Reagan Nat. Advertising v. Capital Outdoors

• Decision Date: 24 October 2002
• Docket Number: No. 03-02-00129-CV.,03-02-00129-CV.
• Citation: 96 S.W.3d 490
• Parties: REAGAN NATIONAL ADVERTISING OF AUSTIN, INC., Appellant, v. CAPITAL OUTDOORS, INC., Appellee.
• Court: Texas Court of Appeals

96 S.W.3d 490

REAGAN NATIONAL ADVERTISING OF AUSTIN, INC., Appellant, v. CAPITAL OUTDOORS, INC., Appellee.

No. 03-02-00129-CV.

Court of Appeals of Texas, Austin.

October 24, 2002.

Douglas W. Alexander, Anna M. Baker, Scott, Douglass & McConnico, LLP, Gary N. Schumann, Mitchell D. Savrick, Savrick, Schumann, Johnson & McGarr, Austin, for appellant.

Vincent L. Hazen, Paul M. Terrill III, Hazen & Terrill, Austin, for appellee.

Before Justices KIDD, B.A. SMITH and YEAKEL.

BEA ANN SMITH, Justice.

Reagan National Advertising of Austin, Inc. ("Reagan") appeals the trial court's order denying its motion for summary judgment and granting summary judgment in favor of Capital Outdoors, Inc. ("Capital"). Capital bought an advertising easement from Met NYTEX, Ltd. ("Met") and built an outdoor advertising billboard on Met's property. Reagan is a former lessee of Met and formerly maintained a billboard on the same land. The lease agreement between Reagan and Met contained a clause prohibiting Met from "releasing" the land to other advertisers for five years after the lease's termination. According to Reagan, this lease clause prohibits Met from conveying, not just from leasing, the property to other advertisers.

In this suit, Reagan attempts to enforce the clause against Met's grantee, Capital. Because the lease clause is not enforceable against Capital, and because neither Met nor Capital violated its terms by entering an easement agreement, we will affirm the judgment of the trial court.

BACKGROUND

Reagan leases more than nine hundred outdoor billboard faces in Austin and the surrounding area. This gives it control of more than eighty percent of the local billboard market. In Austin, this dominant market share is particularly valuable because of the City's restrictions on billboard construction.

The City prohibits the use of off-premise billboards.¹ Austin, Tex.Code of Ordinances § 25-10-102 (2002). But billboard sites that were already operating when this prohibition was enacted have been "grandfathered" and can retain their signs. See Id. § 25-10-152(A). The City also regulates the replacement of signs at these grandfathered sites. To replace a billboard: (1) the City must receive a replacement permit application before the existing billboard is removed, (2) the replacement billboard must be at least twenty-five percent smaller than the existing billboard, and (3) the replacement billboard must be erected within ninety days of the existing billboard's removal. Id. § 25-10-152(D), (B)(5)(c)(iii). A property owner who does not erect a new billboard within ninety days of an existing billboard's removal forfeits this valuable grandfathered property right. See id. § 25-10-152(D)(2); see also Reagan Nat'l Adver. v. Vanderhoof Family Trust, 82 S.W.3d 366, 368 (Tex.App.-Austin 2002, no pet.).

Met owns a grandfathered site. On May 1, 1998, it leased its site to Reagan for a renewable one-year term. The lease agreement includes a clause prohibiting Met from "releasing" the site to other advertisers for five years if it fails to renew with Reagan:

In the event this lease is not renewed or cancelled, lessor agrees that he will not for a period of five years subsequent to the date of termination, release said premises to any other advertiser other than lessee for advertising purposes.

Reagan maintained a billboard at the site for the next three years. When Met decided not to renew for a fourth term, Reagan reminded it of the restrictive lease clause. Met nevertheless refused to renew the lease. Reagan eventually removed its billboard.

Approximately two months before the lease with Reagan expired, Met sold Capital an easement allowing it to build and maintain a billboard on the site. The granting instrument explicitly makes the easement both perpetual and assignable. It also states that Met does not warrant title to the site against claims that Reagan might make under the lease. Capital has since built and is currently maintaining a billboard on the site.

The day after its lease expired, Reagan filed a lawsuit against the City in federal court. Reagan claimed the City had misconstrued its own ordinances by issuing billboard replacement permits to third parties. It argued that the signs themselves, not the sites, were grandfathered, and that the City had taken Reagan's property without compensation by issuing replacement permits to Reagan's competitors. The federal court dismissed the suit for failure to state a claim, explaining that Reagan retains no property interest in a site once its lease expires.

Reagan then filed a state-court lawsuit against Met. In that suit, Reagan sought temporary and permanent injunctions barring Met from conveying or "complying with any agreement authorizing the conveyance ... [of] the property subject to the Lease ... between Reagan and Met." The district court denied Reagan's request for a temporary injunction. Reagan then nonsuited and filed this lawsuit against Capital.

In this lawsuit, Reagan seeks to enforce the lease clause against Capital. It asked the trial court to declare that the clause is enforceable against Capital and to issue an injunction prohibiting Capital from utilizing the site for advertising purposes. Both parties filed motions for summary judgment. The trial court denied Reagan's motion and granted Capital's.

DISCUSSION

Because the propriety of a summary judgment is a question of law, we review the trial court's decision de novo. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994); Texas Dep't of Ins. v. American Home Assurance Co., 998 S.W.2d 344, 347 (Tex.App.-Austin 1999, no pet.). The standards for reviewing a motion for summary judgment are well established: (1) the movant for summary judgment has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). When the trial court grants one party's motion for summary judgment and denies the other, we review both motions and if we find the trial court erred, we will reverse and render the judgment the trial court should have rendered. See Bradley v. State ex rel. White, 990 S.W.2d 245, 247 (Tex.1999).

In its motion for summary judgment, Capital claims that granting an easement does not violate the restrictive lease provision, which prohibits only "releasing" the premises. Capital also claims that the lease provision is an unenforceable restraint on alienation of real property. We agree, and will affirm the summary judgment on both grounds.

Reagan's claim that Met violated the lease provision turns on an unnaturally broad reading of the word "release." Restrictive covenants are subject to the normal rules of contract construction. Pilarcik v. Emmons, 966 S.W.2d 474, 478 (Tex. 1998). In interpreting a restrictive covenant, we seek the objective intent of its drafters. Hodas v. Scenic Oaks Prop. Ass'n, 21 S.W.3d 524, 528 (Tex.App.-San Antonio 2000, pet. denied); see also Wilmoth v. Wilcox, 734 S.W.2d 656, 658 (Tex. 1987). We do not find this intent by looking at isolated words or phrases; instead, we examine the entire context of the instrument. See Crispin v. Paragon Homes, 888 S.W.2d 78, 81 (Tex.App.-Houston [1st Dist.] 1994, writ denied); Brite v. Gray, 377 S.W.2d 223, 225 (Tex.Civ.App.-Beaumont 1964, no writ). Doubts about the meaning of a covenant should be resolved against the party seeking to enforce it and in favor of the unrestricted use of land. Wilmoth, 734 S.W.2d at 657; Davis v. Skipper, 125 Tex. 364, 83 S.W.2d 318, 321 (1935).²

Reagan seeks to construe the lease clause in isolation. It ignores the fact that the instrument containing the clause is itself a commercial lease agreement. But this very fact makes the meaning of the clause unmistakable. If Reagan intended to prohibit Met from conveying the site to other advertisers, it would not have used the word "release" when it drafted the agreement. Neither Met nor Capital violated the restriction on releasing the site. Met conveyed an easement to Capital. It did not lease the property.

There is no doubt about the meaning of the clause, but if there were, Reagan would ask that we not resolve that doubt in favor of unrestricted use of land. Instead, Reagan would have us resolve any doubt in a way that totally destroys Met's grandfathered rights in the billboard site. We decline to do so. But the infirmity of Reagan's broad reading of the clause is even more serious. If Reagan's construction were correct, the clause would be void as an unreasonable restraint on alienation.

The rule prohibiting unreasonable restraints on alienation of real property is well established in Texas. See, e.g., Sonny Arnold, Inc. v. Sentry Say. Ass'n, 633 S.W.2d 811, 813 (Tex.1982); Crestview, Ltd. v. Foremost Ins. Co., 621 S.W.2d 816, 823 (Tex.Civ.App.-Austin 1981, writ ref'd n.r.e.). Texas courts often look to the Restatement of Property for guidance in deciding whether a restraint on alienation exists. See, e.g., Sonny Arnold, 633 S.W.2d at 813. Because Reagan's interpretation would impose contractual liability on Met for attempting to convey its site, and would terminate the property interest that Met conveyed to Capital, it falls squarely within the Restatement's definition of a restraint on alienation:

A restraint on alienation, as that phrase is used in this Restatement, is an attempt by an otherwise effective conveyance or contract to cause a later conveyance ...

(b) to impose contractual liability on the one who makes the later conveyance when such liability results from a breach of an agreement not to convey; or

(c) to terminate or subject to termination all...