For Sale Cheap – 545 Acres in Wood County

In November 2003 William Earl Norris and Martha Sue Norris decided to sell their farm to Eleanor Fox Davis. William and Martha signed not one, not two, but three – count ‘em three – contracts, all with Eleanor.

In the first contract M/M Norris agreed to sell 215 acres to Ms. Davis. Davis also had the right to acquire more acreage from M/M Norris, being the remainder of the 545-acre farm. In the second, Davis agreed to purchase 10 acres from Norris. The third contract was for approximately 210 acres. The parties closed on the second and third contracts, but left the first pending.

In 2006 Davis sent M/M Norris a letter announcing her intention to exercise the option in the first contract. Counsel for the Norris’ did not agree that Davis was entitled to purchase more property, and consequently M/M Norris did not appear at the time and place designated by Davis for closing.

Davis sued M/M Norris for specific performance or damages. Davis lost. Davis appealed.

The Texarkana Court of Appeals first stated that options must be clearly drafted and the purchaser must strictly comply. The Appellate Court concluded that the contract was unclear as to what, exactly, is required to exercise the option. This conclusion was based primarily on the handwritten statement in the contract that: “SELLER WILL HAVE 9 MONTHS NOTICE BEFORE BUYER WILL CLOSE,” coupled with some additional unclear provisions.

The handwritten clause followed a provision granting Davis “. . . an Option and First Right of Refusal until January 1, 2007 to purchase [the property].” But what is the correlation between the January 1, 2007 deadline and the 9-month notice provision? Must nine-month notice be issued before January 1, 2007, or must the closing be completed by January 1, 2007?

At the trial court M/M Norris won a summary judgment based on the single theory that Davis did not timely exercise the option. The Court of Appeals reversed the decision of the trial court, and remanded the case back to Wood County to figure out what the parties had contemplated to properly and timely exercise the purchase option.

See Davis v. Norris, 06-10-00093-CV, 6^th Court of Appeals, Texarkana; October 27, 2011.

Lessons learned:

1.  It appears that no brokers were involved. Thank goodness, since clearly all brokers and agents would have been sued.

2.  Option contracts are tricky. Do not draft option contracts, rights of first refusal, rights of first offer or anything similar, in contracts or leases. Or anywhere else for that matter. Even seasoned lawyers often make mistakes in this area.

3.  Review option language closely. Everything in an option provision must be spelled out with great particularity – timing, property description, pricing, review and due diligence periods, earnest monies or additional deposits, means by which notice must be furnished, title companies, closing documents, prorations, taxes, etc. Tricky stuff. Seriously.


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.

Have You Hugged Your Lawyer Today?

Graydon Howell and Inez Howell owned 43 lake lots at Lake Colorado City, Texas, and leased the lots to various tenants. The lots were ultimately sold to Providence Land Services, LLC in 2008, subject to the leases.

Evidently, the Howells elected to prepare the leases without the aid of an attorney. The duration of the leases was described in this clause: “For the sum of $_____, the receipt of which is hereby acknowledged, a like annual rental of $_____ payable each year on or before _________, Lessor will lease to Lessee the following described lot or parcel of ground on [the] shores of Lake Colorado City, for residential purposes only, for the period from this date until Indefinite . . .” [emphasis added.]

The trial court determined that “Indefinite,” in this context, meant 99 years from the date of lease execution. This was based, at least in part, upon the tenants’ evidence at trial of their substantial work to clear the lake lots for occupancy and substantial, expensive improvements with the expectation that the tenants would be allowed to pay rent and remain at the property for a long time.

Providence appealed.

The Texas Court of Appeals decided that “ ‘Indefinite’ is not synonymous with ‘infinity,’ ‘perpetual,’ or ‘forever.’ ” Since the leases have no stated end date, the tenancy is terminable by either party at any time. That ruling doubtless pleased Providence, but the tenants – not so much.

See Providence Land Services LLC v. Jones, No. 11-09-00298-CV, Texas 11th Court of Appeals, October 6, 2011.

Switching gears . . . William Norris and Martha Norris signed three different contracts to sell Wood County property to Eleanor Davis, all dated November 5, 2003. One contract closed and funded, but then a dispute arose regarding an option to purchase the balance of the farm. Davis sued Norris for specific performance and damages. Norris won in trial, and Davis appealed.

The option contract at issue allowed Davis to purchase the remainder of the 545 acre farm. Exhibit A to the Contract stated: “SELLER WILL HAVE 9 MONTHS NOTICE BEFORE BUYER WILL CLOSE.” Exhibit A also provided that Davis had the “. . . Option and First Right of Refusal until January 1, 2007 to purchase . . .” the option property.

Davis attempted to exercise the option on March 20, 2006, by sending a letter to Norris providing that the closing would be on December 20, 2006. This would seem to satisfy the Exhibit A requirements, except that the letter was not actually mailed until March 28, 2006.

The Texas Court of Appeals, however, decided that the notice clause was ambiguous. The notice provision did not state that the notice was a condition to the proper exercise of the option. The exact meaning of the January 1, 2007 date was also unclear to the Appellate Court.

The Texas Court of Appeals dispatched the case back to the trial court, to try, try again. See Davis v. Norris, No. 06-10-00093-CV, Texas 6th Court of Appeals, October 27, 2011.

Lessons learned:

1. Be sure the language you insert in a Contract or Lease is CRYSTAL clear.

2. Don’t forget that TREC laws and rules prohibit TREC licensees from practicing law. Only the parties and their attorneys can draft these types of legal terms and provisions. TREC licensees may not.

3. Sometimes it makes sense to get a lawyer involved – to be sure the parties’ intent is properly stated.


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.