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VRE v. VLAHAKOS

Court of Appeals of Texas, First District, Houston
Jun 30, 2011
No. 01-10-00146-CV (Tex. App. Jun. 30, 2011)

Opinion

No. 01-10-00146-CV

Opinion issued June 30, 2011.

On Appeal from the 190th District Court, Harris County, Texas, Trial Court Case No. 2008-45333.

Panel consists of Justices KEYES, HIGLEY, and MASSENGALE.


MEMORANDUM OPINION


Voss Road Exxon LLC and Demos Thanos (collectively, "VRE") sued Jackson Walker L.L.P. and one of its partners, Frank Vlahakos (collectively, "Jackson Walker"), asserting that Jackson Walker's alleged legal malpractice and other wrongful conduct caused VRE to fail to consummate a purchase of the property on which it is located pursuant to a right of first refusal in its lease agreement. The trial court granted summary judgment in favor of Jackson Walker. We conclude that VRE's right of first refusal, which expired before VRE contacted Jackson Walker, was not revived by waiver. Jackson Walker did not cause VRE's alleged injury. Because Jackson Walker has disproved causation with respect to VRE's loss of its right of first refusal, and because VRE does not assert on appeal that it had any separate injury distinct from its loss of the right of first refusal, we hold that the trial court did not err by granting summary judgment.

I. Background

A. Factual background

VRE owns and operates a gas station, which is located on property that VRE leases from Billie Jean Reed. The lease agreement contains a right of first refusal that entitled VRE to purchase the property by matching any third-party offer to purchase the property that Reed was willing to accept during the initial five-year term of the lease. Under the right of first refusal, Reed was required to give VRE notice of any acceptable third-party offer within seven days of receiving it; VRE then had ten days to exercise its right of first refusal by sending Reed a "Notice of Exercise." If VRE failed to exercise its right of first refusal, Reed could sell the property to the third-party subject to VRE's right to lease the property for the remainder of the initial five-year term.

The provision states:
So long as Lessee is not in material default hereunder (a material default to include, without limitation, Lessee's failure to pay Base Rent hereunder or any other sums payable by Lessee hereunder, irrespective if such failure is has [sic] been deferred or mitigated by bankruptcy or insolvency proceedings), the Lessor hereby grants to Lessee the right of first refusal to purchase during the Initial Term, in the name of Lessee or Lessee's nominee, the Premises for a purchase price upon terms and conditions offered by a third-party that Lessor is willing to accept (an "Offer"). Within seven (7) days of Lessor's receipt of an Offer, the Lessor shall give Lessee notice of such Offer, which notice shall (a) subject to any confidentiality requirement in such offer, state the name and address of and identity of the person making the Offer, (b) set forth in reasonable detail, the terms of the proposed transaction, and (c) contain a representation by Lessor that the Offer is, to the Lessor's knowledge and belief, the Offer is [sic] a bona fide Offer, that the terms of the Offer as set forth in the notice are true and correct, and that the Lessor will notify Lessee in the event that the terms of the Offer change or the Offer is withdrawn. Lessee's right of first refusal to purchase the Premises at the price and on the terms of such Offer may be exercised by giving Lessor notice of such exercise ("Notification of Exercise") within ten (10) days after Lessor gives Lesseee proper notice of such Offer. . . . In the event Lessee does not exercise its right of first refusal within the time permitted, Lessor shall be permitted to sell the Premises in accordance with the terms communicated to Lessee, free and clear of any further right of refusal, but subject to the remaining Initial Term of the Lease, if any. . . .

Two years into the initial term of the lease, Reed sent VRE notice of an offer to purchase the property. The letter notified VRE that it had until July 30, 2007 — ten days from the date the notice was "effective" under the lease, which was three days after it was mailed — to exercise its right of first refusal. The notice identified Southwest Investment Company, LLC as the third party which had offered to purchase the property, and it contained the principal terms of the offer, including price, earnest money payment, and inspection period.

Thanos, VRE's sole owner, was on vacation in Greece for four weeks in July 2007, and he did not have anyone monitoring his mail. He did not actually receive the notice until he returned home on August 2. Thanos then contacted Vlahakos and retained Jackson Walker to represent VRE in the matter. Vlahakos immediately emailed Reed's counsel, Stephanie Harrison, notifying her that Thanos had been out of the country, stating that VRE wanted to exercise its right of first refusal, and asking her to accept the email as notification of exercise. Thanos also wrote Reed a letter explaining that he had been out of the country and "did not have enough time to reply back by the July 30, 2007 deadline," requesting that she allow him another opportunity to exercise the right of first refusal. Thanos also left a voicemail for Harrison.

Harrison did not immediately respond to Vlahakos's and Thanos's attempts to contact her, and on August 8, Jackson Walker attorney Curt Langley sent her a letter informing her that Thanos was arranging financing and would like to speak with her about the transaction. That day, Langley spoke with Harrison. In an email to Thanos that afternoon, Langley stated that Harrison had made the following statements: (1) when they did not receive a response from VRE by the deadline, they proceeded under the impression that VRE did not wish to exercise its right of first refusal; (2) when she received VRE's notification of exercise on August 2, she inquired of Reed whether she intended to honor the notification or contest it as untimely, but she had not yet received Reed's response; and (3) she considered her notice of offer letter effective and timely under the lease's notice provision. Thanos responded to Langley's email stating that he "totally accept[ed] responsibility" but was disappointed that neither Reed nor her broker, each of whom had been at the gas station recently, had mentioned any possibility of sale. He also stated in the email that "[a] simple courtesy call or a fair warning would have been the ethical thing to do" and his wish was "that Ms. Reed be compassionate."

The next communication Jackson Walker received from Reed was an email on August 16 from Christopher Leavitt, Reed's grandson and an attorney, who requested that Jackson Walker "have your client submit his [purchase and sale agreement] to me." Langley informed Thanos of the communication and introduced him to Rob Harlow, a real estate transactions partner at Jackson Walker. After speaking with Thanos, Harlow started preparing a proposed purchase and sale agreement for VRE. In drafting the agreement, Harlow contacted Leavitt to request a purchase and sale agreement that had already been drafted, which he could use as a starting point for VRE's agreement, to "keep costs down." Leavitt told Harlow that he was "working on the changes for the [purchase and sale] agreement," but he would provide it to Harlow soon. In a subsequent email Leavitt told Harlow: "I found the last one we were working with, and after I make a few changes I will forward it on." The next day, Leavitt sent Harlow a draft purchase and sale agreement between Reed and a buyer to be determined. Leavitt stated that the draft "still might not be 100% perfect."

Leavitt was employed by Apartment Realty Advisors, where he worked with Matthew Rotan, a partner at Apartment Realty Advisors. Rotan is also a partner with Southwest Investments, the third-party that had offered to purchase the property. Rotan approached Reed about purchasing the property through Leavitt. A number of people referred to Leavitt as Reed's broker for the transaction. Harrison stated that she viewed Leavitt as her co-counsel on the matter.

The draft agreement Leavitt sent to Harlow is labeled "DRAFT" on every page and contains terms that differ from those in the offer notice Reed had previously sent to VRE. The price stated in the draft contract is $1,908,000; the notice of offer stated the offered purchase price as $1,800,000 and further stated that, because the lease required a six percent commission, a matching offer from VRE would have to be for $1,914,893.60. Additionally, while both the notice and the draft contract contemplate $100,000 in earnest money and a forty-five day inspection period, the notice stated that the inspection period could be extended by thirty days for payment of an additional $15,000, while the draft contract provided for only a twenty-day extension for the additional payment.

The record contains a proposed purchase and sale agreement between Reed and Southwest Investment Company that includes a mixture of these terms: the purchase price is $1,800,000 but the $15,000 payment entitles the buyer to only a twenty-day extension of the inspection period. This agreement is signed by H. Dean Lane on behalf of Southwest Investments, but it is not signed by Reed.

Using the draft contract as a template, Harlow drafted a purchase and sale agreement for Thanos. Harlow used the $1,914,893.60 purchase price stated in the offer notice rather than the $1,908,000 price in the draft contract sent to him. Harlow also provided for a thirty-day extension of the option period in exchange for payment of an additional $15,000, consistent with the terms identified in the offer notice. Harlow revised the inspection period provision of the draft contract. Under the draft contract, the inspection period began on the later of the date VRE waived its right of first refusal or the date on which all title documents and due diligence materials were delivered. Harlow removed the reference to VRE's waiver of its right of first refusal, and he added a term that provided for the refund of the earnest money if the purchase transaction were terminated before the end of the inspection period. Harlow also revised the indemnity provision of the contract to exclude from VRE's indemnity obligations events occurring on the property before closing. He made a minor revision to the assignment provision, which referenced "TBD, L.L.C." in the draft contract. Finally, Harlow revised the provision of the draft contract reciting the parties' rights in the event of a fire or other casualty before closing.

Reed and VRE had a preexisting indemnity agreement in connection with the lease, which Jackson Walker contended made these provisions unnecessary.

Harlow sent the proposed purchase and sale agreement to Thanos for his review, stating that the draft was "based upon the contract that was proposed to be used for the sale that `triggered' our right of first refusal." He asked Thanos to review and comment on the draft. Thanos asked Harlow questions about the earnest money provision, which Harlow answered. Harlow then sent the revised draft to Leavitt on August 27. The next day, Leavitt requested a redline version to show changes from the draft contract, which Harlow provided. The parties did not communicate further until September 11, when Thanos emailed Leavitt directly to inquire about the status of the revised draft. Leavitt responded that Harrison had the draft and would be communicating with Harlow.

On September 21, Vlahakos emailed Harrison to inquire about the status of the transaction. Three days later, Jackson Walker informed Thanos that Reed had withdrawn the offer to sell the property. The next day, Vlahakos and Thanos discussed how to proceed. Pursuant to this discussion, Vlahakos sent a letter to Reed the following day. The letter stated that they were under the impression that Reed was willing to go forward with the sale and that they considered the proposed purchase agreement sent to Thanos to be an offer on the same terms as the third-party offer made by Southwest Investments, within the meaning of the right of first refusal. The letter further stated that VRE was willing to agree to the purchase agreement sent by Leavitt without any changes, except to identify the buyer and keep the revisions to the earnest money provision; Vlahakos attached to the letter a purchase agreement with only these revisions, signed by Thanos.

On October 22, Harrison sent a letter to Vlahakos in which she stated: Thanos had missed the deadline to invoke his right of first refusal; Reed had subsequently sent Thanos a proposed contract that Reed was prepared to sign; Thanos had revised that draft; Reed considered the changes to be material and to constitute a counteroffer; and Reed found the revisions unacceptable and decided not to sell the property to anyone at that time.

B. Procedural history

After the sale fell through, VRE sued Jackson Walker, asserting that the firm committed legal malpractice, gross negligence, violations of the Deceptive Trade Practice Act, and fraud, causing VRE to lose its right of first refusal. VRE alleged that Jackson Walker acted wrongfully in revising the draft contract sent to it by Leavitt, that VRE did not know or approve of these changes, and that Reed would have accepted VRE's purchase offer if the terms had not be altered. VRE also alleged that Jackson Walker attempted to conceal its misconduct after Reed decided not to sell the property.

Jackson Walker answered and filed a motion for traditional and no-evidence summary judgment. It argued, among other things, that VRE lost its right of first refusal by failing to exercise it timely and that no conduct by Jackson Walker, retained after the fact, could be the cause of such loss. Jackson Walker also asserted that Thanos lacked standing to assert the claims individually. In response to these arguments, VRE asserted that the motion failed to address its "defense of waiver." VRE contended that Reed waived a timely "Notification of Exercise" as a prerequisite to the exercise of VRE's right of first refusal, basing this contention on Reed's failure to expressly reject VRE's untimely notices of its desire to purchase the property and the communications that followed. VRE did not argue that it had an injury separate and apart from the lost opportunity to purchase the property under its right of first refusal. VRE also asserted that Thanos had standing to sue in his individual capacity, noting that he was a guarantor on the lease.

After a hearing, the trial court granted Jackson Walker's motion for summary judgment without stating the grounds upon which it relied. This appeal followed.

II. Standard of review

We review a trial court's decision to grant summary judgment de novo. Mann Frankfort Stein Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009); Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Jackson Walker moved for both traditional and no-evidence summary judgment. With respect to its motion for traditional summary judgment, Jackson Walker bore the burden of demonstrating that no genuine issue of material fact existed and that it was entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). Jackson Walker could satisfy this burden by conclusively negating at least one element of VRE's claims or by establishing all elements of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997).

With respect to Jackson Walker's motion for no-evidence summary judgment, VRE bore the burden of presenting evidence sufficient to raise an issue of fact with respect to each element of its claims challenged in the motion. TEX. R. CIV. P. 166a(i); Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). To determine if VRE raised an issue of fact, we review the evidence in the light most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Fielding, 289 S.W.3d at 848; City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

When the trial court's summary judgment order does not state the basis for the trial court's decision, we must uphold the order if any of the theories advanced in the motion is meritorious. Provident Life Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003). "Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal." TEX. R. CIV. P. 166a(c).

III. Analysis

A. Standing

As an initial matter, we address whether Thanos has standing to pursue the claims pleaded against Jackson Walker. To bring an action in Texas, a party must have standing. E.g., DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 304 (Tex. 2008). We have no jurisdiction over a claim made by a party without standing to assert it. Id. A party has standing only if the party is personally aggrieved and the injury is "concrete and particularized, actual or imminent, not hypothetical." Id. at 304-05.

The injury pleaded in this case is the loss of the opportunity to exercise the right of first refusal in the lease. This injury was suffered by Voss Road Exxon but not by Thanos individually. Although Thanos asserts that he was a guarantor under the lease, the contract establishes that the right of first refusal belonged to Voss Road Exxon alone. When the injury alleged is to a corporate entity, claims arising out of the injury belong to the entity and not to individual owners like Thanos. See Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990) (holding that owner could not sue individually on cause of action belonging to corporation, even if owner was indirectly injured by wrong done to corporation); El T. Mexican Restaurants, Inc. v. Bacon, 921 S.W.2d 247, 251 (Tex. App.-Houston [1st Dist.] 1995, writ denied). Because Thanos did not suffer the injury alleged, he lacks standing to pursue the claims pleaded against Jackson Walker.

B. Waiver

It is undisputed that VRE's right of first refusal lapsed before Thanos contacted Jackson Walker. However, VRE contends that this right was revived through "waiver," treating this argument as an assertion of "the affirmative defense of waiver." The affirmative defense of waiver is not applicable here. A party may waive a contractual right, and waiver can be asserted as an affirmative defense against a party seeking to enforce a contractual right after the party intentionally relinquished the right or engaged in conduct inconsistent with enforcement of the right. Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996). The contractual right at issue in this case, however, is VRE's own right of first refusal. No party is seeking to enforce a contractual right against VRE, nor has any party pleaded affirmative claims against VRE as to which it may assert an affirmative defense.

To the extent VRE argues that Reed waived compliance with the time limit on VRE's exercise of its right to first refusal, thus reviving the right of first refusal, this argument also fails. Once triggered, a right of first refusal is in the nature of an option contract: Reed's notice of a third-party offer was essentially an offer for VRE to purchase the property under the same terms offered by the third-party, and VRE had a right but not an obligation to accept the offer within the ten days during which Reed was obligated to keep the offer open. See, e.g., Holland v. Fleming, 728 S.W.2d 820, 822-23 (Tex. App.-Houston [1st Dist.] 1987, writ ref'd n.r.e.). Acceptance of an option must be unqualified, unambiguous, and in strict compliance with the terms of the agreement; if the agreement requires notice of intent to exercise the option within a specified period, failure to give notice within the time specified is fatal. Comeaux v. Suderman, 93 S.W.3d 215, 220 (Tex. App.-Houston [14th Dist.] 2002, no pet.). "Accordingly, a failure to exercise an option according to its terms, including untimely or defective acceptance, is simply ineffectual, and legally amounts to nothing more than a rejection." Id. (citing Crown Constr. Co., Inc. v. Huddleston, 961 S.W.2d 552, 558 (Tex. App.-San Antonio 1997, no writ)).

VRE's right of first refusal, which is provided for under a lease for a period of more than one year and pertains to an agreement for the sale of real property, is governed by the statute of frauds. See TEX. BUS. COM. CODE ANN. § 26.01(a), (b)(4) (West 2009) (requiring that contracts for lease of real property for more than one year or for sale of real property be in writing and signed by party against whom it is asserted); see also Williams v. Ellison, 493 S.W.2d 734, 736 (Tex. 1973); Reiland v. Patrick Thomas Props., Inc., 213 S.W.3d 431, 438 (Tex. App.-Houston [1st Dist.] 2006, pet. denied) (holding right of first refusal unenforceable where it failed to satisfy statute of frauds). In certain circumstances oral modification of a written contract will not violate the statute of frauds, and this may include parol agreements to extend the time for performance. See Joiner v. Elrod, 716 S.W.2d 606, 609 (Tex. App.-Corpus Christi 1986, no writ) (stating that a party may waive strict compliance with terms of agreement, including time limits on acceptance of an offer, by oral agreement). However, "[i]f a parol agreement to extend the time of an option contract is entered into after the option has expired, it is void and unenforceable." Id.; see also Shafer v. Gulliver, No. 14-09-00646-CV, 2010 WL 4545164, at *7 (Tex. App.-Houston [14th Dist.] Nov. 12, 2010, no pet.) ("As an exception to the general rule against oral modification of contracts covered by the statute of frauds, the parties to a written contract may agree orally to extend the time of performance, so long as the oral agreement is made before the expiration of the written agreement."). This is because an option is merely an offer by the optionor that does not bind the optionee to any obligation; unless and until the option is exercised, there is no bilateral contract. Luccia v. Ross, 274 S.W.3d 140, 148-49 (Tex. App.-Houston [1st Dist.] 2008, pet. denied) (observing that, after option has been exercised, "a contract exists" and parties "owe mutual and concurrent obligations"); Riley, 808 S.W.2d at 188 (noting that option contracts have two components: an underlying contract that is not binding until accepted and a covenant to hold open to optionee the opportunity to accept).

Thus, when the optionor has complied with its obligations, as Reed did here, and the optionee has not exercised the option within the specified time, as VRE failed to do here, there is no continuing contractual obligation under the written contract to be modified by parol agreement. See Luccia, 274 S.W.3d at 148-49; Riley, 808 S.W.2d at 188; see also Kurio v. United States, 429 F. Supp. 42, 64 (S.D. Tex. 1970) (rejecting offeror's argument that it waived deadline for acceptance of offer because once time period of offer expires, "there is no power to accept" and "a belated attempt to accept . . . may well constitute a counteroffer" but may never revive original offer). Even if VRE's efforts to exercise the right of first refusal were not legally ineffective for the reasons explained above, any oral modification of the lease terms would be unenforceable due to a lease provision requiring that any modification, amendment, or alteration be made only by an agreement in writing. Of course, Reed was free to accept VRE's offer to purchase the property under the draft contracts after the expiration of its right of first refusal, creating new contractual obligations between the parties, but the summary judgment evidence establishes that she chose not to do so.

Gallop v. Seagoville Investments, Inc., relied on by VRE, is not contrary to this holding. 417 S.W.2d 727, 728-29 (Tex. Civ. App.-Dallas 1967, writ ref'd n.r.e.). In Gallop, the optionee exercised his option to purchase timely but did so verbally instead of in writing. Id. The optionor's representative accepted the verbal notice. Id. The court then recognized a question of fact as to whether the representative had authority to accept the verbal exercise of the option on behalf of the bank, thus waiving the requirement that acceptance be in writing. Id.

For these reasons, we conclude that the right of first refusal was not revived by any alleged "waiver" by Reed of timely notice owed to her by VRE in order to exercise the right of first refusal.

C. Causation

In order to prevail on any of its claims, VRE had to put forth evidence sufficient to raise an issue of fact as to whether Jackson Walker's alleged conduct was a cause-in-fact of VRE's injury. See Akin, Gump, Strauss, Hauer Feld, L.L.P. v. Nat'l Dev. Research Corp., 299 S.W.3d 106, 112 (Tex. 2009) ("To prevail on a legal malpractice claim, the plaintiff must prove the defendant owed the plaintiff a duty, the defendant breached that duty, the breach proximately caused the plaintiff's injury, and the plaintiff suffered damages."); Metro Allied Ins. Agency, Inc. v. Lin, 304 S.W.3d 830, 835 (Tex. 2009) (observing that, to recover under DTPA, claimant must show that alleged conduct was "producing cause" of claimant's injury, and "[b]oth producing cause and proximate cause contain the cause-in-fact element, which requires that the defendant's act be `a substantial factor in bringing about the injury and without which the harm would not have occurred.'") (quoting Doe v. Boys Clubs of Greater Dallas, 907 S.W.2d 472, 481 (Tex. 1995)); Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 914 (Tex. 2007) (observing that causation is essential element of claims for negligence, gross negligence, violations of DTPA and fraud).

The causation argument VRE makes here is that the "Appellee's actions were a proximate cause of Appellants' damages because the late notification of the [right of first refusal] was waived." Because we have concluded that the right of first refusal was not revived by waiver, we reject VRE's argument on this point. Because the right of first refusal expired before any alleged involvement by Jackson Walker, we conclude that Jackson Walker's alleged conduct was not the cause in fact of VRE's loss of its right of first refusal. See Metro Allied Ins. Agency, 304 S.W.3d at 835 (holding that element of cause in fact requires that defendant's act be substantial factor in bringing about injury, without which harm would not have occurred). VRE makes no causation argument with respect to any injury separate and apart from the loss of the right of first refusal.

Conclusion

For the reasons explained in this opinion, the trial court correctly rendered summary judgment in favor of Jackson Walker. Because we affirm the trial court's judgment due to the absence of any evidence showing that Jackson Walker caused VRE's asserted injury, we do not reach the other grounds upon which the trial court may have granted summary judgment. Accordingly, we affirm.


Summaries of

VRE v. VLAHAKOS

Court of Appeals of Texas, First District, Houston
Jun 30, 2011
No. 01-10-00146-CV (Tex. App. Jun. 30, 2011)
Case details for

VRE v. VLAHAKOS

Case Details

Full title:VOSS ROAD EXXON LLC AND DEMOS THANOS, Appellants v. FRANK G. VLAHAKOS AND…

Court:Court of Appeals of Texas, First District, Houston

Date published: Jun 30, 2011

Citations

No. 01-10-00146-CV (Tex. App. Jun. 30, 2011)