Arbor Windsor Court, Ltd. v. Weekley Homes, LP

463 S.W.3d 131

Arbor Windsor Court, Ltd., Appellant

v.Weekley Homes, LP, Appellee

NO. 14–13–00480–CV

Court of Appeals of Texas, Houston (14th Dist.).

Majority and Dissenting Opinions filed March 17, 2015

Rehearing En Banc Overruled June 2, 2015

Neal D. Cannon, Jr., Houston, TX, Kemp W. Gorthey, Austin, TX, for Appellant.

N. Terry Adams, Jr., Houston, TX, for Appellee.

Panel consists of Justices McCally, Busby, and Donovan.

OPINION

Sharon McCally, Justice

Appellant, Arbor Windsor Court, Ltd. (Arbor), appeals the trial court's judgment following a jury verdict. Specifically, in two main issues, Arbor contends the trial court erred in rendering a take-nothing judgment on its breach of contract claims against Weekley Homes, LP (Weekley). Weekley also asserts two conditional cross-points in support of the trial court's judgment. We affirm.

I. Background

A. Summary Factual Background

In April 2006, Arbor and Weekley entered into an “Agreement for Sale and Purchase of Lots” (the Agreement) whereby Arbor would purchase the land and develop the lots, and then Weekley would buy the developed lots. To that end, Arbor secured a $3,850,000 loan to purchase the land and develop 32–35 lots. Arbor's loan had a two year payoff, beginning on June 30, 2006, and was secured by a deed of trust. The Agreement between Arbor and Weekley provided a rolling schedule for Weekley to purchase the lots. From 2006 to December 1, 2008, the disputed evidence at trial showed that each party believed the other was not fulfilling its obligations under the Agreement and they attempted resolution through amended agreements, culminating in the parties' final Fourth Amendment. By this time, Weekley had bought only 18 of the lots and, as a result, Arbor alleges, Arbor was in default on the loan.

In March 2009, the mortgage company advised Arbor that Texas Community Bank purchased its loan. Arbor later learned the loan had been subsequently purchased by FETC, the entity which eventually gave Arbor notice of its intent to post the land for foreclosure. Arbor proposed to Weekley that Arbor and Weekley jointly attempt to avoid the foreclosure. They did not. FETC foreclosed on the property. Weekley appeared at the foreclosure sale and purchased the properly for $1,320,000.

B. Procedural Background

Arbor sued Weekley¹ for breach of the Agreement and its amendments for failing to purchase lots according to the schedule, as well as for fraud and wrongful foreclosure. Weekley counter sued Arbor for breach of contract. The parties tried their claims to a jury.² Some of the jury's answers favored Arbor and some favored Weekley. Because the issues dispositive of this appeal turn entirely upon the jury's answers to (or failures to answer) Questions Nos. 1, 2, 3, and 4, we set forth those questions and any associated predicate instructions verbatim, along with the responses from the jury:

• Question No. 1

Question No. 1

Do you find that Arbor Windsor Court performed all of the conditions precedent to the agreement as set forth below:

Provided Weekley Homes with 15 days written notice of default under the written agreement so that Weekley could cure such default.

Answer “Yes” or “No.”

The jury answered Question No. 1 “No.”

• Question No. 2

Question No. 2 is preceded by the following predicate instruction: “If you answered ‘Yes' to Question No. 1, answer the following question. Otherwise, do not answer question No. 2.”

Question No. 2

Was Arbor Windsor Court excused from sending a notice of default to Weekley Homes?

You are instructed that Arbor Windsor Court is excused from complying if the failure, if any, was

1. not material, or

2. was waived, or

3. if Weekley Homes anticipatorily repudiated the agreement or

4. if Weekley Homes is estopped from complaining of Arbor Windsor Court's failure to comply with the agreement.

Answer “Yes” or “No.”

The jury did not answer Question No. 2 because of the predicate.

• Question No. 3

Question No. 3

Did Weekley Homes fail to comply with the agreement?

You are instructed that Weekley Homes is excused from complying if the failure, if any, was

1. not material, or

2. was waived, or

3. if Arbor Windsor Court anticipatorily repudiated the agreement

4. if Arbor Windsor Court is estopped from complaining of Weekley's failure to comply with the agreement.

Answer “Yes” or “No.”

The jury answered Question No. 3 “Yes.”

• Question No. 4

Question No. 4

Did Arbor Windsor Court fail to comply with the agreement?

You are instructed that Arbor Windsor Court is excused from complying if the failure, if any, was

1. not material, or

2. was waived, or

3. if Weekley Homes anticipatorily repudiated the agreement or

4. if Weekley Homes is estopped from complaining of Arbor Windsor Court's failure to comply with the agreement.

Answer “Yes” or “No.”

The jury answered Question No. 4 “No.”

Arbor sought judgment on the jury verdict based upon the jury's answer to Question No. 3 (Weekley failed to comply). Weekley sought judgment on the jury verdict based upon the jury's answer to Question No. 1 (Arbor did not perform the condition precedent), or in the alternative, judgment notwithstanding the verdict. The trial court rendered a take-nothing judgment in favor of Weekley without specifying the basis therefor. This appeal ensued.

II. Analysis

A. Weekley's Motion for Judgment on the Verdict

The sole basis for Weekley's motion for judgment on the verdict was the jury's answer to Question No. 1. As a factual matter, Arbor did not and does not here dispute that it failed to send the written notice. Arbor's factual position is that it “accepted Weekley's request not to send this notice.” Therefore, Arbor does not challenge the sufficiency of the evidence to support the answer to Question No. 1.

Instead, Arbor argues two independent legal reasons that the jury's answer to Question No. 1 on condition precedent does not support a Weekley Homes judgment. Both of these issues turn on well-established law governing conditions precedent: A condition precedent must either be met or excused before the other party's obligation may be enforced.³ See Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976). First,⁴ Arbor argues that Question No. 1 should not have been submitted to the jury because the contractual fifteen-day notice provision is not a condition precedent as a matter of law.⁵ Second, Arbor argues that even if the notice provision is a condition precedent, the jury's answer to Question No. 1 became immaterial when the jury explicitly found, in answer to Question No. 4, that Arbor did not fail to comply with the Agreement and thereby implicitly determined that Arbor was excused from performing the condition precedent.

B. Standard of Review for Entry of Judgment on Jury Verdict

Our review of a trial court's entry of judgment on a jury verdict presents a pure question of law. Tex Star Motors, Inc. v. Regal Fin. Co., Ltd., 401 S.W.3d 190, 202 (Tex.App.–Houston [14th Dist.] 2012, no pet.) (noting that determining the legal effect of the jury's answers is a question of law). As such, we review the trial court's decision de novo. See Hicks v. Hicks, 348 S.W.3d 281, 284 (Tex.App.–Houston [14th Dist.] 2011, no pet.) (“We review questions of law de novo.”); see also Resurgence Fin., L.L.C v. Lawrence, No. 01–08–00341–CV, 2009 WL 3248285, at *2 (Tex.App.–Houston [1st Dist.] Oct. 8, 2009, no pet.) (mem.op.) (citing In re Humphreys, 880 S.W.2d 402, 404 (Tex.1994) (stating in the context of entry of judgment that “questions of law are always subject to a de novo review”)).

1. The fifteen-day notice provision is a condition precedent.

The Agreement included the following fifteen-day notice provision:

Notwithstanding the foregoing, Seller and Purchaser covenant and agree, each with the other, to give fifteen (15) days' written notice of any default during which time same may be cured prior to exercise of any rights or remedies pursuant to this Agreement.

As outlined above, the jury determined that Arbor did not perform the “condition precedent” to provide Weekley with fifteen days' written notice of default.

We resolve whether a contractual provision is a covenant or a condition precedent by examining the entire contract to determine the parties' intent. See Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex.1990). Our goal is to determine whether the parties intended that the right or responsibility at issue be conditional. See Restatement (Second) of Contracts § 226 cmt. a (1981). As part of that contract review, we apply additional common law principles that reflect Texas public policy disfavoring conditions precedent. For example, the Texas Supreme Court instructs that “[i]n construing a contract, forfeiture by finding a condition precedent is to be avoided when another reasonable reading of the contract is possible.” Criswell, 792 S.W.2d at 948. Thus, if the language of the contract is susceptible to a non-condition precedent interpretation, we accept that construction and construe the language as a mere covenant. See id.⁶

We begin by noting that neither party argues that the notice provision of the Agreement is ambiguous.⁷ As such, neither party undertakes in any way to set forth two reasonable but competing interpretations of the provision. Instead, Arbor points to (a) the parties' use of the word “covenant” and (b) the absurd result that would flow from reading the provision as a condition precedent.⁸ And, Weekley points to the parties' use of the term “prior to” and argues that this phrase constitutes conditional language that is completely without meaning unless it creates a condition precedent.

The parties are in accord on the general principles of contract interpretation as it relates to conditions precedent. To glean the parties' intent to create a condition precedent, we look for conditional language such as “if,” “provided that,” or “on condition that.” Id. Our task is to construe the entire agreement, and that task is not altered by the parties' use of “magic words” in the...