Merry Homes, Inc. v. Chi Hung Luu

312 S.W.3d 938, 2010 Tex. App. LEXIS 1124, 2010 WL 547373
CourtCourt of Appeals of Texas
DecidedFebruary 18, 2010
Docket01-09-00187-CV
StatusPublished
Cited by31 cases

This text of 312 S.W.3d 938 (Merry Homes, Inc. v. Chi Hung Luu) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Merry Homes, Inc. v. Chi Hung Luu, 312 S.W.3d 938, 2010 Tex. App. LEXIS 1124, 2010 WL 547373 (Tex. Ct. App. 2010).

Opinion

OPINION

JANE BLAND, Justice.

In this commercial lease dispute, we determine whether a landlord may enforce a lease to operate a “nightclub or bar” and for “no other” purpose when the tenant cannot legally obtain a liquor license for the leased premises and the lease requires that any activity on the premises comply with applicable law.

After a bench trial, the trial court entered a judgment declaring the commercial lease between Merry Homes, Inc. and Chi Hung Luu void for illegality, since the lease only authorized the operation of a nightclub or bar at the premises and Luu was unable to obtain a liquor license due to the premises’ proximity to a public school. The trial court awarded Luu $6000 for the security deposit, $25,300 in attorney’s fees, and denied Merry Homes’ counterclaim for unpaid rent. In nine issues, Merry Homes (1) challenges the legal and factual sufficiency of fifteen different findings of fact and conclusions of law; (2) contends the trial court erred in holding the lease void for illegality, using an admission made by a co-defendant against Merry Homes, awarding attorney’s fees to Luu, and denying Merry Homes’ recovery on its counterclaim; and (3) asserts that six findings of fact should be disregarded as irrelevant to the issue of enforceability of the lease. We hold that the trial court correctly determined that Luu could not legally perform under the lease, and therefore affirm the judgment of the trial court.

Background

In December 2004, Chi Hung Luu, his friend and business partner Luc Dao, and Raymond Yu, Merry Homes’ agent, began negotiating to lease space in a new shopping center located on Bellaire Boulevard. Luu informed Yu of his desire to open a nightclub or bar at the location, and Yu responded that this particular location had good potential for that kind of business. Shortly after the initial meeting with Yu, Luu contacted Kim Marketing, an agency that specialized in obtaining liquor licenses, to discuss the requirements for such a license. The representatives of Kim Marketing informed Luu that he did not need to secure a lease before he applied for a liquor license, though Yu, as the landlord’s representative, had to supply lease information on the license application. In December 2004, Luu submitted a proposal of lease terms to Merry Homes, including proposed monthly rent ranging from $7000 to $7700 for a five year lease term, a security deposit of $7000, and Luu’s right *942 to terminate the lease with forty-five days’ notice.

Over the next five months, Luu and Dao met with Yu three or four additional times. On May 20, 2005, Yu presented a copy of the lease to Luu for his review. This version of the lease differed from Luu’s earlier written proposal: the security deposit and monthly rent were each $6000, and the lease included no provision allowing Luu to terminate the lease with forty-five days’ notice. According to Luu and Mary McGrane, a Merry Homes representative, the parties agreed that Merry Homes would not collect rent from Luu until after Luu obtained a permit to operate the bar and completed the build-out. On May 31, 2005, before the parties executed the lease, Kim Marketing asked that Yu provide information about Merry Homes for Luu’s liquor license application. According to both Luu and Dao, Yu refused to provide the necessary information for the application before Luu signed the lease on June 2, 2005.

The lease provides that Luu may use the premises only for the purpose of operating a nightclub or bar and for “no other” purpose. The lease also prohibits Luu from using the premises for “any activity that violates any applicable law, regulation, zoning ordinance, restrictive covenant, [or] governmental order” or for “any activity that violates any applicable federal, state, or local law.” An additional provision requires Luu to “satisfy [himself] that the leased premises may be used as [Luu] intends by independently investigating all matters related to the use of the leased premises or Property.”

On June 10, 2005, Luu submitted his liquor license application to the City of Houston. Approximately one month later, the city faxed a letter to Luu via Kim Marketing, informing him that the city denied his application since the premises is located less than 300 feet from a public school and less than 300 feet from a public hospital. The city mailed a follow-up letter on August 24, again informing Luu that it denied his application, but also suggesting that he attempt to qualify for the “restaurant exception,” which would allow Luu to operate a restaurant that serves alcohol at the premises. Luu testified that immediately after he received the first denial from the City of Houston, he contacted Yu and requested a meeting to determine how to proceed under the lease. At this meeting, Luu requested the refund of $6000 of the $12,000 he had paid Merry Homes for the security deposit and first month’s rent and asked to cancel the lease. Yu responded that Luu had signed the lease and was therefore committed to leasing the premises, but he should consider other options for using the space, such as a pool hall or a restaurant.

After the meeting with Yu, Luu began investigating the possibility of opening a restaurant instead of a bar. Luu testified that a restaurant required a full kitchen and thus a significantly more expensive build-out than a bar. Luu ultimately determined that opening a restaurant instead of a bar would not be financially feasible.

Merry Homes refused to refund Luu’s deposit or cancel the lease. Luu sought a declaratory judgment that the lease was void since it could not be performed legally, and also asserted claims of common law and statutory fraud, negligent misrepresentation, and violations of the Deceptive Trade Practices Act. Merry Homes counterclaimed for breach of contract and sought to recover eight months’ unpaid rent.

After a bench trial, the trial court declared the lease void and issued findings of fact and conclusions of law. The trial court denied recovery on Luu’s four other claims and on Merry Homes’ counterclaim *943 for unpaid rent-. The trial court rested its decision that the lease was void on two grounds: (1) Section 9(a) of the lease, which restricted the use of the premises to that of a nightclub or bar, fatally conflicted with Sections 10(a)(3) and (5), which prohibited any use of the premises that violates an applicable law or regulation; and (2) Luu could not perform his contractual obligations legally, since he could not obtain a liquor license for the premises due to its proximity to a public school. The trial court awarded Luu $6000 in damages and $23,500 in attorney’s fees.

Discussion

Standard of Review

In an appeal from a bench trial, the trial court’s findings of fact have the same weight as a jury verdict. HTS Servs., Inc. v. Hallwood Realty Partners, L.P., 190 S.W.3d 108, 111 (Tex.App.-Houston [1st Dist.] 2005, no pet.). We review a trial court’s findings of fact under the same legal and factual sufficiency of the evidence standards used when determining if sufficient evidence exists to support an answer to a jury question. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994);

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Cite This Page — Counsel Stack

Bluebook (online)
312 S.W.3d 938, 2010 Tex. App. LEXIS 1124, 2010 WL 547373, Counsel Stack Legal Research, https://law.counselstack.com/opinion/merry-homes-inc-v-chi-hung-luu-texapp-2010.