Opinion
No. 01-04-00586-CV
Opinion issued November 9, 2006.
On Appeal from County Civil Court at Law No. 1, Harris County, Texas, Trial Court Cause No. 802024.
Panel consists of Chief Justice RADACK and Justices TAFT and NUCHIA.
OPINION
Appellants, Hong Kong Development, Inc. ("HKDI"), Hai Du Duong ("Duong"), and Phuong Truong Tu ("Tu") (collectively, "appellants"), appeal from a judgment, rendered upon a jury verdict, in favor of Kim Loan Nguyen ("Nguyen") for $15,312.58 in actual damages against HKDI and Duong, jointly and severally; $200,000 in punitive damages against each of HKDI and Duong; and $79,900 in attorney's fees against all three appellants, jointly and severally. We determine whether the trial court could consolidate an appeal pending before it in a forcible-detainer suit with a suit in which Nguyen, invoking the court's original jurisdiction, had asserted various tort and declaratory claims. Answering that question in the negative, we reverse the judgment and remand the case. However, because the issue is likely to recur on remand, we also consider whether a contractual-indemnity provision required Tu to indemnify Nguyen for Nguyen's attorney's fees.
Background
Tu and Nguyen were sisters-in-law. Tu, Nguyen, and Nguyen's sister entered into a partnership to run a bakery and sandwich shop called Alpha Bakery. In February of that same year, Tu and Nguyen leased space for their business in HKDI's shopping mall. The lease that they executed with HKDI ("the lease agreement") listed Tu and Nguyen as "Tenant" and contained the following provisions:
24. ASSIGNMENT AND SUBLETTING BY TENANT
24.1Tenant shall not assign this Lease, or any interest therein, . . . without first obtaining the written consent of Landlord. . . . Any assignment . . . without the prior written consent of Landlord shall be void and shall, at the option of Landlord, terminate this Lease. This Lease shall not, nor shall any interest therein, be assignable, as to the interest of Tenant, by operation of law, without the prior written consent of Landlord. However, it is further understood and agreed that Tenant shall not sell, convey, or assign any interest in the corporation [sic] without prior written approval from Landlord, and if Landlord does not agree to the sale, conveyance or assignment of the corporation [sic], Landlord may, at Landlord's option, terminate this Lease.
. . . .
57. MISCELLANEOUS
57.2Acceptance of Rental by Landlord from Tenant or any assignee, subtenant or other successor in interest of Tenant, or the payment or tender of any Rental to Landlord, with or without notice, shall never be construed as a waiver of any breach of any term, condition or covenant of this Lease. The failure of Landlord to declare any Event of Default upon the occurrence thereof, or any delay by Landlord in taking action with respect thereto shall not waive such default, but Landlord shall have the right to declare such default at any time and to take such action as may be authorized hereunder to the extent herein provided.
Duong, HKDI's president and owner, signed the lease agreement on behalf of HKDI.
Tu's and Nguyen's relationship soured a few years later, about the time that Nguyen and her husband, Tu's brother, began divorce proceedings. The partners' dispute led to a lawsuit ("the partnership suit"), and the partnership eventually went into receivership. The jury in the partnership suit awarded Nguyen and her sister, also a partner, 70% of the partnership; awarded Tu 30% of the partnership; and awarded actual damages to Nguyen and attorney's fees to Nguyen and her sister. In a separate receivership sale of Alpha Bakery, Nguyen purchased the business. Final paperwork for the sale was drawn up, including a contract assigning Tu's lease interest to Nguyen ("the lease assignment"), as well as a contract assigning Tu's partnership interest to Nguyen ("the partnership assignment"). No one obtained HKDI's consent to the lease assignment, despite the lease agreement's requirement that HKDI's written consent be obtained as a precondition to any assignment of the leasehold interest. Nonetheless, Nguyen and Tu signed the documents, including the lease assignment.
The Fourteenth Court of Appeals affirmed the judgment in the partnership suit. Phuong Truong-Tu v. Kim Loan Nguyen, No. 14-02-00461-CV, 2004 WL 162941 (Tex.App.-Houston [14th Dist.] Jan. 29, 2004, pet. denied) (mem. op.).
In a nutshell, Nguyen's position in the current suit was that she and Tu had signed the lease assignment without HKDI's written consent under duress because the trial court in the partnership suit had ordered them to sign it under threat of contempt. She also alleged that Tu's counsel in the partnership suit, who had represented HKDI in other matters, had implied in the partnership suit that he was representing both Tu and HKDI and that HKDI would not object to the assignment. Nguyen also took the position in the current lawsuit that Tu, HKDI, and Duong had conspired, for various reasons, to have the parties execute the lease assignment without first obtaining HKDI's written consent so that Nguyen could be declared in default, HKDI could evict her, and Tu could open a competing restaurant in the same mall. HKDI, Duong, and Tu disputed the validity of Nguyen's theories.
In May 2003, HKDI notified Nguyen that she was in default under the lease because HKDI's consent had not been obtained and instructed her to vacate the premises. Later that month, Nguyen sued HKDI, Duong, and Tu in Harris County Civil Court at Law No. 3 ("the tort suit"). Nguyen (1) sought a declaration that the lease assignment from Tu to Nguyen was not a breach of the lease agreement; (2) asserted a cause of action for breach of fiduciary duty against Tu; (3) asserted a cause of action for conspiracy against all appellants, alleging that they had conspired in order for Tu to run Nguyen's restaurant out of business so that Tu could operate an allegedly competing restaurant within Hong Kong Market; and (4) sought actual damages of "less than $100,000," exemplary damages, attorney's fees, and injunctive relief. Two months later, Nguyen filed a first supplemental petition in the tort suit, seeking a declaration — as an apparent alternative to a declaration that the lease assignment had not breached the lease agreement — that the lease assignment was void for having been executed under the "extreme duress" of the threat of contempt in the partnership suit. All appellants answered, and HKDI and Duong asserted a counter-claim against Nguyen for sanctions for the filing of a frivolous lawsuit.
Kim Loan Nguyen v. Hong Kong Dev., No. 793769 (County Civ. Ct. at Law No. 3, Harris County, Tex.).
In July 2003, HKDI filed suit, against both Tu and Nguyen, for forcible detainer in a Harris County justice of the peace court, seeking possession of the leasehold property ("the forcible-detainer suit"). See Tex. Prop. Code Ann. § 24.002 (Vernon 2000). Although the record does not show how the justice court disposed of the forcible-detainer suit, HKDI asserts, without dispute, that it confessed judgment and then immediately appealed to the county court. See Tex.R.App.P. 38.1(f) ("In a civil case, the court will accept as true the facts stated [in the appellant's brief] unless another party contradicts them."); Mullins v. Coussons, 745 S.W.2d 50, 50 (Tex.App.-Houston [14th Dist.] 1987, no writ) (holding that rendition of agreed judgment in justice court in forcible-detainer suit does not deprive county court of jurisdiction to hear case, when appealed, in trial de novo). Both Tu and Nguyen answered in the county court in the forcible-detainer suit. On October 2, 2003, Nguyen asserted counter-claims in the forcible-detainer suit against HKDI, cross-claims against Tu, and "cross-claims" — which were actually third-party claims — against Duong, who had theretofore not been a party in the forcible-detainer suit. Nguyen alleged (1) that Tu and Duong had tortiously interfered with her contractual relations; (2) that Tu had breached her fiduciary duty to Nguyen; (3) that Tu, Duong, and HKDI had unfairly competed with her; and (4) that Tu, Duong, and HKDI had conspired to evict her. On her counter-, cross-, and third-party claims in the forcible-detainer suit, Nguyen sought actual damages of "less than $100,000," exemplary damages, and attorney's fees. HKDI answered Nguyen's counter-claims against it, but Duong did not. Although the clerk's record does not show this, HKDI and Duong assert on appeal, without contradiction by Nguyen, that Nguyen never served Duong on her third-party claim. See Tex.R.App.P. 38.1(f).
Hong Kong Dev., Inc. v. Kim Loan Nguyen, No. 802024 (County Civ. Ct. at Law No. 1, Harris County, Tex.). This was the same county court that had heard the partnership suit between Nguyen and Tu.
Nguyen also asserted a third-party claim against another individual, but she dropped that individual from the suit in later pleadings.
On October 10 and 15, 2003, respectively, Tu and HKDI moved in the forcible-detainer suit to strike or to sever Nguyen's counter-claims, cross-claims, and third-party claims, arguing that the county court had no subject-matter jurisdiction to consider these matters in a forcible-detainer suit. On October 16, 2003, Nguyen moved in the forcible-detainer suit to consolidate the tort suit and the forcible-detainer suit, which motion HKDI opposed in writing, while also reurging its earlier-filed motion to strike or to sever.
In the meantime, on October 16, 2003 in the forcible-detainer suit, Nguyen filed her first amended counter-claim, cross-claim, and third-party claim, this time omitting Duong as a named party. This amendment occurred before the court in the forcible-detainer suit had ruled on Nguyen's motion to consolidate.
On October 23, 2003, the trial court in the forcible-detainer suit signed an order consolidating the two lawsuits and ordering the tort suit transferred to County Civil Court at Law No. One, the court in which the forcible-detainer suit had been filed ("the consolidated suit"). From that point forward, Nguyen supplemented her petition once on the day that trial began, and she was twice granted leave, over HKDI's and Duong's various objections, to conform the pleadings to the evidence. One of these post-trial amendments re-added Duong as a third-party defendant to Nguyen's third-party claims that had been asserted in the forcible-detainer suit before consolidation. After consolidation, Tu also asserted a counter-claim and a cross-claim against Nguyen for indemnity based on a provision in the lease assignment.
By virtue of her pleadings filed in the separate suits before consolidation, and by virtue of the pre-trial and post-trial amendments that the trial court allowed in the consolidated suit, Nguyen pleaded the following claims, requests for relief, and defenses in the consolidated suit:
At one time in the consolidated suit, Nguyen had also sued HKDI's and Duong's law firm, seeking to enjoin it from communicating with her in alleged violation of the Texas Disciplinary Rules of Professional Conduct. However, Nguyen later non-suited that claim.
a declaration that the lease assignment from Tu to Nguyen was not a breach of the lease agreement with HKDI;
a declaration — as an apparent alternative to a declaration that the lease assignment had not breached the lease agreement — that the lease assignment was void for having been executed under the "extreme duress" of the threat of contempt in the partnership suit;
breach of fiduciary duty against Tu;
conspiracy against all appellants, asserting that they had conspired to evict her;
tortious interference with contractual relations against Tu and Duong;
unfair competition against Tu, HKDI, and Duong;
indemnity against Tu, under theories that Tu had breached a contract and that Tu owed indemnity for attorney's fees under the documents signed in the partnership suit; and
waiver and estoppel, as defenses to HKDI's position that it was entitled to possession because Nguyen had breached the lease agreement with HKDI by virtue of the lease assignment.
Not all of the claims went to the jury, however. The pertinent jury questions and answers were as follows:
------------------------------------------------------------------------- | # | Question Answer | ------------------------------------------------------------------------- 1 Whether any of the following excused the lease assignment, executed without HKDI's prior written consent, from Tu to Nguyen: a. duress a. Yes b. waiver b. Yes c. estoppel c. Yes 2 Whether HKDI breached the lease agreement No 3 --- --- 4 Whether Tu breached her fiduciary duty to Yes Nguyen 5 What the damages that arose from Tu's breach $0.00 of fiduciary duty were 6 Whether Duong wrongfully interfered with Yes Nguyen's contractual relations 7 What the damages that arose from Duong's Nguyen's costs to tortious interference were defend her right to the leased premises: $49,266.66 Nguyen's past mental anguish: $15,000.00 8 Whether Duong was part of a conspiracy that Yes damaged Nguyen (not predicated on any question) 9 Whether HKDI was part of a conspiracy that Yes damaged Nguyen (not predicated on any question) 10 Whether Tu was part of a conspiracy that No damaged Nguyen (not predicated on any question) 11 Whether clear and convincing evidence Yes showed that Duong's malice harmed Nguyen (predicated on question 8) 12 --- --- 13 What Nguyen's attorney's fees were for preparation (predicated on question 11) and trial: $73,900.00 for post-trial motions: $6,000.00 for appeals to higher courts: $0.00 14 --- --- In the punitive-damages phase of trial, the jury awarded Nguyen $1 million against Duong and the same amount against HKDI. The trial court rendered judgment on Nguyen's motion, which HKDI and Duong opposed in writing. The judgment
declared that the lease assignment between Tu and Nguyen did not breach the lease agreement with HKDI;
declared that Tu had to indemnify Nguyen for Nguyen's attorney's fees;
awarded Nguyen possession of the leased premises;
awarded Nguyen $15,312.58 in actual damages and interest against HKDI and Duong, jointly and severally;
The trial court did not render judgment for the $49,266.66 that the jury had found that Nguyen, as a result of Duong's tortious interference, had incurred in costs defending her right to the leased premises. Therefore, the sole actual damages that the court awarded Nguyen for Duong's tortious interference (and for HKDI's and Duong's conspiracy) was $15,000 in mental-anguish damages.
awarded Nguyen $79,900 in attorney's fees against HKDI, Duong, and Tu, jointly and severally;
reduced the exemplary damages and awarded $200,000 in exemplary damages against each of HKDI and Duong; and
rendered a take-nothing judgment on HKDI's, Duong's, and Tu's claims against Nguyen.
Tu moved for judgment notwithstanding the verdict, as did HKDI and Duong. These motions were overruled by operation of law.
HKDI and Duong's Appeal
HKDI and Duong view all of the questions of jurisdiction that they raise as "fram[ing] the dispositive issue on appeal." We agree and discuss these issues below.
A. Our Jurisdiction to Review HKDI and Duong's Challenges
On appeal from a forcible-detainer judgment, we have no jurisdiction to consider the issue of possession if, as is the case here, the disputed premises were used for commercial purposes. See Tex. Prop. Code Ann. § 24.007 (Vernon 2000); Carlson's Hill Country Beverage, L.C. v. Westinghouse Rd. Joint Venture, 957 S.W.2d 951, 952-53 (Tex.App.-Austin 1997, no pet.). The prohibition to consider possession includes consideration of any finding "essential to the issue of" or "dependent on" possession. See Carlson's Hill Country Beverage, L.C., 957 S.W.2d at 953; Rice v. Pinney, 51 S.W.3d 705, 707 (Tex.App.-Dallas 2001, no pet.). The jurisdictional matters raised by HKDI and Duong are not matters essential to the issue of possession, and, thus, we have jurisdiction to review them. See Rice, 51 S.W.3d at 708 ("Section 24.007 does not preclude appellate review of a county court at law's subject matter jurisdiction" because such challenges concern county court's "authority to decide this case regardless of how it resolved the possession issue.").
B. The Trial Court's Jurisdiction Over Nguyen's Tort Claims
In issue one, HKDI and Duong argue that the trial court lacked subject-matter jurisdiction to adjudicate Nguyen's counter-claims against HKDI, and her third-party claims against Duong, that she had asserted in the forcible-detainer suit before consolidation. Specifically, they argue that the county civil court at law, sitting as an appellate court in the forcible-detainer suit, lacked jurisdiction to consider the counter-claims and third-party claims because those claims (1) exceeded the justice court's jurisdiction, (2) fell outside the scope of claims allowed in a forcible-detainer suit, and (3) were impermissibly raised for the first time on appeal to the county civil court at law.
Nor, according to HKDI and Duong, could the trial court "fix" the above-referenced jurisdictional problem by consolidating the forcible-detainer suit, which had this jurisdictional problem, with the tort suit, which did not. HKDI and Duong argue that the trial court erred in consolidating (or that it lacked jurisdiction to consolidate) the two suits because the court's having done so allowed Nguyen to recover the very damages that would not have been recoverable in the forcible-detainer suit had it not been consolidated. They argue that the county civil court at law could exercise either appellate or original jurisdiction, but not both in the same suit. Finally, HKDI and Duong assert that, regardless of what type of jurisdiction the county civil court at law exercised, the aggregate damages that Nguyen sought in her claims, counter-claims, cross-claims, and third-party claims exceeded the jurisdiction of the county civil court at law.
For all of the reasons stated above, HKDI and Duong argue that the trial court erred in not severing or striking the complained-of counter-claims and third-party claims from the forcible-detainer suit before consolidation and that it erred in consolidating the two suits.
1. The Counter-Claims, Cross-Claims, and Third-Party Claims Asserted in the Forcible-Detainer Suit Before Consolidation
a. The Law
"The procedure to determine the right to immediate possession of real property, if there was no unlawful entry, is the action of forcible detainer." Rice, 51 S.W.3d at 709; see Tex. Prop. Code Ann. § 24.002 (defining forcible detainer). Prior to consolidation, the forcible-detainer suit was purely one for forcible detainer.
Justice courts have original jurisdiction over forcible-detainer suits. See Tex. Prop. Code Ann. § 24.004 (Vernon 2000); see also Tex. Gov't Code Ann. § 27.031(a)(2) (Vernon 2004). Any party dissatisfied with a justice-court judgment in such a suit may appeal to the county court, in which trial is de novo. See Tex. R. Civ. P. 749. On appeal in a forcible-detainer suit, the county court exercises appellate, not original, jurisdiction. The county court's appellate jurisdiction is generally confined to the limits of the justice court (with the exception of the specific damages noted below), and the county court has no jurisdiction over a forcible-detainer appeal unless the justice court did. Ward v. Malone, 115 S.W.3d 267, 269 (Tex.App.-Corpus Christi 2003, pet. denied).
Texas Rule of Civil Procedure 749 derives from 1925 Revised Statutes article 3987: "Either party may appeal from a final judgment in such case, to the county court of the county in which the judgment is rendered. . . ." Revised Statutes, 39th Leg., R.S., § 1, art. 3987, 1925 Tex. Rev. Civ. Stat. 2, 1082. The 1925 Revised Statutes used the term "county court" to refer both to the constitutional county court and to the statutory county court. See generally\ Revised Statutes, 39th Leg., R.S., § 1, arts. 1927-1970, 1925 Tex. Rev. Civ. Stat. 2, 532-539 (title 41, Courts — County, defining the duties and powers of the county court). Rule 749 thus allows an appeal to either the constitutional county court or the statutory county court.
"An action of forcible entry and detainer is a special proceeding and as such is governed by the special statutes and rules applicable thereto." Haginas v. Malbis Mem'l Found., 163 Tex. 274, 278, 354 S.W.2d 368, 371 (1962); accord Rice, 51 S.W.3d at 709. "Forcible entry and detainer actions are intended to provide a speedy, summary, and inexpensive determination of the right to immediate possession of real property." Meridien Hotels, Inc. v. LHO Fin. P'Ship I, L.P., 97 S.W.3d 731, 737 (Tex.App.-Dallas 2003, no pet.); see McGlothlin v. Kliebert, 672 S.W.2d 231, 232 (Tex. 1984). The Texas Rules of Civil Procedure ensure the speedy, summary, and inexpensive nature of forcible-detainer suits. See Meridien Hotels, Inc., 97 S.W.3d at 737; see also Tex. R. Civ. P. 739, 740, 745, 746, 748, 749 (all requiring expedited or streamlined procedures in forcible-entry and forcible-detainer suits).
Because of this purpose, the sole issue to be determined in a forcible-detainer or forcible-entry suit is the entitlement to actual and immediate possession. See Tex. R. Civ. P. 746; Haginas, 354 S.W.2d at 371. Nonetheless, the rules do vest the justice or county courts in such suits with jurisdiction over a few other limited matters. For example, a suit for rent may be joined with an action for forcible entry or detainer, as long as the claim for rent falls within the justice court's jurisdiction. Tex. R. Civ. P. 738; Haginas, 354 S.W.2d at 371. Additionally, in trial de novo on appeal to the county court, "the appellant or appellee shall be permitted to plead and prove his damages if any suffered for withholding or defending possession of the premises during the pendency of the appeal," although only the party prevailing in the county court may recover these damages. Tex. R. Civ. P. 752. Such damages include, but are not limited to, loss of rents during the appeal's pendency and reasonable attorney's fees in the justice and county courts, and the prevailing party in the county court may also recover costs. Id. The damages that may be sought under rule 752 are only those "suffered as a direct result of withholding or defending possession." Hanks v. Lake Towne Apartments, 812 S.W.2d 625, 627 (Tex.App.-Dallas 1991, writ denied). Under rule 752, a party may recover the specified damages "regardless of the amount so long as [the prevailing party] can prove such damages." Haginas, 354 S.W.2d at 372. In other words, in a trial de novo in a forcible-detainer proceeding on appeal in county court, a prevailing party may recover the damages allowed by rule 752 even if the amount of those damages exceeds the amount-in-controversy limit of the county court's original jurisdiction. Id.
The county and justice courts lack subject-matter jurisdiction in a forcible-detainer suit to adjudicate matters other than those listed in the immediately preceding paragraphs. See, e.g., Krull v. Somoza, 879 S.W.2d 320, 322 (Tex.App.-Houston [14th Dist.] 1994, writ denied) (holding that damages claims related to maintaining or obtaining possession of disputed premises may be joined with forcible-detainer suit and litigated in county court, but that damages for other causes of action cannot be maintained in same suit); Hanks, 812 S.W.2d at 627 (holding that county court lacked subject-matter jurisdiction over tenant's counter-claims for wrongful retention of rental security deposit that had been asserted on appeal in forcible-detainer suit); Rushing v. Smith, 630 S.W.2d 498, 499-500 (Tex.Civ.App.-Amarillo 1982, no writ) (holding that county court lacked subject-matter jurisdiction over cross-claims for damages to recover for certain farming work that had been done, which damages were unrelated to expenses in defending possession, on appeal in forcible-detainer suit). This result obtains because "[t]he jurisdiction of the County Court is of a dual nature[:] one original and the other appellate from the Justice Court." Neal v. Beck Funeral Home, 131 S.W.2d 778, 779 (Tex.Civ.App.-Fort Worth 1939, writ dism'd) (holding same in appeal to county court from justice court in suit other than one for forcible detainer). When a county court acquires only appellate jurisdiction in a given suit, it may not, absent authorization by statute or rule, determine any matter acquired by virtue of its original jurisdiction in that same suit. See id. at 780.
We distinguish the authority on which Nguyen relies for the contrary proposition. In West Anderson Plaza v. Feyznia, the county court considered the merits of a DTPA counter-claim asserted on appeal in a forcible-detainer action without mentioning the its lack of jurisdiction over that claim. See id., 876 S.W.2d 528, 531-36 (Tex.App.-Austin 1994, no writ). Neither did the Feyznia court address the limited jurisdiction applicable to forcible-detainer suits. See id., passim. The same is true of the court in Anarkali Enterprises, Inc. v. Riverside Drive Enterprises, Inc., 802 S.W.2d 25, 27-28 (Tex.App.-Fort Worth 1990, no writ). Simply put, the Anarkali Enterprises, Inc. and Feyznia courts did not discuss the jurisdictional issue before us, whereas the cases on which we have relied in this paragraph did so expressly.
"An eviction suit does not bar a suit for trespass, damages, waste, rent, or mesne profits." Tex. Prop. Code Ann. § 24.008 (Vernon 2000). Additionally, "[a] judgment or a determination of fact or law in a proceeding in . . . justice of the peace court is not res judicata and does not constitute a basis for estoppel by judgment in a proceeding in a . . . statutory county court." Tex. Civ. Prac. Rem. Code Ann. § 31.005 (Vernon 1997). Accordingly, a forcible-detainer suit in justice court may run concurrently with another action in another court. See id.; Meridien Hotels, Inc., 97 S.W.3d at 737. That is, a forcible-detainer action is cumulative of, not exclusive of, other remedies that a party may have. McGlothlin, 672 S.W.2d at 233; Dormandy v. Dinero Land Cattle Co., L.C., 61 S.W.3d 555, 558 (Tex.App.-San Antonio 2001, pet. dism'd w.o.j.); Rice, 51 S.W.3d at 709. As the Texas Supreme Court has stated, "If all matters between the parties cannot be adjudicated in the justice court in which the forcible entry and detainer proceedings are pending due to the justice court's limited subject matter jurisdiction, then either party may maintain an action in a court of competent jurisdiction for proper relief." McGlothlin, 672 S.W.2d at 233; accord Rushing, 630 S.W.2d at 500.
b. Application of the Law to the Facts
Prior to consolidation, Nguyen alleged in the forcible-detainer suit (by counter-claim, cross-claim, or third-party claim asserted for the first time on appeal to the county court at law) that (1) Duong had tortiously interfered with her contractual relations; (2) Tu had breached her fiduciary duty to Nguyen; (3) Tu, Duong, and HKDI had unfairly competed with her; and (4) Tu, Duong, and HKDI had conspired to evict her. She also sought actual damages of "less than $100,000," exemplary damages, and attorney's fees.
Under the law set out above, the county court at law had no subject-matter jurisdiction over these claims to the extent that it was exercising its appellate jurisdiction over the forcible-detainer suit appealed from the justice court. None of the matters that Nguyen pleaded concerned the right to immediate possession. See Tex. R. Civ. P. 746 (providing that right to possession is sole issue determined in forcible-detainer or forcible-entry suit). Neither were they an attempt to collect rent. See Tex. R. Civ. P. 738 (allowing suit for rent to be adjudicated with forcible-detainer suit, provided that rent sought is within justice court's jurisdiction). Additionally, as she had pleaded her tort claims, Nguyen did not expressly seek, or limit her damages to, damages "suffered for withholding or defending possession of the premises during the pendency of the appeal." Tex. R. Civ. P. 752; see Krull, 879 S.W.2d at 322 (holding that, under rule 752, damages unrelated to maintaining or obtaining possession of disputed premises may not be joined with forcible-detainer suit in county court). Because she did not seek rule-752 damages — which pleading would have allowed her to seek more than the $5,000 amount-in-controversy limit applicable to many appeals from justice court — the fact that Nguyen sought up to $100,000 also took her tort claims outside of the county court's appellate jurisdiction. Compare Tex. Gov't Code Ann. § 27.031(a)(1) (setting amount-in-controversy civil jurisdiction of justice courts at $5,000 maximum, excluding interest) with id. § 25.0003(c)(1) (Vernon 2004) (setting amount-in-controversy civil jurisdiction of statutory county courts at $100,000 maximum, excluding interest, statutory or punitive damages or penalties, and attorney's fees and costs). Finally, exemplary damages do not fall within those damages authorized in forcible-detainer suits. See Tex. R. Civ. P. 746, 752. Simply put, there is no way to construe Nguyen's counter-claims, cross-claims, and third-party claims that she asserted in the forcible-detainer suit before consolidation so that the county court could have exercised jurisdiction over them. 2. The Claims Pending or Asserted After Consolidation
Despite how Nguyen pleaded her tort claims, the court's charge asked the jury whether Nguyen had incurred any damages, in the form of costs to defend her right to the leased premises, arising from Duong's tortious interference. The jury answered $49,266.66. The trial court did not render judgment for those damages. In any event, the eventual charge did not change the fact that Nguyen had not sought those damages for her tort claims when the trial court consolidated the suits.
See Carlson's Hill Country Beverage, L.C. v. Westinghouse Rd. Joint Venture, 957 S.W.2d 957 S.W.2d 951, 954 (Tex.App.-Austin 1997, no pet.); cf. Haginas v. Malbis Mem'l Found., 354 S.W.2d 368, 371 (Tex. 1962). Compare Ward v. Malone, 115 S.W.3d 267, 269 (Tex.App.-Corpus Christi 2003, pet. denied) (indicating that, generally, county court's appellate jurisdiction is confined to limits of justice court and that county court has no jurisdiction over forcible-detainer appeal unless the justice court did); see also Tex. Gov't Code Ann. § 27.031(a)(1) (Vernon 2004) (setting amount-in-controversy civil jurisdiction of justice courts at $5,000 maximum, excluding interest).
Because there was no subject-matter jurisdiction over any claims that Nguyen asserted in the forcible-detainer suit, before consolidation, against HKDI, Duong, or Tu, it is immaterial whether the county civil court at law in that suit had personal jurisdiction over Duong — which Duong argues was lacking over him at that time. Therefore, we need not address Duong's alternative argument under issue one that the trial court in the forcible-detainer suit, at least before consolidation, lacked personal jurisdiction over him.
It is, therefore, clear that the trial court had no subject-matter jurisdiction to consider any of Nguyen's counter-claims, cross-claims, or third-party claims that she had asserted in the forcible-detainer suit before consolidation. The question remains, however, whether the trial court could (or whether it had jurisdiction to) consolidate the tort suit, in which it exercised original jurisdiction to entertain these types of claims, with the forcible-detainer suit, in which it lacked such jurisdiction. That is, could the trial court do through the back door what it could not do through the front?
Nguyen reasserted her third-party claim for tortious interference against Duong after consolidation, with leave of the court. We assume without deciding that the reassertion of this cause of action after consolidation, albeit styled as a "third-party" claim against a previously third-party defendant Duong, was the equivalent of having asserted the cause of action as a "claim" against Duong in his capacity as a defendant post-consolidation. See Tex. R. Civ. P. 71 ("When a party has mistakenly designated any plea or pleading, the court, if justice so requires, shall treat the plea or pleading as if it had been properly designated."); State Bar v. Heard, 603 S.W.2d 829, 833 (Tex. 1980) ("We look to the substance of a plea for relief to determine the nature of the pleading, not merely at the form of title given to it."). That is, we assume without deciding that Nguyen invoked the original jurisdiction of the county civil court at law when she reasserted this claim against Duong after consolidation. We also note that, for purposes of this one jurisdictional discussion, we need not address HKDI's and Duong's related challenge that the trial court abused its discretion in allowing Nguyen leave to add this claim against Duong after consolidation.
Consolidation is a procedural device that a court may utilize at its discretion upon motion, upon stipulation, or sua sponte. See 3 Roy W. McDonald Elaine A. Grafton Carlson, Texas Civil Practice § 17:25, 775 (2d ed. 2000) [hereinafter "McDonald Carlson"]. Texas Rule of Civil Procedure 174(a) provides:
When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated; and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.
Tex. R. Civ. P. 174(a). Consolidation furthers judicial economy by combining actions that involve a common question of law or fact to mitigate the expense associated with litigation, to eliminate the proliferation of suits, and to expedite the judicial process. See McDonald Carlson, supra, at 775-76; see also Owens Corning Fiberglass Corp. v. Martin, 942 S.W.2d 712, 716 (Tex.App.-Dallas 1997, no writ) ("In deciding whether to consolidate, the trial court must balance the judicial economy and convenience that may be gained by the consolidation against the risk of an unfair outcome because of prejudice or jury confusion."). "The trial court may consolidate actions that relate to substantially the same transaction, occurrence, subject matter, or question." Martin, 942 S.W.2d at 716. Rule 174(a) "does not require that all of the questions of law or fact be common to each of the cases to be consolidated. All that is required is that the two actions involve one or more common questions of significance. This is especially true if the parties are identical." 7 William V. Dorsaneo III, Texas Litigation Guide § 112.02[1] (1999) [hereinafter "Dorsaneo"]. However, if the parties and issues differ, then consolidation is improper. McDonald Carlson, supra, 783-84. We review a consolidation order for abuse of discretion. Allison v. Ark. La. Gas Co., 624 S.W.2d 566, 568 (Tex. 1981).
Two types of consolidation exist: true consolidation and consolidation for trial. McDonald Carlson, supra, at 775; see also 7 Dorsaneo, supra, at § 112.01[1][a]. True consolidation, as occurred here, involves merging separate suits into a single proceeding under one docket number. McDonald Carlson, supra, at 775. "`When actions are properly consolidated they become merged and are thereafter treated as one suit. . . .'" Perry v. Del Rio, 53 S.W.3d 818, 825 n. 6 (Tex.App.-Austin 2001) (quoting 1 Tex. Jur. 3d Actions § 77 (1993)), pet. dism'd, 66 S.W.3d 239 (Tex. 2001); see Rust v. Tex. Pac. Ry. Co., 107 Tex. 385, 387, 180 S.W. 95, 95 (1915) ("In the present case, the order of consolidation having been properly made, there remained no separable cause of action. It became but one suit. . . ."). Therefore, when a court orders true consolidation of two or more cases, the actions are merged and thereafter proceed as a single action, as though they had been filed initially as a single suit. See Perry, 53 S.W.3d at 825 n. 6; Rust, 107 Tex. at 387, 180 S.W. at 95; McDonald Carlson, supra, at 775.
On the one hand, it is undisputed that each of the two county courts involved here sat in the same county; that each had subject-matter jurisdiction over forcible-detainer appeals generally; and that each also had subject-matter jurisdiction over the general types of damage claims and declaratory relief that Nguyen sought (putting aside for a moment HKDI and Duong's challenges to the aggregate amounts in controversy). See Tex. Gov't Code Ann. §§ 25.003(a), (c)(1), 25.1031(a), 25.1032(a) (Vernon 2004). When the transferee county court has subject-matter jurisdiction over the matters sought to be transferred to it in a consolidation (which the county civil court at law here did, in the abstract), consolidation is generally a procedural matter, rather than a jurisdictional one. Cf. Montgomery v. Willbanks, 202 S.W.2d 851, 853 (Tex.Civ.App.-Fort Worth 1947, writ ref'd n.r.e.) ("There is no lack of jurisdiction involved here, because the district court acquired jurisdiction of the issues presented in the two cases as they were filed, and did not lose jurisdiction simply because he ordered them tried together."); McNeny v. R.R. Comm'n, 96 S.W.2d 96, 98 (Tex.Civ.App.-Austin 1936, no writ) (indicating that question of joinder is not jurisdictional, and analogizing to consolidation); cf. also Allison, 624 S.W.2d at 568 (indicating that joinder and consolidation rulings are reviewed for abuse of discretion).
On the other hand, by virtue of their consolidation, the two lawsuits in this case merged and proceeded as if they had been initially filed as a single action. See Perry, 53 S.W.3d at 825 n. 6; Rust, 107 Tex. at 387, 180 S.W. at 95; McDonald Carlson, supra, at 775. That means that Nguyen's claims — over some of which the court in the forcible-detainer suit did not have jurisdiction when they were asserted there as cross-claims, counter-claims, and third-party claims — were subsequently allowed to be raised in the consolidated suit by virtue of the consolidation. Consolidation in these circumstances thus accomplished what the same court, when presiding over the forcible-detainer appeal, lacked subject-matter jurisdiction to do.
We conclude that consolidation in these circumstances constitutes error. Forcible-detainer suits are intended to provide a speedy, summary, and inexpensive determination of the right to immediate possession, and the rules accomplish this goal by allowing the parties to litigate only limited matters. See, e.g., Meridien Hotels, Inc., 97 S.W.3d at 737; see also Tex. R. Civ. P. 739, 740, 745, 746, 748, 749. This object is thwarted by allowing through consolidation what is not allowed through assertion of claims in the forcible-detainer suit itself.
We need not determine if issuing the consolidation order resulted in simple error (an abuse of discretion) or, as HKDI and Duong argue, resulted in jurisdictional error because the outcome is the same regardless of how the resulting error is characterized.
There is authority to support our conclusion. In Texas — Mexican Railway Co. v. Cahill, a forcible-detainer suit was initiated in justice court, and appeal was taken to the county's district court. See id., 23 S.W. 232, 232 (Tex.Civ.App.-Galveston 1893, writ ref'd). In overruling the appellant's challenge to the denial of its motion to consolidate the forcible-detainer suit with another suit involving the same appellee pending in the same court, this Court explained, in pertinent part:
Appeal was taken to the district court because the county court of Nueces County had no civil jurisdiction at that time. Cahill v. Tex. — Mex. Ry. Co., 40 S.W. 871, 871 (Tex.Civ.App.-San Antonio 1897, writ dism'd).
[T]he motion to consolidate was properly refused. The appellee's suit, as we have seen, was brought under the statute which provides a remedy for the recovery of the possession of real estate when the premises are in the quiet occupancy of one, and they are forcibly entered by another, or where a lessee, after the expiration of his lease, refuses to restore possession to his lessor. The statute provides a speedy and efficient remedy for restoring possession to him who is wrongfully deprived of the same, and no inquiry as to the title to, or the superior right of either party to the suit or that of any third person in, the property, is permitted. The [other suit] was a suit of trespass to try title to the lot in question. To permit the consolidation of such suits would be contrary to the obvious policy of the law, and in most cases defeat the object of the statute, — the prompt adjudication of the right of possession to the premises, without reference to the right of title to the property.
Id. at 232 (emphasis added). We follow the reasoning and conclusion of our Court in Cahill to hold in this case that the trial court erred in consolidating the tort suit and the forcible-detainer suit. See id. C. The Remedy
We distinguish the authority on which Nguyen relies for the contrary position. In Knight v. K K Properties, Inc., in rejecting a tenant's argument that the landlord could not collect rents in a forcible-detainer suit because the tenant had relinquished possession of the property by the time of appeal, the court noted in dictum that the tenant's objection would have been obviated had the landlord sued for rent in county court and then moved to consolidate that suit with the forcible-detainer appeal. See id., 589 S.W.2d 860, 862 (Tex.Civ.App.-Fort Worth 1979, no writ). We note that rents may be sought in a forcible-detainer suit; that is not true of Nguyen's claims. See Tex. R. Civ. P. 738, 752. In French v. Moore and Green v. Canon, the courts considered — without discussing the propriety of consolidation or the trial court's jurisdiction to do so — appeals in cases in which a county civil court at law had consolidated a forcible-detainer appeal with another suit in which it was exercising original jurisdiction. See French, 169 S.W.3d 1 (Tex.App.-Houston [1st Dist.] 2004, no pet.); Green, 33 S.W.3d 855 (Tex.App.-Houston [14th Dist.] 2000, pet. denied). If, on the one hand, consolidation of a forcible-detainer appeal with an original-jurisdiction suit is error, but not jurisdictional error, then the French and Green courts rightly did not discuss the issue before them, and the holdings of French and Green are not instructive in this case. See Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993) ("We have held repeatedly that the courts of appeals may not reverse the judgment of a trial court for a reason not raised in a point of error."). If, on the other hand, the error is jurisdictional, the courts should have discussed it, even if the parties did not. See McCauley v. Consol. Underwriters, 157 Tex. 475, 477, 304 S.W.2d 265, 266 (1957). Nonetheless, when parties fail to point out fundamental error, courts may inadvertently overlook it. For these two, alternative reasons, we decline to read French and Green as does Nguyen — especially when the only court (ours, in Cahill) expressly addressing the issue has held contrary to Nguyen's reading.
When a court lacks subject-matter jurisdiction over some claims, but not others, it should sever or dismiss those claims over which jurisdiction is lacking. See Thomas v. Long, 49 Tex. S. Ct. J. 532, 534 (Tex. Apr. 21, 2006) ("[I]t is proper for a trial court to dismiss claims over which it does not have subject matter jurisdiction but retain claims in the same case over which it has jurisdiction.") (citing Am. Motorists Ins. Co. v. Fodge, 63 S.W.3d 801, 805 (Tex. 2001)); Fandey v. Lee, 880 S.W.2d 164, 169 (Tex.App.-El Paso 1994, writ denied) (in dictum, indicating that counter-claims for fraud and to quiet title were properly severed from forcible-detainer suit).
HKDI and Duong moved, before consolidation, to strike or to sever all of Nguyen's claims in the forcible-detainer suit. Although severance rulings are reviewable for abuse of discretion, it is an inherent abuse of discretion to misapply the law — such as, for example, when a court exercises jurisdiction over a matter over which it has none. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992); see also Tex. Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002) (providing that question of whether court has subject-matter jurisdiction is question of law). Additionally, to the extent that the court's rulings (here, the motion to strike or to sever) allowed the exercise of jurisdiction over matters over which it lacked jurisdiction, we review those rulings de novo. See Tex. Dep't of Parks Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex. 2004) ("Appellate courts reviewing a challenge to a trial court's subject matter jurisdiction review the trial court's ruling de novo.").
Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990).
Furthermore, HKDI and Duong opposed the consolidation. We have already concluded that consolidating these cases was at least contrary to the law. Although the standard of review for consolidation orders is abuse of discretion, the trial court necessarily abused its discretion here by acting contrary to the law. See Walker, 827 S.W.2d at 840.
Nguyen's brief recites that HKDI and Duong waived their complaint about consolidation because they did not oppose her motion to consolidate, but they did oppose it.
See Allison v. Ark. La. Gas Co., 624 S.W.2d 566, 568 (Tex. 1981).
These errors require reversal and remand. The court's error in denying the motion to strike or to sever resulted in fundamental error because it allowed the court to exercise subject-matter jurisdiction over certain claims that it lacked jurisdiction to consider in the forcible-detainer suit. See Mapco, Inc. v. Carter, 817 S.W.2d 686, 687 (Tex. 1991) (holding, "[L]ack of jurisdiction is fundamental error and may be raised for the first time before this court.").
As for the consolidation order, if consolidation is a jurisdictional matter under these circumstances, then the trial court's improperly having consolidated these cases was also fundamental error, which would render the consolidation order void. See Browning v. Placke, 698 S.W.2d 362, 363 (Tex. 1985) (indicating that judgment is void when, among other things, it is apparent that court rendering judgment "had . . . no jurisdiction of the subject matter"); see also In re Dickason, 987 S.W.2d 570, 571 (Tex. 1998) (holding that order rendered after trial court's plenary jurisdiction had expired was void); cf. In re Cornyn, 27 S.W.3d 327, 332 (Tex.App.-Houston [1st Dist.] 2000, orig. proceeding) ("Mandamus lies over an interlocutory or temporary order that the court had no jurisdiction to make."). If, on the other hand, the court's ruling consolidating the cases was erroneous, but not void for lack of jurisdiction, that error is harmful. See Tex.R.App.P. 44.1.
Texas Rule of Appellate Procedure 44.1 provides:
(a) Standard for Reversible Error. No judgment may be reversed on appeal on the ground that the trial court made an error of law unless the court of appeals concludes that the error complained of:
(1) probably caused the rendition of an improper judgment; or
(2) probably prevented the appellant from properly presenting the case to the court of appeals.
Id.
The harm arising from having to participate in a jury trial before one can obtain what is supposed to be an inexpensive, speedy, and summary ruling on the right to immediate possession is evident. HKDI filed the forcible-detainer suit in July 2003, immediately confessed judgment, and appealed to the county court. Nguyen asserted her tort counter-claims, cross-claims, and third-party claims on October 3, 2003. The trial court consolidated the two suits that same month, implicitly overruling HKDI's motion to strike or to sever Nguyen's tort claims in the forcible-detainer suit. Trial did not begin until December 2, and it ended on December 11; there were seven days of trial proceedings. The trial court did not render judgment adjudicating the right to possession until April 30, 2004. This significant delay in determining the mere right to immediate possession was caused by the consideration of tort claims over which the trial court lacked subject-matter jurisdiction, when the issue should have been decided inexpensively, speedily, and summarily. See, e.g., Meridien Hotels, Inc., 97 S.W.3d at 737; see also Tex. R. Civ. P. 739, 740, 745, 746, 748, 749. Therefore, if the consolidation ruling was non-jurisdictional error, that error was harmful. See Tex.R.App.P. 44.1.
Given our disposition, we need not reach HKDI and Duong's challenges (1) under issue one based on lack of personal jurisdiction over Duong; (2) under issue two concerning the trial court's having granted Nguyen leave to amend her pleadings to assert waiver, estoppel, and mental-anguish damages; and (3) under issue three concerning the legal sufficiency of the evidence supporting the jury's findings on Nguyen's tort claims, damages, and attorney's fees, which Nguyen asked us to reach only if we overruled her challenges to the severance and consolidation rulings.
Tu's Appeal
In three issues, Tu contends that the trial court erred in rendering judgment declaring that the lease and partnership assignments' indemnity provisions made Tu responsible for Nguyen's attorney's fees and awarding Nguyen $79,900 in attorney's fees against Tu, jointly and severally with HKDI and Duong. Tu bases her challenge on three grounds: (1) the court declared that Tu and Nguyen's lease assignment did not breach the lease agreement with HKDI, which declaration allegedly eliminated the sole basis for contractual indemnity; (2) alternatively, the claims alleged against Nguyen did not fall within the indemnity agreements' unambiguous terms; and (3) Nguyen did not segregate evidence of her attorney's fees.
We have already determined that we must reverse the judgment and remand the case for the trial court's errors in having failed to sever Nguyen's tort claims from the forcible-detainer suit and in having consolidated the tort suit and the forcible-detainer suit. Because the indemnity issue is likely to recur on remand, however, we consider Tu's challenges that are questions of law: whether the declaration that no breach occurred negated the sole basis for indemnity and whether the claims asserted against Nguyen fell within the indemnity agreements' terms. See Wachendorfer v. Wachendorfer, 615 S.W.2d 852, 854 (Tex.Civ.App.-Houston [1st Dist.] 1981, no writ) (despite having sustained point of error requiring remand, considering matters that would occur on remand).
A. Pertinent Facts
Two sets of indemnity provisions were at issue in the consolidated suit. The first set was included in the partnership assignment between Tu and Nguyen, and the second set was included in the lease assignment between them. We need to examine only the lease assignment's indemnity provision:
Assignor [Tu] hereby indemnifies Assignee [Nguyen] and agrees to hold [Nguyen] harmless from and against any and all claims, demands, obligations, liabilities, costs, losses and expenses, including without limitation attorney's fees resulting from or arising out of all provisions, agreements, obligations, covenants and conditions which are or were provided or required to be paid, performed, discharged, and/or observed prior to the effective date of this Assignment by [Tu] under or in connection with the Lease [between HKDI and Tu and Nguyen].
(Emphasis added.)
In her pleadings filed in the consolidated suit, Nguyen asserted an indemnity claim against Tu, alleging that "[Tu's] actions would constitute a breach of contract and would bound [sic] her to an indemnification agreement to [Nguyen] and the partnership" and that "[Nguyen] is entitled to indemnification from [Tu] for damages for attorney fee [sic]."
The jury question relevant to our discussion asked if "the `assignment' from Tu to [Nguyen] was `excused'" by waiver, estoppel, or duress. Because this jury question concerned affirmative defenses, the question, its instructions, and its definitions impliedly assumed that the execution of the lease assignment without HKDI's prior written consent violated the terms of the lease agreement with HKDI. The final judgment then recited as follows:
See Tex. R. Civ. P. 94 (indicating that estoppel and duress are affirmative defenses); In re S.A.P., 156 S.W.3d 574, 576 (Tex. 2005) (quoting rule 94 concerning estoppel's being avoidance or affirmative defense); In re Epic Holdings, Inc., 985 S.W.2d 41, 57 (Tex. 1998) ("Waiver is an affirmative defense"); Hardin v. Hardin, 597 S.W.2d 347, 348 (Tex. 1980) (describing duress as affirmative defense).
"An affirmative defense `seeks to establish an independent reason that the plaintiff should not recover' and is `thus [a defense] of avoidance, rather than a defense in denial'; that is, it is a defense of confession and avoidance." Hamm III v. Millennium Income Fund, L.L.C., 178 S.W.3d 256, 268 (Tex.App.-Houston [1st Dist.] 2005, pet. denied) (quoting In re C.M., 996 S.W.2d 269, 270 (Tex.App.-Houston [1st Dist.] 1999, no pet.) and Great Am. Prods. v. Permabond Int'l, 94 S.W.3d 675, 683 (Tex.App.-Austin 2002, pet. denied)).
The Court finds that, in interpreting the lease agreement as a whole, the lease agreement was not breached by [[Nguyen's] and [Tu's] compliance with a Court Ordered assignment of [Tu's] lease interest in relation to the dissolution of the partnership which was done without the prior written consent of [HKDI].
. . . .
The jury returned a verdict as to [Nguyen's] affirmative defenses that the Court Ordered assignment of the lease interest, if the assignment was a breach of the [lease] agreement, was excused.
B. Standard of Review and the Law
We review questions of law like those discussed here de novo. See, e.g., State v. Delany, 197 S.W.3d 297, 300 (Tex. 2006); MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999) (instructing that interpretation of unambiguous contract is a question of law, which is reviewed de novo). Courts "may not expand the parties' rights or responsibilities beyond the limits agreed upon by them in the [indemnity] contract." Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex. 1983); see also Crowder v. Scheirman, 186 S.W.3d 116, 119 (Tex.App.-Houston [1st Dist.] 2005, no pet.) ("The supreme court requires that indemnity agreements be strictly construed to give effect to the parties' intent as expressed in the agreement.") (citing Ideal Lease Serv., Inc., 662 S.W.2d at 953).
C. The Effect of the Judgment's Recitation That No Breach Occurred
In her first issue, Tu argues that the judgment's recitation that "the lease agreement was not breached" negates any ground for indemnification. Specifically, Tu contends that only a breach of the lease agreement with HKDI could trigger her duty to indemnify Nguyen under the lease assignment between Tu and Nguyen.
We disagree. First, the judgment's recitation on which Tu relies indicates that the court found no breach not because the failure to obtain HKDI's prior written consent did not violate the lease agreement with HKDI, but instead because that violation was excused. The judgment's recitation that "the lease agreement was not breached by [Nguyen's] and [Tu's] compliance with a Court Ordered assignment of [Tu's] lease interest," along with its reference to the jury's affirmative-defense findings, can be read as a finding that duress excused the violation of the lease agreement. (Emphasis added.) Accordingly, viewed in context, the judgment's recitation on which Tu relies is not a finding that she did not violate any duties under the lease assignment.
Additionally, the scope of the lease assignment's indemnity provision was broad. Tu reads this indemnity provision restrictively, as being triggered only if Tu and Nguyen were held liable for having breached the lease agreement with HKDI. In contrast, the lease assignment's indemnity provision actually read as follows:
Assignor [Tu] hereby indemnifies Assignee [Nguyen] and agrees to hold [Nguyen] harmless from and against any and all claims, demands, obligations, liabilities, costs, losses and expenses, including without limitation attorney's fees resulting from or arising out of all provisions, agreements, obligations, covenants and conditions which are or were provided or required to be paid, performed, discharged, and/or observed prior to the effective date of this Assignment by [Tu] under or in connection with the Lease [between HKDI and Tu and Nguyen].
(Emphasis added.) The indemnity provision was thus triggered by, among other things, costs that resulted from or arose out of any obligation (etc.) that Tu had to perform under the lease agreement with HKDI. The scope of this language was thus broader than simply costs resulting from liability for the lease agreement's breach.
Tu was the party assigning her leasehold interest to Nguyen. The lease agreement required that "Tenant [Tu and Nguyen] . . . not assign this Lease, or any interest therein, . . . without first obtaining the written consent of [HKDI]" and that "[Tu and Nguyen] shall not sell, convey, or assign any interest in the corporation [sic] without prior written approval from [HKDI]." It is undisputed that HKDI's written consent to the lease assignment was not obtained prior to the assignment's execution. That failure came within the scope of the indemnity provision — whether or not the failure was ultimately excused by waiver, estoppel, or duress. The judicial recitation that "the lease agreement was not breached" did not, therefore, negate the contractual basis for indemnity.
D. The Challenge That the Claims Against Nguyen Fell Outside the Indemnity Agreement's Scope
The lease assignment's indemnity provision required Tu to indemnify Nguyen only for failed obligations (etc.) under the lease agreement that Tu had to perform "prior to" the lease assignment's execution. In her second issue, Tu alternatively argues that the failure to obtain HKDI's prior written consent to the lease assignment could not have occurred before the lease assignment was executed because the failure occurred at the time of the assignment's execution. We reject this argument. Although the lease agreement with HKDI was not violated until the moment that Tu and Nguyen signed the lease assignment, the obligation that Tu, as assignor, was required to perform under the lease agreement with HKDI was to obtain HKDI's prior written consent to the assignment, which failure necessarily occurred prior to the lease assignment's execution.
We overrule the second issue.
E. Summary
We overrule Tu's first two issues. Our holdings concerning those issues will guide the trial court on remand should the indemnification issue again arise. We decline to reach Tu's third issue.
Conclusion
We reverse the judgment of the trial court and remand the case.