                       COURT OF APPEALS
                        SECOND DISTRICT OF TEXAS
                             FORT WORTH


                              NO. 2-08-321-CV


FWT, INC.                                                          APPELLANT

                                      V.

HASKIN WALLACE MASON                                                 APPELLEE
PROPERTY MANAGEMENT, L.L.P.

                                  ------------

        FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY

                                  ------------

                       OPINION ON REHEARING

                                  ------------

     Appellant FWT, Inc. filed a motion for rehearing and en banc

reconsideration of our opinion issued on August 27, 2009. We deny FWT’s

motion for rehearing and en banc reconsideration, withdraw our opinion and

judgment dated August 27, 2009, and substitute the following.

                               I. INTRODUCTION

     Texas law is clear that a right of first refusal empowers its holder with a

preferential right to purchase the subject property on the same terms offered
by or to a bona fide purchaser. Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d

640, 644 (Tex. 1996). What is less clear is whether the holder of a preferential

right who desires to exercise that right can be required under certain

circumstances to purchase assets that are bundled with the subject property.

This is the primary issue at the center of a dispute between FWT and Appellee

Haskin Wallace Mason Property Management, L.L.P. (“Haskin Wallace”). We

will affirm the trial court’s orders denying FWT’s motion for summary judgment,

granting Haskin Wallace’s motion for summary judgment, and overruling FWT’s

objections and special exceptions to Haskin Wallace’s motion for summary

judgment and response.

             II. U NDISPUTED F ACTUAL AND P ROCEDURAL B ACKGROUND

      Greg Haskin, Russell Wallace, and Jim Mason are the owners of Haskin

Wallace. In 1990, they formed Texas Galvanizing, Inc. Texas Galvanizing is

located in Hurst and operates a “hot-dip” galvanizing plant. 1

      In 1997, FWT sold to Haskin Wallace approximately six acres of

undeveloped real property (“the Property”) located in Kennedale and adjacent

to FWT’s plant. A Correction Warranty Deed (“Deed”) identifies FWT as the



      1
        According to Wallace, “hot-dip galvanizing is a process of applying a
zinc coating to fabricated iron or steel materials by immersing the material in a
bath consisting of molten zinc.” Galvanizing assists in corrosion protection of
exposed steel.

                                       2
“Grantor” and Haskin Wallace as the “Grantee”; identifies the Property as that

described in an exhibit attached to the Deed, which is a metes and bounds

description of the six acres; and includes the following right of first refusal in

favor of FWT:

      (a)   In the event Grantee desires to sell, lease or otherwise
            convey all or any part of the Property and shall have a bona
            fide offer from a third party who is ready, willing and able to
            purchase the Property at a price acceptable to Grantee, then
            Grantee shall furnish to Grantor written notice of the name
            of the prospective purchaser and the terms and conditions of
            such offer. Such notice shall be deemed to have been served
            and received, when mailed in the United States mail, postage
            prepaid, by certified mail, return receipt requested, addressed
            to Grantor at the following address:

            FWT, Inc.
            P.O. Box 8597
            Fort Worth, Tarrant County, Texas 76124

            Grantor shall have 20 days after receipt of the notice in
            which to elect to purchase, lease or otherwise accept such
            conveyance, as the case may be, at the same price and
            under the same terms and conditions offered by the
            prospective purchaser. Such election shall be exercised by
            written notice given by Grantor to Grantee. [Emphasis
            added.]

      Haskin, Wallace, and Mason created U.S. Galvanizing, L.P. to operate and

manage a galvanizing business to be located on the Property.          A 22,500-

square-foot facility designed for “hot-dip” galvanizing was constructed on the

Property, and U.S. Galvanizing commenced operations in December 1998.



                                        3
      Haskin, Wallace, and Mason eventually decided to sell Texas Galvanizing

and U.S. Galvanizing. FWT proposed to purchase the businesses for $15.5

million, but Haskin, Wallace, and Mason ultimately reached an agreement with

Valmont Industries, Inc. for the sale of the businesses and for the lease or

purchase of the Property. By letter dated December 17, 2007, Haskin Wallace

notified FWT that Valmont had agreed to purchase the assets of both

galvanizing businesses for $16,500,000; to lease the Property from Haskin

Wallace for $25,000 per month for five years with two additional five-year

options and an option to purchase the Property for $2,500,000; and to

sublease from Haskin Wallace the property on which Texas Galvanizing was

located.   Valmont did not offer to purchase the assets of the businesses

independent of the lease or purchase of the Property.         According to the

December 17 letter, the purchase of one “bundle of assets is contingent upon

the purchase of another.”

      In response to the notification letter, FWT sent a letter dated December

31, 2007, to Haskin Wallace stating as follows:

      This letter is to advise you that FWT, Inc. hereby elects to exercise
      its right of first refusal in the Deed.

Apparently under the impression that FWT desired to exercise its preferential

right and purchase the galvanizing businesses under the same terms and



                                       4
conditions as Valmont, counsel for Haskin Wallace responded to FWT’s

December 31 letter and forwarded to FWT’s counsel a “Closing Checklist” and

a proposed closing date of January 22, 2008. The checklist identified the

“Sellers” as Texas Galvanizing, U.S. Galvanizing, Haskin, Wallace, and Mason,

and it listed the due dates and responsible party for various documents or items

relevant to the sale of Texas Galvanizing and U.S. Galvanizing.

      Thereafter, by letter dated January 8, 2008, FWT notified Haskin Wallace

of the following:

      By letter dated December 31, 2007, I advised you that FWT, Inc.
      had elected to exercise its right of first refusal in the Deed. FWT,
      Inc. is ready to consummate the closing of the exercise of the right
      of first refusal in the Deed. Please advise me of the closing date.

In response to this letter, counsel for Haskin Wallace sent a letter to FWT’s

counsel stating in part that “the exercise of the Option to Purchase by a holder

of a Right of First Refusal must be positive, unconditional and unequivocal and

must be exercised in strict compliance with the terms of the option” and that

“FWT must accept all terms of the offer or the offer will be considered

rejected.” Counsel for Haskin Wallace thus proposed January 18, 2008, as a

closing date and stated that his clients would expect to receive good funds

totaling $16,500,000 for the assets of Texas Galvanizing and U.S. Galvanizing.

No closing ever occurred.



                                       5
      Haskin Wallace sued FWT shortly thereafter, seeking a declaratory

judgment that FWT’s right of first refusal was extinguished or that FWT failed

to materially comply with the right of first refusal and, therefore, waived the

right. FWT answered and sought a declaration in its amended counterclaim that

the right of first refusal contained in the Deed “pertains solely to the sale or

lease of the Property”; that FWT properly exercised its right of first refusal in

the Deed; and that FWT may lease the Property at a rate of $25,000 per month

for five years, elect to renew the lease under the same terms for two additional

five-year terms, and elect to purchase the Property for $2,500,000. FWT also

sought specific performance of its right of first refusal in the Deed and pleaded

that all conditions precedent to recovery on its claim for specific performance

had been performed or have occurred.

      Haskin Wallace filed a motion for summary judgment on its declaratory

judgment action, citing two grounds:       (1) FWT’s right of first refusal was

waived or extinguished because FWT failed to tender performance in conformity

with the terms and conditions of the “Transaction,” and (2) in order to

appropriately exercise the right of first refusal, FWT was required to

unequivocally accept all of the terms and conditions of the “Transaction.”

Haskin Wallace identified the “Transaction” as Valmont’s acquisition of the

assets of Texas Galvanizing and U.S. Galvanizing.         FWT responded and

                                       6
specially excepted to parts of Haskin Wallace’s motion.        FWT also filed a

motion for summary judgment, asserting that summary judgment was proper

on its claim for a declaratory judgment because it properly exercised its right of

first refusal in the Deed, which related solely to the Property, and that summary

judgment was proper on its claim for specific performance. Haskin Wallace

responded, to which FWT filed special exceptions and objections. The trial

court denied FWT’s motion for summary judgment, granted Haskin Wallace’s

motion for summary judgment, and overruled FWT’s objections and special

exceptions. FWT appeals.

                            III. S TANDARD OF R EVIEW

      In a summary judgment case, the issue on appeal is whether the movant

met the summary judgment burden by establishing that no genuine issue of

material fact exists and that the movant is entitled to judgment as a matter of

law. Tex. R. Civ. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211,

215 (Tex. 2002); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,

678 (Tex. 1979). The burden of proof is on the movant, and all doubts about

the existence of a genuine issue of material fact are resolved against the

movant. Sw. Elec. Power Co., 73 S.W.3d at 215.

      When reviewing a summary judgment, we take as true all evidence

favorable to the nonmovant, and we indulge every reasonable inference and

                                        7
resolve any doubts in the nonmovant’s favor.         Valence Operating Co. v.

Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Evidence that favors the movant’s

position will not be considered unless it is uncontroverted. Great Am. Reserve

Ins. Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex. 1965).

But we must consider whether reasonable and fair-minded jurors could differ in

their conclusions in light of all of the evidence presented. See Wal-Mart Stores,

Inc. v. Spates, 186 S.W.3d 566, 568 (Tex. 2006); City of Keller v. Wilson, 168

S.W.3d 802, 822–24 (Tex. 2005). The summary judgment will be affirmed

only if the record establishes that the movant has conclusively proved all

essential elements of the movant’s cause of action or defense as a matter of

law. Clear Creek Basin Auth., 589 S.W.2d at 678.

      When both parties move for summary judgment and the trial court grants

one motion and denies the other, the reviewing court should review both

parties’ summary judgment evidence and determine all questions presented.

Valence Operating Co., 164 S.W.3d at 661. The reviewing court should render

the judgment that the trial court should have rendered. Id.

                           IV. C ONDITIONS P RECEDENT

      In its first issue, FWT argues that Haskin Wallace’s failure to specifically

deny the occurrence of conditions precedent to specific performance bars it

from claiming that its preferential right was not triggered or that it waived the

                                        8
preferential right. 2   FWT raises this argument for the first time on appeal.

Accordingly, the argument is waived. See Tex. R. Civ. P. 166a(c) (“Issues not

expressly presented to the trial court by written motion, answer or other

response shall not be considered on appeal as grounds for reversal.”); Tex. R.

App. P. 33.1 (requiring that as a prerequisite for presenting a complaint for

appellate review, record must show that the complaint was made to trial court

by timely request, objection, or motion). We overrule FWT’s first issue.

                           V. FWT’S P REFERENTIAL R IGHT

      In its second issue, FWT challenges the trial court’s order denying its

motion for summary judgment on its claims for a declaratory judgment and for

specific performance. FWT contends that its preferential right requires it to

meet only the terms offered by Valmont with regard to the Property and that

it is therefore not obligated to additionally purchase the assets of the

galvanizing businesses. It relies on a number of Texas intermediate appellate

court cases that purport to support its position.      FWT claims that Texas



      2
        In its first amended counterclaims, FWT alleged, “FWT pleads that all
of the conditions precedent to recovery on its claim for specific performance
have been performed or have occurred.” It claims that the conditions necessary
for Haskin Wallace’s duty to convey the Property under the preferential right in
the Deed are (1) the right must be triggered and (2) FWT must exercise the
right. FWT contends that Haskin Wallace cannot argue that FWT’s preferential
right was not triggered or that FWT failed to properly exercise its preferential
right because Haskin Wallace did not specifically deny those occurrences.

                                         9
case law “overwhelmingly” supports its position, that “every Texas case

considering whether a right of first refusal obligates its holder to purchase more

than the property subject to the right [of first refusal] has rejected [Haskin

Wallace’s] position,” and that the case law Haskin Wallace relies on is

distinguishable from the facts of this case.

      Haskin Wallace argues that the language in the Deed establishing FWT’s

preferential right required FWT to match the same terms and conditions offered

by Valmont, including purchasing the assets of the galvanizing businesses,

because the terms were commercially reasonable, imposed in good faith, and

not designed to defeat FWT’s preferential right.          Haskin Wallace relies

principally on a case from the Fifth Circuit Court of Appeals 3 and a number of

Texas intermediate appellate court cases applying the rule expressed in the Fifth

Circuit case. It contends that the cases relied on by FWT are distinguishable

and thus not controlling.

      There is no dispute that FWT has a valid preferential right as set forth in

the Deed, that Haskin Wallace gave notice of the terms and conditions of

Valmont’s offer as required by the Deed, that FWT’s preferential right was




      3
        See W. Tex. Transmission, L.P. v. Enron Corp., 907 F.2d 1554 (5th
Cir. 1990), cert. denied, 499 U.S. 906 (1991).

                                       10
triggered, 4 or that FWT gave timely notice of its desire to exercise its

preferential right. Nor is there any dispute or contention by either party that the

language in the Deed setting forth FWT’s preferential right is ambiguous.

Rather, the dispute between FWT and Haskin Wallace only concerns whether,

in exercising its preferential right, FWT must either (a) only lease or purchase

the Property under the same terms and conditions offered by Valmont without

also purchasing the assets of Texas Galvanizing and U.S. Galvanizing or

(b) lease or purchase the Property under the same terms and conditions offered

by Valmont and also purchase the assets of Texas Galvanizing and U.S.

Galvanizing.

      A.    Preferential Rights in General

      A preferential right, also known as a right of first refusal or preemptive

right, is a right granted to a party giving him or her the first opportunity to

purchase property if the owner decides to sell it. Mandell v. Mandell, 214

S.W.3d 682, 688 (Tex. App.—Houston [14th Dist.] 2007, no pet.); Holland v.

Fleming, 728 S.W.2d 820, 822–23 (Tex. App.—Houston [1st Dist.] 1987, writ

ref’d n.r.e.). A preferential right has been described as a dormant option.




      4
        Haskin Wallace argued in its response to FWT’s motion for summary
judgment that FWT’s preferential right was not invoked, but it has abandoned
that contention in this appeal. Therefore, we do not address it.

                                        11
Mandell, 214 S.W.3d at 688 (citing A.G.E., Inc. v. Buford, 105 S.W.3d 667,

673 (Tex. App.—Austin 2003, pet. denied)). Once the property owner conveys

the terms of the offer to the rightholder, the rightholder then has the power to

accept or reject the offer. Abraham Inv. Co. v. Payne Ranch, Inc., 968 S.W.2d

518, 524 (Tex. App.—Amarillo 1998, pet. denied). Thus, when the property

owner gives notice of his intent to sell, the preferential right matures or “ripens”

into an enforceable option. City of Brownsville v. Golden Spread Elec. Coop.,

Inc., 192 S.W.3d 876, 880 (Tex. App.—Dallas 2006, pet. denied).

      The terms of the option are formed by both the provisions granting the

preferential right and the terms and conditions of the third-party offer presented

to the rightholder. Id.; Abraham Inv. Co., 968 S.W.2d at 524–25. Once the

property owner has given the rightholder notice of his intent to sell on the terms

contained in the third-party offer, the terms of the option cannot be changed

for as long as the option is binding on the property owner. Golden Spread Elec.

Coop., 192 S.W.3d at 880.

      The rightholder’s exercise of the option to purchase must be positive,

unconditional, and unequivocal. Id.; Tex. State Optical, Inc. v. Wiggins, 882

S.W.2d 8, 10–11 (Tex. App.—Houston [1st Dist.] 1994, no writ). With regard

to an option, generally, a purported acceptance containing a new demand,

proposal, condition, or modification of the terms of the offer is not an

                                        12
acceptance but a rejection. Golden Spread Elec. Coop., 192 S.W.3d at 880;

Tex. State Optical, 882 S.W.2d at 11. When the rightholder gives notice of his

acceptance of the offer, a contract between the rightholder and the property

owner is created. Golden Spread Elec. Coop., 192 S.W.3d at 880.

      B.    Contract Construction

      Our primary concern when construing a written contract is to ascertain

the true intentions of the parties as expressed in the instrument.       Coker v.

Coker, 650 S.W.2d 391, 393 (Tex. 1983). We examine and consider the entire

writing in an effort to harmonize and give effect to all provisions of the contract

so that none will be rendered meaningless. Id. We presume that the parties to

the contract intend every clause to have some effect. Heritage Res., Inc. v.

NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); XCO Prod. Co. v. Jamison,

194 S.W.3d 622, 627 (Tex. App.—Houston [14th Dist.] 2006, pet. denied).

We give terms their plain, ordinary, and generally accepted meaning unless the

contract shows that the parties used them in a technical or different sense.

Heritage Res., 939 S.W.2d at 121.




                                        13
      C.       FWT’s Case Law

      FWT relies on five Texas cases to support its argument that it is not

obligated to purchase the assets of the galvanizing businesses. We examine

each case.5

               1.   Hinds v. Madison 6

      The Madisons owned a 14,818.63-acre tract of land. Hinds, 424 S.W.2d

at 62. Out of that tract, they leased to Hinds 2,849.28 acres for a term of five

years, beginning October 1, 1962, and ending October 1, 1967.           Id.   The

leased tract was separated from the rest of the acreage by the Devil’s River.

Id. The lease provided that it was subject to the Madisons’ right to sell the

leased premises, and it gave the Madisons the right to terminate the lease on

October 1 of any year by giving to Hinds six months’ prior written notice of the

sale. Id. The lease contained a preferential right in favor of Hinds, stating in

part that “in the event of sale, lessee shall have a preference right to purchase

the leased premises for such price and upon the same terms and conditions

otherwise for which lessors are willing to sell to others.” Id. In December


      5
         FWT additionally directs us to out-of-state case law purporting to
support its argument. Like the Texas case law discussed herein, the out-of-
state case law is split on the issue we consider. See, e.g., Chapman v. Mutual
Life Ins. Co. of N.Y., 800 P.2d 1147, 1151–52 (Wyo. 1990); Crow-Spieker No.
23 v. Robert L. Helms Constr. & Dev. Co., 731 P.2d 348, 350 (Nev. 1987).
      6
           424 S.W.2d 61 (Tex. Civ. App.—San Antonio 1967, writ ref’d n.r.e.).

                                         14
1966, the Madisons entered into a contract with a third party for the sale of the

entire 14,818-acre tract. Id. The sale, however, was never consummated.

Hinds sued seeking a declaration of when he could exercise the preferential

right contained in the lease. Id. The trial court denied Hinds all relief. Id.

      On appeal, after analyzing a number of other points of error, the court

considered Hinds’s argument that, according to the testimony at trial, he had

a preferential right to purchase the entire 14,818-acre tract for the same price

and under the same terms and conditions provided in the contract of sale

between the Madisons and the third party. Id. at 64. FWT directs our attention

to the Hinds court’s lone statement addressing this argument in which the court

reasoned that it did not see “how in any way lessee’s option or preference right

to purchase a portion of the property sought to be sold can be enlarged to

cover other lands owned by lessors, or can in any manner cover anything

except the property actually subject to the option.” Id. The court cited the

holding of one out-of-state case to support its conclusion. See Atl. Ref. Co. v.

Wyo. Nat’l Bank of Wilkes-Barre, 51 A.2d 719, 722–24 (Pa. 1947) (holding

that a lease of a portion of a parcel of land giving the lessee a preferential right

to purchase the demised premises on the same terms of an offer by a third

person does not give the lessee a right to purchase the whole parcel).




                                        15
      Hinds is the first Texas case that we have located relevant to the specific

issue addressed here. There are a couple of observations worth pointing out.

Hinds argued in points of error two through eight that the trial court had erred

by not declaring that he had a preferential right to purchase only the leased

premises for a price proportionate to what the Madisons had contracted to sell

the entire tract of land for. Hinds, 424 S.W.2d at 63. Notwithstanding the

money, this argument is somewhat similar to FWT’s position in this case. The

Hinds court, however, noted that there was “no evidence that lessors desired

to or would sell the 2,849-acre tract alone, without selling the whole tract.”

Id. at 63 (emphasis added). This portion of the opinion appears to support

Haskin Wallace’s position in this case. After concluding that Hinds was not

entitled to purchase only the leased tract of land for a particular sum of money,

the court went on to state, as set out above, that Hinds could not purchase the

entire 14,818-acre tract of land.        The court’s reasoning seems to be

contradictory to a certain extent, but the portion of the opinion relied on by

FWT provides support for its position that the holder of a preferential right

cannot be compelled to purchase assets beyond the scope of the agreement

subject to the preferential right in order to exercise that right.




                                        16
             2.    Riley v. Campeau Homes (Tex.), Inc. 7

      The Rileys were assigned a lease for condominium unit 1801 at the Bayou

Bend Towers from BTI, Ltd., who had leased the premises from Centeq

Condominium, Ltd., who later conveyed the property to Campeau. Riley, 808

S.W.2d at 185. The Rileys’ lease included a preferential right providing that the

tenant would have the right to purchase the property if the landlord received a

bona fide offer to purchase in whole or in part the leased premises. Id. at 186.

Campeau entered into a sales contract with Advocate Equities (U.S.) Inc.,

Trustee for the sale of the Bayou Bend Towers, including unit 1801, and the

Rileys notified Campeau that they desired to exercise their preferential right to

purchase their condominium unit. Id. at 185. Campeau subsequently advised

the Rileys that their unit was part of a larger sale of numerous properties and

that it had no intention to sell it other than as part of the entire transaction with

Advocate. Id. The Rileys demanded that their preferential right to purchase the

unit be honored, but Campeau refused the demand, “asserting that [the Rileys’]

right of first refusal was not applicable to this sale because it was a ‘bulk’ sale

involving other properties.” Id. The Rileys sued, and the trial court granted

Campeau’s motion for partial summary judgment. Id. at 186.



      7
       808 S.W.2d 184 (Tex. App.—Houston [14th Dist.] 1991, writ
dism’d).

                                         17
      On appeal, the court identified the specific issue to be resolved at the

outset of the opinion, stating as follows: “The material issue in this case is

whether a lessee’s right of first refusal on a leased condominium is triggered

when the owner decides to sell that condominium as part of a package with

other condominium units.”       Id. at 185.    The court held that the Rileys’

preferential right to purchase unit 1801 was triggered even though the single

unit was included as part of a “package” deal to purchase all of the Bayou Bend

Towers units. Id. at 189.

      Riley is distinguishable from this case because the issue there—whether

the preferential right was triggered—is not at issue in this case; it is undisputed

that the December 17, 2007 notification letter triggered FWT’s preferential

right. 8 Riley is also distinguishable from this case because Campeau ultimately

withdrew the Rileys’ condominium unit from the sale of the remaining

condominium units. Id. at 186. As Haskin Wallace points out, in this case, the

terms and conditions of Valmont’s offer contemplate an “all or nothing”

proposal.   Because Riley did not present the specific issue that we are

confronted with in this case, it is inapposite.



      8
        The court in McMillan v. Dooley, 144 S.W.3d 159, 181 (Tex.
App.—Eastland 2004, pet. denied), even stated of Riley, “The material issue in
the case was whether or not the preferential purchase right was triggered by
the package conveyance.”

                                        18
              3.    Comeaux v. Suderman 9

      Comeaux leased from the Sudermans slightly less than one acre of land

on the Bolivar Peninsula in Galveston County. Comeaux, 93 S.W.3d at 217.

The lease included a preferential right in favor of Comeaux providing that in the

event the Sudermans received a proposal to sell the leased premises, the sale

was subject to Comeaux’s preferential right to purchase the property on the

same terms and conditions as those offered by the prospective purchaser. Id.

The Sudermans subsequently notified Comeaux in writing of a pending

$350,000 cash offer for the leased premises and some adjoining property to the

east and west of the leased premises. Id. The notice did not specify that the

total acreage to be sold was thirty-five acres.       Id.   Comeaux, however,

apparently assumed that the sale involved only twenty-two acres surrounding

his property. Id. at 218. He told the Sudermans’ real estate agent that he

could not afford the $350,000 payment, and he continued making payments

to the new owners of the land, the Meiers, after the sale was consummated.

Id. Although Comeaux abandoned the leased premises when a storm destroyed

his fishing pier, he later sued the Sudermans and the Meiers, asserting that he

was entitled to specific performance or damages because the Sudermans had

failed to comply with the terms of the preferential right contained in the lease


      9
           93 S.W.3d 215 (Tex. App.—Houston [14th Dist.] 2002, no pet.).

                                       19
agreement.    Id.   The trial court granted summary judgment in favor of the

Sudermans. Id.

      On appeal, Comeaux argued that his preferential right was never triggered

because the written notice he received had failed to offer him the opportunity

to purchase only the leased premises (rather than the entire thirty-five-acre

parcel) and because the notice did not contain all the relevant terms and

conditions of the sale. Id. at 219, 221. The court disagreed and held that

Comeaux’s option had expired because he received actual notice of the

proposed sale of the leased premises and an opportunity to purchase it, which

he declined. Id. at 221–23. The court stated that “because Comeaux received

notice and was given the opportunity to exercise his right of first refusal,

technical deficiencies in the notice—or even no notice—cannot revive the right

he declined.” Id. at 222. FWT does not rely on this, the holding of the case.

Instead, it directs our attention to footnote three, in which the court addressed

the appellees’ argument that they were not required to give any notice to

Comeaux because the sale was for more than the leased premises. Id. at 221

n.3. The court acknowledged that it was “unnecessary to the disposition of

[the] case” to address this issue, but it cited Riley and stated, “A seller who has

given a holder a preemptive right cannot defeat that right by selling the subject

matter of that right as part of a larger transaction.” Id.


                                        20
      Comeaux     is   distinguishable   from   this   case   because   the   issues

there—whether the preferential right was triggered and whether Comeaux made

any effort to exercise his option following his receipt of the notice of the

proposed sale—are not relevant to the issue in this case. 10       The court also

expressly noted that its statement in footnote three was unnecessary to the

disposition of the case. Id. The dicta statement therefore does not support

FWT’s position. Because Comeaux did not consider the specific issue that we

are confronted with in this case, it is inapposite. 11

            4.     McMillan v. Dooley

      McDonald or an entity under his control owned and operated three leases

from the mid-1970s until January 1998. McMillan, 144 S.W.3d at 165. The

assignments by which McDonald acquired the properties were subject to

farmout agreements that contained preferential rights in favor of the assignors.

Id. at 164–65. In 1997, McMillan expressed interest in purchasing the Dooley

Lease, one of the three leases. Id. at 165. McDonald advised McMillan that




      10
         The McMillan court observed of Comeaux, “The holding in Comeaux
establishes that a sufficient presentment to the rightholder occurs even though
the offer includes property not covered by the preferential purchase right in the
offer presented to the rightholder.” McMillan, 144 S.W.3d at 178.
      11
          Indeed, in response to one of Comeaux’s arguments, the court stated
that it did not have to “address whether Comeaux should have been offered the
opportunity to purchase only the leased premises.” 93 S.W.3d at 221.

                                         21
he was interested only in selling all of the leases as a package rather than just

selling the Dooley Lease by itself. Id. McDonald thereafter conveyed all of the

leases to McMillan without advising the preferential rightholders of McMillan’s

offer. Id. at 166. Dooley later informed McMillan of Dooley’s preferential right

as to the Dooley Lease, and McMillan offered to sell all of the leases to Dooley,

not just the Dooley Lease. Id. But Dooley declined the offer because he was

interested in purchasing only the Dooley Lease. Id. at 167. Dooley and the

other    preferential   rightholders   eventually   sued   McMillan   after   further

correspondence. Id. at 166–68. The trial court determined that the preferential

right provisions had been breached, and it granted Dooley’s request for specific

performance, awarding him title to the Dooley Lease. Id. at 169.

        On appeal, the court considered many issues, including whether McMillan

had adequately provided (or “presented”) Dooley with an opportunity to

exercise his preferential right, whether Dooley was required to accept the other

leases in order to exercise his preferential right, and whether Dooley’s

preferential right expired when he declined McMillan’s offer without taking any

further action. Id. at 176–81. In regard to whether Dooley was required to

accept the other leases in order to exercise his preferential right, the issue most

relevant to the issue in this case, the court acknowledged that “[o]nly a few

Texas cases have addressed the enforcement of preferential purchase rights in


                                          22
a package conveyance,” and it discussed only Hinds and agreed with its

reasoning. Id. at 179. The court stated,

        Assuming the defendants had only offered Dooley the opportunity
        to purchase the Dooley Lease, the court’s holding in Hinds would
        have prevented him from seeking to exercise his preferential
        purchase right against the other leases in the conveyance. If a
        rightholder is not permitted to expand his preferential purchase
        right to include property not covered by the provision, it would be
        improper for him to be required to accept other property not
        covered by his preferential right in order to exercise his right.

Id.12

        There are a number of ways in which the facts of McMillan are

distinguishable from this case. Most notably, the package deal that McMillan

offered Dooley consisted of three unrelated leases. In this case, the business

assets and property that FWT has been offered to purchase are significantly

related; Haskin, Wallace, and Mason formed and own both Texas Galvanizing

and U.S. Galvanizing, and U.S. Galvanizing sits directly on top of the Property.

Moreover, in McMillan, there were two other rightholders making claims with

regard to the other two leases that McDonald included in his offer to Dooley.

In this case, there are no other competing rightholders, persons, or entities.




        12
         The court also distinguished West Texas Transmission, but it did so
in the context of considering “whether or not the defendants made a sufficient
presentment to Dooley,” which is not at issue in this case. Id. at 176.

                                        23
              5.      Navasota Res., L.P. v. First Source Tex., Inc. 13

      Navasota had a joint operating agreement with First Source applicable to

certain oil and gas interests in an area near the Navasota River. Navasota, 249

S.W.3d at 529. The parties referred to the property as the “Hilltop Prospect.”

Id. Navasota owned an undivided fifty-five percent working interest, and First

Source owned an undivided forty-five percent working interest.              Id.   The

agreement also contained a preferential right provision requiring that notice be

given to the other party should a party desire to sell all or any part of its interest

under the agreement and providing that the party would have ten days to

purchase the interest under the same terms and conditions offered by the

seller. Id.

      Gastar, the parent company of First Source, signed a letter of intent with

Chesapeake in which (a) Chesapeake would purchase 19.9 percent of Gastar’s

outstanding stock, (b) Chesapeake would purchase 33.33 percent of First

Source’s working interest in the Hilltop Prospect, and (c) Chesapeake and

Gastar would enter an area of mutual interest comprising thirteen counties in

East Texas.        Id. at 530.   First Source notified Navasota of the deal with

Chesapeake and informed Navasota that if it elected to exercise its preferential

right, it would be obligated to pay Gastar for one-third of its leasehold acreage


      13
            249 S.W.3d 526 (Tex. App.—Waco 2008, pet. denied).

                                          24
in the Hilltop Interest and a percentage of drilling costs. Id. This notice did not

require Navasota to purchase Gastar’s stock or enter into the multi-county area

of interest. Navasota timely notified First Source of its intent to exercise its

preferential right, but First Source sent a second notice letter explaining that

Navasota had to comply with every aspect of the agreement with Chesapeake,

including additionally purchasing the stock and entering into the thirteen-county

area of mutual interest. Id. at 531. Navasota refused to accept the modified

offer, Gastar claimed that it had the right to rescind the initial “ambiguous

notice,” Gastar refused to close the deal with Navasota, and Gastar and

Chesapeake closed their agreement. Id. Navasota sued, and the trial court

granted Gastar’s and Chesapeake’s motions for summary judgment.              Id. at

531–32.

      Among numerous other issues addressed on appeal, the court considered

whether First Source could require Navasota to purchase the shares of Gastar

stock and to enter into the thirteen-county area of mutual interest.         Id. at

535–37. The court stated, “Virtually every authority of which we are aware

agrees that the holder of a preferential right cannot be compelled to purchase

assets beyond those included within the scope of the agreement subject to the

preferential right in order to exercise that right.” Id. at 535. In support of this

statement, it cited McMillan, Comeaux, and Hinds. Id. The court distinguished


                                        25
West Texas Transmission and a few cases cited therein and held that First

Source could not require Navasota to purchase the shares of Gastar stock or

enter the thirteen-county area of mutual interest. Id. at 536–37.

      Navasota, like McMillan, arrived at its holding on this issue by relying on

Hinds.     Also, like in McMillan, the assets that First Source demanded that

Navasota additionally acquire were unrelated to the asset the subject of the

joint operating agreement and preferential right. Id. at 530. Further, the court

did not indicate that West Texas Transmission was entirely inapplicable or

irrelevant to the issue; the court merely distinguished it.

      D.      Haskin Wallace’s Case Law

      Haskin Wallace relies on West Texas Transmission and a few Texas cases

to support its argument that FWT must purchase the assets of the galvanizing

businesses in addition to leasing or purchasing the Property. As we did with

the authorities relied on by FWT, we examine each case.

              1.    West Texas Transmission

      Valero, the predecessor of West Texas Transmission, L.P., had a

preferential right to repurchase its interest in a pipeline if Enron decided to sell

its interest in the line.   W. Tex. Transmission, 907 F.2d at 1556.          Enron

thereafter negotiated a deal to sell all of its stock in NorTex, an affiliate,

including its interest in the pipeline, to TECO Pipeline Company. Id. at 1557.


                                        26
The agreement expressly conditioned consummation of the sale on the approval

of the Federal Trade Commission. Id. Valero chose to exercise its preferential

right to repurchase Enron’s pipeline interest, but it declined to agree to the

condition that the FTC approve the purchase. Id. at 1558. The FTC ultimately

disapproved of Enron’s sale to Valero and ratified the sale to TECO. Id. at

1559–60. Valero sued and obtained a temporary injunction, but the trial court

rendered judgment in favor of Enron. Id. at 1561.

      On appeal, the court stated that the agreement between Enron and Valero

“explicitly allows Valero to reacquire the pipeline ‘on the same terms and

conditions as set forth in [a third-party] offer or agreement to purchase.’” Id.

at 1562–63. The court reasoned that under that language, “[T]he terms and

conditions governing Valero’s repurchase remain indeterminate until Enron

receives an acceptable offer from a third party.”     Id. at 1563.   The court

explained that under language similar to that used in the agreement between

Enron and Valero, “[T]he owner of property subject to a right of first refusal

remains master of the conditions under which he will relinquish his interest, as

long as those conditions are commercially reasonable, imposed in good faith,

and not specifically designed to defeat the preemptive rights.”            Id.

Consequently, “where the owner meets these three standards, the holder of the

right of first refusal lacks grounds to remove the specific conditions from the


                                      27
contract, or to extract other concessions as part of the agreement.” Id. The

court held that Valero had to satisfy the condition of FTC approval because it

was commercially reasonable, imposed in good faith, and not specifically

designed to defeat Valero’s preferential right. 14 Id. at 1567–68.

      As the court in Navasota recognized, West Texas Transmission involved

the conveyance of a single asset instead of multiple assets. Navasota, 249

S.W.3d at 536.      However, we do not believe that this renders the case

inapplicable to ours.    The issue addressed by the court in West Texas

Transmission concerned whether the holder of a preferential right must accept

additional conditions included in a third party’s offer. That is the same issue we

consider in this appeal. The condition in West Texas Transmission was FTC

approval; the condition in this case is the acquisition of business assets.

            2.    Texas State Optical

      Texas State Optical had an agreement with Dr. Kernek in which Dr.

Kernek purchased a retail store for the sale of eyewear and, among other

things, a professional optometry practice. Tex. State Optical, 882 S.W.2d at

9. Texas State Optical retained a preferential right to purchase Dr. Kernek’s



      14
         The court acknowledged that “[a] different situation would exist if
Valero had received an option to purchase the pipeline under terms and
conditions specified in the” agreement setting forth the preferential right. Id.
at 1568.

                                       28
businesses if Dr. Kernek received an offer from a third party to purchase the

businesses. Id. After Dr. Kernek’s death, his wife entered into a stock sale

agreement for Wiggins to purchase the stock of the businesses, and Texas

State Optical notified her that it desired to exercise its preferential right to

purchase the businesses. Id. at 10. Texas State Optical, however, reserved

the right to dispute whether certain clauses of the agreement between Mrs.

Kernek and Wiggins were commercially reasonable, imposed in good faith, and

designed to defeat its preferential right. Id. These clauses included a provision

giving a buyer’s commission to Wiggins and a provision giving one-year

employment contracts to certain employees.        Id.   Texas State Optical and

Wiggins both filed declaratory judgments to determine the parties’ obligations

with respect to the disputed conditions of the sale, and Wiggins prevailed. Id.

      On appeal, the court reasoned that with regard to the exercise of an

option, the general rule is that the acceptance must be unequivocal; a purported

acceptance containing a new demand is a rejection. Id. at 10–11. The court

recognized, however, that it is an exception to the general rule if a seller

imposes a term in bad faith to defeat the option. Id. at 11. It discussed the

West Texas Transmission case and held that the trial court had abused its

discretion because it did not “reach the issue of whether the disputed clauses

were commercially unreasonable, or were included in bad faith to defeat [Texas


                                       29
State Optical’s] right of first refusal.” Id. Significantly, the court stated, “We

agree with the Fifth Circuit’s conclusions in West Texas Transmission.” 15 Id.

at 11.

            3.    Shell v. Austin Rehearsal Complex, Inc. 16

      Austin Rehearsal Complex (“ARC”) leased space in a building that

ultimately came into the ownership of the Shells. Shell, 1998 WL 476728, at

*1. The governing agreement contained a preferential right in favor of ARC

requiring the Shells to notify ARC of a bona fide offer to lease other space in

the same building in which ARC leased space and giving ARC the right to lease

the property. Id. at *1 n.1. After the Shells sent ARC notice regarding a space

for lease, ARC claimed that the Shells refused to lease the space to them after

it had exercised its preferential right. Id. at *2. The Shells contended that ARC

did not effectively exercise its option because its acceptance of the notice was

conditional; ARC reserved the right to have a court determine the legality of the

“Permitted Use” and “Terms and Conditions” of the offer. Id. at *2, 9. ARC

sued, and a jury returned a verdict in its favor. Id.




      15
         On rehearing, one justice filed a dissenting opinion contending that
West Texas Transmission should not be followed. Id. at 12 (Cohen, J.,
dissenting).
      16
        No. 03-97-00411-CV, 1998 WL 476728 (Tex. App.—Austin Aug.
13, 1998, no pet.) (not designated for publication).

                                       30
      On appeal, the Shells challenged the sufficiency of the evidence to

support the jury’s affirmative answer to jury question number one: “Do you

find that each of the terms or conditions of the [notice of offer] (a) were

imposed in bad faith, or (b) were not commercially reasonable, or (c) were

reasonably designed to defeat ARC’s right of first refusal?” Id. at *7. The

court detailed the same option rules addressed in Texas State Optical and cited

the exception set out in West Texas Transmission. Id. at *9. The court stated,

      The Shells assert that we should not adopt this exception to the
      general rule because the Fifth Circuit [in West Texas Transmission]
      and Houston Court of Appeals [in Texas State Optical] did not
      follow Texas law but rather created new law. We disagree. Texas
      courts have long recognized that the failure of the optionee to
      strictly comply with the terms or conditions of the option contract
      may be excused when such failure is brought about by the conduct
      of the optionor. We believe the exception stated in Texas State
      Optical is reasonable and applicable to the present case.

Id. (citations omitted). The court thus applied West Texas Transmission, and

it held that the evidence was sufficient to support the jury’s answer to question

number one. Id. at *10.

      E.    The Clear and Unambiguous Language of the Deed is Dispositive

      Our review of the case law leads us to conclude that, as a general rule,

the holder of a preferential right cannot be compelled to purchase assets

beyond the scope of the agreement subject to the preferential right in order to

exercise that right. See Navasota, 249 S.W.3d at 535; Hinds, 424 S.W.2d at


                                       31
64. An exception to this rule exists, however, when the preferential right is

expressly made subject to the same terms and conditions offered by a

prospective, bona fide, third-party purchaser, as is the case here. In such a

case, the question of whether the holder of a preferential right must purchase

the additional assets turns on whether the condition that requires the purchase

of additional assets is commercially reasonable, imposed in good faith, and not

specifically designed to defeat the preferential right. 17           See W. Tex.

Transmission, 907 F.2d at 1563. While this exception has been applied to

cases involving the conveyance of a single asset, we have not been shown any

reason why it should not apply equally to cases involving multiple assets.

        In this case, FWT elected to exercise its preferential right contained in the

Deed.        The Deed’s preferential right provision clearly and unambiguously

requires that FWT meet the same price and the “same terms and conditions



        17
         A factor to consider in determining commercial reasonableness is
whether the assets as a whole are related. In Navasota, the bundled assets—
a percentage of Gastar’s outstanding stock and entry into an area of mutual
interest comprising numerous counties in East Texas—were, at best, minimally
related and severable from the asset the subject of the preferential right—a
working interest in an area of land. 249 S.W.3d at 530. In McMillan, the
bundle of assets that McMillan offered Dooley consisted of three separate
leases. 144 S.W.3d at 166–67. In contrast, in this case, both U.S.
Galvanizing and Texas Galvanizing are galvanizing businesses; both were
created and are owned by Haskin, Wallace, and Mason; and U.S. Galvanizing’s
22,500-square-foot facility, which is specifically designed for galvanizing, sits
directly on the Property.

                                         32
offered by the prospective purchaser,” Valmont. Valmont expressly conditioned

its purchase or lease of the Property on its acquisition of the assets of the

galvanizing businesses; the December 17 notification letter provided to FWT

states in part, “The Transaction, as contemplated by the parties, is contingent

in nature and the relevant components are not mutually exclusive, meaning that

the purchase of one bundle of assets is contingent upon the purchase of

another, and all are contingent on the whole.” Thus, FWT was required to

meet the terms and conditions of Valmont’s offer, including the conditions

requiring acquisition of the business assets, unless those conditions were not

commercially reasonable, were imposed in bad faith, or were specifically

designed to defeat FWT’s preferential right. See id.

      Haskin Wallace’s summary judgment evidence included the December 17

notification letter.   The letter reveals that FWT itself at one point in time

contemplated “an acquisition of all or a majority of the assets that now

comprise the Transaction.” 18 Also, in negotiating the details of the transaction,

Valmont and Haskin Wallace proceeded (for over four months) under the

impression that FWT’s waiver of its preferential right was a “foregone

conclusion.” Thus, FWT’s possible exercise of its preferential right likely played



      18
         Indeed, the record reflects that FWT offered $15.5 million for the
galvanizing businesses and Property.

                                       33
little or no part at all in Valmont’s decision to condition its purchase or lease of

the Property on its acquisition of the assets of the galvanizing businesses. This

is supported by examining the values attributed to the major parts of the

transaction. The December 17 letter identifies the total value of the transaction

as $19,000,000, which includes a purchase price of $12,606,000 for the

assets of U.S. Galvanizing, a purchase price of $3,894,000 for Texas

Galvanizing’s assets, and a purchase price of $2,500,000 for the option on the

Property. A large percentage of the total value of the transaction accordingly

consists of the purchase price for the assets of U.S. Galvanizing and Texas

Galvanizing, not the Property. Because the value of the option to purchase the

Property is but a minor part of the overall value of the transaction

(approximately 7.6%), it indisputably would have been both commercially and

financially unreasonable for Valmont to condition its purchase or lease of the

Property on its acquisition of the assets of the galvanizing businesses simply to

frustrate FWT’s preferential right in the Property. We hold that Haskin Wallace

met its summary judgment burden to show that Valmont’s conditioning its

purchase or lease of the Property on its acquisition of the assets of the

galvanizing businesses was commercially reasonable, imposed in good faith,

and not specifically designed to defeat FWT’s preferential right.




                                        34
      FWT makes no argument and points to no evidence that the parts of

Valmont’s offer conditioning its lease or purchase of the Property on its

acquisition of the galvanizing business assets were commercially unreasonable,

were imposed in bad faith, or were designed to defeat FWT’s preferential right.

      FWT argues on rehearing that this court has “re-written the parties’

agreement for them.”     We disagree. FWT accepted the risk that it is now

confronted with in this case because it agreed to language in the Deed allowing

a third party to dictate the terms and conditions under which it would purchase

or lease the Property. The parties’ intent as expressed in the Deed would be

circumvented if FWT is not required to purchase the bundled assets.

      FWT was not entitled to judgment as a matter of law on its claims for a

declaratory judgment and for specific performance.         Haskin Wallace was

entitled to judgment as a matter of law on its declaratory judgment action. We

overrule FWT’s second issue.

                VI. FWT’S O BJECTIONS AND S PECIAL E XCEPTIONS

      In its third issue, FWT argues that the trial court abused its discretion by

overruling its objections and special exceptions to Haskin Wallace’s summary

judgment motion and response. FWT complains about a number of statements

in Haskin Wallace’s motion and response that allegedly attempt to explain the

intent of the parties in negotiating and signing the Deed. FWT also complains


                                       35
of statements that FWT was willing to waive its preferential right at various

times before the December 17, 2007 notice triggered its right.

         None of the complained-of statements are included in or are part of our

analysis of the issues brought by FWT in this appeal, as demonstrated above.

Thus, the trial court could have denied FWT’s motion for summary judgment

and granted Haskin Wallace’s motion for summary judgment without

considering the challenged statements or evidence. We overrule FWT’s third

issue.

                                 VII. C ONCLUSION

         Having overruled FWT’s issues, we affirm the trial court’s judgment.




                                                    BILL MEIER
                                                    JUSTICE

PANEL: CAYCE, C.J.; MCCOY and MEIER, JJ.

DELIVERED: November 25, 2009




                                        36
