James F. Cotter v. William J. Todd and Jennifer Todd--Appeal from County Court at Law No 3 of Bexar County

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No. 04-01-00084-CV
James F. COTTER,
Appellant
v.
William J. TODD and Jennifer Todd,
Appellee
From the County Court at Law, Number 3, Bexar County, Texas
Trial Court No. 223658
Honorable Shay Gebhardt, Judge Presiding

Opinion by: Karen Angelini, Justice

Sitting: Catherine Stone, Justice

Paul W. Green, Justice

Karen Angelini, Justice

Delivered and Filed: October 9, 2002

AFFIRMED IN PART; REVERSED AND RENDERED IN PART; REVERSED AND REMANDED IN PART

James F. Cotter appeals the trial court's judgment ordering that he return William J. and Jennifer Todd's security deposit and that Cotter take nothing on his counterclaim against the Todds. Because the evidence does not support the trial court's findings in the Todds' favor, and because the evidence conclusively establishes Cotter's right to recover on his counterclaim, but not his request for costs and attorney's fees, the trial court's judgment is reversed and rendered in part, reversed and remanded in part, and affirmed in part.

Factual and Procedural Background

Cotter and the Todds entered into a residential lease agreement. The Todds deposited $3,000.00 for the "faithful performance of the terms and conditions of the Lease." Under the lease "[a]t least thirty (30) days' prior written notice of move-out must be given by Tenant to Landlord as a condition to Landlord being required to refund the Deposit."

Upon the expiration of the initial lease term, the Todds extended their lease on a month-to-month basis. Each time they extended their lease, the Todds notified Maxine L. Hall, the Assistant Controller for Cotter Construction Company. (1) On January 9, 1994, William Todd notified Ms. Hall, in writing, that the "walk-through" with Lance Elliot, a realtor, and Cotter's son had been satisfactorily completed. Todd further requested that his $3,000.00 security deposit be returned immediately. The Todd's deposit was not returned to them.

The Todds brought suit against Cotter, alleging that he wrongfully withheld the security deposit, and alternatively, that he failed to provide them an itemized list of deductions taken from their security deposit in bad faith. The Todds sought recovery of their deposit and reasonable attorney's fees. Cotter answered, asserted affirmative defenses, and counterclaimed that the Todds breached the lease agreement by failing to provide timely written notice of their intent to vacate the premises.

Cotter moved for a no evidence partial summary judgment, arguing that there was no evidence of a "critical element of [the Todds'] cause of action"-the Todds never tendered advance written notice of surrender of the property to Cotter as required by the lease-and that he was, therefore, entitled to judgment. The Todds filed a response to Cotter's motion on the day of the hearing and attached letters informing Ms. Hall of their intent to extend their lease. The Todds maintained these letters constitute written notice of their intent to surrender the property. Cotter objected to the Todds' response as untimely filed and complained that the letters did not amount to competent summary judgment evidence. The trial court initially overruled Cotter's objections and denied his motion for partial summary judgment. (2) But upon his motion for reconsideration, the trial court sustained Cotter's objections to the untimeliness of the Todds' summary judgment response and to the incompetency of their summary judgment proof and granted his motions for reconsideration and for partial summary judgment. Thus, the letters which arguably satisfied the written notice lease provision were not before the trial court nor are they a part of the record on appeal.

The trial court then held a bench trial on Cotter's breach of contract counterclaim and entered a final judgment. The trial court ordered that the Todds recover their $3,000.00 security deposit from Cotter, that Cotter take nothing on his breach of contract counterclaim against the Todds and request for costs, and that both parties be responsible for their own attorney's fees.

Cotter timely requested the trial court to enter findings of fact and conclusions of law. No findings or conclusions were entered. Cotter filed a notice of past due findings of fact and conclusions of law, which also went unanswered by the trial court. Cotter appeals the trial court's judgment and its refusal to enter findings of fact and conclusions of law. (3)

Sufficiency of the Evidence

The trial court entered findings of fact and conclusions of law, which are as follows:

Finding [sic] of Fact: 1. Valid Residential Lease Contract.

2. Timely paid security deposit of $3,000.00.

3. Notice of vacating timely sent to Landlord.

4. Security deposit not refunded.

5. Valid month to month tenancy.

6. Tenants did not damage the property.

Based on the credibility of the witnesses, the weight given to their testimony, and the written exhibits the Court found for the Plaintiff.

Conclusions of Law: There was a meeting of the minds that resulted in a written Residential Lease Contract. The Court upheld the provisions of the Lease contract. Tx. Prop. Code. 92.102, 92.103, 92.1031, 92.104, 91.001, 92.001, 92.109. (4)

Cotter argues the evidence is legally and factually insufficient to support the trial court's finding that notice of surrender was timely sent to him. In response, the Todds do not dispute the fact that notice was not timely; they contend the evidence shows Cotter forfeited his right to retain their security deposit because he acted in bad faith by retaining their security deposit, or alternatively, by not providing the Todds with a written description and itemized list of damages and charges. (5)

Standard of Review

A trial court's findings of fact are reviewable for legal and factual sufficiency by the same standards applied in reviewing the sufficiency of the evidence supporting a jury's finding. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). In reviewing a no evidence challenge, we consider only the evidence and reasonable inferences viewed in their most favorable light, which support the court's findings. Lewelling v. Lewelling, 796 S.W.2d 164, 166 (Tex. 1990). If there is more than a scintilla of evidence to support the finding, the no evidence challenge must fail. Id. In considering the factual sufficiency of the evidence supporting a finding, we review all the evidence and reverse only if the challenged finding is so against the great weight and preponderance of the evidence as to be manifestly unjust. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986).

Conclusions of law, however, are reviewed de novo and will be upheld on appeal if the judgment can be sustained on any legal theory supported by the evidence. Mack v. Landry, 22 S.W.3d 524, 527 (Tex. App.-Houston [14th Dist.] 2000, no pet.); Houston Bellaire v. TCP LB Portfolio I, L.P., 981 S.W.2d 916, 919 (Tex. App.-Houston [1st Dist.] 1998, no pet.). We review the legal conclusions drawn from the facts found to determine their correctness. Dallas County v. Sweitzer, 881 S.W.2d 757, 763 (Tex. App.-Dallas 1994, writ denied).

Texas Property Code Generally

Generally, a landlord must refund a tenant's security deposit on or before the 30th day after the tenant surrenders the property. Tex. Prop. Code Ann. 92.103(a) (Vernon 1995). A landlord may retain all or part of the security deposit to cover the cost of damages and other charges for which the tenant is legally liable. Id. 92.104(a). If the landlord retains any or all of the security deposit for damages or charges, he is required to provide the tenant with a written description and itemized list of all deductions. Id. 92.104(c). A landlord may be liable to a tenant for failure to refund the security deposit in bad faith. Id. 92.109(a). Furthermore, a landlord forfeits the right to withhold any portion of the security deposit to cover the cost of damages if he, in bad faith, does not provide a written description and itemized list of damages and charges. Id. 92.109(b). A landlord who fails to return the security deposit or provide a written description and itemization of damages to the tenant on or before the 30th day following the date the tenant surrenders the property is presumed to have acted in bad faith. Id. 92.109(d).

The Property Code contemplates a landlord's right to temper his or her obligation to refund a deposit by placing certain conditions on tenants in the lease agreement. For example, a landlord may require a tenant to provide advance written notice of his or her intent to vacate the property. See Tex. Prop. Code Ann. 92.103(b) (Vernon 1995) (requiring such clause to be underlined or in bold conspicuous print to be effective).

The Todds' Claims

In their petition, the Todds claimed they were entitled to recover their security deposit because they provided Cotter with their forwarding address and because Cotter retained their security deposit in bad faith. Tex. Prop. Code Ann. 92.103 (Vernon Supp. 2002), 92.109 (Vernon 1995). Alternatively, the Todds argued Cotter forfeited his right to retain their security deposit because he failed to provide them an itemized list of deductions and charges withheld from the deposit in bad faith. Cotter countered that the Todds failed to give written notice, which triggers their right to a refund of their deposit.

Section 92.103 requires a landlord to refund a tenant's security deposit on or before the 30th day after the tenant surrenders the property. Tex. Prop. Code Ann. 93.103(a) (Vernon Supp. 2002). A "landlord is not obligated to return a tenant's security deposit until the tenant gives the landlord a written statement of the tenant's forwarding address ." Id. 92.107(a) (Vernon 1995). Cotter added another exception to this requirement by including a clause within the lease which provided: "At least thirty (30) days' written notice of move-out must be given by Tenant to Landlord as a condition to Landlord being required to refund the Deposit."

Cotter moved for partial summary judgment, alleging there was no evidence to support a critical element of the Todds' claim. Specifically, he argued that the Todds never tendered advance written notice of their intent to vacate the property. The trial court granted summary judgment in Cotter's favor on this ground. And, during trial, the trial court repeatedly reaffirmed its summary judgment ruling. The granting of summary judgment in Cotter's favor is totally at odds with the trial court's finding following trial that the Todds timely provided notice of move-out. (6)

Viewing the evidence in a light most favorable to the trial court's findings, the evidence is legally insufficient to support the trial court's finding that the Todds provided Cotter with advance written notice of their intent to move out. William Todd never testified that he informed Cotter in writing of their intent to move out. In their brief, the Todds cite to letters that were sent to Maxine Hall, Cotter's Assistant Comptroller. These letters, however, are not part of the record before us. And, even though the evidence shows that Hall knew the Todds were vacating Cotter's property, that evidence does not give rise to the inference that the Todds notified her, as Cotter's agent, in writing of their intent to do so. Because the trial court granted summary judgment in Cotter's favor on the grounds that the Todds provided him no advance written notice of their intent to vacate the property and there was no evidence introduced at trial that the Todds provided Cotter with advance written notice of their intent to surrender the property, the trial court's finding that they did so was in error. And, without sufficient evidence to support such a finding, the trial court's legal conclusion that the Todds should recover pursuant to section 92.103 cannot stand. (7)

The Todds also claimed that by providing Cotter with their forwarding address, he was thus required to either return their security deposit or to provide them an itemized list of deductions and charges. The Todds contend that Cotter acted in bad faith by failing to do so. We need not reach this component of the Todds' complaint. The trial court's finding that the Todds tendered timely notice of surrender shows it did not reach their bad faith issue, but instead based its ruling solely on notice. See Tex. R. Civ. P. 299; Vickery v. Comm'n for Lawyer Discipline, 5 S.W.3d 241, 252 (Tex. App.-Houston [14th Dist.] 1999, writ denied) (stating fact that trial court entirely omits ground of defense in findings amounts to evidence court did not rely on defense in reaching its decision).

Nonetheless, we have already determined that Cotter was entitled to forfeiture of the Todds' security deposit because there was no evidence before the trial court that the Todds provided written notice of their intent to surrender the property in accordance with the terms of the lease. The evidence at trial demonstrates that Cotter believed he had a right to retain the deposit because the Todds failed to comply with the lease agreement. Cotter's evidence rebuts the presumption that he acted in bad faith.

Cotter's Counterclaim

Cotter brought a counterclaim against the Todds, alleging that they breached the lease agreement by failing to provide advance written notice of move-out. Because of the alleged breach, Cotter asserted that the Todds were liable for

"forfeiture of their security deposit in the amount of $3,000.00; cost of reletting charge in the amount of $2,000.00; rent that continued to accrue at the stated rate of $2,000.00 per month until August 1995 in an amount not to exceed $18,000.00; and reasonable and necessary attorney's fees for the defense of Defendant against Plaintiff's claims and the prosecution of Defendant's counterclaim, up to and including the trial and any appeal of this matter, as well as court costs."

On appeal, Cotter maintains that there is no evidence to support the trial court's judgment that he take nothing on his claims. It is undisputed that the lease agreement between the Todds and Cotter provides:

At least thirty (30) days' prior written notice of intent to move out must be given to the Landlord or Broker prior to Tenant moving from the Leased Premises at the end of the Lease Term or any renewal or extension period, if applicable. VERBAL NOTICE OF MOVE-OUT IS INSUFFICIENT UNDER ANY CIRCUMSTANCES. FAILURE TO GIVE SUCH 30-DAY WRITTEN MOVE-OUT NOTICE WILL SUBJECT TENANT TO LIABILITY FOR FUTURE RENTS, FORFEITURE OF SECURITY DEPOSIT, AND A COST OF RELETTING CHARGE IN THE AMOUNT OF $2000.00 and other damages and charges to which Landlord is entitled.

We have already determined that the Todds put on no evidence that they presented Cotter with advance written notice of their intent to surrender the property. Accordingly, the evidence conclusively establishes the Todds breached the lease agreement, and Cotter is entitled to retain the security deposit and to recover $2,000.00 in reletting fees, and future rents from the Todds.

The lease expressly provides for forfeiture of the $3,000.00 security deposit and $2,000.00 in reletting fees. The evidence, however, is disputed regarding the amount of future rents due. Specifically, the lease was no longer for a specific term, but was on a month-to-month basis, and there is evidence that Cotter accepted surrender of the property. Accordingly, because Cotter is entitled to future rents under the lease agreement as a matter of law, and because there is a fact issue regarding the amount due, we remand the issue to the trial court. Cotter also argues that he is entitled to recover damages for costs he incurred as a result of resetting the case. (8) On October 20, 2000, the trial court reset the case from October 24, 2000, to October 31, 2000. Cotter moved that he be awarded costs because of the reset. In its order resetting the case, the trial court stated "this Court shall also consider defendant's request for costs as a result of the granting of this reset to plaintiffs on their not ready announcement." At trial, it became clear that Cotter was not requesting costs he incurred because of the reset, but rather lost earnings. Specifically, he asked the court to award him three days worth of his time-"24 hours times $150.00 an hour." The trial court ordered that Cotter take nothing on his request for costs against the Todds.

Although Cotter testified about the expenses he incurred because of the reset, there is no evidence in the record regarding who was at fault for the delay. Accordingly, the trial court did not err in refusing to award Cotter costs he incurred associated with the reset of the trial. That portion of the trial court's judgment is affirmed. Attorney's Fees

Having reached the conclusion that the Todds breached the lease agreement, we must next determine whether Cotter proved his right to recover attorney's fees under section 38.001(8) of the Texas Civil Practice and Remedies Code. See Harrison v. Gemdrill Intern., Inc., 981 S.W.2d 714, 718 (Tex. App.-Houston [1st Dist.] 1998, pet. denied). Whether a party is entitled to recover attorney's fees is a question of law for the court. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999). Section 38.001 provides that "[a] person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for:..(8) an oral or written contract." Tex. Civ. Prac. & Rem. Code Ann. 38.001 (Vernon 1997). When a prevailing party in a suit seeks attorney's fees under chapter 38, an award of attorney's fees is mandatory if there is proof of the reasonableness of the fees. World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 683 (Tex. App.-Fort Worth 1998, pet. denied); see also Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 23 (Tex. App.-Tyler 2000, pet. denied). A trial court has discretion to set the amount of attorney's fees, but it does not have the discretion to completely deny attorney's fees if they are proper under section 38.001. World Help, 977 S.W.2d at 683.

Here, Cotter did not prevail at trial on his breach of contract claim. However, because we have determined on appeal that the trial court erred in failing to enter judgment in Cotter's favor and because we are rendering judgment in Cotter's favor, he has "prevailed" for purposes of recovering attorney's fees. Thus, an award of fees is mandatory. However, whether requested attorney's fees are reasonable is a question of fact. See International Sec. Life Ins. Co. v. Spray, 468 S.W.2d 347, 349 (Tex.1971); World Help, 977 S.W.2d at 684. Accordingly, we remand the cause to the trial court for a determination of the amount of attorney's fees to be awarded.

Conclusion

In light of the foregoing discussion, we hold that there is legally insufficient evidence to support the trial court's finding and legal conclusion that the Todds timely provided Cotter with notice of their intent to surrender the property. Accordingly, we reverse the trial court's judgment awarding the Todds their $3,000.00 security deposit and render they take nothing on their claims against Cotter. Because there is no evidence the Todds provided Cotter with the notice required under the lease, the evidence conclusively demonstrates that the Todds breached the lease agreement. Accordingly, we render judgment in Cotter's favor that he is entitled to retain the $3,000.00 security deposit and that he recover from the Todds $2,000.00 in reletting fees. However, we remand the issue of whether Cotter is entitled to recover future rents from the Todds to the trial court for consideration consistent with this court's opinion. The trial court's judgment denying Cotter's request for costs associated with resetting the trial is affirmed. And finally, because Cotter prevailed on his breach of contract cause of action, he is entitled to an award of attorney's fees. We, therefore, remand this cause to the trial court for a determination of reasonable attorney's fees.

Karen Angelini, Justice

DO NOT PUBLISH

1. According to Cotter, tenants direct information to his California Accounting Office. Ms. Hall is an employee there.

2. Judge Paul Canales denied Cotter's motion for summary judgment.

3. Cotter complains that the trial court erred by failing to enter findings of fact and conclusions of law after he properly and timely requested them. If findings of fact and conclusions of law are properly requested, the trial court has a mandatory duty to file findings and conclusions. Cherne Indus., Inc. v. Magallanes, 763 S.W.2d 768, 772 (Tex.1989). Cotter properly requested the trial court enter findings of fact and conclusions of law. Because Cotter's requests went unanswered, we abated our jurisdiction over this appeal to the trial court for entry of findings of fact and conclusions of law. The trial court filed findings and conclusions in this court, and we permitted Cotter to file a supplemental brief. This issue on appeal is, therefore, moot.

4. It was undisputed by the parties that the lease agreement was enforceable. Rather, the dispute between them centered on whether the parties had fulfilled their obligations under the lease and if not, what damages were appropriate. Accordingly, the trial court's legal conclusions are unrelated to the claims and are not supported by the evidence. Furthermore, it is unclear why the trial court cited to sections 92.102, 92.103, 92.1031, 92.104, 91.001, 92.001 and 92.109 of the Property Code in her conclusions of law. None of the sections relate to the validity of a lease agreement and, therefore, do not support her legal conclusion.

5. The Todds advanced these arguments in their response brief, before the trial court filed findings of fact and conclusions of law. Cotter filed a supplemental brief addressing the trial court's findings and conclusions; the Todds chose not to file a supplemental brief.

6. The Todds respond that because the trial court maintained plenary jurisdiction over the case, she could have rescinded or vacated the order granting summary judgment at any time. There is nothing in the record, however, indicating the trial court overruled her own summary judgment ruling. Rather, throughout trial, the court reaffirmed her ruling by refusing to admit any evidence of notice, stating at one point "there's no consent on notice. I mean, we're not trying anything by consent on the notice issue; that's already been taken care of in the summary judgment." Later, the trial court, in response to defense counsel's objection to the introduction of evidence relating to notice, stated "I've already ruled on that."

7. The Todds contend that an argument similar to Cotter's was rejected by the Dallas court of appeals in Reed v. Ford, 760 S.W.2d 26 (Tex. App.-Dallas 1988, no writ). In Reed, the tenant complained on appeal that the trial court erred in holding that the owner's retention of the security deposit was rightful on the grounds that the tenant had failed to comply with the lease. Id. at 28. The court noted that "[a] construction resulting in forfeiture should be avoided if a reasonable alternative construction is available." Id. at 29 (citing Frank v. Kuhnreich, 546 S.W.2d 844, 848 (Tex. Civ. App.-San Antonio 1977, writ ref'd n.r.e.)). According to the court, the lease required the tenant to provide written notice to obtain a full refund. Id. at 29. But, if the tenant did not give timely notice, the lease agreement would not expire but would be automatically renewed on a month to month basis. The court went on to hold that the clauses gave the tenant "two distinct options, either terminating by giving timely notice, or suffering an automatic month-to-month renewal by virtue of inaction." Id. at 28, 29. Because the tenants did not act, their lease was automatically renewed, and, according to the court, the tenant was entitled to a full refund of the deposit assuming he gave thirty days' written notice before terminating the resultant month-to-month tenancy. Id. at 29.

The lease here, like in Reed, contains a provision that provides for automatic renewal unless the tenant gives 30 days' written notice of termination to the landlord. Once the lease is renewed on a month-to-month basis, "either the landlord or the tenant may terminate the lease with a 30-day prior written termination notice to the other Party."Even though the Todds' lease following the expiration of the original term was on a month-to-month basis, the evidence does not demonstrate that they provided Cotter with 30-days' advance written notice of their intent to permanently vacate the property.

8. Cotter does not complain that the trial court erred in ordering that the parties were each responsible for their own court costs. Rather, Cotter's complaint is limited to the trial court's refusal to order he recover costs he incurred as a result of resetting the trial.