Case Notes

First Cash had to move its business to a new location and the building in which it had leased space was then demolished. (The landlord at the time of the breach was the successor to the entities that originally leased the space to First Cash, but the owners of the original and successor landlord entities were one and the same.)

Plaintiff First Cash sued for damages and won. In accordance with Tex. Civ. Prac. & Rem. Code Ann. (Supp. 2017), when a party makes a claim for damages due to breach of an oral or written contract, they may be awarded attorney fees from the individual or corporation responsible. The jury, in addition to awarding compensatory damages, also awarded the plaintiff $800,000+ in attorney fees, to be paid by the defendants. These entities were limited liability companies, however, not individuals or corporations, so they moved for judgment notwithstanding the verdict (JNOV), arguing that attorney fees cannot be awarded against LLCs §38.001(8). The court granted the motion, and First Cash
appealed.

The court on appeal noted that attorney fees are recoverable only if the contract in question provides for them or if such fee award is specifically authorized by statute. Intercontinental Grp. P'ship v. KB Home Lone Star LP, 295 S.W.3d 650, 653 (Tex. 2009). However, Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (Supp. 2017) limits who may be charged attorney fees — individuals and corporations. First Cash tried to argue that the legislature intended the word “individuals” to mean both persons and entities, but the court, after reviewing § 38.001(8) and its predecessor statute, was unconvinced. The predecessor statute to §38.001(8) was article 2226 of the Texas Revised Civil Statutes, which provided that “[a]ny person, corporation, partnership, or other legal entity having a valid claim against a person or corporation for … suits founded on oral or written contracts” may recover a reasonable amount as attorney's fees. The difference between the two versions pertinent here was the change from the word “person” to the word “individual” — previously, a “person” could be ordered to pay attorney fees and now an “individual” could be so ordered.

The attorney's fees statute is construed in accordance with Texas' code construction act, said the court. That act — Tex. Gov't Code Ann. §311.005(2) (West, Westlaw through 2017 1st C.S.) — defines the word “person” to include a “corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity.” The word “individual” is not defined by the code construction act, but Texas' business organizations code defines “individual” as a “natural person.” Tex. Bus. Orgs. Code Ann. §1.002(38) (West, Westlaw through 2017 1st C.S.). Using these definitions to interpret the ability of the courts to award attorney fees, it would seem then that under the prior version of statute, an LLC — as a “legal entity” — could have been made to pay them.

However, Texas' courts had almost unanimously declined to read the attorney fee statute in that manner, opting instead to order payment of attorney fees in contract disputes only when the losing party was a natural person or a corporation. The exception to this was the case of Wickersham Ford, Inc. v. Orange Cty., 701 S.W.2d 344, 348-49 (Tex. App. – Beaumont 1985, no writ), where a court determined that a county qualified as both a “person” and a “corporation” under the attorney's fees statute, and the plaintiff could therefore be awarded attorney fees. Just after this case was decided, the legislature recodified the attorney fee statute, changing the phrase “person or corporation” to “individual or corporation,” thus eliminating the need to adhere to the Code Construction Act's broad definition of “person” when considering the award of such fees. The word “individual,” not being broadly defined in any other code section, could then be given its plain meaning. Stated the court: “When interpreted according to its plain language, section 38.001 can readily be reconciled with cases construing the predecessor statute to have the same plain meaning: in a breach of contract case, attorney's fees may only be assessed against a natural person or an actual corporation.” Because the statute authorizes recovery of attorney fees only from an “individual or corporation,” and an LLC is neither of these, the appellate court determined that the trial court did not err in granting judgment notwithstanding the
verdict.

No Interaction, No Equitable Tolling

The Court of Appeals of Michigan has determined that the Wayne Circuit Court did not err in dismissing an action brought by a landowner against the former owner of the land, as the action was not timely filed and there was no basis for excusing the delay under the doctrine of equitable tolling. Cloverdale Holdings v. Whitlow, 2018 Mich. App. LEXIS 188 (2018).
Defendant Patricia Whitlow, as a co-owner, through a Michigan co-partnership with others (the co-partnership was known as The Prairie Company) of a certain plot of land, permitted another entity, H.F. Properties, to erect a cell tower and accompanying buildings on the land. H.F. Properties was owned by five families, one of which included defendant Whitlow. H.F. Properties leased the cell tower and its appurtenant buildings and land to an outside entity, Pinnacle Tower, which paid H.F. Properties rent.
At some time after 1997, The Prairie Company conveyed all the land to another owner. In 2006, plaintiff Coverdale Holdings took ownership of the entire plot of land from that interim owner. After failing to pay taxes on the land, plaintiff lost the property in a foreclosure sale. While removing its belongings from the property in 2012, plaintiff's representative learned from the new owner of the premises that there was a cell tower on the land that had been leased for years by an outside entity (Pinnacle) and that another outside entity (H.F. Properties) had been receiving rents on it for many years, even though it no longer held legal rights to the cell tower, the entire property having been conveyed to another around 1997.
Plaintiff Cloverdale Holdings' brought suit against, among others, Patricia Whitlow, alleging common law conversion, statutory conversion, tortious interference with business expectancy, tortious interference with contract, civil conspiracy and unjust enrichment. Patricia Whitlow moved for summary dismissal of the claims against her, which the trial court granted, as Michigan law imposed a three-year statute of limitations on the plaintiff's claims.
On appeal, the plaintiff argued the statute of limitations should be equitably tolled because the defendant concealed the fact that she was receiving rents that she was not entitled to. However, the Court of Appeals of Michigan agreed with the trial court that although the defendant likely committed fraud in accepting those lease payments from Pinnacle, equitable tolling of the statute of limitations was not authorized. The reason: in order to equitably toll the statute of limitations, it must be shown that the defendant acted in a manner intended to induce the plaintiff to forego seeking its rights. Here, the plaintiff and defendant Whitlow did not interact at all, and in fact did not know of each other's existence.