Gkg.Net Inc. D/B/A Global Knowledge Group v. Properties
| Decision Date | 23 December 2010 |
| Docket Number | No. 14–09–00066–CV.,14–09–00066–CV. |
| Citation | 330 S.W.3d 426 |
| Parties | GKG.NET, INC. d/b/a Global Knowledge Group, Appellant,v.MITCHELL RUDDER PROPERTIES, L.P., Successor in Interest to Karbrooke, Inc., Appellee. |
| Court | Texas Court of Appeals |
OPINION TEXT STARTS HERE
Robert A. Swearingen, College Station, for appellant.Scott J. Scherr, Bryan, for appellee.Panel consists of Chief Justice HEDGES and Justices FROST and BOYCE.
In this landlord-tenant case, appellee Mitchell Rudder Properties, L.P., successor-in-interest to Karbrooke, Inc. (“Mitchell Rudder”) sued appellant GKG.Net, Inc. d/b/a Global Knowledge Group (“GKG.Net”) for breach of a commercial leasing agreement. The jury found in favor of Mitchell Rudder and awarded damages and attorney's fees. On appeal, GKG.Net contends that the evidence is legally and factually insufficient to support the damages award. We reverse and remand for a new trial.
On March 2, 2000, GKG.Net, an internet services company, leased commercial office space in Crystal Park Plaza in College Station, Texas, from Karbrooke, Inc. for a three-year term. GKG.Net subsequently executed a renewal lease agreement for an additional ten-year term set to end on March 31, 2013.
In 2004, Mitchell Rudder acquired Crystal Park Plaza through a bankruptcy proceeding. In connection with the acquisition, the tenant leases were assigned to Mitchell Rudder. Mitchell Rudder hired Clark & Wyndam, a property management company, to manage Crystal Park Plaza. Clint Schroff was Crystal Park Plaza's property manager.
On May 31, 2006, GKG terminated its lease. On June 19, 2006, Mitchell Rudder notified GKG.Net that it was in default, terminated GKG.Net's right to possession, and took possession of the premises. At the time it vacated the premises, GKG.Net was paying $13.56 per net rentable square foot per year.
On June 20, 2006, Mitchell Rudder entered into a five-year lease with World Savings Bank FSB for the space previously occupied by GKG.Net. Pursuant to an amended lease, World Savings Bank took possession of the premises and began paying rent on September 16, 2006. The lease agreement provided, among other things, that World Savings Bank could buy out the last two years of its five-year lease or, alternatively, exercise a five-year renewal option. After it signed the lease, World Savings Bank was acquired by Wachovia.
On November 15, 2006, Mitchell Rudder sent a demand letter to GKG.Net seeking payment for past-due rental payments, tenant improvements, and lease commissions to re-let the space. After GKG.Net refused to pay, Mitchell Rudder sued GKG.Net for breach of the lease agreement and sought $113,048.21 in damages for past due rental payments, lease commissions, and tenant improvements.
The trial began on February 4, 2008. On the second day of trial, Mitchell Rudder sought a trial amendment to increase its claim for damages based on Wachovia's intention to exercise the two-year buy-out option pursuant to the terms of the re-lease agreement. The trial court denied the request for a trial amendment, declared a mistrial, and re-set the trial date. Mitchell Rudder subsequently amended its pleadings and alleged actual damages in the amount of $465,831.51 for (1) past due rental payments, (2) the difference between GKG's contractual rent and the amount received from re-letting, (3) future rental payments remaining under the unexpired original lease term, and (4) costs incurred in modifying the vacated premises for the new tenant.
At the conclusion of the second trial, the jury found that GKG.Net had failed to comply with the lease agreement and that its breach was unexcused, and it awarded Mitchell Rudder the following damages: (1) $27,254.71 for the period of time prior to the premises being re-let by World Savings Bank; (2) $314,123.02 for the period of time after expiration of the World Savings Bank lease during which the premises was not re-let; (3) $86,540.77 for costs incurred in re-letting the premises; and (4) $7,358.77 in late charges. The jury also awarded an offset to GKG.Net in the amount of $158,034.57 for the period of time in which the premises was re-let by World Savings Bank. GKG.Net filed motions for new trial, for judgment notwithstanding the verdict, and to disregard jury findings which the trial court subsequently denied. This appeal followed.
In a legal sufficiency review, we determine whether the evidence at trial would enable a reasonable and fair-minded person to reach the finding under review. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005). In conducting this review, we credit favorable evidence if reasonable factfinders could and disregard contrary evidence unless reasonable factfinders could not. Id. We must consider the evidence in the light most favorable to the finding under review and indulge every reasonable inference that would support it. Id. at 822. If there is no evidence to support the finding, we must then examine the entire record to determine if the contrary proposition is established as a matter of law. Id. The trier of fact is the sole judge of the witnesses' credibility and the weight to be given their testimony. Id. at 819; 2900 Smith, Ltd. v. Constellation NewEnergy, Inc., 301 S.W.3d 741, 745 (Tex.App.-Houston [14th Dist.] 2009, no pet.).
We must, and may only, sustain a legal sufficiency challenge when (1) the record discloses a complete absence of evidence of a vital fact, (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a mere scintilla, or (4) the evidence establishes conclusively the opposite of a vital fact. See Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex.1998). When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is less than a scintilla and, in legal effect, is no evidence. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex.2004).
In a factual sufficiency review, we must examine the entire record, considering both the evidence in favor of, and contrary to, the challenged findings. See Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex.1998); 2900 Smith, Ltd., 301 S.W.3d at 746. We may set aside the verdict for factual sufficiency only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. See Ellis, 971 S.W.2d at 407. Because we are not a fact finder, we may not pass upon the witnesses' credibility or substitute our judgment for that of the jury, even if the evidence would support a different result. See Ellis, 971 S.W.2d at 407.
In one issue, GKG.Net contends that the evidence is legally and factually insufficient to support the award of damages. Specifically, it argues that the jury's award of $314,123.02 for the remainder of GKG.Net's unexpired lease term is contrary to the law and the evidence.
Traditionally, Texas courts have regarded the landlord whose tenant has abandoned the lease before the end of its term as having four options. See Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 300 (Tex.1997). First, the landlord can maintain the lease and sue for rent as it becomes due. Id. Second, the landlord can treat the breach as an anticipatory repudiation, repossess, and sue for the present value of future rentals reduced by the reasonable cash market value of the property for the remainder of the lease term. Id. Third, the landlord can treat the breach as anticipatory, repossess, release the property, and sue the tenant for the difference between the contractual rent and the amount received from the new tenant. Id. Fourth, the landlord can declare the lease forfeited (if the lease so provides), and relieve the tenant of liability of future rent. Id. 1 If the landlord re-lets the premises for only a portion of the unexpired term, as here, then the measure of damages has two components: (1) the measure of damages for the period of re-letting is the contractual rent provided in the original lease less the amount realized from the re-letting, and (2) the measure of damages for that portion or period of the lease term as to which there has been no re-letting is the difference between the present value of the rent contracted for in the lease and the reasonable cash market value of the lease for its unexpired term. 25 Richard A. Lord, Williston on Contracts § 66:87 (4th ed. 2007).
On appeal, GKG.Net challenges only the jury's award of $314,123.02. The jury awarded this sum for the period of time during which the premises was not re-let.2 The gravamen of GKG.Net's complaint is that the jury failed to grant an offset for the reasonable cash market value of the lease or the value of the possession of the property. GKG.Net argues that Mitchell Rudder's argument—which the jury ultimately accepted—that the reasonable cash market value of the lease for the unexpired term of GKG.Net's lease was zero is contrary to the law and the evidence.
At trial, Mitchell Rudder relied primarily on Schroff, Crystal Park Plaza's property manager, to present damages evidence. Schroff testified to, among other things, the amount that GKG.Net owed Mitchell Rudder due to its termination of the lease in May 2006. Specifically, when Schroff was asked about the value of the remainder of GKG.Net's lease term after World Savings Bank vacated the premises, he testified as follows:
Well, the—we're asked to see what the reasonable cash market value or rental value was of the unexpired term, and for their unexpired term we felt like it was zero because there's nobody that I know as an investor that would buy that tenth year—or year 11 and the last 3 months of 12 as an income stream for anything when they'd already vacated the building. S...
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