Opinion
NO. 03-19-00096-CV
07-24-2020
Les Bergquist and Austin Mac Repair, LLC, as Successor-in-interest to Les Bergquist, Appellants v. Lamar Gateway Baceline Holdings, LLC, Appellee
FROM THE 250TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-16-005498 , THE HONORABLE JAN SOIFER, JUDGE PRESIDING MEMORANDUM OPINION
Les Bergquist and Austin Mac Repair, LLC (collectively, Austin Mac), appeal the trial court's final judgment rendered after a jury trial. The parties' dispute arose from the sale of commercial real property from appellee Lamar Gateway Baceline Holdings, LLC (Baceline), to Austin Mac. As explained below, we will modify the trial court's judgment and affirm in part the judgment as modified, and we will reverse the trial court's judgment as to its award of attorney's fees and costs and remand that issue for redetermination in light of our modification of the trial court's judgment.
BACKGROUND
On November 1, 2012, Austin Mac and Baceline executed a contract (the Contract) for the sale of the following real property (the Property) in Austin: two unimproved shopping-center pad sites located at the southwest intersection of Anderson Lane and North Lamar Boulevard, directly in front of the existing strip mall and between the strip mall and the two major roads. The Property is depicted below as Lots 2A and 3A, and the existing strip mall is the L-shaped building below and to the left of those lots:
Bergquist executed the Contract in his individual capacity and then later conveyed the property to Austin Mac Repair, LLC—a computer business—for which he serves as an officer and director.
Image materials not available for display.
Austin Mac hoped to construct a two-story building on the Property for its business. A large pylon sign that Baceline used as advertising for its shopping-center tenants was already on the Property, and the Property conveyance included the right to build a second pylon sign that had already received necessary permits. The purchase price was $640,000. The Contract contained the following relevant provisions:
The parties disputed at trial whether they intended that the existing pylon sign, depicted below, would convey with sale of the Property:
1.1. Seller shall sell to Buyer, and Buyer shall purchase from Seller, the "Property," which shall consist of all of the following:
Under section 6.1 of the Contract (entitled "Seller's Representations and Warranties"), Baceline represented and warranted, among other things, that "[it] agrees to ensure a proper reciprocal parking and ingress/egress agreement for the subject lots is obtained for the benefit of Buyer." The Contract allowed Austin Mac a sixty-day period to conduct due diligence and inspection of the Property. During that time, Austin Mac hired an architectural firm to conduct a study(a) The Land, together with any and all rights and interests appurtenant thereto . . . ;
(b) All buildings, structures, and improvements on the Land, and Seller's interest in and to any fixtures and equipment affixed or attached thereto, (together with the Land, the "Real Property"); . . .
(e) Seller's interest in and to all governmental licenses, permits, and certificates, if any, applicable to the ownership, use, occupancy or operation of the Real Property, to the extent transferable, including the right to build in accordance with and as allowed by city zoning laws and regulations; and
(f) Seller's permits, approvals, variances, or other transferable rights or approval concerning the Pylon Sign that Seller has represented to Buyer has already been approved.
Image materials not available for display. to determine what could feasibly be built on the Property, including studying city zoning restrictions on height. Austin Mac's architect determined that the City of Austin had a fifty-foot height restriction on the Property, thus allowing a two-story building.
Three days before the end of the due-diligence period, Baceline's counsel prepared and sent to Austin Mac a proposed Reciprocal Easement Agreement (REA), as had been contemplated in the Contract. The REA would provide Baceline and Austin Mac with reciprocal access, utility, and parking easements and contained the following paragraph entitled "Pad Site Building Improvements":
In order to produce an architecturally compatible unified Commercial Center, not fewer than 30 days prior to the commencement of any development, construction, remodeling or reconstruction affecting the exterior façade of any improvements within the Pad Sites or any painting or other exterior surface treatment thereof, the Pad Site Owner shall submit to Baceline detailed plans, specifications, scaled elevations, exterior design concepts, material selection and color for the exterior surfaces of the proposed or existing building or other improvement to be affected thereby. Baceline shall either approve or disapprove the plans and information so submitted within 15 days of the receipt thereof, however, Baceline shall have the right to arbitrarily withhold its approval as to any proposed landscaping or exterior façade which it determines, in its sole and absolute discretion, is not compatible with the Commercial Center. Failure to so approve or disapprove within said 15-day period shall constitute an approval of the plans and information as submitted. Any disapproval shall be set forth in a written notice delivered within such specified time, which notice shall specify with particularity the reason for the disapproval. No approval of any plan by Baceline shall constitute assumption of responsibility by Baceline for the accuracy, sufficiency or propriety of the plan or a representation or warranty that the plan calls for construction of economic improvements or improvements which comply with applicable laws. No improvement shall be constructed and no other work requiring approval hereunder shall be commenced or performed except in substantial accordance with plans and information as so approved by Baceline, and no material deviation shall be made from the approved plans and information until the proposed changes are first approved by Baceline.(Emphases added.) Believing that the Contract gave it the right to construct a two-story building, Austin Mac agreed to sign the REA, and the parties executed the REA at closing on January 15, 2013.
In September 2015 Austin Mac's architect submitted plans to Baceline for approval of a building that was two stories in part. About two weeks later, Baceline rejected the plans primarily because the proposed building was two stories. Austin Mac redesigned the building as one story and submitted those plans to Baceline, but Baceline rejected those plans also, well after the fifteen-day period provided for in the REA. In an email responding to Austin Mac's most recent submission of revised plans, Baceline represented that it would not approve any plans unless Austin Mac gave Baceline an acknowledgment that Baceline still owned the existing pylon sign. After the parties could not resolve their dispute, Austin Mac filed this lawsuit.
In its petition, Austin Mac asserted claims against Baceline for breach of the Contract and REA by its improper restriction of construction on the Property and for fraud in connection with formation of the Contract and REA. Austin Mac sought specific performance of the Contract to require Baceline to convey the existing pylon sign and a declaratory judgment that Austin Mac is allowed to build up to the maximum height permitted by the city. Baceline counterclaimed, seeking a declaratory judgment that the REA is valid and enforceable—granting it the authority to arbitrarily withhold approval of any building that Austin Mac intends to build—and rescission of the Contract or reformation of it to exclude conveyance of the existing pylon sign due to mutual mistake.
The case was tried to a jury in September 2018. After the close of Austin Mac's evidence, the trial court granted Baceline a directed verdict against Austin Mac on all of Austin Mac's causes of action. The court also granted Baceline a directed verdict on its request for declaratory relief related to the REA and against Austin Mac on its same request. The trial court submitted to the jury the sole remaining fact issue of mutual mistake. The jury found that Baceline's conveyance of the existing pylon sign was a mutual mistake.
In its final judgment, the trial court denied any relief to Austin Mac; granted a declaratory judgment to Baceline that the REA grants it the unqualified right to approve or disapprove of any proposed building on the Property; reformed the Contract and deed to exclude from conveyance the existing pylon sign; and granted Baceline a perpetual easement "in, to, over, under, along and across" the Property for the "operation, use, maintenance, connection, repair, removal and replacement" of the existing sign. The trial court also awarded attorney's fees to Baceline of $249,380 for trial; $50,000 in the event of an unsuccessful post-trial motion filed by Austin Mac; and additional contingent fees for appellate proceedings.
DISCUSSION
In several issues, Austin Mac contends that the trial court erred in: (1) "misconstruing" the meaning of the REA as to height and other restrictions, (2) granting a directed verdict against Austin Mac on its claim for breach of contract, (3) granting a directed verdict against Austin Mac on its fraud claim, (4) excluding Austin Mac's expert evidence regarding damages, (5) granting Baceline a perpetual sign easement on the Property, (6) awarding Baceline its costs and attorney's fees because the award was based on relief erroneously awarded, and (7) awarding Baceline $50,000 in contingent attorney's fees in the event that Austin Mac filed an unsuccessful post-trial motion.
Construction of REA
In its first issue, Austin Mac contends that the trial court erred in construing the REA to confer on Baceline the authority to arbitrarily withhold the approval of any proposed building that Austin Mac intends to build on the Property, including for reasons of height. The trial court's judgment declared that the REA
confers on Baceline the unqualified right to approve or disapprove of any proposed building or improvement (including, without limitation, any sign) on the [Property], which Baceline determines, in its sole and absolute discretion, is not compatible with the . . . Shopping Center, including for the reasons of building height, location or square footage[.]We review the trial court's construction of the REA de novo, Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015), and we construe it according to the plain meaning of its language, Dynegy Midstream Servs. v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009), ascertaining the parties' true intentions as expressed in the instrument, Murphy Expl. & Prod. Co.-USA v. Adams, 560 S.W.3d 105, 110 (Tex. 2018), and as understood in light of the facts and circumstances surrounding its execution, Americo Life, Inc. v. Myer, 440 S.W.3d 18, 22 (Tex. 2014).
The Contract and the REA, as separate instruments pertaining to the same transaction, must be read together to harmonize their provisions and to ascertain the parties' intent as expressed collectively therein, even though they were executed at different times. See Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000). Thus, while section 1.1(e) of the Contract conveyed to Austin Mac all of Baceline's rights "to build in accordance with and as allowed by city zoning laws and regulations," those rights were tempered by the unequivocal right granted to Baceline in the REA to preapprove any construction affecting the exterior façade of improvements and to "arbitrarily withhold approval as to any proposed . . . exterior façade which it determines, in its sole and absolute discretion, is not compatible with the Commercial Center." In conjunction with Baceline's right to preapprove any exterior façade, Austin Mac is required by the REA to submit to Baceline "detailed plans, specifications, scaled elevations, exterior design concepts, material selection and color for the exterior surfaces of the proposed or existing building or other improvements to be affected thereby" at least thirty days before beginning "any development, construction, remodeling or reconstruction affecting the exterior façade of any improvements." (Emphases added.)
The parties join issue over the meaning of the word "façade." Baceline contends that it necessarily includes a building's height, among other characteristics, while Austin Mac contends that the term "simply refers to the front of a building and does not imply height, width or any other dimension." When a contract does not define a term or provide otherwise, we interpret its language according to its plain, ordinary, and generally accepted meaning in an effort to give effect to the written expression of the parties' intent, Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 888 (Tex. 2019), and courts often look to dictionaries to discern the meaning of a commonly used term that the contract does not define, In re Davenport, 522 S.W.3d 452, 456-57 (Tex. 2017). The ordinary meaning of the term "façade," as applicable here, is "the face of a building, especially the principal face." See Façade, American Heritage Dictionary of the English Language (5th ed. 2020); see also Façade, Oxford English Dictionary (2d ed. 2020) (defining façade as "the face or front of a building towards a street or other open place, esp. the principal front").
In light of (a) this definition; (b) the requirement that Austin Mac provide to Baceline for preapproval "detailed plans, specifications, [and] scaled elevations" for the "exterior surfaces" of any proposed building before beginning construction; (c) the express purpose of the approval right—"to produce an architecturally compatible unified Commercial Center"; and (d) the fact that the Property is physically located on the same larger site as the existing strip mall and sits between the mall and two major roads, we conclude that Baceline's approval right extends to building characteristics of the façade such as height and width. Such characteristics are implied within the term "façade" because the faces of a building necessarily encompass its external visual appearance. Such conclusion is also supported by the REA's requirement that Austin Mac submit "scaled elevations" of the exterior surfaces for preapproval. An elevation, in the context of construction and architecture, is "a drawing of a building or other object made in projection on a vertical plane, as distinguished from a ground plan." See Elevation, Oxford English Dictionary (2d ed. 2020); see also Elevation, American Heritage Dictionary of the English Language (5th ed. 2020) (defining elevation as, relevantly, "a scale drawing of the side, front, or rear of a structure"). Accordingly, we conclude that the trial court did not err in construing the REA as providing Baceline with the right to approve or disapprove of any proposed improvements on the basis of the façade's height or width.
However, we conclude that the trial court erred in construing the REA to grant Baceline unqualified approval rights of proposed buildings or improvements and to extend those approval rights to the location or square footage of a building or other improvement on the Property. In its plain language, the REA qualifies Baceline's approval rights to any "development, construction, remodeling or reconstruction affecting the exterior façade of any improvements," as also expressed in the qualified right for it to arbitrarily withhold approval "as to any exterior façade . . . ." (Emphases added.) Such language limits Baceline's approval rights to the external measurements and appearance of improvements but cannot reasonably be construed to also include the location on the Property where such improvements are to be constructed or the "square footage" of an improvement, as "square footage" can be measured in different ways. See In re Diamond Beach VP, LP, 506 B.R. 701, 727 (Bankr. S.D. Tex. 2014) (noting ambiguity in expert's testimony about "square footage" because it was not clear whether he was referring to "gross square footage" (which includes hallways, elevators shafts, etc.) or to some other measure, such as "saleable square footage"); Ebby Halliday Real Estate, Inc. v. Dugas, No. 05-17-01028-CV, 2019 WL 1529174, at *2-3 (Tex. App.—Dallas Apr. 9, 2019, no pet.) (mem. op.) (noting experts' testimony that "square footage" is understood in real estate industry to mean "livable" square feet); Sunrise Helicopters, Inc. v. Northwest Airport Mgmt., Inc., No. 14-99-00274-CV, 2001 WL 253591, at *4 (Tex. App.—Houston [14th Dist.] Mar. 15, 2001, pet. denied) (not designated for publication) (noting difference between "gross" square footage and "usable" square footage). Therefore, we hold that the trial court erred in construing the REA to grant Baceline the "unqualified" right to approve or disapprove of any proposed building or improvement that Baceline determines is not "compatible" with the shopping center, including for the reasons of "location" and "square footage."
Breach of contract
In its second issue, Austin Mac contends that the trial court erred in granting Baceline a directed verdict against it on its claims that Baceline breached the Contract and the REA. A directed verdict is warranted when the evidence is such that no other verdict can be reached, and the moving party is entitled to judgment as a matter of law. Byrd v. Delasancha, 195 S.W.3d 834, 836 (Tex. App.—Dallas 2006, no pet.). In reviewing a directed verdict, the appellate court follows a legal-sufficiency standard of review. City of Keller v. Wilson, 168 S.W.3d 802, 827-28 (Tex. 2005). Only if the plaintiff produced more than a scintilla of evidence to raise a fact issue on the question presented can the appellate court conclude that the trial court erred in granting the directed verdict. See Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 233 (Tex. 2004).
Austin Mac specifically contends that there was more than a scintilla of evidence at trial to show that Baceline breached the Contract and REA by (1) rejecting its initial two-story building design, (2) failing to timely approve or disapprove of its revised building plans, and (3) finally disapproving of its revised building plans on grounds not permitted by the Contract or REA (i.e., representing that Austin Mac's plans would not be approved until it admitted that Baceline still owned the existing sign and granted Baceline an easement to access the sign). It also asserts that there was more than a scintilla of evidence that it was damaged by Baceline's breaches.
We have already determined that Baceline was entitled to disapprove of Austin Mac's building design based on the façade's height. Thus, Baceline's "rejection" of the two-story design was not a breach, as a matter of law. As to Baceline's alleged failure to "timely" approve or disapprove of Austin Mac's revised plans, the REA provided its own consequence for such failure: "Failure to so approve or disapprove within said 15-day period shall constitute an approval of the plans and information as submitted." Thus, Baceline's alleged failure to provide Austin Mac a favorable or unfavorable response within fifteen days could not have constituted a breach but, rather, would merely have triggered the automatic-approval provision, of which the record does not reflect Austin Mac availed itself by beginning to build. See Buckner v. Lakes of Somerset Homeowners Ass'n, Inc., 133 S.W.3d 294, 296-97 (Tex. App.—Fort Worth 2004, pet. denied) (construing similar language in deed restrictions—providing that, if association failed to "approve or disapprove" plans within thirty days, "approval will not be required"—to constitute automatic approval of plans when association did not timely approve or disapprove plans). The same analysis applies to Baceline's alleged late disapproval of the revised plans on grounds not allowed by the REA. When Baceline allegedly failed to timely approve or disapprove of Austin Mac's revised plans, the automatic-approval provision was triggered and, thus, any reason Baceline supplied thereafter is irrelevant and could not constitute a breach. Accordingly, we conclude that the trial court properly directed a verdict in Baceline's favor on Austin Mac's breach-of-contract claims because there was no evidence of a breach by Baceline.
Fraud claims
In its third issue, Austin Mac contends that the trial court erred in granting a directed verdict in favor of Baceline against it on its fraudulent-inducement and statutory-fraud claims. Its argument on this point is intertwined with its contention that the Contract allowed it to build a two-story building unburdened by Baceline's approval rights, which argument we have already rejected. Essentially, Austin Mac contends that the Contract itself—specifically paragraph 1.1.(e) conveying Baceline's right to "build in accordance with and as allowed by city zoning laws and regulations"—constituted a misrepresentation (a "false promise") by Baceline about how tall a building it would allow. See Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998) ("A promise of future performance constitutes an actionable misrepresentation if the promise was made with no intention of performing at the time it was made."). This "false promise," Austin Mac continues, suffices as legally sufficient evidence of the material-misrepresentation element of a fraud claim. See Tex. Bus. & Comm. Code § 27.01 (listing elements of statutory fraud); Anderson v. Durant, 550 S.W.3d 605, 614 (Tex. 2018) (listing elements of fraudulent inducement).
We disagree. The Contract's reference to and conveyance of any and all rights that Baceline had to build on the Property in compliance with applicable zoning laws and regulations was not a material misrepresentation. Even if Baceline intended at the time of the Contract's execution to limit the height of Austin Mac's buildings to one story (via the later-executed REA), such intention does not render its representation that it was conveying any rights it had to build on the Property under applicable laws and regulations fraudulent because there is no evidence that Baceline did not intend to convey those rights (and all the evidence demonstrated that it did, in fact, convey those rights). See Formosa Plastics, 960 S.W.2d at 48 (noting that to prove fraudulent inducement, plaintiff must present evidence that defendant made representation with intent to deceive and with "no intention of performing as represented"). Put simply, there was no evidence of any misrepresentation, and accordingly the trial court properly directed a verdict in Baceline's favor on the fraud claims. We overrule Austin Mac's third issue.
Exclusion of expert testimony on damages
In its fourth issue, Austin Mac contends that the trial court erred in excluding the testimony of its damages expert, Bruce Evans. Austin Mac contends that its excluded damages testimony was relevant to both its breach-of-contract and fraud claims. However, we need not reach this issue because we have determined that the trial court did not err in concluding that there was legally insufficient evidence of a fraudulent misrepresentation or any contractual breach by Baceline. Thus the trial court's error, if any, in excluding Evans's testimony was harmless because Austin Mac's causes of action failed because there was no legally sufficient evidence to support other elements of those causes of action. See Waffle House, Inc. v. Williams, 313 S.W.3d 796, 812 (Tex. 2010) (noting that exclusion of evidence is reversible error only if complaining party shows that trial court committed error that probably caused rendition of improper judgment). We overrule Austin Mac's fourth issue.
Grant of perpetual sign easement
In its fifth issue, Austin Mac contends that the trial court erred in granting Baceline a perpetual easement on the Property to access and maintain the existing sign because Baceline failed to plead for such relief and the issue was not tried by consent. Baceline responds that the perpetual easement was equitable relief that directly flowed from its request for reformation of the Contract due to mutual mistake and that the trial court acted within its equitable power in granting it. See Gause v. Gause, 430 S.W.2d 409, 413 (Tex. App.—Austin 1968, no writ) ("[A] general prayer [for relief] will authorize judgment for any relief the court has jurisdiction to grant, provided the proof under the allegations justifies the relief and the relief is consistent with the theory of recovery stated in the pleadings.").
We agree with Baceline. In its counterclaim, Baceline asserted a cause of action for rescission or, alternatively, reformation of the Contract to exclude conveyance of the existing pylon sign due to mutual mistake. Baceline prayed specifically for Contract rescission or reformation as well as such general equitable or legal relief to which it is entitled. The grant of a perpetual easement was necessary to effectuate the trial court's judgment reforming the Contract to exclude conveyance of the sign, and the trial court had the power to order such equitable relief. See id. We accordingly overrule Austin Mac's fifth issue.
Attorney's fees
In its sixth issue, Austin Mac challenges the trial court's award to Baceline of its attorney's fees, costs, and expert fees because "the award was based on relief erroneously granted by the trial court." In its judgment, the trial court determined that Baceline was entitled to attorney's fees both under the Contract and under section 37.009 of the Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code § 37.009 ("court may award costs and reasonable and necessary attorney's fees as are equitable and just" in declaratory-judgment proceedings). Because we have determined that the trial court erred in making an overly broad declaration about Baceline's approval rights under the REA, we conclude that Austin Mac is entitled to have the issue of attorney's fees and costs remanded to the trial court for reconsideration of whether the award is still "equitable and just" under section 37.009. See WaiWai, LLC v. Alvarado, No. 03-13-00540-CV, 2014 WL 6844934, at *5 (Tex. App.—Austin Nov. 26, 2014, no pet.) (mem. op.) (noting that when declaratory judgment is reversed on appeal, trial court's award of attorney's fees and costs may no longer be equitable and just and, therefore, appellate court may remand to trial court for reconsideration of attorney's fees and costs). We sustain Austin Mac's sixth issue.
In its final issue, Austin Mac contends that the trial court erred in awarding Baceline contingent attorney's fees of $50,000 in the event that Austin Mac filed an unsuccessful post-trial motion because "such award was neither reasonable nor necessary, and constituted a violation of Austin Mac's due process rights." In its appellee's brief, Baceline submits that "it is willing to agree to reform the Final Judgment to delete this portion of the attorneys' fees only." In accordance with Baceline's concession, we sustain Austin Mac's seventh issue.
CONCLUSION
We modify the trial court's final judgment to delete the following sentence: "In the event a Motion for New Trial, Motion to Disregard Jury Findings, and/or Motion for Judgment Notwithstanding the Verdict is filed but denied, Baceline shall recover from Plaintiffs attorney's fees in the additional amount of $50,000." We further modify the judgment as follows, with omissions indicated by strikethrough and insertions indicated in italics:
The Court declares that the REA is valid and enforceable and confers on Baceline the unqualified right to approve or disapprove of the exterior façades of any proposed building or improvement (including, without limitation, any sign) on the Pad Sites, which Baceline determines, in its sole and absolute discretion, is not compatible with the Lamar Gateway Shopping Center, including for the reasons of building height or widthWe affirm the judgment, as modified, in part. However, due to our determination that the trial court erred in granting overly broad declaratory relief to Baceline, we reverse its award of attorney's fees and costs and remand this cause for reconsideration of the award of attorney's fees and costs in light of our modification, in part, of the trial court's judgment., location or square footage(the 'Pad Sites Approval Right').
/s/_________
Thomas J. Baker, Justice Before Justices Goodwin, Baker, and Kelly Modified and, as Modified, Affirmed in Part; Reversed and Remanded in Part Filed: July 24, 2020