2100 Ricchi, LLC v. Hilliard Office Sols. of Tex., 05-21-00158-CV
| Court | Court of Appeals of Texas |
| Writing for the Court | LESLIE OSBORNE JUSTICE |
| Parties | 2100 RICCHI, LLC, Appellant and Cross-Appellee v. HILLIARD OFFICE SOLUTIONS OF TEXAS, LTD. AND THE HILLIARD COMPANIES, LLC, Appellees and Cross-Appellants |
| Docket Number | 05-21-00158-CV |
| Decision Date | 03 August 2022 |
2100 RICCHI, LLC, Appellant and Cross-Appellee
v.
HILLIARD OFFICE SOLUTIONS OF TEXAS, LTD. AND THE HILLIARD COMPANIES, LLC, Appellees and Cross-Appellants
No. 05-21-00158-CV
Court of Appeals of Texas, Fifth District, Dallas
August 3, 2022
On Appeal from the 193rd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-17-02672
Before Justices Myers, Osborne, and Nowell
MEMORANDUM OPINION
LESLIE OSBORNE JUSTICE
This is a cross-appeal arising out of a commercial lease dispute. After a bench trial, the trial court rendered judgment awarding damages to each party, with a net award to the landlord. Appellant and cross-appellee is the landlord; appellees and cross-appellants are the tenant and its general partner. In four issues, Landlord argues the trial court erred by failing to award prejudgment and postjudgment interest and attorney's fees and by awarding actual and exemplary damages to Tenant. In two issues, Tenant argues the trial court's award of damages to Landlord was error
because of Landlord's fraudulent inducement and material breaches of the lease. We affirm in part and reverse and remand in part.
Background
The trial court's detailed findings of fact and conclusions of law are well-known to the parties, and we do not repeat them here. In summary, the parties' dispute arises from a January 29, 2015 "Office Lease Proposal" and a 60-month lease the parties signed in April 2015, under which Tenant occupied 27,857 square feet in an office building in Farmer's Branch. The parties agreed to share the construction costs incurred to bring the premises to "turnkey" condition; Landlord agreed to pay 70 percent of the costs and Tenant agreed to pay 30 percent. Under both the proposal and the lease, all remodeling would be billed at Landlord's "book cost" and Tenant had a right to audit "any and all records" regarding the construction costs.
The lease required timely monthly rental payments of $32,499.83 for the first two years of the lease term. Tenant was required to pay rent "without deduction or set off." Tenant's obligation to pay rent was "not dependent upon the condition of the premises or the performance by Landlord of its obligations hereunder" and continued "notwithstanding any breach by Landlord of its duties or obligations hereunder, whether express or implied." The sole exception permitted Tenant to abate rent if Tenant was "prevented from making reasonable use of the Premises for more than 10 consecutive days" by the unavailability of certain defined "services."
Tenant moved into the premises and the 60-month lease period began on November 1, 2015. Tenant paid rent for the first eleven months of the lease term. Tenant stopped paying rent for an eight-month period between October 2016 and May 2017, but continued to occupy and use the premises. Landlord filed this suit in March 2017 for breach of contract and a parallel suit for eviction in justice court in June 2017. Tenant resumed paying rent in June 2017 through the time of trial in January 2020, and continuously operated its business out of the premises between November 2015 and the time of trial.
Tenant filed a counterclaim alleging that Landlord "knowingly and intentionally misrepresented the improvement expenses" it submitted to Tenant for payment under the lease. Tenant introduced evidence at trial that Landlord marked up remodeling estimates for the premises before sending them to Tenant, did not inform Tenant of the markup, never intended to bill Tenant at Landlord's book cost as the lease required, included fees and expenses unconnected to the project, and failed to provide records when Tenant requested them.
Because Tenant was unable to conduct its own internal audit without the necessary records, it agreed to the appointment of an auditor who would review and reconcile the accounting records and report his findings to the trial court. The auditor disallowed 157 of the 245 items or categories of construction costs analyzed, and calculated a $9,322.85 overpayment by Tenant. Landlord credited this amount to Tenant by subtracting it from the amount of rent due.
The case proceeded to trial before the court. Leobardo Trevino, Landlord's CEO, and Sterling Hilliard, Tenant's President, testified, and the "Auditor Report of Bradford L. Bright" was admitted into evidence with some fifty other exhibits. Both parties filed written closing arguments, proposed findings of fact and conclusions of law, affidavits in support of their attorney's fees, and motions for judgment. Landlord also filed a request for amended findings of fact and conclusions of law.
The trial court rendered judgment awarding Landlord actual damages in the amount of $258,257.56, representing the amount of unpaid rent due after crediting Tenant's overpayment of its share of construction costs. The trial court awarded Tenant actual damages of $62,077.50 on its fraud claim, representing Tenant's half of the auditor's fee, and exemplary damages of $90,469.01. The trial court did not award attorney's fees to Landlord, and the judgment does not include an award of prejudgment or postjudgment interest. This cross-appeal followed.
Standards of Review
In an appeal from a bench trial, the trial court's findings of fact have the same weight as a jury verdict. Fulgham v. Fischer, 349 S.W.3d 153, 157 (Tex. App.- Dallas 2011, no pet.). When the appellate record contains a reporter's record as it does in this case, findings of fact are not conclusive and are binding only if supported by the evidence. Id. 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. Id. The applicable standard
of review depends upon which party bore the burden of proof at trial. We will discuss the pertinent standard in our consideration of each issue.
In a bench trial, the trial court, as factfinder, is the sole judge of the credibility of the witnesses. Id. As long as the evidence falls "within the zone of reasonable disagreement," we will not substitute our judgment for that of the fact-finder. Id. (quoting City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005)).
Discussion
We first address Tenant's issues regarding enforceability of the Lease before considering Landlord's issues regarding amounts due under the Lease.
A. Tenant's Cross-Issues
1. Standards of review
Tenant challenges the legal and factual sufficiency of the evidence regarding issues on which it had the burden of proof. Accordingly, Tenant must demonstrate that the evidence conclusively establishes all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam). The appellant must show that there is no evidence to support the fact finder's finding and that the evidence conclusively establishes the opposite of the finding. See id. The final test for legal sufficiency is whether the evidence would enable a reasonable and fair-minded fact finder to reach the verdict under review. City of Keller, 168 S.W.3d at 827.
When a party challenges the factual sufficiency of the evidence supporting a finding for which it had the burden of proof, the party must demonstrate that the finding is against the great weight and preponderance of the evidence. Dow Chem. Co., 46 S.W.3d at 242. In a factual sufficiency review, an appellate court considers and weighs all the evidence both supporting and contradicting the finding. See Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex. 1998). We do not set the finding aside unless the evidence supporting it is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. See Dow Chem. Co., 46 S.W.3d at 242.
We review de novo a trial court's conclusions of law. Fulgham, 349 S.W.3d at 157. We are not bound by the trial court's legal conclusions, but the conclusions of law will be upheld on appeal if the judgment can be sustained on any legal theory supported by the evidence. Id. at 157-58. Incorrect conclusions of law will not require reversal if the controlling findings of fact will support a correct legal theory. Id. at 158. Moreover, conclusions of law may not be reversed unless they are erroneous as a matter of law. Id.
2. Fraud in the inducement
In its first cross-issue, Tenant contends the trial court erred by awarding damages to Landlord because Landlord's fraud in the inducement precludes enforcement of the lease. We construe this cross-issue as a complaint that Tenant
established both its counterclaim for fraud in the inducement and its right to the remedy of rescission as a matter of law. See Dow Chem. Co., 46 S.W.3d at 241.
A common-law fraud claim requires "a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, which was relied upon, and which caused injury." Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015) (internal quotation omitted). "Fraudulent inducement is a distinct category of common-law fraud that shares the same elements but involves a promise of future performance made with no intention of performing at the time it was made." Id.
Fraudulent inducement arises only in the context of a contract. Anderson v. Durant, 550 S.W.3d 605, 614 (Tex. 2018). "In a fraudulent-inducement claim, the 'misrepresentation' occurs when the defendant falsely promises to perform a future act while having no present intent to perform it." Int'l Bus. Machines Corp. v. Lufkin Indus., LLC, 573 S.W.3d 224, 228 (Tex. 2019). "The plaintiff's 'reliance' on the false promise 'induces' the plaintiff to agree to a contract the plaintiff would not have agreed to if the defendant had not made the false promise." Id....
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