Opinion
No. 04-16-00831-CV
07-11-2018
WONG GROCERY CO., LLC, Appellant v. Patrick LAMBKIN d/b/a Raw Happiness Juice Bar, Appellee
MEMORANDUM OPINION
From the 166th Judicial District Court, Bexar County, Texas
Trial Court No. 2015-CI-10644
Honorable Solomon Casseb, III, Judge Presiding Opinion by: Rebeca C. Martinez, Justice
Dissenting Opinion by: Patricia O. Alvarez, Justice Sitting: Karen Angelini, Justice Rebeca C. Martinez, Justice Patricia O. Alvarez, Justice REVERSED AND RENDERED
Appellant Wong Grocery Company, LLC appeals a judgment awarding breach of contract damages and attorney's fees in favor of appellee Patrick Lambkin d/b/a Raw Happiness Juice Bar. We reverse the trial court's judgment and render judgment that Raw Happiness take nothing on its claims.
BACKGROUND
Patrick Lambkin wanted to open a juice bar called "Raw Happiness Juice Bar" in San Antonio. After looking at several potential locations, Lambkin decided to rent space in a building known as the "Wong Grocery Company." The three-story building is located at 1502 S. Flores Street ("the premises"). Wong Grocery Company, LLC owns the premises. Brent Widen is the current president of Wong Grocery Co., LLC, a limited liability company named after the building where a Chinese grocery store used to operate. We will refer to Wong Grocery Co., LLC throughout this opinion as "Wong Grocery."
On January 9, 2014, Lambkin d/b/a Raw Happiness Juice Bar (hereinafter, "Raw Happiness") entered into a lease agreement with Wong Grocery to lease approximately 529 square feet in the first floor of the premises to operate a fruit and vegetable juice bar. The lease was for a term of 10 years, with a monthly rent of $650. All light, water, and gas were to be provided at the landlord's expense. The lease contained a "right of first refusal" in which Raw Happiness had the ability to lease the entire first floor for $3,800 per month for the first five years, and $4,500 per month for an additional five years; the right of first refusal would mature once the space became available on or after December 1, 2014. Under the terms of the lease agreement, Widen would build out the space necessary for the juice bar to Lambkin's specifications, to be completed within 90 days of the signing of the contract. It was further agreed that the first floor "will always maintain a conference room available for use by any tenant."
The build out took longer to complete than the agreed-upon 90 days and the juice bar did not open for business to the general public until September 2014. Meanwhile, in May 2014, Wong Grocery signed a five-year lease with a five-year renewal option for the remainder of the first floor with AMART Concessions, LLC for a restaurant project. AMART subsequently abandoned the lease but entered into an "amended lease" with Wong Grocery on December 13, 2014, without first offering the space to Raw Happiness in violation of the right of first refusal. AMART demolished the conference room and rendered the remaining portion of the first floor unusable. AMART eventually repudiated the amended lease.
Even though Raw Happiness was timely paying rent each month, Widen began demanding that it leave the premises in January 2015. In May 2015, Widen unsuccessfully sought to evict Raw Happiness from the premises.
On June 30, 2015, Raw Happiness sued Wong Grocery and Widen in his personal capacity for damages and injunctive relief. Raw Happiness pleaded five causes of action: restraining order and injunctive relief; Texas Business and Commerce fraud; common law fraud; breach of contract; and Deceptive Trade Practices Act Violation. Under its breach of contract cause of action, Raw Happiness asserted thirteen separate breaches of contract as follows:
1. Defendants demolished, or caused to be demolished, the conference room that was to be available to Plaintiffs. Defendants rented out this space to another entity in violation of the lease.
2. Defendants demolished, or caused to be demolished, the seating area for customers that was to be available to Plaintiffs. Defendants rented out this space to another entity in violation of the lease.
3. Defendants failed to complete the finish-out in 90 days. Instead, Defendants took approximately 210 days. During that period, Plaintiffs were unable to use the space for their business, but required to pay rent.
4. Defendants removed the thermostat for the air conditioning system so that it could no longer be used by tenants. This was especially damaging to Plaintiffs, in that the product that Plaintiff produces begins to deteriorate if the air conditioning is not kept at 78 degrees Fahrenheit. (This occurs even when it is refrigerated—the outside temperature affects the storage of the materials inside the refrigerator.)
5. Defendants rendered the first floor restroom unsuitable for use.
6. Defendants took away the ability of Plaintiffs to use a sitting room area by demolishing the walls, rendering the area nothing more than a part of the larger first floor space. Defendants rented this space to another party, in violation of the lease.
7. Defendants removed tiles in the ceiling of Plaintiff's space.
8. Defendants blocked the fire exit in an attempt to cause code compliance to shut down Plaintiffs.
9. Defendants refused to fix the water heater in a timely manner.
10. Defendants rented out the entire first floor, without first giving Plaintiffs the opportunity to exercise their "right of first refusal" (the legal effect of the "right of first refusal" will be determined by the court). Defendants allowed the first floor to be demolished by a third party, rendering the "right of first refusal" valueless. In the alternative, Defendants violated the "right of first refusal" by renting the space to another entity, in violation of the "right of first refusal."
11. Defendants filed a notice to quit when [Plaintiffs] were in compliance with their lease terms.Raw Happiness sought money damages for all fees paid for utilities, monies spent to remedy damages caused by Wong Grocery, the loss of the use of the conference room, sitting area, and restroom based on a square footage calculation, and the loss of the benefit of the first refusal provision. Raw Happiness sought "continued performance of the contract with damages for the breach." Alternatively, Raw Happiness sought restitution and/or reliance damages based on the damage to the juice business. Raw Happiness additionally pled in the alternative for "rescission of the contract, with losses calculated as market rent from a similar space that [it] will be forced to move to, subtracting lower rent that [it is] entitled to pay under [its] current contract (under market value)." In addition, Raw Happiness sought lost profits based on the fair market value of the rest of the first floor under the "right of first refusal," taking into account the lower value that it was entitled to pay under the "right of first refusal" compared to the market value of the leasehold estate. Raw Happiness also sought necessary and reasonable attorney's fees.
12. Defendants attempted to evict Plaintiffs in court, although Plaintiffs were not in breach.
13. Defendants have continuously stated that they will not live by the signed contract, and attempted to repudiate same.
The case proceeded to a bench trial. The trial court found Wong Grocery breached the lease agreement and caused damages in the amount of $63,501.60, plus post-judgment interest. On the record, the trial court stated that Raw Happiness was entitled to rescission and damages. The trial court ordered Wong Grocery to pay attorney's fees in the amount of $84,000, plus post- judgment interest. Raw Happiness was ordered to vacate the premises within 90 days. The trial court further ordered that Raw Happiness take nothing on its claims against Widen in his personal capacity.
We question the dissent's position that the "unorthodox" damages are recoverable as "special damages," but even if we assume that they are, the trial court did not award the damages as special damages but as damages for breach of the lease. Although the trial court stated on the record that Raw Happiness was entitled to rescission, it did not incorporate that relief into its judgment or finding of fact and conclusion of law and awarded damages solely for breach of contract. See Lopez v. Brown, 356 S.W.3d 599, 603 n.4 (Tex. App.—Houston [14th Dist.] 2011, no pet.) ("[A] judgment or order that is rendered in writing and signed by the trial judge becomes the official judgment of the court," and recitals in a signed order "control over conflicting recitals in either the reporter's or clerk's record.").
The trial court made the following findings of fact:
1. On or about January 9, 2014, Defendant Wong Grocery Company, LLC entered into a Lease Agreement with Plaintiffs ("Wong Lease Agreement").
2. The Plaintiffs complied with all of the terms of the Wong Lease Agreement.
3. The Defendant, Wong Grocery Company, LLC breached material terms and conditions of the Lease.
4. The Defendant breached the Wong Lease Agreement first in time.
5. The Wong Lease Agreement is not ambiguous.
6. The Defendant's breaches of the Lease caused damages to the Plaintiffs in the sum of $58,273.00.
7. Pre-judgment interest on the damages in the sum of $58,273.00 should be calculated from May 1, 2014 to the date of entry of the Judgment at a rate of 5% per annum. This sum is in the amount of $5,228.60.
8. Plaintiffs made demand on Defendant to cure the breaches of the Lease but Defendant failed and continued to breach the Wong Lease Agreement.
9. The reasonable and necessary attorney's fees incurred in this matter were:
a) $84,000.00 for trial on the merits;
b) $5,000.00 in the event post judgment motions were filed by the Wong Grocery Company, LLC which motions are denied;
c) In the event a Notice of Appeal is filed and the appeal is unsuccessful additional attorney's fees in the sum of $20,000.00;
d) In the event that a Writ is filed with the Supreme Court and the same is unsuccessful additional attorney's fees in the sum of $5,000.00[;] and
e) In the event the Writ is granted by the Supreme Court, if the appeal is unsuccessful additional attorney's fees in the sum of $20,000.
10. The Court finds that the relationship between the Plaintiffs and Defendant as Landlord and Tenant is untenable.The trial court made the following conclusions of law:
11. The Court finds that the Lease should be terminated however grants to Plaintiffs ninety (90) days to vacate the premises provided Plaintiff, as Tenant, pays the rental sums stipulated in the Lease in the sum of $650.00 per month on the first day of each month.
12. For its multiple breaches of the Wong Lease Agreement the Defendant is indebted to the Plaintiff and Judgment is rendered against the Defendant in favor of the Plaintiff in the sum of $63,501.60 plus post judgment interest at a rate of 5% per annum from the date of the Judgment until paid in full.
13. The Contract being the Wong Lease Agreement by and between Plaintiffs and Defendant is hereby terminated.
14. Plaintiff is granted three (3) months to locate new premises but must pay Landlord being the Defendant $650.00 per month on the first day of each month, commencing October 1, 2016 and shall vacate premises by January 1, 2017.
15. The reasonable and necessary attorney's fees incurred in this matter were:
a) $84,000.00 for trial on the merits;
b) $5000.00 in the event post judgment motions were filed by the Wong Grocery Company, LLC which motions are denied;
c) In the event a Notice of Appeal is filed and the appeal is unsuccessful additional attorney's fees in the sum of $20,000.00;
d) In the event that a Writ is filed with the Supreme Court and the same is unsuccessful additional attorney's fees in the sum of $5,000.00[;] and
e) In the event the Writ is granted by the Supreme Court but the appeal is unsuccessful additional attorney's fees in the sum of $20,000.
16. All causes of action asserted by either one of Defendants against Plaintiff are dismissed and each shall take nothing.Wong Grocery requested additional and amended findings of fact and conclusions of law; the request was denied. This appeal followed.
17. All causes of action asserted by Plaintiff against Defendant Brent Widen are dismissed and Plaintiff shall take nothing on these claims.
18. All writs and process issue for enforcement of the Judgment.
On appeal, Wong Grocery complains of the following seven errors: (1) the trial court erred in refusing to grant Wong Grocery's requested additional and amended findings of fact and conclusions of law numbers 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15, 16, and 17; (2) the trial court erred in refusing to specify what acts it believed to be breaches of the lease, as requested in Wong Grocery's requested additional finding of fact and conclusion of law number 11; (3) there was insufficient evidence to support a breach of contract, other than the breach of Raw Happiness's right to use the conference room and the failure to timely complete the build out, for neither of which Raw Happiness provided evidence of damages; (4) the damages awarded by the trial court for breach of contract were arbitrary and capricious and not based on any guiding principles; (5) the trial court erred in awarding attorney's fees because there was no evidence that Wong Grocery is a corporation or individual liable for attorney's fees pursuant to section 38.001 of the Texas Civil Practice and Remedies Code, and there was no other basis pled or proved for an award of attorney's fees; (6) there was insufficient evidence to support an award of attorney's fees pursuant to section 38.001 of the Texas Civil Practice and Remedies Code because Raw Happiness failed to prove presentment of its claim; and (7) the trial court erred in awarding attorney's fees because Raw Happiness failed to segregate its attorney's fees.
BREACH OF CONTRACT DAMAGES
We first address Wong Grocery's fourth issue, in which it contends the damages awarded by the trial court for breach of contract were arbitrary and capricious and not based on any guiding principles.
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. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Villarreal v. Guerra, 446 S.W.3d 404, 411 (Tex. App.—San Antonio 2014, pet. denied). However, when, as here, the appellate record includes a reporter's record, a trial court's findings of fact are not conclusive and are binding only if supported by the evidence. Sheetz v. Slaughter, 503 S.W.3d 495, 502 (Tex. App.—Dallas 2016, 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 whether sufficient evidence exists to support an answer to a jury question. Catalina, 881 S.W.2d at 297. When reviewing the sufficiency of the evidence supporting a trial court's findings, "we do not serve as a fact finder, pass upon the credibility of witnesses, or substitute our judgment for that of the trier of fact, even if there is conflicting evidence upon which a different conclusion could be supported." Hausman v. Hausman, 199 S.W.3d 38, 41 (Tex. App.—San Antonio 2006, no pet.). The trial court is the sole judge of the credibility of the witnesses and the weight to be given their testimony. See City of Keller v. Wilson, 168 S.W.3d 802, 819 (Tex. 2005).
The test for legal sufficiency is "whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." Id. at 827. In making this determination, we credit evidence favoring the finding if a reasonable factfinder could, and disregard contrary evidence unless a reasonable factfinder could not. Id.; Guerra, 446 S.W.3d at 411. If there is more than a scintilla of evidence to support the finding, the legal sufficiency challenge must fail. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002); Guerra, 446 S.W.3d at 411. In reviewing a factual sufficiency issue, we consider all the evidence supporting and contradicting the finding. Plas-Tex., Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). We set aside the judgment only if the finding 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).
Applicable Law
The universal rule in measuring damages for a breach of contract claim is to provide just compensation for any loss or damage actually sustained as a result of the breach. Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991); Sharifi v. Steen Auto., LLC, 370 S.W.3d 126, 148 (Tex. App.—Dallas 2012, no pet.). Courts determine the proper measure of damages from the facts of the case. Vance v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480, 481 n.1 (Tex. 1984); Sharifi, 370 S.W.3d at 148. Breach of contract damages are generally designed to protect three interests: a restitution interest, a reliance interest, and an expectation interest. O'Farrill Avila v. Gonzalez, 974 S.W.2d 237, 247 (Tex. App.—San Antonio 1998, pet. denied). Reliance damages are similar to out-of-pocket damages. Hart v. Moore, 952 S.W.2d 90, 97 (Tex. App.—Amarillo 1997, pet. denied). Out-of-pocket damages measure the difference between the value the buyer has paid and the value of what he has received. Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex. 1997). Expectancy damages are similar to benefit-of-the-bargain damages. See Qaddura v. Indo-European Foods, Inc., 141 S.W.3d 882, 888-89 (Tex. App.— Dallas 2004, pet. denied). Benefit-of-the-bargain damages measure the difference between the value as represented and the value received. Perry, 945 S.W.2d at 817. To recover lost-profit damages, a plaintiff must show the loss by competent evidence and with reasonable certainty. See ERI Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867, 876 (Tex. 2010); Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994). "What constitutes reasonably certain evidence of lost profits is a fact intensive determination." Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). "As a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained." Id. Lost profits cannot be based on pure speculation or wishful thinking. Tex. Instruments, 877 S.W.2d at 279.
Evidence at Trial
At trial, Lambkin testified that if forced to leave the Wong Grocery premises and find a new location for his juice bar, he would incur moving and heavy equipment storage costs of $4,200. He testified that he would incur advertising costs for the new location in the amount of $10,000. Lambkin testified that to build out a new location, including plumbing, finish out, electrical, and hand wash sink, would total $18,150. Martyn Glen, a real estate appraiser, testified about the relocation damage model he prepared for the case. Glen testified that the rent differential cost to Raw Happiness for having to relocate its business to a comparable space is $39,923.
Based on the foregoing evidence, the trial court awarded total damages in the amount of $63,501.60, which included pre-judgment interest of $5,228.60. The trial court stated on the record that the damage award consisted of the following amounts: $4,200 for moving and storage expenses; $9,150 to build out a new location; $5,000 to advertise a new location; and $39,923 for relocation costs and increased rent as testified to by real estate expert Martyn Glen.
Analysis
None of the damages awarded by the trial court can be considered a proper measure of damages for a breach of contract claim. They do not measure the difference between the value Raw Happiness paid and the value it received or the difference between the value of the lease space as represented and the value received. Instead, it appears the trial court awarded damages for costs associated with relocating Raw Happiness's business to a comparable location, but those are not a proper measure of damages for a breach of contract claim. Raw Happiness might be entitled to such damages for constructive eviction, but Raw Happiness did not plead or prove constructive eviction, as it never abandoned the premises. See Daftary v. Prestonwood Mkt. Square, Ltd., 404 S.W.3d 807, 816 (Tex. App.—Dallas 2013, pet. denied) (remanding for consideration of relocation costs as an element of constructive eviction claim).
See Lazell v. Stone, 123 S.W.3d 6, 11-12 (Tex. App.—Houston [1st Dist.] 2003, pet. denied) (providing that abandonment of the premises by the tenant is an essential element of a constructive eviction claim).
Under the facts in this case, the trial court could have awarded expectancy damages for Wong Grocery's failure to timely complete the build-out. However, although Lambkin testified that Wong Grocery failed to timely complete the build-out of the juice bar, neither he nor any other witness testified to any compensable damages caused by this breach. There was simply no evidence presented as to the profits lost as a result of the delayed opening. See ERI Consulting Eng'rs, Inc., 318 S.W.3d at 876 (recovery of lost-profit damages requires competent evidence). Similarly, the trial court could have awarded expectancy damages for Wong Grocery's breach of the lease term requiring it to maintain a conference room available for Raw Happiness's use. Although Lambkin testified he used the conference room as an office for both the juice bar and his insurance business, he did not testify to any damages resulting from the loss of the use of the conference room or any other common area in the building. To recover expectancy damages for this breach, Raw Happiness could have presented evidence of the value of the lost use of the common area square footage, but it did not provide such a calculation.
"Where damages evidence does not relate to the amount of damages sustained under the proper measure of damages, the evidence is both irrelevant and legally insufficient to support a judgment." Berryman's S. Fork, Inc. v. J. Baxter Brinkmann Int'l Corp., 418 S.W.3d 172, 185 (Tex. App.—Dallas 2013, pet. denied) (quoting De Escabedo v. Haygood, 283 S.W.3d 3, 6 (Tex. App.—Tyler 2009), aff'd sub nom., 356 S.W.3d 390 (Tex. 2011)). Raw Happiness had the burden to present legally sufficient evidence of the proper measure of damages. See W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex. 1988) (holding failure to present evidence on the proper measure of damages resulted in failure of cause of action); Tex. Ear Nose & Throat Consultants, PLLC v. Jones, 470 S.W.3d 67, 96 (Tex. App.—Houston [14th Dist.] 2015, no pet.) ("It was [plaintiff's] burden to put on legally sufficient evidence of the proper measure of damages."); Chrysler Corp. v. Schuenemann, 618 S.W.2d 799, 805 (Tex. Civ. App.—Houston [1st Dist.] 1981, writ ref'd n.r.e.) ("The burden of producing sufficient evidence to support findings of the elements of the proper measure of damages rests on the plaintiff."). Because the damages evidence presented in this case does not relate to damages recoverable for a breach of contract claim, the evidence is "both irrelevant and legally insufficient" to support the damages awarded by the trial court for Raw Happiness's breach of contract claim. See Berryman's S. Fork, Inc., 418 S.W.3d at 185. As a result, Raw Happiness's "cause of action must fail." W.O. Bankston Nissan, Inc., 754 S.W.2d at 128. Accordingly, we sustain Wong Grocery's fourth issue. Based on our holding, we need not address Wong Grocery's first three issues. Because Raw Happiness is not entitled to recover damages on its breach of contract claim, it is not entitled to recover its attorney's fees either. See MBM Fin. Corp. v. Woodlands Operating Co., L.P., 292 S.W.3d 660, 666 (Tex. 2009) ("To recover fees under [Chapter 38], a litigant must do two things: (1) prevail on a breach of contract claim, and (2) recover damages."); Myers v. Hall Columbus Lender, LLC, 437 S.W.3d 632, 640 (Tex. App.—Dallas 2014, no pet.).
CONCLUSION
Based on the foregoing, we reverse the trial court's judgment and render judgment that Raw Happiness take nothing on its claims.
Rebeca C. Martinez, Justice