anne-settle-and-john-settle-and-humberto-george-and-aw-industries-inc-v ( 2012 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-11-00444-CV
ANNE SETTLE AND JOHN SETTLE APPELLANTS
V.
HUMBERTO GEORGE AND A&W APPELLEES
INDUSTRIES, INC.
HUMBERTO GEORGE APPELLANT
V.
ANNE SETTLE AND JOHN SETTLE APPELLEES
A&W INDUSTRIES, INC. APPELLANT
V.
ANNE SETTLE AND JOHN SETTLE APPELLEES
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FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION1
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I. INTRODUCTION
Appellants and Appellees Anne Settle and John Settle and Appellants and
Appellees Humberto George and A&W Industries, Inc. appeal the trial court’s
modified order granting summary judgment in favor of George and A&W. We will
modify the order and affirm it as modified.
II. BACKGROUND
A&W is a Texas corporation that manufactures burial vaults. A&W and
George claim that George is A&W’s president and one of its three directors and
that John has served as A&W’s vice president, secretary and treasurer, and
corporate accountant at various times since 1999.
The Settles claim that Anne is a director of A&W and that John is its chief
financial officer; that they entered into an agreement with George in 1999
whereby they acquired 50% of A&W’s stock in exchange for providing financial
assistance to A&W; and that at an annual meeting of A&W’s board of directors in
July 2005, the board voted to rescind all of A&W’s common stock certificates and
to reissue 50% of the common stock to George and the other 50% to Anne.
George claims that Anne has never been a member of A&W’s board of
directors, that A&W does not have a chief financial officer, that the July 2005
1
See Tex. R. App. P. 47.4.
2
board-of-directors meeting never occurred, that the purported minutes from the
meeting are a forgery, and that neither Anne nor John were ever given 50% of
A&W’s stock. According to George, John illegally transferred funds from A&W’s
accounts to himself or to accounts controlled by him, and when George
questioned John about the transfers and demanded an accounting, John refused
to provide any information and notified George that he wanted to sell his shares
in A&W. George consequently took steps to protect A&W’s assets and monies
from further depletion by changing the locks and installing a new security system
at A&W’s corporate office, denying John access to A&W’s new computer server,
and arranging for an independent audit of A&W’s financial records.
The Settles claim that John was concerned about several corporate
purchases and hiring decisions recently made at A&W and that he was locked
out of A&W and denied access to the corporate accounting books around the
time that he notified George that he intended to sell Anne’s shares in A&W.
The Settles sued George and A&W in November 2010, alleging that
George had breached fiduciary duties to A&W, seeking appointment of a receiver
to rehabilitate A&W’s assets, and requesting a temporary injunction prohibiting
George from taking certain actions in regard to A&W’s business. George and
A&W answered and filed special exceptions, which were never ruled on, and
A&W filed counterclaims against the Settles for a declaratory judgment, breach of
fiduciary duty, fraud, embezzlement, and civil conspiracy. The Settles later
amended their petition to assert a fraud claim against George. George and A&W
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each filed motions for summary judgment against the Settles, and the trial court
granted both motions, rendering take-nothing judgments in favor of George and
A&W, and severed the Settles’ claims against George and A&W from any other
outstanding claims. The Settles timely filed a motion for new trial, and after a
hearing thereon, the trial court signed a modified order on George’s and A&W’s
motions for summary judgment that provides in relevant part as follows:
IT IS ORDERED that Plaintiffs, John Settle and Anne Settle
failed to state any cause of action as to Defendants and their case is
dismissed;
....
There is no res judicata to future actual cause of action
pleaded properly because Plaintiff has yet to plead a cause of
action. This is a final judgment.
The Settles, George, and A&W appeal.
III. THE SETTLES’ APPEAL
A. Pleading Deficiency Summary Judgment
In their first issue, the Settles argue that the trial court reversibly erred by
granting George’s and A&W’s motions for summary judgment on the basis of
deficiencies in the Settles’ pleadings. They contend that the trial court “permitted
[George and A&W] to use those motions to substitute for special exceptions and
thus, deprived [the Settles] of the opportunity to amend their pleadings to cure
any alleged defects therein.” Both George and A&W respond that the Settles
failed to preserve this issue for appellate review. We agree with George and
A&W.
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Generally, it is improper to grant summary judgment on a deficient
pleading’s failure to state a cause of action when the deficiency can be attacked
through a special exception. In re B.I.V., 870 S.W.2d 12, 13–14 (Tex. 1994); see
Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). Summary
judgment may be granted only after the complaining party has been given an
opportunity to amend his pleadings through a special exception. See Tex. R.
Civ. P. 91; Friesenhahn v. Ryan, 960 S.W.2d 656, 658–59 (Tex. 1998).
However, a nonmovant waives a complaint that summary judgment was
improperly granted by failing to raise it in the summary judgment proceeding at
trial. San Jacinto River Auth. v. Duke, 783 S.W.2d 209, 210 (Tex. 1990);
Warwick Towers Council of Co-Owners ex rel. St. Paul Fire & Marine Ins. Co. v.
Park Warwick, L.P., 298 S.W.3d 436, 444 (Tex. App.—Houston [14th Dist.] 2009,
no pet.).
George set out the following grounds in support of his first amended
motion for summary judgment:
“Plaintiffs have failed to allege any facts that would give rise to an informal
fiduciary relationship under Texas law. In fact they have, through their
pleadings, alleged facts that affirmatively negate such a duty.”
“Nowhere in the plaintiffs’ petition do they allege any facts showing that
actual fraud was committed by either the corporation or Movant.”
“The plaintiffs have not even alleged any facts showing any legally
cognizable fraud committed by the corporation or Movant.”
“The plaintiffs have not even alleged any facts showing any legally
cognizable breach of fiduciary duty even if such duty were to be owed by
George to the plaintiffs.”
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A&W set out the following grounds in support of its motion for summary
judgment:
“Plaintiffs fail to allege any facts that would support the appointment of a
receiver of Movant.”
“Plaintiffs fail to allege any facts that would support an award of attorney
fees against Movant.”
“Plaintiffs fail to allege any damages caused by Movant and affirmatively
admit that Movant has not committed any illegal acts.”
Considering these grounds and the record on appeal, it is apparent that
George and A&W moved for—and that the trial court granted—summary
judgment on the basis of the Settles’ defective pleadings. But the Settles did not
assert any objection in their original or amended responses to George’s and
A&W’s motions that the summary judgment was improperly sought on account of
the Settles’ deficient pleadings, nor do the Settles argue on appeal that they
somehow otherwise preserved this argument for appellate review.2 Further, the
Settles’ responses did not request an opportunity to amend their petition.
Therefore, we hold that the Settles waived this issue for appellate review. See
Warwick Towers, 298 S.W.3d at 444 (declining to address appellant’s argument
that trial court erred by granting summary judgment on pleadings because
appellant did not object in summary judgment proceeding or request an
opportunity to amend); Ball v. Smith, 150 S.W.3d 889, 893 (Tex. App.—Dallas
2
In fact, the Settles attempted to refute George’s and A&W’s arguments
about the alleged deficient pleadings in their amended responses.
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2004, no pet.) (declining to address appellant’s complaint that appellee should
have filed special exceptions instead of summary judgment because appellant
did not object to motion at trial); Higbie Roth Constr. Co. v. Houston Shell &
Concrete, 1 S.W.3d 808, 811 (Tex. App.—Houston [1st Dist.] 1999, pet. denied)
(holding that appellant waived any complaint premised on the absence of special
exceptions by not objecting in the trial court to appellees’ use of summary
judgment on the pleadings); see also Coleman v. SBC Commc’ns, Inc., No. 04-
99-00889-CV, 2000 WL 1060378, at *1–2 (Tex App.—San Antonio July 19, 2000,
no pet.) (holding that appellant waived argument that trial court improperly
granted summary judgment for deficient pleadings because appellant did not
object to motion at trial). We overrule the Settles’ first issue.
B. Fraud Pleading
In their second issue, the Settles argue that the trial court erred by granting
George’s and A&W’s motions for summary judgment because the Settles alleged
a claim for fraud.
When a motion for summary judgment is based on the insufficiency of a
nonmovant’s pleadings, on appeal, we assume that all allegations and facts in
the pleadings are true and indulge every reasonable inference and resolve any
doubts in favor of the nonmovant. Natividad v. Alexsis, Inc., 875 S.W.2d 695,
699 (Tex. 1994); Warwick Towers, 298 S.W.3d at 444.
A party commits fraud by (1) making a false, material representation
(2) that the party either knows to be false or asserts recklessly without knowledge
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of its truth (3) with the intent that the misrepresentation be acted upon, (4) and
the person to whom the misrepresentation is made acts in reliance upon it and
(5) is injured as a result. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51
S.W.3d 573, 577 (Tex. 2001); All Am. Tel., Inc. v. USLD Commc’ns, Inc., 291
S.W.3d 518, 527 (Tex. App.—Fort Worth 2009, pet. denied). However, it is well
settled that communications in the course of judicial proceedings are absolutely
privileged and cannot serve as the basis of a lawsuit in tort. See James v.
Brown, 637 S.W.2d 914, 916 (Tex. 1982). Although most cases addressing the
judicial communication privilege involve claims of libel or slander, Texas courts
have applied the privilege to claims arising out of communications made in the
course of judicial proceedings, regardless of the label placed upon the claim.
Laub v. Pesikoff, 979 S.W.2d 686, 690 (Tex. App.—Houston [1st Dist.] 1998,
pets. denied); see Bird v. W.C.W., 868 S.W.2d 767, 768 (Tex. 1994) (extending
privilege beyond defamation claim).
The Settles’ second amended petition included the following allegations in
support of their fraud claim:
The Plaintiffs would show that in April of 1999, Humberto
George, acting individually and as president of A&W Industries, Inc.,
agreed to give the Settles 50% of the stock of A&W Industries, Inc.
in return for their financial assistance as previously alleged herein.
On November 17, 2010, Humberto George filed an affidavit in this
cause of action attached as Exhibit “B”. In paragraph 7 of this
affidavit Humberto George states under oath that “John and Anne
Settle were never given 50% of the stock of the corporation.”
Plaintiffs would show that Anne Settle was given Twenty Five
Thousand shares of A&W Industries, Inc. stock and this transfer was
memorialized by Stock Certificate Number 6. (A copy of which is
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attached as exhibit “C”). This document was signed by Humberto
George and Sherry Rountree. Pursuant to the minutes of the
Annual Meeting of Directors on July 7, 2005, these shares were
rescinded and the shares were reissued to Humberto George and
Anne Settle equally as 500 shares a piece. (A copy of the Annual
Meeting of Directors dated July 7, 2005 is attached as Exhibit “A”).
This document was also signed by Humberto George. Further, in a
personal financial statement dated June 30, 2005 and signed by
Humberto George, the Defendant lists his interest in A&W Industries,
Inc. as a 50% owner wherein he states the total value of the assets
of the company to be $600,000.00 and his portion to be one-half that
amount which is $300,000.00. (A redacted copy of this personal
financial statement is attached as Exhibit “D”). The date of
Humberto George’s financial statement of June 30, 2005 is
contemporaneous with the date of the Minutes of the Annual
Meeting of Directors of July 7, 2005. These documents clearly
establish the Plaintiff’s claim of Anne Settle’s 50% stock ownership
of A&W Industries, Inc. Humberto George’s denial of Anne Settle’s
50% ownership of A&W Industries, Inc. is a fraudulent attempt to
deny Anne Settle her ownership interest in the company. . . . These
actions entitle the Plaintiffs to actual and exemplary damages.
[Emphasis added.]
Thus, the Settles did not allege that George committed fraud by not turning
over the A&W stock or by not doing something that he represented he would do
in regard to the A&W stock. Instead, they alleged that George did turn over the
A&W stock but that he committed fraud by claiming in an affidavit filed as part of
this litigation that Anne does not own 50% of A&W’s stock.3 Because the fraud
claim is based upon a privileged communication made during the course of these
judicial proceedings, the Settles did not allege a viable cause of action for fraud,
and the trial court did not err by granting summary judgment in favor of George
and A&W. We overrule the Settles’ second issue.
3
The Settles even supported their pleading with attachments purportedly
demonstrating that Anne does indeed own 50% of A&W’s shares.
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IV. GEORGE’S AND A&W’S APPEALS
In their first issues, George and A&W argue that we should modify the trial
court’s modified order granting the motions for summary judgment to delete the
language providing that the Settles’ claims are “dismissed.” When a motion for
summary judgment seeks a take-nothing summary judgment, an order granting
such a motion results in a take-nothing summary judgment. Jobe v. Lapidus, 874
S.W.2d 764, 766 n.2 (Tex. App.—Dallas 1994, writ denied). Both George’s and
A&W’s motions for summary judgment prayed that they “be granted summary
judgment that Plaintiffs take nothing.” The trial court granted both motions for
summary judgment, expressly stating that “[t]his is a final judgment.” We sustain
George’s and A&W’s first issues. See Martinez v. S. Pac. Transp. Co., 951
S.W.2d 824, 830 (Tex. App.—San Antonio 1997, no writ) (“The case was
disposed of on the motion for summary judgment. Therefore, the proper
judgment is that plaintiff take nothing.”); Neira v. Bandera Cnty. Fresh Water
Supply Dist. No. 1, No. 04-96-00739-CV, 1997 WL 589222, at *4 (Tex. App.—
San Antonio Sept. 24, 1997, pet. dism’d w.o.j.) (reforming dismissal judgment to
take-nothing judgment) , cert. denied, 526 U.S. 824 (1998).
In their second issues, George and A&W argue that we should strike the
language in the modified order disclaiming the res judicata effect of the summary
judgment on future claims.
Res judicata prevents the relitigation of a claim or cause of action that has
been finally adjudicated, as well as matters that, with the use of diligence, should
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have been litigated in the prior suit. Barr v. Resolution Trust Corp. ex rel. Sunbelt
Fed. Sav., 837 S.W.2d 627, 628, 631 (Tex. 1992). A summary judgment is a
final judgment on the merits that bars relitigation of the case. Pines of Westbury,
Ltd. v. Paul Michael Constr., Inc., 993 S.W.2d 291, 294 (Tex. App.—Eastland
1999, pet. denied).
Here, both of the original orders granting George and A&W summary
judgment state that the Settles shall “take nothing” against George and A&W,
respectively. At the hearing on the Settles’ motion for new trial, however, the trial
court explained that it thought the original orders were worded too broadly
because the summary judgments did not dispose of causes of action. The trial
court appeared to be under the impression that because it had granted George
and A&W summary judgment on the basis of the Settles’ deficient pleadings, the
Settles were not prohibited from later asserting a tort claim against George,
A&W, or both. According to the trial court, “So the door is wide open. They
never alleged a cause of action against your client, and so there can be no
res judicata.” The trial court inserted the language in the modified order
disclaiming the res judicata effect of the summary judgment on future claims, but
it retained the language that “[t]his is a final judgment.”
The trial court granted a final summary judgment, albeit on deficient
pleadings. Although the trial court opined that “there can be no res judicata”
because the Settles “never alleged a cause of action,” the doctrine of res judicata
is not so limited—res judicata will also bar the Settles from relitigating any future
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claim that, through the use of diligence, should have been litigated in the suit.
See Barr, 837 S.W.2d at 631. That there were deficiencies in the claims that the
Settles attempted to plead did not somehow relieve them of the duty to
additionally exercise diligence and plead claims that could have been litigated in
the suit. The Settles do not direct us to any authorities, nor are we aware of any,
holding that res judicata is inapplicable when the trial court grants a summary
judgment on the basis of a deficient pleading. Accordingly, we sustain George’s
and A&W’s second issues.
V. CONCLUSION
Having overruled the Settles’ first and second issues and sustained
George and A&W’s first and second issues, we modify the portion of the trial
court’s October 7, 2011 modified order by replacing the phrase “failed to state
any cause of action as to Defendants and their case is dismissed” with “take
nothing against Defendants HUMBERTO GEORGE AND A&W INDUSTRIES,
INC.” We also modify the order to strike the following language: “There is no
res judicata to future actual cause of action pleaded properly because Plaintiff
has yet to plead a cause of action.” We affirm the trial court’s modified order as
modified.
BILL MEIER
JUSTICE
PANEL: DAUPHINOT, MCCOY, and MEIER, JJ.
DELIVERED: July 19, 2012
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