Ed-Sal Investments, Ltd. v. Needmore Ranch II, Ltd.

• Court: Court of Appeals of Texas
• Decided: December 15, 2010
• Docket: 04-09-00421-CV
• Status: Published

Opinion

MEMORANDUM OPINION No. 04-09-00421-CV

ED-SAL INVESTMENTS, LTD., Appellant

v.

NEEDMORE RANCH II, LTD., Appellee

From the 111th Judicial District Court, Webb County, Texas Trial Court No. 2008-CVQ-001272-D2 Honorable Raul Vasquez, Judge Presiding

Opinion by: Phylis J. Speedlin, Justice

Sitting: Karen Angelini, Justice Phylis J. Speedlin, Justice Rebecca Simmons, Justice

Delivered and Filed: December 15, 2010

REVERSED AND RENDERED, INJUNCTION DISSOLVED

Ed-Sal Investments, Ltd. and Needmore Ranch II, Ltd. filed competing motions for

summary judgment on the issue of whether a restrictive covenant in a deed prohibiting

“commercial petroleum or petroleum byproducts storage yards” includes a truck stop. The trial

court granted summary judgment in Needmore Ranch’s favor, agreeing that the restrictive

covenant prohibited the operation of a truck stop on the property at issue. We reverse the

judgment of the trial court, and render judgment in Ed-Sal’s favor. 04-09-00421-CV

FACTUAL AND PROCEDURAL BACKGROUND

In 2007, Ed-Sal acquired title to two parcels of land in Laredo pursuant to two special

warranty deeds. The first parcel consists of 1.5281 acres; the second parcel consists of 4.0219

acres. Both parcels of land are subject to restrictive covenants contained in a separate warranty

deed dated January 10, 1994 (“the 1994 warranty deed”). In the 1994 warranty deed, section (d)

of the “Restrictive Covenants” specifically prohibits fourteen operations and uses on any portion

of the property, including the following:

Commercial petroleum or petroleum byproducts storage yards; except in limited amounts which are not stored for resale and are used by the owner or tenant in conjunction with the primary land use, and then only with the written approval of Dolores Development Company. 1

Soon after acquiring the 1.5281 acre tract, Ed-Sal recorded a plat for 1.5255 acres in

anticipation of building and operating a truck stop on the land. Ed-Sal’s plans for the truck stop

called for a restaurant, shower facilities, bathroom facilities, a driver’s lounge, possibly a game

station or room, laundry facilities, gasoline pumps, as well as a facility that would sell food and

beverages. Thereafter, Needmore Ranch notified Ed-Sal that the restrictive covenants in the

1994 deed: (1) require approval of any plat by Needmore Ranch; (2) preclude the platting of any

property less than two acres in size; and (3) prohibit the operation of a truck stop on the property.

In response, Ed-Sal replatted the property and obtained the necessary approvals from the City of

Laredo and Needmore Ranch for the platting. Needmore Ranch continued to withhold approval

for the building of a truck stop on the property.

Ed-Sal then sued Needmore Ranch, requesting a judgment declaring that Ed-Sal may

operate a truck stop on the property and permanently enjoining Needmore Ranch from

interfering with Ed-Sal’s efforts to build and operate a truck stop. Needmore Ranch answered

1 Needmore Ranch is the successor in interest to Dolores Development Company.

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and counterclaimed seeking a declaration that the 1994 warranty deed prohibited the construction

and operation of a truck stop. The parties filed competing motions for traditional summary

judgment. Ultimately, the trial court granted summary judgment in favor of Needmore Ranch.

The order states that Ed-Sal is permanently enjoined from (1) constructing and/or operating a

truck stop on the property and (2) storing, selling and/or reselling gasoline, diesel fuel,

commercial petroleum and/or petroleum byproducts on the property. Ed-Sal now appeals.

STANDARD OF REVIEW AND APPLICABLE LAW

The standards for reviewing summary judgments are well established. We review the

trial court’s decision to grant summary judgment de novo. Tex. Mun. Power Agency v. Pub. Util.

Comm’n of Tex., 253 S.W.3d 184, 192 (Tex. 2007). The party moving for summary judgment

has the burden of showing no genuine issue of material fact exists and it is entitled to judgment

as a matter of law. See TEX. R. CIV. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546,

548 (Tex. 1985). Where both parties file motions for summary judgment and one is granted and

one is denied, we may consider all questions presented and render the decision the trial court

should have rendered. See Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566

(Tex. 2001); Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988) (per curiam) (orig. proceeding).

If a movant does not show its entitlement to summary judgment as a matter of law, we must

remand the case to the trial court. See Gibbs v. Gen. Motors Corp., 450 S.W.2d 827, 829 (Tex.

1970).

We review the trial court’s construction of a restrictive covenant de novo. Ski Masters of

Tex., LLC v. Heinemeyer, 269 S.W.3d 662, 667 (Tex. App.—San Antonio 2008, no pet.); Owens

v. Ousey, 241 S.W.3d 124, 129 (Tex. App.—Austin 2007, pet. denied). “[R]estrictive covenants

are subject to the general rules of contract construction.” Pilarcik v. Emmons, 966 S.W.2d 474,

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478 (Tex. 1998); see also Sonterra Capital Partners, Ltd. v. Sonterra Prop. Owners Ass’n, Inc.,

216 S.W.3d 417, 420-21 (Tex. App.—San Antonio 2006, pet. denied). Covenants are examined

as a whole in light of the circumstances present when the parties entered into the agreement.

Pilarcik, 966 S.W.2d at 478. “We give effect to every sentence, clause, and word of a covenant,

and avoid constructions that would render parts of the covenant superfluous or inoperative.”

Owens, 241 S.W.3d at 130 (citing City of San Antonio v. City of Boerne, 111 S.W.3d 22, 29

(Tex. 2003)). The reviewing court’s primary intent is to ascertain and give effect to the true

intention of the parties as expressed in the instrument. Owens, 241 S.W.3d at 129. Restrictive

covenants are liberally construed to effectuate their purposes and intent. See TEX. PROP. CODE

ANN. § 202.003(a) (West 2007).

Whether a restrictive covenant is ambiguous is a matter of law for the court to decide.

Pilarcik, 966 S.W.2d at 478. A covenant is unambiguous if, after appropriate rules of

construction have been applied, the covenant can be given a definite or certain legal meaning.

Id.; Pitman v. Lightfoot, 937 S.W.2d 496, 517 (Tex. App.—San Antonio 1996, writ denied)

(holding same concerning contracts generally). By contrast, if, after appropriate rules of

construction have been applied, a covenant is susceptible of more than one reasonable

interpretation, the covenant is ambiguous. Pilarcik, 966 S.W.2d at 478. Mere disagreement over

a restrictive covenant’s interpretation does not necessarily render the covenant ambiguous.

Hodas v. Scenic Oaks Prop. Ass’n, 21 S.W.3d 524, 528 (Tex. App.—San Antonio 2000, pet.

denied); Air Park-Dallas Zoning Comm. v. Crow-Billingsley Airpark, Ltd., 109 S.W.3d 900, 909

(Tex. App.—Dallas 2003, no pet.).

Under the “four corners” rule, we ascertain the intent of the parties solely from the

language in the deed. Concord Oil Co. v. Pennzoil Exploration & Production Co., 966 S.W.2d

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451, 465 (Tex. 1998); Cherokee Water Co. v. Freeman, 33 S.W.3d 349, 353 (Tex. App.—

Texarkana 2000, no pet.). The intent that governs, however, is not the intent that the parties

meant but failed to express, but the intent that is expressed. Cherokee Water, 33 S.W.3d at 353.

The process of deed construction has been described as three-tiered: (1) the court attempts to

ascertain the grantor’s intent by examining the plain language of the deed; (2) the court then

applies applicable rules of construction to the deed; and (3) the court considers extrinsic evidence

to aid interpretation. Cherokee Water, 33 S.W.3d at 353. The third tier, the admission of

extrinsic evidence, is not reached unless the intent of the parties is unclear because the deed is

ambiguous. Cherokee Water, 33 S.W.3d at 353 (citing Stauffer v. Henderson, 801 S.W.2d 858,

863 (Tex. 1990)).

DISCUSSION

The parties concede, and we agree, that the language of the restrictive covenant at issue is

unambiguous. See Dynamic Publ’g & Distrib. L.L.C. v. Unitec Indus. Ctr. Prop. Owners Ass’n,

Inc., 167 S.W.3d 341, 345 (Tex. App.—San Antonio 2005, no pet.) (“If a written contract is so

worded that it can be given a definite or certain legal meaning, then it is not ambiguous.”).

Accordingly, we look only to the language of the restrictive covenant, and not to extrinsic

evidence, when ascertaining the parties’ intent. Davis v. Pletcher, 727 S.W.2d 29, 34 (Tex.

App.—San Antonio 1987, writ ref’d n.r.e.). Before deciding what operations and uses the

drafters of the 1994 warranty deed intended to prohibit on the property, we must first examine

the grammatical structure of the restrictive covenant. Needmore Ranch reads the “or” between

“commercial petroleum” and “petroleum byproducts storage yards” as disjunctive, meaning that

“commercial petroleum” is a stand-alone condition or use that includes “the retail or wholesale

sale of products such as gasoline or diesel fuel.” Thus, Needmore Ranch contends the language

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of the restrictive covenant prohibits (1) commercial petroleum (i.e., “the retail or wholesale sale

of products such as gasoline or diesel fuel”) and (2) petroleum byproduct storage yards.

Ed-Sal, on the other hand, reads both “commercial petroleum” and “petroleum

byproducts” as adjectival phrases modifying the complex noun “storage yards.” Thus, Ed-Sal

contends the restrictive covenant prohibits storage yards holding either commercial petroleum or

petroleum byproducts. In support, Ed-Sal relies on Cherokee Water Co. v. Freeman, in which

the Texarkana Court of Appeals interpreted the following deed language: “The Grantor and his

children living or visiting with him are hereby given . . . a right to fish on the land . . . .”

Cherokee Water, 33 S.W.3d at 354. The lower court had construed the deed to mean that any

children who were alive could fish on the property because “with him” only appeared after

“visiting.” The appellate court disagreed, and held that “or” connected “with him” to both

“living” and “visiting.” Id. Thus, only children living with the grantor and children visiting with

the grantor were permitted to fish on the land. Id.

We agree with Ed-Sal’s construction of the covenant language. Just as in Cherokee

Water, the drafter chose to use “or” as a way to connect both “commercial petroleum” and

“petroleum byproducts” with “storage yards.” Instead of saying “commercial petroleum storage

yards and petroleum byproduct storage yards,” the drafter chose to use the conjunction “or” to

express the same proposition. Further, we cannot agree with Needmore Ranch that the drafter

intended for “commercial petroleum” to be a stand-alone prohibited use. “Commercial

petroleum” alone does not describe a land use or operation; rather, it is a product or thing. The

other restrictions in the 1994 deed, in contrast, refer to specific land operations and uses, such as

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drilling, refining, distillation, dumping, and smelting. 2 Accordingly, we conclude the restrictive

covenant at issue prohibits storage yards holding commercial petroleum or petroleum

byproducts.

Having decided that “commercial petroleum” and “petroleum byproducts” modify the

words “storage yards,” we next must decide whether a truck stop qualifies as a commercial

petroleum or petroleum byproducts storage yard. At the outset, we note the parties stress

different sections of the restrictive covenant in support of their arguments. Needmore Ranch

argues Ed Sal’s own manager and expert established through summary judgment evidence that

Ed Sal intends to use the property to sell diesel fuel and gasoline (which Needmore Ranch argues

are commercial petroleum and petroleum byproducts), store that diesel fuel and gasoline on the

property, and then resell it to the public. According to Needmore Ranch, such use is

unambiguously prohibited by the restrictive covenant which Needmore Ranch contends

“prohibits storage of commercial petroleum or petroleum byproducts for resale.” Needmore

Ranch further asserts its interpretation harmonizes the entire restrictive covenant, including the

exception language “that only permits storage of ‘limited amounts,’ and even then, not for resale

2 The restrictive covenant prohibits the following fourteen operations and uses: (1) Residential uses of any type. (2) Trailer courts, recreational vehicle campgrounds, or any temporary residential use of any kind including but not limited to migrant worker or other labor camps. (3) Junkyards or recycling facilities. (4) Drilling for and removing of oil, gas, or hydrocarbon substances. (5) Refining of petroleum or petroleum byproducts. (6) Commercial petroleum or petroleum byproducts storage yards; except in limited amounts which are not stored for resale and are used by the owner or tenant in conjunction with the primary land use, and then only with the written approval of Dolores Development Company. (7) Commercial excavation, mining, or outdoor storage of building or construction materials, except for excavation and storage necessary in approved construction. (8) Fat rendering. (9) Distillation of bones. (10) Stockyards, animal slaughter, or animal processing facilities. (11) Dumping, disposal, incineration, or reduction of garbage, sewage, offal, dead animals, or other refuse. (12) Smelting of iron, tin, zinc, or other ore or ores. (13) Jails, prisons, detention centers, or honor farms. (14) Cemeteries.

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but just for primary land use.” Ed-Sal replies that the restrictive covenant prohibits two types of

storage yards and a truck stop is simply not a storage yard. Additionally, Ed-Sal stresses that the

exception language found within the restrictive covenant applies only if a storage yard is at issue.

While it is true that we read the covenant as a whole and give effect to every sentence,

clause, and word, we disagree with Needmore Ranch’s reading of the restrictive covenant.

Exceptions are limitations on the language that precedes them. See Silver Spur Addition

Homeowners v. Clarksville Seniors Apts., 848 S.W.2d 772, 775 (Tex. App.—Texarkana 1993,

writ denied). Here, we have a restrictive covenant and a limiting exception to that restrictive

covenant. In other words, the restrictive covenant prohibits a “commercial petroleum or

petroleum byproducts storage yard” on the property at issue unless the “commercial petroleum or

petroleum byproducts storage yard” meets all three prongs of the exception—i.e., (1) “limited

amounts which are not stored for resale,” (2) “used by the owner or tenant in conjunction with

the primary land use,” and (3) “with the written approval of [Needmore Ranch].” If all three

prongs are met, the “commercial petroleum or petroleum byproducts storage yard” is permitted.

The exception language does not define or clarify what is meant by a “commercial petroleum or

petroleum byproducts storage yard.” We certainly cannot say, as Needmore Ranch seems to

suggest, that the exception language demonstrates that the drafters intended to prohibit truck

stops where fuel is sold. We must still decide whether a truck stop is an operation or use falling

within the restrictive covenant prohibiting a “commercial petroleum or petroleum byproducts

storage yard.” 3

3 Needmore Ranch also contends its reading of the restrictive covenant is correct because in Smith v. Mobil Oil Corp., 495 S.W.2d 628 (Tex. Civ. App.—Eastland 1973, no writ), the following restrictive covenant was held to prohibit the use of the plaintiffs’ property as a driveway for a service station:

It is expressly agreed and covenanted between the parties hereto that at no time within a period of 25 years from the date hereof shall the following described land be used for the storage, sale, distribution or advertising of petroleum or by-products thereof.

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Unable to locate authority defining or discussing a petroleum storage yard, we look to the

plain, ordinary meaning of the term “storage yard.” Heritage Resources, Inc. v. NationsBank,

939 S.W.2d 118, 121 (Tex. 1996) (observing that when courts construe unambiguous

instruments they “give terms their plain, ordinary, and generally accepted meaning”); Wilmoth v.

Wilcox, 734 S.W.2d 656, 657-58 (Tex. 1987) (words and phrases used in a covenant will be

given their commonly accepted meaning). The term “storage” implies that goods will be kept in

bulk and not available for immediate sale or disposition. See BLACK’S LAW DICTIONARY 1273

(5th ed. 1979) (defining “storage” as “safekeeping of goods in a warehouse or other

depository”); see also THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE (3rd

ed. 1996) (defining “yard” as “a tract of ground adjacent to, surrounding, or surrounded by a

building or group of buildings”).

In Hasekamp v. Superior Equip. Co., 490 S.W.2d 385 (Mo. Ct. App. 1973), a Missouri

court of appeals was asked to determine whether a defendant was using property as a “storage

yard” in violation of a zoning ordinance. The court noted:

. . . [T]he underlying idea of the word ‘storage’ is that of holding or safe keeping goods in a warehouse or other depository . . . As commonly used, the term is not to be applied to goods or merchandise on hand for immediate sale and disposition, as in the case of the monuments which [defendant] keeps on his premises for sale and not for storage, and which he sells, as does any other retail merchant, whenever a purchaser may be found.

Id. at 389 (quoting Killian v. Brith Sholom Congregation, 154 S.W.2d 387, 395 (Mo. Ct. App.

1941)). Ed-Sal argues the reasoning in Hasekamp is sound and applies here because the truck

stop it seeks to build is not intended as a depository to hold, store, or safeguard goods, and

therefore, would not qualify as a “storage yard.”

Id. at 629. We find Smith to be distinguishable; the restrictive covenants are different. In Smith, there was a clear restriction against “the storage, sale, distribution or advertising of petroleum or by-products thereof.” Id.

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We agree with Ed-Sal and cannot conclude that a truck stop meets the common definition

of a storage yard. The truck stop envisioned by Ed-Sal is a retail business, and not a warehouse

for storing petroleum products. Even the fact that some fuel may be kept on the premises until it

is sold does not convert the truck stop into a petroleum storage yard. In Keller v. Lyman, 66 Pa.

D. & C. 591, 594-95 (1949), the defendants sought to stop the operation of a used car lot on

property that was subject to an ordinance which prohibited “warehouses or storage yards.” The

court held that although slow-turnover could cause some cars to sit on the lot for a long period of

time, the car lot was not a warehouse or storage yard because all retailers have held merchandise

for an extended period of time. Id. Were the opposite true, Home Depot would not be a home

improvement establishment, but a lumber yard, and HEB would not be a grocery store, but a

food warehouse. See id.

Further, our interpretation avoids the unreasonable result of prohibiting the sale of fuel

and gasoline on the property when the plain language of the restrictive covenant prohibits only

the storage of such products. See Fitzgerald v. Advanced Spine Fixation Sys. Inc., 996 S.W.2d

864, 867 (Tex. 1999) (noting that court’s construction of plain language of a statute must avoid

absurd results if the language will allow). Finally, we note the drafters of the 1994 warranty

deed were very specific about listing the prohibited land uses and operations, including

recreational vehicle campgrounds, junkyards, stockyards, jails, and cemeteries. It is therefore

reasonable to assume that had the drafters intended to prohibit truck stops or gas stations, they

could have specifically done so. We therefore hold as a matter of law that a truck stop is not a

commercial petroleum or petroleum byproducts storage yard, and that the restrictive covenant at

issue in this lawsuit does not prohibit Ed-Sal from building and operating a truck stop on the

subject property. Accordingly, we sustain Ed-Sal’s issues on appeal, and reverse the judgment

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of the trial court. Because the parties submitted competing motions for summary judgment, we

render the judgment the trial court should have, and declare that building and operating a truck

stop on the subject property would not violate the restrictive covenant prohibiting commercial

petroleum or petroleum byproducts storage yards.

CONCLUSION

We reverse the judgment of the trial court, dissolve the injunction, and render judgment

in Ed-Sal’s favor.

Phylis J. Speedlin, Justice

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