Court Opinion

ID: 3081356
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:57:09.961466+00
Date Added: 2024-06-11T11:50:32.343998
License: Public Domain

In The

Court of Appeals

Ninth District of Texas at Beaumont

____________________

NO. 09-09-00035-CV

____________________

OSCAR JEWELL TAYLOR and

BARBARA TAYLOR, Appellants

V.

ELISEO CARBAJAL and

ARGELIA CARBAJAL, Appellees

On Appeal from the 411th District Court
San Jacinto County, Texas

Trial Cause No. CV12,237

OPINION
	Oscar Jewell Taylor and Barbara Taylor appeal a judgment that declares the parties'
rights concerning the exercise of an option to purchase land that the Taylors leased to Eliseo
Carbajal and Argelia Carbajal.  The sole issue raised on appeal contends the Carbajals failed
to give timely notice of their intent to exercise their option to purchase the property.  We hold
that the trial court did not err in ruling that the Carbajals gave the Taylors notice of the
exercise of the option before the option expired. Accordingly, we affirm the judgment.
	Using a pre-printed form selected and modified by Barbara Taylor, the parties
executed the lease of commercial property on August 28, 2002.  The lease recites that the
lessors demised the premises for a term of five years, commencing October 2, 2002, and
terminating on October 2, 2007.  The lease required payments of $800 per month, and
provided that "amount paid on lease will go to purchase of property $125,000."  The
Carbajals paid an $8,000 security deposit that remained in the Taylors' possession at the time
of trial.  The dispute primarily arises from the construction of the option to purchase, which
reads as follows:
		Option to Purchase.  Provided that Lessee is not in default in the
performance of this lease, Lessee shall have the option to purchase for an
additional term of ________ months commencing at the expiration of the
initial lease term.  All of the terms and conditions of the lease shall apply
during the renewal term except that the monthly rent shall be the sum of $ 
________ .  The option shall be exercised by written notice given to Lessor not
less than _______ days prior to the expiration of the initial lease term.  If
notice is not given in the manner provided herein within the time specified,
this option shall expire.

	The Carbajals remained in possession of the property beyond October 2, 2007, and
continued to pay $800 per month in rent.  According to Argelia Carbajal, the Taylors
demanded that the Carbajals purchase the property for $110,000 in addition to the lease
payments that had been made, for a total of $150,000.  Jewell Taylor denied that he talked
to Eliseo Carbajal about a new price for the property and testified that "we had already
agreed and he would intend to buy it at the end of the lease."  Jewell Taylor admitted that he
was willing to sell the Carbajals the property at the price agreed to in the lease, but refused
to credit the lease payments.  Barbara Taylor admitted that their agreement in 2002 was to
apply full credit of each and every payment made on the lease, but refused to apply any of
the lease payments made after October 1, 2007, toward the purchase price.     
	On April 23, 2008, the Carbajals gave written notice of their intent to exercise the
option to purchase the property.  The Taylors rejected the Carbajals' May 1, 2008, payment
and on May 20, 2008, gave written notice to vacate the premises by July 1, 2008.  The
Carbajals filed a petition for declaratory judgment and deposited $50,000 into the registry
of the court as the balance due on the purchase price of the property.  
	The trial court found that the Taylors "prepared the lease agreement and left blank
time frames on Lessor's remedies on default and option to purchase."  The trial court found
the balance due by the Carbajals on the purchase price for the property was $55,055.70.  The
Carbajals deposited an additional $5,055.76 into the registry of the court. 
	The Taylors contend the option expired on October 1, 2007.  The Carbajals contend
the option to purchase remained in effect while they remained in possession of the property
and not in default. 
		In construing a written contract, the primary concern of the court is to
ascertain the true intentions of the parties as expressed in the instrument.  J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003);  Gulf Ins. Co. v.
Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000);  Coker v. Coker, 650
S.W.2d 391, 393 (Tex. 1983).  To achieve this objective, courts should
examine and consider the entire writing in an effort to harmonize and give
effect to all the provisions of the contract so that none will be rendered
meaningless.  J.M. Davidson, Inc., 128 S.W.3d at 229;  Coker, 650 S.W.2d at
393.  Contract terms are given their plain, ordinary, and generally accepted
meanings unless the contract itself shows them to be used in a technical or
different sense.   Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121
(Tex. 1996);   W. Reserve Life Ins. Co. v. Meadows, 152 Tex. 559, 261 S.W.2d
554, 557 (1953);  see also [Provident Life & Accident Ins. Co. v.] Knott, 128
S.W.3d [211,] 219 [(Tex. 2003)].

Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).  
	First, we must determine whether the lease expired in October 2007 or remained in
effect on the date the Carbajals gave notice of exercise of the option.  The general common
law rule provides that "[a] tenant who remains in possession of the premises after termination
of the lease occupies 'wrongfully' and is said to have a tenancy at sufferance."  Bockelmann
v. Marynick, 788 S.W.2d 569, 571 (Tex. 1990).  "Under the common law holdover rule, a
landlord may elect to treat a tenant holding over as either a trespasser or as a tenant holding
under the terms of the original lease."  Id. We look to the terms of the lease to determine
whether the terms of the lease continue in the event of a holdover tenancy.  See id. at 571-72. 
 	It is apparent that Barbara Taylor converted a form lease renewal clause into an option
clause, retaining some of the renewal language and leaving several terms blank.  The option
paragraph provides that "[a]ll of the terms and conditions of the lease shall apply during the
renewal term except that the monthly rent shall be the sum of $  ________ ."  It is undisputed
that the Carbajals continued to pay monthly rent in the amount of $800, and that the Taylors
accepted each payment until after the Carbajals gave written notice of the option to purchase.
It follows that the parties did not understand this clause to mean that no rent was due.  Thus,
it appears the "monthly rent" exception did not apply, and all of the terms and conditions of
the lease applied during the "renewal term." 
	"Renewal term" is not defined in the lease, but the previous sentence states that
"[p]rovided that Lessee is not in default in the performance of this lease, Lessee shall have
the option to purchase for an additional term of ________ months commencing at the
expiration of the initial lease term."  The second half of this sentence is somewhat
ambiguous: do the Carbajals have an unspecified number of months to exercise the option
to purchase mentioned earlier in the sentence, or is the phrase merely an acknowledgment
that the lease might be renewed for an unspecified period of time? The agreement of the
parties did not provide the Carbajals with the right to renew the lease; instead, they could
exercise an option to purchase the property.  However, by accepting the lease payments after
October 1, 2007, the Taylors elected to treat the Carbajals as a tenant holding under the terms
of the original lease.  See Bockelmann, 788 S.W.2d at 571.  Under either possible
construction of the clause, the express terms of the contract provided that all of the terms and
conditions of the lease continued during the "renewal term."  The contract does not provide
for the length of the renewal term; however, at the very least, it would include the period
during which the Carbajals continued in possession of the property and the Taylors accepted
monthly lease payments without giving notice of termination. 
	 Next, we must determine whether the option period expired.  The contract provided
that "[t]he option shall be exercised by written notice given to Lessor not less than _______
days prior to the expiration of the initial lease term."  The Taylors construe the contract to
require written notice "prior to the expiration of the lease term."  Thus, they argue, the
Carbajals failed to meet the final sentence of the option paragraph, which required written
notice to be given "within the time specified" by the option paragraph. This approach is
internally inconsistent, as the Taylors' construction of the contract requires that the other
incomplete phrases in the same paragraph be read out of the contract altogether. Furthermore,
the Taylors' construction of the contract fails to account for the fact that no time was
specified for the exercise of the option.  That term was left blank.  The Taylors admitted that
the lease does not give dates and times certain for the Carbajals to give notice of option to
purchase. 
	The Carbajals argue that when the time for performance is omitted, the contract may
be performed within a reasonable time. See KMI Cont'l Offshore Prod. Co. v. ACF
Petroleum Co., 746 S.W.2d 238, 243 (Tex. App.--Houston [1st Dist.] 1987, writ denied)
("When an option provision fails to impose a time limitation, courts will construe the
provision to require that it be exercised 'within a reasonable time.'").  The Taylors argue that
time is always of the essence in an option contract. See Ducc Realty Co. v. Cox, 356 S.W.2d
807, 809 (Tex. Civ. App.--Waco 1962, no writ) ("In option contracts time is nearly always
of the essence."). When an option contract does not specify time of performance, "the law
will imply that a reasonable time is meant." Lusher v. First Nat'l Bank of Fort Worth, 260
S.W.2d 621, 626 (Tex. Civ. App.--Fort Worth 1953, writ ref'd n.r.e.); see also Hatt v.
Walker, 33 S.W.2d 489, 499 (Tex. Civ. App.--Dallas 1930, writ dism'd w.o.j.).  
	Time is of the essence in an option contract because it is unilateral.  Johnson v.
Portwood, 89 Tex. 235, 34 S.W. 596, 598 (1896).  In this case, however, the unilateral option
was part of a bilateral contract.  The Carbajals had the exclusive right to exercise the option
to purchase, but the Taylors had the exclusive right to renew the lease under the same terms
and conditions as the original lease.  Thus, under this contract both parties could control what
occurred after the five-year lease term ended.  The Carbajals could purchase the property, or
the Taylors could renew the lease.  The option provision was not excluded from the renewal
language.  Because the provision was left blank, the contract failed to specify that the notice
had to be given before the expiration of the initial lease term.  
	The contract in this case is distinguishable from a case in which the extension of the
lease is contingent upon the exercise of the option.  In Kruegel v. Berry, the lease provided
that the tenant could buy the property "any time within the expiration of said term of two
years" and also provided that if the landlord defaulted on the covenants "then this lease shall
remain in full force after the expiration of said two years[.]"  Kruegel v. Berry, 75 Tex. 230,
9 S.W. 863, 864 (1888).  The tenant remained in possession and paid the lessor's successor
rent, then tried to exercise the option.  Id.  The court held the lease extension clause never
took effect because it was contingent upon the tenant's timely exercise of the option.  Id. at
865.  
	Here, a renewal clause is contained within the option paragraph, but it is not expressly
contingent on the exercise of the option.  That renewal clause expressly provides that all of
the terms and conditions of the contract will continue during a renewal.  The only potentially
contrary provision appears in a clause that was left blank.  Under these circumstances, a
reasonable time for the exercise of the option includes the period of time during which the
parties continued to perform the lease.  The Carbajals gave written notice before the Taylors
gave notice of termination.  Accordingly, the trial court did not err in declaring that the
Carbajals have a right to purchase the property for the amount agreed to in the lease.  We
overrule the issue and affirm the judgment.
	AFFIRMED.

                                                                            __________________________________
                                                                                              CHARLES KREGER
                                                                                                         Justice

Submitted on December 31, 2009
Opinion Delivered January 14, 2010

Before McKeithen, C.J., Kreger and Horton, JJ.
DISSENTING OPINION

	By the time the Carbajals gave the Taylors written notice of their intent to buy the
Taylors' property, their option to purchase, by its express terms, had already expired.  The
majority finds the Carbajals timely exercised the option, when the record demonstrates
otherwise.  I would find the trial court erred in failing to find that the purchase option had
expired.  Because the majority affirms the trial court's judgment when I would reverse, I
respectfully dissent. 
	Generally, the failure to give the notice within the deadline created by an option
agreement is fatal if the option contract, by its express terms, contains a deadline for such
notice.  Ducc Realty Co. v. Cox, 356 S.W.2d 807, 809 (Tex. Civ. App.-Waco 1962, no writ). 
In this case, the Carbajals' option contract, under the circumstances shown by the evidence,
expired on October 2, 2007.  Further, it is undisputed that the Carbajals did not exercise their
option under the lease to purchase the property until April 23, 2008.  
	The contract between the parties provides that "[i]f notice is not given in the manner
provided herein within the time specified, the option shall expire."  Although the parties left
blank, and thus did not specify the number of days' notice required by their contract, the
contract also states that notice is required to be given "prior to the expiration of the initial
lease term."  Although the term "initial lease term" is not expressly defined in the contract,
the lease's initial term was for five years, which began on October 2, 2002 and ended on
October 2, 2007.  Because the evidence showed that the Carbajals complied with the lease
during this period, the initial lease term expired on October 2, 2007. 
	Regardless of the reasonable time periods that a court might insert into the blanks in
the parties' contract, the contract provision requiring the Carbajals to elect their option to
purchase "prior to the expiration of the initial lease term" cannot be read out of the parties'
agreement.  A reasonable interpretation of the phrase "initial lease term" is that the parties
intended the option to be exercised, if the lease was still in force, no later than October 2,
2007.  In my opinion, Kruegel v. Berry, 75 Tex. 230, 9 S.W. 863, 865 (1888), with similar
facts, requires that we reach a similar result; the optionees' right under the option to purchase
the property expired prior to the date they exercised the option.
	Similarly, after concluding that an option to purchase land had not been timely
exercised, this court explained that the party that exercises an option "'must strictly comply
with the option contract and an attempted acceptance which modifies any of its terms is no
acceptance.'"  Creson v. Christie, 328 S.W.2d 772, 777-78 (Tex. Civ. App.-Beaumont 1959,
writ ref'd n.r.e.) (quoting Lambert v. Taylor, 276 S.W.2d 929, 932 (Tex. Civ. App.-Eastland
1955, no writ) .  The strict enforcement of option terms is well settled, even though the party
that holds the right to exercise an option may be excused under circumstances where the
failure to exercise the option is shown to have been caused by the fault of the party that gave
the option.  See Zeidman v. Davis, 161 Tex. 496, 342 S.W.2d 555, 558 (1961) (reversing and
rendering judgment where lease's renewal option was not timely exercised); Jones v. Gibbs,
133 Tex. 627, 130 S.W.2d 265, 271-72 (1939) (absent fault by the optionor, the optionee held
to the strict terms of option agreement).  In this case, there is no evidence to show that the
Taylors caused the Carbajals to delay their decision to exercise the option to purchase the
property.
	In summary, after considering the testimony in the record, I disagree that a reasonable
interpretation of the phrase "initial lease term" extends through the date the Carbajals elected
to purchase the property in April 2008.  In my opinion, the trial court erred in enforcing an
expired option.  Because the majority chooses to affirm when I would reverse and render, I
respectfully dissent.

								___________________________
									HOLLIS HORTON
										Justice

Dissent Delivered
January 14, 2010