Office Buildings of Houston, Inc. v. Newman
(Tex.App.- Houston [14th Dist.] Aug. 4, 2009)(Frost)
(dispute over the amount of commission owed as a result of a real estate transaction, contract construction)
AFFIRMED: Opinion by Justice Anderson
Before Justices Anderson, Guzman and Boyce
14-08-00173-CV Office Buildings of Houston, Inc v. Carlton B. Newman
Appeal from 215th District Court of Harris County
Trial Court Judge: LEVI JAMES BENTON
Trial Court Cause No. 2006-01741
M E M O R A N D U M O P I N I O N
This is an appeal from a judgment entered following a bench trial of a dispute over the amount of commission
owed as a result of a real estate transaction.
Finding no error, we affirm.
Factual and Procedural Background
Appellant, Office Buildings of Houston, Inc., is a licensed real estate broker operating in Houston, Texas.
Appellee, Carlton B. Newman, owns a small office building located on the North Freeway in Houston, Texas
(the “Office Building"). On August 26, 2004, appellant and appellee entered into an “Exclusive Authority to
Sell and/or Lease Real Estate and Commission Agreement" (the “Commission “Agreement") regarding the
Office Building. The Commission Agreement provided that appellee would have to pay appellant a
commission in the following circumstances: (1) a commission of six percent of any total sales price accepted by
appellee due and payable at the closing of the sale of the property; (2) a six percent commission of the total
rentals payable for the term of the lease, payable in full upon execution of the lease; (3) a four percent
commission on the total rents for any tenant expansion or renewals, payable in full when the lease is executed;
and (4) a six percent commission of the gross sales price for any lease that contains an option to purchase
the Office Building if the tenant exercises the option to purchase.
As a result of its efforts on behalf of appellee, appellant located a person, Eloy E. Tamez, interested in the
Office Building. Mr. Tamez commenced direct negotiations with appellee and he eventually entered into a
lease agreement for a portion of the Office Building. The initial term of the lease was five years with a monthly
payment of $5,177.00. The lease agreement also included the option to renew the lease for two additional
five year terms, the second of which would end on January 1, 2020. Simultaneous with the execution of the
lease agreement, Mr. Tamez purchased an option to buy the Office Building. Mr. Tamez paid appellee
$40,000.00 for the option.
As a result of Mr. Tamez executing the lease agreement, appellee paid appellant the six percent commission
on the total rentals, which totaled $18,637.20. In addition, appellee provided appellant with a copy of the
lease agreement, a copy of the option agreement, and an acknowledgment that appellant might be entitled to
future commissions should Mr. Tamez renew the lease and/or if Mr. Tamez exercised his option to purchase
the Office Building.
A dispute arose over the amount of commission appellee owed appellant. Appellant eventually filed suit
against appellee seeking recovery of additional commission payments under two separate claims. First,
appellant asserted the transaction between appellee and Mr. Tamez, structured as a lease with an option to
purchase, was, in reality, a sale of the Office Building. Under this claim, appellant sought the payment of a six
percent commission based on the alleged total sale price for the Office Building. In its second, alternative
claim, appellant argued it was entitled to a six percent commission on the option payment made by Mr. Tamez.
Under both claims, appellant sought the award of attorney's fees. Appellee filed a counterclaim seeking the
recovery of his attorney's fees under the terms of the Commission Agreement.
The dispute was tried before the trial court without a jury on stipulated facts. The trial court ruled in favor of
appellee and entered a take nothing judgment against appellant and awarded appellee his attorney's fees.
The trial court also entered Findings of Fact and Conclusions of Law. On appeal, appellant challenges only
the trial court's negative ruling on its claim that appellee owed appellant a commission on Mr. Tamez's
purchase of the option. Appellant also seeks the reversal of the award of attorney's fees to appellee and the
award of its own attorney's fees.
Discussion
Appellant raises two issues on appeal. In the first issue, appellant asserts the trial court erred in granting a
judgment in favor of the appellee because, according to appellant, the sale of an option is a sale of an interest
in real property. In its second issue, appellant contends that, in the event the first issue is sustained, then the
award of attorney's fees to appellee must be reversed and that appellant, as the prevailing party, would be
entitled to an award of attorney's fees. In response, appellee says even if appellant is correct that a sale of an
option is a sale of an interest in real property, appellant is not entitled to a commission on Mr. Tamez's
purchase of the option because the Commission Agreement does not provide for a commission on the option
price.
A. The Standard of Review
On appeal, appellant attacks the trial court's application of the law to the stipulated facts. We review the trial
court's conclusions of law de novo. Smith v. Smith, 22 S.W.3d 140, 143-44 (Tex. App.- Houston [14th Dist.]
2000, no pet.). Under de novo review, the reviewing court exercises its own judgment and redetermines each
legal issue. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998). We will uphold conclusions of law on
appeal if the judgment can be sustained on any legal theory the evidence supports. Waggoner v. Morrow,
932 S.W.2d 627, 631 (Tex. App.- Houston [14th Dist.] 1996, no writ). Incorrect conclusions of law do not
require reversal if the controlling findings of fact support the judgment under a correct legal theory. Id.
B. Contract Construction
In construing a written contract, the primary concern of the court is to ascertain the true intentions of the
parties as expressed in the instrument. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).
Ordinarily, the writing alone is sufficient to express the parties' intentions for it is the objective, not subjective,
intent that controls. Matagorda County Hosp. Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex. 2006) (per curiam).
To achieve this, we examine and consider the entire writing in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless. Valence Operating Co., 164 S.W.3d at
662. Contract terms are given their plain, ordinary, and generally accepted meanings unless the contract
itself shows them to be used in a technical or different sense. Id. We construe contracts from a utilitarian
standpoint bearing in mind the particular business activity sought to be served and will avoid when possible
and proper, a construction which is unreasonable, inequitable, and oppressive. Frost Nat'l Bank v. L & F
Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). The contract must be read as a whole, rather than by
isolating a certain phrase, sentence, or section of the agreement. Fein v. R.P.H., Inc., 68 S.W.3d 260, 266
(Tex. App.- Houston [14th Dist.] 2002, pet. denied). We presume the parties to the contract intended every
clause to have some effect. Id. (citing Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)).
C. Must appellee pay appellant a commission based on the sale of the option to Mr. Tamez?
In its brief, appellant goes to great lengths to demonstrate that appellant is a licensed real estate broker under
the Real Estate Licensing Act (Tex. Occ. Code Ann. § 1101.001, et seq) (Vernon 2004)) and is eligible to
receive real estate commission payments. Appellant also points out the Commission Agreement meets the
requirements of the Real Estate Licensing Act as well as those of the Statute of Frauds. Tex. Bus. & Com.
Code Ann. § 26.01 (Vernon 2009). Appellant also spends a great deal of time arguing that an option is a sale
of an interest in real property which can serve as the basis for the payment of a real estate commission to a
licensed real estate broker. Appellant then concludes by arguing the trial court should have awarded it a six
percent commission on the sale of the option to Mr. Tamez because the Commission Agreement provides that
appellee Aagrees to pay [appellant] the commission outlined below on any sale accepted by [appellee]. The
commission shall be calculated at a rate of six percent (6%) of any total sales price accepted by [appellee]."
On appeal, appellant does not contend the option transaction is a sale of the real estate. Instead, appellant
contends the sale of the option to Mr. Tamez is the sale of an interest in real estate; regardless of whether Mr.
Tamez ever exercises that option, appellant contends that it meets the requirements for payment under the
Commission Agreement.[1] We disagree.
We begin by noting that in making this argument, appellant quotes only a portion of the second sentence from
the relevant provision of the Commission Agreement. The complete sentence provides: AThe commission
shall be calculated at a rate of six percent (6%) of any total sales price accepted by [appellee], and shall be
due and payable in full at closing of sale of property." Reading this first commission provision as appellant
suggests would render meaningless the second part of the sentence, which specifies that the payment of a
commission is due and payable only if the property sale closes. Therefore, we hold that, in order for appellant
to be eligible for a commission under this first commission provision, (1) appellant had to introduce a buyer to
appellee who agreed to purchase the Office Building; and (2) the transaction had to be completed. See
Chambers County v. TSP Dev., Ltd., 63 S.W.3d 835, 838 (Tex. App.- Houston [14th Dist.] 2001, pet. denied)
(stating A[a]n option contract for the sale of land gives the optionee the right to elect to purchase the property
at stated terms and within the specified period of time, but with no obligation to do so."). This conclusion is
further reinforced by the fact that the parties to the Commission Agreement specifically contemplated a
situation where an interested party might choose to enter into a lease with an option to purchase, and
established how commissions would be paid if that situation occurred.[2] Because there has been no final
sale of the Office Building to Mr. Tamez, appellant is not entitled to a commission on the sale of the option
under the terms of the first commission payment provision in the Commission Agreement. We overrule
appellant's first issue on appeal.[3]
Conclusion
Having overruled appellant's issue on appeal, we affirm the trial court's final judgment.
/s/ John S. Anderson
Justice
Panel consists of Justices Anderson, Guzman, and Boyce.
[1] Appellant does not argue on appeal that it is entitled to a commission on the option payment based on any
of the other commission payment provisions specified above.
[2] Because Mr. Tamez has not exercised his option to purchase the property, there is no issue before us as
to how a commission payment under that particular provision of the Commission Agreement should be
calculated.
[3] Because we have overruled appellant's first issue, we need not address appellant's second issue
challenging the award of attorney's fees to appellee. Tex. R. App. P. 47.1.