Li Li D/B/A Villa Residential Design Studio v. 1821 West Main Development LLC

Affirmed and Memorandum Opinion filed November 29, 2011.

In The

Fourteenth Court of Appeals

NO. 14-10-01227-CV

LI LI D/B/A VILLA RESIDENTIAL DESIGN STUDIO, Appellant

V.

1821 WEST MAIN DEVELOPMENT LLC, Appellee

On Appeal from the 269th District Court
Harris County, Texas
Trial Court Cause No. 2008-57290

MEMORANDUM OPINION

In this breach of contract case, appellant Li Li d/b/a Residential Design Studio
(―Li Li‖) challenges the trial court’s conclusion that she breached an oral agreement with
1821 West Main Development LLC (―West Main‖).1 Li Li first asserts that there is no
evidence or insufficient evidence to establish that she had a contract with West Main
because (a) West Main’s pleadings do not support this claim and (b) she was not aware
that she was contracting with West Main and instead believed she was contracting with
another developer, Gary Lee of Watermark Homes (―Watermark‖). She further
challenges the evidence to support the trial court’s damages award. We affirm.

1
Li Li’s notice of appeal and brief both list ―Seven Bricks, Inc.‖ as an additional appellee; however, she
raises no appellate issues regarding this entity.
 BACKGROUND

In 2006, West Main purchased property located at 617 Wellesley in Hunter’s
Creek Village, Harris County. Imran Maniar, a principal of West Main and Seven
Bricks, was introduced to Li Li, an experienced high-end residential home designer, by
Gary Lee of Watermark. The two met at the Watermark offices, where they entered into
an oral agreement for Li Li to design a home for the Wellesley property. 2 As part of this
agreement, Li Li charged Maniar a lower-than-usual rate in return for Maniar’s
agreement to provide certain documentation, including a survey of the property, and to
perform the ―leg work‖ of taking the design plans to the appropriate authorities for
approval. Li Li had provided a similar discount to other developers under these same
general terms.

One of Maniar’s employees, a student named Yasir Khan, contacted Li Li and
provided her with a survey of the property. However, the survey was old and did not
include several of the set-back lines. Khan also provided Li Li the contact information
for the building official for Hunter’s Creek Village, Dennis Holm.

Li Li prepared her first home design plans for the Wellesley property sometime in
April 2007, about three to four months after she had been engaged. These plans were
rejected because they did not comply with the appropriate property set-backs. After
several communications between Li Li, Holm, Khan, and Maniar, Li Li provided new
plans a few months later. These plans were likewise rejected because of a mistake Li Li
made. Several revisions to the plans ensued. Each time Li Li submitted new design
plans, they had to be drawn up by an engineering firm at considerable cost. Ultimately,
Maniar asked Gary Lee at Watermark to take over the project because Lee had a better
working relationship with Li Li. West Main paid Watermark $88,000 to take over the
project. After Watermark took over the project, Lee discovered the necessity of a home

2
At no time during the meeting did Maniar disclose to Li Li that he was acting on behalf of West Main or
Seven Bricks.

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owner’s association approval. Maniar had informed Holm at Hunter’s Creek Village that
such approval was not required.

The residential design plans were finally approved almost a year after Li Li
initially undertook the project. These plans were not the ones that Li Li had submitted to
Maniar. Instead, they were plans from a prior project with Watermark that Li Li
modified to fit the Wellesley property. The plans were approved both by Hunter’s Creek
Village and the appropriate homeowner’s association. The house that Li Li designed was
built on the Wellesley property and sold shortly thereafter.

In September 2008, West Main and Seven Bricks, Inc. sued Li Li, claiming that
she had orally contracted with Seven Bricks, Inc., that she breached that contract by
failing to timely provide design plans, and that Seven Bricks suffered damages of
$80,000, which it would have been paid had it completed the project. West Main was
named as a third-party beneficiary to the contract. West Main alleged damages of
$82,367.46 for loan carrying costs, re-engineering fees, and additional permitting fees.
Seven Bricks and West Main also alleged that Li Li was negligent and that their damages
were the same as their alleged contract damages. Li Li generally denied the allegations.

In February 2009, Li Li filed a counter-claim. In her petition, she sued Seven
Bricks and West Main. Specifically, she asserted the following in the ―Factual
Background‖ of her petition:

Counter-defendants [Seven Bricks and West Main] engaged Li Li to
perform design work for a number of projects in Harris County, including
the project that forms the basis of Plaintiffs’ complaints in this lawsuit. Li
Li performed the work requested by Counter-defendants. However,
Counter[-]defendants made some payments but failed to pay Li Li the full
agreed upon amounts for the design services rendered on these projects.
The amount that remains owing to Li Li is $7,560.06.

Under the ―Causes of Action‖ portion of her petition, Li Li asserted that Seven Bricks

and West Main had breached their contract with her:

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 Li Li had a valid and enforceable agreement with Counter-defendants. Li Li
fully performed all conditions, covenants and obligations under the
agreement with Counter[-]defendants, but Counter-defendants refused or
failed to perform in compliance with its obligations. Counter-defendants
have therefore breached the provisions of the contract with Li Li. Because
of such breaches, Li Li has sustained actual damages exceeding the
minimum jurisdictional limits of the Court, for which she now seeks
recovery. Additionally, Li Li has incurred reasonable and necessary
attorney’s fees for the prosecution of this suit for which she also seeks
recovery.

This case was tried to the bench in June 2010. The trial court found that Li Li
breached her contract with West Main and that West Main breached its contract with her.
It awarded West Main damages in the amount of $154,214.60 and attorney’s fees of
$13,000. It awarded Li Li offsetting damages of $7,600 and $3,500 in attorney’s fees.
Prior to rendering judgment on September 29, 2010, the trial court signed the following
findings and conclusions on June 24, 2010:

FINDINGS OF FACT

1. Plaintiff 1821 West Main Development, L.L. C. (―1821 West Main‖)
purchased property located at 613 Wellesley (―Wellesley Property‖)
in Hunter’s Creek Village in 2006.
2. 1821 West Main retained Plaintiff Seven Bricks, Inc. (―Seven
Bricks‖) to construct a house on the Wellesley Property.
3. Imran Maniar acting on behalf of 1821 West Main retained
Defendant Li Li d/b/a Villa Residential Design Studio to design the
house for the Wellesley Property as well as houses to be constructed
on property owned by 1821 West Main on Pine Forest and Reba
streets.
4. In the oral agreement between Li and 1821 West Main, Li agreed to
design the houses on the Wellesley Property, as well as on Pine
Forest and Reba, and 1821 agreed to perform the leg work of taking
the plans for the houses to the applicable local government
permitting authorities and homeowners’ associations for approval
and to return rejected plans to Li.
5. 1821 West Main agreed to pay Li $1.50/ft2 of framed space for her
designs.

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6. Seven Bricks did not prove by a preponderance of evidence that it
was a party to the agreement between Li and 1821 West Main.
7. Li did not timely produce adequate plans for government and
homeowners’ association approvals.
8. Li failed to comply with her agreement with 1821 West Main.
9. Li’s failure to comply with the agreement caused 1821 West Main to
experience out-of-pocket damages of $154,214.60.
10. Li was negligent.
11. The negligence of Li proximately caused damages to 1821 West
Main in the amount of $154,214.60.
12. 1821 West Main was not negligent.
13. Seven Bricks was not negligent.
14. 1821 West Main has not complied with its agreement with Li to pay
her for her designs.
15. 1821 West Main’s failure to comply with the agreement caused Li to
experience damages of $7,600.00.
16. The reasonable and necessary amount of attorneys’ fees that 1821
West Main incurred in prosecuting its claim is $13,000.00.
17. The reasonable and necessary amount of attorneys’ fees that Li
incurred in prosecuting her counterclaim is $3,500.00.
18. To the extent that any Conclusion of Law is more properly
characterized as a Finding of Fact, it is ADOPTED as such.

CONCLUSIONS OF LAW

1. Li owed a duty of ordinary care to 1821 West Main and Seven
Bricks.
2. The Court concludes that 1821 West Main should recover
prejudgment interest at a rate of 6% simple interest for the period of
September 29, 2008, through the day preceding the date judgment is
rendered.
3. The Court concludes that 1821 West Main should recover post
judgment interest at a rate of 6% compounded annually for the
period beginning on the date the judgment is rendered and ending on
the date the judgment is satisfied.
4. The Court concludes that Li should recover prejudgment interest at a
rate of 6% simple interest.

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 5. The Court concludes that Li should recover post judgment interest at
a rate of 6% compounded annually for the period beginning on the
date the judgment is rendered and ending on the date the judgment is
satisfied.
6. To the extent that any Finding of Fact is more properly characterized
as a Conclusion of Law, it is ADOPTED as such.

Li Li’s requested amended findings and conclusions, but the trial court did not rule on her
request. Her motion for new trial was overruled by the trial court, and this appeal timely
followed.

ANALYSIS

A. West Main’s Breach of Contract Claim

In her first issue, Li Li asserts that West Main was not entitled to recover
contractual damages against her because no such recovery is supported by West Main’s
pleadings and because there was no evidence or insufficient evidence to support an oral
agreement or a finding of breach by Li Li. We consider first whether the pleadings
support West Main’s recovery of contract damages, then turn to the sufficiency of the
evidence to support the finding that there was an oral contract and that Li Li breached this
contract.

We agree with Li Li that West Main’s pleadings, which cast West Main as a third-
party beneficiary to an alleged contract between her and Seven Bricks, do not support
West Main’s recovery under a direct breach-of-contract theory. However, issues not
raised by the pleadings may be tried by the express or implied consent of the parties. See
Tex. R. Civ. P. 67; Moore v. Altra Energy Techs., Inc., 321 S.W.3d 727, 733 (Tex.
App.—Houston [14th Dist.] 2007, pet. denied). Here, during Li Li’s counsel’s
examination of Maniar, the following testimony was elicited:

Q: When you met with Li Li to discuss these three projects, the
Wellesley, Reba, Pine Forest, and when you eventually hired her to
do the design work on these three projects, were you doing that on
behalf of 1821 West Main Development?

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 A: 1821 West Main Development owned Wellesley and Reba. The Pine
Forest was owned by another investor.
...
Q: So when you hired Li Li to do the design work, who was - - who was
hiring Li Li?
A: Seven Bricks was hiring Li Li for the Pine Forest project. 1821 West
Main was hiring her for the other two projects.
...
Q: And in making that contract, you were acting on behalf of 1821 West
Main Development?
A: On the Wellesley project.
...
Q: Okay. I’m sorry. So you were acting on behalf of 1821 West Main
Development in making a contract for the Wellesley property with Li
Li?
A: That’s correct.
...
Q: Well, the agreement was between - - I think you just told me - -
between 1821 West Main Development and Li Li?
A: Right . . . .
(emphasis added). These questions and responses directly relate to the issue of whether
West Main was a primary party to the oral agreement regarding the Wellesley property.
They have no bearing whatsoever on whether West Main was a third-party beneficiary to
any other contract. Accordingly, this unobjected-to testimony adequately notified Li Li
that the issue of whether West Main and she had an oral contract was being ―tried.‖ Tex.
R. Civ. P. 67.

Regarding the sufficiency of the evidence to support the trial court’s finding that
Li Li had an oral contract with West Main, as described above, Li Li filed a counter-
claim in this case. In her counter-claim, she acknowledged that she had a valid oral
agreement with both Seven Bricks and West Main. Such an assertion of fact, not pled in
the alternative, in the live pleadings of a party is regarded as a formal judicial admission,
precluding the party from later disputing the admitted fact. Holy Cross Church of God in
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Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001) (citing Houston First Am. Sav. v. Musick,
650 S.W.2d 764, 767 (Tex. 1983) and Gevinson v. Manhattan Constr. Co., 449 S.W.2d
458, 467 (Tex. 1969)). Because Li Li judicially admitted that she had a contract with
West Main, she cannot dispute the existence of the contract. See id. Additionally, the
unobjected-to testimony recited above, coupled with Li Li’s judicial admission that she
had a contract with West Main, vitiate her arguments that the contract did not exist
because she did not have a ―meeting of the minds‖ with West Main or that Manier was
acting as an agent of an undisclosed principal.

Regarding the evidence supporting a finding of breach of this contract by Li Li, in
reviewing a trial court’s findings of fact for legal and factual sufficiency of the evidence,
we apply the same standards we apply in reviewing the evidence supporting a jury’s
answer. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). When the appellate
record contains a reporter’s record, as it does in this case, findings of fact are not
conclusive on appeal if a contrary fact is established as a matter of law or if there is no
evidence to support the finding. See Material P’ships, Inc. v. Ventura, 102 S.W.3d 252,
257 (Tex. App.—Houston [14th Dist.] 2003, pet denied).

A contracting party breaches a contract by failing to complete performance of the
contract within a reasonable time. See Bencon Mgmt. & Gen. Contracting, Inc. v.Boyer,
Inc., 178 S.W.3d 198, 205–06 (Tex. App.—Houston [14th Dist.] 2005, no pet.). Here,
Gary Lee of Watermark testified that he expected Li Li to be familiar with the provisions
of the city building codes and that she was responsible for complying with these codes.
He also testified that a ―commercially reasonable‖ amount of time for a designer to get a
plan to a city is between three and four months. Dennis Holm of Hunter’s Creek Village
testified that the Wellesley project ―seemed that it just kept going on and on and on.‖ He
further stated that the city’s building rules were available on-line and that in his two-year
tenure at Hunter’s Creek Village, no home took longer to get approval than the one at 617
Wellesley. Maniar testified that he became frustrated with Li Li around five to six
months into the project because ―she had no clue how to get plans to [the city] at that

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time.‖ He further testified that in the 55 homes he had built, it never took longer than
three months to get the necessary building plan approvals.

All of this testimony supports the trial court’s finding that Li Li did not timely
produce adequate plans for Hunter’s Creek Village approval. We conclude that
reasonable factfinders could credit this finding; thus legally sufficient evidence supports
it. See City of Keller, 168 S.W.3d at 827. Further, the finding is not so weak or the
evidence to the contrary so overwhelming that it should be set aside. See Burlington N.
& Santa Fe Ry., 174 S.W.3d at 354.

Accordingly, this finding is supported by legally and factually sufficient evidence.
This finding supports the trial court’s conclusion that Li Li failed to comply with her
agreement with 1821 West Main. See Bencon Mgmt. & Gen. Contracting, Inc., 178
S.W.3d at 205–06. Because Li Li judicially admitted that she had a valid and enforceable
contract with West Main and because legally and factually sufficient evidence supports
the trial court’s finding of breach, we overrule Li Li’s first issue.

B. Sufficient Evidence Supports the Damages Awarded to West Main

In her second issue, Li Li asserts that the evidence is legally and factually
insufficient to support the damages awarded to West Main. As noted above, we consider
the legal and factual sufficiency of a trial court’s findings under the same standards as
applied to a jury’s findings.

Here, the following uncontroverted testimony supports the trial court’s damages
award of $154,214.60 to West Main:

The interest incurred on the construction loan that West Main procured to
cover construction costs of the Wellesley property was $3,816.56 between
June of 2007 when Li Li breached the agreement and the property was sold
in February of 2008;
The interest incurred on the mortgage West Main took procured to purchase
the Wellesley property during that same time period was $39,610.60;
West Main paid Watermark $88,000 to take over construction of the
project;

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 During that same period of time, taxes totaling $5,887.45 were incurred;
Re-engineering fees based on Li Li’s unusable plans cost $7,300; and
Li Li was paid $9,600 for her unused plans.
These amounts total $154,214.61, which is one penny more than the damages
found by the trial court.3 Additionally, although West Main did not plead for the interest
accrued on its property loan during Li Li’s breach, this issue was tried by consent. See
Tex. R. Civ. P.67 (explaining that ―issues not raised by the pleadings are tried by express
or implied consent of the parties [and] shall be treated in all respects as if they had been
raised in the pleadings‖). Testimony regarding the property interest loan and the accrued
interest on the loan was introduced without objection. Specifically, Maniar explained
which months Li Li was in breach and then concluded that, based on the interest accrued
on the property loan, she was liable for identified sum. This unobjected-to testimony
adequately notified Li Li that this issue was being ―tried.‖ Tex. R. Civ. P. 67.

Under these circumstances, we conclude that reasonable factfinders could credit
the evidence supporting this finding and there is no controverting evidence regarding this
finding. Accordingly, the trial court’s damages award is supported by legally and
factually sufficient evidence. Li Li’s second issue is overruled.

CONCLUSION

We have overruled each of Li Li’s issues on appeal. We affirm the trial court’s
judgment.

/s/ Adele Hedges
Chief Justice

Panel consists of Chief Justice Hedges and Justices Brown and McCally.

3
Although Li Li challenges the award of attorneys’ fees on appeal, the parties stipulated to these amounts
in the trial court. Thus, this portion of her issue provides no basis for relief.

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