COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-08-300-CV
WOOD CARE CENTERS, INC. APPELLANT
V.
EVANGEL TEMPLE ASSEMBLY OF GOD APPELLEE
OF WICHITA FALLS, TEXAS
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FROM THE 78TH DISTRICT COURT OF WICHITA COUNTY
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OPINION
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I. Introduction
This breach of contract case concerns a facility that Appellant Wood Care
Centers, Inc. (“Wood Care”) leased to Appellee Evangel Temple Assembly of
God of Wichita Falls, Texas (“Evangel Temple”) in fall 2005 for the immediate
purpose of housing Hurricane Katrina evacuees. Evangel Temple terminated the
parties’ lease agreement (the “Agreement”) after the last hurricane evacuees
left the facility. Wood Care later sued Evangel Temple and argued Evangel
Temple was obligated to find other uses for the facility before terminating the
Agreement. The trial court entered a take-nothing judgment against Wood Care
after a bench trial.
In two issues, Wood Care argues the trial court improperly considered
parol evidence in its interpretation of the Agreement and the evidence is legally
and factually insufficient to support the trial court’s conclusion that Evangel
Temple did not breach the Agreement. We affirm.
II. Factual and procedural background
Mike Wood testified for Wood Care at trial. He said Wood Care originally
owned and operated as many as eleven nursing homes. Wood Care previously
sold its other nursing home facilities but was unable to sell the facility at issue
because it was closed and no longer licensed to operate as a nursing home.
After Hurricane Katrina made landfall on August 29, 2005, Evangel
Temple contacted Wood Care to lease the facility to assist Katrina evacuees.
Wood testified that after the parties reached an initial agreement, Evangel
Temple retained an attorney to finalize the Agreement. Wood testified Evangel
Temple’s attorney drafted the document, but Evangel Temple’s business
administrator said Wood provided the initial draft to Evangel Temple.
2
The parties exchanged several drafts of the proposed agreement and
signed the final version of the twenty-year lease on September 6, 2005.
Evangel Temple’s monthly lease payment was $10,997, although Wood Care
made a charitable contribution to Evangel Temple during the initial term in the
form of a reduced monthly lease payment. The Agreement contained a “ten-
percent termination clause” that stated:
Tenant, however, shall have the option of terminating this lease at
any time by giving Landlord written notice of its election to do so
and payment to Landlord of a sum of money equal to 10% of the
balance of the rental payments then owed under the terms of this
lease.
The Agreement also contained a “tax-exemption termination clause” that
stated:
Both parties agree to cooperate with each other to achieve any
available property tax exemption. In the event a property tax
exemption for the leased premises is denied or suspended, Tenant
shall have the option to terminate this lease. If, notwithstanding,
the denial of such property tax exemption, Tenant elects to
continue the lease, then Tenant shall be responsible for the
payment of all property taxes and assessments and shall timely pay
such taxes or assessments.
The original draft of the Agreement did not include the tax-exemption
termination clause. Wood testified that although he did not specifically
remember, he thought Evangel Temple added the tax-exemption termination
clause because a church is traditionally tax-exempt. Wood also testified he
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understood Evangel Temple would initially use the facility to house Hurricane
Katrina evacuees.
After signing the Agreement, Evangel Temple sought a tax exemption for
the facility, stating in the application that the primary use was “to house
victims of natural disasters.” The appraisal district granted the exemption and
informed Evangel Temple in writing that if the use ever changed, the church
must notify the appraisal district.
For the first nine months, Evangel Temple paid reduced rental payments
to Wood Care while receiving financial assistance from FEMA, but the last
evacuees left the facility in approximately May 2006. In late June 2006,
several Evangel Temple representatives met with Wood and gave Wood Care
notice that Evangel Temple would soon move out of the facility. Evangel
Temple sent a termination letter to Wood Care on June 30, 2006, and Wood
Care sent a response the same day making demand for payment of ten percent
of the remaining lease payments under the ten-percent termination clause.
Evangel Temple vacated the facility in approximately July 2006.
According to Wood, Wood Care was unable to sell or lease the facility after
Evangel Temple vacated, and he testified Wood Care’s damages totaled
$256,279.90 in lost rent, ad valorem taxes, insurance premiums, and
maintenance costs. Wood testified he believes Evangel Temple breached the
4
Agreement because it had a duty to implement other tax-exempt uses at the
facility and could have easily done so.
Kile Bateman testified that he is the lead pastor of Evangel Temple and
that Chad Sykes was the business administrator, outreach pastor, and director
of “Called To Compassion.” Bateman testified that Evangel Temple had a few
tax-exempt properties and that, typically, tax exemptions are available if
property is used for non-profit purposes. Evangel Temple’s tax-exempt
properties included undeveloped property next to the church and a facility that
housed Masters Commission students, drug and alcohol counseling, a college
and career ministry, and flood victims.
Bateman testified that the Agreement did not limit Evangel Temple’s use
of the facility and that the parties contemplated future tax-exempt uses for the
facility when negotiating the Agreement. 1 However, Bateman testified that he
understood Evangel Temple’s right to terminate the Agreement was dependent
on Evangel Temple having a program in place that could operate in a self-
sustaining manner at the facility. Bateman believed that if the facility lost its
tax exemption, Evangel Temple had a choice to terminate the Agreement
1
Sykes gave similar testimony but added that Evangel Temple was
always aware the evacuees would eventually go back home.
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without liability or continue with the Agreement in the hope that something
arose in the future.
Bateman agreed it would have been possible to use the facility for the
Masters Commission ministry, “very limited” worship services, or bible study
groups. He also said Evangel Temple “could have” submitted a new application
for tax-exempt status citing “religious purposes” as the primary use of the
facility and conducted some type of activity on the property that would have
allowed the property to remain tax-exempt. Although Bateman agreed that
“[a]nything is possible,” he testified that “not everything is reasonable.”
Bateman testified that if there were another possible use for the facility,
Evangel Temple would have maintained the tax-exempt status, but that there
were no other reasonable uses for the facility. He explained that Evangel
Temple considered using the property for a children’s home, a women’s shelter,
and a Sudanese refugee center. After the lawsuit was filed, Evangel Temple
considered using the facility to house at-risk teenagers or as a Life Challenge
ministry. Ultimately, Bateman believed Evangel Temple did not have any
reasonable uses available for the facility. He testified he believed Evangel
Temple did not breach the Agreement because Evangel Temple did not have
any needs that were not being fulfilled by another facility and because Evangel
Temple did all it could to locate another tax-exempt use.
6
The trial court conducted a bench trial over two days in January and April
2008 and rendered a take-nothing judgment against Wood Care on June 13,
2008. Wood Care requested and the trial court signed findings of fact and
conclusions of law.
III. The Trial Court’s Interpretation of the Agreement
A. Applicable law
When construing contracts and other written instruments, our primary
concern is to ascertain the true intent of the parties as expressed in the
instrument. NP Anderson Cotton Exch., L.P. v. Potter, 230 S.W.3d 457, 463
(Tex. App.—Fort Worth 2007, no pet.). We must examine and consider the
entire contract in an effort to harmonize and give effect to all provisions so that
none are rendered meaningless. Id.; see also J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223, 229 (Tex. 2003). “We construe contracts ‘from a utilitarian
standpoint bearing in mind the particular business activity sought to be served’
and ‘will avoid when possible and proper a construction which is unreasonable,
inequitable, and oppressive.’” Frost Nat’l Bank v. L & F Dist., Ltd., 165 S.W.3d
310, 312 (Tex. 2005) (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527,
530 (Tex.1987)).
Lack of clarity or a disagreement among the parties does not necessarily
create an ambiguity. Universal Health Servs., Inc. v. Renaissance Women’s
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Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003). Rather, whether “a contract
is ambiguous is a question of law that must be decided by examining the
contract as a whole in light of the circumstances present when the contract
was entered.” Id. “If, after the pertinent rules of construction are applied, the
contract can be given a definite or certain legal meaning, it is unambiguous and
we construe it as a matter of law.” Frost Nat’l Bank, 165 S.W.3d at 312
(citing Webster, 128 S.W.3d at 229).
B. Conflicting Termination Clauses
Wood Care contends in part of its first issue that the trial court improperly
considered parol evidence because the conflict between the tax-exemption
termination clause and the ten-percent termination clause could be resolved by
applying rules of contract construction and did not create an ambiguity. 2 In
response, Evangel Temple argues the conflict between the tax-exemption
2
Wood Care states in its brief that it will “assume” that the question
of terminating the Agreement for loss of tax-exempt status presents a patent
ambiguity, but then states that the rules of construction resolve the ambiguity,
so the “Agreement is not rendered ‘ambiguous’ in the sense that the Court may
consider extrinsic evidence” to determine its meaning. See RSI Int’l, Inc. v.
CTC Transp., Inc., 291 S.W.3d 104, 106 (Tex. App.—Fort Worth 2009, no
pet.) (“A contract is ambiguous only if, after the application of established rules
of construction, an agreement is still susceptible to more than one reasonable
meaning.”).
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termination clause and the ten-percent termination clause created an ambiguity
and the trial court properly considered parol evidence.
The Agreement included both a ten-percent termination clause and a tax-
exemption termination clause. 3 The ten-percent termination clause required
Evangel Temple to pay Wood Care “10% of the balance of the rental payments
then owed under the terms of [the Agreement]” if Evangel Temple terminated
the Agreement before the twenty-year lease expired. The tax-exemption
termination clause, however, allowed Evangel Temple to terminate the
Agreement without liability “[i]n the event a property tax exemption for the
leased premises [was] denied or suspended.”
Wood Care correctly asserts that, if possible, the Agreement must be
construed in a way that neither the ten-percent termination clause nor the tax-
exemption termination clause are rendered meaningless. See Potter, 230
S.W.3d at 463 (stating courts must examine and consider the entire contract
“in an effort to harmonize and give effect to all provisions so that none are
rendered meaningless”). Interpreting the Agreement to require Evangel Temple
to pay a ten-percent penalty for terminating the Agreement when the property
was no longer tax-exempt renders the tax-exemption termination clause
3
The Agreement had other termination clauses that are not relevant to
this appeal.
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meaningless. Therefore, the tax-exemption termination clause controls over the
ten-percent termination clause in the event the property loses its tax-exempt
status, as it did in this case, and there is no ambiguity. See RSI Int’l, Inc., 291
S.W.3d at 106 (stating contract ambiguous only if still susceptible to more than
one reasonable meaning after applying rules of construction).
Because the conflict between the ten-percent termination clause and the
tax-exemption termination clause does not create an ambiguity, the trial court
erred by admitting parol evidence on this issue. See Carbona v. CH Med., Inc.,
266 S.W.3d 675, 681 (Tex. App.—Dallas 2008, no pet.) (recognizing “courts
do not consider extrinsic evidence in interpreting [an] agreement” when it is not
ambiguous). But Wood Care has not shown the trial court’s consideration of
parol evidence led to an improper judgment or prevented Wood Care from
properly presenting the case to this court. See Tex. R. App. P. 44.1(a). The
trial court admitted only brief testimony concerning the parties’ intent for the
tax-exemption termination clause to control over the ten-percent termination
clause. 4 Also, the trial court’s ultimate interpretation of the Agreement, that
4
Bateman testified he understood that if Evangel Temple lost its exempt
status, the church had a choice to “remove [it]self from [the] property” or
“continue to make the payments and hope something comes along,” and Sykes
testified he understood the tax-exemption termination clause meant Evangel
Temple could terminate the Agreement without liability if the tax-exemption
was not initially granted or subsequently sustained.
10
Evangel Temple could terminate the Agreement without a ten-percent penalty
if the facility was no longer tax-exempt, was correct. Therefore, the trial
court’s erroneous consideration of parol evidence does not constitute reversible
error. See Sadoskas v. Sadoskas, No. 13-02-216-CV, 2003 WL 21666115,
at *2 (Tex. App.—Corpus Christi July 17, 2003, no pet.) (mem. op.) (finding
no reversible error in admitting a party’s subjective intent testimony where “the
trial court’s final ruling regarding the contract was correct”); see also Orix
Credit Alliance, Inc. v. Omnibank, N.A., 858 S.W.2d 586, 594 (Tex.
App.—Houston [14th Dist.] 1993, no writ) (holding admission of parol evidence
of intent of parties was irrelevant because the agreement alone showed
defendant was entitled to judgment as a matter of law). We therefore overrule
this portion of Wood Care’s first issue.
C. The Tax-Exemption Termination Clause
In the remainder of its first issue, Wood Care contends the trial court
incorrectly interpreted the tax-exemption termination clause. Specifically, Wood
Care argues the trial court erred by (1) considering parol evidence to interpret
the tax-exemption termination clause and (2) interpreting the tax-exemption
termination clause in a manner that permitted Evangel Temple to cause the
facility to lose its tax exemption and then terminate the Agreement without
liability because the facility was no longer tax-exempt.
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We do not agree the trial court improperly considered parol evidence to
interpret the tax-exemption termination clause. As discussed above, the trial
court admitted parol evidence of the parties’ intentions, but the parol evidence
all concerned the conflict between the ten-percent termination clause and the
tax-exemption termination clause, not the meaning of the tax-exemption
termination clause itself. Thus, the trial court did not consider parol evidence
when it interpreted the tax-exemption termination clause. We overrule this
portion of Wood Care’s first issue.
Wood Care also argues the trial court incorrectly interpreted the tax-
exemption termination clause to permit Evangel Temple, through its own
conduct, to cause the facility to lose its tax exemption and then use the loss
of tax-exempt status to terminate the Agreement without liability. To support
its contention, Wood Care cites several cases for the proposition that Texas law
generally prevents a party from invoking a termination clause if that party brings
about the circumstances giving rise to the right to terminate. See Sanderson
v. Sanderson, 109 S.W.2d 744, 749 (Tex. Comm’n App. 1937, opinion
adopted); II Deerfield Ltd. P’ship v. Henry Bldg., Inc., 41 S.W.3d 259, 265–66
(Tex. App.—San Antonio 2001, pet. denied); Heritage Life Ins. Co. v. Heritage
Group Holding Corp., 751 S.W.2d 229, 234 (Tex. App.—Dallas 1988, writ
denied); Rich v. McMullan, 506 S.W.2d 745, 747 (Tex. Civ. App.—San Antonio
12
1974, writ ref’d n.r.e.); Sargent v. Highlite Broadcasting Co., 466 S.W.2d 866,
867 (Tex. Civ. App.–Austin 1971, no writ). These cases are distinguishable,
however, because they each involved circumstances where the breaching party
either wilfully refused to perform its own obligations under the contract or made
performance by the other party impossible. See Sanderson, 109 S.W.2d at
749; II Deerfield Ltd. P’ship, 41 S.W.3d at 265–66; Heritage Life Ins. Co., 751
S.W.2d at 234; Rich, 506 S.W.2d at 747; Sargent, 466 S.W.2d at 867. In this
case, the trial court heard evidence that Evangel Temple took steps to find
other uses for the property before it terminated the Agreement. Further, the
sufficiency of Evangel Temple’s effort to maintain the tax exemption presents
an evidentiary issue rather than an issue of contract construction. See, e.g.,
Sargent, 466 S.W.2d at 867 (holding a fact question is present where the
evidence showed the seller’s president refused to execute the documents
necessary to obtain FCC approval for the sale). We overrule the remainder of
Wood Care’s first issue. 5
5
We will address whether Evangel Temple’s inability to implement a
subsequent tax-exempt use for the facility constitutes a breach of contract in
our analysis of Wood Care’s second issue.
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IV. Legal and Factual Sufficiency
In its second issue, Wood Care challenges the legal and factual
sufficiency of the trial court’s findings that Evangel Temple did not breach the
Agreement. Wood Care argues the evidence at trial conclusively established
that Evangel Temple breached the Agreement and that the trial court’s finding
to the contrary is against the great weight and preponderance of the evidence.
Wood Care specifically challenges the sufficiency of the evidence
supporting the following findings of fact:
(16) After considering all the evidence presented at trial, on
[Wood Care’s] claims of Breach of Contract and other related
allegations concerning the Agreement, [Wood Care] failed to prove
by a preponderance of the evidence that [Evangel Temple] breached
the Agreement.
(18) [Evangel Temple] made reasonable and good faith efforts to
find another use for the premises that would satisfy the legal
requirement that the property was being used for a tax exempt
purpose.
Wood Care also challenges the following conclusions of law:
(6) Under the facts of this case, termination of the Agreement by
[Evangel Temple] without further liability is allowed for the loss of
the tax exempt status of the Property;
(7) Termination by [Evangel Temple] under the facts of this case
does not trigger the 10% termination clause in the Agreement;
(10) [Evangel Temple] did not breach the Agreement by
terminating said Agreement due to loss of tax exempt status;
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(11) All relief requested by [Wood Care] should be denied.
A. Standard of Review
Findings of fact entered in a case tried to the court have the same force
and dignity as a jury’s answers to jury questions. Anderson v. City of Seven
Points, 806 S.W.2d 791, 794 (Tex. 1991). The trial court’s findings of fact are
reviewable for legal and factual sufficiency of the evidence to support them by
the same standards that are applied in reviewing evidence supporting a jury’s
answer. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Catalina v. Blasdel,
881 S.W.2d 295, 297 (Tex. 1994). Conclusions of law may not be challenged
for factual sufficiency, but they may be reviewed to determine their correctness
based upon the facts. AMX Enters., L.L.P. v. Master Realty Corp., 283 S.W.3d
506, 519 (Tex. App.—Fort Worth 2009, no pet.) (op. on reh’g); Dominey v.
Unknown Heirs & Legal Representatives of Lokomski, 172 S.W.3d 67, 71 (Tex.
App.—Fort Worth 2005, no pet.).
We may sustain a legal sufficiency challenge only when (1) the record
discloses a complete absence of evidence of a vital fact; (2) the court is barred
by rules of law or of evidence from giving weight to the only evidence offered
to prove a vital fact; (3) the evidence offered to prove a vital fact is no more
than a mere scintilla; or (4) the evidence establishes conclusively the opposite
of a vital fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334
15
(Tex. 1998), cert. denied, 526 U.S. 1040 (1999); Robert W. Calvert, "No
Evidence" and "Insufficient Evidence" Points of Error, 38 Tex. L. Rev. 361,
362–63 (1960). In determining whether there is legally sufficient evidence to
support the finding under review, we must consider evidence favorable to the
finding if a reasonable factfinder could and disregard evidence contrary to the
finding unless a reasonable factfinder could not. Cent. Ready Mix Concrete Co.
v. Islas, 228 S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168
S.W.3d 802, 807, 827 (Tex. 2005).
When reviewing an assertion that the evidence is factually insufficient to
support a finding, we set aside the finding only if, after considering and
weighing all of the evidence in the record pertinent to that finding, we
determine that the evidence supporting the finding is so weak, or so contrary
to the overwhelming weight of all the evidence, that the answer should be set
aside and a new trial ordered. Pool v. Ford Motor Co., 715 S.W.2d 629, 635
(Tex. 1986) (op. on reh’g); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965);
In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951).
B. Analysis
To prevail on a breach of contract claim, a party must establish the
following elements: (1) the existence of a valid contract; (2) the plaintiff
performed or tendered performance; (3) the defendant breached the contract;
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and (4) the plaintiff sustained damages as a result of the defendant’s breach.
Harris v. Am. Prot. Ins. Co., 158 S.W.3d 614, 622–23 (Tex. App.—Fort Worth
2005, no pet.).
Wood Care correctly asserts that the essential question in this case is
whether Evangel Temple breached the provision of the Agreement that states:
“Both parties agree to cooperate with each other to achieve any available
property tax exemption.” Wood Care argues the evidence conclusively
established Evangel Temple’s breach of this provision because Bateman
“admitted” that it would have been “possible” to have the Master’s Commission
education program, 6 worship services, or a bible study moved to the facility.
Wood Care contends Bateman’s “admission” is the type the trial court
could not disregard. However, Bateman’s alleged “admission” is contradicted
by his other testimony that the Master’s Commission and its leadership moved
to the Houston area in January 2006 before the evacuees left the facility in
May 2006. Bateman’s testimony is also contradicted by Bateman’s and
Sykes’s testimony that the church did not have a bible study group it could
send to the facility, that any use of the facility for worship services would be
6
Bateman confirmed it was “hypothetically” possible to run the Masters
Commission program at the building, but he testified it was not reasonable to
do so.
17
“very limited,” and that Evangel Temple did not have any programs that needed
additional space. On balance, we do not believe that Bateman’s “admission”
was the type that prevents reasonable people from differing in their
conclusions. See City of Keller, 168 S.W.3d at 815–16. 7 Thus, we do not
believe Bateman’s testimony conclusively established that Evangel Temple
breached the Agreement.
Other evidence supports the trial court’s findings. Sykes described the
facility’s limited uses and how its layout prevented Evangel Temple from using
the facility for just any purpose. When asked about Wood Care’s suggestion
of a bible study group at the facility, Sykes explained that a bible study would
not be suitable there because the facility’s primary use was a “residential-type
ministry.” Sykes stated that the facility was “not a gathering place, . . . or
something that you could just throw something in[;] it had a special purpose.”
Sykes testified that the facility was not suitable for Evangel Temple’s other
charitable project, “Angel Food ministry,” because it involved receiving and
storing large food pallets that were delivered by a semi-trailer truck.
7
Reviewing courts “cannot disregard undisputed evidence that allows
of only one logical inference” because “reasonable jurors can reach only one
conclusion from it.” City of Keller, 168 S.W.3d at 814 (citations omitted).
However, ”[e]vidence is conclusive only if reasonable people could not differ in
their conclusions, a matter that depends on the facts of each case.” Id. at 816
(citations omitted).
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Although Bateman agreed Evangel Temple “could have” submitted
another exemption application for the facility after the evacuees left, he also
testified about Evangel Temple’s many efforts to find another use and its
resulting inability to finalize an agreement with any of the potential
organizations for any of the potential tax-exempt uses. Evangel Temple’s
efforts to find other tax-exempt uses for the facility included meeting with CPS
about an interim facility for children, speaking with the county’s veteran’s office
about a veteran’s home, communicating with Dallas representatives about a
Sudanese refugee facility, speaking with a representative about an annex for
women, consulting with a director of the Dallas Dream Center about a place for
at-risk teenagers, and providing a tour of the building for a prison-aftercare
expert. Concerning Evangel Temple’s cooperation with Wood Care to achieve
an exemption, Sykes testified that Wood Care suggested a youth bible study
group be placed at the vacant building. Sykes stated that Wood Care did not
suggest any other uses and did not make any further attempt to cooperate after
the evacuees left the facility. Bateman stated that he did not personally have
any conversations with Wood Care about a continued use of the property.
The evidence at trial supported the trial court’s findings of fact that
Evangel Temple did not breach the Agreement and that it “made reasonable and
good faith efforts” to find another use for the facility. The trial court’s findings
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are not negated by the evidence; the evidence at trial established that Evangel
Temple tried to cooperate by pursuing other tax-exempt uses but could not find
a tax-exempt use that fit the facility’s layout and size. Furthermore, the trial
court drew the correct legal conclusions from the facts that Evangel Temple
could terminate the Agreement without further liability under the facts of this
case, that Evangel Temple’s termination did not trigger the ten-percent
termination clause, that Evangel Temple did not breach the Agreement, and that
Wood Care’s requested relief should be denied.
Based on the foregoing, after reviewing all of the evidence in the light
most favorable to the trial court’s findings, crediting favorable evidence if a
reasonable factfinder could, and disregarding contrary evidence unless a
reasonable factfinder could not, we hold that there is legally sufficient evidence
to support the trial court’s findings that Evangel Temple did not breach the
Agreement. Likewise, after considering and weighing all of the evidence
pertinent to the trial court’s findings, we cannot say that the evidence
supporting the trial court’s findings is so weak or contrary to the overwhelming
weight of all the evidence that it should be set aside and a new trial ordered.
We overrule Wood Care’s second issue.
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V. Conclusion
Having overruled both of Wood Care’s issues, we affirm the trial court’s
judgment.
ANNE GARDNER
JUSTICE
PANEL: DAUPHINOT, GARDNER, and MEIER, JJ.
DELIVERED: February 18, 2010
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