COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-06-430-CV
A.J. MORRIS, M.D., P.A., RIO APPELLANTS
GRANDE VALLEY IMAGING,
INC., AND A.J. MORRIS, M.D.
V.
DE LAGE LANDEN FINANCIAL APPELLEE
SERVICES, INC.
------------
FROM THE 67TH DISTRICT COURT OF TARRANT COUNTY
------------
MEMORANDUM OPINION 1
------------
Appellants A.J. Morris, M.D., P.A. (“AJMPA”), Rio Grande Valley
Imaging, Inc. (“RGVI”), and Dr. A.J. Morris appeal from a summary judgment
granted for Appellee De Lage Landen Financial Services, Inc. (“DLFS”).
Because we hold that DLFS established its right to summary judgment on some
1
… See Tex. R. App. P. 47.4.
of its claims for damages but not for others, we affirm in part and reverse in
part.
Background Facts
DLFS is in the business of arranging for the leasing and financing of
commercial equipment, sometimes under a name other than DLFS. For a time,
DLFS had a business agreement with Toshiba American Medical Systems, Inc.
(“TAMS”) under which DLFS leased out equipment made by TAMS. The
business agreement provided that DLFS would use the name Toshiba American
Medical Credit (“TAMC”) in executing the leases.
Using the TAMC name, DLFS entered into a lease with AJMPA in 1998
(the “1998 lease”). The lease stated that the lessor was “Toshiba American
Medical Credit, a program of Toshiba American Medical Systems, Inc.” Dr.
Morris also entered into a guaranty covering that lease. Appellants claim that
they did not know that TAMC was the same entity as DLFS or that TAMC,
rather than TAMS, was the lessor.
In 2000, AJMPA and RGVI entered into a lease with TAMC (the “2000
lease”), and Dr. Morris executed a guaranty for the lease. TAMC subsequently
sent AJMPA letters notifying it that both leases had been assigned to DLFS.
Under both the 1998 lease and the 2000 lease, AJMPA and RGVI agreed
to pay sales tax on the equipment as well as property tax assessed against the
2
equipment. The leases also provided for the payment of late charges and
finance charges for untimely rental payments. The leases allowed AJMPA and
RGVI to purchase the equipment at the end of the lease for ten percent of the
original acquisition amount so long they were not in default and they exercised
the option not less than 180 days before the end of the lease term.
After AJMPA and RGVI ceased making payments on the leases, DLFS
sent notice of default to Dr. Morris, demanding compliance with the lease
obligations and notifying him that it was entitled to declare him, as guarantor,
liable for the entire amount owing under the leases. When no payments were
made, DLFS filed suit against Appellants.
Procedural History
A number of Appellants’ issues depend on what pleadings were filed and
when. In DLFS’s original petition, it asserted breach of contract and unjust
enrichment claims and sought attorney’s fees. Appellants filed an answer and
counterclaims.
DLFS then filed a motion for summary judgment. DLFS sought
$941,753.81 in damages for unpaid rent, property tax, and sales tax; late
charges and finance charges; the remaining accelerated payments on the 2000
lease; and the purchase option value of the equipment. DLFS also sought
$55,000 in attorney’s fees. With its motion, DLFS attached the affidavit of
3
Jake Hornung and various business records. DLFS also sought no-evidence and
traditional summary judgment on Appellants’ counterclaims.
Appellants filed an amended answer and an amended counterclaim,
adding a claim for rescission. Appellants also filed a response to the summary
judgment motion to which they attached as evidence an affidavit from Dr.
Morris; a letter from Dr. Morris to DLFS from April 2003, informing DLFS that
he wished to exercise the purchase option at the end of the 1998 lease; and a
letter from TAMC to Dr. Morris, offering him terms for the 2000 lease.
DLFS filed a motion to strike portions of Dr. Morris’s affidavit and a
motion for leave to file additional summary judgment evidence. The trial court
granted both motions and granted partial summary judgment (“first summary
judgment”) disposing of DLFS’s breach of contract claims.
Appellants then filed a second amended answer and second amended
counterclaim and a motion to set aside the first summary judgment. DLFS filed
an answer and special exceptions to the second amended counterclaim.
Appellants filed a third amended answer and second amended
counterclaim. DLFS filed another answer and again filed special exceptions to
the second amended counterclaim. Appellants filed a response to the special
exceptions as well as a first supplement to the second amended counterclaim.
DLFS filed an answer and special exceptions to the first supplement. The
4
trial court held a hearing on the special exceptions, and at the conclusion of the
hearing stated that it granted the special exceptions, dismissed Appellants’
counterclaims, and granted final judgment. The court requested the parties to
provide an order to that effect. DLFS filed a proposed order. The proposed
order does not appear in the record, nor does any written order from this
hearing.
Appellants next filed an amended motion to vacate or modify the first
summary judgment. DLFS filed a response to that motion. It then filed a
second motion for summary judgment incorporating by reference evidence filed
with its first summary judgment motion. In the motion, DLFS asked the trial
court for a judgment clarifying that DLFS was entitled to the return of the
leased equipment as a result of the favorable judgment on its breach of contract
claims. It also sought judgment on Appellants’ counterclaims. Appellants filed
a response, with evidence attached, and objections to DLFS’s summary
judgment evidence. At the hearing on the motion, DLFS stated that it did not
object to Appellants’ evidence being considered for purposes of the second
motion but that it did object to any attempt by Appellants to use the evidence
to relitigate the first summary judgment.
After a hearing, the trial court granted the second summary judgment for
DLFS. The order stated that it “supercede[d] and replace[d]” the first summary
5
judgment order. The trial court subsequently entered an order denying
Appellants’ objections to DLFS’s summary judgment evidence. After the trial
court denied Appellants’ motion for reconsideration and for new trial, they filed
this appeal.
Analysis
A plaintiff is entitled to summary judgment on a cause of action if it
conclusively proves all essential elements of the claim.2 When reviewing a
summary judgment, we take as true all evidence favorable to the nonmovant,
and we indulge every reasonable inference and resolve any doubts in the
nonmovant’s favor. 3
In Appellants’ first issue, they argue that the evidence and objections they
filed in response to DLFS’s second summary judgment motion were also
applicable to DLFS’s first summary judgment motion.
Assuming for the moment that DLFS’s evidence established its right to
judgment, the burden then shifted to Appellants to raise a genuine issue of
material fact to prevent summary judgment.4 Objections to Appellee’s evidence
2
… See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59,
60 (Tex. 1986).
3
… IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143
S.W.3d 794, 798 (Tex. 2004).
4
… See Tex. R. Civ. P. 166a.
6
and any evidence on which Appellants relied to raise fact issues had to be
presented to the trial court before it ruled on the claims.5 Thus, if in the second
summary judgment proceedings, the same claims were not before the trial
court, any objections to the evidence would come too late, as would any
evidence produced by Appellants to raise fact issues.
The question is therefore whether DLFS’s breach of contract claims were
before the trial court after the first summary judgment. The issues determined
by a summary judgment are final even though the judgment is interlocutory, and
a party may not continue to litigate the issues so determined unless the
judgment is set aside by the trial court or reversed on appeal.6 If a trial court
decides some of the contested issues prior to trial in a partial summary
judgment, the trial court may later revisit those issues while it retains plenary
power over the judgment as long as the parties are given a fair opportunity to
5
… See Tex. R. Civ. P. 166a(c) (stating the summary judgment shall be
rendered if the evidence on file before judgment shows there is no genuine
issue as to any material fact).
6
… Martin v. First Republic Bank, Fort Worth, N.S., 799 S.W.2d 482,
488–89 (Tex. App.—Fort Worth 1990, writ denied); see also Robles v. Consol.
Graphics, Inc., 965 S.W.2d 552, 558 n.5 (Tex. App.—Houston [14th Dist.]
1997, pet. denied) (stating that because the trial court had already decided an
issue in the first summary judgment, that issue was not before the court in a
second summary judgment and the court properly refused to consider it).
7
present evidence on the issues. 7 A statement in a final judgment that it
supercedes and replaces a previous partial summary judgment does not
necessarily demonstrate that the trial court revisited the previously litigated
issues.8 That the trial court’s final judgment is inconsistent with its prior grant
of partial summary judgment and that, during trial on the remaining issues, the
trial court heard evidence relating to the issues previously decided are
indications that a trial court reconsidered previously litigated issues. 9
Consideration of the record of the hearing on the second summary
judgment and a comparison of the two orders granting summary judgment
show that in the second summary judgment proceeding, the trial court
determined only those issues raised in the second summary judgment
motion—DLFS’s entitlement to the return of the equipment and Appellants’
counterclaims. The trial court repeatedly mentioned in the hearing that it had
already granted final summary judgment in the previous hearing on the special
exceptions. The court stated that it understood that the parties disputed
whether the second summary judgment motion was “just more of a clean up”
7
… Elder Constr., Inc. v. City of Colleyville, 839 S.W.2d 91, 92
(Tex.1992); see also Luecke v. Wallace, 951 S.W.2d 267, 275 (Tex.
App.—Austin 1997, no writ).
8
… Luecke, 951 S.W.2d at 275.
9
… Id.
8
or whether the court could consider Appellants’ objections to DLFS’s summary
judgment evidence. The court ultimately overruled Appellants’ objections, and
it entered a judgment that is entirely consistent with the first summary
judgment. The second summary judgment expanded the amount of
prejudgment interest to include the time from the first summary judgment to the
second and addressed the issues raised by the second summary judgment
motion but in all other respects matched the first summary judgment. The trial
court did not revisit the issues of existence of lease contracts, performance by
DLFS, breach of contract by Appellants, or damages; those issues were not
litigated in the second summary judgment proceeding. Thus, Appellants could
not rely on objections made in or evidence attached to their response to the
second summary judgment to revisit those issues previously adjudicated. We
overrule Appellants’ first issue.
But although Appellants could not rely on objections made after judgment
to prevent summary judgment, on appeal, Appellants may raise new objections
to the substance of DLFS’s evidence to challenge whether DLFS’s evidence
was sufficient to establish its right to judgment.10 In Appellants’ third issue,
10
… Wrenn v. G.A.T.X. Logistics, Inc., 73 S.W.3d 489, 498 (Tex.
App.—Fort W orth 2002, no pet.) (holding that defects in substance may be
raised for the first time on appeal).
9
they argue that DLFS’s evidence was insufficient because it was based entirely
on the affidavit of Jake Hornung, a “litigation specialist” with DLFS, which they
contend was not competent summary judgment evidence. We note that under
this issue, Appellants do not object to this evidence with respect to their
counterclaims.
Appellants object that Hornung’s affidavit fails to meet the business
records exception to the hearsay rule because the affidavit was not made by
a person with knowledge of the facts asserted and does not state or prove that
Hornung or another DLFS employee made the records in the regular scope of
business or made the records at or near the time of the event. They also object
that the affidavit does not satisfy rule 902(10) of the Texas Rules of Evidence.
These are objections to the form of the affidavit and had to be timely raised in
the trial court to be raised on appeal.11 Appellants also object that Hornung’s
lack of personal knowledge prevents the affidavit from constituting competent
11
… See Tex. R. Civ. P. 166a(f) (stating that defects in the form of
affidavits “will not be grounds for reversal unless specifically pointed out by
objection”); Grand Prairie ISD v. Vaughan, 792 S.W.2d 944, 945 (Tex. 1990)
(noting that failure to object to a defect of form in an affidavit results in waiver
of the objection); St. Paul Ins. Co. v. Mefford, 994 S.W.2d 715, 721 (Tex.
App.—Dallas 1999, pet. denied) (stating that hearsay in an affidavit is a defect
of form).
10
summary judgment evidence. This objection is also an objection to form.12
Appellants did not make these objections to the affidavit until after the trial
court had entered judgment on the breach of contract claims, and therefore we
will not consider them in determining whether DLFS established its breach of
contract claims.
But Appellants also object to statements in Hornung’s affidavit that they
allege are conclusory. An objection that a statement is conclusory is an
objection to substance, not form, and may be raised for the first time on
appeal.13 We therefore consider Appellants’ arguments on these objections.
Appellants’ first objection is that the statement by Hornung that DLFS
was the lessor of the equipment is a legal conclusion. Appellants refer to
Hornung’s repeated statements that DLFS entered into the leases with AJMPA
and RGVI using the TAMC name. Appellants appear to argue that because they
12
… See Vaughan, 792 S.W.2d at 945 (stating that an objection that an
affidavit is not based on personal knowledge is a defect of form); Tri-Steel
Structures, Inc. v. Baptist Found. of Tex., 166 S.W.3d 443, 448 (Tex.
App.—Fort Worth 2005, pet. denied) (noting same parenthetically).
13
… Coastal Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136
S.W.3d 227, 232 (Tex. 2004) (holding that conclusory statements cannot
support a judgment even when no objection was made to the statement at
trial).
11
dispute the identity of the lessor and contend that the lessor was TAMS rather
than TAMC or DLFS, Hornung’s statements constitute legal conclusions.
A statement is conclusory when it does not provide the underlying facts
to support it.14 To the extent that these statements are conclusory, any error
by the trial court in considering them was harmless as to DLFS’s breach of
contract claims because sufficient summary judgment evidence demonstrates
that DLFS is currently the lessor under the two leases.15 DLFS’s summary
judgment evidence included: (1) the 1998 lease between TAMC, a program of
TAMS, as lessor, and AJMPA as lessee; (2) a letter from TAMC to Dr. Morris
confirming changes in the monthly payment under the 1998 lease, as provided
in the lease; (3) a letter from TAMC to AJMPA stating that the 1998 lease had
been assigned to DLFS; (4) the 2000 lease between TAMC, a program of
TAMS, as lessor, and AJMPA and RGVI; (5) a letter from TAMC to AJMPA and
RGVI stating that the 2000 lease had been assigned to DLFS; (6) the 1998
guaranty between Morris and TAMC; and (7) the 2000 guaranty between
14
… Residential Dynamics, LLC v. Loveless, 186 S.W.3d 192, 198 (Tex.
App.—Fort Worth 2006, no pet.); see also Black’s Law Dictionary 308 (8th ed.
2004) (defining “conclusory” as “[e]xpressing a factual inference without
stating the underlying facts on which the inference is based”).
15
… See Tex. R. App. P. 44.1(a)(1) (stating that judgment may not be
reversed on appeal unless the complained of error probably caused the rendition
of an improper judgment).
12
Morris and TAMC. Appellants do not deny that they entered into the leases
and guaranties at issue in this case. In their brief, Appellants acknowledge that
letters were forwarded to AJMPA and RGVI that “purportedly indicat[ed] that
the 1998 and 2000 [leases] had been assigned to [DLFS],” although they
contend that the letters were sent by TAMS.
Appellants’ response to the first summary judgment motion included a
2003 letter from Dr. Morris, on behalf of AJMPA, to DLFS indicating that he
wished to exercise the purchase option at the end of the 1998 lease. Thus, Dr.
Morris understood that DLFS was the lessor at that time with respect to at least
the 1998 lease. As for the 2000 lease, Appellants included with their evidence
a proposal letter from TAMC to Dr. Morris and RGVI offering contract terms for
the 2000 lease. The letter is from TAMC and signed by a TAMC representative
and does not refer to TAMS as lessor in any capacity. The letter states that
TAMS is the manufacturer of the equipment and that TAMC would be the
lessor. Thus, Appellants’ own evidence demonstrates that they were aware
that the 2000 lease contract was being offered by TAMC as lessor. And, as
with the 1998 lease, Appellants received a letter indicating that the 2000 lease
had been assigned to DLFS.
Appellants produced no evidence raising a fact issue as to whether DLFS
is now the lessor under the leases and guaranties, and DLFS demonstrated as
13
a matter of law the existence of the contracts at issue between it and
Appellants. Whether DLFS fraudulently represented to Appellants that TAMS
was the lessor at the time the leases were entered into is relevant to
Appellants’ counterclaims but not to DLFS’s burden of proving that it is
currently the lessor who may enforce the leases and guaranties with respect to
its breach of contract claims.
Appellants also object that Hornung’s statement that DLFS “has
performed its obligations under the Lease and Guaranties” is conclusory. We
agree but hold that any error by the trial court in considering it was harmless.
Under the lease agreements, AJMPA and RGVI agreed to lease certain medical
equipment, and it is undisputed by the parties that the equipment was delivered
as agreed.
Appellants argue, however, that DLFS breached the leases by failing to
comply with the lease end option in the 1998 lease by never providing AJMPA
with the original acquisition cost of the equipment so that it could calculate the
lease end purchase price. They also argue that DLFS breached the leases by
wrongfully attempting to repossess the equipment in November 2005,
damaging the equipment in the process.
Although Dr. Morris may have notified DLFS in 2003 that AJMPA wished
to exercise the purchase option at the end of the lease, the lease provided that
14
such option could only be exercised if no event of default had occurred and
remained uncured. Dr. Morris admitted in his affidavit attached to Appellants’
response to the first summary judgment motion that he stopped making
payments on the equipment, which is an event of default under the leases. In
addition to statements in Hornung’s affidavit regarding Appellants’ payment
history, DLFS provided as summary judgment evidence an accounting history
showing that the monthly rent payment for May 2004, the final month of the
original lease term, was not paid until 2005. Furthermore, AJMPA was
provided with what DLFS contends is the acquisition cost in a letter it sent to
Dr. Morris in March of 1999. Although Dr. Morris disputes that this amount is
the actual acquisition cost of the equipment, the fact that he disputes how
much DLFS expected him to pay to exercise the option does not raise a fact
issue on whether he was furnished with the information. We also note that Dr.
Morris did not indicate a disagreement with the quoted acquisition cost when
he sent the letter in 2003 stating that he wished to exercise the lease end
purchase option. Because there existed an uncured event of default at the
expiration of the 1998 lease and therefore DLFS was under no obligation to
allow Appellants to purchase the equipment and because DLFS did provide
Appellants with the acquisition cost, Appellants failed to raise a fact issue as
to whether DLFS performed under the leases.
15
Furthermore, Appellants cannot argue on appeal that DLFS wrongfully
attempted to repossess the equipment and thereby breached the leases.
DLFS’s attempt to repossess the equipment occurred after the trial court had
entered the first summary judgment ruling on DLFS’s breach of contract claims.
An event occurring after adjudication of a breach of contract claim cannot be
a consideration in the trial court’s determination of the plaintiff’s prior breach. 16
Thus, because DLFS sufficiently established that it performed its obligations
under the leases and guaranties, and because Appellants did not raise a genuine
issue of material fact on the issue, any error by the trial court in considering
Hornung’s statement to that effect was harmless.
Appellants next object to statements by Hornung with respect to
Appellants’ breach of the leases. They first object to his statement as to
Appellants’ (1) delay or failure to make lease payments; (2) failure to exercise
the purchase option on the equipment; (3) retaining possession of the
equipment; (4) failure to pay property taxes; (5) defaults on the leases; (6)
failure to cure the defaults; and (7) refusal to perform under the lease
16
… See, e.g., Hussong v. Schwan's Sales Enters., Inc., 896 S.W.2d 320,
323 (Tex. App.—Houston [1st Dist.] 1995) (op. on reh'g) (stating that “a trial
court can only consider pleadings and proof on file at the time of the hearing,
or filed after the hearing and before judgment with the permission of the
court”).
16
agreements and personal guaranties. Rather than point out specific
objectionable statements by Hornung, Appellants point to nine paragraphs,
which we note take up almost three full pages, that they say contain
conclusory statements about these seven subjects.17 In our review of these
three pages, we found only one conclusory statement—that DLFS had
performed its contractual obligations, a statement we have already discussed.
Finally, Appellants object to Hornung’s statements over nine pages of his
affidavit regarding DLFS’s alleged damages resulting from the breaches of the
1998 and 2000 leases. Appellants do not point out which specific statements
they believe are conclusory. After reviewing the nine pages at issue, we found
only one conclusory statement. On page ten of his affidavit, Hornung states
that DLFS “has determined that the amount of taxes associated with the [1998
lease] for the calendar year of 2005 is $10,159.38.” Unlike the amount of
taxes billed for the 2003 and 2004 years, Hornung does not provide the basis
for this calculation, support the statement with documentary evidence, or
demonstrate any personal knowledge of how DLFS arrived at this figure.
17
… See Churchill v. Mayo, 224 S.W.3d 340, 347 (Tex. App.—Houston
[1st Dist.] 2006, pet. denied) (citing former rule 38.1(h) of Texas Rules of
Appellate Procedure and concluding that Mayo presented nothing for review on
her objection to an affidavit as conclusory by failing to identify any particular
statement in the affidavit).
17
Because this statement was conclusory, the trial court should not have
considered it.18 We sustain Appellants’ third issue as to this statement and
overrule their issue as to the remainder of their objections.
In Appellants’ second issue, they contend that DLFS failed to prove that
no genuine issue of material fact existed on its breach of contract claims and
its asserted damages. To establish its right to judgment, DLFS first had to
establish the existence of a valid contract between it and Appellants; its
performance under the contract; breach of the contract by Appellants; and
damages sustained by DLFS as a result of Appellants’ breach.19
As discussed above, DLFS established as a matter of law the existence
of a contract between it and Appellants and performance by DLFS. DLFS also
established that Appellants breached the leases. And, because the guaranties
provided that an event of default under the lease constituted an event of default
under the guaranty, DLFS also established that Appellants breached the
guaranties. Appellants argue, however, that they made all of the requisite lease
payments and timely and properly exercised the lease end option under the
1998 lease. Although Appellants may have made the requisite number of
18
… See Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996)
(stating that a conclusory affidavit does not raise a fact issue).
19
… See Residential Dynamics, 186 S.W.3d at 198.
18
monthly payments under the 1998 lease, they did not do so until 2005 and
therefore did not do so without first breaching the lease agreements.
Furthermore, as discussed above, Dr. Morris’s attempt to exercise the lease end
purchase option on the 1998 lease had no effect because of the existence of
an uncured event of default at the end of the lease term.
Appellants also argue that a genuine issue of material fact exists as to
whether AJMPA and RGVI complied with the 2000 lease. In his own affidavit,
Dr. Morris stated that he stopped making payments on the equipment, which
under the lease was an event of default. Appellants did not timely offer any
other evidence raising a fact issue on compliance with the lease. DLFS
established a prima facie case that Appellants breached the 2000 lease, and
Appellants failed to demonstrate that a genuine issue of material fact exists on
the matter. Appellants attempted to introduce evidence that they contend
raised a fact issue on the matter, but they did not do so until after the first
summary judgment. Because the issue of breach of contract was never
relitigated after that judgment, that evidence, even if it raised a fact issue, was
not timely before the trial court on the issue of Appellants’ breach.
We now consider whether DLFS established its damages as a matter of
law. With respect to the 1998 lease, DLFS asked the court to award
$285,871.80 in damages for unpaid monthly rent payments. Although
19
Appellants assert on appeal that the 1998 lease only required fifty-seven
payments, in their counterclaims filed before the first summary judgment, they
alleged that the 1998 lease required sixty payments. The lease itself failed to
provide the rental payment for the last several months of the lease. It expressly
set out that for the first three months, no payment would be required, and it
expressly set out the rent due for months four through sixty – $19,257.43 in
base rent, $5,200 for a service agreement, and $2,017.81 in taxes. But
through an omission, the lease says nothing about what rent, if any, would be
due for months sixty-one through sixty-three. Because the parties clearly knew
how to specify when no rent was required, we cannot assume that they
intended for no rent to be due for the last several months of the term.
Appellants are bound, however, by their judicial admissions. “Assertions
of fact, not plead in the alternative, in the live pleadings of a party are regarded
as formal judicial admissions.” 20 Appellants in their counterclaim filed before
the first summary judgment asserted that the 1998 lease “provided for 60
payments in the sum of $26,475.24 each which allegedly included sales tax in
the amount of $2,017.81.” They repeated this assertion in their amended
20
… Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568
(Tex. 2001) (quoting Houston First Am. Sav. v. Musick, 650 S.W.2d 764, 767
(Tex. 1983)).
20
counterclaim, also filed before the first summary judgment. The statement is
clear and unequivocal and was not pleaded in the alternative. 21 They did not
repeat this assertion in their amended counterclaims filed after the first
summary judgment; however, at the time the trial court ruled on DLFS’s breach
of contract claim, their live pleadings did contain this statement of fact. Thus,
the terms of the original contract were established to include 60 payments of
$26,475.24 each, which included the base payment of $19,257.43, sales tax,
and the service agreement payment.22
Because the actual cost of the equipment differed from the cost on which
the lease payments were calculated, TAMC sent a letter to AJMPA modifying
the rent payment. The lease allowed TAMC to change the amount of rent by
up to fifteen percent if the actual cost differed from the estimate.
As with the original lease, the letter contained a mistake. Where the
original lease had an omission, the letter amending the lease contained a
typographical error stating that the new lease term requires “36 payments.”
But the letter taken as a whole demonstrates that “36 payments” was a
21
… Id. at 568 (noting that judicial admission that is clear and unequivocal
has conclusive effect).
22
… Houston First Am. Sav., 650 S.W.2d at 767 (stating that “[a]ny fact
admitted is conclusively established in the case without the introduction of the
pleadings or presentation of other evidence”).
21
typographical error. The original contract had a lease term of sixty-three
months. The letter reasserts that the original contract had a lease term of sixty-
three months. The letter’s purpose was to change the lease payments to
reflect the actual cost of the equipment, and it states that all other lease terms
and conditions would remain the same. The letter states that as amended the
lease calls for no payment through the third month and payments of
$19,058.12, plus sales tax and $5,200 as the service agreement payment, for
months four through sixty-three, for a total of $26,058.12. Taking the letter
in its entirety, “36 payments” is clearly a typographical error. The amendment
letter obviously did not intend to change the duration of the lease.
Under the terms of the lease, DLFS’s change of the rent payment amount
was valid. A contract may provide a party to it with the right to amend the
contract.23 The lease agreement provided TAMC with such a right—the right
to change the amount of rent by up to fifteen percent. TAMC could therefore
validly adjust the monthly base rent payment for months four through sixty-
three from $19,257.43 to $19,058.12 because the adjustment changed the
23
… See Couch v. Southern Methodist Univ., 10 S.W.2d 973, 974 (Tex.
Com. App.1928, judgm’t adopted) (noting that contract may include the right
to amend the contract but the right “implies only those changes contemplating
a correction, improvement, or reformation of the agreement rather than a
complete destruction of it”).
22
base rent by less than fifteen percent. The trial court therefore could determine
that the base rent payments should have been $19,058.12.
Having determined as a matter of law the amount owed for each month
under the 1998 lease, the trial court then had to determine whether DLFS
established as a matter of law the number of payments that Dr. Morris failed
to pay. Although Dr. Morris admitted in his affidavit that he stopped making
payments on the equipment, he did not say when this occurred, and thus the
affidavit did not establish how much unpaid rent he owed to DLFS. A DLFS
accounting report that DLFS included as summary judgment evidence showed
that Appellants did not pay the May 2004 payment until 2005 and showed no
payment for any months after May 2004. And Hornung’s affidavit stated that
Appellants had missed fifteen payments, for the months of June 2004 to
August 2005. Fifteen months of payments of $19,058.12 is $285,871.80, the
amount claimed by DLFS. DLFS therefore established the amount of damages
the trial court awarded it for unpaid rent under the 1998 lease.
DLFS also established the amount of sales tax owed on those months of
unpaid rent. Hornung’s affidavit stated that the tax rate is 8.25 percent. That
percentage applied against the monthly rent payment is $1,572.29 per month,
for a total of $23,584.35. DLFS apparently opted not to ask for an award of
the additional costs for collecting and administering tax payments that under
23
the lease it was entitled to be paid. DLFS thus established the amount of
damages the trial court awarded it for unpaid sales tax under the 1998 lease.
DLFS also claimed $20,971.48 in late charges and finance charges.
Hornung’s affidavit stated that Appellants had not paid this amount. DLFS’s
accounting report showed that DLFS charged that amount for late charges and
finance charges and indicated that those charges were not paid. Thus, the trial
court did not err by awarding that amount in damages.
DLFS further claimed damages for unpaid property taxes on the
equipment, taxes that Appellants agreed to pay as part of the lease agreement.
Hornung asserted that the taxes assessed against the equipment came to
$13,682.61 for 2003 and $11,110.76 for 2004. For tax years 2003 and
2004, DLFS included statements from the city and county taxing authorities
showing the amounts owed for all of DLFS’s personal property in the county,
checks from DLFS to the taxing authorities paying the billed amounts, and an
accounting report showing that DLFS billed Appellants for the taxes and that
Appellants had not paid them. According to Hornung, the accounting reports
show that the bills DLFS sent to Appellants failed to reflect two small discounts
from the taxing authorities ($64.98 for 2003 and $52.44 for 2004) but
correctly showed two administrative fees of $62.50, charged each year and
provided for under the leases as a cost for collecting and making the tax
24
payments. The damages sought by DLFS include the amounts charged by the
taxing authorities, including the discounts, plus the administrative fees. The
evidence demonstrates the amount of property taxes that DLFS was entitled to
recover for 2003 and 2004.
Although Dr. Morris argued in his affidavit that the assessed value of the
equipment was out of line with the fair market value of the equipment and that
he had attempted to appeal the assessment with the appropriate taxing
authorities, this does not defeat DLFS’s right to summary judgment on this
claim for damages. Appellants agreed to pay the assessed taxes, which is what
DLFS billed them for and what they did not pay, and under the leases DLFS was
entitled to recover the amounts sought in its summary judgment motion. Thus,
the trial court did not err by awarding damages of $13,807.61 for the 2003 tax
year and $11,235.76 for the 2004 tax year.
For tax year 2005, DLFS claimed damages of $10,159.38. The only
evidence in the record supporting this amount is a statement in Hornung’s
affidavit that DLFS “has determined the amount of taxes associated with the
1998 [lease] for the calendar year of 2005 is $10,159.38.” We have already
held that this statement is conclusory, and therefore it is not competent
evidence of the 2005 taxes. Because DLFS included no other evidence of the
25
2005 taxes, the trial court erred by awarding damages for property taxes for
the 2005 tax year under the 1998 lease.
Finally, DLFS asked for damages for the agreed-upon purchase option
value of the equipment, if Appellants wanted to purchase the equipment. The
trial court did not award damages for this amount and instead awarded DLFS
possession of the equipment. We therefore do not need to consider whether
DLFS established the purchase option value of the equipment as a matter of
law.
With respect to the 2000 lease, DLFS asked for unpaid rent in the amount
of $148,964.31. DLFS produced summary judgment evidence of the lease,
which established the monthly base payment of $16,551.59. Dr. Morris
admitted in his affidavit that he stopped making payments on the leased
equipment. Hornung stated in his affidavit that AJMPA and RGVI did not make
the monthly payments for the months of December 2004 through August
2005. Nine months of unpaid rent at a rate of $16,551.59 a month is
$148,964.31. DLFS therefore met its burden of establishing damages for
unpaid rent under the 2000 lease.
DLFS further sought damages for the remaining payments that were
accelerated under the lease and the purchase option value of the equipment.
The lease permitted DLFS to accelerate the payments due under the lease upon
26
an event of default, discounted “at an annual rate equal to the lesser of six
percent (6%) or the implicit rate of interest of the Lease.” Hornung stated in
his affidavit that DLFS was entitled to $198,619.08 in damages for the
accelerated payments, based on the monthly rent provided for by the lease
multiplied by the number of months left on the lease. Hornung stated that the
purchase option value of the equipment as set out in the lease was
$79,868.70. The two sums together equals a total of $278,487.78 in
damages.
According to Hornung, $278,487.78 discounted to present value comes
to $267,540.55. Hornung expressly stated that DLFS used a discount rate of
six percent. Hornung did not, however, state separately the present day value
of each of the two categories of damages. Thus, if the trial awarded only one
category of damages, Hornung’s affidavit provided no basis for the trial court
to determine the amount of that category discounted to present day value.
The trial court awarded DLFS $192,463.87, purportedly the amount of
accelerated future payments discounted to present value. Not only is this figure
not provided anywhere in the affidavit, but this appears to be a calculation of
present day value that uses a discount rate of four percent, rather than six
percent. DLFS did not include any other evidence on which this figure could be
27
based. Accordingly, the trial court erred by awarding this amount of damages
for accelerated monthly rent payments.
As for damages of the agreed-upon purchase option value of the
equipment, as with the 1998 lease, the trial court did not award damages for
this amount and instead awarded DLFS possession of the equipment. We
therefore do not need to consider whether DLFS established the purchase
option value of the equipment as a matter of law.
DLFS also asked for unpaid property taxes for 2003 and 2004. Hornung
stated in his affidavit that the taxing authorities billed DLFS $16,240.77 for
2003 and that, as with the 1998 lease, DLFS charged two administrative fees
of $62.50 for the tax year, as provided under the lease. Hornung also stated
that DLFS was taxed $14,122.55 for 2004 and that DLFS charged two
administrative fees of $62.50 for the tax year. Hornung stated in his affidavit
that DLFS never received payments from Appellants for the taxes. DLFS thus
asked for a total of $16,365.77 for the 2003 taxes and $14,247.55 for the
2004 taxes. Hornung stated that these amounts were unpaid. Appellants
failed to timely introduce any evidence that they paid when due the property
taxes on the 2000 lease. DLFS established its damages for the amount of
taxes owed under the 2000 lease for 2003 and 2004.
28
For tax year 2005, DLFS claimed damages of $12,882.78 under the
2000 lease. The only evidence in the record supporting this amount was a
statement in Hornung’s affidavit that DLFS “has determined the amount of
taxes associated with the 2000 [lease] for the entire calendar year of 2005 is
$12,882.78.” Like Hornung’s statement with respect to the 1998 lease, this
statement is conclusory and not competent evidence of the amount of 2005
taxes. Because DLFS included no other evidence of the amount of 2005 taxes,
the trial court erred by awarding damages for property taxes for the 2005 tax
year under the 2000 lease.
DLFS’s final category of damages was for the costs of inspecting the
equipment in September 2005. DLFS alleged in its summary judgment motion
that as part of its expenses in connection with its remedies under the leases,
it had the equipment inspected. DLFS included the invoice from DLFS’s agent,
Medical Marketplace, for its costs of $8,212.97. The leases provided that
Appellants were liable for any expenses incurred by the lessor in connection
with the enforcement of any remedies under the leases, including expenses of
repossessing the equipment. Hornung stated in his affidavit that the inspection
was “as a result of [Appellants’] conduct.”
The only evidence introduced by Appellants addressing this evidence was
the affidavit of Dr. Morris, which, after the trial court sustained DLFS’s motion
29
to strike portions of it, asserts that “[t]here is simply no reason to hire someone
from California to inspect the equipment.” This statement does not raise a fact
issue as to whether DLFS was entitled to recover these damages under the
leases. DLFS therefore established its entitlement to these damages under the
leases.
Because DLFS’s evidence was legally insufficient as to the amount owed
on 2005 property taxes or the amount of damages for accelerated payments
under the 2000 lease, we sustain Appellants’ second issue on those points.
We overrule the remainder of Appellants’ second issue.
In Appellants’ fourth issue, they argue that the trial court erred by
granting summary judgment on Appellants’ affirmative defense of DLFS’s prior
material breach, their counterclaims for fraud and intentional or negligent
misrepresentation, and their claim of rescission of the lease agreements.
With respect to Appellants’ affirmative defenses, they first argue that
Morris signed the leases and guaranties under duress. Duress is an affirmative
defense that Appellants had to plead and raise a fact issue on before the trial
30
court ruled on the breach of contract claims.24 Appellants failed to do so, and
thus, we will not consider this argument.25
Appellants next argue that DLFS failed to comply with the lease end
option for the 1998 lease and that DLFS breached both leases by wrongfully
attempting to repossess the equipment in November 2005 and that by these
acts, DLFS breached the leases. Appellants never pleaded in the trial court that
DLFS breached the leases by wrongfully attempting to repossess the
equipment, 26 and as discussed above, the attempt by DLFS to remove the
equipment did not occur until after the trial court had granted the first summary
judgment on DLFS’s breach of contract claims. 27 As for Appellants’ argument
that DLFS breached the 1998 lease by failing to comply with the 1998 lease
end option, we have already held that because Dr. Morris and AJMPA were in
24
… See Tex. R. Civ. P. 94 (requiring a party to affirmatively plead the
affirmative defense of duress); Brownlee v. Brownlee, 665 S.W.2d 111, 112
(Tex. 1984) (stating that when “the party opposing a summary judgment relies
on an affirmative defense, he must come forward with summary judgment
evidence sufficient to raise an issue of fact on each element of the defense to
avoid summary judgment”).
25
… See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,
678 (Tex. 1979).
26
… See Clear Creek Basin, 589 S.W.2d at 678; Brownlee, 665 S.W.2d
at 112.
27
… See Hussong, 896 S.W.2d at 323.
31
default at the end of the 1998 lease, DLFS had no obligation to allow Dr. Morris
to exercise the lease end option. We therefore reject Appellants’ arguments
that these actions allegedly taken by DLFS, if true, constituted a breach of the
leases.
Appellants next make the point that in DLFS’s first motion for summary
judgment, DLFS did not move for summary judgment on Appellants’ affirmative
defenses. But DLFS did not need to move for summary judgment on
Appellants’ affirmative defenses.28 Rather, to avoid summary judgment,
Appellants had to produce evidence raising a fact issue on each element of their
affirmative defenses.29 We reject Appellants’ argument and hold that the trial
court did not err by granting summary judgment on Appellants’ affirmative
defenses.
We now consider whether the trial court erred by granting the second
summary judgment on Appellants’ counterclaims. In their amended
28
… See Tesoro Petroleum Corp. v. Nabors Drilling USA, Inc., 106 S.W.3d
118, 124 (Tex. App.—Houston [1st Dist.] 2002, pet. denied) (noting that a
plaintiff moving for summary judgment has no obligation to negate the
defendant’s affirmative defenses); see also Barrand, Inc. v. Whataburger, Inc.,
214 S.W.3d 122, 143 (Tex. App.—Corpus Christi 2006, pet. denied) (stating
that Whataburger had no burden to address the defendant’s affirmative
defenses in moving for summary judgment).
29
… See Brownlee, 665 S.W.2d at 112.
32
counterclaims, filed after DLFS filed its first summary judgment motion but
before the trial court granted the first summary judgment, Appellants asserted
for the first time several DTPA claims. DLFS did not amend its summary
judgment motion to address these new counterclaims.
In their third amended counterclaim, filed after the trial court granted the
first summary judgment, Appellants dropped their DTPA claims and asserted the
right of rescission based on intentional misrepresentation or negligent
misrepresentation. In the supplement, Appellants added a fraud claim,
contending that DLFS fraudulently represented to Appellants that the lessor was
TAMS and promised to sell the leased equipment at ten percent of the lessor’s
acquisition cost.
DLFS filed special exceptions arguing numerous grounds for the dismissal
of Appellants’ counterclaims, including (1) the trial court had already ruled on
the claims as a matter of law and (2) Appellants had waived the claims by not
asserting them before the first summary judgment. The trial court orally
granted the special exceptions and dismissed Appellants’ counterclaims. In its
second motion for summary judgment, DLFS reasserted those two grounds. In
the trial court’s order granting the second summary judgment, the court stated
that at the special exceptions hearing, the court had orally ruled that the
counterclaims “had previously been expressly ruled on by the Court or
33
otherwise adjudicated and/or were waived.” The court then ordered that
Appellants take nothing on their counterclaims.
Because the trial court’s summary judgment rests on more than one
ground, Appellants had to raise error as to each ground.30 On appeal, however,
Appellants argue only that the trial court had not considered and rejected their
claims in the first summary judgment. They do not address DLFS’s argument
that their claims were waived because they were not timely asserted.
Accordingly, we must affirm the summary judgment on their counterclaims
based on the unchallenged ground of waiver.
Similarly, we hold that the trial court did not err by not allowing
Appellants to replead because they could not cure their untimeliness by
repleading.31 We overrule Appellants’ fourth issue.
30
… See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970)
(holding that summary judgment must stand since it may have been based on
a ground not specifically challenged on appeal); see also Haire v. Nathan
Watson Co., 221 S.W.3d 293, 301–02 (Tex. App.—Fort Worth 2007, no pet.)
(affirming summary judgment on unchallenged ground); Long v. Long, 196
S.W.3d 460, 468–69 (Tex. App.—Dallas 2006, no pet.) (holding that an
appellate court must affirm trial court’s judgment if a separate and independent
ground supporting it is not challenged on appeal); Shelton v. Sargent, 144
S.W.3d 113, 129 (Tex. App.—Fort Worth 2004, pet. denied) (affirming
summary judgment on unchallenged ground).
31
… Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007)
(noting that trial court need not give pleader opportunity to amend pleading
when the pleading defect is of a type that cannot be cured by amendment).
34
Conclusion
We reverse the trial court’s judgment in part and affirm it in part. Having
sustained Appellants’ second and third issues in part as to the awards of
property taxes for the 2005 calendar year for both leases and the accelerated
payments due under the 2000 lease, we reverse that part of the trial court’s
judgment awarding those damages and remand those three damages issues to
the trial court for further proceedings. Having overruled Appellants’ remaining
issues, we affirm the remainder of the trial court’s judgment.
LEE ANN DAUPHINOT
JUSTICE
PANEL: CAYCE, C.J.; DAUPHINOT and GARDNER, JJ.
DELIVERED: January 22, 2009
35