Court Opinion

ID: 3216721
Source: CourtListenerOpinion
Date Created: 2016-06-24 03:27:31.686231+00
Date Added: 2024-06-11T12:42:51.234094
License: Public Domain

Affirmed and Majority and Dissenting Opinions filed June 23, 2016.

                                      In The

                    Fourteenth Court of Appeals

                              NO. 14-14-00345-CV

 ALBERT LUJAN D/B/A TEXAS WHOLESALE FLOWER CO., Appellant
                                        V.
   NAVISTAR, INC., NAVISTAR INTERNATIONAL CORPORATION,
      NAVISTAR INTERNATIONAL TRANSPORTATION CORP.,
    INTERNATIONAL TRUCK AND ENGINE CORPORATION AND
            SANTEX TRUCK CENTERS, LTD., Appellees

                   On Appeal from the 129th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2009-77458

                     MAJORITY                OPINION

      A purchaser of trucks for use in a wholesale flower business appeals the trial
court’s grant of two summary judgments in favor of the truck manufacturer and
related parties, holding that the purchaser’s claims were barred by the trucks’
limited warranties and that the purchaser lacked standing to sue after transferring
the business’s assets to a wholly owned corporation. We affirm.
                       FACTUAL AND PROCEDURAL BACKGROUND

       Appellant Albert Lujan has been in the wholesale flower business since
about 1988. In 2005, Lujan purchased two wholesale flower businesses operated
from a single location in San Antonio. Doing business as Texas Wholesale Flower
Company, Lujan sold and delivered perishable floral products and floral hard
goods throughout central and south Texas. Because the delivery trucks that came
with the businesses were old and past their useful life, Lujan purchased five CF600
trucks manufactured by Navistar, Inc. (Navistar) to replace the existing fleet. Lujan
financed and purchased the trucks through Santex Truck Centers, Ltd. (Santex) and
took delivery of the vehicles on December 17, 2005.

       In June 2006, Lujan decided to incorporate his business, forming Texas
Wholesale Flower Co., Inc. (the Corporation). The Corporation’s federal income
tax return for that year reflected that Lujan made a “section 351” election in which
he transferred the assets of his business to the Corporation in a tax-free exchange,
after which Lujan retained 100% of the Corporation’s stock.1 The transferred assets
included the five CF600 trucks. The Corporation’s income tax returns for both
2006 and 2007 represented that the trucks were corporate assets. On March 28,
2008, however, the Texas Secretary of State declared the Corporation’s charter or
certificate forfeited.

       In December 2009, Lujan sued Navistar, Santex, and other entities in his
individual capacity, doing business as Texas Wholesale Flower Company. For
convenience, we will refer to Navistar, Santex, and the other named defendants

       1
          See 26 U.S.C. § 351(a) (“No gain or loss shall be recognized if property is transferred to
a corporation by one or more persons solely in exchange for stock in such corporation and
immediately after the exchange such person or persons are in control … of the corporation.”);
see also Bongiovanni v. Comm’r, 470 F.2d 921, 924 (2d Cir. 1972) (characterizing § 351 as “a
relief provision to encourage tax-free business reorganizations”).

                                                 2
collectively as “the Navistar parties.”2 Lujan alleged that the five CF600 trucks he
purchased continually broke down while in service, causing Lujan to lose
customers and perishable products. Lujan asserted claims of breach of express and
implied warranties and sought damages of about $3.7 million. In later-amended
petitions, Lujan added allegations that in February 2008, a representative of the
Navistar parties advised Lujan that he must purchase different trucks at a higher
price, and that if Lujan did not comply, Navistar would cease to honor its warranty
obligations by the end of the month. According to Lujan, he incurred additional
debt to purchase the new trucks, rather than suffer injury to his business in the
event that the Navistar parties acted on their threat. Lujan alleged that the Navistar
parties imposed duress and business coercion that compelled him to submit
involuntarily to their demand.

       In late September 2013, the Navistar parties filed a “Motion for Summary
Judgment Pursuant to Rules 166a(b) and 166a(i).” The basis of the Navistar
parties’ motion was that Lujan’s warranty claims should be dismissed because his
warranty rights were disclaimed or, alternatively, that Lujan had no evidence to
prove his claims for breach of the alleged warranties.

       Within days of the Navistar parties’ summary judgment motion, the
Corporation filed an intervention, alleging that it was a Texas corporation and that
“[b]y section 351 election and transfer, [Lujan] is Intervenor’s sole shareholder.”
The Corporation adopted the allegations Lujan made in his individual capacity and
asserted that the Corporation and Lujan had suffered damages in excess of $15
million. The Corporation was represented by the same attorney who was
representing Lujan individually in his suit against the Navistar parties.
       2
          Lujan does not discuss the named defendants other than Navistar and Santex, and
Navistar’s counsel represents in its brief that on appeal it is representing only appellees Navistar,
Inc. and Santex Truck Centers, Ltd.

                                                 3
      At the time of the intervention, the case had been on file for nearly four
years and was a few weeks away from the scheduled trial date. The Navistar
parties moved to strike the intervention as untimely and argued that any claims by
the Corporation were barred by limitations.

      The Corporation filed a response to the Navistar parties’ motion to strike, in
which it represented that Lujan transferred all of his wholesale flower company’s
assets to the Corporation:

            On June 12, 2006, at his accountant’s recommendation, [Lujan]
      made an IRS Section 351 election transfer. Pursuant to the election,
      [Lujan] transferred all of the assets and liabilities of Texas Wholesale
      Flower Co. to Texas Wholesale Flower Co., Inc., in exchange for
      100% ownership of the stock.
The section 351 election was attached to the Corporation’s response as evidence of
Lujan’s transfer of his assets, and the Corporation affirmed that the document was
included in the Corporation’s 2006 federal income tax return. Later, the Navistar
parties would rely on this same document to support their summary judgment
motion on standing.

      At the hearing on the motion to strike, Lujan’s counsel, speaking on behalf
of the Corporation, explained that when the Navistar parties requested discovery
relating to Lujan’s damage model, he saw the Corporation’s tax returns and asked
Lujan about them. According to counsel, he accepted Lujan’s explanation that
Lujan never actually transferred legal title to the trucks and did not do anything
with the Corporation. Lujan’s counsel went on to explain that later, while reading
through the 2006 return, he found the section 351 transfer, which he characterized
as representing a transfer of all of the sole proprietorship’s assets “lock, stock and
barrel” and “broom and dustpan … absolutely everything is transferred over.”

      Counsel went on to explain that for “a third” of Texas Wholesale Flower

                                          4
Company’s existence it was a sole proprietorship, but that the “last two thirds of its
existence it was a corporate entity.” Counsel further explained that, because the
operation of the business did not change in any way, Lujan “never knew that its
essential nature had changed.” In response to an inquiry from the trial court,
however, counsel acknowledged that “on paper” the sole proprietorship and the
Corporation were separate entities.

       The trial court ultimately granted the Navistar parties’ motion to strike,
concluding that the Corporation’s attempted intervention amounted to a
“substantial change in the posture of the suit” that was inappropriate given the
length of time since the sale of the trucks had occurred and the years the case had
been on file. On appeal, Lujan does not challenge the trial court’s ruling on the
Corporation’s attempted intervention.

       Around the same time, Lujan individually filed a motion for leave to file a
fourth amended petition containing the same causes of action, but increasing the
damages sought to more than $15 million. The trial court denied Lujan’s motion
for leave after an oral hearing.3

       In December 2013, the Navistar parties filed a second motion for summary
judgment titled “Defendants’ Motion for Partial Summary Judgment Pursuant to
Rules 166a(b) and 166a(e).” In this motion, the Navistar parties argued that Lujan
individually could not assert a claim for damages because he had transferred his
business assets and liabilities to the Corporation, and therefore the Corporation
owned any claim for breach of warranties. The Navistar parties supported their
motion with four exhibits: (1) Lujan’s third amended petition; (2) a copy of the

       3
          In January of 2014, after the corporation’s intervention was denied and Navistar had
filed its second summary judgment motion on standing, Lujan sought leave to file a fifth
amended petition, which was also denied after an oral hearing shortly before the scheduled trial
date.

                                               5
Corporation’s certificate of formation, filed in the Office of the Texas Secretary of
State; (3) the section 351 election from the Corporation’s 2006 federal income tax
return showing the transfer of assets on June 12, 2006; and (4) the Secretary of
State’s declaration that the Corporation’s charter or certificate was forfeited on
March 28, 2008. A hearing on the Navistar parties’ motion was set for Monday,
January 27, 2014.

      In response to the Navistar parties’ contention that Lujan lacked standing to
sue because he had transferred his assets to the Corporation, Lujan filed a response
and supporting affidavit on January 18, in which Lujan averred in relevant part:

            1. At all times I did business as Texas Wholesale Flower
      Company. At no time have I transferred my assets and liabilities of
      Texas Whole Flower Company. I did not transfer ownership of my
      trucks nor my business to a corporation.
             ***
             2. Texas Wholesale Flower Co., Inc. … never carried debt
      obligations to American Express, Navistar Financial Corporation,
      Texstar Bank, National Plant & Floral, Ford Credit or any other
      creditor, … never acquired, owned, held title to nor operated motor
      vehicles, including the trucks made the basis of my lawsuit against
      Defendants, … [and] never conducted business.

Relying on this affidavit, Lujan argued that the Navistar parties’ allegation that he
transferred his assets and liabilities to a corporation at any time was false. Lujan
also argued that Texas law did not recognize the election as an instrument to effect
a transfer of assets and liabilities and that the document was not evidence of such a
transfer.

      On January 24, the Navistar parties filed a reply brief complaining that
Lujan’s response and affidavit represented a “complete contradiction” of the
written and oral representations made to the trial court during the Corporation’s
attempted intervention just a few months earlier, as well as the evidence Lujan had
                                         6
previously produced to the Navistar parties. The Navistar parties argued that
Lujan’s contradictory affidavit was a sham affidavit that failed to provide “any
explanation for this change.” Additionally, the Navistar parties maintained that
Lujan’s affidavit contained conclusory statements unsupported by any facts and
was made in bad faith.

      The Navistar parties’ reply included six exhibits: (1) a copy of the
Corporation’s response to the Navistar parties’ motion to strike the Corporation’s
intervention; (2) an email from Lujan’s law firm in response to the Navistar
parties’ request for discovery, with attachments consisting of taxpayer copies of
the Corporation’s 2006 Federal S Corporation Tax Return (including the section
351 election) and the Corporation’s 2007 Texas Franchise Tax Report, prepared
and sent to Lujan by his accountant; (3) an October 3, 2013 letter from the Navistar
parties’ counsel notifying Lujan that the Navistar parties were reserving their right
to use all documents produced by “all other parties at the time of trial or an any
hearing in these matters” including all documents produced in response to any
requests for disclosure or production; (4) a transcript of the hearing on the Navistar
parties’ motion to strike the Corporation’s intervention; (5) promissory notes and
other banking documents between the Corporation and Texstar National Bank; and
(6) copies of the Corporation’s 2007 Federal S Corporation Tax Return and 2008
Texas Franchise Tax Report, prepared and sent to Lujan by his accountant.

      In response, Lujan objected to the Navistar parties’ reply and moved to
strike both the reply and the attached evidence because they were not filed at least
twenty-one days before the scheduled hearing as required by Rule 166a(d) of the
Texas Rules of Civil Procedure. Alternatively, Lujan requested a resetting of the
hearing for twenty-one days to comply with Rule 166a(c).

      At the hearing on the Navistar parties’ motion for summary judgment, the

                                          7
Navistar parties argued that the reply attaching the additional evidence only
became necessary after Lujan took a position in his response and affidavit contrary
to that recently taken in support of the Corporation’s intervention, when Lujan’s
counsel argued that the Corporation needed to intervene in the suit because counsel
had discovered that all of Lujan’s assets had been transferred to the Corporation.
The trial court then denied Lujan’s motion to strike the reply and his alternative
motion to reset the hearing for a later date.

      Turning to the substance of the summary judgment hearing, Lujan’s counsel
argued that the representations he made during the intervention were on behalf of
the Corporation, not Lujan himself, and could not be considered judicial
admissions against Lujan. In response to the trial court’s questions about counsel’s
earlier representation that he had explained the situation of the intervention with
Lujan, Lujan’s counsel explained that Lujan told him that the section 351 transfer
was done at the accountant’s recommendation for tax purposes, but that Lujan
never transferred legal title to the trucks to the Corporation. Counsel confirmed
that it was Lujan’s position that all of the claims belong to Lujan and thus the
Corporation’s intervention was unnecessary. Upon further questioning by the trial
court, however, Lujan’s counsel acknowledged that the Corporation had filed tax
returns and borrowed money, contrary to Lujan’s statements in his affidavit that
the Corporation never conducted any business.

       In response to Lujan’s assertion that the Navistar parties had no evidence
that a transfer ever occurred, the Navistar parties argued that the section 351
transfer and Lujan’s counsel’s representations on behalf of Lujan and the
Corporation that all of the assets had been transferred were sufficient to support its
summary judgment motion. The Navistar parties also argued that Lujan’s affidavit
did not create a fact issue because it was a sham affidavit and was made in bad

                                           8
faith, and therefore it should be stricken. Additionally, the Navistar parties argued
that if more evidence was needed to prove that a transfer of assets occurred, the
evidence in the reply—such as Lujan’s representation to the federal government in
the 2006 income tax return that the assets were transferred and the evidence that
Lujan used those assets to take out loans in the Corporation’s name—provided the
proof.

         After an extended discussion, the trial court asked the Navistar parties to
provide additional briefing on the application of the sham affidavit doctrine.
Lujan’s counsel then asked for an opportunity to file a response to the Navistar
parties’ reply, to which the trial court said, “You can provide whatever you want to
provide to the Court. I’m not barring that.” Both parties filed supplemental briefs.

         On February 5, 2014, the trial court granted the Navistar parties’ summary
judgment motion on standing and ruled that (1) Lujan’s statements in his affidavit
in which he denied transferring the trucks or his wholesale flower company’s
assets and liabilities to the Corporation were excluded as conclusory; (2) Lujan’s
affidavit was made in bad faith and was stricken “as a sanction under TRCP and
CPRC”; and (3) Lujan’s affidavit was stricken under the sham affidavit doctrine.
On the same day, the trial court also granted the Navistar parties’ summary
judgment motion on warranty disclaimers. Lujan filed a motion for new trial that
was overruled by operation of law. This appeal followed.

                                ISSUES AND ANALYSIS

         On appeal, Lujan raises seven issues falling into two broad categories in
which Lujan contends that the trial court erred in: (1) granting the Navistar parties’
summary judgment motion on warranty disclaimers; and (2) granting the Navistar
parties’ summary judgment motion on standing. Because we conclude that the
second category of issues relating to the Navistar parties’ summary judgment
                                          9
motion on standing is dispositive of the appeal, we address those issues and do not
reach Lujan’s issues concerning the trial court’s grant of the Navistar parties’
summary judgment motion on the warranty disclaimers.

                                     STANDING

      On appeal, Lujan contends that the trial court erred in granting the Navistar
parties’ summary judgment motion on standing because the Navistar parties failed
to prove that Lujan transferred his assets to the Corporation, and Lujan’s evidence
raised a genuine issue of material fact on the issue. Lujan also challenges the trial
court’s rulings striking Lujan’s affidavit based on the sham affidavit doctrine and
as a sanction, and its ruling that Lujan’s statements that he did not transfer his
trucks, business, or assets to the Corporation were conclusory. Further, Lujan
complains that the Navistar parties’ reply and supporting evidence should have
been stricken because they were not filed and served at least twenty-one days
before the hearing and the Navistar parties did not seek leave to file new evidence.
Alternatively, Lujan argues that the hearing on the Navistar parties’ motion for
summary judgment should have been reset twenty-one days to comply with the
rules of civil procedure.

      A.     Standards of Review

      We review a trial court’s grant of summary judgment de novo. Masterson v.
Diocese of Nw. Tex., 422 S.W.3d 594, 607 (Tex. 2013). To prevail on its motion,
the Navistar parties were required to prove that no genuine issue of material fact
exists and that they were entitled to judgment as a matter of law. See Tex. R. Civ.
P. 166a(c); Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex.
2004). If the Navistar parties’ motion and evidence establishes its right to judgment
as a matter of law, then the burden shifts to Lujan, the non-movant, to raise a
genuine issue of material fact sufficient to defeat summary judgment. See M.D.
                                         10
Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000) (per
curiam).

      In reviewing the summary judgment evidence, we take as true
all evidence favorable to Lujan and we indulge every reasonable inference and
resolve any doubts in Lujan’s favor. See Joe, 145 S.W.3d at 157. We affirm
the summary judgment if any of the theories presented to the trial court and
preserved for appellate review are meritorious. Id.

      Standing is a constitutional prerequisite for a party to bring a lawsuit. Tex.
Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 444 (Tex. 1993). The issue
of standing focuses on the question of who may bring a lawsuit. Patterson v.
Planned Parenthood of Houston & Se. Tex., Inc., 971 S.W.2d 439, 442 (Tex.
1998). A court has no jurisdiction over a claim pursued by a party who lacks
standing to assert the claim. DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299,
304 (Tex. 2008). Under Texas law, a party has standing to bring suit if (1) it has
suffered a distinct injury, and (2) there exists a real controversy that will be
determined by the judicial determination sought. Brown v. Todd, 53 S.W.3d 297,
305 (Tex. 2001).

      The absence of standing can be raised in a traditional motion
for summary judgment. See Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554
(Tex. 2000). We review a party’s standing de novo and construe the pleadings in
favor of the plaintiff. Tex. Dep’t of Transp. v. City of Sunset Valley, 146 S.W.3d
637, 646 (Tex. 2004); Tex. Ass’n of Bus., 852 S.W.2d at 446.

      We review a trial court’s decision to exclude or admit summary judgment
evidence for an abuse of discretion. Fred Loya Ins. Agency, Inc. v. Cohen, 446
S.W.3d 913, 926–27 (Tex. App.—El Paso 2014, pet. denied); Pipkin v. Kroger
Tex., L.P., 383 S.W.3d 655, 667 (Tex. App.—Houston [14th Dist.] 2012, pet.
                                         11
denied). An abuse of discretion exists only when the court’s decision is made
without reference to any guiding rules and principles or is arbitrary or
unreasonable. Eslon Thermoplastics v. Dynamic Sys., Inc., 49 S.W.3d 891, 901
(Tex. App.—Austin 2001, no pet.). When reviewing matters committed to the
court’s discretion, a court of appeals may not substitute its own judgment for that
of the trial court. Fred Loya Ins. Agency, 446 S.W.3d at 927.

      B.     The Navistar Parties’ Summary Judgment Motion on Standing

      In their summary judgment motion on standing, the Navistar parties argued
that Lujan owned the trucks until June 12, 2006, when he transferred ownership of
the trucks and his entire flower business to the Corporation in exchange for 100%
ownership of the Corporation’s stock. Because Lujan did not have standing to
recover individually for damages sustained by the Corporation, the Navistar parties
contended that Lujan was barred from recovering damages after June 12, 2006.

      On appeal, Lujan argues that the section 351 election is legally insufficient
proof that the trucks were transferred and, even if it is some evidence of a transfer,
Lujan’s affidavit in which he avers that he never transferred his assets to the
Corporation raises a genuine issue of fact concerning the transfer.

      To place in context the Navistar parties’ challenge to Lujan’s standing to
maintain his suit, we will briefly discuss the well-established law concerning a
party’s standing to sue individually or on behalf of a corporation. We will then
consider Lujan’s procedural and evidentiary complaints before applying the
summary judgment standard of review to the evidence.

             1.    Standing to sue individually or as a corporation

      Although a shareholder may own 100% of the corporation’s stock, the
corporation itself holds the assets, including its causes of action. El T. Mexican

                                         12
Rests., Inc. v. Bacon, 921 S.W.2d 247, 251 (Tex. App.—Houston [1st Dist.] 1995,
writ denied). A shareholder of a corporation may not sue in his own name and for
his own benefit on a cause of action belonging to the corporation, even if that
shareholder is indirectly injured. Id. (citing Wingate v. Hajdik, 795 S.W.2d 717,
719 (Tex. 1990). This is true even for sole shareholders. Id.

       When a corporation becomes incapacitated due to the forfeiture of its
corporate charter, the title to its assets become bifurcated; legal title remains in the
corporation and beneficial title vests in the shareholders. Carpaint, Inc. v. Pelican
Partners, L.P., 13-07-00751-CV, 2008 WL 3971559, at *4 (Tex. App.—Corpus
Christi Aug. 28, 2008, pet. denied) (mem. op.) (citing Bacon, 921 S.W.2d at 251).
While the shareholders’ beneficial title confers capacity on them to prosecute the
corporation’s claims on the corporation’s behalf, “‘[t]his entitlement to go into
court for the corporation does not amount to the right to recover individually on
the corporate cause of action.’” Mossler v. Nouri, No. 03-08-00476-CV, 2010 WL
2133940, at *7 (Tex. App.—Austin May 27, 2010, pet. denied) (mem. op.)
(quoting Bacon, 921 S.W.2d at 251) (emphasis in original).4

       Until a corporation is dissolved—either voluntarily or involuntarily—it
maintains legal title to its assets, and the shareholders cannot bring suit in their
own name but must sue only as representatives for the corporation. See id.; Bacon,
921 S.W.2d at 253; White v. Indep. Bank, N.A., 794 S.W.2d 895, 898 (Tex. App.—
Houston [1st Dist.] 1990, writ denied).

       There is no evidence, and Lujan does not argue, that the Corporation has
been formally dissolved; nor does Lujan challenge the applicable legal principles.

       4
         Capacity is a party’s legal authority to go into court to prosecute or defend a suit.
Carpaint, 2008 WL 3971559, at *3. To bring suit and recover on a cause of action, a plaintiff
must have both standing and capacity. Id.

                                             13
Lujan’s appeal is instead directed to whether the Navistar parties proved as a
matter of law that Lujan transferred all his assets, including the trucks, to the
Corporation and whether Lujan’s evidence raised a genuine issue of material fact
precluding summary judgment in the Navistar parties’ favor.

      Before addressing the sufficiency of the evidence, we next turn to Lujan’s
complaint that the trial court should not have considered the Navistar parties’
reply, in which the Navistar parties challenged Lujan’s supporting affidavit and
offered additional evidence in support of their arguments.

                2.   The trial court’s consideration of the Navistar parties’ reply
                     and supporting evidence
      Lujan contends that the trial court erred in overruling his motion to strike the
Navistar parties’ reply and objections to the Navistar parties’ supporting evidence
attached to the reply. Specifically, Lujan complains that the Navistar parties’ reply
was filed three days before the summary judgment hearing, and the Navistar
parties introduced additional summary judgment evidence less than twenty-one
days before the hearing in violation of the summary judgment rules. See Tex. R.
Civ. P. 166a(c), (d). Alternatively, Lujan argues that the trial court erred in denying
his request for resetting of the hearing for twenty-one days to comply with Rule
166a. See id.

      Generally, a trial court may not consider summary judgment evidence not
referenced in or incorporated into the motion. Fed. Home Loan Mortg. Corp. v.
Pham, 449 S.W.3d 230, 236 (Tex. App.—Houston [14th Dist.] 2014, no pet.).
When nothing appears in the record to indicate that late-filed summary judgment
evidence was filed with leave of court, we presume that the trial court did not
consider it. Pipkin, 383 S.W.3d at 663 (citing INA of Tex. v. Bryant, 686 S.W.2d
614, 615 (Tex. 1985)). However, a trial court may accept summary judgment

                                          14
evidence filed late, even after summary judgment, as long as the court
affirmatively indicates in the record that it accepted or considered the evidence.
Pham, 449 S.W.3d at 236; Auten v. DJ Clark, Inc., 209 S.W.3d 695, 702 (Tex.
App.—Houston [14th Dist.] 2006, no pet.).

      At the hearing on the Navistar parties’ summary judgment motion, the trial
court denied Lujan’s motion to strike. The transcript also reflects that the trial court
considered the exhibits attached to the Navistar parties’ reply. Further, the trial
court’s order granting the motion states, “the Court having considered all of
Defendants’ briefs and pleadings in support of the same and all of Plaintiff’s briefs
and pleadings in opposition to the same, as well as all exhibits and the oral
arguments of all counsel, finds that said motion is meritorious.”

      Therefore, the trial court did not abuse its discretion in denying Lujan’s
motion to strike the Navistar parties’ reply and supporting evidence. See Pham,
449 S.W.3d at 236; Auten, 209 S.W.3d at 702. Further, the trial court did not abuse
its discretion by refusing Lujan’s alternative request for a resetting of the hearing
for twenty-one days, because Lujan offered no reason for continuing the hearing
other than to comply with the rule’s twenty-one day requirement and, in any event,
the trial court provided Lujan an opportunity to file supplemental briefing before
ruling on the Navistar parties’ summary judgment motion.

             3.     Striking Lujan’s affidavit under the sham affidavit doctrine

      Lujan also challenges each of the trial court’s evidentiary rulings, arguing
that his affidavit was not a sham affidavit, was not made in bad faith, and did not
contain conclusory statements. Because we now adopt the sham affidavit doctrine
and hold that the trial court did not err in striking the affidavit as a sham on the
facts before it, we do not address Lujan’s other complaints.

                                          15
       Generally, a deposition does not have controlling effect over an affidavit in
determining whether a motion for summary judgment should be granted. Randall
v. Dallas Power & Light Co., 752 S.W.2d 4, 5 (Tex. 1988) (per curiam). When
conflicting inferences may be drawn from a deposition and an affidavit made by
the same person and filed in a summary judgment proceeding, a fact issue is
presented that will preclude summary judgment. Id. at 5.

       However, some of our sister courts have held that when an affidavit is
executed after the deposition and there is a clear contradiction on a material point
without explanation, the sham affidavit doctrine may be applied and the
contradictory statements in the affidavit may be disregarded. See, e.g., Pando v.
Sw. Convenience Stores, L.L.C., 242 S.W.3d 76, 79 (Tex. App.—Eastland 2007, no
pet.); Trostle v. Trostle, 77 S.W.3d 908, 915 (Tex. App.—Amarillo 2002, no
pet.); Eslon Thermoplastics, 49 S.W.3d at 901; Burkett v. Welborn, 42 S.W.3d 282,
286 (Tex. App.—Texarkana 2001, no pet.); Farroux v. Denny’s Rests., Inc., 962
S.W.2d 108, 111 (Tex. App.—Houston [1st Dist.] 1997, no pet.).5 As the Farroux
court stated:

       A party cannot file an affidavit to contradict his own deposition
       testimony without any explanation for the change in the testimony, for
       the purpose of creating a fact issue to avoid summary judgment. If a
       party’s own affidavit contradicts his earlier testimony, the affidavit
       must explain the reason for the change. Without an explanation of the
       change in the testimony, we assume the sole purpose of the affidavit
       was to avoid summary judgment. As such, it presents merely a
       “sham” fact issue.

       5
         Other courts of appeals have rejected or limited the sham affidavit doctrine. See Pierce
v. Wash. Mut. Bank, 226 S.W.3d 711, 717–18 (Tex. App.—Tyler 2007, pet. denied); Del Mar
Coll. Dist. v. Vela, 218 S.W.3d 856, 862 (Tex .App.—Corpus Christi 2007, no pet.); Davis v.
City of Grapevine, 188 S.W.3d 748, 756 (Tex. App.—Fort Worth 2006, pet. denied); Thompson
v. City of Corsicana Hous. Auth., 57 S.W.3d 547, 557 (Tex. App.—Waco 2001, no pet). The
Supreme Court of Texas has not expressly ruled on the applicability of the doctrine.

                                               16
962 S.W.2d at 111.

      This Court has not yet decided whether to adopt the sham affidavit doctrine.
See Parkway Dental Assocs., P.A. v. Ho & Huang Props, L.P., 391 S.W.3d 596,
604 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (holding that it was
unnecessary to decide whether to adopt sham affidavit doctrine because issue was
not preserved for appeal). However, this Court has previously signaled its
agreement with the doctrine in a case in which it was ultimately unnecessary to
determine its applicability. See Blan v. Ali, 7 S.W.3d 741, 746 n.3 (Tex. App.—
Houston [14th Dist.] 1999, no pet.) (“While we agree that [Farroux] precludes the
trial court from considering an affidavit that contradicts deposition testimony
without an explanation for the change in testimony, the supplemental affidavit
does not contradict Dr. Reisbord’s deposition testimony.”) (emphasis in original).

      Lujan argues that the sham affidavit doctrine does not apply because the
only deposition testimony that the Navistar parties point to as contradicting Lujan’s
affidavit is an acknowledgment by Lujan that he incorporated his business in 2006
or 2007. Lujan argues that this testimony does not contradict Lujan’s statements in
his affidavit, and he notes that he did not testify that corporate tax returns were not
filed or that a corporation was not formed. Lujan also argues that the Navistar
parties cannot rely on the unsworn statements of Lujan’s counsel because no court
has extended the doctrine to include such statements. Even if such statements were
considered, Lujan argues, his counsel’s statements do not contradict the statements
in Lujan’s affidavit. Further, Lujan asserts that his counsel provided a satisfactory
explanation for any perceived change in position at the January 27 hearing when he
explained that the section 351 election was made on the accountant’s
recommendation, making Lujan a 100% shareholder, but nothing else about the
business changed.

                                          17
       The Navistar parties contend that the trial court did not err by striking
Lujan’s affidavit on the grounds that it was a sham affidavit. The Navistar parties
point out that Lujan’s corporation, represented by Lujan’s counsel, sought to
intervene on the grounds that all of the assets of the sole proprietorship, including
the trucks, had been transferred to his corporation. In response to the Navistar
parties’ motion to strike the intervention, the Corporation unequivocally
represented that on June 12, 2006, Lujan made a section 351 election transfer, and
pursuant to that election, Lujan “transferred all of the assets and liabilities of Texas
Wholesale Flower Co. to Texas Wholesale Flower Co., Inc., in exchange for 100%
ownership of the stock.” The Corporation supported its response with the section
351 election from its 2006 federal tax return, which it maintained “indicates the
exchange.” Lujan’s counsel, on behalf of the Corporation, likewise represented to
the trial court that Lujan had transferred “absolutely everything” to the
Corporation. Navistar argues that the Corporation’s pleadings and counsel’s
arguments to the court in support of the Corporation’s interventions constitute
judicial admissions that Lujan transferred his assets, including the trucks at issue,
to his corporation.6

       When deposed, Lujan admitted in his deposition that he incorporated his
business in 2006 or 2007. However, when Navistar moved for summary judgment
on the grounds that Lujan did not have standing to sue because his sole

       6
          A judicial admission is a clear, deliberate, and unequivocal statement that occurs when
an assertion of fact is conclusively established in live pleadings, making the introduction of other
pleadings or evidence unnecessary. Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 905
(Tex. 2000). A judicial admission not only relieves an adversary from making proof of the fact
admitted, it also bars the party himself from disputing it. Id. Pleadings may be used as summary
judgment evidence when they contain statements rising to the level of admitting a fact or
conclusion which is directly adverse to that party’s theory or defense of recovery. Ehler v.
LVDVD, L.C., 319 S.W.3d 817, 824 (Tex. App.—El Paso 2010, no pet.); Judwin Props., Inc. v.
Griggs & Harrison, 911 S.W.2d 498, 504 (Tex. App.—Houston [1st Dist.] 1995, no writ); Lyons
v. Lindsey Morden Claims Mgmt., Inc., 985 S.W.2d 86, 92 (Tex. App.—El Paso 1998, no pet.).

                                                18
proprietorship’s assets—including the trucks at issue—had been transferred to the
Corporation, Lujan responded with an affidavit in which he stated that he never
transferred the assets and liabilities of his sole proprietorship, and he did not
transfer ownership of his trucks or his business to the Corporation. He also averred,
among other things, that the Corporation never carried debt obligations to any
creditor, including Texas Bank; never acquired, owned, or held title to the trucks;
and never conducted business. Lujan made no attempt in his affidavit to explain
the myriad discrepancies between his averments and positions previously taken by
his solely-owned corporation and his own counsel before the court on the material
issue of whether Lujan or his corporation owned the assets and claims that are the
basis of Lujan’s suit.

      Given the circumstances before the trial court in this case, we cannot say
that the trial court’s evidentiary ruling striking Lujan’s affidavit was an abuse of its
discretion. Although Lujan’s affidavit did not directly contradict his prior
deposition testimony, it directly contradicted the following: (1) the Corporation’s
judicial admission in support of its attempted intervention that Lujan’s assets,
including the trucks at issue, had been transferred to the Corporation; (2) the
Corporation’s reliance on the section 351 election filed with its 2006 federal
income tax return as evidence that Lujan had transferred all of the assets and
liabilities of his sole proprietorship to the Corporation in exchange for 100% of the
stock; (3) Lujan’s counsel’s representations on behalf of the Corporation that the
section 351 election and corporate tax returns demonstrated that Lujan’s assets
were transferred “lock, stock and barrel” to the Corporation in 2006; and (4) the
tax returns and banking documents reflecting that, contrary to Lujan’s affidavit, the
Corporation actively conducted business and engaged in banking transactions.

      We also reject Lujan’s assertion that his counsel’s representations to the trial

                                          19
court were consistent with Lujan’s affidavit and provided a satisfactory
explanation for Lujan’s position. Although counsel explained that the
incorporation was merely an accounting procedure and Lujan never actually
transferred the trucks or changed his business in any way, the federal income tax
returns and the banking documents Navistar presented in its reply tell a different
story. For example, the Corporation’s 2006 federal tax return included the section
351 election, in which the Corporation represented to the Internal Revenue Service,
under penalty of perjury, that Lujan had transferred his assets to the Corporation in
exchange for stock—a transfer that enabled Lujan to take advantage of a corporate
structure for his business without adverse tax consequences.7

       The 2006 and 2007 tax returns also reflected that the Corporation had sales
of almost $1.6 million and over $2.4 million, respectively, despite Lujan’s
assertion in his affidavit that the corporation “never conducted business.” Further,
banking documents produced to the Navistar parties show, contrary to Lujan’s
assertion in his affidavit that he “never carried debt obligations to … Texstar
Bank,” that the corporation obtained two promissory notes from Texstar National
Bank in the amounts of $50,000.00 and $72,500.00. Therefore, to the extent that
Lujan argues that the sham affidavit doctrine should not be applied because
Lujan’s understanding of the effect of the transfer is consistent with the averments
in his affidavit, we disagree. See Fred Loya Ins. Agency, 446 S.W.3d at 927
(rejecting argument that ‘subtle differences’ between deposition testimony and
subsequent affidavit were ‘not so egregious’ as to preclude application of sham
affidavit doctrine).

       7
         As reflected on the signature line of the income tax forms, statements in the section 351
transfer and the federal tax returns are made subject to penalties of perjury. See 26 U.S.C. §§
6065 (tax returns and statements filed with the IRS must be made under penalties of perjury),
7206(1) (criminal penalties for false statements made “under penalties of perjury”).

                                               20
       Lujan     also    contends,     however,      that    any    judicial    admissions      or
representations by the Corporation or his counsel during the intervention
proceedings cannot be attributed to him because the Corporation is a separate and
distinct entity. Lujan is correct that he and his corporation are separate legal
entities, as discussed above. However, the evidence shows that Lujan is the record
owner of 100% of the Corporation’s stock; therefore, only Lujan could have
caused his corporation to take part in the asset transfer and file the corporate tax
returns. Further, the taxpayer copies of the corporate tax returns Lujan produced to
Navistar in discovery were accompanied by correspondence to Lujan from his
accountant, instructing Lujan to sign and file them. On this record, the trial court
could reasonably have concluded that Lujan was attempting to take one position on
behalf of his solely owned corporation and—in the same proceeding—take the
opposite position individually for the sole purpose of creating a material fact issue
to preclude summary judgment. We cannot say that the trial court abused its
discretion in concluding that Lujan’s affidavit was a transparent sham that
warranted the application of the sham affidavit’s rationale on the facts before it.

       We recognize that the trial court struck Lujan’s affidavit on the basis of the
sham affidavit doctrine in circumstances that differ from the usual fact pattern in
which the doctrine is applied by those courts that have adopted it. 8 That alone,

       8
          The dissent criticizes any application of the sham affidavit doctrine beyond “the
Farroux pattern” because other Texas appellate courts have declined to extend it. However, the
dissent’s authorities do not support her argument. For example, in Argovitz v. Argovitz, this court
concluded that the issue was not preserved, but further noted that even if the doctrine were
applied to disregard the conflict between a deposition and affidavit, a fact issue precluding
summary judgment remained between the deposition and an earlier hearing. See No. 14-07-
00206-CV, 2008 WL 5131843, at *16–21 (Tex. App.—Houston [14th Dist.] Dec. 9, 2008, pet.
denied) (mem. op.). The other two cases are from courts that have rejected the rationale behind
the sham affidavit doctrine generally. See Pierce, 226 S.W.3d at 717–18 (rejecting application of
doctrine’s rationale to contradiction between interrogatory answer and deposition based on
Randall); Smith v. Mosbacher, 94 S.W.3d 292, 295–96 & n.1 (Tex. App.—Corpus Christi 2002,
no pet.) (holding that complaint that affidavit filed in response to summary judgment was a sham
                                                21
however, should not preclude the application of the doctrine’s rationale when
analogous circumstances warrant it. See Herrera v. CTS Corp., 183 F. Supp. 2d
921, 929 (S.D. Tex. 2002) (applying sham affidavit doctrine when plaintiff’s
affidavit contradicted both his prior deposition testimony and statements made to
federal government in Social Security Administration questionnaire). We therefore
hold that the trial court did not abuse its discretion in striking Lujan’s affidavit
under the sham affidavit doctrine. See, e.g., Fred Loya Ins. Agency, 446 S.W.3d at
928; Eslon Thermoplastics, 49 S.W.3d at 901; Farroux, 962 S.W.2d at 111.

       Finally, Lujan contends that a sham affidavit complaint is an objection to the
form of the affidavit, and therefore the trial court was required to give him an
opportunity to amend the affidavit. See Broadnax v. Kroger Texas, L.P., No. 05-
04-01306-CV, 2005 WL 2031783, at *5 (Tex. App.—Dallas Aug. 24, 2005, no
pet.) (mem. op.) (“Kroger’s general objection that Broadnax’s affidavit is a sham
affidavit because it contradicts his deposition testimony is an objection
complaining of a defect in the form of his affidavit.”). Under Rule 166a(f), defects
in the form of affidavits or attachments “will not be grounds for reversal unless
specifically pointed out by objection by an opposing party with opportunity, but
refusal, to amend.” Tex. R. Civ. P. 166a(f).

       Assuming without deciding that Lujan’s argument is correct, it does not
assist him because the trial court expressly granted Lujan an opportunity to file a
reply brief and anything else he wished to file. Although Lujan did file a
supplemental brief, he did not take the opportunity to file an amended affidavit.
We therefore overrule Lujan’s contention that the trial court erred by striking his
affidavit.

because it contradicted subsequent deposition testimony was not preserved for appeal, but even if
deposition testimony was considered as summary-judgment evidence, it merely created a fact
issue, citing Randall). These cases are not similar to the present appeal.

                                               22
             4.     Application of the summary judgment standard of
                    review to the evidence
      Having determined that the trial court did not abuse its discretion by
considering the Navistar parties’ reply and supporting evidence in support of their
summary judgment motion on standing, and having further determined that the
trial court did not abuse its discretion by striking Lujan’s affidavit under the sham
affidavit doctrine, we turn to whether the Navistar parties met their burden to
demonstrate as a matter of law that Lujan lacked standing to pursue his claims
against the Navistar parties.

      As discussed in detail above, the Navistar parties presented evidence that
Lujan incorporated his wholesale flower business in 2006. Lujan also chose to
transfer the assets and liabilities of the business to the Corporation. This transfer
was reflected in the section 351 election accompanying the Corporation’s 2006
federal income tax return, in which Lujan represented to the IRS, under penalty of
perjury, that Lujan was transferring specific assets—including the five trucks that
are the subject of Lujan’s claims—in exchange for 100% of the shares of stock in
the Corporation. Navistar’s evidence also showed that the Corporation conducted
substantial business, bringing in gross receipts totaling roughly $4 million over a
two-year period, taking out business loans, and seeking favorable tax treatment
from the IRS. Although the Corporation’s charter was eventually forfeited, no
evidence was presented that the Corporation was formally dissolved.

      Lujan argues, however, that a section 351 election “is not recognized in
Texas as an instrument to transfer legal title to assets and liabilities.” In support of
this contention, Lujan cites provisions of the Texas Transportation Code. See Tex.
Transp. Code §§ 501.071(a) (“[A] motor vehicle may not be the subject of a
subsequent sale unless the owner designated on the title submits a transfer of

                                          23
ownership of the title.”); 502.042 (“The department may not register or renew the
registration of a motor vehicle for which a title is required under Chapter 501
unless the owner … obtains a title for the vehicle ….”). Lujan further asserts that
section 351 merely addresses the federal tax treatment of gains and losses in the
event of a transfer, but does not apply if, as he maintains, no transfer occurred.

       Lujan’s argument that the section 351 election alone is insufficient evidence
of a transfer assumes that the only evidence the trial court should have considered
is the one-page section 351 election the Navistar parties attached to their summary
judgment motion. We have already held, however, that the trial court did not abuse
its discretion by considering the Navistar parties’ reply and supporting evidence,
including the Corporation’s 2006 and 2007 federal income tax returns reflecting
that the sole proprietorship’s assets, including the trucks, were transferred to the
Corporation and treated as corporate assets. The Navistar parties’ evidence facially
established its right to judgment as a matter of law on the grounds that Lujan
lacked standing to sue individually on claims belonging to the Corporation. See
Mossler, 2010 WL 2133940, at *7; Bacon, 921 S.W.2d at 253; White, 794 S.W.2d
at 898. The burden thus shifted to Lujan to raise a genuine issue of material fact
sufficient to defeat summary judgment.

       In response to the Navistar parties’ motion, Lujan offered his affidavit, in
which he generally denied transferring the trucks or his assets and liabilities to the
corporation and denied that the corporation conducted business of any kind. The
trial court struck Lujan’s affidavit under the sham affidavit doctrine, and we have
affirmed the trial court’s ruling. Lujan presented no other evidence to raise a
genuine issue of material fact that Lujan individually, rather than the Corporation,
had standing to pursue the claims for truck-related damages against the Navistar
parties.

                                          24
      Consequently, Lujan was required to file suit on behalf of the Corporation.
Because Lujan did not do so, he lacked standing to pursue causes of action
belonging to the Corporation and the trial court lacked subject-matter jurisdiction
to render judgment awarding him damages individually on any causes of action.
We therefore overrule Lujan’s issues relating to the trial court’s grant of the
Navistar parties’ summary judgment motion on standing and do not reach Lujan’s
other issues.

                                   CONCLUSION

      We affirm the trial court’s grant of summary judgment in favor of the
Navistar parties on standing and the striking of Lujan’s affidavit in response to the
motion as a sham affidavit.

                                       /s/    Ken Wise
                                              Justice

Panel consists of Justices Jamison, McCally, and Wise (McCally, J., dissenting).

                                         25