Opinion
No. 10-08-00073-CV
Opinion delivered and filed July 15, 2009.
Appealed from the 249th District Court, Johnson County, Texas, Trial Court No. C200600426.
Reversed and remanded.
Before Chief Justice GRAY, Justice REYNA, and Justice DAVIS.
(Chief Justice Gray dissenting)
OPINION
Bret "Doc" Berkman filed suit against the City of Keene alleging that the City was obligated to furnish water and sewer services to his property at no charge under an agreement between the City and Berkman's predecessors in title. The court granted the City's summary-judgment motion. Berkman contends in three issues that the court erred: (1) by failing to recognize the mandatory nature of the successors-and-assigns clause of the agreement; (2) by failing to recognize that the agreement created a covenant running with the land; and (3) by considering parol evidence to interpret an unambiguous contract. We will reverse and remand.
Background
Berkman's predecessors in title Laszlo and Amine Varga conveyed three small tracts of land out of their 31.8 acres to the City in 1986. The City maintains wells on these small tracts for the City's public water system.
As consideration for this conveyance, the City signed an agreement with the Vargas to furnish up to 1.2 million gallons of water per year to their property at no charge and to furnish sewer services to the property at no charge. The City agreed to furnish water and sewer services under these terms for 35 years if the property was "used on a continuous basis from the date of this agreement forward as a home for children who are wards of the State" or for 20 years if the property ceased to be used for this purpose.
The Vargas conveyed the property to Odyssey Harbor, Inc. in 1990 and continued to operate a children's home on the property as employees of the corporation. Odyssey Harbor declared bankruptcy and the property was foreclosed on in 1999. Through mesne conveyances, Berkman acquired the property in 2003. Three years later, he learned of the agreement between the Vargas and the City and stopped paying for water and sewer services.
The property ceased to be used as a children's home after the foreclosure. Each owner thereafter paid for water and sewer services until Berkman ceased doing so.
Berkman filed suit against the City alleging: (1) the City breached the contract for water and sewer services; and (2) the City's breach constituted a failure of consideration rendering the Vargas' conveyance to the City void and resulting in the conversion by the City of all water taken from the tracts conveyed.
In addition to answering the suit, the City filed a traditional summary-judgment motion alleging that there was no assignment of the Vargas' rights under the contract to Berkman. Berkman filed a response in which he argued that: (1) he is a successor under the contract, and (2) the contract created a covenant running with the land. In its reply, the City rejoined that: (1) Berkman was not a party to the contract, (2) the contract was not assigned to him, and (3) the contract did not create a covenant running with the land. Following a hearing, the court granted the City's summary-judgment motion.
The City also filed a no-evidence summary-judgment motion alleging that Berkman could produce no evidence that he has any rights under the contract or that the Vargas' rights under the contract were assigned to him. However, this motion is not before us because the trial court expressly granted only the City's "Traditional Motion for Summary Judgment."
Before addressing the merits, we first consider three procedural arguments raised by the City: (1) Berkman did not invoke the jurisdiction of this Court because his notice of appeal is defective; (2) Berkman cannot rely on the theory that the parties' agreement created a covenant running with the land because he did not plead this theory in his petition; and (3) Berkman cannot rely on the theory that the agreement created a beneficial covenant running with the land because his summary-judgment pleadings did not raise this theory of recovery, which was raised for the first time in a post-judgment motion for reconsideration.
Notice of Appeal
To perfect his appeal, Berkman filed a document entitled a "NOTICE OF APPEAL" which reads as follows:
Please take notice that the Plaintiff, Bret "Doc" Berkman, in the above-entitled and numbered cause has filed with the 249th Judicial District, of Johnson County, Texas, an appeal bond in conformity with Rule 571, Texas Rules of Civil Procedure. This notice is being provided in accordance with Rule 21a, Texas Rules of Civil Procedure.
The City is correct that Berkman's notice of appeal does not satisfy most of the requirements of Rule of Appellate Procedure 25.1(d), which provides in pertinent part:
The notice of appeal must:
(1) identify the trial court and state the case's trial court number and style;
(2) state the date of the judgment or order appealed from;
(3) state that the party desires to appeal;
(4) state the court to which the appeal is taken unless the appeal is to either the First or Fourteenth Court of Appeals, in which case the notice must state that the appeal is to either of those courts; [and]
(5) state the name of each party filing the notice.
TEX. R. APP. P. 25.1(d). Berkman's notice satisfies only the first and last of these requirements.
In addition to the contents already noted, Berkman's notice of appeal commences with the trial court cause number, the style of the case, and the name of the trial court as is common with most trial pleadings.
Nevertheless, "the factor which determines whether jurisdiction has been conferred on the appellate court is not the form or substance of the bond, certificate or affidavit, but whether the instrument `was filed in a bona fide attempt to invoke appellate court jurisdiction.'" Warwick Towers Council of Co-Owners v. Park Warwick, L.P., 244 S.W.3d 838, 839 (Tex. 2008) (per curiam) (quoting Walker v. Blue Water Garden Apts., 776 S.W.2d 578, 581 (Tex. 1989) (quoting United Ass'n of Journeymen Apprentices v. Borden, 160 Tex. 203, 328 S.W.2d 739, 741 (1959))).
Although Berkman's notice of appeal does not "state the date of the judgment or order appealed from" or the other omitted information, the record before this Court makes it clear that he is appealing from the order granting the City's summary-judgment motion as well as other pre-judgment and post-judgment rulings usually subject to review on appeal. We therefore construe Berkman's notice of appeal as a bona fide attempt to invoke this Court's jurisdiction. See id.; Darya, Inc. v. Christian, 251 S.W.3d 227, 231-32 (Tex.App.-Dallas 2008, no pet.); Pesina v. Hudson, 132 S.W.3d 133, 135 n. 3 (Tex.App.-Amarillo 2004, no pet.).
Trial by Consent
The City contends that Berkman cannot rely on a theory that the agreement created a covenant running with the land because this theory is not included in his petition. See Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006) (per curiam) (defendant's summary-judgment motion need not negate a claim the plaintiff has not pleaded). However, if a plaintiff raises an affirmative claim for the first time in its summary-judgment response, the defendant must either object or respond on the merits and try the issue by consent. Id. Here, the City did not object until after the court had ruled on its summary-judgment motion. See Montgomery Ward Co. v. Dalton, 665 S.W.2d 507, 511 (Tex.App.-El Paso 1983, no writ) (objection in motion for new trial or motion for JNOV does not prevent trial by consent). Instead, it responded to the merits of Berkman's claim that the agreement created a covenant running with the land. Accordingly, the issue was tried by consent. See Via Net, 211 S.W.3d at 313.
With respect to Berkman's theory that the agreement created a beneficial covenant as opposed to a burdensome covenant, the City contends that the beneficial covenant theory was not tried by consent because Berkman did not assert this theory until he filed a motion for reconsideration after the court granted the City's summary-judgment motion. We disagree.
Berkman's summary-judgment response alleged in the paragraph labelled "II. Introduction" that the agreement "created a covenant running with the land. This means that the successor in title possesses all rights and benefits of that covenant." (emphasis added). As Berkman later argued in paragraph number 12, "The ordinary meaning of this language is to confer the benefit of free water and sewage services to any successor of the Vargas property and to bind any successor of the Defendant to provide such water and sewage services." (emphasis added). True, Berkman did not employ the term "beneficial covenant" until he filed his motion for reconsideration. But having examined the substance of the argument presented in his summary-judgment response, we conclude that the "beneficial covenant" theory was adequately raised in this pleading.
Covenant Running with the Land
Berkman claims in his second issue that the agreement created a beneficial covenant running with the land. He contends in his third issue that the court improperly considered parol evidence to construe the agreement because the subjective intent of the parties to an unambiguous contract is irrelevant.
A covenant runs with the land if (1) it touches and concerns the land, (2) it relates to a thing in existence or specifically binds the parties and their assigns, (3) it is intended by the original parties to run with the land, and (4) any successor to the burden has notice. Inwood N. Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 635 (Tex. 1987); Raman Chandler Props., L.C. v. Caldwell's Creek Homeowners Ass'n, 178 S.W.3d 384, 391 (Tex.App.-Fort Worth 2005, pet. denied). Here, the parties' dispute focuses on the first and third of these requirements. In addition, the City contends that, even assuming the agreement created a covenant running with the land, that covenant was abandoned by Berkman and his predecessors in interest.
The City also addresses the fourth requirement (notice) in its brief. However, the City's summary-judgment pleadings did not challenge Berkman's claim of a covenant running with the land on this basis. Therefore, we do not address the notice requirement. See Nat'l Caf, Servs., Ltd. v. Podaras, 148 S.W.3d 194, 196 n. 1 (Tex.App.-Waco 2004, pet. denied) (on appeal from summary judgment, "[w]e consider only those grounds `the movant actually presented to the trial court' in the motion") (quoting Fletcher v. Edwards, 26 S.W.3d 66, 74 (Tex.App.-Waco 2000, pet. denied) (quoting Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996))).
To prevail on its traditional summary-judgment motion, the City bore the burden of conclusively negating at least one of these elements of Berkman's claim that the agreement created a covenant running with the land. See IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004); Medistar Corp. v. Schmidt, 267 S.W.3d 150, 157 (Tex.App.-San Antonio 2008, pet. denied). We must consider all the evidence in the light most favorable to Berkman, indulging every reasonable inference in his favor and resolving any doubts against the City's motion. See Goodyear Tire Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex. 2007) (per curiam).
Touches and Concerns the Land
Few Texas cases have directly addressed what it means for a covenant to "touch and concern" the land. The Supreme Court's most extensive discussion of this issue is found in Westland Oil Development Corp. v. Gulf Oil Corp, in which the Court observed:
The Restatement (Third) of Property has concluded that the "touch and concern" requirement is no longer necessary. RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 3.2 (2000) ("Neither the burden nor the benefit of a covenant is required to touch or concern land in order for the covenant to be valid as a servitude."). Cf. RESTATEMENT OF PROP. § 537 cmt. a (1944) ("the promise must `touch and concern' the land"). However, our Supreme Court has not adopted the view of the Restatement (Third), and absent guidance from that Court, we decline to do so.
The tests involved in making this determination are far from absolute. The courts have consistently relied upon rather general statements in their analyses of the touch and concern requirement. As stated in Reno, Covenants, Rents and Public Rights, 2 Amer. L. of Prop. § 9.4 (1952):
One of the two often cited statements of the requirement is that a covenant will run `if it affected the nature, quality or value of the thing demised, independently of collateral circumstances, or if it affected the mode of enjoying it' . . .
It has also been said,
If the promisor's legal relations in respect to the land in question are lessened-his legal interest as owner rendered less valuable by the promise-the burden of the covenant touches or concerns that land; if the promisee's legal relations in respect to that land are increased-his legal interest as owner rendered more value [sic] by the promise-the benefit of the covenant touches or concerns the land.
637 S.W.2d 903, 911 (Tex. 1982) (quoting 2 RUSSELL R. RENO, AMERICAN LAW OF PROPERTY § 9.4 (1952); Howard R. Williams, Restrictions on the Use of Land: Covenants Running with the Land at Law, 27 TEX. L.REV. 419, 429 (1949)).
Professor Williams's quotation is from CHARLES E. CLARK, REAL COVENANTS AND OTHER INTERESTS WHICH "RUN WITH LAND" 97 (2d ed. 1947).
A covenant to supply or furnish water touches and concerns the land. Montfort v. Trek Res., Inc., 198 S.W.3d 344, 355 (Tex.App.-Eastland 2006, no pet.); Wimberly v. Lone Star Gas Co., 818 S.W.2d 868, 871 (Tex.App.-Fort Worth 1991, writ denied); see RESTATEMENT (SECOND) OF PROP.: LANDLORD TENANT § 16.1 cmt. b, illus. 3 (1977) (landlord's promise to furnish heat and hot water to apartment touches and concerns the land). The City contends that Montfort and Wimberly are distinguishable because in each case the covenantor agreed to provide water from a specific tract of property owned by the covenantor. We acknowledge this distinction but conclude that it is irrelevant.
Most covenants running with the land involve both a benefit and a burden. "The covenantee's rights are known as the `benefit' while the covenantor's duties are known as the `burden.'" 9 RICHARD R. POWELL, POWELL ON REAL PROPERTY § 60.04[1] (Michael Allan Wolf, ed., Dec. 2005); see RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 1.1 cmt. c (2000) ("A servitude creates both a burden and a benefit."). "Although both benefit and burden frequently run with land, a servitude is created if either one runs with land." RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 1.1 cmt. c.
The Restatement (Third) defines a "servitude" as "a legal device that creates a right or an obligation that runs with land or an interest in land." RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 1.1(1). Subsection (2) provides, "The servitudes covered by this Restatement are easements, profits, and covenants." Id. § 1.1(2) (emphasis added).
According to the Restatement and the Restatement (Second), a benefit touches and concerns the covenantee's property "if its performance affects the use and enjoyment of the [property]." RESTATEMENT (SECOND) OF PROP.: LANDLORD TENANT § 16.1 cmt. b; RESTATEMENT OF PROP. § 537 cmt. f (1944) (performance of promise "must operate to benefit him in the physical use of his land"). As explained by comment a and the corresponding illustration in the Restatement (Second), a landlord's promise to furnish heat and hot water touches and concerns the land because it "affects the enjoyment of the leased property" by the tenant. RESTATEMENT (SECOND) OF PROP.: LANDLORD TENANT § 16.1 cmt. b illus. 3.
Here, the City's promise to provide water and sewer services "affected the enjoyment" of Berkman's property. Or, in the words of our Supreme Court, it "affected the nature, quality or value" of his property and "affected the mode of enjoying it." See Westland Oil Dev. Corp., 637 S.W.2d at 911. Thus, the agreement touched and concerned Berkman's land.
Intent of Parties
To ascertain the intent of the parties to the agreement, we must look to the entire instrument in the light of the alleged covenant. Billington v. Riffe, 492 S.W.2d 343, 346 (Tex.Civ.App.-Amarillo 1973, no writ); see also 9 POWELL, supra § 60.04[3][b] ("The intention of the covenanting parties as to the running of the covenant must be sought in the language of their transaction, read in the light of the circumstances of its formulation.").
The manifestation of intention that the benefit of a promise respecting the use of certain land of the beneficiary of the promise shall run with the land is subject to no special requirements of form. The intention may be and often is explicitly expressed in words by a statement to the effect that the promise shall run. On occasion, the intention may be less explicitly expressed in words and it must be found in a greater or lesser degree by inference from the circumstances in which the words were used. Not infrequently the intention that the benefit of a promise shall run is found entirely by inference from the circumstances under which the promise was made. Though no language of the promise may suggest an intention that the benefit of the promise shall run, the advantage from its running may be so obvious that it is proper to infer that the parties intended it to do so.
RESTATEMENT OF PROP. § 544 cmt. c; see also id. § 531 cmt. c (addressing similar analysis for burden running with land); accord RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 2.2 ("The intent to create a servitude may be express or implied. No particular form of expression is required.").
The requisite intent may be found in the language of the agreement, but the presence or absence of terms like "successors" or "assigns" is not dispositive. Montfort, 198 S.W.3d at 355; Musgrave v. Brookhaven Lake Prop. Owners Ass'n, 990 S.W.2d 386, 395 (Tex.App.-Texarkana 1999, pet. denied); see RESTATEMENT OF PROPERTY § 531 cmt. c; 9 POWELL, supra § 60.04[3][b] ("Technical words are not generally vital").
Even if the language in a deed is unambiguous, the court may admit parol evidence of the existing facts and circumstances for the purpose of ascertaining the real intent of the parties so long as the deed is not added to, varied, or contradicted by the evidence. This is especially true when the surrounding circumstances place the meaning of the language used in doubt.
Billington, 492 S.W.2d at 346 (citations omitted); 9 POWELL, supra § 60.04[3][b].
Here, the agreement contains several provisions arguably relevant to the parties' intent. The agreement states, "it is the intent of this agreement to set out the consideration for the execution of the deed [from the Vargas to the City]." The agreement gave the Vargas "the right to transfer and assign to any party any rights that they may have under the terms of this agreement." The agreement "inure[s] to the benefit of the parties hereto and their respective heirs . . ., successors and assigns where permitted by this agreement." And the agreement required the City to provide this benefit for a minimum of twenty years with the duration being determined solely from the use of the property and not from its ownership. See Owens v. Ousey, 241 S.W.3d 124, 129-30 (Tex.App.-Austin 2007, no pet.) (construing restrictive covenant with 25-year term); see also RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 4.3 cmt. a ("[T]he parties are free to determine the duration of a servitude. If their intent to do so is ascertained, it should be given effect."); RESTATEMENT OF PROP. § 554 cmt. b ("The terms of a promise respecting the use of land may provide a definite duration for the obligation created by it."); 9 POWELL, supra § 60.09 ("The original agreement may set a definite period of duration").
We may also consider the circumstances surrounding the agreement in ascertaining the parties' intent. Bollinger stated in her affidavit, "I had no intention at the time we signed the contract that this agreement would survive beyond my husband's and my ownership or control of the property." In addition, the City contends that "the parties could not have intended a covenant running with the land because . . . the promise to provide sewer and water services does not touch and concern the City's land."
Because parol evidence is admissible on this issue regardless of whether the agreement is ambiguous, we overrule Berkman's third issue in which he contends that the court improperly considered Bollinger's affidavit in construing the agreement. See Billington v. Riffe, 492 S.W.2d 343, 346 (Tex.Civ.App.-Amarillo 1973, no writ).
As we consider the words of the agreement and the circumstances surrounding its execution, we do so by viewing the evidence in the light most favorable to Berkman, indulging every reasonable inference and resolving any doubts in his favor. See Goodyear Tire, 236 S.W.3d at 756.
The City focuses first on the quoted language that intent of the agreement was to describe the consideration for the City's land purchase. However, this stated intent does not conclusively establish that a part of the agreed-upon consideration was not the grant of a covenant running with the land.
Next, the City refers to the fact that the agreement inures to the benefit of "successors and assigns" only "where permitted by this agreement." As the City observes, "Nowhere in the agreement does it state that the metered water and sewer services would continue to be furnished to any subsequent owner as a successor in title to the Vargas' land without an assignment." By the same token, however, the agreement nowhere states that such services would not be furnished to any successor in title. And the provision defining the duration of the City's obligation is based solely on the continuous use of the property "as a home for children who are wards of the State" without reference to ownership of the property. Thus, we cannot agree that the terms relied on by the City "conclusively establish" that the parties did not intend to create a covenant running with the land.
With regard to the circumstances of the transaction, the City notes that the benefit in question (and the corresponding burden assumed by the City) does not relate to land owned by the City, is not binding on successors in title to the City's land, and "does not touch and concern the City's land." The City argues that these circumstances establish the parties' lack of intent to create a covenant running with the land. However, the Restatement rejects this contention.
There is no requirement that, in order for the benefit of a promise to run, the performance of the promise or the consummation of the transaction of which it is a part shall operate to place a burden upon any land. For the benefit to run, the promise must be a promise respecting the use of land with which it runs. It must affect the way in which the land is used. Even the benefit of a promise cannot be so attached to land as to run with it unless the promise relates to the use of the land. If, however, the promise does relate to the use of land of the beneficiary of the promise, the running of the benefit is not subject to any requirement that the promise or the transaction of which it is a part either be intended to create, or be effectual to create, a burden on any land.
RESTATEMENT OF PROPERTY § 543 cmt. c; see RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 1.1 cmt. c ("Although both benefit and burden frequently run with land, a servitude is created if either one runs with land.").
Because this covenant does not "run" with any land owned by the City, it is irrelevant that successors in interest would not be bound to fulfill the covenant. The City will presumably continue to provide water and sewer services for the foreseeable future. See TEX. CIV. PRAC. REM. CODE ANN. § 101.0215(a)(32) (Vernon 2005) (provision of "water and sewer service" is a governmental function); City of San Antonio v. BSR Water Co., 190 S.W.3d 747, 753-54 (Tex.App.-San Antonio 2005, no pet.) (same).
Finally, the City makes reference to the "actual intent" of the parties to the agreement as identified in Bolinger's affidavit. According to the City, this affidavit "eliminates any question of intent, as she testifies that she did not intend for the agreement to survive beyond [the Vargas'] ownership of the land." (emphasis added). However, while evidence of Bolinger's personal intent is some evidence of the intent of all the parties, this evidence does not conclusively establish the intent of all the parties.
Therefore, viewing the evidence in the light most favorable to Berkman and indulging every reasonable inference and resolving any doubts in his favor, the City failed to conclusively establish that the parties to the agreement did not intend to create a covenant running with the land.
Abandonment
The City contends in the alternative that, even if the agreement created a covenant running with the land, Berkman and his predecessors in interest abandoned their rights under the covenant by failing to enforce it for almost ten years. The City relies on section 7.4 of the Restatement (Third) to support this contention.
Section 7.4 provides, "A servitude benefit is extinguished by abandonment when the beneficiary relinquishes the rights created by a servitude." RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 7.4; see also RESTATEMENT OF PROP. § 558. According to the Restatement (Third), "because abandonment is a voluntary, unilateral act on the part of the servitude beneficiary that creates a windfall to the owner of the servient estate, often without any corresponding benefit to the abandoning beneficiary, abandonment is difficult to establish." RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 7.4 cmt. a. More importantly,
Evidence of intentional relinquishment of rights is required. Failure to take advantage of a servitude benefit, even for a lengthy period, is seldom sufficient to persuade a court that abandonment has occurred. Some additional action on the part of the beneficiary inconsistent with continued existence of the servitude is normally required, although the amount of additional evidence required tends to diminish as the period of nonuse grows longer.
Id. cmt. c (second emphasis added); see also RESTATEMENT OF PROP. § 558 (abandonment is accomplished "by an intentional relinquishment of the interest").
Following comment c, the Restatement (Third) provides two illustrations in which a restrictive covenant prohibiting commercial construction in a 10-lot subdivision has not been enforced for ten years. In illustration 3, there was no construction in the subdivision for 10 years. The Restatement (Third) observes that absent other facts or circumstances, a finding of abandonment would not be justified in this instance. RESTATEMENT (THIRD) OF PROP.: SERVITUDES § 7.4 cmt. c, illus. 3.
Conversely in illustration 4, commercial buildings had been constructed on all but one of the lots in the subdivision during the 10-year period. The Restatement (Third) concludes that a finding of abandonment may be premised on these facts because of the widespread and permanent nature of these violations of the restrictive covenant. Id. illus. 4.
The undisputed summary-judgment evidence establishes that the Vargas' successors in title paid the City for water and sewer services from August 23, 1999 to May 9, 2006. This conduct on their part was inconsistent with the benefit which Berkman claims to be a covenant running with the land, but there is nothing in the record to indicate that any of them were aware of the existence of the agreement between the Vargas and the City during this time period. Cf. In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex. 2006) (orig. proceeding) (per curiam) ("Waiver requires intent, either the `intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.'") (emphasis added) (quoting Sun Exploration Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987)); Van Indep. Sch. Dist. v. McCarty, 165 S.W.3d 351, 353 (Tex. 2005) ("While waiver may sometimes be established by conduct, that conduct must be unequivocally inconsistent with claiming a known right.") (emphasis added).
Therefore, viewing the evidence in the light most favorable to Berkman and indulging every reasonable inference and resolving any doubts in his favor, the City failed to conclusively establish that Berkman abandoned any rights he may have under the Vargas' agreement with the City.
Accordingly, because the City failed to conclusively establish that the agreement did not create a covenant running with the land or that Berkman had abandoned any rights he may have under the agreement, the court erred by granting the City's summary-judgment motion. Thus, we sustain Berkman's second issue.
We do not reach Berkman's first issue. See TEX. R. APP. P. 47.1.
We reverse the judgment and remand this cause to the trial court for further proceedings consistent with this opinion.
DISSENTING OPINION
The Court errs. The trial court did not. The contract at issue in this proceeding does not create a covenant running with the land.
Because the entire case is about a relatively short contract, and because the majority does not, I will provide the reader with the full text of the contract. It is as follows:
THE STATE OF TEXAS )(
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF JOHNSON )(
WHEREAS, LASZLO VARGA and wife, AMINE VARGA, are the owners of a certain 31.8 acre tract as described in Volume 637, page 430, Johnson County Deed Records; and
WHEREAS, the property is currently being used as a home for children who are wards of the State of Texas, and is doing business under the name Odyssey Harbor; and
WHEREAS, LASZLO VARGO and wife, AMINE VARGA, are contemporaneously with the execution of this agreement, executing a warranty deed, a true and correct copy of which is attached hereto as Exhibit "A", for a recited consideration of $10.00 and other good and valuable consideration; and
WHEREAS, it is the intent of this agreement to set out the consideration for the execution of the deed shown as Exhibit "A" hereto.
THEREFORE, KNOW ALL MEN BY THESE PRESENTS: That we, LASZLO VARGA and wife, AMINE VARGA (hereinafter VARGAS) and the City of Keene, Texas, a Municipal Corporation, (hereinafter CITY) do make the following agreement:
(1) CITY agrees to furnish metered water from the City Water System to the 31.8 acre tract through two water taps and meters in an amount not to exceed 100,000 gallons per month, or 1,200,000 gallons per year, cumulative. The monthly amount may be exceeded, so long as the yearly maximum amount is not exceeded. No charge shall be made for water which does not exceed the yearly maximum. Rates for water usage over and above the yearly maximum shall be based on the City's then current water rates, with the yearly maximum to be equal to zero (0) gallons on the City's rates.
Should the VARGAS not use their yearly maximum in any one year, the amount not so used may not be accumulated and used during any succeeding year. The first twelve (12) month period for determining the amount of water usage shall begin on January 1, 1986 and end on December 31, 1986.
Sewer service shall be furnished to the VARGAS by the CITY through existing sewer lines on the same basis. The CITY shall not be obligated to construct any additional sewer lines nor will the CITY be required to construct sewer service to any building now located or to be located on the real property. However, the CITY does agree that any sewer service furnished to any buildings on said tract shall be furnished at no charge to the VARGAS and through existing sewer lines up to 1,200,000 gallons of water usage as measured by the above mentioned water meters.
(2) If the property is used on a continuous basis from the date of this agreement forward as a home for children who are wards of the State of Texas then the CITY shall furnish said water and sewer service as heretofore set forth for a period of thirty-five (35) years. In the event that the property ceases to be used as a home for children who are wards of the State of Texas then the term of this agreement shall be for a period of twenty (20) years.
(3) The VARGAS agree to petition CITY for annexation of the said 31.8 acre tract within two (2) years from the date of this contract.
(4) The VARGAS have the right to transfer and assign to any party any rights that they may have under the terms of this agreement and such assignee shall have all the rights, privileges, and duties hereunder.
(5) This agreement shall be construed under and in accordance with the laws of the State of Texas and all obligations of the parties created hereunder are performable in Johnson County, Texas.
(6) This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns where permitted by this agreement.
(7) In case any one or more of the provisions contained in this agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision thereof and this agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
(8) Both parties agree that upon the execution of this agreement and the deed attached as Exhibit "A", the lease agreement covering the 31.8 acre tract shall be terminated and of no further force and effect.
(9) This agreement constitutes the sole and only agreement of the parties hereto and supersedes any prior understandings or written or oral agreements between the parties respecting the within subject matter.
WITNESS our hands, this 11th day of April, 1986.
When the contract is read in its entirety and non-material provisions are not given undue weight, the following is made clear by the express terms of the contract:
1. This contract is part of the consideration, the purchase price, paid by the City for the real property conveyed by the Vargas to the City in an entirely separate document (thus, it is like a note for future payment of water and services rather than money);
2. The City agreed to pay in the form of future delivery of water and sewer services of 1,200,000 gallons per year for a determined period;
3. The period was determined by reference to the use being made of a particular tract of land;
4. While delivery of the water and sewage service was discussed in reference to the property, it was not exclusively limited to that property;
5. Without reference to the real property, the rights of the Vargas under the contract could be assigned; and
6. The rights under the contract pass to the parties' successors and assigns.
Further, it is undisputed that the Vargas never assigned their rights under this contract to anyone.
It is paragraph 4 of the contract that is particularly fatal for Berkman's claim. Under that provision, the Vargas clearly had the right to assign the right to receive water and sewer services, subject to the limit on amounts thereof, to a third party. Thus, this contract for payment did not, and was never intended to, create a covenant running with the land that Berkman purchased.
It is this ability to assign the right to receive water and sewer service at a location other than the property that destroys any suggestion that the agreement touched or concerned the land owned by Berkman. For sure, when the contract was made, the parties anticipated delivery of water and sewer services would be to the property and designated that location in the agreement. But just because that was the initially designated delivery location and service point did not mean that the delivery location and service point could not change. In fact, that is what paragraph 4 allowed.
The contract to be paid in a specified volume of water and sewer services was a part of the price the City agreed to pay for the property. It would not, should not, and according to the contract, did not matter to them to where it was delivered.
Because Berkman did not show he was an assignee of the right to receive the water and sewer services, and because such contractual rights did not touch or concern land such as to be a covenant running with the land, I would affirm the trial court's judgment. Because the Court does not, I respectfully dissent.