Target Corp. v. D&H Props., LLC

• Decision Date: 23 November 2021
• Docket Number: NO. 14-20-00125-CV,14-20-00125-CV
• Citation: 637 S.W.3d 816
• Parties: TARGET CORPORATION, Appellant v. D&H PROPERTIES, LLC, Appellee
• Court: Texas Court of Appeals

637 S.W.3d 816

TARGET CORPORATION, Appellant

v.D&H PROPERTIES, LLC, Appellee

NO. 14-20-00125-CV

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

Opinion filed November 23, 2021

Rehearing Denied December 16, 2021

Melissa Michelle Davis, Austin, Megan Schmid, Caitlin Gernert, Houston, for Appellant.

William T. Green, Houston, for Appellee.

Panel consists of Justices Wise, Jewell, and Poissant.

OPINION

Kevin Jewell, Justice

Target Corporation appeals a take nothing judgment declaring an easement and an option relating to a parcel of land void and denying Target's request for a permanent injunction to enforce the easement.

The land in question is currently the location of a Target store. A prior owner sold the majority of the land for commercial development, but due to environmental contamination and ongoing remediation requirements concerning a small section of the property, the grantor severed the contaminated section into a separate parcel, excepted it from the transfer, and burdened it with a purchase option and easement rights in favor of the surrounding land. The current owner of the contaminated parcel, appellee D&H Properties, LLC, obtained the parcel through a conveyance following a tax foreclosure sale and sought to avoid the effect of the easement. Target sued D&H for violating the easement, for declaratory and injunctive relief, and for refusing to sell the parcel pursuant to the purchase option. After a bench trial, the trial court denied Target's request for injunctive relief and signed a judgment declaring the easement void and the option extinguished.

For the reasons explained below, we conclude that the trial court erred in declaring the easement void. We render judgment in Target's favor on its breach-of-contract claim and its request for declaratory relief related to the easement. Regarding Target's challenge to the portion of the judgment denying its request for specific performance of the purchase option, however, Target has not established that the trial court erred in declaring the option extinguished by the tax foreclosure sale. Therefore, we overrule Target's issue and affirm the portion of the judgment declaring the option extinguished. We remand this case for entry of permanent injunctive relief and for consideration of attorney's fees under the Declaratory Judgment Act in light of our disposition.

Background

The easement and option at issue relate to real property once owned by National Oilwell Varco ("NOV"). In 2002, NOV sold the property to a real estate development company, Woodland Heights Development, L.P. We refer to this real property as the "Dominant Tract." When NOV transferred the Dominant Tract, it excepted from the transfer and retained ownership of a 0.8944-acre parcel within the Dominant Tract that was environmentally contaminated and subject to government-mandated remediation. We refer to the 0.8944-acre contaminated parcel as the "Environmental Parcel."

When NOV transferred the Dominant Tract, it executed a Non-Exclusive Easement Agreement (the "Original Easement Agreement") in favor of Woodland Heights. The Original Easement Agreement granted Woodland Heights a perpetual non-exclusive easement over the surface of the Environmental Parcel for ingress and egress, parking, landscaping, recreational purposes, and signage uses (the "Use Easement"). NOV, on the other hand, retained the obligation to maintain the Environmental Parcel, including the duty to comply with all continuing environmental remediation activities. To assist NOV in satisfying this obligation, the Original Easement Agreement granted NOV ingress and egress rights across the Dominant Tract "for the purpose of permitting [NOV] to inspect and repair [the Environmental Parcel], with reasonable prior notice to [Woodland Heights]" (the "Access Easement"). NOV, however, could not exercise its access rights or use the Environmental Parcel in a manner that interfered with Woodland Heights’ operations on or use of the Dominant Tract and the Use Easement. Also, the rights and duties in the easement ran with the land. Specifically, the Original Easement Agreement provided that all "rights granted and obligations imposed hereby shall run with the land and shall be binding upon and inure to the benefit or burden, as the case may be, of Grantor [NOV] and Grantee [Woodland Heights] and their legal representatives, successors, and assigns as owners of Grantor's Property and Grantee's Property, respectively."

With the Original Easement Agreement, NOV and Woodland Heights signed an option agreement, which provided Woodland Heights the option to purchase the Environmental Parcel for a specified price depending on whether NOV completed the environmental remediation.

The deed, the Original Easement Agreement, and a Memorandum of Option were recorded in the Harris County real property records in September 2002.

About two years later, the following relevant series of conveyances and transactions occurred. Woodland Heights executed a Special Warranty Deed conveying the Dominant Tract, together with additional land, to Sawyer Heights Village, Ltd. (the "Sawyer Heights Deed"). The Sawyer Heights Deed referenced the Original Easement Agreement and the option. Contemporaneously, Woodland Heights and NOV amended the option¹ to declare that: (1) the option period extends until November 1, 2054; (2) the option runs with the land; and (3) the option inures to the benefit of any subsequent owner of the Dominant Tract upon conveyance. Hereafter, we refer to the option, as amended, as the "Option." Woodland Heights assigned the Option to Sawyer Heights when it conveyed the Dominant Tract.

After the conveyance of the Dominant Tract to Sawyer Heights, NOV, Sawyer Heights, and another company, TPO-GP, Inc. ("TPO"),² amended the Original Easement Agreement to expand the Use Easement in the Dominant Tract's favor to expressly include the right to pave the Environmental Parcel (the "Amended Easement Agreement"). As part of the Amended Easement Agreement, the parties agreed that NOV could use the Environmental Parcel "for any uses which do not interfere with (i) the use of [the Use Easement] or (ii) [Sawyer Heights’] operations on, or use of, [Sawyer Heights’] property or the use or operations of any other party having rights to occupy or use [the Dominant Tract]." The Amended Easement Agreement stated, "[e]xcept as specifically modified hereby, the Original Easement [Agreement] shall remain in full force and effect."

Sawyer Heights then conveyed by special warranty deed most of the Dominant Tract to Target (the "Target Deed"). Sawyer Heights also assigned the Option to Target. Target, Sawyer Heights, and TPO entered into an "Operations and Easement Agreement," which governed operations on the Dominant Tract. NOV retained ownership of the Environmental Parcel and was not a party to the Operations and Easement Agreement.

These transactions occurred in October 2004. The parties promptly recorded the deeds, a Memorandum of the Amended Option, the assignments of the Option, the Operations and Easement Agreement, and the Amended Easement Agreement in the Harris County property records.

Target built a retail store and parking lot on the property, which included the Dominant Tract; and Target paved over the Environmental Parcel as part of the parking lot. The store opened in July 2006. Below is an aerial map of the property provided by Target in its briefing. The Environmental Parcel is labeled "Contaminated Parcel" in this depiction.

Years later, in 2014, NOV sold the Environmental Parcel to Biloxi Bacon Enterprise Corporation. The deed referenced and attached the Original Easement Agreement. Biloxi Bacon failed to pay 2014 ad valorem taxes on the property, and Harris County filed a tax foreclosure suit. Biloxi Bacon answered the suit but did not appear for trial, resulting in a default tax foreclosure judgment. Target did not become aware of the tax foreclosure suit or judgment until after the judgment.

As the tax foreclosure proceedings were ongoing, Biloxi Bacon obtained in 2017 a default judgment against Woodland Heights purporting to void the Original Easement Agreement. At that time, however, Woodland Heights no longer owned the Dominant Tract and, in fact, was no longer in existence, having dissolved in 2006.

Pursuant to the tax foreclosure judgment, the taxing authority sold the Environmental Parcel in 2018 to MRH Properties, LLC, an entity owned by Mahmoud Harmouche, for $345,000. Through a series of deeds, the Environmental Parcel is now owned by appellee D&H Properties, LLC, which is owned by Harmouche and Ankur Desai, who are both experienced real estate developers. D&H's deed is expressly "subject to any and all restrictions, covenants, easements, encroachments, and other matters of record to the extent the same are validly existing and applicable to the Property."

Desai testified that, before he and Harmouche purchased the Environmental Parcel, they searched the Harris County real property records, but he could not recall if they found the easement agreements or the Option. Neither Desai nor Harmouche conducted a title search on the Environmental Parcel until after they purchased it. According to Desai, he and Harmouche discovered the easement agreements and the Option while obtaining title insurance.

As matters now stand, Target owns the Dominant Tract, and D&H owns the Environmental Parcel. Since Target acquired the Dominant Tract, it has exercised its right to use the Use Easement continuously. Target paved the Environmental Parcel and used it for guest and employee parking and for truck access to its loading dock.

But in January 2019, D&H installed a chain-link fence on the parking lot around the Environmental Parcel's boundary, which prevented Target from exercising some of its rights under the Use Easement. The following is an aerial photograph provided by Target, showing the general location of the chain link fence and the Environmental Parcel (labeled...