HMC Hotel Properties II LP v. Keystone-Texas Property Holding Corp – Case Brief Summary (Texas)

HMC Hotel Properties II LP v. Keystone-Texas Property Holding Corp., 439 S.W.3d 910 (Tex. 2014), involved the attempted sale of the Rivercenter Mall and the land beneath the San Antonio Riverwalk hotel.

The hotel leased the land beneath it from Keystone-Texas Property Holding Corporation. Id.

The lease included a right-of-first refusal provision, affording it up to 90 days to attempt to negotiate an agreement to purchase the land if Keystone decided to sell it. Id. at 911-12.

Nothing in the lease required the hotel to execute a waiver of this provision if it chose not to purchase under those circumstances. Id. at 914-15.

After the properties were listed for sale, a potential buyer emerged for the two properties, offering $166 million for both. Id. at 911.

Keystone invited the hotel to make an offer to purchase, but it also requested the hotel waive its rights under the lease provision. Id. at 912.

The hotel initially indicated that it would sign the requested waiver, but after meeting with the potential buyer, the hotel suspected that the purchase price had been inflated to discourage it from making an offer. Id.

At that point, the hotel informed Keystone by letter that no waiver was forthcoming. Id. Notably, at all relevant times, the title insurers had stated that they required a waiver from the hotel in order to issue a "clean" title insurance policy. Id. at 913-14.

When the sale of the land beneath the hotel fell through, the hotel sued for breach of contract, and Keystone countersued for tortious interference with a contract. Id. at 912.

The jury found for Keystone, which had argued that the letter from the hotel had been "passed to the proposed title insurers, and had scuttled the sale." Id.

The court of appeals held that the evidence was sufficient to show that the letter "proximately caused the deal's demise." Id.

In the Supreme Court, the hotel argued that there was no evidence of but-for causation, i.e., "no evidence showed the outcome would have been different if the hotel had not sent its letter." Id. at 913. The Supreme Court agreed.

First, it observed that the hotel had no obligation to provide the waiver that the title insurers demanded, and that there was no evidence that the insurers would have dropped that demand. Id. at 915.

Second it rejected testimony about how the title insurers might have "insured around" the lease provision after the expiration of 90 days and in the absence of the hotel's letter. Id. at 916.

The Supreme Court said, "In the end, all of this testimony is simply speculation about what the title insurers might have done had the hotel handled itself differently. Testimony based on nothing but speculation is evidence of nothing at all." Id.

Third, the Court agreed that the evidence showed that the hotel's letter had a "substantial effect" on the deal, but it explained that "testimony that the letter was a substantial factor in bringing about harm to Keystone is only half of the cause-in-fact element. . . . Keystone also had to show that absent the hotel's letter, the harm would not have occurred." Id. at 917.