LAKXN Income, Inc. v. TLC Hospitality, LLC

Opinion

In the Court of Appeals Second Appellate District of Texas at Fort Worth ___________________________ No. 02-20-00415-CV ___________________________

LAKXN INCOME, INC., Appellant

V.

TLC HOSPITALITY, LLC, Appellee

On Appeal from the 96th District Court Tarrant County, Texas Trial Court No. 096-315146-20

Before Sudderth, C.J.; Birdwell and Bassel, JJ. Memorandum Opinion by Justice Birdwell MEMORANDUM OPINION

Appellee TLC Hospitality, LLC sued Appellant LAKXN Income, Inc. for

money had and received, among other claims. When TLC moved for summary

judgment, LAKXN attempted to manufacture a fact issue on the defense of offset by

arranging for an affiliate to partially assign a claim from another lawsuit to LAKXN.

The trial court granted summary judgment in favor of TLC, and LAKXN appealed.

On appeal, LAKXN asserts that it created a fact issue on its offset defense

sufficient to survive summary judgment. We side against LAKXN due to inadequate

briefing, deficient summary judgment proof, and the balance of the equities. We

therefore affirm the summary judgment in TLC’s favor.

I. BACKGROUND

TLC owned an apartment complex in Grapevine (the Property). This suit is

the latest of many related to the Property.

The Initial Suit: The subject of an earlier suit was a 2012 agreement whereby

TLC agreed to sell the Property to Pillar Income Asset Management, Inc. TLC Hosp.,

LLC v. Pillar Income Asset Mgmt., Inc., 570 S.W.3d 749, 757 (Tex. App.—Tyler 2018,

pet. denied). There were complications in the sale, which led TLC to back out. Id.

The trial court determined that TLC had breached the contract and awarded specific

performance and other relief to Pillar, and that ruling was affirmed on appeal. Id.

2 In 2019, TLC complied with the specific performance judgment by selling the

Property to Pillar’s assignee, LAKXN. LAKXN later sold the Property to Grapevine

Investments, LLC.

The Equitable Accounting Suit: In 2018, Pillar also sued TLC for an

equitable accounting in an effort to obtain all the income that TLC collected from the

Property between 2016 and when the sale was completed, along with compensation

for missing out on a more favorable interest rate due to TLC’s delay in closing the

sale. That suit is ongoing.

The Tax Suit: Meanwhile, in another suit, TLC also contested its 2018 tax

assessment for the Property. In 2019, TLC won a $36,487.52 tax refund.

This Suit: By mistake, the tax assessor sent $26,975.52 of the refund to

Grapevine Investments rather than TLC. Grapevine Investments then forwarded the

refund on to LAKXN, also by mistake. LAKXN refused to return the refund to

TLC, so TLC sued LAKXN for money had and received, unjust enrichment, breach

of contract, and constructive trust. TLC moved for summary judgment on its claim

for money had and received.

To defeat the summary judgment, Pillar partially assigned its equitable

accounting claim to its affiliate LAKXN to the extent of $26,975.52, the same amount

as the tax refund that LAKXN had refused to return to TLC. LAKXN relied on that

assigned claim to raise the defense of offset. LAKXN contended that because TLC

3 owed $26,975.52 to LAKXN on the assigned claim, this should cancel out and offset

the $26,975.52 that LAKXN owed TLC.

The trial court granted a summary judgment for $26,975.52 to TLC, and

LAKXN appealed.

II. SUMMARY JUDGMENT STANDARD

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

favorable to the nonmovant, indulge every reasonable inference in favor of the

nonmovant, and resolve any doubts against the motion. Lightning Oil Co. v. Anadarko

E&P Onshore, LLC, 520 S.W.3d 39, 45 (Tex. 2017). A plaintiff satisfies its initial

summary judgment burden if it conclusively proves all essential elements of its cause

of action. Charles Glen Hyde, Nw. Reg’l Airport, Inc. v. Nw. Reg’l Airport Prop. Owners

Ass’n, Inc., 583 S.W.3d 644, 648 (Tex. App.—Fort Worth 2018, pet. denied).

If the movant carries its initial burden, “the burden shifts to the nonmovant to

raise a genuine issue of material fact precluding summary judgment.” Lujan v.

Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018). Where the nonmovant relies on an

affirmative defense to defeat summary judgment, the nonmovant has the burden in its

summary judgment response to present evidence sufficient to raise a fact issue on

each element of the affirmative defense. See Exxon Mobil Corp. v. Rincones, 520 S.W.3d

572, 593 (Tex. 2017).

4 III. DISCUSSION

“[A] cause of action for money had and received is ‘less restricted and fettered

by technical rules and formalities than any other form of action. It aims at the

abstract justice of the case and looks solely to the inquiry of whether the defendant

holds money that belongs to the plaintiff.’” GRCDallasHomes LLC v. Caldwell, 619

S.W.3d 301, 310 (Tex. App.—Fort Worth 2021, pet. filed) (cleaned up) (quoting Staats

v. Miller, 243 S.W.2d 686, 687–88 (Tex. 1951)). “To prove a claim for money had and

received, a plaintiff must show that a defendant holds money which in equity and

good conscience belongs to him.” Id. (quoting Plains Expl. & Prod. Co. v. Torch Energy

Advisors Inc., 473 S.W.3d 296, 302 n.4 (Tex. 2015)). For this type of claim, we afford

the trial court broad discretion in balancing the equities of the case. Id. “In defending

against such a claim, a defendant may present any facts and raise any defenses that

would deny the claimant’s right or show that the claimant should not recover.” Best

Buy Co. v. Barrera, 248 S.W.3d 160, 162 (Tex. 2007) (per curiam).

LAKXN does not dispute that TLC carried its initial summary judgment

burden to conclusively prove its claim for money had and received through its

evidence concerning LAKXN’s appropriation of TLC’s tax refund.1 Instead,

LAKXN contends that it presented evidence sufficient to raise a fact issue on its

defense of offset. We therefore turn to the question of whether LAKXN created a

1 We note, however, that TLC did not sue the tax assessor for the money it never sent to TLC.

5 fact issue on that defense so as to defeat TLC’s entitlement to summary judgment. See

Action Towing, Inc. v. Mint Leasing, Inc., 451 S.W.3d 525, 531 (Tex. App.—Houston [1st

Dist.] 2014, no pet.) (same approach); Goodenberger v. Ellis, 343 S.W.3d 536, 540 (Tex.

App.—Dallas 2011, pet. denied) (same approach).

Setoff (or offset) “is the doctrine of bringing into the presence of each other

the obligation of A to B and B to A and by the judicial action of the court making

each obligation extinguish the other.” J. Michael Ferguson, P.C. v. Ghrist Law Firm,

PLLC, No. 02-18-00332-CV, 2021 WL 2006321, at *27 (Tex. App.—Fort Worth May

20, 2021, pet. abated) (mem. op.) (cleaned up). If the setoff is allowed, the amount

that the plaintiff would recover from the defendant is reduced by the amount that the

plaintiff owes the defendant. Bandy v. First State Bank, Overton, 835 S.W.2d 609, 618

(Tex. 1992) (op. on reh’g); J. Michael Ferguson, 2021 WL 2006321, at *26. The

doctrine’s aim is “to avoid a multiplicity of suits when the debts are mutual,” Branscum

v. Reese, 219 S.W. 871, 872 (Tex. App.—Fort Worth 1919, no writ), and to adjust the

debts in net effect so as “to permit executory process to be enforced only for the

balance that may be due.” Nalle v. Harrell, 12 S.W.2d 550, 551 (Tex. [Comm’n Op.]

1929); Balfour Beatty Rail, Inc. v. Kan. City S. Ry. Co., 173 F. Supp. 3d 363, 406 (N.D.

Tex. 2016), aff’d as modified and remanded, 725 F. App’x 256 (5th Cir. 2018).

A defendant may raise a setoff either “as a defense or counterclaim.” Bandy,

835 S.W.2d at 618; J. Michael Ferguson, 2021 WL 2006321, at *26; see Trueheart v.

Braselton, 875 S.W.2d 412, 415 (Tex. App.—Corpus Christi–Edinburg 1994, no writ).

6 Thus, a defendant may defeat a plaintiff’s entitlement to summary judgment by raising

a fact issue on setoff if it is employed as an affirmative defense. See Stucki v. Noble,

963 S.W.2d 776, 781 (Tex. App.—San Antonio 1998, pet. denied) (“[T]he burden was

upon Stucki to produce competent summary judgment proof sufficient to raise a fact

question regarding whether offsets or payments had been credited to the note.”).

However, LAKXN’s briefing of the setoff issue leaves much to be desired. See

Tex. R. App. P. 38.1(i). The whole of LAKXN’s argument on this front is contained

in two sentences, which assert without elaboration that LAKXN’s evidence creates a

fact issue.2 LAKXN then broadly cites to a 130-page swath of the record, but

LAKXN offers no explanation of what evidence it contains or how it creates a fact

issue. Also absent is any discussion of equitable accounting, what it entails, or how it

might entitle LAKXN to the relief it seeks.3 We liberally construe briefs, but this

2 Those two sentences are as follows:

Here, the evidence, at the very least, raises a fact issue that TLC owes Pillar more than the $26,975.52 awarded to TLC by the trial court . . . and that Pillar validly assigned a limited portion of its claims against TLC to [LAKXN] in the amount of $26,975.52. . . . Accordingly, there is a genuine issue of material fact as to whether the money in equity and good conscience belongs to TLC because, as set forth above, there is a genuine issue of material fact that [LAKXN] is entitled to the funds as a setoff as Pillar’s limited assignee of the amount of the tax refund, $26,975.52, as an offset or setoff. 3 “An accounting may be a particular remedy sought in conjunction with another cause of action or it may be a suit in equity.” Yeske v. Piazza Del Arte, Inc., 513 S.W.3d 652, 674 (Tex. App.—Houston [14th Dist.] 2016, no pet.). “[W]hether to grant ‘an accounting is within the discretion of the trial court.’” Williams v. Wells Fargo

7 cursory sort of argument stretches that liberality to its breaking point. See Lion

Copolymer Holdings, LLC v. Lion Polymers, LLC, 614 S.W.3d 729, 732 (Tex. 2020) (per

curiam).

The problem is compounded by the unexplained gaps in LAKXN’s proof

concerning the setoff it seeks in this suit, which covers the period of 2016 to 2019. In

support of its defense, LAKXN primarily relies on an unsworn declaration from

Pillar’s employee Rhys Heinsch, along with calculations that Heinsch drafted and

testimony that he gave in a prior trial.

At the prior trial, Heinsch testified that when TLC breached the contract and

refused to sell the Property to Pillar as previously agreed, this caused Pillar to lose the

rental income that it would have otherwise collected between 2013 and 2015.

According to Heinsch, TLC’s breach also caused Pillar and LAKXN to miss out on a

more favorable interest rate. Heinsch quoted several numbers that related solely to

his damage calculations from 2013 to 2015.

Bank, N.A., 560 F. App’x 233, 243 (5th Cir. 2014) (quoting Sw. Livestock & Trucking Co. v. Dooley, 884 S.W.2d 805, 809 (Tex. App.—San Antonio 1994, writ denied)). An equitable accounting is proper when the facts and accounts presented are so complex that adequate relief may not be obtained at law. T.F.W. Mgmt., Inc. v. Westwood Shores Prop. Owners Ass’n, 79 S.W.3d 712, 717 (Tex. App.—Houston [14th Dist.] 2002, pet. denied); Hutchings v. Chevron U.S.A., Inc., 862 S.W.2d 752, 762 (Tex. App.—El Paso 1993, writ denied). “To be entitled to an accounting, a plaintiff usually must have a contractual or fiduciary relationship with the party from which the plaintiff seeks the accounting.” T.F.W., 79 S.W.3d at 717. “When a party can obtain adequate relief at law through the use of standard discovery procedures, such as requests for production and interrogatories, a trial court does not err in not ordering an accounting.” Id. at 717–18.

8 In his declaration in this suit, Heinsch states that he updated his calculations to

account for the period at issue in this suit, 2016 to 2019, and he attaches exhibits

reflecting the Property’s “balance sheet” and its “financial damages.” However, there

his explanation ends. Heinsch never states how he updated the calculations, the

significance of the exhibits or the numbers they contain, how they relate to equitable

accounting, or, most importantly, the basis of his personal knowledge. A declarant

must establish the basis for his personal knowledge. Kerlin v. Arias, 274 S.W.3d 666,

668 (Tex. 2008) (per curiam); Ruff v. Ruff, No. 11-20-00122-CV, 2021 WL 388707, at

*10 (Tex. App.—Eastland Feb. 4, 2021, pet. filed) (mem. op.). The numbers reflected

in those exhibits differ materially from his calculations at the prior trial and from the

numbers stated by another declarant, Mark Cooper, as the amount of damages that

LAKXN has sustained in this suit. Heinsch offers no testimony to explain these

discrepancies. He simply states that he reviewed financial data and arrived at certain

conclusions. “A conclusory statement is one that does not provide the underlying

facts to support the conclusion.” Atmos Energy Corp. v. Paul, 598 S.W.3d 431, 467

(Tex. App.—Fort Worth 2020, no pet.). Heinsch’s declaration is conclusory, and

“[c]onclusory statements are not proper summary judgment proof.” Id. As for the

exhibits attached to Heinsch’s declaration, while these financial documents might

mean something to an accountant, their significance is wholly lost on this court in the

absence of any meaningful explanation, either in the briefing or the evidence.

9 Thus, the sum total of what LAKXN has offered is: (1) by way of briefing, a

bare assertion that its evidence creates a fact issue, with no other argument and no

elucidation of what that evidence might be, and (2) by way of declaration, a

conclusory statement that certain calculations have been updated, with no

demonstration of personal knowledge and no explanation of the nature or

significance of those calculations. We cannot say that this is enough to adequately

brief the issue 4 or, even considering the merits, to create a fact issue on LAKXN’s

affirmative defense of setoff. See Stucki, 963 S.W.2d at 781.

Even setting aside the issues with LAKXN’s briefing and evidence, it should be

remembered that this is an equitable suit for money had and received and for

equitable accounting, and setoff itself has been described as an equitable doctrine. See,

e.g., Capital Concepts Props. 85-1 v. Mut. First, Inc., 35 F.3d 170, 175 (5th Cir. 1994).

Thus, equitable concerns take center stage, and one of those concerns must be the

negative equitable dimension of Pillar’s assignment of its claim to LAKXN. By

partially assigning a claim to LAKXN in the exact amount of the liability asserted by

TLC, Pillar is attempting to manufacture a fact issue where none would otherwise

exist. In doing so, Pillar is needlessly doubling the amount of litigation involved in

resolving its claim.

“Brief conclusory statements unsupported by argument or citation to legal 4

authorities present nothing for review.” In re C.R.A., 453 S.W.3d 623, 633 (Tex. App.—Fort Worth 2014, no pet.).

10 As a general rule, “causes of action are freely assignable in Texas.” Am.

Homeowner Pres. Fund, LP v. Pirkle, 475 S.W.3d 507, 517 (Tex. App.—Fort Worth 2015,

pet. denied). “However, exceptions have been carved out of this general rule, mostly

in situations when the particular assignment presents specific dangers, such as jury

confusion, the multiplication of disputes, and potential prejudice to the parties.” Id.

(cleaned up). Thus, courts may employ equitable principles to bar certain types of

assignment, id. at 518, wherein an assignment is used as a “transparent device” to

“increase and distort litigation.” State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696,

708, 711 (Tex. 1996).

We do not go so far as to strip the assignment of legal force. Rather, we simply

note that equity traditionally has an “aversion” to “the multiplying of contentions and

suits” through manipulative assignments. Id. at 706 (cleaned up). Pillar’s assignment

to LAKXN is a transparent ploy that would unnecessarily multiply the contentions

and suits. Thus, Pillar and LAKXN’s attempt to distort the litigation does not swing

the balance of equities in their favor, which is essential since the merits of this suit

come down to the interplay of three equitable doctrines.5

5 Briefly, LAKXN also maintains that the affirmative defense of express contract should bar TLC’s equitable suit for money had and received. “[W]hen a valid agreement already addresses the matter, recovery under an equitable theory is generally inconsistent with the express agreement.” Excess Underwriters at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 50 (Tex. 2008) (op. on reh’g). “It has long been the law . . . that where an adequate and complete remedy at law is provided, our courts, though clothed with equitable jurisdiction, will not grant equitable relief.” GRCDallasHomes, 619 S.W.3d at 308 (cleaned up).

11 We therefore overrule LAKXN’s first issue for reasons of inadequate briefing,

failure of summary judgment proof, and equity. Most important are the deficiencies

in LAKXN’s summary judgment proof; because LAKXN failed to carry its

responsive burden to generate a fact issue on its affirmative defense, TLC is entitled

to summary judgment on its claim for money had and received. This renders it

unnecessary to consider LAKXN’s remaining arguments, which attack the alternative

grounds on which summary judgment might also have been upheld.

IV. CONCLUSION

We affirm the trial court’s summary judgment in favor of TLC.

/s/ Wade Birdwell

Wade Birdwell Justice

Delivered: July 22, 2021

LAKXN has not identified what contract covers the subject matter of TLC’s suit for money had and received, which concerns LAKXN’s wrongful withholding of a tax refund that was meant for TLC. The only contract that LAKXN included in its summary judgment proof was the contract whereby TLC agreed to sell the Property to Pillar, but that contract says nothing of a tax refund that would not be accrued until six years after the contract was finalized. We therefore do not see what contract overlaps with the subject matter of TLC’s claim for money had and received. LAKXN has failed to create a fact issue on the affirmative defense of express contract.