Moore Burger, Inc v. Phillips Petroleum Company

• Citation: 470 S.W.2d 762
• Decision Date: 14 July 1971
• Docket Number: No. 11826,11826
• Parties: Page 762 470 S.W.2d 762 'MOORE' BURGER, INC., Appellant, v. PHILLIPS PETROLEUM COMPANY et al., Appellees. Court of Civil Appeals of Texas, Austin
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 762

470 S.W.2d 762

'MOORE' BURGER, INC., Appellant v PHILLIPS PETROLEUM COMPANY et al., Appellees.

No. 11826.

Court of Civil Appeals of Texas,

Austin.

July 14, 1971.

Rehearing Denied Sept. 20, 1971.

Philip W. Gilbert, Mitchell, Gilbert & McLean, Austin, for appellant.

John W. Stayton, Stayton, Maloney, Black, Hearne & Babb, Austin, for Phillips Petroleum Co. James M. Steed, Palmer & Steed, Austin, for Albert E. Craus.

Coleman Gay, Austin, for C. Milton Dowd.

O'QUINN, Justice.

This case is on appeal from a summary judgment, granted on motions of defendants below, that plaintiff take nothing.

The ultimate question is whether the summary judgment proofs conclusively negate at least one of the essential elements of plaintiff's cause of action. We have decided that question against the plaintiff and will affirm the judgment of the trial court.

The appellant, plaintiff below, is 'Moore' Burger, Inc., the corporate successor of 'Moore' Burger, a partnership, which began a restaurant business in Austin, on one of the tracts of land involved in this case, in 1959. The stock of the corporation is owned by W. D . Scallon, Jr., who is president of the company.

Appellees, who were defendants below, are Albert E. Craus, C. Milton Dowd, and Phillips Petroleum Company.

Appellant brought this lawsuit in 1969 alleging that Craus and Dowd induced appellant in 1967 not to bid on, or make an attempt to buy, the tract upon which its place of business was located, when offered for sale by the City of Austin, on the promise and agreement of Craus and Dowd that they would acquire the adjoining tract and lease that site, and a restaurant building they would erect on it, to appellant for twenty years, in order to make the tract appellant then occupied available to Phillips Petroleum for a service station. Appellant further alleged that it allowed Craus and Dowd to acquire the City of Austin tract without competition from appellant, and that Craus and Dowd also acquired the adjoining tract but sold both pieces of land to Phillips for a service station, and that Phillips then ousted appellant from the City tract on which it had conducted its business since 1959. Appellant alleged also that Phillips Petroleum took the two tracts of land with actual or constructive notice of appellant's claims with respect to the City tract, which appellant was occupying, and, in negligent disregard of appellant's rights, failed to make inquiry as to appellant's rights in both tracts.

Appellees raised defenses under the statute of frauds (Section 26.01(b)(5), Business and Commerce Code, V.T.C.A.; Acts 1967, 60th Leg., ch. 785) and the statute of conveyances (Article 1288, Vernon's Anno.Civ.Stat.). Appellant contends that its cause of action rests on either or both of two exceptions to these statutes. The first theory of appellant's case is under the doctrine of constructive trust, and the second is under the exception of partial performance found in the rule of Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114 (1921).

Appellant leased from the City of Austin in July, 1959, the initial term being for five years, with an option to renew for an additional five years. The adjoining tract, which is also involved in this lawsuit, was owned by the Ing Estate. Prior to June, 1967, Scallon learned that the City of Austin was considering selling the City tract, which 'Moore' Burger, Inc. still occupied under the lease from the City, and on inquiry was advised by the City that he would be given an opportunity to buy the property and that consideration would be given by the City to the fact that 'Moore' Burger, Inc., was occupying the premises as the tenant and had a going business located on the City land. Scallon began making arrangements to buy the tract and by June, 1967, had acquired two sources from which he could finance the purchase.

Craus and Dowd, who on at least two prior occasions had jointly acquired service station sites they sold to Phillips Petroleum, undertook prior to June, 1967, to acquire both the City tract and the Ing tract with a view to selling the two properties to Phillips for a station location. In connection with the undertaking, Craus and Dowd made an agreement with William F. Kemp to act as attorney and trustee for them and to receive title to the properties in Kemp's name as trustee, although Kemp was to have no interest in the sites or in profits realized from the transaction . Pursuant to this arrangement, Craus obtained an option to buy the Ing tract, intending to exercise the option only if he and Craus succeeded also in buying the City tract.

Craus approached Scallon in June of 1967 and learned of Scallon's plans to buy the City tract. Craus then told Scallon that there was no reason for both of them to try to buy the City tract and that if 'Moore' Burger, Inc. would refrain from bidding on the property, Craus would buy the land and lease it to 'Moore' Burger, Inc., at $250 per month, and thereafter would build a new restaurant on the adjoining Ing tract which Craus would then lease to 'Moore' Burger, Inc., under a long term and at a favorable rent. Dowd testified by deposition that from the beginning of their venture he and Craus felt that both the City tract and the Ing tract would be needed for a service station site. Craus testified that he had made a contract to sell both tracts to Broadway Oil Company, a holding company that bought station sites for Phillips, 'months before I even met Mr. Scallon.'

After several meetings with Craus, Scallon went with Craus to Kemp's law office where a written form of their oral agreement was prepared. Scallon took the draft of their agreement to an attorney, resulting in various changes to which Craus assented. The lease agreement provided that the new building would be placed on the Ing tract, at a cost to lessors of $12,000 to $20,000, and the base rent would be $450 per month, plus one percent per month of the cost above $12,000 for the building, with an initial term of twenty years, and with two five-year renewal options. In addition, the agreement provided that during the first ten years 'Moore' Burger, Inc., would have the option to buy that portion of the Ing tract leased for the restaurant, together with the building, for the price to be paid by Kemp, as trustee, to the City of Austin for the City tract.

The lease agreement referred to the City tract as 'Tract I' and to the Ing tract as 'Tract II.' The agreement recited that 'Lessor (William F. Kemp, Trustee) intends to purchase the following described real property (hereinafter sometimes called Tract I) from the City of Austin * * *' and stated further that 'Lessee ('Moore' Burger, Inc.) presently has a lease on said property and is in possession of same * * * It is the mutual intention and desire of Lessee and Lessor for Lessor to purchase Tract I and to retain Lessee as a tenant, subject to the terms and conditions set forth herein and in the lease contract marked 'Appendix A', attached hereto and incorporated herein by reference.'

The instrument further recited that Lessor would make a good faith effort to buy the City tract and that 'If Lessor purchases Tract I within two years from the effective date of this agreement, he will promptly offer to lease the same to the Lessee under the terms and conditions set forth in Appendix A.' Under the terms of Appendix A, appellant was to have a lease on Tract I, the City tract, at a rental of $250 per month. The primary term was for one year, the lease being automatically renewed and extended for nine consecutive, additional terms of one year each, but appellant could terminate the lease by written notice thirty days before expiration of the primary lease or any renewal term.

With reference to the Ing property, designated as Tract II, the agreement recited that 'Lessor further intends to purchase' Tract II, and that 'Within one year after Lessor has acquired title to both Tracts I and II (if he has done so within two years of the effective date of this agreement) Lessor will construct a building on Tract II * * * and will lease said Tract II to Lessee for a monthly rental of $450.00 plus 1% Per month of the amount, if any, by which the cost of said building exceeds $12,000.00.' Lease of Tract II, with the new building, was to be in accordance with the lease contract found in 'Appendix B' attached to the agreement. The agreement further stated that upon execution of the lease on 'Tract II and the building agreed to be constructed thereon by Lessor, the lease of Tract I shall be terminated and of no further force and effect, notwithstanding anything to the contrary in this agreement or its appendices.'

After completion of the final draft of the agreement, with Appendix A and Appendix B attached, Craus went to Scallon's office and read over the agreement. Scallon signed the agreement. After reading it, Craus told Scallon everything was fine, that the agreement was accepted, and that he would have Kemp sign it. Craus told Scallon that Kemp was the attorney on the deal only and that Craus had full authority to accept the agreement. Craus told Scallon to advise the City officials that 'Moore' Burger, Inc., was not going to buy Tract I. Craus testified that prior to this conversation he had already advised the City that Craus and Scallon were engaged in discussions regarding the property.

Meanwhile Craus and Dowd had made a new contract, dated August 24, 1967, to sell both Tract I and Tract II to Broadway Oil Company. Scallon, without knowledge of the contract Craus and Dowd had with Broadway, instructed his attorney to notify the City that 'Moore' Burger, Inc., had made a lease agreement with Kemp and would not bid on the City property when offered for sale. The written agreement Scallon had signed was delivered by Craus to Dowd, and the instrument later reached Kemp who kept it in his file.

A short time after Scallon signed the instrument, apparently less than...