SBI Investments, LLC, 2014-1, and L2 Capital LLC v. Quantum Materials Corp.
03-17-00863-CV
| Tex. App. | Jan 5, 2018Background
- Quantum Materials Corp. obtained a temporary injunction preventing Empire Stock Transfer from effecting a second transfer/alteration of Quantum shares that had been recorded as collateral after alleged repayment.
- Appellants SBI Investments LLC and L2 Capital, LLC (intervenors) appealed, arguing the injunction was void because Empire (the enjoined party) allegedly lacked proper notice of the injunction hearing.
- Appellants participated in the October 26 injunction hearing: they intervened, presented a witness, cross-examined Quantum’s witnesses, and argued at length; the hearing transcript is in the record.
- Quantum presented expert testimony (Dr. Lehrer) and CEO testimony describing a likely “death spiral” if shares were recharacterized/transferred, threatening Quantum’s going-concern value and capital structure.
- Trial court found (and took judicial notice) that Empire had received notice and complied with the injunction; it credited Quantum’s evidence and entered the temporary injunction to preserve the status quo pending final adjudication.
Issues
| Issue | Plaintiff's Argument (Quantum) | Defendant's Argument (Appellants) | Held |
|---|---|---|---|
| Whether Empire received proper notice of the injunction hearing | Empire had actual and constructive notice; service was effective and the court took judicial notice | Empire lacked proper notice, so injunction was void | Court found Empire had notice (actual/constructive); injunction enforcement not an abuse of discretion |
| Whether Appellants have standing to challenge defective service on Empire | Appellants lacked a justiciable interest from a procedural defect to challenge service on a third party | Appellants assert they are aggrieved by enforcement of the injunction and can appeal | Held Appellants lacked standing to litigate alleged defects in service on Empire because they were not personally injured by that defect and they fully participated in the hearing |
| Whether participation at the injunction hearing waived notice/service objections | Participation, cross-examination, and presenting a witness negates later claim of improper notice | Appellants maintain notice defect persists despite participation | Court treated appellants’ active participation as waiver of procedural notice objection |
| Whether Quantum demonstrated probable success and irreparable harm to justify injunction | Testimony showed likely death-spiral dilution and irreparable going-concern harm; Quantum likely to prevail on merits | Appellants argued harm is purely monetary or speculative and collateral should have been forfeited/released | Court credited Quantum’s evidence, found probable right to prevail and definitively irreparable injury, affirmed injunction |
Key Cases Cited
- Amalgamated Acme Affiliates v. Minton, 33 S.W.3d 387 (Tex. App.—Austin 2000) (counsel participation at hearing can waive appellate objections)
- Austin Nursing Ctr. v. Lovato, 171 S.W.3d 845 (Tex. 2005) (standing and justiciable interest analysis)
- Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659 (Tex. 1996) (standing requires real controversy and justiciable interest)
- Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002) (trial court injunction standard; appellate review defers unless evidence compels opposite conclusion)
- Miller v. K & M P’ship, 770 S.W.2d 84 (Tex. App.—Houston [1st Dist.] 1989) (injunctive relief appropriate where monetary damages are difficult to measure and status quo preservation is warranted)