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SHAWN IBRAHIM, INC., MAHMOOD § IN THE DISTRICT COURT OF
AKHTAR, and MUHAMMAD AMIN §
vs. § HARRIS COUNTY, TEXAS
HOUSTON-GALVESTON AREA §
LOCAL DEVELOPMENT CORPORATION §
and SUNNYLAND DEVELOPMENT §
CORPORATION, §
§ 113
Civ. P. 166a(c) and 166a(i) to file its second motion for summary judgment.
I. Nature of the Case.
The plaintiffs are Shawn Ibrahim, Inc. (Ibrahim),
Mahmood Akhtar (Akhtar), and Muhammad Amin (Amin)
Local Development Corporation (CDC) and Sunnyland Development Corporation (Sunnyland).
The CDC is a certified development company operating under the auspices of the U.S. Small Business
Administration (SBA) and is closely affiliated with the Harris-Galveston Area Council of Governments (“H-
The plaintiffs have all brought six claims against CDC. The claims are:
(1) Breach of an Authorization for Debenture Guarantee and Section 504 Loan
Agreement (1 Amd. Pet., at ¶¶ 16-20);
(2) Breach of a Standby Creditor Agreement between CDC and Sunnyland (1 Amd.
(3) Promissory estoppel/detrimental reliance (1 Amd. Pet., at ¶¶ 24-26);
(4) Fraud (1 Amd. Pet., at ¶¶ 27-30);
(5) Negligent Misrepresentation (1 Amd. Pet., at ¶ 31); and
(6) Declaratory Judgment that amount due and owing under a Final Judgment
debt owed by Ibrahim to CDC (or SBA).
II. Procedural History.
Plaintiffs filed this suit on June 12, 2016. On November 4, 2016, CDC filed a plea to the
jurisdiction/motion for summary judgment. The plea/MSJ raised jurisdictional challenges based on standing
and immunity, as well as merits challenges and various affirmative defenses – collateral estoppel and
limitations.
On November 29, 2016, Plaintiffs filed their first amended petition. On December 9, 2016, the Court
immunity grounds.” The Court’s July 14, 2017 order does not purport to address CDC’s other jurisdictional
argument – standing – or any of the merits grounds or affirmative defenses asserted in CDC’s plea/motion.
Accordingly, CDC’s original plea/motion is still pending on all of the grounds not reached by the Court.
On August 2, 2017, CDC filed an appeal from the Court’s July 14, 2017 order. On August 28, 2017,
CDC filed a motion for the Court to rule on the grounds for dismissal left undecided by the Court’s July 14,
2017 order and objecting to the Court’s failure to rule on those grounds. This second motion for summary
judgment has advanced additional grounds for dismissal.
III. Grounds for Summary Judgment.
A. Traditional Motion for Summary Judgment.
As a matter of law, Plaintiffs’ claims lack merit on each of the following grounds:
1. In none of the Loan Documents did CDC promise the plaintiffs to enforce
the Standby Creditor Agreement against Sunnyland. Thus, as a matter of
law, the plaintiffs cannot prove any contractual promise by SBA to sue
Sunnyland to prevent Sunnyland’s enforcement of the Note. Nor is there
any misrepresentation in the Loan Documents to the effect that CDC
the Loan Documents contains any such promise (which is denied), the
obligation was assigned to SBA. Hence, CDC did not breach the alleged
contract or commit any act of misrepresentation.
2. The Loan Documents contain no promise by CDC on which Plaintiffs
could have reasonably relied; thus, as a matter of law, they cannot prove
the reasonable reliance element of their estoppel, fraud, and negligent
misrepresentation claims.
3. Plaintiffs’ claims are each defeated by the defenses of waiver and failure
to mitigate damages.
4. Plaintiffs’ claims for breach of contract are each subject to defenses of
prior material breach and assignment of the contract to the SBA.
5. Plaintiffs’ claims for fraud and negligent misrepresentation are based on
implied promises, which are non-actionable.
6. Plaintiffs’ claim for declaratory judgment is non-justiciable as to CDC.
7. Plaintiffs’ claim for declaratory judgment fails on the merits because as
a matter of law, plaintiffs are not entitled to pre-pay the 504 Loan without
B. No Evidence Motion for Summary Judgment.
1. No-evidence supports the essential elements of the plaintiffs’ breach of
contract claims. (See elements specified at p. 14-15 infra.).
2. No-evidence supports the essential elements of the plaintiffs’ promissory
estoppel/detrimental reliance claims. (See elements specified at p. 23-24
infra.).
3. No-evidence supports the essential elements of the plaintiffs’ fraud
claims. (See elements specified at p. 25-26 infra.).
4. No-evidence supports the essential elements of the plaintiffs’ negligent
misrepresentation claims. (See elements specified at p. 27-28 infra.).
IV. Summary Judgment Record.
Plaintiffs’ Original Petition & Attachments, including the Standby Creditor’s
Agreement attached as Exhibit 2 to the petition.
Declaration of Jack Steele & Attachments, consisting of:
.Amended and Restated By-Laws of Houston-Galveston Area
Local Development Corporation (a Texas non-profit corporation).
.April 21, 2015 Meeting Minutes of Houston-Galveston Area
Local Development Corporation Corporate Membership, documenting approval
of the Bylaws.
. Restated Certificate of Formation of Houston-Galveston Area
Local Development Corporation.
Local Development Corporation Loan Committee, documenting approval of the
Articles/Certificate of Formation
. Executed 504 Loan Agreement from Houston-Galveston Area
Local Development Corporation, Lender, to Shawn Ibrahim, Inc., Borrower.
Certified Court Filings in the “Sunnyland Note Suit” – Cause No. 2011-02593,
Shawn Ibrahim, Inc. v. Suncoast Environmental and Construction, Inc.,
Sunnyland Development, Inc., Ajaz R. Sidddiqui, and Najeeb R. Siddiqui, in the
. Sunnyland Counterclaim.
. Amended Counterclaim.
In submitting the live pleading as part of the record, CDC does not admit to the truth of the matters asserted,
particularly Plaintiffs’ legal conclusions that they are third-party beneficiaries of the Standby Creditor’s Agreement (Ex.
2 to the petition). CDC relies on cited passages from the pleading that constitute judicial admissions for purposes of this
motion, and also to authenticate documents attached to the petition.
. Partial Final Judgment.
. Final Judgment.
Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc., No. 01-14-00583-CV,
2015 Tex. App. LEXIS 6819, 2015 WL 4043242 (Tex. App.—Houston [1st
Dist.] July 2, 2015, pet. denied) (mem. op.).
Declaration of Ramon G. Viada III
Appellant’s Brief in Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc.
V. Facts.
The facts of this case have already been discussed in full in CDC’s original plea to the
jurisdiction/motion for summary judgment. That “Factual Allegations” section of that motion is adopted herein
itional facts here that are pertinent to this motion.
A. Nature of CDC.
CDC is an SBA-certified development company. Steele Declaration, at ¶ 3. H-GAC is the founding
entity of CDC and (a) appoints and can remove CDC’s board of directors, (b) has appointed H-GAC’s own
executive director, Mr. Jack Steele, to serve as the executive director of CDC, and (c) furnishes the staff of
CDC, who are compensated by H-GAC. Steele Declaration, at ¶ 3 (Exhibit 2), and Exs. 2-A and 2-C thereto
B. The Debenture Guarantee.
In 2004-05, Ibrahim contracted for the construction of a truck stop-restaurant complex in LaPorte, Texas
(the Project). Sunnyland was the developer of the Project; and the contractor was a related company, Suncoast
Environmental and Construction, Inc. (Suncoast). Amd. Petition, ¶ 8.
Financing for the Project was provided by Sterling Bank. To close the deal with Sterling, Ibrahim needed
to contribute $200,000 of its own. Ibrahim did not have that $200,000, so Ibrahim agreed to make a separate,
gap-financing loan with the developer of the project, Sunnyland. Amd. Petition, at ¶¶ 9-10. This loan will
an guarantee to Ibrahim, for the development
authorization was in the form of a
Debenture Guarantee (hereinafter, the “Debenture Guarantee”). . This document shows total Project costs of
approximately $3.7 million, of which SBA, upon
cost, plus administrative fees. Among the ADDITIONAL CONDITIONS for making the loan is the following:
obtain Standby Creditor’s Agreement from
Sunnyland Development, Inc., for $200,000.00, plus all accrued and future
interest (Standby Debt). No payment of principal or interest is to be made on the
Standby Debt during the term of the Loan. Standby Creditor must subordinate
any lien rights in collateral securing the Loan to CDC’s right in the collateral,
and take no action against Borrower or any collateral securing the Standby Debt
without CDC’s consent. CDC must attach a copy of the Standby Note evidencing
the Standby Debt to the Standby Creditor’s Agreement.
In August 2005, CDC and Ibrahim (but not Akhtar or Amin personally) agreed to be bound by the terms
Plaintiffs contend that this Debenture Guarantee obligates CDC to take legal action to prevent the
prospective Standby Creditor, Sunnyland, from enforcing the prospective Standby Debt. There is nothing in this
contract that provides for such preventative legal action or litigation by CDC.
C. Ibrahim’s Standby Debt to Sunnyland.
On December 19, 2005, Ibrahim signed a promissory note to Sunnyland (the “Sunnyland Note”)
embodying the Standby Debt. The Sunnyland Note is payable in the amount of $200,000. The Sunnyland Note
is attached as Exhibit 1 to the Plaintiffs’ Original Petition. This Note obligation – the Standby Debt – was
absolutely guaranteed by Plaintiffs Akhtar and Amin.
D. The Section 504 Loan.
On January 24, 2008, the Section 504 Loan Agreement for the Project closed (hereinafter, the “504
Ex. 2-E to Steele Declaration. The 504 Loan was made by CDC, but guaranteed by, and
simultaneously assigned to, the U.S. Small Business Association (“SBA”). The 504 Loan expressly provides
that “after said assignment, the SBA will be entitled to enforce the terms of the Note, this Agreement, and the
rest of the Loan Documents. Borrower [Ibrahim] acknowledges that Lender will remain as a servicing agent for
The 504 Loan Agreement defines “default” by the Borrower (Ibrahim) to include the following:
(1) “Fails to do anything required by the Note and other Loan Documents” (504
(2) “Does not disclose, or anyone acting on their [Ibrahim’s] behalf does not disclose
any material fact to Lender [CDC] or the SBA” (
(3) “Becomes the subject of a civil action that Lender believes may materially affect
Borrower [Ibrahim]’s ability to pay the Note.” ., at Art. II, ¶ 2.13.m.
As will be discussed below, Ibrahim would breach each of these provisions by (1) paying installments
on the Standby Debt in advance of paying off the 504 Loan, and (2) becoming subject to, and failing to
seasonably disclose to CDC or to SBA the fact of Sunnyland’s civil suit against Ibrahim on the Standby Debt.
Lender [CDC] will have no liability to Borrower [Ibrahim] for the sufficiency or
adequacy of any action taken by Lender in pursuit of its remedies.
See 504 Loan, Recitals, p. 1/15 (“Note and all liens securing the Note will be transferred from Lender [CDC]
to the SBA to secure the SBA’s guarantee of the Lender’s Debenture.”); Art. ¶ II, ¶ 2.3 (referencing assignment).
In the 504 Loan, the term “Loan Documents” is defined to mean “the documents, as modified, that are now are
hereafter executed in connection with or as security for the Note, including, without limitation, this Agreement, any
servicing agent agreements, guarantees deeds of trust, security agreements, certifications and affidavits.” , at p. 2/15.
Since the Standby Creditor Agreement was executed “in connection with” the 504 Loan, it is one of the Loan Documents
contemplated.
E. The Standby Creditor’s Agreement.
On the same date that CDC and Ibrahim entered the 505 Loan, CDC and Sunnyland entered into the
Standby Creditor’s Agreement. None of the plaintiffs were parties to that Agreement. Rather, the plaintiffs all
ndby Creditor’s Agreement. Thus
terms is in order.
Essentially, the Standby Creditor’s Agreement is a loan subordination agreement between CDC and
Sunnyland, whereby Sunnyland subordinated its rights under the Sunnyland Note – the Standby Debt – behind
CDC’s and SBA’s rights under the CDC Loan. Ibrahim is not a party to the Standby Creditor’s Agreement.
Ibrahim did not sign the Agreement. The Standby Creditor’s Agreement only identifies Ibrahim as the “Standby
Debtor” and the “Borrower.” Akhtar and Amin, the two guarantors of the Sunnyland Note, are not mentioned
at all by the Standby Creditor’s Agreement, either as “Borrowers” or as “Standby Debtors.” The “Standby Debt”
In the Standby Creditor’s Agreement, “the CDC Loan” is defined as “the Loan from CDC to the
Borrower [Ibrahim] pursuant to the [SBA] Authorization.” As Standby Creditor, Sunnyland agreed to be bound
by the Standby Creditor’s Agreement for the following stated consideration: “[t]o induce CDC to make the CDC
The Standby Creditor’s Agreement imposes several duties on the Standby Creditor, Sunnyland, but no
“a. To accept no further payments on the Standby Debt except as permitted in the
b. To turn over to CDC, within 15 days of receipt, payments received by Standby
Creditor from Standby Debtor in violation of this Agreement;
Plaintiff’s Original Petition and its attachments are part of the record supporting this Plea/Motion and are
collectively identified as Exhibit 1 to the Plea/Motion. The Standby Creditor’s Agreement is Exhibit 2 to the Plaintiffs’
c. To take no action to enforce claims against Standby Debtor on the Standby
Debt, without written consent from CDC, until the CDC Loan is satisfied.
d. To take no action against Standby Debtor’s collateral, without written consent
from CDC, until the CDC Loan is satisfied.
and inferior to all liens and security interests securing the CDC Loan.
f. To sign any other documentation required by CDC to subordinate the liens and
security interests securing the Standby Debt to the liens and security interests
Accordingly, contrary to the plaintiffs’ allegations in this case, the Standby Creditor’s Agreement
imposes no duty to police Sunnyland’s actions in the enforcement of the Standby Debt. Rather, it
imposes a duty for the benefit of CDC and the SBA. It is Sunnyland that promised “to take no
action to enforce claims against the Standby Debtor [Ibrahim] on” the Note, pending CDC’s right to collect the
CDC Loan from Ibrahim. Standby Cr. Agr., at ¶ 2.c. Sunnyland made this promise to induce CDC to loan
construction money to Ibrahim. The Agreement gave CDC the legal right – but not the obligation – to compel
Conversely, there is no language in the Standby Creditor’s Agreement that imposed any duty on CDC
– much less any duty intended for Ibrahim’s benefit or for the benefit of Akhtar or Amin. Indeed, the Standby
Creditors Agreement expressly authorizes CDC to “consent” to Sunnyland asserting its rights under the Note
prior to Ibrahim’s satisfaction of the CDC Loan
no action to enforce claims against Standby Debtor on the Standby Debt, without written consent from CDC
until the CDC Loan is satisfied.”) (emphasis added). This consent provision was obviously included for CDC’s
benefit – so that formal action by CDC is required to excuse Sunnyland from its obligation to subordinate its
interests to CDC/SBA. The fact that no such formal action was given does not create a duty on the part of CDC
to rally to the aid of Ibrahim and the two absolute guarantors of the Sunnyland Note, Akhtar and Amin.
In short, the Standby Creditor’s Agreement exists to protect CDC’s right to receive payment on its loan
ahead of Sunnyland’s right to collect on its Note. Ibrahim is not the intended beneficiary of Sunnyland’s
promise; only the CDC is. The Agreement expressly contemplates that CDC can consent to Sunnyland’s
collection of the Sunnyland Note ahead of the Borrower’s satisfaction of the CDC Loan. Thus, it is obvious that
the CDC has no obligation to Ibrahim to take legal action to protect Ibrahim from Sunnyland in the event
Sunnyland sued to enforce its Note before Ibrahim fully paid off the CDC Loan.
This case also raises the question of whether CDC is totally the wrong party because it is no longer a
party to the contract. The Standby Creditor’s Agreement is expressly assignable by CDC (see Standby Cr. Agr.,
at ¶ 4), and both the CDC Loan Agreement and the Standby Creditor’s Agreement were assigned to SBA on
F. The Sunnyland Note Suit.
On September 21, 2011, approximately two and one-half years after the Standby Creditors Agreement
unnyland Note (the Standby Debt) against Ibrahim, in
Shawn Ibrahim, Inc. v. Suncoast Environmental and Construction, Inc., Sunnyland
Development, Inc., Ajaz R. Sidddiqui, and Najeeb R. Siddiqui, in the 61 District Court of Harris County, Texas
(hereinafter “the Sunnyland Note Suit”). Sunnyland filed the suit as a counterclaim to Ibrahim’s claim against
Counterclaim, Ex. 6-B. About a year later, on October 12, 2012, Sunnyland (and others) joined the two
guarantors of the Sunnyland Note – Akhtar and Amin – as counterclaim defendants. Amended
Counterclaim, Es. 6-C.
At no time during the Sunnyland Note Su e – Ibrahim, Akhtar or Amin –
plead the Standby Creditor’s Agreement as a defense to Sunnyland’s counterclaim. Findings of Fact &
Conclusions of Law, No. 14, Ex. 6-D (“ Ibrahim did not plead the affirmative defe
Debt] note and consequently is not protected from liability on the [Sunnyland] note.”). There was no attempt
by Ibrahim, Akhtar or Amin to join CDC as a necessary party in the Sunnyland Note Suit.
During the Sunnyland Note Suit, the plaintiffs in this case failed to provide notice of the suit to anyone
with the CDC. Second Steele Declar., at ¶ 4 (Exhibit 8). In their initial disclosures, plaintiffs have alleged that
“Shawn Ibrahim, Inc. notified Brenda Edwards at HGALDC of the breach [of the Standby Creditor’s Agreement
by Sunnyland]. See Pls’ Resp. to CDC’s Init’l Discl (Exhibit 9). However, Ms. Edwards was never a CDC
employee, but in late 2014, she was the employee of of the CDC. Her duties did not extend to
making decisions on CDC’s or SBA’s behalf to enforce Loan Documents (such as the Standby Creditor’s
Agreement). She merely served to help administer the loan. Second Steele Declar. (Exhibit 8), at ¶ 5.
On April 14, 2015, the district court rendered judgment in favor of Sunnyland for the amount of the note.
See Ex. 6-E, 6-F. The district court squarely held that “Akhtar, individually, and Amin as an absolute gurantor
of the note, where not part of the CDC [Standby Creditor] agreement and are liable for the entire note.”
Findings of Fact & Conclusions of Law, No. 13, Ex. 6-D; see also FFCL No. 28. “Although the Standby
Creditor Agreement prohibited payment from Ibrahim, it does not prohibit payment from third parties, and in
this case, the absolute guarantors of the Note, Akhtar and Amin.”). The district court further held that because
Ibrahim failed to pled the Standby Creditor Agreement as an affirmative defense, that contention was waived.
Ibrahim appealed the judgment, which the Houston First Court of Appeals affirmed, but on different
See Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc.
LEXIS 6819, 2015 WL 4043242 (Tex. App.—Houston [1st Dist.] July 2, 2015, pet. denied) (mem. op.) (Exhibit
d “The Effect of the Standby Creditor Agreement”:
CDC requests the Court to take judicial notice of the Court’s docket sheet and file in Sunnyland Note Suit. See
Tex. R. Evid. 201. Alternatively, attached as Exhibit 10 is the Declaration of Ray Viada, counsel for CDC, who has
reviewed the docket sheet and has testified that there is no docket entry for any plea in abatement or other motion
contending that CDC or SBA is a necessary party or should be joined for a just adjudication.
Ibrahim firstcontends that Sunnyland did not meet the conditions precedent
required by the standby creditor’s agreement before it sued, which in turn bars
it from enforcing the note. Ibrahim further contends that Sunnyland had the
burden to show conditions precedent that the HGAC loan was satisfied and that
Sunnyland responds that Ibrahim did not plead an affirmative defense that the
standby creditor agreement precluded enforcement on the note. See Tex. R. Civ.
P. 94. But the parties tried the issue by consent. The standby creditor agreement
was introduced at trial and discussed multiple times during witness testimony,
without an objection from Sunnyland; thus, Sunnyland’s challenge to the
pleadings was waived. See RE/MAX of Tex., Inc. v. Katar Corp., 961 S.W.2d
324, 327 (Tex. App.—Houston [1st Dist.] 1997, pet. denied) (HN9 “If an
affirmative defense is not plead or tried by consent, it is waived.”); Moore v.
Altra Energy Techs., Inc., 321 S.W.3d 727, 734 (Tex. App.—Houston [14th
Dist.] 2010, pet. denied) (“A party's unpleaded issue may be deemed tried by
consent when evidence on the issue is developed under circumstances indicating
both parties understood the issue was in the case, and the other party failed to
make an appropriate complaint.”).
Although Ibrahim proffered evidence of the standby agreement, it did not
provide evidence about whether the HGAC agreement had been breached or
whether HGAC had consented to Sunnyland's suit. Nor, in its request for a partial
reporter's record, did Ibrahim identify in its statement of the issues any challenge
to Sunnyland’s compliance with the agreement. With respect to the standby
agreement, in the statement of issues, Ibrahim claims that the trial court erred in
(1) “rewr[iting] the unambiguous [standby] agreement;” and (2) finding “that the
Standby Creditor's Agreement was legally ineffective.” Both of these claims
challenges whether the trial court enforced the agreement at all—neither
addresses Ibrahim's contention in its briefing that Sunnyland breached the
standby agreement with HGAC. In it motion for rehearing, Ibrahim characterizes
its challenge as a question of law, for which no additional materials other than
the agreement are necessary. Its contention that Sunnyland breached the
agreement by failing to comply with conditions precedent, however, is not purely
a legal interpretation, but instead requires an examination of the acts or
omissions that constitute the breaching conduct.
Without a party's submission of a statement of issues, a presumption is created
that the omitted portions of the record support the trial court's finding.
Bennett, 96 S.W.3d at 229. Ibrahim did not raise a challenge regarding
Sunnyland's failure to comply with standby agreement in its statement of issues
and request for a partial reporter's record. Because the reporter's record is a
partial record, we presume that the trial court heard evidence to support its
judgment that the standby agreement does not bar a recovery on the note
due to any failure to comply with a condition precedent. See
S.W.3d at 229-30 (“The court of appeals was correct in holding that, absent a
complete record on appeal, it must presume the omitted items supported the trial
court's judgment.” (quoting , 950 S.W.2d 370,
, 2015 Tex. App. LEXIS 6819, at *8-11 (boldfacing added for emphasis).
Ibrahim filed a petition for review with the Texas Supreme Court that was denied on November 20,
2015. The first notification of the existence of the Sunnyland Note Suit sent to CDC was service of the present
VI. Argument.
A. Standard of Review.
This is a hybrid motion for summary judgment asserting traditional (Tex. R. Civ. P. 166a(c)) and no-
The standard for reviewing a traditional summary judgment is well established: (1) the movant must
demonstrate that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law;
and (2) in deciding whether a disputed issue of material fact exists that would preclude summary judgment, the
Court must take all evidence favorable to the non-movant
resolve any doubts in favor of the non-movant. Nixon v. Mr. Property Management Company, Inc., 690 S.W.2d
A no-evidence summary judgment motion is essentially a pretrial directed verdict motion.
, 118 S.W.3d 742, 749 (Tex. 2003). In a no-evidence summary judgment motion, the
movant contends that there is no evidence of one or more essential elements of the claims for which the
non-movant would bear the burden of proof at trial. T . P. 166a(i). The trial court must grant the
motion unless the non-movant produces summary judgment evidence raising a genuine issue of material fact.
. As in a directed verdict context, the trial court must review the evidence in the light most favorable to the
non-movant, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary
evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 583 (Tex. 2006)
, 168 S.W.3d 802, 822 (Tex. 2005)).
B. Breach of Contract.
1. Essential Elements. The essential elements of a breach of contract claim are the existence
of a valid contract, performance or tendered performance by the plaintiff, breach of the contract by the
defendant, and damages sustained as a result of the breach. City of The Colony v. N. Tex. Mun. Water Dist
S.W.3d 699, 739 (Tex. App.—Fort Worth 2008, pet. dism’d). “‘When a promise is subject to a condition
precedent, there is no liability or obligation on the promissor and there can be no breach of the contract by him
until and unless such condition or contingency is performed or occurs.’” Abrams v. Salinas, 467 S.W.3d 606,
615 (Tex. App.—San Antonio 2015, no pet.) (quoting Roberts v. Clark, 188 S.W.3d 204, 212 (Tex.
App.—Tyler 2002, pet. denied)). “Compensatory damages may only be recovered in a claim for breach of
contract when the loss is a ‘natural, probable, and foreseeable consequence of the defendant’s conduct.’”
., 615 S.W.2d 685, 687 (Tex. 1981).
2. No Evidence Motion. Under Tex. R. Civ. P. 166a(i), Defendant CDC moves for summary
judgment on the following no evidence grounds:
a. No evidence exists that any valid contract exists between CDC and Plaintiff
Ibrahim as is alleged in the pleadings. The contracts in question create no duty
on the part of CDC to prevent Defendant Sunnyland from enforcing the Standby
Debt (Sunnyland Note) against Ibrahim.
b. No evidence exists of any valid contract between CDC and Plaintiff Akhtar. The
contracts in question create no duty on the part of CDC to prevent Defendant
Sunnyland from enforcing Akhtar’s guarantee of the Sunnyland Note against
c. No evidence exists of any valid contract between CDC and Plaintiff Amin. The
contracts in question create no duty on the part of CDC to prevent Defendant
Sunnyland from enforcing Amin’s guarantee of the Sunnyland Note against
Amin.
d. No evidence exists that CDC breached any contractual promise made to, or for
the benefit of, Plaintiff Ibrahim.
e. No evidence exists that CDC breached any contractual promise made to, or for
f. No evidence exists that CDC breached any contractual promise made to, of for
the benefit of, Plaintiff Amin.
g. No evidence exists that Plaintiff Ibrahim’s alleged damages were the natural,
h. No evidence exists that Plaintiff Akhtar’s alleged damages were the natural,
i. No evidence exists that Plaintiff Amin’s alleged damages were the natural,
3. Assignment. All of the agreements in question – the Authorization for Debenture
Guarantee, the 504 Loan Agreement, and the Standby Creditor’s Agreement – all contain express provisions
for the assignment by CDC to SBA of CDC’s interest in the Loan Documents.
a. To the extent there was any duty to prevent Sunnyland from prevailing on its suit
against the plaintiffs – which duty is denied – that duty was assigned to SBA, and
CDC breached no duty by not preventing Sunnyland from obtaining its final
judgment against the plaintiffs.
b. Since all of the Loan Documents were assigned to SBA, plaintiffs’ rights under
those Documents must be enforced, if at all, against SBA. Plaintiffs lack standing
to enforce any of these agreements against CDC on the theory alleged. CDC has
assigned the Loan Documents to the SBA.
4. No Duty under the Loan Documents. The Standby Creditor’s Agreement creates no duty
for CDC to take legal action to prevent Sunnyland from enforcing the Sunnyland Note against Ibrahim or its
guarantors. In fact, the Standby Creditor’s Agreement expressly provides that CDC (and its assignee, SBA) can
consent to Sunnyland’s enforcement of the Note. The express power to consent to the Sunnyland suit negates
the plaintiffs’ claim that CDC had an implied duty to intervene in the Sunnyland suit or otherwise to stop it.
Authorization for Debenture Guarantee (Ex. 2F to Jack Steele Declaration, at p. 7); 504 Loan (Exhibit
2E to Jack Steele Declaration, at ¶ 2.3 (“The Note and all liens on all the Collateral securing the Note will be assigned
to the SBA as security for SBA’s guarantee of Lender’s Debenture. After said assignment, SBA will be entitled to
enforce the terms of the Note, this Agreement, and the rest of the Loan Documents. Borrower acknowledges that
Lender [CDC will remain a servicing agent for the Loan and w of the SBA.”) (emphasis
added), (“Lender [CDC] assigns this Agreement to SBA”) (Ex. 2E to Jack Steele Declaration, at ¶ 2.7, p. 7); Standby
Creditor’s Agreement (Ex. C to Plaintiff’s First Amended Petition, p. 2) (“CDC assigns this Standby Creditor’s Agreement
In their amended petition, Plaintiffs contend that other Loan Documents can be read to create the duty
they allege. Needless to say, there is not a single passage in any of the Loan Agreements that says that CDC
must enforce the Standby Creditor’s Agreement against Sunnyland. Rather, the plaintiffs reference passages
from which they claim a duty to that effect may be implied. Implied duties are disfavored in Texas:
Generally, a court looks only to the written agreement to determine the
obligations of contracting parties. Sun Oil Co. v. Madeley, 626 S.W.2d 726, 728,
25 Tex. Sup. Ct. J. 101 (Tex. 1981). In rare circumstances, however, a court may
imply a covenant in order to reflect the parties’ real intentions. Obviously, courts
must be quite cautious in exercising this power. See Freeport Sulphur Co. v. Am.
Sulphur Royalty Co. of Tex., 117 Tex. 439, 6 S.W
“The court cannot make contracts for parties, and can declare implied covenants
to exist only when there is a satisfactory basis in the express contracts of the
parties which makes it necessary to imply certain duties and obligations in order
to effect the purposes of the parties in the contracts made." . at 1040. An
“implied covenant must rest entirely on the presumed intention of the parties as
gathered from the terms as actually expressed in the written instrument itself, and
it must appear that it was so clearly within the contemplation of the parties that
they deemed it unnecessary to express it . . . ."
Tex. v. Powell
covenant will not be implied simply to make a contract fair, wise, or just.
Universal Health Servs., Inc. v. Renaissance Women's Group, P.A., 121 S.W.3d 742, 747-48 (Tex. 2003);
also In re Bass, 113 S.W.3d 735, 743 (Tex. 2003) (“We have consistently stated that implied covenants are not
favored by law and will not be read into contracts except as legally necessary to effectuate the plain, clear,
unmistakable intent of the parties.”).
In particular, the plaintiffs cite to the following
obtain Standby Creditor’s Agreement from
Sunnyland Development, Inc., for $200,000.00, plus all accrued and future
interest (Standby Debt). No payment of principal or interest is to be made on the
Standby Debt during the term of the Loan. Standby Creditor must subordinate
any lien rights in collateral securing the Loan to CDC’s right in the collateral,
and take no action against Borrower or any collateral securing the Standby Debt
. CDC must attach a copy of the Standby Note
evidencing the Standby Debt to the Standby Creditor’s Agreement.
10 (Exhibit 2F to Steele Declar.) (emphasis added)
According to the plaintiffs, the stand-alone passage – “No payment of principal or interest is to be made
on the Standby Debt during the term of the Loan” – required Ibrahim to “breach” its Note obligation (the
Standby Debt) with Sunnyland. Thus, they argue, illogically, CDC had a duty to protect them from Sunnyland’s
This argument ignores the fact that the duty placed by this highlighted provision is on Ibrahim, not the
CDC. Moreover, the protection from suit by Sunnyland is contained in the very next sentence, which provides
“Standby Creditor must subordinate any lien rights in collateral securing the Loan to CDC’s right in the
Borrower . . . without CDC’s consent.” Ibrahim’s rights as a third party
beneficiary of the Standby Creditor’s Agreement – if any – are against Sunnyland, not against the CDC. It has
been shown, however, that Ibrahim, in the Sunnyland Note Suit, failed to prove its entitlement under the
Standby Creditor’s Agreement to avoid liability to Sunnyland on that Note (the Standby Debt).
In addition, “[c]ourts in construing contracts cannot, by implication, find terms in opposition to the
express language that the parties themselves have written into the contracts.” Dallas Power & Light Co. v.
, 623 S.W.2d 310, 311 (Tex. 1981). “There is no implied covenant when the agreement expressly
see also Gulf Production Co. v. Kishi, 103 S.W.2d 965, 968 (Tex. 1937) (“A court
should never override by implication the intention of the parties expressed in a binding writing”);
v. Atlantic Richfield Co., 678 S.W.2d 944, 947 (Tex. 1984) (“There can be no implied covenant as to a matter
specifically covered by the written terms of the contract.”).
In contending that the Loan Documents impose an implied duty implied duty on CDC to protect the
plaintiffs from a Note enforcement suit by Sunnyland, the plaintiffs have ignored the consent provision in the
Loan Authorization (in boldfaced type above) – whereby CDC can consent to any action Sunnyland may assert
to enforce the Standby Debt. The fact that the Loan Documents expressly allocate power to CDC to consent to
any enforcement action by the Standby Creditor negates any contrary implication that the same Loan
Documents obligate CDC absolutely to protect Ibrahim from enforcement actions by Sunnyland.
The consent provision is also entirely consistent with the overall purpose of the Standby Creditor’s
Agreement – which is to protect the SBA’s rights to repayment by the Lender, Ibrahim. The federal fisc is
protected by SBA having a first lien position on the Standby Debt. The SBA has the power, but not the
the SBA, nor the CDC, is obligated to compel Sunnyland to forebear.
The other Loan Document referenced in the petition, the 504 Loan Agreement – expressly stipulates that
Lender [CDC] has no liability “for the sufficiency or inadequacy of any action taken by the Lender in pursuit
of its remedies.” 504 Loan Agr., at ¶ 5.6 (Ex. 2-E to Steele Declar.). This provision essentially negates the
plaintiffs’ claims.
Accordingly, the CDC’s alleged failure to enforce the Standby Creditor’s Agreement against Sunnyland
is not a breach of any of the Loan Documnents, and therefore, plaintiffs’ claims for breach of contract should
be dismissed on the merits.
5. Mitigation of Damages. Failure to mitigate is an affirmative defense.
v. Potter, 2013 Tex. App. LEXIS 645, *27, 2013 WL 269091 (Tex. App.—Houston [1st Dist.] 2013, pet.
denied) (mem. op.) (citing Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 299 (Tex.
1997)). A defendant asserting failure to mitigate at trial must establish that (1) the plaintiff failed to mitigate
and (2) the amount by which the plaintiff could have reduced its damages.
In this case, the plaintiffs could have avoided liability to Sunnyland simply by properly asserting the
Standby Creditor Agreement as a defense to Sunnyland’s claim and by proving at trial the conditions precedent
At trial in the Sunnyland Note Suit, the district court expressly found that “the Standby Creditor
Agreement prohibited payment from Ibrahim. FFCL, No, 28. However, it further found that “Ibrahim did not
plead the affirmative defense of not paying the note and consequently is not protected from liability on the
.” FFCL No. 14 (emphasis added). That is to say, Ibrahim’s failure to plead the Standby Creditor
Agreement as an affirmative defense to Sunnyland’s claim on the Sunnyland Note (the Standby Debt) paved
the way for Sunnyland to obtain the judgment in question against Ibrahim.
On appeal, the Houston First Court of Appeals affirmed the judgment, but held that Ibrahim’s failure
to plead the defense was not fatal since the defense had been tried by consent. See Shawn Ibrahim, Inc. v.
Suncoast Envtl. & Constr., Inc., No. 01-14-00583-CV, 2015 Tex. App. LEXIS 6819, at *
Preview
SHAWN IBRAHIM, INC., MAHMOOD § IN THE DISTRICT COURT OF AKHTAR, and MUHAMMAD AMIN § vs. § HARRIS COUNTY, TEXAS HOUSTON-GALVESTON AREA § LOCAL DEVELOPMENT CORPORATION § and SUNNYLAND DEVELOPMENT § CORPORATION, § § 113 Civ. P. 166a(c) and 166a(i) to file its second motion for summary judgment. I. Nature of the Case. The plaintiffs are Shawn Ibrahim, Inc. (Ibrahim), Mahmood Akhtar (Akhtar), and Muhammad Amin (Amin) Local Development Corporation (CDC) and Sunnyland Development Corporation (Sunnyland). The CDC is a certified development company operating under the auspices of the U.S. Small Business Administration (SBA) and is closely affiliated with the Harris-Galveston Area Council of Governments (“H- The plaintiffs have all brought six claims against CDC. The claims are: (1) Breach of an Authorization for Debenture Guarantee and Section 504 Loan Agreement (1 Amd. Pet., at ¶¶ 16-20); (2) Breach of a Standby Creditor Agreement between CDC and Sunnyland (1 Amd. (3) Promissory estoppel/detrimental reliance (1 Amd. Pet., at ¶¶ 24-26); (4) Fraud (1 Amd. Pet., at ¶¶ 27-30); (5) Negligent Misrepresentation (1 Amd. Pet., at ¶ 31); and (6) Declaratory Judgment that amount due and owing under a Final Judgment debt owed by Ibrahim to CDC (or SBA). II. Procedural History. Plaintiffs filed this suit on June 12, 2016. On November 4, 2016, CDC filed a plea to the jurisdiction/motion for summary judgment. The plea/MSJ raised jurisdictional challenges based on standing and immunity, as well as merits challenges and various affirmative defenses – collateral estoppel and limitations. On November 29, 2016, Plaintiffs filed their first amended petition. On December 9, 2016, the Court immunity grounds.” The Court’s July 14, 2017 order does not purport to address CDC’s other jurisdictional argument – standing – or any of the merits grounds or affirmative defenses asserted in CDC’s plea/motion. Accordingly, CDC’s original plea/motion is still pending on all of the grounds not reached by the Court. On August 2, 2017, CDC filed an appeal from the Court’s July 14, 2017 order. On August 28, 2017, CDC filed a motion for the Court to rule on the grounds for dismissal left undecided by the Court’s July 14, 2017 order and objecting to the Court’s failure to rule on those grounds. This second motion for summary judgment has advanced additional grounds for dismissal. III. Grounds for Summary Judgment. A. Traditional Motion for Summary Judgment. As a matter of law, Plaintiffs’ claims lack merit on each of the following grounds: 1. In none of the Loan Documents did CDC promise the plaintiffs to enforce the Standby Creditor Agreement against Sunnyland. Thus, as a matter of law, the plaintiffs cannot prove any contractual promise by SBA to sue Sunnyland to prevent Sunnyland’s enforcement of the Note. Nor is there any misrepresentation in the Loan Documents to the effect that CDC the Loan Documents contains any such promise (which is denied), the obligation was assigned to SBA. Hence, CDC did not breach the alleged contract or commit any act of misrepresentation. 2. The Loan Documents contain no promise by CDC on which Plaintiffs could have reasonably relied; thus, as a matter of law, they cannot prove the reasonable reliance element of their estoppel, fraud, and negligent misrepresentation claims. 3. Plaintiffs’ claims are each defeated by the defenses of waiver and failure to mitigate damages. 4. Plaintiffs’ claims for breach of contract are each subject to defenses of prior material breach and assignment of the contract to the SBA. 5. Plaintiffs’ claims for fraud and negligent misrepresentation are based on implied promises, which are non-actionable. 6. Plaintiffs’ claim for declaratory judgment is non-justiciable as to CDC. 7. Plaintiffs’ claim for declaratory judgment fails on the merits because as a matter of law, plaintiffs are not entitled to pre-pay the 504 Loan without B. No Evidence Motion for Summary Judgment. 1. No-evidence supports the essential elements of the plaintiffs’ breach of contract claims. (See elements specified at p. 14-15 infra.). 2. No-evidence supports the essential elements of the plaintiffs’ promissory estoppel/detrimental reliance claims. (See elements specified at p. 23-24 infra.). 3. No-evidence supports the essential elements of the plaintiffs’ fraud claims. (See elements specified at p. 25-26 infra.). 4. No-evidence supports the essential elements of the plaintiffs’ negligent misrepresentation claims. (See elements specified at p. 27-28 infra.). IV. Summary Judgment Record. Plaintiffs’ Original Petition & Attachments, including the Standby Creditor’s Agreement attached as Exhibit 2 to the petition. Declaration of Jack Steele & Attachments, consisting of: .Amended and Restated By-Laws of Houston-Galveston Area Local Development Corporation (a Texas non-profit corporation). .April 21, 2015 Meeting Minutes of Houston-Galveston Area Local Development Corporation Corporate Membership, documenting approval of the Bylaws. . Restated Certificate of Formation of Houston-Galveston Area Local Development Corporation. Local Development Corporation Loan Committee, documenting approval of the Articles/Certificate of Formation . Executed 504 Loan Agreement from Houston-Galveston Area Local Development Corporation, Lender, to Shawn Ibrahim, Inc., Borrower. Certified Court Filings in the “Sunnyland Note Suit” – Cause No. 2011-02593, Shawn Ibrahim, Inc. v. Suncoast Environmental and Construction, Inc., Sunnyland Development, Inc., Ajaz R. Sidddiqui, and Najeeb R. Siddiqui, in the . Sunnyland Counterclaim. . Amended Counterclaim. In submitting the live pleading as part of the record, CDC does not admit to the truth of the matters asserted, particularly Plaintiffs’ legal conclusions that they are third-party beneficiaries of the Standby Creditor’s Agreement (Ex. 2 to the petition). CDC relies on cited passages from the pleading that constitute judicial admissions for purposes of this motion, and also to authenticate documents attached to the petition. . Partial Final Judgment. . Final Judgment. Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc., No. 01-14-00583-CV, 2015 Tex. App. LEXIS 6819, 2015 WL 4043242 (Tex. App.—Houston [1st Dist.] July 2, 2015, pet. denied) (mem. op.). Declaration of Ramon G. Viada III Appellant’s Brief in Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc. V. Facts. The facts of this case have already been discussed in full in CDC’s original plea to the jurisdiction/motion for summary judgment. That “Factual Allegations” section of that motion is adopted herein itional facts here that are pertinent to this motion. A. Nature of CDC. CDC is an SBA-certified development company. Steele Declaration, at ¶ 3. H-GAC is the founding entity of CDC and (a) appoints and can remove CDC’s board of directors, (b) has appointed H-GAC’s own executive director, Mr. Jack Steele, to serve as the executive director of CDC, and (c) furnishes the staff of CDC, who are compensated by H-GAC. Steele Declaration, at ¶ 3 (Exhibit 2), and Exs. 2-A and 2-C thereto B. The Debenture Guarantee. In 2004-05, Ibrahim contracted for the construction of a truck stop-restaurant complex in LaPorte, Texas (the Project). Sunnyland was the developer of the Project; and the contractor was a related company, Suncoast Environmental and Construction, Inc. (Suncoast). Amd. Petition, ¶ 8. Financing for the Project was provided by Sterling Bank. To close the deal with Sterling, Ibrahim needed to contribute $200,000 of its own. Ibrahim did not have that $200,000, so Ibrahim agreed to make a separate, gap-financing loan with the developer of the project, Sunnyland. Amd. Petition, at ¶¶ 9-10. This loan will an guarantee to Ibrahim, for the development authorization was in the form of a Debenture Guarantee (hereinafter, the “Debenture Guarantee”). . This document shows total Project costs of approximately $3.7 million, of which SBA, upon cost, plus administrative fees. Among the ADDITIONAL CONDITIONS for making the loan is the following: obtain Standby Creditor’s Agreement from Sunnyland Development, Inc., for $200,000.00, plus all accrued and future interest (Standby Debt). No payment of principal or interest is to be made on the Standby Debt during the term of the Loan. Standby Creditor must subordinate any lien rights in collateral securing the Loan to CDC’s right in the collateral, and take no action against Borrower or any collateral securing the Standby Debt without CDC’s consent. CDC must attach a copy of the Standby Note evidencing the Standby Debt to the Standby Creditor’s Agreement. In August 2005, CDC and Ibrahim (but not Akhtar or Amin personally) agreed to be bound by the terms Plaintiffs contend that this Debenture Guarantee obligates CDC to take legal action to prevent the prospective Standby Creditor, Sunnyland, from enforcing the prospective Standby Debt. There is nothing in this contract that provides for such preventative legal action or litigation by CDC. C. Ibrahim’s Standby Debt to Sunnyland. On December 19, 2005, Ibrahim signed a promissory note to Sunnyland (the “Sunnyland Note”) embodying the Standby Debt. The Sunnyland Note is payable in the amount of $200,000. The Sunnyland Note is attached as Exhibit 1 to the Plaintiffs’ Original Petition. This Note obligation – the Standby Debt – was absolutely guaranteed by Plaintiffs Akhtar and Amin. D. The Section 504 Loan. On January 24, 2008, the Section 504 Loan Agreement for the Project closed (hereinafter, the “504 Ex. 2-E to Steele Declaration. The 504 Loan was made by CDC, but guaranteed by, and simultaneously assigned to, the U.S. Small Business Association (“SBA”). The 504 Loan expressly provides that “after said assignment, the SBA will be entitled to enforce the terms of the Note, this Agreement, and the rest of the Loan Documents. Borrower [Ibrahim] acknowledges that Lender will remain as a servicing agent for The 504 Loan Agreement defines “default” by the Borrower (Ibrahim) to include the following: (1) “Fails to do anything required by the Note and other Loan Documents” (504 (2) “Does not disclose, or anyone acting on their [Ibrahim’s] behalf does not disclose any material fact to Lender [CDC] or the SBA” ( (3) “Becomes the subject of a civil action that Lender believes may materially affect Borrower [Ibrahim]’s ability to pay the Note.” ., at Art. II, ¶ 2.13.m. As will be discussed below, Ibrahim would breach each of these provisions by (1) paying installments on the Standby Debt in advance of paying off the 504 Loan, and (2) becoming subject to, and failing to seasonably disclose to CDC or to SBA the fact of Sunnyland’s civil suit against Ibrahim on the Standby Debt. Lender [CDC] will have no liability to Borrower [Ibrahim] for the sufficiency or adequacy of any action taken by Lender in pursuit of its remedies. See 504 Loan, Recitals, p. 1/15 (“Note and all liens securing the Note will be transferred from Lender [CDC] to the SBA to secure the SBA’s guarantee of the Lender’s Debenture.”); Art. ¶ II, ¶ 2.3 (referencing assignment). In the 504 Loan, the term “Loan Documents” is defined to mean “the documents, as modified, that are now are hereafter executed in connection with or as security for the Note, including, without limitation, this Agreement, any servicing agent agreements, guarantees deeds of trust, security agreements, certifications and affidavits.” , at p. 2/15. Since the Standby Creditor Agreement was executed “in connection with” the 504 Loan, it is one of the Loan Documents contemplated. E. The Standby Creditor’s Agreement. On the same date that CDC and Ibrahim entered the 505 Loan, CDC and Sunnyland entered into the Standby Creditor’s Agreement. None of the plaintiffs were parties to that Agreement. Rather, the plaintiffs all ndby Creditor’s Agreement. Thus terms is in order. Essentially, the Standby Creditor’s Agreement is a loan subordination agreement between CDC and Sunnyland, whereby Sunnyland subordinated its rights under the Sunnyland Note – the Standby Debt – behind CDC’s and SBA’s rights under the CDC Loan. Ibrahim is not a party to the Standby Creditor’s Agreement. Ibrahim did not sign the Agreement. The Standby Creditor’s Agreement only identifies Ibrahim as the “Standby Debtor” and the “Borrower.” Akhtar and Amin, the two guarantors of the Sunnyland Note, are not mentioned at all by the Standby Creditor’s Agreement, either as “Borrowers” or as “Standby Debtors.” The “Standby Debt” In the Standby Creditor’s Agreement, “the CDC Loan” is defined as “the Loan from CDC to the Borrower [Ibrahim] pursuant to the [SBA] Authorization.” As Standby Creditor, Sunnyland agreed to be bound by the Standby Creditor’s Agreement for the following stated consideration: “[t]o induce CDC to make the CDC The Standby Creditor’s Agreement imposes several duties on the Standby Creditor, Sunnyland, but no “a. To accept no further payments on the Standby Debt except as permitted in the b. To turn over to CDC, within 15 days of receipt, payments received by Standby Creditor from Standby Debtor in violation of this Agreement; Plaintiff’s Original Petition and its attachments are part of the record supporting this Plea/Motion and are collectively identified as Exhibit 1 to the Plea/Motion. The Standby Creditor’s Agreement is Exhibit 2 to the Plaintiffs’ c. To take no action to enforce claims against Standby Debtor on the Standby Debt, without written consent from CDC, until the CDC Loan is satisfied. d. To take no action against Standby Debtor’s collateral, without written consent from CDC, until the CDC Loan is satisfied. and inferior to all liens and security interests securing the CDC Loan. f. To sign any other documentation required by CDC to subordinate the liens and security interests securing the Standby Debt to the liens and security interests Accordingly, contrary to the plaintiffs’ allegations in this case, the Standby Creditor’s Agreement imposes no duty to police Sunnyland’s actions in the enforcement of the Standby Debt. Rather, it imposes a duty for the benefit of CDC and the SBA. It is Sunnyland that promised “to take no action to enforce claims against the Standby Debtor [Ibrahim] on” the Note, pending CDC’s right to collect the CDC Loan from Ibrahim. Standby Cr. Agr., at ¶ 2.c. Sunnyland made this promise to induce CDC to loan construction money to Ibrahim. The Agreement gave CDC the legal right – but not the obligation – to compel Conversely, there is no language in the Standby Creditor’s Agreement that imposed any duty on CDC – much less any duty intended for Ibrahim’s benefit or for the benefit of Akhtar or Amin. Indeed, the Standby Creditors Agreement expressly authorizes CDC to “consent” to Sunnyland asserting its rights under the Note prior to Ibrahim’s satisfaction of the CDC Loan no action to enforce claims against Standby Debtor on the Standby Debt, without written consent from CDC until the CDC Loan is satisfied.”) (emphasis added). This consent provision was obviously included for CDC’s benefit – so that formal action by CDC is required to excuse Sunnyland from its obligation to subordinate its interests to CDC/SBA. The fact that no such formal action was given does not create a duty on the part of CDC to rally to the aid of Ibrahim and the two absolute guarantors of the Sunnyland Note, Akhtar and Amin. In short, the Standby Creditor’s Agreement exists to protect CDC’s right to receive payment on its loan ahead of Sunnyland’s right to collect on its Note. Ibrahim is not the intended beneficiary of Sunnyland’s promise; only the CDC is. The Agreement expressly contemplates that CDC can consent to Sunnyland’s collection of the Sunnyland Note ahead of the Borrower’s satisfaction of the CDC Loan. Thus, it is obvious that the CDC has no obligation to Ibrahim to take legal action to protect Ibrahim from Sunnyland in the event Sunnyland sued to enforce its Note before Ibrahim fully paid off the CDC Loan. This case also raises the question of whether CDC is totally the wrong party because it is no longer a party to the contract. The Standby Creditor’s Agreement is expressly assignable by CDC (see Standby Cr. Agr., at ¶ 4), and both the CDC Loan Agreement and the Standby Creditor’s Agreement were assigned to SBA on F. The Sunnyland Note Suit. On September 21, 2011, approximately two and one-half years after the Standby Creditors Agreement unnyland Note (the Standby Debt) against Ibrahim, in Shawn Ibrahim, Inc. v. Suncoast Environmental and Construction, Inc., Sunnyland Development, Inc., Ajaz R. Sidddiqui, and Najeeb R. Siddiqui, in the 61 District Court of Harris County, Texas (hereinafter “the Sunnyland Note Suit”). Sunnyland filed the suit as a counterclaim to Ibrahim’s claim against Counterclaim, Ex. 6-B. About a year later, on October 12, 2012, Sunnyland (and others) joined the two guarantors of the Sunnyland Note – Akhtar and Amin – as counterclaim defendants. Amended Counterclaim, Es. 6-C. At no time during the Sunnyland Note Su e – Ibrahim, Akhtar or Amin – plead the Standby Creditor’s Agreement as a defense to Sunnyland’s counterclaim. Findings of Fact & Conclusions of Law, No. 14, Ex. 6-D (“ Ibrahim did not plead the affirmative defe Debt] note and consequently is not protected from liability on the [Sunnyland] note.”). There was no attempt by Ibrahim, Akhtar or Amin to join CDC as a necessary party in the Sunnyland Note Suit. During the Sunnyland Note Suit, the plaintiffs in this case failed to provide notice of the suit to anyone with the CDC. Second Steele Declar., at ¶ 4 (Exhibit 8). In their initial disclosures, plaintiffs have alleged that “Shawn Ibrahim, Inc. notified Brenda Edwards at HGALDC of the breach [of the Standby Creditor’s Agreement by Sunnyland]. See Pls’ Resp. to CDC’s Init’l Discl (Exhibit 9). However, Ms. Edwards was never a CDC employee, but in late 2014, she was the employee of of the CDC. Her duties did not extend to making decisions on CDC’s or SBA’s behalf to enforce Loan Documents (such as the Standby Creditor’s Agreement). She merely served to help administer the loan. Second Steele Declar. (Exhibit 8), at ¶ 5. On April 14, 2015, the district court rendered judgment in favor of Sunnyland for the amount of the note. See Ex. 6-E, 6-F. The district court squarely held that “Akhtar, individually, and Amin as an absolute gurantor of the note, where not part of the CDC [Standby Creditor] agreement and are liable for the entire note.” Findings of Fact & Conclusions of Law, No. 13, Ex. 6-D; see also FFCL No. 28. “Although the Standby Creditor Agreement prohibited payment from Ibrahim, it does not prohibit payment from third parties, and in this case, the absolute guarantors of the Note, Akhtar and Amin.”). The district court further held that because Ibrahim failed to pled the Standby Creditor Agreement as an affirmative defense, that contention was waived. Ibrahim appealed the judgment, which the Houston First Court of Appeals affirmed, but on different See Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc. LEXIS 6819, 2015 WL 4043242 (Tex. App.—Houston [1st Dist.] July 2, 2015, pet. denied) (mem. op.) (Exhibit d “The Effect of the Standby Creditor Agreement”: CDC requests the Court to take judicial notice of the Court’s docket sheet and file in Sunnyland Note Suit. See Tex. R. Evid. 201. Alternatively, attached as Exhibit 10 is the Declaration of Ray Viada, counsel for CDC, who has reviewed the docket sheet and has testified that there is no docket entry for any plea in abatement or other motion contending that CDC or SBA is a necessary party or should be joined for a just adjudication. Ibrahim firstcontends that Sunnyland did not meet the conditions precedent required by the standby creditor’s agreement before it sued, which in turn bars it from enforcing the note. Ibrahim further contends that Sunnyland had the burden to show conditions precedent that the HGAC loan was satisfied and that Sunnyland responds that Ibrahim did not plead an affirmative defense that the standby creditor agreement precluded enforcement on the note. See Tex. R. Civ. P. 94. But the parties tried the issue by consent. The standby creditor agreement was introduced at trial and discussed multiple times during witness testimony, without an objection from Sunnyland; thus, Sunnyland’s challenge to the pleadings was waived. See RE/MAX of Tex., Inc. v. Katar Corp., 961 S.W.2d 324, 327 (Tex. App.—Houston [1st Dist.] 1997, pet. denied) (HN9 “If an affirmative defense is not plead or tried by consent, it is waived.”); Moore v. Altra Energy Techs., Inc., 321 S.W.3d 727, 734 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (“A party's unpleaded issue may be deemed tried by consent when evidence on the issue is developed under circumstances indicating both parties understood the issue was in the case, and the other party failed to make an appropriate complaint.”). Although Ibrahim proffered evidence of the standby agreement, it did not provide evidence about whether the HGAC agreement had been breached or whether HGAC had consented to Sunnyland's suit. Nor, in its request for a partial reporter's record, did Ibrahim identify in its statement of the issues any challenge to Sunnyland’s compliance with the agreement. With respect to the standby agreement, in the statement of issues, Ibrahim claims that the trial court erred in (1) “rewr[iting] the unambiguous [standby] agreement;” and (2) finding “that the Standby Creditor's Agreement was legally ineffective.” Both of these claims challenges whether the trial court enforced the agreement at all—neither addresses Ibrahim's contention in its briefing that Sunnyland breached the standby agreement with HGAC. In it motion for rehearing, Ibrahim characterizes its challenge as a question of law, for which no additional materials other than the agreement are necessary. Its contention that Sunnyland breached the agreement by failing to comply with conditions precedent, however, is not purely a legal interpretation, but instead requires an examination of the acts or omissions that constitute the breaching conduct. Without a party's submission of a statement of issues, a presumption is created that the omitted portions of the record support the trial court's finding. Bennett, 96 S.W.3d at 229. Ibrahim did not raise a challenge regarding Sunnyland's failure to comply with standby agreement in its statement of issues and request for a partial reporter's record. Because the reporter's record is a partial record, we presume that the trial court heard evidence to support its judgment that the standby agreement does not bar a recovery on the note due to any failure to comply with a condition precedent. See S.W.3d at 229-30 (“The court of appeals was correct in holding that, absent a complete record on appeal, it must presume the omitted items supported the trial court's judgment.” (quoting , 950 S.W.2d 370, , 2015 Tex. App. LEXIS 6819, at *8-11 (boldfacing added for emphasis). Ibrahim filed a petition for review with the Texas Supreme Court that was denied on November 20, 2015. The first notification of the existence of the Sunnyland Note Suit sent to CDC was service of the present VI. Argument. A. Standard of Review. This is a hybrid motion for summary judgment asserting traditional (Tex. R. Civ. P. 166a(c)) and no- The standard for reviewing a traditional summary judgment is well established: (1) the movant must demonstrate that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; and (2) in deciding whether a disputed issue of material fact exists that would preclude summary judgment, the Court must take all evidence favorable to the non-movant resolve any doubts in favor of the non-movant. Nixon v. Mr. Property Management Company, Inc., 690 S.W.2d A no-evidence summary judgment motion is essentially a pretrial directed verdict motion. , 118 S.W.3d 742, 749 (Tex. 2003). In a no-evidence summary judgment motion, the movant contends that there is no evidence of one or more essential elements of the claims for which the non-movant would bear the burden of proof at trial. T . P. 166a(i). The trial court must grant the motion unless the non-movant produces summary judgment evidence raising a genuine issue of material fact. . As in a directed verdict context, the trial court must review the evidence in the light most favorable to the non-movant, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 583 (Tex. 2006) , 168 S.W.3d 802, 822 (Tex. 2005)). B. Breach of Contract. 1. Essential Elements. The essential elements of a breach of contract claim are the existence of a valid contract, performance or tendered performance by the plaintiff, breach of the contract by the defendant, and damages sustained as a result of the breach. City of The Colony v. N. Tex. Mun. Water Dist S.W.3d 699, 739 (Tex. App.—Fort Worth 2008, pet. dism’d). “‘When a promise is subject to a condition precedent, there is no liability or obligation on the promissor and there can be no breach of the contract by him until and unless such condition or contingency is performed or occurs.’” Abrams v. Salinas, 467 S.W.3d 606, 615 (Tex. App.—San Antonio 2015, no pet.) (quoting Roberts v. Clark, 188 S.W.3d 204, 212 (Tex. App.—Tyler 2002, pet. denied)). “Compensatory damages may only be recovered in a claim for breach of contract when the loss is a ‘natural, probable, and foreseeable consequence of the defendant’s conduct.’” ., 615 S.W.2d 685, 687 (Tex. 1981). 2. No Evidence Motion. Under Tex. R. Civ. P. 166a(i), Defendant CDC moves for summary judgment on the following no evidence grounds: a. No evidence exists that any valid contract exists between CDC and Plaintiff Ibrahim as is alleged in the pleadings. The contracts in question create no duty on the part of CDC to prevent Defendant Sunnyland from enforcing the Standby Debt (Sunnyland Note) against Ibrahim. b. No evidence exists of any valid contract between CDC and Plaintiff Akhtar. The contracts in question create no duty on the part of CDC to prevent Defendant Sunnyland from enforcing Akhtar’s guarantee of the Sunnyland Note against c. No evidence exists of any valid contract between CDC and Plaintiff Amin. The contracts in question create no duty on the part of CDC to prevent Defendant Sunnyland from enforcing Amin’s guarantee of the Sunnyland Note against Amin. d. No evidence exists that CDC breached any contractual promise made to, or for the benefit of, Plaintiff Ibrahim. e. No evidence exists that CDC breached any contractual promise made to, or for f. No evidence exists that CDC breached any contractual promise made to, of for the benefit of, Plaintiff Amin. g. No evidence exists that Plaintiff Ibrahim’s alleged damages were the natural, h. No evidence exists that Plaintiff Akhtar’s alleged damages were the natural, i. No evidence exists that Plaintiff Amin’s alleged damages were the natural, 3. Assignment. All of the agreements in question – the Authorization for Debenture Guarantee, the 504 Loan Agreement, and the Standby Creditor’s Agreement – all contain express provisions for the assignment by CDC to SBA of CDC’s interest in the Loan Documents. a. To the extent there was any duty to prevent Sunnyland from prevailing on its suit against the plaintiffs – which duty is denied – that duty was assigned to SBA, and CDC breached no duty by not preventing Sunnyland from obtaining its final judgment against the plaintiffs. b. Since all of the Loan Documents were assigned to SBA, plaintiffs’ rights under those Documents must be enforced, if at all, against SBA. Plaintiffs lack standing to enforce any of these agreements against CDC on the theory alleged. CDC has assigned the Loan Documents to the SBA. 4. No Duty under the Loan Documents. The Standby Creditor’s Agreement creates no duty for CDC to take legal action to prevent Sunnyland from enforcing the Sunnyland Note against Ibrahim or its guarantors. In fact, the Standby Creditor’s Agreement expressly provides that CDC (and its assignee, SBA) can consent to Sunnyland’s enforcement of the Note. The express power to consent to the Sunnyland suit negates the plaintiffs’ claim that CDC had an implied duty to intervene in the Sunnyland suit or otherwise to stop it. Authorization for Debenture Guarantee (Ex. 2F to Jack Steele Declaration, at p. 7); 504 Loan (Exhibit 2E to Jack Steele Declaration, at ¶ 2.3 (“The Note and all liens on all the Collateral securing the Note will be assigned to the SBA as security for SBA’s guarantee of Lender’s Debenture. After said assignment, SBA will be entitled to enforce the terms of the Note, this Agreement, and the rest of the Loan Documents. Borrower acknowledges that Lender [CDC will remain a servicing agent for the Loan and w of the SBA.”) (emphasis added), (“Lender [CDC] assigns this Agreement to SBA”) (Ex. 2E to Jack Steele Declaration, at ¶ 2.7, p. 7); Standby Creditor’s Agreement (Ex. C to Plaintiff’s First Amended Petition, p. 2) (“CDC assigns this Standby Creditor’s Agreement In their amended petition, Plaintiffs contend that other Loan Documents can be read to create the duty they allege. Needless to say, there is not a single passage in any of the Loan Agreements that says that CDC must enforce the Standby Creditor’s Agreement against Sunnyland. Rather, the plaintiffs reference passages from which they claim a duty to that effect may be implied. Implied duties are disfavored in Texas: Generally, a court looks only to the written agreement to determine the obligations of contracting parties. Sun Oil Co. v. Madeley, 626 S.W.2d 726, 728, 25 Tex. Sup. Ct. J. 101 (Tex. 1981). In rare circumstances, however, a court may imply a covenant in order to reflect the parties’ real intentions. Obviously, courts must be quite cautious in exercising this power. See Freeport Sulphur Co. v. Am. Sulphur Royalty Co. of Tex., 117 Tex. 439, 6 S.W “The court cannot make contracts for parties, and can declare implied covenants to exist only when there is a satisfactory basis in the express contracts of the parties which makes it necessary to imply certain duties and obligations in order to effect the purposes of the parties in the contracts made." . at 1040. An “implied covenant must rest entirely on the presumed intention of the parties as gathered from the terms as actually expressed in the written instrument itself, and it must appear that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it . . . ." Tex. v. Powell covenant will not be implied simply to make a contract fair, wise, or just. Universal Health Servs., Inc. v. Renaissance Women's Group, P.A., 121 S.W.3d 742, 747-48 (Tex. 2003); also In re Bass, 113 S.W.3d 735, 743 (Tex. 2003) (“We have consistently stated that implied covenants are not favored by law and will not be read into contracts except as legally necessary to effectuate the plain, clear, unmistakable intent of the parties.”). In particular, the plaintiffs cite to the following obtain Standby Creditor’s Agreement from Sunnyland Development, Inc., for $200,000.00, plus all accrued and future interest (Standby Debt). No payment of principal or interest is to be made on the Standby Debt during the term of the Loan. Standby Creditor must subordinate any lien rights in collateral securing the Loan to CDC’s right in the collateral, and take no action against Borrower or any collateral securing the Standby Debt . CDC must attach a copy of the Standby Note evidencing the Standby Debt to the Standby Creditor’s Agreement. 10 (Exhibit 2F to Steele Declar.) (emphasis added) According to the plaintiffs, the stand-alone passage – “No payment of principal or interest is to be made on the Standby Debt during the term of the Loan” – required Ibrahim to “breach” its Note obligation (the Standby Debt) with Sunnyland. Thus, they argue, illogically, CDC had a duty to protect them from Sunnyland’s This argument ignores the fact that the duty placed by this highlighted provision is on Ibrahim, not the CDC. Moreover, the protection from suit by Sunnyland is contained in the very next sentence, which provides “Standby Creditor must subordinate any lien rights in collateral securing the Loan to CDC’s right in the Borrower . . . without CDC’s consent.” Ibrahim’s rights as a third party beneficiary of the Standby Creditor’s Agreement – if any – are against Sunnyland, not against the CDC. It has been shown, however, that Ibrahim, in the Sunnyland Note Suit, failed to prove its entitlement under the Standby Creditor’s Agreement to avoid liability to Sunnyland on that Note (the Standby Debt). In addition, “[c]ourts in construing contracts cannot, by implication, find terms in opposition to the express language that the parties themselves have written into the contracts.” Dallas Power & Light Co. v. , 623 S.W.2d 310, 311 (Tex. 1981). “There is no implied covenant when the agreement expressly see also Gulf Production Co. v. Kishi, 103 S.W.2d 965, 968 (Tex. 1937) (“A court should never override by implication the intention of the parties expressed in a binding writing”); v. Atlantic Richfield Co., 678 S.W.2d 944, 947 (Tex. 1984) (“There can be no implied covenant as to a matter specifically covered by the written terms of the contract.”). In contending that the Loan Documents impose an implied duty implied duty on CDC to protect the plaintiffs from a Note enforcement suit by Sunnyland, the plaintiffs have ignored the consent provision in the Loan Authorization (in boldfaced type above) – whereby CDC can consent to any action Sunnyland may assert to enforce the Standby Debt. The fact that the Loan Documents expressly allocate power to CDC to consent to any enforcement action by the Standby Creditor negates any contrary implication that the same Loan Documents obligate CDC absolutely to protect Ibrahim from enforcement actions by Sunnyland. The consent provision is also entirely consistent with the overall purpose of the Standby Creditor’s Agreement – which is to protect the SBA’s rights to repayment by the Lender, Ibrahim. The federal fisc is protected by SBA having a first lien position on the Standby Debt. The SBA has the power, but not the the SBA, nor the CDC, is obligated to compel Sunnyland to forebear. The other Loan Document referenced in the petition, the 504 Loan Agreement – expressly stipulates that Lender [CDC] has no liability “for the sufficiency or inadequacy of any action taken by the Lender in pursuit of its remedies.” 504 Loan Agr., at ¶ 5.6 (Ex. 2-E to Steele Declar.). This provision essentially negates the plaintiffs’ claims. Accordingly, the CDC’s alleged failure to enforce the Standby Creditor’s Agreement against Sunnyland is not a breach of any of the Loan Documnents, and therefore, plaintiffs’ claims for breach of contract should be dismissed on the merits. 5. Mitigation of Damages. Failure to mitigate is an affirmative defense. v. Potter, 2013 Tex. App. LEXIS 645, *27, 2013 WL 269091 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) (mem. op.) (citing Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 299 (Tex. 1997)). A defendant asserting failure to mitigate at trial must establish that (1) the plaintiff failed to mitigate and (2) the amount by which the plaintiff could have reduced its damages. In this case, the plaintiffs could have avoided liability to Sunnyland simply by properly asserting the Standby Creditor Agreement as a defense to Sunnyland’s claim and by proving at trial the conditions precedent At trial in the Sunnyland Note Suit, the district court expressly found that “the Standby Creditor Agreement prohibited payment from Ibrahim. FFCL, No, 28. However, it further found that “Ibrahim did not plead the affirmative defense of not paying the note and consequently is not protected from liability on the .” FFCL No. 14 (emphasis added). That is to say, Ibrahim’s failure to plead the Standby Creditor Agreement as an affirmative defense to Sunnyland’s claim on the Sunnyland Note (the Standby Debt) paved the way for Sunnyland to obtain the judgment in question against Ibrahim. On appeal, the Houston First Court of Appeals affirmed the judgment, but held that Ibrahim’s failure to plead the defense was not fatal since the defense had been tried by consent. See Shawn Ibrahim, Inc. v. Suncoast Envtl. & Constr., Inc., No. 01-14-00583-CV, 2015 Tex. App. LEXIS 6819, at *