Rajendrakumar Gandhi v. Nainesh Gandhi and Chandan Hospitality, Llc. ( 2011 )

NUMBER 13-10-207-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
RAJENDRAKUMAR GHANDI, Appellant,
v.
NAINESH GANDHI AND CHANDAN HOSPITALITY, LLC, Appellees.
On appeal from the 105th District Court
of Kleberg County, Texas.
MEMORANDUM OPINION
Before Justices Benavides, Vela, and Perkes
Memorandum Opinion by Justice Vela
This is an appeal from a partial summary judgment granted in favor of Nainesh
Gandhi and Chandan Hospitality, LLC (―Nainesh‖), appellees, and against appellant,
Rajendrakumar Gandhi (―Rajendrakumar‖) in a suit alleging a cause of action for specific
performance to purchase and sell a hotel in accordance with an executed contract.
Rajendrakumar also pleaded a cause of action for fraud in the alternative. The trial court
severed the summary judgment from Nainesh’s counterclaim for entitlement to the
deposited earnest money and a claim for wrongful filing of a lis pendens, making the
summary judgment final for purposes of appeal. Rajendrakumar raises three issues,
complaining that the trial court erred in granting summary judgment. We reverse and
remand.
l. BACKGROUND
The petition, filed by Rajendrakumar against Nainesh, urged a cause of action for
the specific performance of a contract to purchase and sell a hotel, or, alternatively, for
fraud. Rajendrakumar owns a hotel in Kingsville, Texas which is immediately adjacent to
the disputed property, the Econo Lodge Hotel (―hotel‖), owned by Nainesh through his
company Chandan Hospitality, LLC. In 2008, Rajendrakumar and Nainesh entered into
negotiations to purchase and sell the hotel. After both parties had agreed to the sales
price of $830,000, Rajendrakumar produced a form contract entitled ―Earnest Money
Contract,‖ which Rajendrakumar’s business partner and wife presented to Nainesh.
Upon Nainesh’s acceptance, both parties executed the contract on May 7, 2008.
Paragraph four of the contract provides that the contract is contingent on financing, which
must be obtained within ninety days from the date of signing. Paragraph ten, on the
other hand, states that the closing shall take place no later than seventy-five days from
the date of signing. We quote the following part of the contract as germane to this
opinion:
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4. FINANCING: This Contract is contingent on the approval of a
permanent loan for Buyer by a third party. Purchaser shall have Ninety
(90) days from the date of this contract in order to obtain financing.
10. POSSESSION AND CLOSING: The settlement or closing of the sale
shall be on or before seventy-five days from the date hereof in the offices of
Stewart Title Company of Corpus Christi, Texas.
14. DEFAULT: Upon failure of buyer to comply herewith, Seller may
terminate this Contract and retain the Earnest Money as liquidated
damages. Upon Seller’s failure to comply herewith, Buyer can enforce
specific performance or may terminate this Contract, upon which event all
Earnest Money will be returned to Buyer.
The contract further specified that $10,000 would be escrowed. Rajendrakumar
subsequently furnished Nainesh with an earnest money check, which was later endorsed
to Kleberg County Title Company, a company different from that specified in paragraph
ten of the earnest money contract. On August 4, 2008, the eighty-ninth day after signing,
Rajendrakumar was ready to close on the sale. Nainesh, citing the seventy-five day
closing provision in paragraph ten of the contract, refused to sell the property. On
September 26, 2008, Rajendrakumar subsequently filed suit seeking specific
performance for the purchase and sale of the hotel and for additional economic and
exemplary damages. Rajendrakumar also pleaded, in the alternative, for a finding of
fraud. Nainesh answered the lawsuit and counterclaimed for the $10,000 deposited as
earnest money and for wrongful filing of a lis pendens.
On June 3, 2009, Nainesh moved for partial summary judgment. The motion
detailed the facts and mentioned the cause of action pleaded—specific performance of
the earnest money contract for the purchase and sale of the hotel. The motion stated
that Rajendrakumar should take nothing by his lawsuit because he breached the contract
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by failing to close on the sale within seventy-five days as stated in the contract. In
support of the assertion that the seventy-five day provision should govern, Nainesh
alleged that the contract should be interpreted by either: (a) construing the contract
against the plaintiff since he authored the contract and was the one with the most control
over the stipulated verbiage; or alternatively by (b) finding that the contract was not
binding because it either lacked mutual assent or because it lacked the necessary
specificity; or by (c) holding that the express language in the contract should be given
greater credence and overrule any general inferences to the contrary. The motion
further sought recovery, as a counterclaim, of $10,000 for the earnest money deposit and
requested a cancellation of the lis pendens. Nainesh alleged that because the contract
should be construed against the plaintiff, that the earnest money, in accordance with
paragraph fourteen of the contract, entitled him to terminate the contract and retain the
earnest money. The motion was supported by the affidavit of Nainesh.
In response, Rajendrakumar argued that the motion was improper because the
defendant failed to conclusively establish, as a matter of law, that he had breached the
contract. Rajendrakumar also urged that the affidavit of Nainesh was improper summary
judgment evidence because it was conclusory. Rajendrakumar further argued that the
motion for summary judgment was improper because it was premature as material facts
remained disputed and such facts should have been resolved prior to any such
determination made on summary judgment.
Rajendrakumar contends that the determination regarding whether a mutual or
unilateral mistake occurred is a question of fact. He also contends that because there
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was no clause in the contract stating that time was of the essence, the summary judgment
should not stand. Rajendrakumar argues that after the closing date lapsed, he had a
reasonable time to close on the sale and such determination of reasonableness is a
question of fact. The trial court granted Nainesh’s motion for partial summary judgment.
Rajendrakumar subsequently filed this appeal.
II. STANDARD OF REVIEW
In a summary judgment case, the movant must show 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); Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215–216 (Tex.
2003); M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000); Lear
Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991). The movant has the burden of
proof. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). A
defendant who conclusively negates at least one essential element of the plaintiff’s cause
of action, or who conclusively establishes all of the elements of an affirmative defense, is
entitled to summary judgment. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995);
Klentzman v. Brady, 312 S.W.3d 886, 896–897 (Tex. App.—Houston [1st Dist.] 2009, no
pet.). The burden to raise a fact issue shifts to the non-movant only after the movant has
established that it is entitled to summary judgment as a matter of law. Casso v. Brand,
776 S.W.2d 551, 556 (Tex. 1989).
We review a traditional motion for summary judgment de novo. Mid-Century Ins.
Co. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007); Valence Oper. Co. v. Dorsett, 164
S.W.3d 656, 661 (Tex. 2005); Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.
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1994). We consider the evidence in the light most favorable to the non-movant and
resolve all doubts in the non-movant’s favor. W. Invs., Inc. v. Urena, 162 S.W.3d 547,
550 (Tex. 2005). Issues not expressly presented to the trial court by written motion,
answer or other response shall not be considered on appeal as a ground for reversal.
See TEX. R. CIV. P. 166a(c); City of Houston, 589 S.W.2d at 677.
III. ANALYSIS
In issue two, Rajendrakumar contends that the trial court erred in granting
summary judgment because a factual issue remained disputed that precluded a
determination made on summary judgment. Rajendrakumar alleged three arguments
that potentially raised a fact issue: (1) whether or not the contract was entered into by
mutual mistake; (2) whether or not there was a unilateral mistake in which Nainesh knew
about and remained silent; and/or (3) whether or not Rajendrakumar performed under the
contract in a ―reasonable‖ time, since the contract did not stipulate that time was of the
essence.
Rajendrakumar first argues mutual mistake. The law presumes that a written
agreement correctly embodies the parties' intentions, and is an accurate expression of
the agreement the parties reached in prior oral negotiations. See Estes v. Republic Nat'l
Bank of Dallas, 462 S.W.2d 273, 275 (Tex. 1970). A mutual mistake of fact occurs when
both parties to a transaction have a belief that a present fact exists, that actually does not
exist, and that fact is material to the transaction. Valero Energy Corp. v. Teco Pipeline
Co., 2 S.W.3d 576, 588–89 (Tex. App.—Houston [14th Dist.] 1999, no pet). In order to
establish the defense of mutual mistake, the defendant must raise a fact issue showing
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that the contracting parties were acting under the same misunderstanding of the same
material fact. Johnson v. Conner, 260 S.W.3d 575, 581 (Tex. App.—Tyler 2008, no pet.)
(citing N. Natural Gas v. Chisos Joint Venture I, 142 S.W.3d 447, 456 (Tex. App.—El
Paso 2004, no pet.)). Parol evidence is admissible to show that the writing, because of a
mutual mistake, incorrectly reflects the true agreement. However, the affirmative
defense is unavailable unless the party claiming mistake presents "clear, exact, and
satisfactory evidence." Estes v. Republic Nat'l Bank of Dallas, 462 S.W.2d at 275. The
question of mutual mistake is determined not by self-serving subjective statements of the
parties’ intent, but rather solely by objective circumstances surrounding execution of the
contract. Williams v. Blash, 789 S.W.2d 261, 265 (Tex. 1990). The party asserting a
mistake must prove what the true agreement was, but his case is not made by proof that
there was an agreement which is at variance with the writing. He must go further and
establish the fact that the terms or provisions of the writing, which differ from the true
agreement made, were placed in the instrument by mutual mistake. Estes v. Republic
Nat'l Bank of Dallas, 462 S.W.2d at 275; see also Clemmens v. Kennedy, 68 S.W.2d 32l,
324 (Tex. Civ. App.—Texarkana 1934, writ ref'd).
As summary judgment evidence, Rajendrakumar filed his own affidavit in which
he averred that he and Nainesh discussed financing for the purchase and discussed that
he would have ninety days to organize financing to purchase and close the deal. They
agreed to use Kleberg County Title Company to escrow the earnest money funds and
handle the closing. Rajendrakumar stated that at that time they again discussed the
closing date that would occur within ninety days. Rajendrakumar also submitted the
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affidavit of Jean Stewart, from the Kleberg County Title Company, as summary judgment
evidence. She averred that on May 29, 2008, Kleberg County Title Company mailed a
commitment for title insurance to Nainesh for his review. A closing date was
subsequently set by the parties for August 4, 2008 to occur at Kleberg County Title.
Rajendrakumar averred, and it is uncontroverted, that the parties agreed to use Kleberg
County Title Company to escrow the earnest money funds and handle the closing. It is
uncontroverted that they deposited $10,000 with Kleberg County Title. He also stated
that on July 22, 2009, one day past the seventy-five day deadline that Nainesh now
urges, a professional appraiser retained by ValueBank met with Rajendrakumar and
Nainesh to inspect the property. A draft settlement was sent to the parties before the
closing date, but Nainesh did not show up for the closing and did not notify the title
company that he did not intend for the closing to occur on August 4, 2008.
Francis Stokes, senior vice president for ValueBank Texas, averred in an
affidavit that it was his understanding that Rajendrakumar had ninety days to secure
financing for his purchase. ValueBank Texas approved the financing request and was
ready to fund the transaction.
Rajendrakumar alleged that the seventy-five day provision expressed in the
contract resulted from either a mutual mistake of fact or from a unilateral mistake of which
Nainesh was aware and purposefully remained silent. Rajendrakumar claims the
understanding and intent of the parties create a fact issue which was impermissibly
determined on summary judgment. We agree.
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Nainesh’s summary judgment evidence controverts Rajendrakumar’s,
suggesting that he relied on the seventy-five day provision in the contract and was ready
to sell at that time. He averred that he subsequently decided not to sell the hotel. There
is no evidence that Nainesh took any action to see that that the closing occurred within
seventy-five days.
Although Rajendrakumar was the author of the contract, it is clear from the
summary judgment evidence submitted that both parties, as well as all individuals who
prepared affidavits and were involved in the transaction, mutually believed that the
closing would occur within ninety days, and not seventy-five days as Nainesh now
argues. It would be totally inconsistent for the parties to agree to close at Kleberg
County Title, escrow funds there, and allow an appraiser to look at the property after
seventy-five days had passed, if, indeed, Rajendrakumar had to close the deal within
seventy-five days at a title company in Corpus Christi. It would also make no sense for
Rajendrakumar to have ninety days to obtain financing for the property, yet be required to
close within seventy-five days.
The summary judgment evidence is clear that both parties acted upon a belief that
closing would occur within ninety days. The evidence submitted by Rajendrakumar is
clear and exact. We hold that the summary judgment evidence creates a fact issue with
respect to mutual mistake. Since there remains a genuine issue as to a material fact, a
determination made on summary judgment was improper. TEX. R. CIV. P. 166a(c). We
sustain issue two and hold that the trial court improperly granted summary judgment.
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Rajendrakumar alleges in issue three that the notice of lis pendens was not
improper and thus the trial court erred in the cancellation of such notice. A party is
eligible to file a notice of lis pendens when they are a party to an action involving the title
of real property and seeking affirmative relief. TEX. PROP. CODE ANN. § 12.007(a) (West
Supp. 2010). Because the trial court determined that Rajendrakumar take nothing by his
lawsuit, the lis pendens was cancelled. However, because the summary judgment is
reversed and Rajendrakumar is seeking affirmative relief by his pleading for specific
performance, the notice of lis pendens was not improper. We sustain issue three.
IV. CONCLUSION
We conclude that the trial court erred by granting partial summary judgment.
Having addressed all dispositive issues, the judgment of the trial court is reversed and
remanded.
ROSE VELA
Justice
Delivered and filed the
4th day of August, 2011.
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