from CDC, until
the CDC Loan is satisfied.
d. To take no action against Standby Debtor’s collateral,
without written consent from CDC, until the CDC Loan is
satisfied.
e. That all liens and security interests securing the Standby Debt
are secondary and inferior to all liens and security interests
securing the CDC Loan.
f. To sign any other documentation required by CDC to
subordinate the liens and security interests securing the Standby
Debt to the liens and security interests securing the CDC Loan.
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3. CDC, in its sole discretion, may take any action without affecting
this Agreement, including but not limited to the following:
a. Modify the terms of the CDC Loan.
b. Grant an extension or renewal of the CDC Loan.
c. Defer payments or enter into a workout agreement on the
CDC Loan.
d. Release or substitute collateral securing the CDC Loan.
e. Forbear from collecting on existing collateral or requiring
additional collateral.
f. Declare a default on the CDC Loan and notify Standby
Creditor to stop accepting payments.
g. Agree to release, compromise, or settlement of the CDC
Loan.
4. This Agreement applies to any successor to the Standby Creditor or
assignee of the Agreement or of the Standby Debt, including any
bankruptcy trustee or receiver or guarantors or sureties of the Standby
Debt.
5. Additional Loans made by Standby Creditor to Standby Debtor will
be subject to the terms of this Agreement, unless CDC agrees
otherwise in writing.
According to the declaration of Jack Steele, the executive director of CDC,
following the execution of the 504 Loan Agreement between CDC and Ibrahim,
CDC “assigned all of its rights in the Loan Documents to the SBA but remain[ed] a
‘servicing agent’ for the SBA.” However, CDC did not provide any documents
effectuating the assignment of its interest in the 504 Loan to the SBA.
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E. Sunnyland Note Suit
Several years after the 504 Loan closed in 2008, presumably while Ibrahim
was still making payments on the 504 Loan, Ibrahim became dissatisfied with the
work Sunnyland and Suncoast had completed on the Project.
On January 14, 2011, Ibrahim filed suit in the 61st District Court of Harris
County against Sunnyland, Suncoast, and the principals of those companies for
breach of the construction contract and construction defects, among other claims.
Sunnyland counterclaimed against Ibrahim for the amounts due on the Sunnyland
Note, eventually joining Akhtar and Amin as parties in their capacities as
guarantors on that Note (the Sunnyland Note Suit). Ibrahim settled its claims
against Sunnyland and Suncoast, and Sunnyland’s counterclaim for the amounts
due on the Sunnyland Note went to a bench trial.
The trial court in the Sunnyland Note Suit found in favor of Sunnyland and
ordered Ibrahim, Akhtar, and Amin, jointly and severally, to pay $453,667.59 as
the amount then due under the Sunnyland Note and $63,591.79 as reasonable and
necessary attorney’s fees.
A panel of this Court affirmed the judgment of the trial court. See Shawn
Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc., No. 01-14-00583-CV, 2015 WL
4043242, at *1 (Tex. App.—Houston [1st Dist.] July 2, 2015, pet. denied) (mem.
op.). In that opinion, this Court characterized the Sunnyland Note Suit as “a suit to
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collect on an unpaid promissory note.” Id. at *1. One of the issues raised by
Ibrahim, Akhtar, and Amin in that appeal was whether the trial court
“misinterpreted a standby creditor’s agreement that [Ibrahim alleged would]
preclude[] judicial enforcement of the [Sunnyland Note], thus barring a judgment
against [Ibrahim and the guarantors Akhtar and Amin].” Id. In analyzing the
effect of the Standby Creditor’s Agreement on the enforcement of the Sunnyland
Note, this Court recounted Ibrahim’s contention that “Sunnyland did not meet the
conditions precedent required by the standby creditor’s agreement before it sued,
which in turn bars it from enforcing the note” and that “Sunnyland had the burden
to show conditions precedent[, i.e.,] that the [504 Loan] was satisfied and that the
[CDC had given] its written consent for Sunnyland to enforce the note.” Id. at *3.
Sunnyland argued, however, that Ibrahim failed to plead as an affirmative defense
that the Standby Creditor’s Agreement precluded enforcement of the Sunnyland
Note. Id. at *4.
This Court held that the parties had tried the issue of Ibrahim’s affirmative
defense under the Standby Creditor’s Agreement by consent, observing that “[t]he
standby creditor agreement was introduced at trial and discussed multiple times
during witness testimony, without an objection from Sunnyland.” Id. In
considering the merits of Ibrahim’s claim, this Court held, “Although Ibrahim
proffered evidence of the standby agreement, it did not provide evidence about
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whether the [504 Loan Agreement] had been breached or whether [the CDC] had
consented to Sunnyland’s suit.” Id. This Court further held that, because Ibrahim
provided only a partial reporter’s record and did not raise the issue of whether
Sunnyland breached the Standby Creditor’s Agreement with the CDC in its
statement of issues on appeal, the Court was required to “presume that the trial
court heard evidence to support its judgment that the standby agreement does not
bar a recovery on the note due to any failure to comply with a condition
precedent.” Id.; see also TEX. R. APP. P. 34.6 (governing filing of partial reporter’s
record and providing that partial record will be considered sufficient to review
issues identified in statement of points or issues to be presented on appeal that is
included in request for partial record); Bennett v. Cochran, 96 S.W.3d 227, 229–30
(Tex. 2002) (holding that without statement of points of issues, courts presume that
omitted portions of record support trial court’s findings). This Court ultimately
affirmed the trial court’s judgment in the Sunnyland Note Suit in favor of
Sunnyland. Shawn Ibrahim, Inc., 2015 WL 4043242, at *6.
CDC did not participate in the Sunnyland Note Suit in any way, and the
record indicates that it did not receive notice of those proceedings until, at the
earliest, September 2014. Akhtar filed a declaration stating that he contacted CDC
in September 2014, about six months after the final judgment in the Sunnyland
Note Suit, while the case was pending in this Court on appeal. He stated that he
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informed a woman named Brenda Edwards that Sunnyland had violated the terms
of the loan documents, including the Standby Creditor’s Agreement, by seeking
payment on the Sunnyland Note. CDC disputes that it received this notice and
contends that Ibrahim never sought its involvement in the Sunnyland Note Suit
proceedings.
F. Present Suit against CDC and Sunnyland
Ibrahim filed the present lawsuit on June 12, 2016. In its petition, Ibrahim
set out facts establishing the contractual relationships discussed above.
Ibrahim argued in its petition that the Debenture Guarantee “identified the
Sunnyland Note” and expressly prohibited any payment of principal or interest on
the Sunnyland Note during the term of the 504 Loan. The pleadings also asserted,
It was the clear intention of the SBA and CDC to prevent Sunnyland
from requiring, collecting, or receiving payments on the Sunnyland
Note before the 504 Loan was satisfied. As was intended, Ibrahim
relied on the Authorization [i.e., Debenture Guarantee] and the
Standby Creditor’s Agreement, and did not make regular or timely
payments on the Sunnyland Note.
Ibrahim argues that Sunnyland violated the Standby Creditor’s Agreement when it
sued to collect on the Sunnyland Note and obtained the resulting judgment,
affirmed by this Court, for payments due under the Sunnyland Note and attorney’s
fees—$547,259.38 plus interest. Ibrahim further alleged that Sunnyland “continues
to take action” to enforce its claim on the Sunnyland Note in violation of the
Standby Creditor’s Agreement and that “[t]he CDC was notified and, with actual
15
notice and knowledge of Sunnyland’s violations, is failing to take action to enforce
the Standby Creditor’s Agreement against Sunnyland.”
Based on these facts and allegations, Ibrahim alleged causes of action
against CDC and Sunnyland for breach of contract, promissory estoppel, fraud, and
negligent misrepresentation. Ibrahim sought damages consisting of the amount due
under the final judgment in the Sunnyland Note Suit plus the attorney’s fees and
other expenses that it incurred in litigating the Sunnyland Note Suit.
On September 9, 2017, CDC filed its motion for summary judgment.4 CDC
asserted multiple traditional and no-evidence grounds for summary judgment
dismissing all of Ibrahim’s claims against it. Primarily, CDC asserted that none of
the Loan Documents created a duty to Ibrahim to enforce the Standby Creditor’s
Agreement against Sunnyland, nor could the Loan Documents be construed as a
representation that CDC would so enforce the Standby Creditor Agreement. CDC
also moved for summary judgment on various affirmative defenses such as waiver
and prior material breach. CDC further asserted that Ibrahim had no evidence of
4
This was actually CDC’s second motion for summary judgment. CDC had
previously filed a combined plea to the jurisdiction and motion for summary
judgment, asserting an immunity defense and other grounds for dismissal of
Ibrahim’s claims. The trial court denied the plea to the jurisdiction on immunity
grounds, but did not provide a ruling on the remainder of the grounds raised in
CDC’s first motion. CDC re-urged the grounds from its first motion, but the trial
court ultimately only ruled on the second motion for summary judgment, so that is
the motion that we review on appeal.
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one or more essential elements on its breach of contract, promissory
estoppel/detrimental reliance, fraud, and negligent misrepresentation claims.
CDC argued that the Loan Documents created a subordination agreement by
which Sunnyland agreed to defer its collection of the Sunnyland Note, but they did
not create any duty on the part of the SBA or CDC to enforce the Loan Documents
against Sunnyland to protect Ibrahim from having to pay the Sunnyland Note.
CDC also asserted res judicata, despite the fact that it was not a party to the prior
Sunnyland Note Suit, based on the fact that in the first suit Ibrahim unsuccessfully
raised the issue of the effect of the Standby Creditor Agreement on its obligation to
pay the Sunnyland Note. As summary judgment evidence, CDC provided the Loan
Documents discussed above, certified copies of the court filings from the
Sunnyland Note Suit, and declarations of CDC’s executive director and its
attorney.
Sunnyland likewise moved for summary judgment dismissing Ibrahim’s
claims against it based on res judicata, claiming that the judgment in the Sunnyland
Note Suit precluded Ibrahim from raising its breach of contract and other claims in
the present suit.
On February 12, 2018, the trial court granted CDC’s and Sunnyland’s
motions for summary judgment and dismissed all of Ibrahim’s claims against both
parties. This appeal followed.
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Sunnyland’s Summary Judgment
In its second issue on appeal, Ibrahim argues that the trial court erred in
granting summary judgment in favor of Sunnyland because Sunnyland failed to
establish as a matter of law that all of Ibrahim’s claims against it are barred by res
judicata.
A. Standard of Review
We review a trial court’s ruling on a summary judgment motion de novo.
City of Richardson v. Oncor Elec. Delivery Co., 539 S.W.3d 252, 258 (Tex. 2018).
To prevail on a traditional summary judgment motion, the movant bears the burden
of proving that no genuine issues of material fact exist and that it is entitled to
judgment as a matter of law. TEX. R. CIV. P. 166a(c); City of Richardson, 539
S.W.3d at 258–59. When a defendant moves for traditional summary judgment, it
must either: (1) disprove at least one essential element of the plaintiff’s cause of
action, or (2) plead and conclusively establish each essential element of an
affirmative defense, thereby defeating the plaintiff’s cause of action. Lujan v.
Navistar Fin. Corp., 433 S.W.3d 699, 704 (Tex. App.—Houston [1st Dist.] 2014,
no pet.) (citing Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995) (per curiam);
Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex.1995)).
If the movant meets its burden, the burden then shifts to the nonmovant to
raise a genuine issue of material fact. See Katy Venture, Ltd. v. Cremona Bistro
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Corp., 469 S.W.3d 160, 163 (Tex. 2015) (per curiam); see also First United
Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 220 (Tex. 2017)
(stating that fact question exists if evidence rises to level that would enable
reasonable and fair-minded people to differ in their conclusions). We review the
evidence presented in the motion and response in the light most favorable to the
nonmovant, crediting favorable evidence if reasonable jurors could and
disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort
Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009) (citing
City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005)). We indulge every
reasonable inference and resolve any doubts in the nonmovant’s favor. Helix
Energy Sols. Grp., Inc. v. Gold, 522 S.W.3d 427, 431 (Tex. 2017).
B. Law of Res Judicata
Res judicata is an affirmative defense that bars the re-litigation of certain
claims or cases between parties which have already been decided. See Travelers
Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010); Eagle Oil & Gas Co. v.
Shale Expl., LLC, 549 S.W.3d 256, 266 (Tex. App.—Houston [1st Dist.] 2018, pet.
dism’d). The burden is on the party asserting an affirmative defense to plead and
prove the defense’s respective elements. See Hill v. Heritage Res., Inc., 964
S.W.2d 89, 137 (Tex. App.—El Paso 1997, pet. denied).
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To successfully assert the affirmative defense of res judicata, a party must
prove: (1) a final prior judgment on the merits by a court of competent jurisdiction;
(2) the identity of the parties, or those in privity with them; and (3) a second action
based on the same claims as were or could have been raised in the first action.
Joachim, 315 S.W.3d at 862; Eagle Oil & Gas Co., 549 S.W.3d at 266. “When
applicable, res judicata bars the second, subsequent suit.” Eagle Oil & Gas Co.,
549 S.W.3d at 266 (citing Joachim, 315 S.W.3d at 862); see also Engelman
Irrigation Dist. v. Shields Bros., Inc., 514 S.W.3d 746, 750 (Tex. 2017) (“Res
judicata bars the relitigation of claims that have been finally adjudicated or that
could have been litigated in the prior action.”) (quoting Igal v. Brightstar Info.
Tech. Grp., Inc., 250 S.W.3d 78, 86 (Tex. 2008)); Tex. Water Rights Comm’n v.
Crow Iron Works, 582 S.W.2d 768, 771–72 (Tex. 1979) (holding that party may
not pursue claim determined by final judgment of court of competent jurisdiction
in prior suit as ground of recovery in later suit against same parties).
“When, as here, the material facts are not disputed, the applicability of res
judicata presents a question of law, which we review de novo.” Eagle Oil & Gas
Co., 549 S.W.3d at 267.
C. Analysis
In the prior Sunnyland Note Suit, the trial court ordered Ibrahim to pay
damages to Sunnyland. In the present suit, Ibrahim sued Sunnyland seeking to
20
recover those damages plus the costs and attorney’s fees Ibrahim incurred in
defendant the Sunnyland Note Suit. Ibrahim pleaded causes of action for breach of
contract, fraud, negligent misrepresentation, and promissory estoppel against
Sunnyland, alleging that it breached the Standby Creditor’s Agreement and other
provisions in the Loan Documents providing that Sunnyland was required to
subordinate its interest in the Sunnyland Note to CDC’s interest in the 504 Loan.
Specifically, Ibrahim relies on (1) the provision from the Debenture Guarantee
stating that “No payment of principal or interest is to be made on the Standby Debt
[i.e., the Sunnyland Note] during the term of the [504] Loan” and (2) the provision
of the Standby Creditor’s Agreement between CDC and Sunnyland in which
Sunnyland agreed “[t]o accept no further payments on the Standby Debt except as
permitted in the [Debenture Guarantee].”
Sunnyland moved for summary judgment on the ground that res judicata
barred these claims. Sunnyland asserted that this issue—i.e. the effect of the
Standby Creditor’s Agreement on Ibrahim’s obligation to pay under the Sunnyland
Note—was litigated in the Sunnyland Note Suit between itself and Ibrahim. The
trial court in the Sunnyland Note Suit was a court of competent jurisdiction that
rendered a final judgment rejecting Ibrahim’s defense under the Standby Creditor’s
Agreement, and that judgment was affirmed by this Court. See Shawn Ibrahim,
Inc., 2015 WL 4043242, at *1, *4. As summary judgment evidence, Sunnyland
21
provided certified copies of the pleadings, findings of fact and conclusions of law,
and the final judgment of the trial court in the Sunnyland Note Suit. The trial court
granted Sunnyland’s motion for summary judgment.
Reviewing Sunnyland’s summary judgment evidence, we conclude that it
established the elements of res judicata. The trial court in the prior Sunnyland
Note Suit rendered a final judgment on the merits of Sunnyland’s claim for
enforcement of the Sunnyland Note and the defenses raised by Ibrahim, including
its defense that the terms of the Standby Creditor’s Agreement prevented
Sunnyland from enforcing the Sunnyland Note against Ibrahim. That judgment
was affirmed by this Court. Ibrahim, Akhtar, Amin, and Sunnyland were all parties
to the Sunnyland Note Suit. And the claims raised in this second action are based
on the same rights and obligations of the parties and were raised in the Sunnyland
Note Suit. See id.; see also Joachim, 315 S.W.3d at 862 (reciting elements of res
judicata); Eagle Oil & Gas Co., 549 S.W.3d at 266 (same). Thus, the burden
shifted to Ibrahim to raise a fact issue on at least one element of Sunnyland’s
affirmative defense. See Katy Venture, Ltd., 469 S.W.3d at 163.
As Ibrahim acknowledges in its brief on appeal, there is no dispute that the
Sunnyland Note Suit was a final determination on the merits by a court of
competent jurisdiction or that the Sunnyland Note Suit involved the same parties as
the present case. Rather, Ibrahim argues that “Sunnyland fails to establish the third
22
element [requiring that the second action be based on the same claims as were or
could have been raised in the first action] because the claims in this lawsuit are not
the same claims that the first action was based on, nor are they claims that were
required to have been raised in that lawsuit.” Ibrahim acknowledges that, in the
Sunnyland Note Suit, it “argued that the Standby Creditor’s Agreement barred
Sunnyland from enforcing the [Sunnyland Note].” Ibrahim argues, however, that
this present suit presents a different claim. It now asserts that Sunnyland breached
the Standby Creditor’s Agreement by pursuing collection on the Sunnyland Note
without CDC’s consent and that Sunnyland committed fraud or made a negligent
misrepresentation that its Note would be subordinate to the 504 Loan and that it
would not take action to collect on the Sunnyland Note before the 504 Loan was
paid.
Ibrahim further argues that its claims in the present suit “are substantively
distinct from Sunnyland’s claim in the first lawsuit, and they arise from a different
transaction.” It argues that the Sunnyland Note Suit “concerned performance of
the $200,000 note between Ibrahim and Sunnyland that was signed in December
2005” and that Ibrahim raised the Standby Creditor’s Agreement “only as a
defense to its alleged obligations under the Sunnyland Note.” It contends that this
present case, by contrast, “concerns the formation and performance of that Standby
Creditor’s Agreement, signed in January 2008, and specifically whether, in
23
entering that agreement, Sunnyland made promises on which Ibrahim justifiably
relied but which Sunnyland did not keep.” These distinctions, however, are not
borne out by the record.
The question of whether Sunnyland breached the Standby Creditor’s
Agreement or committed fraud or some other tort in attempting to enforce the
Sunnyland Note is not a separate legal question from the ultimate enforceability of
the Sunnyland Note. Rather, the existence and terms of the Standby Creditor’s
Agreement constituted an affirmative defense to Sunnyland’s collection and
enforcement attempt in the Sunnyland Note Suit. See e.g., Tamsco, Inc. v. Janus,
553 S.W.2d 244, 246 (Tex. App.—Waco 1977, writ ref’d n.r.e.) (holding that if
subordination agreement was to be used as defense to suit to enforce subordinate
note, then debtor bears burden to come forward with proof that senior creditor
would treat collection of subordinate note as breach of subordination agreement);
Montesino v. Arguello, 433 So. 2d 383, 386 (La. Ct. App. 1983) (holding that “the
provisions of the Standby Agreement provide that the obligation to [the standby
creditor] shall be payable when the SBA loan has been paid” and that “those
written documents have modified the terms of the [standby creditor’s] promissory
note”; concluding that “the terms of the note were modified by the Standby
Agreement” and thus, “nothing was owed on the note when suit was filed [and] the
note [was] not due until after payment . . . of the SBA loan”); Culp v. Tri-Cty.
24
Tractor, Inc., 736 P.2d 1348, 1351–52 (Idaho Ct. App. 1987) (recognizing that
subordination agreements “were intended to protect the bank,” but nevertheless
holding, “[T]he fact remains that such protection [afforded by the subordination
clause providing that debtor ‘make no payment to’ the subordinate creditors until
its obligation to the bank had been satisfied or until the bank consented] was
created by altering the rights and duties embodied in the promissory notes” and
that debtor “was entitled to invoke these agreements as a defense to claims that it
defaulted by failing to pay” under terms of subordinate promissory note).
Ibrahim’s claim that the Standby Creditor’s Agreement obligated Sunnyland
to forebear on collecting on the Sunnyland Note should have been—and in fact
was—raised in the prior Sunnyland Note Suit. See Shawn Ibrahim, Inc., 2015 WL
4043242, at *3–4 (concluding that defense to enforcement created by Standby
Creditor’s Agreement was tried by consent in trial court and that Ibrahim failed to
prove its entitlement to that defense). Ibrahim cannot now recategorize these same
arguments as breach of contract or tort claims in an attempt to get Sunnyland to
pay to Ibrahim as damages in the present suit the very judgment that the trial court
awarded to Sunnyland in the first suit. See Engelman Irrigation Dist., 514 S.W.3d
at 750 (“Res judicata bars the relitigation of claims that have been finally
adjudicated or that could have been litigated in the prior action.”); Tex. Water
Rights Comm’n, 582 S.W.2d at 771–72 (holding that party may not pursue claim
25
determined by final judgment of court of competent jurisdiction in prior suit as
ground of recovery in later suit against same parties).
We overrule Ibrahim’s second issue.
CDC’s Summary Judgment
In its first issue on appeal, Ibrahim argues that the trial court erred in
granting CDC’s motion for summary judgment and dismissing all of Ibrahim’s
claims against CDC.
A. Standard of Review
CDC moved for traditional summary judgment on multiple grounds, which
we review under the standard set out above in our discussion of Ibrahim’s claims
against Sunnyland. CDC also moved for summary judgment on no-evidence
grounds. After an adequate time for discovery, the party without the burden of
proof may move for a no-evidence summary judgment on the basis that there is no
evidence to support an essential element of the nonmovant’s claim. TEX. R. CIV. P.
166a(i); Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008) (per curiam). The
trial court must grant the no-evidence summary judgment unless the nonmovant
produces competent summary judgment evidence raising a genuine issue of
material fact on the challenged elements. TEX. R. CIV. P. 166a(i); Hamilton, 249
S.W.3d at 426. We apply the legal-sufficiency standard of review to no-evidence
summary judgment motions. See Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572,
26
581–82 (Tex. 2006); City of Keller, 168 S.W.3d at 823, 827. Applying that
standard, a no-evidence point will be sustained when (1) there is a complete
absence of evidence of a vital fact, (2) the court is barred by rules of law or
evidence from giving weight to the only evidence offered to prove a vital fact, (3)
the evidence offered to prove a vital fact is no more than a mere scintilla, or (4) the
evidence conclusively establishes the opposite of a vital fact. City of Keller, 168
S.W.3d at 810; King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003).
To defeat a no-evidence motion, the nonmovant must produce at least a
scintilla of evidence raising a genuine issue of material fact as to the challenged
elements. Lightning Oil Co. v. Anadarko E & P Onshore, LLC, 520 S.W.3d 39, 45
(Tex. 2017). “More than a scintilla of evidence exists if the evidence ‘rises to a
level that would enable reasonable and fair-minded people to differ in their
conclusions.’” Essex Crane Rental Corp. v. Carter, 371 S.W.3d 366, 376 (Tex.
App.—Houston [1st Dist.] 2012, pet. denied) (quoting Merrell Dow Pharms., Inc.
v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)). A nonmoving party is not required
to marshal all of its proof, but it must present countervailing evidence that raises a
genuine fact issue on the challenged elements. Sw. Elec. Power Co. v. Grant, 73
S.W.3d 211, 215 (Tex. 2002) (citing TEX. R. CIV. P. 166a). We consider the
evidence in the light most favorable to the nonmovant and indulge every
27
reasonable inference from the evidence in the nonmovant’s favor. Lightning Oil,
520 S.W.3d at 45.
When, as here, the summary judgment order does not specify the grounds on
which it was granted, the appealing party must demonstrate that none of the
proposed grounds are sufficient to support the judgment. West v. SMG, 318 S.W.3d
430, 437 (Tex. App.—Houston [1st Dist.] 2010, no pet.). We will affirm a
summary judgment ruling if any of the grounds asserted in the motion are
meritorious. Lightning Oil, 520 S.W.3d at 45.
B. Breach of Contract
In its first issue on appeal, Ibrahim argues, in relevant part, that the trial
court erred in granting CDC’s motion for summary judgment because CDC failed
to establish as a matter of law that it did not make any express or implied promises
to Ibrahim. CDC acknowledges the existence of the contracts in this case, but
argues that nothing in the Loan Documents constituted a contract or other promise
or representation to Ibrahim obligating CDC to enforce its right to subordinate the
Sunnyland Note to the 504 Loan. We agree with CDC.
1. Law Governing Breach of Contract Claim
To prevail on its breach of contract claim against CDC, Ibrahim was
required to establish (1) the existence of a valid contract; (2) performance or
tendered performance by the plaintiff; (3) breach of the contract by the defendant;
28
and (4) damages sustained as a result of the breach. B & W Supply, Inc. v.
Beckman, 305 S.W.3d 10, 16 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).
To maintain a breach of contract action, a plaintiff must show privity of contract or
that it is a third-party beneficiary under the contract. OAIC Commercial Assets,
L.L.C. v. Stonegate Vill., L.P., 234 S.W.3d 726, 738 (Tex. App.—Dallas 2007, pet.
denied). A person seeking to establish third-party beneficiary status must
demonstrate that the contracting parties “intended to secure a benefit to that third
party” and “entered into the contract directly for the third party’s benefit.” First
Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017) (quoting Stine v. Stewart, 80
S.W.3d 586, 589 (Tex. 2002) (per curiam)); City of Houston v. Williams, 353
S.W.3d 128, 145 (Tex. 2011) (stating that third parties have standing to recover
under contracts that are clearly intended for their direct benefit and that contract
need not have been executed solely to benefit third party).
Contract language that can be given a certain or definite meaning is not
ambiguous, and in that situation we construe the contract as a matter of law.
Chrysler Ins. Co. v. Greenspoint Dodge of Houston, Inc., 297 S.W.3d 248, 252
(Tex. 2009) (per curiam). In construing a written contract, our primary concern is
to ascertain the true intention of the parties as expressed in the plain language of
the contract. N. Shore Energy, L.L.C. v. Harkins, 501 S.W.3d 598, 602 (Tex. 2016)
(per curiam); Plains Expl. & Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d
29
296, 305 (Tex. 2015). “We ‘construe contracts from a utilitarian standpoint bearing
in mind the particular business activity sought to be served,’ and avoiding
unreasonable constructions when possible and proper.” Plains Expl. & Prod., 473
S.W.3d at 305 (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex.
1987)). We consider the entire writing, harmonizing and giving effect to all of the
contract provisions so that none of them will be rendered meaningless. Id.; J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); see also Moayedi v.
Interstate 35/Chisam Road, L.P., 438 S.W.3d 1, 7 (Tex. 2014) (“When parties
disagree over the meaning of an unambiguous contract, we determine the parties’
intent by examining the entire agreement.”). “No single provision taken alone is
given controlling effect; rather, each must be considered in the context of the
instrument as a whole.” Plains Expl. & Prod., 473 S.W.3d at 305.
The Texas Supreme Court has held that “well-established law” provides that
instruments pertaining to the same transaction may be read together to ascertain the
parties’ intent, “even if the parties executed the instruments at different times and
the instruments do not expressly refer to each other.” Fort Worth Indep. Sch. Dist.
v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000).
2. Construction of the Loan Documents
In seeking recovery of the sums it was ordered to pay and the attorney’s fees
it incurred in the Sunnyland Note Suit, Ibrahim argues that CDC breached the
30
Debenture Guarantee and the Standby Creditor’s Agreement by failing to enforce
the terms of those agreements and thereby prevent Sunnyland from collecting or
attempting to collect on the Sunnyland Note.
As Ibrahim correctly argues, the Debenture Guarantee—executed by the
SBA on July 28, 2005, and approved by Ibrahim and CDC in August 2005—
contemplated that Ibrahim would obtain standby funding of $200,000 from
Sunnyland and that this standby loan would be subordinate to the 504 Loan once it
closed. Specifically, the Debenture Guarantee contemplated that Ibrahim would
borrow a portion of its financial contribution to the Project costs from a third-party
lender and stated:
If any of the contribution is borrowed and secured by any of the
Project Property, the resulting obligation must be expressly
subordinate to the liens securing the Promissory Note (“Note”) in
favor of CDC and may not be repaid at a faster rate than the Note
unless prior written approval is obtained from SBA.
The Debenture Guarantee further contemplated the specific details of Ibrahim’s
standby funding from Sunnyland, providing:
At or prior to 504 Closing, CDC [is] to obtain [a] Standby Creditor’s
Agreement from Sunnyland Development, Inc., for $200,000.00, plus
all accrued and future interest (Standby Debt). No payment of
principal or interest is to be made on the Standby Debt during the term
of the Loan. Standby Creditor must subordinate any lien rights in
collateral securing the Loan to CDC’s right in the collateral, and take
no action against Borrower or any collateral securing the Standby
Debt without CDC’s consent. CDC must attach a copy of the Standby
Note evidencing the Standby Debt to the Standby Creditor’s
Agreement.
31
Subsequently, at the closing for the 504 Loan that occurred in January 2008,
CDC fulfilled its obligation under the Debenture Guarantee to provide an executed
Standby Creditor’s Agreement. The Standby Creditor’s Agreement, executed
between CDC and Sunnyland on January 24, 2008, expressly referenced the 504
Loan made to Ibrahim, and it cited the requirements of the Debenture Guarantee.
The Standby Creditor’s Agreement identified Shawn Ibrahim, Inc., as the
“borrower” and “Standby Debtor”; it identified Sunnyland as the “Standby
Creditor”; and it recognized CDC as the lender and certified development company
authorized by the SBA. It provided:
To induce CDC to make the CDC Loan to Borrower [Ibrahim], and in
consideration of the making by CDC of the CDC Loan, Standby
Creditor [Sunnyland] hereby represents, warrants and covenants to
and with CDC, its successors and assigns, as follows:
1. There is owing by Standby Debtor to Standby Creditor the amount
of the Standby Debt [$200,000].
2. Standby Creditor agrees:
a. To accept no further payments on the Standby Debt except as
permitted in the [Debenture Guarantee].
b. To turn over to CDC, within 15 days of receipt, payments
received by Standby Creditor from Standby Debtor in violation
of this Agreement.
c. To take no action to enforce claims against Standby Debtor
on the Standby Debt, without written consent from CDC, until
the CDC Loan is satisfied.
....
32
Ibrahim argues that these provisions create at least a fact question as to
whether CDC owed Ibrahim a duty to enforce the Standby Creditor’s Agreement
and, thus, to prevent Sunnyland from enforcing or collecting on the Sunnyland
Note. However, we observe that resolution of this question involves the
construction of these unambiguous contracts and, therefore, is not a question of
fact but a legal question that we determine as a matter of law. See Chrysler Ins.
Co., 297 S.W.3d at 252 (holding that contract language that can be given certain or
definite meaning is not ambiguous and is construed as a matter of law).
Under their plain language, these provisions of the Debenture Guarantee and
the Standby Creditor’s Agreement act to subordinate the Sunnyland Note to the
504 Loan. See Montesino, 433 So. 2d at 386; Culp, 736 P.2d at 1351–52. These
provisions required that Sunnyland agree to forbear collecting on or enforcing the
Sunnyland Note in favor of the 504 Loan, and it vested CDC5 with the right to
enforce the terms of the Standby Creditor’s Agreement. The Standby Creditor’s
Agreement further provided that CDC could consent to Sunnyland taking action to
collect on the Sunnyland Note. And it provided that CDC was entitled to have
5
CDC argues that the rights under the 504 Loan were assigned to the SBA, and that
the right to enforce the terms of the Standby Creditor’s Agreement and other Loan
Documents now rests with the SBA. CDC cites to the declaration of its executive
director indicating that the 504 Loan was assigned to the SBA following closing.
Ibrahim argues that this is no evidence that the 504 Loan was actually assigned,
and we note that the SBA is not a party to this lawsuit, which asks us to determine
CDC’s obligations to Ibrahim under the Loan Documents. Thus, we do not address
what obligations, if any, fall to the SBA.
33
Sunnyland transfer to CDC, “within 15 days of receipt, payments received by
[Sunnyland] from [Ibrahim] in violation of this Agreement.”
These terms were thus developed to allow CDC to protect its investment
through the 504 Loan—nothing in the terms of either the Debenture Guarantee or
the Standby Creditor’s Agreement indicated that these terms were to benefit
Ibrahim. See, e.g., Tamsco, Inc., 553 S.W.2d at 246 (holding that subordination
agreement is “for the sole benefit” of senior creditor); Culp, 736 P.2d at 1351
(recognizing that purpose of subordination agreements was “to protect the bank,”
the senior creditor in that case). While Ibrahim was entitled to invoke this
provision as a defense to Sunnyland’s attempt to enforce the Sunnyland Note—and
Ibrahim did in fact make that argument in the Sunnyland Note Suit, albeit
unsuccessfully—it does not follow that the Standby Creditor’s Agreement vested
CDC with an obligation to raise that defense on Ibrahim’s behalf or otherwise
defend and indemnify Ibrahim in a suit between Ibrahim and Sunnyland.
We conclude that the Debenture Guarnatee and Standby Creditor’s
Agreement gave CDC the right to prevent Sunnyland from enforcing and
collecting on the Sunnyland Note, but these documents did not create an obligation
for CDC to do so for Ibrahim’s benefit. In fact, the Standby Creditor’s Agreement
expressly states that CDC can consent to Sunnyland’s collection efforts.
34
We also observe that Ibrahim was not a party to the Standby Creditor’s
Agreement—it was executed between Sunnyland and CDC. To the extent that
Ibrahim argues it is a third-party beneficiary of this Agreement, we disagree. See
OAIC Commercial Assets, L.L.C., 234 S.W.3d at 738 (holding that plaintiff must
show privity of contract or status as third-party beneficiary under contract to
maintain breach of contract action). There is no evidence, either in the Loan
Documents themselves or in any other summary judgment evidence, that the
contracting parties here “intended to secure a benefit to” Ibrahim in subordinating
the Sunnyland Note to the 504 Loan, or that they entered into the Standby
Creditor’s Agreement “directly for [Ibrahim’s] benefit.” See Brumitt, 519 S.W.3d
at 102. To the contrary, the Standby Creditor’s Agreement was intended to benefit
CDC, and through it the SBA, by protecting its investment in making the 504
Loan. The 504 Loan itself was intended, in part, to benefit Ibrahim, but the
subordination agreements between the creditors were for the benefit of CDC. See
Williams, 353 S.W.3d at 145 (stating that third parties have standing to recover
under contracts that are clearly intended for their direct benefit and that contract
need not have been executed solely to benefit third party); Tamsco, Inc., 553
S.W.2d at 246 (holding that subordination agreement is “for the sole benefit” of
senior creditor).
35
Ibrahim argues that, even if the express terms of the contract do not require
CDC to enforce the Standby Creditor’s Agreement, “as a necessary extension of
CDC’s express promise to obtain Sunnyland’s agreement to take no action against
Ibrahim on the [Sunnyland Note], CDC made an implied promise to enforce that
agreement.” We disagree.
In construing a written contract, our primary concern is to ascertain the true
intention of the parties as expressed in the contract. N. Shore Energy, 501 S.W.3d
at 602; Plains Expl. & Prod. Co., 473 S.W.3d at 305. “Generally, a court looks
only to the written agreement to determine the obligations of contracting parties.”
Universal Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d
742, 747 (Tex. 2003). To imply a term into an agreement, it must appear that it is
necessary to do so in order to effectuate the purposes of the contract as a whole as
gathered from the written instrument. See Fielding, 289 S.W.3d at 850; HECI Expl.
Co., 982 S.W.2d at 888; WesternGeco, L.L.C. v. Input/Output, Inc., 246 S.W.3d
776, 783 (Tex. App.—Houston [14th Dist.] 2008, no pet.). “[I]mplied covenants
are not favored by law and will not be read into contracts except as legally
necessary to effectuate the plain, clear, unmistakable intent of the parties.” In re
Bass, 113 S.W.3d 735, 743 (Tex. 2003) (orig. proceeding).
Considering the Loan Documents as a whole, nothing in the documents
indicates that some implied term is necessary to effectuate the purposes of the
36
contract. Taken together, the Loan Documents serve the purpose of providing the
necessary funding for the Project, and the documents at issue here address the
terms under which Ibrahim could obtain the 504 Loan from CDC, acting on behalf
of the SBA. Both the Sunnyland Note and the 504 Loan created an obligation for
the lenders—Sunnyland and CDC, respectively—to loan Ibrahim money that it
would then be liable to repay under the terms of those loans. The lenders agreed
between themselves to subordinate one of the loans, but there is no indication that
this was for Ibrahim’s benefit or that the loan documents required some additional
terms to effectuate the intent of the parties beyond those expressly provided in the
relevant agreements. Nothing in the Loan Documents constitutes “an express
promise that cannot reasonably be performed absent some type of performance by
[another] party,” and, thus, we need not “imply a return promise so that the
dealings of the parties can be construed to mean something rather than nothing at
all.” See Fielding, 289 S.W.3d at 850. Accordingly, we reject Ibrahim’s argument
that the documents reflect an “implied” promise in this case. See id.
Ibrahim also asserts that construing these documents as CDC contends they
must be construed would make CDC’s agreement with Sunnyland “a meaningless
promise,” arguing that CDC “agreed to obtain a written agreement that prohibited
Sunnyland from enforcing its note without consent, but now CDC claims it had no
obligation to actually provide its consent or to enforce that provision.” It relies on
37
cases holding that courts should avoid interpreting contracts in a manner that
renders a provision meaningless. See, e.g., Coker v. Coker, 650 S.W.2d 391, 393
(Tex. 1983). However, the construction that the Standby Creditor’s Agreement and
other subordination provisions in the Loan Documents were entered into between
CDC and Sunnyland for their own benefit does not render the provisions
meaningless. The subordination terms created a right that CDC could choose to
enforce. It is not necessary that the terms also create a corresponding obligation to
do so in order to have meaning. And nothing in the Loan Documents indicates that
CDC did not retain the right to waive performance of any aspect of those
provisions.
We conclude that CDC established, as a matter of law, that nothing in the
Loan Documents obligated it to enforce the Standby Creditor’s Agreement with
Sunnyland, and, accordingly, we conclude that the trial court properly granted
CDC’s motion for summary judgment on this ground.
C. Ibrahim’s Remaining Claims Against CDC
Ibrahim also asserted causes of action for promissory estoppel/detrimental
reliance, fraud, and negligent misrepresentation against CDC. CDC asserted, in its
motion for summary judgment and on appeal, that Ibrahim provided no evidence of
any promise to Ibrahim that could support a claim for promissory estoppel; there
was no evidence that it made any representation on this matter to Ibrahim; and that
38
it made no statement to Ibrahim that could support a claim for negligent
misrepresentation. See Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am.,
341 S.W.3d 323, 337 (Tex. 2011) (providing that elements of fraud include “that a
material representation was made” and that “the representation was false”); Fed.
Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991) (holding
that elements of neglegent misrepresentation include that person made
representation “in the course of his business, or in a transaction in which he has a
pecuniary interest” and that person “supplies ‘false information’ for the guidance
of others in their business”); Miller v. Raytheon Aircraft Co., 229 S.W.3d 358,
378–79 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (holding that elements of
promissory estoppel are (1) promise, (2) foreseeability of reliance by promisor, and
(3) substantial reliance by promisee to his detriment) (citing English v. Fischer,
660 S.W.2d 521, 524 (Tex. 1983)).
Ibrahim based its claims on these causes of action on the same arguments set
out above—that the obligations created by the Loan Documents constituted a
representation by CDC to Ibrahim that CDC would enforce the Standby Creditor’s
Agreement and other subordination provisions to prevent Sunnyland from
collecting or attempting to collect the amounts due on the Sunnyland Note until
after the 504 Loan was fully discharged. As discussed above, nothing in the Loan
Documents can be construed as such a representation. Ibrahim did not provide any
39
other summary judgment evidence identifying any promise or representation made
outside of those memorialized in the Loan Documents. Accordingly, the trial court
correctly granted summary judgment dismissing these causes of action.6
We overrule Ibrahim’s first issue.
Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Higley, and Goodman.
6
In the trial court, Ibrahim also sought a declaratory judgment that the amount due
and owing to Sunnyland under the final judgment in the Sunnyland Note Suit be
paid into the registry of the Court and credited to the debt owed by Ibrahim to the
CDC. However, it does not challenge the trial court’s judgment dismissing this
declaratory judgment claim on appeal. See Asset Prot. & Sec. Servs., L.P. v.
Armijo, 570 S.W.3d 377, 382 (Tex. App.—El Paso 2019, no pet.) (“Our power of
review in civil cases is constrained by what arguments appear in the parties’ briefs
and we cannot address unassigned error.”) (citing Pat Baker Co. v. Wilson, 971
S.W.2d 447, 450 (Tex. 1998) (per curiam)).
40