Summary
construing an instrument labeled as an “Assignment of Lease” as a sublease and noting that “[t]o decide whether there is an assignment or a sublease, the form of the instrument is not controlling”
Summary of this case from Royalco Oil & Gas Corp. v. Stockhome Trading Corp.Opinion
No. 10-01-00401-CV
Opinion delivered and filed June 2, 2004.
Appeal from the 66th District Court, Hill County, Texas, Trial Court # 36741.
Affirmed.
Peter K. Rusek and Elisa Dillar Rainey, Sheehy, Lovelace Mayfield, Waco, TX, for appellant/relator.
Greg White, McGregor White, Waco, TX, J. Dwight Carmichael, McGregor, McGregor, Carmichael, Hillsboro, TX, and J.P. Kumar, Attorney at Law, Houston, TX, for appellee/respondent.
Before Chief Justice GRAY, Justice VANCE, and Justice REYNA (Chief Justice GRAY dissenting).
MEMORANDUM OPINION
In 1965, Jimmy, Joyce, and Ina Curtis leased land to Texaco, Inc. for the construction and operation of a retail gasoline business and convenience store. The lease contained, inter alia, two provisions: (1) during the last six months of the lease, or last eight months of any extension thereof, Texaco had the right to exercise a fixed-price option to purchase the land for $200,000, and (2) during the term of the lease, within thirty days of receipt of offer, Texaco had a right of first refusal to match any "bona fide offer" made by a third party to the Curtises to purchase the land In 1988, Texaco subleased or assigned (a contested issue) its interest in the property to Bill Dameron, who later transferred his interest to Appellant Dameron Oil Company, Inc. ("Dameron").
In 1995, Dameron subleased the property to Tariq Majeed and provided him with gasoline for resale. In September 1999, Majeed sued Dameron for overcharging him for gasoline. While this suit was pending, on October 27, 2000, Dameron received a copy of a letter from the Curtises to Texaco stating that the lease was to expire on November 30, 2000, and that the property would be sold to Majeed and Appellee, Mohammad Arshad. On October 31, 2000, Dameron responded in writing that it wished to exercise what it claimed was its option to purchase the property. On November 22, 2000, Dameron tendered a check for $200,000 to the Curtises. They rejected the offer and sold the property to Majeed and Arshad.
In December 2000, Dameron sued Arshad, the Curtises, and Texaco as third-party defendants in the lawsuit filed by Majeed, (a) requesting a declaratory judgment that Dameron had an option to purchase the property and specific performance that Arshad convey the property to Dameron, and (b) alleging negligence by Texaco because it did not timely notify Dameron of the letter from the Curtises about the sale. Arshad filed a motion for summary judgment which the trial court granted, ruling that Dameron had neither the right to exercise an option to purchase or a right of first refusal. The court separately severed Dameron's claims against Arshad from all other claims and ordered that Dameron pay Arshad's attorney's fees of $7,369.25. Dameron appeals from the summary judgment and the order for attorney's fees.
Dameron asserts that its first issue — that it had a fixed-price option to purchase as an "assignee" and not a "sublessor" — is dispositive. It says its other issues "show that the trial court's ruling should not be affirmed on some alternative basis." (APPELLANT'S BRIEF, p. 2.) Dameron also complains that Arshad's pleadings do not support an award of attorney's fees, and that it was inequitable and unjust for the court to award attorney's fees.
We will affirm the judgment.
Standards of Review
A party filing a motion for summary judgment must prove by summary-judgment evidence that "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion." TEX. R. CIV. P. 166a(c); e.g., Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex. 1985); Delta Air Lines, Inc. v. Norris, 949 S.W.2d 422, 425 (Tex. App.-Waco 1997, writ denied). A summary judgment is reviewed de novo. E.g., Rucker v. Bank One Texas, N.A., 36 S.W.3d 649, 653 (Tex. App.-Waco 2000, pet. denied).
Whether a contract (such as a document conveying an interest in a leasehold) is ambiguous and the interpretation of the parties' intentions in an unambiguous contract are matters of law for the court. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). Therefore, we review these findings by the court de novo. An unambiguous contract is construed according to the plain meaning of its express wording. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985); Kahn v. Seely, 980 S.W.2d 794, 797 (Tex. App.-San Antonio 1998, pet. denied). The court must look "at the contract as a whole in light of the circumstances present when the contract was entered" into. Nat. Union Fire Ins. v. CBI Industries, 907 S.W.2d 517, 520 (Tex. 1995). Each part of the contract is considered against all other parts to determine its meaning, and there is a presumption that the parties intended every part to have some effect. Heritage Resources, 939 S.W.2d at 121. Terms used in the contract have their "plain, ordinary, and generally accepted meaning unless the [contract] shows that the parties used them in a technical or different sense." Id. Unambiguous contracts are enforced as written. Id. Assignment v. Sublease
Dameron claims that Texaco "assigned" its leasehold interest to Dameron, and the fixed-price option in the original lease was included in the assignment. Arshad counters that Dameron "subleased" the property, and therefore the option was not conveyed. This issue arises when a lessee conveys an interest in the leasehold to a third party.
In 718 Associates, LTD. v. Sunwest N.O.P., we discussed at some length the difference between an assignment of a lease and a sublease. 718 Associates, LTD. v. Sunwest N.O.P., 1 S.W.3d 355, 360-62 (Tex. App.-Waco 1999, pet. denied) (citing Davis v. Vidal, 105 Tex. 444, 151 S.W. 290, 291-92 (1912)). "If an instrument conveys the entire `term' of the lease without retaining any reversionary interest, the instrument will be construed as an assignment." Id. at 360. If the lessee retains any reversionary interest, such as the right to reenter and repossess the premises on default of rental payments by the third-party assignee, there has not been an assignment of the lease. Id. Furthermore, in an assignment, (a) the third-party becomes a tenant in place of the original lessee, (b) the privity of estate (but not contract) between the lessor and the original lessee is destroyed, and (c) privity of both estate and contract is established between the original lessor and the third party. Id. at 361 (citing Amco Trust, Inc. v. Naylor, 159 Tex. 146, 317 S.W.2d 47, 50 (1958); Interstate Fire Ins. Co. v. First Tape, Inc., 817 S.W.2d 142, 145 (Tex. App.-Houston [1st Dist.] 1991, writ denied)). Therefore, the third party (assignee) succeeds to all rights of the lessee. The lessee, however, unless expressly released by the original lessor, becomes a surety or guarantor of the rental payments and remains liable therefor to the original lessor. Id.; Twelve Oaks Tower I v. Premier Allergy, Inc., 938 S.W.2d 102, 116 (Tex. App.-Houston [14th Dist.] 1996, no writ). To decide whether there is an assignment or a sublease, the form of the instrument is not controlling. 718 Associates, 1 S.W.3d at 361. Rather, we look to the plain language of the documents in question, e.g., to the original lease to determine whether the lessee has the right to assign or sublet the leasehold, and to the assigning instrument to determine whether the lessee has any reversionary interest. See id. Finally, all these principles apply when, as in the instant case and also in 718 Associates, there is a series of conveyances of the leasehold interest, i.e., a series of third parties.
Option to Purchase
We have examined the "Assignment of Lease" between Texaco and Dameron and do not find it ambiguous. It expressly grants Texaco two reversionary interests: (1) the right to exercise the option to extend the term of the lease, and (2) the reversion of all right, title, and interest in the lease if Dameron defaults on the terms of the lease. Under 718 Associates, this is a sublease.
Dameron cites Zeidman v. Davis to support its argument. Zeidman v. Davis, 342 S.W.2d 555 (Tex. 1961). But in Zeidman, the Court held that the conveyance document, which contained a provision that at the request of the third party the lessee must exercise its right to extend the lease, was a sublease. Id. at 557. Furthermore, the Court said that "a sub-lessee does not acquire or succeed to the option of a lessee to purchase the premises." Id. at 558. Zeidman does not support Dameron's position.
The assignment instrument is not ambiguous and is a sublease, and there is no genuine issue of material fact that would preclude summary judgment. We overrule this issue.
Attorney's Fees
Section 37.009 of the Uniform Declaratory Judgments Act provides: "In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney's fees as are equitable and just." TEX. CIV. PRAC. REM. CODE ANN. § 37.009 (Vernon 1997). These two issues, "reasonable and necessary" and "equitable and just," are not necessarily dependent on one another; even in the face of evidence that a party has incurred "reasonable and necessary" attorney's fees, the trial court may conclude that it is not "equitable or just" to award them. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). Whether the evidence supports a finding of "reasonable and necessary" attorney's fees, and whether the award is "equitable and just," are both matters reviewed for abuse of discretion. Id. "It is an abuse of discretion for a trial court to rule arbitrarily, unreasonably, or without regard to guiding legal principles, e.g., Goode v. Shoukfeh, 943 S.W.2d 441, 446 (Tex. 1997), or to rule without supporting evidence. Beaumont Bank v. Buller, 806 S.W.2d 223, 226 (Tex. 1991)." Id.
First, Dameron claims that Arshad did not file a counterclaim for a declaratory judgment, and therefore he cannot recover attorney's fees. Under section 37.009, however, the party awarded the fees does not have to be the one who filed the declaratory judgment claim. Templeton v. Dreiss, 961 S.W.2d 645, 671 (Tex. App.-San Antonio 1998, pet. denied) ( also cases cited therein).
Second, Dameron complains that the $7,369.25 awarded is, in its entirety, not "equitable and just." Citing cases involving sanctions for frivolous lawsuits and appeals, Dameron argues that, because it filed its declaratory action in "good faith," attorney's fees are not equitable or just. But, by its express language, section 37.009 is not limited to circumstances in which the lawsuit was frivolous. Thus, even accepting that Dameron acted in good faith, the trial court did not necessarily abuse its discretion by awarding the fees. And the record does not support a finding that the trial court abused its discretion, i.e., that its award of attorney's fees was arbitrary, unreasonable, without regard to guiding legal principles, or without supporting evidence. Bocquet, 972 S.W.2d at 21.
We overrule this issue.
Other Issues
Because of our resolution of issue one, we do not reach Dameron's remaining issues.
Conclusion
Dameron subleased the property from Texaco and did not have an option to purchase it. Furthermore, the trial court did not abuse its discretion by awarding attorney's fees to Arshad. We affirm the judgment.