Barfield v. Howard M. Smith Co. of Amarillo

• Decision Date: 27 March 1968
• Docket Number: No. B--382,B--382
• Citation: 426 S.W.2d 834
• Parties: Bourdon Rea BARFIELD, Trustee, et al., Petitioners, v. The HOWARD M. SMITH COMPANY OF AMARILLO, Respondent.
• Court: Texas Supreme Court

Page 834

426 S.W.2d 834

Bourdon Rea BARFIELD, Trustee, et al., Petitioners, v. The HOWARD M. SMITH COMPANY OF AMARILLO, Respondent.

No. B--382.

Supreme Court of Texas.

March 27, 1968.

Rehearing Denied May 1, 1968.

Underwood, Wilson, Sutton, Heare & Berry, Jerome W. Johnson, Amarillo, for petitioners.

Simpson, Adkins, Fullingim & Hankins, Wayne Sturdivant, Amarillo, for respondent.

GRIFFIN, Justice.

This is a suit to recover sums of money allegedly due under a lease agreement. Petitioners were the plaintiffs and respondent was the defendant. The parties will hereinafter be referred to as petitioners and respondent, respectively. The trial court entered judgment that the petitioners take nothing by their suit, and the Court of Civil Appeals affirmed. 415 S.W.2d 667.

The lease agreement out of which this controversy arose was executed June 12, 1958, for a term from August 1, 1958, through June 30, 1965.

The respondent has operated a clothing store on Polk Street in Amarillo for a number of years. Prior to the lease in question the respondent operated its business in a building at 604--6, Polk, leased from the petitioners under an agreement executed November 3, 1952, for a term from January 1, 1953, to December 31, 1972. That lease provided for a base rental of $20,000.00 per year, payable monthly in advance, and an additional rental based upon a percentage of gross sales during the calendar year as follows: three and one half per cent (3 1/2%) of gross sales in excess of $500,000.00 but not to exceed $800,000.00; three per cent (3%) of gross sales in excess of $800,000.00 but not to exceed $1,000,000.00; and two and one-half per cent (2 1/2%) of gross sales in excess of $1,000,000.00. The respondent was to make an accounting of these additional rentals at the end of each year and remit the amount due less certain credits for taxes, insurance and other matters paid for by the respondent as lessee. It is undisputed that in its accounting at the end of each year under this lease the respondent added to the percentage rentals four per cent (4%) of $500,000.00 or $20,000.00 and then subtracted the amount of the advance payments on the base rental ($20,000.00) to arrive at the amount of the additional rentals due under the lease. It is also undisputed that the $20,000.00 payments per year were a fixed base rental and not intended necessarily to be 4% Of $500,000.00, but since the amount was both added in and subtracted out, it had no effect upon the payment of the correct amount of rental due. The same amount was paid as though the respondent had simply figured the percentages on the gross sales in excess of $500,000.00 and remitted that in addition to the $20,000.00 base rental, as called for in the lease. All rentals due under the provisions of the 1952 lease were paid in full.

The petitioners also owned the building next to the one being used by respondent under the 1952 agreement. On June 12 1958, the lease in controversy was executed between the petitioners and respondent, whereby the respondent would lease an additional 3,240 square feet in the adjoining building, to be operated as a part of the whole business. This lease provided that there should be a base rental of $4,800.00 per year, payable monthly in advance upon this additional space. The lease provides that since the whole space is to be operated as one business and the gross sales under the 1952 lease up to this time had been in the neighborhood of $925,000.00, the additional rentals after payment of the $20,000.00 base rental in the 1952 lease and the $4,800.00 base rental in the 1958 lease would be computed as follows: three and one-half per cent (3 1/2%) of gross sales in excess of $500,000.00 but not to exceed $800,000.00; three per cent (3%) of gross sales in excess of $800,000.00 but not to exceed $925,000.00; 3.67% Of gross sales in excess of $925,000.00 but not to exceed $1,150,000.00; and two and one-half percent (2 1/2%) of all gross sales in excess of $1,150,000.00. The lease also provided that the additional rentals figured at 3.67% Of the gross sales between $925,000.00 and $1,150,000.00 were to be allocated to the additional space, and when added to the base rental of $4,800.00 would constitute the total rent on that area.

Again it is undisputed that when the respondent made its accounting on the additional rentals at the end of the year it continued to add to the percentage rentals 4% Of $500,000.00 or $20,000.00, but now it began subtracting a credit of $24,800.00 ($20,000.00 in monthly rental payments under the 1952 lease and $4,800.00 in monthly rental payments under the 1958 lease.) This method brought about a deficit of $4,800.00 in the yearly rentals because this $4,800.00 was not being added in as a percentage rental as was the $20,000.00 but was being subtracted from the total as a credit. This method was incorrect under the terms of the lease.

On August 1, 1964, a third lease covering the additional space was executed with a term from July 1, 1965 to December 31, 1972, in exactly the same terms as the 1958 lease. On or about October 1, 1964, the petitioners lost possession of the building covered by the 1958 and 1964 leases, due to the foreclosure of a mortgage. It appears that when the additional rentals were rendered at the end of 1964 the petitioners first became aware that the method of computation used by the respondent resulted in the petitioners receiving less rentals than provided for in the 1958 lease. The petitioners brought this suit alleging that they were entitled to the base rent of $4,800.00 per year for the years the 1958 lease was in effect, and which because of respondent's method of computation they had failed to receive.

Respondent's defenses to petitioner's claim were that because of a mutual mistake the 1958 lease failed to state what was intended by the parties and therefore, the lease should be reformed; that the petitioners were barred from asserting a claim to all or a part of the unpaid rentals for the years 1958--1964 by equitable estoppel, laches and the two or four-year statutes of limitation. It is undisputed that under the terms of the 1958 lease petitioners should have received the rentals which are involved in this suit.

Trial was to the court without a jury. The trial court, upon express findings of fact and conclusions of law, held that the terms of the 1958 lease were clear and unambiguous and there is no basis for reforming the lease; but that the four-year statute of limitations barred petitioners' claim for unpaid rentals in the years 1958, 1959, and 1960; that petitioners are equitably estopped from asserting any claim; and also that petitioners are barred by laches. The Court of Civil Appeals concluded that the findings of fact made by the trial court are supported by some evidence and are sufficient to support the judgment on the theory of equitable estoppel under the holding of Champlin Oil & Refining Co. v. Chastain, Tex.Sup., 403 S.W.2d 376 (1965), and on that theory affirmed the trial court without passing on any of the other holdings of the trial court.

This Court recognized in the Champlin case, supra, that each case in which equitable estoppel is sought to be applied must rest upon its own facts. The Court of Civil Appeals in the case before us was of the opinion that the facts in this case brought it within the holding of the Champlin case. In this we hold that the Court of Civil Appeals erred.

Respondent, in its brief in this Court, contends that the lower courts correctly held that petitioners are equitably estopped from asserting their claim because there are findings of fact supported by the evidence that: petitioners had knowledge or imputed knowledge that the method employed by respondent was not correct and the rentals were being underpaid; petitioners' failure to advise respondent of the error, reasonably led it to believe that the method it used was correct and the rentals were being properly paid; and respondent relied on such conduct of petitioners to its detriment.

To sustain estoppel against petitioners, the only acts or conduct relied upon by respondent are that petitioners failed to advise it that it was using an improper method and that the rentals were being underpaid. Silence can be the basis for an estoppel, where there is a duty to speak. Burnett v. Atteberry, 105 Tex. 119, 145 S.W. 582 (1912). The burden of proving an estoppel and the essential elements thereof is on the party asserting it and the failure to prove any one or more of the elements is fatal. Concord Oil Co. v. Alco Oil & Gas Corp., Tex.Sup., 387 S.W.2d 635 (1965); Grinnan v. Dean,62 Tex. 218 (1884).

Petitioners argue that the Court of Civil Appeals and the trial court erred in holding that they were estopped to assert their claim because respondent had knowledge, or the means of acquiring knowledge, of the truth of all matters which form the basis of the estoppel.

A party claiming an estoppel must have used due diligence to ascertain the truth of the matters upon which he relies in acting to his detriment. Champlin Oil & Refining Co. v. Chastain, Tex.Sup., 403 S.W.2d 376 (1965); Houston & T.C.R. Co. v. Paris Milling Co. (Tex.Civ.App., 1922),240 S.W. 638, no writ. One of the requirements of estoppel is that the party claiming the estoppel was without knowledge, or the means of acquiring knowledge, of the facts...