Court Opinion

ID: 4152634
Source: CourtListenerOpinion
Date Created: 2017-03-15 14:13:57.015237+00
Date Added: 2024-06-11T07:46:34.154588
License: Public Domain

Opinion issued March 14, 2017

                                   In The

                            Court of Appeals
                                  For The

                        First District of Texas
                           ————————————
                            NO. 01-16-00347-CV
                          ———————————
                  HASSAN CHAHADEH, M.D., Appellant
                                     V.
JACINTO MEDICAL GROUP, P.A. AND PARADISE MARKETING AND
               CONSULTING, L.P., Appellees

                   On Appeal from the 61st District Court
                           Harris County, Texas
                     Trial Court Case No. 2015-44173

                                OPINION

      Hassan Chahadeh, M.D., personally guaranteed loans made by Jacinto

Medical Group, P.A. and Paradise Marketing and Consulting, L.P. to University

General Health System Inc. and University General Hospital, L.P. (collectively

“UGH”). Subsequently, UGH defaulted on the loans and filed for Chapter 11
bankruptcy protection. Appellees sent notice and demand to Chahadeh requesting

payment under the guaranty agreements, but Chahadeh did not pay. Appellees sued

Chahadeh for breach of the guaranty agreements and filed a traditional summary-

judgment motion, which the trial court granted.

      In his sole issue on appeal, Chahadeh argues that the trial court erred by

granting summary judgment because the bankruptcy court has exclusive jurisdiction

over appellees’ claims against him and the summary-judgment evidence did not

conclusively establish the amount of his liability. We affirm.

                                   Background

The promissory notes & guaranty agreements

      Chahadeh is the CEO of University General Health System Inc. and the

Chairman of University General Hospital, LP. In February 2014, Jacinto loaned

University General Health System Inc. $1,400,000 under the terms of a promissory

note. At the same time, Paradise made two loans to University General Hospital,

L.P.—one in the amount of $360,000 and one in the amount of $457,979.81—under

the terms of two corresponding promissory notes.

      The dispute in this case centers on two guaranty agreements that Chahadeh

executed personally guaranteeing the three promissory notes. One guaranteed

payment of the Jacinto promissory note, and the other guaranteed payment of the

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two Paradise promissory notes. In both guaranty agreements, Chahadeh agreed to

pay any amounts due under the promissory notes if UGH1 defaulted on them:

      In the event of default by [UGH] in payment or performance of the
      Guaranteed Indebtedness, or any part thereof . . . [Chahadeh] shall
      promptly pay the amount due hereunder . . . within two (2) business
      days after notice and demand.”

The agreements provided that they were guarantees of payment, not collection:

      This instrument shall be an absolute, continuing, irrevocable, and
      unconditional guaranty of payment and performance, and not a
      guaranty of collection . . . .
They also provided that Chahadeh could not assert a setoff or reduction defense to a

demand for payment:

      No setoff, counterclaim, recoupment, reduction, or diminution of any
      obligation, or any defense of any kind or nature which [UGH] may have
      against Lender or any other party, or which Guarantor may have against
      [UGH], Lender, or any other party, shall be available to, or shall be
      asserted by, Guarantor against Lender . . . or against payment of the
      Guaranteed Indebtedness or any part thereof.

In addition, Chahadeh agreed that his obligation would not be diminished if UGH

declared bankruptcy:

      Guarantor hereby agrees that its obligations under this Guaranty
      Agreement shall not be released, discharged, diminished, impaired,
      reduced, or affected for any reason or by the occurrence of any event,
      including . . . any disability of [UGH], or the dissolution, insolvency,
      or bankruptcy of [UGH].

1
      The guaranty agreements are substantively identical.
                                           3
UGH declares bankruptcy

      In February 2015, UGH and affiliated companies filed a voluntary petition

seeking Chapter 11 bankruptcy protection. Appellees filed claims in the bankruptcy

proceeding for the amounts UGH owed them under the three promissory notes and

other agreements. Appellees later sent notice and demand to Chahadeh for payment

under the guaranty agreements, but he refused to pay.

The underlying lawsuit

      Appellees sued Chahadeh for breach of the two guaranty agreements. After

discovery, appellees moved for summary judgment and supported the motion with

evidence, including copies of the three promissory notes, the two guaranty

agreements, the demand letter, and Chahadeh’s responses to their requests for

admission. They also submitted the affidavit of Siraj Jiwani, the Chief Executive

Officer of Jacinto and the Vice President of Paradise, who averred that UGH

defaulted on the promissory notes, payment under the guaranty agreements was

demanded from Chahadeh, and he had not paid. Jiwani’s affidavit also set forth the

total unpaid guaranteed indebtedness owed by Chahadeh under each of the two

guaranty agreements and the amount of interest accruing on each per day. Chahadeh

responded and argued that summary judgment was improper because the bankruptcy

court had exclusive jurisdiction over appellees’ claims against him. The trial court

granted summary judgment. Chahadeh appealed.

                                         4
                                     Discussion

      Chahadeh argues that the trial court lacked jurisdiction because appellees’

filing of a proof of claim in the bankruptcy court vested that court with exclusive

jurisdiction over their claims against him. Chahadeh also contends that the trial court

erred in granting summary judgment in appellees’ favor because appellees’

summary-judgment evidence regarding damages was self-contradictory and

therefore did not conclusively establish the amount of his liability.

A.    Standard of Review

      “We review a trial court’s summary judgment de novo.” Travelers Ins. Co. v.

Joachim, 315 S.W.3d 860, 862 (Tex. 2010). “We review the evidence presented in

the motion and response in the light most favorable to the party against whom the

summary judgment was rendered, crediting evidence favorable to that party if

reasonable jurors could, and disregarding contrary evidence unless reasonable jurors

could not.” Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d
844, 848 (Tex. 2009).

      When reviewing a summary judgment, we must (1) take as true all evidence

favorable to the nonmovant and (2) indulge every reasonable inference and resolve

any doubts in the nonmovant’s favor. Id. In a traditional summary-judgment

motion, the movant has the burden to show that no genuine issue of material fact

exists and that the trial court should grant judgment as a matter of law. TEX. R. CIV.

                                          5
P. 166a(a), (c); KPMG Peat Marwick v. Harrison Cty. Hous. Fin. Corp., 988 S.W.2d
746, 748 (Tex. 1999). If the movant meets its summary-judgment burden, the

burden shifts to the nonmovant, who bears the burden to raise a genuine issue of

material fact precluding summary judgment. Lujan v. Navistar Fin. Corp., 433
S.W.3d 699, 704 (Tex. App.—Houston [1st Dist.] 2014, no pet).

B.    Applicable Law

      A guaranty is a promise to a creditor by a third party to pay a debt on behalf

of a principal in the event that the principal defaults on the original obligation. See

Republic Nat’l Bank of Dallas v. Nw. Nat’l Bank of Fort Worth, 578 S.W.2d 109,

114 (Tex. 1978). To support a claim for breach of a guaranty, a party must show

proof of (1) the existence and ownership of a guaranty contract; (2) the terms of the

underlying contract by the holder; (3) the occurrence of the conditions upon which

liability is based; and (4) the failure or refusal to perform by the guarantor. Lee v.

Martin Marietta Materials Sw., Ltd., 141 S.W.3d 719, 720 (Tex. App.—San Antonio

2004, no pet.).

      “The law recognizes two distinct types of guaranty: a guaranty of collection

(or conditional guaranty) and a guaranty of payment (or unconditional guaranty).”

Cox v. Lerman, 949 S.W.2d 527, 530 (Tex. App.—Houston [14th Dist.] 1997, no

pet.) (first citing Universal Metals & Mach., Inc. v. Bohart, 539 S.W.2d 874, 877

(Tex. 1976); then citing United States v. Vahlco Corp., 800 F.2d 462, 465 (5th Cir.

                                          6
1986); then citing Ford v. Darwin, 767 S.W.2d 851, 854 (Tex. App.—Dallas 1989,

writ denied)). A guaranty of collection is an undertaking of the guarantor to pay if

the debt cannot be collected from the primary obligor by the use of reasonable

diligence, and requires the lender to pursue the principal debtor before collecting.

Id. In contrast, a guaranty of payment is an obligation to pay the debt when due if

the debtor does not and requires no condition precedent to its enforcement against

the guarantor other than a default by the principal debtor. Id. Unlike a guarantor of

collection, a “guarantor of payment is primarily liable and waives any requirement

that the holder of the note take action against the maker as a condition precedent to

his liability on the guaranty.” Id. (citing Hopkins v. First Nat’l Bank at Brownsville,

551 S.W.2d 343, 345 (Tex. 1977) (per curiam)). “A guarantor of payment is thus

akin to a co-maker in that the holder of the note can enforce it against either party.”

Id. (citing Reece v. First State Bank, 566 S.W.2d 296, 297 (Tex. 1978)).

      The terms of a guaranty agreement determine whether the guaranty is a

guaranty of collection or of payment. See Berry v. Encore Bank, No. 01-14-00246-

CV, 2015 WL 3485970, at *2, *5 (Tex. App.—Houston [1st Dist.] June 2, 2015, pet.

denied) (mem. op.) (citing Yamin v. Conn, L.P., No. 14-10-00597-CV, 2011 WL
4031218, at *6 (Tex. App.—Houston [14th Dist.] Sept. 13, 2011, no pet.) (mem.

op.)). When construing a guaranty agreement, our primary goal is to ascertain and

give effect to the parties’ intent. Id. (first citing Coker v. Coker, 650 S.W.2d 391,

                                          7
393 (Tex. 1983); then citing Hasty v. Keller HCP Partners, L.P., 260 S.W.3d 666,

670 (Tex. App.—Dallas 2008, no pet.)).            Where the language is clear and

unambiguous, the best guide to the parties’ intent is the language of the guaranty.

Id. (first citing Univ. Sav. Ass’n v. Miller, 786 S.W.2d 461, 462–63 (Tex. App.—

Houston [14th Dist.] 1990, writ denied); then citing Sw. Sav. Ass’n v. Dunagan, 392
S.W.2d 761, 767 (Tex. App.—Dallas 1965, writ ref’d n.r.e.)). We strictly construe

a guaranty in favor of the guarantor. Cox, 949 S.W.2d at 530.

C.    Did the trial court lack jurisdiction over appellees’ claims against
      Chahadeh?

      Because it implicates our own jurisdiction, we first address Chahadeh’s

argument that appellees’ filing of a proof of claim in the bankruptcy court vested

that court with exclusive jurisdiction over appellees’ claims against Chahadeh.

Bankruptcy courts have “original and exclusive” jurisdiction over all cases “under

title 11,” but have only “original but not exclusive” jurisdiction over “all civil

proceedings arising under title 11, or arising in or related to cases under title 11.” 28

U.S.C. § 1334(a), (b). Thus, the only aspect of a bankruptcy proceeding over which

the bankruptcy court has exclusive jurisdiction is the bankruptcy petition itself. In

re Walker, 51 F.3d 562, 568 (5th Cir. 1995); Matter of Brady, Tex., Mun. Gas Corp.,

936 F.2d 212, 218 (5th Cir. 1991) (quoting In re Wood, 825 F.2d 90, 92 (5th Cir.

1987)). State courts have concurrent jurisdiction over any other matters that arise in

or relate to cases under title 11. Brady, 936 F.2d at 218.

                                           8
      While appellees’ suit against Chahadeh is arguably “related to” UGH’s

bankruptcy petition, the bankruptcy court does not have exclusive jurisdiction over

a suit that is merely “related to” a bankruptcy petition. See 28 U.S.C. § 1334(b);

Brady, 936 F.2d at 218; see also Novosad v. Cunningham, 38 S.W.3d 767, 770 (Tex.

App.—Houston [14th Dist.] 2001, no pet.). Rather, it is well-settled that state courts

have concurrent jurisdiction over proceedings “related to” a bankruptcy petition. 28

U.S.C. § 1334(b); Brady, 936 F.2d at 218; see also Novosad, 38 S.W.3d at 770

(automatic bankruptcy stay ordinarily does not extend to actions against parties other

than debtor, including guarantors). Accordingly, the bankruptcy court did not have

exclusive jurisdiction over appellees’ claims against Chahadeh.

      The cases that Chahadeh cites do not support his argument to the contrary.

These cases stand for the propositions that the bankruptcy court has exclusive

jurisdiction over proceedings that only arise in bankruptcy, to allow or disallow

claims against the debtor’s estate. See Langenkamp v. Culp, 498 U.S. 42, 44 (1990)

(bankruptcy court has exclusive jurisdiction over allowance and disallowance of

bankruptcy claims against debtor); In re Wood, 825 F.2d at 97 (bankruptcy court has

exclusive jurisdiction over “core” proceedings, i.e., proceedings that by their nature

only arise in bankruptcy); America’s Favorite Chicken Co. v. Samaras, 929 S.W.2d
617, 630 (Tex. App.—San Antonio 1996, writ denied) (bankruptcy court has

exclusive jurisdiction over allowance and disallowance of bankruptcy claims against

                                          9
debtor). Chahadeh is not the bankruptcy debtor, and appellees’ suit for breach of the

guaranty agreements is not a proceeding that only arises in bankruptcy. In short,

Chahadeh provides no authority to support his claim that the trial court lacked

jurisdiction to decide appellees’ breach of guaranty claims.

      Chahadeh also contends that his liability under the guaranty agreements could

not be conclusively established until the bankruptcy court determines UGH’s

liability on the underlying promissory notes. Chahadeh contends that his liability

could be reduced or discharged if UGH’s liability on the underlying promissory

notes is reduced or discharged by the bankruptcy court. But Chahadeh’s liability

under the guaranty agreements is a separately enforceable obligation. See Cox, 949
S.W.2d at 530. Chahadeh expressly agreed that his obligation would not be reduced

or discharged, even if UGH declared bankruptcy:

      Guarantor hereby agrees that its obligations under this Guaranty
      Agreement shall not be released, discharged, diminished, impaired,
      reduced, or affected for any reason or by the occurrence of any event,
      including . . . any disability of [UGH], or the dissolution, insolvency,
      or bankruptcy of [UGH].

The sole case Chahadeh relies upon to support his argument, Republic National Bank

of Dallas v. Northwest National Bank of Fort Worth, 578 S.W.2d 109 (Tex. 1978),

does not address a guaranty like Chahadeh’s, which provides that he is primarily

liable for the debt and that his obligation would not be diminished if UGH declared

bankruptcy. See Cox, 949 S.W.2d at 530. Under the terms of the guaranty

                                         10
agreements, Chahadeh may be held independently liable for the amount of the

outstanding debts under the promissory notes without regard to the outcome of the

bankruptcy proceeding. See id.; see also Berry, 2015 WL 3485970, at *5 (court

construes terms of guaranty like any other contract to give effect to intent of

drafters).

       In sum, the trial court had jurisdiction over appellees’ claims against

Chahadeh, see Brady, 936 F.2d at 218, and Chahadeh may be held independently

liable for the amount of the outstanding debts under the terms of the guaranty

agreements without regard to the outcome of the bankruptcy proceeding.2 See Cox,
949 S.W.2d at 530; Brady, 936 F.2d at 218; see also GATX Aircraft Corp. v. M/V

Courtney Leigh, 768 F.2d 711, 717 (5th Cir. 1985) (preventing lender from pursuing

claim against guarantor of debt because debtor had filed bankruptcy petition would

be “legally inequitable”).

D.     Did appellees meet their burden to conclusively establish their breach of
       guaranty claims?

       Appellees filed a traditional motion for summary judgment on their breach of

guaranty claims. The elements of a breach of guaranty claim are: of (1) the existence

and ownership of a guaranty contract; (2) the terms of the underlying contract by the

2
       Appellees’ recovery could be limited by the single satisfaction rule, however. See
       In re Wash. Bancorporation, No. 90-00597, 1996 WL 148533, at *16–17 (D.D.C.
       Mar. 19, 1996) (no double recovery allowed).
                                           11
holder; (3) the occurrence of the conditions upon which liability is based; and (4) the

failure or refusal to perform by the guarantor. See Lee, 141 S.W.3d at 720.

Appellees’ summary-judgment evidence included a copy of the two guaranty

agreements executed by Chahadeh, one personally guaranteeing payment of the

Jacinto promissory note and the other the two Paradise promissory notes. The

agreements expressly provided that they were guarantees of payment and not

collection. Each stated:

      This instrument shall be an absolute, continuing, irrevocable, and
      unconditional guaranty of payment and performance, and not a
      guaranty of collection . . . .

Chahadeh agreed that he could not assert a setoff or reduction defense:

      No setoff, counterclaim, recoupment, reduction, or diminution of any
      obligation, or any defense of any kind or nature which [UGH] may have
      against Lender or any other party, or which Guarantor may have against
      [UGH], Lender, or any other party, shall be available to, or shall be
      asserted by, Guarantor against Lender . . . or against payment of the
      Guaranteed Indebtedness or any part thereof.

Chahadeh also agreed that his obligation would not be diminished if UGH declared

bankruptcy:

      Guarantor hereby agrees that its obligations under this Guaranty
      Agreement shall not be released, discharged, diminished, impaired,
      reduced, or affected for any reason or by the occurrence of any event,
      including . . . any disability of [UGH], or the dissolution, insolvency,
      or bankruptcy of [UGH].

The agreements provided that if UGH defaulted, Chahadeh would “promptly pay the

amount due hereunder . . . within two (2) business days after notice and demand.”

                                          12
      The summary-judgment evidence also included an affidavit from Jiwani, the

Chief Executive Officer of Jacinto and the Vice President of Paradise. Jiwani

averred that UGH had defaulted on the three promissory notes secured by

Chahadeh’s two guaranty agreements. Jiwani averred that Jacinto and Paradise sent

Chahadeh a written notice of default demanding that he pay the outstanding balances

under the two guaranty agreements, but Chahadeh had not made any payments after

this demand. Jiwani averred that the total unpaid guaranteed indebtedness owed by

Chahadeh as of October 15, 2015 was $1,398,561.64 under the Jacinto guaranty and

$920,267.48 under the Paradise guaranty. Jiwani further averred that interest was

accruing at the rate of $616.44 per day under the Jacinto guaranty, and $393.52 per

day under the Paradise guaranty.

      Appellees also submitted copies of the three promissory notes and a copy of

their demand letter to Chahadeh. In addition, the summary-judgment evidence

included Chahadeh’s responses to appellees’ requests for admission, in which he

admitted that he had received the demand letter but had not paid.

      Consequently,    appellees’   summary-judgment       evidence   conclusively

established the existence of the guaranty agreements in which Chahadeh had agreed

to pay upon demand if UGH defaulted. See Lee, 141 S.W.3d at 720. The evidence

also conclusively established that UGH defaulted on the loans, that appellees had

demanded payment from Chahadeh, and that he had not paid. See id. Further, the

                                        13
evidence conclusively established the amount Chahadeh owed under the two

guaranty agreements: $1,398,561.64 under the Jacinto guaranty as of October 15,

2015 with interest accruing at a rate of $616.44 per day, and $920,267.48 under the

Paradise guaranty as of October 15, 2015 with interest accruing at a rate of $393.52

per day.3 Accordingly, appellees conclusively proved the essential elements of their

breach of guaranty claims. See id.

      Chahadeh contends that summary judgment was improper because he raised

a fact issue regarding whether the summary-judgment evidence conclusively

established the amount that he owed under the guaranty agreements. Specifically,

Chahadeh argues that Jiwani’s averment regarding the amount Chahadeh owed

under the Paradise guaranty—$920,267.48—was lower than the amount Paradise

sought in its bankruptcy claim—$1,217,979.81.           Chahadeh argues that this

discrepancy raises a fact issue that precludes summary judgment. Appellees respond

that the difference between the two figures is the amount that UGH owes Paradise

under profit-sharing agreements for which Chahadeh did not guarantee payment.

3
      The trial court’s judgment awarded damages as of December 11, 2015, 57 days after
      October 15, 2015, in the amount of $2,376,396.84. This is the sum of:
         $1,398,561.64                    Owed on Jacinto guaranty as of 10/15/15
         $920,267.48                      Owed on Paradise guaranty as of 10/15/15
         $35,137.08 ($616.44 x 57)        Daily interest on Jacinto guaranty x 57 days
      + $22,430.64 ($393.52 x 57)         Daily interest on Paradise guaranty x 57 days
         $2,376,396.84
                                          14
      The summary-judgment evidence shows that there is no conflict between

Jiwani’s affidavit and the Paradise bankruptcy claim. The difference between the

amount of Paradise’s bankruptcy claim and the amount Jiwani averred Chahadeh

owed Paradise is comprised of the amount allegedly owed to Paradise by UGH under

profit-sharing agreements that Chahadeh did not guarantee. Jiwani averred that

Chahadeh owed $920,267.48 under the Paradise guaranty, which was composed of

$797,979.81 in principal and $122,287.67 in accrued interest. Paradise’s bankruptcy

claim shows that the $1,217,979.81 it sought from UGH was composed of the

$797,979.81 in principal owed under the two promissory notes plus $420,000 owed

under profit-sharing agreements. Chahadeh guaranteed the two promissory notes,

but not the profit-sharing agreements. Accordingly, we conclude that Chahadeh did

not raise a fact issue and the trial court did not err by concluding that the summary-

judgment evidence conclusively established the amount that Chahadeh owed. See

TEX. R. CIV. P. 166a(a), (c); KPMG, 988 S.W.2d at 748; Lujan, 433 S.W.3d at 704.

      We overrule Chahadeh’s sole issue.

                                    Conclusion

      We affirm the trial court’s judgment.

                                              Rebeca Huddle
                                              Justice

                                         15
Panel consists of Justices Keyes, Bland, and Huddle.

                                        16