Ajaz R. Siddiqui, Najeeb Siddiqui and Suncoat Environmental and Construction, Inc. v. Fancy Bites, L.L.C., Quick Eats L.L.C., Farhan S. Qureshi and Syed Khalid Ali

Affirmed as Modified and Opinion filed July 26, 2016.

In The

Fourteenth Court of Appeals

NO. 14-14-00384-CV

AJAZ R. SIDDIQUI, NAJEEB SIDDIQUI AND SUNCOAST
ENVIRONMENTAL & CONSTRUCTION, INC., Appellants
V.

FANCY BITES, LLC, QUICK EATS LLC, FARHAN S. QURESHI AND
SYED KHALID ALI, Appellees

On Appeal from the 80th District Court
Harris County, Texas
Trial Court Cause No. 2010-66787

OPINION

This appeal involves a dispute among four individuals who were each co-
equal managers and members of two limited liability companies that were in turn
the general and limited partners of a Texas limited partnership that constructed,
owned, and operated two Hartz Chicken restaurants in Houston. The partnership
obtained two loans for construction costs in connection with the second restaurant,
and both loans were personally guaranteed by the four individuals, Ajaz R.
Siddiqui, Najeeb Siddiqui, Farhan S. Qureshi, and Syed Khalid Ali. The Siddiquis’
construction company performed the construction work on both restaurants. The
restaurants proved to be unprofitable, however, and the partnership ultimately
declared bankruptcy.

The Siddiquis and their construction company sued Qureshi and Ali for
contribution based on the personal guarantees, claiming that the Siddiquis had paid
more than their share of the liability owing on the partnership’s loans. Qureshi and
Ali answered and asserted numerous counterclaims against the Siddiquis and their
construction company, including fraud and breach of fiduciary duty.

After a bench trial, the trial court found that Qureshi and Ali did not owe any
money to the Siddiquis as co-guarantors and ordered that the Siddiquis take
nothing on their claims. The trial court also found that the Siddiquis were liable to
Qureshi and Ali for fraud and breach of fiduciary duty, and awarded Qureshi and
Ali actual and exemplary damages on their counterclaims. On appeal, the Siddiquis
raise seven issues, some of which contain multiple sub-issues, challenging the trial
court’s findings on liability and damages. The Siddiquis also contend that
judgment should be rendered in their favor on their claims for contribution and
attorney’s fees. For the reasons explained below, we affirm as modified.

FACTUAL BACKGROUND1

Brothers Ajaz and Najeeb Siddiqui jointly and equally own Suncoast
Environmental & Construction, Inc.,2 a construction company that was formed in

1
Qureshi and Ali agree that the Siddiquis “have accurately stated the chronology of
events” and acknowledge that their statement of facts “is largely taken from the [Siddiquis’]
briefs.” Accordingly, much of the factual background is taken from the parties’ briefs.
2
At some point, the Suncoast entity’s name was changed to Suncoast Construction, Inc.
The trial court’s judgment identifies the Suncoast entity as “Suncoast Construction, Inc. f/k/a
2
1999. The Siddiquis and Suncoast have built a variety of projects, including gas
stations, shopping centers, travel centers, outside fuel systems, multifamily
townhomes, and garden apartments.

A. Blueline, Fancy Bites, and Quick Eats

In 2003, the Siddiquis purchased a 4.26-acre tract and developed it as the
Champions Valley subdivision. The Siddiquis built thirty-six townhomes and a
Texaco station at this location. They also built the shell of a retail building, located
at 12011 Bammel North Houston (Bammel). The Bammel location would
eventually become the first Hartz Chicken Restaurant owned and operated by
Blueline Real Estate, L.P. (Blueline).

Blueline was formed in May 2006. The general and limited partners of
Blueline were Fancy Bites, LLC and Quick Eats, LLC (collectively, the LLCs).
The LLCs were owned by the Siddiquis. Abdul and Aneela Hameed, the owners of
the Texaco station, expressed an interest in participating in Blueline to purchase
the shell building at Bammel for a Church’s Chicken restaurant. In October 2006,
Aneela Hameed purchased a 50% interest in the LLCs for $406,250.00. However,
Church’s Chicken would not approve the location, so the Siddiquis returned the
purchase money to the Hameeds.

B. The Bammel Hartz Chicken Restaurant

When the Church’s Chicken franchise fell through, Najeeb Siddiqui began
looking for other franchise opportunities. Najeeb had previously met Syed Khalid
Ali through a common friend and knew that Ali was a Hartz Chicken franchisee at
a location about two miles away. Najeeb called Ali to get information about the
franchise, and the two began discussing the possibility of building out the shell

Suncoast Environmental & Construction, Inc.”

3
building at Bammel as a Hartz Chicken restaurant.

Najeeb also discussed the possibility with Farhan S. Qureshi. Najeeb knew
Qureshi because some years earlier Najeeb had unsuccessfully bid on a fuel system
job for one of Qureshi’s stores. In 2007 or 2008, Qureshi approached Najeeb about
bidding on building Qureshi’s retail shopping center on Antoine, which Qureshi
later accepted. In connection with the bid, Najeeb also showed Qureshi what the
Bammel location looked like, and they began discussing the possibility of a Hartz
franchise there. Before these discussions began, Ajaz Siddiqui had never met
Qureshi or Ali, and Qureshi and Ali had not met each other.

On January 8, 2007, in separate sale and purchase agreements, the Siddiquis
sold to Qureshi and Ali each a 25% membership interest in Quick Eats and Fancy
Bites, for a combined 50% interest. Qureshi and Ali each paid $212,500 for their
25% interests. Of the four, only Ali had experience in operating a chicken
franchise.

Ajaz Siddiqui prepared the agreements between the Siddiquis as sellers and
Qureshi and Ali as purchasers of their 25% membership interests in Fancy Bites
and Quick Eats. Each agreement included a representation that it “contains a
complete and accurate legal description of each parcel of real property owned by,
leased to, or leased by the Company.”3 The agreement between Qureshi and the
Siddiquis included an attached Exhibit “A,” a plat of the tract where the shell
building at Bammel was located. The agreement between Ali and the Siddiquis
included no similar exhibit, but according to Ali, the Siddiquis verbally represented
3
It is unclear whether the term “Company” is intended to refer to both Fancy Bites and Quick
Eats, one of them, or something else entirely. Although the introductory paragraphs of the
agreements appear to reflect that Fancy Bites and Quick Eats together are defined as
“Company,” section 2.01 of each sale and purchase agreement provides that “Company is a
Member of the Companies owning all the membership interest in in both of the Companies,
described hereinabove.”

4
to him that the Bammel tract was owned by Blueline, Fancy Bites, or Quick Eats.
At the time of the transactions, the Bammel property was actually titled in the
name of Sunnyland Development, Inc., a holding company solely owned by Ajaz
Siddiqui.

After the transactions, the Siddiquis, Qureshi, and Ali were each 25%
members and owners of the LLCs. All four individuals were managers of the LLCs
with equal voting power and ownership. On October 24, 2007, certificates of
amendment were filed with the Secretary of State to identify all four as managers
of the LLCs.

Effective January 2008, the Siddiquis, Qureshi, and Ali executed a Restated
Agreement of Limited Partnership between Fancy Bites and Quick Eats. The
partnership agreement identified Fancy Bites as the general partner of Blueline
with a 1% ownership interest and Quick Eats as the limited partner with a 99%
ownership interest. The partnership agreement contained a provision allowing
Blueline to contract with any of the partners or their affiliates for the purchase of
goods and services for the benefit of the entity. The Siddiquis, Qureshi, and Ali
separately executed a Restated Company Agreement for each of the LLCs. The
company agreements similarly permitted the LLCs to transact business with any
manager, member, or affiliate.

On February 20, 2007, Qureshi completed a Confidential Franchise
Application on behalf of Blueline for the Hartz Chicken Restaurant on Bammel.
The Siddiquis had no involvement in applying for the franchise. Ali signed and
filed assumed name records in Harris County on behalf of Blueline and Fancy
Bites for the Bammel restaurant. The restaurant opened in March 2008. Ali, who
had hired the first manager for the restaurant, fired him in July 2008. Between
March and November of 2008, the Bammel restaurant never had a net profit,

5
except for April 2008, when it had a net profit of $260.28.

C. The Antoine Hartz Restaurant

Qureshi owned a tract of land on Antoine Drive and had a Conoco station
across the street. After Qureshi and Ali purchased their 25% interests in the LLCs,
Qureshi contracted with Suncoast to build a retail center. The Siddiquis
constructed a pad site on this location. The Siddiquis, Qureshi, and Ali decided this
would be a good location for Blueline to open a second Hartz restaurant. Blueline
agreed to buy the pad site from Qureshi for $150,000.00. The pad site represented
10–15% of the property Qureshi had originally purchased for around $300,000.00.

In January 2008, Blueline submitted a loan application to Southwestern
National Bank (the Bank) to obtain a construction loan for the Antoine Hartz
Chicken Restaurant. The Siddiquis, Qureshi, and Ali all signed the loan
application, which sought $839,000.00 for “land acquisition, new
construction/expansion/repair.” That same month, the Bank sent separate loan
commitments approving a construction loan in the amount of $645,000.00 and a
commercial loan in the amount of $194,000.00 for furniture, fixtures, and
equipment (FF&E) for the Antoine restaurant. The two loan commitments were
executed by Blueline and guaranteed by Fancy Bites and the four individuals.

In connection with the development of the Antoine restaurant, Blueline and
the four individuals executed and delivered to the Bank two promissory notes,
deeds of trust, and guaranty agreements pursuant to which the Siddiquis, Qureshi,
and Ali individually guaranteed Blueline’s debt. Contemporaneously, title to the
Bammel property was formally conveyed to Blueline by warranty deed, at no cost,
on May 12, 2008.

Ali signed and filed assumed name records with Harris County on behalf of

6
Fancy Bites for the Antoine Hartz Chicken Restaurant on April 16, 2008. On July
21, 2008, and July 23, 2008, Blueline filed assumed name certificates with the
Texas Secretary of State for the Hartz restaurants at the Bammel and Antoine
locations. Both documents are signed by the Siddiquis, Qureshi, and Ali as
managers of Fancy Bites.

Construction on the Antoine restaurant commenced on May 27, 2008. As
construction progressed, Suncoast submitted draw requests to the Bank, which sent
an inspector to the site to file a report on the construction and to approve each
draw. On July 28, 2009, the Siddiquis, Qureshi, and Ali, on behalf of Blueline,
executed an Affidavit of Completion, stating that the Antoine restaurant was
completed. The restaurant opened in November 2009. Qureshi and Ali later fired
the manager of the store and operated it themselves for three months. They then
shut the store down.

D. Bankruptcy and Foreclosure

The two restaurants did not generate sufficient revenues to pay for
insurance, loan payments, property taxes, or payments to certain vendors. The
Siddiquis paid the property taxes in 2009, 2010, and 2011. For those years,
Blueline had negative income of $152,169.00, $199,132.00, and $134,350.00,
respectively. The Siddiquis paid $297,947.08 in expenses on behalf of Blueline
because of its insufficient revenue. Of that amount, $191,170.47 was for loan
payments and $4,579.12 was for insurance. Qureshi and Ali began paying one-half
of the note payments in July 2010.4

4
The trial court found that Suncoast made the note payments to the Bank associated with
the loans on behalf of Blueline. On appeal, Qureshi and Ali do not dispute the Siddiqui’s
assertion that these payments were treated as being made by the Siddiquis individually. The trial
court found, however, that because Suncoast was not a guarantor of the loans, Qureshi and Ali
do not owe any money to the Siddiquis or Suncoast.

7
 Hartz repeatedly sent notices of default to Blueline and the individuals,
warning that Blueline had defaulted on required franchise payments and note
obligations. The Siddiquis met with Qureshi and Ali in July 2008, December 2008,
and February 2009 to discuss the negative cash flow. Qureshi and Ali each agreed
to contribute 25% toward Blueline’s debts. Qureshi and Ali made payments each
time to cover the shortages.

In July and October 2010, the Bank sent notices informing Blueline that it
was past due on loan payments and requesting income tax returns and financial
statements for Blueline, Fancy Bites, and the individuals. On March 11, 2011,
counsel for the Bank wrote to lawyers for the individuals informing them that the
Bank intended to post the properties for foreclosure unless certain financial
documentation was provided and a payment of $11,445.57 was made by March 21,
2011.

The loan payments to the Bank were made current, but financials and tax
returns requested were not provided. The Bank agreed to a reinstatement
agreement that the Siddiquis signed. However, Qureshi and Ali did not agree to the
form of the reinstatement agreement, so the Bank accelerated the notes and posted
the properties for foreclosure. Blueline filed for Chapter 11 bankruptcy on
February 7, 2012. The properties were purchased by the Bank in foreclosure on
July 3, 2012. Qureshi then repurchased the Antoine tract that he had previously
owned from the Bank. According to the parties, the bankruptcy was converted to a
Chapter 7 on July 19, 2012. At the time of trial, Blueline, Fancy Bites, and Quick
Eats had no assets.

E. The Ensuing Litigation

The Siddiquis and Suncoast filed suit against Qureshi, Ali, Blueline, Fancy
Bites, and Quick Eats in October 2010. The defendants answered and filed
8
counterclaims, including fraud, breach of fiduciary duty, unjust enrichment,
conversion, and civil conspiracy. After Blueline filed for bankruptcy, it was
dropped as a party.

The case was tried to the court over four days in October 2013. At trial, the
Siddiquis sought to recover from Qureshi and Ali $48,937.42 each for their pro-
rata shares of payments the Siddiquis had made to the Bank to cover Blueline’s
indebtedness. Qureshi and Ali responded with claims for fraud, breach of fiduciary
duty, and unjust enrichment. Qureshi and Ali sought actual damages totaling
$514,482.68, representing their initial investments of $212,500.00 and $44,731.44
each paid toward the loan payments, and unspecified punitive damages. After the
trial, Fancy Bites and Quick Eats nonsuited their claims.

On February 18, 2014, the trial court signed a modified final judgment,
ordering that the Siddiquis and Suncoast take nothing by their suit, and that
Qureshi and Ali recover actual damages on their breach of fiduciary duty and fraud
claims in the amount of $514,482.68, as well as court costs and pre- and post-
judgment interest from the Siddiquis and Suncoast. The trial court also ordered that
Qureshi and Ali recover exemplary damages in the amount of $50,000.00 each
from Ajaz Siddiqui.

On April 3, 2014, the trial court filed findings of fact and conclusions of law.
Although the Siddiquis requested additional findings and conclusions, the trial
court refused to make them.

ANALYSIS OF THE ISSUES

On appeal, the Siddiquis and Suncoast (collectively, “appellants”) raise
seven issues: (1) there is no evidence of a fiduciary relationship between either the
Siddiquis or Suncoast and Qureshi and Ali; (2) the evidence is legally and factually

9
insufficient to support a finding that the appellants committed fraud “in connection
with the sale of 25% interests in Fancy Bites and Quick Eats to Qureshi and Ali” or
“with respect to guaranty agreements”; (3) there is no evidence to support the fraud
damages awarded; (4) no basis exists for a judgment against the appellants on an
unjust enrichment theory; (5) no basis exists for a judgment on a civil conspiracy
theory; (6) no basis exists for any award of exemplary damages; and (7) a money
judgment should be rendered in favor of the Siddiquis against Qureshi and Ali for
contribution and attorney’s fees. Within several of these issues, the appellants
contend that Qureshi and Ali lack standing to assert claims belonging to Blueline, a
non-party debtor in bankruptcy.

We will first address the appellants’ standing arguments, and then address
the substantive issues in turn.

I. Standing to Assert Construction-Related Claims

As a preliminary point, we address the Siddiquis’ contention that Qureshi
and Ali lack standing to sue the Siddiquis or Suncoast with respect to construction-
related claims. Because standing is a component of subject matter jurisdiction, it
cannot be waived and may be raised for the first time on appeal. Tex. Ass’n of Bus.
v. Tex. Air Control Bd., 852 S.W.2d 440, 445–46 (Tex. 1993).

A. Applicable Law

Standing requires “a real controversy between the parties” that “will be
actually determined by the judicial declaration sought.” Austin Nursing Ctr., Inc. v.
Lovato, 171 S.W.3d 845, 849 (Tex. 2005); Tex. Ass’n of Bus., 852 S.W.2d at
446. A determination of standing focuses on whether a party has a “justiciable
interest” in the outcome of the lawsuit, such as when it is personally aggrieved or
has an enforceable right or interest. Lovato, 171 S.W.3d at 849. A claim-by-claim

10
analysis is necessary to ensure that a particular plaintiff has standing to bring each
of his particular claims. Heckman v. Williamson Cnty., 369 S.W.3d 137, 153 (Tex.
2012).

It is well-settled that an individual stakeholder in a legal entity does not have
a right to recover personally for harms done to the legal entity. BJVSD Bird Fam.
P’ship, L.P. v. Star Elec., L.L.C., 413 S.W.3d 780, 785–86 (Tex. App.—Houston
[1st Dist.] 2013, no pet.); Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 250
(Tex. App.—Dallas 2005, no pet.). It is the nature of the wrong, whether directed
against the entity only or against the individual stakeholder, and not the existence
of injury, that determines who may sue. See Haut v. Green Café Mgmt., Inc., 376
S.W.3d 171, 177 (Tex. App.—Houston [14th Dist.] 2012, no pet.); Faour v. Faour,
789 S.W.2d 620, 622 (Tex. App.—Texarkana 1990, writ denied).

For example, a limited partner does not have standing to sue for injuries to
the partnership that merely diminish the value of partnership interests or a share of
partnership income; such claims may be asserted only by the partnership itself.
Hall v. Douglas, 380 S.W.3d 860, 873–74 (Tex. App.—Dallas 2012, no pet.);
Nauslar, 170 S.W.3d at 250. Similarly, a member of a limited liability company
lacks standing to assert claims individually when the cause of action belongs to the
company. Barrera v. Cherer, No. 04-13-00612-CV, 2014 WL 1713522, at *2
(Tex. App.—San Antonio Apr. 30, 2014, no pet.) (mem. op.); see also Wingate v.
Hajdik, 795 S.W.2d 717, 719 (Tex. 1990), superseded by statute on other grounds,
Sneed v. Webre, 465 S.W.3d 169 (Tex. 2015) (“A corporate stockholder cannot
recover damages personally for a wrong done solely to the corporation, even
though he may be injured by that wrong.”).

B. Application of Law to Claims

In this case, the appellants contend that Qureshi and Ali lack standing to
11
assert claims for breach of fiduciary duty, unjust enrichment, and fraud to the
extent that these claims are directed to construction-related claims that belong
exclusively to Blueline. Because we are to make a claim-by claim analysis of
standing, see Heckman, 369 S.W.3d at 153, we will first address the appellants’
standing complaints as to each of these claims. We will then turn to the appellants’
substantive issues as necessary to resolve the appeal.

1. Breach of fiduciary duty

In their first issue on fiduciary duty, the appellants contend in a sub-issue
that Qureshi and Ali lack standing to assert construction-related claims belonging
to Blueline. The appellants also contend that the trial court’s findings and
conclusions relating to construction-related claims must be vacated because the
trial court had no subject-matter jurisdiction to consider the claims.

The trial court’s findings and conclusions include several fact findings
concerning the Siddiquis’ failure to comply with their fiduciary duties. The trial
court found that “the transactions in question were not fair and equitable to Qureshi
and Ali, due to the self-dealings by the Siddiquis with regard to Suncoast.” In a
separate section titled “Unjust Enrichment,” the trial court found that the Siddiquis
and Suncoast were unjustly enriched “by receiving $425,000 for the build-out of
the Bammel property, when it actually cost about $80,000” and “by receiving
$689,000 for the construction of the Antoine property, when it actually cost about
$300,000.”

The Siddiquis challenge these fact findings, arguing that the allegations by
Qureshi and Ali relating to self-dealing and unjust enrichment all pertain to
Suncoast’s construction and equipping of the restaurants for Blueline, as do the
allegations by Qureshi and Ali that Suncoast was paid more by Blueline than the
restaurants actually cost. The Siddiquis also point out that the Blueline limited
12
partnership agreement expressly permits affiliates of the parties to contract with
Blueline to provide goods and services, and the evidence shows that Suncoast built
the restaurants for Blueline. Therefore, the Siddiquis contend, all of the
construction-related claims asserted by Qureshi and Ali belong to Blueline and
thus may only be asserted by Blueline, which is not a party. Further, because
Blueline is a debtor in bankruptcy, the Siddiquis argue that the construction-related
claims belong exclusively to the bankruptcy estate of Blueline.

In response, Qureshi and Ali do not dispute the Siddiquis’ general
statements of the law concerning standing or make any effort to distinguish
between injuries incurred by Blueline or the LLCs and those Qureshi and Ali
incurred individually. Instead, Qureshi and Ali merely argue that because the trial
court did not award any damages for unjust enrichment, whether the trial court’s
findings were correct has no effect on the propriety of the judgment.

We agree with the appellants that, to the extent that Qureshi and Ali seek to
recover individually on claims for construction-related damages sustained by either
Blueline or the LLCs, they would lack standing to assert such claims. See Jerry L.
Starkey, TBDL, L.P. v. Graves, 448 S.W.3d 88, 98–99 (Tex. App.—Houston [14th
Dist.] 2014, no pet.); Barrera, 2014 WL 1713522, at *2; Hall, 380 S.W.3d at 873–
74; Nauslar, 170 S.W.3d at 250. The evidence shows that Blueline, a limited
partnership, was the owner of the Bammel and Antoine restaurants; Blueline
contracted with Suncoast to finish the build-out of the Bammel restaurant and
construct the Antoine restaurant; and Blueline took out the Bank loans for
construction and FF&E for the Antoine restaurant.5 Therefore, all claims for

5
Qureshi and Ali claimed not to have seen the written construction contract between
Blueline and Suncoast for construction of the Antoine restaurant; however, the contract was used
to obtain the Bank loans, and there is no evidence or allegation that Qureshi and Ali individually
contracted with Suncoast for the construction. There was no written contract between Blueline
13
damages relating to Suncoast’s build-out and construction of the restaurants,
including overcharging for services, would belong to Blueline.

However, we disagree that the trial court lacked subject matter to consider
the actions of either the Siddiquis or Suncoast in connection with the individual
claims of Qureshi and Ali for breach of fiduciary duty or to make the complained-
of findings. See Graves, 448 S.W.3d at 98–99 (distinguishing plaintiff’s individual
claims from those belonging to partnership and stating that “[t]he question of
whether there is any evidence that Graves was injured is a question of sufficiency
of the evidence, not a question of standing”). Moreover, the trial court’s fact
findings concerning unjust enrichment are directed to the actions of either the
Siddiquis or Suncoast based on the evidence presented and do not expressly refer
to Blueline or find that Blueline was entitled to any damages. See Kiepfer v. Beller,
944 F.2d 1213, 1221–22 (5th Cir. 1991) (holding that jury could have considered
evidence of harm to physician’s professional association in determining whether
physician proved the elements of his claims and damages accruing to physician
personally based on those claims, where physician was awarded only damages that
accrued to him individually and not to his professional association).We therefore
deny the appellants’ request that the fact findings be vacated on the ground that the
trial court lacked subject matter jurisdiction to make them.

2. Unjust enrichment

The appellants next contend that Qureshi and Ali lack standing to assert—
and the trial court had no jurisdiction to consider—any claim that Suncoast
overcharged Blueline for construction costs associated with the Bammel and

and Suncoast for the completion of the build-out at the Bammel location, but Ajaz Siddiqui
testified that Suncoast was doing the construction work for Blueline, and there was no evidence
to the contrary.

14
Antoine restaurants. As we explained in the preceding section, the trial court had
jurisdiction to make fact findings concerning the actions of the Siddiquis and
Suncoast. And while we agree with the appellants that claims for construction-
related damages would belong to Blueline, the trial court’s judgment does not hold
the appellants liable on an unjust enrichment theory or award Qureshi and Ali
damages for unjust enrichment. Because the trial court did not award damages to
Qureshi and Ali individually for injuries sustained by Blueline, there is no error;
therefore, the unjust enrichment findings need not be addressed. Cf. Wingate, 795
S.W.2d at 719–20 (explaining that trial court erred by awarding unsegregated
damages to corporate shareholder on both shareholder’s individual claims and
claim belonging solely to corporation).

3. Fraud

Appellants also contend that Qureshi and Ali lack standing to assert claims
that the appellants committed fraud in connection with construction-related
representations made after Qureshi and Ali invested in the LLCs. In addition to
rendering judgment that the Siddiquis and Suncoast were liable for breach of
fiduciary duty, the trial court also rendered judgment that they were liable for
fraud. In its findings of fact and conclusions of law, the trial court found that the
Siddiquis made unspecified disclosures and failures to disclose that constituted
fraud. The trial court further found that the Siddiquis’ fraud proximately caused
actual damages to Qureshi and Ali in the amount of $514,482.68.

Because the trial court’s findings and conclusions do not specify the
underlying fraudulent conduct, the Siddiquis initially discuss the sufficiency of the
evidence to support a finding of fraud in connection with the purchase and sale of
the 25% interests in the LLCs to Qureshi and Ali based on three allegations
concerning: (1) misrepresenting the ownership of the Bammel property; (2) the

15
costs of construction on the Bammel restaurant or how the investment proceeds
would be used6; and (3) the personal guarantees executed by Qureshi for the two
bank loans obtained by Blueline.

In response, Qureshi and Ali identify six “misrepresentations or
nondisclosures” they contend support the trial court’s fraud findings: (1) “title”
ownership of the Bammel property; (2) costs of finishing construction on the
Bammel restaurant; (3) costs of construction of the Antoine restaurant; (4) the size
of the Antoine building; (5) progress payments to the Bank and false statements on
“bills paid” affidavits; and (6) Bank payments made to Najeeb on behalf of
Blueline, then transferred to Suncoast or Ajaz to pay Suncoast invoices.

In reply, the appellants argue that all of the alleged misrepresentations

identified by Qureshi and Ali are construction-related claims belonging to
Blueline, except for those concerning (1) the ownership of the Bammel property,
(2) the cost of finishing the Bammel construction, or (3) the execution of the
personal guarantees of Blueline’s debt to the Bank by Qureshi and Ali. For the
reasons already discussed, we agree. Therefore, our discussion of Siddiquis’
challenges to the trial court’s fraud finding will be limited to the sufficiency of the
evidence to support an implied finding that the appellants committed fraud in
connection with one or more of these allegations.

6
The Siddiquis omit the Antoine restaurant because it was planned and built after
Qureshi and Ali purchased their interests in the LLCs and was financed through the construction
and equipment loans that Blueline entered into well after Qureshi and Ali purchased their
interests in January 2007. We agree that Qureshi and Ali could not have been fraudulently
induced to purchase their interests in Fancy Bites and Quick Eats in January 2007 based on
alleged misrepresentations about the Antoine restaurant.

16
II. The Substance of the Appellants’ Issues

Having resolved the appellants’ complaints concerning Qureshi’s and Ali’s
standing to assert construction-related claims belonging to Blueline, we turn to the
substance of the appellants’ challenges to the legal and factual sufficiency of the
evidence.

A. Standards of Review

A trial court’s findings are reviewable for legal and factual sufficiency of the
evidence by the same standards that are applied in reviewing evidence supporting a
jury’s answer. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). We review
legal questions that rest on a factual basis de novo, while affording deference to the
trial court’s findings of fact. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of
Am., 341 S.W.3d 323, 337 (Tex. 2011).

We review the trial court’s conclusions of law de novo. See BMC Software
Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). Conclusions of law are
upheld if the judgment can be sustained on any legal theory the evidence
supports. Waggoner v. Morrow, 932 S.W.2d 627, 631 (Tex. App.—Houston [14th
Dist.] 1996, no writ). Incorrect conclusions of law do not require reversal if the
controlling findings of fact support the judgment under a correct legal theory. See
id.

When reviewing the legal sufficiency of the evidence, we consider the
evidence in the light most favorable to the challenged finding and indulge every
reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d
802, 823 (Tex. 2005). We must credit favorable evidence if a reasonable factfinder
could and disregard contrary evidence unless a reasonable factfinder could
not. See id. at 827. We must determine whether the evidence at trial would enable

17
reasonable and fair-minded people to find the facts at issue. See id. The evidence is
legally insufficient when (1) there is a complete absence of evidence of a vital fact;
(2) the court is barred by rules of law or evidence from giving weight to the only
evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact
is no more than a mere scintilla; or (4) the evidence establishes conclusively the
opposite of the vital fact. Id. at 810.

In a factual sufficiency review, we must consider and weigh all of the
evidence in a neutral light. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d
757, 761 (Tex. 2003). The evidence is factually insufficient only if we conclude
that the verdict is so against the great weight and preponderance of the evidence as
to be manifestly unjust, regardless of whether the record contains some evidence of
probative force in support of the verdict. Id.

The trial court is the sole judge of the credibility of the witnesses and the
weight to be given their testimony. Barrientos v. Nava, 94 S.W.3d 270, 288 (Tex.
App.—Houston [14th Dist.] 2002, no pet.). We may not substitute our judgment
for that of the factfinder merely because we reach a different conclusion. Herbert
v. Herbert, 754 S.W.2d 141, 144 (Tex. 1988).

B. No Evidence of an Informal Fiduciary Duty

In their first issue, which contains multiple sub-issues, the appellants
challenge the trial court’s findings that an informal fiduciary duty existed between
the appellants and Qureshi and Ali; the appellants breached this duty; and Qureshi
and Ali suffered damages as a result. In the dispositive argument, the appellants
contend that there is no evidence of a relationship of trust and confidence giving
rise to any fiduciary relationship between them and Qureshi and Ali.

The trial court’s findings of fact and conclusions of law include findings that

18
the Siddiquis owed a fiduciary duty to Qureshi and Ali because “a relationship of
trust and confidence existed between the Siddiquis and Qureshi and Ali.” The trial
court also made several findings concerning the Siddiquis’ failure to comply with
their fiduciary duties, including the previously discussed findings that the
appellants engaged in self-dealing and were unjustly enriched by overcharging for
construction services. The trial court found that the Siddiquis’ breach of fiduciary
duty proximately caused actual damages to Qureshi and Ali in the amount of
$514,482.68, representing the total of the amounts Qureshi and Ali paid for their
membership interests and the amounts they paid toward Blueline’s indebtedness
pursuant to their personal guarantees. Although the trial court did not find that
Suncoast had a fiduciary relationship with Qureshi or Ali, the trial court did find
that “the Siddiquis and Suncoast were engaged in a conspiracy against Qureshi and
Ali” and rendered a joint and several judgment against the appellants.

1. The applicable law and the parties’ arguments

A fiduciary duty arises as a matter of law in certain formal relationships such
as an attorney-client or trustee relationship. Meyer v. Cathey, 167 S.W.3d 327, 330
(Tex. 2005); Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998). In
contrast, an informal fiduciary duty may arise from a moral, social, domestic, or
purely personal relationship of trust and confidence. Meyer, 167 S.W.3d at 331;
Assoc. Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998).
“The existence of the fiduciary relationship is to be determined from the actualities
of the relationship between the persons involved.” Thigpen v. Locke, 363 S.W.2d
247, 253 (Tex. 1962). The law recognizes the existence of confidential
relationships in those cases “in which influence has been acquired and abused, in
which confidence has been reposed and betrayed.” Associated Indem. Corp., 964
S.W.2d at 287 (internal citations and quotations omitted).

19
 It has long been recognized that “‘not every relationship involving a high
degree of trust and confidence rises to the stature of a fiduciary relationship.’”
Meyer, 167 S.W.3d at 330 (quoting Schlumberger Tech. Corp. v. Swanson, 959
S.W.2d 171, 176–77 (Tex. 1997)). To impose an informal fiduciary duty in a
business transaction, the special relationship of trust and confidence must exist
before and apart from the agreement made the basis of the suit. Ritchie v. Rupe,
443 S.W.3d 856, 874 n.27 (Tex. 2014); Meyer, 167 S.W.3d at 331; Associated
Indem. Corp., 964 S.W.2d at 288. Mere subjective trust does not, as a matter of
law, transform arm’s-length dealing into a fiduciary relationship. Meyer, 167
S.W.3d at 331; Schlumberger, 959 S.W.2d at 177. The Supreme Court of Texas
has long cautioned that “[i]n order to give full force to contracts, we do not create
such a relationship lightly.” Schlumberger, 959 S.W.2d at 177.

In this case, Qureshi and Ali did not contend that a formal fiduciary
relationship exists between them and the appellants. Therefore, they must have
presented some evidence to support the trial court’s conclusion that an informal
fiduciary relationship existed based on a relationship of trust and confidence. The
existence of an informal fiduciary duty is ordinarily a question of fact, but it
becomes a question of law when there is no evidence of such a relationship. La
Ventana Ranch Owners’ Ass’n, Inc. v. Davis, 363 S.W.3d 632, 644 (Tex. App.—
Austin 2011, pet. denied).

The appellants contend that the admission by Qureshi and Ali that they had
no pre-existing relationship of trust and confidence with the appellants at the time
they invested in Fancy Bites and Quick Eats is fatal to their case, citing the
Supreme Court of Texas’s most recent reiterations of that requirement. See Ritchie,
443 S.W.3d at 874 n.27 (“informal fiduciary duties are not owed in business
transactions unless the special relationship of trust and confidence existed prior to,

20
and apart from, the transaction(s) at issue in the case.”); Cardiac Perfusion Servs.,
Inc. v. Hughes, 436 S.W.3d 790, 791 n.1 (Tex. 2014) (per curiam) (noting that an
informal fiduciary duty arises separate and apart from business relationships).

Qureshi and Ali acknowledge that there was no pre-existing relationship
with the Siddiquis, but assert that “the Siddiquis’ conduct during the course of their
business venture—exerting complete control of the management and operations of
the venture, to the point of self-dealing with another company owned by the
Siddiquis—gave rise to an informal fiduciary relationship.” Qureshi and Ali
contend that the evidence showed that “the Siddiquis retained sole and exclusive
control of Blueline, so that they could hide critical information from Qureshi and
Ali.” As support for their contentions, Qureshi and Ali reproduce a portion of
Guevara v. Lackner, in which the court cites several cases for the proposition that
“Texas courts have . . . recognized that an informal fiduciary duty may exist
between the shareholders in a closely held corporation, depending on the
circumstances.” See 447 S.W.3d 566, 580–81 (Tex. App.—Corpus Christi 2014,
no pet.) (emphasis supplied) (collecting cases from the First, Third, Fourth, and
Fifth courts of appeals ).7

Although some Texas appellate courts have held that, in certain
circumstances, an informal fiduciary duty may arise between shareholders in a
closely held corporation in the absence of a pre-transaction relationship, Qureshi

7
We note that Guevara itself is factually distinguishable because in that case, the court
found that there was evidence supporting the existence of an informal fiduciary duty because the
company agreement between Dr. Guevara and the defendants, the Lackners, expressly provided
that “the Lackners, as managers, had ‘the sole and exclusive control of the management, business
and affairs of the Company.” Id. at 581. There was also evidence that the Lackners’ position as
managers gave them intimate knowledge of the company’s daily affairs and plans, and that Dr.
Guevara, who was not a manager, did not have such extensive knowledge and was not involved
in the daily operations of the company. Id.

21
and Ali do not cite and we have not found any case in which this Court has adopted
such an expansive view. After Meyer, this Court has consistently determined that
informal fiduciary duties do not arise in business transactions (as contrasted with a
moral, social, domestic, or merely personal relationship) unless the special
relationship of trust and confidence existed before the transaction at issue. See,
e.g., Envtl. Procedures, Inc. v. Guidry, 282 S.W.3d 602, 628 (Tex. App.—Houston
[14th Dist.] 2009, pet. denied) (Guzman, J.) (quoting Associated Indem. Corp., 964
S.W.2d at 288 (affirming directed verdict on informal fiduciary relationship
because “[w]hen a business transaction is involved, ‘the special relationship of
trust and confidence must exist prior to, and apart from, the agreement made the
basis of the suit”); see also Davis-Lynch, Inc. v. Asgard Techs., LLC, 472 S.W.3d
50, 61 (Tex. App.—Houston [14th Dist.] 2015, no pet.); Daniels v. Empty Eye,
Inc., 368 S.W.3d 743, 749–50 (Tex. App.—Houston [14th Dist.] 2012, pet.
denied); Priddy v. Rawson, 282 S.W.3d 588, 599 (Tex. App.—Houston [14th
Dist.] 2009, pet. denied); Anglo-Dutch Petroleum Int’l, Inc. v. Smith, 243 S.W.3d
776, 781–82 (Tex. App.—Houston [14th Dist.] 2007, pet. denied).

The Texas Supreme Court recently disavowed both a common law claim for
shareholder oppression and a formal fiduciary duty to individual shareholders. See
Ritchie, 443 S.W.3d at 889–91. In light of this precedent, notwithstanding the
Court’s acknowledged “‘gap’ in the protection that the law affords to individual
minority shareholders,” we see nothing in Texas Supreme Court authority since
Meyer to suggest that an expansion of the duty is supported. See id. at 889.
Moreover, we need not do so here because the evidence in this case provides no
special circumstances or special facts warranting such an expansion beyond our
existing precedent.

22
 2. The evidence does not support the imposition of an informal
fiduciary duty on the appellants
Turning to the evidence of the circumstances of the parties’ relationship, we
begin with their contractual arrangements. It is undisputed that Qureshi’s and Ali’s
investments in Fancy Bites and Quick Eats were arm’s-length transactions that
gave each of them a 25% membership in the LLCs. The relationship between
shareholders or members in a closely held corporation, without more, does not give
rise to fiduciary duties. Cardiac Perfusion Servs., 436 S.W.3d at 791 n.1; Power
Reps, Inc. v. Cates, No. 01-13-00856-CV, 2015 WL 4747215, at *10 (Tex. App.—
Houston [1st Dist.] Aug. 11, 2015, no pet.) (mem. op.). Significantly, the
agreements governing the LLCs provided that the Siddiquis, Qureshi, and Ali were
each co-equal managers and owners of the LLCs, with none having a contractual
right to greater control than any of the others. Additionally, the parties’ agreements
expressly permitted the LLCs and Blueline to contract with any of the partners,
managers, members, or their affiliates. Qureshi and Ali were aware that Suncoast
was owned by the Siddiquis, and they agreed that Suncoast would perform the
build-out and construction for both restaurants.

Qureshi and Ali assert that, despite their positions as co-equal managers, the
Siddiquis exercised “sole and exclusive control” of the management and operations
of the venture. At trial, however, Qureshi and Ali acknowledged at least some
participation in the venture. Ali testified that because he already owned a Hartz
Chicken franchise and had contacts with the franchisor, the four agreed that he
would “take the lead” on getting the Bammel restaurant started. With Ali’s help,
Qureshi applied for and obtained the franchise at the Bammel location. Ali also
assisted with obtaining a sign for the restaurant, he signed and filed assumed name
records on behalf of Blueline and Fancy Bites, and he hired and fired the
restaurant’s first manager. Qureshi sold the pad site for the Antoine restaurant to
23
Blueline, and at some point, Qureshi, Ali, and Najeeb Siddiqui all went to an
auction site together to buy equipment for one of the restaurants. Qureshi and Ali
also signed the loan documents and guarantees for the Antoine restaurant.

Further, although Qureshi and Ali both testified that the Siddiquis
“controlled” all aspects of the entities and their finances, their testimony
demonstrates that any control exercised by the Siddiquis resulted because Qureshi
and Ali chose not to participate in the entities’ financial affairs.8 For example, Ali
admitted that he was called on to open the Bammel restaurant because he had prior
franchise experience, but he felt excluded from operating it when, the day after the
store opened, Najeeb told him he did not need to be there every day since there was
a store manager. Ali explained that his “feelings were hurt” and consequently he
decided that he no longer wanted to be involved in the daily operations. He
acknowledged, however, that as a co-equal manager of the LLCs he had an equal
right to access the books and records.

Qureshi, like Ali, agreed that he had the right to participate in the
management of the companies. Yet, Qureshi never asked the Siddiquis for access
to the books and records and never asked to have his name put on the bank
account. Qureshi testified that he assumed the LLCs were making the loan

8
Although Qureshi and Ali denied knowing that the restaurants were not doing well, they
acknowledged meeting with the Siddiquis several times to discuss cash flow shortages and they
agreed to contribute additional funds. They also acknowledged receiving some financial
information from the Siddiquis, Hartz Restaurant, and the Bank between 2008 and 2010. For
example, both Qureshi and Ali received an email from Ajaz Siddiqui dated March 30, 2008,
attaching sales and payroll data for the Bammell restaurant. There were also emails from Ajaz to
Ali in April 2008, forwarding spreadsheets about sales, food and supply costs, and bills from
vendors. Ajaz also sent Ali sales data for April, May, and June 2008. In early 2009, Ali
forwarded to Ajaz weekly sales reports Ali was apparently receiving from Hartz corporate
offices. Ali also acknowledged that in 2009 he regularly received letters from the Bank
concerning late loan payments. In June 2009 and again in June 2010, Qureshi and Ali, along with
the Siddiquis, were notified by legal counsel for Hartz that they were in breach of the franchise
agreement for, among other things, failing to pay franchise fees.

24
payments until July 2010 (when he and Ali began paying 25% each), but he never
asked to see the documentation. And although Qureshi testified that the Siddiquis
controlled access to the two restaurants, Qureshi admitted that he did not want
access to the restaurants, and he never asked for a set of keys to the Antoine
restaurant until after he and Ali fired its manager. Qureshi also admitted that he
never asked the Siddiquis for any sales or expense reports because he was busy
with his own businesses and did not want to get involved.

Qureshi and Ali also assert that Siddiquis exercised control over Blueline
“so that they could hide crucial information” from them, including self-dealing
between Suncoast and Blueline. Specifically, Qureshi and Ali point to testimony
they contend shows that the Siddiquis “prepared the construction invoices on
behalf of Suncoast, then approved them on behalf of Blueline, without ever letting
Qureshi and Ali see them.” In the testimony cited as support, Qureshi states that
the Siddiquis never sent him copies of the progress payments to Suncoast or any of
the communications they had with the Bank about the status and progress of the
loans. But Qureshi and Ali did not testify that the Siddiquis repeatedly refused to
provide the information when requested or otherwise prevented them from
obtaining this information despite the exercise of their positions as co-equal
managers. And, even if, as the trial court found, the Siddiquis engaged in self-
dealing “with regard to Suncoast,” evidence that Suncoast overcharged non-party
Blueline for its construction services, without more, is not enough to overcome the
contractual business arrangements among the entities and impose fiduciary duties
on the Siddiquis. See Schlumberger, 959 S.W.2d at 177 (“In order to give full force
to contracts, we do not create [informal fiduciary relationships] lightly.”).

Neither Qureshi nor Ali testified that they had any relationship other than a
business relationship with the Siddiquis, and they did not testify that they placed

25
any particular trust or reliance on the Siddiquis to manage the venture for them.
See Thigpen, 363 S.W.2d at 253; see also Ins. Co. of N. Am. v. Morris, 981 S.W.2d
667, 674 (Tex. 1998) (stating that a confidential relationship may arise “when the
parties have dealt with each other in such a manner for a long period of time that
one party is justified in expecting the other to act in its best interest”). Even if the
trial court found that Qureshi and Ali acquiesced to the Siddiquis’ management
because they subjectively trusted the Siddiquis, such evidence does not transform
the parties’ business arrangement into a fiduciary relationship. See Meyer, 167
S.W.3d at 331; Schlumberger, 959 S.W.2d at 177; see also Willis v. Donnelly, 199
S.W.3d 262, 277 (Tex. 2006) (declining to impose a fiduciary duty in context
business transaction when “[t]here was no evidence that, after the agreement was
signed, Donnelly developed a close personal relationship of trust and confidence
that could give rise to a fiduciary relationship.”).

Finally, the trial court did not find that Suncoast owed a fiduciary duty to
Qureshi and Ali. We conclude that if the trial court imposed joint and several
liability on Suncoast based on an implied finding that Suncoast knowingly
participated in the Siddiquis’ breach of fiduciary duty to Qureshi and Ali, it was
error. See Kline v. O’Quinn, 874 S.W.2d 776, 786 (Tex. App.—Houston [14th
Dist.] 1994, writ denied) (explaining that a party cannot be jointly liable for
participating in another defendant’s alleged breach of fiduciary duty unless the
other defendant owed a fiduciary duty to plaintiff). We therefore sustain the
Siddiqui’s first issue and hold that the trial court erred in rendering judgment that
Qureshi and Ali recover actual damages from Ajaz Siddiqui, Najeeb Siddiqui, and
Suncoast, jointly and severally, based on breach of fiduciary duties.

26
 C. Fraud

In addition to rendering judgment that the Siddiquis and Suncoast were
liable for breach of fiduciary duty, the trial court also rendered judgment that they
were liable for fraud. In its findings of fact and conclusions of law, the trial court
found that the Siddiquis—but not Suncoast—made unspecified disclosures and
failures to disclose that constituted fraud. The trial court further found that the
Siddiquis’ fraud proximately caused actual damages to Qureshi and Ali in the
amount of $514,482.68.

In their second issue, the appellants contend that there is no evidence or
factually insufficient evidence that the Siddiquis or Suncoast committed fraud in
connection with the sale of the 25% interests in the LLCs to Qureshi and Ali. As
we explained in the section on standing above, the only actionable allegations
Qureshi and Ali have standing to assert individually are that the Siddiquis
fraudulently induced Qureshi and Ali to purchase their 25% interests in the LLCs
based on (1) ownership of the Bammel property, (2) the costs of finishing
construction on the Bammel restaurant, or (3) the execution of the personal
guaranties of Blueline’s debt to the Bank by Qureshi and Ali.

To recover on an action for fraud or fraudulent inducement, a party must
prove that (1) a material representation was made, (2) the representation was false,
(3) when the representation was made, the speaker knew the representation was
false or made it recklessly without knowledge of the truth as a positive assertion,
(4) the representation was made with the intention that it should be acted upon by
the party, (5) the party acted in reliance upon it, and (6) the party thereby suffered
injury. Formosa Plastics Corp., USA v. Presidio Eng’rs & Contractors, Inc., 960
S.W.2d 41, 47 (Tex. 1998); Solutioneers Consulting, Ltd. v. Gulf Greyhound
Partners, Ltd., 237 S.W.3d 379, 385 (Tex. App.—Houston [14th Dist.] 2007, no

27
pet.). Fraudulent inducement is a particular species of fraud that arises only in the
context of a contract and requires the existence of a contract as part of its
proof. Haase v. Glazner, 62 S.W.3d 795, 798–99 (Tex. 2001).

The failure to disclose information is equivalent to a false representation
only when particular circumstances impose a duty on a party to speak, and the
party deliberately remains silent. In re Int’l Profit Assocs., Inc., 274 S.W.3d 672,
678 (Tex. 2009) (orig. proceeding) (per curiam). A duty to disclose may arise (1)
when the parties have a confidential or fiduciary relationship; (2) when one party
voluntarily discloses information, which gives rise to the duty to disclose the whole
truth; (3) when one party makes a representation, which gives rise to the duty to
disclose new information that the party is aware makes the earlier representation
misleading or untrue; or (4) when one party makes a partial disclosure and conveys
a false impression, which gives rise to a duty to speak. Solutioneers Consulting,
237 S.W.3d at 385. Whether such a duty to speak exists is a question of law. In re
Int’l Profit Assocs., Inc., 274 S.W.3d at 678.

1. Ownership of the Bammel property
At trial, Qureshi and Ali testified that they were never told that the Bammel
property was owned by Ajaz’s company, Sunnyland Development, rather than
Blueline or one of the LLCs, and had they known this, they would never have
bought into the venture. On appeal, the appellants contend that that they made no
false oral or written representation concerning the ownership of the Bammel
property to fraudulently induce Qureshi and Ali to invest $425,000.00 in the
venture. The appellants also contend that the evidence is legally and factually
insufficient to support a finding that any misrepresentation concerning ownership
of the property was intentionally or recklessly made, and there is no evidence that
Qureshi and Ali suffered any damages, because ownership of the property was

28
later transferred to Blueline at no cost.

a. Evidence of a false representation

Qureshi and Ali acknowledge that the Siddiquis represented that they
“owned” the Bammel property, but argue that this was a partial representation
which triggered a duty to disclose “who had legal title, and how it might be
transferred into an entity in which Qureshi and Ali were participating.” The
appellants reply that no duty arose on the basis of a “partial disclosure” because the
representation that the Siddiquis “owned” the Bammel tract, as a whole, was not so
misleading or untrue as to constitute fraud.9 See Foust v. Old Am. Cnty. Mut. Fire
Ins. Co., 977 S.W.2d 783, 787 (Tex. App.—Fort Worth 1998, no pet.) (“The term
‘owner’ has no definite legal meaning.”).

According to the appellants, because “ownership” does not necessarily
require legal title but may encompass equitable or beneficial title, the
representation of ownership was not false. The appellants further posit that
“[b]ecause the Bammel tract was titled in the name of Sunnyland Development,
Inc., which was owned 100% by Ajaz Siddiqui and Ajaz Siddiqui was an owner
and manager of Fancy Bites and Quick Eats, Fancy Bites and Quick Eats were
equitable owners of the Bammel tract.” As support for this proposition, the
appellants cite generally to cases in which the courts have held that in certain
circumstances, reference to ownership of real property is not limited to possession
of legal title, but may encompass other forms of ownership. See Galveston Cent.
9
The Siddiquis also argue that they owed no duty of disclosure regarding the actual
owner of the Bammel property because Qureshi and Ali acknowledge that there was no pre-
existing relationship of trust and confidence before they purchased their interests in the limited
liability companies, and thus any informal fiduciary duty would have arisen only after the
purchase and sale transactions occurred. We agree that, because Qureshi and Ali concede that the
parties had no pre-existing relationship of trust and confidence, as a matter of law the Siddiquis
did not have a fiduciary duty to disclose specific information concerning ownership of the
Bammel property to Qureshi and Ali at the time they made their investments.

29
Appraisal Dist. v. TRQ Captain’s Landing, 423 S.W.3d 374, 376 (Tex. 2014);
AHF-Arbors at Huntsville I, LLC v. Walker Cty. Appraisal Dist., 410 S.W.3d 831,
836–37 (Tex. 2012); Estapa v. Saldana, 218 S.W.2d 222, 223–24 (Tex. Civ.
App.—San Antonio 1948, writ ref’d n.r.e.).

To bolster their specific contention that no misrepresentation occurred
because the LLCs were equitable owners of the Bammel property, as Ajaz Siddiqui
had an ownership interest in both the LLCs and Sunnyland, the appellants attempt
to analogize this case to Texas Standard Oil & Gas, L.P. v. Frankel Offshore
Energy, Inc. See 394 S.W.3d 753 (Tex. App.—Houston [14th Dist.] 2012, no pet.).
In Texas Standard, this Court held that the appellants’ representation in a
settlement agreement that they would assign to the appellees “all of their right, title
and interest in and to High Island Block A–96 (being an undivided seventy-five
percent interest)” was not a representation that they held title to 75% of the
property; rather, because one of the appellants owned a 75% beneficial interest in
the property pursuant to a nominee agreement, and appellants merely agreed to
transfer the interest they owned to appellees, no misrepresentation was made. Id. at
770–72.

As the appellants acknowledge, however, Sunnyland Development, the title
holder to the Bammel property, was a completely separate company owned solely
by Ajaz Siddiqui, and was not a party to the agreements with Qureshi and Ali. The
appellants do not explain how the mere fact that Ajaz was also an owner and
manager of Fancy Bites and Quick Eats created in the LLCs an equitable or
beneficial ownership interest in a separate company’s property. Indeed, Ajaz
Siddiqui acknowledged that a transfer of the Bammel property from Sunnyland
Development to the partnership would require him to execute a deed, which he
could not remember doing. Further, unlike Texas Standard, this case involves a

30
seller’s present representation that either Blueline or one of the LLCs owned the
Bammel property, a representation that induced Qureshi and Ali to invest in the
venture, not a seller’s representation that it was merely agreeing to transfer to
another whatever interest it owned.

We conclude that the evidence supports the trial court’s implied finding that
Siddiquis represented that Blueline, Fancy Bites, or Quick Eats owned a valuable
asset that was actually titled in the name of a separate company solely owned by
Ajaz Siddiqui. This representation was a partial disclosure that conveyed a
substantially false impression and gave rise to a duty on the part of the Siddiquis to
make a full disclosure, which they did not do before Qureshi and Ali made their
investments in the venture. See White v. Zhou Pei, 452 S.W.3d 527, 539 (Tex.
App.—Houston [14th Dist.] 2015, no pet.) (concluding that defendant “provided
incomplete information that created a substantially false impression and failed to
provide the full truth concerning Taurus’s status”).10 Moreover, the fact that the
Bammel property was later transferred to Blueline at no cost did not affect the false
impression made at the time of the partial disclosure.

b. Evidence of scienter

The appellants next argue that the evidence is legally and factually
insufficient to show that the representation of ownership was known to be false
when made or was made without knowledge of its truth. “Intent is a fact question
uniquely within the realm of the trier of fact because it so depends upon the
credibility of the witnesses and the weight to be given to their
testimony.” Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986).

10
The Siddiquis cite several cases for the general proposition that a partial disclosure is
not actionable if it does not convey a false impression, but none of the cases cited involve
analogous circumstances or otherwise compel a different conclusion.

31
Intent may be inferred from a party’s actions before and after
the fraudulent conduct and may be proven by the circumstances surrounding
the fraud. Id.

On appeal, the appellants argue that there is no or factually insufficient
evidence that they knowingly or recklessly misrepresented the ownership of the
Bammel property. See Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc.,
962 S.W.2d 507, 526–27 (Tex. 1998) (explaining that a statement is not fraudulent
unless “the speaker knew it was false when made or the speaker made it recklessly
without knowledge of the truth” and that a misrepresentation that is merely made
negligently is insufficient to establish fraud). The appellants also argue that the
trial court’s disbelief or disregard of the appellants’ evidence is not evidence that
the opposite is true. See, e.g., Am. Indus. Life Ins. Co. v. Ruvalcaba, 64 S.W.3d
126, 143 (Tex. App.—Houston [14th Dist.] 2001, pet. denied). As evidence that
Ajaz lacked the requisite intent, the Siddiquis point to Ajaz’s testimony that he
genuinely believed that Blueline owned the Bammel property when Qureshi and
Ali made their investments, because he thought the property had been conveyed
when the partnership interest was first sold to the Hameeds. The Siddiquis also
contend that no testimony was elicited from Najeeb about his knowledge of the
falsity of the representation.

We conclude, however, that sufficient circumstantial evidence exists to
support a finding that the Siddiquis knowingly or recklessly misrepresented the
ownership of the Bammel property. For example, Ajaz confirmed that he and
Najeeb led Qureshi and Ali to believe that Blueline owned the Bammel property
when they were discussing the partnership venture in January 2007. Ajaz admitted,
however, that because Sunnyland Development owned the property, it would have
been necessary for him to sign a deed conveying the property from Sunnyland

32
Development to Blueline, but he could not recall ever doing so. Azaj also admitted
that he made no attempt to confirm that the Bammel property actually had been
transferred to Blueline. Ajaz testified that he assumed that the transfer had been
made when Najeeb and Hameed had signed the documents at the lawyer’s office in
connection with the earlier sale of the LLC interests to the Hameeds, but he
acknowledged that Najeeb was not authorized to convey property owned by
Sunnyland Development.

There was also evidence that in July 2007, well after Qureshi and Ali
purchased their interests, Najeeb filed in Harris County a “Commercial
Development Permit Application” for the Bammel property in which he
represented that “Najeeb R. Siddiqui/Sunnyland” was the property owner, not
Blueline. Further, the Siddiquis did not transfer title to the Bammel property to
Blueline until 2008, and then only after it became necessary to so in connection
with securing the Bank loans for the construction of the Antoine restaurant—loans
that substantially benefitted Suncoast and the Siddiquis. See Spoljaric, 708 S.W.2d
at 435 (“Since intent to defraud is not susceptible to direct proof, it invariably must
be proven by circumstantial evidence.”); Solutioneers Consulting, 237 S.W.3d at
386 (holding that evidence was legally and factually sufficient to support jury
finding of fraudulent intent based on circumstantial evidence and defendant’s
subsequent acts). We hold that legally and factually sufficient evidence
demonstrates that the Siddiquis knowingly or recklessly misrepresented the
ownership of the Bammel property with the intent that Qureshi and Ali rely on this
misrepresentation.

c. Evidence of damages

The Siddiquis also contend that there is no evidence of damages to Qureshi
and Ali resulting from any alleged misrepresentation of ownership. The Siddiquis

33
point out that title to the Bammel property was conveyed to Blueline on May 12,
2008, as security for the Bank loan, and Qureshi and Ali were not harmed by the
delay in transferring title because it was done free of cost. Further, the Siddiquis
assert that Qureshi and Ali “could not articulate or explain how they were damaged
in any way by the later transfer of the property.”

We disagree that the cost-free transfer of the Bammel property after Qureshi
and Ali made their investments is evidence that Qureshi and Ali were not harmed
by the misrepresentation of ownership. The evidence shows that neither Blueline,
Fancy Bites, nor Quick Eats owned any type of interest in the Bammel property at
the time the Siddiquis represented that it was a valuable asset of the partnership to
induce Qureshi and Ali to each pay $212,500.000 for their 25% interests in the
LLCs. Qureshi and Ali both testified that they would not have made their
investments if they had known that the property was not an asset of the venture.
Thus, contrary to the Siddiquis’ assertion, the record contains some evidence of
damages to Qureshi and Ali as a result of the Siddiquis’ misrepresentation of
ownership.

2. No representations concerning cost of Bammel restaurant
build-out
The Siddiquis next contend that there is no evidence of any oral or written
fraudulent misrepresentations or nondisclosures of the costs of finishing
construction on the Bammel property or the use of investment funds made before
Qureshi and Ali invested in the venture. In support of their contention, the
Siddiquis point to the purchase and sale agreements for the LLCs, which provide
for no specific use or disposition of the purchase price of $212,500.00 for each
25% interest. The Siddiquis also point to Qureshi’s and Ali’s testimony that the
Siddiquis and Suncoast made no representations regarding the use of their initial

34
investments or how much the Bammel construction would cost.

In response, Qureshi and Ali point to their testimony concerning what they
“understood” about how the money would be used or what they “believed” the
build-out should have cost, but they repeatedly acknowledged that the Siddiquis
made no express representations to them. Confining our review to pre-partnership
conduct, we agree that the evidence shows that the Siddiquis and Suncoast made
no express representations or fraudulent nondisclosures to Qureshi or Ali
concerning the cost of the Bammel restaurant build-out. Further, because Qureshi
and Ali acknowledge that the Siddiquis had no pre-existing relationship of trust
and confidence with them, the Siddiquis had no duty to provide that information.

3. No representations concerning the guarantees

Lastly, the Siddiquis contend that there is no evidence that they made any
misrepresentations or nondisclosures to induce Qureshi and Ali to sign the
guaranty agreements with the Bank. Specifically, the Siddiquis argue that the loan
documents expressly state the amount of the loans and specify that the loans were
made for the purpose of providing funds for construction, land costs, and FF&E for
the Antoine restaurant. We agree that the documents disclose the amounts and
purpose of the loans. Qureshi and Ali, both experienced businessmen,
acknowledged at trial that they were aware of the financing and guaranty
documents they signed, and they do not direct us to any evidence of
misrepresentations or nondisclosures by the Siddiquis concerning the guarantee
agreements. Accordingly, we hold that there is no evidence that the Siddiquis
fraudulently induced Qureshi and Ali to execute the guarantees. See In re Int’l
Profit Assocs., 274 S.W.3d at 679 (explaining that it is presumed that a party to a
contract understood and agreed to its contents).

35
 4. Summary of evidence of fraud

In summary, we conclude that there is no evidence to support a finding that
the Siddiquis or Suncoast made fraudulent misrepresentations or nondisclosures to
Qureshi and Ali concerning the cost of the build-out of the Bammel restaurant or
the guarantees. However, we also conclude that the Siddiquis’ representation that
Blueline, Fancy Bites, or Quick Eats owned the Bammel property to induce
Qureshi and Ali to invest a total of $425,000.00 in the Hartz Chicken franchise
venture was a misrepresentation or partial disclosure of ownership that triggered
the duty to disclose that the property was actually titled in the name of a separate
company wholly owned by Ajaz Siddiqui. The evidence is also legally and
factually sufficient to show that the Siddiquis made the representation with the
requisite intent and Qureshi and Ali sustained damages as a result. We therefore
overrule the Siddiquis’ second issue.

D. Fraud Damages
In their third issue, the appellants contend that there is no evidence of fraud
damages as a matter law, because Qureshi and Ali did not present evidence from
which the proper measure of restitution damages could be calculated to support the
award of $425,000.00. The Siddiquis also argue that the award of $89,482.68,
representing the return of guarantee payments made by Qureshi and Ali, are not
recoverable because they are consequential damages that were not reasonably
foreseeable or directly traceable to the alleged fraudulent misrepresentations.

1. Some evidence supports direct damages for Qureshi’s and
Ali’s initial investments
Texas recognizes two measures of direct damages for common-law fraud:
the out-of-pocket measure and the benefit-of-the-bargain measure. Formosa, 960
S.W.2d at 49; Fazio v. Cypress/GR Houston I, L.P., 403 S.W.3d 390, 394 (Tex.

36
App.—Houston [1st Dist.] 2013, pet. denied) (en banc). Out-of-pocket damages,
which derive from a restitutionary theory, measure the difference between the
amount the buyer paid and the value of the property the buyer received. Baylor
Univ. v. Sonnichsen, 221 S.W.3d 632, 636 (Tex. 2007) (per curiam); Leyendecker
& Assocs., Inc. v. Wechter, 683 S.W.2d 369, 373 (Tex. 1984).11 In contrast,
benefit-of-the-bargain damages, which derive from an expectancy theory, measure
the difference between the value represented and the actual value received.
Sonnichsen, 221 S.W.3d at 636; Leyendecker, 683 S.W.2d 373. Both measures are
determined at the time of sale. Arthur Andersen & Co. v. Perry Equip. Corp., 945
S.W.2d 812, 817 (Tex. 1997); Fazio, 403 S.W.3d at 395.

The Siddiquis contend that Qureshi and Ali presented evidence only of the
“value paid” component of the out-of-pocket measure of damages and no evidence
of the “value received” component. Absent such evidence, the Siddiquis argue that
Qureshi and Ali are barred from recovering on their fraud claim as a matter of law.
See Leyendecker, 683 S.W.2d at 373; Graves, 448 S.W.3d at 109 n.28 (citing
Arthur Andersen, 945 S.W.2d at 817, for the proposition that “[i]n cases of fraud or
negligent misrepresentation, out-of-pocket damages are the difference between the
value paid and the value received, measured at the time of the transaction.”).

Qureshi and Ali respond that the evidence is legally sufficient to support an
award of restitution damages because they “were induced to invest $212,500

11
Qureshi and Ali refer interchangeably to restitution and rescission when discussing the
basis for the damages awarded. The Supreme Court of Texas has explained that rescission is
merely a shorthand name for “the composite remedy of rescission and restitution.” Cruz v.
Andrews Restoration, Inc., 364 S.W.3d 817, 825 (Tex. 2012) (citing RESTATEMENT (THIRD) OF
RESTITUTION AND UNJUST ENRICHMENT § 54 cmt. a (2011)). Like restitution, rescission is
calculated based on the amount paid minus the benefits received. See id. (noting that “rescission
is not a one-way street” and “requires a mutual restoration and accounting, in which each party
restores property received from the other.”).

37
apiece in a venture that turned out to be worthless.” Therefore, Qureshi and Ali
argue, they are “entitled to be place in the position they would have been had the
fraud not occurred.” To the extent that Qureshi and Ali contend that they were
entitled to the return of the full amount of their investment because the venture
ultimately failed, we reject this contention because the value received must be
determined at the time of the transaction. See Graves, 448 S.W.3d at 109 n.28;
Fazio, 403 S.W.3d at 395–96; see also Highland Capital Mgmt., L.P. v. Ryder
Scott Co., 402 S.W.3d 719, 729–30 (Tex. App.—Houston [1st Dist.] 2012, no pet.)
(concluding that holders of unsecured bonds presented no evidence of the value
received at the time of their investment in bonds to support fraud and
misrepresentation damages, and that testimony that bonds were later considered
“essentially worthless” was not competent evidence of value at the time bonds
were purchased).

Nevertheless, the record contains some evidence that, at the time Qureshi
and Ali made their investments, the venture had no value. As discussed in the
previous subsection, the Siddiquis misrepresented that Fancy Bites, Quick Eats, or
Blueline owned the Bammel property when they induced Qureshi and Ali to make
their investments. Further, on cross-examination, Ajaz Siddiqui admitted that the
venture had no other assets:

Q. [Defense counsel] So, is it fair to say that in January 2007 when
you were discussing with Mr. Qureshi and Mr. Ali about investing in
this partnership with you and your brother, that you told them and led
them to believe that the partnership owned the Bammel property at
that time, correct?
A. [Ajaz Siddiqui] That’s what I believed.
Q. Right. Okay. But in reality the partnership didn’t own anything
at that time, correct?
A. That’s correct.

38
Additionally, the Siddiquis’ testimony concerning how they determined the value
of the partnership—and thus what amount to charge Qureshi and Ali for their 25%
interests—rested on the assumption that the partnership actually owned the
Bammel property that was to be built out and operated as a Hartz Chicken
franchise.

This evidence is legally sufficient to support a finding that the “value
received” component of the out-of-pocket measure of damages was zero at the
time the investments were made. Cf. Woodyard v. Hunt, 695 S.W.2d 730, 732–33
(Tex. App.—Houston [1st Dist.] 1985, no writ) (holding that there was legally
insufficient evidence from which jury could award full value of plaintiff’s
investment in shares of corporation as fraud damages when plaintiff’s shares “had
some value in view of the undisputed evidence that the corporation owned an
interest in certain real property”). Accordingly, legally sufficient evidence supports
the trial court’s award of $425,000.00 as out-of-pocket damages in favor of
Qureshi and Ali on their fraud claim.

2. No evidence supports an award of damages for Qureshi’s and
Ali’s payments on behalf of Blueline
The Siddiquis next challenge the award of $89,482.68, compensating
Qureshi and Ali for loan payments they made pursuant to the guaranty agreements
signed in connection with the Bank loans for construction of the Antoine
restaurant. According to the Siddiquis, these damages are not recoverable because
they are consequential damages that were not reasonably foreseeable or directly
traceable to the alleged fraudulent misrepresentations.12 In response, Qureshi and

12
Direct damages compensate the plaintiff for loss that is conclusively presumed to have
been foreseen by the defendant from his wrongful act. Arthur Andersen & Co., 945 S.W.2d at
816. Consequential damages, unlike direct damages, result naturally, but not necessarily, from
the defendant’s wrongful act and must be foreseeable and directly traceable to the wrongful act.
Id.

39
Ali argue only that they would not have made the $89,482.68 in payments absent
the initial fraud. They do not address the Siddiquis’ contention that these damages
are consequential, rather than direct, damages. However, because we have
determined that there is no evidence that the Siddiquis committed fraud in
connection with the execution of the guaranty agreements, Qureshi and Ali are not
entitled to compensation for their payments to the Bank on behalf of Blueline.

We therefore overrule the appellants’ third issue in part and hold that the
evidence supports the trial court’s award of damages of $425,000.00 to Qureshi
and Ali, representing the amount of their initial investment in the venture. We also
sustain the issue in part and hold that no evidence supports the award of
$89,482.68 for payments made by Qureshi and Ali on Blueline’s behalf pursuant to
the guaranty agreements they signed.

E. Unjust Enrichment

In their fourth issue, the appellants challenge the trial court’s unjust
enrichment findings. In addition to the appellants’ argument that Qureshi and Ali
lack standing to assert such claims, which we have addressed above in the section
on standing, the appellants also argue that unjust enrichment is not an independent
cause of action; the existence of contractual agreements between Blueline and
Suncoast preclude an unjust enrichment claim as a matter of law; and the unjust
enrichment findings are not supported by legally sufficient evidence. However,
because the trial court did not render judgment that the Siddiquis or Suncoast were
liable for unjust enrichment and did not award damages on that basis, we need not
address these contentions. We therefore overrule the appellants’ fourth issue.

F. Conspiracy

The trial court’s findings of fact and conclusions of law included a finding

40
that “[t]he Siddiquis and Suncoast were engaged in a conspiracy against Qureshi
and Ali.” In their fifth issue, the appellants contend that there are no grounds on
which to render judgment against either the Siddiquis or Suncoast for conspiracy,
because conspiracy requires an underlying tort and there was no fraud or breach of
fiduciary duty. See Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996); Zurita v.
Lombana, 322 S.W.3d 463, 482 (Tex. App.—Houston [14th Dist.] 2010, pet.
denied). Although we disagree with the appellants’ argument to the extent that we
have already concluded that the evidence supported the trial court’s fraud finding
based on the Siddquis’ misrepresentation that either Blueline or the LLCs owned
the Bammel property, we conclude that it is unnecessary to address the bulk of this
issue because the trial court did not render judgment against any of the appellants
for conspiracy.

Elsewhere in their brief, however, the Siddiquis have argued that the trial
court’s rendition of judgment against Suncoast for joint and several liability was
error to the extent that it was predicated on the conspiracy finding. Because we
have already concluded that there is no evidence to support the underlying tort of
breach of fiduciary duty, the only remaining basis for imposing joint and several
liability on Suncoast would be an implied finding by the trial court that Suncoast
conspired with the Siddiquis to commit fraud. But Qureshi and Ali do not direct us
to any evidence that Suncoast was involved in the Siddiquis’ misrepresentation of
the ownership of the Bammel property, and we have located none in the record.
Therefore, we sustain the appellants’ fifth issue in part and hold that the trial court
erred to the extent that it imposed joint and several liability on Suncoast for the
actual damages awarded to Qureshi and Ali.

G. Exemplary Damages

In their sixth issue, the appellants contend that the exemplary damages

41
awarded against Ajaz Siddiqui should be reversed and rendered as a matter of law
because there is no independent and underlying tort cause of action or tort
damages. We have already concluded that the trial court did not err by determining
that the Siddiquis were liable for damages based on fraud; therefore, we reject the
appellants’ initial argument that the exemplary damages award is improper as a
matter of law.

The appellants also contend, however, that there is no or legally insufficient
evidence to support the exemplary damages assessed because there is no clear and
convincing evidence of fraud or malice. In support of this argument, the appellants
point to the trial court’s fact findings concerning exemplary damages that reference
the costs of construction of the Bammel and Antoine restaurants. As to those
findings, the appellants argue there is “no legally sufficient evidence” that Ajaz
Siddiqui fraudulently induced Qureshi and Ali to make their initial investments or
execute the personal guarantees “based on construction costs or the costs of
improvements.” Further, to the extent that the trial court’s construction-related
findings are based on purported overcharges by Suncoast, the appellants again
argue that those claims belong solely to Blueline, and therefore Qureshi and Ali
lack standing to assert them for the reasons previously asserted.

The trial court’s findings were not limited to construction-related findings,
however. Among other things, the trial court found that Ajaz “intentionally
defrauded Qureshi and Ali regarding the acquisition of their membership interest in
Fancy Bites and Quick Eats” and that “[t]here is clear and convincing evidence of
fraud perpetrated by Ajaz R. Siddiqui against Qureshi and Ali regarding their
acquisition of their membership interest in Fancy Bites and Quick Eats.”13 As

13
Although the Siddiquis assert in a footnote that they challenge all of the trial court’s
seventeen exemplary damages findings, they present no argument or analysis addressing the
findings not involving construction costs.

42
discussed above, we have rejected the Siddiquis’ evidentiary challenges to the trial
court’s finding that the Siddiquis fraudulently induced Qureshi and Ali to invest a
total of $425,000.00 for the purpose of constructing and operating a Hartz Chicken
franchise on the Bammel property, when in fact the title to the Bammel property
was held by a separate company wholly owned by Ajaz Siddiqui.

We recognize that our evidentiary review of the appellants’ challenge to the
trial court’s fraud findings was not made under the elevated standard of proof
required to support an exemplary damages award. See Tex. Civ. Prac. & Rem.
Code § 41.003(a) (requiring proof “by clear and convincing evidence” to support
exemplary damages award). The appellants assert generally that the exemplary
damages assessed against Ajaz Siddiqui “are supported by no evidence or legally
insufficient evidence” and there is “no clear and convincing evidence of fraud or
malice” to support an award of exemplary damages. However, the appellants do
not brief the clear and convincing standard of review or provide any analysis
explaining how the evidence presented to the trial court does not meet this
standard. We therefore hold that any challenge to the legal sufficiency of the
evidence to support the exemplary damages award is waived. See Tex. R. App. P.
38.1(i); McCullough v. Scarbrough, Medlin & Assocs., Inc., 435 S.W.3d 871, 911–
12 (Tex. App.—Dallas 2014, pet. denied) (holding appellant waived on appeal
challenge to exemplary damages award when he made only conclusory assertions
in his brief and provided no analysis explaining how the evidence presented to the
fact finder did not meet the clear and convincing standard of review). We overrule
the appellants’ sixth issue.

H. The Siddiquis’ Request for Rendition of a Money Judgment

Finally, in their seventh issue, the Siddiquis request that judgment be
rendered in their favor on their contribution claims against Qureshi and Ali, plus

43
attorney’s fees. According to the Siddiquis, the undisputed evidence shows that
they paid more than their share of the indebtedness owed to the Bank, totaling
$195,749.89. Therefore, the Siddiquis contend, they are entitled to judgment
against Qureshi and Ali for contribution for their one-fourth of the payments. See
Miller v. Miles, 400 S.W.2d 4, 9 (Tex. Civ. App.—Tyler 1966, writ ref’d n.r.e.)
(holding co-guarantor established a cause of action for equitable contribution). The
Siddiquis also contend that they are entitled to attorney’s fees of $50,347.50, based
on their trial counsel’s uncontroverted testimony. In response, Qureshi and Ali
argue that the Siddiquis’ fraud vitiates their purported right to transfer some of
their losses to Qureshi and Ali.

The trial court made nine findings of fact in connection with the Siddiquis’
claim for payment from Qureshi and Ali based on their obligations as co-
guarantors. Of those, the Siddiquis discuss only the following finding: “Qureshi
and Ali, as co-guarantors on the two bank loans, do not owe any money to the
Siddiquis or Suncoast for note payments to Bank on behalf of Blueline since the
Siddiquis and Suncoast have ‘unclean hands’ and the Siddiquis committed fraud
and breach of fiduciary duty.” The Siddiquis assert that because there is no
evidence to support the findings that the Siddiquis and Suncoast committed fraud
or breached fiduciary duties, “there are no findings that serve as a defense to the
obligations of Qureshi and Ali to repay the Siddiquis.” But we have already
overruled the Siddiquis’ evidentiary challenges to the trial court’s implied finding
that the Siddiquis fraudulently induced Qureshi and Ali to invest in the venture
based on their representation of ownership of the Bammel property. Therefore, the
Siddiquis’ argument fails.

Next, the Siddiquis again argue that to the extent that Qureshi and Ali rely
on their claim that the Siddiquis and Suncoast committed fraud and breach of

44
fiduciary duty with respect to the management of Blueline or construction
overcharges, Qureshi and Ali have no standing as guarantors to assert the claimed
conduct as a defense to their repayment obligations, citing Thaw v. Schachar, No.
07-10-0027-CV, 2011 WL 3112064, at *4–5 (Tex. App.—Amarillo July 26, 2011,
pet. denied) (mem. op.) (holding that co-shareholder lacked standing to assert
counterclaim for fraud, breach of fiduciary duty, and other claims belonging to
corporation in response to shareholder’s action for enforcement of co-shareholder’s
guaranty obligation on a note and lease after shareholder paid off balances and was
assigned the note and lease). Although we agree with the holding in Thaw for the
reasons previously discussed, it does not preclude the trial court’s denial of the
Siddiquis’ claim for equitable contribution in this case because in Thaw, the co-
shareholder seeking to avoid enforcement of the guaranty obligation asserted only
claims belonging to the corporation. See id. at *4. In the present case, Qureshi and
Ali made individual claims for fraud based on the Siddiquis’ misrepresentations
that induced them to invest in the failed venture in the first place, and we have
concluded that the evidence supports those claims. The Siddiquis make no other
challenge to the trial court’s denial of their request for a money judgment and
attorney’s fees against Qureshi and Ali.

Having rejected the Siddiquis’ arguments, we overrule their seventh issue.

CONCLUSION

We sustain the appellants’ first issue and sustain in part their third and fifth
issues. We overrule the appellants’ second, fourth, sixth, and seventh issues. We
reform the trial court’s judgment to delete that portion of the judgment holding
Ajaz R. Siddiqui, Najeeb Siddiqui, and Suncoast Construction, Inc., liable to
Farhan S. Qureshi and Syed Khalid Ali based on breach of fiduciary duties. We
further reform the award of actual damages to Farhan S. Qureshi and Syed Khalid

45
Ali to provide that Farhan S. Qureshi and Syed Khalid Ali jointly recover from
Ajaz R. Siddiqui and Najeeb Siddiqui, jointly and severally, actual damages in the
amount of $425,000.00, plus prejudgment interest on that sum at the annual rate of
5%, in the amount of $45,050.00, and court costs. We delete that portion of the
judgment rendering Suncoast Construction, Inc., jointly and severally liable for the
actual damages awarded. We affirm the judgment as modified.

/s/ Ken Wise
Justice

Panel consists of Justices Jamison, McCally, and Wise.

46