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 2009-06

Texoma Advertising Co., L.P. v. the Siblings, L.L.C. ( 2009 )


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  • Affirmed and Memorandum Opinion filed June 16, 2009

    Affirmed and Memorandum Opinion filed June 16, 2009.

     

     

    In The

     

    Fourteenth Court of Appeals

    ____________

     

    NO. 14-08-00602-CV

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    TEXOMA ADVERTISING CO., L.P., Appellant

     

    V.

     

    THE SIBLINGS, L.L.C., Appellee

     

      

     

    On Appeal from the 354th District Court

    Rains County, Texas

    Trial Court Cause No. 8294

     

      

     

    M E M O R A N D U M   O P I N I O N

    This is an appeal from a take-nothing judgment following a bench trial.  Appellant Texoma Advertising Co., L.P. (ATexoma@) brought suit against appellee The Siblings, L.L.C. (AThe Siblings@) for breach of a lease agreement and conversion as a result of the removal of a billboard.  The trial court found that Texoma was not entitled to recover from The Siblings because there was no binding lease agreement.  Texoma challenges the legal sufficiency of the evidence supporting the trial court=s conclusion and also argues that the statute of frauds does not apply to bar its claims. Because there is legally sufficient evidence to support the trial court=s conclusions, we affirm.

    BACKGROUND

    In 1996, Alec Outdoor Advertising and Fay Spencer entered into a lease agreement with regard to land owned by Fay in Emory, Texas.  The lease agreement allowed the tenant, Alec Outdoor, to maintain a bulletin advertising sign (billboard) that existed on the land.  The billboard in question, which was built in 1971, was located on the southbound side of Highway 69 and could easily be seen from the road. 

    In 1998, Alec Outdoor and Fay executed another lease agreement, providing for a term that would end in April 2003.  After that term ended, the parties could renew the lease on like terms from year to year.  The rent for each year had to be paid in advance.  After executing the second lease, Alec Outdoor sold its billboards, including the one on Fay=s property, to Paris Outdoor Media, L.P.  Paris Outdoor Media, L.P. merged with Texoma, and Texoma remained as the surviving entity.  Texoma states that it succeeded to the rights of Alec Outdoor on the subject lease.  Neither the 1996 lease nor the 1998 lease were recorded in the real property records.

    In February 2005, Don Spencer, who had inherited the land from his mother Fay, sold the real property on which the billboard was located to The Siblings.  Don testified that, around the time of the sale, he told Roger Hooten (the manager of The Siblings) that the billboard was on the property and that the rent Don received covered maintenance on the lot and a small portion of the taxes.  Roger denied any knowledge of such a conversation and any knowledge of the lease agreement.  The billboard in question did not identify Texoma, or any other company, as the owner, but did contain an advertisement for Murrey Motors, a local car dealership.  Texoma=s representative testified that a phone call to Murrey Motors would have revealed Texoma as the owner of the billboard. 


    Although The Siblings owned the property by April 2005 when the next rent check was due, Texoma paid the 2005B2006 rental check to Don Spencer, because Texoma was not yet aware of the sale.  The rent check was not forwarded to The Siblings, and The Siblings was not aware that any rent had been paid.  From February 2005 until April 2006, neither Roger Hooten nor his son Nathaniel (a member of The Siblings) saw anyone perform maintenance on the billboard.[1] Roger observed that the pole was rotting, and the advertising on the billboards had not been changed since The Siblings had owned the property.  Sometime in April 2006, Roger, having concluded that the billboard was abandoned, had it removed. 

    In early April 2006, now aware of the sale of the real property, Texoma sent the annual rent check to The Siblings.  Texoma did not include a cover letter with, nor other explanation on, the check.  The check was sent to a post office box used by Hooten Financial Bookkeeping Services and Jackson Hewitt Tax Service, an accounting franchise owned by the Hootens. Nathaniel Hooten testified that he received the check during tax season, thought it was for the payment of tax preparation services, and promptly deposited the check into a bank account owned by Big 5 Investments, LLC, the company that owned the Jackson Hewitt tax franchise.[2] Nathaniel explained that, at the time he deposited the check, he was not aware the check was made out to The Siblings.[3] The Siblings did not usually receive checks.  The check was not endorsed by The Siblings and was not deposited to The Siblings= account.

    Also during April 2006, Scott Walderzak, a Texoma employee, went to put a new advertisement on the billboard and discovered that it had been removed.  Walderzak then went to the Hooten=s tax office, which was located near the billboard.  The evidence is disputed with regard to the information given to Walderzak and Texoma about the removal of the billboard.  Walderzak testified that he spoke with Nathaniel, and Nathaniel initially told him that the City had the billboard removed.  Walderzak then spoke with Roger Hooten, who allegedly told Walderzak that he had the billboard removed so that a driveway could be built.  Nathaniel and Roger both denied telling Walderzak that the City had the billboard removed.  Clark Cummins, one of the owners of Texoma, testified that when he learned of the billboard=s removal, he called Roger Hooten.  Roger told Cummins that the billboard had not been paid for and thus did not have a right to be there.  Roger did not recall speaking to Clark Cummins.  Roger and Nathaniel both denied having any actual knowledge of the lease agreement or its terms prior to the underlying lawsuit being filed.

    On April 30, 2006, Jackson Hewitt Tax Service issued a check to Texoma as a refund of the check previously deposited by Nathaniel into the account of Big 5 Investments.  Texoma refused the refund of the check. Texoma then filed this lawsuit, seeking damages for breach of the lease agreement and for conversion.

    After a non-jury trial, the trial court issued a take-nothing judgment in favor of The Siblings.  The trial court found that The Siblings was only liable for the return of the rent check that had been deposited into the Big 5 Investments account.  The trial court issued findings of fact and conclusions of law, wherein it found, among other things, that A[t]he written instrument of 1998 does not constitute a binding lease agreement between Plaintiff and Defendant for use of [the] billboard.@  Texoma timely filed this appeal.

    ANALYSIS

    Texoma challenges the trial court=s judgment in three issues.  In its first issue, Texoma argues the evidence is legally insufficient to support the trial court=s conclusion that no binding lease agreement existed between Texoma and The Siblings and that The Siblings is not liable to Texoma (except for the refund of the April 2006 rent check), and that the trial court=s legal conclusions are incorrect.  In its second issue, Texoma argues that the trial court=s finding of fact that the rent check for the 2005B2006 term was paid to Don Spencer at a time when The Siblings owned the property does not support the trial court=s legal conclusion that the lease was not binding on The Siblings.  In its third issue, Texoma argues that its claims are not barred by the statute of frauds.  We find there is legally sufficient evidence to support the trial court=s legal conclusions and that the trial court made the correct legal conclusions from the disputed facts.  Because of our disposition of Texoma=s first issue, we need not address its second and third issues.[4]

    A.      Standards of review.

    When a trial court issues findings of fact and conclusions of law following a bench trial, we review the findings and conclusions under the same standards that we apply in reviewing jury findings.  Anderson v. City of SevenPoints, 806 S.W.2d 791, 794 (Tex. 1991); Ahmed v. Ahmed, 261 S.W.3d 190, 193B94 (Tex. App.CHouston [14th Dist.] 2007, no pet.).  In a legal sufficiency review, we determine whether the evidence would enable reasonable and fair-minded people to reach the finding under review.  See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).  In conducting this review, we credit favorable evidence if reasonable factfinders could and disregard contrary evidence unless reasonable factfinders could not.  See id.; Ahmed, 261 S.W.3d at 194.  A legal sufficiency, or no evidence, challenge may only be sustained when either the record reveals a complete absence of evidence of a vital fact, the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, the evidence offered to prove a vital fact is no more than a mere scintilla, or the evidence establishes conclusively the opposite of the vital fact.  Ahmed, 261 S.W.3d at 194.

    We consider the evidence in the light most favorable to the finding under review and indulge every reasonable inference in support of the judgment.  City of Keller, 168 S.W.3d at 822; Vickery v. Comm=n for Lawyer Discipline, 5 S.W.3d 241, 252 (Tex. App.CHouston [14th Dist.] 1999, pet. denied).  Unchallenged findings of fact are binding on an appellate court unless the contrary is established as a matter of law.  McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986).  Where the trial court makes findings of fact but inadvertently omits an essential element of a ground of recovery or defense, the court will imply findings in support of the judgment. See Tex. R. Civ. P. 299; Vickery, 5 S.W.3d at 252.

    We review the trial court=s conclusions of law de novo.  BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).  We will uphold conclusions of law on appeal if the judgment can be sustained on any legal theory the evidence supports.  2616 S. Loop L.L.C. v. Health Source Home Care, Inc., 201 S.W.3d 349, 355 (Tex. App.CHouston [14th Dist.] 2006, no pet.).  Incorrect conclusions of law do not require reversal if the controlling findings of fact support the judgment under a correct legal theory.  Id.  Moreover, in a bench trial, the trial court is the sole determiner of the credibility of the witnesses and the weight to be given their testimony.  See Cohn v. Comm=n for Lawyer Discipline, 979 S.W.2d 694, 696B97 (Tex. App.CHouston [14th Dist.] 1998, no pet.); Nordstrom v. Nordstom, 965 S.W.2d 575, 580B81 (Tex. App.CHouston [1st Dist.] 1997, pet. denied).  The trial court, as the finder of fact, may consider all of the evidence and circumstances and can reject or accept all or part of a witness=s testimony.  Nordstrom, 965 S.W.2d at 580-81.

    B.      Was there a binding lease agreement?

    In its first issue, Texoma argues the trial court erred in finding there was no binding lease agreement between Texoma and The Siblings because, at a minimum, The Siblings had constructive notice of the terms of the lease.  According to Texoma, The Siblings= alleged acceptance of the April 2006 rent check by depositing it into Big 5 Investments= bank account, ratified the lease and thereby created a binding contract between the parties.           1.       Actual or constructive notice of the lease

    The trial court did not make an express finding of fact with regard to The Siblings= actual or constructive notice of the lease.  It did, however, make findings of fact that: (1) the lease was never recorded in the real property records; and (2) Texoma had no contact with The Siblings prior to the mailing of the April 2006 rent check.  The Siblings maintains that it had no actual knowledge of the 1998 lease agreement at the time it purchased the real property on which the billboard sits.  Texoma argues that Don Spencer told Roger Hooten about the revenue from the sign at the time of the sale to The Siblings.  However, Roger Hooten disputed that testimony and denied any knowledge of such a conversation.  Because there was disputed evidence with regard to actual knowledge, the evidence is legally sufficient to support an implied finding of fact that The Siblings did not have actual knowledge of the lease.  See City of Keller, 168 S.W.3d at 827; see also Vickery, 5 S.W.3d at 258 (where trial court makes findings of fact but fails to include an element of a claim or defense, implied findings will be made in support of the judgment where the omission was not pointed out to the trial court).

    Texoma maintains on appeal that the more important issue is whether The Siblings had constructive notice of the lease.  Texoma bases its constructive notice argument on the fact that the billboard was located on the property, for all to see, and that a simple phone call by The Siblings could have ascertained the existence of the lease.  This evidence, according to Texoma, satisfies the requirement that an occupant=s possession be visible, open, exclusive, and unequivocal.  We disagree.

    Under Section 13.001 of the Texas Property Code, an unrecorded conveyance of an interest in real property is void as to a subsequent purchaser who purchases the property for valuable consideration and without notice.  See Tex. Prop. Code Ann. ' 13.001(a) (Vernon 2003).  The unrecorded instrument is binding, however, on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.  See id. ' 13.001(b).  To receive the bona fide purchaser protection, a party must acquire the property in good faith, for value, and without notice of any third-party claim or interest.  Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001) (per curiam).  Notice of a third-party=s claim or interest can be either actual or constructive.  Id.; Flack v. First Nat=l Bank, 226 S.W.2d 628, 631 (Tex. 1950). Actual knowledge is found based on personal information or knowledge.  Madison, 39 S.W.3d at 606.  AConstructive notice is notice the law imputes to a person not having personal information or knowledge.@  Id. 

    The law will impute constructive knowledge where a subsequent purchaser has a duty to ascertain the rights of a party in possession.  Id.  The duty to ascertain arises only if the possession is visible, open, exclusive, and unequivocal.  Id.  APossession that meets these requirementsCvisible, open, exclusive, and unequivocal possessionCaffords notice of title equivalent to the constructive notice deed registration affords.@  Id. (citing Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 348 (1936)). However, possession that is ambiguous or equivocal, which may appear subservient or attributable to the possession of the holder of the legal title, is not sufficiently indicative of ownership to impute constructive notice.  Id. If the duty to ascertain arises, then the subsequent purchaser is charged with notice of all the occupant=s claims that the purchaser might have reasonably discovered on proper inquiry.  Id.

    Although the billboard was visible, open, and appeared exclusive, the evidence raised a fact issue with regard to whether Texoma=s possession was unequivocal.  When an occupant=s possession is consistent or compatible with another=s ownership assertion, the occupant=s possession cannot be said to be unequivocal.  Madison, 39 S.W.3d at 607; Strong, 98 S.W.2d at 350.  Roger Hooten testified that the billboard was in poor condition and appeared to be abandoned.  The billboard was built in 1971 and was concededly an older sign.  From February 2005 until April 2006, neither Roger nor Nathaniel saw anyone perform maintenance on the sign, although Texoma presented evidence that the lawn was cut at least once.  Roger observed that the pole was rotting and that the advertising on the billboard had not been changed since The Siblings had owned the property.  The trial court, as the fact finder, was the sole arbiter of the credibility of, and weight to be given, the witnesses= testimony.  See Nordstrom, 965 S.W.2d at 580B81.  Given the evidence, reasonable and fair-minded people might disagree as to whether the pole appeared abandoned and subservient to Spencer=s ownership of the property at the time of the sale. But that was a question for the trial court to resolve acting as the fact finder.  The evidence supports an implied finding of fact that The Siblings did not have constructive knowledge of the lease.  As a result, legally sufficient evidence exists to support the trial court=s legal conclusion that there was no binding lease agreement between Texoma and The Siblings.  See City of Keller, 168 S.W.3d at 827. 

    Texoma relies on Melvin R. Storm Family Partners, L.P. v. Northcutt, No. 11-05-00402-CV, 2007 WL 2204170 (Tex. App.CEastland Aug. 2, 2007, no pet.) (mem. op.), to support its constructive notice argument.  We find Melvin R. Storm distinguishable.  In Melvin R. Storm, an oil and gas operator had a lease for conducting oil and gas operations on a portion of land purchased by the defendant.  Id. at *3.  The purchaser argued that it could not be bound by the lease because it could not be charged with constructive knowledge.  Id.  In finding that legally and factually sufficient evidence existed to support a finding that the oil and gas operator=s possession was visible, open, exclusive, and unequivocal, the court of appeals highlighted testimony from the purchaser that he actually saw the operator coming in and out of the property and operating the wells before the purchase of the property.  Id. at *4.  The court of appeals found that this evidence put the purchaser on notice to investigate the rights under any existing leases.  Id. In contrast, the only evidence Texoma points to in this case is the fact that the billboard was in existence on the property at the time of the sale and the testimony from Don Spencer regarding his comments to Roger Hooten about revenue from the sign.  As noted above, the evidence in this case was disputed as to whether the billboard appeared to be abandoned, and Roger Hooten denied the conversation with Spencer regarding revenue.


    Likewise, we find other authority cited by Texoma in support of its constructive notice argument unpersuasive.  In each of the cases, there were facts that put the purchaser on notice that further inquiry was necessary.  See, e.g., Fletcher v. Minton, 217 S.W.3d 755, 761 (Tex. App.CDallas 2007, no pet.) (presence of cows, a fence, and equipment, coupled with observation by purchaser=s agent of the occupant going to and from property was sufficient to put purchaser on notice); Startex First Equip. Ltd. v. Aelina Enters., Inc., 208 S.W.3d 596, 602 (Tex. App.CAustin 2006, pet. denied) (lease was recorded in deed records, plus Ainquiry notice@ was triggered where occupant was operating gasoline sales business from premises); Texas Wood Mill Cabinets, Inc. v. Butter, 117 S.W.3d 98, 105 (Tex. App.CTyler 2003, no pet.) (statute relating to mechanics= and materialmen=s lien provided for constructive notice; additionally, purchaser=s personal knowledge of improvements being made put purchaser on notice lien can be filed).  There are no such facts in this case.  The mere existence of the billboard is not sufficient to conclusively establish a duty to ascertain because there was also evidence that the billboard appeared to be abandoned.  The trial court resolved the factual dispute in favor of The Siblings.

    Because there was more than a mere scintilla of evidence to support an implied finding that Texoma=s possession was not unequivocal, the trial court properly concluded that the lease agreement was not binding on The Siblings based on constructive notice.

    2.       Ratification of the lease

    Even if the evidence had conclusively established constructive notice on the part of The Siblings, Texoma would still have to show, under the terms of the 1998 lease agreement, that The Siblings accepted a renewal of the lease agreement for the 2006B2007 term.  Texoma argues that The Siblings accepted a renewal of the lease by depositing the April 2006 rent check that Texoma sent to The Siblings, thereby ratifying the terms of the lease.  The Siblings argues that there was no acceptance of the check, and thus no meeting of the minds, as required to establish a binding contract.  We find that there was disputed evidence with regard to whether The Siblings accepted the April 2006 rent check with full knowledge of the facts. Thus, Texoma=s legal sufficiency challenge based on ratification is without merit.

    To establish the existence of a binding contract, Texoma had to establish that there was a meeting of the minds with regard to the agreement; that is, there must be a showing that The Siblings had an intention of making the contract.  See Dhingra v. Mendelow, No. 14-00-00770-CV, 2001 WL 1136149, at *3 (Tex. App.CHouston [14th Dist.] Sept. 27, 2001, no pet.) (not designated for publication) (AThere can be no agreement when one party has an intention to make it, but the other has not.@).  Under the doctrine of ratification, any act based upon a recognition of the contract as existing or any conduct inconsistent with an intention of avoiding it has the effect of waiving the right of recission.  See Rosenbaum v. Texas Bldg. & Mortgage Co., 140 Tex. 325, 167 S.W.2d 506, 508 (1943); Dhingra, 2001 WL 1136149, at *3.  Ratification occurs where: (1) there is adoption or confirmation by a person, (2) with knowledge of all material facts, (3) of a prior act which did not then legally bind that person and which that person had the right to repudiate.  Vessels v. Anschutz Corp., 823 S.W.2d 762, 764 (Tex. App.CTexarkana 1992, writ denied); see also Dhingra, 2001 WL 1136149, at *3.

    After reviewing the evidence under the applicable standards of review, we find that there were fact issues to be resolved by the trier of fact with regard to The Siblings= alleged acceptance of the April 2006 rent check.  Texoma sent the check to a post office box owned by Jackson Hewitt Tax Services.  The check had no cover letter or other notation on it explaining the purpose of the check.  Nathaniel Hooten testified that he received the check, thought it was for payment of tax services, and promptly deposited it into the bank account for the company that owned the Jackson Hewitt tax franchise.  Texoma is correct that the check was made out to The Siblings and that it was a mistake for Nathaniel to deposit it in the Big 5 Investments bank account.  However, Nathaniel explained that it was very unusual for The Siblings to receive any checks (he was not aware of any prior checks), the check was received during busy tax season, and he simply did not realize at the time that the check was made to The Siblings.  Nathaniel conceded that he contacted Texoma to determine the name of the signator on the check, but he did not get any other information regarding the check.  Once he realized what the check was for, a refund was promptly issued to Texoma. Crediting the evidence that is favorable to the trial court=s judgment, as we must, and allowing issues of the credibility of the witnesses to be decided by the fact finder, legally sufficient evidence supports an implied finding of fact that The Siblings did not accept by ratification the terms of the lease agreement.  The trial court thus could correctly conclude that there was no binding agreement between Texoma and The Siblings.

    Texoma argues that The Siblings= unexpressed mental thoughts or reservations regarding the check are immaterial to the question of whether The Siblings accepted the rent check, citing Oram v. General Am. Oil Co. of Tex., 513 S.W.2d 533 (Tex. 1974).  In Oram, however, the defendant continued to accept payments even after she learned of the true terms of the agreement.  See id. (AShe has been fully aware of the terms of the lease and by continuing to accept the benefits of performance thereunder by the lessee, she has ratified and affirmed the lease as her own act.@).  Once The Siblings learned the true nature of the April 2006 rent check, The Siblings tendered a refund of the check to Texoma.  Texoma=s representative Cummins conceded that, had The Siblings not deposited the check and instead returned it to Texoma, Cummins would have considered the lease terminated.  Here, The Siblings did not continue to accept benefits under the lease once it learned the full facts.[5]

    C.      The conversion claim

     

    Although Texoma pleaded a claim for conversion, the trial court made no express findings of fact or conclusions of law with regard to that claim.  Texoma does not provide any argument, citation to authorities, or citation to the record with regard to its conversion claim.  We, therefore, hold that Texoma has waived any challenge to the lack of findings or conclusions with regard to the conversion claim.  See Tex. R. App. P. 38.1(i); Garza v. Texas Alcoholic Beverage Comm=n, 138 S.W.3d 609, 616 (Tex. App.CHouston [14th Dist.] 2004, no pet.).

    CONCLUSION

    The evidence presented at trial was legally sufficient to support the trial court=s conclusion that there was no binding agreement between Texoma and The Siblings with regard to the 1998 lease agreement and that The Siblings was not liable to Texoma (other than with respect to the refund of the April 2006 rent check).  Accordingly, we affirm the trial court=s judgment.

     

     

    /s/      Leslie B. Yates

    Justice

     

     

     

     

    Panel consists of Justices Yates, Guzman, and Sullivan.


    [1]  Texoma=s representative testified that the lawn around the sign had in fact been cut in January 2006.

    [2]  It is not clear from the record when Nathaniel received the April 2006 rent check.  The Bank=s stamp on the check reflects that it was deposited on April 27, 2006. Nathaniel stated that he deposited the check within a few days after his receipt of the check.

    [3]  Nathaniel did call Texoma after receiving the check because he could not read the signature.  He only found out the name on the check was Cummins and did not request any other information.

    [4]  We also need not address Texoma=s second and third issues because The Siblings does not appear to argue in its brief that the 2005B2006 payment to Don Spencer had any effect on the lease agreement and it concedes that the statute of frauds does not apply.

    [5]  To the extent Texoma contends that constructive knowledge can provide the Aknowledge of the full facts@ necessary for purposes of ratification, Texoma cites no authority for that proposition, and we have  located none.  Accordingly, we decline to hold that ratification may be based on constructive knowledge under the facts of this case.