Paciwest, Inc. v. Warner Alan Properties, LLC and Warner Alan/Westcliff, Ltd. ( 2008 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-07-443-CV
PACIWEST, INC. APPELLANT AND
CROSS-APPELLEE
V.
WARNER ALAN PROPERTIES, LLC APPELLEES AND
AND WARNER ALAN/WESTCLIFF, LTD. CROSS-APPELLANTS
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FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY
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OPINION
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Introduction
This case involves competing motions for summary judgment in a suit
over a failed real estate transaction. The trial court granted summary judgment
for the purchaser, appellee Warner Alan/Westcliff, Ltd. (Westcliff), and appellee
Warner Alan Properties, LLC (Warner Alan), Westcliff’s predecessor-in-interest
in the purchase and sale contract. It also ordered that Westcliff was entitled
to specific performance of the contract as a remedy for the seller’s default.
The seller, appellant Paciwest, Inc., brings three issues on appeal in which it
contends that the trial court erred by sustaining appellees’ objections to
Paciwest’s summary judgment proof, by denying Paciwest’s motion for
summary judgment and granting appellees’, and by granting appellees’ request
for specific performance. In a single issue in a cross-appeal, appellees contend
that the trial court erred by determining that they were precluded from
recovering damages in addition to specific performance because of the election
of remedies doctrine. We affirm in part and reverse and remand in part.
Background Facts
On July 28, 2005, Paciwest and Warner Alan entered into a Purchase
Agreement under which Paciwest would sell Warner Alan its interest in the
Westcliff Manor Apartments in Fort Worth, Texas. The agreement provided
that the purchase price for the property would be $5,780,000, payable as
follows:
(a) a portion of the Purchase Price shall be paid by [Warner
Alan’s] assuming (subject to any limitations on personal liability
applicable thereto) the outstanding principal balance owing on the
Closing Date (hereinafter defined) on that certain Promissory Note
(the “Note”) dated October 10, 2002, in the original principal
amount of $4,000,000, executed by [Paciwest] . . . .
(b) The balance of the Purchase Price shall be payable at
the Closing (hereinafter defined) in immediately available funds.
2
“Closing” was defined as “9:00 a.m. on the date fifteen (15) days after written
approval of [Warner Alan’s] assumption of the Note by [the] Lender.” The
contract also provided that closing could be extended if the lender had not
timely sent the title company the signed documents required to evidence the
lender’s approval of the loan assumption.
Shortly after the parties executed the contract, Ted Broadfoot and Chris
Neill of Warner Alan began discussing with Dziem “Jim” Nguyen of Paciwest
the possibility that Warner Alan would seek third party financing rather than
assume Paciwest’s note. On August 6, 2005, Nguyen sent W arner Alan a
letter to Neill’s attention in which he stated the following:
I am writing you this letter just want to recap my
conversation with you and Ted regarding financing of the sale:
1) You will run the number[s] and look into the alternative
of paying off the existing note including defeasance or yield
maintenance by financing with another third party; and you will
decide which way this coming week and will send in the 2
assumption fees check of $3,000 each to [the lender] then if
assumption is still the choice.
2) To accommodate that, I will prepare the assumption
paper to send to [the lender] but will not send in until Wednesday
or next Thursday morning. . . .
....
4) If you choose to assume the note, Parking [repairs] will
have to be done prior to the assumption’s approval. Then, let me
know to what extent you want that done and we will need an
3
addendum to do the repair and increase the contract price.
[Emphasis added.]
On August 17, 2005, Neill faxed Nguyen a letter stating, “Please allow this to
serve as notice that we will not be assuming the current . . . loan which is in
place for Westcliff Manor. We will be placing new debt on this property
through La Jolla Bank.” Subsequently, on August 30, 2005, Nguyen sent a
letter to Paciwest’s lender, stating, “Please accept this letter as our intent to
pay off Loan XX-XXXXXXX within thirty (30) days (by September 30, 2005).
At this time we are requesting payoff information be faxed to (972) 613-
[illegible.].”
Nguyen faxed Broadfoot a proposed First Amendment to the contract on
August 31, 2005. The amendment included the following terms: (1) Warner
Alan would pay, in addition to the purchase price, “all the fees in connection
with paying off the existing note early, including but not limited to the pre-
payment yield maintenance,” (2) Warner Alan’s inspection period would end at
5 p.m. on September 7, 2005, and (3) closing would take place on or before
September 30, 2005, with the option to extend for an additional fifteen days
upon Warner Alan’s depositing an additional, nonrefundable earnest money of
$10,000. It also included a representation that neither party had defaulted
under the contract up to that time and a statement that “[a]ll of [Paciwest’s]
4
warranty and indemnification to [Warner Alan] in the [a]greement with respect
to the existing Loan documents now becomes null and void.”
The next correspondence between the parties occurred on September 5,
2005, when Neill faxed a letter to Nguyen asking for a price reduction of
$300,000. In the letter, Neill stated that “the appraiser has indicated that the
value is much lower than expected and there is a lot of deferred maintenance
outside of our original rehab scope.” Additionally, he noted that “[t]he
occupancy on the property has declined as has the economic collection” and
that the “sizeable drop in collections is greatly impacting the value of the
property.” Neill goes on to state that
[a]ll of these items are causing our lender to lower the amount they
are willing to finance[.] While I fully admit that the property is a
nice property in a good area[,] I also have to realistically point out
that on paper the property is worth significantly less than 5[.]8
million and is in fact worth 2.8 million at an 8 percent capitalization
rate[.] We are willing to purchase a sizeable portion of the upside,
but simply cannot put 2[.]5 million in cash in this deal[.] The
unfortunate reality is that we are at a point where we can move
forward and try to increase funding but the chances of that are
slim[.] We want to do the deal but are at the 23rd hour and are
running out of options and need some help from you.
Nguyen was angry when he received this letter and decided not to go forward
with the transaction under any terms other than those in the original contract;
in other words, Paciwest would perform its obligations under the contract only
if Warner Alan was still able to assume Paciwest’s note.
5
The next day, September 6, 2005, Broadfoot faxed Nguyen a letter with
changes to the proposed First Amendment. In the cover letter, he noted that
the lender had
indicated that part of prepaying the notes is paying the accrued
interest expense which is a full month regardless of prepay date.
We do not want to double pay interest and therefore would not
want to close anytime other than month end. Currently, our lender
believes they will be ready for September 30th, but in case they
are not, we would want to extend for 30 days instead of 15.
The only changes marked on the amendment are the addition “to the best of
their knowledge” to the end of the provision in which each party was to
acknowledge that there had been no breach or default of the contract, the
deletion of the provision that Paciwest’s representations and warranties in the
agreement about the existing loan documents are null and void, and the change
from fifteen to thirty days on the extension date. According to Neill, Warner
Alan did not think an amendment to the contract was necessary, but they
“were trying to be accommodating.”
Nguyen sent another letter on September 9, 2005, in which he stated
that Paciwest could not approve either the price reduction requested by Warner
Alan, nor the requested modifications to the amendment. Thus, Nguyen said,
“the contract stands unchanged, as written.” On September 20, 2005, Warner
Alan’s attorneys sent a letter to Paciwest by fax and certified mail indicating
6
that Warner Alan was “ready, willing and able to close this transaction on
September 30, 2005” and that Westcliff,1
the affiliate of [Warner Alan] to which the Contract will be
assigned, will be present at the September 30 closing and will
tender full performance of all its obligations under the Contract,
including but not limited to full payment of the Purchase Price. The
Note will be fully discharged out of the sale proceeds and any
prepayment penalty will be paid by the purchaser. Therefore the
net amount received by [Paciwest] will be the same as the net
amount it would have received had the Note been assumed.
On September 28, 2005, Paciwest’s attorney sent Warner Alan a letter
indicating that the contract had automatically terminated by its own terms as
of September 26, 2005 because Warner Alan had failed to obtain lender
approval to assume Paciwest’s loan. Neill and Broadfoot both attended the
scheduled closing. Warner Alan wired $5,621,031.91 to the title company,
representing the purchase price, less the initial escrow deposit of $35,000, rent
and tax prorations, and a credit for security deposits held by Paciwest. Warner
Alan also wired an additional $250,000 and had additional funds available if
more money was needed. However, Paciwest did not attend and refused to
close the transaction.
1
… Warner Alan assigned its rights and duties as purchaser under the
contract to Westcliff sometime in September 2005. The assignment document
does not show the exact date the assignment occurred.
7
Appellees sued Paciwest on October 3, 2005, seeking specific
performance of the contract and a declaratory judgment that (1) the contract
did not terminate on September 26, 2005 or at any other time, (2) appellees are
not in breach of the contract, (3) Westcliff can fulfill its obligations under the
contract in an all-cash transaction as opposed to assuming the loan, (4)
Paciwest breached and repudiated the contract by refusing to close and treating
the contract as terminated, and (5) the September 30 closing date was in
compliance with the contract terms. They also sought attorneys’ fees.
Paciwest timely filed an answer. Appellees amended their petition in March,
October, and November 2006 to include claims for damages for (1) “the
difference in interest rates and interest payments caused by [Paciwest’s] failure
to transfer the [p]roperty on September 30, 2005,” (2) lost profits,
management fees, and fair rental value of the property since September 30,
2005, and (3) damages for increases in the cost of repair and improvement
projects and the financing of such projects. They also included an alternative
prayer for relief for damages only.
Appellees filed a traditional motion for partial summary judgment on the
liability and specific performance issues, reserving the damages issues for trial.
Paciwest responded and also filed a competing traditional motion for summary
8
judgment that would dispose of all of appellees’ claims. The trial court granted
appellees’ motion, denied Paciwest’s, and ordered the following:
[It is] ORDERED, ADJUDGED, DECREED AND DECLARED
that Warner Alan Properties, LLC has the right to pay a portion of
the purchase price by paying off Paciwest’s loan instead of
assuming it; and it is further
ORDERED, ADJUDGED, DECREED AND DECLARED that
[Paciwest] breached the contract by failing to convey the Westcliff
Manor Apartments . . . on September 30, 2005; and it is further
ORDERED, ADJUDGED, DECREED AND DECLARED that the
Court GRANTS Warner Alan/Westcliff, Ltd. specific performance
and ORDERS [Paciwest] to perform the contract and convey the
Westcliff Manor Apartments . . . to Warner Alan/Westcliff, Ltd.;
and it is further
ORDERED, ADJUDGED, DECREED AND DECLARED that the
only remaining issues to be determined at trial are the amount of
[appellees’] damages caused by Paciwest’s failure to convey the
Westcliff Manor Apartments on September 30, 2005, and the
amount of [appellees’] reasonable and necessary attorneys’ fees
and expenses.
Thus, after the trial court granted appellees’ motion, the only issues remaining
for trial were whether appellees were entitled to damages as well as specific
performance of the contract.
Paciwest subsequently objected to appellees’ damages expert and
additionally argued that the contract did not provide for the remedy of damages
as well as specific performance but rather that the two are mutually exclusive
remedies under the contract. The trial court agreed, leaving attorneys’ fees as
9
the only issue to be decided. The parties then entered into a stipulation on
attorneys’ fees.
The trial court entered a final judgment incorporating all of its rulings and
the parties’ stipulation on attorneys’ fees on September 28, 2007. Appellees
filed a notice of appeal on December 13, 2007, and Paciwest filed a notice of
appeal on December 21, 2007. The parties later filed an agreed motion to
realign the parties, which this court granted, making Paciwest the appellant and
cross-appellee and Warner Alan and Westcliff appellees and cross-appellants.
Issues Presented
In three issues, Paciwest contends that the trial court erred by sustaining
appellees’ objections to its summary judgment proof, by granting appellees’
motion for partial summary judgment and denying Paciwest’s motion for
summary judgment, and by granting appellees’ request for specific
performance. In their cross-appeal, appellees contend that the trial court erred
by refusing to allow them to recover incidental damages to compensate for
Paciwest’s delay in conveying the property.
Objections to Summary Judgment Evidence
Appellees objected to several statements in Nguyen’s affidavit offered by
Paciwest as summary judgment evidence; the trial court sustained some but not
all of these objections. Specifically, Paciwest complains about the trial court’s
10
sustaining appellees’ objections to the following statements: “There was never
an agreement reached between the parties concerning an amendment to the
Contract,” and “It was Paciwest’s understanding, which was in accordance
with the express terms of the contract, that if an amendment or modification
was not agreed to in writing that the amendment or modification was not
finalized, nor enforceable.”
We review a trial court’s ruling sustaining or overruling objections to
summary judgment evidence for an abuse of discretion. Garner v. Fidelity Bank,
N.A., 244 S.W.3d 855, 859 (Tex. App.—Dallas 2008, no pet.); Bd. of Trustees
of Fire and Police Retiree Health Fund v. Towers, Perrin, Forster & Crosby, Inc.,
191 S.W.3d 185, 192–93 (Tex. App.—San Antonio 2005, pet. denied); see
Reynolds v. Murphy, 188 S.W.3d 252, 259–61 (Tex. App.—Fort Worth 2006,
pet. denied), cert. denied, 127 S. Ct. 1839 (2007). To determine whether a
trial court abused its discretion, we must decide whether the trial court acted
without reference to any guiding rules or principles; in other words, we must
decide whether the act was arbitrary or unreasonable. Downer v. Aquamarine
Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985), cert. denied, 476 U.S.
1159 (1986). Merely because a trial court may decide a matter within its
discretion in a different manner than an appellate court would in a similar
11
circumstance does not demonstrate that an abuse of discretion has occurred.
Id.
Appellees objected to Nguyen’s statement that the parties never agreed
on an amendment to the contract as being a “legal conclusion.” The trial court
agreed. Paciwest contends that the trial court abused its discretion by
sustaining this objection because it did not sustain its similar objection to a
statement in Broadfoot’s affidavit that “[i]n a subsequent conversation, Mr.
Nguyen and I agreed that the closing would take place on September 30,
2005,” or a statement by Neill in his affidavit that “Warner Alan and Paciwest
orally agreed that Warner Alan could pay-off Paciwest’s Note instead of
assuming it.” According to Paciwest, appellees opened the door to Nguyen’s
statement by introducing similar testimony by Neill and Broadfoot. Also, they
contend that by sustaining appellees’ objection but denying Paciwest’s, the trial
court prevented Paciwest from presenting conflicting evidence on the matter.
We conclude and hold that the trial court did not abuse its discretion by
sustaining appellees’ objection to Nguyen’s statement as a legal conclusion.
Neither Neill’s nor Broadfoot’s statements attempt to broadly conclude that an
amendment to the contract was or was not reached; they simply address the
underlying facts of what terms were specifically agreed upon. In contrast,
Nguyen’s statement opines that no legally binding amendment was reached.
12
This is more in the nature of a legal conclusion than a statement of fact. See
Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); Souder v. Cannon,
235 S.W.3d 841, 849 (Tex. App.—Fort Worth 2007, no pet.).
Moreover, we also conclude and hold that the trial court did not abuse its
discretion by sustaining appellees’ objection to Nguyen’s statement that
Paciwest’s understanding was that if an amendment or modification was not
in writing, it was not enforceable, and that Paciwest’s understanding was in
accordance with the terms of the contract. To begin with, the part of the
statement indicating that Paciwest’s understanding is in accordance with the
contract terms is an impermissible legal conclusion. See Brownlee, 665 S.W.2d
at 112; Souder, 235 S.W.3d at 849. Moreover, as Paciwest pointed out in its
objection to the evidence, Paciwest’s subjective intent is irrelevant to the issue
of whether the parties agreed to change the contract terms. A determination
of whether a meeting of the minds has occurred is based on an objective
standard; thus, evidence of Nguyen’s subjective belief about what the contract
says or about whether an amendment occurred is not relevant to whether there
was a meeting of the minds sufficient to amend the contract. See Cox v. S.
Garrett, L.L.C., 245 S.W.3d 574, 579 (Tex. App.—Houston [1st Dist.] 2007,
no pet.); Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App.—San Antonio
1999, pet. denied).
13
We overrule Paciwest’s third issue.
Competing Motions for Summary Judgment
In its first issue, Paciwest challenges the summary judgment for
appellees, contending that Westcliff is not entitled to specific performance
because (1) the statute of frauds and section 9.4 of the contract prohibit
enforcement of the contract under the terms proposed by appellee, (2) the trial
court disregarded the contract’s automatic termination provision and imposed
additional obligations on the parties that were not included in the original
contract, (3) Warner Alan did not have the unilateral right to change the
contract’s payment method from assumption to an all-cash transaction,
(4) compliance with the contract by Warner Alan was still possible once it
received notification from Paciwest that the contract would not be amended as
requested, (5) specific performance is unavailable to Warner Alan because it has
unclean hands, (6) specific performance is unavailable to Warner Alan because
it did not establish that it properly tendered performance, and (7) the original
contract is neither valid nor enforceable because it is not supported by
consideration and lacks mutuality of obligation.
1. Standard of Review
When both parties move for summary judgment and the trial court grants
one motion and denies the other, the reviewing court should review both
14
parties’ summary judgment evidence and determine all questions presented.
Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). The
reviewing court should render the judgment that the trial court should have
rendered. Id.
A plaintiff is entitled to summary judgment on a cause of action if it
conclusively proves all essential elements of the claim. See Tex. R. Civ. P.
166a(a), (c); MMP, Ltd. v. Jones, 710 S.W .2d 59, 60 (Tex. 1986). A
defendant who conclusively negates at least one essential element of a cause
of action is entitled to summary judgment on that claim. IHS Cedars Treatment
Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004); see
Tex. R. Civ. P. 166a(b), (c).
When reviewing a summary judgment, we take as true all evidence
favorable to the nonmovant, and we indulge every reasonable inference and
resolve any doubts in the nonmovant’s favor. Mason, 143 S.W.3d at 798.
Questions of law are appropriate matters for summary judgment.
Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); Westchester
Fire Ins. Co. v. Admiral Ins. Co., 152 S.W.3d 172, 178 (Tex. App.—Fort Worth
2004, pet. denied) (op. on reh’g).
15
2. Analysis
a. Appellees’ Evidence of Amendment to Contract
Paciwest’s first four arguments rest on the assumption that there is no
evidence showing the parties amended the contract to allow appellees to obtain
third party financing instead of assuming Paciwest’s loan.
The statute of frauds requires a real estate contract to be in writing and
signed by the person against whom it is to be charged. Tex. Bus. & Com. Code
Ann. § 26.01(a), (b)(4) (Vernon Supp. 2008); Chambers v. Pruitt, 241 S.W.3d
679, 687 (Tex. App.—Dallas 2007, no pet.). Section 9.4 of the contract
provides that
[n]either this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an
instrument in writing signed by the party against which the
enforcement of such waiver, modification, amendment, discharge
or termination is sought, and then only to the extent set forth in
such instrument.
The plain language of Nguyen’s August 6, 2005 letter, which was signed
by Nguyen and on Paciwest letterhead, indicates that Warner Alan could choose
either to assume the loan or obtain third party financing (with payoff of
defeasance or yield maintenance, in other words, any prepayment penalty); 2
2
… See River E. Plaza, L.L.C. v. Variable Annuity Life Ins. Co., 498 F.3d
718, 719, 721 (7th Cir. 2007); George Lefcoe, Yield Maintenance and
Defeasance: Two Distinct Paths to Commercial Mortgage Prepayment, 28 Real
16
Nguyen instructed that Warner Alan should pay the assumption fees if
assumption was its choice. It is undisputed that Warner Alan did not pay the
assumption fees. Thus, Nguyen’s letter is an offer to Warner Alan to choose
which option it wants. See KW Constr. v. Stephens & Sons Concrete
Contractors, Inc., 165 S.W.3d 874, 883 (Tex. App.—Texarkana 2005, pet.
denied) (“To prove a valid offer, a party must show (1) the offeror intended to
make an offer; (2) the terms of the offer were clear and definite; and (3) the
offeror communicated the essential terms of the offer to the offeree.”).
W arner Alan accepted that offer not only by failing to send in the
assumption fees but also by sending a written letter to Paciwest on August 17,
2005 indicating that it would seek third party financing and it would not
assume Paciwest’s loan.3 Thus, the parties agreed in writing that Warner Alan
Est. L.J. 202, 202–03 (2000).
3
… Paciwest contends that any agreement the parties did come to was
indefinite because Warner Alan did not specifically agree in writing to pay the
prepayment penalty. However, Warner Alan’s letter indicating that it chose to
seek third party financing did not indicate that it would not pay any prepayment
penalty, nor did it attempt to change the terms of Nguyen’s offer in any way.
Cf. Cessna Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465–466
(Tex. App.—Dallas 2006, pets. denied) (“An acceptance must be identical to
the offer, or there is no binding contract.”); Harris v. Balderas, 27 S.W.3d 71,
77 (Tex. App.—San Antonio 2000, pet. denied) (“If the purported acceptance
contains terms that materially change the offer, the acceptance is actually a
rejection and counter-offer.”). Additionally, by failing to pay the assumption
fees, Warner Alan indicated its acceptance of Nguyen’s offer on the terms
17
would no longer be obligated to assume Paciwest’s existing note. Once the
parties agreed to change the financing terms, Paciwest could not unilaterally
change them back to the terms in the original contract without evidence that
Warner Alan subsequently agreed that the original terms of the contract would
be effective. There is no such evidence in the summary judgment record.
In addition, Warner Alan’s letters referencing a September 30 closing,
along with Nguyen’s August 30 letter to Paciwest’s lender, show an agreement
by the parties to close no later than September 30. See EP Operating Co. v.
MJC Energy Co., 883 S.W.2d 263, 266 (Tex. App.—Corpus Christi 1994, writ
denied). Moreover, a September 30 closing—two months after the effective
date of the contract that originally called for lender approval of a loan
assumption—would not have been unreasonable and, thus, could be implied.
See O’Farrill Avila v. Gonzalez, 974 S.W.2d 237, 244 (Tex. App.—San Antonio
1998, pet. denied).
Further, even if the writings between the parties are not sufficient to
show an agreement by Paciwest to an all-cash transaction, provisions in an
earnest money contract that provide for termination of a contract if the buyer
outlined in his letter, which include the payment of any prepayment penalty.
See United Concrete Pipe Corp. v. Spin-Line Co., 430 S.W.2d 360, 364 (Tex.
1968) (holding that performance may be valid acceptance).
18
is unable to obtain financing are solely for the benefit of the buyer and may be
waived by the buyer. See R. Conrad Moore & Assocs., Inc. v. Lerma, 946
S.W.2d 90, 94–95 (Tex. App.—El Paso 1997, writ denied); Renouf v. Martini,
577 S.W.2d 803, 803–04 (Tex. Civ. App.—Houston [14th Dist.] 1979, no
writ). Thus, even a buyer who has not strictly complied with the financing
terms in an earnest money contract, but who is nevertheless able to meet its
obligations to close a transaction, may enforce specific performance against a
seller who thereafter refuses to close the transaction on the ground that the
buyer did not obtain the financing on the express terms provided for in the
contract. See Advance Components, Inc. v. Goodstein, 608 S.W.2d 737,
739–40 (Tex. Civ. App.—Dallas 1980, writ ref’d n.r.e); cf. Potcinske v.
McDonald Prop. Invs., 245 S.W.3d 526, 530–31 (Tex. App.—Houston [1st
Dist.] 2007, no pet.) (distinguishing Advance Components and holding that
analysis of materiality of financing provisions for purposes of contract
enforcement differs from analysis for purposes of contract formation).
Here, a reading of the entire contract shows that the financing provision,
although negotiated, was for Warner Alan’s benefit and Warner Alan waived its
rights involving assumption of Paciwest’s loan. The August 17, 2005 letter
indicating that Warner Alan chose to pay off the loan rather than assume it, the
September 6, 2005 letter enclosing changes to the proposed amendment and
19
indicating that Warner Alan wanted the option to extend for thirty days to
minimize interest payments, and the September 20, 2005 letter indicating that
Warner Alan was ready to pay the purchase price and any prepayment penalty
at closing all indicate Warner Alan’s intention to waive the benefit of the
assumption financing provisions, including the automatic termination provision.
Paciwest claims that the financing provisions in the contract could not be
to appellees’ benefit only because other provisions of the contract were
dependent upon them and because an all-cash transaction would work a
detriment to Paciwest in that it would not receive its tax and insurance reserves
from the lender until up to seven days after closing, rather than at closing from
the purchaser, as was contemplated between the parties in the contract.
However, there is no evidence that the other provisions in the contract, such
as the closing date, were tied to assumption for any particular reason other
than to facilitate the closing date as quickly as possible, which purpose was not
thwarted by the all-cash transaction. Additionally, Paciwest offered no
evidence that a seven-day delay in receiving its escrow from the lender would
have any material or detrimental effect on Paciwest. Accordingly, we conclude
and hold that either (a) sufficient writings indicated an agreement to an all-cash
transaction closing on or before September 30 or (b) Warner Alan was entitled
20
to waive the benefit of the financing provisions to its benefit and proceed with
an all-cash transaction.
b. Whether Westcliff Is Entitled to Specific Performance
Paciwest contends that Westcliff is not entitled to specific performance
because Warner Alan’s wrongful conduct in sending the price reduction letter
is what caused the failure of the transaction and because Westcliff failed to
tender performance, which Paciwest claims is a prerequisite to specific
performance in this case, because Westcliff did not tender the correct purchase
price at closing.
A contract is subject to specific performance if it contains the essential
terms of a contract, expressed with such certainty and clarity that it may be
understood without recourse to parol evidence. Johnson v. Snell, 504 S.W.2d
397, 398 (Tex. 1973); Rus-Ann Dev., Inc. v. ECGC, Inc., 222 S.W.3d 921,
927–28 (Tex. App.—Tyler 2007, no pet.) (holding that lack of closing date in
option contract did not preclude enforcement by specific performance). We
have already determined that the summary judgment record shows that the
original written contract was validly amended, in writing, to provide that Warner
Alan could pay the purchase price via third party financing, rather than
assumption of Paciwest’s loan and that the parties would close within a
reasonable time, no later than September 30, 2005.
21
Specific performance is an equitable remedy that may be awarded at the
trial court’s discretion upon a showing of breach of contract. Kress v. Soules,
152 Tex. 595, 261 S.W.2d 703, 704 (1953); Bell v. Rudd, 144 Tex. 491, 191
S.W.2d 841, 843 (1946); Stafford v. S. Vanity Magazine, Inc., 231 S.W.3d
530, 535 (Tex. App.—Dallas 2007, pet. denied). Specific performance is not
a separate cause of action, but rather it is an equitable remedy used as a
substitute for monetary damages when such damages would not be adequate.
Stafford, 231 S.W .3d at 535; Scott v. Sebree, 986 S.W.2d 364, 368 (Tex.
App.—Austin 1999, pet. denied).
i. Unclean Hands
The doctrine of unclean hands operates as a bar to the equitable relief of
specific performance. Stafford, 231 S.W.3d at 536 n.4; Lazy M Ranch, Ltd.
v. TXI Operations LP, 978 S.W.2d 678, 683 (Tex. App.—Austin 1998, pet.
denied). The party claiming unclean hands has the burden to show that it was
injured by the other party’s unlawful or inequitable conduct. Stafford, 231
S.W.3d at 536 n.4; Willis v. Donnelly, 118 S.W.3d 10, 38 (Tex.
App.—Houston [14th Dist.] 2003), aff’d in part and rev’d in part on other
grounds, 199 S.W.3d 262, 278–79 (Tex. 2006).
The evidence is disputed as to whether the price reduction letter contains
intentional falsehoods; however, even if it does, Westcliff is not barred from
22
obtaining specific performance. The clean hands doctrine should not be applied
unless the party asserting the doctrine has been seriously harmed and the
wrong complained of cannot be corrected without the application of the
doctrine. Dunnagan v. Watson, 204 S.W.3d 30, 41 (Tex. App.—Fort Worth
2006, pet. denied). Here, the evidence shows that any harm suffered by
Paciwest was its own doing; it had no obligation to lower the purchase price
and it rejected Warner Alan’s attempt to do so. Ultimately, by failing to
terminate during the inspection period, Warner Alan obligated itself and
Westcliff to the purchase price as set forth in the contract. However, by
insisting that the contract had not been validly amended to allow Warner Alan
to purchase the property through third party financing rather than assumption
and by refusing to close unless the loan was assumed rather than paid off,
Paciwest was responsible for its own default under the contract. Accordingly,
we conclude and hold that the trial court did not abuse its discretion in
determining that Westcliff was not barred from seeking specific performance
by the “unclean hands” doctrine. See Stafford, 231 S.W.3d at 536 n.4;
Dunnagan, 204 S.W.3d at 41.
23
ii. Tender of Performance
Before a grantor or obligee may assert any rights under an escrow
contract, it must show compliance with the conditions of the escrow—actual
performance—or an offer to perform that was prevented through no fault of the
grantor or obligee. Bell, 191 S.W.2d at 844; Roundville Partners, L.L.C. v.
Jones, 118 S.W.3d 73, 79 (Tex. App.—Austin 2003, pet. denied). In cases in
which the seller’s and buyer’s contract obligations are mutual and dependent,
in that a deed is required to be delivered upon tender of the purchase price, the
purpose of a tender satisfies two purposes: first, it invokes the seller’s
obligation to convey and places him in default if he fails to do so; second, it
satisfies the fundamental prerequisite of specific performance—that the buyer
show that 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. Krayem v.
USRP (PAC), L.P., 194 S.W.3d 91, 94 (Tex. App.—Dallas 2006, pet. denied);
Roundville, 118 S.W.3d at 79. An actual tender in strict compliance with the
provisions of the contract, within the time allowed by the contract, is always
required when a contract provides that time is of the essence unless it is shown
that the defaulting party (1) prevented actual tender by the party attempting to
perform or (2) when, as here, the defendant has repudiated the contract before
the time for performance. Krayem, 194 S.W.3d at 94; Roundville, 118 S.W.3d
24
at 79–81.4 Upon either showing, a party seeking specific performance must
only plead and prove that it is ready, willing, and able to perform its part of the
contract according to its terms. Rus-Ann Dev., Inc., 222 S.W.3d at 927;
17090 Parkway, Ltd. v. McDavid, 80 S.W.3d 252, 258 (Tex. App.—Dallas
2002, pet. denied).
Here, the summary judgment evidence shows that regardless of whether
appellees actually tendered performance in strict compliance with the contract
terms, such tender is excused because Paciwest clearly repudiated the contract
by not only insisting that appellees continue the assumption process but also
by sending the September 28, 2005 letter indicating that the contract was
terminated.5 See Jenkins v. Jenkins, 991 S.W.2d 440, 447 (Tex. App.—Fort
Worth 1999, pet. denied) (stating that repudiation “consists of words or actions
by a contracting party that indicate he is not going to perform his contract in
the future”). Appellees’ pleadings indicate that they “remain ready, willing and
4
… See also Rus-Ann Dev., Inc. v. ECGC, Inc., 222 S.W.3d 921, 927
(Tex. App.—Tyler 2007, no pet.); 17090 Parkway, Ltd. v. McDavid, 80 S.W.3d
252, 258 (Tex. App.—Dallas 2002, pet. denied); Wilson v. Klein, 715 S.W.2d
814, 822 (Tex. App.—Austin 1986, writ ref’d n.r.e.).
5
… This case is thus distinguishable from Riley v. Powell, in which this
court held that actual tender was required when the seller decided not to close
after reviewing closing documents drafted by the purchaser, a real estate broker
who also represented the seller. 665 S.W.2d 578, 580–81 (Tex. App.—Fort
Worth 1984, writ ref’d n.r.e.).
25
able to pay the purchase price, [and] any prepayment penalty, and will perform
any other obligations they have.” Moreover, they presented summary judgment
evidence that they were ready, able, and willing to perform these obligations,
including paying the entire prepayment penalty, 6 on September 30, 2005.
Thus, we conclude and hold that the trial court did not abuse its discretion by
determining, upon the undisputed facts set forth in the summary judgment
record, that specific performance is an appropriate remedy for appellees. See
Longfellow v. Racetrac Petroleum, Inc., No. 02-06-00124-CV, 2008 WL
2404233, at *2–3, 5 (Tex. App.—Fort Worth June 12, 2008, pet. filed) (mem.
op.).
c. Validity and Enforceability of Original Contract
Paciwest additionally contends that the original contract is neither valid
nor enforceable because it is not supported by consideration and lacks mutuality
of obligation. Specifically, Paciwest claims that the contract obligates Warner
Alan to purchase the property only if it receives the lender’s approval of the
loan assumption but that it is not under any obligation to seek such approval
and that it could simply terminate by failing to seek such approval. Thus,
6
… Neill averred in his affidavit that additional funds were available at
closing to supplement the $250,000 paid toward the prepayment penalty.
26
according to Paciwest, it had the obligation to sell the property at all times, but
Warner Alan never had the obligation to purchase it.
Paciwest’s argument fails to take into account the evidence showing that
it had agreed to amend the contract to provide that Warner Alan would pay off
Paciwest’s loan at closing; upon that agreement, Warner Alan was obligated to
fund the purchase price at closing if it failed to terminate during the bargained-
for inspection period. Moreover, numerous contract provisions bind both
Warner Alan and Paciwest. Section 1.3, describing the initial escrow to be
deposited by Warner Alan, specifically states that if Warner Alan terminates the
contract by right under the contract, Paciwest would be entitled to $100 of the
initial escrow deposit as independent consideration for the contract.
As to Paciwest’s argument that Section 4.4 of the contract—which states
in one part that W arner Alan’s “failure to obtain Lender’s approval of the
proposed assumption in a manner consistent with [section 4.4] shall not be a
default by [Warner Alan] under [the contract], but shall entitle [Warner Alan] to
terminate [the contract], [and] receive a refund of the Escrow
Deposit”—allowed Warner Alan to avoid any obligation under the contract by
simply failing to seek the lender’s approval of the loan assumption, Paciwest
reads this single sentence of section 4.4 out of context. The beginning of the
provision obligates Warner Alan to,
27
[w]ithin five (5) business days after [its] receipt of Lender’s list of
required information, . . . apply to Lender for its consent to [Warner
Alan’s] acquisition of the Property pursuant to this Agreement and
for permission to assume the Note, and thereafter [to] diligently
seek to obtain Lender’s approval of such application. [Emphasis
added.]
Thus, even the provision pointed to by Paciwest, when read in its entirety,
shows that both parties were mutually obligated under the contract, regardless
of the termination rights available to Warner Alan. We conclude and hold that
the summary judgment record shows that the contract, as initially entered into
and as amended, was supported by adequate consideration. See Alex
Sheshunoff Mgmt. Svcs, Inc. v. Johnson, 209 S.W.3d 644, 658 (Tex. 2006).
We overrule Paciwest’s first issue.
d. Whether Trial Court Should Have Granted Paciwest’s Motion
Paciwest’s second issue incorporates the arguments in its first issue that
Westcliff is not entitled to specific performance of the contract. However, it
also argues that if this court does hold that the trial court did not err by
determining that Westcliff is entitled to specific performance, there are
nevertheless fact issues precluding summary judgment. Specifically, it
contends that there are fact issues concerning “whether any agreement existed
as to the different terms or modifications alleged by Warner Alan and accepted
by the Trial Court.” However, Paciwest cites no other evidence that was not
already discussed in its first issue, and we discern no fact issues precluding the
28
trial court’s grant of summary judgment in appellees’ favor. Thus, we overrule
Paciwest’s second issue.
Cross-Appeal
In a single issue on cross-appeal, appellees challenge the trial court’s
ruling that the only relief to which they are entitled is specific performance.
This ruling occurred as a result of Paciwest’s Robinson challenge to
appellees’ damages expert. The trial court held a hearing on Paciwest’s
objections on May 17, 2007. At the hearing, the trial court specifically directed
the parties to brief whether appellees were entitled to additional damages
having elected to seek, and having obtained, specific performance.
After taking the issue under advisement, on June 18, 2007, the trial court
sent the parties a letter stating that
[i]t appears that Texas law favors [Paciwest’s] Objections to
Reliability and Foundation of Opinions of Dr. Frank Voorvaart. I
agree with [Paciwest] that [appellees’] remedies are limited to those
allowed by the terms of the contract and there is no contractual
foundation for Dr. Voorvaart’s damage opinions because [appellees]
sought and obtained summary judgment for specific performance.
The trial court’s order incorporating this ruling, dated June 26, 2007, states
that appellees,
having sought and obtained a summary judgment for specific
performance, have elected specific performance as their remedy;
29
Thus, the law and relevant contract provisions do not provide
for the recovery of the additional damages sought by [appellees] in
this case;
That the matters to which Dr. Voorvaart was designated to
testify are directed at these additional damages;
That [Paciwest’s] [o]bjections are well taken and should be
SUSTAINED, that Dr. Voorvaart’s opinions should be STRICKEN,
and that [appellees] should be prohibited from presenting the
testimony and opinions of Dr. Voorvaart at the time of trial. It is
therefore,
ORDERED, ADJUDGED, and DECREED that [Paciwest’s]
Objections and Supplemental Objections to Reliability and
Foundation of Opinions of Dr. Frank Voorvaart are SUSTAINED, Dr.
Voorvaart’s opinions are hereby STRICKEN, and that [appellees] are
prohibited from presenting any of the Dr. Voorvaart’s testimony
and opinions at trial.
Although Paciwest contends that the trial court could have based its ruling on
its other objections to Dr. Voorvaart’s testimony, construing the trial court’s
order as a whole to give effect to all provisions, we conclude that the trial
court’s ruling was based solely on its conclusion that damages were no longer
available to appellees after they had already elected to seek, and had obtained,
specific performance as a remedy. See Shanks v. Treadway, 110 S.W.3d 444,
447 (Tex. 2003). Thus, we will confine our analysis to the trial court’s specific
ruling.7
7
… Accordingly, appellees were not required to make an offer of proof to
preserve this argument, as Paciwest contends. See Echols v. Wells, 510
30
The general rule is that damages constitute an alternative remedy
available only when specific performance either is not sought or is not available.
Foust v. Hanson, 612 S.W.2d 251, 253 (Tex. Civ. App.—Beaumont 1981, no
writ); see Heritage Housing Corp. v. Ferguson, 674 S.W.2d 363, 365 (Tex.
App.—Dallas 1984, writ ref’d n.r.e.). But in appropriate circumstances, the
court may order, in addition to specific performance, payment of expenses
incurred by plaintiffs as a result of a defendant’s late performance. Heritage
Housing Corp., 674 S.W.2d at 365–66; Foust, 612 S.W.2d at 253–54. This
compensation is not considered breach of contract damages, but rather
“equalizes any losses occasioned by the delay by offsetting them with money
payments.” Heritage Housing Corp., 674 S.W.2d at 366. Thus, for example,
a purchaser may recover the rental value of property from the time of its
demand for performance and tender of the purchase price. Id.
Here, appellees pled for, among other things, lost rental, increased
construction costs, and an increased interest rate on their third party financing
as a result of Paciwest’s delay in performing its obligations under the contract.
Because post-closing damages such as these are not in the nature of benefit of
the bargain damages, but rather an accounting between the parties pending
S.W.2d 916, 919 (Tex. 1974); Lewis v. Lewis, 853 S.W.2d 850, 852 (Tex.
App.—Houston [14th Dist.] 1993, no writ).
31
performance of the contract, we conclude and hold that the trial court erred by
determining that appellees were precluded from seeking and presenting
evidence as to these types of damages at trial.
We sustain appellees’ sole issue in their cross-appeal.
Conclusion
Having overruled Paciwest’s three issues, we affirm the part of the trial
court’s judgment incorporating its summary judgment rulings in favor of
appellees. Having sustained appellees’ sole issue in their cross-appeal,
however, we reverse that part of the trial court’s judgment barring appellees
from recovering damages attributable to Paciwest’s delay in performing the
contract. We remand that part of the case to the trial court for consideration
of Paciwest’s other objections to the testimony of appellees’ damages expert
and for further proceedings as to those alleged damages consistent with this
opinion.
TERRIE LIVINGSTON
JUSTICE
PANEL: LIVINGSTON, DAUPHINOT, and MCCOY, JJ.
DELIVERED: September 11, 2008
32