Cricket Hollow Partners, L.P.  v. MMA Cricket Hollow, LLC
(Tex.App.- Houston [1st Dist.] Jul. 16, 2009)(Jennings)
(partnership agreement, interpretation, construction of contract)
AFFIRM TC JUDGMENT: Opinion by Justice Jennings    
Before Justices Jennings, Keyes and Higley  
01-08-00254-CV  Cricket Hollow Partners, L.P. and Cricket Hollow Development, Inc.
v. MMA Cricket Hollow, LLC  
Appeal from 11th District Court of Harris County
Trial Court Judge: Hon. Mark Davidson
Trial Court Case #: 0770095


Opinion issued July 16, 2009
--------------------------------------------------------------------------------

MEMORANDUM OPINION

Appellants, Cricket Hollow Partners, LP ("CHP") and Cricket Hollow Development, Inc. ("CHD"), (1)
challenge the trial court's rendition of summary judgment in favor of appellee, MMA Cricket Hollow, LLC
("MMA"), in CHD's suit against MMA seeking a declaratory judgment that MMA, pursuant to its Partnership
Agreement with CHD, must pay "adequate consideration" before claiming the benefit of certain additional
tax credits issued to CHP. CHD brings four issues for our review. In its first two issues, CHD contends that
the trial court erred in holding that the Partnership Agreement encompasses "unforeseeable" additional tax
credits that were not contemplated by the parties and in adopting "an unreasonable interpretation" of the
Partnership Agreement, which results in a windfall to MMA and a forfeiture of CHP property. In its third
issue, CHD contends that it "presented several reasonable interpretations" of the Partnership Agreement,
which reveal "an ambiguity that precluded summary judgment." In its fourth issue, CHD contends that the
trial court erred in not striking certain portions of the affidavit of Eric Bonney, MMA's vice-president, who
purported to testify about the parties' intentions in negotiating the Partnership Agreement.

We affirm.

Factual and Procedural Background

On September 30, 2004, CHD and MMA entered into a Second Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"), creating CHP, which owns the Cricket Hollow
Apartments in Willis, Texas. CHD, the developer of the apartments, is the general partner of CHP, and
MMA is the sole investor limited partner of CHP. Pursuant to the Partnership Agreement, MMA made a
capital contribution to CHP in the amount of $7,317,000 (2) in exchange for federal low income housing tax
credits made available to the Cricket Hollow Apartments. Prior to entering into the Partnership Agreement,
the estimated amount of any such tax credits "potentially available . . . over a ten year commitment period,"
based upon a 2004 Housing Tax Credit Commitment Notice issued by the Texas Department of Housing
and Community Affairs ("TDHCA"), was $8,711,100. In the Partnership Agreement, the parties projected
that MMA, which owned a 99.99% interest in CHP, would receive 99.99% of these tax credits, or
$8,710,230.

In its original petition, CHD alleged that, in response to the devastation caused by Hurricanes Katrina and
Rita in 2005, the TDHCA "decided to issue additional tax credits for low income housing complexes to
compensate for unforseen additional costs." Thus, in November 2006, the TDHCA advised CHP that the
Cricket Hollow Apartments qualified for an additional $82,466 in federal tax credits per year for a ten year
period beginning in 2007. The total amount of these additional tax credits is $824,660, an amount "above
and beyond" the credits previously allocated by the TDHCA to the Cricket Hollow Apartments. Noting that
the "market price for federal tax credits [had] increased substantially" since the hurricanes, CHD sent
correspondence to MMA to discuss "the additional federal tax credits." MMA, after initially offering to
purchase the additional tax credits at 2004 market prices, subsequently took the position that it, as the sole
investor limited partner, could claim the additional tax credits "regardless [of] whether or not it actually
[paid] any compensation or additional capital contribution to [CHP]." (3)

In seeking declaratory relief, CHD, in its petition, asserted that the Partnership Agreement provided that
CHD may require MMA to purchase up to $100,000 of additional tax credits at a price of $.84 for each
$1.00 of credits, but the Partnership Agreement is "silent about and [does] not contemplate a situation" in
which CHP could receive more than $100,000 in additional tax credits. CHD further asserted that the $.84
price specified in the Partnership Agreement reflects the market conditions that existed in 2004 and, thus,
does not accurately reflect the tax credits' current market value. CHD concluded that any interpretation of
the Partnership Agreement that would enable MMA to claim the $824,000 in additional tax credits, without
paying any additional consideration or a price consistent with the current market rate, represents "a failure
in consideration." Thus, CHD sought a declaration that MMA could not claim the benefit of the additional tax
credits "without first paying adequate consideration."

MMA filed a general denial, and then, shortly thereafter, a summary judgment motion. In its summary
judgment motion, MMA asserted that, under the unambiguous terms of the Partnership Agreement, MMA,
as the sole investor limited partner, is required to increase its capital contribution to CHP by $100,000 and,
in return, MMA is to be allocated 99.99% of the additional tax credits awarded to CHP. In support of this
assertion, MMA relied primarily on section 5.2(E) of the Partnership Agreement, which provides,

Federal Upward Basis Adjuster. If at any time and from time to time the Accountants shall determine or
there shall be a Final Determination that the Adjusted Aggregate Federal Credit Amount properly allocable
to the Investor Limited Partner during the Credit Period is greater than the Projected Aggregate Federal
Credit Amount, then the Capital Contribution of the Investor Limited Partner shall be increased in the
aggregate by the "Federal Increase Factor" (as hereinafter defined) for each $1.00 that the Adjusted
Aggregate Federal Credit Amount properly allocable to the Investor Limited Partner during the Credit
Period is greater than the Projected Aggregate Federal Credit Amount. The "Federal Increase Factor" shall
be an amount equal to $0.84. In no event shall any increase in the Investor Limited Partner's Capital
Contribution pursuant to this Section 5.2E exceed $100,000.

(underlined emphasis in original, italics added). MMA also relied on the definitions of the capitalized terms
in section 5.2(E). Three of the terms relevant to this matter are defined in Article I of the Partnership
Agreement as follows:

"Adjusted Aggregate Federal Credit Amount" means the product of (i) 99.99% and (ii) the aggregate
amount of the Federal Tax Credits that is determined by the Accountants, at Cost Certification, (4)
available to the Property (and is reflected in the final IRS Form(s) 8609 for the Property) for the entire
Credit Period, as such amount may be increased or decreased as a result of a subsequent determination
by the Accountants, a Final Determination or a Recapture Event.
. . . .

"Credit Period" means the period described in Section 42 of the [Internal Revenue] Code [of 1986]. (5)
. . . .

"Projected Aggregate Federal Credit Amount" means $8,710,230 which is the product of (i) 99.99% and (ii)
the aggregate amount of Federal Tax Credits available to the Property during the Credit Period, as
reflected in the Investment Assumptions.

MMA explained that the Adjusted Aggregate Federal Credit Amount, by its plain terms, is the amount of
Federal Tax Credits allocable to MMA by CHP over the Credit Period, and that the term Adjusted
Aggregate Federal Credit Amount expressly contemplates that this amount may increase or decrease as a
result of a subsequent determination by the Accountants or a Final Determination. MMA also explained that
the Projected Aggregate Federal Credit Amount is the total amount of Federal Tax Credits that was initially
projected to be allocated to MMA by CHP over the Credit Period, which was derived from the original award
of tax credits. MMA conceded that the Projected Aggregate Federal Credit Amount was 99.99% of
$8,711,100, or $8,710,230, but MMA contended that the subsequent, additional award of tax credits
caused the Adjusted Federal Credit Amount to exceed the projected amount by $824,575. MMA contended
that application of section 5.2(E) entitled it to receive the additional tax credits for its additional capital
contribution capped at $100,000. (6)

MMA argued in its summary judgment motion that even if the parties "did not reasonably expect that [CHP]
would be awarded" the additional tax credits, their subjective belief does not give rise to a latent ambiguity
because section 5.2(E) plainly applies to the contingency of the award of additional tax credits. Finally,
MMA argued that any claim by CHD that the parties were operating under a "mutual mistake" at the time
they entered into the Partnership Agreement fails as a matter of law because the doctrine of mutual
mistake is only implicated if the purported error relates to a fact in existence at the time of the making of a
contract and the alleged mistake in the instant case relates to "a mere prediction that TDHCA would not
award [CHP] additional Federal Tax Credits."

In its response to MMA's summary judgment motion, CHD asserted that "the parties could not have
contracted with respect to additional tax credits that they had no idea could ever exist, resulting from an
historic series of natural disasters they could not have foreseen would occur." CHD also asserted that the
State of Texas had "authorized and allocated the 2007 tax credits for the express purpose of assisting
[CHP] and other low-income housing developments in Texas coping with increased costs as a result of the
devastation of the 2005 hurricane season" and that MMA, in pursing its requested windfall, sought to
frustrate the governmental policy in issuing the 2007 tax credits.

CHD asserted that the Partnership Agreement is based upon specific tax credits allocated in 2004, section
5.2 does not express an intent to govern "future unforeseeable allocations" of tax credits, MMA itself had
contradicted its own construction of the Partnership Agreement by previously offering to pay for all of the
2007 tax credits, (7) and MMA's interpretation of section 5.2 is unreasonable and results in a forfeiture.
Alternatively, CHD argued that the Partnership Agreement is ambiguous and that extrinsic evidence raises
a fact issue as to whether section 5.2 is merely surplusage. Finally, CHD sought to strike portions of the
affidavit of Eric Bonney, MMA's vice-presidnet, asserting that he lacked personal knowledge of the
negotiations between CHD and MMA regarding the Partnership Agreement.

In support of its response, CHD attached the affidavit of Jeff Gannon, a person experienced in applying for
low-income housing tax credits in Texas, who testified,

After the TDHCA has approved an application, the TDHCA sends the developer a "Housing Tax Credit
Commitment Notice," which states the amount of tax credits that the TDHCA has allocated to the
development. The developer then typically uses the TDHCA commitment notice to obtain funding for the
planned project. Because the developer does not receive all the tax credits immediately . . . the developer
sells the rights to the future credits in exchange for equity contributions paid during the project's
construction.

To receive the tax credits and other benefits from an LIHTC [the Federal Low-Income Housing Tax Credit
program] housing project, the investor must purchase an ownership interest in the low-income housing
project that is entitled to the tax credits. In the limited partnership context, as here, the limited partner
"buys" the tax credits for a fixed price. Then, in exchange for its limited partnership interest, the limited
partner makes capital contributions to the project during construction intervals at the agreed price. The
limited partner's ownership interest entitles it to claim the future tax credits and other benefits in proportion
to the limited partnership's percentage of ownership.

Equity investors or syndicates like MMA typically purchase a 99.99% limited partnership interest. . . . If a
low-income housing project goes as planned, then the investor will receive its desired "internal rate of
return"--the full tax credits at a dollar amount exceeding the amount of the investor's discounted monetary
investment, as well as the depreciation and operating loss deductions that flow from the housing project.
. . . .

The 2007 tax credits . . . do not have the normal risks associated with LIHTC tax credits, because they
relate to a completed and operational housing development. . . . The absence of initial construction risks,
and the immediate availability of the benefits of the 2007 tax credits, vastly increase the value of the 2007
tax credits.
. . . .

Based on my knowledge and experience, prior to the TDHCA's allocation of additional tax credits in 2007,
the TDHCA had never issued additional tax credits to compensate developers for increased costs of
construction. Also, based on my knowledge and experience, there was no mechanism in 2004 or 2005 for
developers to approach the TDHCA for additional tax credits due to increased costs, and there was no
precedent for the TDHCA to award additional tax credits due to increased construction costs. Applications
for federal tax credits in a 9% deal (8) in Texas are governed by the TDHCA's Qualified Allocation Plan
(QAP). The QAP sets out in detail the procedures and requirements for applying for and receiving federal
housing tax credits. The QAP contains no provision for approaching the TDHCA, after a Commitment
Notice has been issued, to ask for more tax credits because a development is more expensive than
anticipated. Not only is a request for increased tax credits due to increased development costs not
procedurally authorized under the QAP, but it would make no sense in the context of a 9% deal.

CHD also attached the affidavit of Brian Cogburn, CHD's secretary, who testified,

CHD's application [for the tax credits] included the projected development costs for building the Cricket
Hollow Apartments. Along with the application, CHD submitted documents for the formation of the
Partnership . . . . After receiving and determining that Cricket Hollow was competitive application to receive
a tax credit award, the THDCA underwrote the total projected construction cost, applied the then-applicable
federal percentage of 8.34% and recommended that Cricket Hollow receive annual available tax credits in
the amount of $8,711,110.

The TDHCA issued the 2004 . . . Commitment Notice to the Partnership. . . . Based on this Commitment
Notice, CHD and MMA negotiated the terms under which MMA would purchase and serve as the limited
partner of [CHP]. . . .

MMA originated and prepared all drafts of the [Partnership] Agreement. All negotiations, and the ultimate
[Partnership] Agreement were specifically based upon on the TDHCA's 2004 Housing Tax Credit
Commitment Notice authorizing tax credits of $8,711,100. Thus, at the time the parties entered into this
[Partnership] Agreement, MMA and CHD knew exactly how many 2004 tax credits were available to finance
Cricket Hollow's development. . . .

Neither MMA nor CHD could have conceivably entered into this Partnership Agreement with any intent to
address or assign a value to the 2007 tax credits, because the 2007 tax credits were completely
unforeseeable. The cost increases experienced by developers resulting from the 2005 hurricane season
were huge. The TDHCA's subsequent voluntary allocation of additional tax credits to the Cricket Hollow
Apartments as well as the State of Texas's entire 2004 and 2005 allocation pool that received an award,
were unknown and unforeseeable.

. . . Based on my knowledge and experience, prior to the TDHCA's allocation of additional tax credits in
2007, the TDHCA had never issued additional tax credits to compensate developers for increased costs of
construction, and has no history of, or procedure for, changing the amount of tax credits promised in a
Commitment Notice. . . .

When the parties negotiated the Partnership Agreement, no one ever discussed the possibility that the
TDHCA might make a new allocation of additional tax credits due to increased costs. . . . The idea that
TDHCA might do such a thing was simply not within our contemplation. . . .
. . . .
I recall discussing Section 5.2 with MMA's representatives during the negotiations. We discussed the fact
that in a . . . transaction like the Cricket Hollow Apartments, there would be no increase in tax credits after
the binding commitment, which made Section 5.2(E) irrelevant. MMA's representatives acknowledged that
this was the case, and that Section 5.2(E) was a non-issue, but insisted on having a number to plug into
the blank in Section 5.2(E). Because Section 5.2(E) was a non-issue, the $100,000 number was not
negotiated. The $100,000 number was not selected to correspond to any price nor was it discussed to fit
an eventual scenario. This was a plug number that was plucked out of thin air and used to fill in a blank.

After filing its response, CHD filed a supplemental petition, in which it asserted that section 5.2(E) of the
Partnership Agreement unambiguously applies only to adjustments to the TDHCA's allocation of 2004 tax
credits. CHD alternatively asserted that section 5.2(E) is ambiguous or that, even if section 5.2(E) applies
to the additional 2007 tax credits, CHD and MMA were "operating under a mutual mistake as to the effect of
section 5.2(E)" and that section 5.2(E) should not be applied "contrary to the parties' intent." However,
CHD did not request any additional relief in this supplemental petition. The trial court granted MMA's motion
for summary judgment and dismissed CHD's claims.

Standard of Review

To prevail on a summary judgment motion, a movant has the burden of proving that it is entitled to
judgment as a matter of law and that there is no genuine issue of material fact. Tex. R. Civ. P. 166a(c);
Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). When a defendant moves for summary judgment, it
must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) plead and
conclusively establish each essential element of its affirmative defense, thereby defeating the plaintiff's
cause of action. Cathey, 900 S.W.2d at 341; Yazdchi v. Bank One, Tex., N.A., 177 S.W.3d 399, 404 (Tex.
App.--Houston [1st Dist.] 2005, pet. denied). When deciding whether there is a disputed, material fact issue
precluding summary judgment, evidence favorable to the non-movant will be taken as true. Nixon v. Mr.
Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Every reasonable inference must be indulged in
favor of the non-movant and any doubts must be resolved in its favor. Id. at 549.

Contract Interpretation

In its first two issues, CHD argues that the trial court erred in granting MMA's summary judgment motion
because the Partnership Agreement does not encompass "unforeseeable" additional tax credits not
contemplated by the parties and the trial court's interpretation of the Partnership Agreement results in a
windfall to MMA and a forfeiture of CHP property. CHD argues that the Partnership Agreement, on its face,
shows that the parties "contracted solely with respect to the 2004 Tax Credits" because the parties defined
the term "Federal Tax Credits" to confirm their "intent to encompass only tax credits for which [CHP] was
eligible at the time of contracting." CHD asserts that the calculations used in the Partnership Agreement
"are predicated" on the amount of tax credits allocated to CHP in the 2004 Commitment Notice. Also, citing,
among other things, Brian Cogburn's affidavit testimony, CHD asserts that the "surrounding circumstances"
show that the parties "contracted solely with respect to the 2004 tax credits," (9) and CHD emphasizes that
MMA's own financial analysis prepared in connection with its investment in CHP is based on the 2004 tax
credits. CHD further asserts that the express language of section 5.2(E) makes clear that the section only
"comes into play" when there is a "determination or redetermination" of the aggregate amount of tax credits
that were the basis of the parties' assumptions at the time that the parties entered into the Partnership
Agreement. CHD notes that the 2007 tax credits were issued on the basis of a "new application, new
project number, and new fee." CHD contends that the trial court, with its interpretation, has "assume[d] that
the parties acted unreasonably and irrationally" in concluding that section 5.2(E) applied to "future
unforeseeable tax credits regardless of the market value of those credits." (10) Finally, CHD asserts that
the trial court has "effect[ed] a forfeiture" of CHP's "valuable property" and allowed CHD to exploit language
that was "essentially surplusage."

Our primary concern in construing a written contract is to ascertain the true intent of the parties as
expressed in the instrument. Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex.
2006); Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005); Edascio, L.L.C. v. NextiraOne
L.L.C., 264 S.W.3d 786, 796 (Tex. App.--Houston [1st Dist.] 2008, pet. filed); Case Funding Network, L.P.
v. Anglo-Dutch Petroleum Int'l, Inc., 264 S.W.3d 38, 51 (Tex. App.--Houston [1st Dist.] 2007, pet. denied);
Motiva Enters., LLC v. McCrabb, 248 S.W.3d 211, 215 (Tex. App.--Houston [1st Dist.] 2007, pet. denied).
Usually, the intent of the parties can be discerned from the instrument itself. ExxonMobil Corp. v. Valence
Operating Co., 174 S.W.3d 303, 312 (Tex. App.--Houston [1st Dist.] 2005, pet. denied). If a written contract
is worded in such a way that it can be given a definite or certain legal meaning, then the contract is not
ambiguous. SAS Inst., Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005). When the parties have entered
into an unambiguous contract, the courts will enforce the intention of the parties as written in the
instrument. Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981).

When an issue regarding the construction of a contract is presented, we are required to take the wording
of the instrument, consider the surrounding circumstances at the time of the contract's formation, and apply
the rules of contract construction to ascertain its meaning. ExxonMobil Corp., 174 S.W.3d at 312; see also
Enter. Leasing Co. of Houston v. Barrios, 156 S.W.3d 547, 549 (Tex. 2004) (stating that to determine
whether contract is ambiguous, we look at agreement as whole in light of circumstances present when
parties entered into contract). The consideration of the facts and circumstances surrounding the execution
of a contract is solely to aid our determination of the contract's meaning. ExxonMobil Corp., 174 S.W.3d at
312.

Moreover, we must examine and consider the entire writing in an effort to harmonize and to give effect to all
the provisions of the contract so that none will be rendered meaningless. Seagull Energy E & P, Inc., 207
S.W.3d at 345. Contract terms will be given their plain, ordinary, and generally accepted meanings unless
the contract itself shows them to be used in a technical or different sense. Valence Operating Co., 164
S.W.3d at 662. A contract is ambiguous only if its meaning is uncertain or if it is subject to two or more
reasonable interpretations. Seagull Energy E & P, Inc., 207 S.W.3d at 345; Edascio, L.L.C., 264 S.W.3d at
796-97. An ambiguity does not arise simply because the parties advance conflicting interpretations of the
contract. Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004). We may not
consider extrinsic evidence to contradict or to vary the meaning of unambiguous language in a written
contract in order to create an ambiguity. (11) See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex.
2006).

Finally, we note that we interpret contracts "from a utilitarian standpoint bearing in mind the particular
business activity sought to be served" and "will avoid when possible and proper a construction which is
unreasonable, inequitable, and oppressive." Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312
(Tex. 2005). A reasonable interpretation of a contract is preferable to one that is unreasonable. Westwind
Exploration, Inc. v. Homestate Sav. Ass'n, 696 S.W.2d 378, 382 (Tex. 1985); see also Bituminous Cas.
Corp. v. Maxey, 110 S.W.3d 203, 213 (Tex. App.--Houston [1st Dist.] 2003, pet. denied).

We first turn to the language used by the parties in the Partnership Agreement. Article V of the Partnership
Agreement, entitled "Capital Contributions of Investor Limited Partner," sets forth MMA's capital contribution
requirements to CHP. Because this Article is the only article in the Partnership Agreement that specifically
addresses MMA's contribution requirements, and because the central dispute in this case concerns what
amount, if any, MMA must pay for the additional tax credits, our analysis necessarily focuses on the
provisions in this article and the associated definitions. First, section 5.1(A) of article V states that MMA,
the sole investor limited partner, "shall contribute as its Capital Contribution the sum of $7,317,000,"
payable in eight installments. Section 5.1(A) then provides a detailed payment schedule for these
installments. Section 5.2 of article V, entitled "Adjustment to Capital Contributions of Investor Limited
Partner," expressly contemplates that MMA's capital contribution "shall be subject to adjustment in the
manner provided" in that section. (12) Section 5.2(E), entitled "Federal Upward Basis Adjuster," specifically
governs any upward adjustment of MMA's capital contribution when the Adjusted Aggregate Federal Credit
Amount properly allocable to MMA during the Credit Period exceeds the Projected Aggregate Federal
Credit Amount. Section 5.2(E) provides:Federal Upward Basis Adjuster. If at any time and from time to time
the Accountants shall determine or there shall be a Final Determination that the Adjusted Aggregate
Federal Credit Amount properly allocable to the Investor Limited Partner during the Credit Period is greater
than the Projected Aggregate Federal Credit Amount, then the Capital Contribution of the Investor Limited
Partner shall be increased in the aggregate by the "Federal Increase Factor" (as hereinafter defined) for
each $1.00 that the Adjusted Aggregate Federal Credit Amount properly allocable to the Investor Limited
Partner during the Credit Period is greater than the Projected Aggregate Federal Credit Amount. The
"Federal Increase Factor" shall be an amount equal to $0.84. In no event shall any increase in the Investor
Limited Partner's Capital Contribution to this Section 5.2E exceed $100,000. (underlined emphasis in
original, italics added).

In sum, article V details MMA's capital contribution requirements and section 5.2(E), on its face, provides
an upward adjuster for MMA's capital contribution in the event that the Adjusted Aggregate Federal Credit
Amount properly allocable to MMA during the Credit Period exceeds the projected amount. Accordingly, the
Partnership Agreement expressly contemplates that the adjusted aggregate amount of tax credits issued to
CHP during the Credit Period could in fact exceed the projected amount of tax credits, or $8,710,230, as
set forth in the Partnership Agreement. Section 5.2(E) does not include any limitations or restrictions in
regard to the circumstances under which the adjusted aggregate amount of tax credits could exceed the
projected amount. Simply put, if the "Adjusted Aggregate Federal Credit Amount" exceeds the "Projected
Aggregate Federal Credit Amount," section 5.2(E) is triggered.

We next turn to the definition of the term "Adjusted Aggregate Federal Credit Amount" to determine if the
award of the 2007 tax credits could cause the "Adjusted Aggregate Federal Credit Amount" to exceed the
"Projected Aggregate Federal Credit Amount" and, thus, trigger section 5.2(E). The Partnership Agreement
defines the term "Adjusted Aggregate Federal Credit Amount" to be the product of "(i) 99.99% and (ii) the
aggregate amount of the Federal Tax Credits that is determined by the Accountants, at Cost Certification,
available to the Property . . . for the entire Credit Period, as such amount may be increased or decreased
as a result of a subsequent determination by the Accountants, a Final Determination or a Recapture
Event." Under the plain terms of the Partnership Agreement, the adjusted aggregate amount of tax credits
includes all of those made available to the property "for the entire Credit Period."

The Partnership Agreement does not provide a fixed number, or even a range of numbers, to limit the
scope or extent of the adjusted aggregate amount of tax credits, nor is there any limitation in the
Partnership Agreement as to the potential cause for or circumstances under which additional tax credits
could be made available to the property. In sum, the Partnership Agreement does not contain any
language restricting the type or amount of tax credits that could be included in the initial or any subsequent
determinations of the "Adjusted Aggregate Federal Credit Amount." In fact, the Partnership Agreement
expressly contemplates that the "Adjusted Aggregate Federal Credit Amount" could be "increased or
decreased as a result of a subsequent determination."

We conclude that, under the plain language of the Partnership Agreement, the tax credits made available
to the property in 2007 fall within the Adjusted Aggregate Federal Credit Amount, and, because this causes
the Adjusted Aggregate Federal Credit Amount to exceed the projected amount, section 5.2(E) is triggered.
We further conclude that, after applying the Federal Increase Factor of $.84, which was specified in section
5.2(E), to the adjusted aggregate amount of tax credits, including the 2007 tax credits, MMA would be
required to increase its capital contribution to CHP by $692,643, but for the last sentence of section 5.2(E).
However, the last sentence of section 5.2(E) unambiguously sets forth a contribution cap, limiting MMA's
additional capital contribution, which is triggered by the inclusion of the 2007 tax credits into the adjusted
aggregate amount of tax credits, to $100,000.

Here, the Partnership Agreement defines the term "Federal Tax Credits" to mean "the tax credits for which
the Project is eligible under Section 42 of the Internal Revenue Code." However, as noted by MMA, the
Agreement defines "Code" as "the Internal Revenue Code of 1986, as amended from time to time, and the
Treasury Regulations promulgated thereunder at the time of reference thereto." Moreover, as noted
above, under the Partnership Agreement, the "Adjusted Aggregate Federal Credit Amount" is subject to
being "increased or decreased" for tax credits made available to the property during the Credit Period.
Section 5.2(E) also states that it applies "[i]f at any time and from time to time" the adjusted aggregate
amount of tax credits available to the property exceeded the projected amount. The fact that the parties
defined the term "Code" in the present tense does not create any ambiguity as to whether the additional
tax credits, which were awarded subsequent to the parties' entry into the Partnership Agreement pursuant
to an amendment to the Code, fall within the Partnership Agreement. The Partnership Agreement
unambiguously applies to these additional tax credits.

In regard to CHD's argument that we should consider, among other things, Gannon's and Cogburn's
affidavits to aid our construction of an otherwise unambiguous contract, we agree, as noted above, that we
must look at Partnership Agreement as whole in light of surrounding circumstances. See Sun Oil Co., 626 S.
W.2d at 731. Thus, we conclude that, as a general proposition, we may consider evidence of the
surrounding circumstances at the time the parties' entered into the Partnership Agreement, including the
affidavits of Gannon and Cogburn, to the extent they contained such evidence. However, even if we were
to consider some portions of Gannon's and Cogburn's affidavits, the specific testimony of Cogburn and
Gannon that CHD cites in support of its interpretation of the Partnership Agreement extends well beyond
any evidence of the "surrounding circumstances." For example, CHD cites Cogburn's testimony that, in
negotiating the Partnership Agreement, he specifically discussed section 5.2 with MMA's representatives
and that they agreed that, because "there would be no increase in tax credits after the binding
commitment," the parties acknowledged that section 5.2(E) was "irrelevant" and a "non-issue." According to
Cogburn, MMA merely "plucked" a number out of thin air to insert into section 5.2(E). Using this testimony
from Cogburn, CHD argues that the parties regarded section 5.2(E) as mere surplusage and that the
parties did not intend for this clause to have any effect.

CHD, in arguing that such testimony merely constitutes evidence of surrounding circumstances, is
effectively asking us to delete section 5.2(E) from the Partnership Agreement. None of the authorities cited
by CHD that address the admission of evidence on surrounding circumstances go so far as to permit an
interested party to offer testimony that a contractual term has no meaning. We further note that even
though Cogburn attempted to characterize section 5.2(E) as completely irrelevant, he also acknowledged
that MMA "insisted" on a specific cap in section 5.2(E). CHD has not cited any case suggesting that a
provision of a contract that was indisputably included at the insistence of one of the parties could ever be
considered surplusage or could be disregarded by a court on the basis of surrounding circumstances
evidence. (13)

CHD also cites Gannon's testimony that a request for increased tax credits due to increased development
costs was "not procedurally authorized" and "would make no sense in the context of" a transaction like the
one at issue here. Similarly, CHD cites Cogburn's testimony that, prior to the TDHCA's allocation of
additional tax credits in 2007, "the TDHCA had never issued additional tax credits to compensate
developers for increased costs of construction, and has no history of, or procedure for, changing the
amount of tax credits promised in a Commitment Notice." Whether this type of testimony, which relates to
the forseeability of additional tax credits, amounts to admissible surrounding circumstances evidence
presents a closer call. Unlike Cogburn's testimony that the parties did not attach any meaning to section
5.2(E), CHD argues that this testimony should be characterized as pertaining to a circumstance that existed
at the time the parties entered into the Partnership Agreement, i.e, industry knowledge as to the type of tax
credits available in the context of the transaction. Although the testimony of Cogburn and Gannon would
place significant and material limits and restrictions on the scope of section 5.2(E), by its plain terms,
section 5.2(E), applies, without limitation or restriction, to tax credits made available to the property during
the "credit period." Nothing in section 5.2(E), or in the associated definitions, suggests that section 5.2(E),
or the entire Partnership Agreement, applies solely to the 2004 tax credits. In sum, none of the cases cited
by CHD have gone so far as to allow a party to offer testimony, even when done so under the pretext of
evidence of industry knowledge or surrounding circumstances, to either delete a contractual provision or
place material limitations and restrictions on a provision that otherwise plainly applies.

Finally, we conclude that interpreting the Partnership Agreement and section 5.2(E) to allow MMA to obtain
the benefit of the additional tax credits in exchange for an additional, but capped, capital contribution is not
unreasonable and does not result in a forfeiture. (14) Even Cogburn testified that MMA insisted upon
including a cap on any potential additional contribution. Thus, even accepting as true Cogburn's testimony
that the parties did not specifically foresee the possibility of additional tax credits being issued by the
TDHCA to account for hurricanes Katrina and Rita, it is undisputed that MMA insisted on the cap provision
and that the contingency described in section 5.2(E) has occurred--the adjusted aggregate amount of tax
credits available to the property has exceeded the projected amount. In sum, we hold that the trial court did
not err in granting MMA's summary judgment motion and dismissing CHD's claims.

We overrule CHD's first and second issues. (15)

Conclusion

We affirm the judgment of the trial court.

Terry Jennings

Justice

Panel consists of Justices Jennings, Keyes, and Higley.

1.
Although CHD and CHP are both appellants, for convenience, we will primarily refer to CHD as the
appellant. As is explained further in the opinion, CHP is the name of the limited partnership entered into by
CHD and MMA, and, in this case, CHD and MMA are disputing the proper interpretation of the Partnership
Agreement.

2.
This would make MMA's capital contribution equal to approximately $.84 for each $1.00 of the tax credits
MMA was entitled to receive.

3.
As discussed in more depth, MMA's position in this case is that it is required to pay for the additional tax
credits at the 2004 market rate up to $100,000, at which its additional capital contribution is capped by the
Partnership Agreement.

4.
"'Cost Certification' means the submission to, and receipt by, the Credit Agency [TDHCA] of a certified audit
by the Accountants of the Partnership's development and related costs for purposes of establishing the
amount of Federal Tax Credits available to the Project [Property]."

5.
At a minimum, the Credit Period for the property goes through 2016.

6.
MMA agreed that, but for this contribution cap, it would have been required to increase its capital
contribution to CHP by $692,643.

7.
In support of this assertion, CHD cites correspondence contained in the record sent from MMA to CHD after
CHD had advised MMA of the availability of the additional tax credits. In this correspondence, an MMA
representative responds to the notification of the additional tax credits by stating that MMA has "capacity in
the LP fund [to purchase] all the additional credits for [the Property]" and MMA proposes to pay for the
credits based upon the price specified in the Partnership Agreement. In subsequent correspondence, MMA
repeats its offer to buy all of the additional tax credits at the 2004 price on March 6, 2007, although it
states that it believes "that the credits are already going to flow to us."

8.
Gannon subsequently explained that this type of deal is described in the industry as a "9% deal," and he
differentiated a "9% deal" from a "bond-financed deal." Gannon explained that, in a 9% deal, "the
developer receives a 'binding commitment' at the outset of the project in which the TDHCA promises that
the developer will receive a certain amount of tax credits." In contrast, in a "bond-financed deal," the
TDHCA sends the developer a notice "stating, among other things, that the applicant has satisfied the
requirements for the allocation of housing tax credits." And, although this notice "provides an initial
'determination' of the amount of housing credits that may be allocated and the applicant's eligibility to claim
these tax credits," the TDHCA's rules "specifically permit a developer in a 4% bond-financed deal to apply .
. . for an increased credit award . . . ." Gannon noted that "[t]here is no comparable provision with respect
to a '9% deal.'"

9.
In support of this assertion, CHD specifically cites Cogburn's testimony that TDHCA's "subsequent
voluntary allocation of additional tax credits . . . [was] unknown and unforeseeable," "there was no
precedent for the TDHCA to award additional tax credits," "no one ever discussed the possibility that the
TDHCA might make a new allocation of additional tax credits," the idea "was simply not within our
contemplation," and "MMA's representatives acknowledged that . . . Section 5.2(E) was a non-issue." CHD
also cites Gannon's testimony that a request for additional tax credits was not "procedurally authorized"
and would "make no sense" in the type of transaction at issue.

10.
CHD, in its brief, also makes a general reference to the doctrine of mutual mistake, but CHD's brief
discussion of this doctrine does not comport with CHD's primary contention that the Partnership Agreement
unambiguously does not apply to the 2007 tax credits or, alternatively, that there is at least a fact issue on
this point. Although CHD has not provided this Court with a substantive discussion of the doctrine of mutual
mistake and how it applies to the instant case, we generally note that the Texas Supreme Court has
recognized that "an error in predicting a future fact known to be uncertain is not the kind of mistake which
will relieve a party from a contract." City of Austin v. Cotten, 509 S.W.2d 554, 557 (Tex. 1974); Green v.
Morris, 43 S.W.3d 604, 607 (Tex. App.--Waco 2001, no pet.) (stating that "many authorities, in dealing with
mistake, draw a distinction between mistakes concerning 'past or present facts' and those concerning
factual occurrences in the future"). CHD has not cited any authority that demonstrates that the doctrine of
mutual mistake has any applicability to the facts at hand.

11.
We also note that when the parties have concluded a valid, integrated agreement, the parol evidence rule
precludes enforcement of a prior or contemporaneous inconsistent agreement. Edascio, L.L.C. v.
NextiraOne L.L.C., 264 S.W.3d 786, 796 (Tex. App.--Houston [1st Dist.] 2008, pet. filed); Ledig v. Duke
Energy Corp., 193 S.W.3d 167, 178 (Tex. App.--Houston [1st Dist.] 2006, no pet.); Baroid Equip., Inc. v.
Odeco Drilling, Inc., 184 S.W.3d 1, 13 (Tex. App.--Houston [1st Dist.] 2005, pet. denied). A written
instrument presumes that all prior agreements relating to the transaction have been merged into it and will
be enforced as written and cannot be added to, varied, or contradicted by parol testimony. Edascio, L.L.C.,
264 S.W.3d at 796. When parol evidence is determined to be inadmissible, it has no legal effect and
merely constitutes proof of facts that are immaterial and inoperative. Id. Parol evidence is only admissible
to show the parties' true intentions if the writing is ambiguous. Id.

12.
Section 5.2(A) through 5.2(D) address a number of specific contingencies that do not appear relevant. For
example, section 5.2(A) details the treatment of the parties if the "Adjusted Federal Credit Amount properly
allocable to the Investor Limited Partner during the Credit Period for all of the Buildings in the Project is or
will be less than the Projected Aggregate Federal Credit Amount. . . ."

13.
We additionally note that CHD's argument goes against well-established precedent that courts should
examine and consider the entire writing of an instrument in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless. See Valence Operating Co. v.
Dorsett, 164 S.W.3d 656, 662 (Tex. 2005); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).

14.
Although we need not directly consider this issue, we note that, if CHD was successful in its contention that
section 5.2(E) is surplusage, it would seem that MMA might actually be entitled to all of the 2007 tax credits
for no additional consideration. This is because there are no other provisions in the Partnership Agreement
addressing MMA's capital contribution and, because the 2007 tax credits were issued to CHP and not the
parties individually, it would seem that they would have to pass under the Partnership Agreement. There is
no support for CHD's contention that, under the Partnership Agreement, the parties were simply "free to
negotiate" a new price in order for MMA to acquire the additional tax credits. There is also no support for
CHD's contention that it would be permissible under the Partnership Agreement to market the tax credits to
a third party without MMA's consent.

15.
Having held that the Partnership Agreement, and section 5.2(E), unambiguously applies to the 2007 tax
credits, we need not consider CHD's third issue, in which it contends that it "presented several reasonable
interpretations" of the Partnership Agreement that precluded summary judgment, or its fourth issue, in
which it contends that the trial court erred in failing to strike portions of Bonney's affidavit.