Np Anderson Cotton Exchange, L.P. v. Potter

• Decision Date: 12 July 2007
• Docket Number: No. 2-06-121-CV.,2-06-121-CV.
• Citation: 230 S.W.3d 457
• Parties: NP ANDERSON COTTON EXCHANGE, L.P., Appellant/Appellee, v. Sandra POTTER d/b/a 7th Street Grill, Appellee/Appellant.
• Court: Texas Court of Appeals

230 S.W.3d 457

NP ANDERSON COTTON EXCHANGE, L.P., Appellant/Appellee, v. Sandra POTTER d/b/a 7th Street Grill, Appellee/Appellant.

No. 2-06-121-CV.

Court of Appeals of Texas, Fort Worth.

July 12, 2007.

Friedman, Suder & Cooke, P.C., Walker C. Friedman, Christian D. Tucker, and Elizabeth Sturdivant Kerr, Fort Worth, for Appellant/Cross Appellee.

Bodoin & Agnew, P.C., Mark Edwin Burge, Fort Worth, for Appellee/Cross Appellant.

Panel A: CAYCE, C.J.; LIVINGSTON and DAUPHINOT, JJ.

OPINION

TERRIE LIVINGSTON, Justice.

I. Introduction

Appellant and cross-appellee NP Anderson Cotton Exchange, L.P. appeals from a declaratory judgment in favor of appellee and cross-appellant Sandra Potter d/b/a 7th Street Grill giving Potter the option to extend a commercial lease for five additional years and awarding Potter attorney fees.¹ We affirm the trial court's judgment on the lease interpretation, but we reverse the trial court's award of attorney fees and remand for an evidentiary hearing on this point.

II. Background Facts and Procedural History

A. The Parties

Potter is the sole proprietor of the 7th Street Grill restaurant in downtown Fort Worth. Her husband, Rex Potter, is also substantially involved in this family-owned and operated business. The 7th Street Grill has been in its present location for at least sixteen years and, before a menu expansion, was known as the 7th Street Hamburger Company.

NP Anderson is a limited partnership formed for the purpose of acquiring the Neil P. Anderson Building, located at 411 West 7th Street in downtown Fort Worth, and developing it from an office building into high-end residential condominiums. NP Anderson is affiliated with the real estate development firm Amicus Interest, LLC and its principals.

B. The Original January 2001 Lease

Potter, the tenant, and NP Anderson, the landlord, are both assignees of parties who originally entered into the contract disputed in this case. On January 22, 2001, the original and long-time tenants, Mark and Linda Gabioud d/b/a/ 7th Street Hamburger Company, entered into a lease agreement with TCDFW 411 West Seventh, L.P. ("TCDFW"), the original landlord, and then-owner of the Neil P. Anderson building. The January 2001 lease ("2001 Lease") was for a 70-month initial term ending on December 31, 2006, and included the following language: "This Lease shall not be amended, changed or extended, except by written instrument signed by both parties hereto."

Paragraph 42 of the main body of the 2001 Lease also expressly incorporated several attached documents, including "Exhibit `D' — Special Stipulations," which contained an option for the tenant to renew and extend the lease for one additional term of five years: "Provided no Event of Default exists and Lessee is occupying the entire Leased Premises at the time of such election, Lessee may renew this Lease for one (1) additional period of five (5) years on the same terms provided in this Lease." [Emphasis in original.]

Exhibit D of the 2001 Lease also contained the following language, which NP Anderson relies upon to support its argument that the option had lapsed:

Lessee's rights under this Exhibit shall terminate if this Lease or Lessee's right to possession of the Premises is terminated, Lessee assigns any of its interest in this Lease or sublets any portion of the Premises, or Lessee fails to timely exercise its option under this Exhibit, time being of the essence with respect to Lessee's exercise thereof.

C. The Assignment of the Lease

In mid-2003, Potter, who is Mark Gabioud's sister and had gained substantial experience managing parts of the 7th Street Hamburger Company for the Gabiouds, obtained a Small Business Administration loan of $150,000 to purchase the business. Potter purchased the business, expanded the menu, and gave the restaurant its new name, the 7th Street Grill.

Potter, Mark and Linda Gabioud, and then-landlord TCDFW all signed a Consent to Assignment ("2003 Consent") that was effective May 27, 2003. In the trial court, the most debated portion of the 2003 Consent was the following clause:

Assignee [Potter] agrees to assume Assignor's [the Gabiouds'] obligations under the Lease and to accept the premises in their present "AS IS" condition. It is agreed and understood that the aforesaid Lease shall remain in full force and effect without modification except as expressly set forth herein. Accordingly, all remaining terms, conditions, and provisions of such Lease shall remain unchanged in full force and effect and are ratified and confirmed.

Landlord [TCDFW] consents to this assignment. [Emphasis added.].

TCDFW and NP Anderson entered into a "Purchase and Sale Agreement" on April 6, 2004. On that same day, TCDFW prepared an Estoppel Certificate for Potter to sign "in connection with the potential building sale." This certificate verified that the only amendment to the 2001 Lease was the 2003 Consent. The certificate also stated,

[Potter] has no right or option whatsoever to purchase or otherwise acquire the premises leased pursuant to the Lease . . . except as follows . . .: Extension Option — One (1) additional period of five (5) years on same terms by delivering (90) days written notice before expiration of the original term. [Emphasis in original.]

D. NP Anderson's Acquisition of the Neil P. Anderson Building and the Subsequent Litigation

On June 23, 2004, pursuant to their Purchase and Sale Agreement, NP Anderson purchased the Neil P. Anderson Building from TCDFW. Upon closing, NP Anderson received an assignment of leases, including Potter's, and thus became the new landlord.

At some point between June and November of 2004, NP Anderson announced plans to convert the Neil P. Anderson Building from offices to luxury condominiums. Potter originally sued NP Anderson for specific performance (to stop the conversion), for a declaratory judgment that the conversion was improper under the governing rules and regulations of the building, for breach of contract (diminution of sales and consequential damages), and for tortious interference with contract.² She later filed a Second Amended Original Petition to add a declaratory judgment claim regarding whether she could extend the 2001 Lease. NP Anderson then filed its own request for declaratory judgment arguing that the Gaboiud-Potter assignment terminated any assignee's right to an extension, which would have required Potter to vacate by December 31, 2006.

After the trial court denied a wave of summary judgment motions, the remaining claims—largely Potter's claim for breach of contract damages and the parties' competing declaratory judgment actions concerning the existence of a five-year lease extension option—went to trial. At the trial of Potter's breach of contract claim regarding NP Anderson's conversion of the building from office to residential use, the jury found that NP Anderson had successfully modified the 2001 Lease to permit residential dwellings and had therefore not breached the 2001 Lease.

Regarding Potter's lease extension claim, the parties disputed the meaning of the language in the 2003 Consent. Potter argued that the language and other circumstances surrounding the assignment meant that the parties agreed she acquired the same five-year lease extension option that the Gabiouds had under the original 2001 Lease. NP Anderson argued that the 2003 Consent did not give Potter the same extension option that the Gabiouds had.

The trial court found that the 2001 Lease and the 2003 Consent, when read together, were ambiguous as a matter of law. Consequently, the trial court submitted a question to the jury to "interpret the Assignment of Lease as applied to the Extension Option" by determining whether the parties to the 2001 Lease and the 2003 Consent intended for Potter (the assignee) to have an option to renew and extend the lease for an additional five years after the 2001 Lease and primary term expired (Question No. 4). The jury concluded that "the parties to the Potter Lease intended that Sandy Potter would have the option to extend and/or renew the lease for an additional period of five years."

The jury also determined that "a reasonable fee for Sandy Potter's attorneys in this case" was $212,753.50 for preparation and trial, $30,000 for the first appeal, and $15,000 for an appeal to the Texas Supreme Court. The trial court entered judgment on the jury's verdict that Potter had the contractual right and option to extend the 2001 Lease for five years and awarded Potter's attorneys reduced fees of $75,000 for trial preparation, $20,000 for a successful initial appeal, and $12,500 for a successful appeal to the Texas Supreme Court. NP Anderson appealed, challenging the trial court's rulings on both the extension and the attorneys' fees, and Potter filed a conditional cross-appeal.

E. Potter's Cross-Appeal

Potter asks us to consider her cross-appeal raising jury charge error in only two situations: (1) if we reverse the trial court's declaratory judgment on the lease extension option or (2) if we reverse the award of her attorneys' fees to Potter for any reason except to remand the case to the trial court for a new evidentiary hearing on attorneys' fees and re-entering of judgment on that basis. Thus, we address NP Anderson's points first.

III. The Lease Assignment and Extension

In its first issue, NP Anderson argues that the trial court erred by overruling its objection to submitting Question No. 4 to the jury, by denying its motion to disregard the jury's answer to that question, and by denying its motion for partial new trial based on Question No. 4.

A. Standard of Review

The trial court determined that the 2001 Lease and 2003 Consent, when read together, were ambiguous as a matter of law. A trial court's conclusions of law are reviewed de novo. Huntley v. Enon Ltd. P'ship, 197 S.W.3d 844, 849 (Tex. App.-Fort Worth 2006, no pet.). We accord no deference to the lower court's decision. Quick v....