Adeel Zaidi, A. K. Chagla, Prestige Consulting, Inc., and Apex Katy Physicians – TMG, L.L.C. v. Pankaj K. Shah and Apex Katy Physicians, LLC ( 2015 )

ACCEPTED
14-14-00855-cv
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
6/22/2015 12:55:53 PM
CHRISTOPHER PRINE
CLERK
No. 14-14-00855-CV
FILED IN
IN THE COURT OF APPEALS FOR THE 14th COURT OF APPEALS
FOURTEENTH SUPREME JUDICIAL DISTRICT HOUSTON, TEXAS
AT HOUSTON, TEXAS 6/22/2015 12:55:53 PM
CHRISTOPHER A. PRINE
Clerk
Adeel Zaidi, A. K. Chagla, Prestige Consulting, Inc.,
and Apex Katy Physicians – TMG, L.L.C., Appellants,
v.
Pankaj K. Shah and Apex Katy Physicians, LLC, Appellees.
On Appeal from the 61st District Court, Harris County, Texas
Trial Court Cause No. 2009-02578
REPLY BRIEF OF APPELLANTS
! ORAL ARGUMENT REQUESTED !
Douglas R. Little
State Bar No. 12416600
440 Louisiana Street, Suite 900
Houston, Texas 77002
713.275.2069
Robin L. Harrison
State Bar No. 09120700
Campbell, Harrison & Dagley L.L.P.
909 Fannin Street, 40th Floor
Houston, Texas 77010
(713) 752-2332
(713) 752-2330 Facsimile
June 22, 2015 ATTORNEYS FOR APPELLANTS
TABLE OF CONTENTS
INDEX OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
RECORD AND PARTY REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
STATEMENT REGARDING ORAL ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . 2
REBUTTAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARGUMENT AND AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. The Court should reverse and remand this case for a new trial because
the trial court’s conclusion of law that Zaidi committed perjury is flawed
in its over-breadth and not based upon legally sufficient evidence, and
the court’s consequent findings as to the relative credibility of the
parties is against the great weight and preponderance of the evidence
and constitutes an abuse of discretion. . . . . . . . . . . . . . . . . . . . . . . . . 9
A. The trial court erred in failing to specify the statement(s) it found
to be perjury, and there was no fabrication of evidence. . . . . . 9
B. Credibility determinations are the province of the trial court. 10
2. Appellants are prevented from adequately making their appeal to this
Court because the trial court’s gross award of damages is neither tied to
specific causes of action nor broken down into specific items of damage
awarded, and there is no evidence, or alternatively insufficient evidence,
to support one or more of the causes of action or items of damage
pleaded.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. The trial court’s award of aggregate damages against Appellants based
upon multiple alleged damages elements and its failure to attribute
damages to or among the multiple causes of action alleged by Appellees
is reversible error. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A. An award in any amount for recovery of “lost” accounts
receivable is improper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-i-
B. An award based upon a contingent asserted liability
is improper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
C. An award of other damages to the Landlord is improper . . . 19
D. Conclusion as to these damages . . . . . . . . . . . . . . . . . . . . . . . 21
4. No damages were proximately caused by any misrepresentation by any
Appellant. (Appellants’ Brief, 50–54.) . . . . . . . . . . . . . . . . . . . . . . 23
5. Appellees ratified everything of which they complain. (Appellants’
Brief, 54–55.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6. Reimbursement for the sums paid to settle with the Landlord investors
effects a double recovery. (Appellants’ Brief, 56–57.) . . . . . . . . . . 24
7. The exemplary damages are excessive across the board. (Appellants’
Brief, 57.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. No malicious conduct of Zaidi or Chagla was shown. (Appellants’
Brief, 57–59.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Appellees’ fraud and related damages are not supported by any legally
sufficient evidence. (Appellants’ Brief, 59–67.) . . . . . . . . . . . . . . . 25
10. Appellants cannot be held liable for fraudulent inducement.
(Appellants’ Brief, 67.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11 – 15. Appellants stand on their Brief on these issues . . . . . . . . . . . 27
CONCLUSION AND PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
- ii -
INDEX OF AUTHORITIES
Cases
Bunton v. Bentley, 153 S.W.3d 50 (Tex. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Crown Life Insurance Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000) . . . . . . . . 15, 23
Eastern Tex. Elec. Co. v. Baker, 254 S.W. 933 (Tex. 1923) . . . . . . . . . . . . . 15, 16
Haase v. Glazner, 62 S.W.3d 795 (Tex. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Harris County v. Smith, 96 S.W.3d 230 (Tex. 2002) . . . . . . . . . . . . . . . 15, 16, 22
Hendricks v. Thornton, 973 S.W.2d 348 (Tex. App.–Beaumont
1998, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Jauregui v. Jones, 695 S.W.2d 258 (Tex. App.–San Antonio
1985, writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Johnston v. Guiterrez, 77 S.W.3d 898 (Tex. App.—Houston
[14th Dist.] 2002, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lifshutz v. Lifshutz, 61 S,W,3d 511, 515 (Tex. App.–San Antonio
2001, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Spiritas v. Robinowitz, 544 S.W.2d 710 (Tex. Civ. App.–Dallas
1976, writ ref’d, n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 19
State v. Eversole, 889 S.W.2d 418 (Tex. App.–Houston [14th Dist.]
1994, pet. disc. rev. den.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tagle v. Galvan, 155 S.W.3d 510 (Tex. App.—San Antonio 2004,
no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Whitaker v. Rose, 218 S.W.3d 216, 224 (Tex. App.—Houston
[14th Dist.] 2007, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 22
- iii -
Statutes and Rules
TEX. R. APP. P. 61.1(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
- iv -
RECORD AND PARTY REFERENCES
1. “CR” refers to the original Clerk’s Record filed in one digital volume on
December 5, 2014.
2. “Supp CR” is the Perryman Deposition admitted into evidence. “Supp
CR,” “Supp CR 2,” “Supp CR 3,” and Supp CR 4" were filed collectively as one
Supplemental Clerk’s Record by the Harris County District Clerk on May 4, 2015.
“RR” refers to the Reporter’s Record filed in nine digital volumes on December 17,
2014. References to individual volumes will be designated “1RR,” “2RR,” etc.
Volumes 1 – 5 contain the testimony adduced on March 17 – 20, 2014. Volumes 6
– 9 contain the parties’ Exhibits.
3. Individual parties will be identified by their last names. Appellant
Prestige Consulting, Inc., which did business as Turn-Around Management Group,
will be identified as “TMG.” Appellant Apex Katy Physicians – TMG, LLC, the
general partner of the Hospital, will be identified as “Apex TMG.” The Hospital,
Apex Long Term Acute Care – Katy, L.P., which having gone through a completed
bankruptcy case was not in fact a party at the time of trial (see 9RR D. Exs. 62, 65),
will be identified as the “Hospital.” Appellee Apex Katy Physicians, LLC, will be
identified as the “Landlord.”
-v-
No. 14-14-00855-CV
IN THE COURT OF APPEALS
FOR THE FOURTEENTH JUDICIAL DISTRICT
AT HOUSTON, TEXAS
Adeel Zaidi, A. K. Chagla, Prestige Consulting, Inc.,
and Apex Katy Physicians – TMG, L.L.C., Appellants,
v.
Pankaj K. Shah and Apex Katy Physicians, LLC, Appellees.
On Appeal from the 61st District Court, Harris County, Texas
Trial Court Cause No. 2009-02578
REPLY BRIEF OF APPELLANTS
TO THE HONORABLE COURT OF APPEALS FOR
THE FOURTEENTH SUPREME JUDICIAL DISTRICT:
Appellants Zaidi, Chagla, TMG, and Apex TMG respond to the Brief of
Appellees in this Reply Brief. Appellants reiterate their challenge to all of the trial
court’s findings and conclusions as unsupported and insupportable, either by legally
or factually sufficient evidence. Appellants also reiterate their challenge to the trial
court’s award of damages as not having been supported by the court’s findings of fact
and conclusions of law. Appellants seek a reversal of the Judgment and a remand for
a new trial.
STATEMENT REGARDING ORAL ARGUMENT
The argument in Appellees’ Brief demonstrates the truth of Appellants’
contention that this case involved a real business deal involving numerous people
who were trying to open and profitably operate a long-term acute care hospital in
Katy, Texas – the Hospital. No one characterized the deal as fraudulent or malicious
at the time, or even until 2010, when Shah and the Landlord invented – not
“discovered” – the story told in Appellees’ Brief.
Appellees will take any position required, even illogical ones, to preserve the
$50,617,101.50 windfall Judgment they received from the trial court. Under these
circumstances, Appellants maintain that the Court would benefit from oral argument,
and Appellants believe that such argument will further the interests of justice.
REBUTTAL TO APPELLEES’
INTRODUCTION AND STATEMENT OF FACTS
Not surprisingly, Appellees’ argument remains based upon the invented
canard that the Hospital deal involving all these parties and many more was a fraud
from the beginning, designed by Zaidi and his minions to “divert most of the money
to himself.” (Appellees’ Brief, 1.) The story is artfully presented, but it is still
artifice.
Appellees’ statement later on page one of their brief belies the entire
argument: “Now if the Tenant [the Hospital] had obtained a long-term acute care
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license as quickly as planned, the business could have been a success . . ..” That
simply does not sound like fraud. Frauds are designed to appear as though they are
real, to seduce the innocent investors, but never to provide anyone other than the
malefactors with a chance to succeed. The Hospital deal was supposed to succeed,
it could have succeeded, and it almost did succeed. As Appellants have insisted all
along, this case is about a Hospital that failed principally because of a governmental
licensing delay.
Notwithstanding their admission that the Hospital deal could have
succeeded, Appellees created and have fostered a contrary story worthy of a white-
collar crime docudrama, and they indeed convinced the trial judge that it was more
documentary than drama. But this Court cannot sustain their $50+ million award
without indulging Appellees’ leaps of faith, by which they gloss over a lack of
substantive evidence supporting their story and utterly disregard other substantive
evidence that does not support it, on many of their grounds of liability, causation, and
damages.
Appellants are certain that their Statement of Facts (Appellants’ Brief, 1–14)
both fairly and accurately set forth what really happened between and among all the
parties to the Hospital deal, and will only address certain material misstatements and
omissions in Appellees’ Introduction (Appellees’ Brief, 1–3) and Statement of Facts
(Appellees’ Brief, 4–18).
-3-
“Wrongful Leverage”: Zaidi’s representations had no effect on this. The
only wrongful leverage was Shah’s: He agreed when he signed the Medistar Binding
Letter of Intent in September 2006 (D. Ex. 4) that he would pay $40,000 in cash per
Unit to participate in the real estate for the Hospital. He did not. If he had, the
MetroBank loan and the lien on the Hospital property would never have happened.
“Overcharging”: The contention that $1.35 million in real estate
commissions was paid is deliberately false, and there was no evidence, only
insinuation, to support it. In this regard, as in others when necessary, Appellees
simply ignore the undisputed evidence of Mr. Perryman (CR 1) – who was not a Zaidi
confidant – that Appellants set out in their brief (48–49): There were no commissions
paid to anyone on the sale of the Hospital property.
“Robbery”: First, the overwhelming evidence of all who testified – except
Shah at trial, as opposed to comments he had made at the time – was that the
$700,000 transferred by check from the Landlord to Apex TMG, and then used by
Apex TMG, the general partner of the Hospital, for Hospital purposes, was a loan.
(Appellants’ Brief, 13, 23–26, 56, 61.) In fact, the entry of the $700,000 as a debt on
the Hospital’s books and as an asset on the Landlord’s books, about which Appellees
complain (e.g., Appellees’ Brief, 2), is the proper way to reflect an intercompany
loan.
-4-
Likewise, the overwhelming evidence of all who testified, this time including
Shah at trial, was that everyone knew that Medistar had units worth $2.8 million that
it did not pay cash out of pocket for; Medistar, through Mr. Perryman, an independent
witness, testified without contradiction that Medistar had provided services in lieu of
cash for these units. (Appellants’ Brief, 11, 29, 46.)
Appellees blithely skip all of the momentous events of December 22, 2006
(Appellees’ Brief, 5), when at the meeting with Mr. Hourani, of Medistar, Shah took
over the real estate investment for his own account (Appellants’ Brief, 6–8). They
fail to acknowledge that the reason for this meeting was Shah’s failure to have paid
for his 125 units. They ignore the fact that the only principals to the contract signed
that night were Medistar and Shah. Zaidi signed only as a witness, as Mr. Perryman
also verified. Shah was no passive investor by any stretch of the imagination.
In an attempt to support the grossly insupportable fraud and exemplary
damages against Mr. Chagla, who did nothing but notarize one document, Appellees
repeatedly call him Zaidi’s “partner” (e.g., Appellees’ Brief, 3, 5), an assertion wholly
unsupported by evidence, and assert that he “drafted the lease with Medistar,” again
a deliberately false statement. Mr. Chagla, acting as the clerk he was, only faxed
Medistar a sample lease for its use. (Appellants’ Brief, 59.)
To be fair, Appellees get the facts right occasionally. They acknowledge
(Appellees’ Brief, 6) that “Shah also invested in the Landlord; Zaidi did not.” As
-5-
Appellants noted (Appellants’ Brief , 2), no person was more involved in every aspect
of the Hospital deal than Shah. Zaidi, on the other hand, was involved only slightly
as an owner in the Hospital deal and never stood to profit materially personally in any
way other than as a part owner of TMG, which had the contract to manage the
Hospital’s business and would profit only from actual work.
Appellees insinuate that Zaidi agreed that had the closing not occurred,
“TMG would have lost millions.” (Appellees’ Brief, 7, citing 2RR 213:16–23.) That
testimony actually consists of Zaidi stating that “[the closing] couldn’t have happened
without Dr. Shah’s and other physicians’ funds and their guarantees.” As Appellants
have said (Appellants’ Brief, 12, 54), it was the doctors, including Shah, who would
have lost millions, not TMG, if the closing had not gone forward. That’s why Shah
made sure that it did.
Appellees overstate the confidence with which Mr. Schulte testified about
Zaidi’s representations before the closing. (Appellees’ Brief, 8.) Mr. Schulte agreed
on cross that Zaidi was present principally on behalf of the Hospital, not the Landlord
(3RR 148:12–149:6), and that Zaidi told him his people “were on board” with a loan,
but never said that they were on board “with getting a lien” (3RR 149:22–150:6).
This distinction is prevalent in Zaidi’s admittedly faulty memory of the events.
The $700,000 loan (Appellees’ Brief, 9–10) has been addressed above and
in Appellant’s Brief (22–24). The accounting for that loan on the two company’s
-6-
books was proper. The only evidence concerning the use of the funds came from
Zaidi, who testified without contradiction that every penny went to Hospital
operations, (5RR 1126:6–23), and not for TMG’s own purposes.
Appellees’ ad hominen attacks regarding the letter of credit and the waiver
of the landlord’s lien (Appellees’ Brief, 9–11) are a rehash of their prior positions
below and are as illogical and factually unsupported as they were there. (Appellants’
Brief, 13, 21, 29–30, 39, 43–44, 46–47.) The amendment to the letter of credit did
not void it, and there still is no evidence that any draw against it was ever attempted.
Shah’s knowledge of the original lien waiver and the execution of the replacement
waiver have been explained and are not meaningfully contradicted. Appellees have
made a very big deal of the “backdated” waiver that “concealed the date,” because
otherwise they have absolutely no evidence against Chagla. We can read the date,
despite the errant notary stamp, and we suspect this Court can as well. (See
Appellees’ Brief, 11.) Appellants have already shown that Shah knew about the
waiver from the beginning, and he did not deny this. Shah especially wanted the
letter of credit, and he understood that the landlord lien waiver was a prerequisite
(4RR 210:9–216:11). Can over $6.0 million in exemplary damages against Chagla
properly be premised upon the notarization of a document that itself caused no
damage?
-7-
With respect to allegedly missing investor funds (Appellees’ Brief, 13–14),
there is no evidence whatever that these funds are in fact missing or were accounted
for incorrectly. Appellees’ assertions here are pure surmise and conjecture. The only
evidence that did exist concerned Medistar, and consisted of Shah’s admission that
he always – and not merely at trial – knew that Medistar did not pay cash and Mr.
Perryman’s uncontradicted testimony that Medistar provided services instead of cash
for those units. There was no evidence from any source that the Appellants “gave”
those units to Medistar.
As to the “maelstrom” of litigation against Shah that Appellees lay at Zaidi’s
feet, two facts are important to remember. First, nothing Zaidi told the investors in
late 2009 could have caused any of the damages Appellees sued him for in this case.
All the acts and omissions complained of had long since occurred. Second, it is
beyond telling that, even with all this knowledge before them, not one of these
investors sued or even blamed Zaidi for the harm; each one blamed Shah and only
Shah, and he settled with them for his defaults as the real manager of the Landlord.
-8-
ARGUMENT AND AUTHORITIES
1. The Court should reverse and remand this case for a new trial
because the trial court’s conclusion of law that Zaidi committed
perjury is flawed in its over-breadth and not based upon legally
sufficient evidence, and the court’s consequent findings as to the
relative credibility of the parties is against the great weight and
preponderance of the evidence and constitutes an abuse of
discretion.
A. The trial court erred in failing to specify the statement(s) it found
to be perjury, and there was no fabrication of evidence.
Appellees quote only part of the trial court’s remarks at the conclusion of the
evidence. (Appellees’ Brief, 22.) Although he said what they quoted, he also said,
before that, as Appellants quoted in their brief (17–18):
[W]hat if the intent necessary for the cause of action that is pled has
not been proven to my satisfaction but I have determined that there
was intent in testimony presented to me that was intended to either
deceive the Court or to directly and intentionally testify contrary to
the facts as I have found them based upon the documents? Two
separate things.
Not only did the trial court intimate that the intent to commit fraud in 2006 and 2007
had not been proved to his satisfaction, the court never identified one false statement
made by Zaidi to deceive the court. Because of this failure, Appellants still are left
to guess at what constitutes the supposed perjury and cannot meaningfully address
this issue on appeal.
Perjury is the fabrication of evidence. That did not happen in this case. For
better or worse, Zaidi continued to tell a story that may be hard for others to believe
-9-
but that he has said for many years that he believes. Appellants acknowledge that this
is not a criminal proceeding, but the trial court’s vague and nonspecific charges are
the bedrock basis for a Judgment of more than $50,000,000. That is equally
significant. “Facts constituting the offense of perjury must be averred directly and
with certainty.” State v. Eversole, 889 S.W.2d 418, 422 (Tex. App.–Houston [14th
Dist.] 1994, pet. disc. rev. den.). The trial court’s conclusion of law that Zaidi
committed perjury is fatally over-broad and not supported by legally sufficient
evidence.
B. Credibility determinations are the province of the trial court.
Appellants do not dispute this and did not dispute it in their brief.
Appellants contend there and here that the court’s credibility determinations were
flawed by his flawed conclusions regarding perjury, and the Judgment eloquently
demonstrates this to be true.
Appellees incredibly state (Appellees’ Brief, 30) that “appellants fail to
specify any alleged inconsistent testimony [of Shah] with any bearing on any material
fact.” Appellees’ apparently did not see section 1.C. of Appellants’ Brief (19–30)
which detailed numerous defects of all kinds in Shah’s story. Several facts are
particularly material:
(1) Shah believed that he had the right to go forward with the closing without
any consents from anyone, and he did just that to protect his investment;
-10-
(2) Shah knew at all times that the Hospital’s lender demanded and received
a waiver of the Landlord’s lien on receivables, and would not have issued the letter
of credit securing the Hospital’s rent that Shah made a requirement of the lease;
(3) Shah brought himself into the deal with Medistar and was the one who
desired to control the real estate, which required the loan and the closing;
(4) contrary to his contrived litigation story, the Hospital investors, on many
occasions, thanked Shah for making the $700,000 loan – which he acknowledged –
to the Hospital at a time when it needed it so badly; and
(5) at no time prior to 2010 did Shah ever ask any questions of anyone about
any of the things he now claims were so obviously fraudulent, including the existence
of the so-called extra Landlord account that was to have been set up in 2007 with the
$700,000 check.
These very material facts are all supported by evidence other than the
testimony of Zaidi, and section 1.C sets out many more such material defects in
Shah’s false story. Appellants are more than willing to let this Court determine, in
view of all the evidence about him, if this behavior really was Shah “being willing to
give appellants the benefit of the doubt.” (Appellees’ Brief, 30.)
Appellees’ several attempts to explain away the inconsistencies in Shah’s
story are unavailing. For example, they say (Appellees’ Brief, 30) that Shah never
called the $700,000 a loan. This is demonstrably false. In his January 2008 memo
-11-
(P. Ex. 40) he identified this money as “borrowed” from Metro and to be repaid.
Indeed, in perhaps a weak moment when he had strayed from his script on cross, Shah
agreed that all the sums he listed as due in this January 2008 memo were loans he
had made to the Hospital (4RR 282:13–283:7).
Appellees deny (Appellees’ Brief, 32) that Shah structured the deal to favor
“himself and his friends at the expense of fellow investors.” They ignore as no doubt
inconvenient the following admission:
Q. So, we have two classes of people. We have Medistar and the
three of you that are in this class [not paying cash]; and all the other
poor schmucks that are in this class, they are paying cash, right?
A. Yes, sir.
(4RR 166:7–167:7; Emphasis added.)
2. Appellants are prevented from adequately making their appeal to
this Court because the trial court’s gross award of damages is
neither tied to specific causes of action nor broken down into
specific items of damage awarded, and there is no evidence, or
alternatively insufficient evidence, to support one or more of the
causes of action or items of damage pleaded.
The trial court’s findings of fact and conclusions of law (CR 1199, Appendix
2) contain no findings of any damages amounts, and the Judgment recites only
damages awarded without making any findings as to how any actual damages were
arrived at or for which claims. This happened even though the court, at the close of
the evidence, asked for proposed findings and conclusions and said: “I do need the
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findings of fact which support the numbers, if any, that you suggest should go in a
judgment” (5RR 145:13–20). This also happened even though, after the court issued
its findings and conclusions on October 3, 2014, Appellants on October 10 requested
additional findings and conclusions that would have quantified the damages, by
claim, to be awarded to Plaintiffs (CR 1207).
Appellees claim (Appellees’ Brief, 36) that Appellants’ argument that
findings and conclusions should not contain a cumulative damages amount
(Appellants’ Brief, 33) is unsupported by authority. All of the cases cited in section
2 of Appellants’ Brief support this conclusion.
Appellees do concede (Appellees’ Brief, 35 and fn.15) that the trial court’s
Judgment awards to Shah $167,207.34 more than he asked for, and suggest a
remittitur in this amount and in the exemplary damages based upon this award. This
would be appropriate if any of the damages could pass muster, which they cannot.
The awarding of this excess amount highlights the flaws in the trial court’s Judgment,
however. The trial court simply could not even correctly calculate, much less justify,
the amounts it awarded in bulk on the claims Appellees asserted.
Appellees list all the claims and amounts attributable to them that they
asserted. These amounts cannot be reconciled to the amounts stated in gross in the
Judgment, however, and the trial court made no effort to do this. Appellees merely
assert without support (Appellees’ Brief, 35) that because their ad damnum amount
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was larger that the amount actually awarded, all discrepancies are harmless error.
3. The trial court’s award of aggregate damages against Appellants
based upon multiple alleged damages elements and its failure to
attribute damages to or among the multiple causes of action alleged
by Appellees is reversible error.
There are two reasons why the trial court’s failure to make specific damages
findings attributable to Appellees’ multiple claims prevents Appellants from being
able properly to present their case to this Court and is therefore error. First, the trial
court’s failure to make any findings concerning each Appellant’s liability for, and the
specific amounts of, the multiple elements of damages alleged by Appellees prevents
Appellants from being able to isolate the errors in the aggregate amounts of damages
awarded as to each by the court. Appellants remind the Court that they specifically
requested such findings by claim. Second, the trial court’s failure to attribute
damages separately to the multiple causes of action alleged by Appellees prevents
Appellants and this Court from being able to determine whether the Judgment is
based upon valid or invalid liability theories. These errors “prevent the [Appellants]
from properly presenting the case to the appellate courts,” and require reversal. TEX.
R. APP. P. 61.1(b). Appellees have failed to address these errors in their brief.
The Landlord alleged more than $18.1 million in damages, and Shah alleged
more than $9.2 million in damages against the “Defendants,” collectively.
(Appellees’ Brief, 34–35.) Plaintiffs offered several different calculations of their
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damages to the trial court (Appellees’ Brief, 35) on the multiple elements of damages
alleged by them: twelve separate damage elements claimed by the Landlord, and
seven separate elements claimed by Shah.
The trial court awarded actual damages to the Landlord of $4,071,584 and
to Shah of $9,336,920 (the latter excessive in any event, as Appellees admit). The
court made no findings of fact concerning the amounts of damages awarded by it,
which elements or amounts claimed by Appellees it accepted or rejected, or the
elements or amounts attributable to any particular cause of action or Appellant.
In Harris County v. Smith, 96 S.W.3d 230, 232–36 (Tex. 2002), the Texas
Supreme Court held that a broad form jury charge that commingled valid and invalid
damages elements constituted harmful error and required a new trial. In so holding,
the Court applied the reasoning of its decision in Crown Life Ins. Co. v. Casteel, 22
S.W.3d 378 (Tex. 2000). In Casteel, the Court held that a single broad form liability
question – the equivalent to the findings and conclusions here – that commingles
valid and invalid liability grounds is harmful and requires a new trial because an
appellate court cannot determine whether the jury based its verdict on an invalid
theory of liability. Id. at 388. The Court in Harris County also relied on its holding
in Eastern Tex. Elec. Co. v. Baker, 254 S.W. 933, 934–35 (Tex. 1923), in which it
held that a defendant is entitled “to have the damages assessed against it by the jury
under proper instructions submitting only the elements of damages as raised by the
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pleadings, and supported by the evidence.” Harris County v. Smith, 96 S.W.3d at
234, quoting Eastern Tex. Elec. Co. v. Baker, 254 S.W. at 934.
The rule in Harris County has been held to be applicable to damages awards
in non-jury trials and even default judgments. Whitaker v. Rose, 218 S.W.3d 216, 224
n. 3 (Tex. App.—Houston [14th Dist.] 2007, no pet.); Tagle v. Galvan, 155 S.W.3d
510 (Tex. App.—San Antonio 2004, no pet.).
Appellees have wholly failed to address the trial court’s error in failing to
make findings of fact with respect to the multiple elements of damages alleged by
them and in awarding gross amounts of damages in the Judgment. Appellees simply
assert, “[b]ut a Harris/Casteel problem arises only if a bulk damages award is
predicated on an invalid liability theory.” This argument was specifically rejected by
the Supreme Court in Harris County: “We hold that Casteel’s reasoning applies
equally to broad-form damage questions, and under its rational we conclude that the
charge error in this case was harmful.” Thus, where a gross or aggregate amount of
damages based on valid and invalid damages elements is awarded, “this court must
reverse and remand as to the entire award, even though one of the other elements
might be sufficient to support the award.” Whitaker v. Rose, 218 S.W.3d at 224, citing
Johnston v. Guiterrez, 77 S.W.3d 898, 903-04 (Tex. App.—Houston [14th Dist.]
2002, no pet.) (explaining that its holding was based upon the same principles applied
in Casteel).
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A. An award in any amount for recovery of “lost” accounts
receivable is improper.
Appellants have shown in their brief (30–49) that a substantial portion of the
damages claimed by Plaintiffs are not supported by any evidence or sufficient
evidence. The Landlord’s claim of $11,218,465 for the loss of alleged accounts
receivable of the Hospital in 2009 has no valid evidentiary support. This huge claim
was based on the testimony of Shah’s nephew, Parag Parikh, who assumed there was
not a landlord’s lien waiver already in place before 2009, contrary to the evidence
(3RR 181:6-182:9). Parikh then totaled amounts of revenue allegedly received by the
Hospital between May 2008 and a later, unknown, date and treated that amount as
accounts receivable. However, the factual evidence is undisputed that the records
relied on by Parikh did not contain accounts receivable data for the relevant time
period (Shebay, 5RR 16:11-18; 15:2-16), and that, to the extent the Hospital ever did
have actual accounts receivable, the Landlord was not precluded from foreclosing on
them by any alleged waiver (3RR 183:5-8).
Accounts receivable does not include “collected” accounts receivable (see
Appellees’ Brief, 36–37), which are more properly referred to as revenue. Moreover,
the lien on Hospital accounts receivable was specifically granted to secure the
payment of rents under the lease. (Lease, P. Ex. 30i.) There is no evidence that past-
due rents ever approached $11.0 million. The only calculation of past-due rents
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placed in evidence was Shah’s 2008 memo (P. Ex. 40) showing past-due rent as of
January 2008 of $1,482,642.50. Even that calculation was flawed in Appellees’ favor
because it did not allow the four-months of free rent provided for in the lease. These
numbers cannot factually support an award of $11.0 million in accounts receivable.
Appellants’ discussion of Bank of America’s failure to collect any accounts
(Appellants’ Brief, 41) was not intended to speak to any issue except that such
accounts did not exist, and that certainly does have bearing on Appellees’ damages.
And Parikh’s unsupported testimony (Appellees’ Brief, 37) that the Landlord
unsuccessfully tried to foreclose is no evidence because he testified as an expert,
however unqualified, and not as a fact witness. He had no such factual knowledge.
B. An award based upon a contingent asserted liability is improper.
The award to Shah by the trial court similarly may include the $5,445,291
contingent liability claimed by Shah related to his guaranty of the MetroBank loan,
which Shah previously has insisted and alleged he does not owe. (4RR 308:15-24.)
This amount has not been paid by Shah, and there is no evidence that it will ever be
paid, or that it may not be discharged or compromised for a different amount in the
future. “A contingency which cannot be determined with reasonable certainty cannot
be made the basis for recovery of a definite amount of damages.” Spiritas v.
Robinowitz, 544 S.W.2d 710, 720 (Tex. Civ. App.—Dallas 1976, writ ref’d n.r.e.).
Based on the trial record, it cannot be known whether Shah has incurred any future
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pecuniary damage arising out of the guaranty. Id. at 719.
Appellants showed that this amount was not recoverable. (Appellants’ Brief,
44–45.) Appellees argue (Appellees’ Brief, 38) nevertheless that Shah’s denial of
liability is irrelevant and that Appellants did not attempt to prove estoppel. These
positions are frankly ridiculous. If Shah denies owing the money, and claims he is
owed instead, it cannot be concluded that damage to him in the amount he has denied
has been “determined with reasonable certainty.” It is the contingency that must be
determined, not the amount of the claim. It is understandable that Shah would like
to have his cake – the Judgment for this amount – and eat it too – denial of the claim
in the arbitration, but this does not support a recovery of this contingency.
C. An award of other damages to the Landlord is improper.
As Appellants have shown (Appellants’ Brief, 45–49), Appellees’ damages
also may have included invalid claims for $2.8 million based on ownership units
allegedly “given” to Medistar, although there is no evidence of any involvement of
any of the Appellants in this regard; $638,000 that Landlord allegedly was not able
to draw against a letter of credit, although there is no evidence Landlord ever
attempted to make a draw; and $1,350,000 for alleged “commissions” paid to
Appellants, although there is no evidence of any commission payment but there is
competent evidence that no such payment was made.
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The Units: (Appellants’ Brief, 45–46.) Appellees argue (Appellees’ Brief,
39–40) that Appellants are liable because there was no evidence that Landlord
received money for the Medistar units. Since this amount was claimed as damage,
it is elementary that it was Appellees’ burden to prove that the damage existed, and
they did not. We have already shown that Shah knew all along about Medistar’s
units; his knowledge was not at all limited to the time of trial, as his testimony shows.
The Letter of Credit: (Appellants’ Brief, 46–48.) In response to Appellants’
correct observation that there was no evidence that Zaidi had the letter of credit or
refused to turn it over, Appellees argue (Appellees’ Brief, 41–42) that Zaidi obviously
possessed it when he signed it. This is not obvious as it is equally likely that he
signed it at the bank. Appellees did not prove that he had it. There is no evidence
that any Appellant caused damage to the Landlord with respect to the letter of credit.
The Bogus Commissions Claim: (Appellants’ Brief, 48–50.) In the face of
clear evidence from Zaidi – who cannot be deemed to have lied about every single
word he said, regardless of the trial court’s conclusions – Ms. Saqer, and Mr.
Perryman, that Medistar did not pay any commissions to anyone on the sale of the
Hospital real estate, and no evidence to the contrary, Appellees with fierce
determination continue to assert (Appellees’ Brief, 42–43) that illegal commissions
were paid. They of course do not attempt to show how any such commissions, even
had they existed, could have actually caused harm to anyone, since the structure of
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the agreement Shah made with Medistar the evening of December 22, 2006, was not
affected in any way. Appellees disregard all the evidence, even of Mr. Perryman,
who was not connected to any party in any way, saying simply that the trial court
could have disregarded it. The trial court cannot properly disregard the
uncontroverted testimony of a disinterested witness just because he doesn’t like it.
“When there is conflicting evidence, the appellate court usually regards the finding
of the trier of fact as conclusive. See Jauregui v. Jones, 695 S.W.2d 258, 263 (Tex.
App.–San Antonio 1985, writ ref'd n.r.e.).” Lifshutz v. Lifshutz, 61 S,W,3d 511, 515
(Tex. App.–San Antonio 2001, pet. denied) (emphasis added). There was no
conflicting evidence here on this point, only insinuation, so the usual rule of appellate
deference should not apply here.
D. Conclusion as to these damages.
The trial court’s failure to make any findings of fact relating to any damages
claimed by Appellees in the findings and conclusions that should have supported its
Judgment award of gross amounts against Appellants prevents them from being able
to isolate the elements of damages claimed by Appellees on which the Judgment is
based and properly present their appeal to this Court. Because there is insufficient
evidence to support more than one alleged damages element, neither Appellants nor
this Court can determine whether the trial court awarded damages based on those
elements. All that can be known is that in order to arrive at the amount awarded,
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some part of these invalid damages had to have been included. Therefore, this Court
should reverse the damages awards against Appellants and remand Appellees’ claims
for a new trial. Harris County v. Smith, 96 S.W.3d at 236; Whitaker v. Rose, 218
S.W.3d at 224.1
Because the trial court also did not allocate damages awarded by it to any of
the multiple causes of action alleged by Appellees, Appellants were again harmed
under the rule in Casteel, and a new trial should be granted. The Supreme Court
ruled in Casteel that when a single liability question commingles valid and invalid
liability grounds, and the Appellants’ objection is timely and specific, the error is
harmful and a new trial is required because the appellate court cannot determine
whether the verdict is based on an invalid theory. Here, because the trial court
assessed gross damage amounts in favor of the Landlord and Shah, Appellants cannot
know what amounts the trial court may have awarded in connection with the multiple
causes of action alleged by Appellees. Appellants have shown that liability against
them cannot be based on one or more of Appellees’ fraud, misrepresentation, breach
of fiduciary duty, conspiracy, and alter ego claims as a matter of law. Appellants
cannot, however, determine whether any or all of the damages awarded in the
Judgment are attributable to these invalid liability claims. As one single example,
1
For the same reasons, the trial court’s award of punitive damages must also be reversed. Bunton
v. Bentley, 153 S.W.3d 50, 54 (Tex. 2004).
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there is not even a scintilla of evidence that Chagla ever owed a fiduciary duty to
Appellees, much less that he breached it. Yet the trial court found him liable for such
a breach, and Appellants can only guess at the amount of damages attributed to that
claim. Appellants are prevented from presenting their appeal because they cannot
isolate and quantify the trial court’s error. The error is harmful, and this Court should
reverse the Judgment and order a new trial. Crown Life Ins. Co. v. Casteel, 22 S.W.3d
at 388.
4. No damages were proximately caused by any misrepresentation by
any Appellant. (Appellants’ Brief, 50–54.)
Appellees in this section (Appellees’ Brief, 43–44) simply restate their
earlier positions, which Appellants believe they have already addressed. Shah
believed he had the authority to enter into the mortgage without any consents, and
Appellants have shown that he had every reason to do so and none not to. These
arguments are not “post-trial speculation” (Appellees’ Brief, 44); they are the drawing
of very obvious inferences from undisputed facts.
5. Appellees ratified everything of which they complain. (Appellants’
Brief, 54–55.)
Appellees assert (Appellees’ Brief, 44–45) that Appellants neither cite nor
quote any memo by Shah to support the ratification. This is false. Appellants call
Appellees’ and the Court’s attention to Plaintiffs’ Exhibit 40, which described the
$700,000 as “Borrowed from Metro on 8/21/07,” and which set out, by Shah’s
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acknowledgment, all of the amounts Shah admitted were loans the Landlord had
made to the Hospital (4RR 282:13–283:7). The Hospital’s response (D. Ex. 40) and
Shah’s conduct thereafter effectuate the ratification.
6. Reimbursement for the sums paid to settle with the Landlord
investors effects a double recovery. (Appellants’ Brief, 56–57.)
Appellees here assert (Appellees’ Brief, 45–46) that as a “technical matter,”
there is no evidence that Shah owns any of the Landlord now. Defendant’s Exhibit
67 (p. 36 of 42), lists Shah’s ownership as “Indus Associates, Attn: Pankaj K. Shah,
MD, Manager.” This is certainly a technicality, since it was presumed all through
trial, and never disputed, that Indus Associates was Shah’s wholly owned investment
vehicle: Indus is Shah, and Appellees do not deny this. This fact is made all the more
plain in that all of Shah’s units in the Landlord, which he does claim, were issued in
the Indus Associates name. (P. Ex. 3.) Although there were many investors at the
beginning, after the settlement, at bankruptcy, there were only three, and Shah was
the big one, with “Approximately 76.7%.” (D. Ex. 67, p. 36 of 42.)
7. The exemplary damages are excessive across the board. (Appellants’
Brief, 57.)
Appellees in this section (Appellees’ Brief, 46) simply restate their earlier
positions, which Appellants believe they have already addressed. The exemplary
damages must fall along with the defective award of compensatory damages.
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8. No malicious conduct of Zaidi or Chagla was shown. (Appellants’
Brief, 57–59.)
Appellees in this section (Appellees’ Brief, 46–47) simply restate their
earlier positions, which Appellants believe they have already addressed. Appellants
add only that the case is far more compelling as to Chagla, who was not Zaidi’s
“long-term partner.” (Appellees’ Brief, 47.) Chagla was a retired clerical employee
who had a vestigial ownership interest in TMG but did not direct its activities in any
way that any evidence showed. The exemplary damage award against him, when he
did nothing but notarize one document, and could not appear to defend himself due
to life-threatening illness, shocks the conscience, particularly when one considers that
he was so unimportant to Appellees until trial that they never even noticed his
deposition.
9. Appellees’ fraud and related damages are not supported by any
legally sufficient evidence. (Appellants’ Brief, 59–67.)
Appellants proved that these claims must fall because they are neither legally
nor factually supported. Appellants made their argument and cited appropriate cases.
In response, Appellees argue in six pages essentially for the creation of a
concept of “collective fiduciary duty” that would allow the court simply to decide that
someone did something wrong and then hold everyone connected to that malefactor
liable for breach of fiduciary duty. Appellees in their Brief cite three cases, total, and
not one stands for the “collective fiduciary duty” concept. It does not exist. The
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court in Hendricks v. Thornton, 973 S.W.2d 348 (Tex. App.–Beaumont 1998, pet.
denied), did recognize a separate cause of action for aiding and abetting a breach of
fiduciary duty, but that cause of action was not pleaded here against any Appellant
other than Zaidi, and the Judgment did not assess liability against any Appellant on
this ground.
Appellants believe that they have addressed every relationship that existed
between and among the parties, and that they have shown that, under the facts of this
case, neither Zaidi nor Chagla breached any applicable fiduciary duty or committed
fraud against either Shah or the Landlord. Appellants stand on that argument.
10. Appellants cannot be held liable for fraudulent inducement.
(Appellants’ Brief, 67.)
Appellees dispute (Appellees’ Brief, 52–53) Appellants’ contention that they
cannot be held liable for fraudulent inducement because they were not parties to
contracts with Appellees. Their rationale is that Appellants did not cite a case
supporting this proposition and that such a holding would be “contrary to basic fraud
principles.” (Appellees’ Brief. 53.)
Appellants call Appellees’ and the Court’s attention to this language in their
brief:
Fraudulent inducement can only exist as a cause of action
with respect to a contract between a Plaintiff and a Defendant.
“Fraudulent inducement ‘is a particular species of fraud’ that
requires proof of the common law elements of fraud and a
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contract . . . between the parties.” Haase v. Glazner, 62 S.W.3d
795, 798–99 (Tex. 2001, emphasis added).
Appellants stand on this proposition of law.
11 – 15. Appellants stand on their Brief on these issues.
With the exception of Appellee’s point 14 (Appellees’ Brief, 55-56),
Appellants believe they have proved that their positions are correct on these issues.
(Appellants’ Brief, 68–74.)
Appellees’ point 14 asserts that the trial court had the right as a matter of
discretion to “impose consequences on Chagla’s failure to appear . . ..” (Appellees’
Brief, 55.) This is wrong under our facts.
Chagla did not refuse to appear, and he did not choose not to appear. He
could not appear, and the trial court refused to order him to appear based upon the
uncontroverted evidence from his doctor that travel from Pakistan to Houston was
medically impossible. Appellees never attempted in all the years this case was
pending, before he returned home, to take his deposition. He did nothing wrong. To
hold that the draconian penalties imposed by the trial court under these circumstances
were permissible is unconscionable, as is Appellees’ continuing demand for these
penalties.
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CONCLUSION AND PRAYER
For all these reasons, and the reasons set out in Appellants’ Brief, the
Judgment of the trial court should be reversed, and this case should be remanded for
a new trial on all issues of liability and damages.
June 22, 2015 Respectfully submitted,
LAW OFFICES OF DOUGLAS R. LITTLE
By /s/ Douglas R. Little
Douglas R. Little
State Bar No. 12416600
The Lyric Centre, Suite 900
440 Louisiana Street
Houston, Texas 77002
713.275.2069
doug@douglasrlittle.com
CAMPBELL, HARRISON & DAGLEY
L.L.P.
By /s/ Robin L. Harrison
Robin L. Harrison
State Bar No. 09120700
909 Fannin Street, 40th Floor
Houston, Texas 77010
(713) 752-2332
(713) 752-2330 Facsimile
COUNSEL FOR APPELLANTS ADEEL
ZAIDI, A. K. CHAGLA, PRESTIGE
CONSULTING, INC., AND APEX KATY
PHYSICIANS – TMG, LLC
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CERTIFICATE OF COMPLIANCE
I hereby certify that this brief was produced on a computer using
WordPerfect 12 software and contains 6,675 words, as determined by the software’s
word-count function, excluding those sections of the brief listed in Texas Rule of
Appellate Procedure 9.4(i)(1) as being excludable. The total applicable word count
for both briefs filed by Appellants in this case is 25,391.
/s/ Douglas R. Little
Douglas R. Little
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing pleading has
been served upon all counsel listed below via eFileTexas.gov or electronic mail on
the 22nd day of June, 2015:
Jeremy Gaston
Andrew K. Meade
Hawash Meade, et al.
2118 Smith Street
Houston, Texas 77002
/s/ Douglas R. Little
Douglas R. Little
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