Opinion
Civil No. 3:04-CV-1954-H.
April 5, 2005
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion for Partial Summary Judgment, filed November 30, 2004; Plaintiff's Response, filed January 7, 2005; and Defendant's Reply, filed January 24, 2005. For the following reasons Defendant's Motion for Partial Summary Judgment is DENIED.
I. Background
On September 5, 2003, Plaintiff Addison Express, L.L.C. ("Addison"), a Texas corporation, entered into a lease agreement with Defendant Medway Air Ambulance, Inc. ("Medway"), a Georgia corporation. (Def.'s Mot. at 2; Pl.'s 2nd Am. Compl. at 1.) Pursuant to the lease, Addison agreed to provide exclusive use of its Learjet Model 35, FAA Reg. No. N354LQ, ("Learjet") to Medway. (Def.'s Mot. at 2; Def.'s App. at 36-50 (Ex. 1).) In return, Medway agreed to pay a security deposit and monthly lease-rentals for a term of twenty-four months. (Def.'s App. at 36-50.) On August 11, 2004, Federal Magistrate Mark Falk of the District of New Jersey issued a Seizure Warrant authorizing the Drug Enforcement Agency ("DEA") to seize the Learjet. ( Id. at 58 (Ex. 3).) The same day, a representative of Addison contacted Medway to notify them of the seizure. ( Id. at 34.) On August 23, 2004, the DEA inspected and grounded the Learjet at Medway's offices. ( Id.) On August 31, 2004, Medway gave notice to Addison that Medway considered the seizure to cause the lease agreement to be "null and void" as of August 11, 2004. ( Id. at 60 (Ex. 4).) On September 7, 2004, Addison brought a breach of contract suit seeking to hold Medway liable for twelve outstanding $19,000 monthly lease payments and other expenses enumerated in the lease agreement. (Pl.'s 2d Am. Compl. at 8-9.) Medway now moves for partial summary judgment on its affirmative defense and counterclaim for declaratory judgment. (Def.'s Mot. at 1.)
II. Standard of Review
Summary judgment is appropriate where the facts and law as represented in the pleadings, affidavits, and other summary judgment evidence show that no reasonable trier of fact could find for the nonmoving party as to any material fact. FED. R. CIV. P. 56; Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Innovative Database Sys. v. Morales, 990 F.2d 217 (5th Cir. 1993). "The moving party bears the initial burden of identifying those portions of the pleadings and discovery in the record that it believes demonstrate the absence of a genuine issue of material fact, but is not required to negate elements of the nonmoving party's case." Lynch Prop., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25).
The moving party may meet its initial burden by "by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325. If the movant fails to meet its initial burden, the motion must be denied, regardless of the nonmovant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). If the movant meets its burden, the nonmovant must go beyond the pleadings and designate specific facts showing that a genuine issue of material fact exists for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998).
In determining whether genuine issues of material fact exist, "[f]actual controversies are construed in the light most favorable to the nonmovant, but only if both parties have introduced evidence showing that a controversy exists." Lynch, 140 F.3d at 625; see also Eastman Kodak v. Image Technical Servs., 504 U.S. 451 (1992). However, in the absence of any proof, the Court will not assume or sift through the record to find that the nonmoving party could or would prove the necessary facts. See Lynch, 140 F.3d at 625; Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003).
A party must do more than simply show some "metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir. 1991).
III. Analysis
The parties do not dispute that the lease agreement is governed by Texas law. (Pl.'s Resp. Br. at 4; Def.'s Br. at 1; Def.'s App. at 48 (Ex. 1).) Medway argues that the undisputed facts prove that it should prevail on its affirmative defenses of excuse and failure of consideration. Specifically, Medway argues that Addison breached its express covenant and warranty of quiet enjoyment when the DEA seized the Learjet; thus Medway's continued performance of the lease was excused. (Def.'s Mot. at 4; Def.'s Br. at 2.) Medway also argues that when the Learjet was seized and became unavailable for Medway's use, the consideration supporting Addison's agreement failed. (Def.'s Mot. at 4; Def.'s Br. at 3.) The Court considers Medway's arguments in turn.
A. Excuse from Further Performance
"It is a fundamental principle of contract law that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from further performance." Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 196 (Tex. 2004); Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex. 1994) Thus, to prevail on its affirmative defense of excuse, Medway must prove that (1) Addison breached the lease agreement and (2) such breach was material. See Mustang Pipeline, 134 S.W.3d at 196. Medway's summary judgment evidence does not "demonstrate the absence of a genuine issue of material fact." Lynch Prop., Inc., 140 F.3d at 625.
1. Article XX
The parties dispute whether or not Addison breached Article XX. (Def.'s Br. at 2; Pl.'s Br. at 6.) The issue, however, is whether Medway is excused from further performance under the terms of Article XX. Article XX reads in pertinent part:
Obligations for payments under this lease shall continue, notwithstanding any unavailability to [Medway] of the [Learjet] for use by [Medway] (except for total destruction of the [Learjet]) during the term of this Lease after delivery and acceptance of the [Learjet] as provided herein, provided that the unavailability of the [Learjet] was not caused by [Addison], its officers, directors, shareholders, servants, agents, or employees.
(Def.'s App. at 48.) Article XX relieves Medway of its "obligations for payments under this lease" if Addison caused the Learjet's unavailability. ( See id.) Medway argues that Addison caused the DEA seizure (Def.'s Br. at 2) and therefore Article XX excuses Medway from its obligation to continue making payments.
Medway's argument lacks evidentiary support. Addison's Second Amended Complaint avers that the Learjet "was `seized' by federal government [sic] pursuant to seizure warrant . . . based on its alleged use in the transportation of narcotics (while the [Learjet] was previously in [Addison]'s possession)." (Pl.'s 2d Am. Compl. at 3). Addison's averment merely recites the fact that the Learjet was seized and the fact that Magistrate Falk issued the Seizure Warrant based on an unproven allegation that the Learjet was used for illicit purposes. Addison's factual allegation does not provide competent summary judgement evidence that Addison caused the Learjet to be used in the transportation of narcotics thereby causing the seizure. Medway has produced no summary judgment evidence showing that the DEA seizure was "caused by [Addison], its officers, directors, shareholders, servants, agents, or employees." (Def.'s App. at 48.) Because Medway has failed "to meet its initial burden, the motion must be denied, regardless of the nonmovant's response." Little, 37 F.3d at 1075. Accordingly Defendant's Motion for Partial Summary Judgment on its defense of excuse under Article XX of the lease is DENIED.
The probable cause required for the Seizure Warrant raises an inference that the unavailability of the Learjet was caused by Addison. An inference, however, is not competent summary judgment evidence. The warrant and its underlying probable cause does not establish that Addison caused the Learjet to become unavailable.
2. Article XVII
Medway argues that Addison breached its express covenant and warranty of quiet enjoyment on August 11, 2004, when the DEA seized the Learjet. (Def.'s Br. at 2.) The covenant and warranty of quiet enjoyment in Article XVII (captioned "Miscellaneous") of the lease reads, in pertinent part:
2. . . . Provided that no Event of Default, or event which, with the passage of time or the giving of notice, would become an Event of Default, shall have occurred and be continuing, [Addison] agrees and covenants that [Medway] shall and may peaceably and quietly have, hold, and enjoy the [Learjet], during the term of this Lease, free from repossession or disturbance by [Addison] or its officers, agents, employees or servants, or by anyone claiming through or under them.
(Def.'s App. at 46-47.)
The Court is of the opinion that the question of whether Addison breached its express covenant and warranty of quiet enjoyment is inextricably intertwined with the question of whether Addison caused either the DEA seizure or the Learjet's unavailability. Because there exists a genuine issue of material fact as to the question of whether the DEA seizure was "caused by" Addison, Defendant's Motion for Partial Summary Judgment on its affirmative defense of excuse is DENIED. B. Failure of Consideration
The premise underlying a failure of consideration defense is that "there was a consideration . . . in the first instance, but that it later failed." Bassett v. Am. Nat'l. Bank, 145 S.W.3d 692, 696 (Tex.App.-Fort Worth Aug. 24, 2004, pet. ref'd). "Generally, failure of consideration occurs when, because of some supervening cause after an agreement is reached, the promised performance fails." Suttles v. Thomas Bearden Co., 152 S.W.3d 607, 614 (Tex.App.-Houston [1 Dist.] July 22, 2004, rehearing overruled); In re Topco, Inc., 894 F.2d 727, 742 (5th Cir. 1990). "A complete failure of consideration constitutes a defense to an action for breach of contract." Walden v. Affiliated Computer Sys., Inc., 97 S.W.3d 303, 320 (Tex.App.-Houston [14th Dist.] 2003, pet. denied).
The Court finds that there was consideration in the first instance, at least from September 5, 2003, through August 11, 2004. The Court concludes, however, that there has not been "a complete failure of consideration." Walden, 97 S.W.3d at 320 (emphasis added). Defendant's summary judgment evidence does not support an absolute defense. Accordingly, Defendant's Motion for Partial Summary Judgment on its defense of failure of consideration is DENIED. C. Rescission
Medway argues that it should be awarded the remedy of rescission. (Def.'s Mot. at 2, 5.) Medway's argument is premised on both its arguments that (1) Addison is in breach and (2) the consideration failed. ( Id.) "Rescission is an equitable remedy that operates to set aside a contract that is legally valid but is marred by fraud or mistake or, for some other reason, the court must set it aside to avoid unjust enrichment." Barker v. Roelke, 105 S.W.3d 75, 84 (Tex.App.-Eastland Mar. 20, 2003, review denied). In the Court's opinion the remedy of rescission is not warranted under these facts. "The decision whether to grant rescission lies within the trial court's sound discretion." Id. Because between September 5, 2003, and August 11, 2004, both parties received their respective promised performance, cancellation of the contract is the appropriate remedy. Accordingly, the portion of Defendant's Motion for Partial Summary Judgment seeking rescission is DENIED.
IV. Conclusion
For the reasons stated above, Defendant Medway Air Ambulance's Motion for Partial Summary Judgment is DENIED.
SO ORDERED.