Opinion
NO. 01-17-00591-CV
07-10-2018
TEXAS FIRST INVESTMENT MANAGEMENT CO., LLP, Appellant v. THOMAS J. COORSH, Appellee
On Appeal from the 125th District Court Harris County, Texas
Trial Court Case No. 2015-74399-A
MEMORANDUM OPINION
Thomas J. Coorsh sued Texas First Investment Management Company, LLP for breach of contract. The trial court granted Coorsh a summary judgment against Texas First Investment, awarding him actual damages and attorney's fees.
On appeal, Texas First Investment raises two issues. It contends that Coorsh did not meet his summary-judgment burden to conclusively establish his breach-of-contract claim. It also asserts that it presented summary-judgment evidence raising a fact issue regarding an affirmative defense to Coorsh's claim. Because we hold that no error has been shown, we affirm the trial court's summary judgment.
Background
Texas First Investment is a limited partnership formed in 2004. In 2005, Texas First Investment's limited partners and its general partner, Texas First Fund Holdings, LLC, signed an "Agreement of Limited Partnership of Texas First Investment" (Original Partnership Agreement). In May 2006, Coorsh became a limited partner of Texas First Investment, purchasing 25,000 partnership units for $50,000. Coorsh also signed the Original Partnership Agreement.
In 2008, Renegade Capital, LP, invested in Texas First Investment. It purchased 250,000 partnership units and became a limited partner. As a result, the Original Partnership Agreement was amended. Renegade, the other limited partners, including Coorsh, and the general partner signed an "Amended and Restated Agreement of Limited Partnership" (Amended Partnership Agreement). The effective date of the Amended Partnership Agreement was July 17, 2008. Among the agreements provisions was Section 9.12, which provides as follows:
9.12 Sell Option. On or after the day that is five years from the 17th day of July, 2008, Renegade Capital, L.P. may require, by giving an irrevocable written notice to the Partnership, that the Partnership purchase from such Partner all or some of such Partner's Units or Option Units at the highest value of the following:
(a) Current fair market value of the collective Units and/or Options Units being purchased; or
(b) Five Dollars ($5.00) per Unit or Option Unit.
This right shall come into existence immediately five years from the 17th day of July, 2008 and shall continue indefinitely thereafter. In the event Renegade Capital, L.P. exercises the right granted to it under this Section 9.12, the remaining Limited Partners (specifically excluding, however, Douglas R. Cannon [a limited partner of Texas First Investment]) shall have the right to similarly require the Partnership to purchase that portion of such Partner's Units which is equal to the portion of the Units or Option Units owned by Renegade Capital, L.P. which Renegade Capital, L.P. is requiring the Partnership to purchase. If, upon exercise of this right, the Partnership does not have sufficient surplus to permit it to lawfully purchase all of such Units and/or Option Units, the General Partner shall promptly take such legal measures as may be appropriate or necessary in order to enable the Partnership to lawfully purchase and pay for all such Units and/or Option Units.
On July 17, 2013, Renegade gave written notice to Texas First Investment, exercising its option under Section 9.12 for Texas First Investment to purchase all of Renegade's 250,000 partnership units. Three days later, on July 20, 2013, Coorsh sent notice to Texas First Investment, exercising the option under Section 9.12 to sell his 25,000 partnership units to Texas First Investment. In July 2013, the fair market value of both Renegade's and Coorsh's partnership units was less than $5 a unit.
After Coorsh gave his Section 9.12 notice in July 2013, Texas First Investment did not repurchase his partnership units. In December 2015, Coorsh filed suit against (1) Texas First Investment, (2) Renegade, (3) limited partner Douglas Cannon, and (4) general partner Texas First Fund Holdings. Among his claims was breach of contract. Coorsh asserted that he had performed all conditions precedent under the Amended Partnership Agreement, including giving proper notice under Section 9.12. Coorsh sought "specific performance of Section 9.12 of the Amended [Partnership] Agreement requiring the Texas First Defendants to purchase his 25,000 units at $5.00 per unit for a total of $125,000."
Eleven months after filing suit, Coorsh filed a motion for partial traditional summary judgment, seeking judgment on his breach-of-contract claim against Texas First Investment. In support of his motion, Coorsh offered (1) his own affidavit, (2) the Amended Partnership Agreement, (3) Renegade's Section 9.12 notice, (3) his Section 9.12 notice, and (4) Texas First Investment's responses to requests for admission.
Coorsh relied on this evidence to show that he had "establishe[d] all the requisite elements of his breach of contract claim." He asserted that the Amended Partnership Agreement, "including Section 9.12[,] was a binding and enforceable contract supported by valid and sufficient consideration." Coorsh claimed that the evidence showed that Section 9.12 "clearly affords Plaintiff the contractual right to exercise his sell option, following Renegade's exercise of its right to sell. The only condition precedent to the exercise of [his] sell option, the issuance of written notice by Renegade to sell all of its units, was satisfied." Coorsh asserted that, after he gave his Section 9.12 notice, Texas First Investment was required "to purchase [his] units at $5 per unit."
In its response, Texas First Investment did not dispute that Renegade and Texas First Investment had each given notice pursuant to Section 9.12, requesting Texas First Investment to repurchase their respective partnership units. Instead, it asserted that Coorsh lacked standing. Specifically, Texas First Investment claimed that Coorsh was not entitled to enforce the Amended Partnership Agreement because he "had no legal standing to assert the buy back of his units in Texas First Investments due to his fraudulent acquisition of his shares."
In making its argument, Texas First Investment relied on the following provisions found in both the Original Partnership Agreement and the Amended Partnership Agreements:
12.14. Representations and Warranties. Each Partner hereby represents and warrants to, and covenants with, each other Partner, effective as of the date of this Agreement, as follows:
. . .
(c) There are no actions, suits or proceedings pending or, to the knowledge of that Partner, threatened against that Partner and/or any of its Affiliates which, if adversely determined, could materially adversely affect the ability of that Partner or
any of its Affiliates to perform any other agreement specifically referred to in this Agreement.
. . .
12.23 Representations and Warranties of the Limited Partners. Each Limited Partner, for such Limited Partner and for such Limited Partner's heirs, personal representatives, successors and assigns, makes the following representations, declarations and warranties with the intent that the same may be relied upon in determining the suitability of the undersigned as a Limited Partner in the Partnership. The following representations, warranties and agreements shall survive the date of this Partnership Agreement. Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership as follows:
. . .
(j) Any information that such Limited Partner has heretofore furnished to the Partnership with respect to such Limited Partner is correct and complete as of the date such Limited Partner's signing of this Agreement. The representations, warranties, agreements, undertakings and acknowledgments made by such Limited Partner in this Agreement are made with the intent that they be relied upon by the Partnership in determining his, her or its suitability as a Limited Partner, and shall survive his, her or its purchase of Units. In addition, such Limited Partner undertakes to notify the Partnership immediately of any change in any representation, warranty or other information relating to such Limited Partner set forth herein.
Texas First Investment asserted that Coorsh had violated these provisions of the partnership agreements because he had failed to disclose—throughout the time he was a limited partner—that he had been the chief financial officer of Wextrust, a company that had been investigated by the Federal Bureau of Investigation and the Securities and Exchange Commission for engaging in a "Ponzi-like scheme." Texas First Investment averred that "Coorsh also did not disclose that, on August 11, 2008, the Securities and Exchange Commission, acting upon a federal court order, seized the assets of Wextrust Capital and turned these assets over to a federally-appointed receiver." It also claimed that Coorsh had not disclosed that Wextrust's chief executive officer and chief operating officer were convicted and sentenced to federal prison related to Wextrust's fraudulent activities.
Texas First Investment asserted that Section 12.23(j) of the Original Partnership Agreement imposed a continuing duty on Coorsh to notify Texas First Investment regarding any change in the information he had initially provided in order to become a limited partner. It averred that Coorsh had failed to do this when he did not disclose that federal charges were brought against Wextrust while the Original Partnership Agreement was in effect. Texas First Investment also claimed that Coorsh did not disclose the charges against Wextrust when he signed the Amended Partnership Agreement in July 2008. Texas First Investment asserted that Sections 12.14(c) and 12.23(j) of the agreement required disclosure of that information. It averred that, "A disclosure of these facts [regarding Wextrust], as required by the Amended [Partnership] Agreement, would have caused Texas First Investment to reject or remove Coorsh as an investor."
Texas First Investment asserted that, because it is a "Registered Investment Advisor," Coorsh's association with Wextrust "made him unfit to be an investor in and part-owner of" Texas First Investment. Texas First Investment averred that it had only "recently discovered" Coorsh's association with Wextrust. It claimed that, had it learned of the association, it would have rejected or removed Coorsh as an investor in the limited partnership. Texas First Investment concluded its summary-judgment response by stating, "Coorsh obtained his shares in Texas First Investment by fraudulent means. Therefore, he lacks legal standing to pursue redemption of these shares."
In support of its response, Texas First Investment offered the affidavit of its president, Douglas Cannon. It also offered (1) the Original and Amended Partnership Agreements, (2) documents printed from the FBI's and SEC's websites relating to the charges against Wextrust, and (3) filings from the suit filed by the SEC in federal court against Wextrust.
Coorsh filed a reply to Texas First Investment's summary-judgment response. In his reply, Coorsh averred that Texas First Investment had not identified the elements of standing or raised a material fact issue with respect to standing. Coorsh also criticized the underlying basis of argument offered by Texas First Investment to show that Coorsh did not have standing. Coorsh asserted that Texas First Investment's argument that he had obtained his partnership units by "fraudulent means" had no bearing on whether he had standing to assert his breach-of-contract claim. Coorsh also indicated that, even if the argument is construed to raise an affirmative defense aside from lack of standing, Texas First Investment failed to offer competent summary-judgment evidence to show, as it claimed, that Coorsh had obtained the partnership units by fraudulent means.
Coorsh also supported his reply with his supplemental affidavit. In it, he testified that he invested in Texas First Investment in May 2006 and signed the Original Partnership Agreement. He stated that he did not commence employment with Wextrust, as its chief financial officer, until June 1, 2007. He stated that he resigned his position with Wextrust on June 8, 2008, and signed the Amended Partnership Agreement on July 8, 2008. According to Coorsh, civil and criminal charges were not initiated against Wextrust until August 2008, after his resignation as chief financial officer of the company.
Coorsh also objected on multiple grounds to the evidence offered by Texas First Investment in support of its summary-judgment response. Among its objections, Coorsh complained that Cannon's affidavit, offered to show that Coorsh had not complied with Sections 12.14(c) and 12.23(j) of the partnership agreements, contained conclusory statements. Coorsh also objected that the documents attached to Texas First Investment's response, such as print-outs from the SEC's and FBI's websites, were not properly authenticated.
Texas First Investment then filed a supplemental response to Coorsh's motion for summary judgment. It asserted that Coorsh was not entitled to enforce the buy-back provision found in Section 9.12 of Amended Partnership Agreement because that provision permitted Coorsh to recover only the portion of his partnership units equal to the partnership units that Renegade was requiring Texas First Investment to repurchase from Renegade. Texas First Investment acknowledged that "Renegade initially did provide notice to Texas First Investment to have its units repurchased" but then claimed that "Renegade nullified this demand through an agreement with Texas First Investment." It claimed, "Renegade and Texas First Investment have agreed to a settlement at a fraction of the 250% amount Renegade Capital initially wanted." However, Texas First Investment offered no summary-judgment evidence to support this assertion in its supplemental response.
The trial court granted Coorsh's motion for partial summary judgment, signing an order that awarded Coorsh monetary damages of $125,000 and attorney's fees of $25,000 against Texas First Investment. The order became a final, appealable judgment after the trial court severed Coorsh's breach-of-contract claim from the only other remaining claim, a counter-claim brought by Renegade. Texas First Investment now appeals the summary judgment, raising two issues.
Summary Judgment
A. Standard of Review
We review a trial court's ruling on a summary judgment motion de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). 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); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
A plaintiff moving for summary judgment must prove that he is entitled to summary judgment as a matter of law on each element of his cause of action. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986); Cleveland v. Taylor, 397 S.W.3d 683, 696-97 (Tex. App.—Houston [1st Dist.] 2012, pet. denied). In other words, a plaintiff moving for summary judgment must conclusively prove all essential elements of his claim. Cullins v. Foster, 171 S.W.3d 521, 530 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. See City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005); Cleveland, 397 S.W.3d at 697.
If the movant meets his burden, the burden then shifts to the nonmovant to raise a genuine issue of material fact precluding summary judgment. See Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995); Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007) (stating that summary judgment evidence raises fact issue if reasonable and fair-minded jurors could differ in their conclusions in light of all evidence presented). To defeat summary judgment by raising an affirmative defense in response to the plaintiff's summary judgment motion, the defendant must bring forth evidence sufficient to raise a genuine issue of material fact on each element of its affirmative defense. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); Anglo-Dutch Petroleum Int'l, Inc. v. Haskell, 193 S.W.3d 87, 95 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).
In determining whether the nonmovant raised a fact issue, we review the evidence in the light most favorable to the nonmovant, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Fielding, 289 S.W.3d at 848 (citing City of Keller, 168 S.W.3d at 827); Cleveland, 397 S.W.3d at 697. We indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002) (citing Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997)); Cleveland, 397 S.W.3d at 697.
B. Condition Precedent
In its second issue, Texas First Investment contends that Coorsh failed to establish a condition precedent required to trigger Texas First Investment's obligation under Section 9.12 of the Amended Partnership Agreement to purchase Coorsh's partnership units.
1. Applicable Law
A plaintiff claiming breach of contract must prove (1) the existence of a valid contract; (2) performance or tendered performance; (3) the defendant's breach; and (4) damages as a result of the breach. Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671, 677 (Tex. App.—Houston [1st Dist.] 2008, pet. denied); Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.—Houston [1st Dist.] 2002, pet. denied). "A breach of contract occurs when a party fails to perform an act that it has expressly or impliedly promised to perform." Case Corp. v. Hi-Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 769-70 (Tex. App.—Dallas 2005, pet. denied).
"'A condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation.'" Solar Applications Eng'g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010) (quoting Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992)); see also RESTATEMENT (SECOND) OF CONTRACTS § 224 (1981) ("A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due."). Conditions precedent occur after the execution of a contract but must occur before there is a right to immediate performance. Tabe v. Tex. Inpatient Consultants, LLP, No. 01-16-00971-CV, 2018 WL 1473785, at *3 (Tex. App.—Houston [1st Dist.] Mar. 27, 2018, no pet.) (citing Nat'l Fire Ins. Co. of Hartford v. State & Cty. Mut. Fire Ins. Co., No. 01-11-00176-CV, 2012 WL 3776422, at *5 (Tex. App.—Houston [1st Dist.] Aug. 30, 2012, no pet.) (mem. op.)).
A party seeking to recover under a contract bears the burden of proving that all conditions precedent have been satisfied. Id. (citing Wakefield v. Ayers, No. 01-14-00648-CV, 2016 WL 4536454, at *10 (Tex. App.—Houston [1st Dist.] Aug. 30, 2016, no pet.) (mem. op.)). A condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation. Id. If the condition is not fulfilled, the contract or obligation attached to the condition cannot be enforced. Id.
2. Analysis
In relevant part, Section 9.12 of the Amended Partnership Agreement provides,
9.12 Sell Option. On or after the day that is five years from the 17th day of July, 2008, Renegade Capital, L.P. may require, by giving an irrevocable written notice to the Partnership, that the Partnership purchase from such Partner all or some of such Partner's Units or Option Units at the highest value of the following:
(a) Current fair market value of the collective Units and/or Options Units being purchased; or
(b) Five Dollars ($5.00) per Unit or Option Unit.
This right shall come into existence immediately five years from the 17th day of July, 2008 and shall continue indefinitely thereafter. In the event Renegade Capital, L.P. exercises the right granted to it under this Section 9.12, the remaining Limited Partners (specifically excluding, however, Douglas R. Cannon [a limited partner of Texas First Investment]) shall have the right to similarly require the Partnership to purchase that portion of such Partner's Units which is equal to the portion of the Units or Option Units owned by Renegade Capital, L.P. which Renegade Capital, L.P. is requiring the Partnership to purchase . . . .(Emphasis added.)
On appeal, Texas First Investment contends that Coorsh did not conclusively establish its right to require Texas First Investment to purchase its partnership units because Coorsh did not show, as required by the highlighted language above, the "is requiring [Texas First Investment] to purchase" component of the condition precedent. We disagree.
In support of his motion for summary judgment, Coorsh offered his affidavit in which he testified: "Pursuant to Section 9.12 of the Amended LP Agreement, Renegade, by letter dated July 17, 2013, issued a notice of [sic] exercising its sell option, making formal demand that the Limited Partnership purchase Renegade's limited partnership units." Coorsh also offered Renegade's notice letter.
In its notice letter, Renegade informed Texas First Investment that it was giving "its irrevocable written notice" that "it is exercising its Sell option" under Section 9.12 of the Amended Partnership Agreement. It averred that Texas First Investment "must purchase Renegade's 250,000 Units in the Partnership[.]" Renegade stated that the "letter constitute[d] Renegade's formal demand that, within thirty (30) days of the Partnership's receipt of this letter, the Partnership purchase Renegade's Units as set forth in the Limited Partnership Agreement." Renegade warned that, "[i]f the Partnership fails to purchase Renegade's Units within the thirty (30) days given, Renegade is prepared to seek all remedies available to it under the Limited Partnership Agreement and the law."
Three days later, on July 20, 2013, Coorsh gave his Section 9.12 notice to Texas First Investment. He averred that "Renegade's exercise of its 'Sell Option' right has satisfied the necessary condition precedent of Paragraph 9.12 thereby extending a similar 'Sell Option' right to the remaining Limited Partners." Coorsh then stated, "I hereby submit irrevocable written notice of my demand to require the Partnership to purchase my entire holding of 25,000 Partnership Units pursuant to the provisions of paragraph 9.12 of the Amended and Restated Agreement of Limited Partnership of Texas First Investment Management Company, LP."
Based on his summary-judgment evidence, Coorsh conclusively established that he had satisfied the condition precedent to require Texas First Investment to purchase his partnership units. The summary-judgment evidence showed that Renegade had timely exercised its right to require Texas First Investment to purchase Renegade's 250,000 partnership units. Section 9.12 then gave Coorsh "the right to similarly require the Partnership to purchase that portion of such Partner's Units which is equal to the portion of the Units or Option Units owned by Renegade Capital, L.P. which Renegade Capital, L.P. is requiring the Partnership to purchase." Renegade was requiring Texas First Investment to purchase its 250,000 partnership units. As a result, Coorsh properly exercised his right to require Texas First Investment to purchase his 25,000 units, thereby satisfying the condition precedent and triggering Texas First Investment's obligation to purchase Coorsh's partnership units. In short, Coorsh satisfied his summary-judgment burden. The burden then shifted to Texas First Investment to raise a material fact issue.
As it did in its supplemental response to the motion for summary judgment, Texas First Investment now asserts that Coorsh did not show that the condition precedent contained in Section 9.12 had been satisfied because Renegade entered into a settlement with Texas First Investment under which Texas First Investment is longer required to purchase Renegade's partnership units. Regardless of whether this would serve to undermine Coorsh's showing that he satisfied the condition precedent, Texas First Investment offered no summary-judgment evidence to support this assertion. Thus, it did not meet its summary-judgment burden to raise a material issue of fact with respect to whether Coorsh satisfied the condition precedent.
We overrule Texas First Investment's second issue.
C. Affirmative Defense
In its first issue, Texas First Investment contends Coorsh was not entitled to summary judgment because it raised a material issue of fact with respect to its affirmative defense that Coorsh "had no legal standing to demand the buy back of his units in [Texas First Investment] due to his fraudulent acquisition" of his ownership interest in the limited partnership. See Brownlee, 665 S.W.2d at 112 (stating that party seeking to avoid summary judgment by way of an affirmative defense bears burden of raising material issue of fact on each element of that defense).
We agree with Coorsh that, in making its argument, Texas First Investment conflates the jurisdictional concept of standing with the affirmative defense of fraudulent inducement. We begin by examining whether the record shows that Coorsh had standing to assert his claim for breach of Section 9.12. We then examine the record to determine whether Texas First Investment offered evidence to raise a fact issue regarding each element of the affirmative defense of fraudulent inducement.
1. Standing
Standing is a constitutional prerequisite to suit, Heckman v. Williamson Cty., 369 S.W.3d 137, 150 (Tex. 2012), and a component of subject-matter jurisdiction. State v. Naylor, 466 S.W.3d 783, 787 (Tex. 2015). "[T]he standing doctrine requires a concrete injury to the plaintiff and a real controversy between the parties that will be resolved by the court." Heckman., 369 S.W.3d. at 154. "A plaintiff does not lack standing simply because he cannot prevail on the merits of his claim; he lacks standing because his claim of injury is too slight for a court to afford redress." DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 305 (Tex. 2008).
To show standing, three elements must be present. Heckman, 369 S.W.3d. at 155. First, "[t]he plaintiff must be personally injured—he must plead facts demonstrating that he, himself (rather than a third party or the public at large) suffered the injury." Id. "A plaintiff establishes standing to maintain a breach-of-contract action by demonstrating that it has an enforceable interest as a party to the contract, as an assignee of a party, or as a third party beneficiary." Republic Petroleum, L.L.C. v. Dynamic Offshore Res. NS, L.L.C., 474 S.W.3d 424, 430 (Tex. App.—Houston [1st Dist.] 2015, pet. denied).
Here, the undisputed evidence established that Coorsh was a party to the Amended Partnership Agreement. The record shows that Coorsh paid $50,000 to obtain 25,000 partnership units in Texas First Investment. Pursuant to Section 9.12 of the agreement, Coorsh, as a limited partner, had the right to enforce the requirement that Texas First Investment purchase his partnership units if certain conditions were met. Thus, Coorsh satisfied the first element of standing to show that he, as opposed to another, was personally injured by Texas First Investment's nonperformance of the agreement.
Second, the plaintiff's alleged injury must be "fairly traceable" to the defendant's conduct. Heckman, 369 S.W.3d. at 155. Here, Coorsh alleged that Texas First Investment injured him by failing to perform its contractual obligation under Section 9.12 of the Amended Partnership Agreement. Thus, the alleged injury was traceable to Texas First Investment.
Third, the plaintiff's alleged injury must be likely to be redressed by the requested relief. Id. "If, for example, a plaintiff suing in a Texas court requests injunctive relief as well as damages, but the injunction could not possibly remedy his situation, then he lacks standing to bring that claim." Id. In this case, Coorsh requested monetary relief to compensate him for the injury caused by Texas First Investment's refusal to purchase his partnership units. Monetary relief would redress Coorsh's injury.
Because all three elements are met, we conclude that the record shows Coorsh had standing to assert his breach-of-contract claim.
2. Fraudulent Inducement
As the non-movant asserting fraudulent inducement as an affirmative defense, Texas First Investment was required to provide sufficient summary-judgment evidence to create a fact issue on each element of the defense. See Brownlee, 665 S.W.2d at 112. Fraudulent inducement is a type of fraud claim that requires a showing that (1) a false material misrepresentation was made that was either known to be false when made or was asserted without knowledge of its truth or falsity, (2) it was intended to be acted on, (3) it was relied on, and (4) it caused injury. MKM Eng'rs, Inc. v. Guzder, 476 S.W.3d 770, 783 (Tex. App.—Houston [14th Dist.] 2015, no pet.) (citing Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998)).
We begin by determining whether Texas First Investment raised a genuine issue of material fact regarding whether Coorsh made a false material misrepresentation. We conclude that it did not.
Texas First Investment contends that Coorsh made a false statement pursuant to Section 12.14(c) of the Original and Amended Partnership Agreements. It claims it relied on those statements, pursuant to Section 12.23(j), to allow Coorsh to initially become, and then remain, a limited partner.
Sections 12.14(c) and 12.23(j) provide,
12.14. Representations and Warranties. Each Partner hereby represents and warrants to, and covenants with, each other Partner, effective as of the date of this Agreement, as follows:
. . .
(c) There are no actions, suits or proceedings pending or, to the knowledge of that Partner, threatened against that Partner and/or any of its Affiliates which, if adversely determined, could materially adversely affect the ability of that Partner or
any of its Affiliates to perform any other agreement specifically referred to in this Agreement.
. . . .
[12.23](j) The representations, warranties, agreements, undertakings, and acknowledgments made by such Limited Partner in this Agreement are made with the intent that they be relied upon by the Partnership in determining his, her its suitability as a Limited Partner and shall survive his, her or its purchase of units. In addition, such Limited Partner undertakes to notify the Partnership immediately of any change in any representation, warranty, or other information relating to such Limited Partner set forth herein.
Texas First Investment contends that, by signing the partnership agreements, Coorsh represented, under 12.14(c), that there were "no actions, suits or proceedings pending or, to [his] knowledge . . ., threatened against [him] and/or any of [his] Affiliates which, if adversely determined, could materially adversely affect [his] ability . . . or any of [his] Affiliates to perform any other agreement specifically referred to in this Agreement." As discussed in the Background above, Texas First Investment contends that Sections 12.14(c) and 12.23(j) required Coorsh to disclose his affiliation, as chief financial officer, with Wextrust, a company that, around 2007 and 2008, was subject to an FBI and SEC investigation and was ultimately subject to civil and criminal penalties.
Texas First Investment asserts that Coorsh's representation that there were "no actions, suits or proceedings pending" or threatened against him or any of his "Affiliates" was a false representation. But, to be a false representation under the language of Section 12.14(c), Texas First Investment also needed to present evidence demonstrating that such actions, suits, or proceedings "could materially adversely affect the ability of [Coorsh] or any of [his] Affiliates to perform any other agreement specifically referred to in this Agreement."
To support its response to Coorsh's motion for summary judgment, Texas First Investment offered (1) the affidavit of its president, Douglas Cannon; (2) printouts from the FBI's and SEC's websites; and (3) filings from the federal court case against Wextrust. The only evidence to address the "adversely affect" language of Section 12.14(c) was Cannon's affidavit. Cannon stated that the federal action "against Wextrust Capital, where Coorsh served as Chief Financial Officer, would have had the adverse effect stated in Section 12.14(c) of the Amended and Restated Agreement." Nothing else in the summary-judgment evidence addresses this portion of the alleged misrepresentation.
Affidavits containing conclusory statements unsupported by facts are not competent summary-judgment evidence. Stryker v. Broemer, No. 01-09-00317-CV, 2010 WL 4484176, at *5 (Tex. App.—Houston [1st Dist.] Nov. 10, 2010, pet. denied) (mem. op.) (citing Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 637 (Tex. App.—Houston [1st Dist.] 2002, pet. denied)); Rizkallah v. Conner, 952 S.W.2d 580, 587 (Tex. App.—Houston [1st Dist.] 1997, no pet.). "A conclusory statement is one that does not provide the underlying facts to support the conclusion." Thompson v. Curtis, 127 S.W.3d 446, 450 (Tex. App.—Dallas 2004, no pet.). An affidavit opposing a summary judgment motion must be factual; conclusions of the affiant lack probative value. Stryker, 2010 WL 4484176, at *5 (citing Prime Prods., 97 S.W.3d at 637); see also Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) ("[Conclusory affidavits are neither] credible nor susceptible to being readily controverted."). "An affidavit that is conclusory is not proper summary judgment evidence to be considered on appeal." Nelson v. Sheedy, No. 05-16-01262-CV, 2018 WL 2434389, at *7 (Tex. App.—Dallas May 30, 2018, no pet. h.) (citing, inter alia, Stryker, 2010 WL 4484176, at *5).
Cannon stated that the federal action "against Wextrust Capital, where Coorsh served as Chief Financial Officer, would have had the adverse effect stated in Section 12.14(c)," but Cannon provided no details identifying what other agreements "specifically referred to" in the Original or Amended Partnership Agreements could no longer be performed by Coorsh or his Affiliates. In other words, Cannon's affidavit did not supply the underlying facts to support his conclusion that the action against Wextrust "had the adverse effect stated in Section 12.14(c)." Thus, this portion of Cannon's affidavit is conclusory and is not competent summary-judgment evidence to show that Coorsh made a false statement to Texas First Investment. Texas First Investment has not shown that there is a genuine issue of material fact with regard to the first element of fraudulent inducement.
We note that Cannon also testified in his affidavit that, had Texas First Investment known about the federal action against Wextrust, it never would have permitted him to be an investor because "Coorsh was clearly unsuitable to be an investor in and part-owner of a Registered Investment Advisor." However, Cannon also did not provide any further explanation for the basis of this conclusion.
Moreover, Texas First Investment presented no evidence regarding the last element of fraudulent inducement; that is, it did not show that Coorsh's nondisclosure of the federal action against Wextrust injured Texas First Investment. See MKM Eng'rs, 476 S.W.3d at 783. As Coorsh points out, the evidence shows that Texas First Investment has had the benefit of Coorsh's $50,000 investment since 2006 but offered no evidence to show that the nondisclosure caused it any injury.
We conclude that Texas First Investment did not meet its summary-judgment burden of raising a genuine issue of material fact regarding each element of the affirmative defense of fraudulent inducement, and we overrule its first issue. See Brownlee, 665 S.W.2d at 112. We hold that Texas First Investment has not shown that the trial court erred in granting summary-judgment in Coorsh's favor.
Conclusion
We affirm the judgment of the trial court.
Laura Carter Higley
Justice Panel consists of Justices Higley, Brown, and Caughey.