Advance Components, Inc. v. Goodstein, 20418

• Decision Date: 10 October 1980
• Docket Number: No. 20418,20418
• Citation: 608 S.W.2d 737
• Parties: ADVANCE COMPONENTS, INC., Appellant, v. Jerald P. GOODSTEIN, Appellee.
• Court: Texas Court of Appeals

Page 737

608 S.W.2d 737

ADVANCE COMPONENTS, INC., Appellant, v. Jerald P. GOODSTEIN, Appellee.

No. 20418.

Court of Civil Appeals of Texas, Dallas.

Oct. 10, 1980.

Rehearing Denied Nov. 10, 1980.

James K. Peden, III, Royal H. Brin, Jr., Strasburger & Price, Richard E. Harrison, Harrison, Mason, Robertson, Hatch & Moss, Dallas, for appellant.

Charles J. McGuire, Winstead, McGuire, Sechrest & Trimble, Dallas, for appellee.

Before GUITTARD, C. J., and ROBERTSON and STOREY, JJ.

ROBERTSON, Justice.

This is an action brought by plaintiff Advance Components, Inc. against Goodstein for specific performance of a contract to convey real estate based upon the exercise of an option to purchase contained in a lease. The trial court granted defendant's motion for summary judgment, thereby denying specific performance, and denied defendant recovery of attorney's fees under the lease. We affirm as to the attorney's fees, but reverse and remand as to the action for specific performance.

On June 6, 1977, defendant leased to plaintiff certain real property. The lease agreement contained an option to purchase the real property that could be exercised by giving written notice at any time from September 1, 1978 to August 31, 1979. The financing provisions of the purchase option stated that plaintiff was:

to assume the unpaid principal balance on an original $165,000.00 promissory note, payable to Seminary State Bank, Ft. Worth, Texas, bearing nine and one-half (91/2%) per cent interest and payable in equal monthly installments of $1,441.61 each (principal and interest), for a period of fifteen (15) years (25 year amortization), from April 10, 1977. In the event tenant exercises said purchase option, then tenant agrees to pay Landlord the CASH difference between the purchase price and the principal balance owed on the hereinabove described mortgage, at closing.

Failure to close as provided in the purchase option was to terminate defendant's obligation to sell and plaintiff's right to purchase. On May 23, 1979, plaintiff gave notice that he was exercising the option in a letter to defendant. Thereafter, plaintiff attempted to comply with the contract by assuming defendant's note with Seminary State Bank but was unable to do so because the bank required individual guaranties of the assumption. Instead of assuming the note, plaintiff arranged financing for the entire purchase price with Republic National Bank. In all other respects plaintiff fully complied with the terms of the purchase agreement. Defendant refused to close because of plaintiff's failure to assume the note, and plaintiff sued for specific performance. The trial court granted summary judgment for defendant because plaintiff failed to strictly comply with the terms of the option. Immediately after granting summary judgment, the trial court tried the issue of attorney's fees and, based on its finding of fact and conclusion of law, denied defendant recovery of attorney's fees because defendant had not prevailed in an action within the purview of the lease provision allowing attorney's fees.

We are faced initially with a determination of what rule of law applies to the facts of this case. Defendant argues in his brief that the transaction here involved is an option, which was not exercised according to its terms, and, therefore, the rule that an option must be strictly complied with to become a binding bilateral contract applies. See Zeidman v. Davis, 161 Tex. 496, 342 S.W.2d 555 (1961). Plaintiff argues that it did not materially breach the agreement and thus should be allowed the remedy of specific performance. See Langley v. Norris, 141 Tex. 405, 173 S.W.2d 454 (1943). The lease with purchase option states "written notice addressed to Landlord shall be sufficient to exercise this purchase option, ...." We hold that the option was exercised by the giving of written notice in the letter of May 23 from plaintiff to defendant. See Kenver Corporation v. Robinson, 492 S.W.2d 317 (Tex.Civ.App.-Beaumont 1973, writ ref'd n. r. e.). Upon the exercise of the option, a bilateral contract, binding on both parties to the contract, was formed. Kenver Corporation v. Robinson, supra. The rule of law in this case, therefore, is that governing bilateral contracts rather than option agreements.

Counsel for defendant admitted at oral argument that the option was exercised by the giving of written notice and that upon the exercise of the option, a bilateral contract was formed. Nonetheless, defendant contends that the trial court correctly applied the rule of strict compliance, as announced in option cases, and, therefore, properly refused to order specific performance of the contract. We cannot agree.

In the early case of Farris v. Bennett's Executors, 26 Tex. 568 (1863), our Supreme Court stated:

(I)t is the general rule, that, to entitle a party to specific performance, he must show that he has been in no default in not having performed the agreement, and that he has taken all proper steps towards the performance, on his part; yet, on the other hand, though there has not been a strict legal compliance with the terms of the contract, yet, if the non-compliance does not go to the essence of the contract, relief will be granted. Id. at 572.

The rule of the Farris case has been followed by our Supreme Court for many years. Linch v. Paris...