Vision Capital Real Estate, LLC v. Wurzak Hotel Group and Jake Wurzak
05-15-00917-CV
| Tex. App. | Oct 19, 2016Background
- Wurzak sought to co-develop a Philadelphia hotel with Parkway; Parkway contributed land (~$11M) and Wurzak committed $4–6M but raised only $2M. Vision Capital was retained (nonexclusive, six-month engagement) to help raise remaining equity for Wurzak, its subsidiaries and/or affiliates; fee: 5% of equity placed up to $5M, measured by amount the capital provider was obligated to advance to Wurzak/its affiliates.
- Vision introduced Glenmont to Wurzak; Glenmont initially rejected investing in Wurzak’s affiliate (DoveHill). Construction financing closed in Feb 2012; 1200 Arch Hotel Partners LP (Hotel Partners) formed with Parkway affiliate contributing ~85.6% and DoveHill (Wurzak affiliate) contributing $2M (14.398%).
- Glenmont later negotiated directly with Parkway to buy ~36% of Hotel Partners for $5M from Street Associates (a Parkway affiliate). An amended partnership agreement reflected Glenmont’s ownership and credited $5M to Glenmont; total capital in Hotel Partners did not increase.
- Vision demanded its placement fee after the Glenmont closing; Wurzak refused and Vision sued for breach of the engagement agreement. At trial, Vision argued it was entitled to its fee because Glenmont — an introducer Vision brought — placed $5M into Hotel Partners, a Wurzak affiliate. Wurzak argued Glenmont did not advance funds to Wurzak or its affiliates and therefore no fee was owed.
- The trial court granted Wurzak’s motion for directed verdict and rendered a take-nothing judgment. Vision appealed, arguing Hotel Partners (or Street Associates) was an affiliate of Wurzak and thus the contract fee provision was triggered.
Issues
| Issue | Plaintiff's Argument (Vision) | Defendant's Argument (Wurzak) | Held |
|---|---|---|---|
| Whether Vision earned placement fee when an introduced capital provider (Glenmont) paid $5M to purchase a partnership interest in Hotel Partners | Vision: Fee due because Vision introduced Glenmont and Hotel Partners (or its affiliates) received the $5M; Hotel Partners is an affiliate of Wurzak through Wurzak’s affiliates serving as partners | Wurzak: Contract requires capital provider to advance equity to Wurzak or its affiliates; Glenmont paid Parkway/Street Associates, not Wurzak or DoveHill — no obligation to advance funds to Wurzak/its affiliates | Court: No. Glenmont did not advance equity to Wurzak or its affiliates; the $5M changed ownership shares but did not increase capital to Hotel Partners, so no commission owed |
| Whether Street Associates (the Parkway affiliate that received $5M) is an affiliate of Wurzak such that Vision’s placement triggers | Vision: Street Associates acted in connection with Wurzak and Wurzak benefited, so it should be treated as an affiliate for the transaction | Wurzak: No evidence of common control; Street Associates was controlled by Parkway, not Wurzak | Court: No. Contractual meaning of “affiliate” requires control/association under common ownership or control; Vision presented no evidence of Wurzak control over Street Associates |
Key Cases Cited
- Blackstone Med., Inc. v. Phoenix Surgicals, L.L.C., 470 S.W.3d 636 (Tex. App.—Dallas 2015) (directed-verdict standard explained)
- King’s Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (review standard for sufficiency of evidence in directed-verdict review)
- Mikob Props., Inc. v. Joachim, 468 S.W.3d 587 (Tex. App.—Dallas 2015) (same as to evidence and inferences for nonmovant)
- Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194 (Tex. 2011) (fact issues preclude directed verdict)
- Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154 (Tex. 2003) (contract terms given plain, ordinary meaning)
- Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) (same, applying ordinary meaning to contract terms)
- Eckland Consultants, Inc. v. Ryder, Stillwell Inc., 176 S.W.3d 80 (Tex. App.—Houston [1st Dist.] 2004) (definition of “affiliate” as controlled/related entity)