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BP Automotive LP v. RLJ-McLarty-Landers Automotive Group

Court of Appeals of Texas, Sixth District, Texarkana

March 2, 2017

BP AUTOMOTIVE LP D/B/A BOSSIER DODGE, Appellant
v.
RLJ-MCLARTY-LANDERS AUTOMOTIVE GROUP, Appellee

          Submitted: January 18, 2017

          On Appeal from the 87th District Court Freestone County, Texas Trial Court No. 10-030-B-1

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

          MEMORANDUM OPINION

          Ralph K. Burgess Justice

         BP Automotive LP d/b/a Bossier Dodge (Automotive) sued RLJ-McLarty-Landers Automotive Group (RLJ) for tortious interference with a franchise agreement, interference with prospective business relations, unfair competition by misappropriation, quantum meruit, unjust enrichment, fraud, and civil conspiracy. RLJ filed a motion for summary judgment, claiming it lacked the legal capacity to be sued. The trial court agreed and granted RLJ summary judgment. Automotive appeals, claiming (1) RLJ waived the right to assert absence of legal capacity, (2) RLJ did not establish entitlement to summary judgment as a matter of law, and (3) the trial court erred in implicitly denying RLJ's motion for a continuance of the summary judgment.

         Although RLJ did not waive its right to assert the absence of legal capacity, RLJ failed to prove its entitlement to summary judgment as a matter of law. We, therefore, reverse the trial court's summary judgment order and remand to the trial court for further proceedings.

         I. Background

         In 2010, Automotive sued RML Waxahachie Dodge, LLC (Waxahachie Dodge), RML Waxahachie Ford, LLC, (Waxahachie Ford) RML Waxahachie GMC, LLC (Waxahachie GMC), RML-McLarty-Landers Automotive Holdings, LLC (RML), and RLJ-McLarty-Landers Automotive Group (RLJ) in the 87th Judicial District Court of Freestone County, [1] claiming that Waxahachie Dodge breached an asset purchase agreement between it and Automotive and that all defendants tortiously interfered with Automotive's franchise agreements with Chrysler and with prospective business and contractual relations.[2] Automotive also claimed that the various defendants committed civil conspiracy and were guilty of unfair competition by misappropriation.[3] Automotive alleged that RLJ "is a partnership with offices at 425 West Capitol, Suite 3810, Little Rock, Arkansas 72201, " and further alleged that "[defendants are all part of an automotive dealership conglomerate known as the RLJ-McLarty-Landers Automotive Group, which is run by Arkansas car dealer Steve Landers. . . . The principals of this Landers partnership group are Landers himself, Robert Johnson . . . and Thomas 'Mack' McLarty. . . ." Third party defendants Scott Bossier and W. Randy Pretzer also filed counterclaims against all defendants, including RLJ.[4]

         Defendants RML, Waxahachie Ford, Waxahachie Dodge, Waxahachie GMC, and RLJ jointly filed a general denial answer to the lawsuit and asserted what were termed "affirmative defenses."[5] RLJ also filed a verified denial of its existence as a separate legal entity:

Defendant also specifically denies that the named Defendant "RLJ-McLarty-Landers Automotive Group" is a separate entity. The Defendants have, in the past, referred to RLJ-McLarty-Landers Automotive Holdings, LLC as "RLJ-McLarty-Landers Automotive Group" to reflect the separate auto dealership entities in which RLJ-McLarty-Landers Automotive Holdings, LLC holds an ownership interest, but it is nothing more than an informal reference to several limited liability companies with a common member.

         Significantly, this verified answer was filed on October 7, 2010.

         Each of the defendants also filed a verified answer to Automotive and Pretzer's counterclaims specifically denying RLJ's status as a partnership or separate entity and containing the same language included in RLJ's October 2010 verified answer. Those verified answers were filed in September 2010. Thereafter, each of the defendants filed verified answers to Automotive's amended petition in October 2010, again specifically denying RLJ's status as a partnership or legal entity.

         Also in October, 2010, RML, Waxahachie Ford, Waxahachie GMC, and Waxahachie Dodge (the Answering Defendants) responded to Automotive's discovery requests. In a footnote to their collective response, the Answering Defendants explained that each "filed a verified denial denying that [RLJ] is a separate legal entity with the capacity to be sued. No answers to this discovery request are on behalf of the party named [RLJ]."[6] Automotive then filed a motion to compel discovery in which it complained, among other things, that "[RLJ] has unreasonably refused to respond to any discovery, despite it being a valid party to this case and despite it having already answered the Original Petition."

         The Answering Defendants filed a motion for protective order, seeking to have the discovery purportedly served on RLJ quashed and to prohibit any future discovery against RLJ. The substance of the argument-made in January 2011-is almost identical to the argument set forth in the motion for summary judgment filed by RLJ in 2015. After a hearing on Automotive's motion to compel discovery, the trial court entered a protective order in February 2011 precluding any discovery on RLJ and denied Automotive's motion as to any requested relief from RLJ.

         In March 2011, the trial court granted the summary judgment motions of defendants Waxahachie Dodge, Waxahachie Ford, Waxahachie GMC, and RML. Those defendants thereafter filed a motion to sever Plaintiffs' claims against RLJ, which motion was granted by the trial court. After the severance, RLJ filed a traditional and no-evidence motion for summary judgment in November 2011, claiming that the trial court's summary judgment against the severed defendants applied with equal force and effect to it.[7] RLJ specifically stated that, by filing the motion, it did not admit that it is a partnership or entity with the capacity to be sued and that it did not waive any argument that it is not a partnership with the capacity to be sued. The motion otherwise did not mention RLJ's capacity to sue or to be sued. The trial court granted RLJ's traditional motion for summary judgment in December 2011.

         RLJ filed its traditional motion for partial summary judgment in July 2015, asking the court to find that it is not an entity with the capacity to be sued, claiming that it did not exist as a separate legal entity apart from RLJ-McLarty-Landers Automotive Holdings, LLC.[8] Concurrent with the filing of that motion, RLJ filed a verified denial stating that it is not an entity with the capacity to be sued.[9]

         In August 2015, Automotive filed its verified motion for continuance of the summary judgment motion and sought to enlarge the discovery period in order to secure discovery to properly respond to RLJ's motion for summary judgment. Specifically, Automotive requested the opportunity to depose Robert Johnson and Paul Hart, [10] the individuals who executed affidavits in support of RLJ's motion for summary judgment. In May 2016, the trial court entered its "Order Granting Defendants' Traditional Motion for Partial Summary Judgment Regarding Capacity of [RLJ], "[11] thereby implicitly overruling Automotive's motion for continuance.

         II. RLJ Did Not Waive the Right to Assert Absence of Legal Capacity

         Automotive contends that, because RLJ did not file a verified denial of its legal capacity to be sued until July 2015-over five years after the litigation began-it has waived its right to assert lack of capacity.[12] It therefore contends that, because RLJ waived its capacity claim, the trial court erred in granting summary judgment. We disagree.

         Automotive relies on Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46 (Tex. 2003), in support of this assertion. In that case, however, the court held that a party may waive the argument that an opposing party lacks capacity if it does not raise that issue in the trial court. Id. at 56. Because the issue of capacity was unquestionably raised in the trial court, Sibley does not support Automotive's waiver argument.

         Nevertheless, the law is clear that a party who fails to file a verified denial waives any capacity defense. See Werner v. Colwell, 909 S.W.2d 866, 870 (Tex. 1995) (holding that party who fails to file verified denial waives any complaint of judgment rendered in capacity in which party was sued); W.O.S. Const. Co. v. Hanyard, 684 S.W.2d 675, 676 (Tex. 1985) (in failing to file verified denial, party can be held liable in either capacities in which he was sued).[13] Here, there is no question that RLJ filed a verified denial. We cannot conclude that the verified denial was untimely filed, or that the filing of such denial prejudiced Automotive's rights.

         Bluebonnet Farms, Inc. v. Gibralter Savings Association, 618 S.W.2d 81 (Tex. App.- Houston [1st Dist.] 1980, writ ref'd n.r.e.), addresses the reverse of this issue. In that case, Bluebonnet sued Gibraltar for breach of a loan commitment contract. Id. at 82. Gibraltar filed a general denial answer. Four years later, Gibraltar filed an amended verified answer alleging lack of Bluebonnet's capacity to sue. Id. at 83. Accompanying that answer was a motion for summary judgment in which Gibraltar alleged Bluebonnet had forfeited its corporate charter by failing to pay franchise taxes. Gibraltar further alleged that more than four years had elapsed since the alleged breach of contract and Bluebonnet's loss of corporate status, thus barring Bluebonnet's claim by limitations. Id. The trial court granted the motion for summary judgment. Id.

          The appellate court reversed, finding that Gibraltar had waived its plea in abatement. This decision was based on an implied finding that Bluebonnet was prejudiced by the plea in abatement, because the "shareholders of the corporation could have carried on this litigation and had every right to do so, once the corporation knew that appellee questioned its status." Id. at 84. Basically, Gibraltar's strategy was to wait until limitations ran to file the plea in abatement. The court found that strategy inherently unfair and in derogation of "the purpose for the Texas Rules of Civil Procedure and the special purpose of a plea in abatement, " both of which are designed to aid the speedy disposition of litigation on the merits. Id.

         We are, therefore, called on to examine the equities of the situation to determine whether RLJ's verified plea was timely filed. See Develo-cepts, Inc. v. City of Galveston, 668 S.W.2d 790, 793 (Tex. App-Houston [14th Dist] 1984, no pet.) (finding that plea in abatement filed two and one-half years after suit was filed was not waived because parties conducted discovery which provided information necessary to urge plea and defect could not have been cured with amended pleadings) (citing Bluebonnet Farms, 618 S.W.2d at 83).

         An examination of the equities in this context includes consideration not only of the passage of time, but also the actions of the party seeking to rely on the plea in abatement or verified plea and whether any delay in the filing of the plea was harmful or prejudicial to the opposing party. See In re Luby's Cafeterias, Inc., 979 S.W.2d 813, 817-18 (Tex. App-Houston [14th Dist.] 1998, no pet.); Develo-cepts, Inc., 668 S.W.2d at 793; Bluebonnet Farms, 618 S.W.2d at 84; Howell v. Mauzy, 899 S.W.2d 690, 698 (Tex. App-Austin 1994, writ denied.) (plea seeking abatement of lawsuit properly denied when plaintiffs in first-filed suit affirmatively represented to court in second-filed suit that it had jurisdiction).

         RLJ filed a verified plea alleging its lack of capacity in 2010. Thereafter, in response to Automotive's amended petition in October 2010, each of the defendants filed a verified plea alleging RLJ's lack of capacity. The opening paragraph of RLJ's verified answer avers that "RLJ-McLarty-Landers Automotive Holdings, LLC, also incorrectly listed as a separate defendant under the name 'RLJ-McLarty-Landers Automotive Group, ' . . . submits the following Answer. . . ."

         In addition to those verified answers, which specifically denied RLJ's capacity to be sued, Automotive was advised that RLJ would not answer discovery because it was not a legal entity. The trial court agreed with that position and entered a protective order in early 2011 precluding Automotive from propounding any further discovery on RLJ. Finally, after the case was remanded to the trial court, RLJ filed yet another verified denial stating that it was not an entity with the capacity to be sued, a position it had consistently maintained since 2010.

         Accordingly, Automotive was on notice from 2010 forward that RLJ and the remaining defendants claimed that RLJ lacked the legal capacity to be sued. RLJ filed three verified pleas stating as much-two in 2010 and a third in 2015. Automotive, therefore, cannot claim that it was prejudiced by the passage of time or by any delay by RLJ in filing a verified plea denying the legal capacity to be sued. This is especially true in light of the trial court's 2011 protective order.

         Automotive further contends, though, that RLJ waived the right to assert lack of legal capacity because RLJ already let the issue of its capacity to sue and be sued go to final judgment and to an appeal. Although it does not elaborate on this statement, it apparently is based on the fact that RLJ filed a traditional and no-evidence motion for summary judgment after the severance in November 2011 on the basis of collateral estoppel. The issue of capacity was not raised in that motion. The trial court granted the motion for summary judgment in December 2011. Automotive again relies on Sibley in support of this claim. Sibley is not on point and merely holds that "any challenge that [appellant's] failure to file an assumed name certificate precludes its suit was waived because it was not properly raised in the trial court." Sibley, 111 S.W.3d at 49.

         Here, the issue of capacity was raised in the trial court. The question of whether this issue was waived by the filing of a motion for summary judgment on the issue of collateral estoppel was not briefed. See Tex. R. App. P. 38.1. Moreover, RLJ specifically stated that, by filing the motion for summary judgment, it did not admit that it is a partnership or entity with the capacity to be sued and that it did not waive any argument that it is not a partnership with the capacity to be sued. We overrule this point of error.

         III. RLJ Failed to Establish Entitlement to Summary Judgment as a Matter of Law

         A. Summary Judgment Standard of Review

         We conduct a de novo review of an order granting a traditional motion for summary judgment. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003); Miers v. Tex. A&M Univ. Sys. Health Sci. Ctr., 311 S.W.3d 577, 578 (Tex. App-Waco 2009, no pet). In our review, we deem as true all evidence which is favorable to the nonmovant, indulge every reasonable inference to be drawn from the evidence, and resolve any doubts in the nonmovant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When the trial court does not specify the basis for its ruling, we must affirm a summary judgment if any of the grounds on which judgment is sought are meritorious. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013).

         To be entitled to traditional summary judgment, a movant must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). Once the movant produces evidence entitling it to summary judgment, the burden shifts to the nonmovant to present evidence raising a genuine issue of material fact. Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996). A defendant who conclusively negates a single essential element of a cause of action is entitled to summary judgment on that claim. Frost Nat l Bank v. Fernandez, 315 S.W.3d 494, 508-09 (Tex. 2010).

         B. Analysis

         RLJ's motion for summary judgment attached certain evidence in support of its lack of capacity claim. That evidence included each of the above-described verified denials, as well as the affidavits of Robert Johnson, one of the purported participants in the partnership, and Paul Hart, CEO of RLJ McLarty-Landers-Automotive Holdings, LLC.[14] The affidavits attempt to explain certain deposition testimony given by the affiants which supports Automotive's claim that RLJ is a legal entity. Beyond that, Hart and Johnson both testified that:

(1) "RLJ-McLarty-Landers Automotive Group" does not maintain a separate set of books and records, does not have its own accounts, and does not file separate tax returns.
(2) "RLJ-McLarty-Landers Automotive Group" does not exist as a separate legal entity apart from RLJ-McLarty-Landers Automotive Holdings, LLC.

         Hart also testified,

"RLJ-McLarty-Landers Automotive Group" is not a separate entity from RLJ-McLarty-Landers Automotive Holdings, LLC. Some officers and directors of RLJ-McLarty-Landers Automotive Holdings, LLC, including myself, have, in the past, internally referred to RLJ-McLarty-Landers Automotive Holdings, LLC as "RLJ-McLarty-Landers Automotive Group" to reflect the separate auto dealership entities in which RLJ-McLarty-Landers Automotive Holdings, LLC holds an ownership interest, but it is nothing more than an informal reference to several limited liability companies with a common member.

         Despite this evidence, Automotive claims that summary judgment should have been denied because genuine fact issues exist regarding the type and the scope of RLJ's "corporate structure." This argument is based on Automotive's contention that RLJ's previous admissions, testimony, and documentary evidence show that it is a partnership and was, therefore, a proper party to Automotive's lawsuit. Automotive contends that this evidence-outlined below-raises a genuine issue of material fact as to RLJ's status under the Arkansas Uniform Partnership Act (Act).[15]

         1. RLJ's Answer to Automotive's Adversary Complaint in the Bankruptcy Court

         Automotive contends that RLJ's answer to the complaint in the bankruptcy court raises a genuine issue of material fact regarding RLJ's existence as a partnership sufficient to defeat summary judgment. That answer, unlike the answer filed in state court, includes a specific admission of partnership: "The Non-Contracting Defendants admit that RLJ-McLarty-Landers Automotive Group is an Arkansas based partnership."[16]

         "Admissions in trial pleadings are judicial admissions in the case in which the pleadings are filed; the facts judicially admitted require no proof and preclude the introduction of evidence to the contrary." In re A.E.A., 406 S.W.3d 404, 410 (Tex. App -Fort Worth 2013, no pet.) (emphasis added); see also Hous. First Am. Sav. v. Musick, 650 S.W.2d 764, 767 (Tex. 1983). A judicial admission is conclusive upon the party making it, relieves the opposing party's burden of proving the admitted fact, and bars the admitting party from disputing it. A.E.A., 406 S.W.3d at 410 (citing Hennigan v. IP. Petroleum Co., 858 S.W.2d 371, 372 (Tex. 1993)).

         Conversely, "[p]leadings in another case that are inconsistent with a party's position in a present case, unlike judicial admissions, are not always conclusive on the admitter, but may be considered evidence which the admitter may explain, contradict, or deny." Louviere v. Hearst Corp., 269 S.W.3d 750, 754 (Tex. App-Beaumont 2008, no pet.); see also Velco Chems., Inc. v. Polimeri Europa Am., Inc., No. 14-03-00395-CV, 2004 WL 1965643, at *4-5 (Tex. App - Houston [14th Dist] Sept. 7, 2004, no pet.) (mem. op.). Although they are generally not conclusive, Cameron Cty. v. Velasquez, 668 S.W.2d 776, 782-83 (Tex. App-Corpus Christi 1984, writ ref d n.r.e.) (op. on reh'g) (citations omitted), [17] such pleadings are treated as "some evidence." Daimler-Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 718 (Tex. App-Austin 2000, pet. dism'd w.o.j.).

         Here, we need not decide whether RLJ's admission of partnership status in its answer to the complaint in the bankruptcy court is a judicial admission, or merely a quasi-admission. Regardless of the category into which this admission falls, it constitutes some evidence of RLJ's partnership status.[18]

         2. Paul Hart's Testimony

         According to his affidavit filed in support of RLJ's motion for summary judgment, Hart is the Chief Financial Officer of RLJ-McLarty-Landers Automotive Holdings, LLC.[19] In March 2010, Hart gave deposition testimony in connection with the adversary case filed in the bankruptcy matter.[20] Automotive relies on the following testimony given by Hart in that deposition:

Q. The RLJ-McLarty-Landers Automotive Group of which you are the CFO is a partnership, isn't it?
A. It is.
Q. Between the RLJ companies. Correct?
A. Yes.
Q. And McLarty-Landers Automotive. Right?
A. Correct.
Q. And the RLJ companies are associated with someone named Robert Johnson. ...

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