Court Opinion

ID: 9908583
Source: CourtListenerOpinion
Date Created: 2023-12-10 08:10:33.700003+00
Date Added: 2024-06-11T12:49:16.079008
License: Public Domain

Affirmed and Memorandum Opinion filed December 5, 2023

                                        In The

                     Fourteenth Court of Appeals

                                NO. 14-22-00774-CV

BLUE SKY SATELLITE SALES & THEATER SERVICES, LLC, Appellant

                                          V.
                              K18TH, LLC, Appellee

                    On Appeal from the 146th District Court
                              Bell County, Texas
                       Trial Court Cause No. 313 015-B

                           MEMORANDUM OPINION

      Appellant Blue Sky Satellite Sales & Theater Services, LLC (Blue Sky)
appeals the trial court’s grant of traditional summary judgment in favor of appellee
K18th, LLC (K18).1 In four issues appellant contends that the trial court erred.
We affirm.

      1
        The Third Court of Appeals transferred this case to this court pursuant to Texas
Supreme Court Transfer Order, Misc. Docket No. 22-9083. See Tex. Gov’t Code § 73.001(a).
                                            BACKGROUND

       Blue Sky and Killeen 18th St. LLC (Killeen) entered into an agreement
entitled “Right of Entry” (ROE) granting Blue Sky the right to “market, offer, sell
and distribute broadband internet, television and video programing services to the
residents of Patriot Landing Apartments.” The ROE’s initial term was ten years.
Approximately five years into the ROE’s initial term, K18 bought the property
from Killeen.2 After K18 purchased the property, a dispute arose between Blue
Sky and K18 regarding whether K18 was bound under the terms of the ROE. Blue
Sky filed suit against K18 for breach of contract.3

       K18 filed a traditional motion for summary judgment arguing that: (1) K18
was not a party to the ROE; (2) K18 never assumed the contract; and (3) Blue Sky
could not prove which version of the ROE is enforceable. K18 argued that under
section 7.10 of the ROE a written assumption is required to be enforceable.
Section 7.10 provides:

       If the Owner sells, conveys, or transfers the Property, the sale,
       conveyance of transfer will be made subject to this Agreement, and
       Owner will have no liability for any obligations arising under this
       Agreement after any sale, conveyance or transfer if (a) proper notice
       is delivered to all parties involved in the transfer or assignment as set
       forth in this Section 7.10 and (b) the transferee assumes this
       Agreement in writing.

K18 argued that because neither notice nor written assumption exists that K18 did
not assume the agreement. K18 attached the affidavit of its managing partner
attesting that no such writing exists. K18 further pointed to the testimony of Blue
Sky’s President and CEO admitting that no such writing exists.
       2
           Killeen is not a party to this appeal.
       3
         Blue Sky also brought claims for tortious interference against K18 and a third party.
Those claims have been resolved and are not at issue on appeal.

                                                    2
       In its response to K18’s summary judgment motion, Blue Sky argued that
K18 was aware of the ROE when it purchased the property, that Blue Sky and K18
had multiple conversations about the ROE both before and after K18 purchased the
property, that K18 continued to advertise and promote the services of Blue Sky,
and that Blue Sky continued to offer services pursuant to the ROE after K18
purchased the property. Blue Sky also contended that K18 was the successor of
the prior owner. Blue Sky attached to its response the ROE and the affidavit of its
president, Brandon Swenson. Swenson testified that before, during, and after the
sale of the property, Blue Sky serviced and provided new installations pursuant to
the ROE and that K18 continued to advertise Blue Sky’s services. Blue Sky
argued that it “has shown the existence of genuine issues of material fact with
regard to the existence of the [ROE], notice requirements of the [ROE], Right to
Cure issue, Assignment and assumption by [K18] of each of the elements.” Blue
Sky argued that K18 assumed the ROE “by receiving notice of the existence of the
[ROE] via due diligence and delivery of the [ROE] from [Blue Sky’s] president . .
., the seller and others.”

       The trial court granted K18’s motion for summary judgment without stating
the reasons therein.4 Blue Sky filed a motion for new trial and a motion to modify
the judgment that the trial court denied.

                                   STANDARD OF REVIEW

       We review a summary judgment de novo. Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). The movant bears
the burden of proof to show that no genuine issue of material fact exists and it is

       4
         The trial court rendered judgment granting K18’s dismissal of its counterclaims without
prejudice and expressly stated that the judgment “disposes of all parties and claims and is a final
and appealable judgment.”

                                                3
entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). We view the
evidence in the light most favorable to the nonmovant, crediting evidence
favorable to that party if reasonable jurors could and disregarding contrary
evidence unless reasonable jurors could not. Fielding, 289 S.W.3d at 848. “Issues
not expressly presented to the trial court by written motion, answer or other
response shall not be considered on appeal as grounds for reversal” of summary
judgment. Tex. R. Civ. P. 166a(c). “This Court has ‘often held that a party
sufficiently preserves an issue for review by arguing the issue’s substance, even if
the party does not call the issue by name.’” Li v. Pemberton Park Cmty. Ass’n, 631
S.W.3d 701 (Tex. 2021) (quoting St. John Missionary Baptist Church v. Flakes,
595 S.W.3d 211, 214 (Tex. 2020)); see also Scripps NP Operating, LLC v. Carter,
573 S.W.3d 781 at 791 (Tex. 2019) (“Although the newspaper did not label the
statements as ‘accurate reporting of allegations,’ it nevertheless presented the issue
to the trial court.”).

                              PRIVITY OF CONTRACT

       In its first issue, Blue Sky contends the trial court erred in granting K18’s
summary judgment motion on the ground that there is no privity of contract
because it is a “capacity defense” that was not pleaded. In its second issue, Blue
Sky argues that privity of contract was not a ground raised in K18’s motion for
summary judgment. K18 argues that it raised the privity of contract issue in the
motion and that Blue Sky waived any argument regarding a lack of pleading by
failing to object.

A.     General Legal Principles

       “In a breach of contract action, the plaintiff has the burden to prove that the
defendant has obligated himself under the contract; the defendant’s denial of this
element does not constitute an affirmative defense under Rule 92.”           Miles v.
                                          4
Plumbing Servs. of Hou., Inc., 668 S.W.2d 509, 512 (Tex. App.—Houston [14th
Dist.] 1984, writ. ref’d n.r.e.) (noting Rule 93(2) refers to mistaken legal capacity);
see also Rodriguez v. USS of Tex., Inc., No. 12-06-00398-CV, 2007 WL 2949643,
at *3 (Tex. App.—Tyler Oct. 11, 2007, no pet.) (mem. op.) (same); see also Basic
Cap. Mgmt. v. Dynex Com., Inc., 348 S.W.3d 894, 899 (Tex. 2011). “Privity is an
essential element for recovery in any action based on contract; a breach of contract
action normally requires privity between the injured party and the party sought to
be held liable.” Sanders v. Total Heat & Air, Inc., 248 S.W.3d 907, 912–13 (Tex.
App.—Dallas 2008, no pet.).

B.    Analysis

      Blue Sky argues that K18 waived its argument that it is not a party to the
contract by failing to plead it as an affirmative defense. Blue Sky also contends
that “privity of contract” is not mentioned in K18’s motion for summary judgment
and cannot be a basis for the trial court’s judgment.     Pleading error is waived if
not raised in the trial court prior to judgment. Godoy v. Wells Fargo Bank, N.A.,
575 S.W.3d 531, 537 (Tex. 2019) (raising pleading deficiency for the first time in
motion for new trial is too late). Blue Sky did not object to the lack of pleading in
in its response to K18’s motion for summary judgment. Blue Sky first raised the
issue in its motion for new trial. As a result, Blue Sky waived any complaint
regarding K18’s lack of pleading. See id.

      Addressing Blue Sky’s second issue, where the substance of the issue is
addressed in the motion for summary judgment, it may be properly asserted on
appeal. See Basic Cap. Mgmt., 348 S.W.3d at 899 (“Regardless of whether the
issue is properly denominated standing . . . or as capacity, . . . the substance of
Dynex’s assertion—that ART and TCI cannot recover for Dynex’s breaches of its
agreement because they were not parties to the agreements—was addressed in

                                          5
cross-motions for summary judgment.”). In its motion for summary judgment K18
argued that it was “not a party” to the ROE and that it is “fundamental that a
contract is not binding on a nonparty.” Blue Sky responded arguing that K18
“knew of the existence of the [ROE] between Blue Sky and the apartment
community prior to [k18’s] purchase of the property in question” so Blue Sky was
not unfairly surprised. See Li, 631 S.W.3d at 705 (“Indeed, the record indicates
that the Association was under no misimpression as to the substance of Li’s
argument.”). Further, there does not appear to be any disagreement that K18 did
not sign the ROE. Instead, Blue Sky’s contention is that K18 assumed the ROE
and is, therefore, liable for breach. Aside from signing the ROE as a party, another
way K18 may become “obligated under the contract” is through assignment. This
issue is raised by Blue Sky in their fourth issue on appeal and is addressed below.

      We conclude that even if K18 was obligated to plead “privity of contract” as
a defense, Blue Sky failed to object to the lack of pleading in its response and the
issue is not preserved on appeal. We overrule Blue Sky’s first issue on appeal.
Because we conclude K18 raised a “privity of contract” argument in its motion for
summary judgment, we overrule Blue Sky’s second issue.

                                   ASSUMPTION

      In its fourth issue, Blue Sky contends that the trial court erred in granting
summary judgment because Blue Sky raised a fact issue on whether K18 assumed
the ROE. Blue Sky argues that there was a “significant course of dealings”
between Blue Sky and K18 sufficient to raise a fact issue on whether K18 assumed
the ROE.    Appellee contends that because there is no written assumption as
provided in the contract, K18 did not assume the contract.

                                         6
A.    General Legal Principles

      “Generally, the assignor of a contract remains liable for the obligations he
originally assumed, even after the contract is assigned.” NextEra Retail of Tex., LP
v. Inv’rs Warranty of Am., Inc., 418 S.W.3d 222, 226 (Tex. App.—Houston [1st
Dist.] 2013, pet. denied). “An assignee is not liable under another party’s contract
without an express or implied assumption of the contract’s obligations.” Wagner
v. Apache Corp., 627 S.W.3d 277, 286 (Tex. 2021) (citing Jones v. Cooper Indus.
Inc., 938 S.W.2d 118, 124 (Tex. App.—Houston [14th Dist.] 1996, writ denied));
see also NextEra Retail of Tex., LP, 418 S.W.3d at 226. To expressly assume a
contract “there must be promissory words or words of assumption on behalf of the
assignee.” Id.; see also Jones, 938 S.W.2d at 124. “The mere acceptance of an
assignment does not create liability against the accepting party.”      Jones, 938
S.W.2d at 126.

      “Implied covenants are not favored, and courts will not lightly imply
additional covenants enlarging the terms of a contract.” Id. at 124. “Implied
covenants can be found (1) when the term was so clearly within the contemplation
of the parties that they deemed it unnecessary to express it or (2) on equitable
grounds.” NextEra Retail of Tex., 418 S.W.3d at 227–28. “An implied assumption
of obligations may arise ‘when the benefit received by the assignee is so entwined
with the burden imposed by the assignor’s contract that the assignee is estopped
from denying assumption and the assignee would otherwise be unjustly enriched.”
Id. at 228.

B.    Analysis

      It is undisputed that K18 was not a party to any contract with Blue Sky.
Instead, Blue Sky argues that K18 is liable because K18 assumed the contract
through its course of dealings with Blue Sky, by using Blue Sky’s services, and
                                         7
because K18 had knowledge of the contract prior to its purchase of the property
from Killeen. However, mere knowledge of the terms of a contract between Blue
Sky and Killeen is not enough to imply the terms and obligations to K18. See
Jones, 938 S.W.2d at 124; NextEra Retail of Tex., 418 S.W.3d at 124.

      Blue Sky did not provide any evidence that K18 expressly assumed the
contract through actual promissory words, or words of assumption, on the part of
K18. See Jones, 938 S.W.2d at 124. Blue Sky argues that the facts of this case are
like those in Castle Hills Pharmacy, LLC v. Trial, No. 14-13-00172-CV, 2014 WL
3587382 (Tex. App.—Houston [14th Dist.] July 22, 2014, pet. denied) (mem. op.).
We disagree. In Castle Hills Pharmacy, a third party purchased a business subject
to an electricity service contract for a term. Id. at *1. In the contract for sale, the
third party agreed to assume all service agreements and contracts in place. Id.
After a bench trial, the trial court rendered a judgment against the third party for
breach of the electricity service contract. Id. at *2. Viewing the evidence in the
light most favorable to the judgment, this court concluded that the third party
agreed to expressly assume the service contract, had notice of the contract, and
operated under the contract. Id. at *4.

      Here, unlike in Castle Hills Pharmacy, Blue Sky has not provided any
evidence to show that K18 had any obligation to assume the obligations and
liability of the ROE under the contract for sale between K18 and Killeen. Instead,
Blue Sky points to the ROE and argues that because the ROE is assignable, that it
was assigned to K18. However, this does not fulfill the requirement that the
assignee, K18, through actual promissory words, or words of assumption,
expressly assume the contract. See Jones, 938 S.W.2d at 124. Further, mere
acceptance of an assignment does not create liability against the accepting party.
See id.; NextEra Retail of Tex., 418 S.W.3d at 226. As a result, even if the contract

                                          8
for sale assigned the ROE to K18, because there is no evidence that K18 expressly
assumed the obligations under the ROE, there is no express assumption.5

        We conclude this case is more akin to NextEra Retail of Texas, LP v.
Investors Warranty of America, Inc.              In NextEra, another case involving an
electricity contract for a term, the electricity provider argued that the third party
expressly assumed the contract though an assignment contained in the deed and
impliedly assumed the obligations of the service contract because the third party
accepted the benefits of the contract for nine months. 418 S.W.3d at 226–27.
However, the court concluded that even though a deed included language of
acceptance of the assignment of contractual interests of the seller, because there
were no “actual promissory words, or words of assumption, on the part of the
assignee” the assignee had not expressly assumed the obligations under the
contract. Id. at 226. Noting that implied covenants are not favored, and although
the third party obtained the benefit of lower electricity rates, the court concluded
the assignee was not unjustly enriched so as to imply an assumption of the
agreement. Id. at 228. The court affirmed the summary judgment against the
electricity provider. Id. at 229.

       Here, Blue Sky presented evidence that after the sale it “serviced and
provided new installations” and K18 continued to advertise and promote the
services on the property for a period of approximately four months. Blue Sky also
presented the evidence of the unpaid invoices, though it is undisputed that K18
never paid any of Blue Sky’s invoices.6 However, like in NextEra, while Blue Sky

       5
          While Blue Sky raises this argument as part of its issue four, we note that Blue Sky did
not raise this argument as a basis for defeating summary judgment in its response.
       6
        For some period after the sale of the property the prior owner continued to pay the Blue
Sky invoices.

                                                9
may have obtained the benefit of lower television provider rates, it was not so
unjustly enriched so as to imply an assumption of the ROE. See id. at 226–29; see
also Creative Artists Agency, LLC v. Las Palmas Race Park, LLC, No. 13-14-
00015-CV, 2015 WL 6652655, at *6 (Tex. App.—Corpus Christi-Edinburg Oct.
29, 2015, no pet.)(mem. op.) (“[I]t is not enough for appellants to show that Las
Palmas performed some of Ramirez’s contractual obligations to establish that
appellants have conclusively proven that Las Palmas assumed the terms of the
Agreement.”). Further, Blue Sky has not shown that the benefit received is so
entwined with the burden imposed that the assignee is estopped from denying
assumption and would otherwise be unjustly enriched. See NextEra, 418 S.W.3d
at 228; Jones, 938 S.W.2d at 125 (where rights under the contract were not
destroyed by the transfer of interest and the original contracting party remained
liable, the “burdens” of the agreement could not be considered “inextricably
entwined with” the benefits so as to justify implying assumption on equitable
grounds).

      We overrule Blue Sky’s fourth issue.

                            RESTRICTIVE COVENANT

      In Blue Sky’s third issue it contends that the ROE is a covenant that runs
with the land and is, therefore, binding on K18 as a subsequent owner of the land.
Aside from citing the law regarding covenants running with the land, the whole of
Blue Sky’s argument is that “[i]n this case, the [ROE] touches and concerns the
property because it was the clear intent by Blue Sky and the property’s previous
owner to have that effect.” K18 argues that the ROE is a personal covenant and
does not run with the land. K18 argues that there is no “privity of estate between
Blue Sky and either the prior owner or [K18] . . . nor do the covenants touch and
concern the land.”

                                       10
A.    General Legal Principles

      “To burden lands with personal covenants would be to hamper and impede
real estate transactions to the detriment of owners, purchasers and agents.” Blasser
v. Cass, 314 S.W.2d 807, 809 (Tex. 1958). “Parties to a covenant restricting the
use of land may always enforce it among themselves under general contract
principles.”   Reagan Nat’l Advert. of Austin, Inc. v. Cap. Outdoors, Inc., 96
S.W.3d 490, 495 (Tex. App.—Austin 2002, pet. granted, judgm’t vacated w.r.m.).
“The same is not true of their successors in title.” Id. A restrictive covenant can
bind a successor to the burdened land in two ways: as a covenant that runs with the
land at law or as an equitable servitude. Id.; see also Wasson Interests, Ltd. v.
Adams, 405 S.W.3d 971, 973 (Tex. App.—Tyler 2013, no pet.) (“In order for a
party to enforce a covenant burdening land against a successor to the party with
whom he covenanted, the covenant must run with the land.”).

      “For a covenant to run with the land, the covenant must be made between
parties who are in privity of estate at the time the covenant was made, and must be
contained in a grant of land or in a grant of some property interest in the land.”
Wasson Interests, Ltd., 405 S.W.3d at 973. “Privity of estate between covenanting
parties means a mutual or successive relationship exists to the same rights in
property.” Id. (citing Westland Oil Dev. Corp. v. Gulf Oil, 637 S.W.2d 903, 910–
11 (Tex. 1992)). When a contract is not part of a transaction conveying the land
involved, or any easement in it, between the parties, there is no privity of estate.
Id.

B.    Analysis

      The contract between Blue Sky and Killeen does not meet the requirements
necessary to make it a covenant running with the land enforceable at law so as to
bind Killeen’s successors in title. See Clear Lake Apartments, Inc. v. Clear Lake
                                        11
Utils. Co., 537 S.W.2d 48, 51 (Tex. App.—Houston [14th Dist.] 1976, modified
sub nom. Clear Lake City Water Auth. v. Clear Lake Utils. Co., 549 S.W.2d 385
(Tex. 1977)). Blue Sky does not argue or point to how it and Killeen were in
privity of estate at the time the ROE was executed. See id. (“Such a covenant must
be made between parties who are in privity of estate at the time the covenant is
made, and must be contained in the grant of the land or in a grant of some property
interest in the land.”). Here, Blue Sky argues that the ROE “touches and concerns”
the land because that was “clearly” the intent of the parties. However, Blue Sky
does not indicate where in the ROE such an intention is manifested and does not
argue how specifically the ROE touches and concerns the land. See URI, Inc. v.
Kleberg Cnty., 543 S.W.3d 755, 764–65 (Tex. 2018) (“[N]o issue regarding the
parties’ intentions is raised unless the [contract] is ambiguous––and evidence of
those intentions cannot be used to create an ambiguity.” (quoting Nat’l Union Fire
Ins. of Pittsburgh v. CBI Indus., Inc., 907 S.W.2d 517, 521 n.5 (Tex. 1995)));
Hamblin v. Lamont, 433 S.W.3d 51, 54 (Tex. App.—San Antonio 2013, pet.
denied) (“Principles of contract law require courts to ascertain and give effect to
the intentions of the parties as expressed within the four corners of the
agreement.”).

      The ROE was not made in a grant of land or an easement on the land and
Blue Sky does not point to any provision within the ROE to support its argument
that it “touches and concerns” the land. See Hamblin, 433 S.W.3d at 54. Further,
Blue Sky has not pointed us to any analogous case that concludes that a contract
for television services for a term has been held to be a covenant running with the
land. See Clear Lake City Water Auth. v. Clear Lake Utils. Co., 549 S.W.2d 385
(Tex. 1977) (upholding appellate court’s conclusion that contract did not meet
technical requirements to run with the land nor an equitable servitude when “[a]t

                                        12
most NCL’s promise limited NCL’s freedom to contract with other suppliers of
water and sewer service.         Such a limitation affects the use of land only
collaterally”); Wayne Harwell Props. v. Pan Am. Logistics Ctr., Inc., 945 S.W.2d
216, 218 (Tex. App.—San Antonio 1997, writ denied) (“[A]n interest in the cash
flow from a piece of land is not so closely linked to the land itself that it constitutes
an interest in the land and so satisfies the privity of estate requirement. . . . they are
merely personal covenants.”).

      We overrule Blue Sky’s fourth issue.

                                     CONCLUSION

      Having overruled each of Blue Sky’s issues on appeal, we affirm the
judgment of the trial court.

                                                /s/ Ken Wise
                                                    Justice

Panel consists of Justices Wise, Bourliot, and Spain.

                                           13