Mr. W Fireworks, Inc. v. NRZ Inv. Grp.
| Decision Date | 21 February 2023 |
| Docket Number | 08-22-00077-CV |
| Parties | MR. W FIREWORKS, INC., Appellant, v. NRZ INVESTMENT GROUP, LLC, NELSON N. LEE, AND ALICE K. LEE, Appellees. |
| Court | Texas Court of Appeals |
Appeal from the 98th Judicial District Court of Travis County, Texas (TC# D-1-GN-21-001715)
Before Rodriguez, C.J., Soto, J., and Marion, C.J. (Ret.) Marion C.J. (Ret.) (Sitting by Assignment)
Appellant Mr. W Fireworks, Inc. (Mr. W) contends that the trial court erred in (1) granting summary judgment in favor of Appellee NRZ Investment Group, LLC (NRZ) on its request for specific performance of its contract with Appellees Nelson N. Lee and Alice K. Lee (together, the Lees) to purchase a 49-acre tract of land in Travis County; (2) finding that the right of first refusal (ROFR) Mr. W claims it had through a lease on the property was null and void; and (3) dismissing Mr. W's claims for breach of contract against the Lees and for tortious interference of contract against NRZ. We affirm the trial court's ruling on the merits of the parties' claims, but we strike the language in the judgment declaring all provisions in Mr. W's lease (other than the ROFR) null and void. As neither NRZ nor the Lees requested such broad relief, trial court lacked the authority to include it.[1]
Appellant Nathan Lee originally entered into a two-year lease with Mr. W in March 2012, allowing Mr. W to lease a "100' by 100' area of frontage" located along the side of a specified road on a 49.243-acre tract of land (the 49-acre tract) in Travis County owned by the Lees. The stated purpose of the lease was to allow Mr. W to operate a seasonal fireworks stand on the subject property, and it gave Mr. W the exclusive right to sell fireworks on the subject property during the lease term, including any "option[]" period. The lease further provided that if Mr. W paid the Lees $1,350 on the 20th of every June and December, the lease would be considered "optioned" for that year. Finally, as regards the present case, the lease stated:
Lessor[s] agree as an independent restriction that survives the lease not to sell or lease any part of said property including any adjoining or contiguous property to any person[s] or corporation for the purpose of selling fireworks in competition to Lessee during the term of this lease including all options, and for a period of ten years after lease is terminated. Lessor will give Lessee the first right of refusal should Lessor decide to sell."
Mr. W filed a "Memorandum of the Lease and Restrictive Covenants" (the Memorandum) in the county records on February 29, 2012, memorializing that it was leasing the property and that it had a ROFR to purchase the property.
Nelson Lee entered into a second lease agreement with Mr. W on January 13, 2021, which Mr. W drafted, stating that the parties were "extending [the] current lease [for] six months and to continue with consecutive six month options from February 21, 2021." The lease again stated that it was for the purpose of allowing Mr. W to sell fireworks on the property and that Mr. W had the exclusive right to do so during the term of the lease and any option period. The lease called for Mr. W to make a $1,500 payment on the 24th of every June and December and provided that the lease would be "considered optioned" if the rent was paid on or before those dates. It further provided that either party had the right to cancel the lease with thirty days' notice. Unlike the first lease, the 2021 lease set forth a legal description of the leased property, which included the 49- acre tract. It also included the following language at issue in this appeal:
Nelson Lee's wife, Appellant Alice Lee, was neither named in nor signed either lease.
On March 8, 2021, NRZ and the Lees entered into a contract in which the Lees agreed to sell NRZ the 49-acre tract for $1,690,000.00, with a closing date of April 15, 2021 (the NRZ contract). After the title company discovered the Memorandum Mr. W had filed reflecting its ROFR in the 2012 lease, Nelson Lee sent an email on March 23, 2021, to Mr. W's manager, Julio Martinez, stating:
The same day, Martinez emailed Cameron requesting disclosure of the material terms of the NRZ contract. On March 26, 2021, Cameron sent Martinez a partially redacted copy of the NRZ Contract.
By letter dated March 31, 2021, Mr. W's attorney advised the Lees that Mr. W was exercising its ROFR and intended to purchase the property on the same terms as the NRZ contract but demanded a later closing date to ensure that "Mr. W is provided the same periods of time [to close its contract] offered in the Contract to [NRZ] and so as not to frustrate Mr. W's exercise of the right of first refusal and subsequent closing." On April 6, 2021, the Lees executed a sales agreement with Mr. W to purchase the 49-acre tract for the same purchase price but gave Mr. W the requested 37 days to close, which pushed the closing date to May 13, 2021. The Lees then informed NRZ they were unable to comply with the NRZ contract due to Mr. W asserting its ROFR.
Naming both Mr. W and the Lees, NRZ filed a lawsuit on April 14, 2021, seeking a declaratory judgment that Mr. W's ROFR was void, or alternatively, that Mr. W did not properly exercise the ROFR, as Mr. W asked for different terms than what the NRZ contract called for- including a different closing date. NRZ sought specific performance of the NRZ contract and further sought damages from Mr. W based on its claim that Mr. W had tortiously interfered with the NRZ contract. In response, Mr. W brought a claim against the Lees for breach of contract for their alleged refusal to sell Mr. W the property and sought specific performance of its ROFR, allowing it to purchase the property for the "same price and on the same terms and conditions" as the NRZ contract. Mr. W brought a counterclaim against NRZ, in the alternative, seeking damages for NRZ's alleged tortious interference with its ROFR.
In their answer to the pleadings, the Lees initially asked the trial court to deny both NRZ's and Mr. W's claims for specific performance, contending that neither party had tendered full consideration to purchase the Property.
On August 2, 2021, NRZ filed a traditional and no-evidence motion for partial summary judgment, seeking a declaration that the ROFR in Mr. W's lease was void under the statute of frauds, as neither the 2012 nor the 2021 lease adequately described the property that was subject to the ROFR.[2] In particular, NRZ argued that neither lease clearly identified what portion of the 49-acre tract Mr. W was leasing or what portion the ROFR covered, i.e., whether the ROFR only covered the frontage strip or whether it covered the entire 49-acre tract. In the alternative, NRZ argued that (1) the ROFR was void under the Texas Family Code, as both of Mr. W's leases were signed only by Nelson Lee, despite the alleged community-property nature of the property;[3] (2) the ROFR (assuming its validity) at most covered only the frontage strip that Mr. W had originally leased; and (3) Mr. W did not properly exercise the ROFR, as it demanded different terms than were contained in the NRZ contract, including a different closing date. In support of its arguments, NRZ attached a declaration from Nelson Lee, averring that the 49-acre tract was acquired by him and his wife during their marriage, that it was jointly titled in both of their names, and that he believed Mr. W's ROFR only covered the strip of land that Mr. was "using for its firework stand, not the entire 49.243-acre tract."[4] The Lees later filed their own motion for summary judgment, seeking dismissal of Mr. W's breach-of-contract claim against them, arguing that they did not breach the ROFR, as the ROFR did not provide any specific timeframe in which they were required to notify Mr. W of their contract with a third party. They further argued that they complied with the ROFR when they gave Mr. W the opportunity to purchase the property in accordance with the terms of the NRZ contract, but that Mr. W did not properly exercise that right when it demanded a different closing date. The Lees therefore asked the trial court to allow them to proceed with their sales contract with NRZ.
Mr. W opposed NRZ's no-evidence summary judgment motion arguing that it was "premature," as only five months had passed from the time the lawsuit was filed, giving the parties inadequate time to conduct discovery prior to the filing of the motion. Mr. W also opposed NRZ's traditional summary judgment motion, as well as the Lee's motion, arguing that the 2021 lease agreement clearly specified that Mr. W was leasing the entire...
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