Thomas F. Noons and Six Continents Hotels, Inc. v. Behzad Arabghani

                              NUMBER 13-03-628-CV

                         COURT OF APPEALS

                     THIRTEENTH DISTRICT OF TEXAS

                         CORPUS CHRISTI - EDINBURG

THOMAS F. NOONS AND

SIX CONTINENTS HOTELS, INC.                                       Appellants,

                                                             v.                               

BEHZAD ARABGHANI,                                                                  Appellee.

       On appeal from the 133rd District Court of Harris County, Texas.

                               MEMORANDUM OPINION

                          Before Justices Yañez, Castillo, and Garza

                            Memorandum Opinion by Justice Garza          

This is an appeal from a summary judgment in favor of Behzad ABob@ Arabghani. Alleging he was wrongfully forced to abandon his leased business premises, Arabghani filed suit against several parties, including Thomas F. Noons and Six Continents Hotels, Inc.^[1]  After Noons and Six Continents failed to respond to Arabghani=s requests for admissions, the requests were deemed admitted as a matter of law and Arabghani subsequently filed a motion for summary judgment against Noons and Six Continents based on the deemed admissions.  Noons and Six Continents subsequently each filed no-evidence motions for summary judgment.  The trial court granted Arabghani=s motion, denied Noons= and Six Continents= motions, and severed the claims against Noons and Six Continents from the case, making the judgment against them final.  We reverse the trial court=s judgment in favor of Arabghani because the deemed admissions amounted to no evidence.  We render judgment in favor of Noons and Six Continents because each established entitlement to judgment as a matter of law in their respective no-evidence motions for summary judgment. 

The undisputed facts are as follows: In September of 2000, Arabghani leased from Westside Hospitality Company (AWestside@) the restaurant facilities at a Holiday Inn Hotel and Suites (the AHotel@) in Houston for a five-year term.^[2]  Arabghani operated a restaurant and bar known as Kolbeh Persian Cuisine, which provided room, banquet, and catering services to the Hotel=s guests.  At the time the lease was executed, Westside was in the process of attempting to sell the Hotel to British American Properties III, Ltd. (ABAP III@).^[3]      On February 21, 2002, in anticipation of the change of ownership of the Hotel and for the purpose of applying for a new food service permit, the City of Houston Health and Human Services Department inspected the restaurant and bar.  The City issued an inspection report showing that numerous repairs would be necessary to obtain a new permit.  The City required that these repairs be completed within sixty days from the date the report was issued.  Upon receipt of the report, an agent for BAP III advised Arabghani of the contents of the report and that his restaurant and bar operations were in violation of both the terms of the lease agreement and the Houston City Code.^[4]    

On March 12, 2002, BAP III purchased the Hotel.  Thereafter, the Hotel was managed by BAP III=s general partner, Heights Hospitality Corporation (AHeights@).  In a letter dated March 12, 2002, Westside notified Arabghani that the Hotel had been sold to BAP III.  The letter also provided Arabghani with ninety days= written notice of termination of the lease with a scheduled termination date of June 11, 2002. On March 13, 2002, Edwin Leslie, on behalf of Heights, delivered correspondence to Arabghani advising him that the 90-day termination provision of the lease with Westside would be honored.^[5]  The letter also Areminded@ Arabghani that he remained obligated to observe the terms and conditions of the lease during the 90-day period.  Arabghani acknowledged the letter by signing it and returned it to Leslie on March 15, 2002. Nevertheless, Arabghani did not improve the conditions of the restaurant and bar premises.  Sometime during the month of March, BAP III and Heights began making the repairs necessary to bring the restaurant and bar operations into compliance with the Houston City Code and Holiday Inn franchise standards.^[6]  Shortly thereafter, Arabghani filed claims against BAP III, Heights, Leslie, Noons,^[7] and Six Continents,^[8] alleging that the repair work rendered the restaurant unsanitary, that lunch guests were covered with dust, and that he could no longer operate the restaurant or his room service concession. Arabghani also alleged that he was forced to abandon the premises.  Arabghani=s suit sought the recovery of damages suffered as a result of breach of contract, breach of the covenant of quiet enjoyment, fraud, and other acts allegedly committed by BAP III, Heights, Leslie, Noons, and Six Continents.  Arabghani later amended his petition and added British American Properties of Houston, Inc. and Holiday^[9] as defendants.  Subsequently, Arabghani filed notice of non-suit without prejudice as to BAP III, Holiday, and British American Properties of Houston, Inc.

After Arabghani filed suit, he served interrogatories and requests for disclosure, production, and admission on Kenneth R. Phillips, who, at that time, was the attorney of record for Noons, Six Continents, and some of the other defendants.  On September 26, 2002, Arabghani served requests for admission on Leslie, Noons, and Six Continents.  The responses to the requests for admission were due on or about October 26, 2002.  See Tex. R. Civ. P. 198.  The responses were not filed before the due date, as a result, the responses to the requests were deemed admitted as a matter of law.  See Tex. R. Civ. P. 198.2. 

On November 19, 2002, Arabghani filed a motion for summary judgment contending that he is entitled to summary judgment because the deemed admissions conclusively established the elements of his causes of action for breach of contract and breach of the covenant of quiet enjoyment.  On November 27, 2002, Noons and Six Continents filed their responses to the requests for admissions.  On December 5, 2002, the parties unsuccessfully attempted to mediate the dispute.  On December 9, 2002, appellants filed a motion to withdraw and substitute counsel and filed a response to Arabghani=s motion for summary judgment, a motion to withdraw or amend admissions, and a motion for continuance.  On December 30, 2002, appellants each filed no-evidence motions for summary judgment. On January 6, 2003, the trial court conducted an evidentiary hearing on appellants= motion to withdraw or amend the admissions.  The trial court denied appellants= motion to withdraw admissions, appellants= motions for summary judgment, and granted Arabghani=s motion for summary judgment and severance.  On June 2, 2003, the trial court signed an interlocutory judgment in cause number 2002-21801 as to Arabghani=s breach of contract and breach of the covenant of quiet enjoyment claims against Leslie, Noons, and Six Continents.  On June 3, 2003, the court signed an order severing Arabghani=s claims for breach of contract and breach of the covenant of quiet enjoyment against Leslie, Noons, and Six Continents from cause number 2002-21801 and docketing such claims under cause number 2002-21801-B.  Noons and Six Continents filed motions for new trial, but the motions were denied.  This appeal ensued.^[10]                

On appeal, Noons and Six Continents present five issues, contending that the trial court erred in (1) overruling their motion to withdraw or amend the deemed admissions, (2) granting appellee=s motion for summary judgment, (3) denying their motions for summary judgment, (4) granting judgment providing for multiple recoveries by appellee for a single injury, and (5) severing appellee=s breach of contract and breach of the covenant of quiet enjoyment claims against them.

Standard of Review

Where, as here, both parties move for summary judgment, each carries its own burden of establishing a right to judgment and neither can win because the other did not discharge its burden.  See Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997); Long v. NCNB-Tex. Nat=l Bank, 882 S.W.2d 861, 862 (Tex. App.BCorpus Christi 1994, no writ).  When both parties file motions for summary judgment and one is granted and one is denied, we review the summary judgment evidence that both sides submitted and determine all questions presented.  See Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001); Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988).  Where the only question presented to the trial court is a question of law and both sides move for summary judgment, the appellate court, if it reverses the trial court, should render the judgment that the trial court should have rendered.  Jones, 745 S.W.2d at 900; Cigna v. Lloyds Ins. Co. v. Bradleys= Elec., Inc., 33 S.W.3d 102, 104 (Tex. App.BCorpus Christi 2000, pet. denied).

I.  Appellee=s Motion for Summary Judgment

Under the rules of civil procedure, requests for admission are automatically deemed admitted as a matter of law on the day after the answers are due if no answers, objections, or assertions of privilege are served.  See Tex. R. Civ. P. 198.2(c), 198.3.  Facts that are deemed admitted are conclusively established against the party who failed to timely respond.  Cartwright v. Mbank Corpus Christi N.A., 865 S.W.2d 546, 550 (Tex. App.BCorpus Christi 1993, no writ).  Deemed admissions will properly support a summary judgment if the result is to establish every element of a claim or defense.  Id.  In their first and second issues on appeal, appellants assert the trial court erred in refusing to grant permission to amend or withdraw the admissions, and in granting appellee summary judgment based on the admissions.  Because we sustain the latter point, we do not address the former. 

Appellants argue that even if the trial court did not err in allowing the deemed admissions to stand, they do not provide the conclusive evidence necessary to support Arabghani=s motion for summary judgment.  Appellants point out that nearly all of the requests for admission sought admission to a proposition as well as denial of the same proposition.  Arabghani served a set of 34 requests on each appellant, consisting of 32 diametrically-opposed requested admissions.  For example, appellants were asked to respond to the following requests:

7.  Admit that the Plaintiffs had a right to a 90-day termination letter, indicating that the Defendant was terminating the Restaurant Lease Agreement, previously identified as Exhibit AA@ to Plaintiff=s First Amended Petition.

8.  Admit that the Plaintiffs did not have a right to a 90-day termination letter, indicating that the Defendant was terminating the Restaurant Lease Agreement, previously identified as Exhibit AA@ to Plaintiff=s First Amended Petition. 

* * *

9.  Admit that the Defendant forwarded a letter to the Plaintiffs on March 12, 2002 terminating the Restaurant Lease Agreement, previously identified as Exhibit AA@ to Plaintiff=s First Amended Petition. 

12.  Admit that the Defendant did not forward a letter to the Plaintiffs on March 12, 2002 terminating the Restaurant Lease Agreement, previously identified as Exhibit AA@ to Plaintiff=s First Amended Petition. 

* * *

25.  Admit that at any time prior to June 10, 2002, the remodeling project of the Defendant, done in accordance with the Property Improvement Plan of Holiday Inn dated August 15, 2002, rendered the kitchen area unsanitary for the preparation of food. 

26.  Admit that at any time prior to June 10, 2002, the remodeling and construction project of the Defendant, done in accordance with the Property Improvement Plan of Holiday Inn dated August 15, 2002, did not render the kitchen area unsanitary for the preparation of food. 

Appellants argue that, at best, these admissions establish both the existence and nonexistence of the same matters and thus do not conclusively prove anything. Appellants further contend that because Arabghani incorporated all of the admissions into his motion for summary judgment, the result is that genuine issues of material fact remain.  In support of their argument, appellants cite to CEBI Sanayi Ve Ticaret A.S., v. Garcia, 108 S.W.3d 464, 466 (Tex. App.BHouston [14th Dist.] 2003, no pet.).  In CEBI, the Fourteenth Court of Appeals addressed a similar situation.  The court held that requesting admissions on contested issues and coupling them with mirror-image opposites created fact questions and, thus, summary judgment based on the deemed admissions could not be sustained.  Id.  The court reasoned that Garcia could not avoid the conflicting answers by relying on half of his requests.  The court stated, A[w]e cannot pick and choose among controverted facts in a summary judgment record, and these admissions become part of that record when they were filed.@  Id.  The court noted that Garcia could not have arranged for half the requests to be deemed admitted and the other half quietly ignored, as deeming occurs automatically.  Id.; see Tex. R. Civ. P. 198.2(c).           

Arabghani argues that mere requests for admission, even if deemed admitted, are not summary judgment evidence; instead, the admissions themselves are the summary judgment evidence. He states that the admissions exist only in some metaphysical or theoretical sense and, while they can be referred to or relied on, they cannot be physically attached to the summary judgment or physically made a part of the record.  We find this argument without merit because requests for admission and answers become part of the record when they are filed with the clerk of the court. CEBI, 108 S.W.3d at 466; Newman v. Utica Nat. Ins. Co. of Tex., 868 S.W.2d 5, 7 (Tex. App.BHouston [1st Dist.] 1993, writ denied).  Moreover, Arabghani states that his motion for summary judgment does not refer to, or introduce into evidence, any of the admissions that do not support the summary judgment.  However, after reviewing Arabghani=s motion for summary judgment, we find that Arabghani did in fact incorporate all of the unanswered requests for admissions as exhibits A-D.^[11]  In his motion, Arabghani specifically incorporated Athe entirety of Exhibits >A=, >B=, >C=, and >D= into this Motion . . . .@ 

The admissions relied upon by Arabghani became a part of the record when he filed the requests with the clerk of the court.  In addition, Arabghani specifically incorporated the entirety of the admissions as summary judgment evidence.  Not only should the trial court have considered the deemed admissions in ruling on the motion for summary judgment, the trial court had no discretion to ignore certain deemed admissions.  Pathfinder Pers. Serv., Inc. v. Worsham, 619 S.W.2d 475, 476 (Tex. Civ. App.BHouston [14th Dist.] 1981, no writ) (holding that trial court erred in disregarding certain of the requests for admission).  Because each of Arabghani=s requests was paired with an opposite request, the deemed admissions conclusively established every proposition and its opposite as well, thus preventing any issues of fact from being resolved.

Arabghani further urges that CEBI is incorrect and that it should not be followed. Arabghani suggests that the holding of CEBI is wrong because it would allow admitting parties to use their own admissions in their favor.  In support of this contention, Arabghani asserts that deemed admissions are effective only against the party making the admission, not against co-defendants, third parties, or opposing parties.  See Thalman v. Martin, 635 S.W.2d 411, 414 (Tex. 1982); Sympson v. Mor-Win Prods., Inc., 501 S.W.2d 362, 364 (Tex. Civ. App.BFort Worth 1973, no writ); Sprouse v. Texas Employers Ins. Ass=n, 459 S.W.2d 216, 220 (Tex. Civ. App.BBeaumont 1970, writ ref=d n.r.e.). Arabghani argues that the holding in CEBI assumes that appellants could avoid summary judgment by relying on their own responses to the admissions, specifically those that are inconsistent with the admissions relied upon by Arabghani.  He argues that under Texas law, Athe party to whom the request is addressed cannot use its own self-serving answers.@  See Sympson, 501 S.W.2d at 364; Sprouse, 459 S.W.2d at 220.   

In response, appellants argue that the analysis in CEBI is not grounded on the assumption that the responding party has offered its own admissions, but instead is based on the notion that the movant=s own summary judgment evidence is conflicting and does not establish the absence of fact issues. We agree.  While a movant=s exhibit can support a motion for summary judgment, it may also create a fact question, as in the present case.  See Keever v. Hall & Northway Adver., Inc., 727 S.W.2d 704, 706 (Tex. App.BDallas 1987, no writ) (AA nonmovant may rely on the summary judgment evidence referenced or set forth in the movant=s own motion in order to raise a fact issue.@).  Material fact issues were raised by Arabghani=s own evidence in support of his motion for summary judgment.  As such, Arabghani failed to meet his burden to show that no issues of material fact exist; therefore, the burden never shifted to appellants to create genuine issues of material fact.  Arabghani=s summary judgment cannot be sustained based on the conflicting deemed admissions. Therefore, the trial court erred in granting summary judgment.  Accordingly, we sustain appellants= second issue.

II.  Appellants= Motions for Summary Judgment

Appellants each filed cross-motions for summary judgment.  Each motion contended that (1) there was no evidence of the essential elements of Arabghani=s breach of contract and breach of the covenant of quiet enjoyment claims on which he had the burden of proof at trial, (2) the summary judgment evidence conclusively disproved as a matter of law the essential elements of Arabghani=s breach of contract and breach of the covenant of quiet enjoyment claims, and (3) the evidence conclusively proved as a matter of law each essential element of appellants= affirmative defenses of estoppel and material breach of agreement by Arabghani which discharged or excused performance by appellants. 

A.  Six Continents= Motion for Summary Judgment

We review a no-evidence summary judgment de novo, viewing the evidence in the light most favorable to the non-movant and disregarding all evidence and inferences to the contrary. See Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); Moore v. K Mart Corp., 981 S.W.2d 266, 269 (Tex. App.BSan Antonio 1998, pet. denied).  A party may move for a no-evidence summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. Tex. R. Civ. P. 166a(i).  A no-evidence summary judgment motion is improperly granted when the non-movant brings forth more than a scintilla of probative evidence that raises a genuine issue of material fact.  Id.; Gomez v. Tri City Cmty. Hosp., Ltd., 4 S.W.3d 281, 283 (Tex. App.BSan Antonio 1999, no pet.).  Less than a scintilla of evidence exists when the evidence is Aso weak as to do no more than create a mere surmise or suspicion@ of a fact.  Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983).  More than a scintilla of evidence exists when the evidence Arises to a level that would enable reasonable and fair-minded people to differ in their conclusions.@ Merrell Dow Pharms., 953 S.W.2d at 711. 

In its no-evidence motion for summary judgment, Six Continents argued that there is no evidence of the essential elements of breach of contract or breach of the covenant of quiet enjoyment.  The elements required to prove breach of contract include (1) the existence of a contractual obligation or duty, (2) performance or tendered performance of the terms of the contract, and (3) the other party=s breach of that contract.  See Garner v. Corpus Christi Nat. Bank, 944 S.W.2d 469, 476 (Tex. App.BCorpus Christi 1997, writ denied); Inglish v. Prudential Ins. Co. of Am., 928 S.W.2d 702, 705 (Tex. App.BHouston [1st Dist.] 1996, writ denied).  The elements required to prove breach of the covenant of quiet enjoyment include (1) an intention of the landlord that the tenant no longer enjoy the premises, (2) a material act by the landlord that substantially interferes with the intended use and enjoyment of the premises, (3) the act permanently deprives the tenant of the use and enjoyment of the premises, and (4) the tenant abandons the premises within a reasonable time after the consummation of the act.  See Holmes v. P.K. Pipe & Tubing, Inc., 856 S.W.2d 530, 539 (Tex. App.BHouston [1st Dist.] 1993, no writ); Coleman v. Rotana, 778 S.W.2d 867, 872 (Tex. App.BDallas 1989, writ denied).

Six Continents= motion for summary judgment asserted that (1) as an affiliate of Holiday, Six Continents owns certain trademarks and licenses them to Holiday; (2) neither Holiday nor Six Continents own, operate, manage, or control the Hotel; (3) neither Holiday nor Six Continents have ever been parties to any lease agreements with Arabghani nor have they ever been in any landlord-tenant relationship with Arabghani; and (4) neither Holiday nor Six Continents have ever had any contract or dealings of any kind with Arabghani.

In response to Six Continents= motion for summary judgment, Arabghani relies only on the deemed admissions as evidence of the existence of a contract between Six Continents and Arabghani. However, we have already held that the deemed admissions are, in effect, no evidence.  Arabghani had the burden to bring forth more than a scintilla of probative evidence that would raise a genuine issue of material fact.  See Galveston v. Newspapers, Inc. v. Norris, 981 S.W.2d 797, 799-800 (Tex. App.BHouston [1st Dist.] 1998, pet. denied) (AUnder the no-evidence summary judgment standard, >the party with the burden of proof at trial will have the same burden of proof in a summary judgment proceeding.=@).  Arabghani failed to bring forth any evidence that Six Continents had a contractual obligation or duty to him.  As such, Arabghani failed to bring forth more than a scintilla of evidence that would raise a genuine issue of material fact as to the first element required for a breach of contract claim. We further find that Arabghani failed to present any evidence to establish breach of the covenant of quiet enjoyment.  Without proof of a contractual relationship, namely a lease, there cannot be a landlord-tenant relationship between Arabghani and Six Continents; therefore, Six Continents could not have breached any covenant of quiet enjoyment.  Accordingly, we hold that the trial court erred in denying Six Continents= motion for summary judgment.  We reverse the order of the trial court and render summary judgment in favor of Six Continents.^[12]

B.  Noons= Motion for Summary Judgment

As grounds for summary judgment, Noons asserted that there is no evidence of the essential elements of Arabghani=s breach of contract or breach of covenant of quiet enjoyment claims.  In response, Arabghani asserts that Noons is a party to the lease agreement.  Arabghani only offered the deemed admissions as evidence of the contract; however, we have already held that the deemed admissions are no evidence.  Accordingly, we find that Arabghani has failed to bring forth more than a scintilla of evidence to raise a fact issue as to the first element required for breach of contract.  We further find that Arabghani failed to present any evidence to establish breach of the covenant of quiet enjoyment.  Again, without proof of a contractual relationship between Noons and Arabghani, it follows that Arabghani failed to establish a landlord-tenant relationship between them; therefore, Noons could not have breached any covenant of quiet enjoyment.  Accordingly, we hold that the trial court erred in denying Noons= no-evidence motion for summary judgment.

Given our disposition of the case, we do not address appellants= remaining two issues, which would entitle appellant to equal or lesser relief. See Tex. R. App. P. 47.1. 

Conclusion

We reverse the decision of the trial court granting summary judgment in Arabghani=s favor.  We render summary judgment in favor of appellants as to Arabghani=s claims of breach of contract and breach of the covenant of quiet enjoyment claims.   

_______________________

DORI CONTRERAS GARZA,

Justice

Memorandum Opinion delivered and

filed this the 25th day of August, 2005.

---

^[1] Arabghani filed suit for breach of contract, breach of the covenant of quiet enjoyment, fraud, and other acts allegedly committed by BAP III, Heights, Leslie, Noons, and Six Continents.

^[2] At the time the lease was executed, the Hotel was owned by Westside, which is not a party to this suit.

^[3] The lease contains the following language:

Section 31. Termination.  In addition to other rights of Landlord to terminate as provided in this lease, either Landlord or Tenant shall have the absolute right to terminate this lease, upon 90 days written notice to the other party, in the event of any sale, transfer or disposition of any material interest in the Hotel or the Landlord or in the event of any major renovation to the Hotel or change in franchise affiliation. 

^[4] Under the terms of the lease agreement, Arabghani agreed to operate the restaurant and related facilities in Aan efficient, high class and reputable manner with adequate personnel, merchandise and inventory to meet usual and ordinary demands,@ to Acomply with the requirements of the existing franchise or any successor franchisor of the hotel, as they may from time to time exist,@ and to Apass all health inspections of the leased premises, . . . not suffer any citations or shut down or permit any adverse publicity to occur regarding operation of the business on the leased premises.@

^[5] Edwin Leslie is a limited partner of BAP III and an officer, director, and shareholder of Heights.

^[6] The parties do not provide us with the exact date on which BAP III and Heights began the repairs.  Appellants state that the work began in AMarch 2002,@ and Arabghani states that work began Aalmost immediately@ after receiving the March 12 letter.  

^[7] Thomas Noons is a limited partner of BAP III and an officer, director, and shareholder of Heights.

^[8] Six Continents is an affiliate of Holiday Hospitality Franchising, Inc. (AHoliday) and owns certain trademarks and licenses them to Holiday.

^[9] The Hotel was operated pursuant to a licensee agreement with Holiday. The license agreement allowed the Hotel to use Holiday=s trademarks, registered marks, service marks, logos and sign designs, and to operate within the Holiday Inn hotel system.

^[10] Leslie does not join in this appeal as his filing for bankruptcy rendered the summary judgment and severance orders void as to him.  See 11 U.S.C. ' 362(a); In re Southwestern Bell Tel. Co., 35 S.W.3d 602, 604-605 (Tex. 2000).  Arabghani=s claims against Leslie remain pending in 133rd District Court under cause number 2002-21801. 

^[11] Exhibit AA@ consists of the unanswered requests for admissions to Heights Hospitality Corporation, exhibits AB@ and AC@ consist of the unanswered requests for admissions to Leslie and Noons, and exhibit D consists of the unanswered requests for admissions to Six Continents.

^[12] Because we grant Six Continent=s no-evidence summary judgment, we do not address its remaining issues on appeal.