Neighbor-to-Neighbor Farm Sale Leads to Lawsuits

Background

The Barkleys farmed 960 acres in Hansford County.  The Connellys farmed land nearby. Mr. Barkley was not interested in selling his farm, but in March 2017 he filed for bankruptcy and was nearing retirement, so he met with Mr. Connelly to discuss Connelly leasing the property from him. During that meeting, they discussed a $2.2 million purchase price for the farm.  The next day, Mr. Barkley told Mr. Connelly that the Barkleys would only sell if they could buy back their house and a 40-acre pasture across the road.  Mr. Connelly understood and told them if he bought the farm, he would allow them to purchase their house back. Mr. Barkley and Mr. Connelly drove around the property and discussed the 40-acre pasture the Barkleys wanted to keep.  Later, they discussed the price of $60,000 for that 40-acre pasture.

In April 2017, the Barkleys cash leased the farm to the Connellys for 2017.  Meanwhile, the parties negotiated a Purchase & Sale Agreement (“Agreement”) for the Connellys to buy the farm.  The Barkleys were represented by counsel and their bankruptcy lawyer was also involved.  In November 2017, the Barkleys and Connellys signed the final Agreement. That Agreement provided for the sale of the entire 960-acre farm, including the Barkley’s homeplace and the 40-acre pasture.  It also included the following “merger clause” language: “This Agreement constitutes the sole and only agreement of the parties hereto and supersedes any prior understanding or written or oral agreements between the parties respecting the within subject matter.  This expressly includes the Offer to Purchase submitted to the Seller on or about April 10, 2017 on the letterhead of Cecil R. Biggers.”  By November 2018, the Connellys closed on the farm and all of the Barkleys’ interest was conveyed to the Connellys by warranty deed.

The Barkleys remained on the property.  In March 2019, they emailed the Connellys and expressed their readiness to buy back the homeplace and 40-acre pasture for $60,000.  The Connellys’ lawyer responded via letter that the parties had no enforceable agreement for the sale of the homeplace and pasture, and that while the Connellys were initially open to the idea of selling the property, they no longer had any intention of doing so due to the Barkelys’ recent behavior toward them.  The Barkleys were given until September 4, 2019 to vacate the property.

On August 9, 2019, the Barkleys’ lawyer notified the Connellys they still desired to re-purchase the property and enclosed a check for $60,000 and surveys from May and July 2019 of the homeplace and 40-acre pasture.  The Connellys did not accept the funds.

The Barkleys filed suit on August 19, 2019 for breach of contract, fraudulent inducement, and trespass-to-try-title.  They later amended the petition to add a promissory estoppel claim.  The court granted the Connellys’ motion for summary judgment and dismissed the breach of contract, trespass-to-try-title, and promissory estoppel claims.  They case proceeded to trial on the fraudulent inducement cause of action, and the jury found for the Connellys.  The court entered a take-nothing judgment against the Barkleys, disposing of all claims.

The Barkleys appealed the court’s grant of the summary judgment motion.

Title Lawsuit – Amarillo Court of Appeals Opinion

The Amarillo Court of Appeals affirmed.  [Read opinion here.]

Breach of Contract

The court first analyzed the breach of contract claim.

Merger doctrine

The Connellys claimed the Barkleys’ breach of contract claim was barred by the merger doctrine.

It is presumed that all prior oral and written agreements merge into a subsequent written document.  A written merger clause is essentially a memorialization of the merger doctrine.  When parties have entered into a valid contract, the parole evidence rule precludes the enforcement of any prior or contemporaneous agreement addressing the same subject matter that is inconsistent with the written contract.

Here, the merger clause in the Agreement states that the Agreement “supersedes any prior understanding or written or oral agreements between the parties respecting the within subject matter.”  Clearly the subject matter of the Agreement involves the sale of the farm.  Although the Barkleys argued the oral buyback agreement was part of the sales agreement, the merger clause expressly provides that the written Agreement is “the sole and only agreement” between the parties.  Under the Agreement, the Connellys had no obligation to sell any property back to the Barkleys. “Any understandings or agreements between the Barkleys and the Connellys relating to the sale of the Barkelys’ farm prior to the signing of the November 2017 purchase agreement were unequivocally extinguished by the written agreement.”

Thus, there was no valid agreement between the parties related to the buyback.

Collateral agreement

However, the parole evidence rule does not preclude enforcement of an agreement that is “collateral” to and not inconsistent with the written agreement.  A “collateral” agreement is one that is supported by separate consideration and that the parties might naturally make separately under the circumstances.

The Barkleys claimed the buyback agreement is both collateral and not inconsistent with the Agreement. The court disagreed.  The Barkleys claimed it was the understanding they could buy back a portion of the farm that convinced them to sell to the Connellys.  That oral promise was not collateral, but was an integral part of the parties’ negotiations.  Further, the buy back promise was not supported by separate consideration indicating it was a different transaction.

Thus, the parole evidence rule barred the enforcement of the alleged collateral agreement that the Connellys would sell back a portion of the farm.

Conclusion

Because the oral promise was unenforceable, the Barkleys had no basis  for their breach of contract claim. The trial court’s dismissal was proper.

Trespass-to-Try-Title

A trespass-to-try-title claim is the exclusive remedy by which to resolve competing claims to property under Texas law.  Such suits must seek to clear problems in chains of title or to establish an owner with right to immediate possession of property to recover possession of land being withheld.  Importantly, a plaintiff must recover upon the strength of his own title by proving: (1) regular chain of conveyances from the sovereign; (2) superior title out of a common source; (3) title by limitations; or (4) prior possession and that the possession had not been abandoned.  The Barkleys did not rely on any of these, but instead relied on a claim that they have “equitable title” to the property.  A plaintiff in a trespass-to-try-title suit may recover on the strength of an equitable title if they prove they paid the purchase price and fully performed under the contract.

The Barkleys based their claim on the oral buyback agreement and their tender of $60,000. However, the court determined the oral promise was not an enforceable contract.  Thus, the Barkleys cannot prove legal or equitable title to the property and the court properly dismissed this claim.

Promissory Estoppel

The parties disputed whether promissory estoppel was a cause of action or merely a defense.  The court noted that it need not address those arguments, because even if it recognized promissory estoppel as a basis for affirmative relief, the trial court’s dismissal was proper.

Promissory estoppel is an equitable remedy that is not available if an express contract covers the disputed subject matter. It is undisputed that the parties to this lawsuit entered into the written Agreement. Thus, a promissory estoppel claim could not succeed.

Conclusion

The Amarillo Court of Appeals affirmed the judgment of the trial court.

Forcible Detainer Lawsuit – Amarillo Court of Appeals Opinion

After the trial court ruled in favor of the Connellys in the title lawsuit, they brought a forcible detainer action against the Barkleys seeking to evict them from the property.  Both the justice court and county court found in favor of the Connellys.  The Barkleys appealed to the Amarillo Court of Appeals raising three issues.  The Amarillo Court of Appeals affirmed.  [Read opinion here.]

Notice

The Barkleys claimed the Connellys failed to comply with the statutory notice requirements.  The court, however, found that this claim was raised for the first time on appeal.  Because it was not preserved below, it could not be considered on appeal.  Thus, it was overruled.

Citation

The Barkleys claimed the Connellys failed to serve them with proper citation and that the service should have been quashed.  The Connellys claimed that the Barkleys waived their complaints as to citation by appearing in the justice court and county court.

Typically, when a party makes a general appearance, the party is deemed to consent to personal jurisdiction of the court and to have waived any complaint of service.  Here, the Barkleys made a general appearance in the two lower courts.  Certainly their appearance in the county court waived any complaint as to service as they filed an answer and various other motions.  They did not file a special appearance to challenge personal jurisdiction.   This issue was also overruled.

Jurisdiction

Lastly, the Barkleys argued the trial court did not have jurisdiction over this matter while an appeal of the title lawsuit was still pending.  They claimed the trial court should have abated this case pending the appellate resolution of the title lawsuit.

A forcible detainer action may only address the right to actual possession of the premises.  Thus, these actions are cumulative of any other legal remedy a party may have, and the displaced party is entitled to bring a separate suit in the district court to determine title.  If a genuine issue of title exists, a forcible detainer action is not the proper method to resolve that issue. If the issues of title and possession “are not so intertwined,” a forcible detainer suit in justice court may run concurrently with another action in another court, even if the other action adjudicates matters that could result in a different determination of possession.

Here, the court found the issues of title and possession are not so interconnected to preclude the county court from determining the right to immediate possession. The Connellys offered deeds showing their ownership of the property in the forcible detainer action.  That was prima facie evidence of their title to the property.  The mere existence of a title dispute in district court did not divest the county court jurisdiction to determine the forcible detainer claim.  This issue was also overruled.

Conclusion

The judgment of the trial court was affirmed.

Potential Appeals

These opinions were released on June 13, and the deadline to seek review from the Texas Supreme Court has not yet passed.  An appeal could be forthcoming.

Key Takeaways

The key takeaway from this case is one that broadly applies in any situation involving a written agreement.  Do not rely on any prior or concurrent oral promises not included in the written agreement.  Such oral agreements are extremely difficult to enforce, particularly when, as here, the contract contains language expressly disavowing any prior oral agreements.  This issue arises not only in property sales contracts such as this, but also with lease agreements, pipeline and transmission line easements, access easements, and more.   It is critical that parties carefully review any final written contract or agreement and ensure every promise is included.

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