Court Opinion

ID: 7802360
Source: CourtListenerOpinion
Date Created: 2022-08-22 08:14:42.769705+00
Date Added: 2024-06-11T16:29:27.279612
License: Public Domain

In the
        Court of Appeals
Second Appellate District of Texas
         at Fort Worth
     ___________________________
          No. 02-21-00405-CV
     ___________________________

 LOCKHEART CHAPEL, INC., Appellant

                      V.

  KATIM ENDEAVORS, INC., Appellee

 On Appeal from County Court at Law No. 3
          Tarrant County, Texas
      Trial Court No. 2017-007142-3

  Before Sudderth, C.J.; Kerr and Walker, JJ.
  Memorandum Opinion by Justice Walker
                           MEMORANDUM OPINION

      Appellant Lockheart Chapel, Inc. appeals the trial court’s judgment (1) ordering

specific performance of a commercial real estate contract between Lockheart, as

seller, and Appellee Katim Endeavors, Inc., as buyer; (2) awarding Katim attorney’s

fees; and (3) authorizing Katim to offset the purchase price for the real estate against

the awarded attorney’s fees. We affirm.

                                I. BACKGROUND

      On February 4, 2016, Lockheart and Katim entered into a commercial real

estate contract whereby Lockheart agreed to sell certain real property located at

3005 Merrick Street in Fort Worth for $25,000. The contract did not contain a set

closing date but, rather, provided that closing was to occur “[w]hen under a seperate

[sic] contract another buyer is found.” The contract required Katim to deposit

earnest money of one dollar with the title company not more than three days after the

“effective date,” which the contract defined as “the date the title company receipts

this contract after all parties execute the contract.”      Additionally, the contract

contained a “special provision” providing that all closing costs were to be paid by

Katim and the new buyer.

      By letter dated September 26, 2017, Katim’s attorney informed Lockheart that

Katim had received the second contract to sell the property, that it had deposited the

$25,000 purchase price in the attorney’s trust account, and that it expected Lockheart

                                           2
to close on the property. On November 3, 2017, Lockheart’s attorney responded via

email that Lockheart did not intend to close on the contract as requested.

       On November 14, 2017, Katim filed suit against Lockheart for specific

performance. In addition to specific performance, Katim sought to recover attorney’s

fees and costs.

       In response, Lockheart filed an original answer and counterclaim, which it

amended twice. In “Defendant’s Third Amended Answer and Second Amended

Counterclaims,” Lockheart set out special exceptions, a general denial, a request for

declaratory judgment, and an allegation of breach of contract, which Lockheart stated

entitled it to attorney’s fees.

       On December 12, 2017, Lockheart sent a “notice” to Katim claiming the

contract was terminated because Katim “did not make the earnest money deposit with

Texas Secure Title Company as required by Paragraph 5.A.” Three days later, a copy

of the contract and the one-dollar earnest money were delivered to the title company.

On the same day, Nancy Gonzalez, a bookkeeping assistant with the title company,

acknowledged receipt of the contract and the earnest money by signing the “Escrow

Receipt” on page 14 of the contract.

       Thereafter, both sides filed competing traditional motions for summary

judgment. Based on its conclusion that Katim had breached the contract by filing suit

prior to performing its contractual obligations, the trial court granted Lockheart’s

                                           3
motion for partial summary judgment and denied all relief sought by Katim.1 Katim

appealed the trial court’s decision. On appeal to this court, we determined that Katim

had not breached the contract by filing suit and that there was a fact issue regarding

whether Katim was ready, willing, and able to perform the contract.2 Accordingly, we

reversed the summary judgment and remanded the case to the trial court.3

      Upon remand, the trial court conducted a bench trial and entered a judgment

granting Katim’s request for specific performance and ordering Lockheart to close the

sale of the property within 30 days.4 The judgment also awarded Katim $70,000 in

attorney’s fees and authorized Katim to set off the $25,000 purchase price for the

property against the attorney’s fees.

      This appeal followed.

      1
       Lockheart’s motion was a partial motion for summary judgment because it did
not address Lockheart’s claim for attorney’s fees, which was to be addressed in a
separate hearing. The parties subsequently stipulated to the amount of Lockheart’s
reasonable attorney’s fees, and the trial court entered a final, appealable judgment
disposing of all issues.

      See generally Katim Endeavors, Inc. v. Lockheart Chapel, Inc., No. 02-18-00358-CV,
      2

2019 WL 4122607 (Tex. App.—Fort Worth Aug. 29, 2019, no pet.) (mem. op.).
      3
       Id. at *8.
      4
       Pursuant to Lockheart’s request, the trial court issued findings of fact and
conclusions of law after the entry of the judgment.

                                           4
                                  II. DISCUSSION

      On appeal, Lockheart raises a number of issues,5 which can be generally

grouped into three broad categories. First, Lockheart asserts that the trial court erred

in ordering specific performance of the contract because Katim failed to demonstrate

that it performed or was “ready, willing, and able to perform” all of its obligations

thereunder.6   Second, Lockheart argues that, because Katim was not entitled to

specific performance, the trial court erred in awarding Katim attorney’s fees. Third,

Lockheart contends that even if the award of attorney’s fees were proper, the trial

court erred in authorizing Katim to set off the $25,000 purchase price for the property

against the attorney-fee award.    For the reasons set forth below, we affirm the

judgment of the trial court.

                               A. STANDARD OF REVIEW

      When reviewing an assertion that the evidence is factually insufficient to

support a finding, we set aside the finding only if, after considering and weighing all

the pertinent record evidence, we determine that the credible evidence supporting the

finding is so weak, or so contrary to the overwhelming weight of all the evidence, that

      5
       Lockheart enumerates twelve separate issues for appeal in its brief.
      6
        As will be discussed below, this first category contains a number of objections
to the trial court’s findings of fact and conclusions of law, most of which pertain to
the interpretation of the contract’s provisions concerning Katim’s second contract
with the new buyer and the obligations of the parties in connection with the closing of
sale.

                                           5
the finding should be set aside. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.

1986) (op. on reh’g); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Garza v. Alviar,

395 S.W.2d 821, 823 (Tex. 1965). A trial court’s findings of fact have the same force

and dignity as a jury’s answers to jury questions. Anderson v. City of Seven Points,

806 S.W.2d 791, 794 (Tex. 1991). As with jury findings, a trial court’s fact-findings on

disputed issues are not conclusive, and when the appellate record contains a reporter’s

record, an appellant may challenge those findings for evidentiary sufficiency. Catalina

v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). We review the sufficiency of the evidence

supporting challenged findings using the same standards that we apply to jury

findings. Id.

       We review conclusions of law de novo. Garner v. Long, 49 S.W.3d 920, 922

(Tex. App.—Fort Worth 2001, pet. denied) (citing Piazza v. City of Granger, 909 S.W.2d

529, 532 (Tex. App.—Austin 1995, no writ)). While we are not bound by a trial

court’s conclusions of law, we will uphold them if the judgment can be sustained on

any legal theory supported by the evidence. Wyde v. Francesconi, 566 S.W.3d 890, 894

(Tex. App.—Dallas 2018, no pet.). Even an incorrect conclusion of law will not

require a reversal if the controlling findings of fact support a correct legal theory.

Wyde, 566 S.W.3d at 894; Garner, 49 S.W.3d at 922. A conclusion of law will not be

reversed unless it is erroneous as a matter of law. Garner, 49 S.W.3d at 922; Westech

Eng’g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.—Austin 1992,

no writ).

                                           6
                            B. SPECIFIC PERFORMANCE

      Specific performance is an equitable remedy that may be awarded upon a

showing of breach of contract. Yazdani-Beioky v. Sharifan, 550 S.W.3d 808, 829 (Tex.

App.—Houston [14th Dist.] 2018, pet. denied).          Specific performance is not a

separate cause of action but, rather, is an equitable remedy that is used as a substitute

for monetary damages when such damages would not be adequate. Ifiesimama v. Haile,

522 S.W.3d 675, 685 (Tex. App.—Houston [1st Dist.] 2017, pet. denied) (citing

Stafford v. S. Vanity Mag., Inc., 231 S.W.3d 530, 535 (Tex. App.—Dallas 2007, pet.

denied)). “A party seeking specific performance must plead and prove (1) compliance

with the contract including tender of performance unless excused by the defendant’s

breach or repudiation and (2) the readiness, willingness, and ability to perform at

relevant times.” Blue Moon Venture, L.L.C. v. Horvitz, No. 14-09-00459-CV, 2010 WL

4013533, at *1 (Tex. App.—Houston [14th Dist.] Oct. 14, 2010, no pet.) (mem. op.)

(citing DiGiuseppe v. Lawler, 269 S.W.3d 588, 593–94, 601 (Tex. 2008)).

      Lockheart argues that Katim was not entitled to specific performance because

Katim did not provide sufficient evidence that it performed or was “ready, willing,

and able to perform” all of its obligations under the contract. Lockheart’s argument is

rooted in its interpretation of the contract’s provisions concerning Katim’s second

contract with the new buyer and the obligations of the parties in connection with the

closing of sale. We will address each of Lockheart’s contentions in turn.

                                           7
                                1. The Second Contract

      The first nine issues Lockheart raises on appeal all relate, directly or indirectly,

to the second contract, particularly the nature and extent of the obligations the

original contract placed on Katim with respect thereto.7 Thus, in order to determine

whether the trial court erred in granting Katim’s request for specific performance of

the original contract, we will need to answer the following questions:

      (1)   Did the contract require that it be closed “in tandem” with the second
      contract?

      (2)    Did the contract require the second contract to close at all?

      (3)  Did the contract require Katim to deliver the second contract to the title
      company?

      (4)    Did the contract require Katim to prove that the second contract was
      “effective” as a condition precedent to the sale?

      (5)    Did the contract require Katim to prove that the new buyer under the
      second contract was “ready, willing, and able” to pay its part of the closing
      costs under the first contract?

In order to address these questions, we must examine the terms of the contract itself.

      The interpretation of a contract is a question of law, which we review de novo.

URI, Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018). When asked to interpret a

contract, our primary duty is to ascertain the parties’ intent as expressed within the

      7
       We note that issue number seven in Lockheart’s brief asks whether the trial
court erred in “finding that there is no requirement in the real estate sales contract
that Katim close the contract at the title company.” As the trial court did not make
any such finding with respect to the first contract, we presume that the “contract” to
which Lockheart here refers is the second contract.

                                           8
four corners of the document. Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991); see

also Burlington Res. Oil & Gas Co. v. Tex. Crude Energy, LLC, 573 S.W.3d 198, 200 (Tex.

2019) (emphasizing that “the decisive factor in each case is the language chosen by the

parties”). “We begin with the most important consideration in interpreting any

contract: ‘the plain meaning of the [agreement’s] operative language.’” Endeavor Energy

Res., L.P. v. Energen Res. Corp., 615 S.W.3d 144, 149 (Tex. 2020) (quoting RSUI Indem.

Co. v. The Lynd Co., 466 S.W.3d 113, 121 (Tex. 2015)). “When a contract’s meaning is

disputed, our primary objective is to ascertain and give effect to the parties’ intent as

expressed in the instrument.” URI, 543 S.W.3d at 763. Objective manifestations of

intent dictate the contract’s meaning, not “‘what one side or the other alleges they

intended to say but did not.’” Id. at 763–64 (quoting Gilbert Tex. Constr., L.P. v.

Underwriters at Lloyd’s London, 327 S.W.3d 118, 127 (Tex. 2010)). “Only where a

contract is ambiguous may a court consider the parties’ interpretation and ‘admit

extraneous evidence to determine the true meaning of the instrument.’” David J.

Sacks, P.C. v. Haden, 266 S.W.3d 447, 450–51 (Tex. 2008) (quoting Nat’l Union Fire Ins.

of Pittsburgh v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995)).

       An examination of the original contract between Lockheart and Katim reveals

only two references to the second contract—one direct and one indirect. The direct

reference is found in paragraph 10 concerning the closing of the sale. The relevant

language provides that “[t]he date of the closing of the sale . . . will be . . . [w]hen

under a seperate [sic] contract another buyer is found.” The indirect reference is

                                             9
contained in paragraph 12, entitled “Special Provisions,” which states, in pertinent

part, that “[a]ll closing costs will be paid by Katim Endeavors, Inc. and the new buyer.

The total amount of $25,000 will be paid to Lockheart Chapel, Inc.”

       These meager references do not support Lockheart’s view of the obligations

imposed on Katim under the contract. Under the relevant language, all Katim was

required to do was find a second buyer, which it did on September 26, 2017, and

together with the second buyer, pay the closing costs of the sale. There is nothing

within the four corners of the contract that requires it to close in tandem with the

second contract.8 Indeed, there is no reference to the closing of the second contract

at all, much less that it be delivered to the title company.

       Lockheart asserts that the delivery of the second contract to the title company

“is significant” because it is a necessary prerequisite for the second contract to

become effective and without it, the title company could not identify the “new buyer”

who is jointly responsible with Katim for paying the closing costs. However, the

contract contains no requirement that the second contract become effective—this is a

       Lockheart’s contention that the two contracts must be closed in tandem
       8

appears to be based upon the testimony of Bill Hays, Katim’s representative, that this
was his “understanding.” However, as the contract is not ambiguous on this point,
Hays’s testimony is irrelevant under the parol evidence rule. See, e.g., URI, 543 S.W.3d
at 764–65. Moreover, even if the court could consider Hays’s testimony, his lay
opinion would not be dispositive regarding Katim’s legal obligations under the
contract. Cf. Mirant Peaker, LLC v. S. Md. Elec. Coop. (In re Mirant Corp.), Adv. No. 04-
4073, 2005 WL 6443618, at *6 (Bankr. N.D. Tex. Nov. 22, 2005) (recognizing that
“witnesses who have no legal training cannot be expected to understand what facts
support a specific legal position”).

                                            10
requirement Lockheart seeks to invent out of whole cloth. As to the identity of the

“new buyer,” even assuming that it were necessary for the title company to know the

identity of the second buyer, the delivery of the contract to the title company is far

from the only means by which such a disclosure could be accomplished.

         Relying on the language of paragraph 12, Lockheart argues that in order to be

entitled to specific performance, Katim had to prove not only that it was “ready,

willing, and able” to perform its obligations under the contract but also that the “new

buyer” under the second contract was “ready, willing, and able” to pay its share of the

closing costs. However, this argument is not supported by the language of the

contract. The most reasonable interpretation of paragraph 12 is that it was included

in the contract to ensure that Lockheart would not have to pay any of the closing

costs.       This construction is supported by the inclusion of the second sentence

providing that “[t]he total amount of $25,000 will be paid to Lockheart Chapel, Inc.”

as this language underscores the parties’ intent that no closing costs would be netted

out of the sale proceeds going to Lockheart. Significantly, the contract is silent

regarding how the closing costs will be divided between Katim and the new buyer,

which makes sense because the division of closing costs between Katim and the new

buyer is of no moment to Lockheart. It is entirely possible that Katim would pay all

of the closing costs by itself;9 this is a matter to be resolved between Katim and the

        In fact, Katim’s representative testified at trial that Katim had sufficient funds
         9

available to pay the necessary closing costs.

                                           11
new buyer. As a result, it would be unreasonable to require Katim to show that the

second buyer, who is not a party to this suit and is not in privity with Lockheart, was

“ready, willing, and able” to pay its share of the closing costs—which could be zero—

for Katim to be entitled to specific performance. Lockheart has cited no authority

that would impose such a requirement, nor is this court aware of any such authority.

      We agree with the trial court’s determination that the only relevance that the

second contract has to the contract between Lockheart and Katim is to determine the

closing date of the sale. The requirements concerning the second contract that

Lockheart seeks to impose—that it close “in tandem” with the first contract (or,

indeed, close at all), that it be delivered to the title company, that it become effective,

and that the “new buyer” thereunder prove that it was “ready, willing, and able” to

pay its share of the closing costs of the first contract—are not supported by the

contractual language. As it is Katim, not Lockheart, who is in privity with the second

buyer, any concerns about the second buyer’s willingness or ability to perform are

Katim’s alone.

      Accordingly, we answer all five of the questions posited above in the negative

and, therefore, see no reason to disturb the trial court’s finding that “Katim . . . was

ready, willing, and able to close at all relevant times.” Accordingly, we overrule

Lockheart’s issues one through nine.

                                            12
                  2. Was Katim Required to Set a Closing Date?

      Lockheart argues that because Katim never scheduled a closing date, it cannot

prove that Lockheart refused and continues to refuse to perform and that, as a result,

Katim is not entitled to specific performance of the contract. In essence, Lockheart

asserts that scheduling a closing date was a condition precedent for Katim to be

entitled to specific performance. However, Lockheart’s argument is not supported by

either the language of the contract or applicable Texas law.

      Lockheart’s argument finds no support in the contractual language as the

contract itself imposes no requirement on Katim to schedule a closing. Rather, it

does not address how closing of the sale will be arranged or which party is responsible

for scheduling the closing.

      Moreover, even if Katim bore responsibility to schedule the closing,

Lockheart’s prior repudiation of the contract excused Katim from doing so. See

DiGiuseppe, 269 S.W.3d at 594–95.       “[W]hen a defendant refuses to perform or

repudiates a contract, the plaintiff may be excused from actually tendering his or her

performance to the repudiating party” as a prerequisite to specific performance. Id. at

594. Here, Lockheart has clearly expressed its intention not to perform the contract

on at least two occasions. Therefore, Katim was not required to perform the “useless

act” or “idle ceremony” of scheduling a closing it had no reason to believe Lockheart

would attend before seeking specific performance of the contract. Id.

                                          13
      Because Katim was not required to schedule a closing of the sale before

seeking specific performance of the contract, we overrule Lockheart’s tenth issue.

                                C. ATTORNEY’S FEES

      In its eleventh issue, Lockheart asserts that the trial court erred in awarding

attorney’s fees to Katim. Lockheart’s challenge to the award of attorney’s fees is

premised on its contention that granting Katim’s request for specific performance was

itself erroneous. However, we have already determined that the trial court did not err

in granting Katim’s request for specific performance. As the contract clearly states

that the prevailing party in any legal proceeding brought thereunder is entitled to costs

and attorney’s fees,10 the trial court did not err in awarding attorney’s fees to Katim.

See, e.g., Ifiesimama, 522 S.W.3d at 690 (“When the trial court finds a breach of contract

and awards specific performance as the remedy, the trial court may properly award

attorney’s fees to the prevailing party if the contract so provides.”). We therefore

overrule Lockheart’s eleventh issue.

      10
        Paragraph 17 of the contract provides as follows:

      If Buyer, Seller, any broker, or the title company is a prevailing party in
      any legal proceeding brought under or with relation to this contract or
      this transaction, such party is entitled to recover from the non-prevailing
      parties all costs of such proceeding and reasonable attorney’s fees. This
      Paragraph 17 survives termination of this contract.

                                           14
                                     D. SETOFF

      In its twelfth issue, Lockheart asserts that the trial court erred in authorizing

Katim to set off the purchase price of the property against the award of attorney’s

fees. For the reasons set forth below, we hold that the authorization to set off the

mutual debts was proper.

      “The doctrine of setoff is ancient, having its roots in early bankruptcy law in

England.” Bandy v. First State Bank, Overton, Tex., 835 S.W.2d 609, 618 (Tex. 1992).

“The right of setoff recognizes that where parties are indebted to each other, the real

amount in issue is the difference between the two debts.” Lavizadeh v. Moghadam,

No. 05-18-00955-CV, 2019 WL 6799756, at *6 (Tex. App.—Dallas Dec. 13, 2019, no

pet.) (mem. op.) (citing Bandy, 835 S.W.2d at 618). Setoff is a doctrine rooted in the

principles of fairness and equity and allows entities that owe each other money to

apply their mutual debts against each other, thereby avoiding “the absurdity of making

A pay B when B owes A.” Studley v. Boyston Nat’l Bank, 229 U.S. 523, 528 (1913).

      Contrary to Lockheart’s assertions, an award of attorney’s fees is not unique

and may be subject to setoff just like any other debt. See Murrco Agency, Inc. v. Ryan,

800 S.W.2d 600, 603 (Tex. App.—Dallas 1990, no writ); cf. Streeter v. Thompson,

751 S.W.2d 329, 331–32 (Tex. App.—Fort Worth 1988, no writ) (offsetting damages

and attorney’s fees awarded to defendant on counterclaim from plaintiff’s award of

damages and attorney’s fees). For example, in Murrco the plaintiff obtained judgments

against two defendants and was awarded both damages and attorney’s fees.

                                          15
800 S.W.2d at 602.       One of the defendants prevailed on a counterclaim against

plaintiff and was also awarded damages and attorney’s fees, though in a lesser amount.

Id. In the judgment, the trial court added all damages and interest awarded to the

plaintiff and subtracted therefrom the lesser damages awarded to the defendant;

however, the trial court did not offset the awards of attorney’s fees. Id. The court of

appeals held that the trial court’s failure to offset the attorney’s fees was error and

reformed the judgment to provide that all awards—including attorney’s fees—were

offset. Id. at 603. Indeed, in the bankruptcy context, creditors have been authorized

to do exactly what the trial court authorized Katim to do in this case, namely, to offset

a claim for attorney’s fees awarded in a cause of action for specific performance of a

real estate contract against the purchase price of the real property. See In re Glaze,

169 B.R. 956, 964–67 (Bankr. D. Ariz. 1994) (allowing the setoff of purchasers’ claim

for damages and attorney’s fees from the purchase price of debtors’ real property

when the property was sold under a specific performance order).

         Accordingly, we conclude that the trial court did not err in authorizing Katim

to set off the $25,000 purchase price for the property against its award of attorney’s

fees and overrule Lockheart’s twelfth issue.

                                  III. CONCLUSION

         Having overruled all of Lockheart’s issues, we affirm the judgment of the trial

court.

                                            16
                                  /s/ Brian Walker

                                  Brian Walker
                                  Justice

Delivered: August 18, 2022

                             17