Cheung-Loon, LLC v. Cergon, Inc.

392 S.W.3d 738, 2012 WL 1678105, 2012 Tex. App. LEXIS 3825
CourtCourt of Appeals of Texas
DecidedMay 15, 2012
DocketNo. 05-10-01171-CV
StatusPublished
Cited by22 cases

This text of 392 S.W.3d 738 (Cheung-Loon, LLC v. Cergon, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cheung-Loon, LLC v. Cergon, Inc., 392 S.W.3d 738, 2012 WL 1678105, 2012 Tex. App. LEXIS 3825 (Tex. Ct. App. 2012).

Opinion

OPINION

Opinion By

Justice MORRIS.

This is an appeal from a summary judgment in a suit for breach of a lease agreement. Cheung-Loon, LLC contends the trial court erred in granting summary judgment in favor of Cergon, Inc. d/b/a Primo’s Bar and Grille and Edward P. Cervantes and in denying Cheung-Looris first and second motions for partial summary judgment. Cheung-Loon generally argues the trial court erred in concluding that it was liable for breaching the lease and that appellees rightfully and properly terminated the contract. For the reasons set forth below, we reverse the trial court’s judgment in favor of appellees and render judgment that they take nothing by their claims against Cheung-Loon. We also render judgment in favor of Cheung-Loon on appellees’ claims for breach of contract, declaratory judgment, and fraud as well as their affirmative defenses of want of consideration, fraud, waiver and estoppel. Finally, we remand for further proceedings Cheung-Loon’s claim for breach of contract and appellees’ affirmative defense of failure of consideration.

I.

Cheung-Loon is the owner of several properties in Dallas, Texas, including a commercial building located at 3317 McKinney Avenue and a parking lot located at 3321 McKinney Avenue. In 2006, Cheung-Loon and Cergon, Inc. d/b/a Pri-mo’s Bar and Grille entered into a lease agreement under which Primo’s agreed to pay a monthly rental fee for use of the parking lot. Edward P. Cervantes, president of Cergon, Inc., signed the lease on behalf of Primo’s and personally guaranteed Primo’s performance under the lease. The term of the lease was for five years with a commencement date of June 1, 2006 and an expiration date of May 31, 2011.

The parties also signed a “Non-Disturbance, Attornment and Estoppel Agreement” with Southwest Bank relating to the bank’s interests as mortgagee of the property. Among the provisions of the non-disturbance agreement was one that allowed the bank a thirty-day opportunity to cure any default by Cheung-Loon on its obligations under the lease following written notice of the default from Primo’s. The lease between Cheung-Loon and Primo’s contained a similar provision requiring Pri-mo’s to provide Cheung-Loon with written notice of any default and a thirty-day opportunity to cure before pursuing legal remedies.

On July 20, 2007, Cheung-Loon sent Primo’s a letter stating that Primo’s was required to obtain a certificate of occupancy for the parking lot from the City of Dallas. Cheung-Loon referenced para[742]*742graph 6.03 of the lease that placed the burden of obtaining a certificate of occupancy on Primo’s. The letter set forth landscape and lighting requirements for the certificate to be granted and included plans and bids for the requirements to be met. The letter concluded with the statement that the approved plan and work must be completed within 30 days to comply with the City’s requirements.

Near the end of 2007, Cheung-Loon began leasing space in its building at 3317 McKinney Avenue to a tenant named Dear Clark. According to Primo’s, the employees and patrons of Dear Clark began using the parking spaces in the lot at 3321 McKinney Avenue to such an extent that Primo’s customers were excluded from most, if not all, of the lot. Charles Saunders, an employee of Primo’s, testified that he notified Cheung-Loon “on a number of occasions throughout the early months of 2008 of the extensive use of Primo’s parking lot by Cheung-Loon’s other tenants in violation of the Lease Agreement.” Saunders further testified that Cheung-Loon took no action in response to his complaints.

On March 4, 2008, Cheung-Loon sent a second letter to Primo’s about the certificate of occupancy. The letter stated that Primo’s failure to complete the work required to obtain a certificate of occupancy constituted an “event of default” as defined by the lease. The letter further stated that Cheung-Loon intended to pursue its remedies under the lease including entering the premises without terminating the lease and completing the required work on Primo’s behalf. Cheung-Loon sent a third letter on April 16 stating that if Primo’s did not begin work on the modifications necessary to obtain a certificate of occupancy by May 1, Cheung-Loon would hire contractors to perform the work and bill Primo’s for the work when completed.

On May 22, Cheung-Loon received an undated letter from Primo’s stating that Primo’s was rescinding its lease agreement with Cheung-Loon. The letter stated that Primo’s customers were not able to use the parking lot because Cheung-Loon’s other tenants were making excessive use of the lot. The letter referenced an agreement that allowed Cheung-Loon’s other tenants to use ten of the twenty-three spaces in the lot during business hours in exchange for Primo’s use of the parking spaces behind 3317 McKinney Avenue after 6 p.m. Primo’s stated this arrangement was not working because the other tenants used more than their ten alotted spaces during the day, extended their business hours and, therefore, use of the lot to 10 p.m., and posted signs in the parking spaces behind their building prohibiting restaurant parking. As of June 1, 2008, Primo’s ceased paying rent under the lease.

On June 4, 2008, Cheung-Loon sent Pri-mo’s a letter stating that it was rejecting Primo’s “unilateral recission” of the lease. Cheung-Loon demanded that Primo’s continue making rental payments under the terms of the lease and that it immediately comply with the requirements to obtain a certificate of occupancy. Cheung-Loon noted in the letter that it considered Pri-mo’s right to use the parking lot to be “non-exclusive” and that it wanted to work with Primo’s and the tenants of 3317 McKinney Avenue to resolve the issue of the lot’s use.

On July 16, Cheung-Loon sent Primo’s a notice of default based on Primo’s failure to obtain a certificate of occupancy and make payments due under the lease. The notice stated that Cheung-Loon was providing Primo’s with an opportunity to cure its default. Primo’s took no action in response to the notice and, approximately one month later, Cheung-Loon brought this suit for breach of contract. Appellees [743]*743answered and asserted the affirmative defenses of want of consideration, failure of consideration, fraud, duress, estoppel, and waiver. Appellees also brought counterclaims for fraud and breach of contract and requested a declaratory judgment that Cheung-Loon violated Primo’s right under the lease to exclusive use of the parking lot.

Cheung-Loon filed a motion for partial summary judgment on its claim for breach of contract and a no-evidence summary judgment on appellees’ claims and affirmative defenses. Cheung-Loon argued the undisputed facts showed that Primo’s unilateral recission of the lease in May 2008 constituted a breach of contract. According to Cheung-Loon, the recission could not be justified by any alleged breach on its part because Primo’s did not provide it or the bank with written notice of a failure to perform and a thirty day opportunity to cure as required by the lease and the non-disturbance agreement. The trial court denied the motion.

Cheung-Loon then filed a second motion for partial summary judgment contending that, as a matter of law, it did not breach the lease by allowing the tenants of 3317 McKinney Avenue to use the parking lot because the lease did not grant Primo’s an exclusive right to use the lot.

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Cite This Page — Counsel Stack

Bluebook (online)
392 S.W.3d 738, 2012 WL 1678105, 2012 Tex. App. LEXIS 3825, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cheung-loon-llc-v-cergon-inc-texapp-2012.