Robert Rowe and Theresa Rowe v. Judy Dorman and Ronda Miller ( 2012 )

In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
_________________________
No. 06-12-00024-CV
______________________________
ROBERT ROWE AND THERESA ROWE, Appellants
V.
JUDY DORMAN AND RONDA MILLER, Appellees
On Appeal from the 124th Judicial District Court
Gregg County, Texas
Trial Court No. 2011-791-B
Before Morriss, C.J., Carter and Moseley, JJ.
Memorandum Opinion by Justice Moseley
MEMORANDUM OPINION
On January 31, 2006, Robert and Theresa Rowe entered into a fifteen-year lease
agreement with Ronda Miller for a building and grounds for the operation of Miller’s child
daycare center, which operates under the name of Treazure Chest Daycare. The agreement was
of the lease-purchase variety and granted Miller the option to convert the lease into a contract for
purchase of the property.
The conflicts between Miller and the Rowes came to a head on March 21, 2011, when
Miller gave written notice to the Rowes of her intent to exercise the option to purchase. The
Rowes did not take action toward that end, but on March 28, responded with a letter stating that
the lease had been terminated and demanding that Miller vacate the premises by March 31.
Miller sued and obtained a declaratory judgment requiring performance of the purchase
agreement.
The controversy between Miller and the Rowes involves Miller’s attempt to exercise that
option to purchase and the question of whether Miller had lost the right to purchase due to
certain breaches of the lease agreement made by her. The suit was originally brought by Miller
and Judy Dorman seeking injunctive relief against the Rowes and seeking a declaratory
judgment regarding the right of Miller to purchase under the lease purchase agreement.1
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Miller granted Dorman a power of attorney to represent Miller in the matters pertaining to the Treazure Chest
Daycare. Dorman had signed the lease purchase agreement as attorney-in-fact for Miller and also signed an
affidavit supporting Miller’s claim for injunctive relief. The record seems to indicate that the sole position of
Dorman in this matter is her representative capacity as attorney-in-fact for Miller and not in her individual capacity.
The file does not reflect why she is shown as a party in her own right. Since the judgment recites that Miller entered
into the lease purchase agreement and does not mention Dorman, we treat Miller as the sole litigant on her side of
the controversy, despite the addition of Dorman’s name in the pleading.
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The trial court first granted a temporary injunction, enjoining the Rowes from interfering
with Miller’s use and occupancy of the building. At a final hearing before the trial court, Miller
was granted a declaratory judgment which found that although Miller had not timely performed
some of her obligations under the lease purchase agreement, she had not forfeited her rights
under the agreement and still possessed a right to purchase. The judgment then directed the
Rowes to perform under the term of the lease following Miller’s notice of exercise of the option
to purchase. The judgment also awarded attorney’s fees to Miller against the Rowes. The
Rowes have appealed.
The Rowes argue on appeal that Miller did not fully perform her obligations under the
lease by not timely making all payments required and thus had no right to exercise the option.
We find no error and affirm.
The Contract—Lease With Option to Purchase Agreement
The contract is relatively lengthy and specifies a monthly rental of $2,251.58, payable on
or before the first day of each month and authorizes the imposition of a late charge of five
percent of the past-due installment if rent is not received within five days of the due date.
Further provisions specify that Miller is to pay all ad valorem taxes assessed against the property
as they become due, but allows the Rowes to satisfy those taxes themselves if not paid in a
timely manner and assess such payments as additional rentals (with interest and a lien for
repayment). Miller is also obligated to maintain insurance on the property, indemnify the Rowes
for any claims, keep the property properly maintained, and timely pay the utilities.
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The Rowes focus their attention on Article 10 of the lease agreement (which is the article
dealing with default). Article 10.01 provides for default in certain circumstances. In relevant
part, it provides that Miller (the lessee) would be in default if:
(i) Lessee shall fail to perform or comply with any of the terms, provisions,
covenants or conditions of this Agreement, and such failure shall have continued
for fifteen (15) days after written notice from Lessor to Lessee of such failure;
[or] (ii) Lessee shall fail to pay to Lessor any rent or any other monetary charge
due from Lessee hereunder as and when due and payable . . . .
Article 10 goes on to provide for remedies for default, listing a substantial number of options,
including self-help and re-entry.2
Article 11 of the contract contains the option for purchase by Miller and states that this
option is conditional, “provided Lessee shall have fully performed Lessee’s obligations. . . .” It
goes on to say that in the event that the option to purchase is exercised, all amounts of rent (but
no late charges or penalties) should be applied against the purchase price. It goes on to prescribe
that notice of the exercise of the option to purchase is to be made by delivery of written notice
and that within a reasonable time after receipt of notice, lessor is to deliver to lessee a
2
Although Article 10.04 of the lease agreement is a “non-waiver” provision which purports to exculpate a lessor
from the consequences of a waiver upon the failure to complain about nonperformance of the lease and although the
Rowes mention this Article in the statement of facts in their brief, they have not provided this Court with any
argument on appeal that the trial court’s findings were erroneous based upon a failure to apply that provision. When
an argument is not presented to this Court, we may not create such an argument, and we will err if we reverse on that
ground in the absence of properly assigned error. Pat Baker Co. v. Wilson, 971 S.W.2d 447, 450 (Tex. 1998) (per
curiam); Aluminum Chems. (Bolivia), Inc. v. Bechtel Corp., 28 S.W.3d 64, 68 (Tex. App.—Texarkana 2000, no pet.)
(“It is not the proper function of this Court to create arguments for an appellant. We are restricted to addressing the
arguments actually raised, not those that might have been raised.”). Even had they done so, such provisions have
been reviewed by this Court and by others, and we have recognized that such a “non-waiver” clause could itself be
waived, depending upon the facts of the case. Winslow v. Dillard Dep’t Stores, Inc., 849 S.W.2d 862, 863–64 (Tex.
App.—Texarkana 1993, writ denied); Zwick v. Lodewijk Corp., 847 S.W.2d 316, 318 (Tex. App.—Texarkana 1993,
writ denied).
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commitment for title insurance. The document completes this by prescribing the division of
closing expenses and other adjustments necessary to complete the transaction.
The Position of the Rowes
In their sole point of error, the Rowes argue that because the failure of Miller to make all
lease payments in a timely fashion, this was a fatal nonperformance of her obligations that
caused her to forfeit her right to purchase under the agreement. Specifically, they point out that
she habitually paid rental payments after the first of the month (although the payments were
typically made before the fifth of the month), that the ad valorem taxes (although eventually
paid) were paid late on several occasions, and that Miller did not pay utility bills timely on
several occasions, resulting in disconnect/cancellation notices and at least twice by actual
termination of the service (followed by payment of reconnect fees and the recommencement of
service).
The Rowes also contend that Miller was in breach because she did not fulfill her
obligation to fully comply with all regulatory requirements governing the use of the property as a
child daycare center. In support of that position, the Rowes point us to the results of several
inspections.3 Violations of varying degrees of indicated importance were noted by governmental
inspectors or regulators, but there is no indication the violations were of such severity or duration
that the operation of the child daycare business was ever in jeopardy due to those violations, and
it appears that all were corrected to the regulatory entity’s satisfaction (or, at a minimum, that no
3
The object of this evidence is apparently an attempt by the Rowes to demonstrate that Miller had operated a child
daycare center on the demised premises in noncompliance with law or regulations and, hence, had violated the lease
agreement. Paragraph 6.02 of the lease agreement is a covenant by the lessee to comply “strictly and in all respects
with the requirements of any applicable law . . . , regulation or order pertaining to health . . . .”
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further action was deemed warranted or taken by the regulatory authorities as a result of those
shortcomings).
The Rowes argue that absolute and strict compliance with all terms by Miller was
required in order for her to exercise her option to purchase; absent such strict compliance, Miller
is in default of the lease purchase agreement. Therefore, under their reasoning, since Miller has
not complied with all precedent conditions necessary to be entitled to exercise the lease option to
purchase, she no longer possesses the right to exercise the option to purchase.
We also note that the evidence shows a consistent overpayment of rent by Miller,
typically by about $400.00 per month for every month during the period of the lease. Although
the lease prescribed the monthly installments of rent to be $2,251.58 each, many of the rental
checks delivered to the Rowes were for the greater sum of $2,669.92. By the time Miller filed
the lawsuit, she had paid the Rowes nearly $26,000.00 above the prescribed amount of the lease.
The Rowes direct us to evidence that they had on several occasions contacted Miller regarding
tardy payments of rentals, but the evidence also shows that Miller cured on each occasion by
tendering payment––payments which were always accepted by the Rowes without further
complaint. Although the Rowes also suggest that Miller had breached the lease agreement due to
insurance cancellation notices issued by the insurer to Miller’s business, it appears that the
requisite insurance was reinstated in each instance with no failure of coverage. The mere
issuance of such notices provides no support for their position. It is also apparent that even
though ad valorem taxes were not always paid before delinquency, in each instance they were
paid before there were any moves taken by taxing authorities to foreclose a tax lien.
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In her testimony, Theresa testified at some length about failures of Miller to consistently
make payments in a timely manner, indicating that at the time of trial, the payments on her own
mortgage were behind schedule due to Miller’s failure to continue to pay after this dispute arose.
However, she also acknowledged that for forty-eight months she had been overpaid and that she
had used that overpayment for her living expenses. (At the rate Miller was prepaying, the
evidence indicates she would have satisfied the purchase price in ten years.) Theresa also
acknowledged that until the problems with the March 2011 tax payment arose, she considered
Miller (and Dorman) to be the purchasers of the building, and after she gave them a letter that
month, she considered that the relationship had been transformed from seller and purchaser to
landlord and tenant. At that point, she delivered a letter to Miller and Dorman which, according
to Theresa’s trial testimony, contained a misstatement. It reads, “[W]e were told that the total
tax payment, as we required, had been paid.” She testified that she meant that the ad valorem
taxes had not been paid. She testified that as a result, she informed Miller that she was in breach,
terminated the lease, and was of the opinion that on that date, Miller was only a renter. The letter
is dated February 17, 2011. However, Miller paid the ad valorem taxes on March 4, within
fifteen days after receiving notice from the Rowes that the taxes had not been paid.
This situation is further complicated by an additional agreement made by the parties in
which Miller agreed to pay the Rowes an additional $400.00 per month into escrow for the
purpose of setting the money aside for the payment of the ad valorem taxes (this payment being
in addition to the $418.34 being paid each month in excess of the lease amount). The Rowes
neither set up a formal escrow account, nor paid the ad valorem taxes from such money.
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The trial court rendered a rather lengthy judgment, which contains a number of findings
of fact and conclusions of law. In short, it found that under these facts and the payments as
actually made, Miller was not in violation or default on payments, late-paid taxes, or on any
other basis and had validly exercised her option to purchase. Applying those findings, the court
ordered the Rowes as lessors/sellers to comply with the purchase agreement.
Argument as Set Out by Rowe
The Rowes argue in a single issue that Miller failed to provide evidence showing that she
was entitled to enforce the judgment. They argue that the evidence conclusively shows that
Miller did not strictly comply with the terms, and thus the findings that she was not in default
were erroneously entered.
Standard of Review
In a legal sufficiency review, we view the evidence in a light favorable to the findings of
the trier of fact, crediting favorable evidence if a reasonable fact-finder could, and disregarding
contrary evidence unless a reasonable fact-finder could not. City of Keller v. Wilson, 168 S.W.3d
802, 827 (Tex. 2005). When reviewing the factual sufficiency of the evidence, we examine all
the evidence and set aside a finding only if it is so contrary to the evidence as to be clearly wrong
and unjust. Bledsoe Dodge, L.L.C. v. Kuberski, 279 S.W.3d 839, 841–42 (Tex. App.—Dallas
2009, no pet.); Cameron v. Cameron, 158 S.W.3d 680, 683 (Tex. App.—Dallas 2005, pet.
denied).4
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Because findings of fact in a bench trial have the same force and dignity as a jury verdict, we review them for legal
and factual sufficiency of the evidence under the same standards we apply in reviewing a jury’s findings. Catalina
v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).
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Application
We have set out above a substantial portion of the evidence that is relevant to this
determination. It is clear that Miller, in fact, had breached the contract because of the late
payments, and arguably at other points because of her failure to timely pay ad valorem taxes she
was required under the agreement to pay. Although there is evidence that she was not in
absolute compliance at all times with all relevant regulations governing the operation of the
business she conducted, the evidence shows nothing except that Miller’s shortcomings in her
performance were apparently corrected or ameliorated sufficiently to satisfy regulators; the child
daycare business she conducted on the premises was never fined or shut down by the authorities
due to uncorrected errors. The suggestion that she was somehow breaking the law with those
failures is not one that is explained by counsel in a way that shows an uncorrectable, unwaivable
breach of contract actually occurred. The letters indicating that insurance coverage had lapsed
on various occasions was in each instance followed by acknowledgement by the insurer that the
insurance was reinstated and that insurance coverage was fully provided.
In their argument, the Rowes take the position that the evidence shows that after several
years of accepting late payments, they finally and properly decided to declare the contract
terminated based upon Miller’s failure to timely pay ad valorem taxes assessed against the
property. The Rowes argue that this failure amounts to a material breach of the lease purchase
agreement, occasioning a right on their part to terminate the agreement. However, under the
terms of the contract itself, the lessee is permitted fifteen days from notification by the lessor of
breach to remedy the breach. There is evidence that Miller did satisfy the taxes within that time
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period from funds over and above the $400.00 per month that Miller had been delivering to the
Rowes for the purpose of paying the taxes.
Rowe also argues, by reference to this Court’s opinion in Besteman v. Pitcock, 272
S.W.3d 777, 784 (Tex. App.—Texarkana 2008, no pet.), that strict compliance (by Miller) was
required and that her prior breaches showed her failure to comply with the terms of the
lease/option agreement; thus, it was unenforceable. However, in Besteman, the problem was a
failure to provide notice of the intent to exercise the option. That is not this situation. The
analysis does not mean that every aspect of the underlying contract must be in every instance
perfectly performed. The cases underlying our opinion in Besteman operate from the
foundational principle that the termination of an optionee’s right to purchase is not an action to
be taken in an inflexible manner. See Jones v. Gibbs, 130 S.W.2d 265, 271–73 (Tex. Comm’n
App. 1939, judgm’t adopted).5 Appellant does not argue in this case that the option was
improperly or untimely exercised (except as discussed in the next paragraph), thus the authorities
are not apposite.
The Rowes also argue that the court’s finding that Miller gave written notice of intent to
exercise the option is unsupported by the evidence. His argument, however, assumes that a copy
of the written notice must appear in the record. Although that might be preferable, there is no
authority holding such evidence indispensible. There is explicit and uncontroverted testimony
from Dorman that on Miller’s behalf, she gave the Rowes written notice of intent to exercise the
5
In general, options to purchase property must be exercised in strict compliance with the terms of the option
agreement. Zeidman v. Davis, 342 S.W.2d 555, 558 (Tex. 1961); Probus Props. v. Kirby, 200 S.W.3d 258, 262
(Tex. App.—Dallas 2006, pet. denied).
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option to purchase on March 24. We reiterate that this notice of intent was given four days
before the evidence shows that Miller received a letter stating the lease had been terminated.
The Rowes argue that Dorman’s testimony about the transmission of the written notice is
insufficient evidence as a matter of law to support a finding that such a written notice was
actually sent. We have reviewed the cases cited by the Rowes, and they do not suggest such a
result; to conclude that oral testimony has no value is not consistent with a standard evidentiary
analysis.
The Rowes also argue that the trial court improperly modified an unambiguous lease by
giving credence to Miller’s testimony that she had overpaid rent. There is no explanation of why
this evidence constitutes a modification of the lease, and it is not apparent that it does so. Rather,
this appears more to be evidence of the way in which the payments under the lease were made by
Miller and accepted by the Rowes.
Finally, the Rowes argue that the evidence is legally and factually insufficient to support
the trial court’s findings that Miller was not in default under the lease agreement. The evidence,
as set out above, shows that she did commit acts of default, but in each such event, Miller cured
each such act of default as allowed by the lease. The contract provides specific penalties for the
stated failures. The Rowes did not seek to recover those penalties, and the record does not
contain evidence that they sent the written notice required by the lease except as noted above.
Finally, the Rowes continued in each instance to accept Miller’s payments and then each
succeeding payment, thereby acknowledging that the default had been cured. There is legally
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and factually sufficient evidence to support the findings of the trial court that have been attacked
on appeal.
We affirm the judgment of the trial court.
Bailey C. Moseley
Justice
Date Submitted: September 17, 2012
Date Decided: October 18, 2012
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