Taco Boy, Inc. v. Redelco Co., Inc.

• Citation: 515 S.W.2d 319
• Decision Date: 31 October 1974
• Docket Number: No. 903,903
• Parties: TACO BOY, INC., et al., Appellants, v. REDELCO CO., INC., Appellee.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 319

515 S.W.2d 319

TACO BOY, INC., et al., Appellants, v. REDELCO CO., INC., Appellee.

No. 903.

Court of Civil Appeals of Texas,

Corpus Christi.

Oct. 31, 1974.

Jeffrey W. Jones, Johnson & Davis, Harlingen, for appellants.

Albert E. Coneway, Harlingen, for appellee.

OPINION

NYE, Chief Justice.

This was a suit brought by a landlord (appellee) for specific performance by Taco Boy, Inc. and IHC, Inc. for payment of delinquent unpaid rentals under a lease contract and additional accruing unpaid rentals under the lease between such date of filing suit and the date of final judgment. The case was tried before the court without a jury. The trial court held appellee was entitled to recover from appellants the total amount of unpaid rentals being those owing and unpaid through the period up to the date of final judgment in the amount of $8,320.00. From this judgment, the tenants hereinafter called appellants perfected this appeal.

On March 15, 1969, Nehi Bottling Company, Inc. of Harlingen, Texas, (appellee's predecessor) entered into a written land and building lease contract with Taco Boy, Inc., an Oklahoma Corporation . Under the lease contract, Nehi Bottling Company was to erect a building and improvements on the subject land which were to be constructed in accordance with the plans and specifications submitted by lessee appellant. The term of the lease was to be for a twenty-year period, to commence on the date the building and improvements were completed. The lease contract also provided for payment of minimum monthly rental of $890.00 by appellant lessee.

The building to be constructed was to be a unique type commercial building for specialized, single-purpose use by Taco Boy as lessee. Also, on March 15, 1969, contemporaneous with the execution of the lease contract referred to above, appellant, IHC, Inc. executed a guaranty contract whereby they undertook to guarantee to lessor and lessor's successors and assigns the payment by lessee of all the rents and charges due, and the performance by lessee as to all obligations under the lease agreement. On December 31, 1969, Nehi Bottling Company, Inc., was succeeded in a corporate reorganization by appellee Redelco Co., Inc. and the said lease contract was assigned by Nehi Bottling Co., Inc., to Redelco Co., Inc. The appellants, Taco Boy, Inc. and IHC, Inc., subsequently entered into a sublease agreement on October 10, 1972. The premises were subleased to Daniel Robledo and Leo Carrasco for a period of three years beginning October 15, 1972, and terminating October 14, 1975, in consideration for monthly rental of $650.00 per month to be paid by the sublessees. Redelco approved the sublease and for convenience agreed to accept directly from sublessees the $650.00 rent due under the sublease and credit this toward the $890.00 rental due from appellants under the original lease. Redelco agreed to this arrangement subject to Taco Boy and IHC remaining fully liable for the full and final performance of all the terms and conditions of the original lease. Appellants were to pay the difference in monthly rental in the amount of $240.00 per month so as to comply with the total amount owing under the original lease.

The rental payment lease term began November 1, 1969, with Taco Boy occupying the leased premises. Redelco has received fully payment of the rentals due up and until April, 1973. The portion of the monthly rentals ($240.00) to be made by Taco Boy or IHC as guarantor, became delinquent beginning April of 1973 and appellants have continued to default in their rental payments due since that time. The sublessees, Daniel Robledo and Leo Carrasco, also defaulted in the monthly rentals due beginning August, 1973, and have continued to be in default for such payment due. On May 22, 1973, appellee's attorney sent a letter to appellants notifying them that the rentals due had become delinquent and demanded that the delinquency be made current on or before June 1, 1973, and if a failure to do so occurs, suit on behalf of Redelco to recover such delinquent rentals would follow. Appellants contend that such letter caused a termination of the lease contract as of June 20, 1973, and because of such termination they are not now liable for any rents after that date. The appellants failed to bring their delinquent account current as demanded by Redelco. In June 1973, Redelco filed suit against Taco Boy and IHC for specific performance under the terms of the lease contract and guaranty agreement and for recovery of the then delinquent rentals and those accruing rentals which remain unpaid between the date of suit and date of final entry of judgment. The trial court rendered judgment for appellee entitling them to recover against appellants, jointly and severally, for all the unpaid rentals owing upon the date of the judgment, the total of which was $8,320.00. From this judgment, appellants have perfected their appeal to this Court.

The appellants assert only one point of error, that being that the trial court erred in holding that the lease agreement in question continued in force and effect after June 20, 1973. This is a rather broad point. The appellants break it up into specific sub-points in their brief, each of which will be considered separately so as to adequately cover appellants' main point of error.

Provision 17 of the lease contract provides as follows:

'17. DEFAULT. If Lessee should default in the payment of any rental or monies due hereunder, when due, or be in default or any covenant, agreement, or condition herein provided for, or abandon the Premises, or become bankrupt or make an assignment for benefit of creditors, or in the event a receiver is appointed for Lessee, then upon the occurrence of any one or more of such contingencies and after Lessee has been given notice by certified mail of such default, Lessee having thirty (30) days after the receipt of such notice within which to correct such default or defaults and if no such corrections are made, this lease is cancelled and all rights of Lessee are terminated. . . .'

The first question to be considered is whether this provision 17 of the lease contract is a tenant or landlord clause. In other words, who may pursue its use and effect to terminate the lease? The appellee contends such clause is for the use of the lessor only and only the lessor has the option to terminate the lease or continue it on lessee's default. Appellants argue and believe that by their failure to pay rent within thirty (30) days after demand by appellee was made, such failure on their part effectuates a termination of the lease without further action by them. We disagree with the appellants.

Where a lease contract provides for termination of the lease on non-payment of rent, the lessor alone has the elective right of determining it on breach. 36 Tex.Jur.2d Landlord and Tenant § 258 p . 111. The Texas Courts in an early decision, Morris v. De Wolf, 11 Tex.Civ.App. 701, 33 S.W. 556 (1895, no writ) stated the rule which has been consistently followed:

'. . . Where a lease contract contains a proviso that on nonpayment of rent the term shall cease, the lessor, and not the lessee, has the elective right of determining it upon breach made. The principle that no man is permitted to take advantage of his own wrong prevents the lessee from doing so. . . .' See also Brady v. Nagle, 29 S.W. 943 (Tex.Civ.App., 1895, no writ).

The provisions of the lease providing for a twenty year term and payment of minimum monthly rental for such period would become wholly meaningless and useless if appellants' contentions were to prevail. Appellants would be able to terminate the lease at any time, even at the end of the first month, by discontinuing paying rent...