Opinion
04-23-00069-CV
04-30-2024
John J. PARKER Jr., Appellant v. OHIO DEVELOPMENT, LLC, Appellee
From the 451st Judicial District Court, Kendall County, Texas Trial Court No. 12-298A Honorable Kirsten Cohoon, Judge Presiding
Sitting: Rebeca C. Martinez, Chief Justice, Liza A. Rodriguez, Justice, Lori I. Valenzuela, Justice
MEMORANDUM OPINION
LORI I. VALENZUELA, JUSTICE
This appeal concerns a business dispute that resulted in litigation between appellant John J. Parker, Jr. and appellee Ohio Development, LLC ("Ohio Development"). The trial court granted Ohio Development's Rule 91a motion to dismiss on the ground that Parker's claims had no basis in law. On appeal, Parker asserts the trial court erred in granting the motion to dismiss because (1) Ohio Development did not move on his live pleadings; (2) the trial court considered evidence attached to the motion in contravention of Rule 91a.6; and (3) applying the Rule 91a standard, his dismissed claims allege a basis in law and fact. We reverse and remand for further proceedings consistent with this opinion.
As explained below, this contention is only relevant to Ohio Development's capacity affirmative defense.
Because we are required to accept Parker's factual allegations as true, our background is premised on Parker's fifth amended petition. Our recitation should not be taken as an endorsement of its veracity beyond the context of our review.
From September 1990 until October 2005, Parker, his father, and several related entities controlled nearly 1900 acres of land in western Kendall County, Texas, commonly known as Tapatio Springs. Of those entities, the primary companies relevant to this appeal are (1) Tapatio Springs Real Estate Holdings, Ltd. ("TSREH") and (2) a real estate partnership, Kendall County Development Company, Ltd. ("KCDC").
The Investor
In mid-2005, Michael Shalit approached Parker about partnering in TSREH. After due diligence, Parker agreed to partner with Shalit to obtain a needed capital infusion. Prior to closing on the partnership deal, Shalit infused TSREH with money; Shalit's loan was secured by a conveyance of land inside the development from KCDC to Shalit. The parties intended Shalit to re-convey the property back to KCSC after the partnership deal closed. Shortly after the deal closed, all but one of the properties were returned to KCDC.
Shalit and his then-wife, Robyn Shalit, owned and controlled several entities. The TSREH partnership closing involved a complex series of arrangements between various related entities that essentially resulted in Parker and his father, on the one hand, and the Shalits, on the other hand, assuming a 50/50 partnership in all aspects of Tapatio Springs development. Shalit assumed the role of general partner in both KCDC and TSREH, and Parker was a limited partner. After Shalit assumed the role of general partner, he began a course of self-dealing and siphoning money out of the partnerships; much of the self-dealing involved shell corporations controlled by Shalit through transactions violating the partnership agreements.
The Property
A 370-acre undeveloped area owned by KCDC lays in the northwest portion of Tapatio Springs. Lakeland West Capital held the note on the parcel. After the note came due, the holder refused to re-finance, the note was purchased by Ohio Development, and the property went into foreclosure. Ohio Development appointed William Harmeyer as substitute trustee. At the start of the February 13, 2014 foreclosure sale, Shalit appeared at the courthouse with a check to bring the note then-held by Ohio Development current and stop the foreclosure proceeding, and Harmeyer and Shalit entered the courthouse to work out the details.
However, Shalit's check was a sham. Several hours later-after competing bidders departed the courthouse-Shalit and Harmeyer returned outside and auctioned the property. Because of the scheme, Ohio Development (represented by its appointed substitute trustee, Harmeyer) was the sole remaining bidder, and Ohio Development purchased the note in a "friendly foreclosure" that deprived KCDC of the auction value of the 370-acre property.
The Lawsuit
During litigation with Shalit, Parker discovered newly acquired information establishing Ohio Development is a shell company controlled by Shalit. Within months of foreclosure, Ohio Development granted Shalit, individually, an option to repurchase the property at a discount off its fair market value. Shalit and Ohio Development's scheme deprived KCDC of the money it would have received at a fair auction of the property and allowed Shalit to individually acquire the property below fair market value. Later, in 2017, Shalit conveyed additional properties from KCDC to Ohio Development without an exchange of consideration.
In his fifth amended petition, Parker, derivatively on behalf of KCDC, asserted claims for common law fraud and civil conspiracy against Ohio Development. Parker alleged derivative standing as a limited partner on the basis that KCDC's general partner, Shalit, would not bring claims on behalf of KCDC against himself and his shell company, Ohio Development, and the court-appointed receiver had stated to Parker's counsel that she would rather not bring the claims. The trial court dismissed Parker's derivative claims against Ohio Development as having no basis in law. After the order was made final, this appeal followed.
Standard of Review
Rule 91a provides parties a procedural vehicle to dismiss baseless causes of action. Tex.R.Civ.P. 91a.1. Although claims may be factually or legally baseless, the only issue in this appeal is whether Parker's claims have no basis in law. "A cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought." Id. To establish a cause of action lacks a basis in law, the defendant must establish the plaintiff's claim is foreclosed as a matter of law because either (1) the cause of action in the petition is not recognized by Texas law or (2) the cause of action is recognized, but the plaintiff has alleged facts that defeat those claims under settled law-in other words, the plaintiff has "pleaded itself out of court." In re Shire PLC, 633 S.W.3d 1, 18 (Tex. App.- Texarkana 2021, no pet.). A motion to dismiss must "state specifically the reasons the cause of action has no basis in law, no basis in fact, or both." Tex.R.Civ.P. 91a.2. "Rule 91a establishes a dismissal procedure that falls between the special exception procedure under Rules 90 and 91 and summary judgment procedure under Rule 166a." Id. at 25. Rule 91a and Rule 166a are wholly different procedural vehicles. See In re Shire, 633 S.W.3d at 11-28 (surveying the evolution of and distinguishing dismissal and pleading challenges under Rules 90, 91, 91a, and 166a).
"In ruling on a Rule 91a motion to dismiss, a court may not consider evidence but 'must decide the motion based solely on the pleading of the cause of action, together with any [permitted] pleading exhibits.'" In re Farmers Tex. Cnty. Mut. Ins. Co., 621 S.W.3d 261, 266 (Tex. 2021) (citing Tex.R.Civ.P. 91a.6).
"We review the merits of a Rule 91a ruling de novo; whether a defendant is entitled to dismissal under the facts alleged is a legal question." Id. We construe the pleadings liberally in favor of the plaintiff, look to the pleader's intent, accept the plaintiff's factual allegations as true, and, if needed, draw reasonable inferences from the factual allegations to determine if the pleadings state, as applicable here, a basis in law. Vasquez v. Legend Nat. Gas III, LP, 492 S.W.3d 448, 450 (Tex. App.-San Antonio 2016, pet. denied) (citing Tex.R.Civ.P. 91a.1).
Analysis
Before turning to the merits of the 91a motion, we first address Parker's contention that his amended pleadings defeated Ohio Development's motion.
What Effect did Parker's Pleadings Amendment Have on Ohio Development's 91a Motion?
On appeal, Parker argues:
After Ohio Development filed its Motion to Dismiss, Parker filed his Fifth Amended Petition, clarifying the derivative nature of his claims against Ohio Development. Ohio Development never moved to Dismiss Parker's Fifth Amended Petition. Pursuant to Rule 91a.5(b), Ohio Development did not file an Amended Rule 91a Motion to Dismiss. Ohio Development's Motion only attacks Parker's Fourth Amended Petition and is therefore of no consequence to Parker's Fifth Amended Petition.
We reject Parker's argument based on the plain text of Rule 91a. Parker filed his fifth amended petition on September 29, 2021, and the court heard the motion on October 8, 2021. Because Parker amended the challenged causes of action more than three days before the date of the hearing, Ohio Development could elect, before the date of the hearing, to (1) withdraw the motion; (2) amend the motion directed to the amended cause of action; or (3) stand on the motion. See Tex. R. Civ. P. 91a.5(b). Absent the agreement of the parties, the trial court was required to rule on the motion unless Ohio Development withdrew the motion or Parker timely nonsuited the challenged claims. See id. R. 91a.5(a), (c).
Put to the election of withdrawing or amending its motion, Ohio Development chose to stand on its existing motion. Therefore, the trial court's mandatory consideration of the motion required the trial court to apply factual allegations contained in the live pleading-the fifth amended petition-to the pending motion to dismiss. Consequently, our de novo review likewise considers factual allegations alleged in the fifth amended petition. See In re Farmers, 621 S.W.3d at 266.
The fourth amended petition is no longer regarded as a part of the pleading in the record of this cause. See Tex. R. Civ. P. 65 (absent exceptions inapplicable here, "[u]nless the substituted instrument shall be set aside on exceptions, the instrument for which it is substituted shall no longer be regarded as a part of the pleading in the record of the cause") (emphasis added).
Ohio Development also moved to dismiss claims of statutory fraud and fraudulent transfer; however, those claims were not asserted in the fifth amended petition. See Tex. R. Civ. P. 91a.5(c) (trial court must rule on motion unless cause of action has been nonsuited).
Having determined the scope of our review, we next turn to the causes of action alleged in the fifth amended petition.
Common Law Fraud
In its motion to dismiss, Ohio Development asserts Parker has "not pleaded any representation (allegedly false or otherwise) made by [Ohio Development] to [Parker], and ha[s] failed to plead any of the other elements of a claim for common-law fraud, including reliance or injury." See Tex. R. Civ. P. 91a.2 (requiring motion to "state specifically the reasons the cause of action has no basis in law"). Thus, Ohio Development concludes, Parker's fraud claim is legally baseless. We disagree.
As stated, to establish a cause of action lacks a basis in law, Ohio Development must establish Parker's common law fraud claim is foreclosed as a matter of law because either (1) fraud is not recognized by Texas law or (2) fraud is recognized, but Parker has alleged facts that defeat the claim under settled law. See In re Shire, 633 S.W.3d at 18. As to the first prong, common law fraud is a recognized cause of action under Texas law. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001). As a result, to establish Parker's fraud claim lacks a basis in law, Ohio Development must establish it is foreclosed as a matter of law because Parker pleaded himself out of court by alleging facts that defeat his fraud claim under settled law-that his fraud claim is legally impossible. In re Shire, 633 S.W.3d at 18. After reviewing the pleadings and drawing reasonable inferences from the factual allegations, we cannot discern facts by which Parker pleaded himself out of court.
In truth, Ohio Development's motion "asserts that the petition fails to state enough detail regarding the facts upon which the claim is based. This is not an argument upon which dismissal can be granted under Rule 91a." Id. at 35. Rather, Ohio Development's contention that Parker failed to sufficiently plead elements of its claim "falls squarely within the special exception procedure." See id. (citing Tex.R.Civ.P. 91). Accordingly, we hold the trial court erred in dismissing Parker's fraud claim under Rule 91a. See id.
The distinction between special exception dismissal and Rule 91a dismissal is not a matter of hyper-technicality. It is well-settled that parties subjected to curable pleading complaints under the special exception procedure are entitled to an opportunity to replead before dismissal is appropriate, and in such a case, dismissal is without prejudice. See In re Shire, 633 S.W.3d at 13. Here, the trial court dismissed Parker's claims with prejudice and without affording Parker an opportunity to cure alleged defects.
Civil Conspiracy
Parker first alleged civil conspiracy in his fifth amended petition, and because it elected not to amend its motion, Ohio Development did not move to dismiss the claim. Although dismissal of a cause of action not subject to the motion to dismiss would typically constitute error, conspiracy is a "derivative tort" rather than an independent cause of action. 1st & Trinity Super Majority, LLC v. Milligan, 657 S.W.3d 349, 372 (Tex. App.-El Paso 2022, no pet.). To prevail on a civil conspiracy claim, a plaintiff must show the defendant was liable for some underlying tort. Id. It follows the dismissal of Parker's underlying fraud claim should result in the dismissal of his civil conspiracy claim. But because we have held the trial court erred in dismissing Parker's underlying fraud claim, and because Ohio Development did not seek dismissal of Parker's civil conspiracy claim, we hold the trial court erred in dismissing Parker's civil conspiracy claim.
Ohio Development's Affirmative Defenses
Ohio Development also moved to dismiss Parker's claims on the basis that he individually lacked standing; however, Parker only asserts derivative claims against Ohio Development in the fifth amended petition under the title "FRAUD - CONSPIRACY / SHALIT & OHIO DEVELOPMENT DERIVATIVE CLAIMS BROUGHT ON BEHALF OF KCDC." See Tex. R. Civ. P. 91a.5(c) (trial court must rule on motion unless cause of action has been nonsuited).
Having determined Parker's derivative fraud and conspiracy claims survive 91a dismissal, we turn to whether they are nevertheless foreclosed by Ohio Development's affirmative defenses.
Statute of Limitations
Ohio Development was first joined as a party on April 16, 2021. In its motion to dismiss, Ohio Development asserts the statute of limitations precludes recovery on Parker's claims because it lapsed no later than four years after the February 13, 2014 foreclosure sale of the 370-acre tract.On appeal, Ohio Development further argues Parker failed to sufficiently plead the discovery rule.
Fraud is subject to a four-year limitations period, and the limitations period for conspiracy is the same as the underlying tort-here, four years. Tex. Civ. Prac. & Rem. Code § 16.004(a)(4) (fraud); Agar Corp., Inc. v. Electro Circuits Int'l, LLC, 580 S.W.3d 136, 142 (Tex. 2019) (conspiracy).
As we have explained, to the extent Ohio Development complains about a lack of fair notice or specificity in Parker's pleadings relating to the invocation of the discovery rule, those complaints are appropriately addressed through special exceptions procedure. See In re Shire, 633 S.W.3d at 35. The question before us is, considering Parker's factual allegations, whether Ohio Development's limitations defense renders Parker's claims legally impossible.
Parker does not plead a specific date when he discovered Ohio Development was Shalit's shell company. However, construing the pleadings liberally in favor of Parker, looking to his intent, and drawing reasonable inferences from the pleaded facts, we can reasonably discern: (1) after becoming general partner of KCDC, Shalit undertook a course of self-dealing directly to himself and to shell companies controlled by him; (2) based on new information acquired during litigation with Shalit, Parker discovered Ohio Development is a shell company controlled by Shalit; and (3) Shalit's control of Ohio Development was concealed from Parker through a sophisticated web of related entities. See Vasquez, 492 S.W.3d at 450.
Applying the appropriate standard of review, we conclude Ohio Development failed to demonstrate the application of the statute of limitations renders Parker's claim legally baseless. See In re Shire, 633 S.W.3d at 21 ("[I]f the defendant cannot demonstrate that the plaintiff's recovery on the claim in its petition are foreclosed as a matter of law, then it may still move for summary judgment, but it is not entitled to dismissal under Rule 91a.").
Capacity
Before we address the merits of Ohio Development's capacity argument, we must first consider Parker's assertion that the trial court erred in considering evidence attached to the motion relevant to Ohio Development's capacity affirmative defense.
Can Ohio Development's Answer be Considered?
On appeal, Parker argues, "Having the trial court consider evidence in a Motion to Dismiss is also not allowed. Defendant cannot attach evidence to a responsive pleading and then point to the attached evidence to support a Rule 91a Motion." In response, Ohio Development correctly points out that, relevant to this appeal, the motion made only one reference to its answer- specifically, the receivership order entered by the trial court attached to the answer.
In Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., the supreme court clarified the appropriate scope of Rule 91a review:
Rule 91a limits a court's factual inquiry to the plaintiff's pleadings but does not so limit the court's legal inquiry. In deciding a Rule 91a motion, a court may consider the defendant's pleadings if doing so is necessary to make the legal determination of whether an affirmative defense is properly before the court. We therefore conclude that Rule 91a permits motions to dismiss based on affirmative defenses "if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought." Of course, some affirmative defenses will not be conclusively established by the facts in a plaintiff's petition. Because Rule 91a does not allow consideration of evidence, such defenses are not a proper basis for a motion to dismiss.595 S.W.3d 651, 656 (Tex. 2020) (internal citation omitted). Applied here, the trial court could properly consider Ohio Development's answer to make the legal determination of whether capacity is properly before the court (and it was). In accord with the plain text of Rule 91a, Bethel instructs the trial court to limit its factual inquiry to the plaintiff's pleadings. Therefore, the trial court could not have considered factual allegations or evidence beyond Parker's pleadings in ruling on the motion. We note, however, nothing in the record indicates the trial court exceeded the scope of review by considering facts or evidence outside of the petition.
The dissent would hold Parker failed to preserve error by not objecting to Ohio Development attaching its answer to its motion. However, under these facts, we need not reach the question of whether error preservation is required under Rule 91a.6. See Tex. R. App. P. 47.1 (opinion should be brief as practicable and address raised issues necessary to final disposition). Under Bethel, (1) the trial court could consider Ohio Development's answer to make the legal determination of whether capacity was before the court; (2) there is no indication in the record the trial court exceeded its authority by considering anything beyond factual allegations asserted in the fifth amended petition; (3) properly considered, the answer was not "evidence" prohibited by Rule 91a.6; and, therefore, (4) Parker did not need to object in the trial court.
We express no opinion as to whether and how preservation is required where the record establishes the trial court considered evidence in contravention of Rule 91a.6. Compare Sw. Airlines Pilots Ass'n v. Boeing Co., No. 05-21-00598-CV, 2022 WL 16735379, at *7 (Tex. App.-Dallas Nov. 7, 2022, pet. filed) (implicitly acknowledging preservation requirement under Rule 91a.6 by concluding party preserved error by reciting standard of review in response to motion), with Davis v. Homeowners of Am. Ins. Co., No. 05-21-00092-CV, 2023 WL 3735115, at *5 (Tex. App.-Dallas May 31, 2023, no pet.) (implicitly rejecting preservation requirement under Rule 91a.6), and id. at *8 (Pedersen, J., dissenting) (dissenting on basis of failure to preserve under Rule 91a.6).
That we need not reach the issue of preservation on this record is underscored by contrast with Owings v. Kelly, No. 07-20-00115-CV, 2020 WL 6588610, at *2 n.1 (Tex. App.-Amarillo Nov. 10, 2020, no pet.). In Owings, the appellate court wrote:
That the court requested evidence (i.e., the prior judgment) at the hearing is rather clear. Equally clear is that the Owingses failed to object to the request. So, any complaint they had regarding the court's request was and is waived.Id. (emphasis added) (internal citation omitted). Thus, in Owings, the record reflected the trial court requested and improperly considered evidence, and our sister court held that the plaintiff waived complaint by failing to object when the judge explicitly erred in open court.
By contrast, here, Ohio Development attached its answer to the motion to dismiss, and the trial court unquestionably could have properly considered the answer to determine whether capacity was before it. Further, this record contains no reporter's record of the hearing evidencing the trial court's misuse of the answer as the trial court used evidence in Owings. And, perhaps more importantly, the trial court's order here does not recite that it considered evidence in ruling on the motion.
In other words, because the trial court's consideration (and our de novo review) of the answer is limited to the legal inquiry of whether the affirmative defense of capacity is before the court, the result of the 91a analysis is unaffected whether legal inquiry is taken by judicial notice of the answer in the court's file or the attachment of the answer to the motion to dismiss. Parker need not have-and could not have successfully-objected to the legal inquiry of whether capacity was properly before the trial court. We next turn to the merits.
Citing Bethel for the proposition "the trial court may properly consider Ohio's First Amended Answer" to "make the legal determination of whether an affirmative defense is properly before the court," Ohio Development argued "Ohio Development's attached evidence is not in contravention of Rule 91a" (emphasis in original).
Merits of Capacity Defense
According to Ohio Development's motion, Parker individually lacks capacity because the receivership order awards exclusive authority to the receiver to pursue claims. But Parker's fifth amended petition does not assert the claims individually; they were instead brought derivatively on behalf of KCDC. Under the title "FRAUD - CONSPIRACY / SHALIT & OHIO DEVELOPMENT DERIVATIVE CLAIMS BROUGHT ON BEHALF OF KCDC," Parker particularly pled:
The motion defines "Plaintiffs" as "Jack Parker" and "Jay Parker," or collectively "the Parkers." With respect to capacity, the motion asserts (interchangeably) that "Plaintiffs" and "the Parkers" (being defined as the individual human-beings Jack Parker and Jay Parker) lack capacity.
Ohio Development bid in its debt to purchase the property depriving KCDC of the actual auction value of the property. As further evidence of its conspiracy, shortly after purchasing the property, Ohio Development gave Shalit an option to purchase the property at a discount off its fair market value. . . .
Shalit and Ohio Development conspired to defraud KCDC out of the money it would have received at a fair auction of the property. . . .
Parker was a limited partner at all times relevant to this lawsuit in KCDC. Pursuant to Texas Business Organizations Code § 153.402,
Parker has standing to bring derivative claims on behalf of KCDC. Pursuant to Tex. Bus. Org. Code § 153.401, it is unlikely the general partner of KCDC, being Mr. Shalit, would bring these
claims since he is named as being liable for this conspiracy against KCDC. Additionally, the Court appointed Successor Receiver has indicated to the undersigned she would rather not bring these claims. Thus, the derivative action on behalf of KCDC is the only way Parker is able to redress the partnership's claims against Shalit and Ohio Development. Tex. Bus. Org. Code § 153.403. [Emphasis added throughout.]
To be clear, Parker's claims were first classified as derivative in the fifth amended petition. Yet, Ohio Development chose to stand on its existing motion to dismiss (aimed only at Parker's individual allegations in the fourth amended petition) notwithstanding these substantive amendments. See Tex. R. Civ. P. 91a.5(b). To the extent the trial court dismissed Parker's derivative claims based on a lack of capacity, it was inappropriate under Rule 91a because the motion was directed only to individual claims, but Parker only alleged his claims derivatively on behalf of KCDC.
Nevertheless, had Ohio Development amended its motion to address the claims derivatively, given the factual allegations in the pleadings discussed above, the trial court would have erred in dismissing Parker's derivative claims under Rule 91a on the basis of capacity.
Applying the appropriate standard of review, we conclude Ohio Development failed to demonstrate Parker's claim is legally baseless because of a lack of capacity. See In re Shire, 633 S.W.3d at 21 ("[I]f the defendant cannot demonstrate that the plaintiff's recovery on the claim in its petition are foreclosed as a matter of law, then it may still move for summary judgment, but it is not entitled to dismissal under Rule 91a.").
Conclusion
Parker's fifth amended petition alleged common law fraud and civil conspiracy claims against Ohio Development derivatively on behalf of KCDC. Taking legal notice of Ohio Development's defenses and taking the factual allegations in Parker's petition as true, Parker's derivative claims state a basis in law. We accordingly reverse the order of the trial court and remand for further proceedings consistent with this opinion.
REVERSED AND REMANDED
DISSENTING OPINION
Rebeca C. Martinez, Chief Justice
It is undisputed that John J. Parker, Jr. did not preserve his second issue - that the trial court erred in considering evidence attached to Ohio Development, LLC's answer and referenced in its Rule 91a motion to dismiss - and that Parker failed to brief why he is entitled to a preservation exemption. And yet, the majority constructs a new preservation exemption that he never sought. This holding directly conflicts with two of our sister courts, and it indirectly conflicts with this court's holdings that an appellant must preserve error relating to other provisions in Rule 91a. In analyzing Parker's third issue - that the Texas Business Organizations Code confers on him derivative capacity to maintain his claims against Ohio Development - the majority shifts from Parker's appellate argument - that presumed he prevailed on his unpreserved second issue - to an argument that it fashions on its own. In doing so, the majority ignores the alternative basis rule and misreads the capacity ground that Ohio Development presented below. I would overrule Parker's second and third issues on waiver and affirm. Because the majority does otherwise, I respectfully dissent.
I. Background
According to Parker's fourth petition, he had ownership interests in a golf club, resort, and hotel, collectively known as Tapatio Springs, and in Kendall County Development Company, Ltd. ("KCDC"). Parker alleged that on October 1, 2005, Lynzara-Austin Real Estate Management, LLC, an entity managed by Michael Shalit, acquired a "1% interest in KCDC and became General Partner of KCDC." As background, Parker alleged:
In the northwestern portion of the Tapatio Springs development sits an undeveloped area consisting of approximately 370 acres. Lakeland West Capital owned the note on the parcel. The note came due and the note holder refused to re-finance, despite Parker paying over $200,000 towards principal reduction. Ultimately, Ohio Development purchased the note from Lakeland West and the note was [sic] into foreclosure.
The property was posted for foreclosure and the foreclosure sale was set for February 13, 2014 on the steps of the Kendall County Courthouse. When the sale began, Shalit appeared with a check which would bring the note current and stop the proceedings.
Shalit and the substitute trustee, William Harmeyer, went inside the Courthouse to work out the details of the sale. Apparently, the check was yet another fraud. Several hours after Shalit first presented the check, Shalit and the Trustee then went out a side door of the Courthouse and auctioned the property. The rest of the bidders had either already left or were waiting at the proper normal auction location, so there was only one bidder for the property. Ohio Development purchased the note at the auction, in what William Harmeyer called a "friendly foreclosure."
Based on newly acquired information, it appears Ohio Development is merely a shell corporation controlled by Shalit. In effect, Shalit, in conjunction with Harmeyer defrauded KCDC out of the 370 acres.
Within months of foreclosing on the property, Ohio Development granted Shalit individually an option to repurchase the property.
Then in 2017, Shalit deeded more property from KCDC to Ohio Development with no rendition of actual consideration being paid by Ohio Development to KCDC.
Under the "Causes of Action" section of Parker's fourth amended petition, he alleged claims for: (1) breach of fiduciary duty; (2) breach of contract; (3) statutory fraud under section 27.01 of the Texas Business and Commerce Code; and (4) conspiracy to commit fraud. The causes of action section, however, fails to mention Ohio Development by name.
Ohio Development answered Parker's fourth petition with a general denial, and it pleaded that his claims were barred by the applicable statute of limitations. Ohio Development also filed a motion to dismiss under Texas Rule of Civil Procedure 91a. Ohio Development's Rule 91a motion argued, among other things, that Parker lacked standing and capacity to maintain a derivative claim on KCDC's behalf. To advance this argument, Ohio Development referenced two orders, attached to its answer, that appointed a receiver and successor receiver, respectively, signed by the same trial court that presided over the Rule 91a dismissal motion (collectively the "receivership orders"). The most recent receivership order provides in relevant part:
IT IS ORDERED that the following property ("Receivership Property") is subject to the receivership and said receivership specifically extends over the following entities, assets, and interests:
a. The assets, liabilities and claims of any of the entities jointly owned by either the individuals John Jay Parker, Jr and Michael Shalit or entities controlled by the same two individuals, specifically including the assets, liabilities and claims of the following entities ("Receivership Entities"): . . . [KCDC]
. . .
b. All assets and operations of the Receivership Entities including but not limited to the following: . . . All claims, causes of action, lawsuits, and judgments held by the Receivership Entities.
Ohio Development's Rule 91a motion emphasized provisions in the receivership orders that granted the receiver "authority over essentially the entirety of the assets, claims, potential awards, [and] liabilities . . ." of KCDC. It argued that "[w]ithout authority received from either the Successor Receiver or [the trial court], [Parker] lack[ed] capacity to bring or prosecute [the underlying] lawsuit against [Ohio Development], and therefore the claims pled by [Parker] against [Ohio Development] are baseless and must be dismissed." Ohio Development also asserted that Parker's claims relating to the February 2014 foreclosure sale were barred by the four-year statute of limitations.
Thereafter, Parker filed his fifth amended - and live - petition, which asserted that he had derivative capacity to maintain claims on KCDC's behalf. Specifically, Parker pleaded:
Parker was a limited partner at all times relevant to this lawsuit in KCDC. Pursuant to Texas Business Organizations Code § 153.402, Parker has standing to bring derivative claims on behalf of KCDC. Pursuant to Tex. Bus. Org. Code § 153.401, it is unlikely the general partner of KCDC, being Mr. Shalit, would bring these claims since he is named as being liable for this conspiracy against KCDC. Additionally, the Court appointed Successor Receiver has indicated to the undersigned she would rather not bring these claims. Thus, the derivative action on behalf of KCDC is the only way Parker is able to redress the partnership's claims against Shalit and Ohio Development. Tex. Bus. Org. Code § 153.403.
In a section titled "Fraud-Conspiracy/Shalit & Ohio Development Derivative Claims Brought on Behalf of KCDC," Parker's fifth amended petition asserted:
As described above, Ohio Development purchased the real estate lien note from Lakeland West Capital in the fall of 2013; just weeks after Shalit took out a $650,000 note from Amboy Bank in New Jersey.
Shortly after buying the note, Ohio Development named William Harmeyer as its substitute trustee and began foreclosure proceedings. Harmeyer and Shalit had worked out a deal where the sale would start and Shalit would appear with a check, so the sale would be stopped. The check was a fraud, and the sale would go forward after all the bidders left.
Ohio Development bid in its debt to purchase the property[,] depriving KCDC of the actual auction value of the property. As further evidence of its conspiracy,
shortly after purchasing the property, Ohio Development gave Shalit an option to purchase the property at a discount off its fair market value.
Shalit and Ohio Development conspired to defraud KCDC out of the money it would have received at a fair auction of the property.
Later in Parker's fifth amended petition, he alleged that "Defendants Shalit and Ohio Development conspired together to defraud KCDC out of the fair market value of its property. KCDC has been damaged by the actions of Shalit and Ohio Development." Parker filed a Rule 91a response, but in it, most notably, he did not object to Ohio Development's reliance on the receivership orders in its Rule 91a motion to dismiss.
Ohio Development stood on its initially filed Rule 91a motion to dismiss, and the trial court signed an order granting it.
II. Preservation
In Parker's second issue, he complains - for the first time on appeal - that the trial court erred in considering evidence attached to Ohio Development's answer. The majority exempts Parker from the preservation requirement in Texas Rule of Appellate Procedure 33.1(a). See Tex. R. App. P. 33.1(a). This exemption directly conflicts with recent decisions by two of our sister courts, it indirectly conflicts with at least three of this court's prior holdings, and it ignores generally applicable error preservation and briefing-waiver rules.
A. Appellate Arguments
In Parker's second issue, he complains that the trial court erred if it considered the receivership orders in contravention of Rule 91a. The only authority Parker references is Southern California Sunbelt Developers, Inc. v. Grammer, No. 03-19-00192-CV, 2019 WL 7342249, at *15 (Tex. App.-Austin Dec. 31, 2019, pet. denied) (mem. op.), for its basic proposition that "the trial court is not to consider evidence in ruling on the [Rule 91a] motion." Parker does not identify how he preserved this error, or alternatively, how he is exempt from Rule 33.1(a)'s preservation requirement.
Ohio Development responds by arguing that (1) Parker failed to preserve his complaint by not objecting to Ohio Development's references to the receivership orders in its Rule 91a motion; (2) the receivership orders constitute "records" and "other written instruments" under Texas Rules of Civil Procedure 91a.6 and 59, and therefore, may be considered; and (3) "if the trial court may consider a defendant's pleadings in adjudicating a Rule 91a Motion, it most certainly may consider its previously entered [o]rders."
Texas Rule of Civil Procedure 91a.6 provides in relevant part that "the court may not consider evidence in ruling on the motion and must decide the motion based solely on the pleading of the cause of action, together with any pleading exhibits permitted by Rule 59." Tex.R.Civ.P. 91a.6.
Texas Rule of Civil Procedure 59 provides:
Notes, accounts, bonds, mortgages, records, and all other written instruments, constituting, in whole or in part, the claim sued on, or the matter set up in defense, may be made a part of the pleadings by copies thereof, or the originals, being attached or filed and referred to as such, or by copying the same in the body of the pleading in aid and explanation of the allegations in the petition or answer made in reference to said instruments and shall be deemed a part thereof for all purposes. Such pleadings shall not be deemed defective because of the lack of any allegations which can be supplied from said exhibit. No other instrument of writing shall be made an exhibit in the pleading.Tex. R. Civ. P. 59.
The majority considers Parker's objection for the first time on appeal; however, it ignores Ohio Development's responsive arguments.
B. The Majority's Preservation Exemption
The majority does not dispute that Parker failed to preserve his second issue in the trial court, and that on appeal, he fails to explain how he is exempt from Rule 33.1(a)'s preservation requirement. Nevertheless, the majority relieves Parker from Rule 33.1 by fashioning a complex legal argument that is untethered to the briefing. Cf. Canton-Carter v. Baylor Coll. of Med., 271 S.W.3d 928, 931-32 (Tex. App.-Houston [14th Dist.] 2008, no pet.) ("It is not this court's duty to review the record, research the law, and then fashion a legal argument for appellant when she has failed to do so."). The majority bases its holding on our de novo standard of review and guidance provided in Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., 595 S.W.3d 651, 654 (Tex. 2020). However, both are unavailing.
Texas Rule of Appellate Procedure 33.1(a) provides:
(a) In General. As a prerequisite to presenting a complaint for appellate review, the record must show that:
(1) the complaint was made to the trial court by a timely request, objection, or motion that:
(A) stated the grounds for the ruling that the complaining party sought from the trial court with sufficient specificity to make the trial court aware of the complaint, unless the specific grounds were apparent from the context; and
(B) complied with the requirements of the Texas Rules of Evidence or the Texas Rules of Civil or Appellate Procedure; and
(2) the trial court:
(A) ruled on the request, objection, or motion, either expressly or implicitly; or
(B) refused to rule on the request, objection, or motion, and the complaining party objected to the refusal.Tex. R. App. P. 33.1(a).
Our de novo standard of review does not provide the preservation exemption that the majority employs. As with a trial court's ruling on a motion to dismiss under Texas Rule of Civil Procedure 91a, we review a trial court's ruling on a summary judgment motion de novo. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005) (citing Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003)). However, preservation is essential even in a de novo review of a summary judgment - and by extension, a Rule 91a motion to dismiss. See AAA Free Move Ministorage, L.L.C. v. Latigo Properties, Inc., No. 04-14-00075-CV, 2015 WL 1120330, at *2 (Tex. App.-San Antonio Mar. 11, 2015, no pet.) (holding that the objection to entry of final judgment was sufficient preservation of error for a Rule 91a nonmovant). In Cincinnati Life Insurance Company v. Cates, 927 S.W.2d 623, 624 (Tex. 1996), the defendants moved for summary judgment on four separate grounds. The trial court granted the summary judgment on two of the grounds presented and expressly denied the remaining grounds. Id. On appeal, the Texas Supreme Court recognized that "courts of appeals should consider all summary judgment grounds the trial court rules on and the movant preserves for appellate review that are necessary for final disposition of the appeal when reviewing a summary judgment" and "the appellate court may consider other grounds that the movant preserved for review and trial court did not rule on in the interest of judicial economy." Id. at 626 (emphasis added). With limited exceptions, the same preservation requirements burden a summary judgment nonmovant. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979) (concluding that, with the exception of issues challenging the legal sufficiency of movant's summary judgment proof, issues not expressly presented to the trial court in a written response shall not be considered as grounds for reversal on appeal). Under Cincinnati Life Insurance, the majority cannot use our de novo standard of review to exempt Parker from Rule 33.1(a)'s preservation requirement. See 927 S.W.2d at 624.
The majority's reliance on Bethel, 595 S.W.3d at 654, is similarly misplaced. Before Bethel reached the Texas Supreme Court, the Fifth Court of Appeals observed:
In her first issue, Bethel asserts the plain language of rule 91a limits the scope of a court's review to the plaintiff's pleading. Because an affirmative defense is not part of a plaintiff's pleading, she argues, it cannot serve as a basis for dismissal. Consequently, she concludes, the trial court erred by granting appellees' motion on the basis of the affirmative defense of attorney immunity.
Initially, we note that Bethel did not present this particular issue to the trial court in her response to the motion to dismiss; rather, her response argued only that appellees' conduct constituted a crime for which attorney immunity should not apply. Preservation of error reflects important prudential considerations recognizing that the judicial process benefits greatly when trial courts have the opportunity to first consider and rule on error. Affording courts this opportunity conserves judicial resources and promotes fairness by ensuring that a party does not neglect a complaint at trial and raise it for the first time on appeal. Because Bethel did not present this issue to the trial court below, we conclude it is waived.Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., 581 S.W.3d 306, 309 (Tex. App.- Dallas 2018) (citations omitted), aff'd, 595 S.W.3d 651, 654 (Tex. 2020). Nevertheless, the Fifth Court of Appeals assumed Bethel's first issue was properly before it and analyzed it. Id. On review, the Texas Supreme Court noted:
The court of appeals also concluded that Bethel perhaps waived the Rule 91a argument, but the court addressed the merits of the argument anyway. In this Court, the parties agree that Bethel did not waive the argument and urge the Court to reach the Rule 91a question on the merits.Bethel, 595 S.W.3d at 654, n.2 (citation omitted). Accordingly, the analysis that followed this footnote - and on which the majority relies - was premised on a basic notion of error preservation, which the parties agreed had been satisfied.
In applying Bethel, the majority notes that "there is no indication in the record [that] the trial court exceeded its authority by considering anything beyond factual allegations asserted in the fifth amended petition[.]" Parker v. Ohio Development, LLC, No. 04-23-00069-CV, Slip Op., 11 (Apr. 30, 2024, no pet. h.). However, every indication suggests that the trial court considered Ohio Development's entire motion. Ohio Development titled its motion: "Ohio Development, LLC's Rule 91a Motion to Dismiss Re: Baseless Causes of Action." The trial court's dismissal order provides in relevant part that "Defendant Ohio Development, LLC's Rule 9la Motion to Dismiss re: Baseless Causes of Action is hereby GRANTED." This statement establishes that the trial court considered Ohio Development's entire Rule 91a motion to dismiss, which in turn, referenced and quoted the receivership orders appended to Ohio Development's answer. The majority continues to err when it writes that "properly considered, the answer was not 'evidence' prohibited by Rule 91a.6[,]" and that "Parker need not have-and could not have successfully- objected to the legal inquiry of whether capacity was properly before the trial court." Id. at 11-12 (emphasis added). True enough - an answer is not evidence - but Ohio Development argued not only that its answer raised the affirmative defense of capacity to bring the matter before the court but also that the receivership orders attached to the answer was competent evidence to establish that affirmative defense. Most significantly, Parker did not object to that evidence, and Ohio Development does not concede that error was preserved. Under these circumstances, Bethel provides no guidance. Again, Bethel concerned only an answer - and not also evidence attached to an answer, and error-preservation was conceded. See Bethel, 595 S.W.3d at 654, n.2. As it stands, the majority's holding grants Rule 91a nonmovants access to fundamental error review without any of the attendant analysis. This is not an outcome sanctioned by Bethel or by the Texas Supreme Court.
I note that we have recognized that "[t]he only exceptions to the preservation requirement of Rule 33.1(a) in civil cases are rare instances of 'fundamental error,' which the supreme court has held includes cases in which the face of the record shows the court lacked jurisdiction or in certain types of error in juvenile delinquency cases." Marin Real Estate Partners, L.P. v. Vogt, 373 S.W.3d 57, 92 (Tex. App.-San Antonio 2011, no pet.) (citing In re B.L.D., 113 S.W.3d 340, 350 (Tex. 2003)). We have also recognized that "[e]ven constitutional error can be waived if not raised in the trial court." Id. at 92 (citing In re L.M.I., 119 S.W.3d 707, 711 (Tex. 2003); City of San Antonio v. Schautteet, 706 S.W.2d 103, 104 (Tex. 1986) (per curiam)). The majority does not discuss these standards.
C. An Unnecessary Conflict
In Owings v. Kelly, No 07-20-00115-CV, 2020 WL 6588610, at *1 (Tex. App.-Amarillo Nov. 10, 2020, no pet.) (mem. op.), Kelly filed a Rule 91a motion to dismiss Owings's claims on the ground that they were barred by res judicata. At the hearing, the trial court asked Kelly for a copy of a previously signed judgment that formed the basis of Kelly's res judicata defense. Id. The trial court granted Kelly's motion to dismiss. Id. On appeal, Owings argued that "Rule 91a was never intended to resolve factual and legal issues related to an affirmative defense [i.e., res judicata] presented by a Defendant, especially when the Defendant carries the burden of proof, thus requiring evidence - that is not allowed in a Rule 91a Motion to Dismiss." Id. at *2. The court responded to Owings's argument by noting the fact that "the [trial] court requested evidence (i.e., the prior judgment) at the hearing is rather clear. Equally clear is that [Owings] failed to object to the request. So, any complaint [he] had regarding the court's request was and is waived." Id. at *2 n.1 (citing Thomas v. Logic Underwriters, Inc., No. 02-16-00376-CV, 2017 WL 5494386, at *5 (Tex. App.-Fort Worth Nov. 16, 2017, pet. denied) (mem. op.)).
In Southwest Airlines Pilots Association v. Boeing Company, No. 05-21-00598-CV, 2022 WL 16735379, at *2 (Tex. App.-Dallas Nov. 7, 2022, pet. filed) (mem. op.), Boeing attached to its answer the Association's prior petition and an order dismissing with prejudice the claims asserted in the Association's prior petition. Boeing then filed a Rule 91a motion to dismiss on the ground that the Association's most recent claims were barred by res judicata. Id. The trial court granted Boeing's motion to dismiss. Id. On appeal, the Association argued that the trial court could not consider the exhibits attached to Boeing's answer. Id. at *7. Boeing responded by arguing that the Association did not object to Boeing's contention that the trial court could consider the exhibits. Id. The court rejected Boeing's argument, writing:
[The Association's] response to the motion to dismiss quotes Rule 91a.6 and states: "In ruling on a Rule 91a motion, a court 'may not consider evidence . . . and must decide the motion based solely on the pleading of the cause of action.'" (Citing Tex.R.Civ.P. 91a.6 and Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., 595 S.W.3d 651, 654 (Tex. 2020)). This statement of the standard of review should have been sufficient to call to the trial court's attention that in determining the applicability of Boeing's defense, the court could not consider evidence nor anything outside [the Association's] petition. [The Association] also stated, "Boeing's Motion is based solely on its affirmative defense unsupported by the pleadings." This assertion notified the trial court that Boeing's motion was not based on the factual allegations in [The Association's] petition. We conclude [the Association] preserved its argument for appeal.Sw. Airlines Pilots Ass'n v. Boeing Co., 2022 WL 16735379, at *7 (emphasis added). I read Southwest Airlines Pilots as recognizing, as Owings did, that an appellant must adhere to Rule 33.1(a)'s preservation requirement. See Owings, 2020 WL 6588610.
Error preservation is so basic to appellate procedure that intermediate appellate courts, including ours on at least two occasions, have routinely applied it to three other provisions in Rule 91a that also utilize the terms "must" or "entitled."
The provision at issue provides that "[e]xcept as required by 91a.7, the court may not consider evidence in ruling on the motion and must decide the motion based solely on the pleading of the cause of action, together with any pleading exhibits permitted by Rule 59." Tex.R.Civ.P. 91a.6 (emphasis added).
First, Rule 91a.3(a) provides that "[a] motion to dismiss must be filed within 60 days after the first pleading containing the challenged cause of action is served on the movant[.]" Tex.R.Civ.P. 91a.3(a) (emphasis added). The First Court of Appeals has held that a complaint regarding a trial court's failure to adhere to Rule 91a.3(a) must be preserved. See Malik v. GEICO Advantage Insurance Company, Inc., No. 01-19-00489-CV, 2021 WL 1414275, at *4 (Tex. App.-Houston [1st Dist.] Apr. 15, 2021, pet. denied) (mem. op.) (noting that appellant did not direct appellate court to "any place in the record in which he objected that appellees' original motion to dismiss was not timely filed," and holding that appellant's complaint under Rule 91a.3 was not preserved).
Second, Rule 91a.3(b) provides that "[a] motion to dismiss must be filed at least 21 days before the motion is heard[.]" Tex.R.Civ.P. 91a.3(b) (emphasis added). The Second, Third, and Fifth Courts of Appeals have held that a complaint regarding a trial court's failure to adhere to Rule 91a.3(b) must be preserved. See Caldwell v. Zimmerman, No. 03-17-00273-CV, 2017 WL 4899447, at *2 & n.2 (Tex. App.-Austin Oct. 26, 2017, pet. denied) (mem. op.) (holding no preservation of Rule 91a.3 complaint when appellant failed to raise the issue in his motion for new trial); Thomas, 2017 WL 5494386, at *5 (holding plaintiff failed to preserve complaint regarding compliance with timing provisions of Rule 91a.3 and Rule 91a.6); Envision Realty Grp., LLC v. Chuan Chen, No. 05-18-00613-CV, 2020 WL 1060698, at *3 (Tex. App.-Dallas Mar. 5, 2020, no pet.) (mem. op.) ("To preserve a complaint about lack of notice [of a Rule 91a motion to dismiss], a party must bring the lack of adequate notice to the trial court's attention at the hearing and object to the hearing going forward or move for a continuance.").
Third, Rule 91a.6 provides that "[e]ach party is entitled to at least 14 days' notice of the hearing on the motion to dismiss." Tex.R.Civ.P. 91a.6 (emphasis added). We and the Fifth Court of Appeals have held that a complaint regarding a trial court's failure to adhere to Rule 91a.6 must be preserved. See Quintana v. Holzhaus, No. 04-23-00599-CV, 2024 WL 1079235, at *3 (Tex. App.-San Antonio Mar. 13, 2024, no pet. h.) (mem. op.) (holding that a non-movant's complaint that a dismissal order was signed on only three days' notice was not preserved); Odam v. Texans Credit Union, No. 05-16-00077-CV, 2017 WL 3634274, at *4 (Tex. App.-Dallas Aug. 24, 2017, no pet.) (noting that a party waives its complaint of insufficient Rule 91a notice if it (a) fails to bring the complaint to the court's attention during hearing or (b) fails to raise the issue in a motion for new trial if the party received no notice of hearing); see also Gaskill v. VHS San Antonio Partners, LLC, 456 S.W.3d 234, 239 (Tex. App.-San Antonio 2014, pet. denied) (noting that a complaint of no notice of Rule 91a hearing was preserved in a motion for new trial).
We have even required error preservation outside of the provisions that include the terms "must" or "entitled." In AAA Free Move Ministorage, L.L.C., 2015 WL 1120330, at *1, an appellant argued that the trial court erred by granting a Rule 91a motion to dismiss that was filed while the case was abated. On appeal, the appellees argued that the appellant "waived its complaint by not appearing at the hearing" on the appellees' motion to dismiss. Id. at *2. We held that the appellant "objected to the entry of the final judgment based on the trial court's previous error of granting a legally null Rule 91a motion. Thus, the issue was preserved, and the trial court erred by granting the Rule 91a motion while the suit was abated." Id. at *3 (emphasis added).
D. The Davis Anomaly
The majority makes a passing reference in a footnote to the majority opinion in Davis v. Homeowners of America Insurance Company, No. 05-21-00092-CV, 2023 WL 3735115, at *6 (Tex. App.-Dallas May 31, 2023, no pet.), as some support for its proposition that it "need not reach the question of whether error preservation is required under Rule 91a.6." Parker v. Ohio Development, LLC, No. 04-23-00069-CV, Slip Op., 11, n .8 (Apr. 30, 2024, no pet. h.). In Davis, 2023 WL 3735115, at *1, Davis sued Homeowners of America in connection with its alleged mishandling of an insurance claim relating to property damage. Homeowners of America filed a Rule 91a motion to dismiss, and it attached evidence in support of its motion. Id. at *6. Davis likewise attached evidence to his Rule 91a filings. Id. at *8 (Pedersen, J., dissenting). In addressing Homeowners of America's reliance on evidence, the Davis majority writes:
[Homeowners of America] argues [Davis's] claims have no basis in fact and law because those claims accrued on November 20, 2017, a date more than two years preceding the filing of the lawsuit. To support its position, [Homeowners of America] points to various communications (including claim-denial correspondence) it sent to and received from the Davises after the dispute arose. These documents were attached to [Homeowners of America's Rule 91a] motion, along with a copy of the homeowners insurance policy applicable, and various other items. We do not consider these, however, because they were not attached to [Davis's] pleading [footnote reproduced below] and, in any event, they are clearly evidentiary and not the type of exhibits rule 59 permits. See Tex. R. Civ. P. 91a.6 (court may not consider evidence and must decide rule 91a motion based solely on the pleading of the cause of action, together with any pleading exhibits permitted by rule 59). As Bethel and rule 91a.6 direct, we may not resort to matters outside [Davis's] pleading in making the rule 91a determination. Bethel, 595 S.W.3d at 656 (rule 91a.6 limits scope of court's factual inquiry in determining whether the cause of action has a basis in law).Davis, 2023 WL 3735115, at *6. In a footnote, the majority writes:
Exhibits offered by a rule 91a movant should not be considered. Sw. Airlines Pilots Ass'n v. Boeing Co., No. 05-21-00598-CV, 2022 WL 16735379, at *5 (Tex. App.- Dallas Nov. 7, 2022, pet. filed) (mem. op.); see also Raider Ranch, LP v. Lugano, Ltd., 579 S.W.3d 131, 134 (Tex. App.-Amarillo 2019, no pet.) (party "seeking to inject its defensive theory into the Rule 91a procedure by means of an exhibit to its answer and motion, finds no support in the text of the rule itself or in the cases").
Rule 91a and the statute from which it was derived make this clear. See Tex. R. Civ. P. 91a.6; Tex. Gov't Code Ann. 22.004(g) (stating, in part, "The supreme court shall adopt rules to provide for the dismissal of causes of action that have no basis in law or fact on motion and without evidence.") (emphasis added).
The trial court's order concluding the rule 91a motion was meritorious "[a]fter consideration of the [m]otion, any responses/replies thereto, evidence, and arguments of counsel" ignored this plain directive. The dissent would have us ignore it as well, as it spends seventeen pages purporting to analyze the merits of [Davis's] claims based on evidence that rule 91a and government code section 22.004(g) both say is not to be considered. See Tex. R. Civ. P. 91a.6; Tex. Gov't Code Ann. 22.004(g).Davis, 2023 WL 3735115, at *6, n.8.
The dissent in Davis had no quarrel with the majority's appreciation that Rule 91a prohibited consideration of evidence outside the limited exception permitted by Rule 59. Id. at *8 (Pedersen, J., dissenting). However, it found significant fault with the majority's refusal to recognize, much less adhere, to (1) the preservation requirement in Rule 33.1; (2) the "generous preservation option" crafted in Southwest Airlines Pilots Association; (3) the prohibition by the Supreme Court of Texas that appellate courts may not reverse a judgment on unassigned error; and (4) the limits on what constitutes "fundamental error." Id. at *9-*10 (Pedersen, J., dissenting).
I find the Davis majority's implicit preservation exemption unavailing because it represents a departure from that same court's holdings in Bethel, 581 S.W.3d at 309, and Southwest Airlines Pilots Association, 2022 WL 16735379, at *7. See generally Mitschke v. Borromeo, 645 S.W.3d 251, 257 (Tex. 2022) ("We favorably quoted a decision of the Fourteenth Court of Appeals, which formalized the requirement that one panel remains bound by a prior panel's holdings . . . ."). Setting aside stare decisis concerns, the Davis majority's failure to grapple with the clear and well-reasoned dissent renders its preservation exemption even more questionable.
For all these reasons, I would overrule Parker's second issue because he failed to preserve error. See Tex. R. App. P. 33.1(a).
III. Capacity
In Parker's third issue, he complains that the trial court erred in dismissing his "derivative claims" because the Texas Business Organizations Code confers on him derivative capacity to maintain such claims. Parker specifically argues:
After Ohio Development filed its Motion to Dismiss, Parker filed an Amended Petition, as allowed by 91a.5. Parker's Fifth Amended Petition makes clear his claims against Ohio Development are brought in his derivative capacity as a shareholder of KCDC. Pursuant to the Texas Business Organizations Code § 153.401, Parker has the right to bring derivative claims on behalf of KCDC. Further, since KCDC is a closely held limited partnership, with less than 35 limited partners, Parker does not have to comply with the requirements of Tex. Bus. Org. Code §§ 153.402-410 in order to bring derivative claims on behalf of KCDC. Tex. Bus. Org. Code § 153.413.
This block quote represents the entirety of Parker's appellate argument. Ohio Development's appellate argument emphasizes that its Rule 91a motion referenced provisions in the receivership orders that granted the receiver "authority over essentially the entirety of the assets, claims, potential awards, [and] liabilities . . ." of KCDC. Ohio Development's appellate brief block quotes its Rule 91a motion, wherein it argued:
The Parkers Lack Capacity.
15. As provided by Tex.R.Civ.P. Rule 94, Ohio has asserted that Plaintiffs lack capacity to bring their claims against this Defendant, i.e., Plaintiffs lack the legal authority to file suit against this Defendant, Austin Nursing Center, Inc., v. Lovato, 171 S.W.3d 845, 848-49 (Tex. 2005).
16. On February 15, 2018, this Court signed an Order granting a motion filed by Plaintiff Jack J. Parker, Jr., appointing Chris Wallendorf as the bonded Receiver over the therein defined "Receivership Property" of various entities, including property of KCDC. In the Order, "Receivership Property" includes:
"[] All claims, causes of action, lawsuits, and judgments held by [KCDC]."
17. Subsequently, on January 25, 2021, such Order was superseded by an Agreed Order Appointing Successor Receiver, therein appointing Kathleen A. Hurren as the Successor Receiver. A true and correct copy of such Order is attached hereto. Exhibit A, Ex. 3 to Answer.
18. As referenced in ¶ 16 above, in such Order the Successor Receiver is awarded exclusive authority over essentially the entirety of the assets, claims, potential awards, liabilities, etc., comprising the claims asserted by the Plaintiffs in this lawsuit. Specifically, the Successor Receiver was granted by the Court "the general powers and duties set out under § 64.031 of the Tex. Civ. Prac. & Rem. Code" over "all claims, causes of actions, lawsuits, and judgments" owned by KCDC. See Exhibit A, Ex. 3 to Answer, pg. 4, ¶ ¶ a & b (10). The authority of the Receiver is further clarified by the enumeration of the "Duties of Successor Receiver," which include the following duties:
"d. Determine the claims of any individual or entity as to any asset or claim against any asset of the entities identified above, or against any of the entities.
e. Determine the claims of any of the entities identified above against any individual or entity . . . ." See id at pg. 4, ¶ d, e.
19. Lastly, the Successor Receiver has been granted full powers to exercise her authority and duties, including the power to take charge of KCDC's Receivership Property, (including the "claims, causes of action, lawsuits," etc., referenced above), and hire attorneys as she deems reasonable and necessary. See id at pg. 3-4, "Duties of Successor Receiver," ¶ ¶ a, j and m. Without authority received from either the Successor Receiver or this Court, Plaintiffs lack capacity to bring or prosecute this lawsuit against this Defendant, and therefore the claims pled by Plaintiffs against this Defendant are baseless and must be dismissed.(Footnotes omitted).
Parker's appellate argument on his third issue presumes that he prevailed on his unpreserved second issue, and it ignores Ohio Development's contention that the trial court's receivership orders deprive him of any capacity to maintain claims on KCDC's behalf. However, Ohio Development's receivership contention constitutes an alternative basis on which the trial court may have granted dismissal. Accordingly, Parker's third issue fails to challenge all grounds upon which the trial court could have granted the motion to dismiss. See Berger v. Flores, No. 03-12-00415-CV, 2015 WL 3654555, at *4 (Tex. App.-Austin Jun. 12, 2015, no pet.) (mem. op.)); see also Stuer v. Duesler, No. 05-19-00752-CV, 2020 WL 4745549, at *3 (Tex. App.-Dallas Aug. 17 2020, pet. denied) (mem. op.) (following Berger); Parkhurst v. Office of Att'y Gen. of Tex., 481 S.W.3d 400, 402 (Tex. App.-Amarillo 2015, no pet.) ("It is appropriate to impose upon an appellant attacking a dismissal under Rule 91a the same obligation as one attacking a summary judgment when the trial court fails to mention a particular ground on which it relied. In each situation, he must negate the validity of each ground upon which the trial court could have relied. If he fails to address any particular ground, 'we must uphold the [order] on the unchallenged ground.'") (quoting Berger, 2015 WL 3654555, at *4). Therefore, I would overrule Parker's third issue.
In light of my disposition of Parker's third issue, I would not address Parker's fourth issue - that his claims are not barred by the four-year statute of limitations. See Tex. R. App. P. 47.1 ("The court of appeals must hand down a written opinion that is as brief as practicable but that addresses every issue raised and necessary to final disposition of the appeal."). I note, however, that Ohio Development's Rule 91a motion also asserted that all of Parker's "pleaded or alluded to claims of fraud, statutory fraud and/or fraudulent transfer regarding a foreclosure sale that occurred in February 2014 are barred by the applicable four-year statutes [sic] of limitations." On appeal, Ohio Development emphasizes that Parker's fifth amended petition does not mention the discovery rule, and it argues that Parker cannot avail himself of a discovery rule that he never pled. See Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988) (citing Tex.R.Civ.P. 94) (holding that "[a] party seeking to avail itself of the discovery rule must therefore plead the rule, either in its original petition or in an amended or supplemented petition in response to defendant's assertion of the defense as a matter in avoidance."). In Skelton v. Gray, 547 S.W.3d 272, 280 (Tex. App.- San Antonio 2018), aff'd, 595 S.W.3d 633 (Tex. 2020), we affirmed the dismissal of a breach of fiduciary duty claim under Rule 91a where the nonmovant "did not plead the discovery rule or otherwise assert that she was not aware of the alleged breach until a later date," and we held that such an untimely claim had "no basis in law." The majority fails to adequately explain how Parker has not "pleaded [himself] out of court," In re Shire PLC, 633 S.W.3d 1, 18 (Tex. App.-Texarkana 2021, orig. proceeding), regarding his claims that relate to the February 13, 2014, foreclosure sale.
Instead of addressing Parker's third appellate issue, as briefed, the majority goes out on its own to narrowly read Ohio Development's capacity ground, as assailing only Parker's individual capacity. Parker v. Ohio Development, LLC, No. 04-23-00069-CV, Slip Op., 11 (Apr. 30, 2024, no pet. h.). The majority stretches even further by faulting Ohio Development for not amending its Rule 91a motion. Specifically, it writes:
. . . Parker's claims were first classified as derivative in the fifth amended petition. Yet, Ohio Development chose to stand on its existing motion to dismiss (aimed only at Parker's individual allegations in the fourth amended petition) notwithstanding these substantive amendments. See Tex. R. Civ. P. 91a.5(b). To the extent the trial court dismissed Parker's derivative claims based on a lack of capacity, it was inappropriate under Rule 91a because the motion was directed only
to individual claims, but Parker only alleged his claims derivatively on behalf of KCDC.Id. at p.13.
Aside from ignoring the briefing before us, the arguments before the trial court, and the alternative basis rule, the majority's analysis is unpersuasive. Nowhere in Ohio Development's capacity ground, which I have already block quoted, does it limit its contention to only Parker's individual capacity. The majority's narrow reading of Ohio Development's capacity ground is not a plain reading of it, and the majority provides no legal authority supporting such a narrow reading. Plainly read, Ohio Development's use of the term "capacity," without the adjectives "individual" - which the majority gratuitously supplies - or "derivative," was broad enough to encompass both of Parker's potential capacity grounds. The majority's faulting of Ohio Development for failing to amend is similarly unavailing. In Reaves v. City of Corpus Christi, 518 S.W.3d 594, 609 n.9 (Tex. App.-Corpus Christi-Edinburg 2017, no pet.), the court observed: "[R]ule 91a's mechanism strongly resembles the traditional practice of summary judgment on the pleadings . . . ." Id. Under traditional summary judgment practice, an amended or supplemental motion for summary judgment is not required if "the original motion is broad enough to encompass the newly asserted claims." Callahan v. Vitesse Aviation Servs., LLC, 397 S.W.3d 342, 350 (Tex. App.- Dallas 2013, no pet.). The provisions in Rule 91a.5(b) providing that a "movant may" withdraw or amend a motion to dismiss suggest, as with traditional summary judgment motions, that a movant has discretion to not withdraw or amend its motion, but instead may stand on its previously filed motion. Tex.R.Civ.P. 91a.5(b) (emphasis added). The majority fails to convincingly explain how Ohio Development's capacity ground, premised on its receivership contention that threads through its trial and appellate filings, is not broad enough to encompass the derivative capacity allegation in Parker's fifth amended petition.
Ohio Development, as the appellee, responded to the appellate argument that Parker presented to us. See Tex. R. App. P. 38.2(a)(1)(2) ("When practicable, the appellee's brief should respond to the appellant's issues or points in the order the appellant presented those issues or points.").
Relatedly, the majority's assertion that "Parker's claims were first classified as derivative in the fifth amended petition," Parker v. Ohio Development, LLC, No. 04-23-00069-CV, Slip Op., 13 (Apr. 30, 2024, no pet. h.), while true regarding Ohio Development, fails to appreciate the litigation history. In Parker's fourth amended petition, which pre-dates Ohio Development's Rule 91a motion, Parker claimed:
Parker was a limited partner at all times relevant to this lawsuit in Tapatio Springs Real Estate Holdings. Pursuant to the Texas Business Organizations Code § 153.402 Parker has standing to bring derivative claims on behalf of TSREH. Pursuant to Tex. Bus. Org. Code § 153.401, it is unlikely the general partner of TSREH, being Mr. Shalit, would bring these claims since he is named as being liable for this conspiracy against TSREH. Additionally, the Court appointed Successor Receiver has indicated to the undersigned she would rather not bring these claims. Further, in email correspondence on April 15, 2021, Chris Byrd, Counsel for the general partner, Michael Shalit, vehemently objected to any attempts by the Successor Receiver to assign these claims. Thus, the derivative action on behalf of TSREH is the only way Parker is able to redress his claims against Shalit and Fairway. Tex. Bus. Org. Code § 153.403.
This allegation is nearly identical to the one Parker made against Ohio Development in his fifth amended petition. Therefore, Ohio Development may have anticipated that Parker would amend his fourth amended petition to reference sections 153.401-153.403 of the Texas Business Organizations Code against it as he had against TSREH. This potentially explains why Ohio Development made its capacity argument broad enough - in accordance with well-recognized dispositive motions practice - to encompass individual and derivative capacity allegations.
IV. Conclusion
For all these reasons, I would affirm the trial court's judgment. Because the majority does otherwise, I respectfully dissent.