Frazier v. Havens

• Decision Date: 27 March 2003
• Docket Number: No. 14-01-00214-CV.,14-01-00214-CV.
• Citation: 102 S.W.3d 406
• Parties: Fred FRAZIER and Kooney X-Ray, Inc., Appellants, v. James B. HAVENS, Shirley E. Frazier, and Groschke Properties, Appellees.
• Court: Texas Court of Appeals

102 S.W.3d 406

Fred FRAZIER and Kooney X-Ray, Inc., Appellants, v. James B. HAVENS, Shirley E. Frazier, and Groschke Properties, Appellees.

No. 14-01-00214-CV.

Court of Appeals of Texas, Houston (14th Dist.).

March 27, 2003.

Rehearing Overruled May 8, 2003.

COPYRIGHT MATERIAL OMITTED

David Ryan, Houston, Scott Rothenberg, Bellaire, for appellants.

David Davenport, William J. Robertson, Houston, for appellees.

Panel consists of Chief Justice BRISTER and Justices HUDSON and FOWLER.

OPINION

WANDA McKEE FOWLER, Justice.

In five issues, Fred Frazier and Kooney X-Ray, Inc. appeal a judgment in favor of James B. Havens, Shirley E. Frazier, and Groschke Properties in a partnership dispute. We reverse and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1980, Fred Frazier, James B. Havens, and Marshall Frazier formed a partnership called Groschke Properties. After Marshall Frazier died, his wife, Shirley Frazier, assumed his partnership interest. The partnership purchased a tract of property and executed a bank note to finance the purchase. At one time, separate companies owned by each of the partners leased portions of the property from the partnership. Eventually, only Kooney X-Ray, Inc., the company owned by Fred Frazier, continued to occupy any of the partnership property, and the partnership sold all of the property except the portion occupied by Kooney.

Kooney's lease, executed in 1981, provided for an initial monthly rent of $2,315, increasing to $2,700 after two months. An amendment to the lease further provided the monthly rent specified in the lease was based on the then-existing 20½% prime rate charged by the bank holding the note on the property, but the monthly rent would be adjusted in unison with adjustments in the bank's prime rate, up to a rate of 24%. At first, Kooney paid rent directly to the partnership which in turn paid the bank note. Later, Kooney paid the same amount of rent, but directly to the bank as payment on the note. Kooney did not pay any rent after the note was paid off in early 1997.

On February 16, 2000, Havens, Shirley Frazier, and Groschke filed suit against Fred Frazier and Kooney. They alleged Frazier breached the partnership agreement and his fiduciary duty to the partnership by allowing Kooney to use partnership property without paying rent. They also pleaded a quantum meruit claim against Kooney for using partnership property without paying rent. In addition, they sought an accounting of partnership assets and appointment of a receiver over the assets. Frazier and Kooney filed a quantum meruit counterclaim seeking reimbursement for payments they made to improve, maintain, and pay the note on the partnership property beyond what they were obligated to pay. They also sought a declaratory judgment to clarify the contractual relationship of the parties.

The trial was to the court. At trial, Frazier explained why Kooney did not pay rent after early 1997. He testified that Kooney overpaid its rent from 1982 to early 1997 because it was never adjusted in unison with the decrease in the bank's prime rate as provided in the amendment to the lease. He further testified that Kooney maintained and paid taxes on partnership property not leased by it. However, pursuant to Havens and Shirley Frazier's statute of limitations objections, the trial court refused to consider evidence of overpaid rent and other excess payments on behalf of the partnership made by Frazier and Kooney before February 16, 1996 (four years before suit was filed).

The trial court entered judgment that Havens and Shirley Frazier each recover $21,800 plus $3,000 in attorneys' fees, and Frazier and Kooney take nothing on their counterclaim. The court also appointed a receiver to sell the partnership property and divide the proceeds among Havens, Shirley Frazier, and Fred Frazier.

The trial court entered findings of fact and conclusions of law. Among other matters, the trial court found (1) Frazier and Kooney owed past due rent to the partnership; (2) Frazier breached his fiduciary duty to the partnership by possessing and using partnership property without paying rent; and (3) Frazier and Kooney failed to prove any setoffs or credits claimed by them. Among other matters, the trial court concluded (1) the four year statute of limitations applied to Frazier and Kooney's claims that occurred before February 16, 1996; and (2) credit for payments made by Frazier or Kooney before February 16, 1996 was waived by their actions.

II. ANALYSIS

In their first three issues, appellants, Frazier and Kooney, claim the trial court erred in applying the statute of limitations to their claim for overpayments made before February 16, 1996¹, and also erred in excluding evidence of these overpayments. As a result of these errors, they allege the court also erred in denying them a judgment credit, offset, or quantum meruit recovery based on limitations.

A. STANDARD OF REVIEW

The admission or exclusion of evidence rests within the sound discretion of the trial court. City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex.1995); Hunt v. Baldwin, 68 S.W.3d 117, 126 (Tex. App.-Houston [14th Dist.] 2001, no pet.). To obtain reversal of a judgment based upon error in the admission or exclusion of evidence, the appellant must show that (1) the trial court committed error; and (2) the error was reasonably calculated to cause and probably did cause rendition of an improper judgment. TEX.R.APP. P. 44.1; Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex.1989); Hunt, 68 S.W.3d at 126.

B. ERROR IN EXCLUDING EVIDENCE

For two reasons, Frazier and Kooney contend the trial court erred in concluding that limitations required him to exclude evidence of their overpayments before February 16, 1996:(1) under section 16.069 of the Texas Civil Practice & Remedies Code their counterclaim is not barred by limitations; and (2) Havens, Shirley Frazier, and Groschke failed to plead limitations.² We agree with both contentions.

1. COUNTERCLAIM NOT BARRED BY LIMITATIONS

Frazier and Kooney brought their claim for overpayments before February 16, 1996 as a counterclaim in Havens, Shirley Frazier, and Groschke's suit. Section 16.069 of the Texas Civil Practice and Remedies Code saves an otherwise time-barred counterclaim under the following circumstances:

16.069. Counterclaim or Cross Claim

(a) If a counterclaim or cross claim arises out of the same transaction

or occurrence that is the basis of an action, a party to the action may file the counterclaim or cross claim even though as a separate action it would be barred by limitation on the date the party's answer is required.

(b) The counterclaim or cross claim must be filed not later than the 30th day after the date on which the party's answer is required.

TEX. CIV. PRAC. & REM.CODE ANN. § 16.069 (Vernon 1997).

Frazier and Kooney were served with Havens, Shirley Frazier, and Groschke's suit on March 6, 2000. Their answer was due on March 27, 2000. See TEX R. CIV. P. 99(b). They filed their counterclaim on April 24, 2000, less than 30 days after their answer was due. Therefore, because their counterclaim was timely filed under section 16.069, it was not barred by the statute of limitations.³

2. FAILURE TO PLEAD LIMITATIONS

A party waives the affirmative defense of statute of limitations if it is not pleaded or tried by consent. See TEX.R. CIV. P. 94; RE/MAX of Texas, Inc. v. Katar Corp., 961 S.W.2d 324, 327 (Tex. App.-Houston [1st Dist.] 1997, pet. denied). Although Havens, Shirley Frazier, and Groschke did not plead limitations, they contend that issue was tried by consent because Frazier and Kooney allowed the admission, without objection, of substantial evidence on the issue.⁴

A party's unpleaded issue may be deemed tried by consent when evidence on the issue is developed under circumstances indicating both parties understood the issue was in the case, and the other party fails to make an appropriate complaint. See TEX.R. CD; P. 67; Realtex Corp. v. Tyler, 627 S.W.2d 441, 443 (Tex.App.-Houston [1st Dist.] 1981, no writ); La Marque Indep. School Dist. v. Thompson, 580 S.W.2d 670, 673 (Tex.App.-Houston [14th Dist.] 1979, no writ). However, this rule is inapplicable here because Frazier and Kooney did not allow admission of evidence on the unpleaded limitations issue. In fact, Havens, Shirley Frazier, and Groschke do not point to any evidence directly related to the limitations issue that was introduced without objection. Instead, they refer us only to evidence Frazier and Kooney introduced showing that overpayments were made before February 16, 1996. This was not evidence relating to the limitations issue; it pertained to Frazier and Kooney's counterclaim seeking reimbursement for overpayments and other items. This evidence does not fit within rule 67 or the cases cited above. We hold that the issue was not tried by consent, and that Havens, Shirley Frazier, and Groschke waived their limitations defense to Frazier and Kooney's claim for overpayments.

Having concluded that Frazier and Kooney complied with section 16.069 of the Texas Civil Practice & Remedies Code, and that limitations was not tried by consent, we hold that the trial court erred in applying the statute of limitations to this counterclaim for overpayments and in excluding evidence of these overpayments.

C. RENDITION OF IMPROPER JUDGMENT

Next, as we have found that the trial court erred in excluding evidence of Frazier and Kooney's overpayments before February 16, 1996, we consider whether this error was reasonably calculated to cause and probably did cause the rendition of an improper judgment. Frazier and Kooney contend the error caused the rendition of an improper judgment because the undisputed evidence established the excluded overpayments exceeded the $43,600 in damages, plus attorneys' fees, awarded against them. We agree. The following appears to be undisputed in the evidence:

• Kooney overpaid $72,000 in rent...