Karl J. Lyons v. Terry David Ortego and Donna Hall Ortego, Individually and D/B/A D&D Supply

Opinion issued August 23, 2018

In The

Court of Appeals

For The

First District of Texas

————————————

NO. 01-17-00092-CV

———————————

KARL J. LYONS, Appellant

V.

TERRY DAVID ORTEGO AND DONNA HALL ORTEGO,

INDIVIDUALLY AND D/B/A D&D SUPPLY, Appellee

On Appeal from the 281st District Court

Harris County, Texas

Trial Court Case No. 2014-31125

MEMORANDUM OPINION

Karl Lyons appeals the trial court’s judgment awarding Terry and Donna

Ortego specific performance of the parties’ contract for the sale of real property.

Lyons argues that the contract terminated by its own terms, so it cannot support an

award of specific performance. To the extent he breached the contract before it

terminated, he contends that the Ortegos were required to prove their tender of

performance to be entitled to specific performance. Consequently, he seeks

reversal of the judgment compelling his specific performance of the contract,

including the trial court’s award to the Ortegos of attorney’s fees, court costs, and

other litigation expenses.

Because the contract terminated by its unambiguous terms without a written

extension, and because the Ortegos were not excused from proving their tender of

performance, we reverse. We render judgment that the Ortegos’ earnest money be

returned to them and that they otherwise take nothing by their claims.

Background

The parties’ dispute centers on their contract for the sale of commercial real

property in northern Harris County. The property was rented and occupied by

appellees Terry and Donna Ortego. A business operated out of a building on the

property, selling water pipes and related equipment. In early 2013, appellant Karl

Lyons informed the Ortegos that he was the new owner of the property, and they

agreed to a lease. The lease included an option for the Ortegos to buy the property.

The parties subsequently executed a sales contract for the property, and the

Ortegos paid $1,500 in earnest money. The contract stated that it “terminates on

October 15, 2013,” and, separately, that “the closing must occur on or before

October 15, 2013.” It also provided that “[t]ime is of the essence.” If Lyons failed

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to comply for any reason, the contract provided that the Ortegos “may terminate

this contract and receive the Earnest Money or sue for specific performance.” It

contained two integration clauses, both of which provided that the contract “cannot

be changed except by [the parties’] written consent.”

The contract’s paragraph 9(A) set forth a procedure for curing title problems

and extending the “Closing Date,” if necessary, while Lyons worked to cure title

problems. The contract defined “Closing Date” as follows: “The closing of the sale

(the ‘Closing Date’) shall take place at Darden, Fowler, & Creighton, L.L.P. if and

when Buyer exercises the option contained in the Commercial Lease of even date

herewith. The closing must occur on or before October 15, 2013.”

A commitment for title insurance prepared by an insurer for Lyons’s counsel

revealed several title problems that needed to be cured before the insurer would

issue a title-insurance policy. The parties dispute what efforts, if any, Lyons or his

representatives undertook to cure the title problems from September 30, when his

attorney received the commitment, to October 15, the date fixed by the contract for

its termination and for the Closing Date. October 15 passed without any written

amendment changing the termination date.

In April 2014, Lyons became “frustrated” that the transaction and efforts to

cure title were “hassles.” In a letter, he advised the Ortegos that the contract

terminated on October 15, 2013; that he understood that they were unwilling to

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waive the title problems; and that he was ending any further discussions with them

about the sale. Despite the ultimate resolution of the title problems that summer,

Lyons refused to complete the sale.

The Ortegos sued, seeking specific performance of the contract and

damages. They maintain that they were always ready, willing, and able to pay the

contract’s purchase price. Lyons stipulated that, if their claim for specific

performance were to be denied, he would refund their earnest money.

The lawsuit proceeded to trial before a jury. The jury returned answers

mostly favorable to the Ortegos. It found that the parties agreed to extend the

contract beyond its termination either in the contract itself or by the conduct of

Lyons or his agents. It found that Lyons failed to comply with the contract and that

the Ortegos did not “fail to comply.” It found that the parties should have closed

the sale by August 30, 2014, and that the Ortegos were ready, willing, and able to

perform on that date. But the jury awarded no money damages.

Lyons opposed entry of judgment in the Ortegos’ favor, contending in part

that the contract’s integration clauses prevented any unwritten amendment from

extending the contract beyond its termination date.

Based in part on the jury’s answers, the trial court entered a judgment

awarding the Ortegos specific performance of the contract, attorney’s fees, court

costs, and other litigation expenses. The court conditioned Lyons’s

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specific-performance obligation on the Ortegos paying the $435,000 purchase

price, less the earnest money and the sums for attorney’s fees, court costs, and

other litigation expenses that the court awarded.

Lyons moved for a new trial, again arguing that the contract terminated on

October 15, 2013, and that it therefore could not be specifically enforced. The trial

court denied the motion. This appeal followed.

Analysis

I. Interpretation of sales contract

In his first issue, Lyons contends that the contract terminated on its

termination date of October 15, 2013, and that it was not extended by any other

provision in the contract or by the parties’ conduct.

Specific performance is an equitable remedy for breach of contract. Luccia

v. Ross, 274 S.W.3d 140, 146 (Tex. App.—Houston [1st Dist.] 2008, pet. denied).

The elements of a contract claim are (1) the existence of a valid contract, (2) the

plaintiff’s performance or tendered performance, (3) the defendant’s breach, and

(4) the plaintiff’s damages sustained as a result of the breach. Id. Therefore, to be

entitled to specific performance, a party must show that the contract is valid and

enforceable. See Antwine v. Reed, 199 S.W.2d 482, 485 (Tex. 1947); Nguyen v.

Woodley, 273 S.W.3d 891, 898 (Tex. App.—Houston [14th Dist.] 2008, no pet.).

When a contract for the sale of real property terminates by its own terms, it no

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longer may be specifically enforced. See Cate v. Woods, 299 S.W.3d 149, 153

(Tex. App.—Texarkana 2009, no pet.); Nguyen, 273 S.W.3d at 898.

Interpreting unambiguous contract language is a question of law, reviewed

de novo. See Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015). “In

construing a contract, a court must ascertain the true intentions of the parties as

expressed in the writing itself.” Id. at 450 (quoting Italian Cowboy Partners, Ltd.

v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011)). Generally, we

interpret a written contract according to what is expressed in the contract’s

language and not according to extra-contractual expressions of intent. See URI,

Inc. v. Kleberg Cty., 543 S.W.3d 755, 763–64 (Tex. 2018); Anglo-Dutch Petrol.

Int’l, Inc. v. Greenberg Peden, P.C., 352 S.W.3d 445, 451 (Tex. 2011).

A court must examine and consider the entire writing and harmonize and

give effect to all provisions of the contract so that none are rendered meaningless.

Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex. 2014). A court

must not “make new contracts between the parties and must enforce the contract as

written.” In re Davenport, 522 S.W.3d 452, 457 (Tex. 2017) (orig. proceeding).

Contract language should be given its plain, ordinary, and generally

accepted meaning, unless the writing directs otherwise or unless the contract itself

shows that the language to be interpreted is being used in a technical or different

sense. See URI, 543 S.W.3d at 764; Moayedi, 438 S.W.3d at 7.

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Lyons relies on the contract’s termination language in paragraph 3: “This

Contract terminates on October 15, 2013.” He contends that this termination date

was never extended. If not extended by some means, then this unambiguous

language requires us to conclude that the contract terminated on October 15, 2013.

The Ortegos respond by offering two arguments to support the contract’s

continuation past the termination date, based upon paragraph 9(A) concerning the

“Closing Date” and the parties’ conduct.

A. “Closing Date” provision

The contract defined “Closing Date” in paragraph 7: “The closing of the sale

(the ‘Closing Date’) shall take place at Darden, Fowler, & Creighton, L.L.P. if and

when Buyer exercises the option contained in the Commercial Lease of even date

herewith. The closing must occur on or before October 15, 2013.” The Ortegos

rely on paragraph 9(A)’s provision for extending the Closing Date to justify

extension of the contract’s termination date. The relevant language provided:

Buyer shall deliver, or cause to be delivered, to Seller within thirty

(30) days from the date of this Contract a Commitment for Title

Insurance (the “Commitment”). If Buyer has an objection to items

disclosed in such Commitment provided for herein, Buyer shall have

twenty (20) days after receipt of each such instrument to make written

objections to Seller. If Buyer makes such objections or if the

objections are disclosed in Commitment or by the issuer of the Title

Policy, Seller shall have twenty (20) days from the date such

objections are disclosed to cure the same, and the Closing Date shall

be extended, if necessary. Seller agrees to utilize its best efforts and

reasonable diligence to cure such objection, if any. If the objections

are not satisfied within such time period, Buyer may (i) terminate this

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Contract and the Earnest Money shall be refunded to Buyer, or

(ii) elect to waive the unsatisfied objections and complete the

purchase

(Emphasis supplied.)

Under this contract, the termination date and the Closing Date were distinct

concepts identified by distinct language. The contract’s anticipation of the

possibility of the Closing Date being extended beyond the initially stated deadline

(“on or before October 15, 2013”) is not inconsistent with the separate provision

that provided for termination by a date certain. The contract specified that time was

“of the essence.” The contract included integration clauses, which required that

amendments be in writing. Even after the termination date passed, the parties were

free to negotiate toward completing the sale. If they intended to remain bound by

the contract, they could have confirmed that in writing.

We must enforce the parties’ contract as it was written. See Davenport, 522

S.W.3d at 457. As it was written, it unambiguously terminated on October 15,

2013. To hold otherwise in the absence of any written amendment would render

the termination provision meaningless. See Moayedi, 438 S.W.3d at 7.

The Ortegos rely on SHA, LLC v. Northwest Texas Healthcare System, Inc.,

No. 07-13-00320-CV, 2014 WL 31420 (Tex. App.—Amarillo Jan. 3, 2014, no

pet.) (mem. op.), for the proposition that contract language may “implicitly” extend

an express termination date. In SHA, a hospital company and insurer entered into

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two amendments to their reimbursement contract, which provided, respectively,

that “[t]his Agreement shall continue for a term of three (3) years and may not be

terminated by either party except for cause” and that “[b]oth Hospital and

FirstCare agree that this Agreement shall not be terminated by either party without

cause prior to August 31, 2012.” 2014 WL 31420, at *2. The court said that the

two amendments helped the parties “to extend their business relationship” by

“mentioning another three years either explicitly as in the First Amendment, or

implicitly as in the Second Amendment.” Id. at *3. Both explicitly referred to

termination of the contract and circumstances which did not justify termination.

By contrast, the extension of the Closing Date referenced in paragraph 9(A)

did not expressly address the contract’s separate provision of a fixed termination

date. Paragraph 9(A) addressed circumstances that could lead to the extension of

the Closing Date, which initially was designated to occur “on or before October 15,

2013,” yet did not purport to override the contract’s distinct provision of an

October 15, 2013 termination date. We conclude that SHA is distinguishable and

that paragraph 9(A)’s closing provisions did not nullify paragraph 3’s termination

date.

B. Extension of contract by conduct of parties

The Ortegos argue that the termination date of the sales contract was

modified by the conduct of the parties, who worked toward completing the

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transaction even after the October 15, 2013 termination date. Lyons contends that

the statute of frauds and the sales contract’s integration clauses barred the parties

from amending the contract’s termination date except by a written amendment.

See, e.g., Robertson v. Melton, 115 S.W.2d 624, 627 (Tex. 1938) (“To permit the

oral modification is forbidden both by the statute of frauds and by the express

agreement of the parties.”); Colvin v. Rickert, No. 04-05-00165-CV, 2006 WL

285993, at *7–8 (Tex. App.—San Antonio Feb. 8, 2006, pet. denied) (mem. op.)

(holding that contract for sale of real estate terminated by date certain expressed in

contract without any written extension amendment). Paragraph 13(E) provided:

“This Contract constitutes the sole and only agreement of the parties hereto and

supersedes any prior understandings or written or oral agreements between the

parties respecting the within subject matter and cannot be changed except by their

written consent.” Similarly, paragraph 25 stated: “This contract contains the entire

agreement of the parties and cannot be changed except by their written consent.”

The Ortegos contend that Lyons may not rely on the contract’s integration

clauses to contend that the parties’ conduct did not extend the termination date.

They assert that “an integration clause, like any other term, can be modified orally

by the conduct of the parties.”

The only authority the Ortegos rely upon for their argument is Shafer v.

Gulliver, No. 14-09-00646-CV, 2010 WL 4545164 (Tex. App.—Houston [14th

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Dist.] Nov. 12, 2010, no pet.) (mem. op.). In Shafer, the court noted “an exception

to the general rule against oral modification of contracts covered by the statute of

frauds”: certain oral agreements may “extend the time of performance, so long as

the oral agreement is made before the expiration of the written agreement.” See

Shafer, 2010 WL 4545164, at *7. The Shafer court also held that a contract for the

sale of real estate whose closing was expressly set for either a date certain “or

within 7 days after objections to matters disclosed in the Commitment or by the

survey have been cured, whichever date is later,” could close after the date certain

because the seller was not able to provide clear title by the date certain. See id.

Shafer is distinguishable because it involved only the statute of frauds and not, as

here, an express contractual provision that required any amendment to be in

writing. The contract at issue in Shafer also did not include an express termination

date separate from the provisions that set the closing date.

Finally, the Ortegos contend, without citation to authority, that Lyons should

have pleaded and secured jury findings on the integration clauses because their

application is an affirmative defense. This misplaces the burden of proof: as the

plaintiffs seeking to specially enforce a contract for the sale of real property, the

Ortegos bore the burden of proving the enforceability of a contract. See Antwine,

199 S.W.2d at 485; Cate, 299 S.W.3d at 153; Luccia, 274 S.W.3d at 146; Nguyen,

273 S.W.3d at 898; see also Bell v. Phillips, No. 14-00-01189-CV, 2002 WL

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576036, at *7 (Tex. App.—Houston [14th Dist.] Apr. 18, 2002, no pet.) (not

designated for publication) (noting and applying rule that party claiming contract

modification bears burden of proof on modification).

We therefore hold that the contract’s integration clauses barred any

amendment to the contract’s termination date that was not in writing. As such, we

need not separately address whether the argument that the contract was extended

by the parties’ continued negotiation was foreclosed by the statute of frauds. TEX.

R. APP. P. 47.1. The Ortegos did not identify any writing that extended the

termination date, and because paragraph 9(A) did not extend the termination date,

the contract was not extended beyond October 15, 2013. Accordingly, any

post-termination conduct by the parties cannot support an award of specific

performance of the terminated contract. See Cate, 299 S.W.3d at 153; Nguyen, 273

S.W.3d at 898. We sustain Lyons’s first issue.

II. Specific performance

Our interpretation of the contract is not dispositive of the appeal, because the

jury found that Lyons breached the contract. In his third issue, Lyons contends that

specific performance was not justified because the Ortegos did not adduce

sufficient evidence of their tender of performance.

The Ortegos respond that they were not required to actually pay the purchase

price to Lyons to seek specific performance. Instead, they contend they were only

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required to obtain a jury finding that they were ready, willing, and able to perform.

They argue that they were excused from tendering performance because Lyons

refused to close, according to his April 2014 letter; because he ended all

discussions about a sale in the same letter; and because the contract did not require

them to pay the purchase price until the Closing Date, which never occurred.

Generally, plaintiffs seeking specific performance must prove both that they

tendered performance and that they were ready, willing, and able to perform. See

DiGiuseppe v. Lawler, 269 S.W.3d 588, 593–94, 599–600 (Tex. 2008). “These two

requirements are not the same thing.” Id. at 599.

The tender requirement may be excused in certain cases. It is excused “when

a defendant refuses to perform or repudiates a contract . . . .” Id. at 594. It is also

excused when the defendant has committed a breach that makes the plaintiff’s

tender a “useless act, an idle ceremony, or wholly nugatory.” See id. (quoting

Wilson v. Klein, 715 S.W.2d 814, 822 (Tex. App.—Austin 1986, writ ref’d n.r.e.));

Mustang Amusements, Inc. v. Sinclair, No. 10-07-00362-CV, 2009 WL 3487796,

at *5 (Tex. App.—Waco Oct. 28, 2009, no pet.) (mem. op.) (applying

DiGiuseppe’s “useless act” rule and holding that trial court did not abuse its

discretion by “determining that [real-estate purchaser’s] actual tender would have

been ‘a useless act’ and therefore, was excused”).

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“Where time is of the essence of a contract, a party must perform or tender

performance in strict compliance with the provisions of the contract within the

time prescribed, in order to entitle him to specific performance.” Liedeker v.

Grossman, 206 S.W.2d 232, 234–35 (Tex. 1947). When time is of the essence in a

contract for the sale of real estate, “the buyer must make an actual tender of the

price and demand of the deed within the time allowed by the contract.” Wilson, 715

S.W.2d at 822 (internal quotation omitted; emphasis in original); accord Mustang

Amusements, 2009 WL 3487796, at *6; Paciwest, Inc. v. Warner Alan Props.,

LLC, 266 S.W.3d 559, 572 (Tex. App.—Fort Worth 2008, pet. denied).

The Ortegos do not contend that they tendered their performance. Instead,

they contend that Lyons’s April 2014 letter demonstrated that it would have been

“futile to require the Ortegos to tender performance.” That letter said that the

contract terminated in October 2013, and it ended the parties’ discussions about a

sale. The Ortegos thus rely on only post-contract-termination conduct for their

contention that a tender was excused. But the law requires a tender “within the

time allowed by the contract.” Wilson, 715 S.W.2d at 822; accord Liedeker, 206

S.W.2d at 234–35; Mustang Amusements, 2009 WL 3487796, at *6; Paciwest, 266

S.W.3d at 572. The Ortegos never tendered the purchase price nor demanded that

Lyons produce the deed on or before October 15, 2013. See Wilson, 715 S.W.2d at

822. Had the Ortegos undertaken some affirmative act to tender performance

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before the contract terminated, it may have triggered Lyons into action. See, e.g.,

id. at 821 (“[T]he purpose of a tender is two-fold: (1) a valid tender of the purchase

price invokes the seller’s obligation to convey and places him in default if he fails

to do so; and (2) the tender satisfies the fundamental prerequisite of specific

performance—that the buyer show that he has done or offered to do, or is then

ready and willing to do, all the essential and material acts which the contract

requires of him.” (emphasis in original)); accord Paciwest, 266 S.W.3d at 572.

The Ortegos also contend that the jury’s findings on breach and on their

readiness, willingness, and ability to perform support an award of specific

performance. The Ortegos rely on the jury’s answers to questions five and six:

QUESTION No. 5

By what date, if any, do you find that the parties should have

closed on the transaction at issue in the Agreement?

Answer with a month, day, and year, if any: 8·30·14

QUESTION No. 6

Do you find that the Ortegos were ready, willing, and able to

perform on the date found by you in Question no. 5?

Answer “Yes” or “No”

Answer: Yes

This contention fails for two reasons. First, proof of tender and proof of

readiness, willingness, and ability to perform “are not the same thing.” See

DiGiuseppe, 269 S.W.3d at 599. Second, the Ortegos’ readiness, willingness, and

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ability to perform on August 30, 2014, was irrelevant because “[t]he plaintiff’s

burden of proving readiness, willingness and ability is a continuing one that

extends to all times relevant to the contract and thereafter.” Id. at 594 (quoting 25

Richard A. Lord, Williston on Contracts § 67:15 (4th ed. 2002)). The finding of

readiness, willingness, and ability to perform in August 2014 does not support the

conclusion that the Ortegos were ready, willing, and able to perform on

October 15, 2013, or that they tendered performance by that date.

The Ortegos also contend that they are not required to have tendered their

performance because the contract required them to pay the purchase price only by

the Closing Date, and no closing ever happened. This contention, however, does

not account for the contract’s termination on October 15, 2013. When a contract

for the sale of real property terminates by its own terms, it may no longer be

specifically enforced. See Cate, 299 S.W.3d at 153; Nguyen, 273 S.W.3d at 898.

The Supreme Court of Texas rejected a similar argument in DiGiuseppe.

DiGiuseppe failed to secure a finding that he was at all times ready, willing, and

able to perform. Id. at 596–97, 603–04. But he contended that the contract excused

him from proving readiness, willingness, and ability to perform. He pointed to the

contractual language that allowed a non-defaulting party to “seek to enforce” the

contract by specific performance. Id. at 596–97. The court rejected this argument,

reasoning that the contractual language that a party may “seek to enforce” the

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contract by specific performance meant merely that specific performance “is

available as a remedy, but nothing in the provision suggests DiGiuseppe is relieved

of his obligation to prove he is entitled to it under the law.” Id. at 598.

Like the contract in DiGiuseppe, the contract provided that Lyons’s failure

to comply meant that the Ortegos may sue for specific performance. That the

Ortegos may sue for specific performance does not mean that they are excused

from proving the elements imposed by the common law for proving entitlement to

the remedy. See id. at 596–98.

The Ortegos were not excused from proving their tender of performance.

Because they did not carry their burden on tender, we sustain Lyons’s third issue.

III. Attorney’s fees and costs

Lyons contends that the award of attorney’s fees, court costs, and other

litigation expenses cannot stand if we reverse the trial court’s judgment. The

Ortegos based their claim for fees, costs, and other expenses on the two contractual

provisions providing for an award to the “prevailing party” and on Civil Practice

and Remedies Code Section 38.001.

For contract claimants to be entitled to attorney’s fees and costs under Civil

Practice and Remedies Code Section 38.001, they must prevail on the cause of

action and recover damages. Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex.

1997). Despite finding a breach by Lyons, the jury awarded no money damages.

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The Ortegos also were not entitled to specific performance. Therefore, the Ortegos

were not entitled to attorney’s fees and costs under Section 38.001. See id.

As for the contract’s provision for an award of fees, costs, and other

expenses to a “prevailing party,” the contract did not define “prevailing party.”

Therefore we apply its ordinary meaning. See Epps v. Fowler, 351 S.W.3d 862,

866 (Tex. 2011). For the Ortegos to be the prevailing parties, they must be awarded

something, either monetary, equitable, or declaratory relief. See id. (quoting

Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 655

(Tex. 2009)). A breach finding, without a monetary, equitable, or declaratory

award, is insufficient to make the plaintiff a prevailing party. See Intercontinental

Grp. P’ship, 295 S.W.3d at 660–61; accord Epps, 351 S.W.3d at 866.

Because our resolution of this appeal leaves the Ortegos without either of the

awards that they sought—damages or specific performance—they are not

prevailing parties. Therefore, they are not entitled to attorney’s fees, court costs, or

other litigation expenses under the contract. We sustain Lyons’s fifth issue.

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Conclusion

The parties’ contract terminated on October 15, 2013, and the Ortegos did

not show their tender of performance to support an award of specific performance.

We need not address Lyons’s other issues. See TEX. R. APP. P. 47.1. We reverse

and render judgment that the Ortegos take nothing by their claims, and that the

earnest money be returned to them. See TEX. R. APP. P. 43.2(c).

Michael Massengale

Justice

Panel consists of Chief Justice Radack and Justices Massengale and Brown.

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