Court Opinion

ID: 2869057
Source: CourtListenerOpinion
Date Created: 2015-09-06 03:01:42.733417+00
Date Added: 2024-06-11T11:31:47.691428
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                             444444444444444444444444444
                               ON MOTION FOR REHEARING
                             444444444444444444444444444

                                       NO. 03-03-00768-CV

  Pearl Witkowski and Joseph Phillips, Individually and on behalf of a class of all others
         similarly situated; and Deanna Warner, Individually and on behalf of a
                      class of all others similarly situated, Appellants

                                                 v.

    Brian, Fooshee and Yonge Properties, a Texas General Partnership; George Yonge;
              Jefferson Fooshee; Patrick Brian; and Embrey Partners, Ltd.,
                         a Texas Limited Partnership, Appellees

     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
           NO. GN000998, HONORABLE PAUL DAVIS, JUDGE PRESIDING

                                           OPINION

               We grant appellants’ motion for rehearing, withdraw our opinion and judgment issued

June 23, 2005, and substitute the following in its place.1

               This appeal arises from the sale of the River Woods apartment complex, part of which

was designated as low-income housing, located in Austin, Texas. Appellants—Pearl Witkowski,

Joseph Phillips, and Deanna Warner, individually and on behalf of two classes of all others similarly

       1
         Appellants Witkowski and Warner alternatively moved for rehearing en banc. We overrule
that motion.
situated—are former low-income tenants and persons eligible for low-income tenancy at River

Woods.2 Appellants assert that they are entitled to collect damages from appellees, who are the

property owners—Brian, Fooshee and Yonge Properties, a general partnership, and Patrick Brian,

Jefferson Fooshee, and George Yonge, individuals (collectively, “BFY”)—and the proposed

purchaser of the property—Embrey Partners, Ltd. (“Embrey”)—because these parties acted

improperly to effect the release of the low-income housing restrictions, resulting in the low-income

tenants’ eviction from River Woods.

               Following their eviction, appellants filed suit against BFY and Embrey, but the

district court granted summary judgments in favor of appellees. Appellants then moved for leave

of court to file a fifth amended petition, which was opposed by BFY. Ultimately, the court denied

appellants’ motion for leave to amend their petition and issued a final judgment in favor of BFY and

Embrey as to all claims asserted by appellants, ordering that appellants take nothing.

               Appellants now appeal the trial court’s decision, urging in five issues that the court

erred (1) by granting summary judgment in favor of BFY and Embrey and (2) by denying appellants’

motion for leave to amend, thereby “dismissing” the newly asserted claim contained in appellants’

proposed fifth amended petition. We will affirm.

                                        BACKGROUND

               The low-income housing restrictions governing the River Woods complex were

imposed pursuant to 12 U.S.C. § 1441a, which was enacted following the savings and loan crisis of

       2
         Pearl Witkowski was originally joined by her daughter, Delores, as a plaintiff and class
representative. Subsequently, Delores withdrew, and Phillips was added as a representative.

                                                 2
the late 1980s. See 12 U.S.C. § 1441a (2001 & Supp. 2005). As part of § 1441a, Congress

established the Resolution Trust Corporation (“RTC”) to serve as a receiver of all properties

previously held by failed thrift institutions. See id. § 1441a(b). The River Woods property was

previously held by a failed thrift and, thus, by 1990 was under the RTC’s control.

               As part of the Act, the RTC was given the authority to sell such residential properties

as long as the sale complied with the Affordable Housing Disposition Program (“AHDP”). See id.

§ 1441a(c). Pursuant to the AHDP, purchasers of thrift property must agree to provide residential

housing opportunities to lower and very-low income families. Id. Specifically, the AHDP mandates

that “not less than 35 percent of all dwelling units” shall be reserved for low-income housing. Id.

§ 1441a(c)(3)(E)(i)(I). The AHDP further requires that these restrictions be agreed to in a contract

or other recorded instrument. Id. § 1441a(c)(3)(E)(ii); see also id. § 1441a(b)(10)(A)(i).

               In 1991, the RTC sold River Woods to George Yonge, who conveyed it days later to

Brian, Fooshee, and Yonge Properties. In order for the sale of River Woods to comply with the

AHDP’s low-income housing regulations, the RTC and Yonge entered a written Land Use

Restriction Agreement (“LURA”), which remained in effect when Yonge transferred the property

to BFY. The LURA characterized River Woods as an “‘eligible multifamily housing property’ as

defined in . . . 12 U.S.C. § 1441a(c)(9)(D)” and stated that, “[d]uring the Term, Owner will maintain

the Property as multifamily rental housing and will . . . make continuously available for occupancy

by Lower-Income Families . . . not less than 40 Units, of which not less than 23 Units shall be made

available for occupancy by Very Low Income Families.”

                                                 3
                The LURA defined the “Term” as continuing either for forty years, or until the

earliest one of four specified events occurred. One of the four events that could cause the Term to

expire before the forty-year mark was “the date upon which the RTC or the Agency determines . . .

(i) that all or a portion of the Property is obsolete as to physical condition . . . making it unusable for

housing purposes, and (ii) that no reasonable program of modifications is financially feasible to

return the Property or a portion of the Property to useful life.” “Agency” was defined in the LURA

as “the State Housing Finance Agency [i.e., the Texas Department of Housing and Community

Affairs (“TDHCA”)] or any agency, corporation, or authority of the United States government that

normally engages in activities related to the preservation of affordable housing,” which included the

RTC or its predecessor, the Federal Deposit Insurance Corporation (“FDIC”). The LURA did not

require any procedural steps, such as notice and hearing, before the applicable government agency

could end the Term by determining that the property was physically obsolete and financially

infeasible to repair.

                Six years after acquiring River Woods, BFY agreed to sell the apartment complex to

Embrey Partners. This sale was conditioned on obtaining a release of the low-income housing

restrictions contained in the LURA. The purchase agreement stated as a “condition precedent” that

“Purchaser shall have obtained (and Seller shall have cooperated in a reasonable manner to assist

Purchaser) an executed instrument filed at or prior to Closing which abandons and/or releases the

restrictive covenants, so that the result is the [LURA] is null and void.”

                After Embrey and BFY considered various options for how to remove the

“encumbrance” of the LURA, Yonge wrote to the TDHCA requesting that it release the LURA “due

                                                    4
to the condition of the property.” Embrey joined BFY’s efforts to have the TDHCA release the

LURA. Accordingly, Embrey submitted to the TDHCA a physical inspection report, which

described the property as dilapidated and unsuitable for residential habitation, and a redevelopment

proposal, which suggested demolishing the existing structure and constructing a new facility on the

land.3

               In February 1998, the TDHCA recommended to the FDIC that the River Woods

LURA be released. The letter was written by the Executive Director of the TDHCA and stated, “The

Department has inspected the property and recommends the LURA be lifted for the entire property.

There are project conditions which support a finding of obsolescence and that it is not economically

feasible to rehabilitate the existing structures.” The letter also described specific, physical problems

that the TDHCA identified as rendering the property unsuitable for habitation or rehabilitation and

concluded by listing several reasons to support the agency’s recommendation that the LURA be

terminated.

               In March 1998, the FDIC signed an order releasing River Woods from the LURA.

The order stated that—in reliance on the representations that the property was physically unsuitable

for habitation and that neither modifications nor repairs were financially feasible—the FDIC, as

successor in interest to the RTC, was releasing and discharging the River Woods property from all

conditions, obligations, restrictions, and duties of the LURA. BFY, Embrey, and the TDHCA then

entered an agreement reflecting the FDIC’s determination that the LURA should be released because

         3
          The appellants challenge the accuracy of these statements, urging that a proper inspection
and financial analysis were never done and that the appellees purposefully misrepresented the status
of the property in order to fraudulently induce the TDHCA to release the LURA.

                                                   5
the River Woods property was unsuitable for residential housing, not financially feasible to repair,

and in need of demolition.

                For one year after these determinations were made, the River Woods apartments

continued to be rented to tenants. On August 13, 1999, the day the sale was completed,4 eviction

letters were sent to each of the River Woods tenants, notifying them that they had one month to

leave, as demolition of the property would begin at 8:00 a.m. on September 14, 1999. The River

Woods manager offered to refund all security deposits to the tenants and offered to compensate them

fifteen dollars per day for each day that a tenant moved out before the 30-day deadline.

                Appellants filed suit on April 4, 2000. They alleged a variety of claims against

appellees—some against BFY and Embrey separately, and some against them jointly—including

causes of action for constructive fraud, breach of contract, breach of fiduciary duty, tortious

interference with a contract, and breach of an implied warranty of habitability. All of appellants’

claims were based on allegations that BFY and Embrey intentionally misrepresented the condition

of the River Woods property to the TDHCA and the FDIC in order to improperly induce the agencies

to release the LURA on the grounds that the property was unsuitable for habitation and financially

infeasible to repair.

                BFY initially sought summary judgment on appellants’ claims for breach of an

implied warranty of habitability, breach of fiduciary duty, and unjust enrichment. The trial court

        4
           Embrey was, ultimately, not the purchaser of the property. On May 11, 1998, Embrey
entered an escrow transfer agreement to assign its interest in the purchase of River Woods to TCR
South Central, Inc., who then assigned the interest to South Congress Reserve Limited Partnership.
The purchase was thereafter completed by South Congress Reserve, which was not named as a party
to this suit.

                                                 6
granted the motion only as to the breach of implied warranty of habitability claim.5 Appellants do

not appeal the first summary judgment.

                Embrey joined BFY in a second summary judgment motion, seeking to dismiss all

of appellants’ claims based on three alternative grounds: (1) appellants lack standing, (2) appellants

failed to state a cause of action upon which relief could be granted, and (3) appellees are immune

under the Noerr-Pennington doctrine,6 which protects government communications. The trial court

granted BFY’s and Embrey’s summary judgment motion without stating the grounds and denied

appellants’ request to issue findings of fact and conclusions of law.

                Appellants then sought leave to amend their petition, which had previously been

amended four times, urging that they needed an opportunity to “more clearly assert a [fraud] claim

that has been the basis of their pleadings since the day this action was filed.” Appellants wanted to

submit a fifth amended petition to include a claim for fraud on the basis that appellees had made

misrepresentations to the tenants about the condition of the property, whereas their previous

pleadings had focused on the alleged misrepresentations made to the TDHCA and the FDIC.

Following BFY’s opposition to this motion, the trial court refused to allow appellants leave to file

        5
           BFY asserts that the trial court’s order on the first summary judgment motion dismissed
all three claims that were addressed in its first motion because appellants conceded at the hearing
that the only remaining claim of the three was the breach of implied warranty of habitability claim.
The trial court later clarified, in issuing its final judgment disposing of all claims, that the breach of
fiduciary duty and unjust enrichment claims had not been disposed of by the first order. In any event,
the outcome of this appeal is not affected by whether these two claims were disposed of by the first
summary judgment or by the final judgment.
        6
        See E.R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961);
United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965).

                                                    7
a fifth amended petition. The trial court then issued a final, take-nothing judgment against appellants

on all of their claims.7

                Appellants now urge this Court to reverse the trial court’s final judgment on the

grounds (1) that the summary judgment was inappropriate because they have standing as third-party

beneficiaries8 and (2) that their motion for leave to file a fifth amended petition should have been

granted and the new fraud claim contained within their proposed fifth amended petition should not

have been dismissed.

                                            ANALYSIS

Summary Judgment Based on Lack of Standing

                A movant for summary judgment pursuant to Rule 166a(c) carries the burden to show

that no genuine issue of material fact remains and that it is entitled to summary judgment as a matter

of law. Tex. R. Civ. P. 166(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985).

In reviewing the summary judgment, we view the evidence in a light most favorable to the

nonmovant and determine whether the movant either disproved at least one element of each of the

nonmovant’s theories of recovery or pled and conclusively established each element of its own

        7
           Although the trial court had already resolved two summary judgment motions against
appellants that collectively addressed each claim raised by appellants, the court subsequently issued
a final take-nothing judgment to clarify that all of appellants’ claims were dismissed, given the
dispute addressed in footnote five about whether the first summary judgment had disposed of one
claim or three claims.
        8
          Appellants additionally challenge the summary judgment by claiming that they stated
viable claims against the appellees and that the appellees are not entitled to immunity under the
Noerr-Pennington doctrine—the alternative grounds on which appellees sought summary judgment.
We do not reach these issues.

                                                  8
affirmative defense. Western Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005); Shah v. Moss,

67 S.W.3d 836, 842 (Tex. 2001). When a trial court grants summary judgment without specifying

the ground for its decision, summary judgment will be affirmed on appeal if “any of the theories

advanced are meritorious.” Urena,162 S.W.3d at 550.

                BFY and Embrey asserted three alternative grounds for summary judgment. Because

the trial court did not specify the ground upon which it granted summary judgment, the judgment

must be upheld if we hold that any one of appellees’ three grounds is meritorious. See id. We begin

by considering the primary ground argued at the summary judgment stage: whether appellants had

standing. Appellants assert in their first issue that they have standing based on their status as third-

party beneficiaries under both federal statute (the AHDP) and the contractual agreement (the LURA).

                Whether a statute or a contract provides a specific cause of action or a right of

enforcement requires us to construe the statutory and contractual language as a matter of law. See

Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1979); Lane Bank Equip. Co. v. Smith S.

Equip., Inc., 10 S.W.3d 308, 321 (Tex. 2000) (Hecht, J., concurring). This Court’s objective in

construing written language, whether it be that of a statute or contract, “is to give effect to the intent

expressed in that language by the person or persons who wrote it or who agreed to be bound by it.

. . . When we construe a statute, we say what the Legislature intended by the words it chose. When

we construe a contract or deed, we say what the parties intended by the language they agreed to.”

Lane Bank Equip. Co., 10 S.W.3d at 321 (citing City of LaPorte v. Barfield, 898 S.W.2d 288, 292

(Tex. 1995) (statutory construction), and Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.

                                                    9
1994) (contract interpretation)). Consequently, our analysis must begin with the actual language

of the statute and contract. Touche Ross, 442 U.S. at 568; Lane Bank Equip. Co., 10 S.W.3d at 321.

               No one disputes that both the AHDP and the LURA provide express rights to low-

income tenants, including appellants, to enforce the low-income housing restrictions contained

within the statute and the contract. Section (c)(11)(B) of the AHDP states: “The lower-income

occupancy requirements applicable under paragraphs (2), (3), (12)(C), (13)(B), and (14)(C) shall be

judicially enforceable against purchasers of property under this subsection or their successors in

interest by affected very low- and lower-income families. . . .” 12 U.S.C. § 1441a(c)(11)(B).

Section 6.2 of the LURA states that “[t]he occupancy requirements set forth in Section 2.2 of this

Agreement also shall inure to, and may be judicially enforced against Owner by affected Lower-

Income Families and Very-Low Income Families.”

               The issue is whether appellants’ right to enforce these enumerated provisions provides

them with a cause of action against BFY and Embrey, the property owners and proposed purchaser

of the property, for allegedly misrepresenting to the TDHCA and the FDIC that, pursuant to the

LURA’s term provision, the restrictions should be discontinued based on the dilapidated and

irreparable condition of the property.

               Each of the specifically enforceable provisions of the AHDP—provisions (2), (3),

(12)(C), (13)(B), and (14)(C)—involve low-income occupancy requirements, but none of them

govern the time period for which the requirements must be satisfied or the events that would cause

such a term to expire. See id. §§ 1441a(c)(2), (3), (12)(C), (13)(B), (14)(C). The closest any of these

provisions comes to governing the term of the restrictions is section (3)(E), which states that 35%

                                                  10
of all units “shall be made available for occupancy by and maintained as affordable for lower-income

and very low-income families during the remaining useful life of the property.”                See id.

§ 1441a(c)(3)(E).

               The specifically enforceable provision of the LURA—section 2.2—similarly pertains

to the number of units that must be reserved for low-income tenants, requiring the property owner

to “make continuously available for occupancy by Lower-Income Families . . . not less than 40 Units,

of which not less than 23 Units shall be made available for occupancy by Very Low Income

Families.” Unlike the AHDP, however, the LURA expressly states that these requirements are to

be satisfied “[d]uring the Term” and specifies that the Term shall continue for forty years unless one

of four designated events occurs and causes it to expire sooner.

               Appellants argue—based on the language that the housing restrictions shall be

effective “during the remaining useful life” in section (3)(E) of the AHDP and “during the Term”

in section 2.2 of the LURA—that their right to enforce the term provisions is “expressly integrated”

into their right to enforce the occupancy requirements. Accordingly, they assert that they have

standing as third-party beneficiaries of both the statute and the contract to collect damages from BFY

and Embrey for causing the Term to expire prematurely by misrepresenting the condition of the

property to the TDHCA and the FDIC. We are not persuaded by appellants’ argument.

               We apply a “strict rule of construction” to statutory enforcement schemes and imply

causes of action only when the drafters’ intent is clearly expressed from the language as written.

Brown v. Arturo de la Cruz, 156 S.W.3d 560, 567 (Tex. 2004). When a statute explicitly provides

certain rights of enforcement, but is silent as to the right sought to be enforced, we may presume that

                                                  11
the Legislature intended for that right to not be included. Touche Ross, 442 U.S. at 571-72

(“implying a private right of action on the basis of congressional silence is a hazardous enterprise,

at best”); see also Old Am. County Mutal Fire Ins. Co. v. Sanchez, 149 S.W.3d 111, 115 (Tex. 2004)

(“because we presume every word of a statute has been included or excluded for a reason, we will

not insert requirements that are not provided by law”). Furthermore, a right of enforcement should

not be implied simply because the statute “fails to adequately protect intended beneficiaries.”

Brown, 156 S.W.3d at 567. The fact that a person has suffered harm from the violation of a statute

does not automatically give rise to a private cause of action in favor of that person. Cannon v.

University of Chicago, 441 U.S. 677, 688 (1979).

               The law similarly disfavors implying third-party rights of enforcement in the

contractual context: a third-party who suffers harm as the result of a contracting party’s breach does

not necessarily have a right to collect damages for that breach. See Stine v. Stewart, 80 S.W.3d 586,

589 (Tex. 2002). “A third-party may recover on a contract only if the contracting parties intended

to secure a benefit to that third-party, and only if the contracting parties entered into the contract

directly for the third party’s benefit.” Id. (citing MCI Telecomms. Corp. v. Texas Util. Elec. Co., 995
S.W.2d 647, 651 (Tex. 1999)). A court will not create a third-party beneficiary contract by

implication. Ortega v. City Nat’l Bank, 97 S.W.3d 765, 773 (Tex. App.—Corpus Christi 2003, no

pet.). Rather, an agreement must clearly and fully express an intent to confer a direct benefit to the

third-party. Id.

               Both the AHDP and the LURA expressly define which provisions of the statute and

the contract that low-income tenants are entitled to enforce. By granting some specific rights of

                                                  12
enforcement regarding the low-income housing restrictions, Congress and the contracting parties

demonstrated that, when they intended appellants to have certain rights of enforcement, they

understood how to provide them. See Touche Ross, 442 U.S. at 572. Nevertheless, neither the

statute nor the contract provide appellants either a blanket right of enforcement or the express cause

of action asserted here. Because Congress and the contracting parties granted certain rights of

enforcement, yet remained silent on whether low-income tenants may collect damages from the

property owner or proposed purchaser for inducing a premature expiration of the Term, we conclude

that neither the statute nor the contract expresses a clear intent to provide appellants with this cause

of action. Consequently, we decline to imply such a right of enforcement into either the statute or

the contract. See Touche Ross, 442 U.S. at 571-72; Ortega, 97 S.W.3d at 775-76.

               We acknowledge that the AHDP and the LURA mandate that the housing restrictions

shall remain effective “during the useful life” and “during the Term,” respectively. Yet, this alone

does not provide appellants with a right to enforce the term provisions. The right to sue a property

owner based on its failure to make available the required number of low-income units is not identical

to or inclusive of the right to hold the owner or proposed purchaser liable for misrepresenting to a

government agency that the housing restrictions should be released because the property is

dilapidated and irreparable. See Akinseye v. Bigos, 75 F. Supp. 2d 976, 979-80 (D. Minn. 1998)

(reaching similar conclusion that low-income tenants’ right to enforce AHDP housing restrictions

did not incorporate right to enforce rent limitations, despite fact that occupancy requirements

mandated units be “maintained as affordable,” because rent limitations were not expressly included

in list of provisions expressly enforceable by third-party beneficiaries).

                                                  13
                Furthermore, even if the statute or contract entitled low-income tenants to enforce the

term provisions, BFY and Embrey were not the ultimate decision-makers responsible for

determining that the Term had expired. That was the duty of the relevant government agencies, the

TDHCA and the FDIC (as predecessor to the RTC). The LURA specified that the Term would

expire if “the RTC or the Agency determines . . . (i) that all or a portion of the Property is obsolete

as to physical condition . . . making it unusable for housing purposes, and (ii) that no reasonable

program of modifications is financially feasible to return the Property or a portion of the Property

to useful life.” (Emphasis added.) Additionally, the 1998 FDIC Affordable Housing Program

Compliance Manual stated, “[u]pon request from the property owner, monitoring agencies may

approve a release from the LURA when one of the conditions discussed [in the LURA term

provision] is documented. Upon recommendation by the Agency, the FDIC will execute the release.

. . . If a monitoring agency is satisfied that one of these conditions is present, release from the LURA

may be authorized by the FDIC and given to the owner.” (Emphasis added.)

                Here, this exact procedure was followed. First, the property owners (BFY) and the

proposed purchaser (Embrey) requested that the monitoring agency (the TDHCA) release the LURA

because the property was physically obsolete and financially infeasible to repair. BFY and Embrey

provided documentation—an independently prepared inspection report and redevelopment

proposal—to support their claims about the condition of the property. The TDHCA conducted its

own inspection of the property, verified the property’s dilapidated and irreparable condition, and

recommended to the FDIC that the LURA be released. Based on the TDHCA’s recommendation,

the FDIC then authorized the release of the LURA.

                                                  14
                Neither the AHDP nor the LURA create an express or implied cause of action that

would entitle appellants to collect damages from BFY or Embrey for misrepresenting the condition

of the property to the state and federal agencies. Thus, appellants lack standing to sue appellees in

this case, and their first issue is overruled.

                Because the trial court did not specify its grounds for granting BFY’s and Embrey’s

summary judgment motion, and because the lack of standing was an appropriate ground on which

to grant summary judgment, we do not reach appellants’ second and third issues challenging the two

alternative grounds asserted for summary judgment. See Urena,162 S.W.3d at 550.

Motion for Leave to Amend and Dismissal of Fraud Claim

                After the trial court granted the second summary judgment in favor of BFY and

Embrey, appellants sought leave to file a fifth amended petition in order to clarify their pleadings on

fraud. In their four previous petitions, appellants had focused their fraud claims on the alleged

misrepresentations that BFY and Embrey made about the condition of the property to the TDHCA

and the FDIC in order to induce the release of the LURA. In their proposed fifth amended petition,

which was attached to their motion for leave, appellants asserted that BFY and Embrey committed

fraud by misrepresenting the condition of the property to the tenants in order to continue collecting

rent after determining that the property was unsuitable for habitation. BFY opposed the motion for

leave to amend. Thereafter, the trial court denied appellant’s motion and issued a final judgment

against appellants on all claims.

                In appellants’ fourth and fifth issues, they assert that the trial court erred by refusing

to grant them leave to amend their petition and by dismissing the fraud claim included in their fifth

                                                   15
amended petition. However, because the trial court refused to consider their fifth amended petition,

the court did not actually “dismiss” the new fraud claim contained within that pleading. Hence,

appellants’ fifth issue is overruled and the only remaining issue is whether the trial court erred in

denying appellants’ motion for leave to amend.

                We review a trial court’s denial of leave to amend for an abuse of discretion. Tex-Air

Helicopters, Inc. v. Galveston County Appraisal Review Bd., 76 S.W.3d 575, 581 (Tex.

App.—Houston [14th Dist.] 2002, pet. denied). Pursuant to Texas Rule of Civil Procedure 63, a

party is entitled to amend its petition “within seven days of the date of trial or thereafter, . . . unless

there is a showing that such filing will operate as a surprise to the opposing party.” Tex. R. Civ. P.

63. A summary judgment proceeding is a trial within the meaning of Rule 63. Goswami v.

Metropolitan Sav. & Loan Assoc., 751 S.W.2d 487, 490 (Tex. 1988). “[T]he trial court may

conclude that the amendment is on its face calculated to surprise or that the amendment would

reshape the cause of action, prejudicing the opposing party and unnecessarily delaying the trial.”

Greenhalgh v. Service Lloyds Ins. Co., 787 S.W.2d 938, 940 (Tex. 1990); Hardin v. Hardin, 597
S.W.2d 347, 349 (Tex. 1980).

                Appellants claim that, because no trial date was set at the time they filed their motion,

they were not within the seven-day window and, therefore, should have been permitted to amend

their pleadings. In making this argument, however, appellants ignore that a summary judgment

proceeding is considered a trial for Rule 63 purposes. Goswami, 751 S.W.2d at 490. Appellants’

motion for leave was not filed until after two separate summary judgments had been entered against

them, including one that dismissed their related fraud claims. In denying their motion for leave, the

                                                    16
court stated that it believed the issues proposed in appellants’ fifth amended petition had been

disposed of by its prior rulings.      See Mitchell v. Laflamme, 60 S.W.3d 123, 132 (Tex.

App.—Houston [14th Dist.] 2000, no pet.) (trial court should deny motion for leave to amend if it

has already rendered judgment).

               Appellants admit that they had been aware of the facts to support their new fraud

claim—regarding the misrepresentations made by BFY and Embrey to the tenants—since the

beginning of the lawsuit. In fact, they stated in their motion that the new claim “relies on the same

facts as were the basis for the implied warranty of habitability claim,” upon which summary

judgment had already been granted, and that the claim “has been the basis of their pleadings since

the day this action was filed.” Yet, in the two and a half years that their suit was pending, during

which appellants filed four amended petitions, they never asserted this fraud claim. See Sosa v.

Corpus Christi, 739 S.W.2d 397, 400 (Tex. App.—Corpus Christi 1987, no writ) (in context of trial

amendment, court should deny leave to amend if “new matter was known or could have been known

through the exercise of due diligence . . . at a time [that] would have enabled [claimant] to include

the claim in his formal pleadings.”)

               Because appellants failed to seek leave until after two summary judgment proceedings

had been completed, and because they had been aware of the necessary facts to support their

amended claim for over two years, the trial court correctly denied their motion. Upon appellees’

objections to appellants’ attempt to amend their pleadings at this late stage, it was not an abuse of

discretion for the trial court to determine that, on its face, the amendment was calculated to cause

                                                 17
surprise or that it would unfairly prejudice BFY and Embrey and cause unnecessary delay. See

Greenhalgh, 787 S.W.2d at 940. Appellants’ fourth issue is overruled.

                                          CONCLUSION

               Summary judgment was properly granted in favor of BFY and Embrey because

appellants do not have standing as third-party beneficiaries to either the federal statute or the

agreement entered pursuant to that statute’s requirements. It was also proper for the trial court to

deny appellants’ motion for leave to amend their petition a fifth time and to refuse to consider the

new claim asserted in the proposed fifth amended petition. Having overruled appellants’ issues, we

affirm the final judgment of the trial court.

                                                W. Kenneth Law, Chief Justice

Before Chief Justice Law, Justices B. A. Smith and Pemberton

Affirmed

Filed: December 8, 2005

                                                  18