MG Building Materials, Ltd. v. C & K Materials Co., Inc.--Appeal from 38th Judicial District Court of Medina County

MEMORANDUM OPINION
No. 04-03-00401-CV
M.G. BUILDING MATERIALS, LTD.,
Appellant
v.
C & K MATERIALS CO., INC.,
Appellee
From the 38th Judicial District Court, Medina County, Texas
Trial Court No. 02-09-16138-CV
Honorable Antonio G. Cantu, Judge Presiding

Opinion by: Alma L. L pez, Chief Justice

Sitting: Alma L. L pez, Chief Justice

Karen Angelini, Justice

Sandee Bryan Marion, Justice

Delivered and Filed: August 13, 2003

AFFIRMED

M.G. Building Materials, Ltd. ("M.G.") appeals the trial court's order granting a temporary injunction in favor of C & K Materials Co., Inc. ("C & K"). M.G. contends that the trial court abused its discretion because: (1) C & K failed to prove a probable, imminent irreparable injury and a lack of adequate remedy at law; (2) C & K failed to prove a probable right to the relief sought; and (3) the relief does not preserve the status quo. We affirm the trial court's order.

Background

In 1999, C & K entered into an agreement with Alamo Reserve, Ltd. ("Alamo") and San Geronimo Creek, Ltd. ("San Geronimo") which stated that C & K was entitled to remove all topsoil and fill-material from a certain tract of real property. C & K agreed to compensate Alamo and San Geronimo for the removal at a stated rate. In early 2001, a dispute arose between the parties, and Alamo and San Geronimo filed a lawsuit to remove C & K from the property. A jury found that Alamo and San Geronimo expressly or impliedly agreed that C & K would be permitted to remove all of the commercially available topsoil and fill from the property and that neither Alamo nor San Geronimo could terminate the agreement.

After the agreement was entered into between the parties and C & K had commenced its removal operations, Alamo and San Geronimo obtained a loan from a bank, pledging the real property as security. In May of 2001, M.G. purchased the note from the bank.

In September of 2002, Alamo and San Geronimo again attempted to remove C & K from the property. C & K filed suit and was granted a temporary injunction precluding Alamo and San Geronimo from interfering with C & K's business operations. In May of 2003, M.G. foreclosed on the property and subsequently directed C & K to cease its operations and vacate the property. C & K filed an amended petition in the pending lawsuit and requested that M.G. also be enjoined. M.G. appeals the trial court's order granting the temporary injunction.

Standard of Review

Whether to grant or deny a temporary injunction is within the trial court's sound discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). A reviewing court may not substitute its judgment for the trial court's judgment and should reverse an order granting injunctive relief only if the trial court's action was so arbitrary that it exceeded the bounds of reasonable discretion. Id.

To obtain a temporary injunction, the applicant must plead and prove three specific elements: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Id. An injury is irreparable if the injured party cannot be adequately compensated in damages or if the damages cannot be measured by any certain pecuniary standard. Id.

Probable, Imminent, Irreparable Injury and Lack of Adequate Remedy at Law

In its first issue, M.G. contends that the trial court abused its discretion in granting the temporary injunction because C & K can be adequately compensated in damages and C & K could have mitigated its loss by seeking an alternative source for its topsoil and fill. C & K responds that damages would be inadequate because the lawsuit involves a unique piece of real property.

Generally, a court will not enforce contractual rights by injunction, because a party can rarely establish an irreparable injury and an inadequate legal remedy when damages for breach of contract are available. Butnaru, 84 S.W.3d at 210. Under an abuse of discretion standard, however, this court cannot overturn the trial court's decision unless the trial court acted unreasonably or in an arbitrary manner, without reference to guiding rules or principles. Id. Moreover, we cannot substitute our judgment for the trial court's reasonable judgment even if we would have reached a contrary conclusion. Id. The trial court does not abuse its discretion if some evidence reasonably supports the trial court's decision. Id.

In this case, the lawsuit involves a contract granting C & K the right to remove the topsoil and fill from a specific tract of real property. Mrs. Potter testified that the location of the real property was unique and provided C & K with a competitive edge. Accordingly, some evidence was before the trial court regarding the unique location of the property, and a trial court may grant equitable relief when a dispute involves real property. Id. Therefore, the trial court did not abuse its discretion in concluding that C & K would suffer irreparable injury and that C & K does not have an adequate legal remedy.

Probable Right of Recovery

M.G. next contends that the injunction was erroneously granted because C & K could not establish a probable right of recovery on its breach of contract claim. Specifically, M.G. asserts that C & K could not prove that a contract existed that was enforceable against M.G. or that M.G. breached that contract.

M.G. focuses its argument on whether the agreement between C & K and Alamo and San Geronimo was binding on M.G., whether the agreement constituted a lease or a license, and whether the foreclosure and the actions taken by M.G. after that foreclosure effectively terminated the lease. In considering M.G.'s argument, we must focus on our applicable standard of review. An applicant requesting a temporary injunction is not required to establish that he or she will prevail at trial.Universal Health Servs., Inc. v. Thompson, 24 S.W.3d 570, 576 (Tex. App.--Austin 2000, no pet.). Instead, the applicant's burden is to establish a probable right of recovery following a trial on the merits. Id.

Evidence was presented to show that C & K entered into an agreement with Alamo and San Geronimo to remove the topsoil and fill before Alamo and San Geronimo pledged the property as security to the bank. The owner of C & K, Kathleen Potter, testified that C & K never agreed to subordinate its leasehold interest to the bank's lien. Evidence was presented to show that a jury previously found that the agreement could not be terminated by Alamo or San Geronimo. Mrs. Potter testified that the agreement was to continue until C & K removed all of the topsoil and fill. M.G. purchased the note from Bank One with knowledge of this agreement.

"If a lease is executed before a deed of trust, the lease is superior to the deed-of-trust lien and not extinguished by foreclosure; the purchaser at the foreclosure sale becomes the new landlord." Med Center Bank v. Fleetwood, 854 S.W.2d 278, 284 (Tex. App.--Austin 1993, writ denied). Notice of the foreclosure sale would not appear to affect this general rule or the priority of the lessee's rights. Unlike the situation where the deed-of-trust lien is superior, the foreclosure would not appear to result in the termination of the lease or the creation of a tenancy at will. Compare ICM Mortg. Corp. v. Jacob, 902 S.W.2d 527, 530 (Tex. App.--El Paso 1994, writ denied) (holding lease terminates if deed-of-trust lien superior).

M.G. argues that the agreement entitling C & K to remove the topsoil and fill was not a lease but only a license, asserting that C & K did not have exclusive possession. Even the case cited by M.G., however, notes that a landlord may reserve rights of possession and entry in the terms of the lease; therefore, exclusive possession is not a requirement for every lease. See DeLeon v. Creely, 972 S.W.2d 808, 813 (Tex. App.--Corpus Christi 1998, no pet.); see also Levesque v. Wilkens, 57 S.W.3d 499, 505 (Tex. App.--Houston [14th Dist.] 2001, no pet.). In this case, Mrs. Potter testified that Alamo and San Geronimo were permitted to conduct operations on the property involving the removal of sand and gravel after C & K had removed the topsoil and fill. With regard to the lease term, Mrs. Potter testified, and a jury previously found, that the lease could not be terminated by the lessor but was to continue until C & K had removed all topsoil and fill from the property.

At best, the trial court was presented with conflicting evidence regarding the nature of C & K's rights with regard to the property, and, under an abuse of discretion standard, we cannot reverse a trial court's order if the record includes evidence that reasonably supports the trial court's decision.Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978). The trial court could reasonably conclude, based on C & K's allegations and the evidence previously discussed, that C & K had a probable right to recovery. Because this conclusion was not so arbitrary as to exceed the bounds of reasonable discretion, the trial court did not abuse its discretion in finding a probable right to recovery. See Butnaru, 84 S.W.3d at 211.

Status Quo

Finally, M.G. contends that the trial court abused its discretion in granting the temporary injunction because it did not preserve the status quo. M.G. asserts, "the status quo between M.G. and C & K is that there is no agreement between them."

The status quo to be preserved by the issuance of a temporary injunction is the last actual, peaceable, noncontested status which preceded the pending controversy. San Miguel v. City of Windcrest, 40 S.W.3d 104, 109 (Tex. App.--San Antonio 2000, no pet.). "If an act of one party alters the relationship between that party and another, and the latter contests the action, the status quo cannot be the relationship as it exists after the action." Universal Health Servs., Inc., 24 S.W.3d at 577.

In this case, C & K had been removing topsoil and fill from the property in question for four years prior to M.G.'s foreclosure. The actions taken by M.G. to prevent C & K from continuing its operations sought to alter C & K's rights under the agreement. The status quo cannot be the relationship that existed between M.G. and C & K after M.G.'s actions. Id. The trial court did not abuse its discretion in concluding that the last actual, peaceable, noncontested status which preceded the pending controversy was the continuation of C & K's operations involving the removal of the topsoil and fill.

Conclusion

The trial court's order is affirmed.

Alma L. L pez, Chief Justice