Preview
FILED
1/11/2024 6:55 AM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Martin Reyes DEPUTY
CAUSE NO. DC-20-12866
MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT
§
Plaintiff, §
v. §
§
CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS
MESQUITE, LLC, et al §
§
Defendants. § 192nd JUDICIAL DISTRICT
DEFENDANTS’ PROPOSED JURY QUESTIONS
AND JURY INSTRUCTIONS
Given the evidence presented in this case and the information procured during the voir dire
process, the Defendants proffer the enclosed jury interrogatories and jury instructions that are
necessary to delineate the applicable law to this case and the appropriate questions to ask the jury.
In accordance with the Court’s request, the Defendants have filed three legal memoranda in
conjunction with this proposed jury charge. Those memorandum are incorporated herein by
reference and are attached hereto as Exhibit A, Exhibit B, and Exhibit C.
Jury Question
When the Defendants executed the Personal Guaranty, did the Personal Guaranty itself contain a
detailed description of all essential terms of the Mesquite Lease?
Answer Yes or No _________________________
Jury Instructions
“Guaranty” means an agreement under which a person assumes, guarantees, or otherwise becomes
primarily or contingently liable for the payment or performance of an obligation of another person.
TEX. FIN. CODE ANN. § 306.001(6)(A) (West 2016).
Essential Terms. To be enforceable, a contract must be reasonably definite and certain. T.O. Stanly
Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). Failure to agree on or include an
essential term renders a contract unenforceable.
Essential Terms for a Personal Guaranty. For a Personal Guaranty to be enforceable under Texas
law, it must satisfy four requirements: (1) the Personal Guaranty must be in writing, (2) it must be
signed by the person to be charged with the promise or by someone authorized to sign for him, (3)
it must be complete in every material detail, and (4) it must contain all essential elements of the
agreement. TEX. BUS. & COM. CODE ANN. § 26.01(a), (b)(2) (West 2009); Cohen v. McCutchin ,
565 S.W.2d 230, 232 (Tex. 1978). The essential terms of a guaranty agreement are (1) the parties
involved, (2) a manifestation of intent to guaranty the obligation, and (3) a description of the
obligation being guaranteed. Goughnour v. Patterson, No. 12-17-00234-CV, at *12 (Tex. App.—Tyler
Dec. 21, 2018) (citing Material P'ships, Inc. v. Ventura, 102 S.W.3d 252, 261 (Tex. App.-Houston [14th
Dist.] 2003, pet. denied).
Specifically, the Personal Guaranty must include the following essential terms: (1) what is to be paid,
(2) who is to pay it, and (3) the terms of the payment as promised. Dunn v. Growers Seed Ass'n, 620
S.W.2d 233, 238 (Tex.App.—Amarillo 1981) (holding that guaranty was unenforceable because it
failed to include the essential terms concerning “what is to be paid, who is to pay it or the terms of
the ‘payment as promised.’).
Guaranty Contracts are construed in Favor of the Guarantors. Under Texas law, a guarantor is a
“so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the
guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan,
392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared that a guarantor is a
'favorite of the law”). “The law on guaranties is well-established. A guarantor may require that the
terms of his guaranty be followed strictly; the guaranty agreement may not be extended beyond its
precise terms by construction or implication.” Federal Deposit v. Attayi, 745 S.W.2d 939, 943 (Tex.
App. 1988).
Jury Question
When the Personal Guaranty sought to incorporate the essential terms of the Mesquite Lease by
reference, did the Defendants have knowledge of all essential terms in the Mesquite Lease and
assent to all essential terms of the Mesquite Lease?
Answer Yes or No _________________________
Jury Instructions.
Incorporation by Reference. When a personal guaranty agreement incorporates by reference the
underlying terms of the agreement being guaranteed, both the guaranty agreement and the
underlying agreement being guaranteed may be construed together so long as the guarantor (i.e., the
Defendants) had knowledge of, and assented to, the incorporated terms from the underlying
agreement. Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex. App. 2013)
(holding that an incorporation by reference is not effective unless “the parties to the agreement had
knowledge of and assented to the incorporated terms.’”) (emphasis added) (citing 11 Samuel
Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30:25, at 234 (4th ed. 1999) and
17A C.J.S. Contracts § 402 (2011)).
More than Plainly Referring to Lease. “Plainly referring to a document requires more than merely
mentioning the document.” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189
(Tex. App. 2013). The “reference to the second document must be clear and the document must be
ascertainable beyond doubt.” Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th
Cir. 2016) (emphasis added). Indeed, Texas law holds that, “[f]or an incorporation by reference to
be effective, it must be clear that the parties to the agreement had knowledge of and assented to the
incorporated terms.’” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189
(Tex.App.—Dallas 2013) (citing 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of
Contracts § 30:25, at 234 (4th ed. 1999) and 17A C.J.S. Contracts § 402 (2011)).
Requires Both Knowledge and Assent. To answer “yes” to the questions above, the jury must find
that each respective Defendant had both knowledge of the essential terms and assented to the
essential terms. That is to say, if the jury finds that a Defendant had knowledge, but did not assent
to, any one of the essential terms in the Mesquite Lease, the answer must be “no.”
Ascertainable Beyond Doubt. Where a contract expressly refers to and incorporates another
instrument in specific terms, both instruments are to be construed together. This is known as the
incorporation by reference doctrine. See 11 Williston on Contracts § 30:25 (4th ed. 1999). The
doctrine may apply even if the second document is unsigned. One Beacon Ins. Co. v. Crowley Marine
Servs., Inc., 648 F.3d 258, 268 (5th Cir. 2011). But the reference to the second document must be
clear and the document must be ascertainable beyond doubt. Id. The "[t]erms incorporated by
reference will be valid so long as it is 'clear that the parties to the agreement had knowledge of and
assented to the incorporated terms.'" Id. (quoting 11 Williston on Contracts § 30:25 (4th ed. 1999)).
Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (emphasis added).
No Meeting of the Minds. When a party does not know or consent to the terms of an agreement
incorporated into a guaranty, the party seeking to enforce the contract cannot establish a meeting of
the minds on the contract to make it valid. see also Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643
F. App'x 386, 4 (5th Cir. 2016) (holing that lack of knowledge concerning the terms of an agreement
incorporated by reference nullifies a basis for a meeting the minds sufficient to establish a valid
contract).
Jury Question.
When the Personal Guaranty sought to incorporate the essential terms of the Mesquite Lease by
reference, was the Mesquite Lease ascertainable beyond doubt to each of the Defendants?
Defendant Brokish: Answer Yes or No _________________________
Defendant Katan: Answer Yes or No _________________________
Defendant Muniz: Answer Yes or No _________________________
Incorporation by Reference Doctrine. “Plainly referring to a document requires more than merely
mentioning the document.” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189
(Tex. App. 2013). The “reference to the second document must be clear and the document must be
ascertainable beyond doubt.” Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th
Cir. 2016) (emphasis added). Indeed, Texas law holds that, “[f]or an incorporation by reference to
be effective, it must be clear that the parties to the agreement had knowledge of and assented to the
incorporated terms.’” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189
(Tex.App.—Dallas 2013) (citing 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of
Contracts § 30:25, at 234 (4th ed. 1999) and 17A C.J.S. Contracts § 402 (2011)).
Ascertainable beyond Doubt. Where a contract expressly refers to and incorporates another
instrument in specific terms, both instruments are to be construed together. This is known as the
incorporation by reference doctrine. See 11 Williston on Contracts § 30:25 (4th ed. 1999). The
doctrine may apply even if the second document is unsigned. One Beacon Ins. Co. v. Crowley Marine
Servs., Inc., 648 F.3d 258, 268 (5th Cir. 2011). But the reference to the second document must be
clear and the document must be ascertainable beyond doubt. Id. The "[t]erms incorporated by
reference will be valid so long as it is 'clear that the parties to the agreement had knowledge of and
assented to the incorporated terms.'" Id. (quoting 11 Williston on Contracts § 30:25 (4th ed. 1999)).
Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (emphasis added).
Jury Question
Did the Defendants reasonably believe that the Mesquite Lease was a $9.4 million lease?
Answer: Yes or No. ________________
If you answered not to the prior question, was there a meeting of the minds between the Defendants
and the Plaintiff concerning the terms and conditions of the Mesquite Lease sought to be
incorporated into the Personal Guaranty.
Answer: Yes or No. ____________________________
Jury Instructions.
No Meeting of the Minds. No Meeting of the Minds. When a party does not know or consent to
the terms of an agreement incorporated into a guaranty, the party seeking to enforce the contract
cannot establish a meeting of the minds on the contract to make it valid. see also Cashman Equip.
Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (holing that lack of knowledge
concerning the terms of an agreement incorporated by reference nullifies a basis for a meeting the
minds sufficient to establish a valid contract).
Mutual Mistake 1 Invalidates Contract Formation. Under Texas law, a mutual mistake concerning
a material fact during the formation of the contract will “invalidate” the contract. Williams v. Glash,
789 S.W.2d 261, 264 (Tex. 1990). (“Pursuant to the doctrine of mutual mistake, when parties to an
agreement have contracted under a misconception or ignorance of a material fact, the agreement
will be avoided.”); see also Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir.
2016) (holing that lack of knowledge concerning the terms of an agreement incorporated by
reference nullifies a basis for a meeting the minds sufficient to establish a valid contract). “If it can
be established that a [contract] sets out a bargain that was never made, it will be invalidated.” Id.
(emphasis in original). “Sometimes the difference between the parties [about the subject of the
contract] goes so deep that it is impossible to say that they ever agreed — that they even have a
contract.” Colfax Envelope Corp. v. Local No. 458-3M, 20 F.3d 750, 752 (7th Cir. 1994); Balistreri v.
Nevada Livestock Production Credit, 214 Cal.App.3d 635, 642 (Cal. Ct. App. 1989) (“each party knew
1 The Defendants are not asserting this doctrine involving mutual mistake as an affirmative defense. Instead,
the Defendants will present evidence that the gap between what the parties thought was being guaranteed was so
significant that the Plaintiff cannot show that there was ever a contract because there was never a meeting of the minds.
In essence, while the Defendants reasonably believed that they were guaranteeing a lease in line with the $1.6 million
Carrollton Lease, the Mesquite Lease was, in fact, a $9.4 million lease. By proffering this evidence, the Defendants can
show that the Plaintiff cannot establish one of its legal elements—a meeting of the minds or mutual assent—for
establishing a valid contract. Thus, this jury instruction is relevant to whether the Plaintiff failed to establish all the
requisite legal elements for a valid contract.
what it wanted; but they did not want or assent to the same thing, and they were both mistaken about
what the other party wanted; "their minds did not agree as to the subject matter."”).
Avoids Windfall. A significant misunderstanding between the contracting parties will invalidate a
contract to avoid creating a financial “windfall” to one of the parties. Williams v. Glash, 789 S.W.2d
261, 265 (Tex. 1990) (“The dissent is willing to hold the parties to a written agreement that is
contrary to their intent and understanding and to ignore the law of mutual mistake, granting as a
result a windfall to the insurer by releasing it from claims that it is contractually obligated to pay.”).
Jury Question.
Did the Plaintiff Landlord and Tenant establish a condition of acceptance for the Personal
Guaranty based on the condition that the Defendants receive a “final” copy of the Mesquite Lease
“together” with the Personal Guaranty?
Answer: Yes or No. ___________________________
If you answered “yes” to the prior question, did the Defendants receive a “final” copy of the
Mesquite Lease “together” with the Personal Guaranty before they executed the Personal Guaranty
on February 26, 2016.
Answer: Yes or No. ___________________________
Jury Instructions.
Failure to Accept Offer. In attempting to reach an agreement, one party may specifically prescribe
the time, manner, and other requirements for the other party’s acceptance of the offer. If the offer
is not accepted as prescribed, there is no agreement. PJC 101.10.
Method of Acceptance must be Strictly Followed. Under Texas law, an “acceptance is effective if
the manner in which it is made strictly complies with the terms of the offer or if it is implicitly
authorized under the circumstances.” O’Connor’s Texas Causes of Action, Ch. 5-A, § 2.5.2, p. 75
(2022 ed.) (citing Town of Lindsay v. Cooke Cty. Elec. Coop., 502 S.W.2d 117, 118 (Tex. 1973); compare
Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944) (holding that agreement was not enforceable because
condition of side agreement was not satisfied) “If the offer requires a specific manner of acceptance,
the offeree must strictly comply with those terms.” Id.
Additional Condition. The Landlord and Tenant may establish an agreement that stipulates the
conditions upon which the Personal Guaranty is accepted as a legally binding document. When
those conditions are not satisfied, you can find that the Personal Guaranty was not a legally
enforceable agreement. If you find that the stipulation was satisfied, you can find that the agreement
was valid.
Legal Support: Under Texas law, parties to a contract may stipulate the condition of when
a contract is deemed enforceable and effective. Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944).
In Baker, the parties agreed to settle a number of business disputes with a settlement and
release agreement. Upon executing the document, the parties agreed to condition the
effectiveness of the agreement on an oral condition that such agreement would not be
enforceable unless one party delivered certain stock to the other party. When one party failed
to deliver the stock, the other party took the position that the agreement was not effective.
During litigation on the matter, the party that failed to deliver the stock argued that the
agreement cannot be changed based on a separate oral agreement that imposes additional
conditions. The Texas Supreme Court rejected this argument, holding that the oral
condition was not barred by the parol evidence rule because the additional condition was
not an agreement to change the terms of the agreement, but rather, was a condition to
determine whether the agreement became effective in the first place.
With this case, the Texas Supreme Court has long held that, “[p]arol evidence is always
competent to show the non-existence of a contract or the conditions upon which it may
become effective.” Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). Under this precedent set
by the Texas Supreme Court, the parties to the Mesquite Lease—the Tenant and Landlord—
can establish a separate agreement about the conditions necessary to make the Personal
Guaranty effective and enforceable.
Jury Question
There is some evidence that the Defendants may have agreed to modified terms of the Personal
Guaranty. Were these modifications, if any, supported by new consideration separate and apart from
the consideration contained in the original Personal Guaranty.
Answer: Yes or No. ___________________________
Jury Instructions
Consideration Essential. A contract is not enforceable if not supported by valid consideration.
Consideration may be either a performance or a return promise bargained for in a present exchange.
Valid consideration requires that both parties regard it as consideration for the contract.
Consideration may consist of a benefit that accrues to one party, or a detriment incurred by the
other party.
New Consideration Required. When a party agrees to do no more than that which he is already
bound to do under an existing contract, the consideration is not sufficient to support a modification.
(PJC § 101.18, comments)
Rule on New Consideration. Under Texas law, “like any contract, a guaranty agreement must be
supported by consideration.” Goughnour v. Patterson, No. 12-17-00234-CV, at *12-13 (Tex. App. Dec.
21, 2018); Walden v. Affiliated Computer Services, Inc., 97 S.W.3d 303, 314 (Tex. App. 2003) (“Texas
courts have consistently adhered to the rule that a modification to a contract must itself be supported
by consideration to be valid.”) (citing Hathaway v. General Mills, Inc., 711 S.W.2d 227, 228 (Tex.
1986)). Consideration must consist of “either a benefit to the promisor or a detriment to the
promisee.” Id. at *13. “If the promise of the guarantor is made contemporary to the promise of the
primary debtor, the consideration which supports the primary debtor’s promise also supports that
of the guarantor.” Id. (citing Schulz v. Jackson Petroleum Prods., Inc., 791 S.W.2d 656, 658 (Tex.App.—
Beaumont 1990, no pet.). However, "[i]n the case of a pre-existing debt, there must be a new and
independent undertaking and a new consideration.” Id. (emphasis added).
Jury Question.
Under the terms and conditions of the Personal Guaranty, “No modification or amendment of
any provision of [the Personal Guaranty] nor consent to any departure by Guarantor therefrom,
shall be effective unless the same shall be in writing and signed by an officer of Lender, and then
shall be effective only in the specific instance and for the purpose for which given.”
Did the Plaintiff produce any evidence that an Officer of the Lender signed a written agreement to
consent to the modifications contained in the alleged modified Personal Guaranty.
Answer Yes or No. __________________
Jury Instructions
Requirement that Plaintiff Strictly Comply with Personal Guaranty Provisions. Under Texas law,
a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly
in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest
Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared
that a guarantor is a 'favorite of the law”). “The law on guaranties is well-established. A guarantor
may require that the terms of his guaranty be followed strictly; the guaranty agreement may not be
extended beyond its precise terms by construction or implication.” Federal Deposit v. Attayi, 745
S.W.2d 939, 943 (Tex. App. 1988). This means that the Plaintiff must show that any modification
of the Personal Guaranty was strictly complied with.
Jury Question.
Under the terms and conditions of the Personal Guaranty, it states that, “[t]his Guaranty and the
Guarantor’s obligations hereunder are irrevocable, except by a writing signed by Landlord.”
Did the Plaintiff produce any evidence that the Landlord executed a document that revoked the
terms and conditions of the Original Personal Guaranty in place of a modified agreement?
Answer Yes or No. _____________________
Jury Instructions
Requirement that Plaintiff Strictly Comply with Personal Guaranty Provisions. Under Texas law,
a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly
in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest
Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared
that a guarantor is a 'favorite of the law”). “The law on guaranties is well-established. A guarantor
may require that the terms of his guaranty be followed strictly; the guaranty agreement may not be
extended beyond its precise terms by construction or implication.” Federal Deposit v. Attayi, 745
S.W.2d 939, 943 (Tex. App. 1988). This means that the Plaintiff must show that any modification
of the Personal Guaranty was strictly complied with.
Jury Question
For purposes of determining the damages in this case, were the Defendants released from their
obligations under the Personal Guaranty when the Mesquite Lease was collaterally assigned to the
Plaintiff’s Lender on or about April 6, 2016?
Answer Yes or No. _____________________
If you answered yes, you must consider all damage testimony based on the fact that the Defendants’
obligation under the damage model must not include any such damages after April 6, 2016.
If you answer no, you must consider all damages testimony based on the fact that Defendants’
obligation under the damages model included all such damages through the full term of the
Mesquite Lease.
Text of Release Provision in Personal Guaranty. The Personal Guaranty contains the following
text in the so-called Release Provision: “RELEASE OF GUARANTOR. Notwithstanding the
foregoing, upon the assignment of this Lease to another person or entity, Tenant and each
Guarantor shall be released from and have no further obligations under this Lease or any guaranties
of this Lease from and after the effective date of such Transfer.” (Defendants’ Trial Exhibit 19).
Factual Issue for Jury to Decipher. The evidence in this case has demonstrated that the Mesquite
Lease was collaterally assigned by the Plaintiff to its lender on April 6, 2016. The issue to be
determined by the jury is whether this collateral assignment triggers the release of the Defendants in
the Release Provision.
Texas Law Requires Construction of Guaranty in Favor of Defendants. Under Texas law, a
guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in
favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings
v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.--Dallas 1965) (“Where uncertainty exists as to the
meaning of a contract, rendering it susceptible to two interpretations, the one favorable to the
guarantor, the other unfavorable, the interpretation will be given which favors the guarantor.”).
Given this strict construction rule, “[i]f the guaranty is ambiguous, then the court must apply the
‘construction which is most favorable to the guarantor.’” Id. That is, if there is more than one
potential interpretation of a guaranty agreement, the interpretation most favorable to the guarantor
must be applied by the court. Southwest Savings v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.--
Dallas 1965) (“Where uncertainty exists as to the meaning of a contract, rendering it susceptible to
two interpretations, the one favorable to the guarantor, the other unfavorable, the interpretation
will be given which favors the guarantor.”).
Jury Question
Were the Defendants released from their obligations under the Personal Guaranty when the Plaintiff
sold the Mesquite Building in April 2021?
Answer Yes or No. _____________________
Jury Instructions
Text of Release Provision in Personal Guaranty. The Personal Guaranty contains the following
text in the so-called Release Provision: “RELEASE OF GUARANTOR. Notwithstanding the
foregoing, upon the assignment of this Lease to another person or entity, Tenant and each
Guarantor shall be released from and have no further obligations under this Lease or any guaranties
of this Lease from and after the effective date of such Transfer.” (Defendants’ Trial Exhibit 19).
Factual Issue for Jury to Decipher. The evidence in this case has demonstrated that the Mesquite
Building was sold and transferred to by the Plaintiff on [insert]. The issue to be determined by the
jury is whether this sale of the Mesquite Building and transfer of ownership triggered the release of
the Defendants in the Release Provision.
Texas Law Requires Construction of Guaranty in Favor of Defendants. Under Texas law, a
guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in
favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings
v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.--Dallas 1965) (“Where uncertainty exists as to the
meaning of a contract, rendering it susceptible to two interpretations, the one favorable to the
guarantor, the other unfavorable, the interpretation will be given which favors the guarantor.”).
Given this strict construction rule, “[i]f the guaranty is ambiguous, then the court must apply the
‘construction which is most favorable to the guarantor.’” Id. That is, if there is more than one
potential interpretation of a guaranty agreement, the interpretation most favorable to the guarantor
must be applied by the court. Southwest Savings v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.--
Dallas 1965) (“Where uncertainty exists as to the meaning of a contract, rendering it susceptible to
two interpretations, the one favorable to the guarantor, the other unfavorable, the interpretation
will be given which favors the guarantor.”).
Jury Question
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate the Plaintiff
for its damages, if any, that resulted from the Defendants’ failure to comply with the Personal
Guaranty?
Answer: ________________________
Jury Instructions
Loss of the Benefit of the Bargain. The difference, if any, between the value received under the
Mesquite Lease agreed to by the Tenant and guaranteed by the Defendants and the value of the
Mesquite Lease as performed by the Tenant. The difference in value, if any, shall be determined at
the time and place the Mesquite Lease was performed.
Benefit of the Bargain Damages. Damages for breach of contract are intended to protect three
interests: a restitution interest, a reliance interest, and an expectation interest. In this case, the
Plaintiff seeks to recover its "expectancy" damages. "Expectancy damages, similar to benefit-of-the-
bargain recoveries, award damages for the reasonably expected value of the contract." Sharifi v. Steen
Automotive, LLC, 370 S.W.3d 126, 148 (Tex. App. 2012). This measure of damages “seeks to restore
the injured party to the economic position it would have been in had the contract been performed.”
Sharifi, at 148 (quoting Sava gumarska in kemijska industria d.d. v. Advanced Polymer Sciences, Inc., 128
S.W.3d 304, 317 n.6 (Tex. App. 2004)). In doing this, the analysis of what “would have been”
incorporates the facts that have occurred since the breach.
Relevant Facts to Consider. “The facts of the case determine the proper measure of damages as well
as any allowance offsets.” Sharifi v. Steen Automotive, LLC, 370 S.W.3d 126, 148 (Tex. App. 2012).
For future damages, the events that occurred between the time of the breach and the time of the
trial are relevant and may be considered by the jury. PRC Kentron, Inc. v. First City Center Associates,
762 S.W.2d 279, 289 (Tex. App. 1989) (holding that trial court “was permitted, in determining the
fair market value of the balance of the term, to consider evidence of market conditions existing not
only at the time of Tenant's breach but also subsequently.”). This means that you may take into
account the sale of the Mesquite Building in April 2021 to determine what the Plaintiff expected
out of the Mesquite Lease in the event of a sale of the Mesquite Building.
Respectfully submitted,
By:
John P. Walsh, Esq.
Texas Bar No. 24048867
Jack.Walsh@Walsh-Legal.com
2770 Main Street, Suite 172
Frisco, Texas 75033
T. 214.773-9167
F. 214.299-8668
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and the foregoing was served upon
the following counsel of record, on November 20, 2023, pursuant to the TRCP, as follows:
VIA E-SERVICE
VIA EMAIL: Shahzeb@GazianiLaw.com
Shahzeb Gaziani
Gaziani Law, PLLC
555 Republic Drive, Suite 200
Plano, Texas 75074
VIA E-SERVICE
VIA EMAIL: anthony@ricciardellilaw.com
Anthony T. Ricciardelli
Ricciardelli Law Firm
1910 Pacific Avenue, Suite 13000
Dallas, Texas 75201
_______________________________________
John P. Walsh
CAUSE NO. DC-20-12866
MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT
§
Plaintiff, §
v. §
§
CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS
MESQUITE, LLC, et al §
§
Defendants. § 192nd JUDICIAL DISTRICT
LEGAL MEMORANDUM
Jury Instructions Concerning Conditional Agreement about when the Personal Guaranty was
Effective and Enforceable
Factual Background. In this case, there was an agreement by the Tenant and Landlord—the
parties to the Mesquite Lease—that the Personal Guaranties would not be accepted unless the
Defendants received a copy of the “final” lease “together” with the guaranty. The Plaintiff testified
that the agreements were intended to be executed simultaneously at the same time.
Legal Issue. Does this conditional agreement between the Landlord and Tenant determine
whether the Personal Guaranty was accepted by the Landlord? Alternatively, does this conditional
agreement constitute a binding agreement about whether the Personal Guaranty was effective when
it was executed in violation of the conditions.
Importance for Jury Instruction in this Case. The jury must received some instruction with
how to interpret and apply the agreement between the Landlord and Tenant demonstrated by the
Defendants Exhibit 1 and Exhibit 2, as well as the testimony by the Amir Rana and the two attorneys.
Legal Answer. The jury must receive three instructions on this matter. First, the jury must
be instructed that the parties to an agreement can dictate the specific terms of acceptance. If those
terms are not adhered to, the underlying agreement is not legally binding. Second, if the “covenants
and duties” associated with the Mesquite Lease are successfully incorporated by reference, that would
include the duty to adhere to the agreement between the Landlord and Tenant concerning the
disclosure of the “final” lease “together” with Personal Guaranty. Third, parties to a contract may
set conditions on when a contract becomes enforceable, even if such conditions are set after
the agreement is reached and such conditions constitute an oral side agreement.
Legal Discussion
First, under Texas law, an “acceptance is effective if the manner in which it is made strictly
complies with the terms of the offer or if it is implicitly authorized under the circumstances.”
O’Connor’s Texas Causes of Action, Ch. 5-A, § 2.5.2, p. 75 (2022 ed.) (citing Town of Lindsay v. Cooke
Cty. Elec. Coop., 502 S.W.2d 117, 118 (Tex. 1973); compare Baker v. Baker, 143 Tex. 191, 198 (Tex.
1944) (holding that agreement was not enforceable because the condition of a side agreement was
not satisfied) “If the offer requires a specific manner of acceptance, the offeree must strictly comply
with those terms.” Id. A failure to strictly comply with the requisite acceptance methods for personal
guaranty contracts is reinforced and heightened by Texas law, holding that guaranty agreements
must be strictly enforced in favor of the guarantors.
Second, if the Incorporation Doctrine is satisfied by the parties to incorporate the “covenants and
duties” of the Mesquite Lease, that should incorporate all such duties, including the duty to provide
a copy of the “final” lease to the guarantors “together” with the lease. What is good for the goose is
good for the gander. Given that the Mesquite Lease was ostensibly incorporated by reference into
the Personal Guaranty, any condition agreed upon by the parties to the Mesquite Lease—i.e., the
Tenant and Landlord—must also be incorporated into that agreement. Because this condition was
part of the transaction involving the Personal Guaranty and the Mesquite Lease, that condition must
also be incorporated by reference.
Third, under Texas law, parties to a contract may stipulate the condition of when a contract
is deemed enforceable and effective. Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). In Baker, the
parties agreed to settle a number of business disputes with a settlement and release agreement. Upon
executing the document, the parties agreed to condition the effectiveness of the agreement on an
oral condition that such agreement would not be enforceable unless one party delivered certain stock
to the other party. When one party failed to deliver the stock, the other party took the position that
the agreement was not effective. During litigation on the matter, the party that failed to deliver the
stock argued that the agreement cannot be changed based on a separate oral agreement that imposes
additional conditions. The Texas Supreme Court rejected this argument, holding that the oral
condition was not barred by the parol evidence rule because the additional condition was not an
agreement to change the terms of the agreement, but rather, was a condition to determine whether
the agreement became effective in the first place.
With this case, the Texas Supreme Court has long held that, “[p]arol evidence is always
competent to show the non-existence of a contract or the conditions upon which it may become
effective.” Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). Under this precedent set by the Texas
Supreme Court, the parties to the Mesquite Lease—the Tenant and Landlord—can establish a
separate agreement about the conditions necessary to make the Personal Guaranty effective and
enforceable.
Respectfully submitted,
By:
John P. Walsh, Esq.
Texas Bar No. 24048867
Jack.Walsh@Walsh-Legal.com
2770 Main Street, Suite 172
Frisco, Texas 75033
T. 214.773-9167
F. 214.299-8668
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and the foregoing was served upon
the following counsel of record, on January 11, 2024 pursuant to the TRCP, as follows:
VIA E-SERVICE
VIA EMAIL: Shahzeb@GazianiLaw.com
Shahzeb Gaziani
Gaziani Law, PLLC
555 Republic Drive, Suite 200
Plano, Texas 75074
VIA E-SERVICE
VIA EMAIL: anthony@ricciardellilaw.com
Anthony T. Ricciardelli
Ricciardelli Law Firm
1910 Pacific Avenue, Suite 13000
Dallas, Texas 75201
_______________________________________
John P. Walsh
CAUSE NO. DC-20-12866
MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT
§
Plaintiff, §
v. §
§
CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS
MESQUITE, LLC, et al §
§
Defendants. § 192nd JUDICIAL DISTRICT
LEGAL MEMORANDUM
Jury Instructions Concerning the Essential Terms Required for a Guaranty Contract
Factual Background. In this case, the Defendants executed a Personal Guaranty that
incorporated the terms of the Mesquite Lease by reference.
This Guaranty Agreement…is executed and delivered by Guarantor to Landlord in
connection with and to assure the payment and performance by Tenant of its convents and
duties that certain Commercial Lease (“Lease”) dated March 3, 2016 between Landlord and
Tenant regarding the real property situated at 1080 E. Cartwright Road, Mesquite, TX.
Other than this reference to the “commercia lease,” there is no other reference to any terms
delineated in this lease for the Mesquite building (the “Mesquite Lease”).
Legal Issue. For guaranty contracts, what are the essential terms and conditions that must be
included in the guaranty contract related to the underlying agreement being guaranteed?
Importance for Jury Instruction in this Case. During voir dire, several jurors expressed strong
beliefs about people being bound by the contracts they signed regardless of whether they had access
to all the “essential terms” of the contract incorporated into the contract. It appeared that this belief
applied to all contracts without regard to whether Texas law applies different standards to guaranty
contracts. Given that the standard contract principles are not all applicable to guaranty contracts,
should this court provide the jury with instructions about the requirement under Texas law related
to guaranty contracts? This includes the requirement to incorporate certain essential terms into the
executed guaranty about the contract being guaranteed. If so, what instructions would be necessary
for these jurors to understand how guaranty contracts operate under Texas law. (A separate
memorandum will address the issue of how such essential terms must satisfy the Incorporation
Doctrine).
Legal Answer. The jury must be instructed that a guaranty agreement must be [1] “compete
in every material detail” and [2] “contain all essential element of the agreement” being guaranteed.
This means that the guaranty must include the following essential terms: (1) what is to be paid, (2)
who is to pay it, and (3) the terms of the payment as promised. If these essential terms are
incorporated by reference into the guaranty, it must satisfy the general contract rules under the
Incorporation Doctrine. (See Legal Memorandum filed in conjunction with this Memorandum)
Legal Discussion
Guaranty contracts have additional requirements to determine whether they are legally
enforceable. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty
agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1
(Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts
have universally declared that a guarantor is a 'favorite of the law”). “The law on guaranties is well-
established. A guarantor may require that the terms of his guaranty be followed strictly; the guaranty
agreement may not be extended beyond its precise terms by construction or implication.” Federal
Deposit v. Attayi, 745 S.W.2d 939, 943 (Tex. App. 1988).
Guaranty contracts also have heightened legal requirements about establishing the essential
terms of the agreement being guaranteed. Under Texas law, a personal guaranty “must [1] be in
writing, [2] signed by the person to be charged with the promise or by someone authorized to sign
for him, [3] be complete in every material detail, and [4] contain all essential elements of the
agreement.” Goughnour v. Patterson, No. 12-17-00234-CV, at *12 (Tex. App. December 21, 2018)
(citing Cohen v. Mccutchin, 565 S.W.2d 230, 232 (Tex. 1978) (“there must be a written memorandum
which is complete within itself in every material detail, and which contains all of the essential
elements of the agreement”) (emphasis added). The “essential terms” of a “guaranty agreement are
(1) the parties involved, (2) a manifestation of intent to guaranty the obligation, and (3) a description
of the obligation being guaranteed.” Id.
This means that the party seeking to enforce the Guaranty must show that the Guaranty
included, at a minimum, the following essential terms: what is to be paid, who is to pay it, and the
terms of the payment as promised. See, e.g., Dunn v. Growers Seed Ass'n, 620 S.W.2d 233, 238
(Tex.App.—Amarillo 1981) (holding that guaranty was unenforceable because it failed to include the
essential terms concerning “what is to be paid, who is to pay it or the terms of the ‘payment as
promised.’”).
Respectfully submitted,
By:
John P. Walsh, Esq.
Texas Bar No. 24048867
Jack.Walsh@Walsh-Legal.com
2770 Main Street, Suite 172
Frisco, Texas 75033
T. 214.773-9167
F. 214.299-8668
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and the foregoing was served
upon the following counsel of record, on January 11, 2024 pursuant to the TRCP, as follows:
VIA E-SERVICE
VIA EMAIL: Shahzeb@GazianiLaw.com
Shahzeb Gaziani
Gaziani Law, PLLC
555 Republic Drive, Suite 200
Plano, Texas 75074
VIA E-SERVICE
VIA EMAIL: anthony@ricciardellilaw.com
Anthony T. Ricciardelli
Ricciardelli Law Firm
1910 Pacific Avenue, Suite 13000
Dallas, Texas 75201
_______________________________________
John P. Walsh
CAUSE NO. DC-20-12866
MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT
§
Plaintiff, §
v. §
§
CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS
MESQUITE, LLC, et al §
§
Defendants. § 192nd JUDICIAL DISTRICT
LEGAL MEMORANDUM
Jury Instructions Concerning the Incorporation Doctrine
Factual Background. In this case, the Defendants executed a Personal Guaranty that incorporated
the terms of the Mesquite Lease by reference.
This Guaranty Agreement…is executed and delivered by Guarantor to Landlord in
connection with and to assure the payment and performance by Tenant of its convents and
duties that certain Commercial Lease (“Lease”) dated March 3, 2016 between Landlord and
Tenant regarding the real property situated at 1080 E. Cartwright Road, Mesquite, TX.
Other than this reference to the “commercia lease,” there is no other reference to any terms
delineated in this lease for the Mesquite building (the “Mesquite Lease”).
Legal Issue. Was this plain reference to the Mesquite Lease being incorporated into the Personal
Guaranty sufficient to bind the Defendants to the terms of the Mesquite Lease? This issue relates to
the legal principles concerning the “Incorporation Doctrine.”
Importance for Jury Instruction in this Case. During voir dire, several jurors expressed their belief
that a party should be automatically bound by the terms of a contract incorporated by reference no
matter what. Some jurors even said that they would not set aside this belief even if the judge
instructed them that the law held otherwise. For these jurors, it did not matter whether a party knew
what was in the contract being incorporated or whether they had access to the second contract. For
these jurors, once a party signed the contract with reference to the second contract, that party was
automatically bound by both agreements. Is this the law of Texas? Is this how the Incorporation
Doctrine works? If not, what instructions must this Court provide those jurors to explain what the
law is concerning the Incorporation Doctrine and how they should analyze these cases. What
instructions would be necessary to guide these jurors in knowing what factors they should consider
when determining whether the incorporation of the Mesquite Lease was done correctly under Texas
law, thereby binding the Defendants to the terms of the Mesquite Lease that were incorporated by
reference.
Short Answer. Texas law does conflicts directly with the belief by some jurors that a party must be
automatically bound by the terms of any agreement referenced in another agreement. Under Texas
Page 0 of 14
law, “Plainly referring to a document requires more than merely mentioning the document.” Under
the Incorporation Doctrine, “[f]or an incorporation by reference to be effective, it must be clear that
the parties to the agreement had knowledge of and assented to the incorporated terms.” In doing
this, the party seeking to enforce the terms of the incorporated document must show that the
incorporated document was “ascertainable beyond doubt.” So, in order to guide these jurors who
do not understand Texas law, this Court must provide jury instructions that adopt these three key
legal principles related to the Incorporation Doctrine.
Legal Discussion
The jurors’ belief that a party should be automatically bound by the terms of an agreement
referenced in another agreement is wrong and not supported by Texas law. Under Texas law, “Plainly
referring to a document requires more than merely mentioning the document.” Bob Montgomery
Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex. App. 2013) (holding that reference to
website link was insufficient to hold party contractually liable for terms and conditions contained in
the website link). 1 “The language in the signed document must show the parties intended for the
other document to become part of the agreement.” To demonstrate what is required to make this
showing of intent when the underlying document is merely referenced, the Dallas Court of Appeals
adopted the legal standard delineated in two legal treatises discussing the Incorporation Doctrine:
• “in order to uphold the validity of terms incorporated by reference, it must be clear that the
parties to the agreement had knowledge of and assented to the incorporated terms” 11
Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30:25, at 234
(4th ed. 1999).
• “For an incorp
Preview
FILED 1/11/2024 6:55 AM FELICIA PITRE DISTRICT CLERK DALLAS CO., TEXAS Martin Reyes DEPUTY CAUSE NO. DC-20-12866 MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT § Plaintiff, § v. § § CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS MESQUITE, LLC, et al § § Defendants. § 192nd JUDICIAL DISTRICT DEFENDANTS’ PROPOSED JURY QUESTIONS AND JURY INSTRUCTIONS Given the evidence presented in this case and the information procured during the voir dire process, the Defendants proffer the enclosed jury interrogatories and jury instructions that are necessary to delineate the applicable law to this case and the appropriate questions to ask the jury. In accordance with the Court’s request, the Defendants have filed three legal memoranda in conjunction with this proposed jury charge. Those memorandum are incorporated herein by reference and are attached hereto as Exhibit A, Exhibit B, and Exhibit C. Jury Question When the Defendants executed the Personal Guaranty, did the Personal Guaranty itself contain a detailed description of all essential terms of the Mesquite Lease? Answer Yes or No _________________________ Jury Instructions “Guaranty” means an agreement under which a person assumes, guarantees, or otherwise becomes primarily or contingently liable for the payment or performance of an obligation of another person. TEX. FIN. CODE ANN. § 306.001(6)(A) (West 2016). Essential Terms. To be enforceable, a contract must be reasonably definite and certain. T.O. Stanly Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). Failure to agree on or include an essential term renders a contract unenforceable. Essential Terms for a Personal Guaranty. For a Personal Guaranty to be enforceable under Texas law, it must satisfy four requirements: (1) the Personal Guaranty must be in writing, (2) it must be signed by the person to be charged with the promise or by someone authorized to sign for him, (3) it must be complete in every material detail, and (4) it must contain all essential elements of the agreement. TEX. BUS. & COM. CODE ANN. § 26.01(a), (b)(2) (West 2009); Cohen v. McCutchin , 565 S.W.2d 230, 232 (Tex. 1978). The essential terms of a guaranty agreement are (1) the parties involved, (2) a manifestation of intent to guaranty the obligation, and (3) a description of the obligation being guaranteed. Goughnour v. Patterson, No. 12-17-00234-CV, at *12 (Tex. App.—Tyler Dec. 21, 2018) (citing Material P'ships, Inc. v. Ventura, 102 S.W.3d 252, 261 (Tex. App.-Houston [14th Dist.] 2003, pet. denied). Specifically, the Personal Guaranty must include the following essential terms: (1) what is to be paid, (2) who is to pay it, and (3) the terms of the payment as promised. Dunn v. Growers Seed Ass'n, 620 S.W.2d 233, 238 (Tex.App.—Amarillo 1981) (holding that guaranty was unenforceable because it failed to include the essential terms concerning “what is to be paid, who is to pay it or the terms of the ‘payment as promised.’). Guaranty Contracts are construed in Favor of the Guarantors. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared that a guarantor is a 'favorite of the law”). “The law on guaranties is well-established. A guarantor may require that the terms of his guaranty be followed strictly; the guaranty agreement may not be extended beyond its precise terms by construction or implication.” Federal Deposit v. Attayi, 745 S.W.2d 939, 943 (Tex. App. 1988). Jury Question When the Personal Guaranty sought to incorporate the essential terms of the Mesquite Lease by reference, did the Defendants have knowledge of all essential terms in the Mesquite Lease and assent to all essential terms of the Mesquite Lease? Answer Yes or No _________________________ Jury Instructions. Incorporation by Reference. When a personal guaranty agreement incorporates by reference the underlying terms of the agreement being guaranteed, both the guaranty agreement and the underlying agreement being guaranteed may be construed together so long as the guarantor (i.e., the Defendants) had knowledge of, and assented to, the incorporated terms from the underlying agreement. Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex. App. 2013) (holding that an incorporation by reference is not effective unless “the parties to the agreement had knowledge of and assented to the incorporated terms.’”) (emphasis added) (citing 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30:25, at 234 (4th ed. 1999) and 17A C.J.S. Contracts § 402 (2011)). More than Plainly Referring to Lease. “Plainly referring to a document requires more than merely mentioning the document.” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex. App. 2013). The “reference to the second document must be clear and the document must be ascertainable beyond doubt.” Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (emphasis added). Indeed, Texas law holds that, “[f]or an incorporation by reference to be effective, it must be clear that the parties to the agreement had knowledge of and assented to the incorporated terms.’” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex.App.—Dallas 2013) (citing 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30:25, at 234 (4th ed. 1999) and 17A C.J.S. Contracts § 402 (2011)). Requires Both Knowledge and Assent. To answer “yes” to the questions above, the jury must find that each respective Defendant had both knowledge of the essential terms and assented to the essential terms. That is to say, if the jury finds that a Defendant had knowledge, but did not assent to, any one of the essential terms in the Mesquite Lease, the answer must be “no.” Ascertainable Beyond Doubt. Where a contract expressly refers to and incorporates another instrument in specific terms, both instruments are to be construed together. This is known as the incorporation by reference doctrine. See 11 Williston on Contracts § 30:25 (4th ed. 1999). The doctrine may apply even if the second document is unsigned. One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 268 (5th Cir. 2011). But the reference to the second document must be clear and the document must be ascertainable beyond doubt. Id. The "[t]erms incorporated by reference will be valid so long as it is 'clear that the parties to the agreement had knowledge of and assented to the incorporated terms.'" Id. (quoting 11 Williston on Contracts § 30:25 (4th ed. 1999)). Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (emphasis added). No Meeting of the Minds. When a party does not know or consent to the terms of an agreement incorporated into a guaranty, the party seeking to enforce the contract cannot establish a meeting of the minds on the contract to make it valid. see also Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (holing that lack of knowledge concerning the terms of an agreement incorporated by reference nullifies a basis for a meeting the minds sufficient to establish a valid contract). Jury Question. When the Personal Guaranty sought to incorporate the essential terms of the Mesquite Lease by reference, was the Mesquite Lease ascertainable beyond doubt to each of the Defendants? Defendant Brokish: Answer Yes or No _________________________ Defendant Katan: Answer Yes or No _________________________ Defendant Muniz: Answer Yes or No _________________________ Incorporation by Reference Doctrine. “Plainly referring to a document requires more than merely mentioning the document.” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex. App. 2013). The “reference to the second document must be clear and the document must be ascertainable beyond doubt.” Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (emphasis added). Indeed, Texas law holds that, “[f]or an incorporation by reference to be effective, it must be clear that the parties to the agreement had knowledge of and assented to the incorporated terms.’” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex.App.—Dallas 2013) (citing 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30:25, at 234 (4th ed. 1999) and 17A C.J.S. Contracts § 402 (2011)). Ascertainable beyond Doubt. Where a contract expressly refers to and incorporates another instrument in specific terms, both instruments are to be construed together. This is known as the incorporation by reference doctrine. See 11 Williston on Contracts § 30:25 (4th ed. 1999). The doctrine may apply even if the second document is unsigned. One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 268 (5th Cir. 2011). But the reference to the second document must be clear and the document must be ascertainable beyond doubt. Id. The "[t]erms incorporated by reference will be valid so long as it is 'clear that the parties to the agreement had knowledge of and assented to the incorporated terms.'" Id. (quoting 11 Williston on Contracts § 30:25 (4th ed. 1999)). Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (emphasis added). Jury Question Did the Defendants reasonably believe that the Mesquite Lease was a $9.4 million lease? Answer: Yes or No. ________________ If you answered not to the prior question, was there a meeting of the minds between the Defendants and the Plaintiff concerning the terms and conditions of the Mesquite Lease sought to be incorporated into the Personal Guaranty. Answer: Yes or No. ____________________________ Jury Instructions. No Meeting of the Minds. No Meeting of the Minds. When a party does not know or consent to the terms of an agreement incorporated into a guaranty, the party seeking to enforce the contract cannot establish a meeting of the minds on the contract to make it valid. see also Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (holing that lack of knowledge concerning the terms of an agreement incorporated by reference nullifies a basis for a meeting the minds sufficient to establish a valid contract). Mutual Mistake 1 Invalidates Contract Formation. Under Texas law, a mutual mistake concerning a material fact during the formation of the contract will “invalidate” the contract. Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990). (“Pursuant to the doctrine of mutual mistake, when parties to an agreement have contracted under a misconception or ignorance of a material fact, the agreement will be avoided.”); see also Cashman Equip. Corp. v. Boh Bros. Constr. Co., 643 F. App'x 386, 4 (5th Cir. 2016) (holing that lack of knowledge concerning the terms of an agreement incorporated by reference nullifies a basis for a meeting the minds sufficient to establish a valid contract). “If it can be established that a [contract] sets out a bargain that was never made, it will be invalidated.” Id. (emphasis in original). “Sometimes the difference between the parties [about the subject of the contract] goes so deep that it is impossible to say that they ever agreed — that they even have a contract.” Colfax Envelope Corp. v. Local No. 458-3M, 20 F.3d 750, 752 (7th Cir. 1994); Balistreri v. Nevada Livestock Production Credit, 214 Cal.App.3d 635, 642 (Cal. Ct. App. 1989) (“each party knew 1 The Defendants are not asserting this doctrine involving mutual mistake as an affirmative defense. Instead, the Defendants will present evidence that the gap between what the parties thought was being guaranteed was so significant that the Plaintiff cannot show that there was ever a contract because there was never a meeting of the minds. In essence, while the Defendants reasonably believed that they were guaranteeing a lease in line with the $1.6 million Carrollton Lease, the Mesquite Lease was, in fact, a $9.4 million lease. By proffering this evidence, the Defendants can show that the Plaintiff cannot establish one of its legal elements—a meeting of the minds or mutual assent—for establishing a valid contract. Thus, this jury instruction is relevant to whether the Plaintiff failed to establish all the requisite legal elements for a valid contract. what it wanted; but they did not want or assent to the same thing, and they were both mistaken about what the other party wanted; "their minds did not agree as to the subject matter."”). Avoids Windfall. A significant misunderstanding between the contracting parties will invalidate a contract to avoid creating a financial “windfall” to one of the parties. Williams v. Glash, 789 S.W.2d 261, 265 (Tex. 1990) (“The dissent is willing to hold the parties to a written agreement that is contrary to their intent and understanding and to ignore the law of mutual mistake, granting as a result a windfall to the insurer by releasing it from claims that it is contractually obligated to pay.”). Jury Question. Did the Plaintiff Landlord and Tenant establish a condition of acceptance for the Personal Guaranty based on the condition that the Defendants receive a “final” copy of the Mesquite Lease “together” with the Personal Guaranty? Answer: Yes or No. ___________________________ If you answered “yes” to the prior question, did the Defendants receive a “final” copy of the Mesquite Lease “together” with the Personal Guaranty before they executed the Personal Guaranty on February 26, 2016. Answer: Yes or No. ___________________________ Jury Instructions. Failure to Accept Offer. In attempting to reach an agreement, one party may specifically prescribe the time, manner, and other requirements for the other party’s acceptance of the offer. If the offer is not accepted as prescribed, there is no agreement. PJC 101.10. Method of Acceptance must be Strictly Followed. Under Texas law, an “acceptance is effective if the manner in which it is made strictly complies with the terms of the offer or if it is implicitly authorized under the circumstances.” O’Connor’s Texas Causes of Action, Ch. 5-A, § 2.5.2, p. 75 (2022 ed.) (citing Town of Lindsay v. Cooke Cty. Elec. Coop., 502 S.W.2d 117, 118 (Tex. 1973); compare Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944) (holding that agreement was not enforceable because condition of side agreement was not satisfied) “If the offer requires a specific manner of acceptance, the offeree must strictly comply with those terms.” Id. Additional Condition. The Landlord and Tenant may establish an agreement that stipulates the conditions upon which the Personal Guaranty is accepted as a legally binding document. When those conditions are not satisfied, you can find that the Personal Guaranty was not a legally enforceable agreement. If you find that the stipulation was satisfied, you can find that the agreement was valid. Legal Support: Under Texas law, parties to a contract may stipulate the condition of when a contract is deemed enforceable and effective. Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). In Baker, the parties agreed to settle a number of business disputes with a settlement and release agreement. Upon executing the document, the parties agreed to condition the effectiveness of the agreement on an oral condition that such agreement would not be enforceable unless one party delivered certain stock to the other party. When one party failed to deliver the stock, the other party took the position that the agreement was not effective. During litigation on the matter, the party that failed to deliver the stock argued that the agreement cannot be changed based on a separate oral agreement that imposes additional conditions. The Texas Supreme Court rejected this argument, holding that the oral condition was not barred by the parol evidence rule because the additional condition was not an agreement to change the terms of the agreement, but rather, was a condition to determine whether the agreement became effective in the first place. With this case, the Texas Supreme Court has long held that, “[p]arol evidence is always competent to show the non-existence of a contract or the conditions upon which it may become effective.” Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). Under this precedent set by the Texas Supreme Court, the parties to the Mesquite Lease—the Tenant and Landlord— can establish a separate agreement about the conditions necessary to make the Personal Guaranty effective and enforceable. Jury Question There is some evidence that the Defendants may have agreed to modified terms of the Personal Guaranty. Were these modifications, if any, supported by new consideration separate and apart from the consideration contained in the original Personal Guaranty. Answer: Yes or No. ___________________________ Jury Instructions Consideration Essential. A contract is not enforceable if not supported by valid consideration. Consideration may be either a performance or a return promise bargained for in a present exchange. Valid consideration requires that both parties regard it as consideration for the contract. Consideration may consist of a benefit that accrues to one party, or a detriment incurred by the other party. New Consideration Required. When a party agrees to do no more than that which he is already bound to do under an existing contract, the consideration is not sufficient to support a modification. (PJC § 101.18, comments) Rule on New Consideration. Under Texas law, “like any contract, a guaranty agreement must be supported by consideration.” Goughnour v. Patterson, No. 12-17-00234-CV, at *12-13 (Tex. App. Dec. 21, 2018); Walden v. Affiliated Computer Services, Inc., 97 S.W.3d 303, 314 (Tex. App. 2003) (“Texas courts have consistently adhered to the rule that a modification to a contract must itself be supported by consideration to be valid.”) (citing Hathaway v. General Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986)). Consideration must consist of “either a benefit to the promisor or a detriment to the promisee.” Id. at *13. “If the promise of the guarantor is made contemporary to the promise of the primary debtor, the consideration which supports the primary debtor’s promise also supports that of the guarantor.” Id. (citing Schulz v. Jackson Petroleum Prods., Inc., 791 S.W.2d 656, 658 (Tex.App.— Beaumont 1990, no pet.). However, "[i]n the case of a pre-existing debt, there must be a new and independent undertaking and a new consideration.” Id. (emphasis added). Jury Question. Under the terms and conditions of the Personal Guaranty, “No modification or amendment of any provision of [the Personal Guaranty] nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by an officer of Lender, and then shall be effective only in the specific instance and for the purpose for which given.” Did the Plaintiff produce any evidence that an Officer of the Lender signed a written agreement to consent to the modifications contained in the alleged modified Personal Guaranty. Answer Yes or No. __________________ Jury Instructions Requirement that Plaintiff Strictly Comply with Personal Guaranty Provisions. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared that a guarantor is a 'favorite of the law”). “The law on guaranties is well-established. A guarantor may require that the terms of his guaranty be followed strictly; the guaranty agreement may not be extended beyond its precise terms by construction or implication.” Federal Deposit v. Attayi, 745 S.W.2d 939, 943 (Tex. App. 1988). This means that the Plaintiff must show that any modification of the Personal Guaranty was strictly complied with. Jury Question. Under the terms and conditions of the Personal Guaranty, it states that, “[t]his Guaranty and the Guarantor’s obligations hereunder are irrevocable, except by a writing signed by Landlord.” Did the Plaintiff produce any evidence that the Landlord executed a document that revoked the terms and conditions of the Original Personal Guaranty in place of a modified agreement? Answer Yes or No. _____________________ Jury Instructions Requirement that Plaintiff Strictly Comply with Personal Guaranty Provisions. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared that a guarantor is a 'favorite of the law”). “The law on guaranties is well-established. A guarantor may require that the terms of his guaranty be followed strictly; the guaranty agreement may not be extended beyond its precise terms by construction or implication.” Federal Deposit v. Attayi, 745 S.W.2d 939, 943 (Tex. App. 1988). This means that the Plaintiff must show that any modification of the Personal Guaranty was strictly complied with. Jury Question For purposes of determining the damages in this case, were the Defendants released from their obligations under the Personal Guaranty when the Mesquite Lease was collaterally assigned to the Plaintiff’s Lender on or about April 6, 2016? Answer Yes or No. _____________________ If you answered yes, you must consider all damage testimony based on the fact that the Defendants’ obligation under the damage model must not include any such damages after April 6, 2016. If you answer no, you must consider all damages testimony based on the fact that Defendants’ obligation under the damages model included all such damages through the full term of the Mesquite Lease. Text of Release Provision in Personal Guaranty. The Personal Guaranty contains the following text in the so-called Release Provision: “RELEASE OF GUARANTOR. Notwithstanding the foregoing, upon the assignment of this Lease to another person or entity, Tenant and each Guarantor shall be released from and have no further obligations under this Lease or any guaranties of this Lease from and after the effective date of such Transfer.” (Defendants’ Trial Exhibit 19). Factual Issue for Jury to Decipher. The evidence in this case has demonstrated that the Mesquite Lease was collaterally assigned by the Plaintiff to its lender on April 6, 2016. The issue to be determined by the jury is whether this collateral assignment triggers the release of the Defendants in the Release Provision. Texas Law Requires Construction of Guaranty in Favor of Defendants. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.--Dallas 1965) (“Where uncertainty exists as to the meaning of a contract, rendering it susceptible to two interpretations, the one favorable to the guarantor, the other unfavorable, the interpretation will be given which favors the guarantor.”). Given this strict construction rule, “[i]f the guaranty is ambiguous, then the court must apply the ‘construction which is most favorable to the guarantor.’” Id. That is, if there is more than one potential interpretation of a guaranty agreement, the interpretation most favorable to the guarantor must be applied by the court. Southwest Savings v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.-- Dallas 1965) (“Where uncertainty exists as to the meaning of a contract, rendering it susceptible to two interpretations, the one favorable to the guarantor, the other unfavorable, the interpretation will be given which favors the guarantor.”). Jury Question Were the Defendants released from their obligations under the Personal Guaranty when the Plaintiff sold the Mesquite Building in April 2021? Answer Yes or No. _____________________ Jury Instructions Text of Release Provision in Personal Guaranty. The Personal Guaranty contains the following text in the so-called Release Provision: “RELEASE OF GUARANTOR. Notwithstanding the foregoing, upon the assignment of this Lease to another person or entity, Tenant and each Guarantor shall be released from and have no further obligations under this Lease or any guaranties of this Lease from and after the effective date of such Transfer.” (Defendants’ Trial Exhibit 19). Factual Issue for Jury to Decipher. The evidence in this case has demonstrated that the Mesquite Building was sold and transferred to by the Plaintiff on [insert]. The issue to be determined by the jury is whether this sale of the Mesquite Building and transfer of ownership triggered the release of the Defendants in the Release Provision. Texas Law Requires Construction of Guaranty in Favor of Defendants. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.--Dallas 1965) (“Where uncertainty exists as to the meaning of a contract, rendering it susceptible to two interpretations, the one favorable to the guarantor, the other unfavorable, the interpretation will be given which favors the guarantor.”). Given this strict construction rule, “[i]f the guaranty is ambiguous, then the court must apply the ‘construction which is most favorable to the guarantor.’” Id. That is, if there is more than one potential interpretation of a guaranty agreement, the interpretation most favorable to the guarantor must be applied by the court. Southwest Savings v. Dunagan, 392 S.W.2d 761, 767 (Tex. Civ. App.-- Dallas 1965) (“Where uncertainty exists as to the meaning of a contract, rendering it susceptible to two interpretations, the one favorable to the guarantor, the other unfavorable, the interpretation will be given which favors the guarantor.”). Jury Question What sum of money, if any, if paid now in cash, would fairly and reasonably compensate the Plaintiff for its damages, if any, that resulted from the Defendants’ failure to comply with the Personal Guaranty? Answer: ________________________ Jury Instructions Loss of the Benefit of the Bargain. The difference, if any, between the value received under the Mesquite Lease agreed to by the Tenant and guaranteed by the Defendants and the value of the Mesquite Lease as performed by the Tenant. The difference in value, if any, shall be determined at the time and place the Mesquite Lease was performed. Benefit of the Bargain Damages. Damages for breach of contract are intended to protect three interests: a restitution interest, a reliance interest, and an expectation interest. In this case, the Plaintiff seeks to recover its "expectancy" damages. "Expectancy damages, similar to benefit-of-the- bargain recoveries, award damages for the reasonably expected value of the contract." Sharifi v. Steen Automotive, LLC, 370 S.W.3d 126, 148 (Tex. App. 2012). This measure of damages “seeks to restore the injured party to the economic position it would have been in had the contract been performed.” Sharifi, at 148 (quoting Sava gumarska in kemijska industria d.d. v. Advanced Polymer Sciences, Inc., 128 S.W.3d 304, 317 n.6 (Tex. App. 2004)). In doing this, the analysis of what “would have been” incorporates the facts that have occurred since the breach. Relevant Facts to Consider. “The facts of the case determine the proper measure of damages as well as any allowance offsets.” Sharifi v. Steen Automotive, LLC, 370 S.W.3d 126, 148 (Tex. App. 2012). For future damages, the events that occurred between the time of the breach and the time of the trial are relevant and may be considered by the jury. PRC Kentron, Inc. v. First City Center Associates, 762 S.W.2d 279, 289 (Tex. App. 1989) (holding that trial court “was permitted, in determining the fair market value of the balance of the term, to consider evidence of market conditions existing not only at the time of Tenant's breach but also subsequently.”). This means that you may take into account the sale of the Mesquite Building in April 2021 to determine what the Plaintiff expected out of the Mesquite Lease in the event of a sale of the Mesquite Building. Respectfully submitted, By: John P. Walsh, Esq. Texas Bar No. 24048867 Jack.Walsh@Walsh-Legal.com 2770 Main Street, Suite 172 Frisco, Texas 75033 T. 214.773-9167 F. 214.299-8668 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and the foregoing was served upon the following counsel of record, on November 20, 2023, pursuant to the TRCP, as follows: VIA E-SERVICE VIA EMAIL: Shahzeb@GazianiLaw.com Shahzeb Gaziani Gaziani Law, PLLC 555 Republic Drive, Suite 200 Plano, Texas 75074 VIA E-SERVICE VIA EMAIL: anthony@ricciardellilaw.com Anthony T. Ricciardelli Ricciardelli Law Firm 1910 Pacific Avenue, Suite 13000 Dallas, Texas 75201 _______________________________________ John P. Walsh CAUSE NO. DC-20-12866 MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT § Plaintiff, § v. § § CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS MESQUITE, LLC, et al § § Defendants. § 192nd JUDICIAL DISTRICT LEGAL MEMORANDUM Jury Instructions Concerning Conditional Agreement about when the Personal Guaranty was Effective and Enforceable Factual Background. In this case, there was an agreement by the Tenant and Landlord—the parties to the Mesquite Lease—that the Personal Guaranties would not be accepted unless the Defendants received a copy of the “final” lease “together” with the guaranty. The Plaintiff testified that the agreements were intended to be executed simultaneously at the same time. Legal Issue. Does this conditional agreement between the Landlord and Tenant determine whether the Personal Guaranty was accepted by the Landlord? Alternatively, does this conditional agreement constitute a binding agreement about whether the Personal Guaranty was effective when it was executed in violation of the conditions. Importance for Jury Instruction in this Case. The jury must received some instruction with how to interpret and apply the agreement between the Landlord and Tenant demonstrated by the Defendants Exhibit 1 and Exhibit 2, as well as the testimony by the Amir Rana and the two attorneys. Legal Answer. The jury must receive three instructions on this matter. First, the jury must be instructed that the parties to an agreement can dictate the specific terms of acceptance. If those terms are not adhered to, the underlying agreement is not legally binding. Second, if the “covenants and duties” associated with the Mesquite Lease are successfully incorporated by reference, that would include the duty to adhere to the agreement between the Landlord and Tenant concerning the disclosure of the “final” lease “together” with Personal Guaranty. Third, parties to a contract may set conditions on when a contract becomes enforceable, even if such conditions are set after the agreement is reached and such conditions constitute an oral side agreement. Legal Discussion First, under Texas law, an “acceptance is effective if the manner in which it is made strictly complies with the terms of the offer or if it is implicitly authorized under the circumstances.” O’Connor’s Texas Causes of Action, Ch. 5-A, § 2.5.2, p. 75 (2022 ed.) (citing Town of Lindsay v. Cooke Cty. Elec. Coop., 502 S.W.2d 117, 118 (Tex. 1973); compare Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944) (holding that agreement was not enforceable because the condition of a side agreement was not satisfied) “If the offer requires a specific manner of acceptance, the offeree must strictly comply with those terms.” Id. A failure to strictly comply with the requisite acceptance methods for personal guaranty contracts is reinforced and heightened by Texas law, holding that guaranty agreements must be strictly enforced in favor of the guarantors. Second, if the Incorporation Doctrine is satisfied by the parties to incorporate the “covenants and duties” of the Mesquite Lease, that should incorporate all such duties, including the duty to provide a copy of the “final” lease to the guarantors “together” with the lease. What is good for the goose is good for the gander. Given that the Mesquite Lease was ostensibly incorporated by reference into the Personal Guaranty, any condition agreed upon by the parties to the Mesquite Lease—i.e., the Tenant and Landlord—must also be incorporated into that agreement. Because this condition was part of the transaction involving the Personal Guaranty and the Mesquite Lease, that condition must also be incorporated by reference. Third, under Texas law, parties to a contract may stipulate the condition of when a contract is deemed enforceable and effective. Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). In Baker, the parties agreed to settle a number of business disputes with a settlement and release agreement. Upon executing the document, the parties agreed to condition the effectiveness of the agreement on an oral condition that such agreement would not be enforceable unless one party delivered certain stock to the other party. When one party failed to deliver the stock, the other party took the position that the agreement was not effective. During litigation on the matter, the party that failed to deliver the stock argued that the agreement cannot be changed based on a separate oral agreement that imposes additional conditions. The Texas Supreme Court rejected this argument, holding that the oral condition was not barred by the parol evidence rule because the additional condition was not an agreement to change the terms of the agreement, but rather, was a condition to determine whether the agreement became effective in the first place. With this case, the Texas Supreme Court has long held that, “[p]arol evidence is always competent to show the non-existence of a contract or the conditions upon which it may become effective.” Baker v. Baker, 143 Tex. 191, 198 (Tex. 1944). Under this precedent set by the Texas Supreme Court, the parties to the Mesquite Lease—the Tenant and Landlord—can establish a separate agreement about the conditions necessary to make the Personal Guaranty effective and enforceable. Respectfully submitted, By: John P. Walsh, Esq. Texas Bar No. 24048867 Jack.Walsh@Walsh-Legal.com 2770 Main Street, Suite 172 Frisco, Texas 75033 T. 214.773-9167 F. 214.299-8668 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and the foregoing was served upon the following counsel of record, on January 11, 2024 pursuant to the TRCP, as follows: VIA E-SERVICE VIA EMAIL: Shahzeb@GazianiLaw.com Shahzeb Gaziani Gaziani Law, PLLC 555 Republic Drive, Suite 200 Plano, Texas 75074 VIA E-SERVICE VIA EMAIL: anthony@ricciardellilaw.com Anthony T. Ricciardelli Ricciardelli Law Firm 1910 Pacific Avenue, Suite 13000 Dallas, Texas 75201 _______________________________________ John P. Walsh CAUSE NO. DC-20-12866 MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT § Plaintiff, § v. § § CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS MESQUITE, LLC, et al § § Defendants. § 192nd JUDICIAL DISTRICT LEGAL MEMORANDUM Jury Instructions Concerning the Essential Terms Required for a Guaranty Contract Factual Background. In this case, the Defendants executed a Personal Guaranty that incorporated the terms of the Mesquite Lease by reference. This Guaranty Agreement…is executed and delivered by Guarantor to Landlord in connection with and to assure the payment and performance by Tenant of its convents and duties that certain Commercial Lease (“Lease”) dated March 3, 2016 between Landlord and Tenant regarding the real property situated at 1080 E. Cartwright Road, Mesquite, TX. Other than this reference to the “commercia lease,” there is no other reference to any terms delineated in this lease for the Mesquite building (the “Mesquite Lease”). Legal Issue. For guaranty contracts, what are the essential terms and conditions that must be included in the guaranty contract related to the underlying agreement being guaranteed? Importance for Jury Instruction in this Case. During voir dire, several jurors expressed strong beliefs about people being bound by the contracts they signed regardless of whether they had access to all the “essential terms” of the contract incorporated into the contract. It appeared that this belief applied to all contracts without regard to whether Texas law applies different standards to guaranty contracts. Given that the standard contract principles are not all applicable to guaranty contracts, should this court provide the jury with instructions about the requirement under Texas law related to guaranty contracts? This includes the requirement to incorporate certain essential terms into the executed guaranty about the contract being guaranteed. If so, what instructions would be necessary for these jurors to understand how guaranty contracts operate under Texas law. (A separate memorandum will address the issue of how such essential terms must satisfy the Incorporation Doctrine). Legal Answer. The jury must be instructed that a guaranty agreement must be [1] “compete in every material detail” and [2] “contain all essential element of the agreement” being guaranteed. This means that the guaranty must include the following essential terms: (1) what is to be paid, (2) who is to pay it, and (3) the terms of the payment as promised. If these essential terms are incorporated by reference into the guaranty, it must satisfy the general contract rules under the Incorporation Doctrine. (See Legal Memorandum filed in conjunction with this Memorandum) Legal Discussion Guaranty contracts have additional requirements to determine whether they are legally enforceable. Under Texas law, a guarantor is a “so-called favorite of the law and as such, a guaranty agreement is construed strictly in favor of the guarantor.” Coker v. Coker, 650 S.W.2d 391, 394 n. 1 (Tex.1983); see also Southwest Savings v. Dunagan, 392 S.W.2d 761, 766 (Tex. Civ. App. 1965) (“courts have universally declared that a guarantor is a 'favorite of the law”). “The law on guaranties is well- established. A guarantor may require that the terms of his guaranty be followed strictly; the guaranty agreement may not be extended beyond its precise terms by construction or implication.” Federal Deposit v. Attayi, 745 S.W.2d 939, 943 (Tex. App. 1988). Guaranty contracts also have heightened legal requirements about establishing the essential terms of the agreement being guaranteed. Under Texas law, a personal guaranty “must [1] be in writing, [2] signed by the person to be charged with the promise or by someone authorized to sign for him, [3] be complete in every material detail, and [4] contain all essential elements of the agreement.” Goughnour v. Patterson, No. 12-17-00234-CV, at *12 (Tex. App. December 21, 2018) (citing Cohen v. Mccutchin, 565 S.W.2d 230, 232 (Tex. 1978) (“there must be a written memorandum which is complete within itself in every material detail, and which contains all of the essential elements of the agreement”) (emphasis added). The “essential terms” of a “guaranty agreement are (1) the parties involved, (2) a manifestation of intent to guaranty the obligation, and (3) a description of the obligation being guaranteed.” Id. This means that the party seeking to enforce the Guaranty must show that the Guaranty included, at a minimum, the following essential terms: what is to be paid, who is to pay it, and the terms of the payment as promised. See, e.g., Dunn v. Growers Seed Ass'n, 620 S.W.2d 233, 238 (Tex.App.—Amarillo 1981) (holding that guaranty was unenforceable because it failed to include the essential terms concerning “what is to be paid, who is to pay it or the terms of the ‘payment as promised.’”). Respectfully submitted, By: John P. Walsh, Esq. Texas Bar No. 24048867 Jack.Walsh@Walsh-Legal.com 2770 Main Street, Suite 172 Frisco, Texas 75033 T. 214.773-9167 F. 214.299-8668 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and the foregoing was served upon the following counsel of record, on January 11, 2024 pursuant to the TRCP, as follows: VIA E-SERVICE VIA EMAIL: Shahzeb@GazianiLaw.com Shahzeb Gaziani Gaziani Law, PLLC 555 Republic Drive, Suite 200 Plano, Texas 75074 VIA E-SERVICE VIA EMAIL: anthony@ricciardellilaw.com Anthony T. Ricciardelli Ricciardelli Law Firm 1910 Pacific Avenue, Suite 13000 Dallas, Texas 75201 _______________________________________ John P. Walsh CAUSE NO. DC-20-12866 MESQUITE MOB PARTNERS, L.L.C., § IN THE DISTRICT COURT § Plaintiff, § v. § § CODE 3 EMERGENCY PARTNERS AT § DALLAS COUNTY, TEXAS MESQUITE, LLC, et al § § Defendants. § 192nd JUDICIAL DISTRICT LEGAL MEMORANDUM Jury Instructions Concerning the Incorporation Doctrine Factual Background. In this case, the Defendants executed a Personal Guaranty that incorporated the terms of the Mesquite Lease by reference. This Guaranty Agreement…is executed and delivered by Guarantor to Landlord in connection with and to assure the payment and performance by Tenant of its convents and duties that certain Commercial Lease (“Lease”) dated March 3, 2016 between Landlord and Tenant regarding the real property situated at 1080 E. Cartwright Road, Mesquite, TX. Other than this reference to the “commercia lease,” there is no other reference to any terms delineated in this lease for the Mesquite building (the “Mesquite Lease”). Legal Issue. Was this plain reference to the Mesquite Lease being incorporated into the Personal Guaranty sufficient to bind the Defendants to the terms of the Mesquite Lease? This issue relates to the legal principles concerning the “Incorporation Doctrine.” Importance for Jury Instruction in this Case. During voir dire, several jurors expressed their belief that a party should be automatically bound by the terms of a contract incorporated by reference no matter what. Some jurors even said that they would not set aside this belief even if the judge instructed them that the law held otherwise. For these jurors, it did not matter whether a party knew what was in the contract being incorporated or whether they had access to the second contract. For these jurors, once a party signed the contract with reference to the second contract, that party was automatically bound by both agreements. Is this the law of Texas? Is this how the Incorporation Doctrine works? If not, what instructions must this Court provide those jurors to explain what the law is concerning the Incorporation Doctrine and how they should analyze these cases. What instructions would be necessary to guide these jurors in knowing what factors they should consider when determining whether the incorporation of the Mesquite Lease was done correctly under Texas law, thereby binding the Defendants to the terms of the Mesquite Lease that were incorporated by reference. Short Answer. Texas law does conflicts directly with the belief by some jurors that a party must be automatically bound by the terms of any agreement referenced in another agreement. Under Texas Page 0 of 14 law, “Plainly referring to a document requires more than merely mentioning the document.” Under the Incorporation Doctrine, “[f]or an incorporation by reference to be effective, it must be clear that the parties to the agreement had knowledge of and assented to the incorporated terms.” In doing this, the party seeking to enforce the terms of the incorporated document must show that the incorporated document was “ascertainable beyond doubt.” So, in order to guide these jurors who do not understand Texas law, this Court must provide jury instructions that adopt these three key legal principles related to the Incorporation Doctrine. Legal Discussion The jurors’ belief that a party should be automatically bound by the terms of an agreement referenced in another agreement is wrong and not supported by Texas law. Under Texas law, “Plainly referring to a document requires more than merely mentioning the document.” Bob Montgomery Chevrolet, Inc. v. Collision Cos., 409 S.W.3d 181, 189 (Tex. App. 2013) (holding that reference to website link was insufficient to hold party contractually liable for terms and conditions contained in the website link). 1 “The language in the signed document must show the parties intended for the other document to become part of the agreement.” To demonstrate what is required to make this showing of intent when the underlying document is merely referenced, the Dallas Court of Appeals adopted the legal standard delineated in two legal treatises discussing the Incorporation Doctrine: • “in order to uphold the validity of terms incorporated by reference, it must be clear that the parties to the agreement had knowledge of and assented to the incorporated terms” 11 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30:25, at 234 (4th ed. 1999). • “For an incorp