K3 Enterprises and Charles Larry Satterwhite, Individually and as Trustee for K3 Enterprises and Ray Arnold d/b/a Servco v. Michael E. McDaniel and The Memc Corporation--Appeal from 272nd District Court of Brazos County

IN THE

TENTH COURT OF APPEALS

No. 10-99-112-CV

K3 ENTERPRISES AND CHARLES LARRY

SATTERWHITE, INDIVIDUALLY AND AS

TRUSTEE FOR K3 ENTERPRISES AND

RAY ARNOLD D/B/A SERVCO,

Appellants

v.

MICHAEL E. McDANIEL

AND THE MEMO CORPORATION,

Appellees

From the 272nd District Court

Brazos County, Texas

Trial Court # 46,253-A-272

O P I N I O N

We must decide (1) whether a lease agreement contains an ambiguous extension provision, and (2) if so, whether a summary judgment can be reversed even though both parties asked for summary judgment.

THE AGREEMENT

K3 Enterprises ( K3") leased commercial real estate in Brazos County to Michael E. McDaniel ( McDaniel ) for a term described in the lease as:

TERM. The primary term of this Lease shall commence on or before the 1st of November, 1988; and shall continue for a period of 7 yrs with a 1-5 yr. extension unless sooner terminated or extended as hereinafter provided. //

The lease is silent about how the extension was to be exercised.

It is undisputed that McDaniel // continued to occupy the leased premises after the primary term expired on October 31, 1995. It is also undisputed that nothing was done to formalize an extension of the lease. On August 1, 1997, K3 changed the locks to prevent McDaniel from having access to the premises and hired Ray Arnold dba Servco to remove McDaniel s property from the premises over the Labor Day weekend. //

THE ISSUE

When K3 refused demands that the property be returned, McDaniel filed suit for the value of the property that had been removed and for lost business revenue. Part of the petition sought a declaratory judgment that the lease agreement at issue herein [is] for a term of seven (7) years with an automatic five (5) year extension, that the lease is in full force and effect until October 31, 2000, . . . . K3 filed a general denial.

McDaniel asked the court for a partial summary judgment on several issues, including that the lease had an automatic extension for five years at McDaniel s option. He urged that his affidavit conclusively established a five-year option period as a matter of fact. K3 filed a response to McDaniel s motion and its own motion for a partial summary judgment. The response and motion were in a single pleading and were supported by an affidavit which stated that the original typewritten agreement specified an option period of five (5) years and that the handwritten changes were made to accommodate McDaniel s desire for greater flexibility. McDaniel s response to K3's motion merely reasserted his own motion and affidavit.

Thus, the issue was joined over the proper interpretation of the words with a 1-5 yr. extension. The court granted McDaniel s motion in part and declared that the lease was for a term of seven (7) years with up to five (5) one (1) year extensions at the option of [McDaniel] by the payment of $1,658.25 in November, 1995, and each November thereafter to and including the year 1999. The court severed the declaratory judgment from the remainder of McDaniel s claims. Notice of appeal was perfected from the resulting final judgment.

The issue is the meaning of the words with a 1-5 yr. extension. McDaniel contended in his motion for summary judgment that they established a five-year option period. K3 contended in its summary-judgment motion that they established either a month to month extension, with a five year maximum, or a year to year extension, up to a maximum of five years. The court found that they mean with up to five (5) one (1) year extensions. K3 asserts on appeal that the words are ambiguous and do not necessarily mean five one-year extensions.

STANDARDS OF REVIEW

We will apply two sets of standards in the review of this summary judgment.

summary judgments

The standards for reviewing a summary judgment are well established. They are:

(1) The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.

(2) In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

(3) Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in his favor.

Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).

Ordinarily when two opposing parties each file a motion for summary judgment and an appeal results, the appellate court can "determine all questions presented, and may reverse the trial court judgment and render such judgment as the trial court should have rendered, including rendering judgment for the other movant." Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988); see also Tobin v. Garcia, 316 S.W.2d 396, 400 (Tex. 1958). However, we may also reverse the judgment and remand the cause when we find that course proper. See Coker v. Coker, 650 S.W.2d 391, 392 (Tex. 1983) (property settlement agreement that trial court found unambiguous found ambiguous by Supreme Court and cause remanded for trier of fact to resolve ambiguity); McCreight v. City of Cleburne, 940 S.W.2d 285, 288 (Tex. App. Waco 1997, writ denied) (disputed facts prevented legal determination of whether condition was special or premises defect); Sosa v. Williams, 936 S.W.2d 708, 711 n.1 (Tex. App. Waco 1996, writ denied) (remand proper when competing motions were based on different premises).

construction of contracts

If a written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law. R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518-19 (Tex. 1980). A contract, however, is ambiguous when its meaning is uncertain or doubtful or it is reasonably susceptible to more than one meaning. Skelly Oil Co. v. Archer, 163 Tex. 336, 356 S.W.2d 774, 778 (Tex. 1962). Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. R & P Enterprises, 596 S.W.2d at 518-19. The ambiguity must become apparent when the contract is read in the context of surrounding circumstances, not after parol evidence of intent is admitted to create an ambiguity. National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex. 1995).

In determining whether an agreement is ambiguous, courts should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (1951). No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument. Myers v. Gulf Coast Minerals Management Corp., 361 S.W.2d 193, 196 (Tex. 1962).

A court may conclude that a contract is ambiguous even in the absence of such a pleading by either party. Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993). However, an ambiguity does not arise merely because the parties advance conflicting interpretations. Grimes v. Andrews, 1999 WL 567094, *3, S.W.2d (Tex. App. Waco 1999, no pet.) (citing Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998)). When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Harris v. Rowe, 593 S.W.2d 303, 306 (Tex. 1979).

DETERMINATION OF THE ISSUE

McDaniel urges us to affirm the judgment on the authority of Willeke v. Bailey, 144 Tex. 157, 189 S.W.2d 477 (1945). In Willeke, an opinion by the Texas Commission of Appeals adopted by the Supreme Court, the parties had entered into two agreements concerning rental of the property. Trial had been to a jury, but the jury was not asked which agreement was executed first. The Commission found from the record that one of the agreements had been executed after the other and thus controlled the decision. The later agreement provided that the rental term was for a period of eighteen months, with option of extension from year up to five years from date. The Commission concluded: Undoubtedly the language of the contract from year up to five years means from one year up to five years. Noting that the lessee s continuing possession after the expiration of the primary term was sufficient to exercise the right to extend when the agreement did not require formal notice of extension, the Commission reformed the judgment to provide for annual renewals at the lessee s option.

We cannot agree that Willeke controls the disposition of this case. The language in the K3-McDaniel lease is a 1-5 yr. extension ; whereas the language in Willeke was extension from year up to five years from date. Furthermore, the handwritten change, from a seven year term with 1-5 yr. extension to with a 1-5 yr. extension must be given meaning. Universal C.I.T. Credit Corp., 243 S.W.2d at 158.

Considering the inclusion of the word a, we do not believe that the lease can be interpreted to mean up to five (5) one (1) year extensions as a matter of law, as found by the court. // National Union Fire Ins. Co., 907 S.W.2d at 521. Examining the lease in its entirety in light of the standards set out above, we conclude that the words with a 1-5 year extension cannot be given a certain or definite legal meaning or interpretation; thus they are ambiguous. R & P Enterprises, 596 S.W.2d at 518. The summary judgment was improper. Harris, 593 S.W.2d at 306.

OTHER ISSUES

K3 also asserts that the court erred in determining that McDaniel had exercised the option, that the rental rate found by the court is not supported by the lease agreement, and that the summary judgment is different from the judgment requested in McDaniel s motion. Because our holding that the lease agreement is ambiguous will result in a trial to determine the intent of the parties, we do not reach those issues.

CONCLUSION

Summary judgment was inappropriate because a fact issue exists about the parties' intent regarding the length of the extension period or periods stated in the lease agreement. Thus, we reverse the judgment and remand the cause for trial.

BILL VANCE

Justice

Before Chief Justice Davis,

Justice Vance, and

Justice Gray

Reversed and remanded

Opinion delivered and filed January 5, 2000

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