Court Opinion

ID: 6499536
Source: CourtListenerOpinion
Date Created: 2022-07-13 06:10:16.553463+00
Date Added: 2024-06-11T15:54:32.681910
License: Public Domain

REVERSE and REMAND and Opinion Filed July 7, 2022

                                  S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                              No. 05-20-01020-CV

    MEHULKUMAR PATEL, CHIRAG PATEL, AND JAYSON PATEL,
                        Appellants
                           V.
     GONZALEZ HOTELS, LLC AND MAHESH PATEL, Appellees

               On Appeal from the 193rd Judicial District Court
                            Dallas County, Texas
                    Trial Court Cause No. DC-16-10453

                        MEMORANDUM OPINION
             Before Justices Partida-Kipness, Reichek, and Goldstein
                       Opinion by Justice Partida-Kipness
      This suit arises from a dispute over a rule 11 agreement concerning the

expenses of running a Texas hotel. Appellee Mahesh Patel won a summary judgment

to enforce the agreement. Appellants argue that this the summary judgment was

erroneous because Mahesh never pleaded a contract claim that would support this

sort of summary relief. Because we agree, we reverse the trial court’s judgment and

remand for further proceedings.
                                          BACKGROUND

        Gonzalez Hotels, LLC owns and operates a Days Inn in Gonzalez Texas.

When Gonzalez Hotels was formed, Mahesh Patel and appellant Mehulkumar Patel

were each member-owners of the company. In 2012, the parties entered an

agreement that changed the ownership of the company so that each of the three

appellants here owned 16.667% of the company. Mahesh retained a 50% stake.

        In the years that followed, Gonzalez Hotels struggled financially, and there

was evidence that Mahesh made over $300,000 in capital contributions to keep the

company afloat. According to Mahesh’s affidavit, appellants made no contributions

to the company and instead withdrew money from its accounts, unbeknownst to

Mahesh.

        In 2016, Mahesh1 sued appellants for breach of fiduciary duty, conversion and

fraudulent transfers, Theft Liability Act violations, and breach of the company’s

governing documents. For this last claim, Mahesh sought to hold appellants liable

for their withdrawals from company accounts and for their failure to make

contributions to the company in proportion to their ownership percentages, as

Mahesh alleges was required by the company’s governing documents.

        1
          Gonzalez Hotels also purportedly joined the suit against appellants. Questions later arose, though,
about Mahesh’s legal right to cause Gonzalez Hotels to sue appellants, given that Mahesh was only a 50%
owner of the company. Regardless, Gonzalez Hotels was awarded nothing in the trial court’s final summary
judgment. Because Gonzalez Hotels’s role as a party is disputed and ultimately immaterial to the outcome
of this appeal, we treat Mahesh as the only plaintiff and appellee for purposes of this opinion.
                                                    –2–
      In 2018, following mediation, the parties entered a rule 11 agreement. One

term in the agreement provided that appellants consented to the entry of an agreed

judgment making them liable for half of Mahesh’s past and future contributions to

the company. Another term specified the amount of appellants’ liability for

Mahesh’s past contributions. Days after the rule 11 agreement was filed with the

court, Mahesh filed a motion to enforce the agreement.

      By 2020, appellants had changed counsel and withdrawn their consent to the

rule 11 agreement. However, Mahesh did not amend his pleadings to set out a claim

for breach of the agreement. He instead filed a motion for summary judgment and

enforcement of the agreement. The stated goal of the motion was to obtain an agreed

judgment to enforce the terms of the agreement.

      Appellants filed a response to the motion in which they raised several

arguments, one of which was their theory that Mahesh could not prevail on summary

judgment without pleading a claim for breach of the rule 11 agreement. Appellants

reasoned that since they had withdrawn their consent to an agreed judgment, Mahesh

could no longer obtain an agreed judgment, and his only recourse was to plead a

claim for breach of contract predicated on the rule 11 agreement. Appellants noted

that Mahesh had never amended his petition to include such a claim, and appellants

argued that Mahesh’s motion to enforce the rule 11 agreement could not act as a

substitute for pleading such a claim.

                                        –3–
      After considering the evidence, the trial court rendered a final summary

judgment in Mahesh’s favor. The summary judgment awarded Mahesh roughly

$200,000 against each appellant, along with attorney’s fees and interest.

                                    ANALYSIS

      On appeal, appellants urge many arguments, but the one that resolves this case

is their argument concerning Mahesh’s failure to plead a contract claim premised on

the rule 11 agreement.

      Written settlement agreements may be enforced as contracts even if one party

withdraws consent before judgment is entered on the agreement. Ford Motor Co. v.

Castillo, 279 S.W.3d 656, 663 (Tex. 2009) (citing Padilla v. LaFrance, 907 S.W.2d

454, 461 (Tex. 1995)). When consent is withdrawn, however, the agreed judgment

that was part of the settlement may not be entered. Id. The party seeking enforcement

of the settlement agreement must pursue a separate claim for breach of contract, id.

which is subject to the normal rules of pleading and proof. Mantas v. Fifth Court of

Appeals, 925 S.W.2d 656, 658 (Tex. 1996).

      Mahesh argues that his motion to enforce the rule 11 agreement should act as

a substitute for the separate contract claim that he would otherwise be required to

plead. According to Mahesh, this motion served the same function as a formally

pleaded contract claim. Controlling precedent compels us to disagree.

      “Motions are not the functional equivalents of pleadings . . . .” Rupert v.

McCurdy, 141 S.W.3d 334, 339 (Tex. App.—Dallas 2004, no pet.). A pleading

                                        –4–
determines and gives notice of the issues for trial. Id. In contrast, a motion is an

application for an order. Id. Motions may be accepted or rejected by the court,

whereas pleadings, if they sufficiently predate the trial, may be submitted and

amended freely by the parties without the necessity of court approval. Id. Thus,

“insufficient similarities exist between a motion and a pleading to allow them to

carry the same legal significance.” Id.

       We have applied this principle to situations much like the one at hand, wherein

the parties entered a rule 11 settlement agreement, but one side later withdrew

consent to the agreement, and the other side filed a motion to enforce the agreement.

See Cadle Co. v. Castle, 913 S.W.2d 627, 630 (Tex. App.—Dallas 1995, writ

denied). In Cadle, when the plaintiff’s failure to plead a separate contract claim came

into question on appeal, we rejected the idea that the motion to enforce the rule 11

agreement could serve in the stead of a pleaded contract claim. Id. at 632. We

emphasized the litigant’s “right to be confronted with appropriate pleadings,” and

we held that the motion to enforce was simply “an insufficient ‘pleading’” to

vindicate that right. Id.

       The same sequence—settlement, withdrawal of consent to the settlement, and

filing a motion to enforce the settlement—played out with similar results in Crump

v. Crump, No. 05-04-01515-CV, 2005 WL 2841146, at *1 (Tex. App.—Dallas Oct.

31, 2005, no pet.) (mem. op.). We noted that the proponent of the agreement had

failed to plead a contract claim, and “[a]s in Cadle, the only document to support

                                          –5–
enforcement of the mediation agreement is the ‘Application for Approval of

Agreement to Settle Estates.’” Id. We again held that this filing was inadequate to

satisfy the litigant’s “right to be confronted by appropriate pleadings.” Id.; see

Gunter v. Empire Pipeline Corp., 310 S.W.3d 19, 22 (Tex. App.—Dallas 2009, pet.

denied) (“Empire had no pleadings to support rendition of judgment on the

settlement agreement. It included a prayer for enforcement of the agreement in its

response to Gunter’s motion to vacate, but that is not a sufficient pleading for these

purposes.”).

      Mahesh, though, cites a case from this court that cuts against Cadle, Crump,

and Gunter. See Browning v. Holloway, 620 S.W.2d 611, 615 (Tex. Civ. App.—

Dallas 1981, writ ref’d n.r.e.). In Browning, we ruled that the defendants effectively

pleaded a contract defense related to a rule 11 agreement by discussing it in their

motion to enforce the agreement.

      Browning is distinguishable for two reasons. First, it concerns the defendants’

pleading of a defense, not a plaintiff’s pleading of an affirmative contract claim for

relief as in this case. Second, the plaintiffs in Browning had already pleaded a

contract claim for breach of the settlement agreement, which according to our

opinion showed that the plaintiffs “anticipated” the defendants’ contract defense,

and that in turn lessened the notice concerns that normally accompany pleading

defects. Id. By contrast, here, appellants objected to Mahesh’s failure to plead a

                                         –6–
contract claim, which brought notice concerns into sharp relief. Thus, Browning is

distinguishable, dated, and outnumbered. Cadle, Crump, and Gunter control.

                                 CONCLUSION

      Because there was no pleaded contract claim to support the trial court’s award,

see TEX. R. CIV. P. 301, and because Mahesh’s motion was an inadequate substitute

for such a pleading, the trial court erred in granting summary judgment. We reverse

the trial court’s judgment and remand for further proceedings consistent with this

opinion.

                                           /Robbie Partida-Kipness/
                                           ROBBIE PARTIDA-KIPNESS
                                           JUSTICE

201020F.P05

                                        –7–
                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

MEHULKUMAR PATEL, CHIRAG                       On Appeal from the 193rd Judicial
PATEL, AND JAYSON PATEL,                       District Court, Dallas County, Texas
Appellants                                     Trial Court Cause No. DC-16-10453.
                                               Opinion delivered by Justice Partida-
No. 05-20-01020-CV           V.                Kipness. Justices Reichek and
                                               Goldstein participating.
GONZALEZ HOTELS, LLC AND
MAHESH PATEL, Appellees

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is REVERSED and this cause is REMANDED to the trial court for further
proceedings consistent with this opinion.

    It is ORDERED that appellants MEHULKUMAR PATEL, CHIRAG
PATEL, AND JAYSON PATEL recover their costs of this appeal from appellees
GONZALEZ HOTELS, LLC AND MAHESH PATEL.

Judgment entered this 7th day of July 2022.

                                         –8–