Coinmach Corp. v. Aspenwood Apartment Corp.

• Decision Date: 14 February 2014
• Docket Number: No. 11–0213.,11–0213.
• Parties: COINMACH CORP. f/k/a Solon Automated Services, Inc., Petitioner, v. ASPENWOOD APARTMENT CORP., Respondent.
• Court: Texas Supreme Court

417 S.W.3d 909

56 Tex. Sup. Ct. J. 77

COINMACH CORP. f/k/a Solon Automated Services, Inc., Petitioner,

v.ASPENWOOD APARTMENT CORP., Respondent.

No. 11–0213.

Supreme Court of Texas.

Argued Feb. 27, 2013.

Decided Nov. 22, 2013.

Rehearing Denied Feb. 14, 2014.

Amy J. Schumacher, Roach & Newton, L.L.P., Austin, TX, Daniel William Davis, Mary Leigh Harrell, Robert M. ‘Randy’ Roach Jr., Roach & Newton, L.L.P., Daryl W. Bailey, Looper Reed & McGraw, P.C., Houston, TX, for Petitioner.

Nelson H. Mock, Texas RioGrande Legal Aid, Inc., Austin, TX, for Amicus Curiae Texas Housing Hustice League.

Alan B. Daughtry, Jack Zeev Yetiv, Attorney at Law, Houston, TX, for Respondent.

Justice BOYD delivered the opinion of the Court.

We have previously explained that a tenant “who remains in possession of the premises after termination of the lease occupies ‘wrongfully’ and is said to have a tenancy at sufferance.” Bockelmann v. Marynick, 788 S.W.2d 569, 571 (Tex.1990). This case involves a commercial tenant that remained in possession for six years after it lost its lease when the property was sold through foreclosure. After arguing to the contrary—at times successfully—for over ten years, the tenant ultimately conceded that the foreclosure terminated the lease and, because the new owner immediately and continually insisted that the tenant vacate the premises, the tenant became a tenant at sufferance. We must decide whether the tenant can be liable for breach of the terminated lease, for trespass and other torts, or for violations of the Texas Deceptive Trade Practices–Consumer Protection Act (DTPA), and whether the property owner can recover attorney's fees under the Texas Uniform Declaratory Judgments Act (UDJA). The trial court entered summary judgment for the tenant on all of the owner's claims, and the court of appeals reversed and remanded in part. Agreeing with the court of appeals, we hold that (1) a tenant at sufferance cannot be liable for breach of the previously-terminated lease agreement; (2) a tenant at sufferance is a trespasser and can be liable in tort (although the extent of liability depends on the nature of the trespass), including, in this case, tortious interferencewith prospective business relations; and (3) the tenant in this case cannot be liable under the DTPA because the property owner was not a consumer. Disagreeing with the court of appeals, we hold that (4) the property owner in this case cannot recover under the UDJA. We therefore affirm the court of appeals' judgment in part, reverse in part, render judgment for the tenant on the owner's claim for declaratory relief, and remand the case to the trial court for further proceedings.

I.BACKGROUND

Coinmach Corp. installs and maintains coin-operated laundry machines in apartment complexes. Rather than lease its equipment to property owners, it leases laundry rooms from the owners and installs and operates its own machines in those rooms. In 1980, Coinmach entered into a ten-year lease of “the laundry room(s)” at the Garden View Apartments in Harris County, Texas. The lease was expressly “subordinate to any mortgage or deed of trust on the premises.” In 1989, the parties extended the lease term until 1999. In 1994, the owner's lender foreclosed on its deed of trust. The individual who bought the complex at the foreclosure sale immediately deeded it to a company he owned, and a few months later that company sold the complex to Aspenwood Apartment Corp.

Aspenwood immediately gave Coinmach written notice to vacate the laundry rooms, asserting that the foreclosure sale had terminated the lease and that Coinmach had failed to maintain the equipment in an adequate and safe condition. When Coinmach refused to vacate, Aspenwood removed Coinmach's equipment, began to remodel one of the laundry rooms, and filed a forcible entry and detainer (FED) action to evict Coinmach from the premises. Coinmach, in turn, obtained a writ of reentry from the justice court,¹ and refused to vacate the premises.

Two years later,² Aspenwood sent Coinmach another notice to vacate and filed a second FED action. This time, the justice court ordered Coinmach to vacate the property, but Coinmach appealed for a de novo trial and the county court at law reversed. Aspenwood appealed that judgment to the court of appeals, but that court ultimately dismissed the appeal for want of jurisdiction.³ By then, the lease's 1999 termination date had passed, but Coinmach still refused to vacate. After Aspenwood contracted with a different laundry company and that company set up operations in a laundry room that Coinmach had previously abandoned, Coinmach obtained another writ of reentry and forced that company to leave the premises, based this time on sworn testimony that the lease had automatically renewed for another nineteen-year term. Coinmach thus continually remained in possession of the premises, while Aspenwood continued to send additional notices to vacate, complaining of Coinmach's repeated failures to maintain the condition of its equipment, pay rent, and provide an accounting of its receipts. Aspenwood maintains it never cashed any checks it received from Coinmach.

Meanwhile, Aspenwood filed the present suit in district court in 1998, shortly after it filed the second FED action. Aspenwood originally asserted claims against Coinmach for trespass to try title, common law trespass, breach of the lease agreement, DTPA violations, statutory and common law fraud, tortious interference with prospective business relations, and a declaratory judgment that Coinmach had no right to possession and no leasehold interest in the property. Coinmach filed counterclaims for breach of the lease agreement, breach of warranties of possession, quiet enjoyment, fitness for a particular purpose, and suitability, defamation, tortious interference, bad faith, and harassment. The trial court first ruled as a matter of law that the 1994 foreclosure sale had terminated Coinmach's lease agreement. It then submitted the case to a jury, which found in favor of Aspenwood and awarded approximately $1.5 million, consisting of actual damages, DTPA treble damages, exemplary damages, attorney's fees, and prejudgment interest. In the spring of 2000, after the trial court entered judgment for Aspenwood on the jury's verdict, Coinmach vacated the premises.

Coinmach also filed a motion for new trial, however, and the trial court granted that motion. The parties subsequently amended their pleadings. Aspenwood reasserted all of its prior claims except for statutory and common law fraud, while Coinmach continued to deny liability but dropped all of its counterclaims. In May 2007, the trial court entered a partial summary judgment, ruling that the foreclosure sale terminated the lease and that Coinmach became a tenant at sufferance. Based on these holdings, the court struck all of Aspenwood's breach of contract claims. Coinmach then filed motions for summary judgment and Rule 166 motions asking the court to rule, as a matter of law, that a tenant at sufferance cannot be a trespasser; that Aspenwood could not seek declaratory relief and attorney's fees under the UDJA; that Aspenwood's trespass, trespass to try title, DTPA, and tortious interference claims were either moot or procedurally improper; and that, since Coinmach was not a trespasser, it could not be liable for such tort-based claims. In June 2008, the trial court issued orders granting Coinmach's motions, ruling that Aspenwood was not a consumer under the DTPA and that Coinmach had a possessory interest in the property from the time of foreclosure until it vacated the premises in 2000, and concluding that the effect of its legal rulings was to preclude Aspenwood's remaining claims as a matter of law. The court thus entered judgment that Aspenwood take nothing on its claims.

The court of appeals affirmed in part, reversed in part, and remanded. The court affirmed the dismissal of Aspenwood's breach of contract claims, holding that, because Aspenwood never consented to Coinmach's remaining on the premises, no actual or implied contractual relationship existed between the parties. 349 S.W.3d at 634. But the court reversed and remanded Aspenwood's claims for trespass, trespass to try title, tortious interference, and declaratory judgment, concluding that Coinmach, as a tenant at sufferance, had no possessory interest in the property. Id. at 638–39. Finally, the court affirmed the dismissal of Aspenwood's DTPA claims, agreeing with the trial court that Aspenwood was not a consumer. Id. at 640. We granted both parties' petitions for review.

II.DISCUSSION

Generally, a valid foreclosure of an owner's interest in property terminates any agreement through which the owner has leased the property to another. B.F. Avery & Sons' Plow Co. v. Kennerly, 12 S.W.2d 140, 141 (Tex. Comm'n App.1929, judgm't adopted); see also Twelve Oaks Tower I, Ltd. v. Premier Allergy, Inc., 938 S.W.2d 102, 108–09 (Tex.App.-Houston [14th Dist.] 1996, no writ); ICM Mortg. Corp. v. Jacob, 902 S.W.2d 527, 530–31 (Tex.App.-El Paso 1994, writ denied). This is particularly true when, as here, the lease agreement is expressly subordinate to a mortgage or deed of trust affecting the leased premises. Although Coinmach argued to the contrary in support of its effort to avoid eviction, even it now concedes that, “when an owner defaults on a mortgage and the property is sold at foreclosure, the purchaser takes the property free of any leases subordinate to the deed of trust being foreclosed upon.” Agreeing that the 1994 foreclosure terminated Coinmach's lease of the laundry rooms, we address the effect of the termination on the parties' legal rights.

A. Tenant at Sufferance

The parties now agree that, upon termination of the lease, Coinmach became a “tenant at sufferance.” Despite their agreement on this point, we must briefly address the nature of a tenancy at sufferance, as a foundation for our discussion...