Send this document to a colleague

Close
This Window

Opinion issued November 20,
2008

In The

Court of
Appeals

For
The

First
District of Texas

NO. 01-06-00002-CV

SEYED HASSAN
MOOSAVIDEEN, Appellant

V.

JOHN TRAVIS GARRETT;
LILLIAN MARIAN FOOTE TIGARD; LUCY LURLINE FOOTE MCKINSTRY; JOSEPH GARRETT
FOOTE; MARY JOSEPHINE FOOTE ENDLICH; JOHN G. MEADOR JR.; BARBARA GENE
MEADOR; MARY FRANCIS MEADOR SIMPSON; DANNA MAHONEY MEADOR; MARY R. MEADOR
CRAWFORD; GLENN MEADOR JR.; SARA E. MEADOR; AND RICHARD L. DOEHRING,
TRUSTEE OF THE 4 TESTAMENTARY TRUSTS CREATED UNDER THE LAST WILL AND
TESTAMENT OF WILLIAM MOSELY GARRETT, DECEASED,
Appellees

* * * *

JOHN TRAVIS GARRETT;
Appellants

V.

SEYED HASSAN
MOOSAVIDEEN, Appellant

On Appeal from the
151st District Court

Harris County,
Texas

Trial Court Cause
No. C-2003-23823

O P I N I O
N

We deny appellees' motion for rehearing.
However, we withdraw our opinion and judgment of July 26, 2007 and issue
this opinion in their stead.

The issue presented by this appeal is
whether a lessee validly exercised a purchase option before being notified
by the lessor that the lessee was in default on the lease. We also
consider whether a lessee can validly exercise a purchase option despite
being in default of the lease. We hold that (1) the lessee validly
exercised the purchase option before being notified that he was in default
on the lease, and (2) the lessee could exercise the purchase option
anytime before the contract terminated because the lease did not contain
language in the option clause conditioning its exercise on the lessee's
performance of the terms of the lease. Accordingly, we reverse and render
in part and reverse and remand in part.

BACKGROUND

The 1928
lease

In 1928, Lucy G. Travis, as lessor, and
Edwin H. Wilder, as lessee, entered into a 99-year lease of a tract of
property located in Harris County, Texas. The lease was freely assignable
by either party, and its terms are binding upon the heirs, legal
representatives, and assigns of the original parties. Two terms of the
lease are relevant to the case before the Court.

Article XV of the lease, hereinafter
referred to as the "purchase option," provides as follows:

In consideration of the amount of the
rental payments hereunder, paid and to be paid, and of the other valuable
considerations inuring to the benefit of the LESSOR hereunder, the LESSOR
hereby gives and grants to the LESSEE, and LESSEE shall have an optional
right at any time within a period of the term of this lease, to purchase
the interest of Lessor in and to the demised premises described in ARTICLE
3 hereof, as follows

At and for an agreed purchase price of
FIFTY THOUSAND DOLLARS ($50,000.00) to be paid either in cash, or one-half
cash, and balance in five (5) equal annual payments, with interest at
seven percent (7%) per annum, payable as it accrues, with Vendor's Lien
reserved to secure payment.

If, and when LESSEE notifies the LESSOR,
of his election to exercise said option to purchase and demonstrates his
readiness to pay the amount specified above, LESSOR binds and obligates
herself to forthwith execute and deliver to LESSEE a conveyance of her
interest in the demised premises and all rights incident thereto, with
covenants of general warranty, conveying her said interest and title to
said premises free and clear of all encumbrances, judgments, or other
liens, subject only to this present lease and anyone claiming hereunder.
After receipt of notice of such election to purchase, the LESSOR agrees to
promptly furnish LESSEE a complete Abstract of Title to the demised
premises so that he may have the title examined before the deed is
executed. If and when said option is exercised and the purchase price
paid, all future rentals which otherwise would become due under this lease
shall cease and the LESSEE shall be under no obligation to the LESSOR for
anything accruing hereunder from and after the date of the consummation of
said sale.

The 1927 lease also contained the
following language in Article X:

At no time during the life of this
contract shall LESSEE permit to be carried on in the demised premises, or
any part thereof, any kind or character of business whatsoever which is
not permitted by law; and LESSEE agrees at all times to perform any and
all lawful requirements in regard to the use and occupancy of the demised
premises and improvements, as well as to the use and occupancy of the
streets and sidewalks adjacent thereto, and agrees that he shall at all
times conform to such requirements and perform the same in such manner as
to relieve the LESSOR and the demised premises from any liability
therefor. The LESSEE shall have the right to use the demised property
during the lease term for any lawful purposes.

Finally, the lease contained the
following provision, whereby the parties were obliged to notify one
another of any change of address:

All notice and delivery of papers herein
mentioned and required to be given shall be given in writing by registered
mail properly addressed to the address of the party for whom it is
intended, and a registered receipt from the postal authorities of the
United States showing the mailing to such party by registered mail at the
proper address, together with a copy of the notice sent in the hands of
the sending party, shall conclusively establish the giving of such notice.
. . .

The present address of Miss Luch G.
Travis, is 4103 Rossmoyne, Houston, Texas, and the present address of the
lessee, Edwin H. Wilder, is 1204 Milam St., Houston, Texas, to which
addresses, until changed as hereinafter provided, all notices required
shall be mailed.

In the event the address of any party
hereto is changed or desired to be changed from those stated in the
preceding paragraph . . . it shall be the duty of the party making or
desiring to make such change to notify the other party hereto . . . giving
such notice his new address, which notice shall likewise be given by
registered mail.

The Subsequent History of the
Lease

Wilder, the original lessee, assigned the
lease to Scott Shambaugh in 1929. In 1930, Shambaugh assigned the lease to
The Texas Company ("Texaco"). Texaco operated a service station on the
property for almost 50 years. The undisputed evidence shows that during
the time the service station was in operation there were no environmental
regulations to report or remediate contamination of the soil. The lease
remained with Texaco
(1) until 1989, when it was assigned to Hamid Liaghat and Hassan
Naghavi.

Moosavideen Obtains the Lease and
Attempts to Exercise Purchase Option

On November 9, 2000, shortly before he
acquired the lease, Moosavideen sent a letter to three of the original
lessor's heirs--Lucy Foote McKinstry, John Travis Garrett, and John G.
Meador, Jr.--expressing his interest in acquiring the lease for the
purpose of exercising the purchase option. He received no response. Three
months later, on January 22, 2001, Moosavideen acquired the lease from
Liaghat and Naghavi.

Moosavideen was informed by his
predecessors that Lucy G. Travis, the original lessor, had four heirs to
whom they had forwarded rent payments: (1) Lucy Foote McKinstry, (2) John
Travis Garrett, (3) Bank One Texas, N.A., as guardian of the estate of
Mildred Webster Garrett, and (4) John G. Meador. On May 18, 2001,
Moosavideen sent notice to these four heirs that he intended to exercise
the option to purchase.

Having received no response, on August 6,
2001, Moosavideen again notified these four heirs that he intended to
exercise the option contract in the lease. Moosavideen also included a
warranty deed he had obtained and requested that the heirs correct any
error in the listing of the owners and their percentage of ownership. The
deed listed 15 owners and included signature blocks for each. Again, the
heirs did not respond to Moosavideen's request to exercise the
option.

Moosavideen Files Suit
and Sends Notice to More Heirs

On November 1, 2001, Moosavideen filed
suit, seeking a declaratory judgment that he had validly exercised the
option contained in the lease and was entitled to a deed transferring the
lease property to him, and for specific performance of the option. During
the course of discovery, Moosavideen determined the names of more heirs
and provided notice to them of his intent to exercise the option. However,
Moosavideen did not provide notice to the Estate of William Mosely
Garrett
(2) until October 17, 2002.

The Heirs give Moosavideen Notice
of Default

On May 15, 2002--almost one year after
Moosavadeen gave notice of his intent to exercise the purchase option to
the four heirs for whom he had addresses--and again on September 13, 2002,
the heirs notified Moosavideen that he was in default of Article X of the
lease. Specifically, their letter to him provided

Pursuant to Article X of the Lease, the
Lessee is required to perform any and all lawful requirements in regard to
the use and occupancy of the Lease Property and improvement and to at all
times conform to such requirements and perform the same in such matter as
to relieve the undersigned Lessor from any liability therefore [sic]. You
have subjected the Lessor and Lease premises to liability as a result of
the use and occupancy of the Lease Property as a service station, in a
manner inconsistent with applicable environmental
laws/regulations.

The default
provision of the lease provides as follows:

If default
be made by LESSEE in the performance of any one or more of the covenants
contained in this lease (other than the covenants to pay rents or other
monies . . .) and LESSOR shall, in writing, notify LESSEE . . .
of such default or defaults, and if such defaults are not corrected by
LESSEE . . . within one hundred and eighty (180) days from the
date of said notice, then LESSOR may forthwith declare said lease
cancelled in the manner and with the results specified in subdivision (a)
next above.

Thus, under the express terms of the
lease, Moosavideen had 180 days--until November 12, 2002--to cure the
claimed default.

Moosavideen Finally Gives Notice
to All Heirs

Moosavideen did not cure
the claimed default. Instead, on October 17, 2002, during the "cure
period," Moosavideen finally gave notice of his intent to exercise the
purchase option to the Estate of William Mosely Garrett, the last
remaining heir to whom notice had not been given. In response, the heirs
claimed that they were no longer required to transfer the property
pursuant to the option because, at the time he gave notice to all heirs,
Moosavideen was in noticed, but uncured, default.

The Trial Court's
Ruling

The case proceeded to trial before the
court. Most of the evidence was stipulated by the parties, with the
exception of testimony from the environmental experts. The trial court
made the following findings of fact, which are relevant to this
appeal:

16. At all times relevant to this cause
(but certainly from 11/09/00) Plaintiff was in material default and breach
of the Lease by virtue of the environmental contamination [in violation of
Article X of the lease].

17. On 05/15/02 and again on 09/13/02,
Defendants notified Plaintiff of his material default/breach under the
Lease by virtue of the environmental contamination (collectively the
"default notice"), and of their intent to forfeit and cancel the Lease if
such default and breach was not cured within 180 days of such default
notice, all in accordance with and as was their right under Article V(b)
of the Lease.

18. Under Article V(b) of the Lease,
Plaintiff had until November 12, 2002 to cure his Lease default and
material breach by virtue of the environmental contamination, but failed
and refused to do so.

19. The Lease was thereupon validly
terminated and canceled by Defendant for duly noticed but uncured material
breach, thereby entitling Defendants to immediate possession of the Lease
Property.

20. Plaintiff attempted to notify
Defendants of his intent to exercise the Lease Purchase Options earlier
(by letters dated May 18, 2001, August 6, 2001, August 2, 2002, and
October 14, 2002), but such notice was not effective and Plaintiff was
already in material breach of Article X of the Lease because of the
environmental contamination of which he was aware.

21. On 10/17/02, Plaintiff effectively
notified Defendants, the Lessor, of his intent to exercise the Lease
Purchase Options ("Notice of intent to exercise Lease Purchase Option"),
but Plaintiff was not entitled to exercise the rights and purchase option
granted in Article XV of the Lease by virtue of his previously noticed but
uncured material breach of Article X of the Lease.

23. The notice of address change
provision in Article XIII of the Lease did not apply to any of the
Defendants at any time relevant to this case, as none of them changed
their addresses.

The following conclusions of law are also
relevant to this appeal:

1. Plaintiff was not entitled to exercise
the rights and option granted in Article XV of the Lease so long as he was
in noticed but uncured material breach and default of the Lease under
Article X.

2. Notice of intent to exercise Lease
Purchase Option was not effective under the Lease until such notice was
received by all of the Defendants.

3. As a matter of law, Plaintiff was at
the time he acquired the lessee interest in the Lease, on constructive
notice of the Estate of William Mosely Garrett, deceased's undivided 25%
lessor ownership of the Lease and of the Lease Property, by virtue of the
probate records on file in Cause No. 96649, Harris County Texas, yet he
failed to notify the Estate of William Mosely Garrett, deceased of his
intent to exercise the Lease Purchase Option until 10/17/02, more than 4
months after Defendants' notice of Lease default and of intent to forfeit
the Lease.

5. Plaintiff was in noticed but uncured
breach of the Lease at the time he attempted to take advantage of the
Lease Purchase Option therein and, therefore, was not entitled to do
so.

Based on these findings and conclusions,
the trial court awarded the heirs $88,456.16 in damages, plus attorneys
fees, for Moosavideen's breach of the lease. The trial court also awarded
Moosavideen a $150,268.02 equitable offset against the judgment--an amount
equal to the purchase price of the lease, plus taxes Moosavideen paid on
the leased property.

WAS PURCHASE OPTION VALIDLY EXERCISED?

In issue one,
Moosavideen contends the trial court erred in concluding that he was
barred from exercising the purchase option. In issue two, Moosavideen
contends the heirs did not validly terminate the lease before he exercised
the option. Specifically, Moosavideen claims that (1) he validly exercised
the option on May 18, 2001, when he gave notice of his intent to exercise
the option to the four heirs who had been accepting rental payments, or
(2) he validly exercised the option on August 2, 2002, when he gave notice
to all of the heirs except the estate of William Mosely Garrett, because
he had given effective notice to the Garrett estate by notifying Bank One,
as he had been instructed by an attorney for the estate, or (3) he validly
exercised the option on October 14, 2002, when he finally gave notice to
all heirs, including the estate of William Mosely Garrett.

Option Exercised on May 18,
2001

We first address Moosavadeen's argument
that he validly exercised the option on May 18, 2001, almost one year
before he was placed in default by the heirs. Specifically, Moosavadeen
argues that, by giving notice to the only four heirs for whom he had
actual knowledge of addresses, he had complied with the terms of the
lease.

In pertinent part, Article XIII of the
lease provides as follows:

The present address of Miss Lucy G.
Travis, is 4103 Rossmoyne, Houston, Texas, and the present address of the
lessee, Edwin H. Wilder, is 1204 Milam St., Houston, Texas to which
addresses until changed as hereinafter provided, all notices required
shall be mailed.

In the event the address of any
party hereto is changed or desired to be changed from those stated in
the preceding paragraph . . . it shall be the duty of the party
making or desiring to make such change to notify the other party
hereto . . . giving in such
notice his new address, which notice shall likewise be given by registered
mail. (Emphasis added).

Nevertheless, the trial court found that
"[t]he notice of address change provision in Article XIII of the Lease did
not apply "to any of [the heirs] at any time relevant to this case, as
none of them changed their addresses." The trial court further found that
Moosavadeen's "[n]otice of intent to exercise Lease Purchase Option was
not effective under the Lease until such notice was received by all of the
Defendants."

Moosavadeen argues that, under the
express terms of the lease, lessees who wished to changed their address
from that given in the lease--4103 Rossmoyne--were required to give him
notice of the change; he also argues that the heirs stipulated that they
had not provided such notice. We agree.

Under the lease, any lessor wishing to
change his address for receiving notice from 4103 Rossmoyne was required
to notify the lessee notice of the change by registered mail. The trial
court erroneously concluded that Article XIII did not apply because none
of the heirs had changed his address. It is irrelevant that the heirs had
not changed the addresses at which they resided. At issue is the lessors'
duty in the event he or she wished to change the address for receiving
notices under the lease from 4103 Rossmoyne to some other
address.

The undisputed evidence shows that on May
18, 2001, Moosavadeen gave notice to all the heirs for whom he had an
address, and that the remaining heirs had never changed their addresses
for receiving notice as required by the lease. Because Moosavadeen's
failure to provide notice to the remaining heirs was brought about by the
conduct of those heirs through their failure to comply with Article XIII
of the lease, Moosavadeen's failure to give notice to them separately is
excused. See Jones v. Gibbs, 130 S.W.2d 265, 272 (Tex. 1939)
(stating that "failure of the optionee to strictly comply with the terms
or conditions of the option will be excused when such failure is brought
about by the conduct of the optionor."); see also Tiffany Dev. Corp.
v. Cangelosi, 514 S.W.2d 321, 325 (Tex. Civ. App--Houston [1st Dist.]
1974, no writ) (holding same).

Because some heirs did not comply with
Article XIII of the lease, Moosavideen's notice of intent to exercise the
purchase option was complete when he gave notice on May 18, 2001 to the
only four heirs for whom he had either received notice or had actual
knowledge of their addresses. Thus, Moosavideen validly exercised the
option to purchase almost one year before he was given notice of his
default under the lease.

Condition
Precedent

Even if we were to hold that Moosavideen
had not validly exercised the option before he was given notice of
default, we would nonetheless conclude that he was entitled to exercise
the option any time before the contract was terminated because his
compliance with the other terms of the lease was not a condition precedent
to his right to exercise the lease purchase option.

Moosavideen claims that his right to
exercise the purchase option was not conditioned on his compliance with
the other clauses of the lease. He further argues that because the
contract had not been terminated by the time he first attempted to
exercise the option, the heirs should be required to specifically perform
the option contract by transferring the property to him. The heirs respond
that Moosavideen's right to exercise the option was conditioned on his
compliance with the other terms of the lease, and that once they notified
him that they intended to terminate the lease [after a 180-day cure
period], he no longer had the right to exercise the option to purchase.
The issue presented to the court is thus: Can a lessee exercise an
option-to-purchase contract in a lease even though he is in noticed, but
uncured, default of other terms of the lease? Put more simply, could
Moosavideen exercise the option contract during the 180-day cure
period?

We first consider whether Moosavideen's
compliance with the terms of the lease is a condition precedent to his
right to exercise the purchase option. In Cook v. Young, 269
S.W.2d 457, 458 (Tex. Civ. App.--Fort Worth 1954, no writ), a lessee filed
suit, seeking specific performance of an option-to-purchase clause in a
lease contract. The trial court granted summary judgment in the lessee's
favor. Id. On appeal, the lessor argued that the summary judgment
was improperly granted because there was a fact issue regarding whether
the lessee had complied with the terms of the lease by paying all water,
gas, and other utility bills accruing on the leased property. Id.
at 460. The court of appeals held that compliance with the terms of the
lease was not a condition precedent to the optionee's right to exercise
the purchase option. Id. "While we find such a provision in the
lease contract, we do not find it in that part of the instrument
containing the option to purchase. The option is unconditionally granted
and there is no requirement creating any condition precedent or otherwise
limiting the right to exercise the option." Id.

In Giblin v. Sudduth, 300 S.W.2d
330, 332 (Tex. Civ. App.--Austin 1957, writ ref'd n.r.e.), the following
purchase option was included in the contract of sale of an adjoining tract
of land:

The seller agrees to give the purchaser
an option on the acre tract joining the property they are buying from the
seller on the east; this option will be for 5 years and the purchasers can
take up their option at any time within 5 years from the date by pay [sic]
the seller $1500.00 in cash. The purchaser agrees to pay a yearly rental
of $10.00.

The purchaser brought an action for
specific performance of the option contract. Id. at 331. The
court of appeals held that the purchaser's failure to pay the annual
rental amount did not operate to bar the action for specific performance.
Id. at 334. "The option was not conditioned upon the payment of
the annual rental, the option was for five years and the purchasers were
allowed to take up their option at any time within five years by paying
the seller $1500.00 in cash." Id.

As in Cook and Giblin,
the option clause in this lease agreement is not conditioned on the
lessee's performance of the terms of the lease. The option provides that
"[i]n consideration of the amount of the rental payments hereunder, paid
and to be paid, and of the other valuable considerations inuring to the
benefit of the LESSOR hereunder, the LESSOR hereby gives and grants to the
LESSEE, and LESSEE shall have an optional right at any time within a
period of the term of this lease, to purchase the interest of Lessor in
and to the demised premises . . ." (Emphasis added.) While the
option provision recites the rental payments as consideration, it does not
condition the right to exercise the option on compliance with any of the
other terms of the lease. Instead, the language clearly states that the
option can be exercised "at any time within a period of the term of this
lease." It is undisputed that, at the time Moosavideen was able to finally
give notice to all of the heirs, on October 14, 2002, rental payments were
current, the lease had not yet terminated, and could not be terminated
until November 12, 2002, when the "cure" period expired.

Had the parties wished to create a
condition precedent to the lessee's right to exercise the option agreement
conditioned on the lessee's compliance with the terms of the lease, they
could have done so. For example, in Tidwell v. Lange, 531 S.W.2d
384, 385 (Tex. Civ. App.--Waco 1975, no writ), the option to purchase in
the lease read as follows:

[P]rovided that lessee while not in
default hereunder and during the final month of this lease term, is
hereby given the privilege of purchasing said premises for the sum of
$26,000 ($2,600 cash down payment and a note for the balance payable in
monthly installments at 8% interest for a 15 year period). (Emphasis
added.)

At the time he gave notice of his intent
to exercise the purchase option, the lessee was two months in default on
the monthly lease rental payments. Id. The court held that the
lessee's notice of his intent to exercise the option was ineffective
because, contrary to the terms of the option, the lessee was in default
[due to nonpayment of the lease] at the time he attempted to exercise the
option. Id. at 386. Put another way, the lessee's right to
exercise the option to purchase was specifically conditioned on the fact
that he not be in default at the time he exercised the option. In
contrast, there in no language in the present lease that requires the
lessee to free from default before exercising the option
contract.

Another instructive case is Tye v.
Apperson, 689 S.W.2d 320, 321 (Tex. App.--Fort Worth 1985, writ ref'd
n.r.e). In Tye, the purchase option provided:

[T]his Option Agreement is conditioned
upon the true and full performance of all of the Lessee's obligations
under the terms and conditions of that Lease Agreement. Should [lessee]
default or otherwise be in violation or breach of any of the terms and
conditions of that Lease Agreement, then, at Optionor's election, this
Option Agreement shall lapse and be null and void for all
purposes.

Id. The lessee attempted to
exercise the purchase option, and the lessor responded that the option had
lapsed. The court noted as follows:

The right to terminate the grant of the
option . . . is not self-executing. The grant of the option does not
self-destruct even though the lease terms are breached; before the option
lapses, . . . the optionors, must have elected to terminate the option and
agreement and declare it null and void for all practical
purposes.

Id. at 323. The court held that
the lessor did not declare the option agreement to be lapsed and terminate
the contract until after the lessee exercised the option, therefore the
lessee had properly exercised his right under the option agreement and the
lessee was entitled to specific performance. Id. at 323-24. Thus,
even when an option contract requires compliance with the terms of the
lease, if termination of the contract is at the option of lessor, and the
lessor has not declared the option lapsed, the lessee may exercise the
purchase option. But, as we stated earlier, the option contract in this
case does not condition the right to exercise the option on the lessee's
compliance with the terms of the lease.

Summary

In sum, we hold that the heirs could not
prevent Moosavideen from exercising the option to purchase by claiming
that he had not given each of them notice, when, in fact, the heirs had
not given Moosavideen any address other than 4103 Rossmoyne, as required
by Article XIII of the lease. Therefore, Moosavideen validly exercised the
lease purchase option on May 18, 2001, when he gave notice to the four
heirs for whom he had actual knowledge of their addresses.

Additionally, the parties could have, but
did not, condition the lessee's right to exercise the purchase option on
the lessee's not being in default of the lease. Because Moosavideen's
compliance with Article X of the lease was not a condition precedent to
his right to exercise the purchase option, the trial court erred in
finding that "[Moosavideen] was not entitled to exercise the rights and
purchase option granted in Article XV of the Lease by virtue of his
previously notice but uncured material breach of Article X of the Lease."

Moosavideen validly exercised the
purchase option before it terminated. On that date--May 18, 2001--the
purchase option was converted into a contract of purchase and sale.
See Sinclair Refining Co. v. Albritton, 218 S.W.2d 185, 188 (Tex.
1949) ("[T]he act of delivering the notice [of intent to exercise purchase
option], if performed within the time limit and not otherwise invalid,
forthwith converts the [purchase] option into a contract of purchase and
sale.").

Accordingly, we sustain issues one and
two. We reverse the portion of the judgment declaring that Moosavideen was
not entitled to exercise the purchase option.

DAMAGES FOR BREACH
OF THE LEASE

In issue three, Moosavideen contends that
the trial court erred by awarding damages against him for breaching the
lease. Specifically, Moosavideen contends that the heirs did not incur
these damages until after he exercised the purchase option.

The trial court judgment provided that
the heirs "have and recover damages against Moosavideen for breach of the
Lease contract in the amount of $88, 456.16 for cost to assess the
environmental contamination of the Lease Property." The undisputed
evidence shows that the heirs incurred these damages in February and
October of 2002. However, we have already held that Moosavadeen validly
exercised the lease purchase option on May 18, 2001, before these damages
were incurred. On that date, the option contract was converted to a
purchase and sale agreement and the landlord-tenant relationship ceased.
Thus, the heirs' damages were not caused by Moosavideen's breach of the
contract. However, we do not hold that Moosavideen could never be liable
to the heirs for breaching Article X of the lease simply because he
purchased the property.

Accordingly, we sustain issue
three. We reverse the portion of the judgment awarding
breach of contract damages because the damages were not caused by
Moosavideen's breach.

EQUITABLE
OFFSET

In their cross-appeal, the heirs argue
that the trial court erred by awarding Moosavideen an equitable offset
against their judgment for the amounts that he spent to acquire the lease
and on taxes. Moosavideen agrees that, if the Court holds that he validly
exercised the purchase option, the equitable offset should be reversed.
Accordingly, because we have reversed the damages awarded to the heirs and
declared that Moosavideen validly exercised the purchase option, we also
reverse the equitable offset that the trial court awarded him.
ATTORNEY'S FEES AND COSTS

The trial court also awarded the heirs
attorney's fees pursuant to Tex. Civ. Prac. & Rem. Code Ann. § 37.009
(Vernon Supp. 2008), which allows the trial court to award attorney's fees
and costs that are "equitable and just" in a declaratory judgment action.
Moosavideen argues that we should reverse the attorney's fees and costs
awarded to the heirs and render an award of attorney's fees and costs to
him.

It is appropriate to award attorneys'
fees to the prevailing party in a declaratory judgment action if the trial
court believes such fees to be reasonable and necessary and the award of
such fees to be equitable and just. State Farm Lloyd's v. Borum,
53 S.W.3d 877, 894 (Tex. App.--Dallas 2001, no pet.). However, the trial
court is not required to award attorney's fees to the prevailing party in
a declaratory judgment, and, indeed, may award attorney's fees to the
nonprevailing party. Id. Because we have reversed the declaratory
judgment, and the judgment does not indicate whether the award of
attorney's fees and costs to the heirs was made because they were the
prevailing party at trial, we reverse the award of attorney's fees and
costs and remand both parties' claims for the same to the trial court for
its reconsideration in light of this opinion. See id. at
894-95.

CONCLUSION

We reverse the declaratory judgment in
favor of the heirs and render judgment declaring that Moosavideen is
entitled to specific performance to exercise the purchase option granted
in Article XV of the lease. We also reverse the portion of the judgment
awarding the heirs $88,456.16 in damages against Moosavideen on their
breach of contract claim and render judgment that the heirs take nothing
on such claim. We also reverse the portion of the judgment granting an
equitable offset to Moosavideen and render judgment that he take nothing
on such claim. Finally, we reverse the award of attorney's fees and costs
to the heirs and remand both parties' claims for attorney's fees and costs
to the trial court for further proceedings.

Sam Nuchia

Justice

Panel consists of Justices Nuchia,
Jennings, and Bland.

1. ""

2.