Tx Far West v. Texas Investments Management

• Decision Date: 15 January 2004
• Docket Number: No. 03-03-00316-CV.,03-03-00316-CV.
• Citation: 127 S.W.3d 295
• Parties: TX FAR WEST, LTD., Appellant v. TEXAS INVESTMENTS MANAGEMENT, INC., Appellee.
• Court: Texas Court of Appeals

127 S.W.3d 295

TX FAR WEST, LTD., Appellant v. TEXAS INVESTMENTS MANAGEMENT, INC., Appellee.

No. 03-03-00316-CV.

Court of Appeals of Texas, Austin.

January 15, 2004.

Rehearing Overruled March 11, 2004.

Barry K. Bishop, Austin, for appellant.

Peter A. Nolan, Melissa A. Prentice, Austin, for appellee.

Before Chief Justice LAW, Justices MACK KIDD and PURYEAR.

OPINION

MACK KIDD, Justice.

This case involves a restrictive covenant that purportedly requires appellant TX Far West, Ltd. ("TX Far West") to pay an annual maintenance fee to appellee Texas Investments Management, Inc. ("appellee"). Because appellee never developed the land as originally contemplated, TX Far West sought a declaratory judgment that appellee had breached the restrictive covenant, and, in the alternative, that the restrictive covenant is not enforceable. Both parties moved for summary judgment, and the district court granted summary judgment for appellee and denied summary judgment for TX Far West. TX Far West appeals both the denial of its summary-judgment motion and the grant of appellee's summary-judgment motion. Because we conclude that appellee failed to prove that no issues of material fact exist and failed to prove that it was entitled to summary judgment as a matter of law, we reverse the district court's order granting summary judgment and remand to the district court for further proceedings.

BACKGROUND

In the early 1980s, appellee Texas Investments Management, Inc. proposed plans to develop a 35.49-acre tract of land in northwest Austin, which was to include several office and commercial buildings, interconnecting roads and sidewalks, and possibly public gathering areas and a jogging trail. While appellee was awaiting approval of its development plans by the City of Austin, Prudential Health Care Plan, Inc. ("Prudential") purchased five acres out of the 35.49-acre tract. The deed of sale to Prudential included restrictive covenants that were attached as an exhibit to the deed. The restrictive covenants provided:

The following restrictive covenants are created as covenants running with the five acre tract of land described in this Deed ("Said Property"), for the benefit of Grantor [appellee] herein, its successors and assigns in its capacity as developer of that certain thirty-five and 49/100 (35.49) acre tract out of which is hereby conveyed the herein described five acre parcel. The restrictions herein imposed are created for the purpose of establishing a high quality mixed-use office and commercial complex composed of a coordinated series of buildings, roadways, landscaping, pedestrian malls and parking facilities.

The restrictive covenants section included a provision for a maintenance fee to be paid by Prudential and subsequent owners to appellee. This provision provided:

Maintenance Fee

1. Grantee [Prudential] and each subsequent owner of Said Property [the five-acre tract] shall pay an annual maintenance fee to Grantor [appellee], for the purpose of providing for the orderly development, operation and maintenance of streets, sidewalks, pedestrian malls and other quasi-public facilities on said 35.49acre tract, as well as to provide for the operation and maintenance of a proposed jogging trail, necessary security services, insurance, traffic control and architectural review and enforcement for said 35.49-acre development. The maintenance fee for Said Property herein conveyed shall be $.20 per gross square foot of building space per year commencing with the initial occupancy of said space.... Commencing with January 1, 1983 and thereafter on January 1 of each following year, the maintenance fee shall be adjusted to reflect any increase in the Consumer Price Index ("CPI") from the base year of 1981.... Grantor shall provide Grantee annually with a written report disclosing all expenditures made by Grantor out of the maintenance fee fund.

Prudential's purchase of the five-acre tract was completed while appellee was awaiting approval of its development plan by the City of Austin, which, in fact, never approved the plan. Despite the City of Austin's failure to approve appellee's master-development plan, Prudential commenced payment of the annual maintenance fee to appellee in 1983 and continued payment until 1998, when Prudential sold the property to Texas HCP Holdings, Inc. ("THCP"). THCP continued paying the maintenance fees until it sold the property to appellant TX Far West in July 2001.

In November 2001, Richard Kemp, the president of TX Far West's corporate general partner, received the billing for the 2002 maintenance fee. Kemp requested a written report itemizing the services being rendered in exchange for payment of the maintenance fee. This request was consistent with the deed requirement that "Grantor shall provide Grantee annually with a written report disclosing all expenditures made by Grantor out of the maintenance fee fund." According to Kemp, Jay Tapp, appellee's president, responded "it is none of your [expletive] business."

After various correspondence between the parties regarding appellee's expenditures, TX Far West filed a declaratory judgment action seeking a determination that appellee had violated the terms of the restrictive covenant due to its failure to provide the amenities specified therein. TX Far West argued that, because it was paying the maintenance fee, it was entitled to receive the benefits provided for in the language of the restrictive covenant, namely, amenities on the 35.49-acre tract. In the alternative, TX Far West alleged that the maintenance-fee covenant was a personal covenant only and did not run with the land.

Appellee responded with a counterclaim for breach of contract and its own declaratory-judgment action. Appellee admitted that, for some or all of the years in question, it had not provided streets, sidewalks, pedestrian malls, or other quasi-public facilities on the 35.49-acre tract, nor had it provided a jogging trail, security services, insurance, or traffic control for the 35.49-acre development. However, appellee did build an 80-foot roadway to access the five-acre tract and has been mowing a strip of grass on the median of that roadway. Appellee claimed that the maintenance fee was not conditioned on the construction of additional amenities. Moreover, appellee argued that the maintenance fee was, in essence, actually a financing arrangement that had been negotiated by Prudential. In his affidavit, Jay Tapp stated:

As president of [appellee], I was involved in negotiating with Prudential about the sale of the five-acre Property. In negotiating with Prudential, I was informed that [appellee]'s asking price was more than Prudential had available in its budget. I also was informed, however, that Prudential was willing to pay a lower price for the land with an additional amount to be paid to [appellee] as a guaranteed annual maintenance fee for a period of fifty years (the "Maintenance Fee"). [Appellee] (through me) and Prudential (through its Vice President, Paul McCarty, now deceased) agreed the amount due each year for the Maintenance Fee would be determined by a mathematical calculation based solely on the square footage of building space on the property and the consumer price index, and not the amount of maintenance expenses incurred in a particular year.

[Appellee] agreed to accept the lower purchase price based, in part, on an analysis that the Maintenance Fee payments would likely exceed actual maintenance costs and much of the price [appellee] had initially sought for the Property could be recovered during the 50-year agreement.

Furthermore, appellee claimed that the development plans initially called for appellee to construct a 30-foot roadway. Because Prudential desired a larger roadway, appellee constructed an 80-foot roadway¹ that allegedly cost $138,144.72 more than the 30-foot roadway originally called for in the development plans. According to appellee, this expanded roadway was the only amenity that Prudential desired. Although the maintenance fee is far greater than current maintenance expenditures,² appellee claims it has failed to recover more than $430,000 of its maintenance expenses when a six-percent interest rate is applied to appellee's initial expenditure.

Both parties filed traditional motions for summary judgment. In its motion, TX Far West argued that because it was paying the maintenance fee and incurring the burden of the restrictive covenant, it was entitled to the benefits provided by the language of the restrictive covenant as well. TX Far West also contended that payment of the maintenance fee was conditioned upon appellee providing the amenities called for in the restrictive covenant. Conversely, appellees argued in its summary-judgment motion that construction of the 80-foot roadway constitutes "development" of the 35.49-acre tract, the amenities mentioned in the restrictive covenant were entirely optional, and appellee's "only obligation included in the language of the Restrictive Covenant [was] to maintain and provide security and insurance for any streets, sidewalks, and public amenities it chooses to construct on the Property." Appellee also presented its argument that the true intent of the maintenance fee was to function as a deferred compensation financing arrangement to compensate for a lower initial price paid by Prudential. The trial court denied TX Far West's summary-judgment motion, granted appellee's summary-judgment motion, and stated that "the payment of this maintenance fee is not conditioned on additional amenities being added to the property, but is solely conditioned on the maintenance of the grass median currently existing in the center of Austin Center Blvd...."

On appeal, TX Far West argues that, because the 35.49-acre tract was not developed as called for in the restrictive covenant, the restrictive covenant should not be enforced because (1) the purpose of the restrictive covenant has been...