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holding that where lockout was lawful, tenant's claim for violation of covenant of quiet enjoyment failed
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No. 14-04-00605-CV
Memorandum Opinion filed October 27, 2005.
On Appeal from the 11th District Court, Harris County, Texas, Trial Court Cause No. 03-05723.
Affirmed.
Panel consists of Justices YATES, ANDERSON, and HUDSON.
MEMORANDUM OPINION
Ashford.com, Inc. ("Ashford"), appeals from a judgment in a landlord-tenant dispute in favor of Crescent Real Estate Funding III, L.P. ("Crescent"). In four issues, Ashford contends the evidence is insufficient to support the trial court's judgment and its award of damages to Crescent. Ashford specifically alleges it did not default on its lease, but rather, it was constructively evicted when Crescent enforced an unauthorized lock-out. Alternatively, Ashford urges this court to suggest a remittitur of certain damages and attorney fees because Crescent failed to prove it was entitled to the amount awarded. We affirm.
Factual and Procedural Background
Ashford and Crescent entered into a commercial lease for various office, retail, and storage space. The 90-page lease was amended and revised several times over the course of its term, but it was, in its various permutations, effective from July 26, 1999, to April 30, 2003.
In early 2002, Ashford was purchased by GSI Commerce, Inc., who immediately began to dramatically taper Ashford's business operations. In December 2002, Ashford sold its inventory, fixtures, and leasehold improvements located on the leased premises to a third party, Times Past, Inc. During the weekend of January 25, 2003, Ashford permitted Times Past to enter the premises and remove virtually all inventory, fixtures, and improvements. While Times Past was removing these items, it allegedly caused substantial damage to the walls and ceiling of the leased premises.
The record indicates Ashford/Times Past removed cabinetry, light fixtures, and other improvements, leaving holes in the walls and ceiling and exposed electrical wires.
On January 29, 2003, Crescent inspected the premises and determined the damage was so severe, it needed to close two areas of the property. Crescent also posted two guards in the remaining portions of the leased premises to (1) maintain the status quo, (2) prevent further damage to the leased premises, and (3) to safeguard persons from potentially hazardous conditions within the damaged areas. Crescent claimed the primary reason for the "lockout" was a concern for asbestos exposure caused by holes in the walls and ceiling. Due to the asbestos concern, Crescent hired an independent environmental-engineering consultant to perform air-sample tests in the asbestos-ridden areas. The results of the tests were returned to Crescent on the evening of Friday, January 31, 2003.
Crescent also stated it was worried about "hot" electrical wires that were left dangling from the ceiling.
On January 31, Ashford sent a letter to Crescent challenging its authority to close the damaged areas and asserted that Crescent's action constituted a constructive eviction. On Monday, February 3, Crescent advised Ashford that the environmental testing had determined the asbestos danger was minimal and further explained that Crescent would re-open the two quarantined areas once the holes had been repaired so as to prevent further disturbance of the asbestos. In fact, Crescent told Ashford that it would be permitted to re-enter the two areas within 24 hours. In addition, Crescent notified Ashford that its February rent was past due and explained that failure to pay the rent would be considered an automatic "Event of Default" under the terms of the lease.
The failure allegedly became an automatic default because Crescent had already provided written notice and an opportunity to cure late rental payments on two previous occasions within the preceding 12 months. Under Section 17(a) of the lease, the third late rental payment within a year was designated as a default authorizing Crescent to exercise its remedial powers under the lease.
Ashford again responded with a letter reiterating its constructive eviction claim. Ashford said it considered the "lockout" both unlawful and a breach of the lease. Accordingly, it denied owing either the February or any remaining rent due under the lease. Further, Ashford demanded a return of its security deposit and a rent refund for the last few days of January.
Crescent, in turn, filed its original petition — initially seeking almost $1 million in damages — and a request for a temporary restraining order and temporary injunction. The following day, Crescent sent notice that it was formally terminating Ashford's right of possession to the leased premises. Crescent also explained that under the terms of the lease Ashford's obligations remained in effect and, thus, Ashford owed the remaining three months rent. Finally, Crescent stated it was retaining the security deposit as partial payment of the February rent arrearage.
Ashford responded by filing a general denial. It also counterclaimed for breach of the lease, constructive eviction, and conversion. Ashford also requested its own temporary restraining order and temporary injunction. On April 23 and 25, 2003, a bench trial was held. The trial court subsequently entered judgment against Ashford and ordered it to pay damages of $346,283.69 plus interest and $74,735.00 in attorney fees. Ashford then filed a motion to amend the final judgment or, in the alternative, for a new trial, and the court held a hearing on the motion. At the conclusion of the hearing, the trial court denied Ashford's request for a new trial, but suggested a remittitur of $40,000. Crescent agreed and final judgment was entered against Ashford for $306,283.69 in damages, plus interest and attorney fees.
On February 13, 2003, the trial court entered an "Agreed Temporary Injunction" permitting Ashford to remove its remaining equipment from the leased premises.
The judgment also requires Ashford to pay an additional $20,000 in attorney fees for an unsuccessful appeal to this court and $15,000 in the event of an adverse ruling in the Texas Supreme Court.
Standard of Review
When a bench trial is conducted and the court does not enter findings of fact and conclusions of law to support its ruling, all facts necessary to support the judgment are implied. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002); Zac Smith Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex. 1987). Because the trial court granted judgment for Crescent, but did not enter specific findings of fact or conclusions of law, we review Ashford's complaints with the presumption that all findings and conclusions were made in favor of Crescent.
Both parties made requests for findings of fact and conclusions of law pursuant to Texas Rules of Civil Procedure 296 and 297. TEX. R. CIV. P. 296, 297. To date, the trial court has not entered any findings or conclusions.
However, when the appellate record includes the reporter's and clerk's records, implied findings are not conclusive and may be challenged on the basis of legal and factual sufficiency. BMC Software Belg., 83 S.W.3d at 795. Here, Ashford ultimately complains of the trial court's judgment on legal and factual sufficiency grounds. More specifically, Ashford contends the evidence indicates Crescent — not Ashford — actually breached the lease. Ashford also contends the evidence on damages and attorney fees was insufficient. Thus, we will review Ashford's points of error under the well established standards for complaints regarding sufficiency of the evidence.
We review the trial court's decision for legal and factual sufficiency of the evidence by the same standards applied in reviewing the evidence supporting a jury's finding. Lenz v. Lenz, 79 S.W.3d 10, 19 (Tex. 2002); Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). When reviewing the legal sufficiency of the evidence, we review the evidence in light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We credit favorable evidence if a reasonable fact finder could and disregard contrary evidence unless a reasonable fact finder could not. Id. at 827. The evidence is legally sufficient if it would enable fair-minded people to reach the verdict under review. Id. Therefore, we must examine the record in this case to determine whether some evidence exists to support the court's judgment.
In reviewing the factual sufficiency of the evidence, we must consider and weigh all the evidence and should set aside the judgment only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We may not substitute our own judgment for that of the trier of fact, even if we would have reached a different result on the evidence. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). Therefore, we will reverse only if the overwhelming weight of the evidence indicates the trial court's judgment for Crescent was clearly wrong and unjust.
Breach of the Lease
In its first issue, Ashford contends the trial court erred in holding that Ashford, rather than Crescent, defaulted on or otherwise breached the lease. Specifically, Ashford claims even if it wrongfully removed fixtures or improvements from the premises, this action constituted a non-monetary breach. According to the lease, this type of breach is not considered an "event of default" until Crescent provides written notice and an opportunity to cure and Ashford fails to properly cure. Similarly, Ashford contends that any damage to the premises was not an "event of default" unless or until the predicate notice, opportunity, and failure to cure had been met. Finally, Ashford suggests that Crescent knew there was no real threat posed by the asbestos and, therefore, the "emergency" justification for the lockout was merely a pretext. Accordingly, Ashford concludes it did not default on or otherwise breach the lease, but rather, it was unlawfully locked-out and constructively evicted thereby allowing it to lawfully terminate the lease and escape liability from all remaining obligations.
The Texas Property Code generally forbids a landlord from excluding or locking-out a tenant from property which is the subject of a valid lease agreement. See TEX. PROP. CODE ANN. § 93.002 (Vernon 1995). When such a lockout occurs, the tenant is entitled to recover possession of the premises or terminate the lease and recover damages from the landlord. Id. § 93.002(g). However, the Code also provides an exception where the lock-out results from "bona fide repairs, construction, or an emergency." Id. § 93.002(c)(1). Thus, where a landlord has properly excluded a tenant for "bona fide repairs, construction, or an emergency," the landlord is shielded from liability. Here, we find sufficient evidence to support the trial court's implied holding that Crescent validly exercised its right to exclude Ashford under section 93.002(c)(1) of the Property Code.
The record indicates that while removing various fixtures and improvements, Times Past inflicted substantial damage to the leased premises. For example, an affidavit from Robert Carlen, Crescent's Property Management Vice President, stated:
In my 22, plus, years involved in the management and leasing of . . . commercial office space, I have never seen a vacating tenant inflict the damage, destruction, and removal of valuable interior, finish fixtures as has occurred with [Ashford's] Retail Lease Space. . . . [Crescent] likely could have re-leased to a future retail tenant with minimal modification and renovation, but for the damage and fixture removal inflicted upon the space by [Ashford].
In addition, photographic evidence provided at trial depicts the destruction exacted by Times Past. It appears that while removing cabinetry, display cases, a sink, and other related improvements, Times Past created numerous holes in the walls throughout the retail space. Also, while removing light fixtures, Times Past produced large holes in the ceiling. These holes ranged in size from a few inches to several feet in diameter. The creation of these holes — and the inherent need to repair them — provided sufficient justification for Crescent to temporarily exclude Ashford from the premises. See TEX. PROP. CODE ANN. § 93.002(c)(1) (permitting a landlord to exclude a tenant for "bona fide repairs").
Further, the perceived danger created by Times Past's destruction of the walls and ceiling also permitted Crescent to exclude Ashford. Id. Crescent offered evidence of a dual danger. First, Crescent was concerned about potentially "hot" electrical wires that were left hanging from the ceiling. To alleviate this concern, Crescent immediately contacted an electrician and paid for both an electrical survey and the capping of the "hot" wires. Thus, Crescent was exercising not only a right, but possibly an obligation, to prevent anyone from coming into contact with dangerous, exposed electrical wires.
Second, Crescent was concerned about the risk of potential asbestos exposure. Ashford was aware that the building contained asbestos fire-proofing material and was specifically admonished not to disturb the material by puncturing the ceiling. Notwithstanding these admonitions, Times Past created a number of sizeable holes in the ceiling when it removed the light fixtures and other improvements. On January 29, 2003 — the same day it discovered the damage inflicted on the premises — Crescent immediately ordered an environmental engineering survey to be conducted. To minimize the risk of asbestos exposure, Crescent also quarantined the at-risk area and excluded Ashford until results of the asbestos testing indicated it was safe to return. Crescent received these results on the evening of Friday, January 31. Crescent informed Ashford on Monday, February 3 — the very next business day — that the results showed no apparent risk of exposure and that Ashford would be permitted to re-enter the space as soon as the holes were patched, i.e., within 24 hours.
Multiple provisions in the lease indicated certain areas of the buildings contained asbestos fire-proofing material. These provisions clearly prohibited Ashford from disturbing this material. For example, section 11 of the "Rules and Regulations" specifically provided that:
. . . pursuant to OSHA and EPA guidelines regarding asbestos containing materials, no tenant shall cause to be open any part of the ceilings in the Building without having first received written permission from [Crescent]. It is the intent of this policy to prevent any ceiling from being opened . . . includ[ing] any action or penetration which would break the plane of the ceiling surface, no matter how slight.
At trial, Crescent presented nearly 100 color photographs detailing how the premises looked both before and after Times Past entered the building. Crescent also introduced into evidence copies of the environmental testing results and all written communications with Ashford regarding the "emergency" situation and temporary lockout. The testimony of Crescent's witnesses was that, at all times, Crescent considered the lockout extremely important, but also of a temporary duration. In addition, Wally Capps, a fifteen-year veteran in asbestos-related environmental clean-up, testified as an expert on Crescent's behalf. Capps participated in the clean-up at Five Greenway Plaza and explained that, based on the condition of the premises, it was both "prudent" and "necessary" for Crescent to secure the areas as it did.
This testimony was offered to refute Ashford's argument that it was constructively evicted. In order to prove its claim of constructive eviction, Ashford was required to establish four elements: (1) an intention on the part of Crescent that Ashford no longer use or enjoy the premises; (2) a material act or omission by Crescent that substantially interfered with Ashford's use and enjoyment of the property; (3) Ashford's permanent deprivation of the use and enjoyment of the premises; and (4) Ashford's abandonment of the premises, within a reasonable time, that was the direct result of Crescent's act or omission. See, e.g., Columbia/HCA of Houston, Inc. v. Tea Cake French Bakery Tea Room, 8 S.W.3d 18, 22 (Tex.App.-Houston [14th Dist.] 1999, pet. denied) (detailing the elements necessary for constructive eviction). Here, the evidence suggests: (1) any interference with Ashford's use and enjoyment of the leased space was only temporary, and (2) Ashford had a predetermined intention to abandon the premises well before Crescent took any action regarding the temporary lockout. Thus, the evidence does not support Ashford's contention that it was constructively evicted.
In rebuttal, Ashford cross-examined several witnesses in an effort to elicit testimony that Crescent knew there was no threat of exposure on January 29. While some evidence suggests there was no immediate threat of asbestos exposure, this evidence was based primarily on a cursory inspection of the premises. However, Crescent's expert witness stated at trial that quarantining the area for further testing was necessary and prudent. Considering the evidence in the light most favorable to the trial court's decision, we find it legally sufficient to sustain the judgment. Furthermore, after reviewing the entire record, we find the trial court's judgment was not so contrary to the overwhelming weight of the evidence as to be clearly wrong or unjust. Accordingly, we affirm the trial court's decision insofar as it determined Crescent did not violate the lease by excluding Ashford from the two areas in Five Greenway Plaza.
We also refuse to overturn the trial court's decision on grounds that Crescent breached the lease by hiring security guards to prevent further damage to the remaining leased space. Nothing in the record suggests the guards prevented access or otherwise interfered with Ashford's business in the remaining space. In fact, trial testimony indicates Ashford was allowed to continue its normal business operations. Therefore, absent evidence the guards excluded Ashford employees or otherwise substantially interfered with its normal activities, Ashford's sufficiency challenges cannot be sustained on this basis.
Turning to whether or not Ashford defaulted on the lease, we find the evidence sufficiently supports the trial court's judgment on this issue. Having already determined that Ashford was not unlawfully locked out, we agree with the trial court's implied finding that Ashford defaulted on the lease. More specifically, because Ashford was not unlawfully locked out, it was not entitled to terminate the lease or otherwise avoid the remaining lease obligations under section 93.002 of the Property Code. Therefore, Ashford's refusal to pay the February rent and all future rents was a breach of the agreement.
According to the terms of the lease, once Ashford failed to pay rent for the third time in a twelve-month period, Crescent was entitled to immediately terminate Ashford's right of possession. It is undisputed that Ashford had failed on two prior occasions within the preceding twelve months to timely pay rent. When Ashford refused to pay rent on the third occasion, its refusal became an automatic "event of default," thus entitling Crescent to terminate Ashford's right of possession upon a single, informative notice. In addition, Crescent was entitled under the terms of the lease to enforce all remaining obligations, including the collection of rent. Therefore, based on the express terms of the lease and the evidence presented at trial, the trial court's decision regarding Ashford's breach was neither clearly wrong nor unjust. Accordingly, we hold the evidence is both legally and factually sufficient to sustain the trial court's decision, and overrule Ashford's first issue.
Section 17 of the lease governed "Defaults and Remedies." This section specifically explained that "[Ashford's] failure to comply with any single provision of this Lease more than 2 times during any consecutive 12 month period during the Term, regardless of cure, shall be an independent Event of Default." The section further stated that upon an Event of Default, Crescent was required to provide only "a single informative notice of default, without further opportunity to cure . . ." Once this notice was provided, Crescent was entitled to terminate Ashford's right of possession without terminating the lease and to seek all damages permitted by law and according to the lease.
Damages for Unpaid Rent
In Ashford's second issue, it complains the evidence does not support the amount of damages awarded for unpaid rent. More specifically, Ashford argues: (1) Crescent failed to prove it was entitled to certain "excess operating expenses" under the lease; (2) the trial court failed to reduce the award for alleged mitigation because Crescent leased part of the premises to another tenant; and (3) the trial court erred by not reducing the award for the wrongful lockout period. According to Ashford's calculations, the total amount of damages for unpaid rent should have been $14.25 per foot, or alternatively, $139,441.98. Excess Operating Expenses
The $346,283.69 in damages was apparently apportioned by the trial court as follows: $212,500.55 for unpaid rent; $114,779 for reparation/restoration of fixtures and improvements; and $19,004.14 for miscellaneous damages such as environmental testing, security, electrical work, and debris removal. After Crescent agreed to a remittitur of $40,000, the damage award totaled $306,283.69.
Ashford calculated total damages as follows:
$89,237.89 [base rent for February] — $71,376 [security deposit refund] — $17,847.54 [lockout credit (see infra note 15)] = $14.25 total damages for unpaid rent; or alternatively, ($89,237.79 [base rent per month] × 3 months) — 71,376 [security deposit refund] — $39,047.85 [mitigation credit for April (see infra note 12)] — $17,847.54 [lockout credit (see infra note 15)] = $139,441.98 total damages for unpaid rent.
Initially, Ashford attacks the sufficiency of Crescent's proof regarding "excess operating expenses" ("EOE") owed under the lease. Ashford concedes that the lease required monthly rent payments of $89,237.79 plus 1/12 of Crescent's good-faith estimate of its EOE. However, Ashford contends there was insufficient evidence that Crescent's EOE claim was a good-faith estimate.
Reviewing the record in this case, we note that the lease provided a detailed description of charges to be included and excluded in the calculation of EOE. Crescent provided billing statements listing all the EOE charges for the months of February through April 2003. Rob Roy, general manager in charge of the subject properties, testified that Crescent audits the billing and financial statements every year to ensure the EOE charges are accurate. Moreover, Roy stated that he personally signs off on the EOE calculations included in the statements. On cross-examination, Ashford challenged Roy regarding the accuracy of the February to April statements. Ashford pointed out that Roy did not personally do the EOE calculations and further noted that the numbers included in the billing statements were not necessarily the final amounts Ashford would be charged. However, nothing in Roy's testimony or in any other evidence presented by Ashford indicates the numbers provided by Crescent were incorrect or that they were not a good faith estimate.
Keeping the appropriate standard of review in mind, we find the trial court's judgment and award of damages on this point is supported by the evidence. Moreover, we cannot say the court's decision was so contrary to the overwhelming weight of the evidence as to be clearly wrong or unjust.
Mitigation Reduction
Ashford next argues that the trial court erred by not reducing the damage award for mitigation because Crescent was able to re-let a portion of the premises to another tenant, Occidental Oil and Gas ("Oxy"). Ashford points out that Crescent required 45 days for "build-out" and "make-ready" activities before Oxy could move into the leased space. Ashford argues that, had it not moved out early, this 45-day period would have precluded Crescent from receiving rent from Oxy until June 1. However, because Crescent was able to begin the "build-out" process when Ashford left, it received rent from Oxy much earlier. Thus, Ashford argues that it was entitled to a mitigation credit for 45 days, or $39,047.85.
Ashford calculates the mitigation credit for 45 days as follows:
$26,032 [monthly rent for the two re-let areas at $10 per square foot]) 30 days = $867.73 [avg. rent per day] — 45 days = $39,047.85 total mitigation credit for 45 days.
On the other hand, Crescent argues that it was required to provide an offset for only 10 days in April. Crescent notes that the Oxy lease was not signed until April 15, 2003, and that no steps were taken in the "build-out" process until April 21. Crescent concedes that it was provided 10 additional days, April 21-30, in which to prepare the leased space for Oxy. Therefore, Crescent argues that Ashford was entitled to a mitigation credit, if any, for only 10 days, or $8,124.82.
Crescent calculates the mitigation credit for 10 days as follows:
((13,215 sq. ft. × $10 per sq. ft.)) 360 days) × 10 days = $3,670.83 rent
+ $1,310 [April EOE] × 1/3 [for 10 days] = $436.67 EOE
$4,107.50 [total offset for Suite B150]
+ ((12,817 sq. ft. × $10.09 per sq. ft.)) 360 days) × 10 days = $3592.32 rent
+ $1,275 [April EOE] × 1/3 [for 10 days] = $425 EOE
$4,017.32 [total offset for Suite B155]
= $8,124.82 total mitigation credit for 10 days.
Here, the lease provided that, upon termination of Ashford's right of possession, Crescent was entitled to recover "all Rent accrued through the end of the month in which termination becomes effective, [i.e., February]" plus " Landlord's Rental Damages"equal to the difference between what Ashford owed for the remaining term and any amount actually received by Crescent once it re-let the premises. Thus, Crescent agreed to provide a prorated offset for the 10 days in which it was able to begin the "build-out" process early. Moreover, it appears from the record that both Crescent's request and the trial court's award included this offset. Because the evidence is legally and factually sufficient to support the award of damages, we refuse to overturn the trial court's decision regarding the mitigation credit Ashford received.
Emphasis in original.
Rent for Six Days' Lockout
Finally, Ashford argues the trial court erred in refusing to reduce the damages for unpaid rent for the six days of "wrongful lockout." Alternatively, Ashford claims that even if the lockout was not a breach of the lease, it was a violation of the covenant of quiet enjoyment. Therefore, Ashford requests a remittitur of six days' rent, or $17,847.54.
Ashford calculates six days' rent as follows:
$89,237.79 [base rent per month]) 30 days = $2,974.59 [avg. base rent per day] × 6 days = $17,847.54.
As we have already observed, the trial court impliedly found the lockout was not wrongful. After considering all the evidence, the trial court concluded that Crescent was entitled to $212,500.55 in damages for unpaid rent. After making our own review of the evidence, we find Crescent's actions were justified under both the Texas Property Code and the lease. See TEX. PROP. CODE ANN. § 93.002(c)(1). Therefore, we disagree with Ashford's contention that any further reduction was required in the calculation of damages for unpaid rent. At the very least, the evidence is neither legally nor factually insufficient to undermine our confidence in the trial court's decision. Accordingly, we overrule Ashford's second issue.
Damage for Repairs
In Ashford's third issue, it argues the evidence does not support the trial court's award of $114,779 in repair damages. Ashford does not dispute that it owed $13,064 for sheet rock repair/replacement. Instead, Ashford claims Crescent failed to prove it was entitled to the remaining damages, namely $57,754 for electrical repair and $26,945 for replacement of certain millwork, or cabinetry. Accordingly, Ashford claims the trial court should have awarded, at most, $18,009.25 for repair damages. Electrical Repair
Ashford calculates repair damages as follows:
$13,064 [undisputed sheet rock repair] + $4,945.25 [electrical repair based on Ashford's estimate] + $0 [millwork replacement] = $18,009.25.
Ashford's primary complaint regarding Crescent's electrical repair claim is that the request was not based on a current, working estimate of the necessary repairs. In other words, Ashford contests the estimate because (1) allegedly, it was not based on personal knowledge of the contractor, and (2) nothing established it was reasonable based on the work actually required.
At trial, Johnny York, president of Cactus Builder's Incorporated, testified about the basis for the electrical repair estimate. York explained that his company had been hired by Crescent to act as the general contractor for the repair project. York testified that, in formulating his own bid, he asked a subcontractor, Midwest Electric Company ("Midwest"), to conduct an onsite survey of the premises and review the initial construction documents from 1999. York explained that Midwest took a look at the space and submitted a bid accordingly. Based on Midwest's bid, York devised his own proposal indicating what he believed the job would cost. Both Midwest's bid and York's proposal letter were introduced as evidence to support Crescent's claim for electrical repairs. In addition, York testified on cross-examination that his proposal was competitive and fair. In fact, York claimed the markup on the proposal was "less than normal" and explained that, if anything, the proposal was "under fair" to Cactus Builder's, Inc.
Ashford sought to refute Crescent's damage estimates through the testimony of Peter de la Mora, an engineering consultant designated as an expert witness. De la Mora testified that he conducted an independent review of the premises and determined that the electrical repair/replacement costs were $4,945.25. De la Mora further explained that this estimate was based on an actual physical inspection of the premises. He further claimed that, in his opinion, the discrepancy between the two bids was due to Cactus Builders' including repair/replacement of all light fixtures — not just the ones needing work. Thus, Ashford suggests that De la Mora's testimony was the only competent evidence regarding the repairs that were actually necessary.
Because the evidence was conflicting in this case, the trial court, as the fact-finder, was the sole judge of the witnesses' credibility and the weight of their testimonies. City of Keller, 168 S.W.3d at 819. Therefore, the trial court may choose to believe the testimony of one witness and disbelieve that of another. Id.
As the reviewing court, we are not a fact finder and cannot pass upon a witness' credibility or substitute our judgment for that of the fact finder. This is true even if conflicting evidence exists that would support a different conclusion than that reached by the trial court. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). Considering these tenets, and the appropriate standard of review for sufficiency of the evidence challenges, we disagree with Ashford's claim that the trial court's electrical repair award is unsupported by the evidence.
Millwork Replacement
Ashford also claims in its third issue that Crescent failed to sufficiently prove it was entitled to compensation for replacement of certain millwork or cabinetry. According to Ashford, the millwork consisted of "trade fixtures" which are presumed to be Ashford's property upon termination of the lease. Accordingly, Ashford contends Crescent was not entitled to any damages for replacement of property it did not rightfully own. Alternatively, Ashford complains that, if Crescent was entitled to damages for replacement of the millwork, Crescent failed to provide evidence that the replacement estimate was reasonable.
A trade fixture is an article attached to a leasehold by a tenant which enables him to carry on the trade, profession, or business which is contemplated by the lease. Connelly v. Art Gary, Inc., 630 S.W.2d 514, 515 (Tex.App.-Corpus Christi 1982, writ ref'd n.r.e.). The article must be removable without permanent or material injury to the premises. Id. Generally, once a lease is terminated, trades fixtures are presumed to be the tenant's property and are removable at his discretion. Alexander v. Cooper, 843 S.W.2d 644, 646 (Tex.App.-Corpus Christi 1992, no writ); Boyett v. Boegner, 746 S.W.2d 25, 27-28 (Tex.App.-Houston [1st Dist.] 1988, no writ). However, this discretion is subject to any contractual provisions to the contrary. Alexander, 843 S.W.2d at 646; Boyett, 746 S.W.2d at 27-28. Therefore, if it specifically addresses fixtures, the lease agreement governs the parties' property rights in fixtures. Alexander, 843 S.W.2d at 646; Fenlon v. Jaffee, 553 S.W.2d 422, 429 (Tex.Civ.App.-Tyler 1977, writ ref'd n.r.e.).
Here, the lease contains several provision which govern improvements, alterations, and fixtures. Ashford points out that section 18(b) requires it to "immediately remove all of [its] FFE from the Premises" upon termination of the lease. "FFE" is defined elsewhere, in section 14(b), as "Tenant's furnishings, trade fixtures, equipment and inventory." Ashford claims these provisions explicitly provide its right to remove the millwork. In fact, Ashford argues that section 18(b) required that it remove these items.
However, in construing the lease, we are to examine the entire document in order to harmonize and give effect to all its provisions so that none will be rendered meaningless. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). No single provision taken alone will be given controlling effect; instead, all provisions must be considered in relation to the whole instrument. Id.
After reviewing the entire lease and considering the context of the provisions cited by Ashford, we disagree with Ashford's assessment of its right regarding the millwork. Section 18(b)(ii) actually states, "provided there is no uncured Event of Default, [Ashford] shall, at its expense, immediately remove all of [its] FFE from the Premises." Here, as previously explained, Ashford's failure to timely pay rent for the third time in a year was an event of default under the lease. Therefore, 18(b)(ii) is not applicable, and we must turn to other provisions in the lease to determine the parties' rights and obligations regarding the millwork. Section 18(b)(i) provides that "[u]pon . . . termination of [Ashford's] right of possession of the Premises . . . all leasehold improvements and Alterations installed in the Premises, including all built-in fixtures and cabling, shall become [Crescent's] property."
Emphasis added.
Emphasis added.
Moreover, trial testimony regarding the millwork centered on whether it was "built-in" or movable. Roy, Crescent's property manager, stated that he believed the millwork was bolted or otherwise affixed to the walls and/or floors in a way that made them permanent improvements. He also explained that, because of their nature, he expected the millwork to remain in the premises after the lease expired. York, Crescent's general contractor, similarly described his understanding of the nature of the improvements. In his opinion, the items Ashford removed were built-in fixtures and should have remained part of the premises for future tenants — much like kitchen cabinets in a house. York also explained why Crescent asked him to submit two different estimates for replacement of the improvements. The first estimate included every piece of shelving, cabinetry, lighting, and all other improvements to the premises. This estimate totaled more than $215,000. In figuring the second estimate, Crescent asked York to exclude any questionable items, viz, any improvements which were arguably movable "furniture." Thus, according to Crescent, the $114,779 damage request included only those items which were undoubtedly built-in fixtures.
Ashford contradicted this evidence with the testimony of its own expert and with original construction documents indicating the cabinetry was built off-site as "freestanding millwork." Ashford also argues that the evidence suggests the millwork was removable with only minimal damage to the walls and ceilings. Therefore, Ashford claims the items were removable "trade fixtures" under the common industry definition of the term.
After considering all the evidence, the trial court found the millwork was built in and should not have been removed by Ashford. Because the status of fixtures as "built-in" or removable is a questions of fact to be determined by the trier-of-fact, the court was entitled to make this determination. Melendez v. State, 902 S.W.2d 132, 137 (Tex.App.-Houston [1st Dist.] 1995, no writ), overruled on other grounds by State Farm Fire Cas. Co. v. Morua, 979 S.W.2d 616 (Tex. 1998); Alexander, 843 S.W.2d at 646. Based on our own review of the evidence, we do not find the trial court's decision to be so contrary to the evidence as to be clearly wrong or unjust.
In addition, we disagree with Ashford's contention that evidence of the actual damage amount is insufficient. Much like with the electrical repair damages, there was conflicting evidence about what the millwork replacement should cost. The court heard this evidence and resolved the discrepancy in Crescent's favor. After reviewing the record, we cannot say this decision was clearly wrong or unjust. Accordingly, we overrule Ashford's third issue.
Both Crescent and Ashford introduced testimony from their respective experts regarding a reasonable cost estimate for replacement of the millwork. In addition, Crescent provided an itemized estimate for the work which was described as "more than fair."
Attorney Fees
In its final issue, Ashford contends the evidence was insufficient to support the award of $74,735 in attorney fees. Specifically, Ashford argues (1) Crescent failed to segregate its request for attorney fees between causes of action on which it prevailed and those which it did not, and (2) the fees were excessive considering the factual and procedural nature of the case.
The lease permitted the prevailing party in any dispute regarding the lease to recover attorney fees. In its original and two supplemental petitions, Crescent included claims for: (a) waste and destruction of property; (b) conversion of fixtures; (c) breach of the lease; (d) declaratory relief; (e) temporary restraining order; (f) temporary injunction; (g) foreclosure of landlord's lien; and (h) additional damages provided for under the lease (e.g., repair/restoration of the premises, removal of additional equipment owned by Ashford). It appears from the judgment Crescent was not successful on all of these claims. Thus, Ashford complains the fee award was not properly segregated.
Regarding Ashford's first complaint, it failed to object at trial regarding the segregation of fees and, therefore, has presented nothing for us to review. See Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 389 (Tex. 1997) ("[I]f no one objects to the fact that the attorney's fees are not segregated as to specific claims, then the objection is waived."); Aero Energy, Inc. v. Circle C Drilling Co., 699 S.W.2d 821, 823 (Tex, 1985) (holding failure to object to the failure to segregate attorney fees among claims waives any complaint on appeal).
Even if Ashford had properly preserved its complaint, we would still find no error in the failure to segregate attorney fees in this case. A plaintiff is not required to segregate attorney fees where his claims arise out of the same transaction and are so interrelated that their prosecution requires proof of essentially the same facts. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10-11 (Tex. 1991); Stamp-Ad, Inc. v. Barton Raben, Inc., 915 S.W.2d 932, 937-38 (Tex.App.-Houston [1st Dist.] 1996, no writ). Here, all of Crescent's claims stemmed from the same basic contention, viz, that Ashford breached the lease and owed damages pursuant to numerous provisions of the agreement.
Ashford also complains the amount awarded for attorney fees was excessive based on the "simple" nature of the case. Ashford argues the case required very little time because there was minimal discovery, no significant motion practice, and the trial itself was a short day-and-a-half bench trial. Therefore, Ashford requests either a 50% reduction in the amount of attorney fees awarded or a reversal of the trial court's decision.
We first note the prevailing party in this dispute is entitled to recover reasonable attorney fees pursuant to the lease agreement. See Norrell v. Aransas County Navigation Dist. No. 1, 1 S.W.3d 296, 303 (Tex.App.-Corpus Christi 1999, no pet.) (awarding attorney fees where a lease agreement provided the prevailing party could recover the fees in any litigation involving the lease); see also Holland v. Wal-Mart Stores, 1 S.W.3d 91, 95 (Tex. 1999) (stating the prevailing party cannot recover attorney fees unless permitted by statute or contract). Thus, the only question becomes whether or not the fees awarded in this case were reasonable.
Section 17(f) states, "[i]n any dispute regarding this Lease, the prevailing party shall be entitled to recover reasonable attorneys' fees, court costs and expenses from the other party."
In determining the reasonableness of attorney fees, trial courts are to consider the following factors:
(1) the time and labor required, and the skill required to perform the legal service properly;
(2) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services were rendered.
Arthur Andersen Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). We review a trial court's decision to award attorney fees under an abuse of discretion standard. Greathouse v. Glidden, 40 S.W.3d 560, 571 (Tex.App.-Houston [14th Dist.] 2001, no pet.). A trial court abuses its discretion when it acts "in an arbitrary or unreasonable manner without reference to any guiding rules or principles." Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex. 2003).
Crescent's attorney testified as to the reasonableness of the attorney fees and discussed each of the factors outlined in Arthur Anderson Co. She testified that she had 20 years of experience in real estate litigation and that, in her estimation, the fees were:
all reasonably and necessarily incurred based upon the unusual circumstances presented by this case and the unusual amount of detailed attention it required regarding the property issues and construction issues at the facility where personalty issues of facilitating the moving of Ashford's property and that of third parties and the like. The pleadings required in this case were all necessary and reasonably prepared and in as an efficient and customary manner as appropriate for someone of my experience and knowledge.
Crescent's counsel also described in great detail the many actions she took on the case including investigation, discovery, mediation, hearings on injunctive relief, and drafting the various pleadings. She also reported that she had spent nearly 200 hours on the case up to the time of trial. In addition, she discussed the assistance she received from a colleague, a transactional real estate attorney with 15 years experience, and listed the hours he assisted on the case. Finally, counsel disclosed that she worked for a discounted billing rate — $330 per hour as opposed to $365 — and that she did not charge for some of the time worked by an associate and a legal assistant.
Opposing counsel had an opportunity to cross-examine Crescent's attorney regarding her fees and, after hearing all the relevant evidence, the trial court determined the request for attorney fees was reasonable. In light of the record before us, we find the trial court's award of attorney fees did not constitute an abuse of discretion. See Greathouse, 40 S.W.3d 560, 571. Accordingly, Ashford's fourth issue is overruled.
The judgment of the trial court is affirmed.