William Farrar v. Steve Harris and Debbie Harris

                                                NO. 12-06-00256-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

WILLIAM FARRAR,            §                      APPEAL FROM THE 114TH

APPELLANT

V.        §                      JUDICIAL DISTRICT COURT OF

STEVE AND DEBBIE HARRIS,

APPELLEES §                      SMITH COUNTY, TEXAS

MEMORANDUM OPINION

            William Farrar appeals from a summary judgment entered in favor of Steve and Debbie Harris, owners of a home he leased.  In a single issue, Farrar contends the trial court erred in finding that the option to purchase contained in their lease had expired prior to his attempt to exercise that option.  We reverse and render in part and remand in part.

Background

            The parties entered into a residential lease agreement by which Farrar leased a home from the Harrises.  Paragraph three of the lease, a standard Texas Association of Realtors residential lease agreement, provides that the term of the lease commenced on January 19, 2002 and ended on January 19, 2003.  Paragraph four states that “[t]his lease will automatically renew on a month-to-month basis unless either party provides the other party written notice of termination at least thirty [30] days before the Termination Date or the end of any renewal period.”  Paragraph 32, entitled “Special Provisions,” includes six miscellaneous items added by the parties and not a part of the preprinted form.  Paragraph 32a provides that “[t]enant shall have the right to purchase said property for the purchase price of $259,000.00 any time during the lease period.”  Paragraph 32d provides that “[t]he term of this lease shall be for an initial period of one year, and at tenants [sic] option, may thereafter be renewed for up to two successive 6-month periods following the initial one year period.”

            Farrar and his wife remained in the home continuously, at least through April 2005, paying the $2,500.00 monthly rent as required by the lease.  On April 25, 2005, Farrar executed an earnest money contract and tendered it to the Harrises’ agent as required by the lease in an attempt to exercise the option to purchase the home for the price of $259,000.00.  The Harrises responded by changing the purchase price to $295,000.00. Farrar refused the counteroffer.

            On June 2, 2005, the Harrises filed a declaratory judgment action asking the court to establish the rights of the parties. They asserted that Farrar’s right to exercise the purchase option terminated on January 19, 2004, at the end of the second six month extension period.  Farrar counterclaimed alleging breach of contract.  The Harrises filed a motion for summary judgment arguing that the lease had expired prior to Farrar’s attempt to exercise the option to purchase. Therefore, they contended, the option was not available, and the Harrises are under no obligation to sell the home to Farrar for $259,000.00.  As evidence, they relied solely on the lease.

            Farrar also filed a motion for summary judgment. He argued that, at the end of the second six month renewal, the lease automatically renewed under paragraph four of the lease and all lease provisions, including the option to purchase, remained in full force and effect at the time he exercised the purchase option. Asserting that he was never a holdover tenant, Farrar explained that he continued to pay $2,500.00 per month, not “two times the monthly rent” as required by paragraph 26 of the lease, which governs holdovers.  He further argued that the Harrises’ refusal to convey the property under the terms of the purchase option constitutes breach of contract.  Farrar requested summary judgment against the Harrises on their declaratory relief claim and summary judgment in his favor on his breach of contract claim.  He also asked the court to grant him specific performance and to find the Harrises liable for contractual damages.  He then asked the court to “set a trial on all damages which involve questions of fact.” As summary judgment evidence, Farrar presented the lease, the earnest money contract, a letter from the Harrises’ attorney, and his own affidavit explaining his version of the events.  

            The trial court granted the Harrises’ motion for summary judgment based on its finding that the lease had expired prior to Farrar’s exercise of the purchase option and that, therefore, the purchase option had expired and the Harrises are not required to sell the property for the purchase price of $259,000.00.  The court further ordered that Farrar must pay the Harrises’ attorneys’ fees and costs.

Summary Judgment

            In his sole issue, Farrar contends the trial court erred in granting the Harrises’ motion for summary judgment and in denying his motion for summary judgment.  He argues that, at the end of the second six month renewal term, the lease automatically renewed on a month to month basis.  Therefore, his argument continues, the lease was still in effect at the time he exercised the option to purchase and the Harrises breached the lease when they refused to sell the property to him for $259,000.00.

            The Harrises respond by arguing that paragraph 32d defined the lease term applicable to the purchase option and that paragraph 4 dealt only with Farrar’s tenancy and his right to remain in the residence.  They assert that paragraph 4 had nothing to do with the option to purchase in paragraph 32.

Standard of Review

            We review the trial court’s summary judgment de novo.  Tittizer v. Union Gas Corp., 171 S.W.3d 857, 860 (Tex. 2005).  To prevail on a traditional summary judgment motion, the movant must show that no genuine issue of material fact exists and that he is entitled to judgment as a matter of law.  Tex. R. Civ. P. 166a(c). A movant who conclusively negates at least one essential element of a cause of action is entitled to summary judgment on that claim.  Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). Evidence is conclusive only if reasonable people could not differ in their conclusions. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).

            When both parties move for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law, and neither party can prevail because of the other’s failure to discharge his burden.  Guynes v. Galveston County, 861 S.W.2d 861, 862 (Tex. 1993); State Farm Lloyds, Inc. v. Williams, 791 S.W.2d 542, 549-50 (Tex. App.–Dallas 1990, writ denied).  We review the summary judgment evidence presented by both parties and determine all questions presented.  City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000); Commissioners Court of Titus County v. Agan, 940 S.W.2d 77, 81 (Tex. 1997). When both parties move for summary judgment, we must indulge all reasonable inferences and resolve all doubts in favor of the losing party.  University of Tex. Health Sci. Ctr. v. Big Train Carpet of El Campo, Inc., 739 S.W.2d 792, 792 (Tex. 1987).  We first review the order granting summary judgment and if we determine the order was erroneous, we review the trial court’s action in overruling the denied motion.  Lambrecht & Assocs., Inc. v. State Farm Lloyds, 119 S.W.3d 16, 20 (Tex. App.–Tyler 2003, no pet.).  We may then either affirm the judgment or reverse and render the judgment the trial court should have rendered.  Id.

Contract Construction

            An appellate court reviews the trial court’s construction of a contract on a de novo basis.  MCI Telecomms. Corp. v. Texas Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999).  When construing a written contract, courts ascertain the intent of the parties as expressed in the instrument.  National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).  Courts examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.  Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).  If there is no ambiguity in the instrument, its construction is a question of law for the court.  Id.  Interpretation of a contract becomes a fact issue, to be resolved by extrinsic evidence, only when application of pertinent rules of construction leaves a genuine uncertainty as to which of two meanings is proper.  Id. at 394.

Discussion

            Paragraph 32a provides that “[t]enant shall have the right to purchase said property for the purchase price of $259,000.00 any time during the lease period.  Any contracts to purchase shall be presented through Landlord’s agent, The Pillsbury Group GMAC Real Estate.”  The specific question before us is whether April 25, 2005, the date Farrar tendered the earnest money contract to the Harrises, was “during the lease period” as contemplated by the parties.  We determine that it was.

            By virtue of paragraph 3 of the lease, the lease commenced on January 19, 2002 and the original term ended on January 19, 2003. Then, pursuant to paragraph 32d, the lease was renewed two times for two six month periods.  The parties agree on that much.  Further, the lease automatically renewed on a month to month basis, beginning January 20, 2004, pursuant to the plain language of paragraph 4 of the lease.  We are bound to give this provision its plain, ordinary, and generally accepted meaning.  See Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 424 (Tex. 2000).  The Harrises argue that paragraph 4 gave Farrar the right to live in the residence but not the option to purchase it for $259,000.00.  We disagree.

            A general covenant to renew or extend a lease, which is silent as to the terms of the renewal or extension, implies a renewal or extension upon the same terms and conditions as provided in the original lease and is sufficiently definite and certain to be enforceable.  Watley v. Vergott, 561 S.W.2d 925, 926 (Tex. Civ. App.–Fort Worth 1978, no writ).  As a general rule, where an original lease or agreement to lease provides for an extension or renewal of the lease at the tenant’s election, and the tenant elects to renew the lease or extend its term, the time for exercising a purchase option contained in the lease and exercisable during the term of the lease is likewise extended.  Exxon Corp. v. Pollman, 729 S.W.2d 302, 304 (Tex. App.–Tyler 1986, writ ref’d n.r.e.).  Therefore, the trial court erred in granting the Harrises’ motion for summary judgment, ordering that the lease and purchase option had expired prior to Farrar’s exercise of the purchase option, and ordering Farrar to pay the Harrises’ attorneys’ fees and costs.

            When Farrar exercised the option, a binding, bilateral contract was formed.  Pitman v. Sanditen, 626 S.W.2d 496, 498 (Tex. 1981).  The relation of landlord and tenant ceased and that of vendor and purchaser arose.  Id.  Thus, Farrar is entitled to specific performance of the purchase option provision of the lease.  Id.  Accordingly, the trial court also erred in denying Farrar’s motion for summary judgment to the extent he asked for specific performance on his breach of contract claim. 

            Farrar’s motion for summary judgment was a motion for partial summary judgment as to liability on his breach of contract action. See Tex. R. Civ. P. 166a(a); American Motorists Ins. Co. v. Box, 531 S.W.2d 401 (Tex. Civ. App.–Tyler 1975, writ ref’d n.r.e.). In his motion, he asked for a trial on the issue of damages.  Because the trial court erroneously ruled against Farrar on the issue of liability, we remand the cause for a determination of the amount of damages, if any, owed him including attorney’s fees, rental reimbursement, and the cost of the fence for which he might be entitled to reimbursement.  See Tex. R. App. P. 43.3(a).  We sustain Farrar’s sole issue.

Disposition

            We reverse the trial court’s orders granting the Harrises’ motion for summary judgment, ordering Farrar to pay their fees and costs, and denying Farrar’s motion for summary judgment.  We render judgment in favor of Farrar and order the Harrises to convey the property at issue to Farrar for the purchase price of $259,000.00 as stated in the lease.  We remand the cause to the trial court for proceedings consistent with this opinion.

                                                                                                    SAM GRIFFITH   

                                                                                                               Justice

Opinion delivered October 17, 2007.

Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.

(PUBLISH)