Wasson Interests, Ltd. v. City of Jacksonville, Texas ( 2019 )

NO. 12-13-00262-CV
IN THE COURT OF APPEALS
TWELFTH COURT OF APPEALS DISTRICT
TYLER, TEXAS
WASSON INTERESTS, LTD., § APPEAL FROM THE 2ND
APPELLANT
V. § JUDICIAL DISTRICT COURT
CITY OF JACKSONVILLE, TEXAS,
APPELLEE § CHEROKEE COUNTY, TEXAS
MEMORANDUM OPINION
Wasson Interests, Ltd. (WIL) filed a motion for rehearing of our August 30, 2019 opinion.
We overrule the motion for rehearing, withdraw our opinion and judgment of August 30, 2019,
and substitute the following opinion and corresponding judgment in their place.
The Texas Supreme Court remanded this case to us to address the City of Jacksonville’s
grounds for summary judgment that remain unresolved after the Court determined that the City
was not entitled to governmental immunity because it engaged in a proprietary function when it
leased lakefront property on Lake Jacksonville to James and Stacy Wasson. 1 We affirm in part
and reverse and remand in part.
BACKGROUND
The City created Lake Jacksonville in the late 1950s as the City’s reservoir to provide a
municipal water supply. The City owns the lots surrounding the lake and decided to lease most of
them for ninety-nine year terms for private residential development.
In the 1990’s, the Wassons assumed an existing ninety-nine year lease on lot 43 and signed
a ninety-nine year lease on lot 46 on the lake. The terms of both leases are identical in all relevant
respects. The Wassons constructed a large home on lot 43 and a cabin on lot 46 in accordance
1
See Wasson Interests, Ltd. v. City of Jacksonville, 559 S.W.3d 142, 154 (Tex. 2018) (“Wasson II”).
with the authorizations in the leases. The Wassons first used lots 43 and 46 as their primary
residence.
Both leases incorporated, and the Wassons expressly agreed to abide by, the Lake
Jacksonville Rules and Regulations, as well as the city ordinances pertaining to building,
sanitation, safety, use, and occupancy. Article VII, Section 10 of the rules and regulations states
that failure to comply with the use and occupancy regulations and ordinances is grounds for
forfeiture of the leases.
Article VII, Section 8 of the rules and regulations states in relevant part that “[a]ll Lake
Jacksonville lease lots located outside of the city limits of the City of Jacksonville shall be
restricted to residential purposes only. No business or commercial enterprise . . . shall be allowed
to occupy any structure or operate from any lease lot outside the city limits.” Lots 43 and 46 are
located outside the Jacksonville city limits. The city ordinance pertaining to commercial activity
authorizes limited home occupations conducted within a residential dwelling, but the authorized
activities do not include those conducted by the Wassons in this case. The ordinance further
provides that any business that does not fall within the authorized home occupations constitutes a
prohibited commercial activity, thereby authorizing the City to issue a cease and desist order.
After relocating to Tyler in 2009, the Wassons conveyed their interest in the two lots to
WIL. WIL rented the property to individuals for terms of a week or less. In response, the City
sent an eviction notice for both lots, notifying WIL that its short-term rentals constituted a
commercial use of the property, which violated its rules and regulations and zoning ordinances
specified in WIL’s leases. 2 The City agreed to excuse the past violations and cancel the eviction.
In exchange, WIL entered into a reinstatement agreement with the City that imposed more specific
conditions concerning the property’s acceptable uses and occupancy limitations under the leases.
The reinstatement agreement provides that WIL cease and desist from all commercial
activity on the property in violation of the City’s ordinances and the Lake Jacksonville Rules and
Regulations. The agreement also prohibited
the advertisement or rental of any structure situated on the [properties] as a hotel, motel, inn, tourist
house, tourist court, lodging house, rooming house, bed and breakfast, a vacation site, events site,
multi-family or corporate retreat site, containing guest rooms and which is occupied, or intended or
designed for occupancy by paying guests, whether rent is paid in money, goods, labor or otherwise.
2
WIL twice unsuccessfully sought a variance from the Lake Jacksonville Advisory Board and the
Jacksonville City Council to allow its commercial use of the two lots.
2
The reinstatement agreement contained an exception stating that:
Nothing in this Agreement shall prohibit [WIL] from renting the [properties] to a single family
consisting of one or more persons related by blood, marriage or legal adoption or a group of not
more than three unrelated persons for private residential purposes, (same being defined as lease to
a lessee, the term of which must be in excess of thirty (30) consecutive days).
Thereafter, the City discovered an advertisement to rent the large home on lot 43. On
December 1, 2010, it sent notice to WIL that its advertisement and rental terms violated the
reinstatement agreement, and as provided in the leases, that the City would terminate the leases if
WIL failed to cease all commercial activity on the properties within ten days. Unsatisfied with
WIL’s response, on May 3, 2011, the City sent a second eviction notice based on WIL’s alleged
continued commercial use of the property.
WIL filed suit, alleging that the City breached the lease by improperly terminating the lease
and evicting WIL. WIL also sought injunctive and declaratory relief. Following extensive
discovery, the City filed a combined motion for a traditional and a no-evidence summary
judgment, which the trial court granted without stating a reason. After two appeals to this Court
and the Texas Supreme Court, the Texas Supreme Court ultimately held that the proprietary-
governmental dichotomy applies to breach of contract suits against a municipality, and that the
City acted in its proprietary capacity when it leased the lots to the Wassons. 3 Because we have not
addressed the merits of the City’s no-evidence motion for summary judgment, the Texas Supreme
Court remanded the cause to us as part of this appeal.
SUMMARY JUDGMENT - BREACH OF CONTRACT
In its first issue, WIL argues that it raised a fact issue on its breach of contract and wrongful
eviction claims, and that the trial court erred when it granted summary judgment in favor of the
City.
3
See Wasson II, 559 S.W.3d at 154; Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 439
(Tex. 2016) (“Wasson I”).
3
Standard of Review
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860,
862 (Tex. 2010). An appellate court reviews a no-evidence summary judgment by reviewing “the
evidence presented by the motion and response in the light most favorable to the party against
whom the summary judgment was rendered, crediting evidence favorable to that party if
reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not.”
Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 311 (Tex. 2009) (quoting Mack Trucks, Inc. v.
Tamez, 206 S.W.3d 572, 582 (Tex. 2006)).
A trial court must grant a no-evidence motion for summary judgment if: (1) the moving
party asserts that there is no evidence of one or more specified elements of a claim or defense on
which the adverse party would have the burden of proof at trial; and (2) the respondent produces
no summary judgment evidence raising a genuine issue of material fact on each of the challenged
elements. See TEX. R. CIV. P. 166a(i). No-evidence motions must be sustained when the record
discloses one of the following situations: (a) a complete absence of evidence of a vital fact; (b) the
court is barred by rules of law or of evidence from giving weight to the only evidence offered to
prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or
(d) the evidence establishes conclusively the opposite of the vital fact. Jelinek v. Casas, 328
S.W.3d 526, 532 (Tex. 2010).
More than a scintilla of evidence exists if the evidence rises to a level that would
enable reasonable and fair-minded people to differ in their conclusions. Merrell Dow Pharms.,
Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). When the evidence offered to prove a vital fact
is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence
is no more than a scintilla and, in legal effect, is no evidence. Jelinek, 328 S.W.3d at 532. When,
as here, the summary judgment order does not specify the grounds on which it was granted, we
will affirm a summary judgment ruling if any of the grounds asserted in the motion are
meritorious. See Lightning Oil Co. v. Anadarko E & P Onshore, LLC, 520 S.W.3d 39, 45 (Tex.
2017).
Applicable Law
The essential elements of a breach of contract claim are (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. See Caprock Inv. Corp. v.
4
Montgomery, 321 S.W.3d 91, 99 (Tex. App.—Eastland 2010, pet. denied). A breach of contract
occurs when a party to the contract fails or refuses to do something that it has promised to do. B
& W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.—Houston [1st Dist.] 2009, pet.
denied).
The elements for wrongful eviction include (1) the existence of a valid unexpired lease; (2)
the tenant’s occupancy of the premises; (3) the landlord’s eviction of the tenant; and (4) damages
suffered by the tenant attributable to the eviction. St. Anthony’s Minor Emergency Ctr., L.L.C.
v. Ross Nicholson 2000 Separate Prop. Tr., 567 S.W.3d 792, 797 n.4 (Tex. App.—Houston [14th
Dist.] 2018, pet. denied).
WIL’s Burden
As part of the City’s hybrid motion for summary judgment, it alleged that there is no
evidence to support WIL’s breach of contract and wrongful eviction claims. It thus became WIL’s
burden to present evidence to raise a fact issue that the City breached the leases or the reinstatement
agreement by evicting it without cause. To accomplish this, WIL must produce more than a
scintilla of evidence that it did not materially breach the reinstatement agreement or the leases.
The City alleges that WIL breached the reinstatement agreement in at least three respects: (1) WIL
advertised the properties for use as a vacation rental; (2) WIL’s rental scheme obligates a renter to
a minimum stay of only one week; and (3) Wasson allowed his employees to stay at the properties
in consideration for their labor.
As an initial matter, WIL contends that we should reverse the trial court’s order granting
summary judgment because the City attached evidence to its motion for summary judgment. We
disagree. The City filed a single hybrid motion for summary judgment, attaching evidence to it.
The fact that evidence is attached to a motion for summary judgment that combines traditional and
no-evidence grounds does not mean that we can disregard the no-evidence portion of the motion.
See Binur v. Jacobo, 135 S.W.3d 646, 651 (Tex. 2004). Here, the City identified the essential
elements for which it asserted its no-evidence motion as it was required to do. See TEX. R. CIV. P.
166a(i). The burden was then placed on WIL to create a fact issue. See id. For the remainder of
this opinion, we address whether it met that burden.
The Advertisement - Lot 43
The reinstatement agreement provides that WIL cease and desist from all commercial
activity on the property in violation of the City’s ordinances and the Lake Jacksonville Rules and
5
Regulations. It also prohibits the advertisement or rental of the properties as a hotel, motel, inn,
tourist house, tourist court, lodging house, rooming house, bed and breakfast, a vacation site,
events site, multi-family or corporate retreat site, containing guest rooms intended to be occupied
by paying guests.
The advertisement is on Vacation Rentals By Owner (VRBO.com), and is titled “Luxury
Lakefront Mansion.” It was placed on the website after WIL and the City executed the
reinstatement agreement. The lengthy advertisement states in relevant part:
This Mediterranean Styled Luxury Lake Property is a perfect getaway from city life and can
accommodate a huge family. It is a complete DESTINATION for your enjoyment. Here you can
throw the coolest party you will ever want and your friends will love you forever if they are lucky
enough to be invited. Bring your band, your karaoke and your margarita machine!!! You can also
relax and enjoy lake activities, ski, kayak, fish, and even ride 4 wheelers around our neighborhood
and on numerous trails on our own 11 acre estate or down numerous other nearby trails frequented
by locals. You can dance on the back decks and dock. You can have a big BBQ. You can jump on
the water trampoline and swim or watch everyone else while you sit perched on the deck. You can
also enjoy and pet our many organically raised animals that we raise on the upper three acre parcel.
....
Families and friends that come from the city will love this blend of lake retreat and country farm.
....
We encourage you to invite your family and friends to visit. We no longer restrict our rentals to
people over 25 so now even the younger college aged generation can let it all hang out. Be sure to
wear your college T-shirts especially if they are Texas schools like TCU, UT, or A&M!!! We hope
you enjoy your stay to its fullest. There is ample parking on the West roadside of Moore Lane if
you need it. Monthly renters will be allowed to use the property in any legal way just as any other
homeowner on the Lake Jacksonville. We will not be limiting the number of people on our property
at any given time of your rental. Many Lake Jacksonville homeowners throw parties, even have
bands especially on Memorial Day and other holidays. Come and enjoy!!! You won’t find a cooler
place!!!
This advertisement violates the above referenced provision in the reinstatement agreement
that WIL cease and desist from the advertisement of the property as a tourist house, tourist court,
lodging house, rooming house, bed and breakfast, a vacation site, events site, multi-family or
corporate retreat site intended for occupancy and use of paying guests. Accordingly, this
advertisement constitutes a breach of the agreement as a matter of law as to lot 43.
The agreement provides that the parties release all claims against the other except for those
growing out of enforcement of the Lake Jacksonville rules and regulations, any applicable city
ordinances, or the terms and conditions of the lease agreements between the parties. The leases
state that all of the terms in the leases are an essential part of the consideration between the parties,
and that any violation or default on WIL’s part authorizes the City to terminate the leases, provided
6
that a ten-day written notice to cure the violation is given to WIL. Similarly, Article VII, Section
10 of the rules and regulations states that failure to comply with the use and occupancy regulations
and ordinances is grounds for forfeiture of the leases.
The consideration for the reinstatement agreement was that the City agreed to reinstate the
lease after previous violations by WIL and the subsequent eviction, so long as WIL agreed to cease
advertising and renting the property as a vacation type tourist home. WIL agreed to abide by the
terms of the reinstatement agreement, but nevertheless began advertising the property for the same
purpose, which is not only a breach of the agreement, but also authorized the City to terminate the
leases and evict WIL on lot 43.
The Rental Scheme – Lot 43
WIL contends that the advertisement and its rental practices fall within the safe harbor
provision of the agreement that authorizes a lease to a group of not more than three unrelated
persons for private residential persons, which the agreement defines as a lease to a lessee, the term
of which must be in excess of thirty consecutive days.
The City replies that WIL’s rental scheme obligates a renter to a minimum stay of only one
week, which is a violation of the reinstatement agreement. We agree. The advertisement states
that it is a monthly rental for $13,950 “which averages $3,150/week, [and] this is a monthly rental
but discounts will be applied based on usage.” The advertisement notes that “[m]onthly renters
will be allowed to use the property in any legal way just as any other homeowner on the Lake
Jacksonville.” Dr. Wasson admitted that renters are obligated only to a minimum stay of seven
days, and that if they sought to use the property for more than seven days, they would pay a daily
rate of $350 for the desired number of days in excess of the minimum obligatory seven-day period.
WIL contends that the agreement does not require the lessee to actually occupy the property
during the entire monthly term. However, the agreement requires any rentals must have a term
that exceeds thirty consecutive days. A lease is “a transfer of interest in and possession of property
for a prescribed period of time in exchange for an agreed consideration called rent.” Sisters of
Charity of the Incarnate Word, Houston, Texas v. Meaux, 122 S.W.3d 428, 431 (Tex. App.—
Beaumont 2003, pet. denied). One of the hallmark rights in a lease is the exclusive right to possess
the premises during the lease term. See TEX. PROP. CODE ANN. § 92.001(6) (West 2014) (defining
“tenant” in residential lease as “a person who is authorized by a lease to occupy a dwelling to the
exclusion of others and . . . who is obligated under the lease to pay rent”); Camp Mystic, Inc. v.
7
Eastland, 399 S.W.3d 266, 276 (Tex. App.—San Antonio 2012, no pet.) (stating that tenant has
the exclusive possession of the leased premises for a fixed time). The owner’s mere assent to the
occupancy is not sufficient; allegiance to the title of “landlord” is one of the distinguishing
characteristics of the landlord-tenant relationship. Redgrave v. Schmitz, 584 S.W.2d 374, 376
(Tex. Civ. App.—San Antonio 1979, no writ). No particular words are necessary to create such a
relationship, “but it is indispensable that it should appear to have been the intention of one party
to dispossess himself of the premises and of the other to occupy them.” City of Irving v. Seppy,
301 S.W.3d 435, 445 n.2 (Tex. App.—Dallas 2009, no pet.).
The rental agreement employed by WIL here obligates a renter only for one consecutive
week, and if the renter wished to have access to the property for more than those seven days, he or
she must pay a fee for each day of use. Moreover, there is nothing preventing WIL from leasing
the property to third parties during a month when a renter only occupied it for the minimum one-
week period. This is not a private residential lease to a lessee for a term in excess of thirty days. 4
Consequently, this rental scheme is “monthly” in name only, and this rental practice does not
trigger the safe harbor provision to excuse WIL’s breach of the reinstatement agreement due to its
advertising practices.
Lot 46
The City claimed in a letter notifying WIL of a violation of the reinstatement agreement
for advertising for rental a “lakefront cabin with water trampoline” and “luxury lakefront
mansion.” As we have discussed, the “luxury lakefront mansion” advertisement is in the record
and constitutes a violation of the agreement as to lot 43. However, the alleged “lakefront cabin
with water trampoline” advertisement is not in the record. Consequently, WIL claims that the City
breached the agreement and improperly evicted it on lot 46. The City argues that WIL waived
consideration of this issue because this argument was raised for the first time on appeal. We
disagree.
4
The City also points to Dr. Wasson’s deposition testimony that the rental periods in the advertisement were
for thirty days, which is by definition not in excess of thirty days as required in the reinstatement agreement. However,
he also stated that the rental period was for “whatever number the City required” in the agreement, and that he could
not recall if it was thirty days or longer. The advertisement is for “monthly” rentals, which for some months would
be in excess of thirty days, and thirty days or less for other months. In any event, we need not dwell on this argument
since the advertisement and rental scheme violates the agreement authorizing termination of the lease and eviction on
lot 43.
8
Issues a nonmovant contends avoid the movant’s entitlement to summary judgment must
be expressly presented by written answer to the motion or by other written response to the motion
and are not expressly presented by mere reference to summary judgment evidence. McConnell v.
Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993); see also TEX. R. CIV. P. 166a(c).
In a no-evidence motion for summary judgment, after the movant specifies the elements for which
there is no evidence, the burden then shifts to the nonmovant to produce evidence raising a genuine
issue of material fact on the elements specified in the motion. TEX. R. CIV. P. 166a(i); Mack
Trucks, 206 S.W.3d at 582. The nonmovant is “not required to marshal its proof; its response
need only point out evidence that raises a fact issue on the challenged elements.” TEX. R. CIV.
P. 166a(i), cmt.
WIL satisfied this burden. WIL’s response to the City’s motion included the issue that it
complied with the reinstatement agreement, that it performed its obligations under the agreement,
and that termination of the leases and eviction was improper. It specifically identified and attached
evidence to its response to the motion, including James Wasson’s deposition testimony. In it, he
stated that he never rented either the large house or the cabin after the parties executed the
reinstatement agreement. Furthermore, at times during Wasson’s testimony, counsel referred to
advertisements generally, but he was presented only with the advertisement for the large home and
specifically questioned about that advertisement. As we have stated, there is no advertisement in
the record for the cabin on lot 46. Accordingly, this ground was before the trial court, WIL
presented more than a scintilla of evidence that it complied with the reinstatement agreement as to
the cabin, and the City failed to conclusively negate it. WIL raised a fact issue as to whether the
City’s termination of the lease for lot 46 and eviction was improper.
Gratuitous Employee Stays at the Properties
The City nevertheless contends that WIL violated the reinstatement agreement for both lots
when it allowed employees to stay at both properties in consideration for their labor. James
Wasson testified that he allowed employees, family, and friends to gratuitously stay at the
properties from time to time. With respect to the employees, the City argues that Wasson and WIL
allowed them to stay at the property in violation of the portion of the reinstatement agreement
stating that WIL cannot rent the property as a vacation type home, “whether rent is paid in money,
goods, labor, or otherwise.”
9
However, there is no evidence in the record that he allowed employees to stay at the
property in consideration for their labor, or that it was otherwise part of their compensation as
employees of his medical practice. Instead, the only evidence in the record is that the Wassons
allowed employees to gratuitously stay at the property if they asked and it was not in use by the
Wassons or others, which is not a violation of the leases or the reinstatement agreement. Therefore,
the City was without cause to terminate either lease and evict on this ground.
In summary, the City was authorized to terminate the lease and evict WIL on lot 43.
However, WIL raised a fact issue concerning the City’s termination and eviction of WIL’s lease
on lot 46. Therefore, WIL’s first issue is sustained as to lot 46 and overruled as to lot 43.
SUMMARY JUDGMENT - REMEDY
In its remaining issue, WIL argues that the leases and reinstatement agreement are
ambiguous as to the remedy upon successful eviction by the City. As part of this issue, WIL argues
that it should be awarded the equity in the permanent improvements it made to the properties.
Applicable Law
We apply well-established rules of contract interpretation when construing the leases and
subsequent contracts governing the parties’ relationship. See NP Anderson Cotton Exch., L.P. v.
Potter, 230 S.W.3d 457, 463 (Tex. App.—Fort Worth 2007, no pet.). In construing a written
contract, our primary concern is to ascertain the true intention of the parties as expressed in the
plain language of the contract. N. Shore Energy, L.L.C. v. Harkins, 501 S.W.3d 598, 602 (Tex.
2016) (per curiam). If a contract is unambiguous, its terms can be interpreted as a matter of law
by the court. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Where contract language is
subject to two or more reasonable interpretations, it is ambiguous. National Union Fire Ins. Co.
v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). Whether a contract is ambiguous is a
question of law for the court to decide by looking at the agreement as a whole in light of the
circumstances present when the contract was entered. Coker, 650 S.W.2d at 394. We examine
and consider the entire writing in an effort to harmonize and give effect to all the provisions of the
contract so that none will be rendered meaningless. Id. at 393. No single provision will control;
rather, all provisions must be considered with reference to the whole instrument. Id.
10
Discussion
Paragraph Six of the leases authorizes the construction of improvements such as homes on
the leased premises, and the lessee is given thirty days after the expiration of the primary term to
remove any improvements made by the lessee if there has been no renewal. Under that provision,
the lease specifies that any improvements remaining after the thirty-day period become the
property of the City.
Paragraph Eight of the leases authorizes the City to cancel the lease in the event that the
leased premises are necessary to effectuate the prime purpose of impounding, storing, and selling
of water for industrial, municipal, and other lawful purposes. If the City exercises this power, the
lessee is required to remove any improvements within six months thereafter.
In between these provisions, the leases specify in Paragraph Seven that each and all terms
of the leases are essential, and any violation or default on the lessee’s part shall be grounds for
terminating the lease at the City’s option. This paragraph requires the City to provide a written
notice to the lessee and allow it ten days to cure the violation or default prior to terminating the
lease. This paragraph is silent as to whether the tenant has a right to remove the improvements or
whether they become the City’s property upon termination.
Contrary to WIL’s contention, we do not interpret the leases to be ambiguous in this regard.
First, all three paragraphs are located sequentially in the leases. Second, Paragraphs Six and Eight
specifically address the ownership of improvements and the lessee’s right to remove the
improvements in two fact scenarios—when the lease expires under its own terms and when the
City must cancel the lease for the public purpose of its water supply function. Paragraph Seven,
the applicable fact scenario here, when the lessee violates or defaults on the lease, is silent on these
issues. Given that the leases specifically addressed these matters in other scenarios, we presume
that the leases are intentionally silent on this issue. But this does not create an ambiguity because
Texas fixture and improvements law provides that a permanent improvement to real property
encompasses virtually anything that permanently enhances the value of the property and is placed
on the land so that it is impossible to remove it or carry it away without injuring the property. See,
e.g., Corral-Lerma v. Border Demolition & Envtl. Inc., 467 S.W.3d 109, 124 (Tex. App.—El
Paso 2015, pet. denied); Big West Oil Co. v. Willborn Bros. Co., 836 S.W.2d 800, 803 (Tex.
App.—Amarillo 1992, no writ). A home on a foundation is generally a permanent fixture and
improvement that cannot be removed without injury to the land. See Dennis v. Dennis, 256
11
S.W.2d 964, 966 (Tex. Civ. App.—Amarillo 1952, no writ). Ordinarily, unless the parties contract
otherwise, the permanent improvement passes with the land to the lessor after termination of the
lease. See Travis Cent. Appraisal Dist. v. Signature Flight Support Corp., 140 S.W.3d 833, 838
(Tex. App.—Austin 2004, no pet.). That is the result here when a tenant such as WIL breached
the lease and the City followed the procedures stated in the lease, electing to terminate and evict
WIL.
However, that does not end our inquiry. WIL contends that it should retain the equity for
the improvements it made on the City’s land. Ordinarily, the landlord in a residential lease
provides not only the land, but the dwelling or tenement to the tenant. In these leases here, the
City provided only the land, and the leases authorized the tenant to construct permanent homes
and other improvements. In this unusual scenario, WIL has been lawfully evicted on lot 43, but
the City retains ownership of the home and other improvements for which the Wassons expended
a vast sum of money.
The principle is established that a party who in good faith makes improvements to property
owned by another is entitled to compensation therefor. See Wagner & Brown, Ltd. v. Sheppard,
282 S.W.3d 419, 425–26 (Tex. 2008). In Wagner, the court went on to note that this is an equitable
doctrine, each case turns on its own facts, and “a breaching party is not necessarily barred from
reimbursement for improvements.” See id. at 472-28. For instance, one who intentionally
terminates a lease has a weaker claim to equity than one who does so by accident. Id. at 428. On
the other hand, one who immediately offers to reinstate an expired lease has cleaner hands than
one who does not. Id. “As with other equitable actions, a jury may have to settle disputed issues
about what happened, but the expediency, necessity, or propriety of equitable relief is for the trial
court.” Id. at 428-29.
The very purpose of the leases was to authorize the lessee to construct private residences
on the lots, as contemplated in the leases’ terms. Consequently, the Wassons in good faith made
significant improvements to the City’s property with the City’s knowledge and approval. The City
would be unjustly enriched under these facts to retain the full value of these extensive
improvements without providing any compensation to WIL. See Eun Bok Lee v. Ho Chang Lee,
411 S.W.3d 95, 112-13 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (holding tenant entitled to
recover value of permanent gasoline tanks, walk in cooler, and vapor recovery system he purchased
12
and installed to construct and operate gas station with landlord’s consent upon termination of
lease).
Under such circumstances, the court may grant relief in several ways. For example, when,
as here, the improvement cannot be removed without great injury to the improvement or to the
land, the court may: (1) award WIL the amount of the enhanced value of the land, which is the
difference in market value before and after the making of the improvements; (2) allow WIL to pay
the City the value of the land before the improvements were placed and become the owner of the
land and improvements if the City is unable or unwilling to pay WIL the amount of the enhanced
value of the land; (3) order the land and improvements sold and the money divided between the
City and WIL if the City is unable or unwilling to pay WIL the amount of the enhanced value of
the land and WIL is unable to pay for the land; or (4) give WIL a judgment for the amount of
enhancement together with a lien against the property. See Producers Lumber & Supply Co. v.
Olney Bldg. Co., 333 S.W.2d 619, 624 (Tex. Civ. App.—San Antonio 1960, writ ref’d n.r.e.); see
also 44 Tex. Jur. 3d Improvements to Realty § 6 (2013).
However, as we have noted, there may be other considerations in the amount to be awarded
within the trial court’s discretion, such as the parties’ conduct. The record has not been developed
on this issue. Even though WIL breached the lot 43 lease, and the City lawfully evicted it, WIL is
entitled to some measure of equitable reimbursement. Therefore, remand is appropriate on this
issue to determine the nature, scope, and extent of reimbursement considering all the equities in
this case.
WIL’s second issue is sustained in part and overruled in part.
SUMMARY JUDGMENT – REMAINING ISSUES
The City also moved for summary judgment on various issues such as WIL’s claims for
declaratory judgment, injunctive relief, attorney’s fees, and exemplary damages. We dispose of
each of these in turn.
Declaratory Judgment
WIL sought three declarations in its declaratory judgment action: (1) that its proposed
rental practices and advertising for rental of the subject property do not violate the lease
agreements, city ordinances, rules and regulations of Lake Jacksonville or the reinstatement
agreement; (2) the lease agreements, city ordinances, rules and regulations of Lake Jacksonville
13
do not prohibit short term rentals of the subject property; and (3) it retains its equity in the
improvements on the subject property upon eviction. WIL acknowledges that the first declaration
is resolved by its breach of contract action. WIL abandons its request for the second declaration
because, unlike other lessees on Lake Jacksonville, it is subject to the reinstatement agreement. 5
WIL still pursues its third declaration, which we have held will be resolved by the trial court on
remand.
Injunctive Relief
WIL acknowledges in its brief that its application for permanent injunctive relief depends
on the resolution of its breach of contract and wrongful eviction claims. Because we have held
that WIL failed to raise a fact issue on its breach of contract and eviction claim on lot 43, WIL is
not entitled to the injunctive relief it requested as a matter of law. Nevertheless, we have likewise
held that WIL raised a fact issue as to the termination and eviction on lot 46, and WIL may continue
to pursue injunctive relief, if appropriate, on remand.
Exemplary Damages
WIL concedes that summary judgment was appropriate on its claim for exemplary
damages, citing authority holding that a plaintiff cannot recover exemplary damages in a breach
of contract action, even if intentionally breached. See Jim Walter Homes, Inc. v. Reed, 711 S.W.
617, 618 (Tex. 1986). We agree. The trial court properly granted summary judgment barring
WIL’s recovery of exemplary damages.
Attorney’s Fees
WIL also concedes that summary judgment was appropriate on its request for attorney’s
fees on its breach of contract claim because a governmental entity is not an “individual” or
“corporation” under Texas Civil Practice Remedies Code Section 38.001. We agree.
“A municipality may not be considered a corporation under a state statute governing
corporations unless the statute extends its application to a municipality by express use of the term
5
During the pendency of this appeal the Supreme Court of Texas decided Tarr v. Timberwood Park Owners
Ass’n, holding “single family residence” and “solely for residential purposes” deed restrictions did not prohibit the
owner from engaging in short term rentals. 556 S.W.3d 274, 287, 291 (Tex. 2018). WIL acknowledges that Tarr is
not applicable here because in consideration for reinstating the lease after eviction, but prior to the court’s opinion in
Tarr, WIL agreed to be bound by the reinstatement agreement. This agreement contains specific and independent
obligations beyond the scope of the restrictive covenants in Tarr. Unlike the reinstatement agreement here, the
covenants in Tarr “fail to address leasing, use as a vacation home, short-term rentals, minimum-occupancy durations,
or the like.” Id. at 290.
14
‘municipal corporation,’ ‘municipality,’ ‘city,’ ‘town,’ or ‘village.’” TEX. LOC. GOV’T CODE ANN.
§ 5.904(a) (West 2008). The statute further clarifies that “[i]t is the intent of the legislature that
the limitation provided by this section apply regardless of whether the municipality is acting in a
governmental or proprietary function.” See id. § 5.904(b). This statute effectively amends Section
38.001 so that it no longer authorizes the award of attorney’s fees against a municipality under that
statute. See, e.g., City of Corinth v. NuRock Dev. Inc., 293 S.W.3d 360, 370 (Tex. App.—Fort
Worth 2009, no pet.); City of Alton v. Sharyland Water Supply Corp., 277 S.W.3d 132, 147 (Tex.
App.—Corpus Christi 2009) (noting that a municipality is “not considered a corporation even
when it is acting in its proprietary function”), aff’d in part and rev’d in part on other
grounds, Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011).
WIL similarly concedes that it may not recover attorney’s fees under its declaratory
judgment action because its contract claims are its central theory of relief, and its declaratory
judgment claim is merely incidental to that theory of relief. We agree. See Jackson v. State Office
of Admin. Hearings, 351 S.W.3d 290, 301 (Tex. 2011); MBM Fin. Corp. v. Woodlands
Operating Co., 292 S.W.3d 660, 669 (Tex. 2009). Accordingly, the trial court properly granted
summary judgment against WIL’s request for recovery of its attorney’s fees.
WIL’s Contentions on Rehearing are Untimely
WIL argues on rehearing that the City was required to plead and prove the affirmative
defense of “excuse by prior breach,” and that consequently the summary judgment burdens we
described in our opinion are reversed. See TLC Hosp., LLC v. Pillar Income Asset Mgmt., Inc.,
570 S.W.3d 749, 763 (Tex. App.—Tyler 2018, pet. denied); Compass Bank v. MFP Fin. Servs.,
Inc., 152 S.W.3d 844, 852 (Tex. App.—Dallas 2005, pet. denied) (“[T]he contention that a party
to a contract is excused from performance because of a prior material breach by the other
contracting party is an affirmative defense that must be affirmatively pleaded.”). Moreover, its
argument continues, because the City failed to plead and prove this defense, summary judgment
was improper. See id. The City responds that the “excuse by prior breach” defense applies only
when the City also breached the agreement, but the breach is excused by WIL’s prior breach. The
City argues that it did not breach the Reinstatement Agreement or the lease, but rather it simply
exercised its right to terminate the lease because WIL breached the agreement, and that
consequently there was no breach to excuse on the City’s part. See, e.g., AME & FE Investments,
Ltd. v. NEC Networks, LLC, No. 04-17-00332-CV, 2019 WL 286121, at *6 (Tex. App.—San
15
Antonio Jan. 23, 2019, no pet.) (mem. op.) (holding that excuse by prior breach did not apply
because there was no breach by party, and without breach there is nothing to excuse).
WIL also argues that the above referenced VRBO advertisement cannot serve as the basis
of termination because the City recited in its December 14, 2010 letter that it thanked WIL for
removing the VRBO advertisement. The City responds that the remainder of the letter, along with
WIL’s response to the motion for summary judgment, and Dr. Wasson’s deposition testimony WIL
attached in support of its response to the motion, all establish that there was another improper
advertisement that remained online that served as the basis for termination. The City also responds
that WIL conclusively admitted to advertising the property for short-term rentals during the
relevant period.
WIL’s argument during the entirety of this dispute has been an acknowledgement that it
advertised the property after it executed the Reinstatement Agreement, but that the advertisements
do not breach the agreement because they were for monthly rentals. Specifically, WIL’s response
to the City’s no-evidence motion for summary judgment stated as follows:
During the relevant period [after the parties executed the Reinstatement Agreement, WIL]
advertised the rental of the properties for a minimum of a 30-day rental period. Exhibit A [Dr.
Wasson’s deposition testimony]. The price to be charged a prospective renter would be determined
by the amount of usage during the 30-day period. Id. The minimum charge for a monthly rental
was $3,500.00, which paid for one week’s worth of usage. Id. Additional usage within the monthly
rental required additional payment.”
WIL concluded in the response that this advertisement and rental scheme were within the safe
harbor provision of the Reinstatement Agreement, or at least, “whether these advertisements were
in compliance with the Reinstatement Agreement is a pure question of fact for a jury to decide.”
In WIL’s appellate brief, it stated that after the parties executed the Reinstatement
Agreement that it “began advertising the properties for monthly rentals and charging a minimal
usage rate of $3,500 for a week, with an additional usage rate of $350.00 per day thereafter.”
Again, WIL’s argument on appeal was that this advertising practice complied with the Agreement.
In making this argument, it also referenced the VRBO advertisement. WIL went on to explain that
“[a]s even [the City] acknowledged, whether or not [WIL’s] advertisements violated the
Reinstatement Agreement is really the crux of this lawsuit. [WIL] earnestly believes the above
described [VRBO advertisement] was in conformity with the Reinstatement Agreement and would
like to have a jury of its peers decide this purely factual question.”
16
Finally, after Wasson I and Wasson II, the parties provided supplemental briefing on the
merits of the City’s no-evidence motion for summary judgment. WIL’s arguments and legal and
factual theories in this regard remained unchanged. We disposed of the arguments as they were
presented to us in the record and the briefs.
In our review of a summary judgment, “[i]ssues not expressly presented to the trial court
by written motion, answer or other response shall not be considered on appeal as grounds for
reversal.” Wells Fargo Bank. N.A. v. Murphy, 458 S.W.3d 912, 916 (Tex. 2015) (emphasis
added) (citing TEX. R. CIV. P. 166a(c) (West 2015)). The term “issues” in the summary judgment
context means “legal theories (i.e., grounds of recovery and defenses) and factual theories.” Atl.
Richfield Co. v. Exxon Corp., 663 S.W.2d 858, 863 (Tex. App.–Houston [14th Dist.] 1983), rev’d
on other grounds, 678 S.W.2d 944 (Tex. 1984). However, we are mindful that briefs are to be
construed liberally. See Lee v. Rogers Agency, 517 S.W.3d 137, 164 (Tex. App.—Texarkana
2016, pet. denied). Accordingly, an appellate court may not reverse a summary judgment on the
basis of “legal theories (i.e., grounds of recovery and defenses) and factual theories” not presented
to the trial court, although it must address every “subsidiary question that is fairly included” within
those legal and factual theories which were presented to the trial court, fully briefed on appeal, and
which are necessary to final disposition of the appeal. See id. Similarly, a failure to assert a theory
in response to an issue raised in a no-evidence motion will not result in a reversal of the summary
judgment on that theory. See, e.g., Durham v. Accardi, No. 14-18-00060-CV, 2019 WL 5078801,
at *5 (Tex. App.—Houston [14th Dist.] Oct. 10, 2019, no pet. h.) (op.) (affirming no-evidence
motion for summary judgment because, although appellant adequately responded to motion on
alter ego theory, nonmovant failed to include argument on issue in response to the motion or in his
appellate brief on separate sham to perpetrate a fraud theory). Accordingly, because these theories
were not addressed in response to the City’s motion, presented to the trial court, or briefed as part
of this appeal, they are not proper grounds upon which to reverse the trial court’s summary
judgment.
Separately, irrespective of these arguments’ merits, they are made for the first time by new
counsel in this almost decade long litigation on rehearing after we issued our original opinion. As
the City points out, at this juncture of the litigation, WIL raised these new factual and legal theories
too late. Generally, we do not base our rulings on arguments raised for the first time on
rehearing. Wells Fargo Bank, N.A. v. Leath, 425 S.W.3d 525, 540 (Tex. App.—Dallas 2014, pet.
17
denied) (supp. op. on reh’g); AVCO Corp. v. Interstate Sw., Ltd., 251 S.W.3d 632, 676 (Tex.
App.—Houston [14th Dist.] 2007, pet. denied) (supp. op. on reh’g); see Sherrod v. Moore, 819
S.W.2d 201, 205 (Tex .App.—Amarillo 1991, no writ) (“It is well established that points of error
raised for the first time in a motion for rehearing are too late and will not be considered.”)
(citing Morrison v. Chan, 699 S.W.2d 205, 207 (Tex. 1985)). The sole purpose of a motion for
rehearing is to provide the court an opportunity to correct any errors on issues already
presented. Wentworth v. Meyer, 839 S.W.2d 766, 778 (Tex. 1992) (Cornyn, J., concurring).
“Rehearing is not an opportunity to test alternative arguments after finding other arguments
unsuccessful.” OAIC Commercial Assets, L.L.C. v. Stonegate Vill., L.P., 234 S.W.3d 726, 746
(Tex. App.—Dallas 2007, pet. denied) (op. on reh’g). An issue adequately briefed in a motion for
rehearing is waived if the original brief “is not sufficient to acquaint the Court with the issue and
does not present an argument that would allow the court to decide the issue.” Wheeler v.
Methodist Hosp., 95 S.W.3d 628, 646 (Tex. App.—Houston [1st Dist.] 2002, no pet.).
“A motion for rehearing does not afford a party an opportunity to raise new issues after the
case has been briefed, argued, and decided on other grounds unless the error is
fundamental.” OAIC, 234 S.W.3d at 747; see Tex. Mun. Power Agency v. Public Util. Comm’n
of Tex., 150 S.W.3d 579, 591 n.13 (Tex. App.—Austin 2004), rev’d in part on other grounds, 253
S.W.3d 184 (Tex. 2007). Fundamental error exists “in those rare instances in which the record
shows the court lacked jurisdiction or that the public interest is directly and adversely affected as
that interest is declared in the statutes or the Constitution of Texas.” Pirtle v. Gregory, 629 S.W.2d
919, 920 (Tex. 1982); see OAIC, 234 S.W.3d at 747; Texas Mun. Power, 150 S.W.3d at 591 n.13.
In WIL’s motion for rehearing, it does not raise an issue of fundamental error, and we decline to
address the new arguments it asserts for the first time in its motion for rehearing. Accordingly, we
overrule WIL’s motion for rehearing.
DISPOSITION
We have overruled the portion of WIL’s first issue pertaining to lot 43, holding that it failed
to raise a fact issue on its breach of contract and wrongful eviction claims, and that the trial court
properly granted summary judgment against it in favor of the City. In accordance with WIL’s
concessions, we have also held that the trial court properly granted summary judgment on WIL’s
declaratory judgment action (with the exception of the declaration that it retained its equity in the
18
improvements made to the properties), its application for injunctive relief on lot 43, and its requests
for attorney’s fees and exemplary damages. Accordingly, we affirm the trial court’s order granting
summary judgment in those respects.
However, we have sustained the portion of WIL’s first issue related to the City’s breach of
contract and eviction of WIL on lot 46, holding that WIL raised a fact issue concerning the lease
termination and eviction from the cabin on lot 46. Because of our disposition of this portion of
WIL’s first issue, we have also held that it may pursue its application for injunctive relief.
Furthermore, we have held that under the unique circumstances here, it would be inequitable for
the City to retain the full value of the improvements made by WIL on lot 43. Therefore, we reverse
that portion of the trial court’s order granting summary judgment in those respects and remand the
case for a determination of WIL’s equitable reimbursement remedy, and for further proceedings
consistent with this opinion.
JAMES T. WORTHEN
Chief Justice
Opinion delivered December 31, 2019.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.
(PUBLISH)
19
COURT OF APPEALS
TWELFTH COURT OF APPEALS DISTRICT OF TEXAS
JUDGMENT
DECEMBER 31, 2019
NO. 12-13-00262-CV
WASSON INTERESTS, LTD.,
Appellant
V.
CITY OF JACKSONVILLE, TEXAS,
Appellee
Appeal from the 2nd District Court
of Cherokee County, Texas (Tr.Ct.No. 2011-05-0389)
THIS CAUSE came to be heard on the appellate record and the briefs filed
herein, and the same being considered, because it is the opinion of this court that there was error
in the judgment of the court below insofar as the trial court granted summary judgment in favor of
the City of Jacksonville as to the lease termination and eviction against Wasson Interest, Ltd. on
lot 46 of Lake Jacksonville. It is also the opinion of this court that there was error in the judgment
insofar as the trial court failed to determine and order equitable reimbursement by the City of
Jacksonville to Wasson Interests, Ltd., after its proper lease termination and eviction of Wasson
Interests, Ltd. on lot 43 of Lake Jacksonville.
It is therefore ORDERED, ADJUDGED and DECREED by this court that the
portion of the trial court’s order granting summary judgment in those respects be reversed and the
cause be remanded for a determination of WIL’s equitable reimbursement remedy and for
further proceedings consistent with this opinion.
It is further ORDERED, ADJUDGED and DECREED that, in all other
respects, the trial court’s judgment is affirmed; all costs of this appeal be assessed one-half against
the Appellant, WASSON INTEREST, LTD., and one-half against the Appellee, THE CITY OF
JACKSONVILLE, for which execution may issue; and that this decision be certified to the court
below for observance.
James T. Worthen, Chief Justice.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.
THE STATE OF TEXAS
MANDATE
*********************************************
TO THE 2ND DISTRICT COURT OF CHEROKEE COUNTY, GREETING:
Before our Court of Appeals for the 12th Court of Appeals District of Texas, on the __nd
day of December, 2019, the cause upon appeal to revise or reverse your judgment between
WASSON INTERESTS, LTD., Appellant
NO. 12-13-00262-CV; Trial Court No. 2011-05-0389
Opinion by James T. Worthen, Chief Justice.
CITY OF JACKSONVILLE, TEXAS, Appellee
was determined; and therein our said Court made its order in these words:
“Text goes here.”
WHEREAS, WE COMMAND YOU to observe the order of our said Court of Appeals
for the Twelfth Court of Appeals District of Texas in this behalf, and in all things have it duly
recognized, obeyed, and executed.
WITNESS, THE HONORABLE JAMES T. WORTHEN, Chief Justice of our Court of
Appeals for the Twelfth Court of Appeals District, with the Seal thereof affixed, at the City of
Tyler, this the xx day of December, 2019.
KATRINA MCCLENNY, CLERK
By: _______________________________
Chief Deputy Clerk