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BP Automotive LP v. RML Waxahachie Dodge, LLC

Court of Appeals of Texas, Sixth District, Texarkana

March 2, 2017

BP AUTOMOTIVE LP D/B/A BOSSIER DODGE, Appellant
v.
RML WAXAHACHIE DODGE, LLC, RLJ-MCLARTY-LANDERS AUTOMOTIVE HOLDINGS, LLC, RML WAXAHACHIE FORD, LLC, AND RML WAXAHACHIE GMC, LLC, Appellees

          Submitted: January 18, 2017

          On Appeal from the 87th District Court Freestone County, Texas Trial Court No. 10-030-B

          Before Morriss, C.J., Moseley and Burgess, JJ.

          OPINION

          Bailey C. Moseley Justice

         This is an appeal of a suit brought by BP Automotive LP d/b/a Bossier Dodge (Automotive) against RML Waxahachie Dodge, LLC, RLJ-McLarty-Landers Automotive Holdings, LLC, RML Waxahachie Ford, LLC, and RML Waxahachie GMC, LLC. Because a great deal of the holdings in this opinion depend on the actions of previous courts litigating controversies between these parties (and related entities), it is worthwhile to recite the prior history of the litigation between them. The previous actions of this case involving this controversy have been partially litigated in several hearings in the United States Bankruptcy Court for the Western District of Texas, multiple appeals of the findings in bankruptcy court to federal district court, additional appeals of the federal district court rulings to the United States Fifth Circuit Court of Appeals, a suit filed in the district court of Freestone County, Texas, which resulted in the entry of summary judgment, an appeal of the district court judgment, which was heard by Texas' First Court of Appeals, the entry of additional motions for summary judgment by the Freestone County district court, and now an appeal to this Court.[1] In this case, Automotive appeals the trial court's partial grant of Appellees'[2]second traditional motion for summary judgment (Second MSJ), and the trial court's grant of Appellees' third and fourth traditional motions for summary judgment (Third MSJ and Fourth MSJ, respectively). That portion of the Second MSJ granted by the trial court asserted Appellees' entitlement to judgment as a matter of law on Automotive's breach of contract, quantum meruit, unjust enrichment, and fraud claims under the theory of collateral estoppel, or issue preclusion, based on the findings and judgments of the federal bankruptcy court in favor of Appellees on similar causes of action asserted by BPRE, L.P. (BPRE), whose ownership is identical to Automotive's.[3] The Third MSJ asserted Appellees' entitlement to summary judgment on Automotive's tortious interference with prospective business relations and unfair competition by misappropriation claims on the same basis. In their Fourth MSJ, Appellees asserted their right to judgment as a matter of law on Automotive's tortious interference with prospective business relations claim based on the alternative theory that there were no genuine issues of material fact that (1) there were no prospective business relations and (2) any damages suffered by Automotive were not caused by Appellees.

         In this appeal, Automotive asserts that the trial court erred in granting summary judgment because (1) collateral estoppel does not apply in this case, (2) the First Court of Appeals has previously held that more than a scintilla of evidence supported Automotive's claims for tortious interference with prospective business relations and unfair competition by misappropriation, and (3) Appellees' Fourth MSJ was filed after the trial court's submission deadline and Automotive did not have notice of the hearing, thereby denying it an opportunity to respond.[4] As explained below, we affirm the trial court's summary judgment on Automotive's breach of contract, unfair competition by misappropriation, and fraud claims, and we reverse the trial court's summary judgment on Automotive's quantum meruit, unjust enrichment, and tortious interference with prospective business relations claims.

         I. Background

         A. Factual Overview[5]

         On March 20, 2009, Automotive and RML Dodge entered into an Asset Purchase Agreement (the APA) whereby RML Dodge agreed to purchase the assets of Automotive, including its franchise from Chrysler, for $180, 100.00. One condition of closing on the APA was that RML Dodge would enter into a lease with BPRE for the land and improvements on which Automotive operated its dealership. That lease was signed by the parties, but was not to take effect until the closing of the APA. Before RML Dodge could secure the approval of Chrysler Motors, LLC (Old Chrysler), as required by the APA, Old Chrysler filed for bankruptcy protection on April 30, 2009. Under the terms of the APA, Automotive was required to continue to conduct its business in the ordinary course of business until closing. Nevertheless, on May 1, 2009, Automotive closed its dealership, and in mid-May 2009, Old Chrysler rejected its franchise in bankruptcy. Also under its terms, the APA could not close until RML Dodge secured all of the necessary permits and licenses, which included securing a franchise from Old Chrysler and a license from the Texas Motor Vehicle Commission (TMVC). Upon filing for bankruptcy protection, Old Chrysler stopped issuing franchises. Evidence of a franchise was required to make a license application to the TMVC. As a result, the APA never closed, and the associated lease never came into effect.

         B. Procedural Overview

         1. Litigation in Federal Court

         Without a lessee for its property, BPRE could not pay its mortgage and, consequently, filed for protection in a Chapter 11 bankruptcy proceeding November 2, 2009. Three weeks later, BPRE and Automotive jointly filed an adversary proceeding in the bankruptcy case against Appellees asserting claims for breach of contract, tortious interference with franchise agreement, tortious interference with prospective business relations, civil conspiracy, unfair competition by misappropriation, breach of lease, quantum meruit, trespass to real property, and unjust enrichment (the adversary proceeding). On January 26, 2010, the bankruptcy court dismissed Automotive and all of its claims without prejudice, finding it was not a proper party since there was not "related to" jurisdiction as to its claims. On that same day, Automotive filed this suit in the district court of Freestone County. The adversary proceeding and the state court action apparently proceeded on parallel courses, with the adversary proceeding going to trial first. BPRE filed its amended adversary complaint March 22, 2010, wherein it reurged all of the original causes of action (except unfair competition by misappropriation) but added causes of action for fraudulent inducement and fraud by nondisclosure.

         On July 15, 2010, Judge Ronald B. King of the bankruptcy court entered twenty-nine findings of fact that had been "fully-adjudicated" by that court and were "binding in the trial of these adversary proceedings" (the King findings). After a trial on the merits, Judge John C. Akard of the bankruptcy court issued his memorandum opinion in which he found against BPRE on all of its causes of action asserted by it in the original adversary complaint. BPRE, L.P., 2010 WL 3270497, at *10-13. After judgment was entered, Akard's decision was appealed to federal district court, where it was affirmed in part and remanded in part for consideration of the fraudulent inducement and fraud by non-disclosure claims asserted in the amended adversary complaint. In re BPRE, LP, 2011 WL 13069405. On remand, Akard held another hearing and entered his unreported memorandum opinion on remand on December 2, 2011, finding against BPRE on its fraud-based claims. Both memorandum opinions[6] by Akard contained fact-findings regarding BPRE's claims, as well as the circumstances surrounding the formation and performance of the APA (the Akard findings). After judgment was entered, the opinion on remand was appealed to the federal district court, where it was affirmed on November 28, 2012.

         The judgment of the district court was appealed to the Fifth Circuit Court of Appeals, where it was vacated and remanded to the district court for further proceedings. In re BP RE, L.P., 735 F.3d 279, 291 (5th Cir. 2013) (the First Appeal). On remand, the federal district court entered its order construing Akard's memorandum opinions as proposed findings of fact and conclusions of law, adopted them, [7] re-entered its prior memorandum opinion and orders as adopting the bankruptcy court's findings and recommendations, and entered judgment that BPRE take nothing on its claims.. That judgment was appealed to the Fifth Circuit, where it was affirmed. In re BPRE, L.P., 599 Fed.Appx. 182, 183-84 (5th Cir. 2015) (per curiam) (the Second Appeal).

         2. Litigation in State Court

         Meanwhile, in the state district court, Automotive filed its amended petition on August 11, 2011. The amended petition's factual allegations are almost identical to the factual allegations contained in BPRE's amended adversary complaint.[8] On August 15, 2011, the state district court granted Appellees' first amended traditional motion for partial summary judgment and no-evidence motion for partial summary judgment and denied Automotive's traditional motion for summary judgment.

         That judgment was appealed and assigned to the Houston First Court of Appeals. The appeal was submitted to the Houston court of appeals after the Fifth Circuit had vacated the bankruptcy judgment in the First Appeal and before the federal district court adopted the bankruptcy court's findings of fact and conclusions of law. BP Auto., L.P. v. RML Waxahachie Dodge, L.L.C., 448 S.W.3d 562, 569 n.3 (Tex. App.-Houston [1st Dist.] 2014, no pet.). The court of appeals reversed Appellees' traditional summary judgment (which was based on the collateral estoppel effect of the judgments of the bankruptcy court) since the Fifth Circuit had vacated those judgments. Id. at 569. However, the court of appeals also noted that after submission of the case, the federal district court had adopted the findings of the bankruptcy court and that nothing precluded Appellees from moving for summary judgment based on the subsequent federal court proceedings after it remanded the case. Id. at 569 n.3. The Houston court went on to affirm the no-evidence summary judgment in regard to Automotive's tortious interference with franchise agreement and civil conspiracy claims and to reverse the no-evidence summary judgment as to the remaining claims. Id. at 570-73.

         A. The State Court and Bankruptcy Court Pleadings

         As noted earlier, the amended petition filed in state court by Automotive is almost identical to the amended adversary complaint filed by BPRE in the adversary proceeding. The allegations made in the "Facts Giving Rise to This Action" section of the amended petition are the same allegations, with only slight variations, as those contained in the "Background" section of the amended adversary complaint. Those allegations, in relevant part, may be summarized as alleging:

1. That RML Dodge and Automotive executed the APA for the purchase of Automotive's assets on March 20, 2009, which provided for a closing date of April 14, 2009, or as soon thereafter as practical.
2. That the parties agreed to use their best efforts to satisfy the conditions of the APA in order to close the APA.
3. That RML Dodge agreed to use its best efforts to obtain all licenses, approvals, authorizations, and consents from third parties and governmental authorities required for consummation of the agreements contained in the APA.
4. That on April 17, RML Dodge had reported to Automotive that Old Chrysler had approved the sale, but Chrysler Financial had not.
5. That Appellees had continued to represent to Automotive that they intended to close the APA through April 29, but Old Chrysler filed for bankruptcy on April 30.
6. That Appellees then delayed closing the APA because they knew that Old Chrysler would reject Automotive's franchise and that New Chrysler would award RML Dodge not only the Chrysler and Dodge franchises previously owned by Automotive, but also the Jeep franchise.

         Both the amended petition and the amended adversary complaint contain a claim for breach of contract-the APA. The amended petition alleges:

By not using its best efforts to close the Asset Purchase Agreement, despite the explicit language that time was of the essence, Defendant RML [Dodge] has breached the Asset Purchase Agreement by failing to close in a timely manner. Defendant RML [Dodge] failed to obtain the consent, authorization and approval of Chrysler within the ten-day inspection period and failed to use its best efforts to satisfy the conditions set forth in the Asset Purchase Agreement.

         The amended adversary complaint breach of contract claim makes an identical allegation, adding that "RML[Dodge] has thus also breached the lease agreement with BPRE that was incorporated into the Asset Purchase Agreement." The amended petition also alleges that RML Dodge chose not to close the APA "due to its concern over Chrysler's financial position and its inside knowledge that Chrysler would award RML [Dodge] the Chrysler, Dodge, and Jeep franchises through the undisclosed bankruptcy proceeding." The amended adversary complaint also included a claim for breach of the lease in which it alleged that RML Dodge breached the lease by taking possession of its premises and failing to pay rent.

In addition, both the amended petition and amended adversary complaint assert claims for tortious interference with prospective business relations. Both pleadings make general allegations of Appellees' intermeddling with Automotive's and BPRE's relationships with their customers and potential customers and that business relationships were prevented by Appellees' tortious acts.

          In the amended petition, Automotive also asserted a claim for unfair competition by misappropriation. Automotive alleges that Appellees misappropriated the franchises and that by misappropriating its franchise, Appellees traded on the goodwill toward the Chrysler brand it had developed through its investment of time, labor, and resources.

         Both the amended petition and amended adversary complaint assert a claim for quantum meruit and unjust enrichment.[9] The amended petition alleges that Appellees used Automotive's telephones and service equipment for maintenance of vehicles from their other dealerships, without paying for their use. The amended adversary complaint alleges that Appellees took possession of Auotmotive's real property and began installing a management system, mowing the grounds, servicing vehicles, and storing items necessary for dealership operations, all without paying rent to BPRE.

         Finally, both the amended petition and amended adversary complaint assert claims for fraud, and for fraudulent inducement and fraud by nondisclosure, respectively. The gravamen of each of those claims is the allegation that Appellees represented to Automotive and BPRE that they would operate only a Chrysler and Dodge dealership on the property, knowing that they intended to operate a Chrysler, Dodge, and Jeep dealership. The amended adversary complaint alleges that Appellees knew that the addition of a Jeep dealership would increase the time required to get approvals from Chrysler and the TMVC. Both Automotive and BPRE allege that they relied on this misrepresentation to their detriment by entering the APA and the associated lease, respectively.

         B. The Akard Findings

         In his first memorandum opinion, Akard set forth the background facts to the dispute in extensive detail. BPRE, LP, 2010 WL 3270497, at *2-9. It is evident from Akard's recitation of the background facts that extensive testimony regarding the negotiations and formation of the APA, as well as of the parties' actions in an effort to close the APA was taken. It is also evident that Bossier and Pretzer, the principals of both Automotive and BPRE, fully participated in the adversary proceeding. Akard also made findings in both his first memorandum opinion and his opinion on remand regarding BPRE's claims. As relevant to this case, these findings included:

1. Regarding BPRE's breach of contract (the APA) and breach of lease claims, the court found that the March lease[10] was an exhibit to the APA and that the two transactions were tied together. The March lease was to become effective (in the terms of the APA "enter into a lease") upon the closing of the APA, which was not to occur until RML Dodge secured the necessary permits, licenses, and a franchise from Chrysler. Although RML Dodge exerted continuous efforts to secure a franchise and a license, it was not able to do so until after March 1, 2010. Since the APA never closed, BPRE had no claim for breach of contract or breach of the March lease. Id. at *10, 12.
2. The court found no evidence to support BPRE's tortious interference with prospective business relations claim. Id. at *11.
3. Regarding BPRE's quantum meruit and unjust enrichment claims, which were based on the Appellees possession and use of BPRE's real property, the court found that the Appellees' payment of utilities and maintenance of the property defeated those claims. Id. at *12-13.
4. Regarding BPRE's fraud in the inducement claim, the court found that the March lease was to become effective upon the closing of the APA, but that the closing of that transaction never occurred because Chrysler filed for bankruptcy, Automotive closed its business on May 1, 2009, and Chrysler cancelled Automotive's franchise. RML Dodge's attempts to close the transaction were prevented by delays in approval by Chrysler and Chrysler Financial. It found no evidence that the approval request to Chrysler included a request for a Jeep dealership, that the approval was delayed because of a request for a Jeep dealership, or that RML Dodge's desire for a Jeep dealership prevented the closing of the APA before Chrysler's bankruptcy.
5. Regarding BPRE's fraud by nondisclosure claim, the court found that RML Dodge did make a representation that it intended only to operate a Chrysler and Dodge dealership and that there was no evidence that RML Dodge delayed the closing of the APA because of efforts to obtain a Jeep franchise.

         As to Automotive's breach of contract claim, Akard did not find whether or not the contract was breached. Id. at *10. He also did not make any findings on the tortious interference with business relations or unfair competition by misappropriation claims insofar as they related to claims held by Automotive. Id. at *11.

         C. The Latest Dispute

         After the federal district court adopted the findings and conclusions of the bankruptcy court and entered its take-nothing judgments against BPRE, Appellees filed their Second MSJ. In their Second MSJ, Appellees asserted that Automotive was collaterally estopped from asserting its breach of APA, quantum meruit, and fraud causes of action because of the findings of the bankruptcy court that were adopted by the federal district court. They also asserted that there was no issue of material fact as to one or more of the elements of Automotive's tortious interference with prospective business relations (tortious interference) and unfair competition by misappropriation claims. The trial court granted Appellees' Second MSJ as to Automotive's breach of APA, quantum meruit, and fraud claims on June 29, 2015.

         On July 6, 2015, Appellees filed their Third MSJ, arguing that Automotive was collaterally estopped from asserting its tortious interference and unfair competition by misappropriation claims by the federal district court's judgment adopting the findings of the bankruptcy court. On July 21, 2015, Appellees sent Automotive notice that their Third MSJ was set for hearing on ...


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