Court of Appeals of Texas, Third District, Austin
Elness Swenson Graham Architects, Inc. Cross-Appellants, Appellant,
RLJ II-C Austin Air, LP; RLJ II-C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC Cross-Appellee, Appellees, RLJ II-C Austin Air, LP; RLJ II-C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC Elness Swenson Graham Architects, Inc.
THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
NO. D-1-GN-10-002325, HONORABLE STEPHEN YELENOSKY, JUDGE
MOTION FOR RECONSIDERATION EN BANC
Chief Justice Rose, Justices Puryear, Pemberton, Goodwin,
Field and Bourland;
Olson Bourland, Justice.
filed a motion for rehearing, motion for reconsideration en
banc, and motion to redesignate our "Memorandum
Opinion" as an "Opinion." We deny RLJ's
motion for rehearing, grant in part and overrule in part
RLJ's motion for reconsideration en banc, and grant
RLJ's motion to redesignate our memorandum opinion as an
opinion. We withdraw our earlier memorandum opinion and
judgment dated January 20, 2017, and substitute the following
opinion and judgment in their place.
Elness Swenson Graham Architects, Inc. (Elness) appeals from
a final judgment in favor of appellees RLJ II-C Austin Air,
LP; RLJ II-C Austin Air Lessee, LP; and RLJ Lodging Fund II
Acquisitions, LLC (collectively, RLJ). RLJ also filed a
cross-appeal against Elness. Elness raises five issues on
appeal, challenging RLJ's right to bring suit for breach
of contract, the trial court's admission of certain
evidence and award of attorney's fees to RLJ, the
propriety of the jury charge, and the sufficiency of the
evidence to support RLJ's damages. RLJ raises two issues
in its cross-appeal, contending that the trial court erred in
applying settlement credits to the damages awarded to RLJ at
trial and in failing to award attorney's fees to RLJ for
its claims against two other defendants with which it
ultimately settled before the end of trial. We will reverse
the trial court's final judgment and render judgment that
RLJ take nothing.
record shows that this case arises from alleged defects in
the design and construction of a hotel near the airport in
Austin. RLJ, the owner of the hotel at the time that the
alleged defects were discovered, filed suit against multiple
defendants involved in the design and construction of the
hotel, alleging that the defendants' work caused the
hotel to have a defective foundation that caused building
movement and further damage. RLJ had previously purchased the
hotel from White Lodging Services Corporation (White
Lodging),  which had previously entered into
contracts with the defendants for development of the hotel.
In the trial court's pre-trial ruling on cross-motions
for summary judgment on the issue of RLJ's capacity to
bring suit as an assignee of the contract between White
Lodging and Elness, the trial court concluded that RLJ had
capacity to bring suit.
on other pre-trial rulings by the trial court and non-suits
filed by RLJ, RLJ's only remaining claims as trial neared
were breach-of-contract claims against three defendants:
Elness, an architectural firm; EBCO General Contractor, Ltd.,
and EBCO/Warrior Management, LLC (collectively, EBCO), a
general contractor; and Terracon Consultants, Inc.
(Terracon), a geotechnical engineering firm. RLJ then entered
into a settlement agreement with Terracon before trial and a
settlement agreement with EBCO during trial. The only
defendant remaining when the case was submitted to the jury
close of trial, the jury found that Elness had "fail[ed]
to comply with the [contract between Elness and White
Lodging] regarding the structural engineering services
required by the contract" and awarded RLJ $785, 000 in
damages. Elness then filed a motion asking the trial court to
apply settlement credits to the damage amount based on the
payments RLJ received from its settlements with Terracon and
EBCO. The trial court granted Elness's motion. The
parties agreed to submit the issue of attorney's fees to
the trial court, and RLJ submitted evidence of its
attorney's fees in the amount of $1, 388, 019 for its
claims against Elness, EBCO, and Terracon. In the
alternative, RLJ requested its fees against Elness only,
which it alleged were $920, 847. The trial court ultimately
awarded RLJ fees in the amount of $901, 650.96 for RLJ's
suit against Elness only. In its final judgment, the trial
court applied the settlement credits (a total of $1, 170,
000) to the amounts awarded in damages and attorney's
fees and ordered that RLJ recover the remaining amount, which
was $516, 650.96. Both parties appeal from the trial
raises several issues on appeal, and RLJ raises two issues as
well as several sub-issues on cross-appeal. We will address
these issues in their logical order, which will sometimes
require us to turn to an issue on cross-appeal before
returning to an issue on appeal.
Capacity to Bring Suit
and White Lodging entered into a contract (the hotel
contract) in March 2005 in which Elness agreed to provide
architectural services for the development of the hotel. The
hotel contract contained an anti-assignment provision stating
that neither party could assign the contract to another
entity without the written consent of the other party. In
September 2005, with Elness's consent, White Lodging
assigned the hotel contract to a company called South
Ausaircourt (Ausaircourt). In March 2016, RLJ entered into a
purchase and sales agreement with several sellers, including
Ausaircourt, Whiteco Industries, and White Lodging, who
served as the manager and agent for Whiteco Industries.
December 2007, the parties closed on the sale of the hotel.
On the same date as the closing, RLJ and Ausaircourt executed
an "Assignment and Assumption of Licenses, Permits and
Intangibles" (the Assignment). The Assignment assigned
Ausaircourt's "interest" in the hotel to RLJ
and further stated that "[Ausaircourt] hereby sells,
transfers, conveys and assigns to [RLJ] all of
[Ausaircourt's] right, title, and interest in and to all
licenses, permits and all other intangible assets relating to
the [hotel] (collectively, "Licenses"), subject,
however, to the terms and covenants of the Licenses and this
Assignment." At some point after RLJ took possession of
the hotel, it noticed alleged problems in the hotel's
foundation and eventually filed suit against Elness and other
RLJ filed suit, Elness filed traditional and no-evidence
summary-judgment motions arguing, among other things, that
RLJ had not been validly assigned the hotel contract or a
cause of action for breach of the hotel contract and thus
could not bring a breach-of-contract suit against Elness. RLJ
filed its own partial summary-judgment motion in which it
contended that the hotel contract and all causes of action
arising from it had been assigned to it in the Assignment.
The trial court denied Elness's motions and granted
Standard of Review
prevail on a traditional motion for summary judgment, the
movant must show that "there is no genuine issue as to
any material fact and the [movant] is entitled to judgment as
a matter of law[.]" Tex.R.Civ.P. 166a(c); Browning
v. Prostok, 165 S.W.3d 336, 344 (Tex. 2005). To prevail
on a no-evidence motion for summary judgment, the movant must
first allege that there is no evidence of one or more
specified elements of a claim or defense on which the
nonmovant would have the burden of proof at trial. Sudan
v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006); see
Tex. R. Civ. P. 166a(i). A nonmovant will defeat a
no-evidence summary judgment motion if the nonmovant presents
evidence that raises a genuine issue of material fact
regarding the elements challenged by the motion. Mack
Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006).
When we review cross-motions for summary judgment, we
consider both motions de novo and render the judgment that
the trial court should have rendered. See Texas Mun.
Power Agency v. Public Util. Comm'n of Tex., 253
S.W.3d 184, 192 (Tex. 2007); Valence Operating Co. v.
Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
contends that the trial court erred in determining that RLJ
had capacity to bring suit for breach of the hotel contract
because, Elness argues, the Assignment did not assign causes
of actions under the hotel contract to RLJ. Both the trial
court and the parties at times referred to this issue as a
challenge to RLJ's standing rather than its capacity, but
all of the arguments made by Elness in the summary-judgment
proceedings and on appeal with respect to this issue
challenge only RLJ's privity of contract with Elness,
which is a challenge to capacity, not standing. See Schlein
v. Griffin, No. 01-14-00799-CV, 2016 WL 1456193, at *5
(Tex. App.-Houston [1st Dist.] Apr. 12, 2016, pet. denied)
(mem. op.); Highland Credit Opportunities CDP, L.P. v.
UBS AG, 451 S.W.3d 508, 516 (Tex. App.-Dallas 2014, no
pet.); see also MCI Telecomms. Corp. v. Texas Utils.
Elec. Co., 995 S.W.2d 647, 651-52, 654 (Tex. 1999)
(concluding that entity was neither party nor third-party
beneficiary entitled to sue on contract and reversing and
rendering take-nothing judgment on merits of contract claim
rather than dismissing for lack of jurisdiction); Ganter
Grp., L.L.C. v. Choice Health Servs., Inc., No.
11-12-00297-CV, 2014 WL 5562945, at *2 (Tex. App.-Eastland
Oct. 31, 2014, no pet.) (mem. op.) ("[A]
privity-of-contract argument goes to capacity, which does not
implicate jurisdiction."). Privity is established by
proof that the defendant was a party to an enforceable
contract with either the plaintiff or a party who assigned
its cause of action to the plaintiff. Brown v. Mesa
Distribs., Inc., 414 S.W.3d 279, 284-85 (Tex.
App.-Houston [1st Dist.] 2013, no pet.); OAIC Commercial
Assets, L.L.C. v. Stonegate Vill. L.P., 234 S.W.3d 726,
738 (Tex. App.-Dallas 2007, pet. denied). RLJ asserts that it
had the right to bring a cause of action against Elness
because it received the right by assignment.
recover on an assigned cause of action, the party claiming
the assignment occurred must show the existence of a cause of
action capable of being assigned and that the cause of action
was in fact assigned to that party. See Pain Control
Inst., Inc. v. GEICO Gen. Ins. Co., 447 S.W.3d 893, 897
(Tex. App.-Dallas 2014, no pet.); Capital One, N.A. v.
Nationstar Mortg. LLC, No. 14-10-00733-CV, 2011 WL
3332145, at *3 (Tex. App.-Houston [14th Dist.] Aug. 4, 2011,
no pet.) (mem. op.); Texas Farmers Ins. Co. v.
Gerdes, 880 S.W.2d 215, 217 (Tex. App.-Fort Worth 1994,
specific circumstances not present in this case, causes of
action in Texas are freely assignable. See PPG Indus.,
Inc. v. JMB/Houston Ctrs. Partners Ltd. P'ship, 146
S.W.3d 79, 106 (Tex. 2004); State Farm Fire & Cas.
Co. v. Gandy, 925 S.W.2d 696, 705-07 (Tex. 1996);
Tate v. Goins, Underkofler, Crawford & Langdon,
24 S.W.3d 627, 633 (Tex. App.-Dallas 2000, pet. denied).
"As a rule, parties have the right to contract as they
see fit as long as their agreement does not violate the law
or public policy." In re Prudential Ins. Co. of
Am., 148 S.W.3d 124, 129 & n.11 (Tex. 2004); see
also Restatement (Second) of Contracts § 317(2)(b)
(1981) ("A contractual right can be assigned unless . .
. the assignment is forbidden by statute or is otherwise
inoperative on grounds of public policy.").
construing a written assignment, an appellate court applies
the rules of interpretation and construction applicable to
contracts. Commercial Structures & Interiors, Inc. v.
Liberty Educ. Ministries, Inc., 192 S.W.3d 827, 832-33
(Tex. App.-Fort Worth 2006, no pet.); MG Bldg. Materials,
Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51,
58 (Tex. App.-San Antonio 2005, pet. denied). A court's
primary goal is to ascertain the intent of the parties as it
is expressed in the written assignment. See Commercial
Structures, 192 S.W.3d at 832. When an appellate court
concludes that contract language can be given a certain or
definite meaning, then the language is not ambiguous, and the
appellate court is obligated to interpret the contract as a
matter of law. Id. Further, unless the agreement
shows the parties used a term in a technical or different
sense, the terms are given their plain, ordinary, and
generally accepted meaning. Heritage Res., Inc. v.
NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). Neither
party contends that the language used in the Assignment is
portion of the Assignment that RLJ relies on in asserting
that Ausaircourt assigned causes of actions arising from the
contract to RLJ states:
Assignment of Licenses, Permits and Intangibles
[Ausaircourt] hereby sells, transfers, conveys and assigns to
[RLJ] all of [Ausaircourt's] right, title and interest in
and to all licenses, permits and all other intangible assets
relating to the Property (collectively,
"Licenses"), subject, however, to the terms and
covenants of the Licenses and this Assignment.
contends that the phrase "all other intangible assets
relating to the Property" includes causes of actions
arising from the contract. In interpreting the meaning of the
term "intangible assets, " we first note that
neither the term nor each individual word within the term is
defined in the Assignment. Thus, we look to the plain,
ordinary, and generally accepted meaning of the words.
See id. "Intangible property" is defined
as "property having no physical substance apparent to
the senses: incorporeal property (as choses in
action) often evidenced by documents (as stocks, bonds,
notes, judgments, franchises) having no intrinsic value or by
rights of action, easements, goodwill, trade secrets."
See Webster's Third New Int'l Dictionary
1173 (2002) (emphasis added). A "chose in action"
is defined as "the right to bring an action to recover a
debt, money, or thing" or "any right to a personal
as opposed to a real thing that is not in one's
possession or actual enjoyment but is recoverable by suit at
law; esp: any right to an act or forebearance (as in case of
debts, stocks, shares, and negotiable instruments or claim of
reparation for a tort)." See Black's Law
Dictionary 275 (9th ed. 2009); Webster's at
399. The Texas Supreme Court has also noted that it has used
the terms "claim, " "cause of action, "
and "chose in action" interchangeably "to
refer to the facts giving rise to a right that is enforceable
in [a lawsuit]." See Jaster v. Comet II Constr.,
Inc., 438 S.W.3d 556, 565 (Tex. 2014) (citing
Gandy, 925 S.W.2d at 698-708).
addition to Webster's, case law also indicates
that choses in action are intangible property. See In re
Marriage of Malacara, 223 S.W.3d 600, 603 (Tex.
App.-Amarillo 2007, no pet.) (stating that
"choses-in-action or contract rights" are types of
"intangible property"); Adams v. Great Am.
Lloyd's Ins. Co., 891 S.W.2d 769, 772 (Tex.
App.-Austin 1995, no writ) (noting that a Texas court
"ha[d] indicated that a chose in action is an
intangible property right"); see also
American Multi-Cinema v. Hegar, No. 03-14-00397-CV, 2017
WL 74416, at *6 (Tex. App.-Austin Jan. 6, 2017, no pet. h.)
(mem. op.) (using Webster's Dictionary
definition of "intangible property" in defining the
"common and ordinary meaning" of the term). Because
a chose in action is included in the definition of
"intangible property, " we conclude that the
assignment of "all of [Ausaircourt's] right, title
and interest in and to . . . all other intangible assets
relating to the Property" included an assignment of
causes of action arising from the hotel contract. See
Webster's at 1173; In re Malacara, 223
S.W.3d at 603; Adams, 891 S.W.2d at 772;
Hegar, 2017 WL 74416, at *6.
argues that the assignment of "intangible assets"
here was still not sufficient to assign causes of action
because "[a] subsequent owner who did not own the
property at the time of the injury may only bring suit where
the subsequent owner receives an express assignment of the
cause of action, " and the provision assigning
"intangible assets" was not an express assignment.
In support of its argument, Elness cites to a line of cases
that require an express assignment for a claim for damages
under certain circumstances. See Exxon Corp. v. Emerald
Oil & Gas Co., L.C., 331 S.W.3d 419, 424 (Tex.
2010); Richey v. Stop N Go Mkts. of Tex., 654 S.W.2d
430, 432 (Tex. 1983); Vann v. Bowie Sewerage Co., 90
S.W.2d 561, 562-63 (Tex. 1936); La Teirra de Simmons
Familia, Ltd. v. Main Event Entm't, L.P., No.
03-10-00503-CV, 2012 WL 753184, at *16 (Tex. App.-Austin Mar.
9, 2012, pet. denied) (mem. op.); Boerschig v.
Southwestern Holdings, Inc., 322 S.W.3d 752, 767 (Tex.
App.-El Paso 2010, no pet.); Brooks v. Chevron USA
Inc., No. 13-05-00029-CV, 2006 WL 1431227, at *7 (Tex.
App.-Corpus Christi May 25, 2006, pet. denied) (mem. op.);
Ceramic Tile Int'l, Inc. v. Balusek, 137 S.W.3d
722, 724 (Tex. App.-San Antonio 2004, no pet.); Cook v.
Exxon Corp., 145 S.W.3d 776, 781 (Tex. App.-Texarkana
2004, no pet.); Exxon Corp. v. Pluff, 94 S.W.3d 22,
27 (Tex. App.-Tyler 2002, pet. denied); Senn v. Texaco,
Inc., 55 S.W.3d 222, 226 (Tex. App.-Eastland 2001, pet.
denied); Indigo Oil, Inc. v. Wiser Oil, Co., No.
05-96-00984-CV, 1998 WL 839591, at *32 (Tex. App.-Dallas Dec.
7, 1998, pet. denied) (not designated for publication);
Lay v. Aetna Ins. Co., 599 S.W.2d 684, 686 (Tex.
Civ. App.-Austin 1980, writ ref'd n.r.e.).
letter from the trial court to the parties explaining the
trial court's decision on this issue, the trial court
stated that all of the cases cited by Elness were
distinguishable from this case. We agree. The cases cited by
Elness address injury to land or property and the issue of
whether a previous owner or current owner of the property had
standing to pursue a cause of action arising from the injury.
In all of the cases, there was no assignment at all, much
less an express assignment. In several of the cases where
property had been sold, the courts concluded that a mere
transfer of the land by deed did not assign or otherwise
transfer a claim for damages to the land. See Vann,
90 S.W.2d at 563; Brooks, 2006 WL 1431227, at *7;
Cook, 145 S.W.3d at 785-86; Pluff, 94
S.W.3d at 27-28; Senn, 55 S.W.3d at 225, 226. All of
the cases but two do not in any way address a cause of action
arising from a contract between the parties, as is present
here. The first case that involved a breach-of-contract claim
was about a lessee's alleged breach of a lease and
whether a subsequent lessor could recover damages for the
breach, but there was no assignment clause involved in that
case. See Richey, 654 S.W.2d at 432. The second case
addressed whether a subsequent owner of property could sue an
oil company for an injury that occurred to the property
before the owner purchased it, and again, there was no
assignment clause in the case. See Cook, 145 S.W.3d
at 785. Because the cases cited by Elness are distinguishable
from the circumstances of this case, and because causes of
action are freely assignable, we reject Elness's
contention that the assignment of Ausaircourt's causes of
action to RLJ was required to be express. See PPG
Indus., 146 S.W.3d at 106; Gandy, 925 S.W.2d at
705-07. Given that the evidence shows as a matter of law that
the Assignment in this case included an assignment of causes
of action arising from the hotel contract, we conclude that
the trial court did not err in granting RLJ's motion for
partial summary judgment and denying Elness's traditional
and no-evidence motions for summary judgment on this
issue. Accordingly, we overrule this issue.
of Hotel Contract
also contends that the trial court erred in admitting the
hotel contract into evidence over Elness's objections.
Elness contends that the trial court should not have admitted
the contract because the contract was inadmissible hearsay
and was not properly authenticated. We review the admission
or exclusion of evidence under an abuse-of-discretion
standard. Southwestern Energy Prod. Co. v.
Berry-Helfand, 491 S.W.3d 699, 721 (Tex. 2016); City
of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex.
1995); ICON Benefit Adm'rs II, L.P. v. Abbott,
409 S.W.3d 897, 906 (Tex. App.-Austin 2013, pet. denied). A
trial court abuses its discretion when it acts without
reference to any guiding rules or principles. Downer v.
Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.
1985). Even if an appellant establishes error, appellate
courts reverse a judgment based on an erroneous evidentiary
ruling only if the error probably resulted in an improper
judgment. Tex.R.App.P. 44.1; Owens-Corning Fiberglass
Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998).
arguing that the hotel contract is inadmissible hearsay,
Elness points out that the witness who testified about the
contract was an employee of RLJ and was therefore not a party
to the contract and did not have personal knowledge of the
terms of the contract. Elness further argues that RLJ failed
to establish an exception to the hearsay rule. However, a
signed instrument, such as a contract, that creates legal
rights is not hearsay because it has legal effect independent
of the truth of any statement contained in it. See
Kepner-Tregoe, Inc. v. Leadership Software Inc., 12 F.3d
527, 539-40 (5th Cir. 1994); Sanders v. Worthington,
382 S.W.2d 910, 915-16 (Tex. 1964); Rogers v. RREF II CB
Acquisitions, LLC, - S.W.3d -, No. 13-15-00321-CV, 2016
WL 6804451, at *10 (Tex. App.-Corpus Christi, Nov. 17, 2016,
no pet.); Humphrey v. Yancey & Nationwide Slate,
No. 05-15-00653-CV, 2016 WL 3568042, at *5 (Tex. App.-Dallas
June 30, 2016, pet. denied) (mem. op.); Rockwall Commons
Assocs. v. MRC Mortg. Grantor Trust I, 331 S.W.3d 500,
511 (Tex. App.-El Paso 2010, no pet.); Reeves v. ...