Opinion
05-22-00692-CV
06-21-2023
ESAM MOHAMMAD ALHALABY AND AURA ENTERPRISES, INC., Appellant v. AUCTION CREDIT ENTERPRISE, LLC, Appellee
On Appeal from the 116th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-21-14909
Before Justices Nowell, Goldstein, and Breedlove
MEMORANDUM OPINION
MARICELA BREEDLOVE JUSTICE.
The trial court granted plaintiff Auction Credit Enterprise, LLC's ("ACE") motion for summary judgment against defendants Esam Mohammad Alhalaby and Aura Enterprises, Inc. d/b/a Nova Motors ("Nova") in an action for breach of contract and breach of guaranty. Nova appeals, complaining in various issues that the trial court erred in granting the motion and in granting attorney's fees. We affirm the trial court's judgment.
Appellant's brief is styled "Appellant Aura Enterprises, Inc. D/B/A Nova Motors Brief of Appellant," and although appellant's attorney is also the attorney for Alhalaby, Alhalaby has not asserted any issues for our review.
I. BACKGROUND
Nova is a car dealership that entered an agreement in March 2020 with ACE, a floor planning financer that provides financing for car dealers who purchase vehicles at car auctions. Alhalaby, Nova's manager, personally guaranteed the agreement. Pursuant to the agreement, ACE financed the purchase of vehicles obtained by Nova at auction which Nova was to sell to retail customers. Once the vehicles were sold, Nova was to repay the financed amount to ACE and retain any additional profits from each sale. Under the agreement, Nova purchased eight cars at auction and sold four of them. However, Nova did not remit payment to ACE for those four vehicles. ACE conducted two lot audits to check whether the vehicles it financed were still in the lot, recovered the remaining four vehicles, and sold them at auction.
ACE filed suit on the agreement and corresponding guaranty on October 8, 2021. Defendants Nova and Alhalaby filed a general denial, asserted an affirmative defense of "No Presentment" under chapter 38.001 of the Texas Civil Practice and Remedies Code, and asserted that the demands, if any, under chapter 38.001 were excessive. On February 22, 2022, ACE filed its First Amended Petition. Defendants did not amend or supplement their answer.
On March 17, 2022, ACE moved for summary judgment. Nova filed a response, alleging that the recovered vehicles were not sold in a commercially reasonable manner. Nova attached affidavits from Alhalaby and Nova's attorney, James Nathan Overstreet, as evidence. The trial court set the motion for hearing on March 28, 2022 but had to reschedule due to docket conflict. The hearing was rescheduled for June 3, 2022. ACE filed its reply to Nova's response on May 31, 2022 and objected to the Alhalaby and Overstreet affidavits on 19 separate grounds. ACE also asserted that the defendants never specifically denied that the sale of the recovered vehicles was conducted in a commercially reasonable manner and that ACE's summary judgment evidence conclusively showed that ACE could recover its reasonable attorney's fees.
The trial court sustained all of ACE's objections to the Alhalaby and Overstreet affidavits and granted summary judgment in favor of ACE in the amount of $80,082.00 plus pre- and post-judgment interest, costs, and reasonable and necessary attorney's fees. This appeal followed. In six issues, Nova complains that:
The arguments in Nova's brief do not correspond with the issues presented on appeal-therefore, throughout this opinion we will attempt to match the argument sections of Nova's brief with the issues presented to the extent possible.
(1) the trial court erred in granting ACE's motion to strike Alhalaby's testimony submitted in response to the motion for summary judgment for failure to answer initial disclosures;
(2) the trial court erred in granting ACE's objections to portions of Alhalaby's affidavit submitted in response to the motion for summary judgment for failure to answer initial disclosures;
(3) the trial court erred in granting summary judgment given that there was a fact issue with regard to the just amount due and owing given Alhalaby's testimony concerning his funds in reserve and "the bogus fees charged for lot audits and collection expense charges";
(4) the trial court erred in failing to consider Alhalaby's testimony that ACE failed to sell the returned vehicles in a commercially reasonable manner;
(5) the trial court erred in failing to consider the contradictory evidence on attorney's fees; and
(6) the trial court erred in requiring defendant to plead commercially reasonable disposition as an affirmative defense rather than requiring it as a part of plaintiff's prima facie case.
In response, ACE argues that:
(1) A plaintiff is not required to prove a prima facie case of commercial reasonableness when the plaintiff pleads generally that all conditions precedent have been performed or have occurred and the defendant has not specifically denied commercial reasonableness and raises commercial reasonableness for the first time in defendant's summary judgment response;
(2) Nova's raising of the issue of lack of commercially reasonable disposition for the first time in Nova's response to ACE's motion for summary judgment is not an amendment of Nova's Original Answer when Nova did not state in its response that the response was amending a previous pleading under Texas Rule of Civil Procedure 64;
(3) The trial court did not abuse its discretion by striking the allegedly expert testimony of Alhalaby and Nova's attorney James Nathan Overstreet because Alhalaby and Overstreet were not disclosed as experts as required under the Texas Rules of Civil Procedure;
(4) No genuine issue of material fact exists as to ACE's damages because Alhalaby's stricken affiant testimony disagrees with the contract between the parties and ACE's summary judgment evidence that lot audits and collection fees may be included in ACE's damages; and
(5) The trial court did not abuse its discretion by awarding ACE its attorney's fees pursuant to the language of the contract between the parties and pursuant to Texas law.
II. STANDARD OF REVIEW
We review a summary judgment de novo. Trial v. Dragon, 593 S.W.3d 313, 316 (Tex. 2019). A traditional motion for summary judgment requires the moving party to show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018). If the movant carries this burden, the burden shifts to the nonmovant to raise a genuine issue of material fact. Lujan, 555 S.W.3d at 84. We take evidence favorable to the nonmovant as true, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 131 (Tex. 2019).
We review a trial court's decision to admit or exclude summary judgment evidence for abuse of discretion. Harris v. Showcase Chevrolet, 231 S.W.3d 559, 561 (Tex. App.-Dallas 2007, no pet.). A trial court abuses its discretion when it acts without reference to guiding rules and principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). To obtain reversal of a judgment based on error in the admission or exclusion of evidence, a party must show "that the error was reasonably calculated to cause and probably did cause rendition of an improper judgment." Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex. 1989).
III. DISCUSSION
Nova raises six issues on appeal. Issues one, two, three, four, and five address challenges to the trial court's rulings on the exclusion of Nova's summary judgment evidence, so we address those issues together. Issue six, regarding whether Nova was required to plead that the vehicles were not sold in a commercially reasonable manner as an affirmative defense, is addressed separately.
A. Exclusion of Alhalaby and Overstreet Affidavits
ACE included 19 separate grounds for the exclusion of the Alhalby and Overstreet affidavits in its motion to exclude. Broadly construed, these grounds fall into the following categories:
(1) objections to the affidavits as conclusory or self-serving (objections 1, 5, 12, 13, 14, 15, 16, 18, 19);
(2) objections to a lack of proper predicate for admissibility (objections 2, 6);
(3) objections to the lack of foundational data for which the opinion is based (objections 3, 8);
(4) objections for failure to designate affiant as an expert witness (objections 4, 9, 17); and
(5) objections to testimony regarding commercial reasonableness (objections 7, 10, 11).
Nova's brief only addresses the fourth category regarding Nova's failure to designate the affiant as an expert witness. Nova's brief does not address the remaining four categories of objections.
The trial court's order struck both affidavits for all purposes but does not specify any specific ground(s) upon which the motion was granted. "[W]hen an appellee urges several objections to a particular piece of evidence and, on appeal, the appellant complains of its exclusion on only one of those bases, the appellant has waived that issue for appeal because he has not challenged all possible grounds for the trial court's ruling that sustained the objection." Cantu v. Horany, 195 S.W.3d 867, 871 (Tex. App.-Dallas 2006, no pet.) (citing Malone v. Foster, 956 S.W.2d 573, 579 (Tex. App.-Dallas 1997), affirmed on other grounds, 977 S.W.2d 562 (Tex. 1998)). Here, Nova only argues that ACE was not surprised or prejudiced by the testimony of the named defendant or the counter-affidavit on attorney's fees. Nova does not address the remaining 16 objections unrelated to Nova's failure to designate the affiants as expert witnesses. We conclude that Nova waived its objections to the exclusion of the Alhalaby and Overstreet affidavits by failing to address all 19 grounds for exclusion included in ACE's motion. See id. We overrule Nova's first, second, third, fourth, and fifth issues.
However, even if this issue had been properly presented for our review, it would not change the disposition of these issues. The record is clear that Nova never disclosed Alhalaby or Overstreet as witnesses, expert or otherwise, and failed to serve either the required initial disclosures under Texas Rule of Civil Procedure 194.2 or the required expert disclosures under Texas Rules of Civil Procedure 194.3 and 195. Therefore, the trial court did not abuse its discretion in excluding the affidavits on that basis. See Ashmore v. JMS Constr., Inc., No. 05-15-00537-CV, 2016 WL 7217256, at *7 (Tex. App.-Dallas Dec. 13, 2016, no pet.) (mem. op.) (holding trial court did not abuse its discretion for striking witness testimony when witness was not timely disclosed) (citing Tex.R.Civ.P. 193.6). Furthermore, this exclusion is automatic and does not require a motion to compel prior to the court's exclusion. See id.
B. Pleading Lack of Commercially Reasonable Sale
In its sixth issue, Nova asserts that it was not required to plead the lack of commercially reasonable sale as an affirmative defense because ACE was required to provide evidence showing commercial reasonableness in its prima facie case. Additionally, Nova argues that ACE was not surprised or prejudiced by its raising of the affirmative defense for the first time in response to ACE's motion for summary judgment.
1. Applicable Law
Section 9.610 of the Uniform Commercial Code requires that collateral must be disposed of in a commercially reasonable manner. Tex. Bus. & Com. Code Ann. § 9.610; Greathouse v. Charter Nat. Bank-Sw., 851 S.W.2d 173, 173 (Tex. 1992). "[A] creditor in a deficiency suit must plead that disposition of the collateral was commercially reasonable." Greathouse, 851 S.W.2d at 176-77. However, a creditor need not plead specifically that the disposition of the collateral was commercially reasonable; generally alleging the completion of all conditions precedent will suffice. Id. at 177. "If pleaded generally, the creditor is required to prove that the disposition of collateral was commercially reasonable only if the debtor specifically denies it in his answer." Id.
2. Discussion
It is undisputed that ACE generally pleaded in its petition that all conditions precedent had been satisfied. It is also undisputed that Nova did not specifically deny commercial reasonableness in its answer. Nova relies on Sunjet, Inc. v. Ford Motor Credit Co., 703 S.W.2d 285 (Tex. App.-Dallas 1985, no writ), for the propositions that the plaintiff has the burden to establish that the sale was conducted in a commercially reasonable manner and that in general, expert testimony is required to do so. However, as discussed at length in Greathouse, that burden is not triggered unless the defendant specifically denies, in its answer, that the sale was done in a commercially reasonable manner. Greathouse, 851 S.W.2d at 177. Therefore, because Nova did not specifically deny the commercial reasonableness of the sale of the recovered vehicles in its answer, ACE was not required to prove that the disposition of collateral was commercially reasonable to prevail on summary judgment. See id.
Nova argues that even though it did not plead the affirmative defense in its answer, raising it in its response to the motion for summary judgment was sufficient. Nova cites to Roark, where the supreme court held that "an unpleaded affirmative defense may also serve as the basis for a summary judgment when it is raised in the summary judgment motion, and the opposing party does not object to the lack of a rule 94 pleading in either its written response or before the rendition of judgment." Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492 (Tex. 1991). However, this case is before us only on ACE's motion, not on cross-motions for summary judgment. Therefore, Roark is inapplicable, especially when the supreme court's later precedent in Greathouse specifically notes that the issue of a commercially reasonable sale must be raised in defendant's answer. Greathouse, 851 S.W.2d at 177.
Nova further argues that its addition of the affirmative defense was acceptable under rule 63 of the Texas Rules of Civil Procedure because there was no showing that ACE was surprised or prejudiced by the amendment. However, rule 63 actually provides that pleading amendments "shall be filed only after leave of the judge is obtained," and the record is devoid of any motion for leave or other pleading showing Nova attempted to amend its answer to include the affirmative defense. See Tex. R. Civ. P. 63. Therefore, whether ACE would have been surprised by an amendment to Nova's answer is immaterial because Nova did not preserve the issue for our review. See Tex. R. App. P. 33.1.
We overrule Nova's sixth issue.
IV. CONCLUSION
Having overruled all of Nova's issues, we affirm the trial court's judgment.
Nova's brief contains an additional argument not included in its issues presented, arguing that ACE failed to meet the demand requirement as prerequisite to the collection of attorney's fees. However, because excessive demand is an affirmative defense, Nova had the burden of proof on that issue. See United Services Auto. Ass'n v. Hayes, 507 S.W.3d 263, 278 (Tex. App.-Houston [1st Dist.] 2016), review granted, judgment vacated, and remanded by agreement, No. 16-0820, 2017 WL 11722772 (Tex. Mar. 24, 2017). Nova was required to demonstrate that ACE acted unreasonably or in bad faith, but other than arguing that "the Plaintiff only made excessive and exorbitant demands," Nova provides no evidence or legal argument that would support summary judgment on this issue. Therefore, we overrule this additional argument. See Tex. R. App. P. 38.1.
JUDGMENT
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellee AUCTION CREDIT ENTERPRISE, LLC recover its costs of this appeal from appellant AURA ENTERPRISES, INC.
Judgment entered.