The Dallas Court of Appeals has reversed a multimillion dollar trial court judgment in a case involving an aborted sale of a Houston specialty grocery store.
World Food Imports and KGF World Food Warehouse v. HHO United Group, as Assignee of Nihaya Qaddura and Sharid Choudhury (05-22-01160-CV; October 23, 2024) arose from a failed agreement between the Kaiser Companies, which own an Indian/Pakistani grocery store in Houston, and HHO United Group, which owns three grocery stores in Dallas. HHO’s broker Choudury acted as broker and drafted the sales contract. The parties executed three of the five documents necessary to complete the sale in October 2014, but problems arose when HHO showed up at the Houston store for the lender’s required inventory. Nihaya Kaiser, the wife of Kaiser Companies owner Mashood Kaisuer, informed HHO that her husband had not informed her of the sale. HHO left the premises without completing the inventory, and Kaiser’s lawyer called the whole thing off the next morning and threatened to call the police. Nevertheless, HHO went through with the deal and signed the closing documents in March 2015. Kaiser did not appear at the closing and never executed the contract.
In May 2015 HHO sued Kaiser for breaching the contract by failing to appear at closing and failing to convey the property. HHO requested specific performance of the contract and sought to recover all losses due to the breach, including lost profits. Kaiser filed a third-party petition against the broker Choudury for fraud and breach of contract. Choudhury filed a counterclaim to recover his commission. After numerous delays the case went to trial in April 2022. The jury found that HHO was at all times ready, willing, and able to perform under the contract and that is failure to tender payment under the contract on or before March 31, 2015, was excused by Kaiser’s failure to perform a material provision of the contract or repudiation of the contract. The trial court ordered Kaiser to pay Choudhury $850,000 for his commission and awarded lost profit damages to HHO in the amount of $3.87 million. The court also awarded attorney’s fees, costs, and interest to Choudury and HHO. Kaiser appealed.
In an opinion by Justice Reichek, the court of appeals affirmed in part and reversed in part. Kaiser argued that there was no evidence of a breach of a contract on their part. Athough it did not attend the closing or convey the property, Kaiser denied a breach of contract because HHO did not tender payment at the closing. Kaiser further claimed that HHO repudiated the contract because it did not tender payment, thus excusing Kaiser’s failure to close. The court rejected this argument, observing that Kaiser’s actions at the inventory and HHO’s lenders’ representation that the funds were ready to be released pending Kaiser’s execution of the closing documents indicated that “prior to the closing date, the Kaiser Companies announced their intention to refuse to perform under the agreement.” Consequently, the “evidence is legally and factually sufficient to prove the Kaiser Companies refused to close the transaction and repudiated the contract in the days prior to the scheduled closing.”
Turning to the specific performance issue, the court concluded that HHO’s failure to tender payment at the closing was excused by Kaiser’s repudiation of the contract, even though the contract had a “time is of the essence” provision that otherwise might haver defeated the equitable remedy. The court further rejected Kaiser’s argument that HHO was not entitled to specific performance because it could not prove it was ready, willing, and able to perform. Kaiser asserted that HHO could not perform because the deal depended on an SBA loan to HHO’s subsidiary, World Gourmet Houston, and thus HHO could not itself complete the deal. The court rejected this argument as well, holding that “the jury could have determined that the loan to World Gourmet Houston was to pay the purchase price under HHO’s contract with the Kaiser Companies.” The court affirmed the judgment awarding HHO specific performance.
As to the $3.87 million in lost profits, however, the court reversed. The court agrees observed that because HHO’s expert only used the Kaiser’s actual profits with a few adjustments to find the equitable monetary compensation without considering any other factors such as HHO’s business model, HHO’s damages model was hopelessly flawed. It thus reversed and rendered judgment that HHO take nothing in damages for lost profits and post judgment interest.
Finally, Kaiser complained that the trial court erred when it excluded three of its witnesses, including its attorney, Ackels. HHO designated Ackels for a deposition, but Kaiser objected and the trial court agreed. A few years later, however, Kaiser moved to call him as a fact witness. HHO duly objected that Kaiser had stopped HHO from deposing him in the first place and that Kaiser had not designated Ackels as a fact witness in its most recent disclosures. Even though Kaiser argued that Ackels was a rebuttal witness, the need for his testimony could have been anticipated well before the trial. For these reasons, the court affirmed the exclusion of Ackels. Kaiser argued further that the trial court erred in excluding two expert witnesses because they were not timely designated. It contended that the scheduling order deadline for expert designation was null because the case had been rescheduled several times. However, the court rejected this argument because Kaiser did not inform the trial court of the issue and could not raise the issue on appeal. Additionally, the trial court never stated that the deadline had become null. The trial court did not err by excluding Kaiser’s experts.
The court likewise affirmed the award of Choudury’s broker fees, agreeing with the trial court that Choudury was a third-party beneficiary of the contract, as well as the award of attorney’s fees to Choudury and HHO. It did, however, reverse the award of pre- and postjudgment interest on the fee.
TCJL Intern Dilara Muslu researched and substantially drafted this article.
