Skyland Developers, Inc. v. Sky Harbor Associates, 1371

• Decision Date: 31 May 1979
• Docket Number: No. 1371,1371
• Citation: 586 S.W.2d 564
• Parties: SKYLAND DEVELOPERS, INC., et al., Appellants, v. SKY HARBOR ASSOCIATES, Appellee.
• Court: Texas Court of Appeals

Page 564

586 S.W.2d 564

SKYLAND DEVELOPERS, INC., et al., Appellants, v. SKY HARBOR ASSOCIATES, Appellee.

No. 1371.

Court of Civil Appeals of Texas, Corpus Christi.

May 31, 1979.

Rehearing Denied Aug. 30, 1979.

Richard A. Hall, Gary, Thomasson, Hall & Marks, Corpus Christi, for appellants.

Lev Hunt, Kleberg & Weil, Corpus Christi, for appellee.

OPINION

NYE, Chief Justice.

This is a suit to recover damages for breach of a real estate sales and management contract. The purchaser, Sky Harbor Associates, brought suit against the sellers, Skyland Developers, Inc., a Texas corporation, and Robert D. Reisinger, Robert B. Reisinger and James L. Collins, individually and d/b/a Skyland Developers, an Oklahoma partnership, to recover damages for the breach of the real estate sales and management contract executed by the parties on May 1, 1974. The contract provided for the purchaser to buy and the sellers to sell, and thereafter manage, as Purchaser's agent, a 224 unit apartment complex located on South Padre Island Drive and McArdle Street in Corpus Christi, Nueces County, Texas. After a jury trial, the court granted plaintiff's motion for judgment on the verdict and entered a judgment awarding damages of $23,061.28 to the plaintiff. The judgment also required sellers to provide plaintiff with an accounting for all income and expenses incurred in connection with the management and operation of the apartment from May 1, 1974 through December 31, 1974. Defendants appeal.

Appellants, Skyland Developers, Inc. and Skyland Developers, (hereafter called Sellers) commenced building the 224 unit apartment project in question in 1973. While the project was still under construction, Sellers entered into a written agreement which, in part, called for the sale of the project to Sky Harbor Associates (hereafter called Purchaser). Under the terms of the contract, ownership was to be transferred to the Purchaser effective May 1, 1974, but the Sellers were to complete the construction of the project and, as agent for Purchaser, were to manage the apartment house project from May 1, 1974 through December 31, 1974. As additional apartment units were completed, Sellers executed rental agreements, collected rent and security deposits, and paid the maintenance and operating expenses. At the end of December, Sellers relinquished possession and management of the apartment complex to Purchaser.

A dispute then arose concerning the responsibility for the payment of the 1974 ad valorem taxes on the property which totaled $7,311.28. Sellers did not pay the 1974 taxes. In April, 1975, after receiving a delinquent tax statement, Purchaser paid all of the 1974 taxes. In addition, a dispute arose when management and possession of the apartment complex was turned over to Purchaser, because Sellers refused to relinquish $15,750.00 which represented unrefunded security deposits they had collected from tenants during the time they managed the complex.

The crux of the dispute between the parties concerns the following contractual provisions:

"5. Proration of Taxes. All general taxes, special assessments, liens and personal property taxes, if any, payable during the year 1974 shall be prorated on the basis of said calendar year between Seller and Purchaser as of May 1, 1974. If the amount of general taxes cannot be ascertained, such proration shall be on the basis of such taxes paid for the preceding year.

9. (ii) (Seller agrees) to exercise its best efforts to lease the apartment units as agent of Purchaser . . . for which Seller shall receive compensation equal to all income and/or cash flow generated by the Project after payment of operating and maintenance expenses other than interest on the Promissory Notes (hereinafter 'Construction Loan Interest'), which, except as otherwise provided in paragraph 11 hereof, shall be the sole responsibility and obligation to the Purchaser.

From May 1, 1974 through December 31, 1974 (or December 1, 1974 if construction is not completed by such date), Seller shall be entitled to all income and/or cash flow from the property and shall be responsible for payment of all expenses incurred in connection with operation and maintenance thereof, other than Construction Loan Interest, which . . . shall be the responsibility and obligation of the Purchaser to pay direct to Cousins on a current basis.

Income realized and expenses incurred in connection with operation of the Project shall be prorated between the parties hereto as of December 31, 1974 and an accounting shall be rendered with respect thereto on or before January 15, 1975."

Purchaser filed suit alleging that, pursuant to paragraph 9 of the agreement, Sellers were to be charged with and responsible for all operating expenses of the apartment complex, including ad valorem taxes assessed against the property for the 1974 tax year. Purchaser also alleged, in effect, that the sum retained by the Sellers representing security deposits collected from tenants was not a part of the compensation Sellers were to receive for their management services.

Sellers defended, in part, on the basis that pursuant to the terms of the contract: 1) they were not obligated to pay ad valorem taxes for the 1974 year which accrued after May 1, 1974; and 2) the retained security deposits constituted "income and/or cash flow generated by the Project" and as such, the security deposits represented part of the Sellers' compensation for managing the project. Sellers alternatively alleged that, if the contract did not specifically support their contentions, then such contract was ambiguous and should be construed to support their contentions.

In response to special issues, the jury found, in relevant part, that: 1) operating expenses for the apartment project for the period from May 1, 1974 through December 31, 1974, included real estate taxes on such apartments; 2) a sum of $4,191.61 represented the amount of real estate taxes which were part of the operating expenses during that period; 3) the unforfeited tenants' security deposits were not part of the income, as that term is used in the May 1 contract, generated by the apartment complex during the period from May 1, 1974 through December 31, 1974; 4) the unforfeited tenants' security deposits were not part of the cash flow, as that term is used in the contract, generated by the apartment complex for the same period; 5) the sum of $15,750.00 represented the amount of unforfeited tenants' security deposits as of December 31, 1974; 6) the Sellers failed to render to the Purchaser an accounting on or before January 15, 1975, with respect to income realized and expenses incurred in the operation of the apartment complex for the period of time from May 1, 1974 to December 31, 1974.

In accordance with the answers to these special issues, the trial judge entered judgment awarding Purchaser $23,061.28 which represented the real estate taxes on the property for the period from May 1 to December 31, 1974, plus the sum of $15,750.00 representing the amount of tenants' security deposits as of December 31, 1974. The trial judge refused to enter judgment awarding the Sellers $493.69 representing salaries Sellers allegedly paid by mistake for managing the project after December 31, 1974.

In points of error one through three, appellant Sellers' major complaint is that the form in which the special issues were submitted to the jury erroneously required the jury to construe the contract, rather than answer factual inquiries concerning the intent of the parties. These contentions are predicated upon Sellers' premise that "(a)mbiguities existed by virtue of the provision . . . that ad valorem taxes on the property were to be 'prorated' between the parties . . . " (Paragraph 5), and because of the provision that Sellers would receive "compensation equal to all income and/or cash flow generated by the project after payment of operating and maintenance expenses. . . ." (Paragraph 9). Purchaser, on the other hand, contends that because the intention of the parties was not at issue, the contract was unambiguous, and thus, the trial court properly submitted issues to the jury requesting them to determine the meaning of undefined words which were used in the contract.

Our threshold inquiry is whether or not the contract in question is ambiguous. If it is not, then, even if we should agree that the form of the special issues erroneously required the jury to answer a question of law, reversible error will not be present if the trial court's judgment, based upon the jury's verdict, reaches the same result the trial judge should have reached if he had interpreted and construed the contract as a matter of law. See Carter v. Associates Discount Corp., 550 S.W.2d 399, 400 (Tex.Civ.App. Amarillo 1977, no writ); City of Houston v. Howe & Wise, 323 S.W.2d 134, 143 (Tex.Civ.App. Houston (1st Dist.) 1959, writ ref'd n. r. e.); Smith v. Smith, 187 S.W.2d 116, 121 (Tex.Civ.App. Fort Worth 1945, no writ). As stated by one eminent authority:

"Absent some showing of extraneous prejudice, the submission of a question of law is harmless: if it is answered as the court should have decided, it can hardly damage; if it is answered to the contrary, the finding would be immaterial and hence should be ignored." 3 McDonald Texas Civil Practice, § 12.37, p. 1169 (1965).

As a general rule, a contract is ambiguous if its meaning is "uncertain and doubtful" or "(if) it is also subject to more than one reasonable meaning, unresolvable by rules of interpretation." Skelly Oil Company v. Archer, 163 Tex. 336, 356 S.W.2d 774, 778 (1962); citing Neece v. A.A.A. Realty Company, 159 Tex. 403, 322 S.W.2d 597 (1959) and Universal C. I. T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154 (1951). In other words, if a contract remains reasonably susceptible to more than one meaning after the established rules of interpretation have been applied, it is ambiguous. On the other hand, if only...