Texoma Advertising Co., LP v. The Siblings, LLC
(Tex.App.- Houston [14th Dist.] Jun. 16, 2009)(Yates) (existence of lease agreement for advertising
purposes successfully disputed, ratification theory rejected, no actual or constructive knowledge,
statute of frauds governing real estate transactions, unrecorded conveyance of interest in land)
The evidence presented at trial was legally sufficient to support the trial court's
conclusion that there was no binding agreement between Texoma and The
Siblings with regard to the 1998 lease agreement and that The Siblings was not
liable to Texoma (other than with respect to the refund of the April 2006 rent
check)
AFFIRMED: Opinion by Justice Brock Yates
Before Justices Brock Yates, Guzman and Sullivan
14-08-00602-CV Texoma Advertising Co., L.P. v. The Siblings, L.L.C.
Appeal from 354th District Court of Rains County
Trial Court Judge: Judge Richard A. Beacom Jr.
Affirmed and Memorandum Opinion filed June 16, 2009.
In The
Fourteenth Court of Appeals
____________
NO. 14-08-00602-CV
____________
TEXOMA ADVERTISING CO., L.P., Appellant
V.
THE SIBLINGS, L.L.C., Appellee
On Appeal from the 354th District Court
Rains County, Texas
Trial Court Cause No. 8294
M E M O R A N D U M O P I N I O N
This is an appeal from a take-nothing judgment following a bench trial. Appellant Texoma Advertising
Co., L.P. ("Texoma") brought suit against appellee The Siblings, L.L.C. ("The Siblings") for breach of a
lease agreement and conversion as a result of the removal of a billboard. The trial court found that
Texoma was not entitled to recover from The Siblings because there was no binding lease agreement.
Texoma challenges the legal sufficiency of the evidence supporting the trial court's conclusion and also
argues that the statute of frauds does not apply to bar its claims. Because there is legally sufficient
evidence to support the trial court's conclusions, we affirm.
BACKGROUND
In 1996, Alec Outdoor Advertising and Fay Spencer entered into a lease agreement with regard to land
owned by Fay in Emory, Texas. The lease agreement allowed the tenant, Alec Outdoor, to maintain a
bulletin advertising sign (billboard) that existed on the land. The billboard in question, which was built in
1971, was located on the southbound side of Highway 69 and could easily be seen from the road.
In 1998, Alec Outdoor and Fay executed another lease agreement, providing for a term that would end
in April 2003. After that term ended, the parties could renew the lease on like terms from year to year.
The rent for each year had to be paid in advance. After executing the second lease, Alec Outdoor sold
its billboards, including the one on Fay's property, to Paris Outdoor Media, L.P. Paris Outdoor Media,
L.P. merged with Texoma, and Texoma remained as the surviving entity. Texoma states that it
succeeded to the rights of Alec Outdoor on the subject lease. Neither the 1996 lease nor the 1998
lease were recorded in the real property records.
In February 2005, Don Spencer, who had inherited the land from his mother Fay, sold the real property
on which the billboard was located to The Siblings. Don testified that, around the time of the sale, he
told Roger Hooten (the manager of The Siblings) that the billboard was on the property and that the
rent Don received covered maintenance on the lot and a small portion of the taxes. Roger denied any
knowledge of such a conversation and any knowledge of the lease agreement. The billboard in
question did not identify Texoma, or any other company, as the owner, but did contain an
advertisement for Murrey Motors, a local car dealership. Texoma's representative testified that a
phone call to Murrey Motors would have revealed Texoma as the owner of the billboard.
Although The Siblings owned the property by April 2005 when the next rent check was due, Texoma
paid the 2005-2006 rental check to Don Spencer, because Texoma was not yet aware of the sale. The
rent check was not forwarded to The Siblings, and The Siblings was not aware that any rent had been
paid. From February 2005 until April 2006, neither Roger Hooten nor his son Nathaniel (a member of
The Siblings) saw anyone perform maintenance on the billboard.[1] Roger observed that the pole was
rotting, and the advertising on the billboards had not been changed since The Siblings had owned the
property. Sometime in April 2006, Roger, having concluded that the billboard was abandoned, had it
removed.
In early April 2006, now aware of the sale of the real property, Texoma sent the annual rent check to
The Siblings. Texoma did not include a cover letter with, nor other explanation on, the check. The
check was sent to a post office box used by Hooten Financial Bookkeeping Services and Jackson Hewitt
Tax Service, an accounting franchise owned by the Hootens. Nathaniel Hooten testified that he
received the check during tax season, thought it was for the payment of tax preparation services, and
promptly deposited the check into a bank account owned by Big 5 Investments, LLC, the company that
owned the Jackson Hewitt tax franchise.[2] Nathaniel explained that, at the time he deposited the
check, he was not aware the check was made out to The Siblings.[3] The Siblings did not usually
receive checks. The check was not endorsed by The Siblings and was not deposited to The Siblings=
account.
Also during April 2006, Scott Walderzak, a Texoma employee, went to put a new advertisement on the
billboard and discovered that it had been removed. Walderzak then went to the Hooten's tax office,
which was located near the billboard. The evidence is disputed with regard to the information given to
Walderzak and Texoma about the removal of the billboard. Walderzak testified that he spoke with
Nathaniel, and Nathaniel initially told him that the City had the billboard removed. Walderzak then
spoke with Roger Hooten, who allegedly told Walderzak that he had the billboard removed so that a
driveway could be built. Nathaniel and Roger both denied telling Walderzak that the City had the
billboard removed. Clark Cummins, one of the owners of Texoma, testified that when he learned of the
billboard's removal, he called Roger Hooten. Roger told Cummins that the billboard had not been paid
for and thus did not have a right to be there. Roger did not recall speaking to Clark Cummins. Roger
and Nathaniel both denied having any actual knowledge of the lease agreement or its terms prior to the
underlying lawsuit being filed.
On April 30, 2006, Jackson Hewitt Tax Service issued a check to Texoma as a refund of the check
previously deposited by Nathaniel into the account of Big 5 Investments. Texoma refused the refund of
the check. Texoma then filed this lawsuit, seeking damages for breach of the lease agreement and for
conversion.
After a non-jury trial, the trial court issued a take-nothing judgment in favor of The Siblings. The trial
court found that The Siblings was only liable for the return of the rent check that had been deposited
into the Big 5 Investments account. The trial court issued findings of fact and conclusions of law,
wherein it found, among other things, that "[t]he written instrument of 1998 does not constitute a
binding lease agreement between Plaintiff and Defendant for use of [the] billboard." Texoma timely
filed this appeal.
ANALYSIS
Texoma challenges the trial court's judgment in three issues. In its first issue, Texoma argues the
evidence is legally insufficient to support the trial court's conclusion that no binding lease agreement
existed between Texoma and The Siblings and that The Siblings is not liable to Texoma (except for the
refund of the April 2006 rent check), and that the trial court's legal conclusions are incorrect. In its
second issue, Texoma argues that the trial court's finding of fact that the rent check for the 2005-2006
term was paid to Don Spencer at a time when The Siblings owned the property does not support the
trial court's legal conclusion that the lease was not binding on The Siblings. In its third issue, Texoma
argues that its claims are not barred by the statute of frauds. We find there is legally sufficient
evidence to support the trial court's legal conclusions and that the trial court made the correct legal
conclusions from the disputed facts. Because of our disposition of Texoma's first issue, we need not
address its second and third issues.[4]
A. Standards of review.
When a trial court issues findings of fact and conclusions of law following a bench trial, we review the
findings and conclusions under the same standards that we apply in reviewing jury findings. Anderson
v. City of SevenPoints, 806 S.W.2d 791, 794 (Tex. 1991); Ahmed v. Ahmed, 261 S.W.3d 190, 193-94
(Tex. App.- Houston [14th Dist.] 2007, no pet.). In a legal sufficiency review, we determine whether the
evidence would enable reasonable and fair-minded people to reach the finding under review. See City
of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In conducting this review, we credit favorable
evidence if reasonable factfinders could and disregard contrary evidence unless reasonable factfinders
could not. See id.; Ahmed, 261 S.W.3d at 194. A legal sufficiency, or no evidence, challenge may only
be sustained when either the record reveals a complete absence of evidence of a vital fact, the court is
barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital
fact, the evidence offered to prove a vital fact is no more than a mere scintilla, or the evidence
establishes conclusively the opposite of the vital fact. Ahmed, 261 S.W.3d at 194.
We consider the evidence in the light most favorable to the finding under review and indulge every
reasonable inference in support of the judgment. City of Keller, 168 S.W.3d at 822; Vickery v. Comm'n
for Lawyer Discipline, 5 S.W.3d 241, 252 (Tex. App- Houston [14th Dist.] 1999, pet. denied).
Unchallenged findings of fact are binding on an appellate court unless the contrary is established as a
matter of law. McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986). Where the trial court makes
findings of fact but inadvertently omits an essential element of a ground of recovery or defense, the
court will imply findings in support of the judgment. See Tex. R. Civ. P. 299; Vickery, 5 S.W.3d at 252.
We review the trial court's conclusions of law de novo. BMC Software Belgium, N.V. v. Marchand, 83
S.W.3d 789, 794 (Tex. 2002). We will uphold conclusions of law on appeal if the judgment can be
sustained on any legal theory the evidence supports. 2616 S. Loop L.L.C. v. Health Source Home
Care, Inc., 201 S.W.3d 349, 355 (Tex. App.-Houston [14th Dist.] 2006, no pet.). Incorrect conclusions
of law do not require reversal if the controlling findings of fact support the judgment under a correct
legal theory. Id. Moreover, in a bench trial, the trial court is the sole determiner of the credibility of the
witnesses and the weight to be given their testimony. See Cohn v. Comm'n for Lawyer Discipline, 979
S.W.2d 694, 696-97 (Tex. App.-Houston [14th Dist.] 1998, no pet.); Nordstrom v. Nordstom, 965
S.W.2d 575, 580-81 (Tex. App.-Houston [1st Dist.] 1997, pet. denied). The trial court, as the finder of
fact, may consider all of the evidence and circumstances and can reject or accept all or part of a
witness's testimony. Nordstrom, 965 S.W.2d at 580-81.
B. Was there a binding lease agreement?
In its first issue, Texoma argues the trial court erred in finding there was no binding lease agreement
between Texoma and The Siblings because, at a minimum, The Siblings had constructive notice of the
terms of the lease. According to Texoma, The Siblings' alleged acceptance of the April 2006 rent
check by depositing it into Big 5 Investments' bank account, ratified the lease and thereby created a
binding contract between the parties.
1. Actual or constructive notice of the lease
The trial court did not make an express finding of fact with regard to The Siblings' actual or constructive
notice of the lease. It did, however, make findings of fact that: (1) the lease was never recorded in the
real property records; and (2) Texoma had no contact with The Siblings prior to the mailing of the April
2006 rent check. The Siblings maintains that it had no actual knowledge of the 1998 lease agreement
at the time it purchased the real property on which the billboard sits. Texoma argues that Don Spencer
told Roger Hooten about the revenue from the sign at the time of the sale to The Siblings. However,
Roger Hooten disputed that testimony and denied any knowledge of such a conversation. Because
there was disputed evidence with regard to actual knowledge, the evidence is legally sufficient to
support an implied finding of fact that The Siblings did not have actual knowledge of the lease. See
City of Keller, 168 S.W.3d at 827; see also Vickery, 5 S.W.3d at 258 (where trial court makes findings of
fact but fails to include an element of a claim or defense, implied findings will be made in support of the
judgment where the omission was not pointed out to the trial court).
Texoma maintains on appeal that the more important issue is whether The Siblings had constructive
notice of the lease. Texoma bases its constructive notice argument on the fact that the billboard
was located on the property, for all to see, and that a simple phone call by The Siblings could have
ascertained the existence of the lease. This evidence, according to Texoma, satisfies the requirement
that an occupant's possession be visible, open, exclusive, and unequivocal. We disagree.
Under Section 13.001 of the Texas Property Code, an unrecorded conveyance of an interest in real
property is void as to a subsequent purchaser who purchases the property for valuable consideration
and without notice. See Tex. Prop. Code Ann. §13.001(a) (Vernon 2003). The unrecorded instrument
is binding, however, on a subsequent purchaser who does not pay a valuable consideration or who has
notice of the instrument. See id. § 13.001(b). To receive the bona fide purchaser protection, a party
must acquire the property in good faith, for value, and without notice of any third-party claim or interest.
Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001) (per curiam). Notice of a third-party's claim or
interest can be either actual or constructive. Id.; Flack v. First Nat'l Bank, 226 S.W.2d 628, 631 (Tex.
1950). Actual knowledge is found based on personal information or knowledge. Madison, 39 S.W.3d
at 606. "Constructive notice is notice the law imputes to a person not having personal information or
knowledge." Id.
The law will impute constructive knowledge where a subsequent purchaser has a duty to ascertain
the rights of a party in possession. Id. The duty to ascertain arises only if the possession is visible,
open, exclusive, and unequivocal. Id. "Possession that meets these requirements - visible, open,
exclusive, and unequivocal possession-affords notice of title equivalent to the constructive notice deed
registration affords." Id. (citing Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 348 (1936)). However,
possession that is ambiguous or equivocal, which may appear subservient or attributable to the
possession of the holder of the legal title, is not sufficiently indicative of ownership to impute
constructive notice. Id. If the duty to ascertain arises, then the subsequent purchaser is charged with
notice of all the occupant's claims that the purchaser might have reasonably discovered on proper
inquiry. Id.
Although the billboard was visible, open, and appeared exclusive, the evidence raised a fact issue with
regard to whether Texoma's possession was unequivocal. When an occupant's possession is
consistent or compatible with another's ownership assertion, the occupant's possession cannot be said
to be unequivocal. Madison, 39 S.W.3d at 607; Strong, 98 S.W.2d at 350. Roger Hooten testified that
the billboard was in poor condition and appeared to be abandoned. The billboard was built in 1971
and was concededly an older sign. From February 2005 until April 2006, neither Roger nor Nathaniel
saw anyone perform maintenance on the sign, although Texoma presented evidence that the lawn was
cut at least once. Roger observed that the pole was rotting and that the advertising on the billboard
had not been changed since The Siblings had owned the property. The trial court, as the fact finder,
was the sole arbiter of the credibility of, and weight to be given, the witnesses' testimony. See
Nordstrom, 965 S.W.2d at 580-81. Given the evidence, reasonable and fair-minded people might
disagree as to whether the pole appeared abandoned and subservient to Spencer's ownership of the
property at the time of the sale. But that was a question for the trial court to resolve acting as the fact
finder. The evidence supports an implied finding of fact that The Siblings did not have constructive
knowledge of the lease. As a result, legally sufficient evidence exists to support the trial court's legal
conclusion that there was no binding lease agreement between Texoma and The Siblings. See City of
Keller, 168 S.W.3d at 827.
Texoma relies on Melvin R. Storm Family Partners, L.P. v. Northcutt, No. 11-05-00402-CV, 2007 WL
2204170 (Tex. App.- Eastland Aug. 2, 2007, no pet.) (mem. op.), to support its constructive notice
argument. We find Melvin R. Storm distinguishable. In Melvin R. Storm, an oil and gas operator had a
lease for conducting oil and gas operations on a portion of land purchased by the defendant. Id. at *3.
The purchaser argued that it could not be bound by the lease because it could not be charged with
constructive knowledge. Id. In finding that legally and factually sufficient evidence existed to support a
finding that the oil and gas operator's possession was visible, open, exclusive, and unequivocal, the
court of appeals highlighted testimony from the purchaser that he actually saw the operator coming in
and out of the property and operating the wells before the purchase of the property. Id. at *4. The
court of appeals found that this evidence put the purchaser on notice to investigate the rights under
any existing leases. Id. In contrast, the only evidence Texoma points to in this case is the fact that the
billboard was in existence on the property at the time of the sale and the testimony from Don Spencer
regarding his comments to Roger Hooten about revenue from the sign. As noted above, the evidence
in this case was disputed as to whether the billboard appeared to be abandoned, and Roger Hooten
denied the conversation with Spencer regarding revenue.
Likewise, we find other authority cited by Texoma in support of its constructive notice argument
unpersuasive. In each of the cases, there were facts that put the purchaser on notice that further
inquiry was necessary. See, e.g., Fletcher v. Minton, 217 S.W.3d 755, 761 (Tex. App.- Dallas 2007, no
pet.) (presence of cows, a fence, and equipment, coupled with observation by purchaser's agent of the
occupant going to and from property was sufficient to put purchaser on notice); Startex First Equip. Ltd.
v. Aelina Enters., Inc., 208 S.W.3d 596, 602 (Tex. App.- Austin 2006, pet. denied) (lease was recorded
in deed records, plus "inquiry notice" was triggered where occupant was operating gasoline sales
business from premises); Texas Wood Mill Cabinets, Inc. v. Butter, 117 S.W.3d 98, 105 (Tex.
App.-Tyler 2003, no pet.) (statute relating to mechanics' and materialmen's lien provided for
constructive notice; additionally, purchaser's personal knowledge of improvements being made put
purchaser on notice lien can be filed). There are no such facts in this case. The mere existence of the
billboard is not sufficient to conclusively establish a duty to ascertain because there was also evidence
that the billboard appeared to be abandoned. The trial court resolved the factual dispute in favor of
The Siblings.
Because there was more than a mere scintilla of evidence to support an implied finding that Texoma's
possession was not unequivocal, the trial court properly concluded that the lease agreement was not
binding on The Siblings based on constructive notice.
2. Ratification of the lease
Even if the evidence had conclusively established constructive notice on the part of The Siblings,
Texoma would still have to show, under the terms of the 1998 lease agreement, that The Siblings
accepted a renewal of the lease agreement for the 2006-2007 term. Texoma argues that The Siblings
accepted a renewal of the lease by depositing the April 2006 rent check that Texoma sent to The
Siblings, thereby ratifying the terms of the lease. The Siblings argues that there was no acceptance of
the check, and thus no meeting of the minds, as required to establish a binding contract. We find that
there was disputed evidence with regard to whether The Siblings accepted the April 2006 rent check
with full knowledge of the facts. Thus, Texoma's legal sufficiency challenge based on ratification is
without merit.
To establish the existence of a binding contract, Texoma had to establish that there was a meeting of
the minds with regard to the agreement; that is, there must be a showing that The Siblings had an
intention of making the contract. See Dhingra v. Mendelow, No. 14-00-00770-CV, 2001 WL 1136149,
at *3 (Tex. App.- Houston [14th Dist.] Sept. 27, 2001, no pet.) (not designated for publication) ("There
can be no agreement when one party has an intention to make it, but the other has not."). Under the
doctrine of ratification, any act based upon a recognition of the contract as existing or any conduct
inconsistent with an intention of avoiding it has the effect of waiving the right of recission. See
Rosenbaum v. Texas Bldg. & Mortgage Co., 140 Tex. 325, 167 S.W.2d 506, 508 (1943); Dhingra, 2001
WL 1136149, at *3. Ratification occurs where: (1) there is adoption or confirmation by a person, (2)
with knowledge of all material facts, (3) of a prior act which did not then legally bind that person and
which that person had the right to repudiate. Vessels v. Anschutz Corp., 823 S.W.2d 762, 764 (Tex.
App.-Texarkana 1992, writ denied); see also Dhingra, 2001 WL 1136149, at *3.
After reviewing the evidence under the applicable standards of review, we find that there were fact
issues to be resolved by the trier of fact with regard to The Siblings' alleged acceptance of the April
2006 rent check. Texoma sent the check to a post office box owned by Jackson Hewitt Tax Services.
The check had no cover letter or other notation on it explaining the purpose of the check. Nathaniel
Hooten testified that he received the check, thought it was for payment of tax services, and promptly
deposited it into the bank account for the company that owned the Jackson Hewitt tax franchise.
Texoma is correct that the check was made out to The Siblings and that it was a mistake for Nathaniel
to deposit it in the Big 5 Investments bank account. However, Nathaniel explained that it was very
unusual for The Siblings to receive any checks (he was not aware of any prior checks), the check was
received during busy tax season, and he simply did not realize at the time that the check was made to
The Siblings. Nathaniel conceded that he contacted Texoma to determine the name of the signator on
the check, but he did not get any other information regarding the check. Once he realized what the
check was for, a refund was promptly issued to Texoma. Crediting the evidence that is favorable to the
trial court's judgment, as we must, and allowing issues of the credibility of the witnesses to be decided
by the fact finder, legally sufficient evidence supports an implied finding of fact that The Siblings did not
accept by ratification the terms of the lease agreement. The trial court thus could correctly conclude
that there was no binding agreement between Texoma and The Siblings.
Texoma argues that The Siblings' unexpressed mental thoughts or reservations regarding the check
are immaterial to the question of whether The Siblings accepted the rent check, citing Oram v. General
Am. Oil Co. of Tex., 513 S.W.2d 533 (Tex. 1974). In Oram, however, the defendant continued to
accept payments even after she learned of the true terms of the agreement. See id. ("She has been
fully aware of the terms of the lease and by continuing to accept the benefits of performance
thereunder by the lessee, she has ratified and affirmed the lease as her own act."). Once The Siblings
learned the true nature of the April 2006 rent check, The Siblings tendered a refund of the check to
Texoma. Texoma's representative Cummins conceded that, had The Siblings not deposited the check
and instead returned it to Texoma, Cummins would have considered the lease terminated. Here, The
Siblings did not continue to accept benefits under the lease once it learned the full facts.[5]
C. The conversion claim
Although Texoma pleaded a claim for conversion, the trial court made no express findings of fact or
conclusions of law with regard to that claim. Texoma does not provide any argument, citation to
authorities, or citation to the record with regard to its conversion claim. We, therefore, hold that
Texoma has waived any challenge to the lack of findings or conclusions with regard to the conversion
claim. See Tex. R. App. P. 38.1(i); Garza v. Texas Alcoholic Beverage Comm'n, 138 S.W.3d 609, 616
(Tex. App.- Houston [14th Dist.] 2004, no pet.).
CONCLUSION
The evidence presented at trial was legally sufficient to support the trial court's conclusion that there
was no binding agreement between Texoma and The Siblings with regard to the 1998 lease agreement
and that The Siblings was not liable to Texoma (other than with respect to the refund of the April 2006
rent check). Accordingly, we affirm the trial court's judgment.
/s/ Leslie B. Yates
Justice
Panel consists of Justices Yates, Guzman, and Sullivan.
--------------------------------------------------------------------------------
[1] Texoma's representative testified that the lawn around the sign had in fact been cut in January
2006.
[2] It is not clear from the record when Nathaniel received the April 2006 rent check. The Bank's stamp
on the check reflects that it was deposited on April 27, 2006. Nathaniel stated that he deposited the
check within a few days after his receipt of the check.
[3] Nathaniel did call Texoma after receiving the check because he could not read the signature. He
only found out the name on the check was Cummins and did not request any other information.
[4] We also need not address Texoma's second and third issues because The Siblings does not
appear to argue in its brief that the 2005-2006 payment to Don Spencer had any effect on the lease
agreement and it concedes that the statute of frauds does not apply.
[5] To the extent Texoma contends that constructive knowledge can provide the "knowledge of the full
facts" necessary for purposes of ratification, Texoma cites no authority for that proposition, and we
have located none. Accordingly, we decline to hold that ratification may be based on constructive
knowledge under the facts of this case.