JOE B. GARZA, Appellant v. MARK AND KELLY BUNTING, Appellees

AFFIRM and Opinion Filed May 30, 2007
 
 
 
In The
Court of Appeals
Fifth District of Texas at Dallas
............................
No. 05-06-01307-CV
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JOE B. GARZA, Appellant
V.
MARK AND KELLY BUNTING, Appellees
.............................................................
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 05-01069
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MEMORANDUM OPINION
Before Justices Moseley, Bridges, and Richter
Opinion By Justice Richter
        This appeal involves the interpretation of a mutual release provision in a settlement agreement. In two issues, Garza asserts (1) the trial court misconstrued the settlement agreement and released his counterclaims, or alternatively the agreement was ambiguous, and (2) the trial court erred in dismissing his counterclaims through a declaratory judgment. We affirm the trial court's judgment.
Background
        Mark and Kelly Bunting owned a home in Highland Park. At various times through the years, brokers had asked them to consider selling their home, and they agreed they would consider selling if they received the right offer. In the fall of 2004, a broker contacted Mr. Bunting with an $8.75 million offer from appellant Joe Garza. The Buntings rejected this offer and countered with $9.75 million, which consisted of $9.6 million for the home and $150,000 for some personal property they wanted to sell with the home. They also wanted to execute a lease allowing them to stay in the home until June 7, 2005 so their children could finish the school year.
        In December 2004, the parties closed on the home, executed a Seller's Temporary Residential Lease (the “Lease”), and a Bill of Sale regarding the personal property.   See Footnote 1  Despite several promises to pay for the personal property, Garza never provided the Buntings with the $125,000 check required by the Bill of Sale.
        On January 10, 2005, the cordial relationship between the parties turned. Garza called Mr. Bunting and told him he needed to be out of the home by April 1, 2005, or he would cause legal troubles. Garza claimed they were starting construction on the inside of the home whether the Buntings were there or not. He threatened to change the locks and take control of the security system because “I'm the landlord.” He further asserted the lease was “absolutely voidable,” and he was going to “give [him] a scholarship on what's wrong with the lease and how things work.”
        On January 26, 2005, Garza, through his lawyer, demanded access to the home for a three hour inspection on January 27. The Buntings allowed the inspection; however, they hired an off- duty Highland Park officer to be present because of their concerns with Garza's past behavior and threats. The parties' lawyers were also present at the inspection.
        Despite the Buntings' Lease through June 7, 2005, Garza continued threatening to start construction by April 1 and to evict them from the home. The Buntings filed an original petition and application for temporary restraining order and temporary injunction on February 2, 2005, which the trial court granted. The temporary restraining order restrained the parties from communicating directly with each other and stated specific times and parameters for future inspections.
        During the next several weeks, the parties reached a settlement regarding their disputes and signed a “Settlement Agreement and Mutual Release” (the “Agreement”) on March 4, 2005. It stated the parties “wish to compromise and settle claims relating to the house and property at 3428 Beverly (the 'Property') in order to avoid further litigation and to buy peace of mind, including claims related to the sale of personal property and concerning the Lease between the Parties.” It further contained a mutual release clause stating the following:
 
 
E.
 
Mutual Release. The Buntings on the one hand, and Garza, on the other hand, do hereby release and forever discharge each the other, their sureties and affiliates, attorneys, officers, directions, agents, servants and employees, and any person, natural or corporate, in privity with any of them, from any and all claims or causes of action of any kind whatsoever, known or unknown, now existing, which arise out of or relate in any way to the claims asserted, or that could have been asserted in Cause No. 05-01069; Mark Bunting and Kelly Bunting vs. Joe B. Garza, pending in the 160th Judicial District Court, Dallas County, Texas (the “Litigation”).
 
The Agreement also recognized that the original agreements between the parties remained in force, except as modified and/or superseded by the Agreement. In case of any conflict, the Agreement controlled.
        Also as part of the Agreement, the litigation would be dismissed with prejudice. Garza, however, refused to agree to the motion to dismiss and began asserting damage claims against the Buntings for condition of the house upon their June 7 exit. The Buntings filed a motion to enforce settlement on July 18, 2005. In October 2005, they filed their first amended original petition in which they requested a declaration from the trial court regarding their rights under the Agreement and included a breach of contract claim. They specifically asked the trial court to “review the relevant documents and laws and declare that under the unambiguous terms of the Agreement, Garza has released the Buntings from any and all past and future claims relating to the house and property at 3428 Beverly, except for those expressly carved out by the Agreement.” Garza then filed counterclaims for fraud and misrepresentation for the condition of the home prior to sale. The Buntings filed their motion for summary judgment based on their declaratory judgment claim.
        The trial court granted their summary judgment on June 30, 2006 and further declared the following:
 
. . . [U]nder the unambiguous terms of the Settlement Agreement, Plaintiffs and Defendant, Joe Garza, have released one another of any and all claims relating to “the house and property at 3428 Beverly . . . including claims related to the sale of personal property and concerning the Lease between the Parties,” through the date of such Settlement Agreement, namely March 4, 2005.
 
 
 
        This Court further DECLARES that Section II, paragraph (F), page 5, of such Settlement Agreement, specified that the parties would dismiss this litigation with prejudice and in conformance therewith this case is dismissed with prejudice.
 
 
 
        This Court further DECLARES that this Order and dismissal with prejudice does not dispose of any claim by either Party which may arise from a breach of the Settlement Agreement or from the remaining term of the temporary lease after March 4, 2005.
 
This appeal followed.
 
Standard of Review
        We review declaratory judgments under the same standards as other judgments and decrees. Tex. Civ. Prac. & Rem. Code Ann. § 37.010 (Vernon 1997); City of Galveston v. Giles, 902 S.W.2d 167, 170 (Tex. App.-Houston [1st Dist.] 1995, no writ.). We look to the procedure used to resolve the issue at trial to determine the standard of review on appeal. Id. Because the trial court determined the declaratory judgment issue through summary judgment, we review the propriety of the trial court's declarations under the same standards we apply to summary judgments. Lidawi v. Progressive County Mut. Ins. Co., 112 S.W.3d 725, 730 (Tex. App.-Houston [14th Dist.] 2003, no pet.).         The standard of review for summary judgment is well-established. The party moving for traditional summary judgment has the burden of showing no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Santillan v. Wal-Mart Stores, Inc., 203 S.W.3d 502, 505 (Tex. App.-El Paso 2006, pet. denied). In deciding whether a disputed material fact issue exists, evidence favorable to the non-movant will be taken as true, and every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in his favor. Santillan, 203 S.W.3d at 505. The question on appeal is not whether the summary judgment proof raises fact issues as to required elements of the movant's claim, but whether the summary judgment proof establishes there is no genuine issue of material fact as a matter of law as to one or more elements of the movant's claim. Id.
Use of Declaratory Judgment Action
        In his second issue, Garza contends a declaratory judgment is not the proper remedy for the Buntings because the language of the declaration sought was impermissibly vague and included potential tort claims. The Buntings assert Garza has waived his issue by failing to specially except to the pleadings. Alternatively, a declaratory judgment is proper under these facts.
        We first conclude Garza properly preserved his argument. In his response to plaintiff's motion for summary judgment, Garza specifically argued “a declaratory judgment is not the proper remedy for Plaintiffs” because the Buntings wanted the trial court to impermissibly determine tort liability. Although he did not file separate special exceptions, he informed the trial court that he questioned the use of a declaratory judgment under the facts. See Harlingen Irrigation Dist. Cameron County No. 1 v. Caprock Commc'n Corp., 49 S.W.3d 520, 534 (Tex. App.-Corpus Christi 2001, pet. denied) (holding when a party fails to specially except or otherwise make the trial court aware of a complaint that a declaratory judgment action is improper prior to the trial court signing the judgment, the party fails to preserve that complaint for appeal) (emphasis added). Thus, his argument is properly preserved; however, as discussed below, we conclude it has no merit.
        Under the Declaratory Judgment Act, a contract may be construed either before or after a breach. Tex. Civ. Prac. & Rem. Code Ann. 37.004(b) (Vernon 1997). The Act thereby provides preventive relief, empowering a court to adjudicate or declare the rights of parties where there has arisen a real controversy before the wrong actually takes place. Fleming v. Ahumada, 193 S.W.3d 704, 716 (Tex. App.-Corpus Christi 2006, no pet.). However, the Act does not constitute an open- ended invitation to parties seeking interpretation of their contracts. Id. There must be some showing that litigation is imminent between the parties unless the contractual uncertainties are judicially resolved. Id.; see also Tex. Civ. Prac. & Rem. Code Ann. § 37.004(a) (“A person interested under a . . . contract . . . may have determined any question of construction or validity arising under the instrument . . . and obtain a declaration of rights, status, or other legal relations thereunder.”). In addition, issues raised under the Act may not be hypothetical or contingent, and the questions presented must resolve an actual controversy. Fleming, 193 S.W.3d at 717.
        Garza claims a declaratory judgment may not be used to determine potential tort liability. See, e.g., Abor v. Black, 695 S.W.2d 564, 566 (Tex. 1985); De Mino v. Sheridan, 176 S.W.3d 359, 367-68 (Tex. App.-Houston [1st Dist.] 2004, no pet.) (requesting declaration that party, in his official capacity, made false and defamatory statements was not within the proper scope of an action for declaratory relief because it involved tort claim); Averitt v. PriceWaterhouseCoopers, L.L.P., 89 S.W.3d 330, 334-35 (Tex. App.-Fort Worth 2002, no pet.) (holding declaratory judgment was not appropriate when a party asked court to declare whether defendant owed a duty to plaintiff, which originated in tort). While this proposition is correct, it is not relevant here because unlike the cited cases above, this is a contract action. Trinity Univ. Ins. Co. v. Sweatt, 978 S.W.2d 267, 271 (Tex. App.-Fort Worth 1998, no pet.). Construction and validity of a contract is the most obvious and common use of the declaratory judgment action. Id. This is precisely what the Buntings sought in their action.
        They filed their first amended original petition requesting a specific declaration that the trial court “review the relevant documents and laws and declare that under the unambiguous terms of the Agreement, Garza has released the Buntings from any and all past and future claims relating to the house and property at 3428 Beverly, except for those expressly carved out by the Agreement.” Although Garza had not filed any claims against the Buntings prior to the declaratory judgment, statements and letters between the parties indicated that Garza was contemplating claims despite the Agreement. And in fact, prior to the Buntings filing their summary judgment motion, Garza filed his counterclaims. Thus, the Buntings properly sought a declaratory judgment from the trial court to adjudicate and declare the parties' rights under a contract. Garza's second issue is overruled.
Meaning of Settlement Agreement and Mutual Release
        In his first issue, Garza claims the trial court misconstrued the Agreement and released his fraud and misrepresentation counterclaims. Alternatively, he argues the Agreement is ambiguous. The Buntings contend the Agreement is not ambiguous, and Garza is construing the mutual release too narrowly, which is contrary to well-established case law.
        A release is an agreement or contract in which one party agrees a duty or obligation owed by the other is discharged immediately on the occurrence of a condition. Stafford v. Allstate Life Ins. Co., 175 S.W.3d 537, 541 (Tex. App.-Texarkana 2005, no pet.). A release extinguishes a claim and bars recovery on the released matter. Id. To release a claim effectively, the releasing instrument must “mention” the claim to be released. Victoria Bank & Trust Co. v. Brady, 811 S.W.2d 931, 938 (Tex. 1991). Claims not “clearly within the subject matter” of the release are not discharged, even if those claims exist when the release is executed. Id. It is not necessary, however, for the parties to anticipate and explicitly identify every potential cause of action relating to the subject matter of the release. Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692, 698 (Tex. 2000). Although releases generally contemplate claims existing at the time of execution, a valid release may also encompass future unknown claims. Id.
        In construing a release, as with other contracts, the primary effort is to ascertain and give effect to the intention of the parties to the release, considering the instrument as a whole. Anheuser- Busch Co., Inc., 858 S.W.2d at 933; Stafford, 175 S.W.3d at 541 (contract must be read as a whole rather than isolating a certain phrase, sentence, or section of the agreement). The contract's language is to be given its plain grammatical meaning unless doing so would defeat the parties' intent. Stafford, 175 S.W.3d at 541. Further, when a release refers to a related document, the other document should be taken into consideration. Anheuser-Busch Co., Inc., 858 S.W.2d at 933.
        We must also consider whether the Agreement is ambiguous, which is a question of law we determine from examining the contract as a whole, in light of the circumstances present when the parties entered into it. Grimes v. Andrews, 997 S.W.2d 877, 881 (Tex. App.-Waco 1999, no pet.). A court may conclude that a contract is ambiguous even when the parties do not plead ambiguity. Id. Here, however, Garza raised the issue of ambiguity in his response to the Buntings' motion for summary judgment.
        A contract is not ambiguous when it is so worded that it can be given a certain or definite legal meaning or interpretation. State Farm Fire & Cas. Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998). It is ambiguous when its meaning is uncertain and doubtful, or it is reasonably susceptible to more than one meaning. Grimes, 997 S.W.2d at 882. An ambiguity does not arise merely because the parties advance conflicting interpretations. Id. Only when a contract is susceptible to two or more reasonable interpretations, after applying the applicable rules of contract construction, will a court hold the contract is ambiguous. Id. If a contract is ambiguous, then a fact issue exists on the parties' intent and summary judgment is improper. Id.
        We first determine if the Agreement is ambiguous, thus creating a fact issue precluding summary judgment. The Buntings allege the unambiguous terms of the Agreement released them from any and all past and future claims relating to the house on Beverly Drive, except for those expressly carved out by the Agreement, specifically, claims of damages occurring post-settlement during the remainder of the Lease. The specific “carved out” provision is as follows:
 
 
B.
 
Security Deposit. Nicky Sheets, realtor, previously has paid $25,000 of the purchase price for the items shown on Attachment A. Contemporaneously with the execution of this Agreement, Garza shall pay over balance of the purchase price to Martyn Hill, as trustee, who shall hold such funds as security for the Buntings' obligations to maintain the Property and make repairs pursuant to Paragraph 14 of the Lease.   See Footnote 2  At termination of the Lease, Garza promptly shall notify the trustee of any claim against the funds, in which case the trustee shall either pay the claim or at the Buntings' request, interplead funds pending resolution of any dispute. If no claim is made within five days of Garza's possession of the Property, the trustee shall release the funds to the Buntings. The failure of Garza to make a claim against the funds shall not affect any liability of the Buntings pursuant to Paragraph 14 of the Lease. At the Buntings' option, the trustee may invest the funds in an interest- bearing account at any FDIC-insured bank.
 
 
Garza, however, contends there is nothing within this paragraph that indicates it does not continue to apply in its entirety and not just to damages occurring post-settlement as urged by the Buntings. As further explained below, we conclude that although the parties advance conflicting interpretations of the Agreement, it is not ambiguous.         We agree with the Buntings that the parties agreed to a “carve out” provision relating to any claims that may arise between the parties from the date of settlement, March 4, 2005 and through the end of the Lease, June 7, 2005. The plain language of this provision negates Garza's argument that it allows for claims arising pre-settlement. The provision states the trustee, “with the execution of this Agreement,” would hold the remaining balance of the purchase price for the personal property as security for the Buntings' obligations to maintain the property and make repairs according to paragraph 14 of the Lease. It then provides certain steps for Garza to take if he wishes to assert a claim “at termination of the Lease.” Because the terms of the provision begin with execution of the Agreement and then continue through the termination of the Lease, it is clear the parties created a specific provision, separate from the mutual release provision, for Garza to assert a specific class of potential post-settlement claims, i.e. claims for maintenance and repair of the property. Thus, this provision does not create an ambiguity.
        Garza also argues the “controlling documents” provision in the Agreement creates an ambiguity. The “controlling documents” provision states “This Agreement modifies and in some cases supercedes terms of the original written agreements between the Parties. The original agreements remain in full force and effect, as modified by this Agreement. In case of conflict, this Agreement shall control.” Although both parties acknowledge the Lease, the Sales Contract, and the Bill of Sale remain in effect, as modified by the Agreement, Garza's reliance on this provision is misplaced.
        For example, Garza argues the Buntings are still bound under provision 9 of the Lease. This provision states “[t]enant accepts the Property in its present condition and state at the commencement of the Lease. Upon termination, Tenant shall surrender the Property to Landlord in the condition under the Contract at the time of closing, except normal wear and tear and any casualty loss.” When the Lease terminates, if the Buntings do not surrender the property in the condition required at the time of closing, then Garza asserts they have breached the Lease, which remains in full force and effect.
        We agree with Garza's interpretation; however, he overlooks the fact that any claim based on provision 9 of the Lease would not be barred under declarations made by the trial court. The trial court specifically released all claims through the date of the Agreement, March 4, 2005. It further declared the order and dismissal “does not dispose of any claim by either Party which may arise from a breach of the . . . remaining term of the temporary lease after March 4, 2005.”   See Footnote 3  If Garza determined problems existed with the property upon termination of the lease, which was June 7, 2005, he still could pursue such claims to the extent they arose after the date of the Agreement.    See Footnote 4  Thus, Garza's argument does not create an ambiguity in the contract. As such, we conclude the contract is not ambiguous, and we will now consider whether the trial court properly construed the mutual release provision to dismiss Garza's counterclaims as a matter of law.
        The language of the mutual release is broad, which courts have determined is not forbidden so long as the release “mentions” the claim to be released. Kreck, Mahin & Cate, 20 S.W.3d at 698. Garza contends “only claims on file at the time of the settlement agreement, and claims intimately derivative of them, are released.” This narrow interpretation of the mutual release not only contradicts its plain language, but also contradicts established case law.
        In Keck, the parties entered into a release in which they agreed to forgive unpaid legal fees. A suit was later filed alleging malpractice; however, the plaintiff argued the prior release only applied to unpaid legal fees and not a malpractice claim. Keck, Mahin, & Cate, 20 S.W.3d at 698. The Supreme Court of Texas found the release was effective as to the malpractice claims and not just unpaid fees. Id. The release specifically mentioned “claims . . . attributed to . . . legal services.” Id. The court concluded the term “legal services” was clear and encompassed a legal malpractice claim. Thus, plaintiff's claim was barred. Id.
        In Dresser Industries, Inc. v. Underwriter's at Lloyd's London, Dresser was sued by plaintiffs for fraud and negligence in providing well servicing operations. Dresser Indus., Inc. v. Underwriter's at Lloyd's London, 106 S.W.3d 767, 768 (Tex. App.-Texarkana 2003, pet. denied). The parties released “all claims and other causes of action it may ever have or has had, whether or not known or asserted, . . . in any way connected with, related to, concerning or arising out of the Lawsuit or the fracturing or otherwise servicing of wells . . . .” Id. at 773. Dresser later brought asbestos-related claims against the insurance carrier, which the carrier claimed was barred by the prior release. Id. The court concluded the language of the release involved indemnity regarding well servicing; whereas, the indemnity claims arising from asbestos were not released since they were not “mentioned.” Id. at 774. But see Mem'l Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d 433, 434-35 (Tex. 1997) (construing document that released hospital from “any and all claims . . . of any kind . . . directly or indirectly attributable to or in any way arising out of corrective action . . . and any other matter relating to Keszler's relationship with Memorial” as releasing later claims for fraud, negligence, and gross negligence against hospital for doctor's exposure to ethelyne dioxide) (emphasis added).
        Here, the mutual release, as in Keszler and Keck, is broadly written. The opening recital states the parties “wish to compromise and settle claims relating to the house and property at 3428 Beverly (the 'Property') in order to avoid further litigation and to buy peace of mind, including claims related to the sale of the personal property and concerning the Lease between the Parties.” The Agreement specifically provides the following:
 
        Mutual Release. The Buntings on the one hand, and Garza, on the other hand, do hereby release and forever discharge each the other, their sureties and affiliates, attorneys, officers, directions, agents, servants and employees, and any person, natural or corporate, in privity with any of them, from any and all claims or causes of action of any kind whatsoever, known or unknown, now existing, which arise out of or relate in any way to the claims asserted, or that could have been asserted in Cause No. 05-01069; Mark Bunting and Kelly Bunting vs. Joe B. Garza, pending in the 160th Judicial District Court, Dallas County, Texas (the “Litigation”).
 
The plain language of the recitals and mutual release is clearly intended to release any claims, known or unknown, existing now or in the future, relating to the property on Beverly Drive. Similar to the court's determination in Keck that legal services encompassed a legal malpractice claim, Garza's fraud and misrepresentation counterclaims in the sale of the home are clearly within the subject matter of “any and all claims . . . which arise out of or relate in any way to the claims asserted or that could have been asserted” involving the property. Stated another way, but for the contractual relationship between the parties involving the property, Garza would have no counterclaims against the Buntings. See Kalyanaram v. Burck, 2006 WL 1559230, *6 (Tex. App.-El Paso 2006, no pet.). The mutual release is not limited, as Garza suggests, to only those claims on file at the time of settlement or those derivative of them. Id. (refusing argument that release is limited to all claims that could have been brought at the time of the agreement or that are expressly stated in the agreement because release language is broad). Unlike Dresser Industries, Inc., Garza's claims are within the broad language of the mutual release and therefore are “mentioned.” Dresser Indus., Inc., 106 S.W.3d at 774.
        Thus, any cause of action arising from the property on Beverly Drive or involving cause number 05-01069 prior to March 4, 2005 are mentioned by the release. As such, the trial court properly granted summary judgment on the unambiguous terms of the Agreement and dismissed Garza's counterclaims. We overrule Garza's first issue.
        Having overruled both of Garza's issues, we affirm the trial court's judgment.
 
 
                                                          
                                                          MARTIN RICHTER
                                                          JUSTICE
061307F.P05
        
 
        
 
 
Footnote 1 Because of Garza's concern regarding the value of the personal property, the broker agreed to take a $25,000 deduction in his commission in exchange for reducing the price of the personal property items. The Bill of Sale provides the items would be sold for “a combined package of $150,000, $25,000 reduction in commissions and $125,000 in a check from Joe Garza upon closing and funding of the sale of 3428 Beverly on or before January 5, 2005.”
Footnote 2 Paragraph 14 of the Lease provides:
 
 
Tenant shall bear all expense of repairing and maintaining Property. Including but not limited to yard, trees, and shrubs unless otherwise required by the Texas Property Code. Tenant shall promptly repair at Tenant's expense any damage to the Property caused directly or indirectly by any act or omission of the Tenant or any other person other than Landlord, Landlord's agents, or invitees.
Footnote 3 This comported with the declaration sought by the Buntings, which did not include disputes that might arise under the Lease for any possible damages occurring during the Lease.
Footnote 4 As recognized by the Buntings, any post-settlement claims are not the subject of their summary judgment. Rather, only those counterclaims asserted or that could have been asserted by Garza are at issue.