Cheung-Loon, LLC v. Cergon, Inc., 392 S.W.3d 738

Background

Cheung-Loon owned 3317–3321 McKinney Ave properties in Dallas and leased the 3321 lot to Primo’s Bar and Grille for five years (June 1, 2006–May 31, 2011) with Cervantes signing and personally guaranteeing.
The parties executed a Non-Disturbance, Attornment and Estoppel Agreement with Southwest Bank, requiring written notice and a 30-day cure period before remedies could be pursued; the lease contained a parallel cure provision.
Prime issues arose over Primo’s obligation to obtain a city certificate of occupancy for the lot, how use of the lot by Primo’s and others affected exclusive use, and Primo’s May 2008 unilateral termination.
Primo’s claimed exclusive use of the parking lot; Cheung-Loon argued the use was non-exclusive and that Primo’s failed to give proper notice and cure as a condition precedent.
Cheung-Loon moved for summary judgment on breach of contract; Primo’s and Primo’s affiliates counterclaimed for breach, declaratory relief, and fraud, with affirmative defenses including want of consideration, failure of consideration, estoppel, waiver, and duress.
The trial court granted summary judgment for appellees on breach/declaratory judgment and awarded damages and fees; the appellate court reverses in part, grants judgment for Cheung-Loon on several defenses, dismisses some defenses, and remands for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Was Primo’s termination proper given lack of written notice and cure?	Cheung-Loon contends notice and cure were mandatory conditions precedent.	Primo’s argues termination was permissible due to underlying breaches and futility of notice.	No; lack of written notice and cure barred enforcement of contract claims; termination was not proper under conditions precedent.
Did Primo’s have exclusive use of the parking lot, and did Cheung-Loon’s actions breach the lease?	Primo’s claims it had exclusive use; Cheung-Loon’s actions breached exclusivity.	Cheung-Loon’s allowed access by other tenants did not infringe exclusivity because exclusivity was not clearly granted.	Question of exclusivity raised material fact; summary judgment on breach defense reversed.
Are the affirmative defenses (want of/ failure of consideration, fraud, estoppel, waiver) properly resolved?	Cheung-Loon sought no-evidence judgment on these defenses.	Appellees contend defenses are supported by record evidence.	Want of consideration granted; failure of consideration, fraud, estoppel, and waiver resolved variably: want of consideration affirmed, others remanded or dismissed per analysis.
Did Cheung-Loon prove a lack of consideration or a failure of consideration as a defense to breach?	Cheung-Loon argues defenses nullify breach due to lack/failure of consideration.	Appellees contend there was mutual consideration and partially ongoing performance.	Want of consideration established; failure of consideration found factually in part but not dispositive to all claims.

Key Cases Cited

Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276 (Tex. 1998) (conditions precedent and proof require showing satisfying performance)
DiGiuseppe v. Lawler, 269 S.W.3d 588 (Tex. 2008) (futile-notice doctrine not established without evidence of futility)
Fina Supply, Inc. v. Abilene Nat’l Bank, 726 S.W.2d 537 (Tex. 1987) (special rule for misrepresentation of legal rights as fact)
Huff v. Speer, 554 S.W.2d 259 (Tex. Civ. App.—Houston [1st Dist.] 1977) (partial vs total failure of consideration)
King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (requirements to prove exclusive use and breach)
McGraw v. Brown Realty Co., 195 S.W.3d 271 (Tex. App.—Dallas 2006) (post-formation defense to contract validity)
Pinnacle Anesthesia Consultants, P.A. v. Fisher, 309 S.W.3d 93 (Tex. App.—Dallas 2009) (improper termination as breach)
Food Mach. Corp. v. Moon, 165 S.W.2d 773 (Tex. Civ. App.—Amarillo 1942) (cancellation or recission due to total failure of consideration)
Treviño v. Allstate Ins. Co., 651 S.W.2d 8 (Tex. App.—Dallas 1983) (conditions precedent concept in contract)
Laurel Land Mem’l Park, Inc. v. Dallas Cent. Appraisal Dist., 911 S.W.2d 783 (Tex. App.—Dallas 1995) (summary judgment burden when both sides move)
Carbonata v. Texas Stadium Corp., 244 S.W.3d 651 (Tex. App.—Dallas 2008) (standard for traditional summary judgment)