Sohani v. Sunesara

546 S.W.3d 393
CourtCourt of Appeals of Texas
DecidedMarch 1, 2018
DocketNO. 01-16-00460-CV
StatusPublished
Cited by7 cases

This text of 546 S.W.3d 393 (Sohani v. Sunesara) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sohani v. Sunesara, 546 S.W.3d 393 (Tex. Ct. App. 2018).

Opinion

Evelyn V. Keyes, Justice *396In this case involving former business associates, Manisch Sohani and Anis Virani sued Nizar Sunesara for fraud and sought a declaratory judgment that Sunesara was not a member of three limited liability companies formed to manage the business of three retail shops that sold tobacco products and smoking accessories. Sunesara sought a declaration that he was a member of all three limited liability companies (collectively, the LLCs) and that he was entitled to one-third of the profits from the LLCs. After a jury trial, the jury found that Sunesara was a member of the LLCs and was entitled to one-third of the profits from the LLCs. The jury also found that Sohani and Virani were estopped from denying that Sunesara was a member of the LLCs and that Sunesara did not commit fraud against Sohani and Virani. The trial court entered a final judgment declaring that Sunesara was a member of the LLCs and was entitled to one-third of the profits from the LLCs. The trial court also awarded Sunesara trial and conditional appellate attorney's fees, court costs, and post-judgment interest.

In three issues on appeal, Sohani and Virani contend that (1) the trial court's judgment conflicts with Business Organizations Code section 101.201, which requires that profits and losses of a limited liability company be allocated to each member based on the agreed value of the member's contributions "as stated in the company's records," and none of the LLCs here had a written record of Sunesara's alleged contributions; (2) the trial court erroneously admitted documents that Sunesara disclosed less than thirty days before trial; and (3) the trial court lacked subject matter jurisdiction because Sunesara sought damages in excess of the jurisdictional limits of the county civil court at law.

We modify the judgment of the trial court and affirm as modified.

Background

A. Initial Acquisition of Three Smoke Shops

The parties to this case have known each other for nearly two decades. Sunesara and Virani are cousins, and Sunesara met Sohani through a fraternity at the University of Houston and later introduced him to Virani. The three men decided to go into business together, and this dispute arises out of that relationship.

In 2002, Sunesara and Virani started selling smoking accessories and devices in flea markets in Houston and Austin on the weekends. Sunesara used his own funds to purchase inventory, and Virani contributed his time. Sohani, who owned a "general merchandise wholesale" business, was not involved in running the flea market shop, although he was one of their vendors. After having success with the flea markets, in 2003, Sunesara and Virani decided to start a brick-and-mortar retail shop selling smoking accessories in Houston seven days per week. They called this business Zig Zag Smoke Shop. Sohani, along with several other vendors, contributed inventory on credit to Zig Zag. Virani acted as the general manager of Zig Zag. Virani testified that he and Sunesara offered Sohani a portion of the ownership of Zig Zag, and *397they agreed to split profits in thirds.1

In 2007 or 2008, Sunesara transitioned away from a daily focus on Zig Zag when Sohani offered him a sales and marketing position at his company, Mike's Worldwide Imports ("MWI"). Sunesara eventually became the chief financial officer of MWI. Virani also took a position in sales and marketing at MWI, but he continued managing the day-to-day operations at Zig Zag while he worked at MWI. At the time of trial, Virani was the chief financial officer of MWI.

In 2012, Zig Zag was doing well, and Sunesara and Virani decided that they wanted to expand their business, so they found a second retail location. Sunesara and Virani called this store Burn Smoke Shop ("Burn I"). Sunesara testified that he contributed $10,000 in cash for the startup of Burn I, and he gave this money to Virani. He stated that no records of this contribution exist and that he did not ask Virani for a receipt or documentation. Sunesara testified that he also contributed "deferred profits," which he explained as an agreement among himself, Virani, and Sohani that they would obtain the inventory for Burn I from MWI and "that inventory would be paid back before we took out any profits from the business."

Virani testified that Sunesara did not contribute anything to Burn I. He testified that Burn I acquired all of the fixtures in the shop from a company on credit and that Sohani, via MWI, contributed the inventory. Virani disagreed that Sunesara ever gave him $10,000 in cash or that he contributed "deferred profits" because all of the profits from the shops went to Sohani to cover the inventory that he had contributed. Sohani testified that he provided inventory to Burn I, but he did not want to be otherwise involved with that shop.

Toward the end of 2012, another retail smoke shop decided to sell its existing business, called EZ Smoke Shop, and Sunesara, Virani, and Sohani agreed to purchase this business. They then changed the name to Burn Smoke Shop Two ("Burn II"). Sunesara testified that he contributed $10,000 in cash to the acquisition of this business and deferred profits. He stated that, as with Burn I, he gave the cash to Virani, and he did not receive a receipt or any kind of documentation concerning this contribution. Sunesara testified that Virani contributed $10,000 in cash and became the manager of Burn II, while Sohani contributed inventory from MWI and assumed a personal guarantee for the purchase price of the shop, which was between $80,000 and $100,000.

Virani testified that Sohani had another customer who owned a retail shop, who wanted to leave the industry, and who owed Sohani money, so Sohani and this other individual worked out a deal in which Sohani purchased the ongoing business and forgave some of the debt that the other person owed to him. Virani testified that Sunesara's only involvement in the acquisition of Burn II was that he wrote some of the checks on behalf of MWI to the prior owner of the shop. Sohani agreed with Virani that Sunesara did not contribute anything to the three shops. Virani stated that his contribution to the smoke shops was his time and effort in organizing the shops, getting them ready for business, and overseeing the day-to-day operations. Sohani testified that, with regard to Zig Zag and Burn I, in addition to contributing inventory from MWI, he also made arrangements *398with the shops' other vendors to assume around $40,000 to $50,000 in debt that the shops owed.

SSV Corporation, which Sunesara incorporated in 2007, owned the assets of both Zig Zag and Burn I. It never owned the assets of Burn II. Sunesara and Virani both owned fifty percent of SSV Corporation. The trial court admitted a spreadsheet-Defendant's Exhibit 17-which purported to be a yearly cash flow statement that Virani prepared for SSV Corporation in 2011. This document reflected that monthly "profits/commissions" were paid to various people, including equal amounts to Virani, Sohani, and Sunesara. Sunesara testified that, although Sohani was not a formal owner of SSV Corporation, everyone "still considered him a partner" and he "was still a part of the company," which is why he received profit distributions from SSV Corporation.

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546 S.W.3d 393, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sohani-v-sunesara-texapp-2018.