Opinion
No. 01-06-00819-CV
Opinion issued July 19, 2007.
On Appeal from County Civil Court at Law No. 4 Harris County, Texas, Trial Court Cause No. 818248.
Panel consists of Chief Justice RADACK and Justices KEYES and HIGLEY.
MEMORANDUM OPINION
This is a dispute over earnest money that was deposited by appellants, K. Casey Youn and Chan J. Youn (collectively, "Youn"), in conjunction with a contract ("Contract") to purchase commercial real estate from appellee, Emnora Hollister Realty Corp. ("Emnora"). When Youn terminated the Contract, both parties claimed entitlement to the earnest money. After a bench trial, the trial court concluded that Youn had failed to timely terminate the Contract and ordered that Emnora recover the earnest money. The trial court issued findings of fact and conclusions of law.
In four issues that can be broken down into two arguments, Youn challenges (1) the legal and factual sufficiency of the evidence to support the trial court's finding, and the propriety of the trial court's conclusion of law, that the parties did not modify the terms of the Contract (issues 1-3) and (2) the trial court's conclusion that Youn breached the Contract (issue 4).
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We affirm.
Summary of Facts and Procedural History
On April 29, 2003, Youn contracted to purchase from Emnora the Emnora Hollister Business Park ("Property"), consisting of 33,000 square feet of office and warehouse space located on 1.47 acres in Houston, Texas, for the total sum of $680,000. Pursuant to the terms of the Contract, Youn deposited $10,000 in earnest money with Chicago Title Company. The date of closing was set for June 30, 2003. Emnora was represented in the transaction by a real estate broker, Jeffrey C. Barbles of Marcus Millichap Real Estate Investment Brokerage Company.
Paragraph 7B(2) of the Contract provided that Youn had 30 days from the effective date of the Contract, which was April 29, 2003, to inspect the premises and to conduct an economic feasibility study. Paragraph 7B(3) permitted Youn to terminate the Contract for any reason within the 30-day period by providing written notice to Emnora. In addition, Paragraph 7B(3) provided that if Youn terminated the Contract under that provision, Youn was to receive a refund of the earnest money, less $100 to be retained by Emnora in consideration for the termination privilege. Furthermore, if Youn did not terminate the Contract within the time specified, Youn was deemed to have "accept[ed] the Property in its present `as is' condition."
To allow Youn to conduct the feasibility study, Paragraph 7B(1) required Emnora to deliver certain items to Youn within seven days after the effective date of the Contract. The Contract required Emnora to deliver these items "to the extent that the items are in [its] possession or are readily available to [Emnora]." Pursuant to the Contract, "[a]ny item not delivered is deemed not to be in [Emnora's] possession or readily available to [Emnora]."
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Paragraph 22(C) provided that the Contract constituted the entire agreement of the parties and that the terms of the Contract could not be changed except in writing. In addition, Paragraph 23 provided that time was of the essence and that the parties agreed to strict compliance with the times for performance.
During the months of negotiations leading up to the execution of the Contract, Emnora provided to Youn certain items that were later included in the boilerplate enumerated list in Paragraph 7 of the Contract. On May 1, 2003, Emnora submitted to Youn certain other items from the enumerated list.
On May 23, 2003, Youn sent a complaint to Barbles that the rent roll submitted by Emnora was not accurate and that Youn had been unable to conduct the feasibility study. Youn asked Barbles to draft an amendment to the Contract providing that the feasibility period would be extended to run for "23 days after receiving accurate property information."
On May 27, 2003, two days before the original feasibility period was to expire, Barbles notified Youn by facsimile that Barbles had spoken with Emnora about Youn's concerns and that Barbles would "get the paperwork in the form of an addendum to extend the period necessary to get all the information together." However, the feasibility period expired on May 29, 2003 without an extension having been executed by the parties.
Throughout the month of June 2003, Youn and Barbles continued to exchange correspondence, and Emnora continued to provide various documentation. Barbles exchanged correspondence with Shu Mak, Youn's loan officer at Cathay Bank, and Vivien Wong, Mak's assistant, concerning the documentation required to process Youn's loan, and Emnora produced various documents to Cathay. In a letter from Mak to Barbles, dated June 20, 2003, Mak expressed an intent to close the loan as soon as possible. There is no further correspondence in the record dated subsequent to this letter and prior to June 30, 2003, the scheduled date for closing. The closing did not occur.
On July 10, 2003, Barbles and Youn visited the Property to inquire about alleged inaccuracies in the rent rolls. During the visit, Youn learned that one of the tenants, a marble-polishing operation, had created a potential environmental concern because it had been injecting grinding fluid into the ground. The next day, on July 11, 2003, Youn sent to Barbles written notice terminating the Contract and requesting the release of the earnest money. Thereafter, Emnora refused to release the earnest money.
On June 24, 2004, Youn sued Emnora for breach of contract, alleging that Emnora had failed to produce the feasibility documents within seven days after the effective date of the Contract, as required; that, although certain documents were provided subsequent to the seven-day deadline, those documents were incomplete and inaccurate; that Emnora had failed to disclose an environmental issue; and that Emnora had failed to refund the earnest money upon termination, as required in the Contract.
On October 28, 2004, Emnora failed to appear at trial, and the trial court rendered a default judgment, ordering that Youn was to recover the earnest money. On November 24, 2004, Emnora moved to set aside the default judgment on the basis of mistake, and the trial court granted the motion. On March 3, 2006, Emnora filed counterclaims against Youn, alleging that Youn had breached the Contract by failing to terminate as provided in the Contract and then failing to purchase the Property. Emnora sought the earnest money as damages.
On May 11, 2006, after a bench trial, the trial court awarded the earnest money to Emnora. On June 9, 2006, Youn filed a motion for new trial, which was overruled by operation of law. On August 4, 2006, the trial court issued findings of fact and conclusions of law.
The trial court found, inter alia, that the parties had entered into a written contract whereby Youn had agreed to purchase the Property; that Youn deposited $10,000 in earnest money; that "in the event [Youn] failed to comply with the CONTRACT and was in default, [Emnora] was authorized to receive the earnest money as liquidated damages"; that Emnora was to deliver certain items to Youn within seven days of the effective date of the Contract to the extent that those items were in Emnora's possession or were readily available and that any item not provided was deemed not to have been in Emnora's possession or readily available; that Youn had been authorized to terminate the Contract for any reason within 30 days of the effective date by providing written notice of the termination; that if Youn did not terminate the Contract within the 30-day period, that Youn "accepted the Property in its present `as is' condition with any repairs [Emnora] is obligated to complete under this Contract"; that "any changes to the CONTRACT had to be in writing"; that there had been no "evidence of a writing that changed any of the terms of the CONTRACT"; that there was no evidence that Youn had terminated the Contract within 30 days of the effective date; and that there was no evidence that the Contract had closed.
Based on these findings, the trial court concluded, inter alia, that (1) Youn failed to prove that the parties modified any of the terms of the Contract and (2) Emnora proved that Youn breached the Contract. This appeal ensued.
Modification of the Contract
In his first through third issues, Youn challenges the legal and factual sufficiency of the evidence to support the trial court's finding, and the propriety of the trial court's conclusion of law, that the parties did not modify the terms of the Contract.
A. Standards of Review
Findings of fact in a bench trial have the same force and dignity as a jury's verdict upon jury questions. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); In re K.R.P., 80 S.W.3d 669, 673 (Tex.App.-Houston [1st Dist.] 2002, pet. denied). When challenged on appeal, the findings are not conclusive if there is a complete reporter's record, as there is here. In re K.R.P., 80 S.W.3d at 673. A trial court's findings are reviewable for legal and factual sufficiency of the evidence under the same standards that are applied in reviewing evidence supporting a jury's answer. Catalina, 881 S.W.2d at 297.
In a legal-sufficiency review, we view the evidence in the light most favorable to the verdict and indulge every reasonable inference that supports the verdict. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We must credit evidence that supports the judgment if a reasonable fact-finder could and must disregard contrary evidence unless a reasonable fact-finder could not. See id. at 827. If the evidence falls within the zone of reasonable disagreement, we cannot substitute our judgment for that of the fact-finder. Id. at 822. Unless "there is no favorable evidence . . . or if contrary evidence renders supporting evidence incompetent . . . or conclusively establishes the opposite," we must affirm. See id. at 810-11. "The final test for legal sufficiency must always be whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." Id. at 827. When, as in this case, an appellant attacks the legal sufficiency of an adverse finding on an issue for which it had the burden of proof — here, that a modification occurred — he must demonstrate on appeal that the evidence conclusively established all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001); City of Pasadena v. Gennedy, 125 S.W.3d 687, 692 (Tex.App.-Houston [1st Dist.] 2003, pet. denied).
In reviewing a factual-sufficiency challenge to a finding on an issue on which the appellant had the burden of proof, the appellant must show that "the adverse finding is against the great weight and preponderance of the evidence." Francis, 46 S.W.3d at 242. We consider and weigh all of the evidence and set aside the adverse finding only if it is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Id.
In an appeal from a bench trial, we review a trial court's conclusion of law de novo, and we uphold the conclusion if the judgment can be sustained on any legal theory supported by the evidence. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); Houston Bellaire, Ltd. v. TCP LB Portfolio I, L.P., 981 S.W.2d 916, 919 (Tex.App.-Houston [1st Dist.] 1998, no pet.). Although a trial court's conclusion of law may not be challenged for factual sufficiency, we may review the legal conclusion drawn from the facts to determine whether the conclusion is correct. BMC Software Belgium, N.V., 83 S.W.3d at 794; Houston Bellaire, Ltd., 981 S.W.2d at 919.
B. The Law
In construing contracts, our task is to ascertain and to give effect to the intentions of the parties as expressed in the contract. Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). We give terms their plain, ordinary, and generally accepted meaning, unless the instrument shows that the parties intended them in a different sense. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). When a written contract is worded so that it can be given a definite legal meaning or interpretation, we construe it as a matter of law and enforce it as written. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003); Phillips Petroleum Co. v. St. Paul Fire Marine Ins. Co., 113 S.W.3d 37, 40 (Tex.App.-Houston [1st Dist.] 2003, pet. denied).
"Whether a contract is modified depends on the parties' intentions and is a question of fact." Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228-29 (Tex. 1986); see Ghidoni v. Stone Oak, Inc., 966 S.W.2d 573, 581 (Tex.App.-San Antonio 1998, pet. denied). The party asserting contractual modification bears the burden to prove that the other party had notice of the change and accepted the change. Hathaway, 711 S.W.2d 227 at 229; Ghidoni, 966 S.W.2d at 581.
C. Analysis
The evidence reflects that Paragraph 7B(2) of the Contract provided that Youn had 30 days from the effective date of the Contract to inspect the premises and to conduct an economic feasibility study. Paragraph 7B(3) permitted Youn to terminate the Contract within that 30-day period, for any reason, by providing written notice to Emnora. In the event that Youn terminated under this provision, Youn was to receive a refund of the earnest money, less $100 in consideration for the termination privilege. If Youn did not terminate within the time permitted, Youn was deemed to have "accept[ed] the Property in its present `as is' condition." Paragraph 22(C) provided that the Contract constituted the entire agreement of the parties and that it could not be modified except by written agreement of the parties. In addition, Paragraph 23 provided that time was of the essence and that the parties agreed to strict compliance with the times for performance. It is undisputed that the parties did not execute a written agreement extending the feasibility period beyond the original deadline of May 29, 2003.
Youn nonetheless contends that the parties agreed to modify the Contract by extending the feasibility period. Youn points to a letter that it sent to Barbles on May 23, 2003, in which Youn alleged that the rent roll that Emnora had provided was not accurate and that the feasibility study could not be conducted. In the letter, Youn asked Barbles to draft an amendment to the Contract extending the feasibility period for "23 days after receiving accurate property information." Youn points to a letter that it received from Barbles on May 27, 2003, two days before the original feasibility period was to expire, in which Barbles stated that he had spoken with Emnora about Youn's concerns and stated, "I will get the paperwork in the form of an addendum to extend the period necessary to get all the information together."
The Contract clearly provided that its terms could not be modified except by written agreement of the parties, Youn and Emnora, and it is undisputed that a written extension was not executed. Barbles's prospective statement of intent to seek an extension from the seller, Emnora, does not constitute evidence that Emnora had in fact agreed to an extension of the feasibility period of the Contract.
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Youn contends that a June 3, 2003 email in which Barbles stated that he would procure estoppel certificates "after the earnest money has gone hard" is evidence that the parties were operating under an extension of the feasibility period after the May 29, 2003 expiration date. Although the timing of Barbles's statement could be construed as showing his belief that the earnest money remained pending after May 29 and that he anticipated that an extension was forthcoming, this statement does not constitute evidence that the seller, Emnora, had in fact agreed to an extension of the feasibility period. Manoucher Malekan, the owner of Emnora, testified that, when he was approached for an extension to the feasibility period, he declined because Youn had already had the materials at issue for a long time.
Youn contends that Emnora's continued production of materials due under Paragraph 7 of the Contract, notwithstanding that the original date for inspection had expired, constitutes evidence that the terms had been modified. However, Malekan testified that Emnora produced certain items to Youn and to the lender after May 29, 2003 because the feasibility period had closed and the transaction was moving forward. This testimony is supported by evidence in the record that, throughout the month of June, Barbles and Youn corresponded with Youn's loan officer, Mak, at Cathay Bank, and Emnora provided documentation to Cathay to support Youn's loan. A letter by Mak to Barbles, dated June 20, 2003, indicates that Cathay Bank was trying to close Youn's loan at that point.
Viewing the evidence in the light most favorable to the judgment and indulging every reasonable inference that supports the judgment, we conclude that this evidence would enable reasonable and fair-minded people to reach the conclusion that the parties did not modify the terms of the Contract. See City of Keller, 168 S.W.3d at 822. We cannot conclude that Youn met its burden to establish conclusively all vital facts in support of the issue: namely, that Emnora accepted a change to the feasibility period. See Francis, 46 S.W.3d at 241; Hathaway, 711 S.W.2d 227 at 229; Ghidoni, 966 S.W.2d at 581. Therefore, we hold that the evidence is legally sufficient to support the trial court's finding that the parties did not modify the terms of the Contract.
Youn also challenges the factual sufficiency of this same evidence to support the trial court's finding that the parties did not modify the terms of the Contract. After considering all of the evidence of modification in the record for factual sufficiency, we cannot conclude that the trial court's finding that the Contract was not modified is against the great weight and preponderance of the evidence. See Dow Chem. Co., 46 S.W.3d at 242; Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). Therefore, we hold that the evidence is factually sufficient to support the trial court's finding that the terms of the Contract were not modified.
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Furthermore, from these facts, we hold that the terms of the Contract were not modified and accordingly affirm the trial court's conclusion of law holding the same.
We overrule Youn's first, second, and third issues.
Breach of Contract
In its fourth issue, Youn challenges the trial court's conclusion that Youn breached the Contract.
Whether a party has breached a contract is a question of law for the trial court, which determines what the contract required of the parties as a matter of law. See BACM 2001-1 San Felipe Rd. Ltd. P'ship v. Trafalgar Holdings I, Ltd., 218 S.W.3d 137, 146 (Tex.App.-Houston [14th Dist.] 2007, pet. denied); Meek v. Bishop Peterson Sharp, P.C., 919 S.W.2d 805, 808 (Tex.App.-Houston [14th Dist.] 1996, writ denied). When the terms of the contract are clear and unambiguous, and the facts concerning performance or breach are undisputed or conclusively established, the trial court determines, as a matter of law, whether the facts show performance or breach. See Meek, 919 S.W.2d at 808. We review questions of law de novo. Trafalgar Holdings I, Ltd., 218 S.W.3d at 143.
Here, the record shows, and the trial court found, that Youn agreed to purchase the Property pursuant to the terms of the Contract, that any termination of the Contract by Youn was required to occur on or before May 29, 2003, and that Youn failed to terminate the Contract by that date. Because Youn did not timely terminate, Youn was deemed, pursuant to Paragraph 7, to have "accept[ed] the Property in its present `as is' condition," as the trial court found. The record also shows, and the trial court found, that Youn failed to purchase the property.
Youn contends that, under the circumstances of this case, its performance was excused. Generally, a material breach by one party to a contract can excuse the other party from the obligation to perform and is generally a question of fact. Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004). Construing the briefs liberally, it appears that Youn contends that Emnora failed to produce the materials required under Paragraph 7 of the Contract in a timely manner and thus Emnora "could not enforce the `as is' and `drop dead' provisions of that same section" of the Contract. However, the record shows, and the trial court found, that the Contract merely required Emnora to deliver those items "to the extent that the items [were] in [its] possession or [were] readily available to [Emnora]" and that "[a]ny item not delivered [was] deemed not to be in [Emnora's] possession or readily available to [Emnora]." In addition, Malekan testified at trial that, by the time that the Contract was executed, many items had already been produced to Youn during the negotiations period. Those items that remained outstanding were produced as quickly as possible. Malekan's property manager had recently passed away, and some information was not readily available.
Based on the trial court's findings, we conclude that the trial court's conclusion that Youn breached the Contract is supported by the evidence and is not erroneous.
Accordingly, we overrule Youn's fourth issue.
Conclusion
We affirm the judgment of the trial court.