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Wasson Interests, Ltd. v. City of Jacksonville

Court of Appeals of Texas, Twelfth District, Tyler

August 30, 2019


          Appeal from the 2nd District Court of Cherokee County, Texas (Tr.Ct.No. 2011-05-0389)

          Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.


          James T. Worthen, Chief Justice.

         The Texas Supreme Court remanded this case to us to address the City of Jacksonville's grounds for summary judgment that remain unresolved after the Court determined that the City was not entitled to governmental immunity because it engaged in a proprietary function when it leased lakefront property on Lake Jacksonville to James and Stacy Wasson.[1] We affirm in part and reverse and remand in part.


         The City created Lake Jacksonville in the late 1950s as the City's reservoir to provide a municipal water supply. The City owns the lots surrounding the lake and decided to lease most of them for ninety-nine year terms for private residential development.

         In the 1990's, the Wassons assumed an existing ninety-nine year lease on lot 43 and signed a ninety-nine year lease on lot 46 on the lake. The terms of both leases are identical in all relevant respects. The Wassons constructed a large home on lot 43 and a cabin on lot 46 in accordance with the authorizations in the leases. The Wassons first used lots 43 and 46 as their primary residence.

         Both leases incorporated, and the Wassons expressly agreed to abide by, the Lake Jacksonville Rules and Regulations, as well as the city ordinances pertaining to building, sanitation, safety, use, and occupancy. Article VII, Section 10 of the rules and regulations states that failure to comply with the use and occupancy regulations and ordinances is grounds for forfeiture of the leases.

         Article VII, Section 8 of the rules and regulations states in relevant part that "[a]ll Lake Jacksonville lease lots located outside of the city limits of the City of Jacksonville shall be restricted to residential purposes only. No business or commercial enterprise . . . shall be allowed to occupy any structure or operate from any lease lot outside the city limits." Lots 43 and 46 are located outside the Jacksonville city limits. The city ordinance pertaining to commercial activity authorizes limited home occupations conducted within a residential dwelling, but the authorized activities do not include those conducted by the Wassons in this case. The ordinance further provides that any business that does not fall within the authorized home occupations constitutes a prohibited commercial activity, thereby authorizing the City to issue a cease and desist order.

         After relocating to Tyler in 2009, the Wassons conveyed their interest in the two lots to Wasson Interests, Ltd (WIL). WIL rented the property to individuals for terms of a week or less. In response, the City sent an eviction notice for both lots, notifying WIL that its short-term rentals constituted a commercial use of the property, which violated its rules and regulations and zoning ordinances specified in WIL's leases.[2] The City agreed to excuse the past violations and cancel the eviction. In exchange, WIL entered into a reinstatement agreement with the City that imposed more specific conditions concerning the property's acceptable uses and occupancy limitations under the leases.

         The reinstatement agreement provides that WIL cease and desist from all commercial activity on the property in violation of the City's ordinances and the Lake Jacksonville Rules and Regulations. The agreement also prohibited

the advertisement or rental of any structure situated on the [properties] as a hotel, motel, inn, tourist house, tourist court, lodging house, rooming house, bed and breakfast, a vacation site, events site, multi-family or corporate retreat site, containing guest rooms and which is occupied, or intended or designed for occupancy by paying guests, whether rent is paid in money, goods, labor or otherwise.

         The reinstatement agreement contained an exception stating that:

Nothing in this Agreement shall prohibit [WIL] from renting the [properties] to a single family consisting of one or more persons related by blood, marriage or legal adoption or a group of not more than three unrelated persons for private residential purposes, (same being defined as lease to a lessee, the term of which must be in excess of thirty (30) consecutive days).

         Thereafter, the City discovered an advertisement to rent the large home on lot 43. On December 1, 2010, it sent notice to WIL that its advertisement and rental terms violated the reinstatement agreement, and as provided in the leases, that the City would terminate the leases if WIL failed to cease all commercial activity on the properties within ten days. Unsatisfied with WIL's response, on May 3, 2011, the City sent a second eviction notice based on WIL's alleged continued commercial use of the property.

         WIL filed suit, alleging that the City breached the lease by improperly terminating the lease and evicting WIL. WIL also sought injunctive and declaratory relief. Following extensive discovery, the City filed a combined motion for a traditional and a no-evidence summary judgment, which the trial court granted without stating a reason. After two appeals to this Court and the Texas Supreme Court, the Texas Supreme Court ultimately held that the proprietary-governmental dichotomy applies to breach of contract suits against a municipality, and that the City acted in its proprietary capacity when it leased the lots to the Wassons.[3] Because we have not addressed the merits of the City's no-evidence motion for summary judgment, the Texas Supreme Court remanded the cause to us as part of this appeal.

         Summary Judgment - Breach of Contract

         In its first issue, WIL argues that it raised a fact issue on its breach of contract and wrongful eviction claims, and that the trial court erred when it granted summary judgment in favor of the City.

         Standard of Review

         We review a summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). An appellate court reviews a no-evidence summary judgment by reviewing "the evidence presented by the motion and response in the light most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not." Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 311 (Tex. 2009) (quoting Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)).

         A trial court must grant a no-evidence motion for summary judgment if: (1) the moving party asserts that there is no evidence of one or more specified elements of a claim or defense on which the adverse party would have the burden of proof at trial; and (2) the respondent produces no summary judgment evidence raising a genuine issue of material fact on each of the challenged elements. See Tex. R. Civ. P. 166a(i). No-evidence motions must be sustained when the record discloses one of the following situations: (a) a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence establishes conclusively the opposite of the vital fact. Jelinek v. Casas, 328 S.W.3d 526, 532 (Tex. 2010).

         More than a scintilla of evidence exists if the evidence rises to a level that would enable reasonable and fair-minded people to differ in their conclusions. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. Jelinek, 328 S.W.3d at 532. When, as here, the summary judgment order does not specify the grounds on which it was granted, we will affirm a summary judgment ruling if any of the grounds asserted in the motion are meritorious. See Lightning Oil Co. v. Anadarko E & P Onshore, LLC, 520 S.W.3d 39, 45 (Tex. 2017).

         Applicable Law

         The essential elements of a breach of contract claim are (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained as a result of the breach. See Caprock Inv. Corp. v. Montgomery, 321 S.W.3d 91, 99 (Tex. App.-Eastland 2010, pet. denied). A breach of contract occurs when a party to the contract fails or refuses to do something that it has promised to do. B & W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.-Houston [1st Dist.] 2009, pet. denied).

         The elements for wrongful eviction include (1) the existence of a valid unexpired lease; (2) the tenant's occupancy of the premises; (3) the landlord's eviction of the tenant; and (4) damages suffered by the tenant attributable to the eviction. St. Anthony's Minor Emergency Ctr., L.L.C. v. Ross Nicholson 2000 Separate Prop. Tr., 567 S.W.3d 792, 797 n.4 (Tex. App.-Houston [14th Dist.] 2018, pet. denied).

         WIL's Burden

         As part of the City's hybrid motion for summary judgment, it alleged that there is no evidence to support WIL's breach of contract and wrongful eviction claims. It thus became WIL's burden to present evidence to raise a fact issue that the City breached the leases or the reinstatement agreement by evicting it without cause. To accomplish this, WIL must produce more than a scintilla of evidence that it did not materially breach the reinstatement agreement or the leases. The City alleges that WIL breached the reinstatement agreement in at least three respects: (1) WIL advertised the properties for use as a vacation rental; (2) ...

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