Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Shields Limited Partnership v. Bradberry

Supreme Court of Texas

May 12, 2017

Shields Limited Partnership, Petitioner,
Boo Nathaniel Bradberry and 40/40 Enterprises, Respondents

          Argued March 23, 2017

         On Petition for Review from the Court of Appeals for the Fifth District of Texas

          Eva M. Guzman Justice.

         In this forcible-detainer action, [1] a commercial landlord seeks to oust a long-term tenant claiming a superior right of immediate possession under a lease-extension option. Though the tenant frequently defaulted on the lease's rental-payment terms, the landlord regularly accepted the tenant's rental payments when tendered and without protest. The parties had agreed, however, that the landlord's "acceptance of late installment of Rent shall not be a waiver and shall not estop Landlord from enforcing that provision or any other provision of [the] lease in the future"; "all waivers" must be "in writing and signed by the waiving party"; and any forbearance of enforcement shall not be construed to constitute a waiver.[2]

         Express contract terms notwithstanding, the tenant asserts the landlord waived the contractual nonwaiver provision by accepting late payments without protest and, therefore, cannot deny force and effect to a lease extension the tenant had the option to exercise if he had "fulfilled all of the terms and conditions" of the lease. The tenant contends the landlord's conduct in accepting late rental payments waived the contractual nonwaiver clause. The decisive issue is whether waiver of a nonwaiver provision can be anchored in the same conduct the parties specifically agreed would not give rise to a waiver of contract rights. We hold it cannot.[3] A contrary conclusion could not be squared with Texas's strong public policy favoring freedom of contract[4] or with the notion that waiver requires intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.[5] The lease's plain terms permit the landlord to rely on the contractual nonwaiver clause and accept due and payable, but late, rental payments without waiving its right to enforce the lease as written.

         Though we do not hold a nonwaiver provision may never be waived, [6] there must, at a minimum, be some act inconsistent with its terms.[7] Here, the record bears no evidence the landlord acted inconsistently with the contract's express terms. Nor has the tenant identified any false or misleading representation supporting an equitable-estoppel bar to eviction, as the tenant asserts. We therefore reverse the court of appeals' judgment rejecting the landlord's forcible-detainer action, render judgment in the landlord's favor, and remand to the trial court to award attorney's fees in accordance with the parties' contract.[8]

         I. Factual and Procedural Background

         Shields Limited Partnership (Shields) owns commercial property housing the San Francisco Rose restaurant in Dallas, Texas. Boo Nathaniel Bradberry and 40/40 Enterprises, Inc. (collectively Bradberry) claim a superior right to immediate possession of the property as tenants under sublease and sub-sublease agreements executed in 2005. Shields argues Bradberry is merely a month-to-month holdover tenant while Bradberry counters that he effectively exercised an option to extend the lease through May 31, 2017.

         The pertinent terms of the base lease, sublease, and sub-sublease provide as follows:

• Monthly rent is due "without . . . prior demand" on the first day of the month. Failure to pay rent by the tenth day of the month is "an event of default" under the lease.
• "All waivers must be in writing and signed by the waiving party. Landlord's failure to enforce any provisions of this Lease or its acceptance of late installments of Rent shall not be a waiver and shall not estop Landlord from enforcing that provision or any other provision of this Lease in the future."
• "If Tenant has fulfilled all of the terms and conditions of the initial lease period [expiring May 31, 2007], he shall have the option to extend the lease for an additional 5-year period at the rate of $3, 000/month [expiring May 31, 2012]. Tenant will notify Landlord's Agent in writing of his intention to exercise this option no later than ninety (90) days prior to the expiration of the initial lease period."
• If the tenant does not vacate the premises upon the expiration of the lease, occupancy converts to a month-to-month tenancy, subject to the terms of the lease and a holdover rent of $3, 000 per month.
• Bradberry assumed the tenant's obligations as outlined in the base lease; the sublease is subordinate to the base lease; and if the terms of the base lease were fulfilled on June 1, 2007, Bradberry was to sign a new lease with Shields and thereby become the "tenant" rather than the "subtenant" (which never happened).
• "If Subtenant [Bradberry] has fulfilled all the terms and conditions of the lease and option set forth [in the base lease], he shall have the option as Tenant to extend the lease for an additional 5 years from June 1, 2012, through May 31, 2017" with a new rental rate tied to the Consumer Price Index (CPI) and payment of a pro-rata share of property taxes "when billed by the Principal Realtor or Landlord."
• Bradberry also had the option to extend the lease for two additional five-year periods-ending May 31, 2027-on the same terms as above, including giving timely notice, fulfilling all the terms of the base lease through each preceding option period, paying CPI-adjusted rent, and paying a pro-rata share of property taxes.
• Rent and all notices were to be delivered to the landlord's "Principal Broker, " which was J.W. Lindsley & Co. until December 2011 and, thereafter, S.E. Covington & Company (Covington).

         As specified in the parties' agreements, following the May 31, 2012 expiration of the base lease's initial option period, Bradberry had the option to extend the lease term for three successive five-year periods, the last of which would expire on May 31, 2027. Bradberry's option to extend the lease was contingent on Bradberry (1) timely exercising the option in writing and (2) "fulfill[ing] all of the terms and conditions of the [base] lease and [preceding] option[s]." Importantly, had Bradberry exercised the option to extend the lease, the rent, which had been fixed at $3, 000 per month, would fluctuate annually based on the CPI-adjusted formula prescribed in the sublease with the modified base amount compounded annually.[9] Moreover, Bradberry would be required to pay a pro-rata share of property taxes "when billed by the Principal Realtor or Landlord."

         In September 2011, Bradberry notified the landlord, in writing via J.W. Lindsley & Co., that he intended to exercise his option to extend the lease from June 1, 2012, to May 31, 2017. The notice, ostensibly delivered more than ninety days before the lease was set to expire, was also timely.[10]

         Bradberry was not as timely with his rental payments, regularly violating the lease terms by paying rent past the due date and cure period-with the extent of the deviation varying from relatively slight to significant. Without fail, the landlord, intent on getting paid, accepted the rent when tendered without protest or assessment of late fees. Bradberry was current with his rent when he purported to exercise the option, but by the time May 31, 2012, rolled around, he was one month late with the rent. Bradberry did not tender the outstanding rent until June 13, 2012, and the late rental payment was, again, accepted without protest.

         If Bradberry had properly exercised the option, his rental rate starting June 1, 2012, would have been $3, 340 per month, as required by the lease's CPI-adjusted rent provision. But rather than paying the amount due under the lease-extension option, Bradberry continued to pay $3, 000 for monthly rent. And even paying this lesser amount, Bradberry persisted in paying rent untimely and irregularly.

         On November 30, 2012, the landlord's principal broker, Covington, emailed Bradberry notice of the penalties he had incurred for late November and December rent payments. The email expressed, for the first time in writing, a belief that a month-to-month tenancy governed the relationship with a rental rate of $3, 000 per month: "It is my understanding the landlord is trying to get things current in an effort for us to deliver you a new lease for your space vs. the month to month you are currently on in the space etc." Without disputing the existence of the claimed month-to-month tenancy, Bradberry responded a few days later that a cashier's check for outstanding rent would arrive the following day via overnight mail.

         When the rent failed to arrive as promised, Covington sent Bradberry a notice of default on December 18, 2012. In addition to responding that the check was "already in the mail, " Bradberry reported his understanding that he was under lease through May 31, 2017, with two additional lease-extension options through 2027. Bradberry made clear that, since 2005, he had invested over $250, 000 to improve the property and would not have done so absent the option to extend the lease through 2027. He concluded the letter with "now that we are current as of December 19, 2012 it would be great to get the 'new' lease taken care of as soon as possible."

         In October 2013, after sending additional default notices for late rent, Shields offered Bradberry a new lease with a rental rate of $9, 700.83 per month. Bradberry promptly rejected the proposed lease, and Shields notified Bradberry he would have to vacate the premises within 30 days, claiming he had converted to a month-to-month tenancy on June 1, 2012. Bradberry refused to surrender possession, and Shields instituted eviction proceedings.

         The justice court ruled in Bradberry's favor. The result was the same following a bench trial de novo in the county court. There, the court rendered a take-nothing judgment against Shields and awarded Bradberry his attorney's fees through trial and on appeal. No findings of fact or conclusions of law were made or requested; however, the final judgment states that Shields "failed to sustain its burden of proof in establishing that it has a superior right to immediate possession of the [leased] premises."

The court of appeals affirmed, holding:
The trial court could have found that Shields's acceptance of the late May rent payment without protest constituted acceptance of the payment as fulfilling the obligations under the lease. The trial court could have determined that if Shields had meant to accept the late payment but also object to the lack of compliance with the lease's requirement of timely payment, Shields would have had to do something, such as impose late fees or declare the lease in default, indicating that the late payment did not constitute compliance with the lease. The trial court could have found that Shields's conduct of accepting the late May 2012 rent payment without protest was not consistent with an assertion that Bradberry had failed to fulfill the obligations of the lease. Because Bradberry had previously given Shields timely notice of his intent to exercise the extension option, the extension took effect.[11]

         The court of appeals also summarily rejected Shields's alternative argument that, even if Bradberry had successfully exercised the extension option, he was in default under the lease based on his failure to pay CPI-adjusted rent starting June 1, 2012. Although Shields had asked the trial court to take judicial notice of the CPI, including for April 2012, which produced a new base rental rate of $3, 340 per month, the court of appeals said Shields failed to ask the trial court to take judicial notice of the April 2013 CPI specifically. The court explained that, without evidence of the April 2013 CPI, Shields "failed to prove conclusively that Bradberry owed any more rent than what he had paid [at the time] Shields declared the lease terminated for failure to pay the rent as adjusted by the CPI."[12]

         II. Discussion

         The sole focus of a forcible-detainer action is the right to immediate possession of real property.[13] To establish a superior right to immediate possession, Shields had the burden to prove (1) Shields owns the property, (2) Bradberry is either a tenant at will, tenant at sufferance, or a tenant or subtenant willfully holding over after the termination of the tenant's right of possession, (3) Shields gave proper notice to Bradberry to vacate the premises, and (4) Bradberry refused to vacate the premises.[14] The parties do not dispute that Shields owns the property and gave proper notice or that Bradberry refused to vacate the premises. The only dispute is whether the record conclusively establishes that Bradberry's right of possession terminated.

         Disposition of that matter ultimately turns on the force and effect of the parties' nonwaiver agreement, which unequivocally precludes a defense of waiver premised on the landlord's acceptance of late rental payments. We note our appellate courts have treated nonwaiver provisions inconsistently.[15] We may therefore exercise jurisdiction over this appeal, despite its origin, [16] because an opinion of this Court addressing the matter would "remove unnecessary uncertainty in the law and unfairness to litigants."[17]

         Citing the specific language of the lease's nonwaiver clause, Shields asserts that acceptance of late payments, without more, can never effect a waiver of either the nonwaiver agreement or Shields's contractual right to enforce strict compliance with the option requirements.[18] Shields argues it follows then that Bradberry failed to successfully exercise the sublease's first five-year option period because he was in default on his rent when the base lease expired on May 31, 2012, and as a result, had not "fulfill[ed] all the terms and conditions of the lease and option[s]."

         Shields contends Bradberry became a month-to-month holdover tenant at that point, meaning Shields was entitled to terminate the tenancy at any time with proper notice.[19] To emphasize the argument, Shields notes that Bradberry continued to pay $3, 000 per month in rent after the base lease terminated and never paid the enhanced CPI-adjusted rental amount required under the terms of the option. Moreover, Bradberry had never paid the pro-rata tax payments that would have been required if the lease had been extended pursuant to the option. Relying on these undisputed facts, Shields asserts it has not acted inconsistently with its position that Bradberry's attempt to exercise the option was ineffective, neither demanding nor accepting an enhanced rental payment or property tax payments. Alternatively, Shields argues that Bradberry was in default under the lease even if the option was properly exercised and must surrender possession, notwithstanding Shields's acceptance of late and insufficient rental payments.

         Bradberry acknowledges he was more than a month late in paying the May 2012 rental payment. He argues, however, that timeliness of the May 2012 rental payment is irrelevant because (1) he exercised the option in September 2011 by delivering notice to the party designated in the lease, (2) he had fulfilled all the lease's terms at that time, and (3) the option was effective as soon as he delivered the notice. In the alternative, Bradberry maintains that Shields waived defective performance, if any, by accepting the May 2012 payment without protest and without rejecting Bradberry's election to extend the lease.

         Concerning the enhanced rental payments that would be due under a properly exercised lease extension, Bradberry claims Shields was required to give notice that a different rental rate was due and to bill him for his portion of the tax payments. Bradberry also raises an estoppel defense, suggesting he detrimentally relied on the promise of lease extensions through 2027 in making substantial improvements to the property during his time as a tenant, including approximately $30, 000 in improvements after he purported to exercise the option.

         To support his estoppel defense, Bradberry cites a statement in the September 2011 option letter, in which he inquired about the prospect of obtaining an additional five-year option period (through 2032) on the basis that he was "looking at doing another big renovation to turn the bar into an island style bar, which will probably be a $30, 000 [renovation]." Though there is no evidence Shields entertained the request, Bradberry completed construction on the referenced improvements in March 2012 or 2013, and Shields's representative noticed the work had been completed when he visited the property.[20]

         We agree with Shields that, as a matter of law, accepting late rental payments does not waive the nonwaiver provision in the underlying lease or, correspondingly, the contractual requirement that rent is due on the first of the month, without prior demand, and no later than the tenth day of the month. Moreover, Shields did not act inconsistently with its right to accept untimely rent without waiving the nonwaiver provision.

          A. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.