Sanchez v. Dickinson

• Decision Date: 04 May 1977
• Docket Number: No. 15708,15708
• Citation: 551 S.W.2d 481
• Parties: Felipe SANCHEZ, Jr. and Luis F. Puig, Jr., Appellants, v. Charles B. DICKINSON et al., Appellees.
• Court: Texas Court of Appeals

Page 481

551 S.W.2d 481

Felipe SANCHEZ, Jr. and Luis F. Puig, Jr., Appellants, v. Charles B. DICKINSON et al., Appellees.

No. 15708.

Court of Civil Appeals of Texas, San Antonio.

May 4, 1977.

Thomas Rocha, Jr., Rocha, Tutt & Rosenberg, San Antonio, for appellants.

Lawrence A. Mann, Mann, Cronfel & Person, Nat B. King, Laredo, for appellees.

KLINGEMAN, Justice.

This case involves a first refusal right to purchase contained in a contract between Victor Pena and wife as sellers and J. W. Elledge as buyer, dated December 13, 1962, of record in the deed records of Zapata County, Texas. Suit was brought by appellees, Charles B. Dickinson and wife, Bertha G. Dickinson, against Gilberto Pena, Lilia Pena de Lucio, Gulf Oil Corporation, Felipe Sanchez, Jr., and Luis F. Puig, Jr. to avoid or cancel certain oil, gas, and mineral leases and mineral deeds on a tract of 152.73 acres, which leases and mineral deeds plaintiffs assert were made in contravention of a recorded first refusal option owned by them.

All defendants filed motions for summary judgment and plaintiffs moved for partial summary judgment. On May 24, 1976, the trial court denied each of the summary judgments filed by the respective defendants and granted plaintiffs partial motion for summary judgment. Thereafter, on June 8, 1976, a final judgment was entered herein in which the court confirmed its previous judgment; Gulf was dismissed from the lawsuit; the cross-action filed by Puig was dismissed; plaintiffs were found to be the owners of an oil, gas, and mineral lease given in 1969 on the 152.73-acre tract by Victor Pena to James A. Mayo and thereafter assigned to Gulf, ¹ which lease was found to be superior to an oil, gas, and mineral lease on such tract taken by Sanchez and Puig; and Sanchez and Puig are directed to convey to plaintiffs their interest in two mineral deeds and any rights they may have in and to the oil, gas, and mineral leases above referred to. Such judgments also provide for tender of certain payments by plaintiffs to Sanchez and Puig. This judgment contains various findings made by the trial court. Only Sanchez and Puig appeal from such judgment.

The trial court filed extensive findings of fact and conclusions of law, the pertinent portions of which may be summarized as follows:

1. The 1962 contract between Victor Pena and Elledge consisted of two separate parts: (a) an option to purchase a 991.21-acre tract except for the 200-acre homestead; and (b) a first option to purchase the reserved 200 acres, when and if sellers decide to convey said acreage. This contract was filed for record in Zapata County, Texas.

2. The first option to purchase this smaller tract was assigned by Elledge to the Garzas in 1963 and by mesne conveyances passed from the Garzas to Dickinson, where it is now vested.

3. Various oil, gas and mineral leases and mineral deeds were executed without notice to plaintiffs.

4. Neither Sanchez nor Puig asserted that the description of the land was inadequate or insufficient.

The court, in its conclusions of law, found that:

1. The first refusal right to purchase the homestead tract is separate and distinct from the remainder of the 1962 contract.

2. Such first refusal right is a covenant running with the land, is binding on Sanchez and Puig, and is without any time limitation.

3. Sanchez and Puig had constructive notice of the first refusal right to purchase.

4. Plaintiffs are entitled to have conveyed to them the various leases and mineral interests upon payment to Sanchez and Puig of the consideration that Sanchez and Puig paid.

The 1962 contract between Victor Pena and Elledge is styled "OPTION CONTRACT OF PURCHASE." The pertinent portions here involved are as follows:

Paragraph one provides for the purchase and sale of a tract of 743.94 acres of land out of a tract of 943.94 acres (by survey established as 791.21 acres out of the 943.94 acres), upon certain terms and considerations.

Paragraph four grants to the buyer the first option to purchase the reserved 200 acres (by survey determined to be 152.73 acres), when and if seller decides to convey said acreage.

Paragraph seven provides that the option shall be for 90 days from date and that the purchase price or consideration shall be the sum of $25.00 per acre or $18,600.00 (by mathematical calculation it is clear that this option refers to the 743.94 acres).

Paragraph nine provides that the option and agreement shall bind the heirs, executors, administrators, and assigns of both parties.

A chronological listing of the material instruments is as follows:

1. 12-13-62. The contract between Victor Pena and Elledge, hereinbefore described.

2. 4-18-63. Warranty deed from Victor Pena et ux. to Elledge of 791.21 acres. No reference is made of the first refusal right to purchase the 152.73 acres 3. 12-23-63. Warranty deed from Elledge to the Garzas conveying the 791.21-acre tract, which deed recites that Elledge was given a first refusal option to purchase the smaller tract under a recorded contract and this first refusal option is conveyed to buyers.

4. 1-31-68. Warranty deed from the Garzas to Dickinson and Rodriguez. Virtually identical to the deed above. Rodriguez thereafter conveys his interest to Dickinson.

5. 9-16-69. Oil, gas, and mineral lease from Victor Pena to James A. Mayo on the 152.73-acre tract. Mayo assigns and conveys this lease to Gulf Oil Corporation.

6. 11-1-72. Victor Pena dies and de Lucio and Gilberto Pena are named as executors of his estate.

7. 10-18-73. Hunting and grazing lease on the 152.73-acre tract between de Lucio and Gilberto Pena and Dickinson.

8. 2-17-75. Oil, gas, and mineral lease from de Lucio and Gilberto Pena on the 152.73-acre tract to Sanchez. Thereafter, Sanchez conveys an interest in such lease to Puig.

9. 3-28-75. Mineral deed from de Lucio and Gilberto Pena on the 152.73-acre tract to Sanchez. Sanchez thereafter conveys an interest therein to Puig. ²

The controlling question in this suit is whether appellees are the holders of a valid and subsisting first refusal right to purchase the 152.73-acre tract under the December 13, 1962 contract of sale. ³

Appellants assert that such first option was not a valid one because:

1. The time to exercise it had expired (90 days).

2. There was no purchase price mentioned.

3. Such right was not a covenant running with the land.

4. It was not included in the warranty deed from Victor Pena to Elledge.

Although appellant refers to the first refusal right of purchase as an option, there are fundamental differences between an ordinary option to purchase and a right to buy ahead of others if the seller desires to sell, which is the nature of a preferential right to purchase. The rule is set forth in 77 Am.Jur.2d Vendor & Purchaser § 49 (1975), as follows:

The distinction between an option and a pre-emptive right to purchase in the event the landowner should decide to sell is well recognized. Unlike an option, a pre-emptive right does not give the pre-emptioner the power to compel an unwilling owner to sell; it merely requires the owner, when and if he decides to sell, to offer the property first to the person entitled to the pre-emptive right at the stipulated price. There is no doubt that an agreement based on a consideration to give the promisee the refusal or first right to purchase in case the landowner wishes to sell at a fixed price or at a price which may be made certain, while of less value than an ordinary option to purchase, is valid and binding on the landowner. The pre-emptive right ripens into an option when the owner has elected to sell.

We are of the opinion that paragraph four of the 1962 contract granted a pre-emptive right to purchase in the event the landowner should decide to sell.

In Gochman v. Draper, 389 S.W.2d 571 (Tex.Civ.App. Austin 1965), the lessee in the lease agreement was given the right of first refusal to purchase the interest of the lessor if the lessor desired to sell his interest. The Court of Civil Appeals held that the first refusal provision in the lease was a valuable, valid, enforceable contract right, and stated The phrase 'first refusal' has acquired a well understood meaning in the business world which is that the owner of such right must be given the opportunity to buy the subject property on the terms offered by any bona fide purchaser. * * *

It is indisputable that a purchaser from a lessor who has given lessee a right of first refusal to buy takes the property subject to that right and lessee must be granted the opportunity to purchase at the price transferred. ⁴

In Foster v. Bullard, 496 S.W.2d 724 (Tex.Civ.App. Austin 1973, writ ref'd n. r. e.), Foster brought suit to enforce the terms of a first refusal option agreement made with Bullard, who was acting for Casa Monte Company. Foster had purchased 30 acres, and the first refusal option covered an additional 50 acres. Bullard sold the 50 acres to Mutual. The Court stated:

Mutual took with actual notice of Foster's first refusal purchase rights. To be a bona fide purchaser Mutual was obligated to make reasonable inquiry to determine whether Casa Monte had met its obligations under the option contract to offer the fifty acres to Foster at a price consistent with Mutual's offer . . . .

In Stone v. Tigner, 165 S.W.2d 124 (Tex.Civ.App. Galveston 1942, writ ref'd), Tigner, the lessee under a lease agreement, was given the first right and option to purchase any and all of the land should the lessor decide to sell. The Court held that the option runs with the land itself, and thus, it was not a collateral or personal contract between the parties.

We have concluded that the contract and agreement between Victor Pena and Elledge, dated December 13, 1962, created a valid and binding first refusal right to purchase the 152.73-acre tract here involved.

Appellants assert that even if such contract created a valid and enforceable right to purchase said tract, it is no longer...