AKIB Construction, Inc. v. Neff Rental, Inc. ( 2008 )

Reversed and Remanded and Memorandum Opinion filed April 3, 2008

Reversed and Remanded and Memorandum Opinion filed April 3, 2008.

In The

Fourteenth Court of Appeals

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NO. 14-07-00063-CV

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AKIB CONSTRUCTION, INC., Appellant

V.

NEFF RENTAL, INC., Appellee

On Appeal from the County Civil Court at Law No. 3

Harris County, Texas

Trial Court Cause No. 845514-101

M E M O R A N D U M   O P I N I O N

Appellant, AKIB Construction, Inc., appeals from a summary judgment favoring appellee, Neff Rental, Inc.  Neff sued AKIB over the use of construction equipment owned and leased out by Neff.  Neff pleaded causes of action for suit on a sworn account, breach of contract, and quantum meruit. Neff further filed a motion seeking summary judgment on each of these theories of recovery.  The trial court granted the motion without specifying the grounds therefor.  In a single issue, AKIB contends that the trial court erred in granting summary judgment.  Specifically, AKIB asserts that judgment was legally improper if based on a theory of suit on a sworn account and that material issues of fact preclude summary judgment on the breach of contract and quantum meruit theories.  We reverse and remand.

I.  Background

Manzoor A. Memom, president of AKIB Construction, signed an application for credit to open an account with Neff Rental.  Subsequently, Neff delivered construction equipment to a construction site, where invoices were apparently signed by representatives or employees of Bean Excavation Co., a subcontractor to AKIB.  The invoices state that the listed equipment is being rented to AKIB.  AKIB (according to Memom) then paid approximately $14,000 for the rentals but at some point stopped paying bills sent by Neff.^[1] Neff subsequently sued, alleging that AKIB owed an additional $14,507.03 for the rentals.  Neff=s petition raised causes of action for suit on a sworn account, breach of contract, and quantum meruit.

In a Second Amended Motion for Final Summary Judgment, Neff argued that it was entitled to judgment as a matter of law because AKIB had agreed to pay the invoices and failed to do so.  In the motion, Neff primarily relied upon the credit application, the invoices, and Memom=s deposition testimony.  In his deposition, Memom admitted that he signed the credit application, knew that the equipment was being rented under his account, and paid certain of the invoices.  He further acknowledged that he never notified Neff that Bean personnel were not permitted to order equipment under the account.  He insisted, however, that although he was responsible for rental payments up to $14,000 (pursuant to his contract with Bean), the rental agreement was between Bean and Neff.

In an affidavit attached to the motion, Todd Dubeau stated that he was the authorized representative of Neff.  He further averred that (1) Neff Ahas provided goods and/or services to [AKIB] on an ongoing account,@ (2) AKIB owes Neff Afor unpaid goods and/or services rendered in the total amount of $14,507.03,@ and (3) A[t]here are no offsets currently pending.@  Attached to the affidavit were AKIB=s credit application and a number of invoices.

In its response to the motion, AKIB argued generally that Neff had failed to prove as a matter of law all elements of its causes of action and that there was a genuine issue of material fact on each cause of action precluding summary judgment.^[2] AKIB further asserted that it never contracted with Neff; instead, the only contract for rentals was between Neff and Bean.  AKIB additionally argued that Neff=s billing failed to account for adjustments for periods when the equipment could not be used due to inclement weather and equipment failures.  In the response, AKIB stated that the promise of adjustments was made by Bean; however, in his deposition (attached to Neff=s motion), Memom suggested that Bean in turn received those promises from Neff.

In an affidavit attached to the response, Memom averred that representatives of Bean ordered the equipment from Neff.  He said that pursuant to the agreement between Bean and AKIB, a Atotal allowance of $14,000 was authorized for the equipment rental.@  He also reiterates an entitlement to adjustments for days when the equipment could not be used and asserts that Neff has denied such credit.  Lastly, Memom averred that A[t]he equipment was rented to a plumbing contractor, friend of [the] owner of the Bean Excavation Co. without informing [AKIB].@  The record does not reflect that Neff objected to any statements in Memom=s affidavit or other summary judgment evidence.

The trial court granted summary judgment favoring Neff, awarding it $14,507.03 in actual damages plus prejudgment interest and attorney=s fees.  The trial court did not specify the basis for its ruling.

II.  Analysis

We review a grant of summary judgment under a de novo standard.  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).  When, as here, the trial court grants summary judgment without specifying the grounds on which it bases its decision, we must affirm the judgment if any of the grounds presented by the movant are meritorious.  FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872‑73 (Tex. 2000).  When reviewing a grant of summary judgment, we take as true all evidence favorable to the nonmovant and indulge every reasonable inference and resolve any doubts in the nonmovant=s favor.  Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004).  In a traditional motion for summary judgment under Texas Rule of Civil Procedure 166a(c), such as was filed by Neff, the movant has the burden of demonstrating that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.  Tex. R. Civ. P. 166a(c); Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).

A.  Suit on a Sworn Account

We begin by considering Neff=s suit on a sworn account claim.  When a party has pleaded an action founded upon an open account on which a systematic record has been kept, Rule 185 of the Texas Rules of Civil Procedure authorizes that party, under certain circumstances, to establish a prima facie case by filing an affidavit that the claim is just and true, due, and that all just and lawful offsets, payments, and credits have been allowed.  Tex. R. Civ. P. 185. Although Neff contends that it fulfilled the requirements of Rule 185 in the present action, several courts of appeals, including the Fourteenth, have held that suit on a sworn account is inapplicable when the underlying agreement resulting in the alleged debt was a lease agreement.  See, e.g., Schorer v. Box Serv. Co., 927 S.W.2d 132, 134‑35 (Tex. App.CHouston [1st Dist.] 1996, writ denied); Murphy v. Cintas Corp., 923 S.W.2d 663, 665 (Tex. App.CTyler 1996, writ denied); Great‑Ness Prof. Servs., Inc. v. First Nat=l Bank, 704 S.W.2d 916, 917 (Tex. App.CHouston [14th Dist.] 1986, no writ).^[3] Neff does not dispute that its suit on a sworn account theory of recovery is based on an alleged lease agreement.

Neff contends that AKIB=s failure to argue improper use of sworn account in the trial court resulted in waiver of this argument on appeal, citing Clifton v. American Express Centurian Bank,  No. 09-06-00283-CV, 2007 WL 2493517 (Tex. App.CBeaumont 2007, no pet.).  The Clifton court indeed held that the appellant in that case could not raise a similar issue (the impropriety of suit on a sworn account based on a credit agreement) on appeal because he had not raised it in the trial court.  Id. at *1. However, Clifton was not an appeal from a summary judgment.  Id. In the summary judgment context, such as we encounter here, an appellant may attack the legal sufficiency of the grounds on which judgment was based even if it did not do so in the trial court.  E.g., McConnell v. Southside I.S.D., 858 S.W.2d 337, 343 (Tex. 1993); Tello v. Bank One, N.A., 218 S.W.3d 109, 118-19 (Tex. App.CHouston [14th Dist.] 2007, no pet.).

Neff additionally argues that the courts of appeals addressing the sworn account/lease agreement issue simply got it wrong, citing Schorer, 927 S.W.2d at 135 (Mirabal, J., concurring).  We decline to adopt the position set forth in the Schorer concurring opinion, which disagrees with the longstanding principle that Rule 185 does not apply to lease agreements.  Neff also cites Tenneco Oil Co. v. Padre Drilling Co., 453 S.W.2d 814 (Tex. 1970), a case involving recovery of attorney=s fees, in an attempt to persuade us to change the applicability of the sworn account remedy.  The analogy is too remote to be compelling.

We find no merit in Neff=s contention that a suit on a sworn account can be based on a lease agreement.  Because Neff=s sworn account was based on a lease agreement, the trial court erred if it based the summary judgment on this theory of recovery.

B.  Breach of Contract

We next turn to the breach of contract theory of recovery. To be entitled to summary judgment on a breach of contract claim, a plaintiff must conclusively demonstrate (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained as a result of the breach.  E.g., Winchek v. Am. Express Travel Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.CHouston [1st Dist.] 2007, no pet.).  A valid and enforceable contract is formed by an offer, an acceptance, a meeting of the minds, and an expression of the terms with sufficient certainty so that there is no doubt regarding the parties= intentions.  MG Bldg. Materials, Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 61 (Tex. App.CSan Antonio 2005, pet. denied).  While Texas courts favor validating transactions rather than voiding them, the courts may not create a contract where none exists.  Kelly v. Rio Grande Computerland Group, 128 S.W.3d 759, 766 (Tex. App.CEl Paso 2004, no pet.).  See generally Angelou v. African Overseas Union, 33 S.W.3d 269, 278-80 (Tex. App.CHouston [14th Dist.] 2000, no pet.) (discussing at length the requirements for contract formation).

As proof of contract formation, Neff points to AKIB=s signing of the credit application as well as the signature of Bean representatives on the invoices listing AKIB as renter.  On its face, however, the credit application does not set any terms regarding the equipment rentals but merely seeks the extension of credit.  Indeed, the document does not even contain a promise by AKIB to pay or any promises whatsoever by Neff.^[4] It is merely an application to open a credit account.  Although there is some suggestion in the evidence that Bean may have been acting in a representative capacity for AKIB in signing the invoices, such evidence is inferential only and does not establish agency as a matter of law.^[5]

Furthermore, in both his deposition testimony attached to Neff=s motion and his affidavit attached to AKIB=s response, Memom asserted that the contract for equipment rental was between Bean and Neff.  He insists that AKIB did not enter such a contract and did not order any equipment; rather, AKIB agreed (with Bean) only to make payments for the rentals up to $14,000. Consequently, a fact issue exists as to whether a contract was ever formed between AKIB and Neff obligating AKIB to pay for all rentals requested.  The trial court therefore erred if it based the summary judgment on Neff=s breach of contract theory of recovery.

C.  Quantum Meruit

Lastly, we look at Neff=s quantum meruit cause of action.  Quantum meruit is an equitable remedy which does not arise out of a contract but is independent of it.  Vortt Exploration Co. v. Chevron USA, Inc., 787 S.W.2d 942, 944 (Tex. 1990).  In fact, a party may generally recover on quantum meruit only when no express contract covers the services or goods at issue.  Id.  The quantum meruit remedy is based upon the promise implied by law to pay reasonable value for beneficial services knowingly accepted.  See id.  To recover under quantum meruit, a claimant must prove that:  (1) valuable services were rendered or goods provided; (2) for the person sought to be charged; (3) which services or goods were accepted by the person sought to be charged, used and enjoyed by him; (4) under such circumstances as reasonably notified the person sought to be charged that the plaintiff in performing such services or providing such goods was expecting to be paid by the person sought to be charged.  See id. Additionally, the claimant must establish the reasonable value for the services that were rendered or materials provided.  Hudson v. Cooper, 162 S.W.3d 685, 688 (Tex. App.CHouston [14th Dist.] 2005, no pet.).  If the claimant does not establish reasonable value as a matter of law, the issue is one for a finder of fact to determine.  See id.

In its Second Amended Motion for Final Summary Judgment, Neff devotes scant attention to its quantum meruit cause of action.  At no point in the motion does Neff cite to any evidence that AKIB accepted any services or materials or used and enjoyed them.  Instead, Neff=s allegations focus on AKIB=s supposed agreement to pay for the leased equipment.

Additionally, Neff=s motion cites to no evidence of the value of the services rendered.  Although various invoices are attached to the motion, there is no claim (in the motion or in any attached affidavit) that the charges reflected on the invoices constituted reasonable value for services rendered.  Consequently, Neff has failed to conclusively establish its right to recovery under its quantum meruit cause of action.  See id.  The trial court therefore erred if it based its judgment on this theory of recovery.  Because we find that the trial court=s grant of summary judgment is not supported by any of the grounds raised in Neff=s motion, we sustain AKIB=s sole issue.

We reverse the trial court=s judgment and remand for further proceedings in accordance with this opinion.

/s/      Adele Hedges

Chief Justice

Judgment rendered and Memorandum Opinion filed April 3, 2008.

Panel consists of Chief Justice Hedges and Justices Anderson and Brown.

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^[1]  There is some discrepancy in the record regarding exactly how much AKIB paid Neff, but it is undisputed that AKIB did make payments to Neff.

^[2]  In its brief, Neff suggests that we should not consider AKIB=s response to the motion for summary judgment because it was filed prior to Neff=s filing its Second Amended Motion, which the trial court granted.  In its Amended Motion (filed prior to the Second Amended Motion), Neff sought judgment only on its suit on a sworn account cause of action; in the Second Amended Motion, Neff sought judgment on all three of its causes of action.  Although filed prior to the filing of Neff=s Second Amended Motion, AKIB=s response indeed addresses the possibility of summary judgment on all three causes of action.  We will not ignore AKIB=s arguments on breach of contract and quantum meruit simply because AKIB filed the response before Neff filed its last amended motion. Both documents (the Second Amended Motion and AKIB=s earlier response) were before the trial court when it granted judgment.  The important questions here are whether Neff has proven any of its causes of action as a matter of law and whether AKIB has raised any issues that would prevent summary judgment on those claims, not the chronological order of the motions and the response.

^[3]  Although the Great-Ness case was decided under a prior version of Rule 185, as the Schorer court explained, the amendment did not change the substantive application of the Rule.  Schorer, 927 S.W.2d at 134‑35.

^[4]  The document does contain a personal guarantee signed by Memom for debts incurred by AKIB; however, Memom is not a defendant in the present action.

^[5]  Specifically, AKIB=s payment of invoices signed by Bean but listing AKIB as renter suggests the possibility that Bean may have been acting as AKIB=s agent.  However, Memom refutes this in his deposition and affidavit.

We further note that at no point (in the court below or on appeal) does Neff expressly argue that it conclusively established the existence of an implied contract by conduct.  See generally Preston Farm & Ranch Supply, Inc. v. Bio-Zyme Enters., 625 S.W.2d 295, 298 (Tex. 1981) (discussing implied contracts by conduct); Live Oak Ins. Agency v. Shoemake, 115 S.W.3d 215, 218-19 (Tex. App.CCorpus Christi 2003, no pet.) (same).  Accordingly, we do not address that theory of recovery.