Michael Steve Rush v. Craig W. Johnson, Individually, and Craig W. Johnson Enterprises, Inc. D/B/A Texas Hydraulics and Pneumatics ( 2019 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-19-00102-CV
Michael Steve Rush, Appellant
v.
Craig W. Johnson, Individually, and Craig W. Johnson Enterprises, Inc. d/b/a
Texas Hydraulics and Pneumatics, Appellees
FROM THE 353RD DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-18-001656, THE HONORABLE DON R. BURGESS, JUDGE PRESIDING
MEMORANDUM OPINION
Michael Steve Rush appeals the district court’s order granting summary judgment
in favor of Craig W. Johnson, Individually, and Craig W. Johnson Enterprises, Inc. d/b/a Texas
Hydraulics and Pneumatics (collectively, Appellees). After Appellees filed their amended
motion for summary judgment, Rush filed an amended petition abandoning his previously
pleaded causes of action and presenting a declaratory-judgment request that he contends was not
addressed in Appellees’ motion. On appeal, Rush contends that the district court erred by
granting greater relief than Appellees sought in their amended motion for summary judgment.
We will affirm the district court’s order.
BACKGROUND 1
Rush and Johnson discussed the possibility of going into the hydraulic-repair
business together in the spring of 1999. Their original discussion contemplated that Johnson
would run the business aspects of the operation and Rush would take care of the day-to-day
repair work and training and supervision of service personnel for the business. Also in early
1999, Rush and Johnson, along with Rush’s wife Liz Rush, Johnson’s father Ronald “Pete”
Johnson, Johnson’s mother Caroline Johnson, and Johnson’s brother Trey Johnson, attended a
meeting at Johnson’s parents’ home to discuss creation of the new business. Pete and Caroline
were to create the new entity and help run the new business in the capacity of directors. Trey
would contribute financially by making purchases with his credit card and would be employed
by the new entity as the outside salesman in the near future.
Rush was offered a 20% stake in the new business in exchange for a monetary
contribution of $15,000 and his agreements to run the shop, be lead mechanic, and teach Johnson
how to repair hydraulic components. Craig, Pete, Caroline, and Trey would hold the remaining
80% interest. However, because Rush did not want his name used on anything and did not want
any liability if the new venture failed, he agreed to accept 20% of the net profit realized from the
sale of the business, if and when it sold, in exchange for his $15,000 contribution. 2
1
The facts are taken from Rush’s amended petition, which was his live pleading when
the district court heard Appellees’ amended summary judgment, and the undisputed summary
judgment evidence.
2
Rush’s sworn (and not supplemented) responses to interrogatories state that his
“percentage agreement” was made at Pete and Caroline’s home in 1999 and that it was for an
ownership interest of “25% of the company.” But Rush’s live pleading states that his agreement
was for “20% of the net profit from the sale of the business.”
2
Rush began working for the new business, Caroline Johnson Hydraulics, Inc.
(CJH) when it began operations in the summer of 1999. CJH did business under the assumed
name of “Texas Hydraulics & Pneumatics, Inc.” (Texas Hydraulics). Rush never declared to the
Internal Revenue Service any alleged ownership interest in Texas Hydraulics.
CJH’s ownership changed over the years. Trey left CJH in 2003. In 2008, Pete
and Caroline retired and sold their interest in CJH to Craig Johnson. Also in 2008, Craig
Johnson formed Craig W. Johnson Enterprises, Inc. (Enterprises) and kept the assumed name of
Texas Hydraulics.
As of 2007, Rush was still working for CJH, as reflected in his W-2 Wage and
Tax Statement, identifying his employer as “Caroline Johnson Hydraulics, Inc.” Rush claimed
that he learned about Johnson’s formation of Enterprises “[w]hen the name showed up on my
checks.” Rush’s W-2 statements for 2012, 2014, 2015, 2016, and 2017 show that he was
working for Enterprises, which is identified as his employer for each of those years. On
June 3, 2017, Rush was terminated from Enterprises.
Rush’s lawsuit against Appellees
Rush sued Appellees on April 4, 2018, alleging causes of action for breach of
contract, fraud in a stock transaction, and promissory estoppel, and requesting a declaratory
judgment
[t]o declare the Parties’ ownership interest in Craig W. Johnson Enterprises, Inc.
d/b/a Texas Hydraulics and Pneumatics and issue an order requiring Defendants
to issue a stock certificate to [Rush] consistent with the Court’s determination.
Appellees initially filed a general denial, followed by an amended answer alleging
the affirmative defenses of accord and satisfaction, laches, payment, statute of limitations, and
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mitigation. The amended answer included a verified denial stating that “the agreements
allegedly made by Rush were with CJH,” not “Craig W. Johnson and Craig W. Johnson
Enterprises d/b/a Texas Hydraulics and Pneumatics” who were not proper parties to the suit. The
amended answer also pleaded a counterclaim for sanctions against Rush for filing a frivolous
lawsuit. See Tex. Civ. Prac. & Rem. Code § 10.004(c); Tex. R. Civ. P. 13. Along with their
amended answer, Appellees filed a motion for summary judgment on Rush’s claims.
Three weeks later, on October 25, 2018, Appellees filed an amended motion for
summary judgment resulting in the order challenged here. The amended motion contended,
among other things, that Rush’s causes of action against Appellees were barred by the applicable
four-year statutes of limitations. See Tex. Civ. Prac. & Rem. Code §§ 16.004(a)(4) (four-year
limitations period for fraud claims), 16.051 (four-year residual limitations period); Stine v.
Stewart, 80 S.W.3d 586, 592 (Tex. 2002) (stating that four-year residual limitations period is
applicable to breach of contract claims); Prestige Ford Garland Ltd. P’ship v. Morales,
336 S.W.3d 833, 836 (Tex. App.—Dallas 2011, no pet.) (stating that four-year residual
limitations period is applicable to promissory estoppel claims).
Rush amends petition and responds to Appellees’ amended summary-judgment motion
Rush filed an amended petition on January 16, 2019, dropping all of his
previously pleaded causes of action—i.e., for breach of contract, fraud in a stock transaction, and
promissory estoppel—and presenting a revised request for declaratory judgment that no longer
referenced Appellees but only “Defendants.” Specifically, Rush asked the district court
[t]o declare and confirm the Parties’ agreement that [he] is entitled to 20% of the
net profit realized from the sale of Defendants’ hydraulic repair business, if and
when it sells.
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The next day, Rush filed a response to Appellees’ amended summary-judgment motion. The
response referred to “Craig W. Johnson, Craig W. Johnson Enterprises, Inc. d/b/a Texas
Hydraulics & Pneumatics” collectively as “Defendants,” stated that all of Rush’s causes of action
were dropped, and requested only declaratory relief:
[Rush] has amended his lawsuit to drop his causes of action for Breach of
Contract, Fraud in a Stock Transaction, and Promissory Estoppel, and now only
seeks a declaratory judgment from the Court confirming the parties’ agreement
and declaring his right pursuant to the agreement between [Rush] and Defendants
to 20% of the net profit realized from the sale of Defendants’ hydraulic repair
business, if and when it sells.
(Emphasis added.)
On January 24, 2019, the district court signed an order granting Appellees’
amended motion for summary judgment without specifying the grounds for its ruling. The order
recited that Rush would take nothing on his claims and clarified that “[t]his is a final and
appealable order.” This appeal followed.
DISCUSSION
On appeal, Rush contends that the district court erred by granting greater relief
than Appellees sought in their amended motion for summary judgment. Specifically, Rush
contends that Appellees’ amended motion for summary judgment did not address Rush’s request
for declaratory judgment as set forth in his live pleading. Appellees respond that this appeal is
improper because no controversy currently exists between the parties and that the district court’s
ruling foreclosed any potential recovery by Rush against CJH, which ceased operations and
dissolved in 2008, ten years before Rush filed the underlying suit.
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We review a trial court’s grant of summary judgment de novo. Community
Health Sys. Prof’l Servs. Corp. v. Hansen, 525 S.W.3d 671, 680 (Tex. 2017). We consider
whether the movant showed its entitlement to judgment as a matter of law, taking as true all
evidence favorable to the nonmovant and indulging reasonable inferences and resolving doubts
in its favor. Id. When, as here, a trial court does not specify the grounds for its grant of
summary judgment, we must affirm if any of the grounds asserted in the summary-judgment
motion are meritorious. Id. To prevail on a traditional motion for summary judgment, a movant
must show that no genuine issue of material fact exists and that it is entitled to judgment as a
matter of law. Id. at 681; see Tex. R. Civ. P. 166a(c). An issue is established conclusively if
reasonable minds could not differ about the conclusion to be drawn from the facts in the record.
Hansen, 525 S.W.3d at 680.
Effect of amended petition
We begin our analysis by determining the effect of Rush’s amended petition as to
Appellees’ amended motion for summary judgment.
1. Breach of contract, fraud, and promissory estoppel causes of action
Rush’s amended petition omitted the breach of contract, fraud in a stock
transaction, and promissory estoppel causes of action that he had pleaded in his original petition,
effectively nonsuiting them. See Rodarte v. Investeco Grp., L.L.C., 299 S.W.3d 400, 408
(Tex. App.—Houston [14th Dist.] 2009, no pet.) (noting that act of omitting claims from
amended petition effectively nonsuited those omitted claims); see also Tex. R. Civ. P. 62
(distinguishing amended pleadings from supplemental pleadings), 65 (providing that substituted
pleading supersedes original one). The record reflects that the only matter before the district
court when it ruled was Rush’s declaratory-judgment request.
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Rush contends that his amended petition also alleged a “new Breach of
Cont[r]act” claim. But Rush’s amended petition deleted any reference to a breach of contract
claim and makes no pleading for an award of damages. The amended petition sought only
declaratory relief. As we have noted, Rush’s amended response to the amended summary-
judgment motion clarified that he “ha[d] amended his lawsuit to drop his causes of action for
Breach of Contract, Fraud in a Stock Transaction, and Promissory Estoppel, and now only
s[ought] a declaratory judgment from the Court[.]” (Emphasis added.)
Rush further contends that “[s]ummary judgment cannot be rendered on the
merits of a claim that has been abandoned before the summary judgment ruling.” This complaint
is directed to the breach of contract, fraud in a stock transaction, and promissory estoppel causes
of action that Rush dropped from his amended petition. But apart from this statement, Rush
presents no argument indicating how he was harmed by this alleged error. See Wilkinson v.
Dallas/Fort Worth Int’l Airport Bd., 54 S.W.3d 1, 18 (Tex. App.—Dallas 2001, pet. denied)
(rejecting assertion that trial court erred by granting summary judgment as to claims that were
dropped before ruling on motion for summary judgment because there was no showing of harm);
see also Tex. R. App. P. 44.1(a) (providing that no judgment may be reversed unless trial court
error probably caused rendition of improper judgment or probably prevented appellant from
properly presenting case to court of appeals). Thus, Rush has not shown his entitlement to
reversal of Appellees’ summary judgment on this basis.
2. Declaratory-judgment request
As to Rush’s request for declaratory judgment—which was the only matter
remaining before the district court when it heard Appellees’ motion—we conclude that the
district court did not err by granting summary judgment. The Texas Declaratory Judgments Act
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is a remedial statute designed to afford relief from uncertainty and insecurity with respect to
rights, status, and other legal relations. See Tex. Civ. Prac. & Rem. Code § 37.002(b); Bonham
State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995). The Declaratory Judgments Act does
not alter a party’s substantive rights nor does it expand a trial court’s jurisdiction. Craig v. Tejas
Promotions, LLC, 550 S.W.3d 287, 298 (Tex. App.—Austin 2018, no pet.); see Local Neon Co.
v. Strayhorn, No. 03-04-00261-CV, 2005 Tex. App. LEXIS 4667, at *18 (Tex. App.—Austin
June 16, 2005, no pet.) (mem. op.) (same). A declaratory judgment is appropriate only if a
justiciable controversy exists as to the rights and status of the parties and the controversy will be
resolved by the declaration sought. Bonham State Bank, 907 S.W.2d at 467. For a justiciable
controversy to exist, there must be a real and substantial controversy involving a genuine conflict
of tangible interests and not merely a theoretical dispute. Id.; Rodarte, 299 S.W.3d at 408-09.
Rush complains that Appellees’ amended motion for summary judgment did not
address Rush’s request for declaratory judgment as set forth in his live pleading, and he notes
that summary judgments may only be granted on grounds expressly asserted in the summary-
judgment motion. Tex. R. Civ. P. 166a(c); G & H Towing v. Magee, 347 S.W.3d 293, 297
(Tex. 2011). Generally, a party is not entitled to a final summary judgment on the entire case if
the party fails to address claims asserted in an amended petition because such judgment would
grant more relief than requested. Silver Gryphon, LLC v. Bank of N.Y. Mellon, 529 S.W.3d 595,
598 (Tex. App.—Houston [14th Dist.] 2017, no pet.); see Lehmann v. Har-Con Corp.,
39 S.W.3d 191, 200 (Tex. 2001) (noting that judgment that grants more relief than party is
entitled to is subject to reversal); Rust v. Texas Farmers Ins. Co., 341 S.W.3d 541, 552
(Tex. App.—El Paso 2011, pet. denied) (citing Lehmann). But an amended, supplemental, or
new motion for summary judgment is not always necessary when: (1) an amended petition
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“essentially reiterates” previously pleaded theories of liability; (2) a ground asserted in a motion
for summary judgment conclusively negates a common element of the newly and previously
pleaded claims; or (3) the original motion is broad enough to encompass the newly asserted
claims. Silver Gryphon, LLC, 529 S.W.3d at 598; Coterill-Jenkins v. Texas Med. Ass’n Health
Care Liab. Claim Tr., 383 S.W.3d 581, 592 (Tex. App.—Houston [14th Dist.] 2012, pet.
denied); Rust, 341 S.W.3d at 552; see Magee, 347 S.W.3d at 297-98 (“Although a trial court errs
in granting a summary judgment on a cause of action not expressly presented by written motion,
we agree that the error is harmless when the omitted cause of action is precluded as a matter of
law by other grounds raised in the case.”). Determining whether a motion is sufficient to support
the trial court’s grant of summary judgment requires comparison of the petitions and the liability
theories that were pleaded with the grounds asserted in the motion for summary judgment. See
Silver Gryphon, LLC, 529 S.W.3d at 599.
First, we consider whether Rush’s amended petition “essentially reiterates” his
request for declaratory judgment and theory of liability that was in his original petition.
a. Rush’s original petition
Rush alleged that in June 1999, he attended a meeting at Craig Johnson’s parents’
home, where Craig Johnson and members of Johnson’s family were also present.
At that meeting, the parties agreed that they would go into the hydraulics business
together. Johnson represented to [Rush] that a company was to be formed with
[Rush] owning 25% of the business, and Johnson and various family members
owning the remaining 75%. Also at that meeting the subject of working capital
for the company was addressed. [Rush] mentioned that he had a 401(k) plan
about $15,000.00 in cash. Relying on Johnson’s representations that he would
receive 25% equity in the hydraulics company, [Rush] offered to pay the
$15,000.00 to purchase his equity and provide working capital to the company.
[Rush]’s offer was accepted, and he delivered a $15,000.00 cashier’s check to the
company. The company used the funds provided by [Rush] to pay payroll and to
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meet other expenses in the startup stage of its business. Those funds have never
been returned to [Rush], nor has any interest, dividends, or other form of
compensation been paid for the use of those funds since they were provided to the
company.
Rush’s original petition made this request for declaratory judgment:
A justiciable controversy exists between the parties as to the ownership of
Enterprises. Plaintiff is thus entitled to a declaratory judgment as to his rights
under the Texas Uniform Declaratory Judgments Act. On final hearing hereof
Plaintiff seeks to have the Court determine the ownership interests in Enterprises,
to issue a declaratory judgment granting Plaintiff ownership in Enterprises
according to the Court’s determination, and to issue an order requiring Johnson
and Enterprises to issue a stock certificate to Plaintiff consistent with the Court’s
determination.
b. Rush’s amended petition
In his amended petition, Rush dropped all of the causes of action from his original
petition (alleging breach of contract, fraud in a stock transaction, and promissory estoppel) and
revised his request for declaratory judgment. Rush’s amended petition alleged that in early 1999,
he attended a meeting at Craig Johnson’s parents’ home, where his wife, Craig Johnson, Pete
Johnson, Caroline Johnson, and Trey Johnson were also present. Rush alleged that he was
offered a 20% stake in the new business in exchange for his $15,000 contribution and
agreements to run the shop, be lead mechanic, and teach Johnson how to repair hydraulic
components. But because Rush decided that he did not want his name on anything, any liability,
or to be responsible in any way if the new venture failed,
[Rush] and Johnson agreed that [Rush], in return for his $15,000.00 investment,
would receive 20% of the net profit realized from the sale of the business, if and
when it sold. [Rush] delivered a $15,000.00 cashier’s check, and they began
operation of the business. The business used [Rush’]s funds to pay payroll and to
meet other expenses during the startup stage. Those funds have never been
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returned to [Rush], nor has any interest, dividends, or other form of compensation
been paid for the use of those funds since they were provided to the company.
[Rush] specifically denies that the business paid $18,000.00 to the Attorney
General’s office on his behalf, and further specifically denies acknowledging that
whatever amount the business may have assisted him with concerning any
personal child support obligations was related to his $15,000.00 contribution or
extinguished the agreement for [Rush] to be paid 20% of the net profit realized
from the sale of the business, if and when it sold. 3
The amended petition made this revised request for declaratory judgment:
A justiciable controversy exists between the parties as to [Rush’]s right to 20% of
the net profit realized from the sale of Defendants’ hydraulic repair business, if
and when it sells, an agreement which Defendants have repudiated. [Rush] is thus
entitled to a declaratory judgment as to his rights under the Texas Uniform
Declaratory Judgments Act. On final hearing hereof [Rush] seeks to have the
Court determine his right pursuant to the agreement between [Rush] and
Defendants to 20% of the net profit realized from the sale of Defendants’
hydraulic repair business, if and when it sells, and to issue a declaratory judgment
confirming the parties’ agreement.
In both petitions, the liability alleged to support the declaratory judgment is based
on the same conversations in 1999 and the $15,000 contribution that Rush made to CJH in 1999.
Rush’s amended petition sought only a different remedy—i.e., a declaration that he will be
entitled to receipt of 20% of the net profit from a future sale instead of a 25% ownership
interest—tacked onto the same set of liability facts alleged from his original petition—i.e., the
lack of return for the $15,000 contribution Rush made to CJH in 1999. Thus, although Rush
3
Appellees contend that Rush did not inquire about any interest in the business because
CJH paid Rush’s $18,000 child-support arrearage to the Texas Attorney General’s Office and
Rush considered that sufficient repayment of his $15,000 contribution to CJH. Appellees
provided affidavits from Johnson and Phil Henson, Enterprise’s operations manager, about a
conversation between Johnson and Rush in November 2010 that Henson witnessed. During that
conversation, according to the affiants, Rush acknowledged that CJH paid his child-support
arrearage of $18,000, that such amount exceeded the $15,000 he contributed to CJH, and that
payment of the arrearage “repaid him in full” and “squared things between Steve [Rush] and
CJH.” Rush denies this acknowledgement.
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requested a different remedy in his amended petition, it “essentially reiterated” his previously
pleaded request for declaratory judgment and theory of liability.
Further, the limitations ground asserted in Appellees’ amended motion for
summary judgment conclusively negates a common element of Rush’s newly and previously
pleaded request for declaratory relief. Appellees’ summary-judgment evidence showed that Pete
and Caroline sold their interest in CJH to Johnson in 2008, that CJH ceased to exist in 2008, that
Rush knew CJH’s existence terminated in 2008, and that Rush filed suit in 2018 to enforce a
promise made to him in 1999, long after the applicable statutes of limitations had run on his
causes of action. On this record, a justiciable controversy did not exist between Rush and
Appellees and declaratory relief was not warranted. See Bonham State Bank, 907 S.W.2d at 467;
Rodarte, 299 S.W.3d at 408-09; see also Beadles v. Lago Vista Prop. Owners Ass’n, No. 03-02-
00228-CV, 2002 Tex. App. LEXIS 7940, at *6 (Tex. App.—Austin Nov. 7, 2002, pet. denied)
(mem. op., not designated for publication) (noting that if statute of limitations has run, trial court
has no power to render declaratory judgment and summary judgment is appropriate).
Finally, Appellees’ amended motion for summary judgment contended that there
was no basis for a declaratory judgment under the Declaratory Judgments Act because “no
justiciable controversy between the parties exists as to the ownership of Enterprises.” That
contention was broad enough to encompass Rush’s requests for declaratory relief as pleaded in
both his original and amended petitions.
Because the record shows that Rush’s amended petition essentially reiterated his
previously pleaded request for declaratory judgment, that Appellees’ summary-judgment motion
conclusively negated a common element of Rush’s previously pleaded and amended request for
declaratory relief, and that Appellees’ amended summary-judgment motion was broad enough to
12
encompass the request for declaratory relief as set forth in Rush’s live pleading, we conclude that
the district court properly granted summary judgment. See Hansen, 525 S.W.3d at 680;
Silver Gryphon, LLC, 529 S.W.3d at 598; Coterill-Jenkins, 383 S.W.3d 581 at 592; Rust,
341 S.W.3d at 552. We overrule Rush’s appellate issue.
CONCLUSION
We affirm the district court’s order granting Appellees’ amended motion for
summary judgment.
__________________________________________
Gisela D. Triana, Justice
Before Chief Justice Rose, Justices Triana and Smith
Affirmed
Filed: August 27, 2019
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