James and Patricia Chapman v. Doug and Eleanor Olbrich ( 2006 )

Affirmed and Majority and Dissenting Opinions filed June 29, 2006

Affirmed and Majority and Dissenting Opinions filed June 29, 2006.

In The

Fourteenth Court of Appeals

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NO. 14-05-00056-CV

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JAMES AND PATRICIA CHAPMAN, Appellants

V.

DOUG AND ELEANOR OLBRICH, Appellees

On Appeal from the 157th District Court

Harris County, Texas

Trial Court Cause No. 2002-36479

D I S S E N T I N G   O P I N I O N

One who seeks specific performance of a real estate contract must prove that he has diligently and timely performed or tendered performance of all obligations set forth in the contract.  Graves v. Alders, 132 S.W.3d 12, 18 (Tex. App.CBeaumont 2004, pet. denied).  Because the Olbrichs did not tender their own performance under the real estate contract at issue, I respectfully dissent.

It is well established that specific performance is an equitable remedy.  Bell v. Rudd, 144 Tex. 491, 191 S.W.2d 841, 843 (1946).  Specific performance is not a matter of right, but, instead, a matter of grace within the court=s discretion.  Roundville Partners, L.L.C. v. Jones, 118 S.W.3d 73, 79 (Tex. App.CAustin 2003, pet. denied).  Specific performance may be awarded when a valid contract to purchase real property is breached by the seller.  Id. at 78B79.  The party seeking specific performance must demonstrate compliance with all the terms of the contract in that he has performed, or tendered performance, of all contractual obligations.  American Apparel Prods., Inc. v. Brabs, Inc., 880 S.W.2d 267, 269 (Tex. App.CHouston [14th Dist.] 1994, no writ); Texacally Joint Venture v. King, 719 S.W.2d 652, 653 (Tex. App.CAustin 1986, writ ref=d n.r.e.).

Where the contract requires a deed to be delivered upon tender of the purchase price, the purpose of a tender is two-fold.  Roundville Partners, 118 S.W.3d at 79; Wilson v. Klein, 715 S.W.2d 814, 821 (Tex. App.CAustin 1986, writ ref=d n.r.e.).  First, the valid tender of the purchase price invokes the seller=s obligation to convey and places him default if he fails to do so.  Roundville Partners, 118 S.W.3d at 79; Wilson, 715 S.W.2d at 821.  Second, the tender satisfies the fundamental prerequisite of specific performance, i.e., that the buyer demonstrate he has done or offered to do, or is then ready and willing to do, all the essential and material acts which the contract requires of him.  Roundville Partners, 118 S.W.3d at 79; Wilson, 715 S.W.2d at 821. 

The Chapmans argue the Olbrichs never tendered their own performance as required under the contract, but tendered, at best, a nonconforming performance.  The Olbrichs, on the other hand, argue the Chapmans had no intention of complying with the contract as evidenced by their sale of Lot 21 to the Medranos in the face of a recorded notice of lis pendens and the Olbrichs= pleadings seeking specific performance.  Thus, the Olbrichs contend any actual tender, under these circumstances, would have been a useless act.  Accordingly, the Olbrichs claim they were required only to tender performance in their pleadings. 

A[A] formal tender is excused where a tender would be a useless and idle ceremony.@  Burford v. Pounders, 145 Tex. 460, 199 S.W.2d 141, 145 (1947) (citations omitted). Thus, the tender of the purchase price Ais excused where the vendor or seller has put it out of his power to perform, as where he has conveyed the property . . . to a third person.@  Id. (citations omitted).  In Burford, a lease gave Burford the right of refusal of purchase of the land before Beaird sold the property to a third party.  Beaird nevertheless sold the property to a third party without giving Burford the right of first refusal.  Id. at 141B42.  Because ABeaird put himself in an attitude of default, and repudiated the contract by selling to Pounders,@ the supreme court held Burford was not required to actually tender the purchase price, but, instead, it was sufficient for Burford to offer in his pleadings to do equity. Id. at 145. 

In Henry v. Mr. M Convenience Stores, Inc., we also considered an award of specific performance in light of the repudiation of a contract for the sale of property.  543 S.W.2d 393 (Tex. Civ. App.CHouston [14th Dist.] 1976, writ ref=d n.r..e.).  Mr. M entered into an earnest money contract with Mrs. Henry for the sale of property Alocated in a fashionable section of Houston.@  Id. at 394.  Three days prior to the scheduled closing, Mrs. Henry conveyed the property by way of general warranty deed to Laigle (another residential property owner in the neighborhood), as trustee for thirteen named individuals, who were concerned about the possibility of a commercial enterprise being located in their neighborhood.  Id.  Laigle then executed a deed of trust and security agreement in favor of a bank.  Id. at 394B95. Simultaneously, with the attempt to fix a lien in favor of the bank, Laigle executed a second deed of trust in favor of Mrs. Henry.  Id. at 395. Laigle also executed and filed of record instruments placing certain restrictions on the property to limit the use of the property to residential purpose in direct contravention to the commercial intentions of Mr. M.  Id. We found that because the contract between Mrs. Henry and Mr. M had been Aeffectively repudiated@ by the conveyance of Mrs. Henry=s legal title and by the placement of the restriction on the property, Mr. M was excused from formally tendering performance at closing.  Id. 

The Olbrichs contend that after notifying the Chapmans that they intended to claim specific performance, demanding an immediate closing, threatening to file a notice of lis pendens, offering to purchase a smaller Lot 21 without the pool, filing a lawsuit, and actually filing of a notice of lis pendens, any tender would have been an idle act.  Thus, the Olbrichs argue they were excused from the requirement of actual tender and claim that the constructive tender in their pleadings was sufficient.  The Olbrichs assert they were ready, willing, and able to close on June 7, 2002, but there was no further contact with the Chapmans until July 15.  However, unlike the sellers in Burford or Henry, when the Olbrichs filed suit on July 22, 2002, the Chapmans still owned the property and did not close with the Medranos until AAugust the 8th or 9th,@ 2002. Moreover, by their July 20, 2002 letter, the Olbrichs apparently believed the Chapmans would be willing to sell Lot 21 to them two days prior to filing this lawsuit.

The Olbrichs rely on 17090 Parkway, Ltd. v. McDavid in support of their argument that any actual tender would have been a useless act or idle ceremony.  80 S.W.3d 252 (Tex. App.CDallas 2002, pet. denied).  In 17090 Parkway, Ltd., the court of appeals considered the necessity of an actual tender when the seller of an office building notified the purchaser in writing that he was terminating the sales contract.  Id. at 255.  The court of appeals rejected the seller=s argument that the buyer had to actually tender the full purchase price to be entitled to specific performance.  Id. at 257.  Noting that Awhere a defendant openly refuses to perform his part of a contract, a plaintiff need not tender performance before bringing suit,@ the court observed that the because seller had terminated the contract and would not have conveyed the property to the buyer if he had tendered the purchase price, actual tender would have been a useless act.  Id. at 256B57.  Unlike in 17090 Parkway, the Chapmans never told the Olbrichs they were terminating the contract; rather, the Chapmans simply stated they believed the contract had expired.  Indeed, the original closing date was May 25, 2002.  It was extended to June 9, 2002.  By July 15, 2002, the Chapmans believed the contract was over.  Further, there was no jury finding that the Chapmans had Aopenly refused to perform [their] part of the contract.@ 

When a party seeks specific performance, he must show that he has complied with all the terms of the contract in that he has performed, or tendered performance, of all contractual obligations.  American Apparel Prods., Inc., 880 S.W.2d at 269; Texacally Joint Venture, 719 S.W.2d at 653.  This is true even where the other party has indicated that he will not carry out the contract.  Riley v. Powell, 665 S.W.2d 578, 581 (Tex. App.CFort Worth 1984, writ ref=d n.r.e.); Hamon v. Allen, 457 S.W.2d 384, 390 (Tex. Civ. App.CCorpus Christi 1970, no writ); Walker v. Central Freight Lines, Inc., 382 S.W.2d 125, 130 (Tex. Civ. App.CSan Antonio 1964, writ ref=d n.r.e.).  At the time the Olbrichs filed this suit, the Chapmans still  owned Lot 21.  The Chapmans may have indicated that they would not sell Lot 21 to the Olbrichs, but they had not Aput it out of [their] power to perform@ by having already conveyed to the property to a third party.  Burford, 199 S.W.2d at 145.

The Olbrichs complain the Chapmans refused to respond to their July 16 demand to close and their July 20 offer to purchase a smaller Lot 21.  On July 16, 2002, the Olbrichs notified the Chapmans that they were claiming specific performance and demanded an immediate closing, with the Olbrichs= thereafter tendering payment with reimbursement of the cost of removing the pool and attorney fees.^[1]

The contract provided that the sales price of $20,000 was payable in cash at closing.  There is nothing in the contract allowing the purchaser to tender the purchase price after closing.  Nor is there any provision in the contract allowing for any decrease in the purchase price, i.e., reimbursement for removal of the encumbrance and attorney fees, as demanded in the July 16, 2002 letter.  AIt is well settled in Texas that a party cannot himself disaffirm a part of a contract and at the same time enforce specific performance on the part of the other party.@  Jones v. Riley, 471 S.W.2d 650, 657 (Tex. Civ. App.CFort Worth 1971, writ ref=d n.r.e.).  Thus, the Olbrichs cannot insist upon the Chapmans= performance under the contract when they have not only failed to comply with the terms of the contract by tendering the full purchase price, but when they actually sought to modify the terms of the contract. 

Relying on McMillan v. Smith, the Olbrichs contend the July 16, 2002 letter is immaterial to whether they are entitled to specific performance because the Chapman=s default excuses an actual tender of performance thereby rendering the unconditional tender in their pleadings sufficient.  363 S.W.2d 437 (Tex. 1962).  In McMillan, the sellers were in default when the tender was made because they had failed to show good title and had failed and refused to cure certain defects.  Id. at 439.  The buyers pleaded they were ready, willing, and able to carry out the contract, offered to do complete equity, deposited in the court the amount they regarded as owing, and offered to deposit any additional amounts as determined by the court.  Id. at 440.  Observing that the contract was difficult to construe and that the buyers had tendered the amount they believed in good faith due under the contract and offered to tender any additional amounts the court found to be due, the court held, under these circumstances, that failure to tender the amount actually due did not preclude specific performance once they had paid the full amount.  Id. at 443. 

McMillan does not stand for the proposition that the purchaser does not have to tender the purchase price if the seller is in default under the contract.  Unlike the buyers in McMillan, the Olbrichs did not tender into the registry of the court any sum due under the contract, but, instead, demanded an immediate closing and, thereafter, tender an amount that was clearly less than the amount of the purchase price stated in the contract. 

A tender is an unconditional offer by the obligor to pay a sum not less than what is due to the obligee.  Baucum v. Great Am. Ins. Co. of N.Y., 370 S.W.2d 863, 866 (Tex. 1963).  Thus, any offer by the obligor that is less than what is due under the contract does not constitute a tender and it is the obligor=s burden to make sure his tender is of a sufficient amount.  Wilson, 715 S.W.2d at 821.  Here, the Olbrichs cannot condition any tender of their performance on removal of the pool, claiming reimbursement not provided for in the contract.  See id. (A[T]he very definition of >tender= does not even allow for the possibility of conditional offers.@) (emphasis in original).^[2]

On July 20, 2002, the Olbrichs proposed to purchase Lot 21, but reduced in size by 3,325 square feet so that the boundary line would be moved and the swimming pool would be located solely on the Chapman=s property, for the original $20,000 purchase price.^[3] However, the Olbrichs= July 20, 2002 offer to purchase a smaller portion of Lot 21 poses similar problems for the Olbrichs as the demands found in the July 16, 2002 letter because they are still attempting to change the terms of the contract.  Thus, the Olbrichs cannot complain of the Chapmans= refusal to accede to the July 16 demands or accept the July 20 offer to bolster their position that making an actual tender of the full purchase price under the contract was excused because it would have been a useless act under the facts of this case.

Because the Olbrichs failed to establish that they complied with all terms of the contract by performing, or tendering performance, of all contractual obligations, they are not entitled to the equitable remedy of specific performance.  Accordingly, I would reverse the judgment of the trial court and render judgment that the Olbrichs take nothing on their claims for specific performance and attorney fees against the Chapmans.  I must, therefore, respectfully dissent. 

/s/      J. Harvey Hudson

Justice

Judgment rendered and Majority and Dissenting Opinions filed June 29, 2006.

Panel consists of Justices Hudson, Frost, and Seymore.

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^[1]  The July 16 letter states, in relevant part:

[W]e intend to claim specific performance for the contract, meaning that we want to close immediately and thereafter tender performance by contracting for removal of the encroachment on the subject property, including removal of fencing, pool demolition and filling of the pool void as specified in Addendum #1, with reimbursement to us of associated expenses and any attorney fees. 

^[2]  In post-submission briefing, the Olbrichs argue the July 16, 2002 letter with the nonconforming tender is irrelevant because they abandoned any claimed reductions related to the removal of the pool after the Medranos purchased the lot.  Even if this were so, it does not change the result.  Because of the reasons explained above, the Olbrichs were required to make an actual tender of the $20,000 purchase price prior to filing suit. 

^[3]  The Olbrichs= proposal is contained in a letter dated  July 20, 2002:

According to the survey, the lot measures 119' in width by 175' in length, which totals 20,825 square feet.  We will agree to resurvey the lot at our expense to take off 19' in width on the southern side.  This will move the boundary line off the pool and off of the septic tank, and will add 19 more feet in width to the lot on which your house sits. . . . Rather than asking you for an adjustment in price reflecting the reduced size of the lot, we will maintain the original agreed-to price of $20,000. 

This offer allows you to receive your agreed-to price for the lot and frees you up to sell your remaining property without incurring any expense in removing encroachments.  We will also be absorbing the cost of the new survey and the loss of square footage without any reduction in price. . . .