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Filed 10 August 19 P 2:38
Loren J ackson - District Clerk
Harris Coun!
ED101) 015919269
By: Charleta J ohnson
Consolidated with
MEDISTAR CORPORATION and
MEDISTAR SUGAR LAND MEDICAL
Plaintiffs,
HARRIS COUNTY, TEXAS
NILESH BAVISHI, M.D.
Defendant and
Third-Party Plaintiff,
MONZER HOURANI,
IN THE DISTRICT COURT OF
Plaintiff,
HARRIS COUNTY, TEXAS
NILESH BAVISHI, MD
BAVISHI MANAGEMENT, LLC
BAVISHI ENDOSCOPY CENTER, LLC
BAVISHI INVESTMENT MANAGEMENT,
CORP AND JOHN DOE CORP
Defendants. 189th JUDICIAL DISTRICT
Defendant Nilesh Bavishi (“Dr. Bavishi’) moves for entry of summary judgment in his
favor on all claims brought by Plaintiffs Medistar Corporation (“Medistar’) and Medistar Sugar
Land Medical Center, Ltd. (collectively “the Medistar Parties”), and moves for summary
judgment on his affirmative counter-claims for breach of contract and breach of fiduciary duty
against the Medistar Partie
SUMMARY OF ARGUMENT
A Dr. BAVISHI LAIMS GAINST THE EDISTAR OURANI
This case involves the development of the St. Luke’s Hospital and adjacent medical
office building in Sugar Land, Texas. Medistar, and its principal owner, Monzer Hourani
(“Hourani”), entered into written agreements to be partners with Dr. Bavishi in this development.
The parties signed the most recent such agreement on March 3, 2006. This agreement governs
It is undisputed that Dr. Bavishi has performed under the agreement. As a result, he is
; and (2) conveyance of a 10% ownership interest in the hospital portion of the Project.
ligation under the agreement, the Me
the interest for themselves and deprived their partner, Dr. Bavishi, of his rightful interest. In
doing so, Hourani and the Medistar Parties breached the agreement, as well as their fiduciary
Rather than contest whether Dr. Bavishi fulfilled his obligations under the written
agreement, the Medistar Parties originally argued that an oral promise to lease a medical office
building formed part of Dr. Bavishi’s obligations under the agreement. At least that is what the
Medistar Parties argued up until July 9, 2010. Their story changed when forced to respond to Dr.
Bavishi’s motion for summary judgment and in particular his argument that any alleged promise
would have merged into the written agreements between the parties. In an attempt to outrun
Dr. Bavishi filed his original Motion for Summary Judgment Against Medistar’s Claims for Affirmative
Relief on June 9, 2010.
summary judgment, the Medistar Parties amended their pleadings to allege that this oral
agreement was made, not before, but after, the parties signed the written agreements.
Specifically, they allege Hourani and Dr. Bavishi entered into an oral agreement in August 2006.
The only proof for this new-found agreement is a self
Conclusory affidavit testimony, however, is not competent summary judgment evidence.
Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (per curiam). The Medistar
Parties presented no other evidence of this alleged oral agreement. Furthermore, the Statute of
Frauds bars the alleged oral agreement, because the agreement it purportedly “novates” includes
a promise to convey real estate. T § 26.01(a), (b)(4) Thus, the written
agreement is the only contract that governs the parties’ rights and obligations and Dr. Bavishi is
entitled to partial summary judgment that the Medistar Parties and Hourani breached their
written agreement and breached fiduciary duties owed to Dr. Bavishi by failing to grant a 10 %
B. T EDISTAR LAIMS GAINST AVISHI
Under the pretext of claiming injury from Dr. Bavishi’s failure to fulfill the alleged
promise to lease the medical office building to doctors, the Medistar Parties sued Dr. Bavishi for
(1) fraud, (2) negligent misrepresentation, (3) promissory estoppel, (4) breach of contract, and
(5) numerous declaratory judgments. The Medistar Parties are really only defendants in this
Their claims fail as a matter of law because:
The Medistar Parties amended the following causes of action out of their active pleading in response to Dr.
Bavishi’s Motion for Summary Judgment: conversion/monies had and received/theft, business disparagement, and
tortious interference.
Dr. Bavishi brought this lawsuit in March 2007 after Hourani and Medistar refused to perform under the
written agreement. Hourani convinced Dr. Bavishi to non-suit with the promise of a quick settlement, but then filed
this action just days later. Solely by virtue of this gamesmanship are the Medistar Parties plaintiffs in this suit.
Fraud and Negligent Misrepresentation: Neither fraud (whether plead as
‘fraudulent inducement’ or ‘promissory fraud’) nor negligent misrepresentation
can be based upon a future promise as a matter of law. Byrant v. Transcont’] Gas
Pipe Line Co., 821 S.W.2d 187, 190 (Tex. App.— Houston [14th Dist.] 1991, writ
Roof Sys., Inc. v. Johns Manville Corp., 130 $.W.3d 430, 439
) (negligent misrepresentation).
Breach of Contract: The contract that covers the subject matter includes no
provision requiring Dr. Bavishi to lease the medical office space.
Sacks, P.C. v. Haden, 266 S.W.3d 447, 450-51 (Tex. 2008) (per curiam) (a
Promissory Estoppel: There can be no promissory estoppel when there is a
contract that governs the same subject matter. Barnett v. Coppell, 123 S.W.3d
804 (Tex. App.— Dallas 2003, pet. denied). Nor can Dr. Bavishi’s alleged
promise create a binding obligation that Medistar may rely upon under a
promissory estoppel theory. Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex.
App.— Houston [14th Dist.] 1999, pet. denied).
These claims are improper because they fail to request
affirmative relief, and instead merely assert defenses to liability on Dr. Bavishi’s
counter-claims. Gen. Land Office of Tex v. Oxy U.S.A., Inc., 789 S.W.2d 569, 570
EVIDENCE
Attached to this motion and incorporated by reference as if fully set forth are:
Description
A-1006 November 23, 2005 Letter A greemen
A-1007 March 3, 2006 Letter A greement between Dr. Bavishi, Hourani and
Medistar (the “Operative Agreement”).
A-1014 August 14, 2006 Letter from Houran
Grant Dr. Bavishi an Interest in the Hospital
B-2011 June 8, 2005 Letter
A greement between Dr. Bavishi, Hourani and
Each exhibit identified with [Letter-Number] refers to the exhibit number used to identify the document at
a deposition.
Letter from Scott Cunningham
A FORMATION OF THE ELATIONSHIP
Dr. Bavishi is a practicing physician and a me
area medical community. Monzer Hourani is the CEO of Medistar Corporation, a national
developer of hospitals and medical office facilities. Ex. A, 5:15-21. Dr. Bavishi and Hourani
met several times, starting in May or June of 2005 to discuss developing an acute care hospital
on a piece of land located in Sugar Land to which Medistar held an option contract. at 207:9-
see also
fearful of losing its option money and significant due diligence funds that were expended on an
ill-fated attempt to develop a long-term acute care hospital. Ex. A, 135:6-136:8. Medistar had
made several other efforts to develop this property under a variety of scenarios, none of which
materialized.
In these early meetings, Dr. Bavishi proposed that the property be developed into a
physician-owned acute care hospital and adjoining condominium medical office building where
the physicians would own a part of the hospital as well as the space to be occupied for their daily
In June of 2005, Dr. Bavishi and Hourani (both individually and as the CEO of Medistar)
memorialized their business relationship in a one-page written agreement. Ex. B, 50:6-51:7, Ex.
The terms of this agreement provided, in pertinent part, that Hourani and Medistar
ve ownership in the amount of 10% of the hospital project” for
his involvement in the Project, including putting together the group of physicians and finding a
hospital operating company interested in the Sugar Land market and the concept.
With the partnership forged, the parties began working together to find a hospital
operator and talking to doctors about practicing in the hospital and occupying space in the MOB.
These efforts included, among other things, hosting group presentations at hotels for doctors
interested in the Project and one-on-one meetings with doctors and groups of doctors who might
be interested. Ex. A, 112:9-115:2. Both Dr. Bavishi and Medistar paid for and participated in
these presentations. , 111:25-113:6, 116:9-118:1. In addition, Dr. Bavishi and Hourani talked
with several hospital operating companies, including St. Luke’s Healthcare System. Ex. B
86:13-87:15. As the Project developed, Dr. Bavishi and others worked as a liaison between
Ex. B, 223:10-15. Hourani acknowledged that Dr. Bavishi was
instrumental in these efforts. Ex. A
As Dr. Bavishi and Medistar were progressing in their efforts to make the Project a
reality, in November 2005, the parties entered into a more comprehensive written agreement that
ligations of the parties with respect to the development and
ownership of the Project. Ex. A, 205:1-11; Ex. A-1006. Specifically, this agreement provided
that upon funding of a construction loan for the Project, Dr. Bavishi would receive $500,000 in
erred partnership interest” as compensation for
“the work [Dr. Bavishi has] done thus far and [his] commercially
continuing to promote, endorse, consult rega the development and
Very early in the Project’s development, Dr. Bavishi thought it important to find a Primary Care Physician
with strong ties to the area. Dr. Bavishi made a pitch to Dr. John Vanderzyl who became an early investor in the
hospital and a tenant in the MOB. Ex. D, 8:9-9:17. Dr. Bavishi and Vanderzyl worked together on many aspects of
the Project. Ex. D, 37:6-39:8.
construction of the Project.” Ex. A-1006. A few months later, on March 3, 2006, the parties
updated this agreement without material change other than to value the capital accounts of the
partners (the “Operative Agreement”). Ex. A
Through the collective efforts of Dr. Bavishi, Medistar, Hourani and others, as
acknowledged by Hourani himself, the Project became a reality. Ex. A, 171:14-172:7. First, in
the summer of 2006, St. Luke’s Healthcare System formed a special pur
Sugar Land Hospital, L.P., to own and operate the hospital. The hospital operating entity, in
turn, signed a lease to occupy and operate a 100-bed acute care hospital on the Sugar Land site
(then legally owned by a Medistar entity - Medistar Sugar Land Medical Center, Ltd. - and in
which Dr. Bavishi beneficially owned a 10% interest). Ex. A, 278:5-279:25; Ex. A-1007
Hourani concedes that Dr. Bavishi’s efforts assisted in bringing in
—
B HOURANI NILATERALLY LTERS THE USINESS
At some point, Hourani decided to abandon the original plan in place at the time of the
parties’ agreements - to sell the MOB as condominiums. , 97:15-99:6. Hourani instead
unilaterally switched the MOB to a rental. When Hourani changed
expressed concern about the difficulty of leasing the MOB as opposed to giving the doctors an
ability to own their own medical office space. Ex. B
Medistar, however, felt differently and, with an entire department devoted to leasing its
many medical developments, must have felt that it was better suited and more profitable to lease
the space rather than sell it. In addition, in August of 2006, without mentioning a word to Dr.
Bavishi, Medistar hired Tarantino Properties as the exclusive leasing agent for the MOB. Ex. A
This limited partnership was owned 51% by St. Lukes and 49% by physicians including Dr. Bavishi, his
wife, also a physician, Dr. Vanderzyl, and many others.
95:2-96:22. Nevertheless, after
assist in developing the project as contemplated under the Operative Agreement. Ex. A-1007
Cc T ROJECT EALITY
As a result of the parties’ hard work, the construction loan funded in December of 2006.
, 242:2-8. And as both the November and the Operative Agreements contemplated,
Hourani paid Dr. Bavishi the $500,000 within days of the initial funding. But, despite repeated
requests, Medistar and Hourani never took formal steps to convey to Dr. Bavishi his 10%
Ex. A, 101:1-102:23. Construction begans
in early October 2008, the St. Luke’s Sugar Land Hospital opened to much fanfare. At the
opening ceremony, Hourani thanked Dr. Bavishi for bringing the project
, 117:16-119:2. Notwithstanding the successful completion of the Project and the
many admissions by Hourani that Dr. Bavishi played a significant role in that endeavor, he and
the Medistar Parties have failed and refused to live up to the Operative Agreement. As a result,
Bavishi sought redress from this Court.
This became very frustrating to Dr. Bavishi, such that in early 2007, he asked that Medistar cash him out at
the agreed upon value of his capital account in the Operative Agreements, even though by that time the Project had
become a reality and the value was much greater. Ex. A, 100:8-101:18; Ex. A-1007. Medistar refused. Ex. A.
100:22-25.
The recitals in the Operative Agreement confirm that Dr. Bavishi had already performed: “[the Medistar
Parties and Hourani] acknowledge (i) that you have been assisting the Medistar Group and me in securing needed
support from the medical community in order to have the opportunity to develop, construct and obtain tenants for
the Project and (ii) that your influence and public support has been and will be instrumental in the development of
, although much is left to be done. In consideration of the work you've done thus far and your
commercially reasonable efforts in continuing to promote, endorse, consult regarding and cooperate in the
development and construction of the Project...” Ex. A-1007, p. 2. The Medistar Parties and Hourani further admit
this in a letter they drafted (but never sent), which provides: “I appreciate the time and effort that you have already
contributed since the inception of the project; I know that you spent a tremendous amount of time away from your
practice to help and assist with this project.” Ex. A-1014.
8.
D T LLEGED ROMISEANDTHE PERATIVE
Hourani admits that Dr. Bavishi worked hard with him on the Project, at 172:6-12,
and acknowledges that he and Dr. Bavishi were partners. at 202:20-203:13. Hourani does
not deny entering into the Operative Agreement, which, in addition to binding the Medistar
Parties, also personally bound Hourani. In fact, Hourani goes so far as to express the following
in the Operative Agreement: “I intend to bind myself and my affiliates to our agreement.” Ex.
—__
But now, in an attempt to escape summary judgment, Hourani and the Medistar Parties
have come up with a new theory. Now Hourani claims that Dr. Bavishi orally promised, months
after execution of the Operative Agreement, to be responsible for leasing 80% or selling 60% of
the MOB in exchange for two cash payments. Ex. C, p. 8, 133. The Medistar Parties argue that
because of Dr. Bavishi’s failure to fulfill this after-the-fact, dreamed up oral agreement, he
breached this so-called “contract,” defrauded and made negligent misrepresentations to the
This newly constructed oral agreement provides the sole basis for the Medistar Parties
and Hourani’s failure to hold up their end of the bargain. Hourani repeatedly admits that Dr.
Bavishi worked hard to make the project a reality, satisfying his obligations under the Operative
Agreement “in continuing to promote, endorse, consult regarding and cooperation in the
development and construction of the Project.” Ex. A. 171:14-172:12; 242:2-8; Ex. A-1007, p. 2.
star Parties refused to deliver Dr. Bavishi the interest owed
to him.
Accordingly, the Medistar Parties cannot prevail on any of their claims and Dr. Bavishi
has conclusively established his breach of contract and breach of fiduciary duty counter-claims
against the Medistar Parties and Hourani as a matter of law. This Court should grant summary
judgment in Dr. Bavishi’s favor.
ARGUMENT AND AUTHORITIES
A STANDARDS OVERNING OTION
To prevail on a traditional summary judgment motion, a movant must show that “there is
no genuine issue as to any material fact and that [it] is entitled to judgment as a matter of law.”
P. 166a(c). A judge should award summary judgment if the defendant conclusively
negates at least one of the essential elements of a cause of action or conclusively establishes each
element of an affirmative defense. Randall’s Food Mkts., Inc. v. Davis
(Tex. 1995). Additionally, a party can move for a no evidence summary judgment under Texas
Rules of Civil Procedure 166a(i) by simply stating the elements of the nonmovant’s claims as to
which they have not presented evidence. The court should then award summary judgment if the
nonmovant fails to “produce summary judgment evidence raising a genuine issue of material
fact. A genuine issue of material fact exists if the nonmovant produces more than a scintilla of
evidence establishing the existence of the challenged element.” Ford Motor Co. v. Ridgway
S.W.3d. 598, 601 (Tex. 2004).
Moreover, to prevail on an affirmative claim for relief, a movant must conclusively prove
the essential elements of his cause of action. Clear Creek Basin Auth., 589 S.W.2d 671, 678
(Tex. 1979). Once the movant meets this burden, unless the non-movant provides sufficient
evidence to raise a fact issue regarding an affirmative defense, the court should award summary
judgment.
10.
EDISTAR ARTIES ANNOT ECOVER LAIMS
1 Breach of C ontract
Dr. Bavishi’s alleged promise to provide tenants to the MOB forms the sole basis of the
Medistar Parties’ breach of contract claims. Plaintiffs’ Second Amended Petition, p. 13-14.
Even construed in the light most favorable to the Medistar Parties, this alleged promise cannot
create a contractual obligation as a matter of law.
The March 3, 2006 Written Letter Agreement Controls the
Relationship Between The Parties
Written agreements memorialize the Medistar Parties, Hourani, and Dr. Bavishi’s
business relationship relating to the Project. Accordingly, the most recent written agreement,
executed between the parties on March 3, 2006, exclusively governs their rights and
Operative Agreement.
() The Medistar Parties Fail to Offer Competent Evidence of the
alleged oral agreement
The Medistar Parties sue for breach of an oral agreement that was allegedly made in
August 2006 and allegedly replaces the written Operative Agreement. During Hourani’s
deposition, however, he never testified to the existence of an oral agreement occurring in August
2006, or at any point after March 3, 2006, when the parties executed the Operative Agreement.
In fact, the Medistar Parties failed to even assert the existence of such an agreement until they
motion for summary judgment on July 9, 2010 - one
week before the scheduled hearing on the summary judgment motion. The only “evidence”
offered to support their response came in the form of Hourani’s self-serving affidavit testimony,
attached to their Second Amended Petiti
On August 14, 2006 Medistar delivered a letter to Dr. Bavishi confirming the
decision to cancel the prior agreements and outlining proposed terms going
forward... We orally agreed that the prior agreements were cancelled and entered
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into a new oral agreement that in exchange for Dr. Bavishi successfully leasing
80% of the space in the MOB or selling 60% of the space in the MOB (the
“Target Goals”), Medistar would pay him $ 500,000.00 at the closing of the
construction loan and an additional $ 1,000,000 upon his successfully completion
, p. 7,933. Hourani’s affidavit testimony, however, fails to provide competent evidence of
agreement as a matter of law.
To raise a fact issue with affidavit testimony, the affidavit “shall be made based on
personal knowledge, shall set forth facts as would be admissible in evidence, and shall show
affirmatively that the affiant is competent to testify to the matters stated therein.” T
166a(£) Hourani’s affidavit testimony, however, provides only a bare, conclusory assertion of
the existence of a contract, which, as a matter of law, is inadequate summary judgment evidence
for purposes of proving that the parties entered into an oral agreement. Ryland Group, Inc. v.
, 924 S.W.2d 120, 122 (Tex. 1996) (per curiam). The proffered testimony merely recites
purported terms of an oral agreement without providing factual support of the parties entering
into this agreement in August of 2006. Affidavits containing only “self-serving, conclusory
statements without any underlying factual detail cannot support a summary judgment.” Grant v.
, 01-07-00227, 2009 WL 793638 at *15 (Tex. App.— Houston [1st Dist.] 2009, pet
denied) (upholding no evidence summary judgment against fraud claim).
(2) The Statute of Frauds Bars the Alleged Oral Agreement
The Medistar Parties unconvincingly argue that the alleged oral agreement novates (or
replaces and discharges the obligations of) the prior Operative Agreement, which falls within the
statute of frauds. The Operative Agreement promises to transfer real estate to Dr. Bavishi upon
funding of the construction loan. The Operative Agreement defines the “Project” as the
development and construction of an acute care hospital and the adjacent medical office building.
, p. 2. Upon funding of the construction loan, the Operative Agreement states that
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the Medistar Parties will grant Dr. Bavishi a 10 percent ownership interest “in the most favorable
atsoever for the Hospital portion of the Project.” Therefore, the
Operative Agreement grants Dr. Bavishi an ownership interest in real estate, and must be
executed in writing to satisfy ODE
The law provides that an oral agreement may not alter one or more of the terms of an
agreement required to be in writing. San Felipe v. Trafalgar, 218 S.W.3d 137, 145 (Tex.
App.—[14th Dist.] 2007, pet. denied); Dracopoulas v. Rachal, 411 S.W.2d 719, 721 (Tex.
1967). Accordingly, because the statute of frauds requires the Operative Agreement to be in
writing, the Operative Agreement may not be modified, let alone novated, by any oral
agreement.
b. The Medistar Parties’ Breach of Contract Claim Fails Because any
Alleged Oral Agreement Merged into the Written Agreement
Prior to Dr. Bavishi filing his original motion for summary judgment, Hourani’s
deposition testimony provided the only support for the existence of an oral promise or oral
agreement between Hourani and Dr. Bavishi. During his deposition, Hourani testified that Dr.
Bavishi promised to lease the MOB space very early in their relationship and long before the
Operative A greement. ——_
For the first time, on July 9, 2010 and in response to Dr. Bavishi’s motion for summary
judgment, the Medistar Parties claim that an oral agreement, made in August 2006, replaced the
written Operative Agreement. Plaintiffs’ Second Amended Petition. Yet there can be no
such oral agreement because Dr. Bavishi allegedly promised to provide tenants to the MOB prior
to the Operative Agreement, according to Hourani’s own testimony. Ex. A
203:16-204:11. Because oral agreements or promises made prior to a written agreement merge
With the narrow and inapplicable exception of an extension of time for performance on a contract. San
Felipe v. Trafalgar, 218 S.W.3d 137, 145 (Tex. App.—[14th Dist.] 2007, pet. denied).
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under Texas Law, the oral agreement does not exist.
S.W.3d 894, 899 (Tex. App.— Houston [14th Dist.] 2007, no pet.)
The Medistar Parties failed to allege that the parties entered an oral agreement after
March 3, 2006, the date of the Operative Agreement, until Dr. Bavishi moved for summary
judgment and the Medistar Parties offered new theories based upon their alleged oral agreement.
As of this motion, the Medistar Parties have neither pled nor alleged the existence of additional
oral agreements. Even assuming, however, that the Medistar Parties presented competent
summary judgment evidence that the parties made an oral agreement after the date of the
Operative Agreement, the statute of frauds bars such an agreement. (B)(1)(b),
This merger rule also prevents Hourani’s claims that Dr. Bavishi promised to lease the
MOB space from forming the basis for equitable recovery under a promissory estoppel theory.
Prior oral promises as well as prior oral agreements merge into a subsequent written agreement.
, 417 S.W.2d 650, 662 (Tex. Civ. App.— Fort
The Operative Agreement defines the scope of the parties’ rights
relating to this partnership. The obligation about which the Medistar Parties complain and which
no doubt falls within the ambit of the Operative Agreement - that Dr. Bavishi provide tenants for
the MOB - is nowhere to be found in any of the written agreements. The
Operative A greement provides:
you have been assisting the Medistar Group and me in
securing needed support from the medical community in order to have the
opportunity to develop, cons the Project and (ii) that
your influence and public support and will be instrumental in the
development of the Project, although much is left to be done.
The fraud exception necessary to rebut the presumption of merger does not apply here for the reasons
articulated in section B(2), infra See Yasuda Fire & Marine Ins. v. Criaco, 225 S.W.3d 894, 899 (Tex. App.—
Houston [14th Dist.] 2007, no pet.)
14
Page 2, 3 (emphasis added). Dr. Bavishi’s contribution to the Project, as
unambiguously contemplated, only the medical community in
ss obligation to lease space.
Lastly, in an attempt to avoid application of the merger rule, the Medistar Parties assert
that the Operative Agreement is ambiguous and that parol evidence may be admitted to
determine its meaning. A contract is ambiguous if subject to two or more reasonable
interpretations. , 128 S.W.3d 223, 229 (Tex.
Parties fail to offer any reasonable alternative interpretations of the Operative Agreement or any
evidence of ambiguity. The Operative Agreement, therefore, should be enforced as written.
, 266 S.W.3d 447, 450-51 (Tex. 2008) (per curiam).
2 Fraud and Negligent Misrepresentation
The Medistars Parties’ fraud and negligent misrepresentation claims likewise lack merit.
To succeed on either claim, Medistar must prove two essential elements: (1) that Dr. Bavishi
made a misrepresentation and (2) that Medistar’s reliance on the misrepresentation was
reasonable. Under either cause of action, the elements require the same proof. See American
Tobacco, Inc. v. Grinnell, 951 S.W.2d 420, 436 (Tex. 1997). The Medistar Parties’ fraud and
negligent misrepresentation claims depend on Dr. Bavishi’s alleged promise to provide tenants
for the MOB. Because the Medistar Parties cannot satisfy these elements for either claim as a
matter of law, they fail and should be dismissed.
While “fraud” and “negligent misrepresentation” are distinct causes of action, they have these two elements
in common. The elements of fraud are: (1) the making of a material misrepresentation, (2) made recklessly or with
knowledge of its falsity, (3) with the intention to induce the plaintiff to act upon the representation, and (4) the
plaintiff actually and justifiably relied upon the representation thereby suffering injury. Aquaplex v. Rancho La
Valencia, 297 S.W.3d 768, 774 (Tex. 2009). The elements of a negligent misrepresentation claim include: (1)
while acting in the course of business, (2) defendant supplied false information for the guidance of plaintiff, (3)
without exercising reasonable care, and (4) the plaintiff justifiably relied upon the information thereby suffering
injury. McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999).
15-
A Promise to Perform a Future Act Cannot be Fraud or Negligent
Misrepresentation
Even assuming that Dr. Bavishi made an alleged promise to lease the MOB, such
statements refer to future events or future performance and cannot, as a matter of law, form the
basis for either a negligent misrepresentation or fraud claim. See Bryant v. Transcont’l Gas Pipe
Line Co., 821 S.W.2d 187, 190 (Tex. App.— Houston [14th Dist.] 1991, writ denied) (fraud);
Roof Sys., Inc. v. Johns Manville Corp.
2004, no pet.) (negligent misrepresentation).
The statements generally involve physicians leasing space or investing money at some
point in the future. Indeed, Hourani agrees that the statements purport to impose obligations to
perform in the future:
Q._... [Y Jour testimony is... that the agreements required
him to deliver tenants?
A. The agreement that he will assist in bringing
physician to the hospital, he will assist the bringing
physician to the, you know, MOB, he would -- he told me
verbally, "Don't worry about it.
on. This is our agreement.
, 101:11-18. Promises to perform in the future cannot form the basis of a fraud or
negligent misrepresentation claim. , 821 S.W.2d at 189 (upholding the validity of jury
a promise about future even esentation if it is not
given with the intent to deceive); Johns Manville, 130 S.W.3d at 439 (a statement that a
defendant would not issue a warranty on a roofing project could not support a negligent
misrepresentation claim because the defendant made a representation about future conduct, not
16.
The Medistar Parties’ Failure to Meet the Reliance Element of Fraud
Also Bars their Claim for Fraudulent Inducement
The Medistar Parties plead two separate fraud causes of action. They allege that Dr.
Bavishi promised to provide physicians necessary to lease the MOB, and that the Medistar
Parties expanded the square footage of the MOB on that representation. Plaintiffs’ Second
Amended Petition, p. 12-13. They also allege, incredibly, that at the time of the “Letter
Agreements” - before construction on the MOB had even begun - Dr. Bavishi represented he
had a list of physicians “committed to filling a 125,000 square foot MOB.” ,p. 12. For the
reasons articulated in section (B)(2)(c) , failure of reliance bars the Medistar Parties’
fraudulent inducement claim as surely as it bars their claim for ‘promissory fraud.’
v. Wackenhut Corp., 793 S.W.2d 670, 688-89 (Tex. 1990) (requiring proof of the same elements
for ‘fraud’ and ‘fraudulent inducement ).
nclusively Precludes Reasonable
Nor can the Medistar parties prove that they reasonably relied upon the alleged
representations. The evidence conclusively establishes both that th
them, and, based on Hourani’s own testimony, that no reasonable person could have relied on
them.
() No Reliance
The Medistar Parties did not rely on any representations alleged in their pleadings. They
allege that they decided to contract with Dr. Bavishi and expand the square footage of the MOB
in reliance on Dr. Bavishi’s statement that he had tenants to fill it. Hourani’s testimony
contradicts this allegation. Hourani repeatedly admits that he is a sophisticated businessman
familiar with written agreements customary in large transactions and that he had numerous
opportunities to include a requirement to fill the MOB as part of the written agreements:
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Q (BY MR.ANTWEIL Mr. Hourani, you're a sophisticated
businessman, aren't you, sir?
rge development transactions all
over the United States, true?
time that require very sophisticated agreements, don't you?
Q - if, for example,
agreements with Dr. Bavishi, that you wanted to require him to
meet a milestone of, let's say,
in retum for receiving some, eith
building, you could have asked that that be in the agreement,
couldn't you?
A. Based
on my --
Q (BY MR. ANTWEIL Yes or no to that one first?
A. Yeah. My understanding, and I told him, and there
was witnesses, that I need the building at least
Q. That's not my question.
A. What?
Q. My question is, if you wanted that agreement to be
part of the written agreement, you could have demanded that it
be in the agreement, couldn't you?
other people, I did not demand it on
many projects, because I took their word, and they delivered
MR. ANTWEIL: Object to the answer as
Q. The answer -- my question, sir, is if you wanted it
in the written agreement, you could have demanded that it be
18.
102:24-105:5. Accordingly, if Medistar and Hourani wanted the promises to be part of
the contract, they should have included it in the written agreements. Their failure to act now
precludes them from claiming to have been duped.
Nor is Hourani’s conduct and subsequent testimony consistent with reasonable reliance.
On December 2006, long after the alleged represen Medistar to pay Dr.
Bavishi $500,000 in partial satisfaction of the obligations under the Operative Agreement even
though not a square foot of space had been leased in the MOB. , 213:4-17; 280:18-24.
Hourani testifies:
Q. Other than the written agreements that you signed
money were the written agreements
true?
A Based on what he told me, too.
Q Beyond the written agreements?
But you paid him?
Of course.
And he satisfied you?
When?
In terms of production, enough to pay him $500,000?
MR. FOGEL: Object
to the form.
A. No. No. Because at that time, I pleaded for him,
"Please, I need the leases. I need" -- because Wachovia were
This is especially true with regard to the Medistar Parties’ fraudulent inducement claim. They allege that
Dr. Bavishi represented he had “(1) the ability to attract physicians to make the Project a success; (2) a list of over
50 physicians in the Sugar Land area committed to investing in the Project; and (3) that he had sufficient physicians
committed to filling a 125,000 square foot MOB.” Plaintiffs’ Second Amended Petition, p. 12, 4 35. Yet the
Medistar Parties can provide no explanation why such topics did not merit attention in any of the three written
agreements.
All of the statements made by Dr. Bavishi related to the MOB being sold as condominiums, so no alleged
representation by Dr. Bavishi could have possibly included a promise to lease. See id. at 96:3-22.
-19-
Moreover, in his affidavit, Hourani admits knowing that Dr. Bavishi’s real estate
healthcare experience was limited to running his “individual physician office practice” and that
“having physician leases in place was critical to the business model and success of the projects.”
,»p. 2,97,
p. 5, § 22. In making these statements, Hourani acknowledges the
unreasonableness of placing the “success of the projects” on the shoulders of someone lacking
the experience of the Medistar Parties or Hourani. These admissions are binding on the
Medistar Parties and further preclude the possibility that the Medistar Parties or Hourani relied
on Dr. Bavishi’s alleged misrepresentations. See Mason v. Mid-Continent Supply Co.
S.W.2d 922, 925 (Tex. Civ. App.— Forth Worth 1964, writ ref’d ne.) (holding admissions
Accordingly, summary judgment should be granted in favor of Dr. Bavishi on the
Medistar Parties’ fraud and negligence claims.
there was Reliance by the Medistar Parties, it was
Unjustified Because the Promise was too Vaque as a Matter of
Law.
Nor is reliance on the promise contained in the alleged representations reasonable or
justifiable. Statements to the effect of “[dJon’t worry about it. I got the Doctors,” are too vague
to be representations worthy of reliance. , 101:17-18 (Hourani’s version of Dr.
Bavishi’s alleged “promise”).
Hartford Fire Insurance Co. v. C. Springs 300, Ltd. perfectly illustrates this point. 287
S.W.3d 771 (Tex. App.— Houston, no pet.). In that case, the defendant, a bonding company,
knowingly misled the plaintiff by falsely representing in a letter that it had given one of the
plaintiff's subcontractors, William Industries, a bonding commitment. at 774. The bonding
20
company later determined that it could not provide the bond because of the subcontractor’s
financial problems.
The court held that the plaintiff's reliance on the letter as a promise to bond William
Industries was unreasonable as a matter of law. at 881. “[N]o one could reasonably believe
that such a letter binds a surety to stand ready in perpetuity to issue bonds whenever they are
whatever conditions exist at that time.”
The nature of the communication in Hartford Fire bears a strong resemblance to the
assurance that Hourani claims Dr. Bavishi provided. Dr. Bavishi allegedl
he had doctors ready to lease the MOB. Like in Hartford Fire, this representation is at most a
promise to provide doctors ready to lease office space “on whatever contract price, under
whatever conditions exist at that time.” at 781. Hourani’s testim
alleged representation is far too indefinite and lacks the finality necessary to support justifiable
reliance under Hartford Fire at 781. The representation, therefore, cannot form the basis of
reasonable reliance necessary to support either a fraud or a negligent misrepresentation claim.
The Medistar Parties attempt to distinguish Hartford Fire as a statute of frauds case
rather than a reasonable reliance case. Plaintiffs’ Response to Defendant Nilesh Bavishi, M.D.’s
Motion for Summary Judgment p. 15-16. The opinion makes clear, however, that the statute of
plaintiff from recovering under a contra —
of reasonable reliance precluded as a matter of law. Hartford Fire
287 S.W.3d at 779-82. Whether the alleged promise in complied with the statute of
the court’s fraud analysis.
The Medistar Parties attempt to analogize Dr. Bavishi’s alleged promise to a
company that it had the capability to provide supplies in
21
accordance with a contract already in existence. See Lyda Constructors, Inc. v. Butler
, 103 S.W.3d 632 (Tex. App.— San Antonio, 2003, no pet.). At the
time of Dr. Bavishi’s alleged representations (whether before or after the written agreements),
ground had not yet been broken at the construction site, let alone the terms of the lease set.
Unlike the representation in , any alleged promise to provide MOB tenants did not refer to a
an existing contract (or even a building) yet in existence, making Dr. Bavishi’s alleged
Hartford Fire
Medistar’s ‘Promissory Fraud’ and Negligence Claims Are Nothing
In reality, the Medistar Parties’ claims lie in contract. To have a valid tort claim, Texas
law requires that the alleged conduct create tort liability even in the absence of contractual
, 809 S.W.2d 493, 494 (Tex. 1991). When damages
from an injury arise from the subject matter of in contract alone,
, 711 S.W.2d
617, 618 (Tex. 1986). This rule of law specifically bars negligent and fraudulent
misrepresentation claims, such as those Medistar asserts here. Southwest. Bell., 809 S.W.2d at
Classical Vacations Inc. v. Air France, No. 01-01137, 2003 WL 1848247
at *2-3 (Tex. App.— Houston [1st Dist.] 2003, no pet.) (fraud).
Under the Medistar Parties’ pleadings for breach of contract, the Plaintiffs allege that Dr.
Bavishi breached his agreement with the Medistar Parties’ and Hourani by failing to provide
doctors to lease the MOB. Plaintiff's Second Amended Petition, p. 12. They assert the same
srepresentation claims.
In other words, the Medistar Parties only allege fraud damages arising from the
contractual relationship between Dr. Bavishi and Medistar. Hourani agrees. He repeatedly
22
testified that Dr. Bavishi to provide tenants for the Project because it was part
of the “agreement.” 101:11-18. Accordingly, the Medistar Parties’ ‘promissory
fraud’ and negligent misrepresentation claims fail because the relief sought is for an alleged
, 711 S.W.2d at 618.
3 The Operative Agreement Bars a Promissory Estoppel Claim and Dr.
e Was Too Indefinite to Support Reasonable
When there exists a valid written contract, there can be no promissory estoppel arising
out of the same subject matter of the written contract. Barnett v. Coppell, 123 S.W.3d 804, 825
denied). All rights ting to development of
the Project are set out in the Operative Agreement. Also, according to Hourani’s own testimony,
Dr. Bavishi’s alleged promise to lease the MOB occurred prior to the existence of the written
agreements between the parties, including the Operative A greement. —_
Any prior alleged promise merged into the Operative Agreement.
S.W.2d at 652;
Evidentiary deficiencies notwithstanding, any alleged promise made after the Operative
Agreement cannot support a promissory estoppel claim. A claim for promissory estoppel
requires the defendant to make a promise and for the plaintiff to reasonably rely upon it to its
detriment. Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 378-79 (Tex. App.— Houston [1st
Dist.] 2007, no pet.). Dr. Bavishi’s alleged promise to supply tenants to the MOB is far too
indefin