HOUSTON – The 14th Court of Appeals has reversed rulings made by a Texas district court in a settlement case between a restaurant and a lot owner.

The opinion, filed on Aug. 22 by Justice Tracy Christopher, sent both issues back the Harris County 61st District Court to be resolved.

According to the opinion, the disputes began in 2013 after customers of Tony's Barbeque and Steakhouse were parking in Three Points Investments LTD's lot, which was next to the restaurant's parking lot. Three Points sued Tony's Barbeque alleging trespass, unjust enrichment and breach of the lease. The trial court set the deadline for the parties to amend the pleadings to Nov. 9, 2015.

The parties filed a Rule 11 settlement agreement eight days after the amendment deadline had passed. The court of appeals stated that under the agreement, "Restaurant’s title insurer was to pay Three Points $45,000 within 45 days, and the restaurant was to purchase Three Points’ lot for $78,000. The parties agreed that the restaurant would pay $25,000 at the closing on the property, and the remaining $53,000 would be financed at 7 percent for 24 months."

The parties also agreed that the "deed conveying the property would not be filed at closing but would be held in trust until the restaurant paid the note in full," the opinion states.

One month later, Three Points amended its petition in order to assert a claim for anticipatory breach of the agreement. The restaurant's title insurer then sent Three Points a check for $45,000. Later, Tony's Barbeque discovered that it "could not obtain a title-insurance policy if the deed was held in trust," the opinion states. Despite the agreement, the property sale tax never closed.

On Jan. 20, 2016, Tony's Barbeque amended its pleading to make a counterclaim against Three Points to enforce the settlement agreement. Three Points moved to strike the amended pleading on grounds that it was filled after the deadline. The trial granted the motion the next day at a pretrial conference.

Tony's Barbeque moved for entry of judgment to enforce the settlement. At the trial, Three Points argued that neither parties knew that holding the deed in trust would produce a cloud on the title. The trial court then denied the restaurant's motions, and the jury found Three Points to be victorious in the case. The investment company was awarded $500 for trespass, $92,000 for unjust enrichment and attorney's fees.

Tony's Barbeque appealed the trial's decision and also filed a separate suit three weeks later against Three Points for breach of the settlement agreement, breach of the property tax contact that was within the agreement and fraud. The investment company moved to dismiss all claims against it on the ground of res judicata, which refers to a case having encountered a final judgment and therefore cannot be appealed. The trial court granted the motion and dismissed the restaurant's claims. 

Tony's Barbeque appealed this decision, arguing that the trail court "erred in striking its settlement agreement claims," erred in "finding that the settlement agreement was the result of mutual mistake," and erred in "ordering the restaurant to pay Three Points’ attorney’s fees."

The court of appeal agreed with the restaurant's claims. The court found that the trial court abused its discretion in refusing the restaurant's last-amended pleading and that the new pending amendment should have been allowed because the new claim arose from the settlement agreement that satisfied the rules governing late-filed pleading amendments. 

The court also found that the restaurant's pleading has not been established as barred by res judicata because the restaurant "filed a separate suit to resolve the settlement dispute and asked the appellate court to abate the appeal of the underlying cause pending that resolution," which is allowed.

The trial court's judgments were reversed and referred back to the trial court for further proceedings, including the award, costs and attorney's fees.

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