Opinion
03-23-00226-CV
08-30-2023
Archon Design, L.L.C., and E-Mex Holdings, L.L.C., Appellants v. Antonio Naim; GarGroup, L.L.C.; and Jane Nelson, in her Official Capacity as Secretary of State for the State of Texas, Appellees
FROM THE 53RD DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-21-006776, THE HONORABLE MARIA CANTÚ HEXSEL, JUDGE PRESIDING
Before Chief Justice Byrne, Justices Triana and Theofanis
MEMORANDUM OPINION
Rosa Lopez Theofanis, Justice
In one issue, appellants Archon Design, L.L.C., and E-Mex Holdings, L.L.C. challenge the trial court's order denying their application for a temporary injunction. For the following reasons, we affirm.
BACKGROUND
In 2006, Antonio Naim Sarkis and Alfredo Naim Sarkis (the Naim brothers) and Entretenimiento de Mexico, S.A. de C.V. entered into a joint venture agreement to construct and operate a casino in Mexico City. Among the agreement's terms was a forum-selection clause that required disputes related to the joint venture to be heard in courts in Mexico. Other terms included that the Naim brothers would contribute land and pay for certain construction costs, and Entretenimiento de Mexico would contribute gaming permits and equipment and perform certain construction.
During the hearing before the trial court on appellants' application for a temporary injunction, the son of Alfredo Naim Sarkis testified that his father was deceased. According to appellants' original petition, Alfredo Naim Sarkis passed away in February 2019.
In a related original proceeding, our sister court details the background of the parties' dispute as of 2013. See In re Emex Holdings, L.L.C., No. 13-11-00145-CV, 2013 Tex.App. LEXIS 4802, at *2-11 (Tex. App.-Corpus Christi-Edinburg April 18, 2013, orig. proceeding) (mem. op.) (en banc).
In 2007, the parties signed an amendment to the joint venture agreement. The forum-selection clause was not amended, but E-Mex, a limited liability company that was affiliated with Entretenimiento de Mexico, was added as a party. Among the terms of the amendment, the parties agreed that the Naim brothers would transfer 66.6 percent of their ownership interest in Garden Group, L.P., a Texas limited partnership, to E-Mex. At that time, Garden Group was wholly owned by the Naim brothers, it held title to the land in Mexico, and its general partner was GarGroup L.L.C., an entity also wholly owned by the Naim brothers. E-Mex agreed to pledge the 66.6 percent ownership interest in Garden Group to the Naim brothers, signing a "Pledge of Partnership Interest in Garden Group, L.P." as security for the Naim brothers' investment in the land and building in Mexico, which costs were estimated to be $7,250,000. At the same time, the Naim brothers also agreed to transfer 7.5 percent of their ownership in Garden Group to two individuals.
The Naim brothers agreed to transfer 5.0 percent to Sergio Seade Kuri and 2.5 percent to Elias Adam Kuri.
Disputes arose among the parties, and in October 2008, the Naim brothers sued E-Mex in Hidalgo County, and in 2009, they sued E-Mex and others in Mexico. See In re Emex Holdings, L.L.C., No. 13-11-00145-CV, 2013 Tex.App. LEXIS 4802, at *6 (Tex. App.-Corpus Christi-Edinburg April 18, 2013, orig. proceeding) (mem. op.) (en banc). In the Hidalgo County case, E-Mex answered and moved to dismiss the case based on the forum-selection clause in the joint venture agreement. The trial court denied the motion to dismiss, but E-Mex sought, and our sister court conditionally granted, mandamus relief in 2013, holding that the forum-selection clause applied to the Naim brothers' claims, requiring that they litigate those claims in Mexico. See id. at *2, *33. In 2016, the Naim brothers nonsuited their claims in the Hidalgo County case, representing to the court that they would pursue remedies in Mexico.
Our sister court conditionally granted mandamus relief directing the trial court to enforce the forum-selection clause unless the Naim brothers could show "changed circumstances." See In re Emex Holdings, L.L.C., 2013 Tex.App. LEXIS 4802, at *33.
The crux of the parties' dispute in this case concerns the ownership of Garden Group and filings with the Secretary of State. According to appellants, the current general partner of Garden Group is Archon Design, L.L.C., and E-Mex owns a 66.6 percent interest in Garden Group. At a purported partnership meeting in 2008, the two individuals with the combined 7.5 percent ownership interest in Garden Group transferred .5 percent of their respective interests to Barraka, L.L.C., and Barraka was elected as the general partner. Barraka then filed a report with the Secretary of State reflecting that the general partner of Garden Group had changed from GarGroup to Barraka. At a purported partnership meeting in December 2020, Barraka was removed, and Archon Design was elected to be the general partner. In January and March 2021, appellants attempted to file certificates of correction regarding February and April 2016 filings with the Secretary of State by the Naim brothers as to the ownership of Garden Group, but the Secretary of State rejected appellants' filings.
In February and April 2016, the Naim brothers had filed, and the Secretary of State accepted: (i) a certificate of amendment by Garden Group that named GarGroup as its general partner; (ii) a certificate of conversion by GarGroup, L.L.C., as the general partner of Garden Group, that converted Garden Group into Garden Group, LLC; and in February 2017, (iii) a certificate of conversion that converted Garden Group LLC to Ajusco Development Company, a Delaware limited liability company. According to Antonio Naim and GarGroup (collectively, "the Naim Parties"), E-Mex does not have an ownership interest in Garden Group.
In November 2021, appellants sued the Naim Parties and the Secretary of State in the underlying proceeding. Appellants challenged the 2016 filings with the Secretary of State and sought damages and temporary injunctive relief. Specifically, they sought a temporary injunction directing the Naim Parties to cease, desist, and refrain from the following acts:
They also seek a court order directing the Secretary of State to file appellants' certificates of correction that the Secretary of State did not approve. See Tex. Bus. Orgs. Code § 12.004(a) (authorizing appeals to district court in Travis County from disproval of filing instrument by Secretary of State).
(1) claiming, asserting, or representing that a valid Garden Group, L.P. Partnership meeting was held on April 4, 2016 or that the actions taken at the invalid April 4, 2016 partnership meeting carry any legal effect, or that the meeting minutes of the April 4, 2016 partnership meeting are a valid Partnership document of Garden Group, L.P.;
(2) taking any action on behalf of Garden Group, L.P.;
(3) relying upon, asserting as valid, asserting as true, asserting as reliable or otherwise depending on or asking others to depend on the false and unauthorized filings made by Alfredo Naim and Antonio Naim, individually and/or as Manager of GarGroup, L.L.C., with the Texas Secretary of State on February 25, 2016 and April 4, 2016;
(4) claiming, asserting, or representing that they are the sole owners in Garden Group, L.P.;
(5) claiming, asserting, or representing in any form that Garden Group, L.P. does not exist;
(6) claiming, asserting, or representing that the false and unauthorized filings with the Texas Secretary of State on February 25, 2016 and April 4, 2016, constitute a resolution of ownership interest or management interest by the Texas Secretary of State;
(7) claiming, asserting, or representing that the Texas Secretary of State made a determination on whether the false and unauthorized filings by Alfredo Naim and Antonio Naim of February 25, 2016 and April 4, 2016, were authorized to be filed with the Texas Secretary of State;
(8) claiming, asserting, or representing that the Texas Secretary of State made a determination that the false and unauthorized filings by Alfredo Naim and Antonio Naim filed on February 25, 2016 and April 4, 2016 were in compliance with governing documents of Garden Group, L.P.; [and]
(9) claiming, asserting, or representing that the Texas Secretary of State made any determination as to whether any material misrepresentation had been made by Alfredo Naim and Antonio Naim in the false and unauthorized documents of February 25, 2016 and April 4, 2016.
Appellants sought to return the parties to "the status quo that existed prior to the filings of Alfredo Naim and Antonio Naim on February 25, 2016 and April 4, 2016 in order for there to be a proper judicial resolution." The Naim Parties filed an answer and moved to stay the case until the completion of court proceedings pending in Mexico.
The Naim Parties also filed a verified plea to the jurisdiction and plea in abatement. The trial court denied those pleas.
In December 2022, the trial court held a hearing on the Naim Parties' motion to stay the case and appellants' request for a temporary injunction. The witnesses included Alfredo Naim Sarkis's son, who testified about the parties' dispute from the Naim Parties' perspective, and a licensed attorney in Mexico, who had handled litigation in Mexico on behalf of Ajusco Development that concerned or was related to the parties' dispute. The exhibits included the 2006 joint venture agreement, the 2007 amendment to the joint venture agreement, Garden Group's limited partnership agreement, E-Mex's pledge of the 66.6 percent ownership interest in Garden Group, filings and rulings from related court proceedings in Mexico, filings in a Delaware proceeding that resulted in a 2019 default judgment against Barraka, and the 2016 filings with the Secretary of State that are central to appellants' claims.
The other witness to testify at the hearing was a senior vice president of Lone Star National Bank. The senior vice president testified about an outstanding loan that was owed by Garden Group and that he had been managing since 2013.
The declarations in the default judgment include that Ajusco is the successor-in-interest to Garden Group and Garden Group, LLC and that "Barraka has no right or authority to direct, manage, operate or control Ajusco's business, affairs or assets, and all prior actions by Barraka purportedly on Ajusco's behalf are void ab initio and without legal effect." The son testified that Barraka unsuccessfully sought to have the default judgment set aside.
Alfredo Naim Sarkis's son, who was the manager of Ajusco, testified that the parties' dispute arose because of "a complete noncompliance and default on the Entretenimiento side to meet very basic obligations of the joint venture agreement," specifically, that the joint venture agreement required E-Mex to establish a new entity to operate the business but it failed to do so and that the agreement required E-Mex to return the property to Garden Group "after the build-out on the construction" but that it did not do so. He denied that the contemplated transfer of 66.6 percent of the ownership interest in Garden Group to E-Mex occurred, explaining that the partnership agreement has "a very specific process and several things that need to happen in order to admit new partners" and that the process to transfer "was never completed." He also testified about the litigation in Hidalgo County related to the parties' dispute and pending litigation in Mexico from 2007 to the time of the hearing and denied that the Naim Parties misrepresented anything to a court in Mexico. The son testified that based on the results of court proceedings in Mexico, the Naim brothers filed the 2016 certificates with the Secretary of State and, after Garden Group, L.L.C. was converted to Ajusco, filed suit against Barraka in 2019 in Delaware.
The son also testified about a ruling by a Mexican court in August 2020 in a suit in which Lone Star National Bank was the plaintiff and Garden Group and E-Mex were defendants. The ruling stated that Ajusco was the legal entity that was the successor to Garden Group and Garden Group, L.L.C.
The attorney testified that he had served as legal counsel for Ajusco starting in November 2019; that he was familiar with the predecessor entities of Garden Group and Garden Group, L.L.C.; that based on a 2010 judgment in a Mexican court, the Naim brothers did not need to take any other action to take control of the 66.6 percent ownership interest that secured the $7.2 million debt; and that there were multiple lawsuits pending in Mexico related to the parties' dispute, including a suit that began in 2021. He also testified about the Hidalgo case and the default judgment against Barraka in Delaware. His understanding of the court's ruling from the Hidalgo case was that the parties' disputes concerning their joint venture "had to be resolved in Mexico." The attorney denied that the Naim brothers had made a misrepresentation to the courts in Mexico; testified that in the Mexican proceedings in which he was involved, there was no challenge to the introduction of evidence about the Delaware default judgment against Barraka; and that control of Garden Group will likely be at issue in the most recently filed case in Mexico.
Following the December 2022 hearing, the trial court stayed the case pending the completion of court proceedings in Mexico and denied appellants' application for temporary injunction. This interlocutory appeal from the denial of appellants' application for a temporary injunction followed. See Tex. Civ. Prac. & Rem. Code. § 51.014(a)(4).
Appellants also filed a petition for writ of mandamus with this Court, challenging the trial court's stay of the case. See In re Archon Design, L.L.C., No. 03-23-00284-CV, 2023 Tex.App. LEXIS 5351, at *1 (Tex. App.-Austin July 21, 2023, orig. proceeding) (mem. op.). We denied the petition. See id.
ANALYSIS
In their sole issue, appellants argue that the trial court erred in failing to grant their application for a temporary injunction to preserve the status quo and restore their ownership and management rights in Garden Group. They assert that the status quo was before the Naim brothers' 2016 filings with the Secretary of State and that the Naim Parties "have interfered with [appellants'] management rights, including in litigation in Mexico where the Naim Parties are wrongfully asserting control over Garden Group."
Standard of Review and Applicable Law
"A temporary injunction is an extraordinary remedy and does not issue as a matter of right." Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). "In a hearing on an application for a temporary injunction the only question before the court is the right of the applicant to a preservation of the status quo of the subject matter of the suit pending a final trial of the case on its merits." Transport Co. of Tex. v. Robertson Transp., Inc., 261 S.W.2d 549, 552 (Tex. 1953); see Butnaru, 84 S.W.3d at 204 ("A temporary injunction's purpose is to preserve the status quo of the litigation's subject matter pending a trial on the merits."). The "status quo" in this context is defined as "the last, actual, peaceable, non-contested status [that] preceded the pending controversy." In re Newton, 146 S.W.3d 648, 651 (Tex. 2004) (orig. proceeding). To obtain a temporary injunction, an applicant must plead and prove three elements: (1) "a cause of action against the defendant"; (2) "a probable right to the relief sought"; and (3) "a probable, imminent, and irreparable injury in the interim." Butnaru, 84 S.W.3d at 204.
A trial court has broad discretion in deciding whether to grant or deny a temporary injunction, and its ruling is subject to reversal only for a clear abuse of that discretion. See id.; Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993). "[W]e view the evidence in the light most favorable to the trial court's order, indulging every reasonable inference in its favor, and determine whether the order was so arbitrary as to exceed the bounds of reasonable discretion." Universal Health Servs., Inc. v. Thompson, 24 S.W.3d 570, 576 (Tex. App.-Austin 2000, no pet.); see Butnaru, 84 S.W.3d at 204 (stating that appellate court may not substitute its judgment for that of trial court "unless the trial court's action was so arbitrary that it exceeded the bounds of reasonable discretion"). A trial court does not abuse its discretion if some evidence reasonably supports its decision. See Thompson, 24 S.W.3d at 576.
Probable, Imminent, and Irreparable Injury
We limit our review of appellants' issue to the third element that a plaintiff must plead and prove to be entitled to a temporary injunction-"a probable, imminent, and irreparable injury in the interim"-because our review of this element is dispositive. See Butnaru, 84 S.W.3d at 204 (requiring applicant to plead and prove three elements); see also Tex. R. App. P. 47.1 (requiring court of appeals to "hand down a written opinion that is as brief as practicable but that addresses every issue raised and necessary to final disposition of the appeal").
"Establishing probable, imminent, and irreparable injury requires proof of an actual threatened injury, as opposed to a speculative or purely conjectural one." Texas Dep't of Pub. Safety v. Salazar, 304 S.W.3d 896, 908 (Tex. App.-Austin 2009, no pet.). "[T]he requirement that injury be probable and imminent is not satisfied by evidence suggesting that the harm or injury is merely possible or feared." Hotze v. Hotze, No. 01-18-00039-CV, 2018 Tex.App. LEXIS 5386, *5 (Tex. App.-Houston [1st Dist.] July 17, 2018, no pet.) (mem. op.); see Salazar, 304 S.W.3d at 908 ("Fear or apprehension of possible injury is insufficient to support a finding of imminent injury."). "Instead, to support injunctive relief, the commission of the act must be more than speculative and the injury that flows from the act must be more than conjectural." Hotze, 2018 Tex.App. LEXIS 5386, *5-6; see Salazar, 304 S.W.3d at 908.
Further, as to the required proof to show irreparable injury, applicants must prove that they "cannot be adequately compensated in damages" or "the damages cannot be measured by any certain pecuniary standard." Butnaru, 84 S.W.3d at 204; see Thompson, 24 S.W.3d at 578 (describing "irreparable harm for which there is no adequate remedy at law" and explaining that applicant's burden is to show that "award of damages would be inadequate for the harm suffered"). Courts generally "do not enforce contractual rights by injunction, because an applicant who may recover breach-of-contract damages can rarely establish an irreparable injury and accompanying inadequate legal remedy." North Cypress Med. Ctr. Operating Co. v. St. Laurent, 296 S.W.3d 171, 175 (Tex. App.-Houston [14th Dist.] 2009, no pet.).
In their pleadings to the trial court, appellants assert that there was a "present, real, and substantial threat" that the Naim Parties would use the "fraudulent filings" with the Secretary of State "to their advantage" and to the "permanent detriment of other partners." On appeal, appellants characterize the Naim Parties' actions as "improper," deceptive, gamesmanship, and "disruptive of the status quo" and assert that the Naim Parties "have been multiplying the fruits of their false filings" by obtaining the Delaware default judgment and then "deploy[ing] the Delaware default judgment to mislead the courts" in Mexico "that the default judgment was somehow a ratification of the 2016 Texas Secretary of State filings or the Naim Parties' contentions regarding E-Mex." Appellants further argue that the Naim Parties "have interfered with Appellants' management rights, including in litigation in Mexico where the Naim Parties are wrongfully asserting control over Garden Group."
Appellants also assert that the Naim Parties are "using a false document to defraud Lone Star Bank out of its loan," but the bank is not a party in this case.
"In certain scenarios, courts have recognized the existence of an irreparable injury where an applicant will suffer the loss of unique management rights in a company." Cheniere Energy, Inc. v. Parallax Enters., L.L.C., 585 S.W.3d 70, 94 (Tex. App.-Houston [14th Dist.] 2019, pet. dism'd); see id. at 83 ("The loss of management rights over a company are unique, irreplaceable, and 'cannot be measured by any certain pecuniary standard.'" (quoting Sonwalker v. St. Luke's Sugar Land P'ship, L.L.P., 394 S.W.3d 186, 201 (Tex. App.-Houston [1st Dist.] 2012, no pet.))). But appellants' pleaded causes of action-that the Naim Parties breached the partnership agreement and that they are liable for filing false documents-generally support the award of damages that are capable of calculation and fully compensable. See Tex. Bus. Org. Code § 4.007 (allowing recovery of damages for loss caused by false filing instruments); St. Laurent, 296 S.W.3d at 175; see also Okoro v. Cardenas, No. 03-12-00486-CV, 2013 Tex.App. LEXIS 10737, at *8 (Tex. App.-Austin Aug. 17, 2013, no pet.) (mem. op.) (explaining that injunctive relief is generally not appropriate when "potential damages are capable of calculation and fully compensable"); Brammer v. KB Home Lone Star, L.P., 114 S.W.3d 101, 108-09 (Tex. App.-Austin 2003, no pet.) (rejecting party's "attempt to independently rest the temporary injunction on its breach-of-contract claim" and observing that party failed to present evidence to show that injury suffered was different from that "normally suffered as a result" of claim).
Here, appellants' pleadings raise concerns that they will be harmed because the Naim Parties would use the "fraudulent filings" with the Secretary of State "to their advantage" and to the "permanent detriment of other partners," but they did not present evidence to support that an actual, threatened injury in the interim was imminent absent injunctive relief or that damages from such injury would not be calculable or fully compensable. Thus, the trial court could have determined that appellants did not prove that that they would suffer a probable, imminent, and irreparable injury stemming from the Naim Parties' alleged breach of the joint venture agreement or the 2016 filings to support injunctive relief. See Butnaru, 84 S.W.3d at 204 (stating that it is applicant's burden to plead and prove elements to be entitled to injunctive relief); Cardenas, 2013 Tex.App. LEXIS 10737, at *8 (explaining that injunctive relief is generally not appropriate when "potential damages are capable of calculation and fully compensable"); Salazar, 304 S.W.3d at 908 (explaining that "apprehension of possible injury is insufficient to support a finding of imminent injury"). To the contrary, the trial court could have credited the son's and the attorney's testimony about the parties' lengthy dispute and the court proceedings in Mexico and, based on this testimony, determined that an imminent injury without a temporary injunction in the interim to appellants was not probable or that it would not be irreparable. See Thompson, 24 S.W.3d at 576 (stating that appellate court views evidence in light most favorable to trial court's order, indulging every reasonable inference in its favor).
Delay in Seeking Equitable Relief
We also observe that the trial court reasonably could have considered appellants' delay in seeking equitable relief and balanced the equities and resulting hardships in favor of denying their requested temporary injunction. See id. at 578 (stating that trial court may balance equities and resulting hardships from issuance or denial of temporary injunction); Landry's Seafood Inn & Oyster Bar-Kemah, Inc. v. Wiggins, 919 S.W.2d 924, 927 (Tex. App.-Houston [14th Dist.] 1996, no writ) (explaining that equitable principles apply to request for injunctive relief and that movant "must have acted promptly to enforce its rights"); see also Tex. Civ. Prac. & Rem. Code § 65.001 (stating that generally "principles governing courts of equity govern injunction proceedings"); In re Gamble, 71 S.W.3d 313, 317 (Tex. 2002) (orig. proceeding) ("A request for injunctive relief invokes a court's equity jurisdiction."); NMTC Corp. v. Conarroe, 99 S.W.3d 865, 868 (Tex. App.-Beaumont 2003, no pet.) (concluding that trial court did not abuse its discretion in balancing equities between parties and denying temporary injunctive relief).
In this case, appellants assert that the status quo was before the 2016 filings with the Secretary of State, but appellants delayed filing suit until November 2021, more than five years later, and the trial court's hearing on their motion for temporary injunction did not occur until December 2022, more than another year later. The trial court also could have considered appellants' inconsistent position in its defense of the suit brought by the Naim brothers in Hidalgo County. In that case, appellants argued that the appropriate forum for the parties' dispute concerning their joint venture was Mexico, and the evidence before the trial court was that court proceedings in Mexico were pending before and after appellants' application for a temporary injunction, including a proceeding in which a central dispute in this case-the control of Garden Group-was at issue.
CONCLUSION
For these reasons, we conclude that the trial court did not abuse its discretion when it denied appellants' application for a temporary injunction, overrule their issue, and affirm the trial court's order denying their application for temporary injunction.
Affirmed.