Person v. MC-Simpsonville, SC-1-UT, LLC

Steve Person, Jim Walesa, and Trident Healthcare Properties I, LP, Appellants v. MC-Simpsonville, SC-1-UT, LLC, Appellee

No. 03-20-00560-CV

Court of Appeals of Texas, Third District, Austin

August 27, 2021

FROM THE 368TH DISTRICT COURT OF WILLIAMSON COUNTY NO 19-0651-C368, THE HONORABLE RICK J. KENNON, JUDGE PRESIDING

Before Justices Goodwin, Triana, and Jones ^[*]

MEMORANDUM OPINION

J Woodfin Jones, Justice

Appellee MC-Simpsonville, SC-1-UT, LLC brought suit against Steve Person, Jim Walesa, and Trident Healthcare Properties I, L.P. (collectively, "the Guarantors") for breach of a guaranty agreement. The trial court granted summary judgment in favor of MC-Simpsonville against all defendants as to liability. The court then conducted a bench trial as to damages and attorney's fees, following which the court rendered judgment for MC-Simpsonville for compensatory damages, pre- and post-judgment interest, attorney's fees, and court costs totaling approximately $2.8 million. On appeal, the Guarantors assert four issues complaining of the summary judgment as to liability, the award of attorney's fees, and the award of pre-judgment interest. We will affirm in part and reverse and remand in part.

Factual and Procedural Background

MC-Simpsonville as landlord, and MCA Simpsonville Operating Company, LLC, as Tenant (a non-party to the lawsuit), entered into a lease agreement for the Tenant to operate an assisted living facility. Concurrent with the lease, Person, Walesa, and Trident Healthcare Properties signed an agreement guaranteeing the Tenant's performance under the lease. At some point the Tenant stopped paying rent, and MC-Simpsonville subsequently filed suit against the Guarantors asserting breach of the guaranty agreement.

The trial court granted MC-Simpsonville's combined traditional and no-evidence motion for summary judgment against the Guarantors as to liability. The court then held a bench trial as to damages and attorney's fees. At the conclusion of the trial, the court rendered judgment against the Guarantors for damages, interest, and attorney's fees totaling approximately $2.8 million. The attorney's fee award was approximately $250, 000.

On appeal, the Guarantors assert four issues complaining that (1) the trial court erred in considering summary judgment evidence that was filed untimely without leave of court; (2) they were released from liability under the terms of the guaranty agreement itself; (3) the award of attorney's fees was improper on several grounds; and (4) the trial court erred in relying on inadmissible hearsay to calculate the amount of interest awarded.

Discussion

I. Improper Consideration of Summary Judgment Evidence^[1]

In their first issue, the Guarantors complain that the trial court erred by improperly considering summary judgment evidence that was submitted untimely by MC-Simpsonville without leave of court. Specifically, they complain that one day before the summary judgment hearing MC-Simpsonville tendered to the court a 302-page document that was referred to as "Plaintiff's binder of authorities with table of contents." Guarantors argue that this document contained summary judgment evidence and at least one discovery product that had not been previously filed or referred to in the summary judgment motion. The Guarantors assert that the consideration of the "Binder" by the court violated the requirements in Texas Rule of Civil Procedure 166a(c) and (d) that supporting documents be filed by the movant at least 21 days before the summary judgment hearing. MC-Simpsonville, in contrast, asserts that its Binder raised no new grounds for summary judgment and added no new material evidence.

We need not address these opposing arguments, however, because even though the Guarantors attached a copy of the Binder as an appendix to their brief in this Court, it was never filed with the trial court and is not part of the appellate record. Accordingly, we may not consider it. See, e.g., Hammer v. Hammer, No. 03-18-00715-CV, 2021 WL 1916481, at *3 (Tex. App.-Austin May 13, 2021, no pet.) (mem. op.) ("[An a]ppellate court cannot consider documents or hearings that are cited in the brief and attached as appendices if they are not formally included in the record on appeal." (quoting Burke v. Insurance Auto Auctions Corp., 169 S.W.3d 771, 775 (Tex. App.-Dallas 2005, pet. denied))); Bell v. State ex rel. S.E.G., No. 08-20-00149-CV, 2021 WL 937457, at *1 (Tex. App.-El Paso Mar. 11, 2021, no pet. h.) (mem. op.) ("[W]e may not consider documents in an appendix that are not in the appellate record."); Ahmed v. Sosa, 514 S.W.3d 894, 896 (Tex. App.-Fort Worth 2017, no pet.) ("[W]e may not consider a document cited in a brief and attached as an appendix if it is not formally included in the record on appeal.").

It is an appellant's burden to show error on appeal. Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990) ("The burden is on the appellant to see that a sufficient record is presented to show error requiring reversal."); Dee v. Crosswater Yacht Club, LP, No. 03-10-00796-CV, 2012 WL 1810213, at *6 (Tex. App.-Austin May 18, 2012, no pet.) (mem. op.) (same). Moreover, "[i]f the pertinent summary judgment evidence considered by the trial court is not included in the appellate record, an appellate court must presume that the omitted evidence supports the trial court's judgment." Enterprise Leasing Co. v. Barrios, 156 S.W.3d 547, 550 (Tex. 2004); see also McKinnon v. Wallin, No. 03-17-00592-CV, 2018 WL 3849399, at *3 (Tex. App.-Austin Aug. 14, 2018, pet. denied) (mem. op.) ("The appellate record also does not contain the summary judgment motions or evidence so we must presume that the omitted documents supported the trial court's summary judgment rulings.").

Because we may not consider the Binder attached as an appendix to the Guarantors' brief and must presume that the document supports the trial court's summary judgment, we hold that the trial court has not been shown to have erred or abused its discretion by considering untimely summary judgment evidence.

II. Release from Liability under the Terms of the Guaranty Agreement

In their second issue, the Guarantors assert that they were released from liability under the terms of the guaranty agreement itself. Paragraph 12 of the guaranty agreement states as follows: "Upon demonstration that the parent corporation of Tenant has a net worth in excess of Fifty Million Dollars ($50, 000, 000.00) the principals of said corporation signing below shall be released from this Guaranty." It is undisputed that Memory Care America ("MCA") is the parent corporation of the Tenant. In response to MC-Simpsonville's motion for summary judgment, the Guarantors attached the affidavit of Jim Walesa, who averred in conclusory terms that "MCA's net worth exceeds $50, 000, 000.00." The Guarantors argue that Walesa's affidavit testimony, combined with the foregoing provision of the guaranty agreement, created a fact issue as to whether Guarantors were released from their obligation by the terms of the agreement, thereby making summary judgment improper. For its part, MC-Simpsonville argues that for various reasons Walesa's affidavit is not sufficient to demonstrate MCA's net worth.

Again, however, we do not have to address those opposing arguments. The guaranty agreement provided in a different section that the Guarantors' "liabilities and obligations" are "immediately due and payable . . . upon the occurrence of a default under the lease":

All of the Liabilities and the obligations of the undersigned hereunder shall be immediately due and payable by the undersigned, anything contained herein to the contrary notwithstanding, immediately upon the occurrence of a default under the Lease which continues beyond the expiration of the applicable notice and/or grace period, if any, under the Lease.

(Emphasis added.) It is undisputed that the Tenant had defaulted in its obligations under the lease before MC-Simpsonville filed suit and that the Guarantors had been notified of the Tenant's default. Therefore, the Guarantors' obligations under the agreement had likewise arisen before Walesa's affidavit testimony. In like manner, the Guarantors' breach of those obligations had also preceded Walesa's testimony.

Under the terms of the guaranty agreement, the release of the Guarantors would occur only "upon demonstration" that MCA's net worth exceeded $50, 000, 000. The phrase "upon demonstration" is similar to the kind of conditional language that is often associated with the creation of a condition precedent to an obligation under a contract. See, e.g., Solar Applications Eng'g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104 109 (Tex. 2010) ("In order to make performance specifically conditional, a term such as 'if', 'provided that', 'on condition that', or some similar phrase of conditional language must normally be included." (quoting Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex. 1990))). The only difference here is that "upon demonstration" is used in reference to the release from an obligation rather than the creation of one. The effect of the conditional language is the same, however, i.e., the status quo is not altered until the occurrence of the event that is named as the 5 condition for a new status. Thus, the new status-whether it be the creation of an obligation or the release of one-does not come into being until the event occurs. Accordingly, the Guarantors could not have been released from their obligation to guarantee the Tenant's performance under the lease until MCA's net worth was demonstrated to exceed $50, 000, 000. And assuming arguendo that Walesa's affidavit was sufficient to make such a demonstration, that did not occur...