Clear Lake Ctr., L.P. v. Garden Ridge, L.P.

• Decision Date: 18 July 2013
• Docket Number: No. 14–12–00414–CV.,14–12–00414–CV.
• Citation: 416 S.W.3d 527
• Parties: CLEAR LAKE CENTER, L.P., Appellant v. GARDEN RIDGE, L.P., Appellee.
• Court: Texas Court of Appeals

416 S.W.3d 527

CLEAR LAKE CENTER, L.P., Appellant

v.GARDEN RIDGE, L.P., Appellee.

No. 14–12–00414–CV.

Court of Appeals of Texas, Houston (14th Dist.).

July 18, 2013.

Whitney Rawlinson, Michael D. Conner, Eric Lipper, Houston, for Appellant.

Suzanne Wellen, Linda Richichi Stahl, Dallas, for Appellee.

Panel consists of Justices CHRISTOPHER, JAMISON, and McCALLY.

OPINION

SHARON McCALLY, Justice.

Garden Ridge, L.P. sued Clear Lake Center, L.P. for breach of a commercial real property lease. Garden Ridge claimed that Clear Lake charged Garden Ridge for impermissible management fees under the lease. Garden Ridge moved for summary judgment on its affirmative claim and on Clear Lake's counterclaim for declaratory relief. Clear Lake responded and moved for summary judgment on its affirmative defenses of limitations, res judicata, and waiver. The trial court granted Garden Ridge's motion, held a jury trial on the issue of Garden Ridge's attorney's fees, and signed a final judgment awarding Garden Ridge $470,087.53 on its breach of contract claim, $530,000.00 in attorney's fees, conditional appellate attorney's fees, and contractual interest at a rate of eighteen percent, among other things.

We affirm in part, reverse the trial court's judgment in part and render judgment that Garden Ridge's claims accruing before September 10, 2005, are barred by limitations, and remand for further proceedings.

Background

In 1995, Garden Ridge and Fiesta Mart signed a commercial lease for Garden Ridge to rent space in Fiesta Mart's shopping center. Article VI of the lease concerned the common area of the shopping center, in part as follows:

Section 6.1. Common Area. The term “Common Area” is defined for all purposes of this Lease as that part of the Shopping Center intended for the common use of all tenants, including among other facilities (as such may be applicable to the Shopping Center) parking area, sidewalks, drainage facilities, lighting facilities, drinking fountains, public toilets, and the like but excluding space in buildings (now or hereafter existing) designed for rental for commercial purposes, as the same may exist from time to time, and further excluding streets and alleys maintained by a public authority....

...

Section 6.3. Operation of Common Area. Landlord shall operate, manage and maintain the Common Area, the manner of operation, management and maintenance and the expenditures therefor to be in the sole discretion of Landlord, provided such operation, management and maintenance shall be comparable to similar shopping centers in Harris County, Texas. Landlord shall have the right to select a person to maintain and operate any of the Common Area if at any time Landlord determines that the best interests of the Shopping Center will be served by having any of the Common Area maintained and operated by that person. Landlord shall have the right to negotiate and enter into a contract with that person on such terms and conditions and for such period of time as Landlord deems reasonable and proper, both as to services and as to cost.

Section 6.4. Common Area Costs. In addition to rentals and other charges prescribed in this Lease, Tenant shall pay to Landlord Tenant's Share of Common Area Costs (as hereinafter defined). “Common Area Costs”, as used herein, means all sums expended by Landlord during the Lease Term in operating, managing, policing, equipping, lighting, repairing, replacing and maintaining the Common Areas, and an allowance to Landlord for Landlord's supervision of the Common Areas in an amount equal to seven and one-half percent (7–1/2%) of the total of all Common Area Costs. Common area Costs shall include, without limitation, costs of resurfacing and restriping the parking and driveway areas; repainting, cleaning, sweeping, and other janitorial services, policing, purchase,construction and maintenance of refuse receptacles, planting and relandscaping; directional signs and other markers; car stops; lighting and other utilities; installing, operating and maintaining Shopping Center identification signs; premiums on public liability and property damage insurance (excluding increases therein due to vacancy in the Shopping Center); maintenance, repair and replacement of utility systems, including water, sanitary and storm sewer lines and other utility lines, pipes and conduits serving the Shopping Center; drainage systems serving the Shopping Center; rental charges for machinery and equipment used in the operation, maintenance and repair of the Common Areas; costs of personnel to implement all of the foregoing, including wages, unemployment taxes and social security taxes; personal property taxes; fees for required licenses and permits; supplies; and other costs necessary in Landlord's judgment for the maintenance, operation and management of the Common Areas, but excluding depreciation of the original cost of constructing the Common Areas.... Tenant shall make such payments to Landlord at intervals not more frequent than monthly.... Such monthly or other periodic charges shall be based upon the Landlord's estimated annual Common Area Costs, payable in advance but subject to adjustment after the end of each calendar year during the term of this Lease on the basis of the actual Common Area Costs for such year. Upon the computation of such adjustment (which shall be completed within 180 days following the end of the calendar year to which such adjustment relates) and notice to Tenant, Tenant shall pay to Landlord the amount of any deficiency, or Landlord shall refund to Tenant the amount of any excess, as the case may be, such reimbursement or payment to be made within thirty days following the Tenant's receipt of such statement.

Section 6.5. Common Area Costs. Landlord shall keep complete books and records for all Common Area Costs, and Tenant, at its expense, shall have the right to inspect, audit and copy such books and records upon reasonable notice during the business hours of Landlord or Landlord's property manager. Landlord shall promptly refund to Tenant any overpayment and Tenant shall promptly pay to Landlord any deficiency (in each case, within 30 days following completion of the audit)....

The lease identified Garden Ridge's pro rata share of the “common area maintenance” (CAM) costs. Pursuant to Section 6.4 of the lease, Garden Ridge prepaid estimated CAM costs, and the landlord sent a reconciliation statement to Garden Ridge in the following year detailing the remainder of sums owed to the landlord for CAM costs.

Edwin Freedman signed the lease as president for the broker, United Equities, Inc., which also acted as the management company for the shopping center since the inception of the lease.

Vice President of Real Estate for Garden Ridge Patrick Willis testified by affidavit that Clear Lake purchased the shopping center from Fiesta Mart in 2003, and prior to that purchase, Fiesta Mart had never charged Garden Ridge a management fee, either as part of CAM costs or any other charge. Beginning in 2003, after Clear Lake acquired the shopping center, Clear Lake billed Garden Ridge for a “management fee” on the reconciliation statements detailing the CAM costs. The management fees Garden Ridge paid were as follows for years 2003 through 2009:

2003—$58,259.14

2004—$60,095.87

2005—$75,561.47

2006—$75,513.31

2007—$72,947.20

2008—$69,159.01

2009—$84,013.87

Willis explained that Garden Ridge also paid the seven and one-half percent “supervisory fee” on top of the management fees, so Garden Ridge paid a total of $470.087.53 to Clear Lake in “management fees plus the supervisory fee applied to the management fees.” Each year until the 2008 reconciliation payment was due, Garden Ridge paid the management fee. For the 2008 and 2009 years, Garden Ridge paid “under protest.”

In 2009, Garden Ridge's auditor conducted an audit of the charges billed under the lease for 2004 through 2008 and concluded that Clear Lake “charged exorbitant Management Fees to Tenant in the annual CAM reconciliations.” The auditor concluded, “All Management Fees are paid to an affiliate of Landlord pursuant to a Property Management and Leasing Agreement dated April 16, 2003 between Landlord and United Equities Incorporated.” Willis testified that the audit showed the “management fee that had been charged by Clear Lake and paid by Garden Ridge had predominantly been for non-common area services.”

In the course of this audit, Garden Ridge received a copy of the property management and leasing agreement. Freedman signed the agreement on behalf of both entities—as president of United Equities and president of CL Group, Inc., general partner of Clear Lake. Freedman testified that he negotiated the terms of the agreement for both entities.

Under the management and leasing agreement, United Equities managed, leased, and operated the entire shopping center property. Clear Lake gave United Equities the “powers and duties” to, among other things, bill and collect rents and other charges from tenants, maintain the property and common areas of the property, make arrangements for utilities, pay taxes, acquire and keep licenses, and pay operating expenses. As compensation for United Equities' services in managing the property, Clear Lake agreed to pay United Equities a “management fee” equal to five percent of the monthly gross collections.

Freedman testified extensively about United Equities' management activities, both related and unrelated to the common area. He testified that under the management agreement, United Equities' responsibilities included “operating, overseeing, [and] supervising everything in the common area.” He explained further:

But to be very honest, my interest and job description, I feel, as a company is to be managing the entire shopping center situation. And, that would include the rights of tenants among other tenants. If somebody was doing something that they were not supposed to be selling or doing, that...