Opinion
No. 04-15-00525-CV
03-09-2016
AMF BOWLING CENTERS, INC., Appellant v. RIO VENTURES, LTD. and Rio Club, L.L.C., Appellee
MEMORANDUM OPINION
From the County Court at Law No. 10, Bexar County, Texas
Trial Court No. 2015CV03002
Honorable Jason Wolff, Judge Presiding Opinion by: Sandee Bryan Marion, Chief Justice Sitting: Sandee Bryan Marion, Chief Justice Karen Angelini, Justice Patricia O. Alvarez, Justice AFFIRMED
The underlying cause involves a de novo appeal to the county court in a forcible entry and detainer action. The county court awarded possession of the premises located at 13307-A San Pedro Ave, San Antonio, Texas (the "Premises") to Rio Ventures, Ltd. and Rio Club, L.L.C. AMF Bowling Centers, Inc. appeals the county court's order asserting the sublease to Rio Ventures was void because the sublease to Rio Ventures's sublessor was void. AMF Bowling further asserts if the county court erred in awarding possession to Rio Ventures, it also erred in awarding attorney's fees to Rio Ventures. We overrule AMF Bowling's issues and affirm the county court's order.
BACKGROUND
In 1989, AMF Bowling subleased a building which included the Premises from F.W. Woolworth Co. AMF Bowling's sublease has been renewed and extended and is not set to expire until June 30, 2022.
In October of 2005, AMF Bowling entered into a sublease of the Premises with "Metropolis, Inc. or assigns d/b/a Metropolis a limited liability company, organized and existing under the laws of the State of Texas." The sublease was signed by Gil Butnaru as Vice President of Metropolis, and by Mark S. Hatcher as Vice President of Real Estate of AMF Bowling. The sublease was dated to be effective October 14, 2005. On April 30, 2014, a sublease extension was signed, extending the term of the sublease through May 31, 2019. The sublease extension was signed by Samuel Panchevre as President of Metropolis, and by Hatcher as Vice President of Real Estate of AMF Bowling.
On March 6, 2007, Metropolis entered into a sublease of the Premises with "Rio Ventures, Ltd. a Texas limited partnership." The sublease is signed by Rio Ventures's general partner, Rio Club, LLC. On April 30, 2014, an extension of the sublease was signed, extending the term of the sublease through May 31, 2019.
On December 29, 2014, AMF Bowling filed a lawsuit in Bexar County district court against Metropolis, Rio Ventures, and Rio Club seeking declaratory, injunctive, and other relief concerning the validity, enforceability and existing rights under the various sublease agreements. Metropolis Nightclubs I, L.P. filed a motion for partial summary judgment asserting: (1) it is the tenant in the sublease with AMF Bowling and the sublessor in the sublease with Rio Ventures; and (2) the misnomer in the subleases and extensions did not affect their validity and enforceability.
In addition to the Bexar County lawsuit, AMF Bowling also filed a lawsuit in Harris County. On January 14, 2015, the Harris County district court entered an agreed final judgment declaring that Metropolis, Inc., a Texas corporation, never entered into a sublease with AMF Bowling. The agreed final judgment also stated the sublease was terminated "to the extent any sublease agreement exists between Metropolis, Inc. and AMF Bowling Centers, Inc." The record in the underlying cause established Metropolis, Inc. is a separate entity from Metropolis Nightclubs I, L.P., and the entities are owned and operated by different individuals.
In March of 2015, AMF Bowling filed a petition in the justice court to evict Rio Ventures and Rio Club, attaching a copy of the Harris County court's agreed judgment. The justice court entered a judgment in favor of AMF Bowling, and Rio Ventures and Rio Club filed a de novo appeal of that judgment in the underlying cause in the county court.
On July 9, 2015, the Bexar County district court granted Metropolis Nightclubs I, L.P. motion for partial summary judgment and entered an order declaring Metropolis Nightclubs I, L.P. was the proper name of the tenant in the sublease and extension with AMF Bowling and also was the proper name of the landlord in the sublease and extension with Rio Ventures and Rio Club. The order also stated the misnomer of Metropolis Nightclubs I, L.P. in the subleases did not impact the validity or enforceability of the subleases. Finally, the order stated the Harris County court's agreed judgment did not impact or affect the rights of Metropolis Nightclubs I, L.P. and Rio Ventures to the Premises.
The parties subsequently filed competing motions for summary judgment in the underlying de novo appeal. The county court signed an order stating the misnomer of Metropolis Nightclubs I, L.P. did not impact the validity or enforceability of the subleases. As previously noted, the county court's order awarded possession of the Premises to Rio Ventures and Rio Club. AMF Bowling appeals.
STANDARD OF REVIEW
We review a summary judgment de novo. Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We consider all the evidence in the light most favorable to the respondent, indulging all reasonable inferences in favor of the respondent, and determine whether the movant proved that there were no genuine issues of material fact and that it was entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). "When both sides move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both sides and determine all questions presented." Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). In such a case, "we render the judgment [that] the trial court should have rendered." Id.
VALIDITY OF SUBLEASES
In its first two issues, AMF Bowling asserts the county court erred in awarding possession of the Premises to Rio Ventures and Rio Club. AMF argues its sublease with Metropolis is void because Metropolis Nightclubs I, L.P. was not formed on the date the sublease was signed. AMF further argues because its sublease with Metropolis is void, Rio Ventures and Rio Club obtained no rights to the Premises under Rio Ventures's sublease with Metropolis. AMF Bowling bases its argument on undisputed evidence from the Texas Secretary of State establishing that neither Metropolis Nightclubs I, L.P. nor its general partner existed on the date the sublease was executed.
In support of its argument that the sublease is void, AMF Bowling cites numerous opinions holding a non-existent entity cannot enter into a contract. See, e.g. Kahn v. Imperial Airport, L.P., 308 S.W.3d 432, 438 (Tex. App.—Dallas 2010, no pet.); In re Hawthorne Townhomes, L.P., 282 S.W.3d 131, 138 (Tex. App.—Dallas 2009, no pet.); WesternGeco, L.L.C. v. Input/Output, Inc., 246 S.W.3d 776, 786 (Tex. App.—Houston [14th Dist.] 2008, no pet.); HTS Servs., Inc. v. Hallwood Realty Partners, L.P., 190 S.W.3d 108, 114 (Tex. App.—Houston [1st Dist.] 2005, no pet.). As Rio Ventures and Rio Club point out in their brief, however, none of these opinions hold a contract entered into by a non-existent entity is void.
In Kahn, Steven Kahn signed a commercial lease in July of 2005, as president of Common Sense. 308 S.W.3d at 435-36. The lessor subsequently sued Kahn individually for breach of the lease. Id. at 435. At trial, Kahn claimed M. Stack, LLC was the lessee under the lease but also agreed M. Stack did not exist when the lease was signed. Id. at 438. Kahn also claimed Common Sense was just a DBA or assumed name. Id. The trial court found Kahn individually liable and awarded damages to the lessor. Id. at 435. On appeal, Kahn challenged the trial court's findings that he entered into the lease in his individual capacity and was individually liable. Id. at 438.
The Dallas court first concluded "to the extent Kahn purported to sign the Lease on behalf of Common Sense as a DBA, he bound only himself." Id. The Dallas court then referred to the law regarding promoter liability on pre-incorporation contracts, noting "when a promoter signs a contract on behalf of an unformed entity, he is personally liable on the contract unless there is an agreement with the contracting party that the promoter is not liable." Id. at 438-39 (citing Fish v. Tandy Corp., 948 S.W.2d 886, 897 (Tex. App.—Fort Worth 1997, writ denied)). The Dallas court concluded Kahn was personally liable because: (1) the lease was not made in the name of M. Stack, the unformed entity; (2) the record contained no evidence the lessor agreed not to hold Kahn liable or that M. Stack adopted the lease after its formation; and (3) conflicting testimony was presented as to whether the lessor knew Kahn was purporting to sign the lease for M. Stack as an unformed entity. Id. at 439. Therefore, in Kahn, a valid contract was formed; however, under the law governing promoter liability, Kahn was held individually liable. As the Austin court explained the law in an earlier decision:
It is quite generally held that a contract made by a promoter of a corporation, in its behalf and upon express agreement that the corporation alone is to be bound, and no personal liability is to exist against the contracting promoter, is valid, provided the contract is one which the corporation, if it were then in existence, could legally make; and a subsequent adoption of the contract by the corporation will relieve the promoter of personal liability thereon.Weeks v. San Angelo Nat'l Bank, 65 S.W.2d 348, 349 (Tex. Civ. App.—Austin 1933, writ ref'd); see also Aloe Ltd., Inc. v. Koch, 733 S.W.2d 364, 366-67 (Tex. App.—Corpus Christi 1987, no writ) (holding corporation formed after execution of contract liable where contract was made upon express agreement that unformed corporation was to be bound).
In its reply brief, AMF Bowling contends the foregoing law is not applicable because no evidence was presented to show Butnaru, the individual who signed the sublease on behalf of the unformed Metropolis entity, intended to sign as a promoter for the unformed entity. The summary judgment evidence, however, contains a declaration of Sam Panchevre who signed the sublease extension on behalf of Metropolis Nightclubs I, L.P. after its formation. In this declaration, Panchevre states:
In or about October 2005, I learned that a nightclub that operated in the premises located at 13307-A San Pedro Avenue, San Antonio, Bexar County, Texas (the "Premises"), was closing and that the lease space would be available. At that time, Kirk Frazer, Gil Butnaru and I came together with a plan to open a new nightclub called "Metropolis" in the Premises. Mr. Butnaru introduced me to Mark Hatcher, who I understood to be the Vice-President for Real Estate for AMF Bowling Centers, Inc. and the landlord for the Premises. Mr. Hatcher and I discussed the plans for the "Metropolis" nightclub by telephone and the basic lease terms such as the security deposit, monthly rental, and lease term. One term that I specifically discussed with Mr. Hatcher was the need for a contingency that released me and my group from liability for the "Metropolis" corporate entity we intended to establish to lease the Premises [and] secure the necessary business and liquor licenses. One or about October 14, 2005, Mr. Hatcher delivered the proposed lease to us bearing the terms and conditions we previously discussed. We signed and returned the lease on or about October 17, 2005 to AMF Blowing Centers, Inc. on behalf of our to-be-formed company, which the lease provisionally identified as "Metropolis, Inc. or assigns, d/b/a Metropolis" for the Tenant.AMF Bowling did not present any evidence controverting this declaration. In fact, Panchevre's declaration is attached as an exhibit to AMF Bowling's motion for summary judgment. Therefore, Panchevre's declaration is evidence that Butnaru intended to sign the sublease as a promoter for the unformed Metropolis Nightclubs I, L.P.
AMF Bowling also argues Rio Ventures did not make this argument in its motion for summary judgment; however, both AMF Bowling's and Rio Ventures's motions for summary judgment cite Kahn which discusses the law governing liability under pre-incorporation contracts signed by promoters on behalf of an unformed entity. As previously noted, we review a trial court's ruling on a motion for summary judgment de novo; therefore, we also examine the law cited in the motion for summary judgment de novo.
Applying the foregoing law, we hold a valid contract was formed when the sublease was executed between the to-be-formed Metropolis Nightclubs I, L.P. and AMF Bowling for the following reasons. See Kahn, 308 S.W.3d at 438-39; Aloe Ltd., Inc., 733 S.W.2d at 366-67; Weeks, 65 S.W.2d at 349. First, both Panchevre's uncontroverted declaration and the manner in which Metropolis's name is listed in the sublease are evidence that Butnaru intended to sign the lease for the to-be-formed entity. In addition, Panchevre's declaration is evidence AMF Bowling agreed the to-be-formed entity "alone [was] to be bound." Weeks, 65 S.W.2d at 349. Finally, Panchevre's declaration also establishes that Metropolis Nightclubs I, L.P. adopted the sublease after its formation. Therefore, we hold the county court properly granted summary judgment awarding possession of the Premises to Rio Ventures.
CONCLUSION
The trial court's order is affirmed.
Sandee Bryan Marion, Chief Justice