A construction company convinced an appeals court to reverse a summary judgment against it in its fraud and breach of contract case against Madison Plaza, LP.
While the 58th District Court in Jefferson County, Texas granted Madison summary judgment in Wallace Construction & Development Company’s lawsuit, the Court of Appeals for the Ninth District of Texas at Beaumont reversed the ruling on Sept. 26.
Madison was hit with a lawsuit after it refused to acknowledge what Wallace said was a verbal joint venture between the two. The supposed agreement gave Wallace 25 percent interest as profit in one of Madison’s projects in which Wallace served as the construction company. Wallace appealed after the lower court granted Madison summary judgment on Wallace’s attempt to get a declaratory judgment that would order Madison to recognize the partnership. The appeals court reversed in Wallace's favor.
Madison had argued that Wallace had no right to sue because it was a terminated entity via the Texas Business Organizations Code. Wallace said that was not the case, and the appeals court agreed.
“We conclude that, under the terms of section 11.001(4) of TBOC, Wallace never became a terminated entity because (1) its existence was not terminated in a manner authorized by the TBOC, since the TBOC no longer authorizes termination for failure to pay franchise taxes, and (2) Wallace’s forfeiture pursuant to the Tax Code was set aside in 2018,” the appeals court said.
Wallace also said that Madison failed to establish its affirmative defense for fraud, fraudulent inducement and breach of contract claims. The appeals court also backed this argument and pointed out that Wallace pleaded the discovery rule on the claims. So to win this round, Madison had to refute the application of the rule, which it didn’t do. The appeals court added that Madison failed to show that there were no genuine issues of material fact.
Justice Steve McKeithen authored the opinion. Chief Justice Hollis Horton and Justice Leanne Johnson concurred.
Wallace sued Madison on Feb. 24, 2014, asking the district court for declaratory judgment on its fraud, fraudulent inducement and breach of contract claims.