                                                                                    ACCEPTED
                                                                                03-17-00749-CV
                                                                                      21197960
                                                                     THIRD COURT OF APPEALS

                            03-17-00863-CV                                      AUSTIN, TEXAS
                                                                            12/11/2017 10:13 AM
                                                                              JEFFREY D. KYLE
January 5, 2018                                                                          CLERK
                            No. 03-17-00749-CV
                             In the                             FILED IN
                                                         3rd COURT OF APPEALS
                      Third Court of Appeals                 AUSTIN, TEXAS
                                                        12/11/2017 10:13:40 AM
                          Austin, Texas                    JEFFREY D. KYLE
                              ________________                   Clerk
                       SBI INVESTMENTS LLC, 2014-1,
                           AND L2 CAPITAL, LLC,
                                                 Appellants,

                                     v.

                       QUANTUM MATERIALS CORP.,
                                                   Appellee.
                             ________________
                  On Appeal from the 428rd District Court,
                     Hays County, Texas (No. 17-2033)
                      The Hon. Gary Steel, Presiding
                             ________________
                    APPELLANTS’ BRIEF ON THE MERITS
                             ________________

                                          Timothy A. Cleveland
                                           State Bar No. 24055318
                                          Carlos R. Soltero
                                           State Bar No. 00791702
                                          Kevin J. Terrazas
                                           State Bar No. 24060708
                                          CLEVELAND | TERRAZAS PLLC
                                          4611 Bee Cave Rd, # 306B
                                          Austin, Texas 78746
                                          512-689-8698

                                          ATTORNEYS FOR APPELLANTS
              IDENTITIES OF PARTIES AND COUNSEL

SBI Investments, LLC, 2014-       Appellants
1, and L2 Capital, LLC,

Timothy Cleveland                 Trial and Appellate Counsel
Carlos Soltero
Kevin Terrazas
CLEVELAND | TERRAZAS PLLC
4611 BEE CAVE RD, # 306B
AUSTIN, TEXAS 78746
512.689.8698

Quantum Materials Corp.           Appellees

Michael Minns                     Trial and Appellate Counsel
Ashley Arnett
MINNS & ARNETT
919 Gessner, Suite 1
Houston, Texas 77074
713.777.0772
713.777.0453 fax

Seth Kretzer
440 Louisiana, Suite 1440
Houston, Texas 77002
713.775.3050
713.929.2019 fax




                              i
                                     TABLE OF CONTENTS
IDENTITIES OF PARTIES AND COUNSEL .....................................................I
STATEMENT OF THE CASE........................................................................ IV
STATEMENT REGARDING ORAL ARGUMENT ............................................. V
ISSUES PRESENTED ................................................................................. VI
INTRODUCTION .......................................................................................... 1
STATEMENT OF FACTS ............................................................................... 2
  A. Appellants and Quantum entered an arms-length business
  transaction in March 2017 where Appellants invested in Quantum. ... 2
  B. Quantum Irrevocably Instructs Empire to Issue Shares of Common
  Stock to the Appellants in the Event of Default. ................................... 3
  C. Quantum Defaults on the Agreements with Appellants. ................ 5
  D. Quantum files this lawsuit against Empire and obtains an ex parte
  TRO to stop Empire’s transfer of Quantum stock to Appellants. ......... 5
  E. The district court sets the temporary injunction hearing for
  October 26, 2017 and Empire is not given notice of the same. ............. 6
STANDARD OF REVIEW .............................................................................. 7
SUMMARY OF THE ARGUMENT ................................................................... 8
ARGUMENT............................................................................................... 10
  I. The District Court Erred in Entering the Injunction Order Because
  Empire Was Never Given Notice of the Hearing. ................................ 10
  II. The District Court Erred in Entering the Injunction Order
  Because Quantum Gave Empire the Stock at Issue in Accordance with
  the Contract Such That There Was No Probable Right to Relief for
  Conversion. ........................................................................................... 12
  III. Because the Damages Here Are Monetary, There Is No
  Imminent and Irreparable Harm. ........................................................ 14
CONCLUSION ............................................................................................ 16
CERTIFICATE OF COMPLIANCE................................................................ 18
CERTIFICATE OF SERVICE ....................................................................... 19



                                                    ii
                                    TABLE OF AUTHORITIES
CASES ..................................................................................................PAGE
Apple Imports, Inc. v. Koole, 945 S.W.2d 895
 (Tex. App.—Austin 1997, writ denied) ................................................ 13
Austin v. Tex. Pub. Emps. Assoc., 528 S.W.2d 637
 (Tex. Civ. App.—Austin 1975, no writ) ................................................ 10
Bright Land & Cattle, LLC v. PG-M Int’l, LLC,
 No. 07-16-00336-CV, 2017 Tex. App. LEXIS 2083
 (Tex. App.—Amarillo Mar. 9, 2017, no pet.) ........................................ 15
Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002) ........................... 8
Frey v. DeCordova Bend Estates Owners Ass’n, 647 S.W.2d 246
 (Tex. 1983) ............................................................................................ 16
Hitt v. Mabry, 687 S.W.2d 791
 (Tex. App.—San Antonio 1985, no writ) .............................................. 13
In re Turner, 500 S.W.3d 641 (Tex. App.—Austin 2016, no pet.) ............ 8
Indep. Capital Mgmt., LLC v. Collins, 261 S.W.3d 792
  (Tex. App.—Dallas 2008, no pet.) .......................................................... 8
J. Luecke Grandchildren’s P’ship, LP v. Barnard Ranches, LLC,
  No. 03-11-00027-CV, 2011 Tex. App. LEXIS 8009
  (Tex. App.—Austin 2011, no pet.) ........................................................ 10
Peralta v. Heights Medical Center, Inc., 485 U.S. 80 (1987) .................. 10
Reagan Nat’l Adver. v. Vanderhoof Family Trust,
 82 S.W.3d 366 (Tex. App.—Austin 2002, no pet.) ........................... 8, 12
Tanglewood Homes Ass’n v. Feldman, 436 S.W.3d 48
 (Tex. App.—Houston [14th Dist.] 2014, pet. denied) .......................... 15


STATUTES/TREATISES

TEX. R. CIV. P. 21a ................................................................................... 11
TEX. R. CIV. P. 681 ................................................................................... 10
TEX. R. CIV. P. 683 ................................................................................... 16



                                                    iii
                       STATEMENT OF THE CASE
Nature of the Case:           This appeal arises from a Temporary
                              Injunction against Defendant Empire
                              Stock Transfer based on a cause of action
                              of conversion based on the potential that
                              Empire may follow Appellee’s specific
                              authorizations     to    exchange     debt
                              obligations of Appellants for Appellee’s
                              shares.    The injunction was entered
                              despite there being no evidence Empire
                              had any notice of the temporary injunction
                              hearing and without a probable right to
                              relief.

District Court:               The Honorable Gary Steel, 428th District
                              Court, Hays County, Texas.

District Court Disposition:   The district court entered an Order
                              Granting Temporary Injunction on
                              October 26, 2017.

Related Proceedings:          None.




                                   iv
               STATEMENT REGARDING ORAL ARGUMENT

     Appellants SBI Investments LLC, 2014-1, and L2 Capital, LLC

believe that oral argument is not necessary to aid the Court in resolving
this appeal. The reversible errors of the Order Granting Temporary
Injunction are evident on the face of the order and in the very short

written record. Additionally, the laws controlling the relevant issues are
straightforward and well established.      Therefore, oral argument is
unlikely to aid the Court in deciding this appeal. However, should the
Court determine that oral argument is necessary, Appellants respectfully
request that they be allowed to participate.




                                    v
                          ISSUES PRESENTED

1.   Whether the District Court abused its discretion in entering the
Order Granting Temporary Injunction when the party enjoined, Empire
Stock Transfer, was not provided notice of the temporary injunction
hearing as required by Texas Rule of Civil Procedure 681.

2.   Whether the District Court abused its discretion in entering the
Order Granting Temporary Injunction, when a contract specifically
required that Empire acquire and later transfer the shares at issue such
that no probable right to relief existed because Empire could not have
committed conversion.

3.    Whether the District Court abused its discretion in entering the
Injunction Order because there was no showing that any imminent or
irreparable harm would befall Quantum.




                                   vi
                             INTRODUCTION
     The Temporary Injunction Order (the “Injunction Order”) at issue

in this case was entered ex parte because the party to whom it was filed
against, Empire Stock Transfer (“Empire”), was never given the required
notice of a hearing. That was by design. In an effort to avoid the business

consequences of an arms-length investment transaction with Appellants
(the investors), Appellee Quantum Materials (“Quantum”) filed a lawsuit
in Hays County, Texas against a Nevada-based transfer agent, Empire,

alleging a claim of conversion. But Empire’s only role with respect to the
business relationship between Quantum and Appellants—like a title
company or escrow agent—is as the transfer agent who holds and has

been instructed in written agreements to distribute shares of Quantum
stock to Appellants if Quantum defaulted on its obligations.          Both
Quantum and Appellants gave written and irrevocable authorization to
Empire to exchange shares of Quantum stock to Appellants in the event
of default.   The temporary restraining order and later temporary
injunction, therefore, were used by Quantum as a backhanded way to
avoid the contractual consequences of Quantum’s defaults. As expected,
Empire has never appeared in this case and it is questionable as to
whether Empire has ever been served.
     Regardless of notice, the Injunction Order failed in several other
respects. For example, because Quantum had authorized Empire to hold
Quantum’s shares in reserve and irrevocably authorized Empire to


                                    1
distribute those shares to Appellants in the event of default, Empire
could not have exercised wrongful or unauthorized dominion over

Quantum’s property. Further, while Quantum had no legal right to
demand the return of the shares held by Empire in reserve, there is no
evidence of such a demand, or that Empire failed to return those shares

after being asked. Moreover, Quantum’s complaints are about money
and there is no showing (nor does the Injunction Order specify) of any
imminent or irreparable harm that would be suffered by Quantum if the

Injunction Order had not been entered.
     The Injunction Order is both procedurally and substantively
defective. Accordingly, the district court abused its discretion in entering

the Injunction Order, and Appellants respectfully request that the Court
reverse and remand for further proceedings.

                          STATEMENT OF FACTS

     A.    Appellants and Quantum entered an arms-length
           business transaction in March 2017 where Appellants
           invested in Quantum.

     Appellants are investors in small and microcap companies based in

New York and the Kansas City area. Quantum is a public company based
in San Marcos, Texas. This case arises from an arms-length business
deal between Appellants and Quantum. On March 29, 2017, Quantum

consummated an investment transaction in a securities instrument with
each of the Appellants. This investment transaction included both the



                                     2
issuance of short-term debt securities by Appellants totaling $565,000,
and an equity line of credit of up to $5,000,000. 3.RR.IX.1-6. The parties

executed four promissory notes, a registration rights agreement, and an
equity purchase agreement in connection with the investment
transaction. Id. Appellants and Quantum were each represented by

counsel in the negotiation of the securities transaction and the associated
agreements. 2.RR.69; 3.RR.IX.1-6.
     As part of the investment with Appellants, Quantum issued

written, irrevocable instructions to Empire—its transfer agent in
Nevada—to reserve shares of Quantum common stock for safekeeping for
the benefit of the Appellants.     3.RR.IX.1-6, 11-14.    That stock was

reserved for the Appellants by Empire in accordance with the agreement.
Id. The shares of Quantum stock that were reserved by Empire were not
“issued” – meaning that while the shares were in reserve with Empire
they had no dilutive effect on the Company. 2.RR.106.

     B.    Quantum Irrevocably Instructs Empire to Issue Shares
           of Common Stock to the Appellants in the Event of
           Default.

      The agreements between Appellants and Quantum also contained
default provisions. 3.RR.IX.1-6. According to the agreements, a default
occurs if there is: (a) failure by Quantum to repay principal or interest
at maturity or on acceleration; (b) failure by Quantum to issue shares
of its common stock upon an Appellants’ exercise of a conversion right;



                                    3
(c) delaying, impairing, or hindering by Quantum of Quantum’s transfer
agent—Empire—in transferring shares of Quantum common stock to

Appellants pursuant to a default; (d) replacing Quantum’s auditor
without the consent of Appellants; (e) restating Quantum’s financial
statements in a manner that adversely affects Appellants’ rights under

their respective promissory notes, and (f) failing to file to register the
Quantum shares from the equity purchase agreement. Id.
     In the event that Quantum defaulted on its obligations under any

of the promissory notes, the repayment of the full outstanding balance
of that note would be accelerated, and additional contractually-agreed
amounts would be owed by Quantum to Appellants. 3.RR.IX.1-2,4-5.

     Based on these provisions, in the event of a default, Quantum
issued written, irrevocable instructions to Empire to provide the
Quantum shares previously reserved to Appellants.         3.RR.IX.11-14.
Specifically, Quantum “irrevocably authorized and instructed” Empire
to issue shares of Quantum common stock to Appellants “at the request
of (Appellants) . . . without any further action or confirmation by
[Quantum].” Id. (emphasis added).         Quantum sent these written,
irrevocable instructions and authorizations to Empire in four transfer
letters on March 29, 2017. Id. Quantum also repeatedly acknowledged
in the agreements that Appellants’ ability to exchange their promissory
notes for shares of Quantum common stock was a “material obligation
of [Quantum]” under the agreements. Id.


                                    4
    C.      Quantum Defaults on the Agreements with Appellants.
     Quantum failed to perform several of its obligations in the

agreements with Appellants, including (1) failing to file its initial
registration statement with the Securities and Exchange Commission,
(2) improperly restating its financials with the SEC, and (3) replacing

its auditor without seeking or obtaining the consent of Appellants.
2.RR.94-95, 108-109. Quantum also failed to pay the amounts owed
under the agreements. 2.RR.102, 108.

     Quantum’s defaults triggered Appellants’ rights to recover the
amounts due and payable by Quantum, in whole or in part, through the
common stock in Quantum that was being held in escrow by Empire.

3.RR.IX.1-2, 4-5; 2.RR.94, 103.    On October 2, 2017, L2 and SBI
delivered to Quantum a notice invoking these rights.         2.RR.104.
However, Quantum did not issue or deliver the shares to L2 and SBI,
which constituted another default under the relevant agreements.
2.RR.104.

    D.      Quantum files this lawsuit against Empire and obtains
            an ex parte TRO to stop Empire’s transfer of Quantum
            stock to Appellants.

     Quantum filed the underlying lawsuit against Empire, the

transfer agent—but not Appellants—on September 28, 2017, just days
before its full payment of the initial tranches of the promissory notes
was due (and days before the Quantum shares underlying the



                                  5
    promissory notes would be eligible for resale into the market). CR.4-10.
    In doing so, Quantum asserted a claim of conversion against Empire.

    but did not allege any wrongdoing on Empire’s part. Id. Before Empire
    ever received notice of the suit, Quantum obtained an ex parte TRO on
    October 2, 2017, which precluded Empire from transferring common

    stock of Quantum to Appellants. CR.11. The TRO also set the hearing
    for a temporary injunction on October 12, 2017. CR.12. In securing this
    ex parte TRO, Quantum did not disclose to the district court that it had

    previously agreed to irrevocably authorize and instruct Empire to
    transfer its common stock to Appellants—the very thing that it now
    claimed was an unlawful conversion by Empire.

        E.    The district court sets the temporary injunction
              hearing for October 26, 2017 and Empire is not given
              notice of the same.

         On October 12th, Quantum moved (without written motion) the

    district court to extend the TRO, without notice to Empire. See CR.16.
         Without any reference to or finding of good cause, the district court
    extended the TRO and set the temporary injunction hearing to October
    26, 2017. CR.16. No return of service was ever filed showing that this
    Order    Extending   TRO    was   ever   received   by Empire.        See
    http://public.co.hays.tx.us/default.aspx.1 At the temporary injunction



1The record sheet with the “unserved” notation can be found at this link
upon entering the underlying case number, 17-2033, at the search page

                                       6
hearing on October 26, 2017, Quantum’s counsel stated that Empire
was “faxed” notice of the temporary injunction hearing, but Quantum

provided no certificate or other evidence of service, or testimony in
support of same. 2.RR.21-22. Empire did not appear at the temporary
injunction hearing and has in fact never appeared in the case.

      On October 26, 2017, the district court held a hearing related to
the request for a temporary injunction. At the hearing, Quantum did
not dispute the validity of its agreements with Appellants, or the

transfer letters, which were admitted into the evidentiary record.
3.RR.IX1-6, 11-14; 2.RR.77. However, the district court entered the
Injunction Order—prohibiting Empire from transferring Quantum

common stock to Appellants in accordance with its contract. CR.19-20.
     Appellants timely appealed on November 6, 2017. CR.23.
     Following the notice of appeal, Quantum moved to correct the date
of the trial setting provided in the temporary injunction, which purported
to set the case for trial on April 16, 2017 (as opposed to April 16, 2018).
Following that motion (and not part of this record), the district court
granted the motion and made the clerical change.2
                          STANDARD OF REVIEW
     In an appeal from an order granting a temporary injunction, the

for civil records. Appellants ask that the Court take judicial notice of this
docket sheet as it is a public record maintained by the district court.
2 To preserve all rights, Appellants are filing a notice of appeal and

motion to consolidate related to this revised order.

                                     7
appellate court’s review is “confined to the validity of that order.” Reagan
Nat’l Adver. v. Vanderhoof Family Trust, 82 S.W.3d 366, 370 (Tex. App.—

Austin 2002, no pet.).     “A reviewing court should reverse an order
granting injunctive relief only if the trial court abused [its] discretion.”
Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). “A trial court

has no discretion to misapply the law . . . .” In re Turner, 500 S.W.3d 641,
642 (Tex. App.—Austin 2016, no pet.). A trial court also abuses its
discretion if it concludes that the applicant has demonstrated a probable

injury or a probable right to recovery and the conclusion is not reasonably
supported by evidence, Reagan Nat’l Adver., 82 S.W.3d at 370, or if the
temporary injunction fails to satisfy the specificity requirements of Rule

683 from the Texas Rules of Civil Procedure. Indep. Capital Mgmt., LLC
v. Collins, 261 S.W.3d 792, 795-96 (Tex. App.—Dallas 2008, no pet.).
                      SUMMARY OF THE ARGUMENT
     The Injunction Order is invalid and should be reversed because the
party enjoined by the order, Empire, did not receive the required notice
of the temporary injunction hearing as required by Texas Rule of Civil
Procedure 681. That rule is mandatory and renders any subsequent
injunction invalid.
     In addition, Quantum did not establish a probable right to recovery
on its only claim against Empire—conversion—because the undisputed
evidence establishes that Empire’s possession of Quantum’s shares was
expressly and irrevocably authorized ahead of time, in writing, by


                                     8
Quantum through a valid and binding agreement. Quantum therefore
has no probable right of recovery because Empire could not have

exercised wrongful dominion or control over Quantum’s shares and
Quantum never asked for Empire to return such shares—negating
necessary elements of the sole claim.

      Finally, Quantum’s concerns in this case are that it would lose some
of the value of its shares—a monetary concern. Courts have consistently
held that monetary relief does not satisfy the imminent and irreparable

requirement for the issuance of a temporary injunction. Moreover, any
claimed harm is not imminent—Quantum is concerned about what “may”
happen but there is no evidence that any immediate, irreparable harm

will befall it.
      Because the party enjoined, Empire, never received notice of the
injunction hearing, a prior agreement between Appellants and Quantum
authorized Empire to retain and transfer the stock at issue such that no
conversion could have occurred, and because monetary relief would fully
compensate Quantum for any injury, the district court abused its
discretion in granting the temporary injunction. Appellants therefore
respectfully request that the Court reverse and remand for further
proceedings.




                                    9
                               ARGUMENT

I.   THE DISTRICT COURT ERRED IN ENTERING THE INJUNCTION
     ORDER BECAUSE EMPIRE WAS NEVER GIVEN NOTICE OF THE
     HEARING.

     Rule 681 of the Texas Rules of Civil Procedure states that a
temporary injunction cannot issue without notice to the adverse party.
TEX. R. CIV. P. 681; J. Luecke Grandchildren’s P’ship, LP v. Barnard
Ranches, LLC, No. 03-11-00027-CV, 2011 Tex. App. LEXIS 8009, *5-6
(Tex. App.—Austin 2011, no pet.) (“a temporary injunction shall not issue
without notice to the adverse party and, unless otherwise agreed, an
opportunity for the adverse party to offer testimony or other evidence to
present its defenses”); Austin v. Tex. Pub. Emps. Assoc., 528 S.W.2d 637,
640 (Tex. Civ. App.—Austin 1975, no writ) (“Tex. R. Civ. P. 681 requires
that no temporary injunction be issued without notice to the adverse
party.   The requirement of notice impliedly requires an adequate
opportunity to be heard”).
     On this ground alone the Injunction Order should be reversed
because the party enjoined, Empire, was not provided the lawfully

required notice under Rule 681. Notice is not a mere trivial formality but
a matter of constitutional significance.    Peralta v. Heights Medical
Center, Inc., 485 U.S. 80, 84-86 (1987).    Quantum sued Empire and

obtained a TRO on October 2, 2017. CR.11-12. The TRO was extended
(again without notice to Empire) and the notice of the hearing for the
temporary injunction was executed on October 16, 2017.         CR.16-17.


                                   10
There is no return of service or any written certification of service in the
record to show that Empire received notice of the temporary injunction

hearing. In fact, the district court’s online docket sheet states that the
notice of the Temporary Injunction hearing—the October 16th order
extending the TRO and set the hearing for October 27th—was

“unserved.” See http://public.co.hays.tx.us/default.aspx.
     Appellants raised this issue at the temporary injunction hearing.
2.RR.8, 19-23. The only attempt by Appellee to satisfy the requirements

of Rule 681 were statements by counsel at the hearing that notice of the
Temporary Injunction hearing had been “faxed” to Empire through the
ProDoc filing system. 2.RR.21-22. But no documentary evidence of that

purported fax was provided by Appellee, nor did anyone testify to that
effect. Moreover, ProDoc is an electronic filing system that does not have
facsimile    capabilities.       See        http://www.efiletexas.gov/Service-
Providers/ProDoc.htm.
     Rule 21a of the Texas Rules of Civil Procedure states that a signed,
written certification by the serving party is prima facie evidence of the
fact of service. TEX. R. CIV. P. 21a(e). There is no such certificate in the
record. There was no evidence that Empire was provided notice of the
temporary injunction hearing as required by Rule 681. For this reason,
the Injunction Order should be reversed.




                                       11
II.   THE DISTRICT COURT ERRED IN ENTERING THE INJUNCTION
      ORDER BECAUSE QUANTUM GAVE EMPIRE THE STOCK AT ISSUE IN
      ACCORDANCE WITH THE CONTRACT SUCH THAT THERE WAS NO
      PROBABLE RIGHT TO RELIEF FOR CONVERSION.

      In addition to the lack of notice, the district court abused its
discretion in entering the Injunction Order because it was not possible
for Empire to have converted the stock at issue—Quantum had already
given that stock to Empire for safekeeping in the event of a default. A
trial court abuses its discretion when it concludes that an applicant for a
temporary injunction has demonstrated a probable injury or a probable
right to recovery and the conclusion is not reasonably supported by
evidence. Reagan Nat’l Adver., 82 S.W.3d at 370. The district court’s
conclusion that Quantum demonstrated a probable right to relief is not
reasonably supported by the evidence.
      Quantum’s only pleaded claim against Empire is for conversion.
CR.6. The elements of conversion are “(1) the plaintiff owned or had legal
possession of the property or entitlement to possession; (2) the defendant
unlawfully and without authorization assumed and exercised dominion

and control over the property to the exclusion of, or inconsistent with the
plaintiff’s rights as an owner; (3) the plaintiff demanded return of the
property; and (4) the defendant refused to return the property.” Apple

Imports, Inc. v. Koole, 945 S.W.2d 895, 899 (Tex. App.—Austin 1997, writ
denied).




                                    12
     Empire was the transfer agent who held shares of Quantum stock
in reserve based on the written agreements between Quantum and

Appellants. 3.RR.IX.11-14. Empire therefore had direct authorization to
assume and exercise dominion and control over the property. Id. In
addition, Empire was irrevocably authorized and instructed by Quantum

and SBI/L2—in writing—to transfer Quantum shares to SBI and L2
when requested by SBI and L2.           3.RR.IX.11-14.   Quantum’s CEO
admitted at the temporary injunction hearing that the transfer letters

documented how Empire was authorized to act. 2.RR.77. The second
element of conversion requires that the defendant unlawfully and
without authorization assume and exercise dominion and control over

the property the exclusion of the plaintiff. Apple Imports, 945 S.W.2d at
899. Here, the undisputed and uncontroverted evidence establishes that
Empire had specific, express, written authorization (from Quantum) to
hold, and then issue, the Quantum shares to Appellants. 3.RR.IX.11-14.
     Further, an injunction “must not be so broad as to enjoin a
defendant from activities which are a lawful and proper exercise of his
rights.” Hitt v. Mabry, 687 S.W.2d 791, 795 (Tex. App.—San Antonio
1985, no writ). Because Empire had the authorization to transfer the
shares—in writing and from Quantum—there is no evidence
reasonably supporting Quantum’s probable right of recovery against
Empire on its conversion claim. Moreover, because the Injunction Order
improperly restricts Empire from exercising its express rights and


                                   13
obligations from the agreement between Quantum and Appellees, the
Injunction Order cannot stand.

     What’s more, Quantum also failed to provide any evidence that it
had requested the shares back from Empire or that Empire refused to
provide Quantum with those shares.        Notably, even in the lawsuit,

Quantum does not seek to have Empire return the stock to Quantum—
that would be in violation of the contract. Without even so much as a
demand for return of the shares by Quantum, there is no basis for a

conversion claim. Apple Imports, 945 S.W.2d at 899. It also follows that
without a request for the return of the shares, Empire could not have
refused to return them. Id.

     Quantum failed to provide even a prima facie case of several of the
elements of its claim. As such, the Injunctive Order was not based on a
probably right to relief and the district court abused its discretion in
entering the Injunctive Order.

III. BECAUSE THE DAMAGES HERE ARE MONETARY, THERE IS NO
     IMMINENT AND IRREPARABLE HARM.

     Finally, the district court abused its discretion in granting the
Injunction Order because there was not a showing of imminent and
irreparable harm—the only damages to Quantum is the loss of value of

the shares transferred. In its petition, Quantum provides that “In the
event of a default, the note holders can convert their debt into equity at
a disproportionately favorable exchange rate in favor of the lenders.”


                                   14
CR.5 (emphasis added). In other words, what Quantum has complained
about is not that they will be losing the shares, but that Appellants could

purchase shares for a lower price—a monetary concern directed at
Appellants, not Empire.
        Claims for monetary damages do not rise to the level of irreparable

and imminent harm.        Indeed, a claim for monetary damages is the
opposite of what is required for imminent and irreparable harm. “An
injury is irreparable if it cannot be adequately remedied at law through

monetary damages.” Tanglewood Homes Ass’n v. Feldman, 436 S.W.3d
48, 77 (Tex. App.—Houston [14th Dist.] 2014, pet. denied) (emphasis
added). The fact that Quantum does not seek return of the shares from

Empire and its claimed harm is only the difference in value of the shares,
there is no support that an injunction was warranted.
        Quantum’s other claimed concern is that “Quantum has other debt
obligations for whom the respective lenders may try to piggyback on SBI
Investment LLC and/or L2 Capital’s unilateral declarations of default.”
CR.6.     But not only did Quantum not support this claim with any
evidence at the hearing, something that “may” happen in the future does
not qualify as imminent harm. Indeed, “[i]mminent or immediate injury
is not injury that may arise at some point.” Bright Land & Cattle, LLC
v. PG-M Int’l, LLC, No. 07-16-00336-CV, 2017 Tex. App. LEXIS 2083, *11
(Tex. App.—Amarillo Mar. 9, 2017, no pet.); see also Frey v. DeCordova
Bend Estates Owners Ass’n, 647 S.W.2d 246, 248 (Tex. 1983) (“fear or


                                     15
apprehension of the possibility of injury alone is not a basis for injunctive
relief”). At best, at the hearing, Quantum provided testimony from a

purported expert (not any shareholders or other persons) that “other
debentures . . . have the option” to purchase shares at a decreased price—
not that they would actually do so.         2.RR.53-54.   Quantum did not

establish any imminent or irreparable harm as a basis for the Injunction
Order.
     The Injunction Order even deviates from Quantum’s claims and

evidence, stating only that “Quantum Materials Corporation’s stock will
be converted with no mechanism for return of the stock to Quantum
Materials Corporation.”      CR.19.        But there is no imminent and

irreparable harm in stock being transferred from one entity to another.
Moreover, such a statement does not provide the specificity required
under Texas Rule of Civil Procedure 683. TEX. R. CIV. P. 683.

                               CONCLUSION
     For the foregoing reasons, Appellants SBI Investments, LLC, 2014-
1 and L2 Capital, LLC respectfully request that the Court reverse the

district court’s Order Granting Temporary Injunction and remand for
further proceedings. Appellants further respectfully request all other
relief to which they may be entitled, whether in law or equity.




                                      16
Respectfully submitted,

By: /s/ Timothy A. Cleveland
   Timothy A. Cleveland
   State Bar No. 24055318
   Carlos Soltero
   State Bar No. 00791702
   Kevin J. Terrazas
   State Bar No. 24060708
   CLEVELAND | TERRAZAS PLLC
   4611 Bee Cave Rd, # 306B
   Austin, Texas 78746
   512-689-8698
   tcleveland@clevelandterrazas.com
   csoltero@clevelandterrazas.com
   kterrazas@clevelandterrazas.com

ATTORNEYS FOR APPELLANTS




 17
                     CERTIFICATE OF COMPLIANCE

     I certify that this document was produced on a computer using

Microsoft Word and contains 3,625 words, as determined by the computer
software’s word-count function, excluding the sections of the document
listed in Texas Rule of Appellate Procedure 9.4(i)(1).


                                   /s/ Timothy A. Cleveland
                                   Timothy A. Cleveland




                                    18
                         CERTIFICATE OF SERVICE

      I hereby certify that on this 11th day of December 2017, a true and

correct copy of the foregoing was filed electronically, and notice of this

filing will be sent to all parties by operation of the Court’s electronic filing

system as follows:


Michael Minns
Ashley Arnett
MINNS & ARNETT
919 Gessner, Suite 1
Houston, Texas 77074
713.777.0772
713.777.0453 fax

Seth Kretzer
440 Louisiana, Suite 1440
Houston, Texas 77002
713.775.3050
713.929.2019 fax

ATTORNEYS FOR APPELLEE

                                     /s/ Kevin J. Terrazas
                                    Kevin J. Terrazas




                                      19
             No. 03-17-00749-CV
               In the
        Third Court of Appeals
            Austin, Texas
                ________________
 SBI INVESTMENTS LLC, 2014-1, AND L2 CAPITAL,
                   LLC,
                                   Appellants,

                       v.

         QUANTUM MATERIALS CORP.,
                                    Appellee.
              ________________
   On Appeal from the 428rd District Court,
      Hays County, Texas (No. 17-2033)
       The Hon. Gary Steel, Presiding
              ________________
APPENDIX TO APPELLANTS’ BRIEF ON THE MERITS
              ________________

                            Timothy A. Cleveland
                             State Bar No. 24055318
                            Kevin J. Terrazas
                             State Bar No. 24060708
                            Carlos Soltero
                             State Bar No. 00791702
                            CLEVELAND | TERRAZAS PLLC
                            4611 Bee Cave Rd, # 306B
                            Austin, Texas 78746
                            512-680-3257
                            ATTORNEYS FOR APPELLANT
                          INDEX

Tab   Date       Description                Record Page

A.    10/26/17   Order Granting Temporary   CR.19-20
                 Injunction
Tab A
000019
000020
