Opinion
Civil Action No. SA-03-CA-1302-FB.
April 4, 2006
ORDER REGARDING CROSS-MOTIONS FOR SUMMARY JUDGMENT
Before the Court are plaintiff's Second Motion for Summary Judgment and Memorandum of Supporting Points and Authorities (docket no. 56), Defendants' Cross-Motion for Summary Judgment (docket no. 55), plaintiff's Facts and Documents Supporting Plaintiff's Second Motion for Summary Judgment (docket no. 57), Plaintiff's Response to Defendants' Cross-Motion for Summary Judgment (docket no. 58), Defendant's Sur-Response to Plaintiff's Second Motion for Summary Judgment (docket no. 59), Plaintiff's Objection to Defendants' Sur-Response to Plaintiff's Second Motion for Summary Judgment and Reply to Defendants' Sur-Response (docket no. 60), and Defendants' Reply (docket no. 61) to plaintiff's objections to defendants' sur-response. After careful consideration of the motions and related filings, the pleadings on file and the entire record in this case, the Court is of the opinion plaintiff's motion for summary judgment should be granted in part and denied in part and defendants' cross-motion for summary judgment should be granted. Specifically, plaintiff's motion should be granted to the extent plaintiff seeks to recover $605,678.06 due as a result of a dishonored check, but denied to the extent plaintiff is pursuing a breach of lease claim to recover $780,000 it claims it is owed under the lease. Defendants' motion for summary judgment, which acknowledges the $605,678.05 is due and owing to plaintiff and seeks only to avoid liability on the full amount of $780,000, should be granted.
BACKGROUND
This dispute involves the alleged breach of a Shell Lease Agreement. Plaintiff, as lessee and tenant, operates an outpatient dialysis clinic in San Antonio, Texas on the premises leased from defendants. Defendant BAP-FMC San Antonio, Ltd. ("BAP"), a limited partnership, is the successor in interest to Post Oak Development, the original landlord, and is the present owner of the property; defendant British American Properties of Houston, Inc., is the general partner of BAP. Plaintiff and defendants' assignor, Post Oak Development, entered into the Shell Lease Agreement on May 2, 2001. The lease was assigned to defendants on July 31, 2001.
Pursuant to the terms of the lease agreement, plaintiff was to "finish out" the premises with a "Tenant Improvement Allowance" provided by the defendants. To this end, the lease contains the following provision at paragraph 6:
Landlord will, at its own expense, develop plans and construct the Premises as a "shell building" project in accordance with the attached Exhibits A, B, and C. Exhibit A consists of a general description of the responsibilities of the parties, including shell building outline specifications for Landlord's construction. Exhibit B is a floor plan of the Premises. Exhibit C is a site plan for the Premises. Landlord will provide Tenant a tenant improvement allowance of sixty and 00/100 ($60.00) per square foot in the amount of $780,000 ("Tenant Improvement Allowance") to finish out the interior of the Building ("Tenant's Work") as well as a standard sprinkler system to the Building. Upon completion of Tenant's Work, and at such time as Tenant receives final billing for all work from the contractors, Tenant shall present Landlord with a detailed statement of the final cost of Tenant's Work. Landlord's payment of such Tenant Improvement Allowance for such completed Tenant's Work shall become due and owing within ten(10) days after Tenant's presentation of such statement to Landlord. Tenant may, at its own expense, remodel said Premises in accordance with the plans submitted by Tenant to landlord and approved by Landlord. Tenant may, at its own expense, either at the commencement of or during the term of the Lease, install such counters, partitions, walls, shelving, fixtures, fittings, machinery and equipment upon or within the Premises as Tenant may consider necessary to the conduct of its business. Tenant may also, at its own expense, either at the commencement of or during the term of this Lease, make such alterations in and/or additions to the Premises, including without prejudice to the generality of the foregoing, the addition of a television antenna, flue openings and an emergency generator as well as alterations in the water, gas, and the electric wiring system, as may be necessary to fit the same for its business, upon first obtaining the written approval of the Landlord as to the materials to be used and the manner of making such alterations and/or additions. Landlord covenants not to unreasonably withhold, condition or delay its approval of alterations and/or additions proposed to be made by Tenant.
At any time prior to the expiration of earlier termination of this Lease, Tenant may remove any or all such alterations, additions or installations in such a manner as will not substantially injure the Premises, or the portion or portions affected by such removal, and the Premises shall be restored to the same condition as existed prior to the making of such alteration, addition or installation, ordinary wear and tear damages or destruction by fire, flood, storm, civil commotion, or other unavoidable cause excepted. All alterations, additions or installations not so removed by Tenant shall become property of Landlord without liability on Landlord's part to pay for the same.
(emphasis added).
Various contractors worked on the premises, and plaintiff presented defendants with a request for payment of the Tenant Improvement Allowance accompanied by various invoices and a request for the entire $780,000 it claims is due under paragraph 6 of the lease. Plaintiff itemized its request for payment of the allowance as follows:
1. Final Application and Certification for Payment #6, dated 08/28/02, (Horizon Interior Systems). This final amount of $57,979 is for retainage only and has been forwarded to corporate for payment. You will note that the final cost of the interior construction (Line 3) was $574,034.63.
2. Invoice for Architectural Services #92823-6 (Camden Design Group). This final payment amount of $2,632.67 has been paid to Camden. You will note that the final cost for architectural and engineering for this project was $31,643.43.
3. Copies of equipment purchase requisitions for: Televisions Phone/Data Wiring $20,275.51 + $2,731.71) totaling $22,986.51.
4. Copies of equipment purchase requisitions for: Water Treatment System components and installation ($67,761.80 + $27,606 + $42,800) totaling $99,109.36.
5. Copies of equipment purchase requisitions for: Two recessed electronic scales ($2,739.71 + $2,731.71) totaling $5,479.42.
6. A full set of Furniture Control Pages, dated May 23, 2002. You will note that pages one (1) through twenty-two (23) [sic] total $ 21,636.96.
7. As you can see, the above expense, alone, is very close to the Tenant Improvement Allowance. There are, however, significant, other costs and expenses (such as a complete phone system) associated with this project that have been ordered and paid at the corporate level for which I do not have invoice copies.
(emphasis in original).
Defendants responded by tendering to plaintiff a check in the amount of $605,678.06 to compensate plaintiff for the first two of the six itemized requests for payment. In the correspondence accompanying the check, defendants explained their belief that plaintiff was not entitled to be reimbursed the full $780,000 under the terms of the lease agreement. The letter states:
[C]heck no. 1070 is in the amount of $605,678.06 which represents the total funds due Bio-Medical Application of Southeast San Antonio (Tenant) under the terms of the Lease Agreement. The amount funded represents the $574,034.63 you paid Horizon for the interior build out and the $31,643.43 paid to the architects, Camden Design Group. Under [paragraph] 6 of the Lease, all the other items you have p[resented] are Trade Fixtures and or Personal Property. Furthermore, all of these extras are not "improvements" because the Lease Agreement (which the Tenant drafted) makes a clear provision for removal of trade fixtures. Ordinarily, the trade fixtures are removable anyway, unless the contract (lease) specifies otherwise. . . .
(emphasis added). Paragraph 7 of the lease agreement governs "Trade Fixtures, Personal Property." This provision states:
All articles of personal property and all business and trade fixtures, machinery and equipment, furniture and movable partitions owned by Tenant or installed by Tenant at its expense in the Premises ("Tenant Trade Fixture") shall be and remain the property of Tenant and may be removed by Tenant at any time during the term of the Lease provided Tenant is not in default hereunder past any applicable cure period, and provided further that Tenant shall repair any damage caused by such removal. Tenant's water treatment equipment shall be considered a Tenant Trade Fixture for purposes of this lease.
(emphasis added). The check which defendants tendered to plaintiff was annotated by defendants: "Endorsement of this check constitutes full and final settlement of all landlord obligations for tenant allowance of Lease of 05/20/2000."
Plaintiff accepted the check, annotating it twice "without prejudice under protest." It then twice attempted to deposit the check, only to have it returned both times marked "insufficient funds."
Defendants allege the check was returned because a former business partner without their knowledge withdrew the majority of the partnership's cash from the account and absconded with the money.
On December 30, 2003, plaintiff filed its complaint alleging defendants (1) breached the lease agreement by failing to tender a check for the full amount of the $780,000 and (2) failed to have on deposit sufficient funds to honor the $605,678.06 check. Defendants answered and counterclaimed seeking a declaration from the Court concerning paragraph six of the lease; specifically, whether "improvements" includes counters, fixtures, television sets and other removable items plaintiff had installed. Defendants also requested a set-off against the improvement allowance for unpaid taxes, insurance premiums and rents.
Plaintiff filed a motion for summary judgment which was denied. At the direction of the Court, the parties attempted to mediate the dispute, but were unable to reach an agreement. Plaintiff's second motion for summary judgment and defendants' cross-motion for summary judgment are currently pending.
STANDARD OF REVIEW
A party may obtain summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." FED. R. CIV. P. 56(c); Ford Motor Co. v. Texas Dept. of Transp., 264 F.3d 493, 498 (5th Cir. 2001). The movant bears the burden of proof, and must conclusively establish the fundamental elements of the claim to prevail on the motion for summary judgment.Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). To avoid summary judgment, the non-moving party must present some evidence tending to demonstrate "a genuine issue of material fact." Stahl v. Novartis Pharms. Corp., 283 F.3d 254, 263 (5th Cir. 2002). On cross-motions for summary judgment, each party's motion is reviewed independently, and each time the evidence and inferences are viewed in the light most favorable to the non-moving party. Ford Motor Co., 264 F.3d at 498 (citingTaylor v. Gregg, 36 F.3d 453, 455 (5th Cir. 1994)). Following such review, if only one conclusion on the issue is reasonable, summary judgment is appropriate. International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264 n. 6 (5th Cir. 1991) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986)).DISCUSSION
Plaintiff brings suit on the $605,678.06 amount due as a result of the dishonored check, and is also pursing a breach of lease cause of action to recover the full $780,000 it claims it is owed under the lease. To prevail on the dishonored check claim, plaintiff must demonstrate: (1) the note is payable at or though a banking institution; (2) presentment of the instrument is made; and (3) the note is not paid on the later of either the day it becomes payable or the day of presentment. See Tex. Bus. Com. Code § 3.104(a) (Vernon 2002) (governing negotiable instruments);Bailey Aught, Robertson Co. v. Remington, Invs., Inc., 888 S.W.2d 860, 864 (Tex.App.-Dallas 1994, no writ) (indicating "sum certain" requirement is designed to provide commercial certainty in transfer of negotiable instruments and to make negotiable instruments functional equivalent of money). Defendants tendered a check to plaintiff, drawn on defendants' account at First National Bank, which plaintiff attempted to twice deposit in its Fleet Bank account; each time the check was presented for payment, defendants' bank refused because the First National Bank account had insufficient funds to cover the check. This entitles plaintiff to recover the $605,678.06.
Defendants, however, do not dispute this amount is owed plaintiff. Defendants agree the $574,034.63 paid to Horizon Interior Systems for the interior build out and the $31,643.43 paid to Camden Design Group for architectural and engineering services were covered by the Tenant Improvement Allowance of the lease agreement. Pursuant to their First Offer of Judgment, defendants have offered to pay plaintiff the $605,678.06 due, minus the amount of rents and taxes withheld by plaintiff during the pendency of this litigation. This offer has been in place since December 24, 2004. To this extent, plaintiff's motion for summary judgment is granted such that plaintiff is awarded $605,678.06 for the amount due as a result of the dishonored check. The salient and remaining issue, then, is whether plaintiff is entitled to recover the $174,321.94 it claims it is owed per the lease agreement as a result of defendants' alleged breach.
Recent filings indicate the entire $605,678.06 has been liquidated through the set-off of rents, insurances and taxes and that, in December of 2005, plaintiff began to make these payments as a result of the total liquidation of the undisputed amount owed to plaintiff.
Calculated as: [$780,000 (amount to which plaintiff claims it is entitled)] — [$605,678.06 (undisputed and liquidated portion of the Tenant Improvement Allowance)] = $174,321.94.
It must first be determined whether plaintiff's remaining itemized requests for payment fall under the finish out provision of the Shell Lease Agreement. If so, they are covered by the Tenant Improvement Allowance and, in failing to reimburse plaintiff for these expenses, defendants are in breach of the Shell Lease Agreement.
Plaintiff seeks $99,109.36 in reimbursement for a water treatment system, including installation. Plaintiff also seeks $2711.00 in reimbursement for phone/data wiring. Paragraph six of the Shell Lease Agreement specifically provides: "[t]enant may . . ., at its own expense, either at the commencement of or during the term of this Lease, make such alterations in and/or additions to the Premises, including . . . alterations in the water . . . and the electric wiring system." Specifically regarding the water treatment system, paragraph seven of the lease further provides that the "[t]enant's water treatment equipment shall be considered a Tenant Trade Fixture for purposes of this lease," meaning that it is to be "installed by Tenant at its expense in the Premises" and "shall be and remain the property of Tenant and may be removed by Tenant at any time during the term of the Lease. . . ." As the express terms of the lease provide that the water treatment system, including its installation, along with phone/data wiring are to be provided at plaintiff's expense, this Court declines to find that these costs are covered under the finish out provision of the lease.
Plaintiff also seeks $20,275.51 in reimbursement for televisions, $5479.42 in reimbursement for two recessed electronic scales, $21,636.96 in reimbursement for furniture, control panels and partitions, and an unspecified amount in reimbursement for "a complete phone system." Plaintiff identifies the television and electronic scale acquisitions as "equipment purchase[s]." Paragraph 6 of the Shell Lease Agreement provides the "[t]enant may, at its own expense, either at the commencement of or during the term of this Lease, install such counters, partitions, walls, shelving, fixtures, fittings machinery and equipment upon or within the Premises as Tenant may consider necessary to the conduct of its business." This paragraph further provides that "[a]t anytime prior to the expiration of earlier termination of this Lease, Tenant may remove any or all such alterations, additions or installations. . . ." Paragraph seven, regarding "Trade Fixtures, Personal Property," provides that "[a]ll articles of personal property and all business and trade fixtures, machinery and equipment, furniture and movable partitions" are to be installed by the tenant "at its own expense" and "shall be and remain the property of the tenant and may be removed by tenant at any time during the term of this Lease. . . ." The televisions, scales, furniture, control panels, partitions, and the phone system qualify as machinery, equipment and furniture/movable partitions which plaintiff apparently deemed necessary to conduct its business. Plaintiff must therefore install these trade fixtures/personal property items at its own expense under the terms of the lease.
This conclusion is supported by Texas law. The term "improvement" is not defined in the Shell Lease Agreement. The Court must therefore look to the definition supplied by the law of this State. See Erie R.R. v. Tompkins, 304 U.S. 64 (1938) (Texas law applies because this Court's jurisdiction is grounded solely upon diversity of citizenship). Under Texas law, a tenant improvement means a permanent fixture to the real estate but does not include items which are removable such as television sets and the other acquisitions for which plaintiff now seeks reimbursement. See Neely v. Jacobs, 673 S.W.2d 705, 707-08 (Tex.App.-Fort Worth 1984, no writ) (tenant improvements paid by landlord are those which permanently enhance value of realty and do not include removable trade fixture improvements installed for purposes of tenant's trade).
Plaintiff maintains under the unambiguous terms of the lease agreement, it is entitled to the entire $780,000 sum and defendants' failure to tender this entire amount breached said lease agreement. Plaintiff strenuously argues that the $780,000 was a sum certain to be paid to plaintiff regardless of the amount expended by plaintiff in finishing out the interior of the building. In support of its conclusion, plaintiff argues the Tenant Improvement Allowance was a "loan" advanced by the defendant landlords to the plaintiff tenant, and the monthly rental amount reflected a sum calculated to allow the landlord to recover the $780,000 loan over the life of the lease. According to plaintiff, to allow defendants to tender "only" $605,678.06 would result in a "windfall" to defendants because the stipulated rental amount was intended to repay the $780,000 amount. Essentially, plaintiff argues it agreed to the rental amount based on its belief that whatever it spent on finishing out the building's interior, it would be entitled to the $780,000, and to allow defendants to tender only $605,678.06 would effectively deny plaintiff the benefit of its bargain because plaintiff would be effectively paying back $780,000 over the lease term while receiving only $605,678.06.
Plaintiff further argues the language of the lease agreement clearly reflects it was in the contemplation of the parties that plaintiff would spend more than the $780,000 amount in preparing the facility for its use, and the language of the lease, to the extent it speaks of items to be installed at the "tenant's expense," is referring to those items, purchased by plaintiff after the $780,000 allowance was exhausted, and removable by plaintiff upon termination of the lease. Consequently, according to the plaintiff, the lease establishes plaintiff is absolutely entitled to the full $780,000 figure.
Plaintiff's arguments find support in neither case law nor a plain meaning reading of the lease agreement. A recent Texas case considering a tenant improvement allowance noted that such a provision is included in a lease to assist tenants in "offset[ting] the costs of permanent improvements to the landlord's property which [tenants] undertake per the lease contract." Hooker v. Nguyen, No. 14-04-00238-DV, 2005 WL 2675018, at *1 (Tex.App. Houston [14th Dist.] Oct. 20, 2005, no pet. h.). Plaintiff, contrary to this definition, argues a tenant improvement allowance provides a tenant with an unqualified right to spend said allowance on any items, whether intended to become permanently attached to the landlord's property or not, as long as the tenant is willing to leave such items behind upon expiration of the lease. Aside from a lack of support in the applicable case law, plaintiff's position when carried to its logical end yields unreasonable results. Under the plaintiff's interpretation, a tenant could spend no money on actual physical improvements to the landlord's property, but instead exhaust the entire tenant improvement allowance on acquisitions made for the purposes of its particular trade and, as long as the tenant did not mind leaving the articles on the premises after the lease terminated, reimbursement from the landlord would be required for the full amount of the allowance. Plaintiff is seeking reimbursement for items such as televisions, water softening equipment, and office furniture, as well as freight and shipping charges for said items. However, plaintiff has not shown it is reasonable to suggest that the landlord would readily agree to pay for these items, even if plaintiff intends to leave them behind when the lease terminates. The landlord might not want these items because they might be totally unsuited for the needs of future tenants and, as a result, of no use to the landlord. Moreover, these items are more in the nature of personal property, and will depreciate in value more rapidly than would permanent improvements to the property, thereby making the proposition that the landlord would agree to provide funds for the purchase of such items doubtful. Finally, the plain language of the lease makes a clear distinction between the "Tenant's Work," specifically defined as "finish-out of the building's interior," which triggers payment of the Tenant Improvement Allowance upon presentation of contractor's receipts, and other work to be completed at the tenant's expense, such as installation of "counters, partitions, walls, shelving, fixtures, fittings, machinery, and equipment . . . the addition of a television antenna, flue openings and an emergency generator as well as alterations in the water, gas, and the electric wiring system, as may be necessary to fit the same for its business."
In Texas, if only one interpretation of the lease agreement is a reasonable construction per the plain language of the contract, as a matter of law the Court must adhere to the plain language of the contract. DeWitt County Elec. Coop. Inv. v. Parks, 1 S.W.3d 96, 100 (Tex. 1999); see also Steuber Co. v. Hercules Inc., 646 F.2d 1093, 1098 (5th Cir. 1981). Plaintiff's argument in the instant case fails as a reasonable interpretation of the parties' agreement. It suggests a landlord entering a lease agreement containing a tenant improvement allowance contemplates the expenditure of the entire sum extended to the tenant without regard to whether the landlord is actually benefitting from the expenditure of the allowance, and it renders several other statements contained within the parties' agreement essentially meaningless. A contract should be read as a whole, with an eye toward harmonization of seemingly conflicting provisions; whenever possible, conflicting provisions of the lease agreement should be read together to see if a unified explanation of the contracts terms can be reached. National Union Fire Inc. Co. v. Care Flight Air Ambulance Serv., Inc., 18 F.3d 323, 328-29 (5th Cir. 1994). In the instant case, plaintiff is arguing for summary judgment based upon its view that the plain language of the lease establishes in them an absolute right to the sum of $780,000. However, this position is contradicted by other statements in the same paragraph of the lease agreement. Paragraph six of the lease contract clearly states that upon the tenant's receipt of the contractors' bills for completion of the interior finish-out ("Tenant's Work"), a detailed statement of the same should be forwarded to the landlord prior to payment of the Tenant Improvement Allowance. Plaintiff's construction of the lease renders this aspect of the parties' agreement meaningless. If, as per plaintiff's argument, the landlord is required to pay the tenant improvement allowance to tenant regardless of the type of items purchased, as long as the tenant agrees to leave them behind at the termination of the lease, then why should it be necessary for plaintiff to submit a detailed statement of the work completed, and why would the language of the lease clearly reference both the fact that "Tenant's Work" is defined as interior finish-out, and that this type of work is such that contractors would be required? Summary judgment in favor of the plaintiff is not appropriate because, viewing the evidence in the light most favorable to the non-moving party, it is not certain the only reasonable interpretation of the lease is the one forwarded by plaintiff.
Defendants argue the purpose behind including the calculation of the Tenant Improvement Allowance within the lease was to demonstrate an amount up to which the tenant could spend on permanent improvements to the property, not to provide plaintiff with an absolute right to spend $780,000 on both permanent improvements to the property and whatever personal items it might possibly need. In response to plaintiff's contention that the landlord was "loaning" the tenant money and recouping these proceeds by inflating the monthly rental payment due, the defendants' answer that plaintiff, in incurring the costs of the finish-out of the interior of the shell building, was actually loaning defendant money, and the payment of the Tenant Improvement Allowance by defendant was intended to reimburse plaintiff for the amounts it personally expended for items which constituted permanent improvements to the landlord's property. Under defendants' construction of the lease agreement, items classifiable as personal property likely to be removed from the premises upon the termination of the lease are not items for which the plaintiff is entitled to be recompensed out of the tenant improvement allowance because, unlike the finish-out of the interior of the building, said items of personal property do not benefit the landlord. Defendants' argument, then, is that the Tenant Improvement Allowance, as expressed in the instant lease agreement, represented a ceiling up to which defendants agreed to reimburse the tenants for work done to improve the property, and the plain language of the lease agreement clearly delineates between amounts spent for this purpose and amounts spent on such "fixtures, fittings, machinery, and equipment" particular to the operation of the plaintiff's business, which were to be installed at the "tenant's sole expense."
Defendants' argument more closely comports with the established construction of tenant improvement allowances in Texas. Hooker v. Nguyen, No. 14-04-00238-DV, 2005 WL 2675018, at *1 (Tex.App. Houston [14th Dist.] Oct. 20, 2005, no pet. h.) (tenant improvement allowance is means of reimbursing tenant for taking on finish-out or redecorating costs which ultimately benefit landlord and his property). It also finds support in the plain language of the parties' lease contract. The wording of paragraph six of the lease agreement clearly indicates that two types of expenses were in the contemplation of the parties at the time the lease was drafted: (1) expenses initially paid for by the tenant in finishing-out the interior of the shell building, and for which the tenant would be compensated through the Tenant Improvement Allowance up to $780,000; and (2) expenses incurred by the tenant in setting up the building specifically for the use of a dialysis clinic, which the landlord would allow upon submission and approval of plans, but for which the tenants bore the sole financial responsibility. Defendants' construction of the agreement harmonizes the conflicting provisions of the lease and at the same time gives meaning to all the provisions of paragraph six of the lease agreement. Per the defendants' interpretation of the lease, plaintiff is entitled to up to $780,000 to finish-out the interior of the building to its liking and in accord with the needs of its business; however, expenses resulting from business-specific purchases, such as the buying of "fixtures, fittings, machinery, equipment" and the installation of "television antenna, flue openings and an emergency generator as well as alterations in the water, gas, and the electric wiring system, as may be necessary to fit the same for its business" are the responsibility of plaintiff. This is, defendants argue, the reason the lease specifically requires the submission of the "detailed statements of final costs," as it was in the contemplation of both parties at the time the lease was signed that the tenants would be doing some work to the interior of the building which would not fall under the Tenant Improvement Allowance.
These two types of expenses are clearly delineated within the lease and, as an added emphasis of their separate nature, are off-set in that they are discussed in two paragraphs within paragraph six of the lease agreement.
Even when viewing the facts in the manner most favorable to plaintiff, defendants' argument harmonizes any conflicting terms of the lease agreement and gives meaning to all provisions of paragraph six of the lease without rendering any provisions of the contract moot. Texas law states that a court must adhere to the plain language of a contract if only one construction of the lease agreement is reasonable and arises from the plain language of the contract. Parks, 1 S.W.3d at 100; see also Steuber Co., 646 F.2d at 1098. Here, defendants' interpretation of the plain language of the lease is the only construction which does not yield unreasonable results. As a result, defendants' construction should control and summary judgment in favor of the defendants is proper.
As discussed above, under Texas law, a court should not strain to find a contract ambiguous, should look at the contract as a whole in light of circumstances present when the parties entered the agreement, and should find a contract unambiguous if there is only one reasonable interpretation of a contract. National Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995);Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983); see also Taco Cabana, L.P. v. Taco Cabana, Inc., No. Civ. A. SA-02-CA-1209-XR, 2005 WL 1397032, at *6 (W.D. Tex. June 10, 2005). However, if it is determined a provision of a contract is ambiguous, the ambiguity should be construed against the drafter of the contract. National Union Fire Ins. Co., 907 S.W.2d at 520; Coker, 650 S.W.2d at 394; see also Taco Cabana, L.P., 2005 WL 1397032 at *6. This well-known principle of contract law is frequently applied in Texas courts as a "last resort," when application of ordinary rules of construction leave a reasonable doubt as to the proper interpretation of the contract.Forest Oil Corp. v. Strata Energy, Inc., 920 F.2d 1039, 1043, 44 (5th Cir. 1991) (citing Smith v. Davis, 453 S.W.2d 340, 344 (Tex.Civ.App.-Fort Worth 1970, writ ref'd n.r.e.)).
In the instant case, neither party disputes the fact that defendants were not a party to the original lease drafting and signing. Defendants were essentially a stranger to the various intents of the original contracting parties, one of whom was Post Oak Development, defendants' assignor. The lease was apparently a collaborative event between plaintiff and defendants' assignor, Post Oak Development, although the parties seem to dispute the level of participation of the two original contracting parties. Per the above stated rules of contract construction, if any ambiguity exists, it should be construed against the drafter of the contract. Id. In the instant case, plaintiff is the only one of the two litigating parties to have participated in the drafting of the original lease agreement. Plaintiff could have included a provision which specifically addressed what was to happen with the balance of the allowance, if any, after the actual finish-out of the interior of the building was complete and upon what amount was the negotiated rental price calculated. Indeed, it is alleged plaintiff originally attempted to do just this, but its intent did not result in such a provision being included in the actual lease agreement.6 Defendants should not be penalized for plaintiff's lack of diligence in ensuring that the lease agreement reflected plaintiff's intent. As a party to the original contract, plaintiff could have insisted upon the inclusion of almost any provision within the contract and, if the other party refused to agree, was free to choose not to enter into the contract. Instead, plaintiff signed the agreement and contractually bound itself to the terms expressed within the four corners of that document.
Plaintiff is familiar with these types of agreements. In an earlier litigation, Bio-Medical Applications of Texas, Inc. v. Medical Mgmt., P.A., 198 F.Supp.2d 849, 855 (E.D. Tex. 2002), plaintiff prevailed on a claim for expenditures not falling under a tenant improvement allowance specifically because plaintiff drafted these additional expenditures into the lease as the responsibility of the landlord. In the prior case, the Court in reviewing plaintiff's summary judgment motion employed the analysis undertaken by this Court in the instant controversy, examining the document as a whole and attempting to read the agreement in a manner which both harmonized and gave effect to all the provisions of the lease agreement. Id. at 853-54. Because plaintiff had, in the previous lease, specifically identified certain expenses as being the landlord's responsibility, the Court concluded the lease required the landlord to reimburse the tenant for those expenses, in addition to any responsibilities the landlord owed under the tenant improvement allowance. Id. Here, plaintiff's failure to ensure the lease agreement currently under this Court's consideration adequately reflected its intent concerning the Tenant Improvement Allowance should not be made to bind defendants to provisions which do not exist in the instant agreement. See id. The agreement could have stated "up to $780,000" or "$780,000 for whatever plaintiff wants," but it does not. To the extent this is an ambiguity, it cannot be held against defendants because they were not involved in the drafting of the lease.
The Court finds plaintiff has not met its burden to show summary judgment on its breach of lease claim is proper because it has not conclusively proven the lease agreement was breached by defendants. Defendants' cross-motion for summary judgment, however, demonstrates plaintiff is arguing for an interpretation of the lease contract which is not reasonable, and that plaintiff cannot prevail on its breach of contract claim because, under the only reasonable interpretation of the contract, defendant did not breach the terms of the lease. Consequently, resolution of the breach of lease claim in favor of defendants is proper.
IT IS THEREFORE ORDERED that plaintiff's Second Motion for Summary Judgment (contained within docket no. 56) is GRANTED In PART and DENIED In PART. Specifically, the motion is GRANTED to the extent plaintiff seeks to recover $605,678.06 due as a result of the dishonored check, but denied to the extent plaintiff is pursuing a breach of lease claim to recover $780,000 it claims it is owed under the lease.
IT IF FURTHER ORDERED that Defendants' Cross-Motion for Summary Judgment (docket no. 55), which acknowledges the $605,678.05 is due an owing to plaintiff and seeks only to avoid liability on the full amount of $780,000, is GRANTED.
IT IS FINALLY ORDERED that the above-styled and numbered cause is DISMISSED. Motions pending with the Court, if any, are dismissed as moot.
It is so ORDERED.