BREACH OF CONTRACT STEMMING FROM EXERCISE OF OPTION TO PURCHASE PROPERTY SUBJECT OF LEASE

Luccia v. Ross (Tex.App.- Houston [1st Dist.] Sep. 4, 2008)(Alcala)
(
lease, Landlord-Tenant law, real estate sale purchase option for property, specific performance)
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS:
Opinion by
Justice Alcala

We conclude that evidence shows that Luccia made sufficient tender by notifying
Ross of his ability and willingness to pay the purchase price under the option to
purchase.

Before Justices Taft, Keyes and Alcala
01-07-00080-CV        Paul Luccia, Individually and d/b/a Cabot & Rowe v. Kathryn L. Ross
Appeal from 80th District Court of Harris County
Trial Court
Judge: Hon. Kent C. Sullivan

O P I N I O N

In this breach of contract case concerning the sale of real property, appellant, Paul Luccia,
individually and doing business as Cabot & Rowe (Luccia), appeals from the trial court's summary
judgment order rendered in favor of appellee, Kathryn L. Ross. Luccia, the tenant, filed suit against
Ross, the landlord, asserting that Ross refused to honor the terms of their lease agreement (the
"Lease Agreement") that allowed Luccia to purchase the rental property. Luccia sought specific
performance and attorney's fees.

In five issues, Luccia asserts the trial court erred by (1) construing the Lease Agreement as stating
a limit on the time that Luccia could exercise the option to purchase the property; (2) construing the
Lease Agreement as requiring Luccia to close the sale within the term of the lease; (3)
determining that the option to purchase the property was extinguished by Luccia's failed attempt to
purchase the property; (4) requiring a formal tender of purchase money when Luccia demonstrated
that he was ready, willing, and able to purchase the property; and (5) failing to determine that it
was unnecessary for Luccia to show tender of the purchase money because Ross was unwilling to
sell the property at the contract price.

We conclude the Lease Agreement did not limit the number of times that Luccia could attempt to
purchase the property, as long the option was taken within the terms of the lease, which it was. We
also conclude that Luccia's evidence conclusively established that he proved the element of
tender, and therefore we remand to the trial court for consideration of the remaining elements of
Luccia's breach of contract action. We need not address Luccia's fifth issue, in which Luccia
contends that the cause should be remanded for an alternative reason. We reverse the trial court's
judgment and remand this cause for further proceedings consistent with this opinion.

Background

On April 29, 2003, Luccia leased an office building on Montrose Boulevard in Houston, Texas,
from Ross pursuant to the Lease Agreement. The Lease Agreement expired on July 31, 2005.
Section 36 of the Lease Agreement incorporated the "Special Provisions" attached to the Lease
Agreement as "Exhibit A." Exhibit A provided, in pertinent part,

SALE PRICE: $502,000.00 - Net Sales Price

$555,000.00 less rent credit of $48,000.00 and $5,000.00 deposit

RENTAL CREDIT: Fifty Percent (50%) of rents applied to sale price.
. . . .

OPTION TO PURCHASE: Anytime with credit on rents prorated.


On September 30, 2004, Luccia provided written notice to Ross of his desire to exercise the
option to purchase the property under the terms of the Lease Agreement. Luccia and Ross
entered into a contract on December 21, 2004 for sale of the property (the "Purchase Contract").
The Purchase Contract provided that the closing would take place by January 31, 2005, and that
time was of the essence. The Purchase Contract provided that Ross could keep Luccia's earnest
money of $5,000 as liquidated damages in the event of default.

In the Purchase Contract, the parties also agreed to a special provision that stated,

The Lease/Purchase Contract executed by parties on April 29, 2003 is incorporated herein for all
purposes and Earnest Money/deposit of $5,000.00 is incorporated in this sale contract and will be
forfeited if default occurs or closing is after January 1 [sic], 2005, lease payments will continue on
schedule and Lessee/Buyer will reimburse Lessor/Seller for insurance premiums paid.

Luccia was unable to close the sale by January 31, and as a result of the default, Ross terminated
the Purchase Contract, taking the $5,000 as liquidated damages.

After Luccia failed to meet the January 31 deadline, he made a second attempt to purchase the
property under the option to purchase portion of the Lease Agreement. Luccia secured approval
for a loan to purchase the property. The mortgage broker sent a letter to Ross informing her of the
approval and requesting a final payoff amount so that a closing could be scheduled. Luccia
notified Ross of his intent to purchase the property by sending notice to Ross that, pursuant to the
option to purchase the property, "financing has been approved and that a May 15, 2005 closing
date has been set." Luccia's attorney also sent a letter to Ross's attorney stating,

Please allow this letter to serve as notice of Mr. Paul Luccia's unconditional and unqualified
acceptance of the "option to purchase anytime with credit on rents prorated" as provided in Exhibit
A of the commercial lease executed by your client, Ms. Ross, and my client, Paul Luccia, in
connection with certain real property located at 3209 Montrose Blvd. in Houston, Texas. Mr. Luccia
is ready, willing and able to meet his obligation with closing set for May 15, 2005.

Ross declined to sell the property to Luccia, contending that a "new contract with new terms" would
be necessary. Luccia responded to Ross's refusal to sell by filing this suit for breach of contract,
seeking the remedy of specific performance or, alternatively, damages. Ross counterclaimed
seeking a declaration that Luccia had no right to exercise the option and also seeking damages
for Luccia's breach of contract for failing to meet the terms of the original Lease Agreement.
Specifically, Ross alleged that

Luccia breached the Lease by his (i) failure to timely pay rentals when due and (ii) by doing certain
damage to the Leased Premises upon his vacating of the Leased Premises. Ross faithfully
performed her obligations under the Lease and Luccia breached his obligations. Luccia failed to
pay rent due for the months of June and July, 2005, in the sum of $8,366.39. Rental, with insurance
payment was $4,256.08 per month. Luccia paid only $145.77 for those two months. As a result of
Luccia's breach of the Lease Ross has sustained damages for plumbing repairs and clean up
caused by a flood when the water was turned on after Luccia vacated the leased premises. The
damages were caused by faulty plumbing work which Luccia had performed. All conditions
precedent to recovery have been performed or have occurred. Ross also seeks to recover her
attorney's fees in connection with this action, in an amount of at least $50,000.00.

Also, in her prayer, Ross requested "recovery of damages as a result of Luccia's breach of the
Lease."

Ross filed a motion for summary judgment challenging Luccia's breach of contract lawsuit for the
refusal to sell the property. Ross's motion, as amended, asserted that (1) Ross satisfied her
obligations under the Lease Agreement when Luccia exercised the option to purchase in the
attempted sale of the property that never closed, and Ross was no longer required to give Luccia
a second opportunity to exercise the option to purchase; and (2) the evidence was undisputed that
Luccia failed to timely tender the price due in a purchase contract, which therefore precluded
Luccia's right to obtain specific performance that would require that the sale of the property take
place. The sole assertion in Luccia's motion for summary judgment was that the terms of the
Lease Agreement allowed him to have multiple attempts to exercise the option to purchase the
property, and that the only limitation was the limitation that the option be taken during the term of
the lease. Within this issue, Luccia raised the same issues in the motion for summary judgment as
in this appeal, that the option survived the failed closing of the Purchase Contract and that actual
tender was not required.

The trial court granted Ross's amended motion for summary judgment, rendering judgment that
Luccia take nothing against Ross. Further, the trial court's order "adjudged and decreed that all
claims to any option, right to purchase or other interest in or claim asserted by [Luccia] to certain
property located at 3209 Montrose . . . be and is hereby removed as clouds on [Ross's] title to
such real property described above." The trial court did not specify the grounds on which it granted
summary judgment. The trial court later severed Ross's breach of contract claim into a separate
cause of action. (1)

Summary Judgment Standard of Review

We review summary judgments de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661
(Tex. 2005). As here, when both sides move for summary judgment and the trial court grants one
motion and denies the other, we review the summary judgment evidence presented by both sides
and determine all questions presented. Comm'rs Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997);
Cigna Ins. Co. v. Rubalcada, 960 S.W.2d 408, 411-12 (Tex. App.--Houston [1st Dist.] 1998, no
pet.). We render such judgment as the trial court should have rendered. Agan, 940 S.W.2d at 81;
Rubalcada, 960 S.W.2d at 412. When, as here, a summary judgment does not specify the grounds
on which it was granted, we will affirm the judgment if any one of the theories advanced in the
motion is meritorious. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004).

Summary judgment is proper only when a movant establishes that there is no genuine issue of
material fact and that the movant is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c).
A motion must state the specific grounds relied upon for summary judgment. Id. In reviewing a
summary judgment, we must indulge every reasonable inference in favor of the nonmovant, take all
evidence favorable to the nonmovant as true, and resolve any doubts in favor of the nonmovant.
Valence Operating Co., 164 S.W.3d at 661.

Breach of Contract Law

All of Luccia's issues challenge the trial court's summary judgment in favor of Ross that determined
that there was no breach of contract.

We apply well-established rules of contract interpretation when construing the Lease Agreement.
See Huntley v. Enon Ltd. P'ship, 197 S.W.3d 844, 849 (Tex. App.--Fort Worth 2006, no pet.).
Specifically, when construing a written contract, our primary concern is to ascertain the true intent
of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).
We must examine and consider the entire contracts in an effort to harmonize and give effect to all
provisions so that none are rendered meaningless. J. M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 229 (Tex. 2003); Coker, 650 S.W.2d at 393. If the written instrument is so worded that it can
be given a definite or certain legal meaning, then the contract may be construed as a matter of law.
Coker, 650 S.W.2d at 393.

All contractual provisions should be considered with reference to the entire instrument, and no
single provision taken alone should be controlling. J. M. Davidson, 128 S.W.3d at 229. A simple
lack of clarity or disagreement between parties does not render a term ambiguous. See DeWitt
County Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 100 (Tex. 1999). Rather, an ambiguity arises only
after the application of established rules of construction leaves an agreement susceptible to more
than one meaning. Id. For an ambiguity to exist, both potential meanings must be reasonable. Id.
Whether a contract is ambiguous is a question of law for the trial court to decide by looking at the
contract as a whole in light of the circumstances present when the contract was entered. Coker,
650 S.W.2d at 394.

Luccia filed suit for breach of contract, seeking specific performance of the option to purchase
contained in the Lease Agreement and, alternatively, damages. Specific performance is an
equitable remedy that may be awarded upon a showing of breach of contract. Stafford v. S. Vanity
Magazine, Inc., 231 S.W.3d 530, 535 (Tex. App.--Dallas 2007, pet. denied) (citing Kress v.
Soules, 261 S.W.2d 703, 704 ( Tex. 1953)). The essential elements of a breach of contract claim
are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff;
(3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result
of the breach. Valero Mktg. & Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex. App.--Houston
[1st Dist.] 2001, no pet.).

A party seeking specific performance must show that he is ready, willing, and able to perform the
contract. Stafford, 231 S.W.3d at 535 (citing Am. Apparel Prods., Inc. v. Brabs, Inc., 880 S.W.2d
267, 269 (Tex. App.--Houston [14th Dist.] 1994, no writ)); Chessher v. McNabb, 619 S.W.2d 420,
421 (Tex. Civ. App.--Houston [14th Dist.] 1981, no writ). However, when the other party clearly
refuses to perform his part of a contract, the party who seeks specific performance need not
tender performance before bringing suit. 17090 Parkway, Ltd. v. McDavid, 80 S.W.3d 252, 256
(Tex. App.--Dallas 2002, pet. denied). Even when tender of performance is excused, a party must
plead and prove he is ready, willing, and able to perform. Id.; Chessher, 619 S.W.2d at 421;
Hendershot v. Amarillo Nat'l Bank, 476 S.W.2d 919, 920 (Tex. Civ. App.--Amarillo 1972, no writ).
When a party seeks to prove it is ready, willing, and able to perform under the terms of a contract,
but is unable to prove it has a firm commitment for financing, that party is not entitled to specific
performance of the contract. Hendershot, 476 S.W.2d at 921.

The elements at issue in this case are (1) the existence of a valid contract, specifically, whether the
option survived the failed January 31, 2005 closing of the Purchase Contract, and (2) performance
or tendered performance by Luccia.

Requirements for Exercising Option to Purchase in Lease Agreement

The parties dispute whether the option to purchase in the Lease Agreement allowed Luccia more
than one attempt to close the sale. In other words, the parties disagree whether the Purchase
Contract that was to be closed on January 31, 2005 was the only time that the option to purchase
could be exercised, or whether Luccia could again exercise the option to purchase during the
period of time after the failed January 31closing and the end of the lease six months later on July
31. In his first, second, and third issues, Luccia contends the trial court erred by rendering
judgment in favor of Ross because the plain, unambiguous language of the Lease Agreement
allows him to exercise the option to purchase anytime during the lease term and the failure to close
the Purchase Contract did not extinguish the option. Ross responds that once Luccia exercised
the option, the relationship between Luccia and Ross became one of vendor and purchaser. We
address these issues together because they are all premised on the same question--whether
Luccia could exercise the option to purchase more than once.

Luccia contends that because the Lease Agreement does not specify an exact time for the
exercise of the option, it may be exercised at any time during the lease term, even though he
defaulted on the Purchase Contract entered into as a result of his exercise of the option. Ross
responds that once Luccia exercised the option and defaulted under the Purchase Contract, the
option right terminated. We disagree with Ross, because the plain terms of the agreement do not
limit the number of times that Luccia can exercise the option to purchase the property, other than to
require that the options be exercised during the term of the lease.

Ross cites to no authority to support her position that the option to purchase expires when it is
exercised once. Further, the authority relied on by Ross, Sinclair Refining Co. v. Allbritton, 218
S.W.2d 185 (Tex. 1949), is inapplicable. In Sinclair, the supreme court stated, "But in the usual
case, whatever the practical object of the notice requirement, the act of delivering the notice, if
performed within the time limit and not otherwise invalid, forthwith converts the option into a
contract of purchase and sale." Sinclair, 218 S.W.2d at 188 (emphasis added). We agree with
Sinclair that, in general, a party's notice that he is exercising the option to purchase makes that
agreement into a contract of purchase and sale. See id. Here, Luccia's exercise of the option to
purchase resulted in the contract of purchase and sale that described the terms of the sale. The
Purchase Contract merely stated that the Lease Agreement "is incorporated herein for all
purposes." Nothing in the Purchase Contract dissolved any of the terms in the Lease Agreement.
Thus, if the Purchase Contract did not close for any reason, the parties were still bound to the
terms of the Lease Agreement that included the option to purchase.

Ross alternatively contends that the Purchase Contract modified the option contained in the Lease
Agreement. Ross did not raise this as a ground in her Amended Motion for Summary Judgment.
We therefore do not address it. See Tex. R. Civ. P. 166a(c) ("The motion for summary judgment
shall state the specific grounds therefor."); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d
337, 341 (Tex. 1993) (summary judgment motion "must stand or fall on the grounds expressly
presented in the motion"). We also note, however, that the Purchase Contract incorporated the
Lease Agreement for all purposes, thus stating that the Lease Agreement remained viable along
with the terms of the Purchase Contract.

The plain language of the Lease Agreement does not provide that the option offers a
one-time-only chance to Luccia. The option expressly states "Anytime with credit on rents
prorated." (Emphasis added). The reference to the rents indicates the option was tied to the lease
term. "Unless the option contains provisions to the contrary all that is required of the optionee is
that he notify the optionor, prior to the expiration of the option, of his decision to exercise the
option." W. Fed. Sav. and Loan Ass'n v. Atkinson Fin. Corp., 747 S.W.2d 456, 461 (Tex.
App.--Fort Worth 1988, no writ) (citing Odum v. Sims, 609 S.W.2d 881, 882 (Tex. Civ. App.--San
Antonio 1980, no writ); San Antonio Joint Stock Land Bank v. Malcher, 164 S.W.2d 197, 200 (Tex.
Civ. App.--San Antonio 1942, writ ref'd w.o.m.)). "Optionee thereafter has a reasonable time within
which to complete the deal." Id. Because the Lease Agreement expressly allowed the option to be
exercised anytime, the only time limitation was the expiration of the lease, and thus the Lease
Agreement allowed Luccia to exercise the option between the period of time after the failed
closing on January 31 and the end of the lease six months later on July 31. Although the trial court
did not state its reasons for granting the summary judgment, it would have erred by granting
summary judgment on the ground that the option expired after Luccia defaulted on the Purchase
Contract. We sustain Luccia's first, second, and third issues.

Tender of the Purchase Price

Having determined that the Lease Agreement permitted Luccia to exercise the option to purchase
during the term of the lease, we must next determine whether Luccia's conduct between January
31, 2005 and the end of the lease on July 31, 2005 was sufficient to exercise the option. In his
fourth issue, Luccia contends that the trial court erred by rendering summary judgment for Ross
because "formal tender of purchase monies is an unnecessary formality as a matter of law when
an optionee has demonstrated that he was ready, willing and able to purchase and communicated
this fact to the seller."

A. Applicable Law

Once an option has been exercised, a contract exists. See Sinclair, 218 S.W.2d at 188. The
parties owe mutual and concurrent obligations -- the optionee is obligated to pay the purchase
price and the optionor is required to execute a deed. See Kenver Corp. v. Robinson, 492 S.W.2d
317, 320 (Tex. Civ. App.--Beaumont 1973, writ ref'd n.r.e.) (citing Perry v. Little, 419 S.W.2d 198,
200 (Tex. 1967)). In Perry, the supreme court stated the rule regarding tender in such situations as
follows:

The rule governing this case is expressed in 6 Williston on Contracts, (3rd ed.) s[ection] 833:

"It is said that the strict rules of tender are not applicable to a conditional offer to perform a
concurrent condition; that what is essential is that it shall appear to the court and shall have been
made clear to the other party to the contract that the exchange agreed upon would be carried out
immediately if the latter would do his part. This requirement involves both ability on the part of the
plaintiff to perform and an indication of that ability to the other party. The actual production of the
money or other thing which the plaintiff is to give is said to be unnecessary.

"As the courts have said 'the word "tender" as used in connection with such a transaction, does not
mean the same thing as when used with reference to the offer to pay money where it is absolutely
due, but only a readiness and willingness to perform in case of the concurrent performance by the
other party, with present ability to do so, and notice to the other party of such readiness.'"

Perry, 419 S.W.2d at 200. (2) "The term 'tender' means to notify the other party that one intends to
perform one's side of the bargain immediately or at a specific time and place and to demand that
the other party do likewise." Roundville Partners, L.L.C. v. Jones, 118 S.W.3d 73, 79 n.7 (Tex.
App.--Austin 2003, pet. denied) (citing Perry, 419 S.W.2d at 200-01); see also Bavarian Pastry
Shop, Inc. v. Bavarian Bakeries, Inc., No. 05-94-01002-CV, 1995 WL 702571, at *2 (Tex.
App.--Dallas Nov. 22, 1995, no writ) (stating that tender requires "(1) readiness and willingness to
perform in case of the concurrent performance by the other party; (2) a present willingness to do
so; and (3) notice to the other party of such readiness") (citing Perry, 419 S.W.2d at 200).

B. Analysis

Luccia contends that he had the ability to perform and gave an indication of that ability to Ross,
which is sufficient tender under Perry. See 419 S.W.2d at 200. Ross does not directly address
Luccia's issue. Instead, Ross contends that, because the Purchase Contract replaced the option
right contained in the Lease Agreement, that the "time is of the essence" clause in the Purchase
Contract meant that only actual tender within the time set forth in the Purchase Contract would
suffice.

Here, the undisputed evidence shows that Luccia communicated his willingness and ability to
perform under the Lease Agreement. Luccia sent notice to Ross that, pursuant to the option to
purchase the property under the Lease Agreement, "financing has been approved and that a May
15, 2005 closing date has been set." Luccia's attorney also sent a letter to Ross's attorney stating,

Please allow this letter to serve as notice of Mr. Paul Luccia's unconditional and unqualified
acceptance of the "option to purchase anytime with credit on rents prorated" as provided in Exhibit
A of the commercial lease executed by your client, Ms. Ross, and my client, Paul Luccia, in
connection with certain real property located at 3209 Montrose Blvd. in Houston, Texas. Mr. Luccia
is ready, willing and able to meet his obligation with closing set for May 15, 2005.

The summary judgment evidence also includes an "OK TO CLOSE FORM" showing that Luccia
had obtained financing in excess of the purchase price provided for in the Lease Agreement. We
conclude that evidence shows that Luccia made sufficient tender by notifying Ross of his ability
and willingness to pay the purchase price under the option to purchase. See Perry, 419 S.W.2d at
200; Roundville Partners, L.L.C, 118 S.W.3d at 79 n.7.

We sustain Luccia's fourth issue.

Having determined that the summary judgment must be reversed, we need not address Luccia's
fifth issue presented in which he presents an alternative reason for reversing the trial court's
judgment.

Conclusion

We reverse the summary judgment rendered in favor of Ross and remand this cause. All pending
motions are dismissed as moot.

Elsa Alcala

Justice


Panel consists of Justices Taft, Keyes, and Alcala.

1. The trial court did not dispose of Ross's breach of contract claim, nor did it sever that claim
when the case was originally appealed to us. At oral argument, this Court expressed concern to
the parties that it may lack jurisdiction over this appeal. See Lehmann v. Har-Con Corp., 39
S.W.3d 191, 195 (Tex. 2001) (summary judgment order that does not dispose of all parties and
issues is interlocutory and not appealable). After oral argument, the trial court severed Ross's
claim for breach of contract into a separate cause number. We therefore treat Luccia's notice of
appeal, filed before the trial court entered an appealable order on the motion for summary
judgment, as prematurely filed, and conclude that we have jurisdiction over this appeal. See Tex.
R. App. P. 27.2 ("The appellate court may treat actions taken before an appealable order is
signed as relating to an appeal of that order and give them effect as if they had been taken after
the order was signed."); Iacono v. Lyons, 6 S.W.3d 715, 716 (Tex. App.--Houston [1st Dist.] 1999,
no pet.).

2. The current version of Williston states the rule in very similar language:

It is said that the strict rules of tender, in the sense of a tender of money or property sufficient to
discharge a contract, are not applicable to a conditional offer to perform a concurrent condition;
that what is essential is that it shall appear to the court and shall have been made clear to the other
party to the contract that the agreed upon exchange would be carried out immediately if the other
party performs. This requirement involves both ability on the part of the plaintiff to perform and an
indication of that ability to the other party. The actual production of the money or other
consideration is generally held to be unnecessary.

As the courts have said, "the word 'tender,' as used in connection with such a transaction, does not
mean the same thing as when used with reference to the offer to pay money where it is absolutely
due, but only a readiness and willingness to perform in case of the concurrent performance by the
other party, with present ability to do so, and notice to the other party of such readiness."

Richard A. Lord, Williston on Contracts § 47:5 (4th ed. 2001).