Kyung Lee v. Kwik Industries, Inc. (Tex.App.-Houston [1st Dist.] Dec. 18, 2008)(Jennings)
breach of contract and declaratory judgment)
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS:
Opinion by Justice Jennings
Before Justices Jennings, Hanks and Bland
01-07-01003-CV Woo Kyung Lee and Jung Lee Jones Partnership v. Kwik Industries, Inc.
Appeal from 151st District Court of Harris County
Trial Court Judge: Hon. Caroline E. Baker
Appellants, Woo Kyung Lee and Jung Lee Jones Partnership (collectively "Lee"), challenge the trial
court's rendition of summary judgment in favor of appellee, Kwik Industries, Inc., in Lee's suit against
Kwik for breach of contract and declaratory judgment. In six issues, Lee contends that the trial court
erred in granting Kwik summary judgment and in denying it a hearing on Kwik's summary judgment
Factual and Procedural Background
In its original petition, Lee alleged that on October 14, 2002, Lee and Kwik "entered into a written
contract . . . for the purchase and sale of a property and business . . . subject to an assumption of [an]
SBA loan," Lee paid Kwik $120,000, and Kwik "was to convey the assumption of the SBA loan and
marketable title to the property and the business." Lee further alleged that Kwik did not provide it with
"closing documents, title abstract[,] title insurance," or "documents showing assumption of the SBA
loan." Lee further alleged that the title to the property was "unmarketable" and that it was "uncertain" as
to "the terms of the loan" and "what [was] happening to the payments." Lee requested a judgment
"canceling the contract" and ordering Kwik to return the $120,000 payment.
Kwik filed special exceptions and an original answer, including a general denial. Kwik also asserted,
as an affirmative defense, that it had fully performed all of its obligations under the contract.
Kwik then filed a summary judgment motion. In its motion, Kwik first argued that it was entitled to
summary judgment on Lee's breach of contract claim arising from Kwik's alleged failure to provide Lee
copies of the closing documents because there was no provision in the contract requiring it to provide
such documents, the closing documents were equally available to all parties from Alamo Title
Company, and Kwik and Amresco Independence Funding, Inc., who was involved in the closing, had
actually provided Lee with copies of closing documents. Second, Kwik argued that it was entitled to
summary judgment on Lee's breach of contract claim arising from Kwik's alleged failure to provide a
title abstract or title insurance because no provision in the contract required Kwik to provide Lee with
an abstract of title or title insurance and, although paragraph 3(b) of the contract required Kwik to
deliver a title commitment binding the title company to issue a title insurance policy, such a
commitment had been delivered to Lee. Third, Kwik argued that it was entitled to summary judgment
on Lee's breach of contract claim arising from Kwik's alleged failure to provide documents relating to
Lee's assumption of an existing SBA loan because there was no provision in the contract requiring
Kwik to provide Lee with copies of documents relating to an SBA loan, Kwik was not a party to any
SBA loan assumption and did not have copies of these documents and that Amresco had provided
Lee with copies of these documents. Finally, Kwik argued that it was entitled to summary judgment on
Lee's rescission claim because Lee could not establish that it did not have an adequate remedy at law,
any alleged breach of the contract did not relate to the essence of the contract and did not constitute
material breaches, and Lee had never shown its intent to rescind or abandon the contract.
Kwik attached to its motion a copy of the contract identifying Kwik as the seller and "Hong Ju Lee and
or assigns" as the purchaser, describing the property to be conveyed, and stating a total purchase
price of $1,698,510, which was payable by a $120,000 cash down payment from Lee and Lee's
assumption of two notes. The contract also obligated Kwik to deliver a title commitment within ten days
of the contract and to deliver a general warranty deed, a title policy, and possession of the property at
Kwik also attached the affidavit of Ray Ellis, Kwik's custodian of records, in which Ellis testified that the
contract was the complete agreement between the parties and that Lee was to pay consideration of a
$120,000 down payment and assume a "first lien note" with an original principal balance of
$1,019,000 and a second lien note with a modified balance of $596,088. Ellis attached to his affidavit
a copy of the "Agreement for Assumption of Indebtedness" for the first note that was dated October 14,
2002 and signed by a transferor, (1) Lee, and a lender. Ellis also attached a document entitled the
"Amresco Loan Commitment Revision/Modification," which referenced the first note and which was
executed by an Amresco representative on October 14, 2002. Ellis explained that Kwik was not a party
to the assumption agreement for this first note and thus did not receive copies of the closing
documents relating to the assumption of the first note. Ellis also attached a copy of the "Modification
Agreement of Real Estate Note and Lien," which appears to pertain to the second note referenced in
the contract, and which was dated October 14, 2002. This modification agreement identified Kwik as
the holder and Lee as the obligor, and it was signed by Lee. Ellis stated that a copy of this modification
agreement, as well as copies of all the closing documents in connection with the closing that were in
Kwik's possession, were provided to Lee at the closing on October 14, 2002. Ellis further stated that
copies of all closing documents were available to all parties at Alamo Title Company. Additionally, Ellis
attached a copy of a "Commitment for Title Insurance Issued by Alamo Title Insurance Company,"
which Ellis contended was ordered by Kwik "pursuant to the terms of the [c]ontract and [s]ale and
delivered to [Lee] on or about May 20, 2004." The commitment states an effective date of May 20,
2004, identifies the proposed insured as Kwik, and states that the record title to the property on the
effective date "appears to be vested in" Lee by virtue of a deed recorded under an identified Harris
County Clerk's File number. Finally, Ellis testified that title to the property sold pursuant to the contract
was vested in Lee "by virtue of deed recorded under" an identified Harris County Clerk's file number.
Kwik also attached deposition testimony from Timothy Meeks, a collections officer for Amresco, and
Margaret Surdick, a loan officer for Amresco who handled loans and assumptions of notes. Meeks
testified that the assumption agreement was signed by Lee and approved by Amresco, thus allowing
Lee to assume the first note. Meeks explained that the "Amresco Loan Commitment
Revision/Modification" form was a document prepared and submitted to the loan committee to
authorize Lee's assumption of the first note. Meeks noted that in a "typical closing" a copy of the
closing documents would have been mailed to the parties and that any party to the transaction could
have contacted Amresco to obtain copies. Meeks also noted that Kwik was not a party to the
transaction and typically would not receive these documents. Surdick testified that the assumption
agreement was made between the present owner of the note, the borrower, which was Lee, and
Amresco. As the closer, Surdick stated that by the time she handles a closing, all initial paperwork to
assume the loan has been completed and the loan has been approved. Surdick also stated that
Amresco was a preferred lender of the SBA and, as such, Amresco could make decisions for the SBA
on the assumption of a loan without having to actually obtain the SBA's approval for the assumption.
Surdick explained that Amresco was only involved with the assumption of the first note. Surdick
personally made copies of all documents signed by Lee and sent those copies to Lee. She said that
those documents were not returned as undeliverable and that she had not received notice from Lee
that it did not receive the documents. She also said that Lee could have contacted her at any time to
obtain the closing documents. Surdick also explained that on an assumption of a note, it would not be
her function as the loan closer to determine whether or not a new title policy or a commitment for a title
policy had been obtained before the transaction would be closed. Rather, a purchaser would have to
obtain its own title policy if it wanted one. Surdick did not offer any testimony about the contractual
provisions requiring the title policy or the title commitment in this case. Following Kwik's filing of its
summary judgment motion, Lee filed an amended petition, adding a claim for a declaratory judgment
that it had terminated the contract. Lee then filed a response to Kwik's summary judgment motion,
stating that Kwik never signed the contract or returned a signed copy to Lee, rendering the contract
invalid and unenforceable. (2) Lee cited the contract's provision that stated that the execution of the
contract by the first party constituted an offer to purchase or sell the property and that
unless within five days from the date of the execution of the contract by the first party, the contract is
accepted by the other party and a fully executed copy is delivered to the first party, the offer of this
contract shall be automatically revoked and terminated, and the earnest money, if any, shall be returned
to the purchaser." (3)
Lee argued that because the contract was never executed, it should have terminated by its own terms.
(4) Lee also argued that Kwik never delivered marketable title because it had not delivered a title
policy until May 20, 2004. Lee attached a copy of a title report prepared by Alamo Title Company on
November 28, 2005, stating that title "appears good" in Lee by virtue of a deed, although Lee did not
offer any clear explanation as to how this document established that it lacked marketable title. Lee also
attached letters from it to Kwik, the first of which was dated December 8, 2003, indicating Lee's intent
to terminate the contract. In this first letter, Lee asserted that it "appear[ed] that closing could not occur"
because the financing could not be transferred. Lee complained of problems with the assignment of
both notes. Lee asserted that these termination notices were provided in a reasonable time and
The trial court granted Kwik's summary judgment motion and dismissed Lee's claims.
Standard of Review
To prevail on a summary judgment motion, a movant has the burden of proving that it is entitled to
judgment as a matter of law and that there is no genuine issue of material fact. Tex. R. Civ. P. 166a(c);
Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). When a defendant moves for summary judgment, it
must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) plead and
conclusively establish each essential element of its affirmative defense, thereby defeating the plaintiff's
cause of action. Cathey, 900 S.W.2d at 341; Yazdchi v. Bank One, Tex., N.A., 177 S.W.3d 399, 404
(Tex. App.--Houston [1st Dist.] 2005, pet. denied). When deciding whether there is a disputed, material
fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Every reasonable inference must
be indulged in favor of the non-movant and any doubts must be resolved in its favor. Id. at 549.
In its first five issues, Lee argues that the trial court erred in granting Kwik summary judgment because
the contract does not contain Kwik's signature and Kwik did not deliver the contract or a copy to Lee
and there is a fact issue as to "whether the contract was actually closed and materially breached . . .
even if the contract was closed"; the "evidence shows [Lee] properly terminated the contract"; Kwik
"did not provide marketable title"; the "absence of insurance materially affects [the property's] market
value"; Kwik did not provide the insurance policy "at the time of contract closing date," but instead
provided it with "severe delay," and that the title insurance issued shows "zero balance"; and "the
question remains [as to whether Kwik had] fraudulently induced [Lee] to sign the contract with false
representation" when Kwik had "represented to convey the assumption of the SBA loan and
marketable title" and that "the assumption had been completed at the closing." In sum, Lee concludes
that fact issues precluded the trial court from granting summary judgment.
The elements of a breach of contract claim are (1) the existence of a valid contract between plaintiff
and defendant, (2) the plaintiff's performance or tender of performance, (3) the defendant's breach of
the contract, and (4) the plaintiff's damage as a result of the breach. Prime Prods., Inc. v. S.S.I.
Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.--Houston [1st Dist.] 2002, pet. denied).
Here, in its original petition, Lee complained that Kwik was required to convey the assumption of the
SBA loan and marketable title. Although these general allegations lacked clarity, Lee then specifically
complained of three ways in which Kwik had breached the contract, one of those being that Kwik had
failed to provide "abstract or title insurance." In its amended petition, the live pleading at the time the
trial court granted the summary judgment motion, Lee again asserted, without referencing any specific
complaints, that Kwik had failed to perform its obligations under the contract, had "materially
breached" the contract, and had failed "to perform any of the essential terms" of the contract.
Kwik, in its summary judgment motion, sought to establish its entitlement to judgment as a matter of law
by disproving the essential element of breach. (5) Kwik attempted to prove that it had not breached the
contract in the manners specified, including its failure to provide title insurance. In regard to this issue,
Kwik argued that, as a matter of law, it had not breached the contract because no provision in the
contract required Kwik to provide a title abstract or title insurance. Kwik alternatively argued that Lee's
claim failed, as a matter of law, because a title commitment had been delivered to Lee.
In its efforts to establish, as a matter of law, that no breach of the contract had occurred in this regard,
Kwik cited the contract. However, the contract, a critical piece of evidence relied upon by Kwik to
support its summary judgment motion, directly contradicted Kwik's assertions regarding Kwik's
contractual obligations to furnish both a title commitment and a title policy. Contrary to Kwik's
assertions, the contract specifically obligated Kwik to deliver a title commitment within ten days of the
execution of the contract and to deliver a title policy at closing. The summary judgment record further
establishes that Kwik had breached at least one of these requirements--Kwik failed to provide a title
commitment within ten days from the date of the execution of the contract. Although Ellis testified that
Kwik had ordered the title commitment "pursuant to the terms of the [c]ontract and [s]ale and delivered
to [Lee] on or about May 20, 2004," Ellis, in his affidavit, did not address the undisputed fact that the
title commitment was not issued until May 2004, well after the October 2002 closing in violation of the
contract. Rather than provide any summary judgment evidence addressing the specific provisions of
the contract related to the title commitment and the title policy, Kwik first attempted to wholly disregard
these provisions by arguing that they did not exist and, second, attempted to ignore the specific
requirement by providing Ellis's unsubstantiated testimony that Kwik had complied with these terms.
But the summary judgement evidence at least raises a fact issue as to whether Kwik breached the
contract with regard to the title commitment obligation. And, resolving doubts in favor of the
non-movant, the summary judgment evidence also raised a fact issue in regard to Kwik's
non-compliance with the title policy obligation. Based on the specific grounds on which Kwik sought
summary judgment and the limited evidence supporting these grounds contained in the record before
us, we hold that Kwik did not establish as a matter of law that it did not breach the contract.
Accordingly, we further hold that the trial court erred in granting summary judgment on Lee's beach of
contract claim because fact issues remain as to whether there was a breach of the contract, and Kwik
presented no other ground for summary judgment to support the trial court's judgment. (6)
We sustain the portion of Lee's first issue related to Kwik's failure to establish as a matter of law that it
did not breach the contract.
Because Kwik sought summary judgment on Lee's breach of contract claim on the ground that it did
not breach the contract and having held that Kwik failed to establish as a matter of law that it did not
breach the contract, we need not consider Lee's remaining issues.
We reverse the judgment of the trial court and remand for further proceedings consistent with this
Panel consists of Justices Jennings, Hanks, and Bland.
The transferor, who appears to have been the original owner of the property, is not a party to this proceeding.
Lee's response was contradictory. Lee asserted both that the contract was never properly executed and was
unenforceable and that the parties had entered into an enforceable contract and, "through their conduct," had
established their entry into the contract.
The contract specifically stated that no earnest money was provided.
Lee did not address the fact that the parties still proceeded to closing on October 14, 2002.
In a portion of its summary judgment motion addressing Lee's rescission claim, Kwik asserted that, even
assuming it had breached the contract, its failure to, among other things, timely provide Lee with a title
commitment was "not the essence of the agreement." However, Kwik did not present any arguments in the
portion of its summary judgment motion addressing the element of breach that its failure to provide title
commitments and insurance did not constitute material breaches or did not cause Lee damages. Rather, Kwik's
motion on the breach of contract claim was focused on Kwik's efforts to prove, as a matter of law, that it had not
breached the contract.
As noted above, in its motion on the breach of contract claim, Kwik only sought to prove, as a matter of law, that
it had not breached the contract. Kwik did not argue, or present any evidence, to establish, as a matter of law,
that no material breach had occurred. Kwik also did not move for summary judgment on Lee's breach of
contract claim on the ground that there was no evidence of a material breach. See Tex. R. Civ. P. 166a(i).
On appeal, Kwik makes multiple arguments as to why the trial court's summary judgment ruling should be
affirmed, but these arguments, and any supporting evidence, were not contained in its summary judgment
motion. For example, Kwik argues that Lee "produced no summary judgment evidence to support their
contention that time was of the essence in the [c]ontract or that appellants were damaged in anyway as a result
of [Kwik's] delay in delivering the title policy." But even if Kwik's assertions on appeal are true, Kwik did not
present the trial court with a summary judgment motion on these issues.