Court Opinion

ID: 2902493
Source: CourtListenerOpinion
Date Created: 2015-09-09 19:12:16.607563+00
Date Added: 2024-06-11T11:33:57.852052
License: Public Domain

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS

E.P. TOWNE CENTER PARTNERS,
L.P.,

                            Appellant,

v.

CHOPSTICKS, INC.,

                            Appellee.
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No. 08-06-00221-CV

Appeal from the

327th District Court

of El Paso County, Texas

(TC# 2005-6454)

O P I N I O N

	Appellee has filed a motion for rehearing in this case on three grounds.  Appellee asserts that
the Court made two substantive errors in its analysis. First, Appellee asserts the Court erred by
focusing its analysis of Appellee's non-performance to the issue of breach and by not addressing the
materiality of that breach.  Second, Appellee asserts the Court erred by not considering evidence of
latent ambiguity and in concluding that the settlement agreement was unambiguous.  Third, Appellee
urges the Court to modify and clarify its judgment.  Appellee's motion for rehearing is denied
regarding the substantive issues raised.  Appellee's motion for rehearing for the purpose of
modifying and clarifying the judgment is granted.  The Court's opinion of August 23, 2007, is
withdrawn, and the following is issued in its place.
	This is an appeal from the trial court's dismissal of the motion for entry of judgment of
Appellant, E.P. Towne Center Partners, L.P. ("Towne Center"), which is based on a mediated
settlement agreement.  Because the trial court erred in determining that Appellee, Chopsticks, Inc.
("Chopsticks"), had complied with the terms of the settlement agreement, we will reverse and render
judgment in favor of Appellant.
FACTUAL AND PROCEDURAL BACKGROUND

	This suit arose from a lease dispute between Towne Center and its tenant, Chopsticks. 
Chopsticks signed a lease in 1997 to rent a restaurant location in Towne Center's shopping center
in the eastern part of El Paso.  In 2005, Chopsticks filed a breach of contract action against Towne
Center, alleging that the landlord had violated the contract's exclusivity clause by leasing space in
the shopping center to a second Asian-style restaurant.  Towne Center responded by filing a counter-claim for breach of contract,  alleging Chopsticks had failed to make numerous rental payments.  The
parties attended a meditation on January 21, 2006, at the conclusion of which both entities signed
a (mostly) hand-written Rule 11 Agreement ("the agreement" or "the settlement agreement") settling
both breach of contract claims.  The agreement provided, in pertinent part, as follows:
	(1)  Chopsticks, Inc. shall pay L.P.[Towne Center] $40,000.00 on or before February
1, 2006; then $7,902 by Feb. 7, 2006; then monthly installments of $7,902 for March,
April and May, 2006, on or before the 7th of each month;

	(2)  The parties will bear their own attorney's fees and costs;

	(3)  The parties will execute a mutual release;

	(4)  The parties will agree to keep the terms of settlement confidential, with a
liquidated damages  provision of $15,000.00, with losing party to any lawsuit to pay
attorney's fees;

	(5)  The lawsuit will be dismissed with prejudice; and

	(6)  In the event that Chopsticks fails to pay $40,000.00, on or before Feb[.] 1, 2006,
or any monthly installment by its due date, L.P. may submit a judgment to the Judge
in Case No. 2005-6454 that provides for damages of $10,000.00, plus all unpaid
installments, attorney fees of $5,000.00, with contingent awards of $7,500.00 to
Court of Appeals, and $7,500.00 to the Texas Supreme Court, plus past judgment %
at the rate of 6%.
	Chopsticks paid the initial $40,000 settlement payment on time.  Chopsticks also tendered
a check for the February 7 installment. (1)  Towne Center attempted to deposit the check on March 2,
but it was returned due to insufficient funds.  Towne Center contacted Chopsticks to secure an
alternative payment and, in a later conversation, was instructed to redeposit the check.  Towne
Center was not able to do so, because it was no longer in possession of the instrument.  There is
some evidence that the parties may have attempted to negotiate an alternative payment method
following the check's return.  However, there is conflicting testimony regarding whether Towne
Center specifically asked for either a cashier's check or money order to replace the declined check. 
Towne Center received Chopsticks' March installment on March 7.  Towne Center deposited the
March payment without incident. (2)
	Towne Center filed a motion for entry of judgment based on the settlement agreement, on
April 3, 2006.  On April 11, Chopsticks tendered a cashier's check to Towne Center for $10,837.50. 
This sum represented the February and April installments, less the amount of Chopsticks' security
deposit.  Towne Center rejected the tender from Chopsticks.
	Chopsticks filed a response to Towne Center's motion for entry of judgment on May 3, 2006. 
Chopsticks then deposited $18,739 with the district clerk.  The deposit included installment
payments for February, April, and May according to the agreement, minus the amount of Chopsticks'
security deposit.
	A hearing was held on May 8, 2006.  Chopsticks argued that the agreement was fatally
deficient, because it lacked certain essential terms.  Chopsticks' counsel described negotiations
which took place subsequent to the mediation.  He explained that, during the subsequent
negotiations, the parties discussed how the premises were to be vacated and the return of the security
deposit. (3)  Towne Center explained that these subsequent negotiations failed to produce a final
agreement.
	On May 22, the trial court denied Towne Center's motion for entry of judgment.  On June
30, the trial court issued findings of fact and conclusions of law.  The court concluded that the
agreement was incomplete and ambiguous concerning key issues of the settlement, specifically the
timing for Chopsticks to vacate the premises and the disposition of the security deposit.  The trial
court also concluded, as a matter of law, that Chopsticks had fulfilled its obligations under the terms
of the settlement agreement.  Towne Center appeals.
	In Issue One, Towne Center argues that the trial court erred in determining that the settlement
agreement was ambiguous and that it did not contain certain essential terms.  In Issue Two, Towne
Center argues that the evidence is legally and factually insufficient to support the trial court's
conclusion that Chopsticks complied with the terms of the settlement agreement.
DISCUSSION
	The trial court denied Towne Center's motion for entry of judgment on the ground that the
agreement was "incomplete and ambiguous concerning key issues relative to the settlement achieved
by the parties . . . ."  In Issue One, Towne Center contends that this conclusion was in error, because
the agreement contained all terms necessary for its enforcement.
	The interpretation of a settlement agreement is subject to the law of contracts.  See Tex. Civ.
Prac. & Rem. Code Ann. § 154.071; Browning v. Holloway, 620 S.W.2d 611, 615 (Tex. Civ. App.
--Dallas 1981, writ ref'd n.r.e.).  There is a significant legal difference between a contract's silence
- i.e., its failure to address a particular issue - and the presence of an ambiguity in the contract
language.  See Thompson v. CPN Partners, L.P., 23 S.W.3d 64, 71 (Tex. App.--Austin 2000, no
pet.).  When a contract is silent on a particular issue, the court must determine the effect of the
silence.  See id.  Contract ambiguity, on the other hand, is a question of interpretation.  See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998).  A contract term is
ambiguous when it is subject to two or more reasonable interpretations.  Id.
	The trial court identified the "timing for [Chopsticks] to vacate the leasehold premises" and
"the refund of [Chopsticks'] security deposit," as critical to the settlement agreement.  Although the
trial court included a finding of ambiguity in its decision, the terms which the court identified as the
bases for its finding are completely absent from the text of the agreement.  Therefore, we will limit
our discussion to the effect of the contract's silence on these issues.
	A contract is legally binding, only when it contains terms which are sufficiently definite to
enable a court to understand the parties' intentions.  Fort Worth Indep. Sch. Dist. v. City of Fort
Worth, 22 S.W.3d 831, 846 (Tex. 2000).  Specifically, the agreement must identify a basis for
determining the existence of a breach and provide for the appropriate remedy.  See Ski River Dev.,
Inc. v. McCalla, 167 S.W.3d 121, 133 (Tex. App.--Waco 2005, pet. denied) (citing Restatement
(Second) of Contracts § 33(2) (1981)).  Where the parties have intended to conclude a bargain,
the agreement's silence as to non-essential, or collateral, matters is not fatal.  See West Beach
Marina, Ltd. v. Erdeljac, 94 S.W.3d 248, 259 (Tex. App.--Austin 2002, no pet.) (parties need not
settle all pending issues for mediated settlement agreement to be enforceable, but may agree on
certain severable issues, while not resolving the entire dispute).  Whether a settlement agreement
fails for lack of an essential term is a question of law for the court to determine.  Ronin v. Lerner,
7 S.W.3d 883, 888 (Tex. App.--Houston [1st Dist.] 1999, no pet.).
	The settlement agreement in this case provides for the mutual release of the parties' claims
and dismissal of the underlying suit with prejudice.  The agreement specifically describes the amount
of money Chopsticks was obligated to pay and includes an installment schedule for timely payment. 
The parties also agreed on what would constitute a breach of the agreement (non-payment by the due
dates) and identified the available remedy (entry of judgment, any amounts owed, etc.).  These terms
make clear that a failure to pay the amount specified according to the agreed schedule would
constitute a breach.  While the issues cited by the trial court may have been significant to the parties'
relationship, the disposition of Chopsticks' security deposit and the date by which it was required
to vacate the premises were collateral matters.  The agreement's silence on those issues does not
affect its validity.  Because the agreement did not lack essential terms, we sustain Towne Center's
first issue.
	In Issue Two, Towne Center contends that the evidence in support of the trial court's
conclusion that Chopsticks complied with the terms of the Rule 11 agreement is legally and factually
insufficient.  Towne Center argues, first, that it established that Chopsticks had breached the
agreement when it showed that the February installment check was dishonored.  Second, Towne
Center argues that Chopsticks failed to present any evidence that it had, in fact, complied with the
terms of the agreement.
	A party challenging the legal sufficiency of an adverse finding on an issue on which that party
had the burden of proof at trial must demonstrate that the evidence conclusively established all vital
facts in support of the issue, as a matter of law.  Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241
(Tex. 2001); Carrasco v. Stewart, 224 S.W.3d 363, 367 (Tex. App.--El Paso 2006, no pet.).  In a
"matter of law" challenge, the reviewing court must first examine the record for evidence in support
of the adverse finding, while ignoring all evidence to the contrary.  Francis, 46 S.W.3d at 241.  The
reviewing court must indulge every reasonable inference to support the finding, crediting favorable
evidence if a reasonable jury could and disregarding contrary evidence, unless a reasonable jury
could  not.  See City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005).  If there is no evidence
to support the adverse finding, the court must then examine the entire record to determine whether
the contrary proposition is established as a matter of law.  Francis, 46 S.W.3d at 241.  The reviewing
court will sustain such a challenge only if the contrary proposition is conclusively established.  Id.	A breach of contract claim requires the plaintiff to prove that (1) a valid contract existed,
(2) the plaintiff performed, (3) the defendant breached, and (4) the plaintiff has suffered damages
as a result.  Prudential Securities, Inc. v. Haugland, 973 S.W.2d 394, 396 (Tex. App.--El Paso 1998,
pet. denied).  A party breaches a contract by failing to perform when that party's performance is due. 
See TeleVentures, Inc. v. International Game Tech., 12 S.W.3d 900, 910 (Tex. App.--Austin 2000,
pet. denied); see also Restatement (Second) of Contracts § 235(2) (1981) ("When performance
of a duty under a contract is due any non-performance is a breach").  A breach of contract claim
accrues immediately at the time that the contract is breached.  See Stine v. Stewart, 80 S.W.3d 586,
592 (Tex. 2002).  Whether a party's conduct constitutes a breach is a question of law for the court
to determine.  See XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 632 (Tex. App.--Houston [14th
Dist.] 2006, pet.  denied).  A fact question exists on the issue of breach only to the extent that there
is a dispute as to whether a party performed.  See id.
	Towne Center asserts that the record contains uncontradicted evidence that Chopsticks failed
to make the February payment, as required by the agreement.  Chopsticks does not dispute that the
February 7 check was returned.  Instead, Chopsticks argues that it satisfied the terms of the
settlement agreement by citing Towne Center's delay in depositing the check; Towne Center's
"inconsistent behavior" concerning the security deposit; Chopsticks' urging to redeposit the check
when it was returned for insufficient funds; Chopsticks' offer of payment in April; and the deposit
of all funds due into the registry of the Court.  Chopsticks argues that this evidence supports the trial
court's ruling.  We disagree.
	Although the date of the tender is in question, there is no dispute that Chopsticks tendered
a check for the February 7 payment.  Towne Center deposited that check on March 2.  The bank
rejected the check due to insufficient funds.  Towne Center called Chopsticks to secure a
replacement payment for the rejected check.  Chopsticks did not tender any replacement payment
until April 11, after Towne Center filed the motion for entry of judgment.  These facts are
uncontested and do not support a finding of performance.
	An uncertified check is merely a conditional payment for an obligation and payment is made
absolute when the check is presented and honored.  Probus Props. v. Kirby, 200 S.W.3d 258, 262
(Tex. App.--Dallas 2006, pet. denied).  When one is presented with an uncertified check, the
obligation due under the agreement is suspended until the check is dishonored or until it is paid or
certified.  Tex. Bus. & Com. Code Ann. § 3.310(b)(1); Probus, 200 S.W.3d at 262.  If the check
is dishonored, the obligee may enforce either the instrument or the obligation.  Tex. Bus. & Com.
Code Ann. § 3.310(b)(3); Probus, 200 S.W.3d at 262.
	Chopsticks' tender of a check on February 7 was not performance of its obligation under the
agreement until the check was presented and honored.  See Probus, 200 S.W.3d at 262.  When the
check was returned for insufficient funds, Chopsticks was in breach of the agreement.  When the
breach was not cured and the parties were unable to agree on an alternative remedy, Towne Center
chose to exercise its option for enforcement under the contract. (4) See Tex. Bus. & Com. Code Ann.
§ 3.310(b)(3).
	Chopsticks argues that the trial court's conclusion was not in error, based, in part, on theories
of estoppel and substantial performance.  Chopsticks asserts that Towne Center waived any alleged
breach in the February payment by accepting Chopsticks' March installment payment, and it is
therefore estopped from denying that the terms were satisfied.  Estoppel is an affirmative defense
which must be plead under the Texas Rules of Civil Procedure.  Tex. R. Civ. P. 94.  Chopsticks does
not cite, and we have been unable to find, any such pleading in the record.  In addition, regardless
of the facts of Chopsticks' performance before or after its failure to perform, the doctrine of
substantial performance is not available to a party whose breach involves the omission of essential
performance.  See Smith v. Smith, 112 S.W.3d 275, 279 (Tex. App.--Corpus Christi 2003, pet.
denied).  As we have already discussed, the payment schedule was an essential term of this
agreement, the non-performance of which prevents other performance by Chopsticks from being
"substantial."  See id.
	Chopsticks continues by arguing that, since only one out of five payments was untimely, its
breach, if any, was immaterial.  In support of this argument, Chopsticks relies on the evidence of: 
(1) its instruction to Towne Center to redeposit the February 7 check; (2) its offer of a cashier's
check as a compromise for the returned check; and (3) its deposit of the remaining payments into the
court's registry.  As we have noted above, any non-performance when a party's performance is due
is a breach.  See International Game Tech., 12 S.W.3d at 910.  Evidence that other payments were
timely made does not negate evidence of the breach, because a cause of action for breach of a
contract calling for periodic payments accrues for each missed payment.  See F.D. Stella Prods. Co.
v. Scott, 875 S.W.2d 462, 465 (Tex. App.--Austin 1994, no writ).  Therefore, evidence that
Chopsticks made other payments according to the dates specified in the agreement does not affect
whether the contract was breached via the dishonored February 7 check.
	Finally, Chopsticks argues that Towne Center's inconsistent behavior regarding the security
deposit supports the trial court's conclusion.  Evidence that Towne Center acted inconsistently
regarding the security deposit does not support the conclusion that the Chopsticks performed the
obligation due on February 7.  Towne Center's behavior concerning the security deposit, even if
inconsistent and/or confusing, did not begin until at least March 14, when it sent the first letter
indicating consumption of the security deposit.  When Chopsticks tendered an insufficient-funds
check in February, it did so without any knowledge of Towne Center's future behavior in March. 
Indeed, evidence concerning Towne Center's behavior tells us nothing about Chopsticks' 
performance.
	Neither Chopsticks' cited evidence nor our own review of the record supports the trial court's
conclusion that Chopsticks complied with the settlement agreement.  As the only remaining evidence
is that establishing Chopsticks' non-payment and breach of its obligation, the evidence is legally
insufficient to support the trial court's conclusion.  In addition, because Towne Center established
Chopsticks' non-performance as to the February payment date, we hold that Chopsticks was in
breach, as a matter of law.  Therefore, Towne Center's second issue is sustained on legal
insufficiency grounds. (5)
	Having sustained both of Appellant's issues, we reverse and remand the cause to the trial
court to render judgment in favor of Towne Center pursuant to the parties' settlement agreement as
follows:  Towne Center is awarded $10,000 for damages, $18,739 as deposited by Chopsticks in the
registry of the district court in cause number 2005-6454, representing settlement payment for
February, April, and May, 2006, $5000 in attorneys' fees in the trial court, and $7,500 for attorneys'
fees on appeal.  Furthermore, Towne Center is awarded post-judgment interest, as provided in the
agreement at a rate of 6 percent, to be calculated by the trial court on remand and included in the
judgment.
						KENNETH R. CARR, Justice

November 15, 2007

Before McClure, J., Carr, J., and Ables, J.
Ables, J., sitting by assignment
1.   There is some dispute as to when the February payment was received.  The check was dated February 7. 
Towne Center's attorney stated in opening argument that he received the check and mailed it to Towne Center's property
manager.  The check was returned because Towne Center's attorney had the wrong address for the property manager.
The property manager received the check on February 15.
2.   On March 14, Towne Center's property manager sent a letter to Chopsticks indicating the balance owed, due
to the missing February payment.  The letter asserted that Chopsticks' original security deposit was not available to cover
the deficiency, as it had been applied to the tenant's balance for previously-unpaid rent prior to the parties' legal disputes. 
However, Towne Center later admitted that it was unable to locate records identifying when and how the deposit had
been applied, and it credited Chopsticks for the amount.
3.   In its response to Towne Center's motion for entry of judgment, Chopsticks attached an unsigned, typewritten
document entitled "Compromise and Settlement Agreement."  The document identified in detail when and how
Chopsticks was to vacate the premises and how the parties would apply the security deposit to the amount owed.
4.   Chopsticks also cites the fact that Towne Center did not immediately deposit the February 7 check as evidence
in support of the trial court's conclusion.  However, this has no bearing on Chopsticks' breach.  The drawer of a check
is responsible for its payment for 90 days after its date.  See Tex. Bus. & Com. Code Ann. § 3.304(a)(2).  Towne Center
presented the check within 30 days of its date.  Since Chopsticks was still responsible for the payment at the time the
check was deposited and would have satisfied its obligation under the agreement only if the check were honored, Towne
Center's delay in presenting the check for payment had no bearing upon, and did not justify, Chopsticks' breach.
5.   Because we have determined that the evidence is legally insufficient to support the trial court's conclusion,
there is no need for us to address Towne Center's factual sufficiency challenge.  See Tex. R. App. P. 47.1.