Opinion
No. 06-16-00041-CV
03-02-2017
BP AUTOMOTIVE LP D/B/A BOSSIER DODGE, Appellant v. RLJ-MCLARTY-LANDERS AUTOMOTIVE GROUP, Appellee
On Appeal from the 87th District Court Freestone County, Texas
Trial Court No. 10-030-B-1 Before Morriss, C.J., Moseley and Burgess, JJ.
MEMORANDUM OPINION
BP Automotive LP d/b/a Bossier Dodge (Automotive) sued RLJ-McLarty-Landers Automotive Group (RLJ) for tortious interference with a franchise agreement, interference with prospective business relations, unfair competition by misappropriation, quantum meruit, unjust enrichment, fraud, and civil conspiracy. RLJ filed a motion for summary judgment, claiming it lacked the legal capacity to be sued. The trial court agreed and granted RLJ summary judgment. Automotive appeals, claiming (1) RLJ waived the right to assert absence of legal capacity, (2) RLJ did not establish entitlement to summary judgment as a matter of law, and (3) the trial court erred in implicitly denying RLJ's motion for a continuance of the summary judgment.
Although RLJ did not waive its right to assert the absence of legal capacity, RLJ failed to prove its entitlement to summary judgment as a matter of law. We, therefore, reverse the trial court's summary judgment order and remand to the trial court for further proceedings.
I. Background
In 2010, Automotive sued RML Waxahachie Dodge, LLC (Waxahachie Dodge), RML Waxahachie Ford, LLC, (Waxahachie Ford) RML Waxahachie GMC, LLC (Waxahachie GMC), RML-McLarty-Landers Automotive Holdings, LLC (RML), and RLJ-McLarty-Landers Automotive Group (RLJ) in the 87th Judicial District Court of Freestone County, claiming that Waxahachie Dodge breached an asset purchase agreement between it and Automotive and that all defendants tortiously interfered with Automotive's franchise agreements with Chrysler and with prospective business and contractual relations. Automotive also claimed that the various defendants committed civil conspiracy and were guilty of unfair competition by misappropriation. Automotive alleged that RLJ "is a partnership with offices at 425 West Capitol, Suite 3810, Little Rock, Arkansas 72201," and further alleged that "[d]efendants are all part of an automotive dealership conglomerate known as the RLJ-McLarty-Landers Automotive Group, which is run by Arkansas car dealer Steve Landers. . . . The principals of this Landers partnership group are Landers himself, Robert Johnson . . . and Thomas 'Mack' McLarty. . . ." Third party defendants Scott Bossier and W. Randy Pretzer also filed counterclaims against all defendants, including RLJ.
Originally appealed to the Tenth Court of Appeals, this case was transferred to this Court by the Texas Supreme Court pursuant to Section 73.001 of the Texas Government Code. See TEX. GOV'T CODE ANN. § 73.001 (West 2013). We are unaware of any conflict between precedent of the Tenth Court of Appeals and that of this Court on any relevant issue. See TEX. R. APP. P. 41.3.
In 2009, Automotive and BPRE, LP (a former tenant of Automotive and a debtor in a prior bankruptcy matter), filed an Adversary complaint against each of the defendants in the United States Bankruptcy Court for the Western District of Texas. In February 2010, Automotive was dismissed as a party to the bankruptcy case on jurisdictional grounds. Automotive then filed the case from which this appeal emanates in the trial court in January 2010 and amended its petition in August 2010. Automotive is the former operator of the Chrysler and Dodge dealership in Waxahachie, Texas.
The circumstances giving rise to these allegations are rather complex, and a rendition of those facts is unnecessary to the resolution of the issues presented in this appeal.
Bossier and Pretzer are Automotive's limited partners.
Defendants RML, Waxahachie Ford, Waxahachie Dodge, Waxahachie GMC, and RLJ jointly filed a general denial answer to the lawsuit and asserted what were termed "affirmative defenses." RLJ also filed a verified denial of its existence as a separate legal entity:
The original answer did not allege that RLJ was not a legal entity and therefore lacked the capacity to be sued.
Defendant also specifically denies that the named Defendant "RLJ-McLarty-Landers Automotive Group" is a separate entity. The Defendants have, in the past, referred to RLJ-McLarty-Landers Automotive Holdings, LLC as "RLJ-McLarty-
Landers Automotive Group" to reflect the separate auto dealership entities in which RLJ-McLarty-Landers Automotive Holdings, LLC holds an ownership interest, but it is nothing more than an informal reference to several limited liability companies with a common member.Significantly, this verified answer was filed on October 7, 2010.
Each of the defendants also filed a verified answer to Automotive and Pretzer's counterclaims specifically denying RLJ's status as a partnership or separate entity and containing the same language included in RLJ's October 2010 verified answer. Those verified answers were filed in September 2010. Thereafter, each of the defendants filed verified answers to Automotive's amended petition in October 2010, again specifically denying RLJ's status as a partnership or legal entity.
Also in October, 2010, RML, Waxahachie Ford, Waxahachie GMC, and Waxahachie Dodge (the Answering Defendants) responded to Automotive's discovery requests. In a footnote to their collective response, the Answering Defendants explained that each "filed a verified denial denying that [RLJ] is a separate legal entity with the capacity to be sued. No answers to this discovery request are on behalf of the party named [RLJ]." Automotive then filed a motion to compel discovery in which it complained, among other things, that "[RLJ] has unreasonably refused to respond to any discovery, despite it being a valid party to this case and despite it having already answered the Original Petition."
Automotive elaborated, stating,
Defendant [RLJ] filed an answer in this case, and in other litigation it has answered pleadings, provided initial disclosures, and propounded and answered discovery. Nevertheless, [RLJ] has refused to respond to BP Automotive's discovery requests. Defendants now claim that [RLJ] is not an entity. In a bankruptcy court matter involving Defendants, [RLJ] admitted that "RLJ-McLarty-Landers Automotive Group is an Arkansas based partnership." . . . Further, Defendants' officers and directors, Paul Hart and Robert Johnson have testified to the existence of an entity called RLJ-McLarty-Landers Automotive Group and that it is a partnership or joint venture. Defendants' own website tells the world that [RLJ] is a partnership, and Mr. Johnson testified that the documentation of the formation of [RLJ] is located at his corporate offices in Bethesda, Maryland.
Because Defendants contend that [RLJ] is not an entity, [RLJ] has not filed its initial disclosures and has not responded to BP Automotive's requests for production, requests for admission, and interrogatories, all as required by Texas Rules of Civil Procedure 194, 196, 197 and 198. During all attempts by BP Automotive to resolve this dispute, Defendants have refused to provide any information that would suggest that [RLJ] answer in this suit or previous actions in other suits was incorrect and have taken the position that BP Automotive would need to file a motion to compel with the Court. Without any other recourse, BP Automotive has no choice but to file this motion and request that the Court compel [RLJ] to respond to discovery requests.
The Answering Defendants filed a motion for protective order, seeking to have the discovery purportedly served on RLJ quashed and to prohibit any future discovery against RLJ. The substance of the argument—made in January 2011—is almost identical to the argument set forth in the motion for summary judgment filed by RLJ in 2015. After a hearing on Automotive's motion to compel discovery, the trial court entered a protective order in February 2011 precluding any discovery on RLJ and denied Automotive's motion as to any requested relief from RLJ.
In March 2011, the trial court granted the summary judgment motions of defendants Waxahachie Dodge, Waxahachie Ford, Waxahachie GMC, and RML. Those defendants thereafter filed a motion to sever Plaintiffs' claims against RLJ, which motion was granted by the trial court. After the severance, RLJ filed a traditional and no-evidence motion for summary judgment in November 2011, claiming that the trial court's summary judgment against the severed defendants applied with equal force and effect to it. RLJ specifically stated that, by filing the motion, it did not admit that it is a partnership or entity with the capacity to be sued and that it did not waive any argument that it is not a partnership with the capacity to be sued. The motion otherwise did not mention RLJ's capacity to sue or to be sued. The trial court granted RLJ's traditional motion for summary judgment in December 2011.
In the severed action, Waxahachie Dodge, RML, Waxahachie Ford, and Waxahachie GMC moved for traditional partial summary judgment and no-evidence summary judgment on Automotive's claims. Specifically, these defendants moved for traditional summary judgment on Automotive's claims for breach of contract, quantum meruit, and unjust enrichment. These defendants also moved for no-evidence summary judgment on Automotive's claims for breach of contract, tortious interference with contract, tortious interference with prospective business relations, unfair competition by misappropriation, quantum meruit, fraud, and civil conspiracy. These motions were granted by the trial court in August 2011.
RLJ filed its traditional motion for partial summary judgment in July 2015, asking the court to find that it is not an entity with the capacity to be sued, claiming that it did not exist as a separate legal entity apart from RLJ-McLarty-Landers Automotive Holdings, LLC. Concurrent with the filing of that motion, RLJ filed a verified denial stating that it is not an entity with the capacity to be sued.
Defendants and RLJ do not dispute the existence of an entity named RLJ-McLarty-Landers Automotive Holdings, LLC. However, they deny that RLJ-McLrty-Landers Automotive Group is an entity separate from RLJ-McLarty-Landers Automotive Holdings, LLC.
The four-year delay between the trial court's grant of RLJ's traditional motion for summary judgment on the merits and its motion based on lack of capacity was occasioned, in part, by an appeal of the initial summary judgment order (together with an appeal of the order granted in favor of the now-severed defendants) to the First Court of Appeals. The First Court of Appeals affirmed the dismissal of Automotive's claims for tortious interference with existing contracts and civil conspiracy against all defendants, but reversed summary judgment on six other counts. See BP Auto., L.P. v. RML Waxahachie Dodge, L.L.C., 448 S.W.3d 562 (Tex. App.—Houston [1st Dist.] 2014, no pet.). The First Court noted that
Group did not move for summary judgment, either no-evidence or traditional, based on its argument that it was not a legal entity. Instead, its motions mirror those filed by RML. Thus, for the reasons detailed above in Cause No. 01-12-00085-CV, we hold that the trial court erred in granting . . . Group's traditional motion for summary judgment because no collateral estoppel can be applied to the bankruptcy court's findings, which have been vacated and would nonetheless [be] subject to de novo review by the federal district court. . . . Therefore, the trial court also erred in granting . . . Group's no-evidence motion for summary judgment on all claims except the tortious interference with existing contracts and civil conspiracy claims.Id. at 576. The case was remanded to the trial court.
In August 2015, Automotive filed its verified motion for continuance of the summary judgment motion and sought to enlarge the discovery period in order to secure discovery to properly respond to RLJ's motion for summary judgment. Specifically, Automotive requested the opportunity to depose Robert Johnson and Paul Hart, the individuals who executed affidavits in support of RLJ's motion for summary judgment. In May 2016, the trial court entered its "Order Granting Defendants' Traditional Motion for Partial Summary Judgment Regarding Capacity of [RLJ]," thereby implicitly overruling Automotive's motion for continuance.
Automotive deposed Johnson and Hart in March and April 2010 in the bankruptcy case, and specifically questioned each witness about RLJ. Automotive relied on this testimony in its response to RLJ's motion for summary judgment.
The order reads,
On September 21, 2015[,] came on for consideration Defendant's Traditional Motion for Partial Summary Judgment Regarding Capacity of [RLJ], hereafter ''Motion." The Court, having considered the Motion, the Response, and the Reply, is of the opinion that the Motion should be GRANTED. IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that Plaintiff BP Automotive LP d/b/a/ Bossier Dodge shall take nothing by way of its claims against [RLJ].
II. RLJ Did Not Waive the Right to Assert Absence of Legal Capacity
Automotive contends that, because RLJ did not file a verified denial of its legal capacity to be sued until July 2015—over five years after the litigation began—it has waived its right to assert lack of capacity. It therefore contends that, because RLJ waived its capacity claim, the trial court erred in granting summary judgment. We disagree.
Rule 93 of the Texas Rules of Civil Procedure provides that a pleading which states that the defendant does not have the legal capacity to be sued shall be verified by affidavit "unless the truth of such matters appear[s] of record." TEX. R. CIV. P. 93(1). In this case, however, RLJ filed a verified denial of its legal capacity in October 2010. The verified answer was filed by RLJ-McLarty-Landers Automotive Holdings, LLC a/k/a RLJ-McLarty-Landers Automotive Group. See supra note 8.
Automotive relies on Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46 (Tex. 2003), in support of this assertion. In that case, however, the court held that a party may waive the argument that an opposing party lacks capacity if it does not raise that issue in the trial court. Id. at 56. Because the issue of capacity was unquestionably raised in the trial court, Sibley does not support Automotive's waiver argument.
Nevertheless, the law is clear that a party who fails to file a verified denial waives any capacity defense. See Werner v. Colwell, 909 S.W.2d 866, 870 (Tex. 1995) (holding that party who fails to file verified denial waives any complaint of judgment rendered in capacity in which party was sued); W.O.S. Const. Co. v. Hanyard, 684 S.W.2d 675, 676 (Tex. 1985) (in failing to file verified denial, party can be held liable in either capacities in which he was sued). Here, there is no question that RLJ filed a verified denial. We cannot conclude that the verified denial was untimely filed, or that the filing of such denial prejudiced Automotive's rights.
Automotive also claims, without citation to legal authority, that RLJ's summary judgment should have been denied because it repeatedly admitted its status as a legal entity, in reliance on the admissions, testimony, and documents enumerated above. This argument is most appropriately analyzed in terms of whether a genuine issue of material fact exists which would preclude the grant of summary judgment.
Bluebonnet Farms, Inc. v. Gibralter Savings Association, 618 S.W.2d 81 (Tex. App.—Houston [1st Dist.] 1980, writ ref'd n.r.e.), addresses the reverse of this issue. In that case, Bluebonnet sued Gibraltar for breach of a loan commitment contract. Id. at 82. Gibraltar filed a general denial answer. Four years later, Gibraltar filed an amended verified answer alleging lack of Bluebonnet's capacity to sue. Id. at 83. Accompanying that answer was a motion for summary judgment in which Gibraltar alleged Bluebonnet had forfeited its corporate charter by failing to pay franchise taxes. Gibraltar further alleged that more than four years had elapsed since the alleged breach of contract and Bluebonnet's loss of corporate status, thus barring Bluebonnet's claim by limitations. Id. The trial court granted the motion for summary judgment. Id.
The appellate court reversed, finding that Gibraltar had waived its plea in abatement. This decision was based on an implied finding that Bluebonnet was prejudiced by the plea in abatement, because the "shareholders of the corporation could have carried on this litigation and had every right to do so, once the corporation knew that appellee questioned its status." Id. at 84. Basically, Gibraltar's strategy was to wait until limitations ran to file the plea in abatement. The court found that strategy inherently unfair and in derogation of "the purpose for the Texas Rules of Civil Procedure and the special purpose of a plea in abatement," both of which are designed to aid the speedy disposition of litigation on the merits. Id.
We are, therefore, called on to examine the equities of the situation to determine whether RLJ's verified plea was timely filed. See Develo-cepts, Inc. v. City of Galveston, 668 S.W.2d 790, 793 (Tex. App.—Houston [14th Dist.] 1984, no pet.) (finding that plea in abatement filed two and one-half years after suit was filed was not waived because parties conducted discovery which provided information necessary to urge plea and defect could not have been cured with amended pleadings) (citing Bluebonnet Farms, 618 S.W.2d at 83).
An examination of the equities in this context includes consideration not only of the passage of time, but also the actions of the party seeking to rely on the plea in abatement or verified plea and whether any delay in the filing of the plea was harmful or prejudicial to the opposing party. See In re Luby's Cafeterias, Inc., 979 S.W.2d 813, 817-18 (Tex. App.—Houston [14th Dist.] 1998, no pet.); Develo-cepts, Inc., 668 S.W.2d at 793; Bluebonnet Farms, 618 S.W.2d at 84; Howell v. Mauzy, 899 S.W.2d 690, 698 (Tex. App.—Austin 1994, writ denied.) (plea seeking abatement of lawsuit properly denied when plaintiffs in first-filed suit affirmatively represented to court in second-filed suit that it had jurisdiction).
RLJ filed a verified plea alleging its lack of capacity in 2010. Thereafter, in response to Automotive's amended petition in October 2010, each of the defendants filed a verified plea alleging RLJ's lack of capacity. The opening paragraph of RLJ's verified answer avers that "RLJ-McLarty-Landers Automotive Holdings, LLC, also incorrectly listed as a separate defendant under the name 'RLJ-McLarty-Landers Automotive Group,' . . . submits the following Answer. . . ."
In addition to those verified answers, which specifically denied RLJ's capacity to be sued, Automotive was advised that RLJ would not answer discovery because it was not a legal entity. The trial court agreed with that position and entered a protective order in early 2011 precluding Automotive from propounding any further discovery on RLJ. Finally, after the case was remanded to the trial court, RLJ filed yet another verified denial stating that it was not an entity with the capacity to be sued, a position it had consistently maintained since 2010.
Accordingly, Automotive was on notice from 2010 forward that RLJ and the remaining defendants claimed that RLJ lacked the legal capacity to be sued. RLJ filed three verified pleas stating as much—two in 2010 and a third in 2015. Automotive, therefore, cannot claim that it was prejudiced by the passage of time or by any delay by RLJ in filing a verified plea denying the legal capacity to be sued. This is especially true in light of the trial court's 2011 protective order.
Automotive further contends, though, that RLJ waived the right to assert lack of legal capacity because RLJ already let the issue of its capacity to sue and be sued go to final judgment and to an appeal. Although it does not elaborate on this statement, it apparently is based on the fact that RLJ filed a traditional and no-evidence motion for summary judgment after the severance in November 2011 on the basis of collateral estoppel. The issue of capacity was not raised in that motion. The trial court granted the motion for summary judgment in December 2011. Automotive again relies on Sibley in support of this claim. Sibley is not on point and merely holds that "any challenge that [appellant's] failure to file an assumed name certificate precludes its suit was waived because it was not properly raised in the trial court." Sibley, 111 S.W.3d at 49.
Here, the issue of capacity was raised in the trial court. The question of whether this issue was waived by the filing of a motion for summary judgment on the issue of collateral estoppel was not briefed. See TEX. R. APP. P. 38.1. Moreover, RLJ specifically stated that, by filing the motion for summary judgment, it did not admit that it is a partnership or entity with the capacity to be sued and that it did not waive any argument that it is not a partnership with the capacity to be sued. We overrule this point of error.
III. RLJ Failed to Establish Entitlement to Summary Judgment as a Matter of Law
A. Summary Judgment Standard of Review
We conduct a de novo review of an order granting a traditional motion for summary judgment. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003); Miers v. Tex. A&M Univ. Sys. Health Sci. Ctr., 311 S.W.3d 577, 578 (Tex. App.—Waco 2009, no pet.). In our review, we deem as true all evidence which is favorable to the nonmovant, indulge every reasonable inference to be drawn from the evidence, and resolve any doubts in the nonmovant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When the trial court does not specify the basis for its ruling, we must affirm a summary judgment if any of the grounds on which judgment is sought are meritorious. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013).
To be entitled to traditional summary judgment, a movant must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). Once the movant produces evidence entitling it to summary judgment, the burden shifts to the nonmovant to present evidence raising a genuine issue of material fact. Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996). A defendant who conclusively negates a single essential element of a cause of action is entitled to summary judgment on that claim. Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 508-09 (Tex. 2010).
B. Analysis
RLJ's motion for summary judgment attached certain evidence in support of its lack of capacity claim. That evidence included each of the above-described verified denials, as well as the affidavits of Robert Johnson, one of the purported participants in the partnership, and Paul Hart, CEO of RLJ McLarty-Landers-Automotive Holdings, LLC. The affidavits attempt to explain certain deposition testimony given by the affiants which supports Automotive's claim that RLJ is a legal entity. Beyond that, Hart and Johnson both testified that:
See supra note 8. These affidavits were attached to RLJ's amended motion for protective order concerning the discovery served on RLJ. The amended motion for protective order was submitted as evidence in support of RLJ's motion.
(1) "RLJ-McLarty-Landers Automotive Group" does not maintain a separate set of books and records, does not have its own accounts, and does not file separate tax returns.
(2) "RLJ-McLarty-Landers Automotive Group" does not exist as a separate legal entity apart from RLJ-McLarty-Landers Automotive Holdings, LLC.Hart also testified,
"RLJ-McLarty-Landers Automotive Group" is not a separate entity from RLJ-McLarty-Landers Automotive Holdings, LLC. Some officers and directors of RLJ-McLarty-Landers Automotive Holdings, LLC, including myself, have, in the past, internally referred to RLJ-McLarty-Landers Automotive Holdings, LLC as "RLJ-McLarty-Landers Automotive Group" to reflect the separate auto dealership entities in which RLJ-McLarty-Landers Automotive Holdings, LLC holds an ownership interest, but it is nothing more than an informal reference to several limited liability companies with a common member.
Despite this evidence, Automotive claims that summary judgment should have been denied because genuine fact issues exist regarding the type and the scope of RLJ's "corporate structure." This argument is based on Automotive's contention that RLJ's previous admissions, testimony, and documentary evidence show that it is a partnership and was, therefore, a proper party to Automotive's lawsuit. Automotive contends that this evidence—outlined below—raises a genuine issue of material fact as to RLJ's status under the Arkansas Uniform Partnership Act (Act).
The Act defines "partnership" as "an association of two (2) or more persons to carry on as co-owners a business for profit formed under § 4-46-202, predecessor law, or comparable law of another jurisdiction." ARK. CODE ANN. § 4-46-101(6) (West 2009). Section 4-46-202 states, "Except as otherwise provided in subsection (b) of this section, the association of two (2) or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership." ARK. CODE ANN. § 4-46-202(a) (West 2000). Subsection (b) provides, "An association formed under a statute other than this chapter, a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under this chapter." ARK. CODE ANN. § 4-46-202(b) (West 2000).
1. RLJ's Answer to Automotive's Adversary Complaint in the Bankruptcy Court
Automotive contends that RLJ's answer to the complaint in the bankruptcy court raises a genuine issue of material fact regarding RLJ's existence as a partnership sufficient to defeat summary judgment. That answer, unlike the answer filed in state court, includes a specific admission of partnership: "The Non-Contracting Defendants admit that RLJ-McLarty-Landers Automotive Group is an Arkansas based partnership."
The "Non-Contracting Defendants" are identified in the answer as "Defendants named in the above-referenced proceedings," among which is RLJ. The April 1, 2010, answer to Automotive's amended complaint filed in the bankruptcy court was styled "Answer of RLJ-McLarty-Landers Automotive Holdings, LLC, RML Waxahachie Ford, LLC, RML Waxahachie GMC, LLC and RLJ-McLarty-Landers Automotive Group to Plaintiffs' Amended Complaint." That pleading was attached as summary judgment evidence to Automotive's response to RLJ's motion for summary judgment.
"Admissions in trial pleadings are judicial admissions in the case in which the pleadings are filed; the facts judicially admitted require no proof and preclude the introduction of evidence to the contrary." In re A.E.A., 406 S.W.3d 404, 410 (Tex. App.—Fort Worth 2013, no pet.) (emphasis added); see also Hous. First Am. Sav. v. Musick, 650 S.W.2d 764, 767 (Tex. 1983). A judicial admission is conclusive upon the party making it, relieves the opposing party's burden of proving the admitted fact, and bars the admitting party from disputing it. A.E.A., 406 S.W.3d at 410 (citing Hennigan v. I.P. Petroleum Co., 858 S.W.2d 371, 372 (Tex. 1993)).
Conversely, "[p]leadings in another case that are inconsistent with a party's position in a present case, unlike judicial admissions, are not always conclusive on the admitter, but may be considered evidence which the admitter may explain, contradict, or deny." Louviere v. Hearst Corp., 269 S.W.3d 750, 754 (Tex. App.—Beaumont 2008, no pet.); see also Velco Chems., Inc. v. Polimeri Europa Am., Inc., No. 14-03-00395-CV, 2004 WL 1965643, at *4-5 (Tex. App.—Houston [14th Dist.] Sept. 7, 2004, no pet.) (mem. op.). Although they are generally not conclusive, Cameron Cty. v. Velasquez, 668 S.W.2d 776, 782-83 (Tex. App.—Corpus Christi 1984, writ ref'd n.r.e.) (op. on reh'g) (citations omitted), such pleadings are treated as "some evidence." Daimler-Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 718 (Tex. App.—Austin 2000, pet. dism'd w.o.j.).
However, a quasi-admission is treated as a judicial admission when it appears that (1) the declaration was made during the course of a judicial proceeding; (2) the statement is contrary to an essential fact embraced in the declarant's theory of recovery or defense; (3) the statement is clear and deliberate, and not a mistake; (4) giving conclusive effect to the admission will not be contrary to the public policy on which the rule is based; and (5) the statement is not destructive of the offering party's theory of recovery. DowElanco v. Benitez, 4 S.W.3d 866, 871 (Tex. App.—Corpus Christi 1999, no pet.).
Here, we need not decide whether RLJ's admission of partnership status in its answer to the complaint in the bankruptcy court is a judicial admission, or merely a quasi-admission. Regardless of the category into which this admission falls, it constitutes some evidence of RLJ's partnership status.
Automotive further claims that RLJ has admitted its status as a "legal entity" by virtue of the fact that it filed an answer to Automotive's petition in state court. The February 19, 2010, answer to Automotive's petition filed in the district court of Freestone County was styled, "Original Answer of RML-McLarty-Landers Automotive Holdings, LLC, RML Waxahachie Ford, LLC, RML Waxahachie GMC, LLC, and RLJ-McLarty-Landers Automotive Group." Beyond the inclusion of RLJ as an answering defendant, the answer does not include any statements regarding RLJ. This is merely a general denial, with the inclusion of some affirmative defenses—none of which mention RLJ or its status as a legal entity. Automotive cites no cases in support of the proposition that the mere filing of an answer to a lawsuit amounts to an admission that the answering party is a legal entity capable of being sued, or that a fact issue is thereby raised sufficient to defeat a motion for summary judgment.
2. Paul Hart's Testimony
According to his affidavit filed in support of RLJ's motion for summary judgment, Hart is the Chief Financial Officer of RLJ-McLarty-Landers Automotive Holdings, LLC. In March 2010, Hart gave deposition testimony in connection with the adversary case filed in the bankruptcy matter. Automotive relies on the following testimony given by Hart in that deposition:
See supra note 8.
See In Re: BPRE, LP, Plaintiff vs. RML Waxahachie Dodge, LLC, RML-McLarty-Landers Auto. Holdings, LLC, RML Waxahachie Ford, LLC, RML Waxahachie GMC, LLC, and RLJ McLarty-Landers Auto. Grp., Defendants, In proceedings under Chapter 11, Case No. 09-61289, Adversary Case No. 09-6031.
Q. The RLJ-McLarty-Landers Automotive Group of which you are the CFO is a partnership, isn't it?
A. It is.
Q. Between the RLJ companies. Correct?
A. Yes.
Q. And McLarty-Landers Automotive. Right?
A. Correct.
Q. And the RLJ companies are associated with someone named Robert Johnson. Is that correct?
A. That's correct.
After Hart testified that RLJ was a partnership, he then testified that "McLarty-Landers, LLC" is a holding company (perhaps a reference to RML-McLarty-Landers Automotive Holdings, LLC) and investor in RLJ-McLarty-Landers Automotive Holdings, LLC. Although Hart's deposition testimony was not always precise, he testified in some detail regarding RLJ-McLarty-Landers Automotive Group's revenues and the number of dealerships it owns. While Hart explained in his affidavit that, when counsel for Automotive "continued to use the term 'RLJ-McLarty-Landers Automotive Group,'[he] misunderstood [counsel] to be informally referring to all of RLJ-McLarty-Landers Automotive Holdings, LLC's affiliated limited liability companies," this explanatory testimony is not sufficient to defeat the fact issue raised by Hart's deposition testimony.
The following is Hart's deposition testimony regarding RLJ-McLarty-Landers Automotive Group:
Q: Mr. Hart, by way of background, you are the chief financial officer for RLJ-McLarty-Landers Automotive Group. Is that correct?
A: Correct
. . . .
Q: The RLJ McLarty-Landers Automotive Group of which you are the CFO is a partnership, isn't it.
A: It is.
Q: Between the RLJ Companies. Correct?
A: Yes.
Q: And McLarty-Landers Automotive. Right?
A: Correct.
Q: And the RLJ companies are associated with someone named Robert Johnson. Is that correct?
A: That's correct.
. . . .
Q: And on the other side is the McLarty-Landers Automotive Group. Correct?
A: McLarty-Landers, LLC, yes.
Q: And they are a holding company. Correct?
A: They are an investor in the RLJ-McLarty-Landers Automotive Holdings.
Q: Forty percent?
A: Correct.
Q: Now, this RLJ-McLarty-Landers Automotive Group is a very large company, isn't it?
A: I'm not sure how you define "large."
Q: It has revenues of approximately $400 million per year, doesn't it?
A: It is greater than that, correct.
Q: What are the current revenues for the RLJ-McLarty-Landers Automotive Group?
A: Just over 600 million last year.
Q: And the Group has a part of increasing those revenues to over a billion dollars in the next several years. Isn't that correct?
A: That's a stated goal that -- yes.
Q: Currently, how many dealerships -- car dealerships does the RLJ-McLarty-Landers Automotive Group own?
A: I'd have to go through the list, but it's 10 to 18, depending on how you count -
Q: Is there any shorthand that you guys use for RLJ-McLarty-Landers Automotive Group? Can we just call that -- can we call it the RLJ Group? Can we call it -- just for purposes of shorthand for this deposition, is there a common term that you use?
A: We don't. I'm open to whatever you'd like to use.
Q: Why don't we just call it Landers for the overall organization.
A: I would prefer RML.
. . . .
Q: The RLJ-McLarty-Landers Group includes a lot of different companies, doesn't it?
A: RLJ-McLarty-Landers?
Q: RLJ-McLarty-Landers Automotive Group is an umbrella organization that includes a lot of companies. Correct?
A: It's a holding company that has investments, that's right, is multiple companies.
Q: And one of the companies that would be a -- an affiliate is RML Waxahachie Dodge?
A: That's Correct.
Q: Other than your title as CFO of the RLJ-McLarty-Landers Automotive Group, what other titles do you hold?
A: Within what context are you talking?
Q: Within the context of this entire organization.
A: I'm the officer of certain of the companies. I'm the secretary and treasurer of RLJ-McLarty-Landers Automotive Group. I'm the secretary and treasurer of RML Waxahachie Dodge.
. . . .
Q: And -- well, as CFO of this RML group
A: Right.
Q: -- this larger group
A: Right.
Q: -- where is your office?
A: Little Rock, Arkansas.
Q: And is that where the headquarters is?
A: It's where the primary corporate group is based. That's correct.
Q: Who's -- who's your primary corporate group?
A: We have myself as the CFO, Scott Landers as the president of RLJ-McLarty-Landers, Franklin McLarty as the vice president.
. . . .
A: -- and additionally, we have a fixed parts and service kind of operations director. We've got a used car director and a couple of other people that help oversee the financial aspects of the group. And they're based in Little Rock, Arkansas.
Q: So, all of those folks are the main business folks for the whole organization?
A: They're the corporate -- I don't know that -- No, that's not correct.
Q: Okay. That's the -- that's who works at the corporate headquarters?
A: That's correct.
A similar fact pattern was presented in Santander Consumer USA, Inc. v. Palisades Collection, LLC, 447 S.W.3d 902 (Tex. App.—Dallas 2014, pet. denied). In that case, Palisades attached the affidavit of Steve Braun in support of its motion for summary judgment. In his affidavit, Braun described spreadsheets detailing whether Palisades had collected on certain accounts. Id. at 908. He explained that no deficiency balance letters were provided for any of the accounts. Id. In his deposition two months earlier, however, Braun testified that he did not know if Palisades was successful in any of its attempts to collect on the debt for the accounts in question. Id.
The court determined that Braun's earlier deposition testimony and his subsequent affidavit testimony "create[d] conflicting inferences about his knowledge to testify regarding Palisades' attempts to collect on certain accounts." Id. at 908-09. Consequently, Braun's testimony failed to establish as a matter of law that there was no genuine issue of material fact as to Palisades' breach of contract counterclaim. See TEX. R. CIV. P. 166a(c) (summary judgment may be founded upon the testimony of an interested witness if the testimony is clear, direct, positive, credible, free from contradiction or inconsistency, and readily controvertible).
Here, Hart's earlier deposition testimony would have clearly precluded summary judgment. By affidavit, Hart attempted to explain "misunderstandings" on which his deposition testimony was based. While some of the affidavit testimony is clear, positive, and direct, it is not necessarily all credible, and much of it is not readily controvertible. See D.G. Bros., Inc. v. Pizza Inn, Inc., No. 06-98-00151-CV, 2000 WL 16470, at *4 (Tex. App.—Texarkana Jan. 12, 2000, pet. denied) (mem. op.) (readily controvertible requirement excludes affidavits containing statements of what interested witness knew or intended, because such statements are not easily confirmed or denied). Consequently, we conclude that Hart's affidavit does nothing to overcome the fact issues raised by his deposition testimony.
3. Robert Johnson's Testimony
According to his affidavit filed in support of RLJ's motion for summary judgment, Johnson is the chairman of the board of RLJ-McLarty-Landers Automotive Holdings, LLC. In April 2010, Johnson gave deposition testimony in connection with the adversary case filed in the bankruptcy matter. Automotive relies on the following testimony given by Johnson in that deposition:
See supra note 8.
Q. Okay. And so have you been the chairman of these organizations since the time that you entered the partnership?Johnson further testified:
A. Yes.
Q. How did you get involved with RML?
A. I've known Mack McLarty for, gee, maybe over 20 years. He approached me about a possible joint venture business deal. And based on that, discussions we had, I agreed to partnership with him in the automotive business.
Q. Okay. Would you call it a partnership at all?RLJ attached a more complete copy of Johnson's deposition to its motion for summary judgment. Johnson testified that he owns "RLJ-McLarty-Landers" and that he is chairman of "RLJ-McLarty-Landers." Johnson then testified:
A. No. Joint venture.
Q. And so you're the chairman of RLJ-McLarty-Landers Automotive Group; is that correct?
A. That is correct.
Q. And that is held out to be the official name of the organization; is that correct?
A. That is correct. I believe so. Yes.
Q. Okay. And if I represented to you that this was taken from the RLJ Companies' website, would you believe that to be accurate?
A. Yes.
Q. And it says here that RLJ-McLarty-Landers Automotive Group is headquartered in Little Rock, Arkansas; is that correct?
A. Yes.
Q. And is it correct currently today that it consists of 19 auto dealerships and three Harley-Davidson motorcycle dealerships?
A. Based on the information I have, that is correct.
Q. Okay. And it has, in total, 35 automotive franchises within its portfolio?
A. Based on the information I have, that would be correct.
Q. Okay. And an estimated gross revenue of approximately $625 million?
A. Based on the information I have, that would be correct.
. . . .
Q. And RLJ-McLarty-Landers Automotive Group has its own management structure; is that correct?
A. Yes.
This deposition testimony clearly raises a fact issue regarding RLJ's status as a legal entity. As did Hart, Johnson attempted to explain the referenced testimony in a subsequently-filed affidavit in which he stated that he misunderstood counsel to be informally referring to "all of RLJ-McLarty-Landers Automotive Holdings, LLC's affiliated limited liability companies" and that any answer he gave during the deposition was with the understanding that the term "McLarty-Landers Automotive Group" was an "informal reference to several limited liability companies with some common members, not to a separate legal entity." Further, Johnson stated that he "was not using the term 'partnership' or 'joint venture' in [his] deposition as a legal term to signify a separate entity."
It is worth noting that Johnson holds a master's degree from Princeton in international affairs.
Johnson added that he has no right to receive a share of any profits of and no right to participate in the control of an entity or partnership called "RLJ-McLarty-Landers Automotive Group." Although Hart's deposition testimony is alone sufficient to conclude that RLJ failed to establish, as a matter of law, that there is no genuine issue of material fact as to its partnership and/or entity status, Johnson's deposition merely reinforces that conclusion. As with Hart, Johnson's affidavit does not meet the test to permit summary judgment based on the testimony of an interested party because it is not sufficiently clear, direct, positive, credible, free from contradiction or inconsistency, and readily controvertible. TEX. R. CIV. P. 166a(c).
4. Documentary Evidence
Automotive relies on information gleaned from RLJ's website to support its contention that summary judgment was improper. The website states,
Automotive also relies on the fact that RLJ propounded discovery in the bankruptcy matter. In March 2010, RLJ sent interrogatories to BPRE, LP. The discovery was captioned "Defendant RLJ-McCLarty [sic]-Landers Automotive Group's First Set of Interrogatories to BPRE, LP." The determination of whether or not propounding discovery in a separate lawsuit, and thus, acting as a legal entity, is sufficient to raise a fact issue to preclude summary judgment is unnecessary in light of the evidence previously discussed.
RJL-McLarty-Landers Automotive Group is a partnership between the RLJ Companies and McLarty-Landers Automotive. RLJ McLarty-Landers is
headquartered in Little Rock, Arkansas and consists of 19 auto dealerships and three Harley-Davidson motorcycle dealerships across central Arkansas. RLJ-McLarty-Landers currently has 35 automotive franchises within its portfolio and projects an estimated gross revenue for FY09 of $625M.
. . . .
There is no claim that this evidence was not properly authenticated or was not otherwise proper evidence to raise a fact issue sufficient to preclude summary judgment. This evidence raises a fact issue regarding RLJ's partnership status.
RLJ-McLarty-Landers Automotive Partnership. New and Used car dealers in Little Rock . . .,
Because RLJ failed to establish entitlement to summary judgment, the trial court erred in granting summary judgment in its favor.
RLJ further contends that, even if the Court believes a genuine issue of material fact exists with respect to its legal capacity to be sued, it can nevertheless affirm the summary judgment on the basis of collateral estoppel. We disagree. The issue of collateral estoppel was not raised in RLJ's motion for summary judgment. The motion states only that Automotive's case "was tried and lost once already in the prior bankruptcy litigation, where exactly the same Defendants were sued by [Automotive] and [BPRE] who were both represented by Mr. Terrazas." This lone statement is not sufficient to provide either the trial court or Automotive notice that RLJ was seeking summary judgment on the basis of collateral estoppel.
RLJ's motion for summary judgment was captioned "Defendant's Traditional Motion for Partial Summary Judgment Regarding Capacity of RLJ-McLarty Landers Automotive Group." The entire conclusion of the motion reads, "[Automotive's] claims against [RLJ] are nothing more than an attempt by [Automotive] to twist loose, informal references made by non-lawyer witnesses of RML Defendants into the creation of a new legal entity where none exists. No genuine issue of material fact exists as to whether [RLJ] is partnership [sic] or any legally cognizable entity with the capacity to be sued, and Defendant is therefore entitled to judgment as a matter of law."
Moreover, the words "collateral estoppel" appear in RLJ's motion for summary judgment only under the heading of "Factual Background and Procedural History," in which RLJ recites that "[o]n August 12, 2011, this Court heard RML Defendant's Amended Motion for Partial Summary Judgment on their collateral estoppel claims and No-Evidence Motion for Summary Judgment. . . . This Court granted both of RML Defendants' Summary Judgment Motions and, on September 22, 2011, entered a Final Judgment in favor of RML Defendants." Because the motion for summary judgment in this case did not raise the issue of collateral estoppel, we decline to affirm the summary judgment on this basis.
IV. Conclusion
We reverse the trial court's summary judgment order, and remand to the trial court for further proceedings consistent with this opinion.
Ralph K. Burgess
Justice Date Submitted: January 18, 2017
Date Decided: March 2, 2017