Partnership sours over land purchase

Law of the Land

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Oct. 27, 2010

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Law of the Land

Tara-Nicholle Nelson
Inman News

In 2004, Farouk Alattar and John Ganim visited a 3,800-acre property in Washington County, Texas; two days later, Alattar executed a purchase agreement for the property. Ganim was reportedly present when Alattar signed the contract, on which the buyer was identified as "Frank Alattar, Trustee," but no further detail was provided on the trust, court records state.

Three days following Alattar's execution of the purchase contract, Ganim and Alattar both signed a "Letter of Intent," listing a number of terms of what the letter referred to as a "partnership" between the two men.

This "Letter of Intent" repeatedly referenced a "property," but never identified the property at issue, according to court documents (Alattar v. Ganim, 14-08-00756-CV, Tex. App.14th Dist., Feb. 18, 2010).

Over the next month, Alattar's attorney sent a letter to Alattar expressing that he had reviewed the purchase contract for the "3,800 acres -- Washington County, Texas," and would form a limited partnership and a limited liability company, then sent another letter to both Alattar and Ganim forming those corporate entities.

After Ganim signed to form the companies, though, his own attorney reviewed the documents and advised Ganim that they did not conform to the letter of intent and that he should not proceed with the transaction unless certain changes were made, according to court documents.

When Ganim forwarded his lawyer's comments to Alattar, Alattar refused to move forward with the partnership, according to court documents.

In May 2004, Ganim sued Alattar, alleging various types of fraud and breaches of contract and fiduciary duties, and seeking lost profits, punitive damages, specific performance, attorney's fees and court costs.

In the meantime, the Washington County property's sellers got embroiled in a lawsuit over the title to the property, delaying the sale to Alattar; as a result, it was not until May 2005 that the deed to the property was finally transferred to Alattar as trustee -- again with no description or details provided as to any trust Alattar was representing.

At trial, Ganim argued that six different written documents, collectively, proved that Alattar bought the property for the benefit of their partnership; a jury agreed and awarded Ganim over $2 million, for his share of the difference between the property's current fair market value and the price Alattar had paid for it.

Alattar appealed, and the 14th Texas Court of Appeals reversed the trial court's judgment. Alattar argued that the statute of frauds was not satisfied by the six writings Ganim produced at trial, and the appellate court agreed.

In Texas, the court explained, the statute of frauds applies to the sale of real property; in cases where the statue applies, "then the agreement is unenforceable unless it is in writing and signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him."

The court went on to clarify that the two issues disputed in this appeal were whether Alattar agreed to buy the property for the alleged Alattar-Ganim partnership and, if so, whether Alattar breached this agreement.

The court held that any agreement to purchase the property for the partnership is a "contract for the sale of real property," so that the statute of frauds applies to it.

The court pointed to the fact that Ganim himself argued that no additional transfer of the property from Alattar to the partnership was necessary as proving -- over Ganim's objection -- that the agreement was a contract for the sale of real property, as the essence of Ganim's argument was that the partnership purchased the property "acting through Alattar."

After establishing that the statute of frauds applied, the court moved on to the issue of whether the statue was satisfied in this case.

Alattar argued -- and the court agreed -- that because the various documents introduced by Ganim did not reference and incorporate each other or the details of the alleged partnership agreement, and/or were not signed by Alattar, the documents did not satisfy the statute of frauds.

The court elaborated that to satisfy the statute of frauds, the writing must contain all essential terms of the agreement, multiple documents must incorporate or reference earlier ones, the documents referenced must all exist at the time they are referenced, and the documents must be signed by the person charged with the agreement (in this case, Alattar).

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