Pala, Suresh v. Michael Maxim

• Court: Court of Appeals of Texas
• Decided: February 7, 2002
• Docket: 01-01-00618-CV
• Status: Published

Opinion

Opinion issued February 7, 2002

In The

Court of Appeals

For The

First District of Texas

____________

NO. 01-01-00618-CV

SURESH PALA, Appellant

V.

MICHAEL MAXIM, Appellee

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On Appeal from County Court at Law No. 1

Harris County, Texas

Trial Court Cause No.729,414

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O P I N I O N

          This landlord-tenant dispute arises from early termination of a residential lease by appellee, Michael Maxim (tenant). Appellant, Suresh Pala (landlord), appeals a judgment by which each party prevailed on their respective claims, but recovered no damages, and which also required each party to pay the other $4,000 in attorney’s fees. Trial was to the court, which filed findings of fact and conclusions of law. Landlord presents four issues that: (1) challenge the finding that landlord materially breached the lease contract by not replacing buckled formica countertops; (2) contend the requirement to replace the countertops was not a condition precedent to performance of the contract; (3) challenge the finding that tenant did not act in bad faith by applying her security deposit to her last month’s rent; and (4) challenge the attorney’s fees awards. We affirm.

Facts and Procedural History

          Landlord and tenant signed a lease agreement for rental of 201 Vanderpool # 79 for one year at $2,400 per month. The one-year term began on December 2, 1998, and ended on December 1, 1999. Tenant paid landlord a month’s rent as a security deposit, as required by ¶ 11 of the lease, which referred to provisions of the Property Code relating to security deposits. Paragraph 32 of the lease contained two handwritten “special provisions”: (1) the unit was to be professionally cleaned before tenant occupied and (2) landlord was to “replace formica where buckled on kitchen counter.” When tenant found the cleaning inadequate and had the unit professionally cleaned after she moved in, landlord allowed tenant to deduct her costs from her first month’s rent.

          It is undisputed that landlord did not replace the buckled countertops, despite tenant’s repeated requests, although tenant acknowledged landlord made “some effort” to replace the countertops by obtaining estimates and bids from contractors, and landlord acknowledged tenant obtained a bid on her own. Landlord explained he is a self-employed CPA and could not proceed after obtaining the bids because they came in during his busy spring tax season. When tenant inquired in early summer about progress on the contractors’ bids, however, landlord replied he was considering replacing the countertops with granite. Landlord also testified he decided to replace the countertops with granite because he “got an indication” in March or April that tenant would be moving.

          Somewhat later that summer, the unit flooded. Tenant testified the following exchange occurred when she telephoned landlord about the flooding and he replied he would “send somebody over right away”:

I said, “Just like you said the formica people would be over right away.” I said, “Mr. Pala, I’m going to move.” And he said [“]okay.[”] And I wasn’t expecting him to say [“]okay.[”]

Tenant claimed she sent landlord a letter at that point, to indicate she intended to apply her security deposit to her last month’s rent. She further testified she telephoned him once again, after sending the letter, to confirm she intended to move as soon as she found another place to live.

          Landlord’s evidence included a letter, sent from him to tenant by certified mail on July 9, 1999, which confirmed his telephone conversation with tenant of that day, but tenant denied ever receiving the letter, and landlord was unable to produce a green card receipt at trial. In this letter, landlord notified tenant her July rent was past due, stated the lease prohibited applying the security deposit to the last month’s rent, and requested payment for July, plus late fees. On August 2, 1999, tenant issued written notice to landlord, also referring to the telephone conversation of July 9, 1999, in which she confirmed she would vacate the unit by August 9, apply her security deposit to the July rent, and pay pro rata rent of $720 to cover rent through August 9. The record contains a copy of a $720 check, issued by tenant to landlord and dated August 9, for the pro rata August rent.

          Tenant denied any intent to cheat or harm landlord by applying her security deposit to the July rent. When asked why she applied the deposit, tenant stated she felt landlord had taken advantage of her. Tenant maintained landlord neither returned her telephone calls nor came by to check the unit, and she expressed doubt, based on her past dealings, that he would ever return her deposit.

          Landlord sued tenant for applying the security deposit to the last month’s rent and for “unilaterally” breaching the contract before the lease terminated, under theories that included breach of contract and violations of section 92.108(a) of the Property Code. Tenant’s counterclaims included breach of contract, based on landlord’s failure to replace the formica countertops. Both landlord and tenant sought attorney’s fees under article 38.001 of the Civil Practice and Remedies Code. Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (Vernon 1997).

          The trial court resolved the parties’ claims by rendering judgment in favor of tenant, based on landlord’s having materially breached the lease, by not replacing the countertops, and in favor of landlord, based on tenant’s having applied her security deposit to the last month’s rent, although the court determined tenant did not act in bad faith. Although the trial court awarded no damages to either party, each was required to pay the other $4,000 in attorney’s fees. Landlord challenges each of these rulings. On landlord’s request, the trial court filed findings of fact and conclusions of law.

Challenge to Specific Findings

          Appellant’s first and third issues challenge the following findings by the trial court: that landlord materially breached the contract and that tenant did not act in bad faith by applying her security deposit to pay withheld rent.

A.      Standard of Review

          Findings of fact in a case tried to the court have the same force and effect as a jury’s verdict on questions and are reviewable for legal and factual sufficiency. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); Min v. Avila, 991 S.W.2d 495, 500 (Tex. App.—Houston [1st Dist.] 1999, no pet.). The trial court’s conclusions of law are reviewable de novo. McDermott v. Cronin, 31 S.W.3d 617, 623 (Tex. App.—Houston [1st Dist.] 2000, no pet.).

          When, as here, the appellate record contains a complete reporter’s record of the trial, the trial court’s findings of fact are not conclusive, but subject to the same, well-settled standards that govern legal and factual sufficiency challenges to jury findings. Commission of Contracts of the General Executive Comm. of the Petroleum Workers Union v. Arriba, Ltd., 882 S.W.2d 576, 582 (Tex. App.—Houston [1st Dist.] 1994, no writ); In the Interest of M.J.Z., 874 S.W.2d 724, 728 (Tex. App.—Houston [1st Dist.] 1994, no writ). In analyzing the legal sufficiency of the evidence to support findings on which tenant had the burden of proof, therefore, we consider only the evidence and inferences tending to support the challenged finding and disregard all inferences to the contrary. See Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex.1986); Arriba, 882 S.W.2d at 582. If any evidence of probative force supports the finding, we must overrule the challenge and uphold the finding. Southern States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex. 1989); Arriba, 882 S.W.2d at 582. In attacking the legal sufficiency of the evidence to support a finding on which landlord had the burden of proof, landlord must show that the evidence conclusively established a finding in his favor. See Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989). In reviewing this challenge, we first examine the record for evidence that supports the trial court’s finding and disregard contrary evidence. See id. If no evidence supports the finding, we then examine the entire record to determine whether it establishes the contrary proposition as a matter of law. Id.

          In determining the factual sufficiency of the evidence to support findings on which tenant had the burden of proof, we must weigh all the evidence, both supporting and conflicting with the finding, and may set the finding aside only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951); Arriba, 882 S.W.2d at 582. In attacking the factual sufficiency of the evidence to support a finding on which landlord had the burden of proof, landlord must show that the adverse finding is against the great weight and preponderance of the evidence. See Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983). In reviewing this challenge, we again examine the evidence to determine if some evidence supports the trial court’s finding. See id. If some evidence supports the finding, we must then determine, in light of the entire record, whether the finding is so contrary to the great weight and preponderance of the evidence that the finding is clearly wrong and manifestly unjust, or whether the great weight and preponderance of the evidence supports nonexistence of the finding. Cain, 709 S.W.2d at 176.

B.      Material Breach by Landlord

          Landlord’s first issue challenges the trial court’s ruling in favor of tenant on her counterclaim that landlord materially breached the contract by not replacing the buckled formica countertops in the kitchen. Material breach by one party to a contract excuses the other party from any obligation to perform. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 693 (Tex. 1994); Re/Max, Inc. v. Katar Corp., 961 S.W.2d 324, 327 (Tex. App.—Houston [1st Dist.] 1997, pet. denied). In determining that landlord’s failure to replace the formica countertops was material, the trial court impliedly ruled that landlord breached the contract and that tenant was thus excused from her obligation to pay rent for the full one-year term.

          The lease contract required landlord to replace the countertops, and it is undisputed that landlord did not replace them. When the terms of a contract are clear and unambiguous, and the facts concerning breach or performance are undisputed or conclusively established, the trial court decides, as a matter of law, whether the facts show performance or breach. Meek v. Bishop Peterson & Sharp, P.C., 919 S.W.2d 805, 808 (Tex. App.—Houston [14th Dist.] 1996, writ denied).

          Whether a breach is material, however, is an issue for the trier of fact, in this case, the trial court. See Hernandez, 875 S.W.2d at 693 & n.2 (citing Restatement (Second) of Contracts § 241(a) (1981) for factors relating to materiality of breach); see also Briargrove Shopping Center Joint Venture v. Vilar, Inc., 647 S.W.2d 329, 331 (Tex. App.—Houston [1st Dist] 1982, no writ) (holding trial court properly submitted to jury question of materiality of breach of lease provisions that common areas, parking areas, and alleyways of shopping center would not be reduced in size). Accordingly, we review the trial court’s determination that landlord materially breached the lease as a finding of fact under the usual legal and factual sufficiency standards.

          Landlord first challenges the finding of materiality on the grounds that tenant merely bargained for a habitable dwelling. Relying on tenant’s testimony that the countertops were unsightly, landlord contends the condition of the countertops did not prevent her from using the kitchen or create a hazard. To the extent, if any, landlord’s arguments might constitute defenses to tenant’s claim of material breach, landlord has waived them by not asserting them in the court below. See Tex. R. App. P. 33.1(a). Moreover, landlord’s arguments ignore that tenant’s counterclaim is premised on the bargained-for benefit of replacement countertops and the landlord’s failure to provide that benefit, and that the case was tried below on that theory.

          The benefit tenant could reasonably anticipate from full performance of landlord’s breached promise here was timely replacement of the buckled countertops. It is undisputed that landlord never replaced them. Under the first factor for materiality recognized in Hernandez, tenant was completely deprived of the benefit she bargained for in agreeing to the terms of the lease. See Hernandez, 875 S.W.2d at 693. Under the second factor, although landlord readily agreed to deduct tenant’s cleaning costs from the monthly rental after she moved in, nothing in the record suggests any attempt to compensate tenant for landlord’s continuing failure to replace the buckled countertops. Similarly, although landlord assured tenant he would perform and obtained bids to replace the countertops, landlord claimed at trial that his accounting-business schedule prevented him from acting on the bids. In addition, landlord indicated he suspected, as early as March or April, that tenant would move and, on that basis, planned to replace the countertops with granite instead. This evidence supports a minimal likelihood, under the fourth factor for materiality, that landlord would replace the countertops as promised, and also suggests, under the fifth factor, landlord’s lack of good faith in continuing not to perform while promising to perform.

          After applying the usual standards to our review of the evidence, we hold it is legally sufficient to support the trial court’s finding of fact that landlord materially breached the lease by not replacing the buckled countertops as promised. We further hold that any evidence against the finding does not so greatly preponderate in favor of a finding of lack of material breach as to render the trial court’s finding clearly wrong and manifestly unjust.

          We overrule issue one.

C.      No Bad Faith by Tenant

          In issue three, landlord challenges the trial court’s finding that, although tenant violated the Property Code by applying her security deposit to the last month’s rent, she did not act in bad faith. Section 92.108 of the Property Code creates a presumption of bad faith for applying a security deposit to unpaid rent. Tex. Prop. Code Ann. § 92.108(b). Landlord contends tenant offered no credible testimony to rebut the presumption of bad faith, and thus contends there is “no evidence,” or legally insufficient evidence, to support the trial court’s finding.

          Tenant disclosed her intent to apply the security deposit to her last month’s rent by telephone on July 9, 1999, and in writing on August 9, 1999. Tenant also claimed she sent landlord an earlier letter with a similar notice, and denied she received landlord’s letter of July 9, 1999, informing her that applying the deposit was prohibited. Although ¶ 11 of the lease indicated that applying the security deposit to a withheld rent payment was prohibited by the Property Code, and that bad-faith withholding of rent could subject tenant to trebled liability damages and attorney’s fees, ¶ 11 did not include notice that withholding rent to apply the security deposit creates a presumption of bad faith. Tex. Prop. Code Ann. § 92.108(b). Tenant denied she intended to cheat or harm landlord by applying the security deposit, and explained that, because of her past dealings with landlord, she felt he had taken advantage of her and doubted he would ever refund her deposit. This evidence supports and is legally sufficient to support the trial court’s finding that tenant did not act in bad faith in applying her security deposit to her last month’s rent.

          We overrule issue three.

Condition Precedent Argument Waived

          In issue two, landlord argues, for the first time on appeal, that the requirement to replace the buckled formica on the kitchen countertops was not a condition precedent to performance of the contract. Landlord has waived any error by not raising this issue in the trial court. See Tex. R. App. P. 33.1(a). Moreover, landlord’s argument ignores his own testimony that he agreed to replace the countertops and intended to replace them. More importantly, landlord’s argument conflicts with his conceding, at trial, that he understood replacing the buckled countertops was a condition tenant included in the lease in exchange for accepting landlord’s requirement to pay $2,400 monthly rent for the unit.

          We overrule issue two.

Attorney’s Fees

          In issue four, landlord contends the trial court abused its discretion by (1) awarding tenant $4,000 in attorney’s fees, and (2) limiting landlord’s recovery of attorney’s fees to $4,000. An award of attorney’s fees must be based on statutory or contractual authority. Jackson v. Biotechtronics, Inc., 937 S.W.2d 38, 44 (Tex. App.—Houston [14th Dist.] 1996, no writ). In requesting attorney’s fees, both landlord and tenant relied on section 38.001 of the Civil Practice and Remedies Code. Tex. Civ. Prac. & Rem. Code Ann. §38.001 (8) (“A person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract.”). In addition, ¶ 33 of the lease specified that, “Any person who is a prevailing party in any proceeding brought under or related to the transaction described in this Lease is entitled to recover prejudgment interest, attorney’s fees, and all other costs of litigation from the prevailing party.”

          The language used in the governing statute dictates whether the trial court has any discretion in awarding attorney’s fees or whether recovery is mandatory. See Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998). When the statute states that the court “may award” attorney’s fees, the trial court’s decision is discretionary. Id. The trial court has no discretion, however, when, as here, the statute states that a party “may recover.” Id.; see Tex. Civ. Prac. & Rem. Code Ann. §38.001. Accordingly, the appropriate, initial inquiry is not whether the trial abused its discretion, but whether, as a matter of law, the awards met the requisites of the statute, section 38.001. See Bocquet, 972 S.W.2d at 20 (listing several statutes in which attorney’s fees are not discretionary). As a question of law, the trial court’s resolution of this inquiry is reviewable de novo. See McDermott, 31 S.W.3d at 623. In determining whether a party is entitled to recover attorney’s fees under section 38.001, we determine whether the party (1) prevailed on a cause of action for which attorney’s fees are recoverable, and (2) recovered damages. See Green Int’l v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). On meeting these requirements, the party is entitled to “reasonable” attorney’s fees. See Tex. Civ. Prac. & Rem. Code Ann. §38.001.

          The reasonableness of an attorney’s fee award is a question for the trier of fact, here the trial court. See Bocquet, 972 S.W.2d at 20. Because we have a reporter’s record of the trial and the trial court entered findings of fact concerning the reasonableness of the $4,000 awarded each party as attorney’s fees, the trial court’s findings of reasonableness may be reviewed for legal and factual sufficiency. See Anderson, 806 S.W.2d at 794; Min, 991 S.W.2d at 500.

B.      Award to Tenant

          In challenging the $4,000 awarded to tenant, landlord contends tenant was not entitled to any attorney’s fees because she failed the second element of the Green Int’l v. Solis test. See id. at 390. Specifically, tenant prevailed on her claim for material breach of the lease contract and thus met the first element of the test, but recovered no damages. See id. The trial court’s responses to both parties on rendering judgment, however, clearly recite landlord’s duty to refund tenant’s security deposit, subject to any prorated rent due, as well as tenant’s duty to pay the last month’s rent. The parties’ duties with respect to this sum of money constitute the necessary element of damages to tenant, as well as landlord. Accordingly, tenant was entitled to her award of attorney’s fees.

C.      Award to Landlord

          With respect to his own award of attorney’s fees, landlord objects to the trial court’s having awarded only $4,000, despite landlord’s uncontroverted evidence that he incurred $6,150 in attorney’s fees. We construe landlord’s arguments as challenging the legal and factual sufficiency to support the trial court’s fact finding that $4,000, and no more, was a reasonable award of attorney’s fees to landlord.

          As the trial court’s oral pronouncements in rendering judgment reflect, the court awarded attorney’s fees to landlord because he succeeded on his claim that tenant wrongfully applied her security deposit to the last month’s rent. Consistent with its ruling in favor of tenant on her claim for material breach, which negated tenant’s duty to continue to pay rent after the breach, Hernandez, 875 S.W.2d at 693, the trial court rejected landlord’s claim for the full balance due under the remaining term of the lease. Thus, while landlord may have incurred $6,150 in attorney’s fees in pursuing his claims, he prevailed only on the claim for wrongful withholding of rent.

          In reviewing the reasonableness of an award of attorney’s fees, we may consider many factors. See Arthur Anderson & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). The determining factor, however, is whether the fees awarded are reasonable and necessary for the prosecution of the suit. See Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex. 1991). Given that landlord prevailed only partially on his claims, after applying the usual standards to our review of the evidence concerning landlord’s attorney’s fees, we hold there is evidence of probative force to support the trial court’s limiting landlord’s award by finding that only $4,000 in attorney’s fees was reasonable and necessary, and we therefore conclude the evidence is legally sufficient to support that finding. We further hold, in light of the entire record, that any evidence against that finding does not so greatly preponderate in favor of a greater award as to render the award of $4,000 clearly wrong and unjust.

          We overrule issue four.

Conclusion

          We affirm the judgment of the trial court.

     Tim Taft

     Justice

Panel consists of Chief Justice Schneider and Justices Taft and Radack.

Do not publish. Tex. R. App. P. 47.4.