Great Southwest Regional Center, LLC v. ACSWD, LP
14-18-00679-CV
Tex. App.Jan 14, 2020Background
- Great Southwest Regional Center (100% owned by Frost Rains Holdings) sponsored an EB-5 project and organized ACSWD, LP as the EB-5 investment vehicle; ACSWD’s partnership agreement and offering memorandum contemplated loaning investor capital to 3:16 Disposal Systems, Series LLC to operate salt‑water disposal facilities.
- Lu Jun invested $575,550 in ACSWD (nominally a $500,000 EB‑5 investment) and became the sole limited partner (99%). Jun later sought a refund; her individual claims were later nonsuited and ACSWD intervened asserting breach of contract, breach of fiduciary duty, and fraudulent transfer claims against Great Southwest and related parties.
- ACSWD executed loan documents labeled for a 3:16 loan (favorable, secured, 7% with sinking fund) but, according to testimony, funds were ultimately advanced to Frost Rains Holdings under a different promissory note (unsecured, 1% interest, balloon), and Frost Rains commingled and used funds for general expenses.
- The trial court (bench trial) found Great Southwest breached fiduciary duties and the partnership agreement/Memorandum, concluded self‑dealing occurred via the Frost Rains loan, awarded ACSWD $500,000 in damages, prejudgment and postjudgment interest, attorney’s fees, and issued declarations adjusting partnership roles (removing Great Southwest as GP; admitting SWD Investment Recovery Fund as successor GP).
- Great Southwest appealed, raising six issues: jurisdiction/ripeness, construction of the partnership agreement (admission/appointment of successor GP), sufficiency of evidence for certain findings, damages basis (Memorandum vs partnership agreement), attorney’s fees segregation, and computation/start date and compounding of prejudgment interest. The Fourteenth Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ripeness / subject‑matter jurisdiction | ACSWD: injury had occurred or was likely when ACSWD intervened (Frost Rains loan diverted capital and changed terms) | Great Southwest: damages speculative because repayment not yet due; claims not ripe | Court: claims were ripe; evidence established likely injury when ACSWD intervened; ripeness does not require final ascertainment of all damages |
| Construction: appointment/admission of successor general partner | ACSWD: limited partner removal under §13.2 and successor appointment under §13.3 validly removed GP and admitted SWD Investment Recovery Fund | Great Southwest: §14.1(I)(iv) requires written consent of General Partner to admit new partner; no GP existed so admission invalid | Court: read §§13.2–13.3 as the specific controlling provisions; successor appointment permitted without current GP consent; judgment affirmed |
| Sufficiency of evidence for related‑party and loan‑obligation findings | ACSWD: testimony and exhibits showed common control (Frost Rains/Great Southwest/Robert Frost) and that ACSWD’s offering contemplated loaning to an entity operating the facilities | Great Southwest: disputes factual findings, argues Advanced Construction inability undermines findings | Court: findings supported by testimony and documentary evidence; appellate challenges rejected |
| Damages basis (Memorandum vs partnership agreement) | ACSWD: damages based on breaches of partnership agreement and Memorandum | Great Southwest: Memorandum is not a contract between ACSWD and Great Southwest; cannot support damages | Court: appellant inadequately briefed this point and waived; judgment sustainable on partnership agreement breaches so award affirmed |
| Attorney’s fees segregation | ACSWD: counsel testified and supplied billing showing segregation and reasonable allocation | Great Southwest: fees improperly include work for Jun’s personal claims and nonrecoverable matters | Court: sufficient evidence of segregation; award of $91,928.46 upheld |
| Prejudgment interest (rate, compounding, start date) | ACSWD: trial court set 5% compounded annually from June 4, 2015 | Great Southwest: interest should be simple, not compound; start date improper | Court: issue not preserved—appellant failed to raise it below—so appellate review denied |
Key Cases Cited
- Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849 (Tex. 2000) (ripeness/subject‑matter jurisdiction principles)
- Patterson v. Planned Parenthood of Houston & Se. Tex., Inc., 971 S.W.2d 439 (Tex. 1998) (ripeness requires injury occurred or likely to occur)
- City of Austin v. Whittington, 385 S.W.3d 28 (Tex. App.—Austin 2012) (ripeness and contingency analysis)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (contract language with definite meaning is construed as a matter of law)
- Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex. 1994) (specific contract provisions control over general ones)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (attorney’s fees: segregation and testimony standards)
- Plasky v. Gulf Ins. Co., 335 S.W.2d 581 (Tex. 1960) (preservation of appellate complaints about interest requires raising issue in trial court)