TierOne Converged Networks, Inc. v. Lavon Water Supply

REVERSE and RENDER; and Opinion Filed August 22, 2014.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-00370-CV
TIERONE CONVERGED NETWORKS, INC., Appellant
V.
LAVON WATER SUPPLY CORPORATION, Appellee
On Appeal from the County Court at Law No. 5
Collin County, Texas
Trial Court Cause No. 005-00055-2013
MEMORANDUM OPINION
Before Justices Bridges, Francis, and Lang-Miers
Opinion by Justice Lang-Miers
This is an appeal of a judgment awarding possession of leased premises to the landlord in
a forcible detainer case. Appellant TierOne Converged Networks, Inc., the tenant, argues that
the trial court erred by awarding possession of the property to Lavon Water Supply Corporation,
the landlord, because TierOne exercised its option to renew the lease and was entitled to
possession of the property. Because all dispositive issues are settled in law, we issue this
memorandum opinion. TEX. R. APP. P. 47.2(a), 47.4. We reverse and render.
BACKGROUND
On July 10, 2006, Lavon signed a lease agreement with Lavon Internet and Computer
Services (Lavon Internet) for “the collocation of wireless communications equipment on the
water towers owned and operated by” Lavon. In September 2009, TierOne assumed the lease by
assignment from Lavon Internet and agreed to comply with all terms and provisions of the lease. 1
The lease provided that “[t]he systems shall generally consist of four (4) sector antennas and
wireless radios for wireless internet distribution and two (2) backhaul antennas and radios for the
main feed of internet access” and that “Lessee’s equipment to be installed shall be subject to
reasonable approval of the Lessor.”
Paragraph 2 of the lease stated:
The initial term of this Letter Agreement for a wireless communication
system shall be for a period of five (5) years beginning on the date of execution of
this Letter Agreement. Provided Lessee is not in default, the lease term may be
renewed by Lessee for subsequent te[r]ms of (5) years each, provided, however,
that from and after the third (3) such renewal term, Lessor may terminate this
lease by providing Lessee extra ninety (90) days prior written notice before any
renewal term.
Paragraph 19 of the lease allowed Lavon to terminate the lease if TierOne committed an
“event of default,” including (1) not making payments within ten days of their due date and not
remitting the payments within five days of receiving notice from Lavon and (2) not complying
with any other term of the lease after receipt of written notice from Lavon, and not curing or
commencing to cure that failure within thirty days of receiving notice and completing the cure
within ninety days of the written notice. In addition, paragraph 20 provided that, at the
termination of the lease, if TierOne was not in default, TierOne would have ninety days to
remove its equipment and return the premises to its original condition. Paragraph 22 provided
that, after five years, Lavon would give TierOne at least ninety days’ written notice “in the event
that the hardware should be removed and services terminated.”
1
Lavon asserts that, in 2008 and 2009, TierOne delayed in acknowledging the terms and obligations of the lease and did not make timely
rental payments during numerous months. These alleged defaults are not at issue here.
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The lease also required that “[a]ll notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally” by certain methods and addressed to the party.
On May 11, 2011—two months before the initial lease term expired on July 10, 2011—
Lavon notified TierOne by letter that TierOne was over ten days late in paying Lavon $1,800 and
that Lavon would exercise its right to terminate under paragraph 19 of the lease if TierOne did
not send payment to Lavon within five days. Lavon’s office manager, Camille Reagan, testified
that TierOne paid Lavon the outstanding rent. In the May 11 letter, Lavon also notified TierOne
that Lavon “may exercise its right” under paragraph 22 of the lease to terminate the lease ninety
days after the expiration of the initial term, on October 8, 2011. Lavon stated that it would be
soliciting bids for the right to lease its water towers for wireless communications and that
TierOne would have the opportunity to bid, provided that it was not in default under the lease at
the time that bids were taken.
On June 16, 2011, TierOne’s chief financial officer Ron Celmer sent an e-mail to Herman
Stork at Lavon regarding “Renewal of leases” and told him TierOne wanted to “begin new lease
discussions[.]” He attached diagrams of the water towers and equipment on the towers. On July
7, 2011, Celmer sent two e-mails with a “proposed lease to replace the existing lease which
expires on July 10, 2011” and diagrams of the towers. The negotiations were unsuccessful and
the parties did not execute a new lease. After the end of the initial five-year term in July 2011,
TierOne continued to make monthly payments of rent to Lavon and continued in possession of
the leased property.
In April 2012, Lavon sent a proposed new lease agreement to TierOne and stated that if
TierOne did not “respond to the contract” by June 10, 2012, TierOne must remove all equipment
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from Lavon’s premises. 2 A month later, TierOne requested a thirty-day extension to “respond to
the Water Tower Lease renewal proposed by Lavon[.]”
On June 8, 2012—eleven months after the initial term of the lease expired on July 10,
2011—TierOne stated in a letter to Lavon that it “consider[ed] itself to be in contract with Lavon
. . . under Paragraph 2 of the” lease. Six days later, on June 14, 2012, Lavon confirmed by letter
that TierOne was “paid thru the end of June 2012 at th[at] point” but informed TierOne that it
would not accept the last check that TierOne submitted as rental payment until TierOne and
Lavon reached an agreement on the new lease. 3 TierOne responded on August 9, 2012 that it
was TierOne’s “belief and position that TierOne Networks [was] not in breach” of the lease and
that the lease was “still in full force and effect.” On August 17, 2012, Lavon stated by letter that
TierOne “ha[d] in fact breached the Agreement on numerous occasions” and that, based on
TierOne’s letter from August 9, “it appears that [TierOne was] once again in violation of
Paragraph 18 of the Agreement.” 4 Lavon also stated that, “[i]n any event,” Lavon had notified
TierOne by letter in May 2011 “of its intent to exercise its rights [to terminate the lease] under
Paragraph 22” and that, “pursuant to Paragraph 22 of the Agreement, Lavon WSC hereby
terminates the Agreement as of November 15, 2012” and “[p]ursuant to Paragraph 20 of the
Agreement,” TierOne must remove its equipment from the towers by November 15, 2012.
On November 16, 2012, Lavon notified TierOne that it must vacate the premises. Lavon
stated that “the initial term of the Lease expired on July 10, 2011, and the Lease was not
renewed.” Lavon stated that “[t]hereafter, TierOne became a month-to-month tenant of the
Premises.” Lavon gave TierOne three days to vacate the premises.
2
Beginning with the April 2012 letter, correspondence to and from Lavon referred to Lavon Special Utility District. As Lavon’s witness
Reagan explained, Lavon was “changing from a utility district from a [water supply corporation] at some point.”
3
Lavon’s office manager Camille Reagan testified that TierOne continued to pay its rent to Lavon each month after June 2012, but that
Lavon did not cash those checks.
4
Paragraph 18 limited TierOne’s right to assign the lease without Lavon’s permission.
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After TierOne did not vacate the property, Lavon filed a forcible detainer lawsuit in
justice court seeking possession of the property. Lavon’s complaint stated that “[t]he Lease was
not renewed prior to its expiration and expired by its terms on July 10, 2011” and that
“[t]hereafter, TierOne continued in possession of the Premises, making monthly rental payments
to Lavon WSC.” The justice court entered judgment for TierOne and Lavon appealed to the
county court at law. After a bench trial, the county court at law entered judgment in favor of
Lavon, granting Lavon immediate possession of the property. TierOne appealed.
In one issue, TierOne argues that “[t]he trial court erred by awarding possession of the
property to Lavon based on an expired lease because TierOne exercised its option to renew the
lease for five years.”
STANDARD OF REVIEW AND APPLICABLE LAW
When an appellant attacks the legal sufficiency of an adverse finding on an issue on
which it did not have the burden of proof, the appellant must demonstrate there is no evidence to
support the adverse finding. See Exxon Corp. v. Emerald Oil & Gas, Co., 348 S.W.3d 194, 215
(Tex. 2011). We will sustain a no-evidence challenge on appeal if the record shows (1) a
complete absence of evidence of a vital fact, (2) the court is barred by the rules of law or
evidence from giving weight to the only evidence offered to prove a vital fact, (3) the evidence
offered to prove a vital fact is no more than a mere scintilla, or (4) the evidence conclusively
establishes the opposite of a vital fact. Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221, 228 (Tex.
2011). “Evidence is legally sufficient if it ‘would enable reasonable and fair-minded people to
reach the verdict under review.’” Exxon Corp., 348 S.W.3d at 215 (quoting City of Keller v.
Wilson, 168 S.W.3d 802, 827 (Tex. 2005)).
In a bench trial where no findings of fact or conclusions of law are requested or filed, the
judgment implies all findings of fact necessary to support it. Johnson v. Oliver, 250 S.W.3d 182,
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186 (Tex. App.—Dallas 2008, no pet.). But if the appellate record includes a clerk’s record and
a reporter’s record, those implied findings are not conclusive and may be challenged for legal
sufficiency on appeal. Id.
Additionally, when parties disagree over the meaning of an unambiguous contract, we
must determine the parties’ intent by considering and examining the entire writing in an effort to
give effect to the parties’ intentions as expressed in the contract. Seagull Energy E&P, Inc. v.
Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Ascendant Anesthesia PLLC v. Abazi, 348
S.W.3d 454, 459 (Tex. App.—Dallas 2011, no pet.). “No single provision taken alone will be
given controlling effect; rather, all the provisions must be considered with reference to the whole
instrument.” Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011) (quoting Coker v. Coker, 650
S.W.2d 391, 393 (Tex. 1983)). Only if a contract is first determined to be ambiguous may a
court consider the parties’ interpretation and admit extraneous evidence to determine the true
meaning of the instrument. Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520
(Tex. 1995) (per curiam).
Finally, as a general rule, where a lease does not require any notice for renewal, a lessee’s
continued possession and payment of rent in accordance with the lease after the expiration of the
primary term constitutes an election by the lessee to renew. Willeke v. Bailey, 189 S.W.2d 477,
481 (Tex. 1945); Haltom City State Bank v. King Music Co., 474 S.W.2d 9, 11 (Tex. Civ.
App.—Fort Worth 1971, writ ref’d n.r.e.); see Fisher v. Church & Akin, L.L.C., No. 07-11-0495-
CV, 2012 WL 5059548, at *3 (Tex. App.—Amarillo Oct. 16, 2012) (mem. op.), rev’d in part on
other grounds, Lubbock Cnty. Water Control & Improvement Dist. v. Church & Akin, L.L.C.,
No. 12-1039, 2014 WL 2994645, at *3–9 (Tex. July 3, 2014). But this general rule applies only
“in the absence of an express or implied agreement to the contrary.” Haltom City, 474 S.W.2d at
11; see Willeke, 189 S.W.2d at 481; see also Nortex Foods, Inc. v. Burnett, 278 S.W.2d 485, 487
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(Tex. Civ. App.—Dallas 1955, no writ) (stating “general rule” that, when lease provides for
notice to renew, “such notice is necessary to effect the renewal”).
Arguments of the Parties
TierOne’s Arguments
TierOne contends that it exercised its option to renew the lease for an additional five-year
term under paragraph 2 of the lease and established its right to possession of the property
because the lease did not contain a holding over provision or a provision requiring TierOne to
submit notice to exercise the option to renew and because it was “undisputed” that TierOne
remained in possession and paid its rent and that Lavon accepted the rent for a year after the end
of the initial term. TierOne also argues that it was entitled to renew if it was not in default and
there was no evidence that TierOne was in default at the time of renewal. TierOne contends that
Lavon did not allege that TierOne was in default, but rather pleaded that the lease expired, and
the trial court cannot award judgment based on an unpleaded theory.
In addition, TierOne argues that the notice provision in the lease only governs the form of
notices already required by the lease. And TierOne contends that, because the lease did not
require notice to renew, the general notice requirement governing the form of notices does not
apply. 5
TierOne additionally states that Lavon’s monthly invoices were not evidence that the
parties had a month-to-month agreement because Lavon invoiced TierOne monthly both during
and after the initial term and the invoices “simply reflect[ed] that the rent was paid monthly[.]”
And TierOne argues that negotiations between the parties concerning the terms of a new lease
5
TierOne also argues that, even if the notice provision in the lease applied, TierOne exercised the option by continuing to pay rent in
writing by check and because TierOne notified Lavon in writing that it had renewed the lease.
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were not evidence that the initial lease was not renewed or in effect and that nothing in the record
supports Lavon’s argument that the parties agreed that the lease was not renewed.
Lavon’s Arguments
Lavon argues that TierOne was in default of the lease at the time the first term expired
because it “monopolized” available space on the towers “by doubling and tripling the amount of
allowable equipment on the towers” without Lavon’s approval as required by the lease. Lavon
states that diagrams that TierOne provided in June 2011 and testimony by TierOne’s former
chief financial officer Celmer demonstrate that “TierOne had installed significantly more
equipment on the towers than what was listed in the lease.” It contends that Lavon’s primary
witness, Camille Reagan, testified that TierOne did not seek approval prior to placing additional
equipment on the towers and that, although TierOne’s witness “vaguely contradicted” this
testimony, the contradicting testimony “is of no consequence for purposes of this Court’s
review” because this Court must resolve any inconsistency in testimony in favor of the trial
court’s judgment if a reasonable person could do so. Lavon contends that, as a result of this
default, TierOne “never had the legal right to exercise the option to renew” because the lease
allowed TierOne to renew the lease only if it was not in default.
Lavon also argues that TierOne’s “mere payment of rent” after the initial term expired
did not renew the lease because the lease contained a “broad and all-encompassing notice
provision” that required any notice under the lease to be in writing and delivered personally to
Lavon by certified mail, fax, or courier. Lavon contends that, because the renewal clause in the
lease provided that the lease “may” be renewed, “the lease indicates that TierOne must take some
action in order to renew the lease” and, “[a]t a minimum,” the action “included informing Lavon
that TierOne was exercising its option to renew the lease.”
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Lavon argues that there was more than a scintilla of evidence that Lavon and TierOne
agreed that TierOne’s continued possession and payment of rent would not renew the lease but
rather that “TierOne would become a temporary month-to-month tenant while the new lease
negotiations continued.” Lavon states that it “sent TierOne a monthly invoice for temporary
occupancy of the water towers during the lease negotiation process” and that “[e]ach invoice
included a notation that TierOne’s payment of the invoice would allow TierOne to continue to
occupy the water towers for an additional thirty (30) days” and “TierOne would then submit
payment after accepting the terms of the invoice.”
Lavon contends that evidence supports this implied-in-fact agreement, including that
TierOne did not mention renewal of the lease in its correspondence with Lavon towards the end
of the initial term or during the year after expiration of the initial term. Lavon argues that it was
an “abrupt change” when TierOne informed Lavon almost a year “after the expiration of the
original lease” that TierOne considered the original lease renewed. Lavon states that, in
response, it “immediately stopped accepting payments” from TierOne although it acknowledged
that TierOne was paid through June 2012 “in keeping with the parties’ temporary arrangement.”
Lavon argues that, because whether an agreement existed between the parties is generally a
question of fact, and because the evidence was conflicting, we must presume that the trial court
decided that “the parties reached an agreement that TierOne was not renewing the lease by
continuing in possession or by making rental payments after the lease expired,” and instead that
they agreed that TierOne “would become a temporary month-to-month tenant while the new
lease negotiations continued.” Lavon argues that, as a result, the lease was not renewed and
Lavon was entitled to immediate possession of the leased property.
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Analysis
Was Notice Required?
TierOne contends the lease did not expire because it renewed the lease by continuing to
pay rent and staying in possession. And Lavon argues the lease expired because the general
notice provision in paragraph 24 and the renewal provision in paragraph 2 of the lease must be
read together and required TierOne to give Lavon notice of renewal. We do not agree with
Lavon.
Paragraph 2 of the lease provided that, if TierOne is not in default, “the lease term may
be renewed by Lessee for subsequent te[r]ms of (5) years each[.]” The general notice provision
in paragraph 24 applied to all “notices . . . hereunder” and required that notices be in writing and
delivered personally. The cases that Lavon cites involve lease provisions that required notice in
order to renew or state the general rule that, in the absence of a formal notice provision,
continuing in possession by paying rent constituted an election to renew. See Willeke, 189
S.W.2d at 481 (“Since the contract did not require formal notice, the fact that respondents so
continued in possession was enough.”); Fisher, 2012 WL 5059548, at *3 (noting that lease, like
the lease in Willeke, did not require notice to exercise the option to extend); Nortex Foods, 278
S.W.2d at 487 (noting that lease provided for renewal ‘“at the same price and upon the same
terms by notifying lessor thirty (30) days in advance of the termination date of such lease’”). But
here, the notice provision in paragraph 24 did not state that it applied to the renewal provision in
paragraph 2, and paragraph 2 did not include a notice requirement for TierOne to renew. We
note that, in contrast, this same provision required lessor—after the third renewal term—to give
lessee ninety days’ prior written notice before a renewal term if it wanted to terminate the lease.
The absence of any notice requirement in part of this paragraph and presence of a prior written
notice requirement in another part indicates the difference was intentional. See Seagull Energy,
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207 S.W.3d at 345 (stating that a court must determine the intent of the parties as expressed in a
contract by examining and considering the entire writing in an effort to harmonize and give
effect to all of the contract provisions); Ascendant Anesthesia, 348 S.W.3d at 459 (“The parties’
intent must be taken from the agreement itself, and the agreement must be enforced as written.”).
As a result, because the lease did not require any notice or involve any other “express or
implied agreement to the contrary[,]” the general rule applies that TierOne’s continued
possession of the leased property and payment of rent in accordance with the lease after the
expiration of the initial term constituted an election to renew. Haltom City, 474 S.W.2d at 11;
see Willeke, 189 S.W.2d at 481.
Did Lavon Prove Default?
Lavon argues that we may affirm the judgment because TierOne was in default when the
first term of the lease expired and it was not entitled to renew the lease. Lavon argues that
TierOne was in default because it placed equipment on the towers without Lavon’s approval.
And TierOne argues that Lavon did not plead or prove it was in default, that it was not in default,
and there was no evidence of default. 6
The lease provided that “Lessee’s equipment to be installed shall be subject to reasonable
approval of the Lessor.” Lavon contends that this language gave it the right to approve any
additional equipment that might be installed on the water towers prior to installation and imposed
a mandatory duty on TierOne to seek Lavon’s approval prior to installing any additional
equipment. TierOne argues that this language does not require approval prior to the installation
of any additional equipment. We agree with TierOne.
The lease did not state that TierOne had to obtain approval prior to installing any
additional equipment on the towers. Lavon offered Reagan’s testimony that it was her
6
Because of our resolution of this issue, we do not address TierOne’s argument that Lavon did not plead that TierOne was in default.
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“understanding” that “Tierone was supposed to ask for authorization before it installed
equipment on Lavon WSC water towers” and that, “to [her] knowledge,” TierOne did not “ever
ask for permission” to install additional equipment on Lavon’s water towers. But Reagan’s
understanding of the lease terms cannot supplant the plain language of the lease. See Nat’l
Union Fire Ins. Co., 907 S.W.2d at 520; Ascendant Anesthesia, 348 S.W.3d at 459. And the
lease did not specify whether the approval had to be obtained prior to installation or could be
sought after installation. Additionally, Reagan testified that, to her knowledge, TierOne did not
ask for permission to install additional equipment before the installation, but she did not testify
that TierOne did not obtain approval at some other time. We conclude that Lavon presented less
than a scintilla of evidence that TierOne was in default at the time the initial term expired.
Was There an Implied Agreement for a Month-to-Month Term?
TierOne argues that it renewed the lease and the parties did not have an agreement that
TierOne was a month-to-month tenant after the initial term. Lavon argues that there was more
than a scintilla of evidence that Lavon and TierOne agreed that TierOne would become a month-
to-month tenant during lease negotiations after the expiration of the initial term. Lavon states
that it “sent TierOne a monthly invoice for temporary occupancy of the water towers during the
lease negotiation process” and that the invoices included a notation that TierOne’s payment
“would allow TierOne to occupy the water towers for an additional thirty (30) days.” But the
record only contains invoices that Lavon sent to TierOne during the initial term for February
2009 and February through May 2011 and does not contain any invoices from the period after
the initial lease term ended on July 10, 2011. These invoices during the initial term bill TierOne
for a month’s rent. Lavon’s office manager Reagan testified that, after the initial term, Lavon
also sent invoices to TierOne for a month’s rent. Consequently, there is no evidence in the
record that the parties’ relationship changed after the initial term.
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Lavon also cites general authority that an implied-in-fact contract arises from the parties’
acts and conduct. See Stewart Title Guar. Co. v. Mims, 405 S.W.3d 319, 338 (Tex. App.—
Dallas 2013, no pet.). But Lavon has not cited any authority supporting its position that ongoing
negotiations for a new lease are evidence that the current lease is not renewed or in effect.
We conclude that there is no evidence in the record to support Lavon’s argument that the
parties entered into an implied, temporary, month-to-month agreement after the expiration of the
initial term of the lease.
We sustain TierOne’s issue.
CONCLUSION
We reverse the judgment of the trial court and render judgment that Lavon take nothing
in its forcible detainer claim against TierOne.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE
130370F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
TIERONE CONVERGED NETWORKS, On Appeal from the County Court at Law
INC., Appellant No. 5, Collin County, Texas
Trial Court Cause No. 005-00055-2013.
No. 05-13-00370-CV V. Opinion delivered by Justice Lang-Miers,
Justices Bridges and Francis participating.
LAVON WATER SUPPLY
CORPORATION, Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and judgment is RENDERED that appellee Lavon Water Supply Corporation take
nothing in its forcible detainer claim against appellant TierOne Converged Networks, Inc.
It is ORDERED that appellant TierOne Converged Networks, Inc. recover its costs of
this appeal from appellee Lavon Water Supply Corporation.
Judgment entered this 22nd day of August, 2014.
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