Terry Laney v. Austin Auto Air Conditioning, Inc.

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-98-00305-CV

Terry Laney, Appellant

Austin Auto Air Conditioning, Inc., Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT

NO. 97-08702, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

Terry Laney appeals the trial court's judgment that he wrongfully terminated his real-estate lease to appellee Austin Auto Air Conditioning, Inc. He also appeals the trial court's award of attorney's fees to appellee and the failure to award him attorney's fees. We will affirm the judgment.

THE UNDERLYING DISPUTE

Laney, who owned a used-car business, sublet a portion of the building and adjacent parking lot to appellee.⁽¹⁾ Among other aspects, the lease required appellee to pay $950 rent on or before the first of each month, plus pay for one-third of the utilities, bathroom and kitchen supplies, and mowing and yard maintenance. The lease states that

on failure to pay the rent in advance, as aforesaid, or to comply with any of the foregoing obligations, or in violation of any of the covenants, the Lessor may declare this lease forfeited at Lessor's discretion and Lessor or Lessor's agent or attorney shall have the power to enter and hold, occupy and repossess the entire premises hereinbefore described, as before the execution of these presents.

Following this provision, a handwritten addendum referred to an attached, handwritten page of additional requirements; among these was the requirement that appellee not store on premises junk, old tires, or non-running cars for more than ten days.

Appellee did not always fully comply with the lease terms. Appellee paid the rent in the amount prescribed by the lease, but did not always pay by the first of the month;⁽²⁾ Laney's records showed that appellee was late with rent payments fourteen times between January 1994 and December 1997.⁽³⁾ Laney also testified that appellee's utility payments were so late on three occasions that Laney received notices of termination of service. There was no claim or proof that any rent or utility bills were overdue at the time of the attempted termination or at time of trial. Laney also complained that appellee allowed its customers and vendors to park in front of the building, contrary to its rights under the lease, thus blocking motorists' view of his cars for sale.

On July 8, 1997, Laney gave notice he would "no longer be able to rent shop and office" to appellee and demanded that appellee vacate the premises by August 8, 1997. Appellee refused, contending it had a valid lease. After initially rejecting the rent payment for August 1997, Laney cashed all of appellee's payments, including ones made after this lawsuit began.

Following a non-jury trial, the court ruled that the lease was valid and existing when Laney demanded appellee vacate. The court held that Laney's wrongful termination of the lease caused appellee to incur $17,576 in attorney's fees to assert its rights. The court declined to award damages to either side. The court also held the lease terminated on December 31, 1997.

ANALYSIS

Laney raises four issues on appeal. He contends that appellee's failure to make timely rent and utility payments, its use of the front parking areas, and its storage of junk cars for more than ten days constituted material breaches of the lease agreement and justified termination of the lease. He argues that he did not waive his right to terminate the lease by accepting late rent and utility payments. He contends that appellee is not entitled to attorney's fees and that, instead, he is entitled to damages and attorney's fees for appellee's breach of the lease.

Whether a party has breached a contract is a question of law. Lafarge Corp. v. Wolff, Inc., 977 S.W.2d 181, 186 (Tex. App.--Austin 1998, pet. denied). The trial court's conclusions of law are reviewable de novo. See Westech Eng'g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.--Austin 1992, writ denied). We will uphold conclusions of law on appeal if we find a legal theory supported by the evidence which supports the judgment. Id. Incorrect conclusions of law will not require reversal if the controlling findings of facts will support a correct legal theory. Id. "[A]lthough the trial court's conclusions of law may not be challenged on appeal for factual sufficiency, a trial court's conclusions drawn from the facts may be reviewed to determine the correctness of those legal conclusions." Burtch v. Burtch, 972 S.W.2d 882, 888 (Tex. App.--Austin 1998, no pet.).

Laney did not state a basis for termination in his notice to appellee, nor did the lease require him to do so. To evaluate his claim of breach, we will address the bases he asserted at trial and restates on appeal.

Late payment of rent. The lease expressly authorizes Laney to declare the lease forfeited upon appellee's failure to pay the rent in advance. Appellee does not dispute Laney's contention that the rent was late on more than one occasion, including the month in which Laney declared the lease forfeited. Laney does not dispute that he accepted every late payment, including the one during the month in which he declared the lease forfeited; in fact, he accepted the payment on July 2 before declaring the lease forfeited on July 8. Appellee argues that Laney thereby waived his right to terminate the lease.

Waiver is the intentional relinquishment of a known right. Straus v. Kirby Court Corp., 909 S.W.2d 105, 108 (Tex. App.--Houston [14th Dist.] 1995, writ denied). Where there is conflicting evidence, waiver is a question for the factfinder. Id. A lessor can waive his right to declare a forfeiture for failure to pay by a certain date if he repeatedly does not demand payment by that certain date. Wendlandt v. Sommers Drug Stores Co., 551 S.W.2d 488, 489 (Tex. Civ. App.--Austin 1977, no writ); see also Miers v. Clark, 253 S.W.2d 941, 942 (Tex. Civ. App.--Dallas 1952, no writ).

The Wendlandt case has factual similarities to this case. In both cases, the lease required rent payments on or in advance of the first of the month. See Wendlandt, 551 S.W.2d at 489. As in this case, the Wendlandt lease allowed the lessor, upon discovering a breach, to declare the lease forfeited at his discretion; unlike this lease, the Wendlandt lease gave the lessee thirty days to cure any defaults. Id. Starting at least by mid-1973, the lessor in Wendlandt accepted without complaint rent checks mailed between the second and fifth of the month. In November 1974, the lessor sent a letter dated the second of the month citing the failure of the rent check to arrive by the first. (The check for that month, mailed as customarily done on the second, apparently never reached the lessor.) In December 1974, the lessor sent a letter on the third of the month citing the breach of the prompt-payment requirement as a basis for termination of the lease. The lessor accepted lessee's payment of both months' rent, but insisted the lease was terminated.

In Wendlandt, this Court held that, by not complaining about the late arrival of rents for one-and-a-half years, the lessor waived its right to declare the lease forfeit for late payment. Id. at 490. This Court also held that, unless the lease waives demand for performance as a condition precedent to forfeiture, a landlord cannot declare a lease forfeited for the tenant's failure to comply with the payment provisions without first making demand for performance. Id.; but see Caro v. Housing Authority of City of Austin, 794 S.W.2d 901, 903 n.1 (Tex. App.--Austin 1990, writ denied) (declining to decide whether duty to demand performance exists). In Wendlandt, this Court wrote:

Notice of default in payment of rent must convey a message that the notifier is initiating steps necessary to finally assert his legal rights that if default is not cured, he may take final action as provided in the contract. . . . [I]t is only in cases in which the lease contract contains an express waiver of demand for performance that the rule announced above can be disregarded.

Wendlandt, 551 S.W.2d at 490.

Laney's reliance on Straus for the proposition that he did not waive his right to evict appellee by accepting late rent payments is misplaced because the lease in Straus had a clause that specifically allowed the landlord to accept late payments without waiving its right to evict the tenant. See Straus, 909 S.W.2d at 107. Laney has no such clause in this lease.

We hold that the trial court correctly concluded that Laney wrongfully terminated the lease with regard to late rent payments. The lease itself does not address whether Laney had to warn appellee of a default. It contains neither a notice-of-default requirement nor a waiver of demand for performance. Laney accepted all of appellee's forty-one rent payments made before July 1998, including the thirteen that were late; there is no evidence of complaint regarding lateness. Laney's repeated acceptance of late payments with no evidence of complaint curtailed his right to terminate the lease for late payments without warning; though he might have resurrected that right by cautioning of his intent to enforce the timeliness provision, there is no evidence of any such warning. Laney accepted the July 1998 rent a day late, then declared the lease forfeited six days later. The notice of forfeiture did not give appellee the chance to cure any default (indeed, the payment had been made) nor is there evidence that Laney warned appellee that he intended to start enforcing the payment deadline. After the July notice, appellee tendered every rent payment on or before the first of the month.⁽⁴⁾

Payment of utilities. Though appellee sometimes paid the utility bill late, there is no evidence that appellee breached its obligation to pay the utility bills. No clause in the lease sets a date for payment of the utility bill and there is no provision that failure to meet the utility company's deadlines will result in termination. The termination clause does not authorize termination for late payment of utility bills, only for non-payment of the bills. There is no evidence that the utility bill was due and unpaid when Laney declared the lease was terminated.

Use of the front parking lot and storage of junk and non-running cars. The lease did not authorize termination for use of the front parking lot. No provision in the lease, including the termination clause, refers to or limits use of the front parking lot. There was no evidence of an oral agreement allowing termination for any breach of an oral agreement regarding use of the parking lot. Appellee's principal shareholder and officer, Chris Perry, testified he could not authorize appellee's customers and suppliers to park in the front driveway (which blocked the view of Laney's cars from Burnet Road), not because of any lease language or possessory interest by Laney, but because the driveway area was "Austin property"--i.e. the City of Austin's easement. The lease does not authorize termination for interference with the City's easement.

Nor did the lease authorize termination for the storage of junk and cars. The termination clause authorizes termination for violation of the "foregoing obligations" listed on page one of the lease. The clause restricting the storage of junk and cars appears on a page attached to the lease; it is therefore not one of the "foregoing obligations" listed on page one. Even the reference on page one to the existence of page two appears after the termination clause.

We find no evidence in the record that Laney notified appellee that he would declare the lease forfeited because of its breach of parking-lot or junk-storage agreements. Laney complained, especially about the use of the front lot, but the only evidence is that appellee rectified the problems by moving the offending vehicles.

We hold that the trial court correctly declared that the parties had a valid lease and that Laney wrongfully terminated it.

The record also supports the trial court's refusal to award Laney damages. He requested damages for actions of appellee that we have just determined did not justify termination of the lease. The record shows no outstanding payments due and no other breaches of the lease or oral understandings that were not remedied promptly. Our conclusion that he wrongfully terminated the lease necessarily means the trial court correctly did not award him damages for appellee's refusal to vacate the premises upon his notice of termination.

Laney correctly states that the prevailing party in a breach-of-contract suit is entitled to recover reasonable attorney's fees. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West 1997). The prevailing party in a declaratory-judgment action also may recover reasonable attorney's fees. Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (West 1997). We review an award of attorney's fees for abuse of discretion. Oake v. Collin County, 692 S.W.2d 454, 455 (Tex. 1985) (declaratory judgment). Laney argues that appellee is not entitled to attorney's fees because it breached the lease and should not have prevailed; he contends that he should prevail and gain attorney's fees. We have concluded, however, that the trial court correctly decided that appellee should prevail and that Laney should not. Laney's actions compelled appellee to file this suit to enforce its rights under the lease. The trial court did not abuse its discretion by awarding attorney's fees to the prevailing party in a declaratory-judgment and contract case. Laney does not attack the amount of attorney's fees awarded. We find no abuse of discretion in the trial court's award.

Having resolved all issues on appeal in appellee's favor, we affirm the trial court's judgment.

Bea Ann Smith, Justice

Before Justices Jones, B. A. Smith and Yeakel

Affirmed

Filed: April 22, 1999

Do Not Publish

1. The initial lease ran for six months from January 1, 1994. A second lease ran for eighteen months from July 1, 1994. During the second lease-term, the parties agreed to one-year renewals. There was some dispute at trial regarding the nature of the renewal option. On appeal, however, Laney does not dispute that a lease was in effect in July 1997; he focuses his contentions on whether appellee breached the terms of the renewed lease.

Though the agreement between Laney and appellee was a sublease, for convenience, we will refer to it as "the lease."

2. Laney's records have an unexplained gap in place of the January 1996 and January 1997 payments. There was evidence that winter was a very slow season for air-conditioning repair and that appellee sometimes closed his shop during winter.

3. Only three of the late payments were made later than the third day of the month. Six of the late payments were made on the first non-holiday weekday after the first of the month.

4. Laney's records show that he accepted the August 1998 rent payment on August 13; other evidence shows that appellee tendered that payment on July 29, but Laney initially refused to accept it.

torage of junk and cars appears on a page attached to the lease; it is therefore not one of the "foregoing obligations" listed on page one. Even the reference on page one to the existence of page two appears after the termination clause.