Bond v. Kagan-Edelman Enterprises, KAGAN-EDELMAN

Decision Date22 January 1999
Docket NumberNo. 01-98-00128-CV,KAGAN-EDELMAN,01-98-00128-CV
Citation985 S.W.2d 253
PartiesJames C. BOND d/b/a Shamrock Construction Company, Appellant, v.ENTERPRISES, Kagan-Edelman Capital Fund Series VII Ltd., Lawrence M. Kagan, and Darryl B. Edelman, Appellees. Gateway Lumber Co., Inc., Appellant, v. Kagan-Edelman Enterprises, Kagan-Edelman Capital Fund Series VII Ltd., Lawrence M. Kagan, and Darryl B. Edelman, Appellees. (1st Dist.)
CourtTexas Court of Appeals

Bridget Champman, Eldon Lee Youngblood, Oscar Nipper, Houston, for Appellant.

John J. Irwin, Eric Lipper, Jeffrey J. Brookner, Houston, for Appellees.

Before Justices MIRABAL, O'CONNOR, and NUCHIA.



This is an appeal from a judgment in a suit to recover payment for labor and materials furnished by James C. Bond d/b/a Shamrock Construction Co. (Bond), the appellant here and plaintiff below, and Gateway Lumber Co., appellant here and intervenor below, from Kagan-Edelman Enterprises, Kagan-Edelman Capital Fund Series VII Ltd., Lawrence M. Kagan, and Darryl B. Edelman, the appellees here and defendants below (collectively referred to as Kagan-Edelman). Bond and Gateway appeal the trial court judgment in favor of Kagan-Edelman. 1

We reverse and remand to the trial court for proceedings consistent with this opinion.

A. Factual Background

Kagan-Edelman owns Cypresswood Court Shopping Center. On May 12, 1994, Kagan-Edelman signed a contract with John Irwin for the construction and leasing of a space in the shopping center. The commencement date of Irwin's lease was October 1, 1994. Irwin was not required to make rental payments before that date.

Under the contract, Irwin was required to complete construction of the premises for use as a restaurant. Kagan-Edelman agreed to contribute $27,732 to the cost of construction, but reserved the right to retain 10% of the construction allowance as a "normal construction retainer." Completion of the premises was a condition precedent to the commencement of the lease. Irwin was required to open the premises to the public for business within 30 days after it was ready for occupancy.

Irwin hired Bond to complete the interior construction of the restaurant. Bond met with Kagan-Edelman before construction and Kagan-Edelman provided Bond with interior finish specifications. Kagan-Edelman required all work performed by Bond to conform to those specifications. Bond prepared and submitted plans to Irwin and Kagan-Edelman for approval. Kagan-Edelman representatives inspected the work weekly.

Bond provided labor and material for the construction between May 19 and June 30, 1994. This included installing temporary utilities and completing the site work, which consisted of concrete sawing, breaking out, removing concrete, and concrete pouring. Bond also installed the exterior and interior doors, an acoustic ceiling with insulation, sheetrock, the cabinets and shelving, formica, floor tile, and fiberglass reinforcing boards as required for restaurants by the health department.

The agreed price for Bond's labor and material was $34,691.21. Bond was only paid $4,700, leaving an unpaid balance of $29,991.21. Bond and his employees discontinued their work on the premises as soon as Bond learned Irwin was not going to pay him for his services. 2

Bond sent notice of his claim and demand for payment to Irwin on July 5, 1994 and to Kagan-Edelman on July 15, 1994. Bond filed a lien affidavit of record against the real property and improvements to perfect his claim for payment. Bond sent notice of his claim and demand for payment to Irwin and Kagan-Edelman, with a copy of the lien affidavit, on July 21, 1994 and again on July 29, 1994. Kagan-Edelman admitted receiving these notices from Bond.

Gateway supplied and delivered lumber materials to Bond for use in the build-out. The cost of Gateway's goods and services was $13,306.17, which was not paid. On August 3, 1994, Gateway sent notice of the unpaid balance and demand for payment to Irwin and Kagan-Edelman. On August 11, 1994, Gateway filed an affidavit for mechanic's lien and materialmen's lien against the real property owned by Kagan-Edelman.

Despite receiving the notices of the claims by Bond and Gateway, on September 27, 1994, Kagan-Edelman paid Irwin the agreed construction price of $27,732. Kagan-Edelman required Irwin to sign a release and an affidavit stating all debts incurred in the construction of the restaurant had been paid. Kagan-Edelman accepted a $35,000 promissory note from Irwin, which Kagan testified was accepted in case other claims related to the construction arose.

Bond sued Kagan-Edelman for breach of contract, funds trapping and retainage under the Texas Property Code, foreclosure of a statutory mechanic's lien, and unjust enrichment for the improvements to their property. Gateway intervened and sued Bond, Irwin, and Kagan-Edelman to recover $13,306.17, the cost of the materials it had supplied to Bond for construction of the restaurant. The case was tried to the court. The trial court found against Bond and Gateway, concluding neither of them had a claim against Kagan-Edelman under the Property Code. On appeal, Bond and Gateway challenge the trial court's findings and conclusions of law.

B. Standard of Review

Findings of fact in a case tried to the court have the same force and dignity as the jury's verdict on special issues. Herbage v. Snoddy, 864 S.W.2d 695, 698 (Tex.App.--Houston [1st Dist.] 1993, writ denied). However, findings of fact are not conclusive when a complete statement of facts appears in the record. Id. Findings of fact are binding on this Court only if supported by evidence of probative force. Pontiac v. Elliott, 775 S.W.2d 395, 399 (Tex.App.--Houston [1st Dist.] 1989, writ denied). The trial court's findings of fact are reviewable by the same standards applied in reviewing the legal or factual sufficiency of the evidence supporting a jury's answer to a jury question. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); Stern v. Wonzer, 846 S.W.2d 939, 942 (Tex.App.--Houston [1st Dist.] 1993, no writ).

In reviewing the legal sufficiency of the evidence, we consider only the evidence and inferences that, when viewed in their most favorable light, tend to support the finding, and ignore all evidence and inferences to the contrary. Catalina, 881 S.W.2d at 297; Stern, 846 S.W.2d at 942. If there is any evidence of probative force, we must overrule the point and uphold the finding. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965); Stern, 846 S.W.2d at 942. In reviewing the factual sufficiency of the evidence, we examine all of the evidence, both the evidence that supports the finding and the evidence that controverts the finding. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); Pizzitola v. Galveston County Cent. Appraisal Dist., 808 S.W.2d 244, 246 (Tex.App.--Houston [1st Dist.] 1991, no writ). We will set aside the finding only if it is so against the great weight and preponderance of the evidence that it is clearly wrong and manifestly unjust. Cain, 709 S.W.2d at 176; Airflow Houston, Inc. v. Theriot, 849 S.W.2d 928, 931 (Tex.App.--Houston [1st Dist.] 1993, no writ).

The legal conclusions of the trial court are not binding upon an appellate court. The review of conclusions of law is de novo, and we are free to draw our own legal conclusions. Connelly v. Paul, 731 S.W.2d 657, 661 (Tex.App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.). Although a party may not challenge the trial court's conclusions of law for factual insufficiency, a party may challenge them as incorrect, based on the facts. Airflow Houston, 849 S.W.2d at 931. We will uphold the conclusion if the judgment can be sustained on any legal theory supported by the evidence. Nelkin v. Panzer, 833 S.W.2d 267, 268 (Tex.App.--Houston [1st Dist.] 1992, writ dism'd w.o.j.).

C. Analysis

In issue one, Bond claims Kagan-Edelman is liable to him under the mechanic's lien statute. He challenges the following conclusions of law:

(3) James Bond and Gateway Lumber Company do not have a valid lien on the entire Cypresswood Shopping Center because when the lessee contracts for construction, the mechanic's lien attaches only to the leasehold interest, not to the fee interest of the lessor.

* * *

(5) Neither Bond nor Gateway have a claim under the Property Code. Bond and Gateway's claims for funds trapping also fail as a matter of law because it is Irwin who should have withheld funds to pay Gateway, not the property owner Kagan-Edelman.

Both of these conclusions depend on the trial court's factual finding that Kagan-Edelman and Irwin had only a landlord-tenant relationship. 3 Bond challenges the conclusions as incorrect based on the facts. Therefore, we are required to examine the sufficiency of the evidence to support the trial court's factual finding. See Airflow Houston, 849 S.W.2d at 931. Once we determine the status of the Kagan-Edelman relationship, we may properly resolve the remaining questions of law.

1. Relationship between Kagan-Edelman and Irwin

Bond insists the trial court's finding is against the great weight and preponderance of the evidence because it showed Irwin had two relationships with Kagan-Edelman. We agree with Bond.

The trial court relied on a provision in the contract between Irwin and Kagan-Edelman that stated the only relationship created by the agreement was that of a landlord and tenant. This provision disclaimed the creation of any other relationship.

Although the disclaimer provision indicates there was only a landlord-tenant relationship, this provision is not conclusive on the issue. See Mahan Volkswagen, Inc. v. Hall, 648 S.W.2d 324, 329 (Tex.App.--Houston [1st Dist.] 1982, writ ref'd n.r.e.) (rejecting argument that disclaimer of agency in written agreement was conclusive because jury was presented with evidence of other provisions that indicated agency relationship). To determine...

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