Opinion
NO. 14-16-00880-CV
07-16-2019
TRANSAMERICA CORP, Appellant v. BRAES WOODS CONDO ASSOCIATION, INC., Appellee
Appellant, Transamerica Corp ("Transamerica"), appeals the trial court's orders granting Braes Woods Condo Association, Inc.'s ("Braes Woods") motion for summary judgment and motion to show authority. We affirm.
BACKGROUND
Appellant/Plaintiff Transamerica filed suit against Defendant/Appellee Braes Woods. Transamerica pleaded that Yigal I. Bosch ("Bosch") (1) was its former President, (2) owned at least three properties managed by Braes Woods, and (3) died intestate on January 29, 2015. The probate court appointed David Bash ("Bash") (son of Bosch) administrator of Bosch's estate. Bash allegedly learned Braes Woods rented out some of Transamerica's condos without its (the owner's) effective consent and had collected approximately $60,000 in rent from unauthorized tenants.
Transamerica sued Braes Woods in Harris County District Court. In its Original Petition, Transamerica alleged conversion of rental payments, fraud, injury to business reputation, "breach of duty good faith and fair dealing", and sought an accounting as well as both injunctive and declaratory relief. Attached thereto was an unsigned and unnotarized document purporting to be an "affidavit". In it, the "affiant" expressly alleged specific facts that would otherwise arguably tend to prove its entitlement to at least some relief.
Braes Woods countered that Transamerica owed it money for assessments and back rent; alleging non-payment, Braes Woods then initiated foreclosure on three condos. Transamerica sought to enjoin the foreclosure sales. At the April 2, 2016 hearing, the ancillary judge encouraged the parties to discuss the matter and identify alternatives; after doing so, the parties entered into an Agreement under Texas Rule of Civil Procedure 11. Braes Woods' counsel drafted the Rule 11 Agreement, which required (inter alia ):
• Transamerica to timely pay the March and April assessments;
• Transamerica to timely pay the entire remaining balance (after offsets and credits) by April 1, 2016;
• Transamerica to post a $2,000 bond; and
• "p – will produce any offsets or credits by March 16, 2016."
Transamerica's only compliance was the March payment. Braes Woods sold the condos in May 2016. On June 28, 2016, Braes Woods filed a motion for summary judgment based on Transamerica's breach of the Rule 11 Agreement.
On August 22, 2016, the trial court held a hearing on Braes Woods' motion for summary judgment based on the alleged violation of the Rule 11 Agreement and granted the motion. The record contains (1) emails from Transamerica's counsel to Braes Woods' counsel repeatedly seeking records reflecting the credits and offsets (albeit without a specific due date) and (2) responses (after the Rule 11 Agreement allegedly had been breached) affirming Braes Woods "had no issue" providing an accounting. The only discovery conducted by the parties was a single Request for Disclosure.
Such a request is not a request for production; one email from Transamerica's counsel even specifically stated, "If you need for us to serve DISCOVERY to obtain this information [concerning credits and offsets], then we shall do so." (capitalization in the original).
Following the grant of summary judgment, Braes Woods filed a verified plea to the jurisdiction and verified motion to show authority on September 8, 2016. In the plea to the jurisdiction, Braes Woods alleged Transamerica had forfeited its charter and therefore lacked standing to sue. In its consolidated response, Transamerica argued its corporate forfeiture meant (inter alia ) the court's previous orders against it were void; it did not respond to Braes Woods' motion to show authority.
The court held a hearing on October 3, 2016, and pressed Transamerica's counsel as to why he did not respond to the motion to show authority; Transamerica's counsel insisted a response to said motion was unnecessary as Braes Woods had discovered and presented the (presumably and previously unknown) forfeiture of its charter. Transamerica insisted subject matter jurisdiction was lacking and therefore the trial court's previous orders were void. At the end of the hearing, the trial court granted Braes Woods' motion to show authority, declined to address subject matter jurisdiction, dismissed Transamerica's counsel, and orally struck Transamerica's pleadings (but did not include the language striking the pleadings or dismissing counsel in the final written order).
Transamerica filed a "Motion to Set Aside \ [sic] Reconsider Partial Summary Judgment; to Abate and\or for New Trial" in which it argued (inter alia ) the matter was void in its entirety because the trial court lacked subject matter jurisdiction.
ANALYSIS
Transamerica argues in its first issue that the trial court's orders granting Braes Woods' motion for summary judgment and motion to show authority are void because the trial court lacked subject matter jurisdiction. In that regard, Transamerica argues Braes Woods judicially admitted Transamerica lacked capacity to sue or be sued in this case because it forfeited its corporate charter; therefore, any orders signed by the trial court are allegedly void.
We begin by addressing Transamerica's challenge to the trial court's order granting Braes Woods' motion to show authority. Braes Woods filed a plea to the jurisdiction and a motion to show authority in which it challenged Transamerica's capacity to sue Braes Woods and asked the trial court to dismiss Transamerica's claims. The trial court granted Braes Woods' motion to show authority (apparently agreeing Transamerica lacked capacity to sue Braes Woods) and dismissed Transamerica's claims.
Braes Woods framed the issue in the trial court as one of standing, but the real issue presented (when reading the arguments in the pleading) is Transamerica's lack of capacity to sue.
As a general rule, corporations whose charters have been forfeited and not reinstated can neither sue nor defend themselves in Texas courts. Tex. Tax Code Ann. § 171.252(1) (Vernon 2015); see also Ross Amigos Oil Co. v. State , 134 Tex. 626, 138 S.W.2d 798, 800 (1940). But see Vanscot Concrete Co. v. Bailey , 853 S.W.2d 525, 526-527 (Tex. 1993) (reversing the court of appeals and holding corporations that have "ceased to exist" may appeal a trial court's decisions against it).
At the time it filed suit, Transamerica had forfeited its corporate charter due to nonpayment of taxes. Therefore, it lacked capacity to sue. See Tex. Tax Code Ann. § 171.252(1) ; Ross Amigos Oil Co. , 138 S.W.2d at 800 ; see also El T. Mexican Rests., Inc. v. Bacon , 921 S.W.2d 247, 250 (Tex. App.—Houston [1st Dist.] 1995, writ denied). Stated simply, Transamerica lacked the "legal authority to act", particularly in Texas' courts. See Coastal Liquids Transp., L.P. v. Harris Cty. Appraisal Dist. , 46 S.W.3d 880, 884 (Tex. 2001) ; see also Harris Cty. Emergency Servs. Dist. No. 2 v. Harris Cty. Appraisal Dist. , 132 S.W.3d 456, 460 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) and Adeleye v. Driscal , 544 S.W.3d 467, 474 (Tex. App.—Houston [14th Dist.] 2018, no pet.). Despite this incapacity, it nonetheless attempted to sue Braes Woods in a Texas court.
There is neither evidence nor argument Transamerica remedied this defect at any time.
This lack of capacity (unlike standing) can be waived if it is not challenged in the trial court. See Coastal Liquids Transp., L.P. , 46 S.W.3d at 884 ; Nootsie, Ltd. v. Williamson Cty. Appraisal Dist. , 925 S.W.2d 659, 662 (Tex. 1996). Lack of capacity must be challenged by a verified pleading or it is waived. Nootsie, Ltd. , 925 S.W.2d at 662 (citing Tex. R. Civ. P. 93) ; Bacon , 921 S.W.2d at 250 (citing Tex. R. Civ. P. 93 and Bluebonnet Farms, Inc. v. Gibraltar Sav. Ass'n , 618 S.W.2d 81, 83-85 (Tex. Civ. App.—Houston [1st Dist.] 1980, writ ref'd n.r.e.) ); see also Kriegel v. Scott , 439 S.W.2d 445, 446 (Tex. Civ. App.—Houston [14th Dist.] 1969, writ ref'd n.r.e.). Here, Braes Woods verified the facts contained in its plea to the jurisdiction. Therefore, Braes Woods did not waive its challenge to Transamerica's lack of capacity and instead properly presented this dispositive issue to the trial court. No party has argued the presentment was untimely, Transamerica both urged the trial court to rule on this issue below and reiterated its argument here, and there is no evidence Transamerica's incapacity was ever corrected. The parties seemingly agree that Transamerica lacked capacity to sue and the "legal authority to act" in Texas courts. See Coastal Liquids Transp., L.P. , 46 S.W.3d at 884 ; see also Harris Cty. Emergency Servs. Dist. No. 2 , 132 S.W.3d at 460. The trial court agreed that Transamerica lacked capacity to sue Braes Woods and granted Braes Woods' motion to show authority. The trial court properly signed the order granting Braes Woods' motion, and the order is not void. Therefore, we reject Transamerica's argument that the order is void.
We next address Transamerica's contention that the trial court's order granting Braes Woods' motion for summary judgment on its counterclaim for breach of the Rule 11 Agreement is void because Transamerica lacked the capacity to enter into a contract and to sue or be sued. Transamerica could have entered into a valid contract "because the law does not expressly declare that contracts made by a corporation whose right to do business has been forfeited are void." Ross Amigos Oil Co. , 138 S.W.2d at 800.
Further, we are not persuaded by Transamerica's argument that the trial court's order granting summary judgment is void due to Transamerica's lack of capacity. The record shows Transamerica's lack of capacity was not brought up in the trial court until after summary judgment regarding the breach of the Rule 11 Agreement. A challenge to a party's capacity to bring suit must be raised by a verified pleading in the trial court to preserve the issue for review. Tandan v. Affordable Power, L.P. , 377 S.W.3d 889, 893 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (citing Tex. R. Civ. P. 93(1), (2) ). No argument regarding Transamerica's lack of capacity was made in the trial court prior to the grant of summary judgment concerning the breach of the Rule 11 Agreement. Failure to raise Transamerica's lack of capacity waived the issue for appeal. See Nootsie , 925 S.W.2d at 662. Therefore, the trial court's order granting summary judgment is not void.
Finally, Transamerica argues that, even if we conclude the summary judgment and the underlying Rule 11 Agreement are not void due to a lack of capacity, the trial court erroneously granted summary judgment because Braes Woods breached the Rule 11 Agreement when it refused "to cooperate so that the offsets and credits could be determined" and made Transamerica's performance under the Rule 11 Agreement "impossible." Transamerica also argues that "the award of purported deficiency and attorney fees" is "wrong as a matter of law" because (1) Braes Woods in its "writings explicitly states that there was an ‘excess funds’ [sic] post the wrongful foreclosure"; and (2) a review of the record shows the alleged deficiency is "not mathematical[ly] accurate."
Rule 11 agreements are contracts relating to litigation, and the Texas Supreme Court has construed them under the same rules as a contract. Trudy's Tex. Star, Inc. v. City of Austin , 307 S.W.3d 894, 914 (Tex. App.—Austin 2010, no pet.). We do not give a Rule 11 agreement greater effect than the parties intended. Shamrock Psychiatric Clinic, P.A. v. Tex. Dep't of Health & Human Servs. , 540 S.W.3d 553, 560-561 (Tex. 2018) (citing Austin v. Austin , 603 S.W.2d 204, 207 (Tex. 1980) ). If a contract can be given a certain or definite legal meaning or interpretation, it is not ambiguous, and we construe it as a matter of law. Id. (citing Coker v. Coker , 650 S.W.2d 391, 393 (Tex. 1983) ). To be effective, a Rule 11 agreement must consist of "a written memorandum which is complete within itself in every material detail, and which contains all of the essential elements of the agreement." Padilla v. LaFrance , 907 S.W.2d 454, 460 (Tex. 1995) (quoting Cohen v. McCutchin , 565 S.W.2d 230, 232 (Tex. 1978) ).
On the face of the Rule 11 Agreement, there is no evidence of Transamerica's claim that Braes Woods was required to complete performance of any kind, let alone to cooperate by issuing an accounting of offsets and credits. The Rule 11 Agreement contemplates that "p" (Plaintiff, here Transamerica) "will produce any offsets or credits by March 16, 2016". The language on the face of the Rule 11 Agreement is directly in conflict with Transamerica's argument herein. We presume that two attorneys engaged in litigation are sophisticated enough to understand the contract terms to which they are binding their clients when signing a Rule 11 Agreement. Furthermore, as a matter of law, the evidence presented to the trial court supports the damages award in the order granting summary judgment, and Transamerica did not (at the time of the hearing or thereafter) produce any proof of credits that may have offset that award. The trial court only granted summary judgment on Braes Woods' breach of the Rule 11 Agreement counterclaim and left Transamerica's additional claims intact so that it could potentially recover if it later gained proof of Braes Woods' alleged wrongdoing.
We overrule Transamerica's issues.
CONCLUSION
We affirm the trial court's orders.
( Frost, C.J., dissenting).
DISSENTING OPINION
Kem Thompson Frost, Chief Justice
Appellee/defendant Braes Woods Condominium Association, Inc. filed a motion to show authority under Texas Rule of Civil Procedure 12, asserting that attorney James Okorafor lacked authority to prosecute this suit on behalf of whichever Transamerica entity is the plaintiff in this case. The trial court granted the Rule 12 motion and struck the plaintiff's pleadings. James Okorafor attempted to perfect appeal and prosecute this appeal on behalf of various Transamerica entities. No purported appellant in this case has assigned error or presented argument challenging the trial court's Rule 12 ruling; therefore, under binding precedent, this court must dismiss this appeal for lack of jurisdiction. Because it does not, I respectfully dissent.
Trial Court Pleadings
James Okorafor filed the original petition that started this case in the trial court. In that pleading, the plaintiff is identified as "TRANSAMERICA CORPORATION OF HOUSTON, INC. {TRANSCORP} acting by and through its Administrator, MR. DAVID BASH" and also as "TRANSAMERICA CORPORATION OF HOUSTON, INC. {TRANSCORP}." In the style of the petition and in other documents filed in the trial court, such as an agreement under Texas Rule of Civil Procedure 11, the plaintiff is identified as "TRANSAMERICA CORP." In no document filed in the trial court does a party identify the plaintiff as "Houston Transamerica Corp."
Braes Woods filed a counterclaim seeking to enforce a Rule 11 agreement James Okorafor signed as counsel for the plaintiff. Braes Woods's counsel also signed the agreement on behalf of Braes Woods. The trial court granted a partial summary judgment in favor of Braes Woods on its counterclaim, awarding Braes Woods $2,694.16, plus attorney's fees and costs, against the "Plaintiff." Braes Woods later filed a "Plea to the Jurisdiction and Motion to Show Authority." In the plea to the jurisdiction, Braes Woods asserted that the trial court lacked subject-matter jurisdiction over the case because (1) the plaintiff has no standing to bring suit against Braes Woods; (2) no legal entity named "TRANSAMERICA CORPORATION OF HOUSTON" exists in Texas or is registered to do business in Texas; (3) the two Texas legal entities that have been affiliated with Yigal Bosch (David Bash's father) — "HOUSTON TRANSAMERICA CORP." and "TRANSAMERICA OF HOUSTON OIL AND GAS COMPANY, LLC" (hereinafter "the Bosch Entities") involuntarily forfeited their charter or certificate through the Texas Secretary of State; and (4) to the extent that one of the Bosch Entities is the correct plaintiff in this case, Tax Code section 171.252 bars this suit by operation of law.
The Trial Court's Rule 12 Determination
In the motion to show authority, Braes Woods asserted that attorney James Okorafor lacked authority to prosecute this suit on behalf of whichever Transamerica entity is the plaintiff in this case. Braes Woods asserted that the plaintiff is a "non-existent entity" or a "forfeited entity" purporting to bring this suit at the direction of David Bash, who does not purport to be an officer, director, shareholder, or owner of either of the Bosch Entities and who does not appear in the chain of title to the properties made the subject of this suit. Presuming for the sake of argument that David Bash retained Okorafor, Braes Woods asserted that (1) Bash has provided no proof that he holds any position of authority in any Transamerica entity; and (2) no individual affiliated with any Transamerica entity with the authority to retain an attorney has retained James Okorafor to prosecute this suit on behalf of any Transamerica entity. Under Rule 12, Braes Woods asked the trial court to cite James Okorafor to appear before the court to show his authority to prosecute this case.
See Tex. R. Civ. P. 12.
Under Rule 12, a party in a suit pending in a Texas court may, by sworn motion stating that the party believes the suit is being prosecuted without authority, cause the opposing attorney to be cited to appear before the court and show the attorney's authority to act. At the hearing on the Rule 12 motion, the challenged attorney bears the burden of proving sufficient authority to prosecute the suit on behalf of the opposing party. If the attorney fails to show this authority, the trial court must refuse to permit the attorney to appear in the case and must strike the pleadings if no person who is authorized to prosecute appears.
Id.
Id.
Id.
After a hearing at which James Okorafor did not show his authority to prosecute this suit on behalf of any Transamerica party, the trial court granted the motion to show authority under Rule 12 and declined to rule on the plea to the jurisdiction. By granting the Rule 12 motion, the trial court necessarily concluded that James Okorafor lacked authority to prosecute this case on the plaintiff's behalf. The trial court struck the pleadings James Okorafor filed.
Lack of Appellate Jurisdiction
James Okorafor signed a notice of appeal, purporting to perfect appeal on behalf of "PLAINTIFF, TRANSAMERICA CORPORATION." He signed and filed an appellant's brief in this court, in which he sometimes states that the appellant is "Transamerica Corporation," and sometimes states that the appellant is "Houston Transamerica Corp." Under binding precedent, if a trial court determines that an attorney lacks authority to represent a party to the suit, and if the attorney purports to perfect an appeal on the party's behalf but fails to show that the trial court erred in making this determination, then this court lacks jurisdiction over the appeal.
See Bosch v. Harris County , No. 14-13-01125-CV, 2015 WL 971317, at *3–4 (Tex. App.—Houston [14th Dist.] Feb. 26, 2015, no pet.) (mem. op.).
In the appellant's brief filed in this court, no error is assigned as to the trial court's Rule 12 determination, nor is any argument presented challenging this ruling. Even if the trial court's Rule 12 determination had been challenged, the trial court did not err in its Rule 12 determination. Thus, under binding precedent this court should dismiss the appeal for lack of jurisdiction.
See id.
See id.
The majority asserts that when the appellant, "Transamerica Corp.," filed this lawsuit, that entity's corporate charter had been forfeited due to nonpayment of taxes. No evidence in our record shows that the charter or certificate of either "Transamerica Corp.," or "Transamerica Corporation of Houston, Inc." was forfeited or that the Texas Secretary of State declared the charter or certificate of either of these entities was forfeited.
Ante at 734, 736.
The majority states that "[t]he trial court agreed that Transamerica lacked capacity to sue Braes Woods and granted Braes Woods'[s] motion to show authority." The majority indicates that Braes Woods asserted in its motion to show authority that Transamerica lacked capacity due to the forfeiture of the plaintiff's corporate charter. But, in its motion to show authority, Braes Woods did not assert that the plaintiff lacked capacity or standing based on any forfeiture of the plaintiff's corporate charter. Thus, the majority addresses a lack-of-capacity issue on which the trial court did not rule and that is not before this court.
Ante at 736–37. The majority similarly states that "[t]he trial court granted Braes Woods' motion to show authority (apparently agreeing Transamerica lacked capacity to sue Braes Woods) and dismissed Transamerica's claims." Ante at 736.
See ante at 735–38.
Because the appellant has not shown that the trial court erred in granting the motion to show authority, under binding precedent this court should dismiss for lack of appellate jurisdiction without addressing the merits of the appeal.
See Bosch , 2015 WL 971317, at *3–4.