Fedgess Shopping Centers, Ltd. v. MNC SSP, Inc. MNC MCT, Inc. MNC Memorial City Terrace, L.P. And MNC Spring Shadows Place, L.P.

• Court: Court of Appeals of Texas
• Decided: December 18, 2007
• Docket: 14-07-00211-CV
• Status: Published

Opinion

Affirmed and Memorandum Opinion filed December 18, 2007

Affirmed and Memorandum Opinion filed December 18, 2007.

In The

Fourteenth Court of Appeals

____________

NO. 14-07-00211-CV

FEDGESS SHOPPING CENTERS, LTD., Appellant

V.

MNC SSP, INC.; MNC MCT, INC.; MNC MEMORIAL CITY TERRACE, L.P.; AND MNC SPRING SHADOWS PLACE, L.P., Appellees

On Appeal from the 190th District Court

Harris County, Texas

Trial Court Cause No. 2006-02381

M E M O R A N D U M   O P I N I O N

This appeal arises out of a dispute over the proper disposition of funds held in escrow pursuant to a sale of real property.  Appellant, FedGess Shopping Centers, Ltd. (AFedGess@), appeals a summary judgment in favor of appellees, MNC SSP, Inc., MNC MCT, Inc., MNC Memorial City Terrace, L.P., and MNC Spring Shadows Place, L.P. (collectively AMNC@).  We affirm.

I.  BACKGROUND

FedGess owned two tracts of land, one known as the I-10 Gessner Shopping Center (the AProperty@), and the other the Federal East Plaza Shopping Center.  MNC Terrace at Willowbrook, L.P. (AWillowbrook@) became interested in acquiring the Property.  During negotiations with Willowbrook, the Texas Department of Transportation (ATXDOT@) was conducting a condemnation proceeding and sought to take a portion of the Property (the ATXDOT Tract@).  TXDOT first offered $1,975,850 to compensate FedGess for the taking of the TXDOT Tract, but FedGess declined the offer and hired attorney Stephen I. Adler to obtain a higher award.  Adler and FedGess executed an attorney=s fees contract that would pay Adler twenty-five percent of the amount he obtained for the TXDOT Tract above TXDOT=s original offer of $1,975,850.  Adler=s efforts prompted TXDOT to make another offer in the amount of $2,285,761. 

On January 14, 2005, Willowbrook and FedGess executed a Purchase and Sale Agreement (the APSA@); Willowbrook immediately assigned its interest to MNC.   While the sale of the Property was pending, it became clear that the condemnation proceedings would not be concluded prior to closing.  Additionally, the parties anticipated that the condemnation award would exceed the amount of the second $2.2 million offer.  In response, FedGess and MNC signed an amendment to the PSA and an escrow agreement (the AEscrow Agreement@).  The purpose of the PSA amendment and the Escrow Agreement was to ensure that FedGess would receive a fair value of the TXDOT Tract award in the condemnation proceeding, which the parties believed was worth at least $4,000,000.

Pursuant to the amendment, MNC agreed to pay FedGess $2.2 million for the TXDOT Tract at closing, and agreed to deposit an additional $1.8 million in an interest bearing escrow account, subject to the terms of the Escrow Agreement.  The amendment also required MNC to hire Dixon Montague of Vinson & Elkins to represent MNC in the condemnation proceeding after closing on the Property.  (Prior to closing on the Property, Adler had represented FedGess in the condemnation proceeding.) 

According to the relevant portions of the Escrow Agreement, FedGess was entitled to the $1.8 million (plus interest) in escrow less legal fees and expenses associated with the condemnation proceeding after closing if the condemnation award was more than $4 million.  Before the condemnation proceeding was settled with TXDOT, FedGess and MNC closed on the Property, and $1.8 million was deposited in an escrow account with Alamo Title Company (AAlamo@).  MNC did not hire Montague; Adler ultimately settled the condemnation proceeding for $4,510.844.  MNC paid Adler=s fee at the closing of the final condemnation settlement.  Thereafter, FedGess refused to allow Adler=s post-closing attorney=s fees to be deducted from the $1.8 million (plus interest) escrow account.  It based its refusal on MNC=s failure to hire Montague.  As a result, this lawsuit arose over the disposition of the funds held in escrow by Alamo and whether Adler=s post-closing attorney=s fees were to be paid by MNC or by FedGess from the escrow deposit.

FedGess filed suit against MNC for breach of contract and sought a declaratory judgment regarding the rights of the parties under the PSA, the PSA amendment, and the Escrow Agreement.  MNC counter-claimed for breach of contract and declaratory judgment.  Both parties moved for summary judgment.  The trial court denied FedGess=s motion for summary judgment and granted MNC=s summary judgment motion.  The trial court found that FedGess was obligated to pay MNC, from the escrow deposit, all of Adler=s attorney=s fees and expenses, including his post-closing fees and expenses, associated with the condemnation proceeding.

On appeal, FedGess argues that the trial court erred in granting MNC=s motion for summary judgment because: (1) appellant=s affirmative defense of prior material breach is a question of fact for the jury; and (2) the PSA amendment and the Escrow Agreement are ambiguous regarding which party is required to pay post-closing attorney=s fees since Montague was not hired for the condemnation proceeding. 

II.  STANDARDS OF REVIEW

Summary judgment under rule 166a(c) is proper only when a movant establishes that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law.  Tex. R. Civ. P. 166a(c); Randall=s Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995).  We review a summary judgment de novo.  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).  A defendant is entitled to summary judgment if the evidence disproves as a matter of law at least one element of each of the plaintiff=s causes of action or if the evidence conclusively establishes all elements of an affirmative defense.  See Randall=s, 891 S.W.2d at 644. 

When both parties, as here, move for summary judgment on the same issues and the trial court grants one motion and denies the other, the reviewing court considers the summary judgment evidence presented by both sides, determines all questions presented, and renders the judgment the trial court should have rendered.  Dorsett, 164 S.W.3d at 661; FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).   In reviewing a summary judgment, we must indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor.  Randall=s, 891 S.W.2d at 644; Lawson v. B Four Corp., 888 S.W.2d 31, 33 (Tex. App.CHouston [1st Dist.] 1994, writ denied).  Declaratory judgments decided by summary judgment are reviewed under the same standards of review that govern summary judgments generally.  Lidawi v. Progressive County Mut. Ins. Co., 112 S.W.3d 725, 730 (Tex. App.CHouston [14th Dist.] 2003, no pet.). 

III.  AFFIRMATIVE DEFENSE

In FedGess=s first issue, it argues that the trial court erred in granting MNC=s motion for summary judgment because FedGess=s affirmative defense of prior material breach is a question of fact for the jury.  More specifically, FedGess contends that MNC breached the PSA amendment and the escrow agreement when if failed to hire Montague after closing.  According to FedGess, it was material to the PSA amendment and the Escrow Agreement that Montague (not Adler) prosecute the condemnation proceeding.  Materiality arises from the facts that (1) FedGess considered Montague the best condemnation attorney in the State of Texas, and (2) FedGess wanted to recover as high an amount as possible from TXDOT in the condemnation proceeding.  FedGess argues that a jury is required to determine whether MNC=s breach was material. 

A party breaches a contract when it neglects or refuses to perform a contractual obligation.  Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.CHouston [14th Dist.] 2006, pet. denied).  If the breach is material, the other party is excused from further performance of the contract.  See Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex. 1994).  Texas courts apply the considerations set forth in Restatement (Second) of Contracts ' 241(a) (1981) in determining whether the breach was material.  Mustang Pipeline Co., Inc v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 199 (Tex. 2004).  The factors are:

(1) the extent to which the injured party will be deprived of the benefit which he reasonably expected;

(2) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;

(3) the extent to which the party failing to perform or to offer performance will suffer forfeiture;

(4) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; and

(5) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Id.; Restatement (Second) of Contracts ' 241(a).

            A court=s primarily consideration in determining the materiality of a breach is the extent to which the non-breaching party will be deprived of the benefit it reasonably could have anticipated had the breach not occurred.  Hernandez, 875 S.W.2d at 693.  The less the non-breaching party is deprived of the expected benefits, the less likelihood the breach is material.  Id.          In the present case, appellant failed to produce evidence that raises a disputed fact issue as to whether appellees= breach caused it to be deprived of the benefit it reasonably anticipated. FedGess anticipated a condemnation award exceeding $4 million; MNC settled the condemnation proceeding for $4.5 million.  Though the issue of whether a breach rises to the level of a material breach is generally a fact question, appellant must still produce evidence showing deprivation of the anticipated benefit to put this material fact in dispute.  See Seale v. Nichols, 505 S.W.2d 251, 253-54 (Tex. 1974); Richardson v. Office Bldgs. of Houston, 704 S.W.2d 373, 376 (Tex. App.CHouston [14th Dist.] 1985, no writ) (to show there was a disputed fact issue to preclude summary judgment, appellant was required to offer summary judgment proof on each element of the affirmative defense).   Here, FedGess has failed to prove the existence of a fact issue on the question of materiality.  It simply makes conclusory statements that the breach was material because it considered Montague the best condemnation attorney in Texas.  FedGess produced no evidence showing how it was materially injured by Adler=s representation, or how it was deprived of the benefit it reasonably could have anticipated had Montague been hired.  Instead, the record reflects that FedGess received what it reasonably anticipated: a condemnation award exceeding $4 million.  Because FedGess has failed to produce evidence implicating materiality, there is no disputed fact issue as to whether MNC committed a material breach.  See id.  Accordingly, the trial court did not err is granting summary judgment.  We overrule FedGess=s first issue.

IV.  AMBIGUITY

In FedGess=s second issue, it argues that the trial court erred in granting MNC=s motion for summary judgment because the PSA amendment and escrow agreement are ambiguous regarding which party is required to pay post-closing attorney=s fees if Montague is not hired for the condemnation proceeding. 

The law in regard to contract interpretation is clear and well-settled.  The interpretation of an unambiguous contract is a question of law, which is reviewed de novo.  MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999).  Whether a contract is ambiguous is also a question of law.  Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996).  To determine whether a contract is ambiguous, we look at the agreement as a whole in light of the circumstances present when the parties entered into the contract.  Nat=l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).  We examine and consider the entire writing in an effort to harmonize and to give effect to all the provisions of the contract so that none will be rendered meaningless.  Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133-35 (Tex. 1994); CenterPoint Energy Houston Elec., L.L.P. v. Old TJC Co., 177 S.W.3d 425, 430 (Tex. App.CHouston [1st Dist.] 2005, pet denied).  No single provision will control; rather, all provisions must be considered with reference to the whole instrument.  Forbau, 876 S.W.2d at 134; Old TJC, 177 S.W.3d at 430.

Our primary concern in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument.  Forbau, 876 S.W.2d at 133; Lone Star Heat Treating Co., Ltd v. Liberty Mut. Fire Ins. Co., 233 S.W.3d 524, 527 (Tex. App.CHouston [14th Dist.] 2007, no pet.).  If a contract is worded in such a way that it can be given a definite or certain legal meaning, then the contract is not ambiguous.  CBI Indus., 907 S.W.2d at 520.  A contract will become ambiguous only if its meaning is uncertain or if it is subject to two or more reasonable interpretations.  Id.  An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract.  Forbau, 876 S.W.2d at 134. 

FedGess argues that the PSA amendment and the Escrow Agreement are ambiguous because the parties offer two interpretations, one that the post-closing legal fees and expenses incurred by anyone other than Montague are to be paid by MNC and the other that all post-closing legal fees and expenses are to be paid by FedGess, regardless of who is hired to prosecute the condemnation proceeding.  However, an ambiguity does not arise simply because the parties advance conflicting interpretations of the contract.  Id.  Our primary concern is to ascertain the true intent of the parties as expressed in the instrument; we examine and consider the entire writing in an effort to harmonize and to give effect to all the provisions of the contract.  Forbau, 876 S.W.2d at 133-34.  The relevant portions of the PSA amendment reads:

because of the pending finality of the Existing Gessner Condemnation and because it is anticipated the total amount of the award will exceed $4,000,000.00, Purchaser hereby agrees to escrow at closing an additional sum of One Million Eight Hundred Thousand Dollars (1,800,000.00) (the AEscrow Deposit@) with the Seller=s Title Company pursuant to the terms of an Escrow Agreement agreed to by Seller and Purchaser and Seller=s Title Company as conditional purchase proceeds pending determination and receipt of the final award (the AAward@) paid by TXDOT for taking the TXDOT Tract.  In addition . . .

Seller shall, at Seller=s expense, pay all legal fees, costs and expenses, appraiser fees and other costs and expenses associated with the Existing Gessner Condemnation incurred prior to the date of Closing including but not limited to legal fees of Stephen Adler.  Purchaser shall hire Dixon Montague of Vinson & Elkins to represent Purchaser in the Existing Gessner Condemnation.  Dixon Montague=s fees shall be 30% of the amount of the Condemnation Award on the existing condemnation in excess of $2,000,000.00 and such fees and all expenses related to the Existing Gessner Condemnation shall be paid out of the Escrow Deposit before any amount is paid to Seller.

The relevant portion of the Escrow Agreement reads:     

In the event that the condemnation award (the AAward@) in the Existing Gessner Condemnation is $2,200,000 or less, the entire amount of the Escrow Deposit shall be paid to Buyer. In the event that the award is greater than $2,200,000 and not more than $4,000,000, the amount of the Award (less $2,200,000 less all expenses incurred in connection with the Existing Gessner Condemnation not previously paid by Seller including but not limited to fees due to Stephen Adler) shall be paid to Seller, and the remainder of the Escrow Deposit shall be paid to Buyer.  In the event the amount of the Award is greater than $4,000,000 then the entire Escrow Deposit (less all other expenses incurred in connection with the Existing Gessner Condemnation not previously paid by Seller including but not limited to fees due to Stephen Adler) shall be paid to Seller and the remainder of the Escrow Deposit shall be paid to Buyer. 

It is undisputed that of the three scenarios regarding disposition of the escrow funds and legal fees, the third scenario is controlling in this case.  Importantly, the Escrow Agreement provided that FedGess would pay all legal fees and expenses in the second scenario (an award between $2.2 million and $4 million) and in the third scenario (an award over $4 million).  Both agreements clearly reflect that the parties intended to negotiate an award exceeding $4 million and that FedGess would pay the legal fees associated with a $4 million award.  The agreements do not become ambiguous simply because MNC was suppose to hire Montague and the parties did not indicate who would be responsible for attorney=s fees if Montague was not hired.  See Forbau, 876 S.W.2d at 134 (stating that no single provision will control; rather, all provisions must be considered with reference to the whole instrument).  The agreements here are worded in such a way that the provisions regarding the party responsible for legal fees and expenses in the case of a $4 million award can be given a definite or certain legal meaning.  See CBI Indus., 907 S.W.2d at 520.

Moreover, a contract is ambiguous only if its meaning is uncertain or if it is subject to two or more reasonable interpretations.  Id.  FedGess=s interpretation, that it was responsible for attorney=s fees if only Montague was hired, is unreasonable and not supported by the four corners of the contract.  There is nothing in the agreements that reflects any intent to shift the responsibilities for payment of legal expenses associated with the condemnation away from FedGess and over to MNC.   Accordingly, FedGess has not provided two or more reasonable interpretations of the agreements sufficient to render them ambiguous.  We therefore hold  that the agreements are not ambiguous.  We overrule FedGess=s second issue.

We affirm the trial court=s judgment.

/s/      Adele Hedges

Chief Justice

Judgment rendered and Memorandum Opinion filed December 18, 2007.

Panel consists of Chief Justice Hedges and Justices Anderson and Seymore.