Robert Stanton, as Successor in Interest to Hospitality Innovators, Inc. v. Forum Arlington Properties, Ltd. ( 2009 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-07-301-CV
ROBERT STANTON, AS APPELLANT
SUCCESSOR IN INTEREST TO
HOSPITALITY INNOVATORS, INC.
V.
FORUM ARLINGTON APPELLEE
PROPERTIES, LTD.
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FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION 1
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The trial court granted summary judgment for Appellee Forum Arlington
Properties, Ltd. (“Forum Arlington”) and found that Forum Arlington had
properly terminated a lease between it and Appellant Robert Stanton. Stanton
now appeals, arguing in one issue that the trial court erred by granting summary
1
… See Tex. R. App. P. 47.4.
judgment because a genuine issue of material fact exists as to whether the
lease was properly terminated. Because we hold that the lease was properly
terminated, we affirm.
In July 1993, Hospitality Innovators, Inc. ("Hospitality") entered into a
ten-year commercial lease with Forum, Ltd., Forum Arlington’s predecessor.
The lease provided that Hospitality would use the premises to operate a dance
club. An amendment to the lease allowed Hospitality to renew for two
successive five-year terms.
Section fourteen of the lease required Hospitality to maintain throughout
the lease term an occurrence-based comprehensive general liability (“CGL”)
insurance policy and to name landlord Forum, Ltd. as an additional insured.
After the lease was executed, Forum Arlington acquired the property and
became the successor landlord under the lease.
The Texas Secretary of State revoked Hospitality’s charter in February
1998, and according to Stanton, he became the successor in interest to the
lease as Hospitality’s sole stockholder. In 2003, however, attorney Michael
Hassett (the attorney who represented Stanton in the trial court in this case)
notified Forum Arlington in writing that he represented Midnight Country Club,
Inc. (“MCC”), d/b/a Desperado’s, the successor to Hospitality with respect to
the lease, and that his client was renewing the lease. Stanton contended in the
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trial court that MCC was a corporation he created to sublease from Hospitality
and to operate Desperado’s.
In 2005, Angelinaisela Aranda filed a lawsuit against Desperado’s and
Forum Arlington, alleging that while she was at the club, she was injured by a
security guard working there. After the lawsuit was filed, Forum Arlington’s
insurance carrier sent a letter to Hospitality, noting that the lease required
Hospitality to carry insurance naming Forum Arlington as an additional insured
and to indemnify Forum Arlington. The insurance carrier requested Hospitality
to defend and indemnify Forum Arlington with respect to the Aranda lawsuit.
Several months later, an attorney for Forum Arlington sent a letter to an
attorney representing Desperado’s, noting that he had previously requested a
copy of any insurance policy covering Desperado’s, that the documents had not
been provided, and that he understood that Desperado’s either had not
maintained an insurance policy or had failed to list Forum Arlington as an
additional insured. Consequently, Forum Arlington had filed a cross-action
against MCC d/b/a Desperado’s for breach of contract, contribution, and
indemnity. Subsequently, MCC filed for bankruptcy protection, and on February
8, 2006, the lawsuit was removed from the trial court’s active docket.
On February 27, 2006, Stanton filed an original suit against Forum
Arlington; Forum, Ltd.; and Henry Real Estate Services, L.L.C. seeking a
3
declaratory judgment and to interplead funds. He alleged that Forum Arlington
had failed and refused to comply with the lease terms in that it failed to provide
gas service, to light or stripe the parking areas, to provide electricity to the
property, and to maintain common areas in the shopping center. He also
alleged that he did not know who had the right to receive rent payments
because Forum, Ltd. was the original landlord, but he believed that Forum
Arlington may have purchased the property, and Henry had directed Stanton to
make rent payments directly to Henry. Stanton asked the court to determine
the true landlord under the lease and to declare that the lease was still valid and
in full force and effect.
Forum Arlington filed an answer and counterclaim asserting that it was
the landlord under the lease and seeking among other relief a declaration that
the lease had terminated. Forum Arlington subsequently filed a motion for
partial summary judgment, seeking a declaration that the lease had terminated
by reason of default because Stanton had failed to indemnify Forum Arlington
in the Aranda lawsuit and because he had failed to maintain a general liability
insurance policy and name Forum Arlington as an additional insured. In his
response, Stanton alleged that he had provided Forum Arlington with a
certificate of insurance naming Forum Arlington as an additional insured.
Stanton attached to his response a certificate of insurance showing an effective
4
date of April 11, 2006. Forum Arlington objected to this evidence on relevancy
grounds, arguing that the certificate was not relevant to the issue of whether
Stanton had maintained the required insurance policy at the time of the events
giving rise to the 2005 Aranda lawsuit. The trial court sustained the objection,
striking the evidence. After a hearing, the trial court granted Forum Arlington’s
motion, and Stanton now appeals.
We review declaratory judgments under the same standards as other
judgments and decrees.2 Thus, we review a declaratory judgment decided by
summary judgment under the same standard of review by which we review
summary judgments generally.3 A plaintiff is entitled to summary judgment on
a cause of action if it conclusively proves all essential elements of the claim. 4
When reviewing a summary judgment, we take as true all evidence favorable
2
… Tex. Civ. Prac. & Rem. Code Ann. § 37.010 (Vernon 2008); Truck
Ins. Exch. v. Musick, 902 S.W.2d 68, 69 (Tex. App.—Fort Worth 1995, writ
denied).
3
… Tex. Civ. Prac. & Rem. Code Ann. § 37.010; Bowers v. Taylor, 263
S.W.3d 260, 264 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
4
… See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59,
60 (Tex. 1986).
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to the nonmovant, and we indulge every reasonable inference and resolve any
doubts in the nonmovant’s favor.5
On appeal, Stanton argues that the trial court erred by granting summary
judgment on Forum Arlington’s declaratory judgment action because a material
fact issue exists as to whether the lease was properly terminated. We first
examine the lease to determine on what grounds Forum Arlington could
terminate the lease. The construction of an unambiguous lease is a question
of law.6 Neither party contends that the lease is ambiguous. We therefore look
at the lease’s terms as to termination, giving those terms their plain meaning
unless doing so would clearly defeat the parties’ intentions. 7 In doing so, we
are mindful of Texas law holding that a landlord cannot forfeit a lease for a
tenant’s failure to comply with lease provisions without first making demand for
performance unless the lease contract contains a waiver of such demand. 8
5
… IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143
S.W.3d 794, 798 (Tex. 2004).
6
… Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550, 554 (Tex.
2002).
7
… Id.
8
… Wendlandt v. Sommers Drug Stores Co., 551 S.W.2d 488, 490 (Tex.
Civ. App.—Austin 1977, no writ).
6
Section fourteen of the lease requires Hospitality to maintain an
occurrence-based CGL insurance policy, naming the landlord as an additional
insured. The section also requires Hospitality to provide to the landlord the
originals of the policy or duplicates of the originals. Section seventeen of the
lease provides that it is an event of default if Hospitality fails to comply with
any provision of the lease and, after notice, fails to cure or attempt to cure
within fifteen days. No particular form of notice is required, although section
twenty-seven requires any notice given under the lease to be in writing. Also
under section seventeen, upon an event of default, the landlord has the option
to terminate the lease by giving Hospitality twenty days’ notice. Section
seventeen also provides that the landlord may take such action upon an event
of default without first providing any demand whatsoever. Thus, under the
terms of the lease, it was an event of default if Hospitality failed to maintain an
appropriate insurance policy naming Forum Arlington as an additional insured
and provide originals or duplicates of those policies to Forum Arlington and also
failed to cure or begin to cure its failure within fifteen days of notice of its
noncompliance with the lease. In the event of such default, Forum Arlington
could terminate the lease upon twenty days’ notice without first making any
further demand to Hospitality that it come into compliance or giving Hospitality
further opportunity to cure.
7
We next determine whether Forum Arlington established as a matter of
law that it properly terminated the lease in accordance with its terms. The
summary judgment evidence shows that on May 20, 2005, the insurance
carrier for Forum Arlington sent a letter to Hospitality notifying it that under the
lease, Hospitality was required to indemnify Forum Arlington and to have named
Forum Arlington as an additional insured on an insurance policy covering the
premises. The letter requested that Hospitality defend and indemnify Forum
Arlington in the Aranda lawsuit, and it requested a response within two weeks.
Then on August 8, 2005, an attorney for Forum Arlington sent a letter to an
attorney representing Desperado’s. The letter stated that “[a]s you are aware,
we have previously requested a copy of any and all insurance policies which
cover your client, Desperado’s. As of this date, we [have] not been provided
with any of those documents.” The letter notes that the lease required
Desperado’s to maintain a policy of liability insurance and to have listed Forum
Arlington as an additional insured. The letter goes on to say that “[i]t is my
understanding that your client has either not maintained a policy of insurance
or has failed to list my client as an additional insured on such policy.” The
letter notes that because of this failure, Forum Arlington had filed a cross-action
against Desperado’s in the Aranda suit. This letter clearly notified Desperado’s
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attorney of Forum Arlington’s belief that his client was not in compliance with
the lease agreement.
Furthermore, in an affidavit filed with Stanton’s response to the summary
judgment motion, he stated that MCC was a corporation he had formed to run
two adjacent nightclubs on the leased premises. Other evidence shows that
one of those clubs was Desperado’s. During the existence of an attorney-client
relationship, knowledge acquired by the attorney is imputed to the client.9
Furthermore, in the cross-action filed against MCC in the Aranda lawsuit, Forum
Arlington alleged that MCC “was required to maintain a policy of general liability
insurance” and that MCC “breached this contract.” Thus, by at least August
2005, Stanton had received written notice that he was not in compliance with
the lease terms and also that Forum Arlington was pursuing steps to assert its
legal rights resulting from the noncompliance. If this noncompliance continued
for fifteen days without Stanton curing or attempting to cure, then such
noncompliance would constitute an event of default under the lease, and Forum
Arlington could terminate the lease by giving twenty days’ notice. The
evidence Stanton filed with his response to the summary judgment motion
shows that he did not obtain insurance until at least April 2006. Thus, he did
9
… Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 584 (Tex.
2006).
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not cure his noncompliance within fifteen days of receiving notice.
Accordingly, Forum Arlington could thereafter terminate the lease by providing
twenty days’ notice that it was doing so.
On August 31, 2006, an attorney for Forum Arlington sent Stanton a
letter informing him that he was still in default and giving him twenty days’
notice to cure any default. The letter states that Stanton and Forum Arlington
had previously entered into a May 25, 2006 letter agreement in which Stanton
had agreed to provide proof that he had insurance coverage for the leased
premises. The letter then stated that Stanton had failed to do so. Although the
letter could have been more clear, it did notify Stanton’s attorney that Stanton
was in violation of the lease and specifically noted that the lease required
Hospitality to maintain liability insurance naming Forum Arlington as an
additional insured and that Stanton had failed to provide proof that he had such
insurance despite previous requests and a letter agreement on the subject. The
letter did not, however, state that the lease would be terminated in twenty
days.
On September 21, 2006, Forum Arlington’s attorney sent a letter to
Stanton stating that the lease had been terminated as of September 19, 2006
due to Stanton’s unremedied default under section fourteen. If the August
2006 letter was not sufficiently clear to constitute a termination letter, the
10
September letter did clearly give Stanton notice that Forum Arlington was
exercising its right to terminate the lease. Thus, at the latest, the lease
terminated twenty days after the September 21, 2006 letter.
The summary judgment evidence demonstrates that Stanton was required
to maintain insurance on the premises naming Forum Arlington as an additional
insured and to provide the originals or copies of such policy to Forum Arlington;
that as early as 2005, Forum Arlington had reason to believe that Stanton was
not in compliance with his lease; that in 2005 Forum Arlington notified Stanton
of its belief that he was not in compliance with his lease; and that in 2006,
Forum Arlington terminated the lease for the noncompliance. The certificates
of insurance that Stanton filed with his response did not demonstrate that he
had cured or had begun to cure his default within fifteen days of receiving
notice of his noncompliance in 2005.
Furthermore, although Stanton argued that the lease could not have been
terminated for failure to provide proof of insurance because he had provided
such proof to Forum Arlington, there was no competent evidence that Stanton
had ever demonstrated to Forum Arlington that he had obtained insurance prior
to Forum Arlington’s exercise of its option to terminate the lease, despite Forum
Arlington’s statements to him that he was in violation of the lease and Forum
Arlington’s repeated requests that he provide proof of insurance. At the latest,
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Forum Arlington notified Stanton that it was terminating the lease on
September 21, 2006, and Stanton did not file his response to the summary
judgment motion with the certificate of insurance attached until November 14,
2006, more than twenty days after the termination notice. The only summary
judgment evidence that he had ever previously demonstrated to Forum
Arlington that he had insurance on the property was a statement in his affidavit
that certificates of liability insurance “have been provided to Forum Arlington
on more than one occasion.” He did not state when he had provided proof of
insurance, and specifically, he did not assert that he had provided proof before
Forum Arlington notified him that the lease had been terminated. His
conclusory statement is not competent evidence that he had provided proof of
insurance to Forum Arlington before it terminated the lease or that he timely
cured or began to cure his noncompliance. 10
Stanton further argues that the reason Forum Arlington gave him for
terminating the lease and the ground asserted by Forum Arlington in its motion
for summary judgment were that he had failed to provide proof of insurance,
10
… See Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996)
(“Conclusory affidavits are not enough to raise fact issues.”); Residential
Dynamics, LLC v. Loveless, 186 S.W.3d 192, 198 (Tex. App.—Fort Worth
2006, no pet.) (“A conclusory statement is one that does not provide the
underlying facts to support the conclusion.”).
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but that Forum Arlington’s reply in support of the motion asserted for the first
time that the issue was his failure to maintain insurance. Specifically, he
contended that in its reply, Forum Arlington changed the issue to whether
Forum Arlington could properly terminate the lease for Stanton’s failure in 2006
to provide proof that he had maintained insurance in 2003. He contends that
by waiting until 2006 to provide notice of default with respect to 2003, Forum
Arlington made it impossible for him to cure the default and that such failure
could not be the basis for termination of the lease.
Forum Arlington’s motion alleged that Stanton had breached the lease by
failing to maintain insurance. And when Forum Arlington requested Hospitality
and Stanton to provide proof of insurance, it was contending that Stanton had
failed to maintain insurance and was asking him to demonstrate, by providing
proof of insurance, that he was not in default. Furthermore, even if we were
to interpret Forum Arlington’s summary judgment motion as asserting as the
ground for termination merely that Stanton had failed to provide proof of
insurance rather than that he had failed to maintain insurance, as stated above,
there was sufficient evidence that Stanton had failed to provide such proof and
no competent evidence that Stanton provided proof to Forum Arlington before
it terminated the lease.
13
Because Stanton caused an event of default by failing to maintain
insurance and to provide the originals or copies of an insurance policy to Forum
Arlington and by failing to cure this noncompliance within fifteen days of being
notified of the matter, and because Forum Arlington complied with its obligation
under the lease to provide twenty days’ notice before terminating the lease, we
hold that the trial court did not err by concluding as a matter of law that Forum
Arlington had properly terminated the lease. Accordingly, we overrule
Stanton’s issue.
Having overruled Stanton’s sole issue, we affirm the judgment of the trial
court.
LEE ANN DAUPHINOT
JUSTICE
PANEL: CAYCE, C.J.; DAUPHINOT and MCCOY, JJ.
DELIVERED: April 23, 2009
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