Crandall Medical Consulting Services, Inc. v. John A. Harrell

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-07-00689-CV
Crandall Medical Consulting Services, Inc., Appellant
v.
John A. Harrell, Appellee
FROM THE DISTRICT COURT OF COMAL COUNTY, 274TH JUDICIAL DISTRICT
NO. C2007-0109C, HONORABLE JACK A. ROBISON, JUDGE PRESIDING
MEMORANDUM OPINION
Appellant Crandall Medical Consulting Services, Inc., (“CMC”)1 appeals the trial
court’s grant of summary judgment in favor of appellee John A. Harrell and the denial of summary
judgment in its favor. The trial court ordered specific performance of the contract for the sale of real
property between the parties and awarded damages and attorney’s fees. In two issues, CMC
contends that the trial court erred in granting summary judgment in favor of Harrell because he failed
to deposit additional earnest money of $100 as required by the contract and that CMC was entitled
to summary judgment because it timely terminated the contract. Because we conclude the trial court
did not err in granting summary judgment in favor of Harrell, we affirm the trial court’s judgment.
1
Appellant is identified as Crandall Medical Consulting Services, Inc., in Harrell’s pleadings
and the final summary judgment, but appellant refers to itself as “Crandall Medical Consulting, Inc.”
or “CMC” in its briefing to this Court. Appellant has not alleged a pleading defect. See Tex. R.
Civ. P. 91 (special exceptions to challenge pleading defects), 93 (verified pleading to challenge
defect of parties).
FACTUAL AND PROCEDURAL BACKGROUND
CMC and Harrell executed the contract for the sale of real property (the “Contract”)
on or around November 17, 2006. CMC agreed to sell and Harrell agreed to buy real property
located in the city of New Braunfels in Comal County for $253,000 on or before January 26, 2007.
The Contract provided that “[t]ime is of the essence in this contract.” It also provided for attorney’s
fees to the prevailing party in any legal proceeding related to the transaction and the remedy of
specific performance in the event that either party was in default.
The Contract required Harrell to deposit earnest money with a title company. Harrell
agreed to deposit earnest money of $2000 within three days of the Contract’s effective date and to
deposit “additional earnest money” of $100 on or before the 14th day after the feasibility period
expired. During the thirty-day feasibility period, Harrell had the right to terminate the Contract for
any reason and recover his earnest money deposit less $100. Harrell deposited $2000 with the title
company in accordance with the Contract, but he did not deposit the additional earnest money of
$100 prior to closing his part of the Contract on January 26, 2007.
In December 2006, CMC requested that the closing date be extended. Harrell
responded that he would agree to the extension provided that CMC agreed to pay rent for every
month that CMC occupied the property after the closing. The parties ultimately were unable to agree
to an extension, and Harrell notified the title company by letter dated December 29, 2006, to
“proceed with the necessary paperwork so we may close on or before January 26, 2007 as noted in
the original terms of the Contract.”
2
On or about January 3, 2007, Dr. Dora Crandall2 on behalf of CMC sent a “Notice
of Termination of Contract” to the title company. Harrell does not dispute that he received a copy
of the notice from the title company.3 The notice states that “Seller notifies Buyer that the Contract
is terminated” and directs the title company to release the earnest money to Harrell.
On or around January 9, 2007, Harrell’s attorney notified CMC and the title company
that, in his opinion, CMC did not have a legal right to terminate the Contract, that Harrell had the
legal right to enforce specific performance, and that Harrell would proceed with the closing. On
January 26, 2007, Harrell closed his side of the Contract and tendered the purchase price of
$253,000 by cashier’s check to the title company in the amount of $64,029.01 and a real estate lien
note on the balance. Thereafter, Harrell brought this suit to enforce specific performance of the
Contract and for damages.
The parties filed competing motions for summary judgment and responses to the other
party’s motion. In his motion for summary judgment, Harrell contended that there were no genuine
issues of material fact that the Contract was valid as a matter of law and subject to enforcement by
specific performance. It was undisputed that the Contract was valid and enforceable when executed,
that Harrell timely deposited earnest money of $2000, that Harrell timely tendered the purchase
2
Dora Crandall, M.D., is the president of CMC. She negotiated and executed the Contract
on behalf of CMC and sent the notice of termination with a letter and a release of earnest money to
the title company.
3
In his second amended petition, Harrell states: “On or about January 4, 2007, the Plaintiff
received notice from [the title company] that Defendant had attempted to terminate the contract and
had instructed [the title company] to disburse the earnest money to the Plaintiff.” In his original
petition, Harrell attached a copy of Crandall’s letter to the title company, the “Notice of Termination
of Contract,” and a “Release of Earnest Money” as exhibits.
3
price, and that CMC refused to convey the real property. Harrell’s summary judgment evidence
included the Contract and affidavits from Harrell, Lacie Orsak, Yerger Hill, III, and Kenneth D.
Brazle. Harrell averred that he had closed his portion of the Contract and that, because the real
property was unique, he did not have an adequate remedy at law if CMC was not required to convey
the real property. Orsak, a commercial lender, averred to her appraisal of the real property, opining
that the value of the real property on January 23, 2007, was $254,072. Hill and Brazle, Harrell’s
attorneys, averred and opined to Harrell’s incurred attorney’s fees.
CMC responded to Harrell’s summary judgment motion and filed its own motion for
summary judgment in the same pleading. In response to Harrell’s motion, CMC contended that there
were genuine issues of material fact as to its counterclaim for breach of fiduciary duty and its
affirmative defenses of duress and estoppel. In its motion for summary judgment, CMC contended
that it was entitled to judgment as a matter of law because the “uncontradicted summary judgment
evidence establishes that the contract on which [Harrell] relies expired on his receipt of written
notice of cancellation from Seller [CMC] on or about January 3, 2007.” CMC also filed a
supplemental motion for summary judgment seeking its attorney’s fees and a supplemental response
to Harrell’s motion for summary judgment raising the additional affirmative defense that the
Contract was unconscionable.
CMC’s summary judgment evidence included the affidavits of CMC’s counsel,
Crandall, Michelle Sanders, and Barbara Parrish. Crandall averred to her relationship and
communications with Harrell concerning the Contract and that she “gave formal notice of
termination of the agreement” on January 3, 2007. CMC also attached deposition excerpts from
4
Harrell in which he testified that the title company forwarded the notice of termination to him and
that he did not deposit the “additional $100” of earnest money prior to closing the transaction.
Sanders and Parrish averred to interactions that they witnessed between Crandall and Harrell and
Harrell’s representative. CMC’s counsel averred to attorney’s fees. CMC attached to its
supplemental response the affidavits of John Welch who performed an appraisal of the property and
Douglas Cottle who averred to a conversation that he overheard at Crandall’s office.
Harrell thereafter filed a reply to CMC’s responses and special exceptions and
objections to and motion to strike CMC’s summary judgment evidence and its responses to Harrell’s
motion for summary judgment. As to Crandall’s affidavit, Harrell sought to exclude it on several
grounds, including that it was conclusory, argumentative, and “so in conflict with her sworn
deposition testimony” that it was unreliable. Harrell also sought to exclude CMC’s evidence that
addressed defenses that CMC had not pleaded. CMC’s live pleading, its first amended original
answer and counterclaim, did not include breach of fiduciary duty as a counterclaim or duress,
estoppel, or unconscionability as affirmative defenses. CMC asserted breach of fiduciary duty as an
affirmative defense, and, also as an affirmative defense, that the Contract was unenforceable
“because it terminated under its own terms when Defendant gave contractual Notice of Termination
on January 3, 2007.”4
The trial court held a hearing on Harrell’s motion for summary judgment. At that
time, CMC did not set its motion for summary judgment, and CMC does not dispute that its
4
CMC does not challenge the trial court’s summary judgment rulings based on its
affirmative defense of breach of fiduciary duty.
5
pleadings did not include breach of fiduciary duty as a counterclaim or the affirmative defenses of
duress, estoppel, or unconscionability. A week later, CMC filed a motion for leave to amend its
pleadings to include its defenses raised in its responses to Harrell’s motion for summary judgement.
The district court denied CMC’s motion for leave to amend its pleadings. Thereafter, the trial court
entered its final summary judgment, ordering specific performance of the Contract and awarding
damages and attorney’s fees to Harrell. The trial court also sustained Harrell’s special exceptions
and objections to and motion to strike CMC’s summary judgment evidence and its responses to
Harrell’s motion for summary judgment, and denied CMC’s motion for summary judgment. This
appeal followed.
ANALYSIS
In two issues, CMC contends that the trial court erred in granting Harrell’s summary
judgment and in denying CMC’s summary judgment. In its first issue, CMC contends that the trial
court erred in granting Harrell’s summary judgment because Harrell’s “summary judgment proof
failed to prove that he had tendered the additional earnest money required by the Contract as a matter
of law.” In its second issue, CMC contends that the trial court erred in denying its motion for
summary judgment because Harrell’s “uncontroverted summary judgment proof proved that [Harrell]
failed to deposit the additional earnest money and that [CMC] had timely terminated the Contract.”
Standard of Review
We review the trial court’s decision to grant summary judgment de novo. Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To prevail on a summary judgment
6
motion, the movant must demonstrate that there are no genuine issues of material fact and that it is
entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); City of Houston v. Clear Creek
Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979) (movant must conclusively prove all “essential
elements of his cause of action or defense as a matter of law”). In deciding whether there is a
disputed material fact issue precluding summary judgment, we must take evidence favorable to the
nonmovant as true, indulge every reasonable inference in favor of the nonmovant, and resolve any
doubts in the nonmovant’s favor. Dorsett, 164 S.W.3d at 661; Nixon v. Mr. Prop. Mgmt. Co.,
690 S.W.2d 546, 548-49 (Tex. 1985). Where the trial court does not specify the grounds for its
summary judgment, we must affirm the summary judgment if any of the theories presented to the
trial court and preserved for appellate review are meritorious. See Provident Life & Accident Ins. Co.
v. Knott, 128 S.W.3d 211, 216 (Tex. 2003).
If the movant shows that it is entitled to judgment as a matter of law, the burden shifts
to the nonmovant to present evidence to raise a material fact issue that precludes summary judgment.
See City of Houston, 589 S.W.2d at 678-79. As to a non-movant’s affirmative defenses, once a
movant establishes its right to summary judgment as a matter of law on its claims, the burden shifts
to the nonmovant to present evidence raising a genuine issue of material fact on each element of its
affirmative defenses; a mere pleading of an affirmative defense will not avert summary judgment.
KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 749 (Tex. 1999);
Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); Parker v. Dodge, 98 S.W.3d 297, 300
(Tex. App.—Houston [1st Dist.] 2003, no pet.). When both parties move for summary judgment on
the same issues and the trial court grants one motion and denies the other one, the reviewing court
7
considers the summary judgment evidence presented by both sides, determines all questions
presented, and, if the reviewing court determines that the trial court erred, renders the judgment that
the trial court should have rendered. Dorsett, 164 S.W.3d at 661.
CMC’s issues address matters of contract construction. “[A] court interprets a
contract by ascertaining the true objective intentions of the parties, based on the contract language.”
SAS Inst., Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005) (citing Coker v. Coker,
650 S.W.2d 391, 393 (Tex. 1983)). A court construes written instruments as a whole in an effort to
harmonize and give effect to all the provisions of the instrument so that none will be rendered
meaningless. Dorsett, 164 S.W.3d at 662; Shell Oil Co. v. Khan, 138 S.W.3d 288, 292 (Tex. 2004).
No single provision taken alone will be given controlling effect; rather, all the provisions must be
considered with reference to the whole instrument. Khan, 138 S.W.3d at 292. Contract terms are
given their “plain, ordinary, and generally accepted meanings unless the contract itself shows them
to be used in a technical or different sense.” Dorsett, 164 S.W.3d at 662. When a court concludes
that contract language can be given a certain or definite meaning, then the language is not
ambiguous, and the court will construe the contract as a matter of law. Coker, 650 S.W.2d at 393.
Additional Earnest Money of $100
In its first issue, CMC contends that trial court erred in granting summary judgment
because Harrell’s “summary judgment proof failed to prove that he had tendered the additional
earnest money required by the Contract as a matter of law.” CMC contends that the remedy of
specific enforcement required Harrell to “show that he has diligently and timely performed or
tendered performance of all obligations under the contract” and that he did not do so because it was
8
undisputed that he did not deposit the $100 of additional earnest money. CMC argues that Harrell’s
failure to deposit the additional earnest money of $100 was a default under the Contract, and
“[h]aving so defaulted, Harrell did not satisfy one of the conditions prerequisite to the invocation of
his contractual right to specific performance.”
The law of contracts and the equitable principles of specific performance control a
contract to sell real estate that requires an earnest money payment. See Hudson v. Wakefield,
645 S.W.2d 427, 430 (Tex. 1983) (citing Cowman v. Allen Monuments, Inc., 500 S.W.2d 223, 226
(Tex. App.—Texarkana 1973, no writ)). “Specific performance of a contract for the sale of realty
is ordinarily granted where the suit is based on a valid contract, but it is not a remedy which exists
as a matter of right.” Kress v. Soules, 261 S.W.2d 703, 704 (Tex. 1953); see Wilson v. Klein,
715 S.W.2d 814, 819 (Tex. App.—Austin 1986, writ ref’d n.r.e.) (specific performance is
equitable remedy).
A party may avoid enforcement of its contractual obligations based on the other
party’s material breach. See Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 198
(Tex. 2004) (party released from further contractual obligations when the other party materially
breached); Hudson, 645 S.W.2d at 430 (plaintiff not entitled to specific performance if it has
committed a material breach); Advance Components, Inc. v. Goodstein, 608 S.W.2d 737, 739
(Tex. App.—Dallas 1980, writ ref’d n.r.e.) (when “‘non-compliance does not go to the essence of
the contract,’” remedy of specific performance available; quoting Farris v. Bennett’s Executors,
26 Tex. 568, 572 (1863)). This theory of avoidance is an affirmative defense. See Tex. R. Civ. P. 94
9
(matters constituting avoidance are affirmative defenses); Mustang, 134 S.W.3d at 197 (“In their
respective answers, both parties raised the other’s material breach as an affirmative defense.”).
Important to the resolution of this issue is what CMC does not dispute, challenge, or
contend and CMC’s pleadings. CMC does not dispute that the Contract was valid and enforceable
when executed, that it is unambiguous, that Harrell timely deposited earnest money of $2000, and
that Harrell tendered the full purchase price prior to the contractual closing date. CMC does not
challenge the trial court’s denial of its motion for leave to amend its pleadings to assert the defenses
that it raised in its responses to Harrell’s motion for summary judgment. CMC does not challenge
the trial court’s ruling sustaining Harrell’s special exceptions and objections to and motion to strike
CMC’s summary judgment evidence and its responses to Harrell’s motion for summary judgment
except as to Crandall’s affidavit.5 CMC did not plead as an affirmative defense and does not contend
otherwise that Harrell’s failure to deposit additional earnest money of $100 was a material breach
of the Contract or that CMC was prejudiced or damaged in any way by Harrell’s failure to deposit
additional earnest money.6 On this record, we conclude that Harrell was not required to present
5
As part of its second issue, CMC contends that the trial court erred in excluding Crandall’s
affidavit, particularly her statement that she terminated the Contract. Because Harrell does not
dispute that he received the notice of termination from the title company and we conclude that the
Contract did not allow CMC to terminate based on Harrell’s failure to deposit additional earnest
money of $100 prior to the closing, we need not address CMC’s argument that the trial court erred
in excluding Crandall’s affidavit. See Tex. R. App. P. 44.1(a); 47.1.
6
Whether the other party’s breach is material to excuse a party’s performance of a contract
ordinarily is a fact question. See Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195,
198-99 (Tex. 2004). In Mustang, the jury returned a verdict that both parties breached the
agreement, but the jury was not asked to determine whether the respective breaches were material.
Id. at 197. The supreme court concluded that the defendant’s breach was material as a matter of law
to excuse the plaintiff’s performance. Id. at 199. The supreme court listed factors to consider in
determining materiality:
10
summary judgment evidence that he had deposited additional earnest money of $100 prior to closing
his portion of the Contract to prove the “essential elements of his cause of action” and that he met
his burden to prove that he was entitled to summary judgment as a matter of law. See Tex. R.
Civ. P. 166a(c); City of Houston, 589 S.W.2d at 678. The issue then is whether CMC presented
evidence to raise a material fact issue to preclude summary judgment. See City of Houston,
589 S.W.2d at 678-79.7
CMC relies on its interpretation of the Contract’s earnest money provisions and the
provision that time was of the essence to support that Harrell’s failure to deposit additional earnest
money precluded summary judgment in Harrell’s favor and the remedy of specific performance of
the Contract. We turn then to a review of the Contract and these provisions. Pursuant to the earnest
(a) the extent to which the injured party will be deprived of the benefit which he
reasonably expected; (b) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be deprived; (c) the extent
to which the party failing to perform or to offer to perform will suffer forfeiture; (d)
the likelihood that the party failing to perform or to offer to perform will cure his
failure, taking account of the circumstances including any reasonable assurances;
[and] (e) the extent to which the behavior of the party failing to perform or to offer
to perform comports with standards of good faith and fair dealing.
Id. (citing Restatement (Second) of Contracts § 241 (1981)). CMC did not plead material breach by
Harrell to excuse its performance, but, even if it had, it failed to present summary judgment evidence
that would support a finding in its favor on any of the supreme court’s enumerated factors. See id.
7
The dissent concludes that we uphold the summary judgment on a basis not presented by
Harrell to the trial court because Harrell did not seek summary judgment on the basis that he
breached the Contract but that his breach was not material. But the burden was on CMC to plead
material breach by Harrell as an affirmative defense and to present summary judgment evidence that
Harrell materially breached the Contract to preclude summary judgment. See id.; KPMG Peat
Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 749 (Tex. 1999) (once movant
establishes right to summary judgment, burden on nonmovant to present evidence raising fact issue
on affirmative defense).
11
money provisions, Harrell was required to deposit earnest money of $2000 with the title company
within three days of the Contract’s effective date and additional earnest money of $100:
Not later than 3 days after the effective date, Buyer must deposit $2,000.00 as earnest
money with [the title company] at [the title company’s address]. Buyer will deposit
additional earnest money of $100.00 on or before [ ] the 14th day after Buyer’s right
to terminate under [the feasibility period provision] expires.
The Contract also provides that “[t]ime is of the essence in this contract. The parties require strict
compliance with the times for performance.” We conclude that these provisions are not ambiguous,
and we interpret them as a matter of law. See Coker, 650 S.W.2d at 393.
CMC relies on Liedeker v. Grossman, 206 S.W.2d 232 (Tex. 1947), and Wilson
v. Klein, 715 S.W.2d 814, to contend that Harrell was strictly bound to comply with the Contract and
that, when he failed to do so by not depositing the additional earnest money, he was not entitled to
specific performance. In Liedeker, the parties agreed that time was of the essence and that the
contract to convey land was to be closed within 20 days. 206 S.W.2d at 232. The supreme court
denied specific performance, observing that it was undisputed that the terms of the contract were to
be carried out within twenty days and that did not happen. Id. at 234. In Wilson, this Court denied
specific performance to enforce a real estate contract that contained a stipulation that time was of
the essence when it was undisputed that the buyer never made an “actual tender—an unconditional
offer to pay the correct amount.” 715 S.W.2d at 822-23. Unlike the parties in Liedeker and Wilson,
it is undisputed that Harrell actually tendered the full purchase price within the “essential time limit”
prescribed by the contract—“on or before January 26, 2007.” See City of Houston,
12
589 S.W.2d at 678; Liedeker, 206 S.W.2d at 234 (“essential time limit” that “parties comply with
their obligations under the contract” by closing date).
CMC’s interpretation of the Contract would allow it to avoid its contractual
obligation to convey the real property at the same time that CMC acknowledges that Harrell tendered
the full purchase price prior to the closing date and that CMC was not harmed or prejudiced by the
amount of earnest money on deposit at any time. See Hohenberg Bros. Co. v. George E. Gibbons
& Co., 537 S.W.2d 1, 3 (Tex. 1976) (quoting Henshaw v. Texas Natural Res. Found., 216 S.W.2d
566 (Tex. 1949)) (“forfeitures are not favored” and “‘[i]f the terms of a contract are fairly susceptible
of an interpretation which will prevent a forfeiture, they will be so construed.’”). In light of our
interpretation of the Contract, CMC failed to raise a material fact issue based on Harrell’s failure to
deposit additional earnest money of $100 to preclude summary judgment and the remedy of specific
enforcement. We conclude that the trial court did not err in granting Harrell’s motion for summary
judgment. We overrule CMC’s first issue.
CMC’s Termination of the Contract
In its second issue, CMC contends that the trial court erred in denying its motion for
summary judgment because the “uncontroverted” summary judgment evidence proved that CMC
timely terminated the Contract when Harrell failed to deposit the additional earnest money. CMC
contends that it terminated the Contract after Harrell failed to deposit the additional earnest money
with the title company by January 2, 2007—within 14 days after the feasibility period expired.
Harrell does not dispute that he received a copy of the notice of termination from the title company.
In its first amended answer, CMC alleged as an affirmative defense that “the contract that was made
13
the basis of Plaintiff’s petition is unenforceable because it terminated under its own terms when
Defendant gave contractual Notice of Termination on January 3, 2007.” See Tex. R. Civ. P. 94. To
be entitled to summary judgment on its affirmative defense, the burden was on CMC to prove its
defense as a matter of law. See Tex. R. Civ. P. 166a(c). As it is dispositive, we begin by reviewing
the Contract to determine if it allowed CMC to terminate based on Harrell’s failure to deposit
additional earnest money of $100.
CMC relies on the earnest money and the default provisions of the Contract to support
its contractual right to terminate the Contract when Harrell did not timely deposit additional earnest
money of $100. The earnest money provisions allowed CMC to terminate the Contract by providing
written notice if Harrell failed to deposit “the earnest money” and, in that event, to exercise its
remedies under the Contract’s default provisions:
If Buyer fails to timely deposit the earnest money, Seller may terminate this contract
by providing written notice to Buyer before Buyer deposits the earnest money and
may exercise Seller’s remedies under [the default provisions].
We conclude that these provisions are not ambiguous, and we interpret them as a matter of law.
See Coker, 650 S.W.2d at 393.
CMC contends that the reference to “the earnest money” in the sentence allowing
CMC to terminate included both the initial deposit of $2000 and the additional deposit of $100,
validating CMC’s termination of the Contract when Harrell failed to deposit the additional $100.
The plain language, however, in this sentence refers to “the earnest money” singularly and allows
CMC to terminate only before Harrell deposited “the earnest money,” supporting an interpretation
14
that the parties’ intent was to allow CMC to terminate only if Harrell failed to deposit the initial
amount of $2000. See Dorsett, 164 S.W.3d at 662 (contract terms given plain meaning).
Interpreting “the earnest money” to refer to the initial deposit also is consistent with the purpose of
earnest money—“to show a good-faith intention to complete the transaction.” See Black’s Law
Dictionary 525-26 (7th Ed. 1999). By depositing the earnest money, Harrell showed his intention
to complete the transaction.
Had Harrell failed to deposit earnest money, CMC would not have been contractually
obligated to take any actions or expend any funds. CMC could have proceeded with the Contract
without an earnest money deposit, or it could have sought available remedies under the default
provisions, including specific performance or liquidated damages. In contrast, after Harrell
deposited earnest money of $2000, the parties contractually were required to take actions in
preparation for the closing, further supporting that the parties did not intend to give CMC another
opportunity to terminate the Contract after the feasibility period had expired based on the additional
earnest money deposit of $100.8 We conclude that the sentence in the earnest money provisions
providing CMC the right to terminate for Harrell’s failure to deposit “the earnest money” did not
allow CMC to terminate the Contract based on Harrell’s failure to deposit the “additional earnest
money” of $100 prior to his tender of the purchase price.
CMC also contends that the default provisions allowed CMC to terminate the
Contract by Harrell’s failure to deposit the additional earnest money of $100. CMC contends that
8
The feasibility period provision allowed Harrell to terminate the Contract for any reason
“within 30 days after the effective date” by providing written notice to CMC.
15
“Harrell’s failure to deposit the additional earnest money constituted a default under the Contract”
and that an available remedy to CMC for “a default” was termination. The default provisions
provide the following remedies for the other party’s failure to comply with the Contract:
A. If Buyer fails to comply with this contract, Buyer is in default and Seller may:
(1) terminate this contract and receive the earnest money as liquidated
damages, thereby releasing the parties from this contract; or
(2) enforce specific performance, or seek other relief as may be provided
by law, or both.
B. If, without fault, Seller is unable within the time allowed to deliver the
estoppel certificates or the commitment, Buyer may:
(1) terminate this contract and receive the earnest money, less any
independent consideration under [the feasibility period provision], as
the sole remedy; or
(2) extend the time for performance up to 15 days and the closing will be
extended as necessary.
C. Except as provided in Paragraph [ ]B, if Seller fails to comply with this
contract, Seller is in default and Buyer may:
(1) terminate this contract and receive the earnest money, less any
independent consideration under [the feasibility period provision], as
liquidated damages, thereby releasing the parties from this contract;
or
(2) enforce specific performance, or seek such other relief as may be
provided by law, or both.
We conclude that these provisions are not ambiguous, and we interpret them as a matter of law.
See id.
16
CMC’s interpretation of the Contract would modify the law of contracts and specific
performance to allow CMC to terminate the Contract no matter how immaterial the breach.
See Hudson, 645 S.W.2d at 430; see also Hohenberg Bros. Co., 537 S.W.2d at 3.9 CMC’s
interpretation also is inconsistent with the contract as a whole. See Khan, 138 S.W.3d at 292 (no
single provision taken alone will be given controlling effect). By the parties’ express reference in
the earnest money provisions to CMC’s right to seek remedies under the default provisions if Harrell
failed to deposit “the earnest money,” the parties’ intent was not to include this same
remedy—remedies under the default provisions—as to the “additional earnest money” of
$100. See id. (courts are to harmonize the provisions of a contract to give effect to all provisions).
We conclude that the default provisions did not allow CMC to terminate the Contract based on
Harrell’s failure to deposit the additional earnest money of $100 prior to his timely tender of the
purchase price.
CMC relies on Limestone Group, Inc. v. Sai Thong, L.L.C., 107 S.W.3d 793, 796-97
(Tex. App.—Amarillo 2003, no pet.), to support its interpretation of the Contract that the parties
modified the general right to seek specific performance of a real estate contract as long as the party
is not in material breach. In Limestone, our sister court affirmed the trial court’s denial of a request
9
The dissent contends that the “enforceability of the termination provision—i.e. whether
[CMC] had the right to terminate the contract” was not adjudicated as a question of law or fact. But
CMC raised the issue before the trial court in its motion for summary judgment, which motion the
trial court denied. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005)
(reviewing court considers issues raised in competing motions). The trial court does not state its
grounds for denying CMC’s motion for summary judgment, but it could have interpreted the
Contract to conclude that it was unambiguous and enforceable and that it had not expired based on
CMC’s notice of termination. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (interpretation
of unambiguous contract is as a matter of law).
17
for specific performance to enforce a real estate contract after the buyer, who was seeking specific
performance, had deposited earnest money of $25,000 out of the contractually required amount of
$75,000. Id. at 795, 797. The default provision of the contract provided the purchaser the right to
enforce the contract by specific performance but only if “Purchaser shall not be in default
hereunder.” Id. at 796. In contrast, unlike the default provision in Limestone, Harrell’s contractual
right to enforce the contract by specific performance did not contain similar language—it was not
conditioned on Harrell “not be[ing] in default hereunder.” See id. Additionally, at the time that
Harrell sought specific performance, he had tendered the full purchase price, which amount included
earnest money deposits.10
In light of our interpretation of the Contract and the undisputed facts, we conclude
that CMC did not have the contractual right to terminate the Contract based on Harrell’s failure to
deposit additional earnest money of $100. We, therefore, conclude that the trial court did not err in
denying CMC’s motion for summary judgment. We overrule CMC’s second issue.11
10
The Contract provides that earnest money “will be applied first to any cash down payment,
then to Buyer’s closing costs, and any excess will be refunded to Buyer.”
11
The dissent contends that it was undisputed that CMC terminated the Contract. Harrell,
however, contends that, although CMC attempted to terminate the Contract, CMC failed to do so
because it did not provide written notice of termination in compliance with the Contract. In his
second amended petition, Harrell states: “Defendant never sent notice to Plaintiff as required by . . .
the contract, of any attempt to terminate the contract.” Because we conclude that the Contract did
not allow CMC to terminate based on Harrell’s failure to deposit the additional earnest money of
$100, we need not address whether CMC provided written notice of termination in compliance with
the Contract. Tex. R. App. P. 47.1.
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CONCLUSION
Because we conclude that the trial court did not err in granting summary judgment
in favor of Harrell and in denying summary judgment in favor of CMC, we affirm the trial court’s
judgment.
__________________________________________
Jan P. Patterson, Justice
Before Justices Patterson, Waldrop and Henson
Dissenting Opinion by Justice Waldrop
Affirmed
Filed: February 5, 2009
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