Warner Communications, Inc. v. Keller

• Decision Date: 23 November 1994
• Docket Number: No. 08-93-00183-CV,08-93-00183-CV
• Citation: 888 S.W.2d 586
• Parties: WARNER COMMUNICATIONS, INC., Atari Holdings, Inc., Texas Builders, Mark O'Brien, Tim O'Brien, Gerald O'Brien and Marvin Oates, Appellants, v. James A. KELLER, d/b/a James A. Keller Realtors, Appellee.
• Court: Texas Court of Appeals

Page 586

888 S.W.2d 586

WARNER COMMUNICATIONS, INC., Atari Holdings, Inc., Texas Builders, Mark O'Brien, Tim O'Brien, Gerald O'Brien and Marvin Oates, Appellants, v. James A. KELLER, d/b/a James A. Keller Realtors, Appellee.

No. 08-93-00183-CV.

Court of Appeals of Texas El Paso.

Nov. 23, 1994.

Rehearing Overruled Dec. 21, 1994.

Jeffrey S. Alley, David R. Pierce, Scott, Hulse, Marshall, Feuille, Finger & Thurmond, El Paso, Larry W. Hicks, Jeffrey T. Lucky, Hicks & Associates, El Paso, for appellants.

Phillip C. Bowen, Johnson & Bowen, Brenda J. Norton, El Paso, for appellee.

Before KOEHLER, LARSEN and McCOLLUM, JJ.

OPINION

LARSEN, Justice.

In this appeal, Texas Builders, Warner Communications, Inc., and Atari Holdings, Inc. challenge a judgment awarding James A. Keller Realtors, Inc. a commission on the lease of commercial property. After a bench trial, the court awarded judgment to Keller for $68,586, imposed a constructive trust on the property for 6% of all future lease payments or sales proceeds, and awarded exemplary damages of $100,000 jointly and severally against all defendants. All defendants appeal. We affirm in part and reverse and render in part.

FACTS

In 1984, Texas Builders leased one of its commercial real estate properties located at 12058 Rojas, El Paso Texas, to Atari, Inc. Atari was a manufacturer of video games, and intended to use the property for that purpose. Texas Builders began substantial improvements to its building to accommodate Atari's needs. Before Atari ever occupied the building, however, it was acquired by Warner Communications, Inc. and ceased operations. The company's name was changed to Atari Holdings, Inc. and its sole purpose became the winding up of Atari's affairs. ¹ Atari Holdings' officers and directors were all employees of Warner Communications, and it never had separate headquarters or independent employees or functions after it was acquired by Warner.

One of Atari Holdings' tasks was to extricate itself, on the best terms possible, from its obligations stemming from its lease with Texas Builders. To that end, in 1986 it entered an exclusive listing agreement with James A. Keller Realtors, a commercial real estate brokerage in El Paso. Keller was to look for a subtenant to take over the lease. Warner/Atari renewed this listing several times, with the last agreement expiring September 30, 1988. The agreement contemplated a 4% broker's commission if Keller found a suitable subtenant for Warner/Atari's space, at a rental of $4 per square foot for 112,500 square feet.

During this time Warner/Atari also negotiated directly with Texas Builders in an effort to buy out the remaining term of the lease. The contract provided for an early buy out after five years if Warner/Atari paid Texas Builders $700,000. Keller recognized that Warner/Atari had the right to buy out of the lease, which might affect its exclusive listing contract. Keller was aware of the on-going negotiations Warner/Atari had with Texas Builders to free itself from the obligation to rent unused space.

In addition, Texas Builders was attempting to find tenants for a number of its properties, including the empty Warner/Atari space. In January and May 1988, Texas Builders sent letters to El Paso brokers listing the properties it had available, including Warner/Atari's leased building. Both letters stated "Texas Builders pays 6% commission for all signed leases." Texas Builders sent one of these letters to Keller Realty.

Keller's evidence at trial sounded a theme of discontent with Texas Builders. Keller's agents had trouble showing the Warner/Atari property to prospective tenants. Among other difficulties, Texas Builders refused to give Keller a key to the property and would not allow Keller to put its sign on the building. Keller presented testimony that Texas Builders would discourage tenants from renting the Warner/Atari space by telling them it would take at least 6 months to complete the half-finished interior construction. Texas Builders would then describe to potential tenants other properties it owned that were unleased and could be available in far less time. Thus, Keller claimed, Texas Builders could continue receiving rent for the unused space from Warner/Atari, while encouraging rental of other idle properties. The implication of this evidence was that Texas Builders was, (from an early date) sabotaging Keller's efforts to sublease Warner/Atari's space.

Texas Builders presented evidence that it had become equally disenchanted with Keller during this time. Keller's agents had apparently made disparaging remarks to potential tenants about Texas Builders' construction; Keller had urged one such client to obtain an independent structural inspection before renting Texas Builders' property. Keller had obtained an unauthorized key to the Warner/Atari space, which caused Texas Builders to change all locks on the premises and charge the cost against an unrelated Keller commission. In January 1986, Keller wrote a letter to Warner/Atari, explaining difficulties in subletting the property and suggesting that Warner/Atari try to negotiate a lower rent. He suggested that Warner/Atari require Texas Builders to finish the interior of the building as required by the lease, a process which had been halted when Warner/Atari ceased manufacturing operations. Texas Builders somehow obtained a copy of this letter, which enraged the partners and was apparently the final straw leading to the severing of all business relationships between Texas Builders and Keller Realtors.

Meanwhile Quickie Manufacturing, a light industrial manufacturing business, expressed its interest in relocating to El Paso. It began looking into commercial properties with the help of Keller and another broker, Best Realty. Keller sent Quickie a brochure and video on seven El Paso properties, including Warner/Atari's Rojas location. Quickie's representative, Peter Vosbikian, came to El Paso in 1988 and was shown the Rojas property by both Best and Keller agents. He was introduced to Texas Builders' property manager, Wayne Windle, by Best.

Keller presented Warner/Atari with a proposal from Quickie, but Warner/Atari concluded Quickie was not a suitable subtenant and rejected its offer. Warner/Atari suggested that Keller go directly to Texas Builders with Quickie's proposal, as Warner/Atari did not intend to continue its lease past its five-year buy out option, did not want to pay for Quickie's proposed improvements to the property, and wanted a subtenant for the entire building, not just the 50,000 square feet in which Quickie was interested.

Matt Koch, a Keller agent, then went directly to Wayne Windle with Quickie's proposal. Windle at that time completed an internal "space inquiry sheet" that listed the desired square footage, lease rate, and Matt Koch (a Keller agent) as broker. The sheet did not mention any commission.

It is here that the parties' versions of events diverge. Matt Koch testified that he called Wayne Windle repeatedly asking for Texas Builders' response to the Quickie offer. Windle told him each time that Gerald O'Brien, a Texas Builders' partner, had to make the decision, and that O'Brien was extremely ill. Windle claimed that he was under strict orders not to disturb O'Brien, and therefore was unable to give Koch an answer. Texas Builders' telephone logs and call records reflect otherwise, that Windle was communicating extensively with O'Brien, Quickie, and Warner/Atari during this time. On August 4, 1988, Koch learned for the first time that Texas Builders would not enter any lease for which Keller was the broker. Koch testified that only when he directly confronted Windle did he learn that Texas Builders was negotiating directly and indeed refused to do any further business with Keller.

Windle, on the other hand, testified that he was unable to reach O'Brien and could not get a response to Quickie's offer. He testified repeatedly that he could remember almost nothing about the events leading to this lawsuit. Quickie did enter into the lease with Texas Builders, and no commission was ever paid to Keller, despite Keller's written demands. Keller eventually brought suit against Texas Builders, Warner, and Atari, and obtained judgment for actual and punitive damages.

The record reflects that in El Paso commission agreements between brokers and landlords are never executed in commercial land transactions until a deal is complete. Thus, a broker is without any legal recourse against an owner who refuses to pay a commission, no matter how instrumental that broker was in obtaining a lease or sale. Texas Builders argues that this system works because "the practicalities of working in the relatively small El Paso industrial real estate market and the dependence of real estate owners on brokers prevents owners from abusing the system."

TEXAS BUILDERS' APPEAL

Texas Builders, in twenty-eight points of error, claims that the trial court erred in entering judgment against it. Their complaints can be divided into six categories: lack of a written commission agreement, lack of evidence on fraud, lack of pleadings or evidence to support a constructive trust, lack of evidence on conspiracy, lack of evidence on tortious interference with contract, and the inappropriateness of exemplary damages. We examine these complaints in turn.

A. Written contract for real estate commission.

In its Points of Error One through Ten, Texas Builders complains that the trial court erred in finding a breach of contract, as there was no evidence or insufficient evidence to establish that Keller possessed an enforceable promise to pay a commission. Texas Builders also urges in these points that Keller's evidence of contract failed as a matter of law. We disagree.

Real estate brokers in Texas are regulated by the Real Estate License Act, TEX.REV.CIV.STAT.ANN. art. 6573a et seq. The act applies to leases as well as the sale of real property....