                                         NO. 12-19-00013-CV

                                IN THE COURT OF APPEALS

                  TWELFTH COURT OF APPEALS DISTRICT

                                             TYLER, TEXAS

 BREAKWATER ADVANCED                                       §       APPEAL FROM THE
 MANUFACTURING, LLC, MARK
 LEACH, BRYAN BENOIT, AND GREG
 DAVID,
 APPELLANTS
                                                           §       COUNTY COURT AT LAW NO. 2
 V.

 EAST TEXAS MACHINE WORKS,
 INC.,
 APPELLEE                                                  §       GREGG COUNTY, TEXAS

                                         MEMORANDUM OPINION
        Breakwater Advanced Manufacturing, LLC (Breakwater), Mark Leach, Bryan Benoit, and
Greg David appeal the trial court’s order granting summary judgment in favor of East Texas Machine
Works, Inc. (ETM). Appellants present six issues for our consideration. We affirm in part and
reverse and remand in part.


                                                  BACKGROUND
        In December 2015 and January 2016, ETM sold machining services to Breakwater. Leach,
Benoit, and David are members of Breakwater. 1 Appellants failed to pay the invoices for several
months. In August, ETM sued Appellants for suit on an account and breach of contract. ETM
attached two unpaid invoices dated December 28, 2015 and January 7, 2016, respectively, totaling
$31,800. On September 21, Appellants paid ETM $10,000. In October, Appellants filed a general
denial and sought reimbursement of attorney’s fees and litigation costs.

        1
          In its original petition, ETM also sued Velocity Machine, Inc. and three other individuals: Eileen Naquin,
Lester LeBouef, and Glen DeCoux. ETM filed a notice of non-suit with respect to Velocity Machine, Naquin, and
LeBouef. DeCoux was never served with citation. Thus, the trial court granted summary judgment only against
Breakwater, Leach, Benoit, and David. In an affidavit filed by Leach on September 9, 2017, he explained that Breakwater
purchased Velocity Machine’s assets in February 2014 and thereafter conducted business as Velocity Machine.
        In December, Appellants made an offer of settlement, pursuant to Texas Rule of Civil
Procedure 167, for $25,230. 2 ETM filed written objections to the offer. In January 2017, the trial
court held a hearing to determine the validity of ETM’s objections to Appellant’s offer. Appellants
waived their appearance at the hearing, and the trial court sustained ETM’s objections. On March
21, 2017, Appellants paid ETM $21,800.
        Thereafter, Appellants filed a traditional and no evidence summary judgment motion. ETM
responded to the motion, and filed a counter motion for traditional summary judgment. When
granting ETM’s motion and denying Appellants’ motion, the trial court issued a letter ruling setting
forth the reasons for its rulings. The trial court’s written order denying Appellants’ summary
judgment motion does not contain its reasons for granting ETM’s summary judgment motion but
states that ETM’s motion is granted “as set forth in the Court’s letter ruling dated October 23, 2018.”
The trial court’s written order provides that ETM recover $1,895.63 in interest and $12,000 in
attorney’s fees from Breakwater, Leach, Benoit, and David, jointly and severally. 3 This appeal
followed.


                                      THE TRIAL COURT’S LETTER RULING
        Before we address the issues in this case, we first must determine the extent to which we may
consider the trial court’s letter ruling.
        The letter ruling states the following reasons for granting ETM’s motion for summary
judgment:


        1.     ETM’s live pleading alleges a suit on sworn account and contains a verification of paragraphs
               VIII-IX.
        2.     Appellants failed to file a verified denial pursuant to Rule 93 of the rules of civil procedure as
               required to dispute the receipt of the services or correctness of the charges in a suit on a sworn
               account.
        3.     The invoices attached to ETM’s petition state the terms of payment as “[n]et 30 days” and
               “[a]ccounts are due and payable according to the indicated terms. If not paid within term, account
               will be past due and subject to the maximum interest charge allowed by law.”
        4.     The invoices are evidence of an implied agreement to pay interest on the past due accounts.



        2
            TEX. R. CIV. P. 167.2.
        3
           The trial court further awarded ETM $7,500 in attorney’s fees through appeal to this Court, and $5,000 in
attorney’s fees through appeal to the Texas Supreme Court against Breakwater, Leach, Benoit, and David, jointly and
severally.


                                                            2
       5.   Appellants payment of the invoices during the pendency of the lawsuit did not extinguish their
            agreement and obligation to pay the interest accruing on the account.
       6.   Appellants’ failure to pay the prejudgment interest necessitated the continuation of the lawsuit.
       7.   Breakwater’s corporate charter was forfeited in January 2017, and Leach, Benoit, and David were
            each shareholders of Breakwater at the time of the forfeiture.



       Findings of fact and conclusions of law are neither necessary nor proper in a summary
judgment proceeding. See IKB Indus. (Nigeria) Ltd. v. Pro-Line Corp., 938 S.W.2d 440, 441 (Tex.
1997). This is because a summary judgment is only properly rendered when there are no genuine
issues as to any material fact, and the legal grounds are limited to those stated in the motion and
response. Id. When a trial court sends a letter to the parties accompanying its order, the written
order itself, and not the letter, is controlling on appeal. See e.g. Trahan v. Fire Ins. Exchange, 179
S.W.3d 669, 672 n.2 (Tex. App.—Beaumont 2005, no pet.); see also Mattox v. Cty. Comm’rs Court,
389 S.W.3d 464, 469 (Tex. App.—Houston [14th Dist.] 2012, pet. denied); Bush v. Coleman
Powermate, Inc., No. 03-04-00196-CV, 2005 WL 1241075, at *8 (Tex. App.—Austin May 26, 2005,
no pet.) (mem. op); Shannon v. Tex. Gen. Indem. Co., 889 S.W.2d 662, 664 (Tex. App.—Houston
[14th Dist.] 1994, no writ). Moreover, a letter is not an appropriate method for apprising parties of
the grounds for granting an order or judgment. Shannon, 889 S.W.2d at 664; Martin v. Sw. Elec.
Power Co., 860 S.W.2d 197, 199 (Tex. App.—Texarkana 1993, writ denied). Because a letter ruling
cannot be considered on appeal as giving the comprehensive reasons that a trial court granted
summary judgment, we do not consider the trial court’s letter as conclusive on the bases for the trial
court’s rulings. Trahan, 179 S.W.3d at 672 n.2.
       When reviewing a summary judgment, courts of appeals should consider all summary
judgment grounds the trial court rules on and the movant preserves for appellate review that are
necessary for final disposition of the appeal. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623,
625-626 (Tex. 1996). We also may consider other grounds that the movant preserved for review and
the trial court did not rule on in the interest of judicial economy. Id. Thus, if any theory advanced
in a motion for summary judgment supports the granting of a summary judgment, we may affirm
regardless of whether the trial court specified the grounds on which it relied. See id.


               ISSUES NOT PRESENTED IN THE PARTIES’ WRITTEN MOTIONS
        Appellants present six issues for our review. We begin our analysis by framing the issues
we can consider in this case.


                                                          3
         All theories in support of or in opposition to a motion for summary judgment must be
presented in writing to the trial court. See TEX. R. CIV. P. 166a(c). A motion for summary judgment
must itself expressly present the grounds upon which it is made, and must stand or fall on these
grounds alone. See id.; Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 912 (Tex. 1997). A
court cannot grant summary judgment on grounds that were not presented. Johnson v. Brewer &
Pritchard, P.C., 73 S.W.3d 193, 204 (Tex. 2002). This court can only address grounds for summary
judgment that were raised in writing in the trial court. See TEX. R. CIV. P. 166a(c); Kaye/Bassman
Intern. Corp. v. Help Desk Now, Inc., 321 S.W.3d 806, 818 (Tex. App.—Dallas 2010, pet. denied);
Hackberry Creek Country Club, Inc. v. Hackberry Creek Home Owners Ass’n, 205 S.W.3d 46, 50
(Tex. App.—Dallas 2006, pet. denied). In determining whether the grounds are expressly presented,
we look only to the motion itself; we do not rely on briefs or summary judgment evidence. Science
Spectrum, Inc., 941 S.W.2d at 912.
         In Appellants’ first and second issues, they argue that the trial court erred in granting
summary judgment in favor of ETM and denying their motion for summary judgment based upon
their failure to file a verified denial as required by Texas Rules of Civil Procedure 93(10) and 185.
See TEX. R. CIV. P. 93(10) (listing certain pleas to be verified, including denial of an account which
is the foundation of the plaintiff’s action, and supported by affidavit); 185 (if party resisting sworn
suit on account claim does not timely file written denial, under oath, he shall not be permitted to deny
claim, or any item therein). According to ETM, Appellants did not comply with Rule 185 because
the affidavit that Appellants argue comported with Rules 93(10) and 185 was filed by another party
in the case. 4 See TEX. R. CIV. P. 93(10); 185. Moreover, ETM argues that the affidavit is insufficient
because it does not deny the account and does not appear in Appellants’ answer as required by Rules
93(10) and 185. See id. 93(10); 185. ETM argues that the trial court properly granted summary
judgment in favor of ETM against Leach, Benoit, and David individually, because these Appellants
failed to file a verified denial to contest their liability as partners or individuals as required by Rule
93. See id. 93(1)-(16) (listing certain pleas to be verified).
         ETM did not advance the argument that Appellants failed to comply with Rules 93 or 185 in
its written motion for summary judgment. 5 See TEX. R. CIV. P. 93(1-16); 185. Because the trial court


         4
          The affidavit, signed by Leach, was attached to a motion filed by Velocity Machine, Inc., Eileen Naquin, and
Lester LeBouef prior to ETM’s notice of non-suit against them.
         5
           This ground is identified in the trial court’s letter ruling, but as previously discussed, that letter is not
controlling.


                                                           4
cannot grant a motion for summary judgment on grounds not presented in the motion, we cannot
consider Appellants’ failure to file a verified denial as grounds for the affirmance of the trial court’s
summary judgment. See TEX. R. CIV. P. 166a(c); Johnson, 73 S.W.3d at 204; Science Spectrum,
Inc., 941 S.W.2d at 912; Kaye/Bassman Intern. Corp., 321 S.W.3d at 818; Hackberry Creek
Country Club, Inc., 205 S.W.3d at 50. Furthermore, ETM did not assert a suit on a sworn account
in any of its pleadings nor did it move for summary judgment on a claim for suit on a sworn account.
Appellants did not argue in their motion for summary judgment or responses that ETM failed to
comply with the procedural requirements of Rule 185. See TEX. R. CIV. P. 185. Therefore, ETM’s
failure to comply with the requirements of Rule 185 cannot be considered as grounds for reversal of
the trial court’s summary judgment or for the rendering of summary judgment in favor of Appellants.
See id. 166a(c); Johnson, 73 S.W.3d at 204; Science Spectrum, Inc., 941 S.W.2d at 912;
Kaye/Bassman Intern. Corp., 321 S.W.3d at 818; Hackberry Creek Country Club, Inc., 205 S.W.3d
at 50.
         In Appellants’ third issue, they argue that the trial court erred in granting summary judgment
in favor of ETM because the trial court incorrectly found that ETM’s invoices presented evidence
of an implied agreement to pay interest on the past due accounts. This argument challenges another
of the bases enumerated in the trial court’s letter ruling. However, ETM did not move for summary
judgment on grounds that the invoices created an implied agreement to pay interest. Thus, an implied
agreement to pay interest cannot be considered as a ground for affirmance of the trial court’s
summary judgment. See TEX. R. CIV. P. 166a(c); Johnson, 73 S.W.3d at 204; Science Spectrum,
Inc., 941 S.W.2d at 912; Kaye/Bassman Intern. Corp., 321 S.W.3d at 818; Hackberry Creek
Country Club, Inc., 205 S.W.3d at 50.
         In Appellant’s sixth issue, they assert entitlement to attorney’s fees under Rule 167 because
they made an offer of settlement, they contend the trial court erred in sustaining ETM’s objections
to their offer of settlement, and ETM was not entitled to recover damages. See TEX. R. CIV. P. 167.1
(except in specified cases, certain litigation costs may be awarded against a party who rejects an offer
made substantially in accordance with the Rule to settle a claim for monetary damages), 167.2
(settlement offer), 167.4 (if settlement offer is rejected, and judgment to be awarded on monetary
claims covered by offer is significantly less favorable to offeree than was the offer, court must award
the offeror litigation costs, which includes reasonable attorney’s fees, against offeree from time offer
was rejected to time of judgment). Although the record reflects that the trial court sustained ETM’s
objections to Appellants’ offer, Appellants did not argue in their written motion for summary


                                                   5
judgment that the trial court erred in sustaining ETM’s objections. 6 Thus, we cannot consider
Appellant’s argument that the trial court erred in sustaining ETM’s objections to Appellants’ offer
of settlement because it was not presented to the trial court in Appellants’ written motion for
summary judgment. See TEX. R. CIV. P. 166a(c); Johnson, 73 S.W.3d at 204; Science Spectrum,
Inc., 941 S.W.2d at 912; Kaye/Bassman Intern. Corp., 321 S.W.3d at 818; Hackberry Creek
Country Club, Inc., 205 S.W.3d at 50.
         As part of their sixth issue, Appellants also argue that they should have prevailed on their
declaratory judgment claims and are entitled to attorney’s fees under Chapter 37 of the civil practice
and remedies code. See TEX. CIV. PRAC. & REM. CODE ANN. 37.009 (West 2015) (in any proceeding
under Chapter 37, declaratory judgments, court may award costs and reasonable and necessary
attorney’s fees as are equitable and just). 7 The record reflects that Appellants asserted counter claims
for declaratory judgment prior to moving for summary judgment; however, their motion and
responses did not address their claims for declaratory judgment or argue entitlement to attorney’s
fees pursuant to Chapter 37. See id. Thus, we cannot address Appellants’ argument that they are
entitled to a declaratory judgment and attorney’s fees pursuant to Chapter 37. See TEX. R. CIV. P.
166a(c); Johnson, 73 S.W.3d at 204; Science Spectrum, Inc., 941 S.W.2d at 912; Kaye/Bassman
Intern. Corp., 321 S.W.3d at 818; Hackberry Creek Country Club, Inc., 205 S.W.3d at 50.
         Because issues one, two, three, and six were not raised in the summary judgment pleadings,
we do not consider them in this appeal.


                                                   REMAINING ISSUES
         After a review of Appellants’ written summary judgment motion, responses, and brief on
appeal, we conclude that Appellants raised and preserved two issues. The first is whether Appellants’
payment of the account prior to the rendition of a final judgment (1) precludes ETM from proving
the elements of suit on account or breach of contract, (2) entitles Appellants to no evidence or
traditional summary judgment, (3) precludes ETM from recovering prejudgment interest, and (4)

        6
           Rejection of an offer made subject to a condition determined by the trial court to have been unreasonable
cannot be the basis for an award of litigation costs under Rule 167.2. TEX. R. CIV. P. 167.2(c).
         7
             Neither party contends that the trial court’s judgment is not final. We note that the trial court’s judgment states
that it is final and that “[a]ll other relief requested by any of the parties not addressed in this Final Judgment is denied.”
Moreover, given that Appellants sought declarations that (1) payment of the account requires that ETM take nothing and
(2) payment of the account precludes ETM from recovering attorney’s fees for breach of contract, it is clear that the
intent of the trial court’s judgment is to finally dispose of the case. See Lehmann v. Har-Con Corp., 39 S.W.3d 191,
200 (Tex. 2001).


                                                               6
precludes ETM from recovering attorney’s fees (issue four). 8 The second is whether ETM met its
burden on summary judgment to show it is entitled to recover from Leach, Benoit, and David
individually pursuant to Section 171.255 of the Texas Tax Code (issue five). See TEX. TAX CODE
ANN. § 171.255 (West 2015).
Standard of Review and Applicable Law
        The movant for traditional summary judgment has the burden of showing that there is no
genuine issue of material fact and that it is entitled to judgment as a matter of law. See TEX. R. CIV.
P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). When reviewing
traditional and no evidence summary judgments, we perform a de novo review of the entire record
in the light most favorable to the nonmovant, indulging every reasonable inference and resolving any
doubts against the motion. See Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006); KPMG Peat
Marwick v. Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999).
         When, as here, competing motions for summary judgment are filed, and one is granted while
the other is denied, we first review the order granting summary judgment. See Cent. Mut. Ins. Co.
v. KPE Firstplace Land, LLC, 271 S.W.3d 454, 458 (Tex. App.—Tyler 2008, no pet.). If we
determine the order was erroneous, we review the trial court’s action in overruling the denied motion.
Id. We determine all questions presented, and may reverse the trial court judgment and render such
judgment as the trial court should have rendered, including rendering judgment for the other movant.
See Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988). If, however, a genuine fact issue exists,
summary judgment for either party is inappropriate, and we reverse and remand. McCreight v. City
of Cleburne, 940 S.W.2d 285, 288 (Tex. App.—Waco 1997, pet. denied). A fact issue may be
created either by disputed or ambiguous facts. Id.
Effect of Payment Prior to the Rendition of a Final Judgment
        Appellants argue that their payment of $31,800 to ETM precludes ETM from proving the
elements of suit on an account. A plaintiff in a suit on account case must prove (1) the sale and
delivery of merchandise or performance of services; (2) the amount of the account is “just,” that is,
the prices charged are pursuant to an express agreement, or in the absence of an agreement, the



        8
          Appellants include an argument that their payment of the account precludes ETM from prevailing on its claim
for breach of contract. However, a review of ETM’s written motion for summary judgment reveals that ETM moved for
summary judgment only on their claim for suit on an account. Thus, we do not address Appellants’ argument that its
payment of the account precludes ETM from proving the elements of breach of contract. See TEX. R. CIV. P. 166a(c);
TEX. R. APP. P. 47.1.


                                                         7
charges are usual, customary, or reasonable; and (3) the outstanding amounts remain unpaid. Powers
v. Adams, 2 S.W.3d 496, 499 (Tex. App.—Houston [14th Dist.] 1999, no pet.).
       In Appellants’ motion for summary judgment and in their appellate brief, they concede that
ETM sold them machining services. By their own admission, they do not dispute the “correctness”
of the charges.    Moreover, the undisputed evidence shows that Appellants paid the charges.
Appellants argue, essentially, that their payment of the account, after suit was filed but prior to
rendition of a final judgment, precludes ETM from showing that the account remains unpaid,
defeating their cause of action. Appellants further argue that “ETM is not entitled to prejudgment
interest because the account was paid prior to trial and ETM cannot prevail or collect damages.”
Finally, Appellants argue that ETM is not entitled to attorney’s fees under Section 38.001 because it
cannot prevail on its cause of action and recover damages. See TEX. CIV. PRAC. & REM. CODE ANN.
§ 38.001 (West 2015). Appellants’ reasoning is as follows:


       Prejudgment interest is calculated based on the past damages awarded, but
       court costs are not included in this calculation. Texas Courts have made it clear that
       prejudgment interest must be calculated based on damages recovered from the main
       cause      of    action.  []    ETM       cannot    recover     “additional   damages”    through
       prejudgment interest because ETM was never awarded any damages [sic].                 Thus, ETM
       fails the second requirement under [Section 38.001] because they were not awarded any damages.


       In support of their arguments, Appellants cite In re Nalle Plastics Family Ltd. P’ship, 406
S.W.3d 168 (Tex. 2013) and Hamra v. Gulden, 898 S.W.2d 16 (Tex. App.—Dallas 1995, writ
dism’d w.o.j.). In Nalle, a law firm sued Nalle for breach of contract, alleging that Nalle failed to
pay its attorney’s fees. 406 S.W.3d at 169. The Texas Supreme Court held that attorney’s fees
incurred in prosecuting a claim are not compensatory damages; however, when actual damages are
attorney’s fees they do constitute compensatory damages. Id. at 175. In Hamra, the appellate court
considered whether a plaintiff could recover attorney’s fees under a Deceptive Trade Practices Act
(DTPA) claim when the plaintiff consumer settled with a defendant for $8,000 and obtained a
damages award at trial of $7,500 from the non-settling defendant. 898 S.W.3d at 19. The court held
that the plaintiff did not “prevail” under the pertinent provisions of the DTPA because the plaintiff
had already received payment of an amount equal to or greater than the damages found by the fact
finder in the trial of the consumer’s case against the non-settling defendant. Id.
       These cases do not support Appellants’ argument. In this case, the uncontroverted evidence
shows that ETM presented two invoices for the performance of machining services, each for $15,900,



                                                      8
to Appellants for payment on December 28, 2015 and January 7, 2016, respectively. On August 15,
2016, ETM filed this lawsuit. On September 21, Appellants tendered an unconditional partial
payment of $10,000 to ETM. On March 21, 2017, Appellants tendered another unconditional
payment of $21,800 to Appellants. The fact that Appellants belatedly paid the principal prior to
moving for summary judgment does not defeat ETM’s cause of action for suit on an account. Cf.
Hand & Wrist Ctr. of Houston, P.A. v. Republic Servs., Inc., 401 S.W.3d 712, 718 (Tex. App.—
Houston [14th Dist.] 2013, no pet.) (health care providers not required to submit to jury their claims
for pretrial payments received from defendant to recover prejudgment interest on those amounts
because it was undisputed that plaintiffs were entitled to recover payments).
        Moreover, Appellants’ belated payment of the principal does not extinguish ETM’s claim
for interest. See id. ETM argued in its motion for summary judgment that it is entitled to collect six
percent interest on the principal amount due beginning on the 30th day after the date on which the
amounts were due pursuant to Section 302.002 of the finance code. See TEX. FIN. CODE ANN.
§ 302.002 (West 2016). Section 302.002 provides that, where a creditor has not agreed with an
obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal
interest at the rate of six percent a year on the principal amount of the credit extended beginning on
the 30th day after the date on which the amount is due. Id. A “creditor” is a person who loans money
or otherwise extends credit. Id. § 301.002 (3) (West 2016). An “obligor” is a person to whom money
is loaned or credit is otherwise extended. Id. § 301.002 (13). Based upon the undisputed facts before
us, we conclude that ETM is a creditor and Appellants are obligors, as those terms are defined.
Further, Appellants do not dispute that there was no agreement to charge interest.           Because
Appellants and ETM did not agree to a specific interest rate, the statutory rate of six percent is by
law read into the agreement. See Risica & Sons, Inc. v. Tubelite, a Div. of Indal, Inc., 794 S.W.2d
468, 470 (Tex. App.—Corpus Christi 1990), aff’d, 819 S.W.2d 801 (Tex. 1991). Thus, the trial
court’s award of interest was proper. See TEX. FIN. CODE ANN. § 302.002.
       Appellants further argue that their payment of the account precluded ETM from recovering
attorney’s fees because ETM was never awarded any damages. To recover attorney’s fees under
Chapter 38 of the civil practice and remedies code, a party must first prevail on the underlying claim
and recover damages. See TEX. CIV. PRAC. & REM. CODE § 38.001 (West 2015); Nalle, 406 S.W.3d
at 173. Here, ETM received $31,800 from Appellants before Appellants moved for summary
judgment. In addition, the trial court awarded ETM $1,895.63 in interest. Appellants’ payment of
the account prior to the rendition of a final judgment does not change the fact that ETM recovered


                                                  9
damages from ETM. Cf. Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 816-817 (Tex.
2006) (plaintiffs entitled to recover prejudgment interest on damages received in the form of pretrial
payments that were not awarded in final judgment). Thus, we conclude that Appellants’ payment of
the account prior to the rendition of a final judgment does not preclude ETM from recovering
attorney’s fees under Chapter 38. We overrule issue four.
Individual Liability
       Appellants argue that ETM did not meet its summary judgment burden to establish that
Leach, Benoit, and David are individually liable because Breakwater’s charter had not yet been
forfeited at the time the transactions took place in December 2015 and January 2016. Appellants
argue that “ETM does not allege and the trial court did not find that…Breakwater was in forfeiture
status at any point of time between January 2015 and December 2016…there is a genuine issue of
material fact to preclude a summary judgment.”
       In its motion for summary judgment, ETM argued that Leach, Benoit, and David are jointly
and severally liable as partners pursuant to Section 171.255 of the tax code because their charter was
forfeited in January 2017. See TEX. TAX CODE ANN. § 171.255.
       Section 171.255 states as follows:


       (a) If the corporate privileges of a corporation are forfeited for the failure to file a report or pay a tax
           or penalty, each director or officer of the corporation is liable for each debt of the corporation that
           is created or incurred in this state after the date on which the report, tax, or penalty is due and
           before the corporate privileges are revived. The liability includes liability for any tax or penalty
           imposed by this chapter on the corporation that becomes due and payable after the date of the
           forfeiture.
       (b) The liability of a director or officer is in the same manner and to the same extent as if the director
           or officer were a partner and the corporation were a partnership.



Id. Section 171.255 also applies to the forfeiture of a taxable entity’s right to transact business in
Texas. Id. § 171.2515 (West 2015). Section 171.255 imposes liability on members of a taxable
entity in the same manner and to the same extent as if the director or officer were a partner and the
corporation was a partnership. See id. § 171.255(b); see also TEX. BUS. ORGS. CODE ANN. § 152.304
(West 2012) (In general, “all partners are jointly and severally liable…for all obligations of the
partnership unless otherwise provided by law.”); U.S. Rest. Properties Operating L.P. v. Motel
Enterprises, Inc., 104 S.W.3d 284, 293 (Tex. App.—Beaumont 2003, pet. denied) (partners are
jointly and severally liable for debts of general partnership).



                                                           10
       According to ETM, Breakwater’s charter was forfeited “based upon their continued failure
to file a franchise tax return in May 2016 and pay taxes which were incurred and due for the tax year
2015.” In support of this contention , ETM attached a notice of forfeiture from the Texas Secretary
of State to Breakwater. That notice states the following:

       The Secretary of State finds that:
       1. The Secretary has received certification from the Comptroller of Public Accounts under Section
           171.302 of the Texas Tax Code indicating that there are grounds for the forfeiture of the taxable
           entity’s charter, certificate or registration; and
       2. The comptroller of Public Accounts has determined that the taxable entity has not revived its
           forfeited privileges within 120 days after the date that the privileges were forfeited.


The document indicates the forfeiture was effective January 27, 2017. ETM also attached a public
information report naming Leach, Benoit, and David as members for report year 2015.
       A taxable entity is subject to a two step loss of rights for its failure to comply with Chapter
171 of the tax code: (1) the forfeiture of its right to transact business and (2) the forfeiture of its
charter, certificate, or registration. See TEX. TAX CODE ANN. §§ 171.251-.257; 171.301-.302,
171.309-.311 (West 2015). First, the taxable entity’s right to transact business may be forfeited if
(1) it does not file a report required by Chapter 171 of the tax code within 45 days after the date a
notice of forfeiture is mailed; (2) does not pay a tax or penalty relating to that tax required by Chapter
171 within 45 days after a notice of forfeiture is mailed; or (3) does not permit the comptroller to
examine the entity’s records. See id. § 171.251-2515. It is a ground for the forfeiture of the taxable
entity’s charter or certificate of authority if the entity does not pay the amount necessary to revive its
right to transact business or permit the comptroller to examine its records within 120 days after the
date the entity loses its right to transact business. See id. § 171.301-.3015. If the taxable entity fails
to cure the default within 120 days after its right to transact business is forfeited, the comptroller
shall certify the name of the entity to the attorney general and secretary of state. See id. § 171.302
(West 2015). Finally, the secretary of state may then forfeit the taxable entity’s charter if he receives
the comptroller’s certification and the entity fails to revive its forfeited rights within 120 days after
the date the rights were forfeited. See id. § 171.309.
        There is a split of authority as to whether personal liability is imposed on individual members
of the taxable entity for debts incurred after the actual forfeiture of an entity’s right to transact
business, or if liability is imposed for debts incurred between the date the tax, report, or penalty was
due, but not filed or paid, and the date of the actual forfeiture of the right to transact business. See
Serna v. State, 877 S.W.2d 516, 519 (Tex. App.—Austin 1994, writ denied) (contractual obligations


                                                        11
entered into before the forfeiture of corporate privileges do not impose liability on the officers or
directors for payments that are due after forfeiture); compare In re Trammell, 246 S.W.3d 815, 822
(Tex. App.—Dallas 2008, no pet.) (individuals liable for debts created or incurred in Texas after the
date on which the report, tax, or penalty is due and before corporate privileges are revived); Dae
Won Choe v. Chancellor, Inc., 823 S.W.2d 740, 743 (Tex. App.—Dallas 1992, no writ) (same).
          The plain and ordinary meaning of the words in Section 171.255 impose liability for debts
incurred “after the date on which the tax, report or penalty is due and before the corporate privileges
are revived,” and includes liability for debts incurred before forfeiture but after the date the franchise
tax, report, or penalty was due but not filed or paid. TEX. TAX CODE ANN. § 171.255; see State Office
of Risk Mgmt. v. Martinez, 539 S.W.3d 266, 270 (Tex. 2017) (appellate court construes statute
according to plain language); see also In re Lee, 411 S.W.3d 445, 451 (Tex. 2013) (statute’s plain
language is “surest guide” to legislative intent). Therefore, we conclude that Section 171.255
imposes individual liability on members after the date on which the tax, report or penalty is due.
TEX. TAX CODE ANN. § 171.255; In re Trammell, 246 S.W.3d at 822; Dae Won Choe, 823 S.W.2d
at 743.
          Here, the evidence shows that Breakwater’s charter was forfeited, pursuant to Section
171.309, on January 27, 2017. See TEX. TAX CODE ANN. § 171.309. The notice of forfeiture does
not state the grounds for the forfeiture of Breakwater’s charter, which could be failure to pay a tax
or penalty or allow the comptroller to examine its records. See id. §§ 171.301-.302. ETM cites
Section 171.202 of the tax code to support their contention that Breakwater’s charter was forfeited
for their failure to file a franchise tax return in May 2016 and pay taxes incurred and due for the 2015
tax year. See id. § 171.202 (West 2015). ETM did not cite to a specific subsection in Section 171.202
that supports this conclusion, but subsection (b) provides that a taxable entity shall file its annual
report before May 16 of each year after the beginning of the regular annual period. Id. § 171.202(b).
However, Section 171.202 also states that extensions can be granted under certain circumstances.
See id. 171.202(c)(e)(f).
          ETM, as the movant for summary judgment, was required to prove there is no genuine issue
of material fact and it is entitled to judgment as a matter of law. See TEX. R. CIV. P. 166a(c); Nixon,
690 S.W.2d at 548. Because evidence favorable to the non-movant must be taken as true and doubts
about evidentiary issues resolved in its favor, it would be improper for this Court to draw the
inference that Breakwater was delinquent in paying franchise taxes in 2015, because it is simply not
definitively demonstrated by the evidence. See State v. Durham, 860 S.W.2d 63, 66 (Tex. 1993);


                                                   12
see also City of Keller v. Wilson, 168 S.W.3d 802, 824-25 (Tex. 2005). The only facts conclusively
proved by the evidence presented by ETM is that Breakwater failed to pay a tax or penalty or allow
the comptroller to review its records at least 120 days prior to January 27, 2017. See TEX. TAX CODE
ANN. §§ 171.302; 171.309. We are unable to determine, based upon the notice of forfeiture, the date
upon which Breakwater became delinquent in its obligations under Chapter 171. Thus, the evidence
does not prove that Breakwater was delinquent in its obligations under Chapter 171 at the time it
entered into the transactions with ETM that are the subject of this suit. See Trammell, 246 S.W.3d
at 822; see also Dae Won Choe, 823 S.W.2d at 743. Therefore, we hold ETM did not meet its
summary judgment burden to show that Leach, Benoit, and David are individually liable, because a
genuine issue of material fact remains as to whether Breakwater was delinquent in its obligations
under Chapter 171 at the time of transactions. See TEX. R. CIV. P. 166a(c); Nixon, 690 S.W.2d at
548; see also Durham, 860 S.W.2d at 66; City of Keller, 168 S.W.3d at 824-25. Therefore, we
sustain Appellants’ fifth issue.

                                                    DISPOSITION
         Having concluded that ETM met its burden to show it was entitled to judgment on its claim
for suit on a sworn account, we affirm the trial court’s order granting summary judgment in favor of
ETM and its award of interest and attorney’s fees.
         Further, having concluded that ETM did not meet its summary judgment burden to show that
Leach, Benoit, and David are individually liable, we reverse the trial court’s judgment and remand
the case to the trial court for further proceedings consistent with this opinion.

                                                                    GREG NEELEY
                                                                       Justice


Opinion delivered February 19, 2020.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.




                                                          13
                                COURT OF APPEALS

      TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

                                       JUDGMENT

                                     FEBRUARY 19, 2020


                                      NO. 12-19-00013-CV


  BREAKWATER ADVANCED MANUFACTURING, LLC, MARK LEACH, BRYAN
                   BENOIT, AND GREG DAVID,
                           Appellants
                              V.
               EAST TEXAS MACHINE WORKS, INC.,
                            Appellee


                          Appeal from the County Court at Law No. 2
                     of Gregg County, Texas (Tr.Ct.No. 2016-1524-CCL2)

                      THIS CAUSE came to be heard on the oral arguments, appellate record and
briefs filed herein, and the same being considered, it is the opinion of this court that there was
error in a portion of the trial court’s order granting summary judgment, and that the same should
be affirmed in part and reversed and remanded in part.
                      It is therefore ORDERED, ADJUDGED and DECREED that the portion of
the trial court’s order granting summary judgment that MARK LEACH, BRYAN BENOIT,
AND GREG DAVID, are individually liable, be reversed and remanded to the trial court for
further proceedings, in accordance with the opinion of this Court, in all other respects, the trial
court’s order granting summary judgment is affirmed; and that all costs of this appeal are hereby
adjudged against the party incurring same, for which execution may issue, and that this decision
be certified to the court below for observance.
                   Greg Neeley, Justice.
                   Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.
