Plaza City, LLC v. AES Septic, LLC ( 2022 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
________________
NO. 09-21-00030-CV
________________
PLAZA CITY, LLC, Appellant
V.
AES SEPTIC, LLC, Appellee
________________________________________________________________________
On Appeal from the 457th District Court
Montgomery County, Texas
Trial Cause No. 18-07-09861-CV
________________________________________________________________________
MEMORANDUM OPINION
In its sole issue, Appellant Plaza City, LLC (“Plaza”) asks whether the trial
court erred in granting AES Septic, LLC’s (“AES”) Traditional Motion for Summary
Judgment. Plaza argues that: (1) AES’s Motion for Summary Judgment should have
been denied, because it was untimely filed; (2) the doctrine of collateral estoppel
does not apply to this case; (3) the impact of AES’s breach created fact issues
pertaining to causation and damages; and (4) the deemed admissions AES relied on
in its motion were merit preclusive, the result of a good-faith mistake, and should
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have been set aside. For the following reasons, we will reverse the trial court’s
judgment and remand.
I. Background
A. Parties’ Relationship and History
Plaza owns an office building in Montgomery County and entered into an
agreement with Tenant 1 for the buildout of certain space that required redesigning
the septic system to the building. The lease commenced on May 1, 2018, and Plaza
had ninety days to complete the improvements or Tenant could terminate the lease.
The lease provided that time was of the essence and required “strict compliance with
the times for performance.” The lease obligated Tenant to pay rent on 10,900 square
feet of space. In April 2018, Plaza hired AES to upgrade the septic system and
prepare drawings to submit to the Montgomery County Permit Department
(“MCPD”), which were required to be signed as approved by a licensed sanitarian.
Tenant’s affidavit and emails between Plaza, Plaza’s architect, and Tenant
showed that Tenant learned in May 2018 the occupancy restrictions on the leased
premises would be 159 given the square footage of the “party rooms.” The emails
further revealed that Tenant’s business plan required a minimum occupancy of 200,
and Tenant claimed that Plaza had previously been made aware of this. The lease’s
1Tenant is Crawford Strategies, LLC and Jennifer Crawford, who are not
parties to this appeal. Jennifer Crawford executed the lease with Plaza and was the
affiant in the affidavit referenced in the above paragraph.
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written terms do not address the Tenant’s occupancy needs. Given the occupancy
restriction, Tenant told Plaza not to do any further work on the premises until they
could meet.
In June 2018, Plaza and Tenant met with the MCPD, who advised them that
the sanitarian’s signature on AES’s septic drawings had been forged, and MCPD
denied the permit. On June 18, 2018, Tenant sent a letter to Plaza indicating they
were terminating their agreement. The letter from Tenants to Plaza advised, “Due to
the recent fraudulent activities surrounding the septic permit involving our potential
business, PlayCation Zone, we must remove ourselves from this situation, in
particular, by terminating the lease at 32507 Tamina Road.” Tenant also demanded
return of their payments, which Plaza refused.
In a separate lawsuit filed in Montgomery County Court at Law, Tenant sued
Plaza for breach of contract. Tenant filed two traditional motions for summary
judgment, one as to liability on their breach of contract claim and another for
damages. In its Traditional Motion for Partial Summary Judgment as to Liability for
Breach of Contract, Tenant argued that Plaza failed to perform, specifically citing to
the activities around the septic permit but also arguing that regardless of the septic
permit issue, Plaza failed to meet Tenant’s occupancy requirements and instead of
providing the 10,900 square feet of space they agreed to, Plaza only provided 9,900.
The trial court in that case granted Tenant’s motions for summary judgment on
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liability and damages, awarding damages against Plaza in the amount of $83,560.00
plus attorney’s fees. Tenant’s motions, the summary judgment evidence, and orders
were made part of the summary judgment record in this case.
B. Procedural Posture
Plaza alleged that AES advertised their company as a “septic system
designing, permitting and installation company.” Plaza hired AES to design the
expansion of the septic system, and prior to the installation, AES was required to
obtain a permit from the MCPD. Plaza alleged that AES submitted documents to the
MCPD with a forged sanitarian’s signature, specifically Stephanie L. Sturman, and
that when she advised the MCPD that AES forged her signature, the MCPD denied
the permit application and the expansion project was halted. Plaza further alleged
that due to the halt of the project, Tenant terminated the long-term lease agreement
and demanded a refund of all payments made toward the lease agreement.
After Tenant terminated the lease, Plaza sued AES for breach of contract,
breach of fiduciary duty, fraud, and negligent misrepresentation. Plaza subsequently
amended its Petition and added Stephanie L. Sturman, the sanitarian whose seal AES
used, as a defendant. 2 Plaza also added causes of action against AES for “civil
conspiracy/joint and several liability.” Plaza sought actual damages, exemplary
2The trial court severed and ordered Plaza’s claims against AES dismissed
with prejudice.
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damages, and attorney’s fees. AES asserted a general denial, then later amended its
answer adding failure to mitigate, collateral estoppel, and res judicata as affirmative
defenses. AES also designated Tenant as a responsible third party.
C. Motion for Summary Judgment, Response, and Evidence
1. AES’s First Motion for Summary Judgment
In January 2020, AES initially filed its Traditional Motion for Summary
Judgment for All Claims (“First Motion for Summary Judgment”), which the trial
court did not rule on. AES argued, among other things, that it was entitled to
summary judgment based on Plaza’s deemed admissions to AES’s Requests for
Admissions to Plaza filed on September 10, 2019, which Plaza failed to answer. In
response to the motion, Plaza argued its deemed admissions were merit-preclusive
and for that reason should be set aside since AES was required to show that Plaza
acted in “flagrant bad faith or callous disregard,” which Plaza argued AES could not
do. The Response noted Plaza’s firm was involved in a law firm merger, and its
failure to answer AES’s Requests for Admissions resulted from an “unfortunate
oversight.” The record, however, does not show Plaza presented any evidence
supporting its claims of oversight. Plaza also never filed a separate motion to strike
or a motion to withdraw the deemed admissions. Likewise, the record does not show
that Plaza ever answered the Requests for Admissions. AES set its First Motion for
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Summary Judgment for submission, but it does not appear the trial court considered
it as the record does not contain an order denying or granting AES’s Motion.
2. AES’s Second Motion for Summary Judgment
In October 2020, AES filed another Traditional Motion for Summary
Judgment for All Claims, which the trial court granted. AES argued that it
conclusively negated causation and damages as to all Plaza’s claims on two grounds.
First, AES argued that collateral estoppel barred Plaza from litigating issues in this
action that were fully and fairly litigated in the suit filed in the Montgomery County
Court at Law, which includes whether any delays in obtaining the septic permit
caused Plaza to breach it lease with Tenant, or whether its breach of the lease had
caused its damages. According to AES, the Montgomery County Court at Law had
already ruled that Plaza breached its lease with Tenant by failing to provide a
building with the space—the square footage—Tenant required, a matter unrelated to
delays in obtaining a permit on the building’s septic system. Second, AES argued
that the deposition of Plaza’s corporate representative, Antonio Rogers, together
with Plaza’s deemed admissions, establish it has no damages it can relate to AES’s
breach. According to AES, Rogers testified that forging Sturman’s name to the
documents associated with the permit was an immaterial breach of the parties’
contract, a breach that resulted in a delay of about two weeks before Plaza submitted
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another application to MCPD for a permit to the septic system serving Plaza’s
building.
AES’s summary judgment evidence includes: (1) counsel’s affidavit averring
it sent Requests for Admissions to Plaza, which Plaza never answered, and outlined
a pattern of discovery abuse that required it to file motions to compel before Plaza
fully answered discovery; (2) Tenant’s Traditional Motion for Partial Summary
Judgment as to Liability for Breach of Contract with accompanying evidence; (3)
Interlocutory Order Granting [Tenant’s] Traditional Partial Motion for Summary
Judgment as to Liability for Breach of Contract without specifying basis; (4) Order
Granting [Tenant’s] Motion for Summary Judgment as to Damages; (5) Order
Granting [Tenant’s] Motion to Dismiss; (6) Plaintiff’s 4th Amended Original
Petition; (7) Tenant’s Reply in Support of Traditional Motion for Partial Summary
Judgment as to Liability for Breach of Contract; (8) Plaza’s Response to Tenant’s
Partial Summary Judgment Motion as to Liability for Breach of Contract in which
Plaza argued Tenants repudiated the contract before the improvements to the space
were complete under the lease, which it argues excused its duty to perform the lease
and creates a fact issue regarding whether the seven-day delay related to obtaining
the septic permits constituted a material breach of the lease; (9) AES’s Motion to
Compel the Production of Documents and Answers Responsive to Defendant’s
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Discovery Requests; and (10) a transcript of the deposition of Plaza’s owner and
corporate representative Antonio Rogers.
Plaza responded to the Motion for Summary Judgment (its second) that AES
filed in October 2020. Plaza attached the following evidence to its Response: (1)
amended Docket Control Order; (2) the lease signed by Tenant; (3) correspondence
pertinent to Sturman’s signature on the documents submitted for the permit; (4)
Tenant’s notice canceling the lease dated June 18, 2018 to Plaza, given the “recent
fraudulent activities surrounding the septic permit[;]” (5) Tenant’s Traditional
Motion for Partial Judgment as to Liability for Breach of Contract; (6) emails from
attorneys; and (7) plans and construction notes on the building, which reflect the
building contains over 11,000 square feet of space.
The trial court granted AES’s Traditional Motion for Summary Judgment for
All Claims without specifying the basis for its ruling. The trial court’s order stated
that “[a]fter reading the motion, the response, and all relevant summary judgment
evidence brought to the Court’s attention, the Court is of the opinion the Motion
should be granted.”
II. Analysis
A. Timeliness of Motion for Summary Judgment
Plaza contends that the trial court should have denied AES’s Motion for
Summary Judgment, because it was untimely. Specifically, Plaza argues that the
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Docket Control Order signed on September 3, 2019, provided a summary judgment
deadline of February 15, 2020.
“Trial courts have discretion to manage their dockets and to schedule cases so
the court may conveniently and efficiently dispose of the cases that are on its
docket.” Coe v. Weller, Green, Toups & Terrell, LLP, No. 09-18-00365-CV, 2020
WL 6929662, at *8 (Tex. App.—Beaumont Nov. 25, 2020, pet. denied) (mem. op.)
(citing Clanton v. Clark, 639 S.W.2d 929, 931 (Tex. 1982)). The record shows that
AES initially filed its Traditional Motion for Summary Judgment in January 2020.
The record also shows this case was continued, and in April 2020, the trial court
entered a new Docket Control Order with a January 19, 2021 trial date. The new
Docket Control Order provided that all motions for summary judgment should be
set for submission thirty days before trial, which would have been December 20,
2020. On October 27, 2020, AES filed its Traditional Motion for Summary
Judgment for All Claims and attached additional evidence, including among other
things, deposition testimony of Rogers. AES set its Traditional Motion for Summary
Judgment for submission on December 4, 2020. Plaza does not claim that it did not
have adequate notice or was not afforded an opportunity to respond to AES’s re-
filed Traditional Motion for Summary Judgment that included additional evidence.
See Trevino v. Trevino, 64 S.W.3d 166, 170 (Tex. App.—San Antonio 2001, no pet.)
(noting that plaintiffs did not argue they did not have adequate notice or an
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opportunity to respond to defendant); see also Ihde v. Nationstar Mortg. LLC, No.
05-20-00576-CV, 2021 WL 5104374, at *3 (Tex. App.—Dallas Nov. 3, 2021, pet.
denied) (mem. op.) (noting same). Rather, the record establishes that Plaza
responded to AES’s Motion for Summary Judgment, and the trial court considered
Plaza’s response in its ruling.
Despite Plaza’s assertion to the contrary, the record shows that AES’s
Traditional Motion for Summary Judgment as to all claims was timely filed under
the applicable Docket Control Order. Regardless, given the rescheduled trial setting,
newly conducted discovery, and Plaza’s opportunity to respond, we cannot say the
trial court clearly abused its discretion by considering AES’s Traditional Motion for
Summary Judgment. See Clanton, 639 S.W.2d at 931 (explaining that “the court is
given wide discretion in managing its docket” and reviewing court will not interfere
absent a clear abuse of discretion); Coe, 2020 WL 6929662, at *8 (noting same).
B. Motion for Summary Judgment
Plaza challenges the summary judgment in favor of AES and argues that: 1)
collateral estoppel does not apply to this case; 2) the impact of AES’s breach created
fact issues related to causation and damages; and 3) the deemed admissions AES
relied on were merit-preclusive, the result of a good-faith mistake, and should have
been set aside.
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We review a trial court’s ruling on a motion for summary judgment de novo.
Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018); Travelers Ins. Co. v.
Joachim, 315 S.W.3d 860, 862 (Tex. 2010). In doing so, we review the evidence in
the light most favorable to the nonmovant, crediting evidence favorable to the
nonmovant and indulging every reasonable inference in its favor. See Lujan, 555
S.W.3d at 84. With a traditional motion for summary judgment, the movant has the
burden to show no genuine issue of material fact exists and it is entitled to judgment
as a matter of law. See id.; see also Tex. R. Civ. P. 166a(b), (c). “An issue is
conclusively established ‘if reasonable minds could not differ about the conclusion
to be drawn from the facts in the record.’” Cmty. Health Sys. Prof’l Servs. Corp. v.
Hansen, 525 S.W.3d 671, 681 (Tex. 2017) (quoting Childs v. Haussecker, 974
S.W.3d 31, 44 (Tex. 1998)). If the movant meets its burden, the burden then shifts
to the nonmovant to raise a genuine issue of material fact precluding summary
judgment. Lujan, 555 S.W.3d at 84.
1. Deemed Admissions
We next turn to Plaza’s argument that the deemed admissions AES relied upon
were merit-preclusive and should have been set aside. Plaza contends that it did not
act in bad faith or with callous disregard for the rules with respect to the Requests
for Admissions and good cause existed for its failure to answer, because the firm
representing Plaza was going through a law firm merger and the reason the
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admissions were not answered was the result of “unfortunate oversight.” Plaza
further asserts that AES failed to produce any evidence in its summary judgment to
support that Plaza’s failure to respond to the Requests for Admissions “was the result
of flagrant bad faith or callous disregard.”
A trial court has broad discretion to permit or deny the withdrawal of deemed
admissions but cannot do so arbitrarily, unreasonably, or without reference to
guiding rules or principles. Marino v. King, 355 S.W.3d 629, 633 (Tex. 2011) (per
curiam); Wheeler v. Green, 157 S.W.3d 439, 443 (Tex. 2005) (per curiam).
When a party is served with requests for admissions and fails to respond, each
request is deemed admitted by operation of law. See Tex. R. Civ. P. 198.2(c). “A
matter admitted under this rule is conclusively established as to the party making the
admission unless the court permits the party to withdraw or amend the admission.”
Id. 198.3. A trial court can allow the withdrawal or amendment of an admission if
(1) a party shows good cause, and (2) the trial court finds that the parties relying on
the deemed admissions will not be unduly prejudiced and presentation of the action’s
merits will be subserved by allowing the amendment or withdrawal of the admission.
See id. A party may establish good cause by showing its failure to respond was
accidental or a mistake, rather than intentional or the result of conscious indifference.
Wheeler, 157 S.W.3d at 442. To establish a lack of undue prejudice, a party must
show “that withdrawing the admission will not delay the trial or significantly hamper
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the opposing party’s ability to prepare for it.” Romero v. D.R. Kidd Co., Inc., No.
14-18-00057-CV, 2019 WL 2939253, at *3 (Tex. App.—Houston [14th Dist.] July
9, 2019, no pet.) (mem. op.) (citing Wheeler, 157 S.W.3d at 442).
Typically, a party seeking withdrawal of admissions has the burden of proof.
Id. at *3. However, when using deemed admissions as the basis for summary
judgment due process concerns are implicated, and the movant must show flagrant
bad faith or callous disregard as an element of their summary judgment burden. See
Marino, 355 S.W.3d at 634; Wheeler, 157 S.W.3d at 443–44. “‘Bad faith is not
simply bad judgment or negligence, but the conscious doing of a wrong for
dishonest, discriminatory, or malicious purpose.’” Time Warner, Inc. v. Gonzalez,
441 S.W.3d 661, 666 (Tex. App.—San Antonio 2014, pet. denied) (citation
omitted). Evidence that shows “‘a party is mindful of pending deadlines and
nonetheless either consciously or flagrantly fails to comply with the rules’” satisfies
the flagrant bad faith or callous disregard standard. Ramirez v. Noble Energy, Inc.,
521 S.W.3d 851, 860 (Tex. App.—Houston [1st Dist.] 2017, no pet.) (quoting In re
TT-Fountains of Tomball, Ltd., No. 01-15-00817-CV, 2016 WL 3965117, at *12
(Tex. App.—Houston [1st Dist.] July 21, 2016, orig. proceeding) (mem. op.)).
When no showing of flagrant bad faith or callous disregard for the rules is
made, it is presumed that presentation of the merits would be served by allowing the
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withdrawal of the deemed admissions. See Ralls v. Funk, 592 S.W.3d 178, 183 (Tex.
App.—Tyler 2019, pet. denied).
Requests for admissions are improper and ineffective when used to establish
controverted issues that constitute the fundamental legal issues in a case. Cedyco
Corp. v. Whitehead, 253 S.W.3d 877, 880 (Tex. App.—Beaumont 2008, pet.
denied) (reversing summary judgment based on deemed admission concerning
which party was the “sole legal owner” of a judgment). Requests for admissions are
meant to simplify trials and are useful to address uncontroverted matters or
evidentiary ones but were not intended to be used to force a party to admit the
validity of his claims or concede his defenses. See Marino, 355 S.W.3d at 632.
The Requests for Admission that Plaza failed to answer included the
following:
4. Admit that Plaintiff was in breach of the lease agreement with
Crawford Strategies, LLC even if the septic design submitted on June
4, 2018 had contained Stephanie L. Sturman’s signed seal that was
signed physically by Stephanie L. Sturman.
6. Admit that Defendant’s signing of Stephanie L. Sturman’s signature
did not cause Crawford Strategies, LLC to terminate the lease with
Plaintiff.
7. Admit that Defendant’s signing of Stephanie L. Sturman’s signature
did not cause any of the damages alleged in Plaintiff’s lawsuit against
Defendant.
9. Admit that Plaintiff was not in breach of the lease with Crawford
Strategies, LLC with regard to any of the project relating to the septic
system when the design was accepted in the summer of 2018.
10. Admit that Plaintiff was in breach of the lease with Crawford
Strategies, LLC for terms unrelated to the septic system.
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11. Admit that Plaintiff would have suffered the same losses relating to
the lease agreement with Crawford Strategies, LLC whether or not
Defendant was involved in the septic system project.
AES supported the Traditional Motion for Summary Judgment with counsel’s
affidavit, wherein he averred that he served the Requests for Admissions to Plaza’s
attorney on September 10, 2019, via email with additional discovery requests.
Counsel also outlined repeated failures by Plaza’s attorney to answer discovery and
averred that he had to file at least two motions to compel before Plaza responded to
discovery. AES included the email sent to Plaza’s attorney with the discovery
requests and counsel averred he received an email from that same address later in
the day. Finally, counsel averred that he still had not received any responses to the
Requests for Admissions. This was despite filing the First Motion for Summary
Judgment in January 2020 based on those same deemed admissions. Although in its
Response Plaza attributed the failure to answer the Requests for Admissions to an
oversight and law firm merger, Plaza did not include an affidavit or any evidence to
controvert AES’s counsel’s affidavit averring that Plaza repeatedly failed to fully
answer discovery and Plaza still had not responded to the Requests for Admissions.
These deemed admissions were merit-preclusive and the basis of a summary
judgment motion, therefore AES bore the burden of establishing that Plaza acted in
bad faith or with callous disregard. See Time Warner, Inc., 441 S.W.3d at 666. We
do not need to go through each admission in painstaking detail, as the gist of them
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is clear. See Medina v. Zuniga, 593 S.W.3d 238, 246 (Tex. 2019). AES asked Plaza
to admit its sole responsibility for the Tenant breaching the lease and for any
damages Plaza incurred. See id.The affidavit of AES’s counsel averring that it sent the Requests for
Admissions and outlining Plaza’s pattern of not fully answering discovery absent a
motion to compel, plus Plaza’s failure to ever respond to the Requests for
Admissions is some evidence from which the trial court could have determined there
was flagrant bad faith or a callous disregard of the rules, especially where AES’s
First Motion for Summary Judgment put Plaza on notice of its failure to respond to
the Requests for Admissions approximately nine months earlier. See In re TT-
Fountains of Tomball, Ltd., 2016 WL 3965117, at *11 (“[T]he length of time that a
response is tardy may factor into whether a party acts with the requisite state of mind
sufficient to deny his motion to withdraw when he is aware of being served with
discovery[.]”); Darr v. Altman, 20 S.W.3d 802, 808 (Tex. App.—Houston [14th
Dist.] 2000, no pet.) (“While not receiving the requests for admissions would have
constituted good cause for allowing the withdrawal of the deemed admissions,
waiting three months after receiving the motion for summary judgment with the
attached requests to either answer the requests or move to withdraw
the deemed admissions vitiated that good cause.”). Because there is some evidence
in the record to support a finding of flagrant bad faith or callous disregard of the
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rules, AES negated the existence of good cause, and the trial court did not abuse its
discretion in implicitly denying Plaza’s request to withdraw the deemed admissions.
See Estate of Campos, No. 04-19-00350-CV, 2020 WL 1866460, at *5 (Tex. App.—
San Antonio Apr. 15, 2020, no pet.) (mem. op.) (reasoning same).
Before we address Plaza’s remaining arguments, including the collateral
estoppel argument and the existence of issues of material fact, we determine if the
deemed admissions have a conclusive effect. See id. at *6. Generally, once
admissions are deemed, they constitute judicial admissions and “may not be
contradicted by any evidence, including summary judgment affidavits.”
Willowbrook Foods, Inc. v. Grinnell Corp., 147 S.W.3d 492, 502 (Tex. App.—San
Antonio 2004, pet. denied) (citing Marshall v. Vise, 767 S.W.2d 699, 700 (Tex.
1989)); see also Neal v. Wisconsin Hard Chrome, Inc., 173 S.W.3d 891, 894 (Tex.
App.—Texarkana 2005, no pet.). “Admissions of fact on file at the time of a
summary judgment hearing are proper summary judgment proof and will, therefore,
support a motion for summary judgment.” Cedyco Corp., 253 S.W.3d at 880(emphasis original) (citations omitted); see also Tex. R. Civ. P. 166a(c). However,
requests for admissions asking a party to admit or deny purely legal issues are
improper, and deemed admissions involving purely legal issues are of no binding
effect. Cedyco Corp., 253 S.W.3d at 880 (citations omitted); see also Maswoswe v.
Nelson, 327 S.W.3d 889, 896–97 (Tex. App.—Beaumont 2010, no pet.) (citations
17
omitted); Boulet v. State, 189 S.W.3d 833, 838 (Tex. App.—Houston [1st Dist.]
2006, no pet.). This is because the primary purpose of requests for admissions is to
simplify trials by eliminating matters about which there is no real
controversy. See Marino, 355 S.W.3d at 632; Stelly v. Papania, 927 S.W.2d 620,
622 (Tex. 1996) (per curiam); Cedyco Corp., 253 S.W.3d at 880. Here, AES asked
Plaza to admit its claims were invalid and concede AES was not liable, which were
matters in dispute. Requests for admission were not intended for this purpose. See
Marino, 355 S.W.3d at 632; Stelly, 927 S.W.2d at 622.
Due-process concerns arise when deemed-admissions resulting in a penalty
akin to a death-penalty sanction are attributable to counsel that falls not on counsel
but instead falls on the client. See Medina, 593 S.W.3d at 245 (“Our cases on [the
implications arising from deemed admissions] are not constitutional holdings per se,
but rather reflect judicially created prophylactic measures designed to ensure that
our rules of civil procedure—rules this Court promulgated—are not applied in a way
that risks violating due process.”). Since the motion for summary judgment AES
filed hinges on merits-preclusive requests for admissions, we agree with Plaza the
requests improperly seek admissions of purely legal issues and for that reasons
constitute improper summary judgment evidence. See Marino, 355 S.W.3d at 632;
Cedyco Corp., 253 S.W.3d at 880–81. Accordingly, we consider the parties’
remaining summary judgment evidence to determine if it raises genuine issues of
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material fact. See Tex. R. Civ. P. 166a(c); see also Maswoswe, 327 S.W.3d at 896–
97; Cedyco Corp., 253 S.W.3d at 880–81.
2. Collateral Estoppel
AES moved for summary judgment asserting collateral estoppel, arguing that
the trial court’s determination in the lawsuit between Tenant and Plaza that Plaza
breached the contract was determinative in this proceeding. Plaza counters that AES
failed to timely plead the affirmative defense of collateral estoppel, and collateral
estoppel does not apply in this case.
In our discussion of the timeliness of the motion for summary judgment, we
have already outlined the new trial setting of January 2021 and discussed the
applicable Docket Control Order. The Docket Control Order set a deadline of
pleading amendments as 150 days before trial, which would have placed the
pleading deadline in August 2020. AES asserted the affirmative defense of collateral
estoppel in its First Amended Answer filed in February 2020, well within the
applicable deadlines.
A party asserting the bar of collateral estoppel must establish (1) the facts
sought to be litigated in the second action were fully and fairly litigated in the first
action, (2) those facts were essential to the judgment in the first action, and (3) the
parties were cast as adversaries in the first action. John G. & Marie Stella Kenedy
Mem’l Found. v. Dewhurst, 90 S.W.3d 268, 288 (Tex. 2002) (citations omitted).
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Collateral estoppel is designed to promote judicial efficiency and prevent
inconsistent judgments by preventing the relitigation of an ultimate issue of fact.
Tex. Dep’t of Public Safety v. Petta, 44 S.W.3d 575, 579 (Tex. 2001). It does not
require mutuality and applies when the party against whom it is raised had a full and
fair opportunity to litigate the issue in the prior suit. Id.; Eagle Props., Ltd. v.
Scharbauer, 807 S.W.2d 714, 721 (Tex. 1990). “A party in a subsequent suit may
invoke collateral estoppel even if it did not participate in the first suit, if the party
against whom collateral estoppel is asserted was either a party or in privity with a
party in the earlier litigation.” Better Bus. Bureau of Metro. Hous., Inc. v. John
Moore Servs., Inc., 500 S.W.3d 26, 44–45 (Tex. App.—Houston [1st Dist.] 2016,
pet. denied) (citing Eagle Props., 807 S.W.2d at 721).
Collateral estoppel is an affirmative defense. See Tex. R. Civ. P. 94. When a
party moves for summary judgment on an affirmative defense, as here, the movant
must plead and conclusively prove each element of the affirmative defense, thus
defeating the plaintiff’s cause of action. Chau v. Riddle, 254 S.W.3d 453, 455 (Tex.
2008); CommunityBank of Tex., N.A. v. Orange Cty. Ins. Brokerage, Inc., No. 09-
14-00033-CV, 2016 WL 4572278, at *4 (Tex. App.—Beaumont Sept. 1, 2016, pet.
denied) (mem. op.).
Generally, there cannot be estoppel by alternative holdings. Johnson &
Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 522 (Tex. 1998);
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Caprock Inv. Corp. v. Montgomery, 321 S.W.3d 91, 97 (Tex. App.—Eastland 2010,
pet. denied). “‘If a judgment of a court of first instance is based on determinations
of two issues, either of which standing independently would be sufficient to support
the result, the judgment is not conclusive with respect to either issue standing
alone.’” Johnson & Higgins, 962 S.W.2d at 522 (quoting Restatement (Second) of
Judgments § 27, cmt. i (Am. Law. Inst. 1982)). On the other hand,
[i]f the judgment of the court of first instance was based on a
determination of two issues, either of which standing independently
would be sufficient to support the result, and the appellate court upholds
both of these determinations as sufficient, and accordingly affirms the
judgment, the judgment is conclusive as to both determinations. In
contrast to the case discussed in Comment i, the losing party has here
obtained an appellate decision on the issue, and thus the balance weighs
in favor of preclusion.
Id. (quoting Restatement (Second) of Judgments § 27, cmt. o (Am. Law. Inst. 1982)).
In the present case, Plaza asserts claims against AES for not only breach of
contract, but fraud, breach of fiduciary duty, negligent misrepresentation, and civil
conspiracy. AES contends that the issue of Plaza’s breach and specifically, the issue
of its failure to provide the agreed upon 10,900 square footage to Tenant was
determinative to the judgment in the first case. AES argues that determination is
dispositive to all causes of action Plaza raises in this case, as it conclusively negates
causation and damages.
A careful examination of the summary judgment record in this case shows
that Tenant’s Traditional Motion for Partial Summary Judgment in the first case was
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based not only on Plaza’s failure to provide adequate square footage but also Plaza’s
failure to timely complete construction within the ninety-day period provided by the
lease agreement and subsequent failure to return Tenant’s money paid under the
contract. Tenant specifically argued in its Motion for Summary Judgment that it
“discovered that Plaza City was unable to continue construction due to the denied
permit for construction of the septic, and that the plans submitted were under
capacity to accommodate their business model.” Tenant further cited to factual
allegations pleaded by Plaza in this lawsuit regarding AES’s conduct and the denial
of the permit as causing the construction delay to support its Traditional Motion for
Partial Summary Judgment. The trial court granted Tenant’s Motion for Summary
Judgment as to Liability for Breach of Contract against Plaza without specifying
whether it was due to Plaza’s failure to provide adequate square footage or
construction delays brought about by the septic permitting issues, which implicates
AES’s conduct. Because the trial court’s summary judgment in favor of Tenant in
the first case was based on determinations of two issues, either of which standing
independently would be sufficient to support the determination that Plaza breached
the agreement with Tenant, the judgment is not conclusive with respect to either
issue standing alone. See id.; Caprock Inv. Corp., 321 S.W.3d at 97.
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Because AES failed to conclusively establish its affirmative defense of
collateral estoppel, the trial court should not have granted summary judgment on that
basis. See Tex. R. Civ. P. 94; Chau, 254 S.W.3d at 455.
3. Issues of Material Fact
Finally, Plaza asserts the evidence shows fact issues exist regarding AES’s
breach and the damages caused by that breach. Viewing the evidence in the light
most favorable to the nonmovant, we agree. See Lujan, 555 S.W.3d at 84.
AES relies on Plaza’s deemed admissions and argues those admissions prove
no causation and damages. As previously discussed, these requests improperly asked
Plaza to admit purely legal questions and therefore, were improper summary
judgment evidence, so we will consider the remaining summary judgment evidence
to determine if genuine issues of material fact exist. See Maswoswe, 327 S.W.3d at896–97; Cedyco Corp., 253 S.W.3d at 881.
The summary judgment evidence presented by the parties shows that Plaza
entered into an agreement with Tenant to provide 10,900 square footage of space in
their commercial building, and the construction buildout should be completed within
ninety days of the lease’s commencement. The evidence further established that
Plaza hired AES to help provide plans for a redesigned septic system and assist with
the permitting process; AES used a sanitarian’s seal and signature without her
knowledge, and the MCPD denied the septic permits on this basis. Documents in the
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summary judgment record show that Tenants demanded to be let out of the lease
“[d]ue to the recent fraudulent activities surrounding the septic permit involving our
potential business[.]” Although AES presented some evidence in the form of
Rogers’s deposition testimony that this caused only a brief delay and as such argued
it was an immaterial breach, the Tenant’s demand letter cited the activities
surrounding the septic permit as a deciding factor in terminating the lease. Contrary
to AES’s claims that Plaza failed to provide the required square footage, which had
nothing to do with the septic permits, Plaza provided evidence in the form of
construction and design plans that showed over 11,000 square feet of space,
including a second floor.
Because reasonable minds could differ about conclusions drawn from the
facts in the record, AES has failed to conclusively negate causation or damages. See
Hansen, 525 S.W.3d at 681; Childs, 974 S.W.3d at 44. Viewing the evidence in the
light most favorable to the nonmovant, we conclude that AES failed to meet its
burden of showing no genuine issues of material fact remain as to its claims and that
it is entitled to judgment as a matter of law. See id.; see also Tex. R. Civ. P. 166a(b),
(c). We sustain Plaza’s sole issue.
III. Conclusion
We conclude that the trial court improperly granted summary judgment in this
case based on deemed admissions and collateral estoppel. We further conclude that
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the evidence shows genuine issues of material fact remain. Accordingly, we reverse
the trial court’s judgment and remand for further proceedings.
REVERSED AND REMANDED.
________________________________
W. SCOTT GOLEMON
Chief Justice
Submitted on August 9, 2022
Opinion Delivered December 1, 2022
Before Golemon, C.J., Kreger and Horton, JJ.
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