Court Opinion

ID: 2983796
Source: CourtListenerOpinion
Date Created: 2015-09-22 21:49:46.054942+00
Date Added: 2024-06-11T11:44:35.157677
License: Public Domain

Reversed and Remanded and Opinion filed June 10, 2014.

                                     In The

                    Fourteenth Court of Appeals

                              NO. 14-13-00251-CV

              ADVANCED PERSONAL CARE, LLC, Appellant

                                        V.

  JACQUELYN CHURCHILL, EVERETT CHURCHILL AND JED, INC.,
                        Appellees

                   On Appeal from the 269th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2011-04324

                                OPINION

      This is an appeal from a judgment after a nonjury trial. The lawsuit began as
a dispute about a buyer’s purchase of leased property and ended as a claim for
breach of a settlement agreement. The settlement agreement provided that as
consideration for the parties’ release of their claims, the sellers would sell the
property to the buyer at a reduced rate. After the buyer refused to complete the
sale, each side alleged that the other breached the settlement agreement. The trial
court found that the buyer breached the agreement, and enforced the release while
refusing to enforce the property sale. We reverse and remand the case for the trial
court to determine whether the sellers elected to treat the settlement agreement as
continuing or as terminated.1

                     I. FACTUAL AND PROCEDURAL BACKGROUND

       Appellees Jacquelyn and Everett Churchill own a residence in Houston in
which they operated an assisted-living facility through their company, appellee
JED, Inc. (collectively, “the Sellers”). In December 2009, they entered into a lease
agreement with option to purchase (“the Option Contract”) with appellant
Advanced Personal Care, LLC (“the Buyer”). The parties agreed that if the Buyer
exercised the option, then it could purchase the residence and the operations
(collectively, “the Property”) for $200,000.

       During the tenancy, the parties’ relationship became strained. The Buyer
exercised the option to purchase, but the Sellers served the Buyer with a notice to
vacate the premises, so the Buyer sued for damages and injunctive relief, and the
Sellers asserted counter-claims.           The parties agreed that while the case was
pending, payments that would be due under the Option Contract would be paid into
the registry of the court.

       The parties next agreed to settle their dispute. As part of the consideration
for releasing their claims against one another, the Sellers would sell the Property to
the Buyer for $170,000. The Sellers were responsible to have all documents
prepared for transferring the Property, and the Buyer was to receive all funds that
were deposited in the court’s registry in connection with this case. To effectuate
the settlement, the parties executed two documents with the same effective date: a
       1
          If the settlement agreement is continuing, the seller must sell the property to the buyer;
if the agreement is terminated, the parties revert back to their original positions in the lawsuit.

                                                 2
“Full and Final Mutual Compromise and Release” (“the Release”) and a “Real
Estate Sales Contract” (“the Sales Contract”).                The Sales Contract contained
language identifying the parties’ sole and exclusive remedies for a default before
closing. If one side defaulted before closing, the other side was permitted to
terminate the Release and the Sales Contract and the parties would resume their
litigation against one another. If the non-defaulting party already had incurred out-
of-pocket expenses to document the transactions, then that party also could recover
those expenses and attorney’s fees. If the Sellers defaulted, the Buyer had the
additional option to enforce specific performance of the sale.

       The Buyer asserted that the Sellers breached the Sales Contract and refused
to proceed with the sale. Both sides then amended their pleadings. The Sellers
alleged that the Buyer breached the agreement, and Buyer asserted that it properly
terminated the agreement due to the Sellers’ default.2

       The parties agreed to bifurcated proceedings in which they would first try
their respective claims for breach of the Sales Contract without a jury. If the trial
court concluded that the Buyer properly terminated the contract so that the Release
was no longer binding, then the parties would try their claims under the Option
Contract before a jury. The day after the first phase of the trial, the trial court
issued findings of fact and conclusions of law in which it held that (a) only the
Buyer materially breached the Release and the Sales Contract, (b) the Buyer had
released its claims against the Sellers, and (c) it was unnecessary to proceed with
the second phase of trial. After the parties filed opposing motions for release of
the registry funds, the trial court signed two orders releasing money to each side.3

       2
         The Sellers also added a third-party claim against the Buyer’s owner, but judgment was
not rendered against him and he has not appealed.
       3
           The two orders contain different amounts, but neither is identified as an amended order.

                                                  3
In the final judgment, the trial court ruled that the Buyer was to take nothing on its
claims against the Sellers, and awarded the Sellers nearly $39,000 in attorney’s
fees, but no other relief.    The Buyer appealed, but the Sellers did not file a
responsive brief.

                             II. ELECTION OF REMEDIES

      In its dispositive issue, the Buyer argues that the trial court erred as a matter
of law in failing to order specific performance of the Sales Contract because (a) the
Release and the Sales Contract are part of a single Settlement Agreement; (b) upon
the Buyer’s material breach of that agreement, the Sellers were required to elect
whether to terminate the entire agreement or to treat the entire agreement as
continuing; and (c) because the Sellers chose to enforce the Release portion of the
Settlement Agreement, they elected to treat the entire agreement as continuing,
thereby waiving the Buyer’s breach as an excuse for their own nonperformance of
the Sales Contract. We agree with the first two points. We agree that there are not
two independent contracts; there is one Settlement Agreement. We further agree
that under the common-law principle of election of remedies, the Sellers were
required to elect whether to treat the Settlement Agreement as continuing or as
terminated.

      We do not agree with the third point, that the record conclusively establishes
that the Seller elected to treat the agreement as continuing. Instead, the record
shows that the trial court based its ruling solely on language in the Sales Contract
that if the Sellers breached the contract, the Buyer could elect to enforce the sale or
to terminate “both” the Release and the Sales Contract. Because the trial court
found that the Buyer, not the Sellers, breached the Sales Contract, it held that the
Buyer could neither terminate the Release nor enforce the sale. We cannot make
the missing finding concerning the Sellers’ election, because on this record, we

                                          4
cannot say that it has been conclusively established that the Sellers elected to treat
the Settlement Agreement as continuing or as terminated. We instead reverse and
remand without reaching the Buyer’s remaining issues.

A.    The effective dates, common purpose, and terms of the Release and the
      Sales Contract establish that they form a single, indivisible Settlement
      Agreement.
      The law of contracts applies to settlement agreements and releases. See
Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 178 (Tex. 1997);
Hernandez v. LaBella, No. 14-08-00327-CV, 2010 WL 431253, at *3 (Tex.
App.—Houston [14th Dist.] Feb. 9, 2010, no pet.) (mem. op.). When we interpret
a written contract, “our primary concern is to ascertain and give effect to the intent
of the parties as expressed in the contract.” In re Serv. Corp. Int’l, 355 S.W.3d
655, 661 (Tex. 2011) (orig. proceeding) (per curiam). To understand that intent,
we examine the contract as a whole in light of the circumstances present when the
contract was entered. Anglo-Dutch Petroleum Int’l, Inc. v. Greenberg Peden, P.C.,
352 S.W.3d 445, 451 (Tex. 2011). In this examination, “separate documents
executed at the same time, for the same purpose, and in the course of the same
transaction are to be construed together.” Jim Walter Homes, Inc. v. Schuenemann,
668 S.W.2d 324, 327 (Tex. 1984); Nat’l City Bank of Ind. v. Ortiz, 401 S.W.3d
867, 884 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (op. on reh’g). In
appropriate circumstances, “a court may determine, as a matter of law, that
multiple documents comprise a single written contract” and “may construe all the
documents as if they were part of a single, unified instrument.” Fort Worth Indep.
Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000). Where, as here,
a contract is unambiguous, its construction is a question of law that we review de
novo. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011).

      We agree that the Release and the Sales Contract are part of a single

                                          5
agreement. The Sellers executed both documents on the same day, and the Buyer
executed them on successive days, but the effective date of both documents was
October 25, 2011. Both documents were intended to resolve the parties’ disputes
concerning the Property, and the Property sale is expressly identified as the
consideration for the Release. The documents also refer to each other and to the
litigation, and treat the Release and all of the documents effectuating the sale as a
single agreement, as the following language from the two documents shows:4

                 Full and Final Mutual Compromise and Release

      Consideration.
      A.     The Note/Transfer Documentation: The parties hereto agree to
      the following terms for financing the purchase . . . [and] transfer of the
      Property:
      (i)   A Note will be executed by [the Buyer], payable to the [Sellers]
      in the amount of $170,000.00, financed at the rate of seven percent
      (7%) per annum amortized over twenty-five (25) years.
                                          ....
      (v) The [Sellers] will arrange for the preparation of all
      documentation necessary to document the transfer of title and
      Note. . . .
                                          ....
      D.     Closing Date to be on or before October 31, 2011: The
      parties hereto will close on this transaction on or before October 31,
      2011. The parties hereto recognize that time is of the essence as this
      matter is set for trial in December, 2011 and much discovery remains
      to be completed to ready this matter for trial.
                                          ....
      Entire Agreement and Further Assurances.
      It is further understood and agreed that this Release and all
      documentation required and/or executed in furtherance of the goals of
      4
         To increase readability, we have standardized capitalization and applied the same
formatting to both documents.

                                            6
this Settlement Agreement & Mutual Release contains the entire
agreement between the parties . . . . [The Buyer] and the [Sellers]
agree to execute any and all documents necessary to effectuate the
understandings, assignments and agreement contained in [the
“Consideration” section] above.

                     Real Estate Sales Contract
       Seller’s Disclosure at Time of Closing . . . Sellers have no
personal knowledge as to the current condition of the Property other
than the plumbing defects which have been the subject of litigation in
Cause No. 2011-04324. Buyers have agreed to repair these defects
using the funds which are currently being held in the Harris County
Court Registry.
                                 ....
       Buyer’s Default; Remedies before Closing. If Buyer fails to
perform any of its obligations under this contract (“Buyer’s Default”),
Seller may terminate this contract as well as the Full and Final Mutual
Compromise and Release signed by the Sellers on October 6, 2011
[sic] by giving notice to Buyer on or before Closing. The parties will
then be permitted to reopen discovery and proceed to trial in Cause
No. 2011-04324 pending in Harris County, Texas. If Buyer’s Default
occurs after Seller has incurred costs to perform its obligations under
this contract and Seller terminates this contract in accordance with the
first sentence, Buyer will also pay to Seller as liquidated damages
Seller’s actual out-of-pocket expenses incurred to document the
Settlement Agreement and transaction documents related hereto
(“Buyer’s [sic] Expenses”), within ten days after Buyer’s receipt of an
invoice from Seller stating the amount of Seller’s Expenses
accompanied by reasonable evidence of Seller’s Expenses and
attorney[’]s fees. The foregoing constitutes Seller’s sole and
exclusive remedies for a default by Buyer before closing.
                                 ....
      Entire Agreement. This contract, its exhibits, the Full and Final
Mutual Compromise and Release signed by the Sellers on October 6,
2011 [sic] and any Closing Documents delivered at closing constitute
the entire agreement of the parties concerning the sale of the Property
by Seller to Buyer.

                                   7
                                        ....
             “As Is, Where Is” . . . The purchase price was bargained on the
      basis of an “as is, where is” transaction and reflects the agreement of
      the parties that there are no representations, disclosures, or express or
      implied warranties, except those in this contract, the Full and Final
      Mutual Compromise and Release signed October 6, 2011 [sic] and the
      closing documents.
            Buyer is not relying on any representations, disclosures, or
      express or implied warranties other than those expressly contained in
      this contract, the Full and Final Mutual Compromise and Release
      signed October 6, 2011 [sic] and the Closing Documents.
            Schedule of Debt . . . If the Seller fails to make timely payments
      to the lienholder, the lienholder may attempt to collect the debt by
      foreclosing on the lien and selling the Property at a foreclosure sale.
      Such failure by Seller constitutes a breach of this Sales Contract, the
      Full and Final Mutual Compromise and Release signed by the Sellers
      on October 6, 2011 [sic] and all closing documents.
Based on the foregoing, we conclude as a matter of law that the Release and the
Sales Contract are two parts of a single Settlement Agreement. See McDowell v.
Bier, No. 2-09-231-CV, 2010 WL 1427244, at *1, *4 (Tex. App.—Fort Worth
Apr. 8, 2010, no pet.) (mem. op.) (holding that a release and a sales contract must
be construed together because they were executed contemporaneously, they both
concerned the release of the parties’ claims against each other, and the release was
conditioned on the sales contract); Giles v. Corbett, 293 S.W. 180, 182 (Tex. Civ.
App.—Galveston 1927, no writ) (explaining that a check and a letter received in
exchange for a release, “all being a part of the same transaction and having for
their purpose to effect a compromise and settlement, . . . are ‘in the eye of the law
one instrument and will be read and construed together as if they were as much one
in form as they are in substance’”).

B.    The Sellers were required to elect whether to treat the Settlement
      Agreement as continuing or as terminated.
      Breach of contract can be waived. Ramex Constr. Co. v. Tamcon Servs. Inc.,
                                         8
29 S.W.3d 135, 137 (Tex. App.—Houston [14th Dist.] 2000, no pet.) (citing
Chilton Ins. Co. v. Pate & Pate Enters., Inc., 930 S.W.2d 877, 888 (Tex. App.—
San Antonio 1996, writ denied) (sub. op.)). The election of whether to waive the
breach ordinarily is made when the breach occurs. See Hanks v. GAB Bus. Servs.,
Inc., 644 S.W.2d 707, 709 (Tex. 1982). Thus, upon the Buyer’s breach of the
Settlement Agreement, the Sellers had a choice. If they were to treat the contract
as terminated, then the breach would excuse them from any further performance.
See Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex.
2004) (per curiam). If the Sellers instead were to treat the contract as continuing,
then they would waive the Buyer’s breach as an excuse for their own failure to
perform the Property sale. See, e.g., Long Trusts v. Griffin, 222 S.W.3d 412, 415–
16 (Tex. 2006) (per curiam); Hanks, 644 S.W.2d at 708–09.

         The Buyer placed the election-of-remedies problem before the trial court in
its detailed answer to the Sellers’ breach-of-contract counterclaim. The Buyer
alleged that even if it breached the Settlement Agreement, the Sellers “made an
election to enforce that agreement,” and thus, they were required to perform their
contractual obligations. The Buyer therefore argued that if the trial court enforced
the Release, it also should release the funds in the court’s registry to the Buyer and
order the Sellers to transfer the Property to the Buyer upon the financing terms
stated in the Settlement Agreement. However, the trial court failed to answer the
fact question of whether the Sellers elected to treat the Settlement Agreement as
terminated or as continuing. Cf. In re Gen. Elec. Capital Corp., 203 S.W.3d 314,
316 (Tex. 2006) (orig. proceeding) (per curiam) (explaining that unless the
surrounding facts and circumstances are undisputed, waiver usually is a question of
fact).

                                          9
C.     The trial court erred in failing to address the question of the Sellers’
       election.
       The trial court issued findings of fact and conclusions of law, but it did not
find that the Sellers waived the Buyer’s breach (or otherwise treated the contract as
continuing) or that the Sellers were excused from further performance (or
otherwise treated the contract as terminated).5 Although we will presume in some
circumstances that the trial court made omitted findings in support of its
judgment,6 the presumption does not apply where, as here, the record reveals that
the trial court based its judgment on an erroneous interpretation of law, and failed
to answer a factual question necessary to resolve the case under a correct
interpretation.      See Jones v. Smith, 291 S.W.3d 549, 553–555 (Tex. App.—
Houston [14th Dist.] 2009, no pet.).

       The circumstances here are analogous to those in Jones. In that case, a
property owner sold his property, but the original deed conveying the property was
lost or destroyed. Id. at 550. Two friends testified that they both were present at
the closing, but each claimed that the deed conveyed the property only to him. Id.
Each man later recorded a replacement deed. Id. at 551. The trial court made
findings identifying the date, grantor, and grantee identified in the deeds that were
recorded, but made no findings in connection with the lost deed. Id. at 551–52.
Finally, the trial court concluded that one of the litigants had title to the property
under the first-recorded replacement deed. Id. at 552. We explained that the
findings of fact and conclusions of law revealed that instead of identifying the
person named as the grantee in the lost deed, the trial court erroneously treated a
conveyance as effective only if recorded. Id. at 554. We therefore reversed and
       5
          The Buyer requested additional or amended findings two months later, but the Rules of
Civil Procedure provide that such requests “shall be made within ten days after the filing of the
original findings and conclusions by the court.” TEX. R. CIV. P. 298.
       6
           See TEX. R. CIV. P. 299.

                                               10
remanded the case. Id. at 555.

      Here, the record shows that the trial court did not treat the Settlement
Agreement as a single indivisible contract and did not consider the question of the
Sellers’ election of remedies under the common law; instead, the trial court treated
the Release and Sales Contract as separate agreements, and considered election of
remedies only when determining whether the Sellers had breached the Sales
Contract so as to trigger a contractual provision governing the Buyer’s election of
remedies. The trial court’s interpretation of law can be seen in the following
findings of fact and conclusions of law:

    “under the Release and under the Sales Contract,” the Sellers materially
     performed their obligations, and the Buyer materially breached its
     obligations under “both agreements”;
    the Release was effective upon its execution; therefore, “as of October 25,
     2011,” the Buyer released its claims against the Sellers;
    “the Sales Contract provided an exception to [the Buyer’s] [R]elease”: if the
     Buyer properly terminated the Sales Contract, then its terms permitted the
     Buyer either to seek specific performance or to continue prosecuting its
     claims against the Sellers “despite the terms of the Release”;
    the Buyer did not terminate the Sales Contract according to its terms; and
    the Buyer released its claims against the Sellers and should take nothing on
     its claims.
      The Buyer attempted to bring to the trial court’s attention the question of the
Sellers’ common-law election of remedies, but the trial court’s response showed
that it considered only the availability of the Buyer’s contractual election of
remedies.    For example, after the trial court read its findings of fact and
conclusions of law showing that it was enforcing the release, the Buyer’s attorney
asked about proceeding with the closing on the Property.             The trial court
responded, “I don’t think that that was squarely in front of me; but the usual — the
usual rule of law is that a party in breach can’t enforce a contract.” This is true in
                                           11
those cases in which the other party chooses to treat the breach as terminating the
contract, but there is more to the rule. “[I]f, after the breach, the non-breaching
party continues to insist on performance by the party in default, ‘the previous
breach constitutes no excuse for nonperformance on the part of the party not in
default and the contract continues in force for the benefit of both parties.’” Henry
v. Masson, 333 S.W.3d 825, 840 (Tex. App.—Houston [1st Dist.] 2010, no pet.)
(quoting Chilton Ins. Co., 930 S.W.2d at 887). Thus, if the non-defaulting party
continues to insist on performance, then so can the breaching party.

      That is just what the Buyer attempted to do here, arguing in its pleadings and
in its post-trial motions that if the Sellers elected to enforce the Release, then they
were obligated to proceed with the Property sale. But the final judgment shows
that the trial court refused to address the question. Instead, it denied the Buyer’s
“request to transfer title or otherwise require specific performance of the sale of the
Property,” while also stating that it “does not find or otherwise rule that [the
Sellers] are excused from their obligations under the [Release] and the [Sales
Contract].” Thus, there is no express finding or ruling on the question of the
Sellers’ election, and none can be implied.

      The Buyer argues that no finding is necessary because the record
conclusively establishes that the Sellers elected to treat the Settlement Agreement
as continuing, but we do not find the record to be so clear or complete. The Sales
Contract portion of the agreement provided that the Sellers’ sole remedy for the
Buyer’s default before closing was to terminate the Settlement Agreement, recover
their out-of-pocket expenses, reopen discovery, and proceed to trial on the parties’
claims under the Original Agreement, and there is evidence that the Sellers chose
this option. Jacquelyn Churchill was the only Seller to testify at trial, and in
accordance with that contractual provision, her testimony illustrates that the Sellers

                                          12
were willing to perform under the original Option Contract, but not under the
breached Settlement Agreement:

      Q:    [W]ould you be willing to abide by the agreement that
      everybody signed off on, full and final release and settlement?
      A:     The — this one?
      Q:     Would you be willing to abide by your word that you signed off
      on?
      A:   Well, the — no. I — I don’t — the original 200,000 amount, I
      would.
As for reopening discovery and proceeding to trial on the original claims, the “trial
court activity inquiry sheets” in the record show that after the breach, the trial court
signed an order compelling a deposition, but the record does not indicate who
sought the discovery. The record also indicates that the Sellers first amended their
pleading to raise a claim for breach of the Settlement Agreement just six weeks
after the breach occurred, and three months later, the trial court denied the Sellers’
motion for partial summary judgment, but neither the pleading nor the motion is in
the record. Although the Sellers’ counsel argued at trial that the Release and the
Sales Contract were separate and the Release remained in effect unless the Buyer
properly terminated both agreements due to the Sellers’ breach, the same attorney
also argued for recovery of attorney’s fees that were recoverable only if the
contract was terminated. We are unwilling to treat a legal argument made by
counsel a year after the breach as conclusive evidence that the Sellers elected to
treat the Settlement Agreement as continuing, given that (1) the argument is wrong
as a matter of law; (2) it contradicts the only factual evidence from the Sellers
themselves about their willingness to perform the Settlement Agreement; (3) the
Sellers sought summary judgment of some claims after the breach, but we do not
know the claims or grounds addressed; and (4) the record shows that someone
reopened discovery, but does not show whether it was the Buyer or the Sellers.

                                          13
                                 III. CONCLUSION

      Although the Buyer has requested rendition rather than remand, remand is
the relief to which it is entitled. See Jones, 291 S.W.3d at 555. We therefore
reverse the trial court’s judgment and remand the case. See TEX. R. APP. P. 43.3(a)
(“When reversing a trial court’s judgment, the court must render the judgment that
the trial court should have rendered, except when . . . a remand is necessary for
further proceedings . . . .”); Garza v. Cantu, No. 14-11-00724-CV, 2013 WL
5451592, at *9–10 (Tex. App.—Houston [14th Dist.] Aug. 27, 2013, pet. denied)
(sub. op.) (remanding for a new trial where that was the relief authorized, and
although the appellant asked only for rendition, it “did not adopt a ‘rendition-or-
bust’ strategy”). In light of this disposition, we do not reach the Buyer’s challenge
to the orders concerning the release of registry funds, because our remand makes
those orders interlocutory. The trial court remains free, however, to issue such
orders as are necessary to protect the parties’ interests pending final judgment or to
apply credits and offsets in the final judgment as necessary to account for the over-
or under-disbursement of funds to any party.

                                       /s/     Tracy Christopher
                                               Justice

Panel consists of Justices Boyce, Christopher, and Brown.

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