Durrett Development, Inc. v. Gulf Coast Concrete, LLC (Tex.App.- Houston
[14th Dist.] Aug. 27, 2009) (Frost)(real estate transaction, lease law, lease with purchase option,
right of first refusal, declaratory judgment)
Based on the evidence, Gulf Coast Concrete conclusively established that it exercised the
purchase option in section 15.01 according to the lease terms before expiration of the Option
Deadline. See Sinclair Refining Co., 147 Tex. at 472, 218 S.W.2d at 187 (providing that once
lessee delivered notice of election to exercise purchase option, the act established the relationship
of vendor and purchaser between the parties); see also Comeaux, 93 S.W.3d at 220 (providing that
in order for an option to ripen into an enforceable contract of sale, the holder of the option must
manifest unambiguous acceptance in strict accordance with the terms of the lease agreement).
Gulf Coast Concrete's motion and summary-judgment evidence facially established its right to
judgment as a matter of law. See, e.g., Comeaux, 93 S.W.3d at 223 (affirming summary judgment).
AFFIRMED: Opinion by Justice Frost
Before Justices Frost, Brown and Boyce
14-07-01062-CV Durrett Development, Inc. v. Gulf Coast Concrete, LLC
Appeal from 23rd District Court of Brazoria County
Trial Court Judge: BEN HARDIN
M E M O R A N D U M O P I N I O N
This case arises out of a dispute between a landlord and its tenant, who contracted for an option to
purchase the leased property The landlord-optionor sought a declaratory judgment to settle a
dispute with the tenant-optionee under the parties' written agreement as to the tenant-optionee's
exercise of a purchase option or right of first refusal. The trial court granted summary judgment in
favor of the tenant-optionee. We affirm.
I. Factual and Procedural Background
Appellant Durrett Development, Inc., as landlord, entered into a written lease agreement with
appellee Gulf Coast Concrete, LLC, as tenant. In the parties' agreement, Durrett Development
granted Gulf Coast Concrete an option to purchase the leased property and a right of first refusal,
as set forth below:
Option to Purchase Leased Premises
15.01. Landlord, for the consideration of Tenant entering into this lease agreement, grants to
Tenant an irrevocable option to purchase the leased premises. To exercise this purchase option,
Tenant must, on or before September 25, 2007 give written notice to Landlord, in the manner
required for notices under this lease, of the Lessee's election to exercise the option. At that time,
Tenant will present Landlord with an appraisal of the property and an offer price. If Landlord is not
willing to accept Tenant's offer price based upon Tenant's appraisal, Landlord may choose his own
appraiser and submit an offer price to Tenant based on the findings of Landlord's appraiser. If
Tenant does not accept Landlord's appraiser's valuation, Tenant's appraiser and Landlord's
appraiser will select a mutually acceptable appraiser to appraise the property and the selling price
of the property will be based on an average of three appraisals.
Right of First Refusal to Purchase Leased Premises
15.02[.] If Landlord, during the lease term or any extension of the lease, offers to sell or receives a
bona fide offer from a third party to buy all or any portion of the leased premises [separately or as
part of the larger parcel of which the leased premises are a part], Landlord will promptly give written
notice to Tenant of the terms of the offer made or received and Landlord's willingness to sell for
that price and on those terms. Upon receiving the notice, Tenant may exercise the option, in the
manner specified below, to purchase the property described in the offer at the stated price and on
the stated terms.
15.03[.] If Tenant elects to accept the Landlord's offer or meet the third-party's offer under the
provisions of the preceding section, Tenant must notify Landlord of that election, doing so in writing
delivered to Landlord within sixty days after the date of Landlord's notice to Tenant of the offer. If
Tenant elects to refuse the offer or not to meet the third-party offer, Tenant need take no action
whatsoever; further, if Tenant fails to deliver to Landlord a notice of Tenant's elections to accept
within the time required of such notice, Tenant will be deemed to have refused the offer to sell or
the right to meet the offer of purchase. If Tenant elects or is deemed to refuse the offer, Landlord
is free to sell or accept the offer to buy the property subject to the continuation of the leasehold
estate created by this lease.
Prior to the option deadline, on August 11, 2006, Gulf Coast Concrete received a letter from Durrett
Development's attorney, notifying Gulf Coast Concrete of an offer from a third-party, MAW
Development, LLC, to purchase the property and advising of Durrett Development's willingness to
accept the third-party offer. The letter states in pertinent part,
Pursuant to paragraphs 15.01 and 15.02 of the lease, this will serve as the required notice of the
offer of sale and my client's willingness to sell the property at the price offered and under the terms
specified. Under the terms of the lease, you have the right of first refusal to purchase the property
at the stated price and on the same terms. You have sixty (60) days after the date you receive this
notice to notify my client if you indent [sic] fo [sic] meet the purchaser's offer.
The letter was accompanied by a letter from MAW Development to Kris Durrett, the president of
Durrett Development, in which MAW Development proposed terms and conditions for the sale of
the property.
By letter dated October 2, 2006, Gulf Coast Concrete sent Durrett Development written notice of its
election to exercise its option to purchase the property under section 15.01 of the lease. The
notice is provided in relevant part below:
In accordance with Section 15.01 of the above referenced Lease, Tenant hereby gives its written
notice to Landlord of Tenant's elections to exercise its option to purchase the Leased Premises
(the “Option”). The offer price for Tenant's purchase of the real estate and the concrete batch
plant on the property is $3,425,000.00. In support of that offer price, enclosed please find a
current appraisal of the Leased Premises by Osenbaugh Realtors dated September 28, 2006
(“Tenant's Appraisal?”).
In this notice, Gulf Coast Concrete proposed a number of terms for payment and purchase of the
property.
Durrett Development responded with a letter that stated in relevant part, “Section 15.01 of the
lease, as referenced in your correspondence relating to Tenant's option to purchase, is no longer
applicable. Rather, the receipt of the [MAW Development] LOI [Letter of Intent] and Durrett's
willingness to accept same triggered Section 15.02 (Right of First Refusal to Purchase Leased
Premises).” Gulf Coast Concrete subsequently demanded that Durrett Development perform under
the purchase-option provision in section 15.01 by selling the property; Durrett Development did not
comply. As a result of the parties' dispute, Durrett Development claimed that it was unable to sell
the property to MAW Development. Gulf Coast Concrete notified Durrett Development of its belief
that Durrett Development was in default under the contract for failure to perform in accordance with
section 15.01.
Durrett Development filed suit seeking a declaratory judgment as to the parties' rights under the
contract provisions for the purchase option and the tenant's right of first refusal. Both parties filed
motions for summary judgment. The trial court denied Durrett Development's motion and later
granted Gulf Coast Concrete's motion. In a single issue on appeal, Durrett Development
challenges the trial court's granting of Gulf Coast Concrete's motion for summary judgment.[1]
II. Analysis
Durrett Development claims that summary judgment was improper because Gulf Coast Concrete
did not exercise either the purchase option or the right of first refusal under the applicable
provisions of the lease. Resolution of this issue turns on whether Durrett Development's initiation
of the right-of-first-refusal process under section 15.02 rendered Gulf Coast Concrete's purchase-
option rights under section 15.01 inapplicable, as Durrett Development urges on appeal.
In a traditional motion for summary judgment, if the movant's motion and summary-judgment
evidence facially establishes its right to judgment as a matter of law, the burden shifts to the
nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. M.D.
Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). In our de novo review of a
trial court's summary judgment, we consider all the evidence in the light most favorable to the
nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and
disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez,
206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and
fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence.
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007). When, as in this case,
the trial court did not specify in the order granting summary judgment the grounds upon which the
trial court relied, we must affirm the summary judgment if any of the independent summary-
judgment grounds is meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872
(Tex. 2000).
In construing the language of the parties' agreement, our primary concern is to ascertain and give
effect to the intentions of the parties as expressed in their written contract. Kelley-Coppedge, Inc.
v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). To ascertain the parties' true intentions,
we examine the entire agreement in an effort to harmonize and give effect to all provisions of the
contract so that none will be rendered meaningless. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co.,
995 S.W.2d 647, 652 (Tex. 1999). Terms in a contract are given their plain, ordinary, and
generally accepted meanings unless the contract itself shows the terms to be used in a technical or
different sense. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). When a
written contract is worded so that it can be given a certain or definite legal meaning or
interpretation, it is unambiguous, and the court construes it as a matter of law. Am. Mfrs. Mut. Ins.
Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). Neither party contends that the agreement is
ambiguous, and we conclude it is unambiguous. The interpretation of an unambiguous contract is
a question of law that we review de novo. See MCI Telecomms. Corp., 995 S.W.2d at 650-51.
At the outset, we note that the parties' agreement contains two discrete provisions that individually
give Gulf Coast Concrete potential rights to purchase the leased property. The first, created in
section 15.01, is an irrevocable option, which, if exercised, would give Gulf Coast Concrete the
absolute right to purchase the property on or before September 25, 2007 (the “Option Deadline”)
under the terms specified in the parties' agreement.
The second provision, set forth in section 15.02, creates a right of first refusal, which, if exercised,
could ripen into an option to purchase the property under the terms set forth in section 15.03 of the
parties' agreement. Unlike the option created in section 15.01, which by its terms is limited to the
time period before the Option Deadline, the right of first refusal created in section 15.02 may be
triggered at any time during the lease term and any extensions of the lease, even after the Option
Deadline.
Did the optionee exercise its right of first refusal?
Durrett Development argues that Gulf Coast Concrete did not exercise its right of first refusal under
the lease provisions. Generally, a right of first refusal empowers the holder with the preferential
right to purchase the property on the same terms offered by or to a bona fide purchaser in the
event that the property owner decides to sell the property. See Tenneco, Inc. v. Enterprise Prods.
Co., 925 S.W.2d 640, 644 (Tex. 1996); Comeaux v. Suderman, 93 S.W.3d 215, 219 (Tex. App.-
Houston [14th Dist.] 2002, no pet.).
A right of first refusal is distinct from a purchase option, in which the holder of the option purchases
the right to compel a sale of property on the stated terms before the expiration of the option.
Sinclair Refining Co. v. Albritton, 147 Tex. 468, 475, 218 S.W.2d 185, 188-89 (Tex. 1949);
Comeaux, 93 S.W.3d at 219-20. Typically, option contracts have two components: (1) an
underlying contract that is not binding until accepted, and (2) a covenant to hold open to the
optionee the opportunity to accept. Comeaux, 93 S.W.3d at 220.
A right of first refusal may ripen into an option contract upon the occurrence of a triggering event,
as specified in the parties' agreement. Although a right of first refusal may ripen into an option
when the owner elects to sell, an option cannot ripen into an enforceable contract of sale until the
holder of the option manifests acceptance. See id.; see also Sinclair Refining Co., 147 Tex. at 474,
218 S.W.2d at 188 (providing that the act of delivering notice, if timely and not otherwise invalid,
converts an option into a contract of purchase and sale).
Acceptance of an option must be unqualified, unambiguous, and in strict accordance with the terms
of the option agreement. Comeaux, 93 S.W.3d at 220. Failure to exercise an option according to
its terms, including untimely or defective acceptance, amounts to a rejection. Id. If the optionee
declines to purchase the property, the owner may sell to anyone. Id.
Gulf Coast Concrete attached a copy of the lease to its summary-judgment motion. Under section
15.02, if Durrett Development offers to sell or receives a bona fide offer from a third-party to buy all
or any portion of the leased property, Durrett Development is required to give written notice to Gulf
Coast Concrete of the terms of the offer made or received and of the landlord's willingness to sell
for that price and on those terms. Durrett Development sent notice of MAW Development's offer
and Durrett Development's willingness to sell the property. This notice was included in Gulf Coast
Concrete's summary-judgment evidence. We presume, without deciding, that the offer from MAW
Development was a bona fide third-party offer and that Durrett Development's letter, dated August
11, 2006, operated as the written notice required under section 15.02.[2] Therefore, Gulf Coast
Concrete's right of first refusal ripened into an option when Durrett Development elected to sell.
See id.
However, before the option created by the right of first refusal could ripen into an enforceable
contract, Gulf Coast Concrete had to manifest unambiguous acceptance of the option strictly in
accordance with the terms of the agreement. See id. Under section 15.03 of the lease, to exercise
its right of first refusal, Gulf Coast Concrete was required to notify Durrett Development of its
election to purchase the property at the same price and terms offered by MAW Development.
Under the undisputed summary-judgment evidence, Gulf Coast Concrete did not do so, and thus it
did not manifest acceptance of the terms proposed for the right of first refusal. Rather, Gulf Coast
Concrete sought to proceed under an entirely different provision; it sought to exercise its option
right under section 15.01. In a letter, dated October 2, 2006, Gulf Coast Concrete specified that it
elected to exercise the purchase option under section 15.01 of the lease. This letter, along with an
offer price and valuation appraisal, contained Gulf Coast Concrete's own terms for purchase and
payment of the leased property. Though Gulf Coast Concrete's failure to exercise the right of first
refusal according to section 15.03 in the lease would amount to a rejection of the right of first
refusal in section 15.02, Gulf Coast Concrete did not rely on section 15.02 in asserting its right to
purchase the property. Instead, Gulf Coast Concrete sought to exercise its option right under
section 15.01. See id. at 222-23 (involving a tenant who had notice of third-party offer and was
given an opportunity to exercise the right of first refusal, which the tenant declined).
Durrett Development asserts that “[t]he Lease, in § 15.02, limits and modifies 15.01 in the event
[Durrett Development] received an offer to sell the subject property from a third-party.” Although
option contracts generally are construed against the optionee, a purchase option is largely for the
benefit of the optionee. Sinclair Refining Co., 147 Tex. at 474, 218 S.W.2d at 188. We therefore
construe the purchase option in section 15.01 accordingly. See id.
Durrett Development points to language in section 15.02 that provides, “[u]pon receiving the notice,
Tenant may exercise the option, in the manner specified below, to purchase the property described
in the offer at the stated price and on the stated terms.” We construe the language in section
15.02, to which Durrett Development refers, as operating to ripen the tenant's right of first refusal in
section 15.02 into an option, which thereafter may be accepted by Gulf Coast Concrete. See
Comeaux, 93 S.W.3d at 220 (providing that a right of first refusal ripens into an option when the
owner elects to sell, but an enforceable contract of sale ripens from that option once the holder of
the option manifests acceptance). Despite Durrett Development's contentions, section 15.02 does
not specify that, once the landlord gives written notice of a third-party offer, section 15.01 is no
longer applicable.[3] The lease does not contain any provision that renders inapplicable Gulf
Coast Concrete's option to purchase the property under section 15.01 before the Option Deadline.
To the contrary, section 17.07 of the lease provides that “the rights and remedies provided by this
lease are cumulative, and either party's using of any right or remedy will not preclude or waive its
right to use any other remedy.”
In section 15.01, Gulf Coast Concrete was granted an irrevocable option to purchase the leased
premises by the giving of written notice of its election to exercise the option, along with an offer
price and valuation appraisal, on or before the Option Deadline. See Sinclair Refining Co., 147 Tex.
at 475, 218 S.W.2d at 188 (“The purpose of purchase options is to give the optionee the right to
purchase at his election within an agreed period at a named price, which presumably was
considered satisfactory by the option or in case the option should be exercised at any time during
the option term.”); Comeaux, 93 S.W.3d at 219-20 (providing that the holder of a purchase option
has the right to compel sale of the property on the stated terms before expiration of the option).
Therefore, the unambiguous language of the lease does not support Durrett Development's
contention that the lease terms limited or modified application of section 15.01 or terminated Gulf
Coast Concrete's right to purchase the property under section 15.01.
Did the optionee exercise the purchase option under the lease?
Section 15.01 provides that in order to exercise the purchase option under the lease, Gulf Coast
Concrete, on or before the Option Deadline, must give written notice to Durrett Development of Gulf
Coast Concrete's election to exercise the purchase option. The summary-judgment evidence
reflects that before expiration of the Option Deadline, on October 2, 2006, Gulf Coast Concrete
sent written notice to Durrett Development indicating its election to exercise the purchase option
and specifically referring to section 15.01 of the parties' agreement. Under section 15.01, at the
time Gulf Coast Concrete gives written notice, it also must present Durrett Development with an
appraisal of the property and an offer price. Gulf Coast Concrete included in the October 2, 2006
letter both an offer price and a current appraisal, which also was part of Gulf Coast Concrete's
summary-judgment evidence.
Based on the evidence, Gulf Coast Concrete conclusively established that it exercised the
purchase option in section 15.01 according to the lease terms before expiration of the Option
Deadline. See Sinclair Refining Co., 147 Tex. at 472, 218 S.W.2d at 187 (providing that once
lessee delivered notice of election to exercise purchase option, the act established the relationship
of vendor and purchaser between the parties); see also Comeaux, 93 S.W.3d at 220 (providing that
in order for an option to ripen into an enforceable contract of sale, the holder of the option must
manifest unambiguous acceptance in strict accordance with the terms of the lease agreement).
Gulf Coast Concrete's motion and summary-judgment evidence facially established its right to
judgment as a matter of law. See, e.g., Comeaux, 93 S.W.3d at 223 (affirming summary judgment).
The burden then shifted to the Durrett Development to raise a genuine, material fact issue
sufficient to defeat summary judgment. In response to Gulf Coast Concrete's motion, Durrett
Development submitted evidence that prior to August 10, 2006, Gulf Coast Concrete had not made
a written offer to purchase the property. Likewise, Durrett Development submitted evidence that
prior to August 10, 2006, Gulf Coast Concrete had not submitted a valuation appraisal on the
property. Section 15.01 requires Gulf Coast Concrete to give written notice to landlord on or
before the Option Deadline, notifying Durrett Development of Gulf Coast Concrete's election to
exercise the purchase option along with an offer price and an appraisal. In its letter dated October
2, 2006, Gulf Coast Concrete specified its election to exercise the purchase option under section
15.01 along with the offer price and appraisal. Durrett Development's evidence, even if true, does
not raise a fact issue as to whether Gulf Coast Concrete elected to exercise the purchase option in
accordance with section 15.01. See Comeaux, 93 S.W.3d at 220 (providing that an option ripens
into an enforceable contract of sale when the holder of the option unambiguously manifests
acceptance in strict accordance with the agreement). Summary judgment was therefore proper.
See id. at 223 (affirming summary judgment granted in favor of the lessor when evidence
demonstrated lessee affirmatively declined to exercise right to purchase property).
III. Conclusion
In light of the evidence presented, the trial court did not err in granting summary judgment in favor
of Gulf Coast Concrete. Therefore, we overrule Durrett Development's sole issue on appeal and
affirm the trial court's judgment.
/s/ Kem Thompson Frost
Justice
Panel consists of Justices Frost, Brown, and Boyce.
[1] Durrett Development does not claim on appeal that the trial court committed error in
denying Durrett
Development's motion for summary judgment.
[2] In its motion for summary judgment, Gulf Coast Concrete argued that the process for right
of first refusal was not triggered by “proper notice” because MAW Development's offer to Durrett
Development was not a definite, final bona fide third-party offer. It is undisputed that Gulf Coast
Concrete received written notice from Durrett Development of a pending sale of the leased
premises. See Comeaux, 93 S.W.3d at 221-22 (declining to address argument that notice was
technically insufficient because tenant had actual notice of proposed sale). In the notice, Durrett
Development made a reasonable disclosure of the terms of the proposed sale to MAW
Development and of Durrett Development's willingness to accept the terms. See id. (concluding
that notice made reasonable disclosure of necessary terms). Furthermore, the notice offered Gulf
Coast Concrete the opportunity to exercise its right of first refusal, which Gulf Coast Concrete
declined. See id. at 222 (concluding that technical deficiencies in the notice do not revive the right
of first refusal that the tenant declined).
[3] Cf. The Elec. Reliability Council of Tex., Inc. v. Met Ctr. Partners, No. 03-04-00109-CV,
2005 WL 2312710, at *11 (Tex. App.-Austin Sept. 22, 2005, no pet.) (mem. op.) (involving lease
terms that expressly permitted the purchase option to cease and terminate upon delivery of notice
of a bona fide offer that triggered the tenant's right of refusal).