Elness Swenson Graham Architects, Inc. v. RLJ II-C Austin Air, LP

• Decision Date: 03 May 2017
• Docket Number: NO. 03–14–00738–CV,03–14–00738–CV
• Citation: 520 S.W.3d 145
• Parties: ELNESS SWENSON GRAHAM ARCHITECTS, INC., Appellant RLJ II–C Austin Air, LP ; RLJ II–C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC, Cross–Appellants v. RLJ II–C AUSTIN AIR, LP ; RLJ II–C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC, Appellees Elness Swenson Graham Architects, Inc., Cross–Appellee
• Court: Texas Court of Appeals

520 S.W.3d 145

ELNESS SWENSON GRAHAM ARCHITECTS, INC., AppellantRLJ II–C Austin Air, LP ; RLJ II–C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC, Cross–Appellants

v. RLJ II–C AUSTIN AIR, LP ; RLJ II–C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC, AppelleesElness Swenson Graham Architects, Inc., Cross–Appellee

NO. 03–14–00738–CV

Court of Appeals of Texas, Austin.

Filed: May 3, 2017

Rehearing Overruled May 3, 2017

Rehearing En Banc Overruled May 3, 2017

Steven R. Baggett, Gregory N. Ziegler, Matthew R. Mum, Weston M. Davis, MacDonald Devin, PC, Dallas, TX for Appellant.

J. Stephen Gibson, Jessica Neufeld, Benton T. Wheatley, Tracy Lynn Paczkowsk McCreight, Munsch, Hardt, Kopf and Harr, Austin, TX, Michael W. Huddleston, Munsch Hardt Kopf & Harr PC, Dallas, TX for Appelee.

Before Chief Justice Rose, Justices Puryear, Pemberton, Goodwin, Field and Bourland ;

ON MOTION FOR RECONSIDERATION EN BANC

OPINION

Cindy Olson Bourland, Justice

RLJ 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.

Appellant 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.

BACKGROUND

The 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),¹ 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.

Based 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 was Elness.

At the 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 court's judgment.

DISCUSSION

Elness 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.

RLJ's Capacity to Bring Suit

A. Background

Elness 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.

In 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 defendants.

After 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 RLJ's motion.

B. Standard of Review

To 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).

C. Analysis

Elness 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.² 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 ...