Court Opinion

ID: 27444
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:08:24+00
Date Added: 2024-06-11T11:49:56.922333
License: Public Domain

UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT

                        _______________________

                              No. 01-41104
                            Summary Calendar
                        _______________________

                        SCENIC GALVESTON, INC.,
                             Plaintiff--Counter-Defendant--Appellee,

                                  versus

                        INFINITY OUTDOOR, INC.,
               formerly known as Outdoor Systems, Inc.,
                            Defendant--Counter-Plaintiff--Appellant.

_________________________________________________________________

           Appeal from the United States District Court
                for the Southern District of Texas
                             00-CV-751
_________________________________________________________________
                           April 8, 2002

Before JONES, SMITH, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

           Scenic Galveston, Inc., brought this declaratory judgment

action seeking a determination that Infinity Outdoor, Inc., had

terminated a lease agreement governing the erection and maintenance

of   billboards.       Having    determined     that    Infinity    Outdoor

unambiguously exercised its option to terminate the lease, the

     *
            Pursuant to 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
district court granted summary judgment for Scenic Galveston.                       We

affirm.

                                     I

            Scenic Galveston, Inc., is a Texas non-profit corporation

dedicated to curbing the proliferation of billboards.                     In 1998,

Scenic    Galveston   purchased    property    along   Interstate              45   in

Galveston County that was subject to a 40-year lease agreement

regarding billboards.      Scenic Galveston acquired all rights as

lessor.      Infinity   Outdoor,     Inc.     (“Infinity”),       a       Delaware

corporation whose principal place of business is Arizona, is the

successor in interest to the original lessee.

            The lease agreement provided that the lessee could erect

and maintain billboards at eight sites.           In return, the lessee

agreed to pay $495 a month as rent.            For the purposes of this

lawsuit, the most significant provision of the agreement is the

lessee’s option to terminate the lease agreement if the lessee were

“prevented    by   authorities    having    jurisdiction      .       .    .    from

constructing or maintaining its advertising structures.”

            Soon after acquiring the property, Scenic Galveston began

notifying the Texas Department of Transportation that some of the

billboards were not in compliance with state regulations.                      In the

summer of 2000, the Texas Department of Transportation ordered that

at least two of Infinity’s billboards be removed.          The real estate

manager of Infinity Outdoor then wrote to Scenic Galveston on

August 24, 2000: “The court has ruled that the signs must come down

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and not be replaced.         Therefore, we are hereby terminating our

lease    with   you   and   no   future       rent   payments   will   be    made.”

(Emphasis added.)      Infinity points out that, although the quoted

passage refers to “signs,” the letter specifically discusses only

one of the six billboards that Infinity was operating at the time.

Moreover, in spite of their declaration that they would no longer

pay rent, Infinity wrote a check on September 1, 2000, for $412.50,

which reflects a one-sixth reduction of the usual rental payment of

$495.    Scenic Galveston deposited this check, along with another

prorated rent check for $412.50 in early October.

            On October 4, 2000, an attorney for Scenic Galveston

wrote to Infinity and acknowledged Infinity’s letter of August

24th.      Scenic     Galveston’s    letter,         after   referring      to   the

termination provision in the lease agreement, states that “Scenic

Galveston accepts the termination of the lease by Infinity Outdoor.

Please remove any remaining billboards from the subject property

within 30 days of your receipt of this letter.”                 Scenic Galveston

then refunded the two payments made after August 24.

            Infinity refused to remove the billboards.                   Infinity

insisted that they did not want to terminate the entire lease and

that “the only lease canceled was for the sign required to be taken

down.”    Infinity now admits, however, that the terms of the lease

agreement do not allow any kind of partial termination of the

agreement.

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           Scenic Galveston filed a declaratory judgment action,

which Infinity removed to federal court.       The district court

entered summary judgment for Scenic Galveston.

                                 II

           We review the district court’s grant of summary judgment

de novo.   Horton v. City of Houston, 179 F.3d 188, 191 (5th Cir.

1999); Fed. R. Civ. P. 56(c).

           The question is whether Infinity’s letter of August 24

was sufficient to exercise its option to terminate the lease.

Texas courts have recognized that

     A reservation in a contract, of a right in behalf of one
     of the parties to rescind, is a valid stipulation. Upon
     the exercise of the option, the rights of the parties
     under the contract terminate; the other party cannot
     insist on further performance and is bound to restore
     whatever consideration he may have received under the
     contract.

Rigsby v. Boone County State Bank of Lebanon, Ind.,   241 S.W. 207,

210 (Tex. Civ. App. -- Amarillo 1922, no writ).       “An option to

cancel or rescind a contract must be exercised in strict compliance

with its terms.”   Stretcher v. Gregg, 542 S.W.2d 954, 957 (Tex.

Civ. App. -- Texarkana, 1976).

           The terms of this contractual provision are clear and

undisputed.   First, the right of termination is conditional: The

lessee has the right to terminate when a government official

prevents the lessee from building or maintaining a billboard.   The

parties agree that this condition was met.       Second, the lease

agreement does not contemplate a partial termination; if the lessee

                                 4
exercises this option, he would void the entire agreement.             Third,

the lease agreement does not place any restrictions on how the

lessee must give notice of cancellation.

          The     only    question,   to   repeat,   is   whether   Infinity

actually exercised this option to terminate.                Looking to the

objective manifestations of intent, we agree with the district

court that the August 24th letter -- which declared, “we are hereby

terminating our lease with you” -- constitutes a valid exercise of

the option.     When this letter was sent, the rights and obligations

of both parties terminated, and Scenic Galveston had the right to

demand   that    the     billboards   be   removed   from   its     property.

Infinity’s later statements that they had actually intended a

partial termination of the lease are not relevant.                  See Derr

Construction Co. v. City of Houston, 846 S.W.2d 854, 861 (Tex. App.

-- Houston [14th Dist.] 1992, no writ)(emphasizing that “objective,

not subjective, intent controls”); Republic Nat. Bank of Dallas v.

National Bankers Life Ins. Co., 427 S.W.2d 76, 80 (Tex. Civ. App.

-- Dallas 1968, writ ref’d n.r.e.)(“[T]he question is not what the

parties meant to say but the meaning of what they did say.”).

          Infinity attempts to frame the issue as the “repudiation”

or “anticipatory breach” of the lease agreement.             Infinity thus

contends that the contract was not repudiated because some of the

evidence -- especially the payment of partial rent -- does not show

a “fixed intention to abandon, renounce, and refuse to perform” its

                                      5
obligations under the contract.        Group Life & Health Ins. Co. v.

Turner, 620 S.W.2d 670, 672-73 (Tex. Civ. App. -- Dallas 1981, no

writ). However, repudiation requires that the party who refuses to

perform does so “without just excuse.”          Id. at 673.       Infinity was

not breaching the lease agreement without cause; instead, they were

merely exercising their contractual right -- pursuant to the lease

agreement -- to cancel the agreement.

          Infinity   also   contends     that   their     offer    and   Scenic

Galveston’s   acceptance    of   the     two    prorated     rent    payments

constitutes   a   modification   of     the    parties’    long-term      lease

agreement.    However, because a change in the amount of rent

constitutes a material modification of the agreement, the statute

of frauds requires that such an alteration of the agreement be

evidenced by a writing.     See Foster v. Mutual Savings Ass’n, 602

S.W.2d 98, 100 (Tex. Civ. App. -- Fort Worth 1980, no writ), cited

in Horner v. Bourland, 724 F.2d 1142, 1148 (5th Cir. 1984).                  No

writing exists in this case.

                                  III

          For the foregoing reasons, we conclude that Infinity

exercised its right to terminate the lease agreement.              The summary

judgment for Scenic Galveston is therefore AFFIRMED.

                                   6