Mr. W Fireworks, Inc., a Texas Corporation v. Alamo Fireworks, Inc., a Texas Corporation

MEMORANDUM OPINION No. 04-04-00934-CV MR. W FIREWORKS, INC., Appellant v. ALAMO FIREWORKS, INC., Appellee From the 288th Judicial District Court, Bexar County, Texas Trial Court No. 2004-CI-18677 Honorable Fred Shannon, Judge Presiding Opinion by: Sarah B. Duncan, Justice Sitting: Alma L. López, Chief Justice Sarah B. Duncan, Justice Phylis J. Speedlin, Justice Delivered and Filed: September 14, 2005 REVERSED AND REMANDED Mr. W Fireworks appeals the trial court’s order denying its application for a temporary injunction and enjoining it from undertaking certain actions with respect to the real property in dispute. We reverse the trial court’s order and remand the cause to that court for further proceedings consistent with this opinion. Factual and Procedural Background In May 2003, a horse farm operator was leasing all of a 102-acre tract bordering Interstate10 except one 100’ x 100’ corner, which was fenced off from the remainder of the 102-acre tract. That month Alamo Fireworks, Inc. signed a lease in which the granting clause described the entire 102-acre tract as the property being conveyed but limited Alamo’s occupancy to the 100’ x 100’ corner – all that was needed by Alamo to conducts its business. The lease also provided that Alamo would have the exclusive right to sell fireworks on the entire 102-acre tract, thus protecting Alamo from a competitor using any part of the 102-acre tract other than the 100’ x 100’ corner for the sale of fireworks during the term of the lease. Alamo’s lease provided that it would automatically terminate if “all of the leased property” were sold. In November 2004, Mr. W Fireworks, Inc. bought five acres of the 102-acre tract, including the 100’ x 100’ corner leased by Alamo. When Alamo refused to vacate the corner, Mr. W filed this suit for an injunction. Alamo answered and counterclaimed for an injunction. The trial court concluded that Mr. W’s purchase of the five-acre tract that included the 100’ x 100’ corner did not terminate Alamo’s lease because Alamo had leased the entire 102-acre tract. The trial court thus denied Mr. W’s request for a temporary injunction and granted Alamo’s, enjoining Mr. W from selling fireworks on its five-acre tract or otherwise interfering with Alamo’s business and possession of the leased premises. Mr. W appealed. DISCUSSION Mr. W argues the trial court abused its discretion in denying its application for a temporary injunction because the court erroneously concluded that Alamo leased the entire 102-acre tract and that Alamo’s lease did not terminate when Mr. W purchased the five acres containing the 100’ x 100’ corner occupied by Alamo. We agree. In their briefs, Mr. W and Alamo agree the lease is unambiguous. We agree. The construction of an unambiguous lease is a question of law that we review de novo. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999). Our primary duty in construing a lease is to ascertain the intent of the parties as is expressed in the agreement. Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550, 554 (Tex. 2002). In doing so, we consider the wording of the lease in light of the surrounding circumstances and apply the rules of construction to determine its meaning. Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981). These rules require us to examine the entire lease and attempt to harmonize all its parts. Anadarko, 94 S.W.3d at 554. We also presume the parties know the law and intend their contract to have legal effect. Foard County v. Sandifer, 105 Tex. 420, 151 S.W. 523, 524 (1912). Therefore, if a lease is susceptible to two constructions, one of which would render it valid and enforceable and the other of which would render it unenforceable, the construction validating it must prevail. Harris v. Rowe, 593 S.W.2d 303, 306 (Tex. 1979). On appeal, we review the trial court’s ruling on an application for a temporary injunction under an abuse of discretion standard. Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993); Anadarko, 94 S.W.3d at 554. “With respect to resolution of factual issues,” the trial court abuses its discretion if the record establishes it “could reasonably have reached only one decision,” and it fails to do so. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992). However, “[a] trial court has no ‘discretion’ in determining what the law is or applying the law to the facts. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion ....” Id. at 840. Mr. W argues Alamo leased only the 100’ x 100’ corner and not the entire 102-acre tract because the lease granted Alamo exclusive possession of only the 100’ x 100’ corner, not the entire tract. We agree. It is well-settled that a lease is valid only if it confers upon the lessee the right to exclusive possession or occupancy of the premises described in the granting clause. Vallejo v. Pioneer Oil Co., 744 S.W.2d 12, 14-15 (Tex. 1988); Brown v. Johnson, 118 Tex. 143, 12 S.W.2d 543, 545 (1929); see Johnson County Sheriff’s Posse, Inc. v. Endsley, 926 S.W.2d 284, 285 (Tex. 1996) (equating“possession” and “occupancy” in the lease context). Here, the granting clause described the entire 102-acre tract but limited Alamo’s occupancy to the 100’ x 100’ corner. Because the granting clause did not confer upon Alamo the right to exclusive possession of the described premises (the entire 102-acre tract) but only a portion of it (the 100’ x 100’ corner), we hold the lease conveyed to Alamo the portion it had the exclusive right to occupy: the 100’ x 100’ corner. Alamo argues, however, that the plain language of the granting clause granted it a leasehold estate in the entire 102-acre tract with conditions of occupancy – a permissible conveyance because Texas law permits a landowner to lease the same land to different lessees for different purposes. As support for its argument, Alamo directs us to the example of a landowner who leases her land to one person for ranching and to another person for hunting or mineral development. However, what we colloquially call a “hunting lease” is not a lease; it is a license, which does not convey an interest in property. Digby v. Hatley, 574 S.W.2d 186, 190 (Tex. Civ. App.–San Antonio 1978, no writ); Kibbin v. McFaddin, 259 S.W. 232, 234 (Tex. Civ. App.–Beaumont 1924, writ ref’d). Similarly, a “mineral lease” “is a not a ‘lease’ in the traditional sense”; it is a conveyance of a fee simple determinable interest in subsurface minerals. Natural Gas Pipeline Co. of Am. v. Pool, 124 S.W.3d 188, 192 (Tex. 2003). Alamo also argues that resolution of this appeal rests not upon what the lease conveyed but on what the parties intended in the lease provision providing that the lease would automatically terminate if “all of the leased property” were sold. But this puts the cart before the horse. To determine the meaning of the “leased property” in this provision, we must first determine what leasehold estate was conveyed. Alamo also argues that, had it meant to lease only the 100’ x 100’ corner, the granting clause would have so stated. However, the converse is also true: If the lease conveyed to Alamo a leasehold interest in the entire 102-acre tract, the granting clause would not contain the occupancy restriction. Alamo also argues that construing “property” and “tract” in the lease as the 100’ x 100’ corner leads to internal inconsistencies within the lease and renders meaningless the lease provision granting Alamo the exclusive right to sell fireworks “to the entire tract of property” because it permits the owners to lease all but the corner to Alamo’s competitors. However, internal inconsistencies also exist under Alamo’s interpretation. For instance, the lease requires Alamo to restore the “property” at the end of the lease. If the “property” refers to the entire 102-acre tract, Alamo must restore property that it did not and could not legally occupy. Moreover, if the parties intended to convey to Alamo a leasehold estate encompassing the entire 102-acre tract, why did the lease include a provision granting Alamo the exclusive right to sell fireworks? We hold the lease is susceptible to only one construction that is reasonable, renders the lease valid and enforceable, harmonizes all its parts, and reflects the parties’ intent as expressed in the agreement in light of the surrounding circumstances: Alamo leased the 100’ x 100’ corner only. Accordingly, the purchase of that corner by Mr. W terminated Alamo’s lease. Conclusion Because Alamo leased only the corner and not the entire 102-acre tract, Mr. W’s subsequent purchase of the corner terminated Alamo’s lease. We therefore hold the trial court abused its discretion in denying Mr. W’s application for a temporary injunction, reverse the trial court’s order, and remand the cause to the trial court for further proceedings consistent with this opinion. Sarah B. Duncan, Justice