Azib Chotani and Azam Chaudhry v. Mohammad Khan, Rafaqat Ali and Mehak Investments, LLC

NO. 12-23-00217-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

AZIB CHOTANI AND § APPEAL FROM THE 4TH
AZAM CHAUDHRY,
APPELLANTS

V. § JUDICIAL DISTRICT COURT

MOHAMMAD KHAN, RAFAQAT ALI
AND MEHAK INVESTMENTS, LLC,
APPELLEES § RUSK COUNTY, TEXAS

MEMORANDUM OPINION

Azib Chotani and Azam Chaudhry appeal from the trial court’s judgment in favor of
Muhammad Khan and Rafaqat Ali. They present two issues on appeal. We reverse and render.

BACKGROUND
This case arose out of legal relationships concerning a convenience store in Kilgore,
Texas, known as Tiger Express or TexStop #3. At all times relevant to this case, YCF Properties
owned the store’s premises and White Oak Station owned the master lease to operate the store. 1
In the Spring of 2018, Ali lived in Arlington, Texas, and was employed as a personal
driver for companies such as Uber. He met Saad Sheikh at a party at his boss’ house in Dallas
and learned that Sheikh was in the business of owning and operating convenience stores. Ali,

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Neither YCF nor White Oak are parties to the case.
who had previous experience as a convenience store clerk, expressed an interest in finding a
store to operate. Shiekh gave him Chotani’s contact information.
Chotani, the Chief Operating Officer for White Oak Station, was tasked with finding
operators to lease stores either owned by the company or under an operations lease. He also
occasionally acted as a broker to help arrange the sale of convenience stores and the leasing of
stores’ operational rights.
Chaudhry had been in the convenience store business for approximately twenty years and
operated four or five different stores. In the Spring of 2018, he had been operating the Tiger
Express since January under his entity Menghi Enterprises, Inc., subleasing the store from White
Oak. He wished to sell his lease and find another store closer to his home in the Dallas area.
Ali contacted Chotani in March 2018. Chotani informed Ali that he knew of three
convenience stores for lease: one in Arkansas, one in Kilgore, and one in Carthage. Ali was
interested in the Kilgore store because of its proximity to his home. Chotani acted as a broker
between Ali and Chaudhry in negotiating an agreement. Ali received full authority to inspect the
store and pull reports from the store’s point of sales system.
Khan, Ali’s father-in-law, wanted to start a business to support his family and agreed to
help Ali finance the acquisition of the operations lease and formed Mehak Investments LLC. He
contributed $12,500 of lottery winnings to help buy the store lease. Ali also went to Pakistan to
sell family land to fund the purchase.
The lease agreement was signed on May 28, by which Menghi agreed to sublease its
operational lease at Tiger Express to Mehak. Mehak would also purchase the store’s existing
inventory. Mehak assumed management of the store in early July. Ali served as the store
manager and dealt exclusively with Chotani while operating the store. Khan did not operate the
store and did what Ali told him needed to be done.
Convenience stores require certain licenses to operate and sell specific items. These
include sales tax, tobacco, lottery, alcohol, and fuel. All licenses must be in the name of a single
person or entity. When Mehak assumed operations in July, it did not have any of its own
licenses. Chaudhry agreed to allow Ali to operate the store as a manager under Menghi until
Mehak obtained its own licenses. And because of the way the fuel supply cost is paid, Chaudhry
also allowed Mehak to use a Menghi bank account. Mehak obtained some of the necessary
licenses; however, Ali stated that the Texas Alcoholic Beverage Commission (TABC) denied the

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alcohol license in November or December. No documentation of the denial was offered into
evidence.
Chaudhry proposed that he transfer Menghi to Khan, so that Khan and Ali could then use
Menghi’s alcohol permit. Khan agreed and they met at Chaudhry’s accountant’s office on
January 26, 2019. Chaudhry signed an undated stock issuance certificate for 1,000 shares. Khan
signed a notice of amendment to Menghi’s agent of record naming himself as the registered
agent for Menghi and filed it with the Texas Secretary of State.
Shortly thereafter, Khan and Ali attempted to renew Menghi’s fuel permits with the Texas
Commission on Environmental Quality (TCEQ). However, those were denied because TCEQ
assessed a fine against Menghi via a default order on October 3, 2018. Chaudhry denied any
knowledge of the fine until he was informed of it by Ali and Khan. In May 2019, Mehak
obtained a TCEQ tank registration. Soon afterwards, Ali told Chotani that he and Khan were
unhappy operating the store and wanted to sell their lease. Chotani agreed to buy the lease and
assumed operations in July 2019.
Eventually, Ali and Khan filed suit against Sheikh, Chotani, and Chaudhry alleging
causes of action for fraud by non-disclosure, violations of the Deceptive Trade Practices Act
(DTPA), breach of fiduciary duty, and civil conspiracy. The day before trial, the trial court
limited Ali’s and Khan’s economic damages claim to the amount of the TCEQ fine after they
represented that the administrative penalty assessed against Menghi serves as the basis of their
case. The case then proceeded to a jury trial. At the conclusion of trial, the trial court granted a
directed verdict dismissing Sheikh and the civil conspiracy cause of action. The jury then found
in favor of Khan and Ali on both the fraud by non-disclosure and DTPA claims. The jury
awarded Khan $52,555 in economic damages, the amount of the TCEQ fine, for each claim. The
jury further awarded Khan an additional $10,000 in damages on the DTPA claim. And the jury
awarded Ali $25,000 in mental anguish damages for each claim. Chotani and Chaudhry filed a
motion to disregard the jury answers and a judgment notwithstanding the verdict, which the trial
court denied. The trial court rendered judgment in accordance with the jury’s verdict, ultimately
awarding Khan a total of $121,410.04 and Ali $63,202.08, including damages, attorney’s fees,
court costs, and prejudgment interest. This appeal followed.

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CONSUMER STATUS – DTPA
In issue 1.D, Chotani and Chaudhry contend Khan and Ali lacked standing to bring their
DTPA claim because they are not consumers. 2
Applicable Law
The elements of a DTPA “laundry list” cause of action are (1) the plaintiff is a consumer;
(2) the defendant engaged in a false, misleading, or deceptive act or practice; (3) that was relied
on by the consumer; and (4) that constituted a producing cause of the consumer’s actual
damages. TEX. BUS. & COM. CODE ANN. § 17.50(a)(1) (West 2021). To prove an action for a
violation of the DTPA, the plaintiff must establish its status as a consumer. Eckman v.
Centennial Sav. Bank, 784 S.W.2d 672, 674 (Tex. 1990). Proving standing under the DTPA
requires demonstration that the plaintiff was (1) a consumer that (2) sought or acquired, by
purchase or lease, (3) goods or services. TEX. BUS. & COM. CODE ANN. § 17.45(4) (West 2021);
Amstadt v. United States Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996). To qualify as a
consumer under the DTPA, two requirements must be established by the plaintiff: (1) the person
must have sought or acquired goods or services by purchase or lease; and (2) the goods or
services purchased or leased must form the basis of the complaint. Cameron v. Terrell &
Garrett Inc., 618 S.W.2d 535, 539 (Tex. 1981); Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169,
174–75 (Tex. 1980). If either requirement is lacking, the person aggrieved by a deceptive act or
practice must look to the common law or some other statutory provision for redress. Cameron,
618 S.W.2d at 539; Lewis, 603 S.W.2d at 175.
The DTPA statute requires us to liberally construe it to protect consumers from false,
misleading, and deceptive business practices. TEX. BUS. & COM. CODE ANN. § 17.44(a) (West
2021); Kennedy v. Sale, 689 S.W.2d 890, 892 (Tex. 1985). The DTPA defines a “consumer” as
“an individual . . . who seeks or acquires by purchase or lease, any goods or services.” TEX. BUS.
& COM. CODE ANN. § 17.45(4). Goods are defined as “tangible chattels or real property
purchased or leased for use.” Id. § 17.45(1). Tangible property includes both real and personal
property. Wheeler v. Box, 671 S.W.2d 75, 77 (Tex. App.—Dallas 1984, no writ). Tangible
property is commonly understood to be property that is capable of being handled or touched. Id.

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Chaudhry and Chotani present two issues that contain several sub-issues. 1.D is one such sub-issue and
we will refer to the sub-issues in that manner throughout the opinion.

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The DTPA excludes transactions that convey wholly intangible rights, such as money or
accounts receivable, that are not associated with any collateral services. See Lewis, 603 S.W.2d
at 174–75; Clary Corp. v. Smith, 949 S.W.2d 452, 464 (Tex. App.—Forth Worth 1997, pet.
denied). Generally, a business is an intangible, unless it encompasses goods or services
purchased for use in the function of the business. Clary Corp., 949 S.W.2d at 464; Wheeler, 671
S.W.2d at 78–79. Whether a party is a consumer under the DTPA is a question of law. Basic
Energy Serv., Inc. v. D-S-B Props., Inc., 367 S.W.3d 254, 269 (Tex. App.—Tyler 2011, no pet.).
Application
Khan and Ali contend that Chaudhry and Chotani violated the DTPA by making false and
fraudulent representations regarding the rights they possessed, the goods and services available,
and the lack of liabilities. See TEX. BUS. & COM. CODE ANN. §§ 17.45(5), 17.46(b)(5), (24),
17.50(a)(3) (West 2021). In their petition, they urge that Chotani and Chaudhry misrepresented
that they owned the property on which the store is located. They further claim Chaudhry and
Chotani misrepresented whether the store would be able to sell alcohol, which affected the
profitability. And they claim they were not told that Menghi was subject to a TCEQ lien and
faced potential liability in an ongoing lawsuit at the time of the transfer. Chotani and Chaudhry,
in turn, urge that Khan and Ali are not consumers under the DTPA and lack standing to bring a
DTPA action.
At a pretrial conference the day before trial, Ali and Khan represented to the trial court
that their economic damages were only based on the amount of the fine that was not disclosed
prior to the sale of Menghi. And the trial court limited the economic damage model to the
amount of the fine. As such, Ali and Khan limited the basis of their claim to the sale or transfer
of Menghi. See Smith v. Herco, Inc., 900 S.W.2d 852, 860 (Tex. App.—Corpus Christi 1995,
writ denied) (DTPA allows recovery of actual damages caused by the deceptive practice).
Khan and Ali did not purchase the mere intangible right to operate the convenience store
in Kilgore. Instead, they leased the physical premises and agreed to purchase physical assets,
consisting of the store’s inventory. We hold this transaction qualified as one for “goods and
services,” thereby satisfying the first requirement to qualify as a consumer.
We now address whether Ali and Khan satisfy the second requirement, i.e., whether the
goods or services purchased or leased form the basis of their complaints. The representation that
forms the basis of their claim involves the transfer of Menghi’s shares to Khan so the store could

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use Menghi’s TABC license to sell alcohol. They contend that Chaudhry failed to disclose that
Menghi had a $52,555 lien against it by the TCEQ and misrepresented that the corporation was
unencumbered. However, as mentioned above, a business or corporation is an intangible and not
considered a good or service under the DTPA. See TEX. BUS. & COM. CODE ANN. § 17.45(1);
Clary Corp., 949 S.W.2d at 464; Wheeler, 671 S.W.2d at 78–79. Therefore, we hold Khan and
Ali were not consumers under the provisions of the DTPA. We sustain Chotani’s and Chaudhry’s
issue 1.D.
LEGAL SUFFICIENCY - FRAUD
In issues 2.A and 2.B, Chotani and Chaudhry urge the evidence is legally insufficient to
support the jury’s finding of fraud by non-disclosure and the trial court erred in overruling their
motion for a judgment notwithstanding the verdict (JNOV).
Standard of Review
A trial court may disregard a jury verdict and render a JNOV if no evidence supports the
jury finding on an issue necessary to liability or if a directed verdict would have been proper. See
TEX. R. CIV. P. 301; Tiller v. McLure, 121 S.W.3d 709, 713 (Tex. 2003). A directed verdict is
proper (1) when the evidence conclusively establishes the movant’s right to judgment or negates
the opponent’s right, or (2) when the evidence is insufficient to raise a material fact issue.
Prudential Ins. Co. of Am. v. Fin. Rev. Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000). A jury
finding should also be disregarded if a legal principle prevents a party from prevailing on a claim
or defense. See Hous. Lighting & Power Co. v. City of Wharton, 101 S.W.3d 633, 638 (Tex.
App.—Houston [1st Dist.] 2003, pet. denied).
We review the granting or denial of a JNOV under a legal sufficiency standard. Tanner v.
Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex. 2009); City of Keller v. Wilson, 168
S.W.3d 802, 809–28 (Tex. 2005). We view the evidence in the light most favorable to the
verdict. Ingram v. Deere, 288 S.W.3d 886, 893 (Tex. 2009). We credit evidence favoring the
jury verdict if reasonable jurors could and must disregard contrary evidence unless reasonable
jurors could not. See Tanner, 289 S.W.3d at 830. Every reasonable inference deducible from the
evidence is to be indulged in support of the jury’s finding. Bustamante v. Ponte, 529 S.W.3d
447, 456 (Tex. 2017).
We may sustain a legal sufficiency challenge only when (1) the record discloses a
complete absence of evidence of a vital fact, (2) the court is barred by rules of law or of evidence

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from giving weight to the only evidence offered to prove a vital fact, (3) the evidence offered to
prove a vital fact is no more than a mere scintilla, or (4) the evidence establishes conclusively the
opposite of a vital fact. Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620 (Tex. 2014).
Generally, when we sustain a legal-sufficiency issue, we must render judgment for the
appellant because that is the judgment the trial court should have rendered. See AutoZone, Inc.
v. Reyes, 272 S.W.3d 588, 595 (Tex. 2008) (sustaining challenge to legal sufficiency of evidence
and rendering take nothing judgment); Vista Chevrolet, Inc. v. Lewis, 709 S.W.2d 176, 176 (Tex.
1986); EAN Holdings, LLC v. Arce, 636 S.W.3d 290, 295 (Tex. App.—Fort Worth 2021, pet.
denied). Finally, when a party presents multiple grounds for reversal, we decide rendition issues
(legal sufficiency challenges) before remand issues (factual sufficiency challenges). See TEX. R.
APP. P. 43.3; Bradleys’ Elec., Inc. v. Cigna Lloyds Ins. Co., 995 S.W.2d 675, 677 (Tex. 1999)
(per curiam); Altice v. Hernandez, 668 S.W.3d 399, 409 (Tex. App.—Houston [1st Dist.] 2022,
no pet.).
Applicable Law
Fraud by non-disclosure, a subcategory of fraud, occurs when a party has a duty to
disclose certain information and fails to disclose it. Schlumberger Tech. Corp. v. Swanson, 959
S.W.2d 171, 181 (Tex. 1997). To establish fraud by non-disclosure, the plaintiff must show: (1)
the defendant deliberately failed to disclose material facts; (2) the defendant had a duty to
disclose such facts to the plaintiff; (3) the plaintiff was ignorant of the facts and did not have an
equal opportunity to discover them; (4) the defendant intended the plaintiff to act or refrain from
acting based on the nondisclosure; and (5) the plaintiff relied on the non-disclosure, which
resulted in injury. See Bradford v. Vento, 48 S.W.3d 749, 754–55 (Tex. 2001) (explaining that
there must be a duty to disclose); Wise v. SR Dall., LLC, 436 S.W.3d 402, 409 (Tex. App.—
Dallas 2014, no pet.) (listing the elements for fraud by non-disclosure) (citing 7979 Airport
Garage, L.L.C. v. Dollar Rent A Car Sys., Inc., 245 S.W.3d 488, 507 n.27 (Tex. App.—Houston
[14th Dist.] 2007, pet. denied)).
Application
Chaudhry and Chotani deny failing to disclose a material fact within their knowledge and
urge there was no evidence they were aware of the TCEQ lien against Menghi.
The evidence at trial showed that Khan and Ali formed Mehak and attempted to secure
the necessary licenses under that name to operate the convenience store. However, the TABC

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denied the application for the license to sell alcohol. Menghi already had a license to sell alcohol
for the store. None of the parties were exactly clear as to why Mehak’s application was denied;
however, there was some discussion about a school being near the convenience store. Chaudhry
offered to allow Khan and Ali to use Menghi’s TABC license. But because all the store’s
licenses must be under the same business, Chaudhry would have to transfer ownership of the
company to Khan. In January 2019, Khan and Chaudhry met at Chaudhry’s CPA’s office and
Chaudhry signed an undated stock issuance certificate for 1,000 shares. Khan signed a notice of
amendment to Menghi’s agent of record the same day and filed it with the Texas Secretary of
State, which named himself as Menghi’s registered agent.
Shortly thereafter, Khan and Ali applied to renew Menghi’s TCEQ permit. The
application was denied because of the TCEQ fine against Menghi from October 2018 in the
amount of $52,555. The fine apparently concerned a different convenience store Chaudhry
previously owned. When he purchased it, he was notified of environmental complaints that had
to be addressed. Chaudhry made corrective actions at that convenience store throughout 2017.
He stopped operating that store in March 2018. Chaudhry claimed he was unaware of the fine
until Khan and Ali told him about it. The notice of the fine was sent to Menghi’s registered
address, which is the same address listed on other Menghi documents. Chaudhry claimed he
moved from that address in 2016 and did not receive notice of the default order. He further
testified that his CPA handles all his corporate paperwork and he believed the CPA would have
handled changing the address on his paperwork.
Khan testified that he was not involved with the operation of the convenience store.
However, he believed he was purchasing Menghi so that the store could operate. But Khan
claimed that purchasing the company did not fix the problems with the store because they were
unable to sell gasoline.
Jurors are the sole judges of the weight and credibility of the witness testimony, and if the
evidence at trial would allow reasonable, fair-minded jurors to differ in their conclusions, then
jurors must be allowed to do so. City of Keller, 168 S.W.3d at 819, 822. It is entirely possible
that the jurors did not believe Chaudhry’s claim that he was unaware of the fine, especially since
he had previous knowledge of the violations that led to the fine.
Chaudhry and Chotani further argue that, even if they failed to disclose the fine to Khan,
Khan failed to prove he was harmed by such failure. While Khan and Ali testified that the store

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could not sell gasoline for approximately three months after the license renewal was denied, they
offered no evidence of the amount of lost profits. The only damages they claimed was the
$52,555 TCEQ fine. Neither Khan nor Ali paid the fine, and Ali testified that they had no
intention of paying the fine. In addition, there was no evidence that Menghi became less
valuable or lost income because of the fine. And neither Khan nor Ali could confirm that
Menghi was still functioning or still had its corporate charter in force. Furthermore, the TCEQ
fine is a liability of the corporation, and Khan, as a stockholder, cannot recover damages
personally for a wrong done solely to the corporation. See Wingate v. Hajdik, 795 S.W.2d 717,
719 (Tex. 1990). The general principle of damages is compensation to a plaintiff for his actual
loss resulting from a defendant’s wrong. R. G. McClung Cotton Co. v. Cotton Concentration
Co., 479 S.W.2d 733, 737 (Tex. Civ. App.—Dallas 1972, writ ref’d n.r.e.). Because Khan
offered no evidence that he suffered harm as a result of the failure to disclose the TCEQ fine, the
evidence is legally insufficient to support the jury’s finding of fraud by non-disclosure. We
sustain Chotani and Chaudhry’s issues 2.A and 2.B.

MENTAL ANGUISH DAMAGES
In issue 1.E, Chotani and Chaudhry urge that the evidence was insufficient to show Ali
suffered mental anguish damages. 3
“The mere fact of injury does not prove compensable pain and mental anguish.” Grant v.
Cruz, 406 S.W.3d 358, 364 (Tex. App.—Dallas 2013, no pet). Generally, to support an award of
mental anguish damages, the plaintiff’s evidence must describe “the nature, duration, and
severity of their mental anguish, thus establishing a substantial disruption in the plaintiff[’s] daily
routine.” See Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788, 797 (Tex. 2006) (quoting Parkway
Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995)). The Texas Supreme Court held that “some
types of disturbing or shocking injuries have been found sufficient to support an inference that
the injury was accompanied by mental anguish.” Parkway, 901 S.W.2d at 445. But even when
an occurrence is of the type for which mental anguish damages are recoverable, evidence of the
nature, duration, and severity of the mental anguish is required. Hancock v. Variyam, 400

3
We note that the jury charge contained a separate question for whether Chotani and Chaudhry committed
fraud in the sale of Menghi to Ali when that cause of action is not contained in the petition. However, the propriety
of that question was not presented on appeal. Therefore, we address Ali’s damages separate from the cause of action
alleged by Khan.

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S.W.3d 59, 68 (Tex. 2013). The record must reflect more than the existence of “mere emotions”
to support an award of damages for mental anguish. Latham v. Castillo, 972 S.W.2d 66, 70 (Tex.
1998).
The evidence at trial failed to establish that Ali’s alleged mental anguish constituted
anything more than mere worry and anxiety over the convenience store business. Nor did the
evidence distinguish between worry about the profitability of the store and learning that Menghi
was burdened with a TCEQ fine, which is the basis of the fraud complaint. Ali and his son,
Muhammad Numann, both testified that Ali suffered from depression, sleepless nights, and lost
weight as a result of the business. However, according to Numann, this behavior was originally
tied to learning that Chotani and Chaudhry did not own the land on which the convenience store
sat. Ali apparently believed they would be allowed to purchase the land after approximately ten
years even though the lease only includes a right of first refusal and not an option to purchase.
Numann further testified that he could not remember if Ali’s troubles started before or after they
learned of the TCEQ fine.
None of the evidence of Ali’s alleged mental anguish revealed any evidence of “a high
degree of mental pain and distress” that is “more than mere worry, anxiety, vexation” caused by
the failure to disclose the TCEQ fine when transferring the ownership of Menghi. See Parkway,
901 S.W. 2d at 444. As such, the evidence is insufficient to support the jury’s mental anguish
damages award in favor of Ali. We sustain Chotani and Chaudhry’s issue 1.E. 4

DISPOSITION
Having sustained Chotani’s and Chaudhry’s issues 1.D, 1.E, 2.A, and 2.B, we reverse the
trial court’s judgment and render judgment that Ali and Khan take nothing.

GREG NEELEY
Justice

Opinion delivered July 24, 2024.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

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We need not address Chotani’s and Chaudhry’s remaining issues and sub-issues. See TEX. R. APP. P. 47.1

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COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

JUDGMENT

JULY 24, 2024

NO. 12-23-00217-CV

AZIB CHOTANI AND AZAM CHAUDHRY,
Appellants
V.
MOHAMMAD KHAN, RAFAQAT ALI AND MEHAK INVESTMENTS, LLC,
Appellees

Appeal from the 4th District Court
of Rusk County, Texas (Tr.Ct.No. 2020-031)

THIS CAUSE came to be heard on the appellate record and the briefs filed herein, and
the same being considered, because it is the opinion of this court that there was error in the
judgment of the court below, it is ORDERED, ADJUDGED, and DECREED by this court that
the trial court’s judgment be reversed, and a judgment that Rafaqat Ali and Muhammad Khan
take nothing be rendered; and all costs of this appeal are hereby adjudged against the appellees,
Mohammad Khan, Rafaqat Ali and Mehak Investments, LLC, in accordance with the opinion of
this court; and that this decision be certified to the court below for observance.

Greg Neeley, Justice.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.