Ray Malooly Trust v. Juhl, No. 08-02-00512-CV (TX 6/17/2004)

• Decision Date: 17 June 2004
• Docket Number: No. 08-02-00512-CV.,08-02-00512-CV.
• Citation: Ray Malooly Trust v. Juhl, No. 08-02-00512-CV (TX 6/17/2004) (Tex. 2004)
• Parties: THE RAY MALOOLY TRUST, Appellant, v. CHRIS JUHL AND MARIA JUHL, Appellees.
• Court: Texas Supreme Court

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THE RAY MALOOLY TRUST, Appellant, v.CHRIS JUHL AND MARIA JUHL, Appellees.

No. 08-02-00512-CV.

Court of Appeals of Texas, Eighth District, El Paso.

June 17, 2004.

Appeal from the County Court at Law No. Three of El Paso County, Texas, (TC# 99-1746).

Before PanelNo. 4, BARAJAS, C.J., LARSEN, and McCLURE, JJ.

MEMORANDUM OPINION

SUSAN LARSEN, Justice.

In this breach of contract case, The Ray Malooly Trust appeals a judgment against it for $222,000 plus attorney's fees.We affirm.

Factual Summary

In 1972, Ray Malooly and Earl West signed a lease agreement for West to operate a laundromat at 8836 Alameda.The ten-year lease included two five-year options to renew.In 1980, Malooly approved of West's assignment of the lease to Maria Cooper, who married Chris Juhl in 1981.In 1993, Chris Juhl entered into a new contract with William Abraham, who was the leaseholder at that time.This lease was for twelve years—three years initially with three options to renew—and contained a non-competition clause barring the landlord from leasing space in the center to another similar business.It also contained a clause binding successors to the leaseholder, and instructions for exercising the options.

The laundromat never moved from its original retail space at 8836 Alameda, but this new lease bore the address of "a portion of the premises situated at 8828 Alameda," an address within the same shopping center, adjacent to the laundromat.Although the laundromat's location never changed, different addresses—8828, 8836, and 8830—were used over the years to designate its address.Over the life of the lease, the Trust addressed mail to Juhlat 8830 Alameda, and Malooly admitted it was not unusual for shopping centers to shift addresses without any actual physical changes in the center.

In 1995, Juhl exercised his option to renew by properly notifying the leaseholder.The option period was to begin in March 1996.However, the Trust notified Juhl in January of 1996 that it was the new leaseholder, and asked Juhl to verify his lease.At no point did the Trust assert it was not provided a copy of the Juhl lease by the predecessor landlord.Malooly claimed Juhl orally informed him he had no lease on the property, but was operating on a month-to-month basis; Juhl disputed this.To the contrary, he asserts he promised to continue paying rent and abiding by the terms of the lease.Juhl continued operating the laundromat and making rent payments under the terms of the lease through the first three-year option period.In 1998, Juhl again timely notified Malooly he intended to exercise his option to renew.At about the same time, Malooly rented space within the same shopping center to another laundromat, at much higher rental rates.Malooly also sent a letter to Juhl alleging there was no lease between them, and characterizing Juhl's tenancy as month-to-month.There is no evidence that prior to trial, Malooly ever claimed Juhl breached his lease by paying rent and improving portions of 8836 Alameda, as opposed to 8828.The rent checks paid by Juhl to Malooly referenced property located at "8836 Alameda."

The new laundromat opened in the shopping center in December 1998, severely impacting Juhl's business and eventually forcing it to close.Juhl filed suit for breach of contract, and a jury found in his favor.The jury awarded lost profits in the amount of $222,000 plus attorney's fees.This appeal follows.

Issues One, Two, Three, and Four: Trust Can Be Sued

In its first four issues presented, the Trust complains the trial court improperly allowed suit to proceed because a trust, as a relationship rather than a legal entity, cannot be sued and a judgment collectible against trust property cannot be rendered unless the trustee is sued in his representative capacity.He relies on the Texas Property Code, which provides:

If a trustee or a predecessor trustee makes a contract that is within his power as trustee and a cause of action arises on the contract, the plaintiffmay sue the trustee in his representative capacity . . . .Tex. Prop. Code Ann. § 114.084(a)(Vernon 1995)(emphasis added).

We note first that this language is permissive, not mandatory, and the statute does not expressly prohibit suits against trusts.We cannot see how this statute, without more, prohibits suit against a trust.

Moreover, Texas statutes clearly indicate that the legislature intended for a trust to be treated as a legal entity.The Code Construction Act specifies that a "person" includes a "corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity."Tex. Gov't Code Ann. § 311.005(2)(Vernon 1998)(emphasis added).Trusts are listed in numerous Texas statutes as "person" subject to civil penalties.See, e.g.,Tex. Prop. Code Ann. § 301.003(12)(Vernon Supp. 2004);Tex. Ins. Code Ann. art. 1.10D, § (1)(a)(4)(Vernon Supp. 2004);Tex. Health & Safety Code Ann. § 481.002(33)(Vernon 2003& Supp. 2004).We cannot reconcile these statutes with the Trust's assertion that the judgment against it is fundamentally defective because it is not a legal entity.

Further, a number of Texas cases indicate a trust may be named as a party without inclusion of trustee.See, e.g., Castle Tex. Production Ltd. Partnership v. Long Trusts,2003 WL 21771718, at *1(Tex. App.—TylerJuly 31, 2003, pet. denied);Reagan Nat. Advertising v.Vanderhoof Family Trust, 82 S.W.3d 366, 368(Tex. App.—Austin 2002, no pet.);Bright & Co. v. Holbein Family Mineral Trust,995 S.W.2d 742, 743(Tex. App.—San Antonio1999, pet. denied);B.F. Saul Real Estate Inv. Trust v. McGovern,683 S.W.2d 531, 532(Tex. App.—El Paso 1984, no writ).At least one court has stated that a trust is a "separate legal entity."Innovative Office Systems, Inc. v. Johnson,906 S.W.2d 940, 952(Tex. App.—Tyler), writ dism'd by agr.,911 S.W.2d 387(Tex.1995).

Appellant does provide some authority for his argument that a trust is a legal relationship that is not properly subject to suit.SeeHenson v. Estate of Crow,734 S.W.2d 648, 649(Tex.1987);Dueitt v. Dueitt,802 S.W.2d 859, 861(Tex. App.—Houston[1st Dist.]1991, no writ).These cases, however, do not address the specific questions of whether a trust may be held liable as a judgment debtor, nor do they reverse a judgment entered against a trust.Moreover, neither Henson nor Dueitt involved an entity which had entered into a contractual relationship with the plaintiff, as happened here.The Trust also cites Coverdell v. Mid-South Farm Equip. Ass'n,335 F.2d 9, 13-14(6th Cir.1964), which does hold that under Tennessee law a trust cannot be sued.The Trust does not argue that Tennessee law is comparable or even similar to Texas law, however.As this case is governed by Texas law, Coverdell is not controlling, nor do we believe it would be wise to adopt its reasoning in light of numerous Texas cases and statutory authority indicating a trust may be sued.We overrule the Trust's first, second, third, and fourth issues.

Issues Five, Six, and Seven: Contract Issues

In Issues Five, Six, and Seven, Appellant asks the Court to render judgment in the Trust's favor because the lease is not sufficiently certain to be enforceable, it violated the statute of frauds, and because Appellees first breached the lease contract.

Issue Five relies on the difference between the address number stated in the contract and the one actually occupied and improved by the Juhls.Appellant contends the Juhls were first to breach the contract by failing to occupy the address on the lease, 8828 Alameda, and therefore Appellant cannot be held liable for its own breach.Issue Seven focuses on the lack of Malooly's signature on the lease, thereby invoking the statute of frauds, which requires a signed writing.These are both affirmative defenses on which Appellant bore the burden of proof at trial, so we consider them together.SeeTex. R. Civ. P. 94.

When an appellant attacks the sufficiency of the evidence on issues where it bore the burden of proof, it must establish on appeal that the evidence conclusively proved all vital facts in support of the issue.SeeSterner v. Marathon Oil Co.,767 S.W.2d 686, 690(Tex.1989);Smith v. Central Freight Lines, Inc.,774 S.W.2d 411, 412(Tex. App.—Houston [14th Dist.]1989, writ denied).In a "matter of law" review, we use a two-prong test.SeeW. Wendell Hall, Revisiting Standards of Review in Civil Appeals, 24 St. Mary'sL. J. 1045, 1135(1993).We first examine the record for evidence that supports the finding, while ignoring all evidence to the contrary.Dow Chem. Co. v. Francis,46 S.W.3d 237, 241(Tex.2001).If there is no evidence to support the finding, we then examine the entire record to determine if the contrary proposition was established as a matter of law.SeeSterner,767 S.W.2d at 690.Only if the contrary proposition is conclusively established will we sustain the issue.Croucher v. Croucher,660 S.W.2d 55, 58(Tex.1983).

The statute of frauds requires a writing for a lease that cannot be performed in one year or less, signed by the person against whom the contract is charged.Nevertheless, the courts will not enforce the statute of frauds where non-enforcement of a contract would itself plainly amount to a fraud.SeeFort Worth Neuropsychiatric Hosp., Inc. v. Bee Jay Corp.,587 S.W.2d 746, 748(Tex. Civ. App.—Fort Worth1979), rev'd on other grounds,600 S.W.2d 763(Tex.1980).A valid contract need not be a single writing, but may consist of various communications signed by parties connected with the transaction.SeeKey v. Pierce,8 S.W.3d 704, 708(Tex. App.—Fort Worth1999, pet. denied).When one party partially performs under an agreement, an exception to the statute of frauds is implied.SeeNewsom v. Newsom,378 S.W.2d 842, 844-45(Tex.1964)(oral agreement to lease property for more than one year...