the Cliffs Property Owners' Association, Inc. v. R. Mike Ward, Randy Gracy, Stack Bowers, Fred Molsen, Double Diamond, Inc., and Double Diamond Utilities, Inc. ( 2022 )

Opinion filed September 29, 2022
In The
Eleventh Court of Appeals
__________
No. 11-21-00068-CV
__________
THE CLIFFS PROPERTY OWNERS’ ASSOCIATION, INC.,
Appellant
V.
R. MIKE WARD, RANDY GRACY, STACK BOWERS, FRED
MOLSEN, DOUBLE DIAMOND, INC., AND DOUBLE DIAMOND
UTILITIES, INC., Appellees
On Appeal from the 29th District Court
Palo Pinto County, Texas
Trial Court Cause No. C49308
MEMORAND UM OPI NI ON
Appellant asks that we reverse, in part, and modify a final judgment in which
the trial court granted Appellant’s petition for a temporary and permanent injunction,
but awarded one of the Appellees $138,203.50, plus attorneys’ fees, for its suit on a
sworn account. In its first issue, Appellant argues that the trial court lacked
jurisdiction to order that it pay damages because the receiving Appellee lacked
standing. In its second issue, Appellant contends that the trial court’s final judgment
must be modified because it is internally ambiguous and inconsistent with the trial
court’s oral rulings in open court. For the following reasons, we affirm.
Background
Sometime between 1988 and 1993, Franklin Federal Bancorp. acquired a
sizeable amount of real property adjoining Possum Kingdom Lake. In April 1993,
Franklin contracted with the Brazos River Authority (BRA) for the right to withdraw
water from the Lake (the 1993 contract). Franklin agreed to pay for 1,000 acre-feet
of water every year until December 31, 2034, regardless of whether it actually
withdrew the full amount of water in a given year. The 1993 contract prohibited
Franklin from assigning its rights and obligations without the written consent of
BRA. The 1993 contract also specifically granted Franklin an easement to build,
operate, and maintain water diversion facilities in order to withdraw water from the
Lake (the BRA Easement).
Six months later, Franklin sold the property, and assigned all of its rights and
obligations under the 1993 contract, to Double Diamond, Inc. (DDI). In
January 2016, DDI entered into a second water-withdrawal contract with BRA to
purchase an additional 227 acre-feet of water per calendar year, again regardless of
whether it actually withdraws the full amount of water from the Lake in a given year
(the 2016 contract). The 2016 contract specifically identifies DDI as the purchaser.
The 2016 contract also specifically states that DDI may only assign its rights and
obligations with the written consent of BRA. There is no documentation in the
record of written consent from BRA for any assignment by DDI of its rights and
obligations under either the 1993 or 2016 contracts.
In January 1994, shortly after acquiring the property, DDI created the legal
entity that is the Appellant in this matter: The Cliffs Property Owners’ Association,
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Inc. (POA). One of the stated purposes behind POA’s creation was to maintain the
recreational facilities on the property. Under POA’s articles of incorporation and
bylaws—as well as DDI’s declaration as to the creation of POA—“recreational
facilities” is defined as “all swimming pools, tennis courts, golf courses, club houses,
recreational centers and other similar recreational facilities constructed from time to
time within the Property” (emphasis added). In short, POA is obligated to maintain
the golf courses on the property by, among other things, adequately watering them.
According to Appellees, DDI created and assigned all of its rights and
obligations under the 1993 and 2016 contracts to Double Diamond Utilities, Inc.
(DDU Inc.). There is no documentation of such assignments in the record. Nor does
the record include any articles of incorporation for DDU Inc., though it does contain
articles of incorporation for Double Diamond Utilities, Co. (DDU Co.). DDU Inc.
claims that it entered into an agreement with POA, whereby POA agreed—pursuant
to its obligation to maintain the golf course and swimming pools on the property—
to pay DDU Inc. for half of the water that DDU Inc. purchases from BRA and half
of the electricity required to operate the water diversion facilities. This alleged
agreement was never reduced to a written contract. However, POA made several
recorded payments to “Double Diamond Utilities” (DDU) for water usage. And
DDU sent numerous invoices to POA for unpaid irrigation water and electricity bills.
The record also contains invoices for potable water delivered to POA, which was
used to maintain two swimming pools on the property. These potable water invoices
specifically state that the payments, though instructed to be made out to DDU, would
be remitted to DDU Inc.
According to DDU Inc., for more than twenty years—from the inception of
its agreement with POA until mid-2019—POA consistently paid DDU Inc. for half
of the water purchased from BRA (which POA used to irrigate the golf course), for
half of the electricity used to withdraw the water, and for the specific amount of
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potable water POA used for the swimming pools it maintained. Indeed, the invoices
from DDU Inc. to POA in the record indicate that, by and large, POA stopped making
payments on May 7, 2019. Over the course of a year beginning in May 2019, POA
made two irrigation water payments: one in December 2019 and the other in January
2020. No payments were made during that same one-year period for the electricity
used to withdraw the water that DDU Inc. delivered to POA.
In January 2020, DDU Inc. responded by placing a lock on the gates to the
pump station and storage tank (the water storage facility), obstructing POA’s access
to the water needed to irrigate the golf course. Shortly thereafter, POA sought a
temporary restraining order (TRO), and temporary and permanent injunctions, to
require DDU Inc. to remove the locks from the gates around the water storage facility
and to enjoin DDU Inc. from taking any further steps to obstruct POA’s ability to
access the water from that facility. In its petition, POA specifically named DDU
Inc., not DDU Co., as a defendant. The trial court granted POA’s request for a TRO
and set a hearing for POA’s temporary and permanent injunction claims. DDU Inc.
then counterclaimed against POA for breach of contract and suit on a sworn account,
seeking actual damages in the amount of $133,811.94 for unpaid invoices from
May 2019 through June 2020. DDU Inc. filed its counterclaims under the same
name used by POA in its petition—DDU Inc., rather than DDU Co.
In support of its suit on a sworn account counterclaim, DDU Inc. alleged that
it kept a systematic record of open utility accounts for electricity and water with
POA and that, after calculating all lawful offsets, payments, and credits, POA owed
$133,811.94 as of June 2020. Attached to the counterclaim was the sworn affidavit
of Christie Rotramel, the custodian of records for DDU Inc. Rotramel swore and
affirmed that she had read the factual allegations in DDU Inc.’s suit on a sworn
account, that those allegations were within her personal knowledge, and that they
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were true and correct. POA never filed a sworn, written denial of DDU Inc.’s suit
on sworn account.1
At a pretrial hearing in August 2020, POA and DDU Inc. stipulated that DDU
Inc. owns the water system that enables POA to access water from the lake to irrigate
the golf course and fill its swimming pools. During the stipulation discussions, the
parties referred to DDU Inc. at times as “DDU,” “Double Diamond Utilities,”
“Double Diamond,” and “Double Diamond Utilities Company.” DDU Inc. and POA
also stipulated that DDU Inc. and DDI are distinct legal entities and that POA is
obligated to maintain the golf course.
At trial, the trial court found that DDU Inc.’s suit on sworn account was
properly verified by Rotramel. POA could provide no reason for failing to submit a
sworn, written denial of DDU Inc.’s counterclaim, see TEX. R. CIV. P. 93, 185, other
than overlooking the sworn affidavit of Rotramel, which was attached as Exhibit O
to the counterclaim. The trial court granted POA’s request for injunctive relief,
ordering that DDU Inc. “shall be enjoined from shutting down, locking up, or turning
off the Water System, which provides raw water to [POA] in order to irrigate the
golf course.” The trial court also found in favor of DDU Inc.’s suit on a sworn
account counterclaim and ordered that POA pay $138,203.50 in “past-due amounts.”
The trial court’s final judgment was entered on January 27, 2021. POA filed
a timely motion for new trial on February 26, 2021, arguing solely that it was entitled
to a new trial on the basis of newly discovered evidence and that DDU Inc. fabricated
evidence. See TEX. R. CIV. P. 329b(a). POA then filed an untimely supplement to
its motion for new trial, on April 1, 2021, arguing for the first time that DDU Inc.
lacked standing to bring its sworn account counterclaim. See id. at 329b(b) (“One
or more amended motions for new trial may be filed . . . within thirty days after the
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POA also failed to submit even a general denial of any of DDU Inc.’s counterclaims.
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judgment or other order complained of is signed.”); Equinox Enter., Inc. v. Assoc.
Media, Inc., 730 S.W.2d 872, 875 (Tex. App.—Dallas 1987, no writ) (holding that
Rule 329b(b) applies to supplemental motions for new trial). The trial court denied
POA’s original motion for new trial less than a week later, on April 7, 2021. The
trial court did not rule on POA’s supplemental motion.
Discussion
I. Subject-Matter Jurisdiction
In its first issue on appeal, POA argues that DDU Inc. lacks standing and, thus,
that the trial court lacked subject-matter jurisdiction to enter its judgment awarding
damages to DDU Inc. on its suit on a sworn account counterclaim. POA advances
this argument on two fronts. First, POA claims that DDU Inc. lacked standing to
bring its counterclaim because it was incorporated using the corporate designator
“Co.,” not “Inc.,” and thus the name under which it counterclaimed against POA
denoted a nonexistent legal entity. See, e.g., Smith v. CDI Rental Equip., Ltd., 310
S.W.3d 559, 566 (Tex. App.—Tyler 2010, no pet.) (stating that “[c]ivil suits may be
maintained only by or against parties having an actual or legal existence”). Second,
POA claims that DDU Inc. lacked standing to bring its counterclaim because DDU
Inc. was not a party to any contract with either POA or BRA. See id. (stating that
“only the parties to a contract have the right to complain of a breach thereof”). For
the following reasons, we disagree with POA on both fronts and overrule its first
issue on appeal.
A. Standard of Review
We review questions of standing de novo. Farmers Tex. Cnty. Mut. Ins. Co. v.
Beasley, 598 S.W.3d 237, 240 (Tex. 2020). “This is because standing is a component
of subject matter jurisdiction.” Id. (citing Austin Nursing Ctr., Inc. v. Lovato, 171
S.W.3d 845, 849 (Tex. 2005)). “Without standing, a court lacks subject matter
jurisdiction to hear the case.” Lovato, 171 S.W.3d at 849. Standing is a question of
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law, although facts necessary to answering that question may need to be determined
by the factfinder. Linegar v. DLA Piper LLP (US), 495 S.W.3d 276, 279 (Tex. 2016).
To have standing, a plaintiff must plead facts demonstrating it suffered an injury that
is “concrete and particularized, actual or imminent.” Heckman v. Williamson Cnty.,
369 S.W.3d 137, 155 (Tex. 2012) (quoting DaimlerChrysler Corp. v. Inman, 252
S.W.3d 299, 304–05 (Tex. 2008)). “In applying a de novo standard of review to a
standing determination, reviewing courts ‘construe the pleadings in the plaintiff’s
favor, but we also consider relevant evidence offered by the parties.’” Farmers Tex.
Cnty. Mut. Ins. Co., 598 S.W.3d at 240 (quoting In re H.S., 550 S.W.3d 151, 155
(Tex. 2018)). The injury must be fairly traceable to the defendant’s conduct and
must be redressable by the plaintiff’s requested relief. Heckman, 369 S.W.3d at 154–
55. “The standing inquiry ‘requires careful judicial examination of a complaint’s
allegations to ascertain whether the particular plaintiff is entitled to an adjudication
of the particular claims asserted.’” Id. at 156 (quoting Allen v. Wright, 468 U.S. 737,
752 (1984)). “[T]he mere fact that a plaintiff may ultimately not prevail on the merits
of the lawsuit does not deprive the plaintiff of standing.” Farmers Tex. Cnty. Mut.
Ins. Co., 598 S.W.3d at 241 (citing Inman, 252 S.W.3d at 305).
B. Analysis
1. Standing—It is clear from the record before us that DDU Inc. has standing.
DDU Inc. alleged that it entered into an agreement with POA whereby POA agreed
to pay DDU Inc. for half of the water that it purchased from BRA and half of the
electricity that was necessary to operate the water diversion facilities to withdraw
the water from the lake and bring it to the property. DDU Inc. alleged that, until
May 2019, it routinely sent invoices to POA pursuant to this arrangement and that
POA routinely made the agreed-upon payments. DDU Inc. attached over sixty
pages of unpaid invoices to its counterclaim—invoices that DDU Inc. had sent to
POA over the course of a year for utility services provided. DDU Inc. also attached
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an e-mail from POA to DDU Inc., dated February 19, 2020, in which POA
disclaimed any intent to continue paying DDU Inc. for its water services because
POA had executed its own contract with BRA for irrigation water for the year 2020.
And DDU Inc. attached the sworn affidavit of Christie Rotramel, its custodian of
records. In it, Rotramel affirmed that each factual allegation in DDU Inc.’s
counterclaim was within her personal knowledge and that they were each true and
correct. In short, DDU Inc. pleaded facts that demonstrated that it suffered a
concrete and particularized injury traceable to POA’s failure to continue making
payments for services rendered. And this injury is readily redressable by an award
of actual damages in the amount of the overdue invoices, which is precisely what
DDU Inc. sought and received. Accordingly, DDU Inc. had standing to bring its suit
on sworn account as a counterclaim, and the trial court had jurisdiction to award the
relief that DDU Inc. requested.
2. Assumed Name—POA’s argument that DDU Inc. lacked standing because
it used the name “DDU Inc.” rather than “DDU Co.” misses the mark. DDU Inc.
has sufficiently demonstrated that it suffered a concrete injury traceable to POA’s
conduct and that a favorable award of damages would redress that harm. That is
sufficient for standing. In any event, the record demonstrates that “DDU Inc.,” just
like “DDU,” is an assumed name of DDU Co.
Any . . . private corporation . . . doing business under an assumed
name may sue or be sued in its . . . assumed or common name for the
purpose of enforcing for or against it a substantive right, but on a
motion by any party or on the court’s own motion the true name may
be substituted.
TEX. R. CIV. P. 28. Rule 28 is “predicated on the notion that a case has already
commenced against the proper party, but the party’s legal name is incorrect.”
Molinet v. Kimbrell, 356 S.W.3d 407, 412 (Tex. 2011). That is precisely what
occurred here.
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In a prior dispute between these parties—which was also appealed to this
court—POA sued DDU Inc. under its legally correct name: “DDU Co.” See
Dipprey v. Double Diamond, Inc., 637 S.W.3d 784 (Tex. App.—Eastland 2021, no
pet.). The trial judge in this case, who also presided over the dispute in Dipprey,
acknowledged that POA and DDU Inc. were also opposing parties in the former suit.
Furthermore, the trial court asked that the parties stipulate as to matters that had
already been litigated in Dipprey, and POA complied by stipulating that DDU Inc.
owns the water diversion facilities. Additionally, the invoices to POA for water and
electricity suggest that DDU Co. did business with POA using the assumed names
DDU and DDU Inc. See KM-Timbercreek, LLC v. Harris Cnty. Appraisal Dist., 312
S.W.3d 722, 730 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (conditioning
availability of Rule 28 on a showing by the named entity that it actually does
business under that name), superseded by statute on other grounds as stated in Town
& Country Suites, L.C. v. Harris Cnty. Appraisal Dist., 461 S.W.3d 208 (Tex. App.—
Houston [1st Dist.] 2015, no pet.). In any event, whether an entity does business
under an assumed or common name is a question of fact for the trial court to
determine. Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 52 (Tex. 2003). The
trial court in this case did not make any findings of fact, so we must presume it made
all the necessary findings to support the judgment. Ryan v. Abdel-Salam, 39 S.W.3d
332, 334 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). For all of these
reasons, we may not ignore the trial court’s implied necessary finding that “DDU
Inc.” is an assumed name under which DDU Co. conducts its business and under
which it did, in fact, conduct its business with POA.
3. Capacity—POA insists that “DDU Inc.” is not an assumed name used by
DDU Co. because DDU Co. never registered the name “DDU Inc.” by filing an
assumed name certificate. See TEX. BUS. & COM. CODE ANN. § 71.101 (West Supp.
2021). POA stresses that, under the Business and Commerce Code, if a corporation
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does not file an assumed name certificate, it “may not maintain . . . an action or
proceeding arising out of a contract . . . in which an assumed name was used.” Id.
§ 71.201(a) (West 2015). Whether DDU Inc. filed an assumed name certificate is
immaterial here. The issue POA raises on appeal is that DDU Inc. lacks standing—
the failure to file an assumed name certificate would only affect DDU Inc.’s capacity
to sue. See Sixth RMA Partners, L.P., 111 S.W.3d at 55–56 (holding that the “failure
to file an assumed name certificate does not render a plaintiff’s claim void” but does
“affect[] a plaintiff’s capacity to bring suit”).
Capacity and standing are distinct concepts. “A plaintiff has standing when it
is personally aggrieved, regardless of whether it is acting with legal authority; a party
has capacity when it has the legal authority to act, regardless of whether it has a
justiciable interest in the controversy.” Nootsie, Ltd. v. Williamson Cnty. Appraisal
Dist., 925 S.W.2d 659, 661 (Tex. 1996). Crucially, “[a]n argument that an opposing
party does not have the capacity to participate in a suit can be waived by a party’s
failure to properly raise the issue in the trial court.” Sixth RMA Partners, L.P., 111
S.W.3d at 56 (citing Nootsie, 925 S.W.2d at 662). Here, POA never raised or
presented to the trial court—in any pleading or motion—DDU Inc.’s failure to file
an assumed name certificate. Therefore, POA waived any complaint as to DDU
Inc.’s capacity to sue. As such, any failure on DDU Inc.’s part to file an assumed
name certificate has no bearing on the issue of standing.
4. Suit on a Sworn Account—POA’s second argument against standing—that
DDU Inc. was never a party to any contract with POA or BRA—also misses the
mark because it only relates to the merits of DDU Inc.’s suit on a sworn account
counterclaim, not DDU Inc.’s standing. We have already determined DDU Inc.’s
standing insofar as it alleged a concrete injury traceable to POA’s conduct and
redressable by an award of damages. But even setting aside the fact that POA’s
argument does not actually relate to standing, it further fails because POA waived
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any dispute it may have had with DDU Inc.’s counterclaim through inaction in the
trial court.
DDU Inc.’s counterclaim falls under Rule 185 of the Texas Rules of Civil
Procedure. See TEX. R. CIV. P. 185. Rule 185 provides that, when a claim is based
on an open account “on which a systematic record has been kept,” the account “shall
be taken as prima facie evidence” of the claim if it is supported by affidavit. Id.;
Copeland v. A-Town/Hi-Tech, L.P., No. 11-18-00154-CV, 2020 WL 3287149, at *2
(Tex. App.—Eastland June 18, 2020, no pet.) (mem. op.). The affidavit supporting
the claim must be made by the party, his agent, or his attorney, and must be “to the
effect that such claim is, within the knowledge of [the] affiant, just and true, that it
is due, and that all just and lawful offsets, payments and credits have been allowed.”
TEX. R. CIV. P. 185. Unless the opposing party files a sworn, written denial of the
claim, a plaintiff who satisfies these requirements is entitled to summary disposition
of the case without the need to formally introduce the account as evidence of the
debt. Woodhaven Partners, Ltd. v. Shamoun & Norman, L.L.P., 422 S.W.3d 821,
833 (Tex. App.—Dallas 2014, no pet.); S. Mgmt. Servs., Inc. v. SM Energy Co., 398
S.W.3d 350, 354 (Tex. App.—Houston [14th Dist.] 2013, no pet.). If the opposing
party fails to file a written denial under oath, he “may not dispute the receipt of the
items or services, or the correctness of the stated charges.” Vance v. Holloway, 689
S.W.2d 403, 404 (Tex. 1985) (quoting Rizk v. Fin. Guardian Ins. Agency, Inc., 584
S.W.2d 860, 862 (Tex. 1979)); see also TEX. R. CIV. P. 93(10), 185.
As we have explained, DDU Inc. suffered a concrete injury traceable to POA’s
conduct. DDU Inc. has also satisfied all the requirements of Rule 185 in asserting
its counterclaim. Accordingly, DDU Inc. was entitled to a summary disposition on
its suit on sworn account unless POA filed a sworn, written denial. It did not. POA
did not even file a general denial, much less a sworn, written denial as demanded by
the rule. When asked why, POA responded that it was unaware that DDU Inc.’s suit
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on sworn account had been verified. In other words, POA overlooked Rotramel’s
affidavit, which was attached to DDU Inc.’s counterclaim as Exhibit O. Even
assuming the veracity of POA’s excuse, it makes no difference. POA did not file a
sworn, written denial of DDU Inc.’s counterclaim and, pursuant to Rule 185, waived
any right to dispute that claim now on appeal. See TEX. R. CIV. P. 185; see also
id. R. 93.
Because DDU Inc. had standing to bring its suit on sworn account—and
because each of POA’s arguments to the contrary are meritless—we overrule POA’s
first issue.
II. No Inconsistency Between the Trial Court’s Rulings and the Judgment
In its second issue, POA requests that we modify the final judgment, or
remand this case to the trial court to do so, because of a perceived inconsistency
between the trial court’s oral rulings in open court and its final judgment. We
overrule POA’s second issue because there is no inconsistency.
In its suit on a sworn account counterclaim, DDU Inc. also sought declaratory
relief. DDU Inc. submitted proposed findings of fact and conclusions of law, which
included the declaration that POA “has no rights in or to the BRA Easement and thus
has no authority under the BRA Easement to access, maintain[,] or operate” the water
diversion facilities (emphasis added).
At the conclusion of trial, the trial court made several oral rulings. The trial
court pronounced that POA has a right of use that is “necessarily implied [by its]
duty to maintain the [recreational] facilities [i.e., to adequately water the golf
course].” Thus, the trial court enjoined DDU Inc., stating that POA “can’t be locked
out of the pump house or wherever it was that they were allegedly locked out of.”
However, the trial court also granted DDU Inc.’s aforementioned proposed
declaration, explaining that it was doing so because POA “[does not] have any
authority under the BRA easement” (emphasis added).
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In its final judgment, the trial court ordered that “DDU shall be enjoined from
shutting down, locking up, or turning off the Water System, which provides raw
water to [POA] in order to irrigate the golf course.” The trial court further ordered
that POA “has no rights in or to the BRA Easement and thus has no authority under
the BRA Easement to access, maintain[,] or operate” the water diversion facilities
(emphasis added).
We find no ambiguities in the findings recited in the trial court’s final
judgment, nor between those findings and the trial court’s oral rulings at the
conclusion of trial. The trial court enjoined DDU Inc. from taking any actions to
prevent POA from accessing the water that it needs to irrigate the golf course. The
declaratory relief that the trial court granted to DDU Inc. is not inconsistent with that
injunction. It merely states that the source of POA’s right to use the water system is
not the BRA Easement. POA has a right to use the raw water diverted from the lake
by DDU Inc.’s water diversion facilities because it has an independent duty to
irrigate the golf course—not because it has any rights or authority arising out of the
BRA Easement. Accordingly, we overrule POA’s second issue on appeal.
This Court’s Ruling
We affirm the judgment of the trial court.
W. BRUCE WILLIAMS
JUSTICE
September 29, 2022
Panel consists of: Bailey, C.J.,
Trotter, J., and Williams, J.
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