R. HASSELL BUILDERS, INC., Appellant
TEXAN FLOOR SERVICE, LTD., Appellee
Appeal from the 157th District Court Harris County, Texas
Trial Court Case No. 2015-48906
consists of Chief Justice Radack and Justices Keyes and
V. Keyes Justice
breach of contract case concerning services and labor
provided in connection with the expansion of the Houston
Transtar building, Texan Floor Service, Ltd. ("Texan
Floor") sued R. Hassell Builders, Inc. ("R. Hassell
Builders") for non-payment of Texan Floor's
retainage fee and attorney's fees. R. Hassell Builders
answered and filed a "Suggestion of Bankruptcy and
Notice of Automatic Stay" concerning a bankruptcy
proceeding involving an entity in the same corporate family
as R. Hassell Builders. R. Hassell Builders was not the
debtor in the bankruptcy proceeding. While the automatic stay
was in place, Texan Floor filed a motion for traditional and
no-evidence summary judgment. Within thirty days after the
bankruptcy court lifted the stay, the trial court granted
summary judgment in favor of Texan Floor and awarded it
damages, attorney's fees, and interest. On appeal, R.
Hassell Builders contends it was entitled to the protection
of the automatic stay despite its not being the bankruptcy
debtor and, as a result, the trial court erred in rendering
summary judgment in favor of Texan Floor within the
thirty-day grace period following the lifting of an automatic
stay pursuant to Bankruptcy Code section 108(c).
Hassell Builders, the sole defendant in the trial court and
appellant here, is part of a corporate family of entities,
all of which are involved in various aspects of the
construction business. Royce Hassell is the President of R.
Hassell Builders and R. Hassell Holding Company, Inc. Phillip
Hassell is the President of Hassell Construction Company,
Inc. In 2012, R. Hassell Holding Company, Hassell
Construction Company, and another related entity, Hassell
Management Services, L.L.C., entered into a joint venture
agreement and created the Hassell 2012 Joint Venture, a
general partnership, and the Springwoods Joint Venture.
Although R. Hassell Holding Company, Hassell Construction
Company, and Hassell Management Services were all partners of
the Hassell 2012 Joint Venture, the record does not indicate
whether R. Hassell Builders was also a partner.
couple of the Hassell entities, including Hassell
Construction Company and R. Hassell Builders, were involved
in a construction project relating to expanding the building
that houses Houston Transtar. As part of this project, R.
Hassell Builders subcontracted with Texan Floor in September
2012 to supply labor, materials, and services for the
project. Although the appellate record includes a copy of
this contract, the copy is nearly illegible in places.
However, some parts of the contract are legible, including
the first page, which states, "R. Hassell Builders, Inc.
& Texan Floor Service, " and "Subcontract for
New Construction" for the "Transtar Emergency
Building Expansion." The contract contains repeated
references to "R. Hassell Builders, Inc." and
"Texan Floor Service, " and the signature page
lists the parties as R. Hassell Builders, Inc. and Texan
Floor Service. The "project schedule" attached
to the contract, although mostly illegible, indicates the
involvement of Hassell Construction Company with the Transtar
project, with each page containing a footer reading,
"Hassell Construction Co., Inc. Transtar Emergency
2014, Texan Floor sent an invoice to R. Hassell Builders for
$6, 511.04, reflecting its earned, but unpaid, retainage fee.
This invoice reflected that the total contract price,
including change orders, was $130, 220.40 and that Texan
Floor had received $123, 709.36 of the contract price.
February 2015, Royce Hassell, as the president of R. Hassell
Holding Company, one of the general partners of the Hassell
2012 Joint Venture, filed an involuntary bankruptcy petition
against the Hassell 2012 Joint Venture and the Springwoods
Joint Venture, as the debtors, in the United States
Bankruptcy Court for the Southern District of Texas. R.
Hassell Holding Company alleged in the bankruptcy petition
that the Hassell 2012 Joint Venture was not generally paying
its debts as they became due. Appellant R. Hassell Builders
was not listed as a debtor in this bankruptcy petition. On
May 8, 2015, the bankruptcy court signed a Memorandum Opinion
in response to a motion to dismiss filed by James Hassell,
Hassell Construction Company, and Hassell Management
Services. See In re Hassell 2012 Joint Venture, No.
15-30781, 2015 WL 2265414 (Bankr.S.D.Tex. May 8, 2015). In
this Memorandum Opinion, the bankruptcy court set out the
relationship of several of the Hassell entities, although it
did not mention appellant R. Hassell Builders, and it ruled
that the Hassell 2012 Joint Venture was a general partnership
under Texas law and was entitled to respond to the
involuntary bankruptcy petition. Id. at *1, 4.
August 2015, more than a year after submitting its invoice
for the retainage fee to R. Hassell Builders, which remained
unpaid, Texan Floor sent a demand letter to a principal of
Hassell Construction Company. In this demand letter, Texan
Floor's attorney stated, "Hassell Construction,
Inc./R. Hassell Builders, Inc. ("Hassell")
contracted [Texan Floor] to furnish labor and materials for
the Transtar Emergency Building Expansion Project in
accordance with the parties' September 6, 2012
Construction Subcontract . . . ." Texan Floor's
counsel stated that Texan Floor had completed its contractual
obligations, and he demanded payment of the retainage fee
within a week and stated that if it were not paid Texan Floor
would file suit.
Floor did not receive payment of the retainage fee in
response to its demand letter. On August 20, 2015, Texan
Floor filed suit solely against R. Hassell Builders,
asserting causes of action for breach of contract, promissory
estoppel, and unjust enrichment/quantum meruit. Texan Floor
also sought attorney's fees.
Hassell Builders answered on September 18, 2015, and asserted
the affirmative defense of impossibility of performance. R.
Hassell Builders simultaneously filed a "Suggestion of
Bankruptcy and Notice of Automatic Stay, " informing the
trial court that an involuntary bankruptcy proceeding against
the Hassell 2012 Joint Venture and the Springwoods Joint
Venture had been filed in February 2015, and requesting that
the trial court acknowledge the protections of the automatic
months later, in November 2015, Texan Floor moved for
traditional and no-evidence summary judgment, seeking summary
judgment on its breach of contract claim and damages in the
amount of $6, 511.04, attorney's fees, and pre-judgment
interest. Texan Floor sought traditional summary judgment on
its breach of contract claim, arguing that there was no
dispute that R. Hassell Builders had subcontracted with it to
perform work on the Transtar project, that Texan Floor had
timely performed its contractual obligations in full, and
that R. Hassell Builders had breached the contract by failing
to pay Texas Floor its earned retainage fee. Texan Floor
sought no-evidence summary judgment on R. Hassell
Builders' affirmative defense of impossibility of
performance, arguing that R. Hassell Builders failed to plead
this affirmative defense with particularity and that R.
Hassell Builders could produce no evidence of any of the
limited circumstances in which Texas courts find
impossibility of performance.
summary judgment evidence, Texan Floor attached its demand
letter, the contract, the invoice it sent to R. Hassell
Builders for the retainage fee, and the affidavit of Jeffrey
Hill, its President. Hill averred that R. Hassell Builders
retained Texan Floor to furnish labor, materials, and
services for the Transtar project, that R. Hassell Builders
approved change orders for the project, that Texan Floor
invoiced R. Hassell Builders for the retainage fee of $6,
511.04, and that R. Hassell Builders had failed to pay the
January 4, 2016, the trial court signed an order noting that
Texan Floor had filed its summary judgment motion despite
receiving notice that R. Hassell Builders had filed a
suggestion of bankruptcy and automatic stay. The trial court
stated, "[Texan Floor] needs to explain why this motion
was filed despite the automatic stay."
February 1, 2016, Texan Floor filed a response to this order.
In its response, Texan Floor argued that the automatic stay
did not apply because R. Hassell Builders was not, and never
had been, a debtor in bankruptcy. Texan Floor cited federal
law holding that the automatic stay does not apply to
non-debtors, even if the non-debtor is a corporate affiliate
of the debtor. Texan Floor argued that because the automatic
stay did not apply to its claim against R. Hassell Builders,
the trial court should proceed to hear Texan Floor's
summary judgment motion. R.
Builders did not file a response to this filing by Texan
Floor, nor did it file a response to Texan Floor's
summary judgment motion.
further action happened in the underlying case for several
months. Then, on September 23, 2016, the bankruptcy court
issued a second Memorandum Opinion, in which it ruled on
Hassell Construction Company's summary judgment motion
seeking dismissal of the involuntary bankruptcy petition
against the Hassell 2012 Joint Venture. See In re Hassell
2012 Joint Venture, No. 15-30781, 2016 WL 5369475
(Bankr.S.D.Tex. Sept. 23, 2016). Hassell Construction Company
argued in its summary judgment motion that R. Hassell Holding
Company could produce no evidence that the Hassell 2012 Joint
Venture was not generally paying its debts as they came due.
Id. In response, R. Hassell Holding Company listed
several alleged debts of the Hassell 2012 Joint Venture and
included Texan Floor's claim for its retainage fee, the
subject of the underlying case, as an alleged debt of the
Joint Venture. Id. at *2. In reply, Hassell
Construction Company responded that this debt was disputed,
stating that the debt refers to a "pending lawsuit
against [Hassell Construction Company.]" Id. at
*7. The bankruptcy court did not analyze Texan Floor's
claim, but it did rule that Hassell Construction Company had
"met its burden of demonstrating that a bona fide
dispute exists as to" this alleged debt to Texan Floor.
Id. Ultimately, the bankruptcy court concluded that
R. Hassell Holding Company had not demonstrated that the
Hassell 2012 Joint Venture was not paying its debts as they
became due, and it dismissed the involuntary bankruptcy
petition. Id. at *9.
days later, on October 3, 2016, Texan Floor filed a second
notice of submission of its summary judgment motion. The
trial court granted Texan Floor's summary judgment motion
on October 12, 2016, awarding Texan Floor $6, 511.04 in
damages, $515.67 in pre-judgment interest, and $10, 673.89 in
attorney's fees, for a total judgment of $17, 700.60.
Hassell Builders subsequently moved for a new trial, arguing
that Texan Floor had moved for summary judgment in violation
of the automatic stay and that, pursuant to Bankruptcy Code
section 108(c), R. Hassell Builders was entitled to a
thirty-day grace period following the expiration of the
automatic stay in which to respond to Texan Floor's
summary judgment motion, but the trial court rendered
judgment before that thirty-day period expired. As evidence, R.
Hassell Builders attached the suggestion of bankruptcy that
it filed contemporaneously with its answer, the trial
court's January 4, 2016 order requesting that Texan Floor
explain why it filed a motion for summary judgment despite
the automatic stay, the bankruptcy court's September 23,
2016 Memorandum Opinion, and the bankruptcy court's order
dismissing the involuntary bankruptcy petition.
trial court denied R. Hassell Builders' motion for a new
trial. This appeal followed.
the Hassell 2012 Joint Venture appealed the bankruptcy
court's September 23, 2016 memorandum opinion to the
District Court for the Southern District of Texas. On July
24, 2017, while R. Hassell Builders' appeal of the trial
court's underlying summary judgment was pending in this
Court, the District Court issued a memorandum opinion
affirming the bankruptcy court's opinion in part and
remanding in part. See In re Hassell 2012 Joint
Venture, No. H-16-3220, 2017 WL 3141168 (S.D. Tex. July
24, 2017). Relevant to this case, the District Court
addressed whether the bankruptcy court had properly found
that Texan Floor's claim for the retainage fee, which R.
Hassell Holding Company had listed as an alleged debt of the
Joint Venture in the bankruptcy proceeding, was subject to a
"bona fide dispute." Id. at *6-7. The
District Court held that, in making its ruling, the
bankruptcy court had relied solely on a conclusory statement
in Hassell Construction Company's summary judgment reply,
which had stated that Texan Floor's lawsuit was
"answered and disputed." Id. at *7. The
District Court noted that the record contained only Texan
Floor's original petition and summary judgment motion
filed in the Harris County district court and did not include
an answer or other pleading, and thus the court could not
make an "independent review" of whether "there
appeared to be a bona fide dispute as to the Joint Venture
owing the debt or [whether] instead it was just not paying
the debt and got sued." Id. The District Court
thus remanded the case to the bankruptcy court to make a
determination whether the debt was the subject of a bona fide
bankruptcy court issued a memorandum opinion addressing this
question on September 21, 2017. See In re Hassell 2012
Joint Venture, No. 15-30781, 2017 WL 4220425
(Bankr.S.D.Tex. Sept. 21, 2017). In considering Texan
Floor's claim, the bankruptcy court noted, after quoting
portions of Texan Floor's original petition filed against
R. Hassell Builders, that "Texan Floor sought only
retainage amounts and related fees, interest and costs."
Id. at *2. The bankruptcy court stated that the
retainage amount was not payable until the Hassell entities
received payment of that amount from Harris County for the
Transtar project. Id. The court concluded that
because "[t]here was never a moment in time when the
retainage was due and not paid, " Texan Floor's
claim was subject to a bona fide dispute. Id. The
bankruptcy court again dismissed the involuntary bankruptcy
petition against the Hassell 2012 Joint Venture. Id.
sole issue, R. Hassell Builders contends that the trial court
erred in granting summary judgment in favor of Texan Floor
because R. Hassell Builders, despite not being the debtor in
the bankruptcy proceeding, was entitled to the protection of
the automatic stay. R. Hassell Builders argues that, as a
result, the trial court erred in ruling on Texan Floor's
summary judgment motion before the thirty-day grace period
following the lifting of an automatic stay pursuant to
Bankruptcy Code section 108(c) had expired.