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«COINMACH CORP. F/K/A SOLON AUTOMATED SERVICES, INC., PETITIONER, v. ASPENWOOD APARTMENT CORP., RESPONDENT ...»

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IN THE SUPREME COURT OF TEXAS

444444444444

NO. 11-0213

444444444444

COINMACH CORP. F/K/A SOLON AUTOMATED SERVICES, INC., PETITIONER,

v.

ASPENWOOD APARTMENT CORP., RESPONDENT

4444444444444444444444444444444444444444444444444444

ON PETITION FOR REVIEW FROM THE

COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS

4444444444444444444444444444444444444444444444444444 Argued February 27, 2013 JUSTICE BOYD delivered the opinion of the Court.

JUSTICE GUZMAN filed a concurring opinion, joined by JUSTICE DEVINE and JUSTICE BROWN.

We have previously explained that a tenant “who remains in possession of the premises after termination of the lease occupies ‘wrongfully’ and is said to have a tenancy at sufferance.” Bockelmann v. Marynick, 788 S.W.2d 569, 571 (Tex. 1990). This case involves a commercial tenant that remained in possession for six years after it lost its lease when the property was sold through foreclosure. After arguing to the contrary—at times successfully—for over ten years, the tenant ultimately conceded that the foreclosure terminated the lease and, because the new owner immediately and continually insisted that the tenant vacate the premises, the tenant became a tenant at sufferance. We must decide whether the tenant can be liable for breach of the terminated lease, for trespass and other torts, or for violations of the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA), and whether the property owner can recover attorney’s fees under the Texas Uniform Declaratory Judgments Act (UDJA). The trial court entered summary judgment for the tenant on all of the owner’s claims, and the court of appeals reversed and remanded in part.

Agreeing with the court of appeals, we hold that (1) a tenant at sufferance cannot be liable for breach of the previously-terminated lease agreement; (2) a tenant at sufferance is a trespasser and can be liable in tort (although the extent of liability depends on the nature of the trespass), including, in this case, tortious interference with prospective business relations; and (3) the tenant in this case cannot be liable under the DTPA because the property owner was not a consumer. Disagreeing with the court of appeals, we hold that (4) the property owner in this case cannot recover under the UDJA.

We therefore affirm the court of appeals’ judgment in part, reverse in part, render judgment for the tenant on the owner’s claim for declaratory relief, and remand the case to the trial court for further proceedings.

I.

BACKGROUND

Coinmach Corp. installs and maintains coin-operated laundry machines in apartment complexes. Rather than lease its equipment to property owners, it leases laundry rooms from the owners and installs and operates its own machines in those rooms. In 1980, Coinmach entered into a ten-year lease of “the laundry room(s)” at the Garden View Apartments in Harris County, Texas.

The lease was expressly “subordinate to any mortgage or deed of trust on the premises.” In 1989, the parties extended the lease term until 1999. In 1994, the owner’s lender foreclosed on its deed of trust. The individual who bought the complex at the foreclosure sale immediately deeded it to a

–  –  –

Apartment Corp.

Aspenwood immediately gave Coinmach written notice to vacate the laundry rooms, asserting that the foreclosure sale had terminated the lease and that Coinmach had failed to maintain the equipment in an adequate and safe condition. When Coinmach refused to vacate, Aspenwood removed Coinmach’s equipment, began to remodel one of the laundry rooms, and filed a forcible entry and detainer (FED) action to evict Coinmach from the premises. Coinmach, in turn, obtained a writ of reentry from the justice court,1 and refused to vacate the premises.

Two years later,2 Aspenwood sent Coinmach another notice to vacate and filed a second FED action. This time, the justice court ordered Coinmach to vacate the property, but Coinmach appealed for a de novo trial and the county court at law reversed. Aspenwood appealed that judgment to the court of appeals, but that court ultimately dismissed the appeal for want of jurisdiction.3 By then, the lease’s 1999 termination date had passed, but Coinmach still refused to vacate. After Aspenwood contracted with a different laundry company and that company set up operations in a 1 Aspenwood asserts that Coinmach obtained this writ ex parte based on a sworn affidavit that failed to disclose that the lease was expressly subordinate to a deed of trust that had been foreclosed, and that falsely stated that Coinmach’s equipment was perfectly functional when in fact it was in bad condition and presented a danger to the complex’s residents. W e need not and do not consider these factual assertions to resolve this appeal.

2 The record does not explain Aspenwood’s delay in sending additional notices to vacate, or in filing this lawsuit. Again, we need not address these factual issues, other than to note the parties’ agreement that Aspenwood continually objected, and never consented, to Coinmach’s possession of the premises.





3 See Aspenwood Apartment Corp. v. Solon Automated Servs., No. 01-98-00516-CV, 1999 W L 1063435 (Tex.

App.— Houston [1st Dist.] Nov. 24, 1999, no pet.) (not designated for publication); see also Acts of May 27, 1997, 75th Leg., ch. 1205 1997 Tex. Gen. Laws 4628-29 (amended 2011) (current version at TEX. PROP. CODE § 24.007(a)) (providing that final judgment of a county court in an eviction suit may not be appealed on the issue of possession unless the premises are used only for residential purposes).

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and forced that company to leave the premises, based this time on sworn testimony that the lease had automatically renewed for another nineteen-year term. Coinmach thus continually remained in possession of the premises, while Aspenwood continued to send additional notices to vacate, complaining of Coinmach’s repeated failures to maintain the condition of its equipment, pay rent, and provide an accounting of its receipts. Aspenwood maintains it never cashed any checks it received from Coinmach.

Meanwhile, Aspenwood filed the present suit in district court in 1998, shortly after it filed the second FED action. Aspenwood originally asserted claims against Coinmach for trespass to try title, common law trespass, breach of the lease agreement, DTPA violations, statutory and common law fraud, tortious interference with prospective business relations, and a declaratory judgment that Coinmach had no right to possession and no leasehold interest in the property. Coinmach filed counterclaims for breach of the lease agreement, breach of warranties of possession, quiet enjoyment, fitness for a particular purpose, and suitability, defamation, tortious interference, bad faith, and harassment. The trial court first ruled as a matter of law that the 1994 foreclosure sale had terminated Coinmach’s lease agreement. It then submitted the case to a jury, which found in favor of Aspenwood and awarded approximately $1.5 million, consisting of actual damages, DTPA treble damages, exemplary damages, attorney’s fees, and prejudgment interest. In the spring of 2000, after the trial court entered judgment for Aspenwood on the jury’s verdict, Coinmach vacated the premises.

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The parties subsequently amended their pleadings. Aspenwood reasserted all of its prior claims except for statutory and common law fraud, while Coinmach continued to deny liability but dropped all of its counterclaims. In May 2007, the trial court entered a partial summary judgment, ruling that the foreclosure sale terminated the lease and that Coinmach became a tenant at sufferance. Based on these holdings, the court struck all of Aspenwood’s breach of contract claims. Coinmach then filed motions for summary judgment and Rule 166 motions asking the court to rule, as a matter of law, that a tenant at sufferance cannot be a trespasser; that Aspenwood could not seek declaratory relief and attorney’s fees under the UDJA; that Aspenwood’s trespass, trespass to try title, DTPA, and tortious interference claims were either moot or procedurally improper; and that, since Coinmach was not a trespasser, it could not be liable for such tort-based claims. In June 2008, the trial court issued orders granting Coinmach’s motions, ruling that Aspenwood was not a consumer under the DTPA and that Coinmach had a possessory interest in the property from the time of foreclosure until it vacated the premises in 2000, and concluding that the effect of its legal rulings was to preclude Aspenwood’s remaining claims as a matter of law. The court thus entered judgment that Aspenwood take nothing on its claims.

The court of appeals affirmed in part, reversed in part, and remanded. The court affirmed the dismissal of Aspenwood’s breach of contract claims, holding that, because Aspenwood never consented to Coinmach’s remaining on the premises, no actual or implied contractual relationship existed between the parties. 349 S.W.3d at 634. But the court reversed and remanded Aspenwood’s claims for trespass, trespass to try title, tortious interference, and declaratory judgment, concluding

–  –  –

Finally, the court affirmed the dismissal of Aspenwood’s DTPA claims, agreeing with the trial court that Aspenwood was not a consumer. Id. at 640. We granted both parties’ petitions for review.

–  –  –

Generally, a valid foreclosure of an owner’s interest in property terminates any agreement through which the owner has leased the property to another. B.F. Avery & Sons’ Plow Co. v.

Kennerly, 12 S.W.2d 140, 141 (Tex. Comm’n App. 1929, judgm’t adopted); see also Twelve Oaks Tower I, Ltd. v. Premier Allergy, Inc., 938 S.W.2d 102, 108–09 (Tex. App.—Houston [14th Dist.] 1996, no writ); ICM Mortg. Corp. v. Jacob, 902 S.W.2d 527, 530–31 (Tex. App.—El Paso 1994, writ denied). This is particularly true when, as here, the lease agreement is expressly subordinate to a mortgage or deed of trust affecting the leased premises. Although Coinmach argued to the contrary in support of its effort to avoid eviction, even it now concedes that, “when an owner defaults on a mortgage and the property is sold at foreclosure, the purchaser takes the property free of any leases subordinate to the deed of trust being foreclosed upon.” Agreeing that the 1994 foreclosure terminated Coinmach’s lease of the laundry rooms, we address the effect of the termination on the parties’ legal rights.

–  –  –

The parties now agree that, upon termination of the lease, Coinmach became a “tenant at sufferance.” Despite their agreement on this point, we must briefly address the nature of a tenancy at sufferance, as a foundation for our discussion of the points on which the parties do not agree. A

–  –  –

“holdover tenant.” See Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 908 (Tex. 2007). The status and rights of a holdover tenant, however, differ depending on whether the tenant becomes a “tenant at will” or a “tenant at sufferance.” See, e.g., TEX. PROP. CODE § 24.002(a)(2) (providing that a person commits a forcible detainer if the person “is a tenant at will or by sufferance, including an occupant at the time of foreclosure of a lien superior to the tenant’s lease”).

A tenant at will is a holdover tenant who “holds possession with the landlord’s consent but without fixed terms (as to duration or rent).” BLACK’S LAW DICTIONARY 1604 (9th ed. 2009).

Because tenants at will remain in possession with their landlords’ consent, their possession is lawful, but it is for no fixed term, and the landlords can put them out of possession at any time. Robb v. San Antonio St. Ry., 18 S.W. 707, 708 (Tex. 1891); see also ICM Mortg., 902 S.W.2d at 530. By contrast, a tenant at sufferance is “[a] tenant who has been in lawful possession of property and wrongfully remains as a holdover after the tenant’s interest has expired.” BLACK’S LAW DICTIONARY 1605 (9th ed. 2009); see also Bockelmann, 788 S.W.2d at 571 (“A tenant who remains in possession of the premises after termination of the lease occupies ‘wrongfully’ and is said to have a tenancy at sufferance.”). The defining characteristic of a tenancy at sufferance is the lack of the landlord’s consent to the tenant’s continued possession of the premises. See, e.g., ICM Mortg., 902 S.W.2d at 530. With the owner’s consent, the holdover tenant becomes a tenant at will; without it, a tenant at sufferance.

A lease agreement may provide that its terms continue to apply to a holdover tenant. See Bockelmann, 788 S.W.2d at 571–72. But if, as here, the lease does not address the issue, and if the

–  –  –

holdover tenant becomes a tenant at will or a tenant at sufferance. See, e.g., Mount Calvary Missionary Baptist Church v. Morse St. Baptist Church, 2005 WL 1654752, at *7 (Tex. App.—Fort Worth 2005, no pet.) (mem. op.). “Under the common law holdover rule, a landlord may elect to treat a tenant holding over as either a trespasser”—that is, a tenant at sufferance—“or as a tenant holding under the terms of the original lease”—that is, a tenant at will. Bockelmann, 788 S.W.2d at 571; see also Howeth v. Anderson, 25 Tex. 557, 572 (1860) (holding that a landlord may treat a holdover tenant as either a trespasser or a tenant at will). Thus, an implied agreement to create a new lease using the terms of the prior lease may arise if both parties engage in conduct that manifests such intent. See, e.g., ICM Mortg., 902 S.W.2d at 532–33; Twelve Oaks Tower, 938 S.W.2d at 108–10. If the tenant remains in possession and continues to pay rent, and the landlord, having knowledge of the tenant’s possession, continues to accept the rent without objection to the continued possession, the tenant is a tenant at will, and the terms of the prior lease will continue to govern the new arrangement absent an agreement to the contrary. See, e.g., Carrasco v. Stewart, 224 S.W.3d 363, 368 (Tex. App.—El Paso 2006, no pet.); Barragan v. Munoz, 525 S.W.2d 559, 561–62 (Tex.



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