BREOF Bnk Texas, L.P. v. D.H. Hill Advisors, Inc. and D.H. Hill, Individually

Affirmed and Opinion filed April 17, 2012.
In The
Fourteenth Court of Appeals
NO. 14-11-00351-CV
BREOF BNK TEXAS, L.P., Appellant,
V.
D.H. HILL ADVISORS, INC. AND D.H. HILL, INDIVIDUALLY, Appellees.
On Appeal from the 11th District Court
Harris County, Texas
Trial Court Cause No. 2009-05033
OPINION
This is a breach-of-contract case concerning a commercial lease. Appellant Breof
BNK is the landlord, and appellee D.H. Hill Advisors, Inc., is the tenant. Dan Hill, also
an appellee, is Advisors’ principal investor. After a bench trial, the trial court rendered a
take-nothing judgment against Breof, awarded actual damages and attorneys’ fees to
Advisors and Hill, and issued findings of fact and conclusions of law in support of its
judgment. We affirm.
I
In late spring and early summer of 2008, Advisors was nearing the end of its five-
year lease of an office suite in Humble, and it began negotiations with Breof for a new
lease in the same space. In these negotiations, Breof was represented by a real-estate
agent and Advisors was represented by Hill, individually, acting in his capacity as a
licensed real-estate broker. The previous lease was set to expire on October 5, 2008.
Having established a reputation at that office and not wanting to change locations,
Advisors intended to stay. But negotiations dragged on for several months, partly because
appellees insisted that Breof make certain improvements to the office space. The
appellees asked Breof to repaint the walls, install wood flooring, carpet, and an ADA-
compliant restroom.1 Installation of the restroom was particularly important to the
appellees; throughout the term of its previous lease, the only restroom available to Hill
and other Advisors employees was located on another floor of the office building. During
negotiations, Hill made it clear that without the restroom, Advisors would not sign a new
lease.
Breof agreed to install the restroom in a specified location adjacent to Advisors’
suite, and agreed to do so by November 1, 2008. The date was important to the appellees
because the fourth quarter is Advisors’ busiest. In May, Breof began accepting
preliminary bids from contractors for the painting and new construction. By June, it had
contacted an architect to draft plans for the restroom installation. Also in June, at least
one contractor toured Advisors’ suite in preparation for submitting his bid to Breof. That
contractor was eventually hired to complete the remodeling Breof promised in the lease.
In contrast, the architect never physically inspected Advisors’ suite, and he noted as
1
Nowhere in the record do the parties specify what ADA stands for, but we presume it is the
Americans with Disabilities Act, the requirements of which are set out in the ADA Accessibility
Guidelines. See 28 C.F.R. § 36.406 (2011).
2
much with an explicit disclaimer on the proposal he submitted.2 Based on his tour of the
suite and the architect’s proposal, the contractor submitted his preliminary bid in June,
estimating that the bathroom could be built in two to three weeks.
Lease negotiations extended into the fall of 2008. At some point, Breof’s real-
estate agent informed Hill that if a new lease were not signed by October 5—the end of
the previous lease term—Advisors would be subject to a holdover provision. Hill then
asked for reassurances the bathroom could be built by November 1. If not, Hill told the
agent, he would immediately begin to look for office space elsewhere. The agent assured
Hill that the work could be done by November 1, and Hill executed the lease on behalf of
Advisors on October 3. Upon signing the lease for Advisors, Hill earned a brokerage fee
of $17,026.66, an amount previously agreed to by the parties, though Breof did not
immediately write a check for that amount. Without any explanation or warning, Breof
waited until October 27 (more than three weeks later) to execute the lease. Without a
fully executed lease, the contractor could not apply for the necessary construction
permits; so during this period, no progress was made toward the improvements required
under the lease.
2
Understandably, the trial court asked the architect why he had not done an in-person assessment.
The following exchange from the record is informative.
THE WITNESS: Well, [in this case, the suite we would be working on] was occupied. A
lot of times the landlord will say that [the space] is occupied, and when we first start up,
they don’t tell us to go and look. Sometimes they will tell us later, [T]his is coming up,
please verify.
THE COURT: So, in other words, you have to get authority from them to spend the time
and their money to go out and verify?
THE WITNESS: Yes.
THE COURT: You weren’t asked to do that in this case?
THE WITNESS: That’s right.
THE COURT: Whose responsibility then is it to verify it if you’re not given the authority
to go do it?
THE WITNESS: Well, the thinking is if we do a plan like that, we put that disclaimer, that
everybody involved will look at it and, really, that shows what the final plan is going to
look like. And the thinking is between all the other people involved, they will kind of
look at it and see if there is anything obviously wrong.
3
November 1 passed without any construction on the leasehold. Sometime in mid-
November, Breof asked the contractor to inspect Advisors’ suite and make a detailed
estimate of remodeling costs. Finally, on November 18, Breof signed an agreement with
the contractor. Only then was it discovered that the architect had based his proposal on an
outdated floor plan. In addition to the floor-plan discrepancies, the contractor discovered
a column in one of the walls that substantially complicated the construction. Shortly
thereafter, the contractor informed Hill it was impossible to build the restroom at the
location designated in the lease. Angered, Hill informed the contractor and Breof that
without the restroom, “the deal is off.” He was receptive, however, when Breof told him
it would look into alternative locations for the restroom: “When they said they could
come in and make some changes to the mailroom to possibly make it work[,] I was okay.
I was open to that.”
On December 1 and 12, Breof presented alternative plans, both of which
drastically changed the suite’s layout and made the lobby area “look like a maze.” Hill
rejected those plans. Breof then suggested that Advisors move its offices to the building’s
second floor, which already included a bathroom. Hill and other Advisors employees
spent several days making measurements and calling furniture companies about reducing
the size of Advisors’ cubicles—which were too large to bring to the second floor.
Advisors decided that a move to the second story “probably would have worked,” but
Breof then provided several new proposals for remodeling the first-floor suite, all of
which included major redesigns. On December 16, in the midst of this flurry of new
proposals, Breof wrote a check to Hill for his broker’s commission; Hill deposited that
check into his bank account on December 23. On December 31, Advisors received a
letter invoicing him for January rent and informing him that construction would likely
continue until February 28, 2009. The letter also informed Hill that if he refused to pay
rent, “this matter shall be turned over to the [l]andlord’s attorney for enforcement of the
[l]ease.” At that point, having “no confidence in [Breof’s] ability to get things done,” Hill
immediately attempted to contact Breof. After several unsuccessful attempts, Advisors
4
vacated the suite and leased a new space elsewhere, incurring $10,063.65 in moving
expenses.
Breof brought suit against Advisors and Hill for an assortment of claims, and both
Advisors and Hill countersued for damages and recovery of attorneys’ fees. After a bench
trial, the trial court rendered a take-nothing judgment against Breof on all of its claims.
The trial court further rendered judgment in favor of the appellees on their counterclaims
for actual damages of $10,063.65 and attorneys’ fees in the amount of $68,467.00. The
trial court also entered findings of fact and conclusions of law. Breof’s motion for new
trial was denied, and this appeal followed.
II
Breof raises five issues on appeal: (1) the trial court erred by finding that Breof
instead of Advisors had breached the lease, when the evidence was not factually and
legally sufficient to support such a finding; (2) the judgment below was effectively a
rescission of the lease, and it was error to award rescission without ordering Advisors to
pay November and December rent; (3) a mutual mistake of fact existed because it was
impossible to build the bathroom in the location contemplated in the lease, and the trial
court erred by failing to find such a mistake and ordering rescission of the contract and
payment of November and December rent; (4) Advisors waived strict compliance with
the lease, and it was error for the trial court to find otherwise; and (5) the trial court
erroneously awarded damages despite a lack of evidence and a lease provision shielding
Breof from liability.
A
In its first issue, Breof asks us to reverse the trial court’s judgment that Breof
breached and Advisors did not, and render the opposite result. We decline to do so.
When confronted with both legal- and factual-sufficiency points, we must first
examine legal sufficiency. Mohnke v. Greenwood, 915 S.W.2d 585, 589 (Tex. App.—
Houston [14th Dist.] 1996, no writ). In so doing, we examine the evidence in the light
5
most favorable to the challenged finding and indulge every reasonable inference that
would support it. See City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We
credit favorable evidence if a reasonable fact finder could, and we disregard contrary
evidence unless a reasonable fact finder could not. Id. at 827. The evidence is legally
sufficient if it would enable a reasonable and fair-minded person to reach the verdict
under review. Id. A party attacking the legal sufficiency of an adverse finding on an issue
on which he has the burden of proof must demonstrate that the evidence conclusively
establishes all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d
237, 241 (Tex. 2001).
Breof centers its legal-sufficiency argument on its assertion that the November 1
completion date was not a material term of the lease, so Advisors was not released from
its duties under the lease when Breof failed to build the bathroom by that date. See
Restatement (Second) of Contracts § 237 (1981). The trial court concluded that the
restroom was a material term, as was the installation of wood flooring and carpet. The
question of whether a term is material is a legal one, and we review it de novo, taking
each contract on a case-by-case basis. Parker Drilling Co. v. Romfor Supply Co., 316
S.W.3d 68, 74 (Tex. App.—Houston [14th Dist.] 2010, pet. denied).
For timely performance to be a material term in a contract, the parties must
expressly state that time is of the essence or there must be something in the nature or
purpose of the contract and the circumstances surrounding it making it apparent that the
parties intended that time be of the essence. Deep Nines, Inc. v. McAfee, Inc., 246 S.W.3d
842, 846 (Tex. App.—Dallas 2008, no pet.). Ordinarily, time is not of the essence, and a
date stated for performance does not mean time is of the essence. Kennedy Ship &
Repair, L.P. v. Pham, 210 S.W.3d 11, 19 (Tex. App.—Houston [14th Dist.] 2006, no
pet.). Unless the contract expressly makes time of the essence, the issue is a fact question.
Id. When it is clear the parties intend that time is of the essence to a contract, untimely
performance is a material breach discharging the duties of the non-breaching party. See
6
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per
curiam).
Exhibit C of the lease provides that Breof “shall use commercially reasonable
efforts to cause [all the contemplated improvements—including the bathroom, repainting,
and installation of new flooring] to be completed prior to November 1, 2008.” However,
the lease does not go further to explicitly make time of the essence. This makes the
parties’ intent a fact issue. See Kennedy Ship & Repair, 210 S.W.3d at 19. In finding of
fact No. 17, the trial court found that “The restroom was required to be built and the
wood flooring and carpet installed by November 1, 2008 under the terms of the [l]ease.”
The evidence supports this finding:
During negotiations for the new lease, Hill made it clear Advisors would not sign
a new lease without the installation of the ADA-compliant restroom.
Advisors’ employees had gone the entirety of the previous five-year lease without
access to a restroom on their floor.
Hill informed Breof that “the fourth quarter is [Advisors’] most busy period.”
Breof began accepting bids for the construction work by May, and it had solicited
plans form an architect by June.
Breof accepted the preliminary bid from the contractor it would eventually hire in
June.
The contractor estimated the project would be done in two to three weeks.
Breof threatened Advisors and Hill with holdover penalties if a new lease was not
signed by October 5.
Hill informed Breof he would look for another office space if the restroom could
not be built by November 1.
On October 3, Breof reassured Hill that the restroom could be completed by
November 1.
7
Based on this reassurance, Hill signed the lease on behalf of Advisors that day.
We affirm the trial court’s holding that the November 1 date was a material term
in the lease, and Breof’s failure to timely perform was a material breach. See Deep Nines,
246 S.W.3d at 846. Because the November 1 deadline was a material term, when Breof
failed to timely perform, Advisors’ duties under the lease ended. See Mustang Pipeline,
134 S.W.3d at 196. And, because Advisors was no longer bound under the lease,
Advisors could not breach by abandoning the office space or failing to pay rent. The
evidence supports Advisors’ contention that a reasonable and fair-minded person would
come to the same conclusion as the trial court. City of Keller, 168 S.W.3d at 822. It is
legally sufficient. See id.
Likewise, the evidence is factually sufficient to support the trial court’s conclusion
that Breof breached and Advisors did not. When a party challenges the factual sufficiency
of a finding on an issue upon which that party has the burden of proof, that party must
demonstrate the adverse finding is against the great weight and preponderance of the
evidence. Dow Chem. Co. v. Francis, 46 S.W.3d at 242; Austin v. Weems, 337 S.W.3d
415, 427 (Tex. App.—Houston [1st Dist.] 2011, no pet.). We must consider and weigh all
of the evidence and set aside a verdict only if the evidence is so weak or if the finding is
so against the great weight and preponderance of the evidence that it is clearly wrong and
unjust. Dow Chem. Co., 46 S.W.3d at 242; Austin, 337 S.W.3d at 427. The trial court is
the sole judge of the credibility of the witnesses and the weight to be given their
testimony. Arrellano v. State Farm Fire and Cas. Co., 191 S.W.3d 852, 856 (Tex.
App.—Houston [14th Dist.] 2006, no pet.).
As early as June 2008, the parties were negotiating a new lease, and the ADA-
compliant restroom was a central part of the negotiations. In the version of the lease
eventually executed, Breof agreed to install the bathroom by November 1. As of that
date, no construction was completed and Breof had yet to hire a contractor to complete
the work. On November 18, Breof hired a contractor and the contractor discovered that
the restroom could not be built where the lease specified it would be. The parties
8
considered several alternative locations for the restroom, but by the end of December
2008, construction had still not begun. Despite this, Breof sent Advisors a bill for the full
amount of January rent. Unable to reach Breof to challenge the billed amount, Advisors
abandoned the premises in early January 2009. Breof has failed to demonstrate that the
trial court’s finding was against the great weight and preponderance of the evidence. We
overrule Breof’s first issue.
B
In its second issue, Breof argues that the trial court erred by effectively rescinding
the lease without ordering restitution. But the trial court never explicitly invokes
rescission, and Breof offers no authority for its argument that the trial court’s judgment
amounts to rescission. Our task is not to search for conflicts in the trial court, be they real,
imagined, or conjured. So. Life & Health Ins. Co. v. Medrano, 698 S.W.2d 457, 460 (Tex.
App.—Corpus Christi 1985, writ ref’d n.r.e.). Rather, it is to resolve actual and
reviewable conflicts. Moreover, the court’s decision not to order restitution is consistent
with an intent to avoid rescission. See Adams v. Loftin, 1 S.W.2d 429, 430 (Tex. Civ.
App.—El Paso 1927, no writ) (“Restoration is the fundamental theory on which equity
acts in administering the remedy of rescission . . . .”). We overrule Breof’s second issue.
C
Breof’s third issue is an attack on the trial court for failing to find the lease was the
product of a mutual mistake even though—Breof alleges—the facts support such a
finding. In effect, Breof asks this court to reinterpret the trial court’s findings to include
“mutual mistake” and to then rescind the contract and order Advisors to pay back rent.
We cannot and will not do so.
Whether the lease is a product of the parties’ mutual mistake is an issue of fact for
the trial court. See Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 325–26
(Tex. App.—Houston [14th Dist.] 2003, pet. denied). Under the doctrine of mutual
mistake, when parties to an agreement have contracted under a misconception or
9
ignorance of a material fact, the agreement will be avoided. Id. at 326. To prove a mutual
mistake, however, the evidence must show that both parties were acting under the same
misunderstanding of the same material fact. Id. A mistake by one party to an agreement,
where it is not induced by the other party, will not be grounds for relief. Seymour v. Am.
Engine & Grinding Co., 956 S.W.2d 49, 58 (Tex. App.—Houston [14th Dist.] 1996, writ
denied). An appellate court may not substitute its interpretation of the evidence for the
trial court’s because, although appellate courts can unfind facts, they are not fact-finding
courts. Van Heerden v. Van Heerden, 321 S.W.3d 869, 874 (Tex. App.—Houston [14th
Dist.] 2010, no pet.).
In support of this argument, Breof points to two findings of fact made by the trial
court. Finding of fact No. 4 provides: “[Breof] used a floor plan as exhibit C-1 to the
[l]ease that was incorrect.” No. 21 provides: “[Breof] used a floor plan as an exhibit to
the [l]ease that was incorrect and did not properly show the floor plan as it existed in
October 2008.” Breof urges us to interpret findings 4 and 21 as evidence that both parties
were mutually mistaken to think the restroom could be built where the lease indicated.
The trial court, however, did not find the restroom’s location to be a material term of the
lease, and found that it was not the impossibility of the original location, but rather
Breof’s “failure to provide in a commercially reasonable manner the leased [p]remises as
required by the [l]ease” that led Advisors to move out.
The evidence supports this finding. Breof made no attempt to develop serious
plans with its architect during several months of negotiations, and did not hire anyone to
actually install the restroom until more than two weeks after the November 1 deadline.
Soon after expiration of the November 1 deadline, the contractor discovered the errors in
the plans and informed Advisors. Advisors diligently considere alternative plans,
including a plan that would have moved the entire office to a different floor of the office
building. Breof, however, continued to offer alternative locations that required significant
alteration to the existing space.
10
We see no need for additional facts and no need to “unfind” any of the trial court’s
findings of fact. We overrule Breof’s third issue.
D
In its fourth issue, Breof complains that the trial court erred by finding that
Advisors did not waive strict compliance with the lease. As in its first issue, Breof here
complains of an error by the trial court and invites this court to render the opposite result.
Again, we decline to do so.
Our analysis on this point begins and ends with one clause in the lease. Article
15.19 of the lease, entitled “Non-Waiver,” provides: “Neither party’s failure to enforce or
require strict performance of any provision of this [l]ease or any of the Rules and
Regulations, nor Landlord’s acceptance of Rent with knowledge of a breach shall
constitute a waiver of such breach or any future breach.”
Although non-waiver clauses may themselves be waived, they are generally
considered valid and enforceable. A.G.E. v. Buford, 105 S.W.3d 667, 676 (Tex. App.—
Austin 2003, pet. denied). Breof has not argued that Advisors waived the non-waiver
clause or that such a clause should be unenforceable in the circumstances of this case.3
Accordingly, we overrule Breof’s fourth issue. See id.
E
In Breof’s fifth and final issue, it disputes the trial court’s finding that Advisors
$10,063.65 in damages.4 Breof asks us to reverse that finding on two grounds: (1) the
3
Breof urges us to consider Advisors estopped from claiming breach on the basis Advisors
“accepted two months of free rent.” We reject this argument. The “free rent” was an express term in the
lease under Article 1.7, entitled “Adjustment to Base Rent.” That article set out periodic increases in rent
amounts throughout the lease term. We do not agree with Breof that Advisors is trying to have its cake
and eat it too.
4
Breof also disputes (1) the trial court’s award of attorneys’ fees and (2) the trial court’s decision
to allow Hill to keep his $17,026.66 broker’s commission. Breof’s sole argument regarding attorneys’
fees is that the underlying judgment was in error. Because we find the underlying judgment to be correct,
we affirm the trial court’s award of attorneys’ fees. Likewise, we affirm on the broker’s-commission
issue. It is well established in Texas that a broker earns his commission upon producing a person who is
ready, able, and willing to take the property on the terms prescribed. Stevens v. Karr, 33 S.W.2d 725, 727
11
only evidence supporting damages was improperly admitted, and (2) the lease explicitly
prohibits Breof’s liability for consequential damages. Neither argument is persuasive.
The admission or exclusion of evidence rests within the sound discretion of the
trial court. State v. Bristol Hotel Asset Co., 65 S.W.3d 638, 647 (Tex. 2001); Van
Heerden, 321 S.W.3d at 875. A trial court abuses its discretion in admitting or excluding
evidence if it acts without reference to any guiding rules and principles or if the act
complained of is arbitrary and unreasonable. Carpenter v. Cimarron Hydrocarbons
Corp., 98 S.W.3d 682, 687 (Tex. 2002); Van Heerden, 321 S.W.3d at 875. To show the
trial court abused its discretion, an appellant must demonstrate: (1) the court erred in
admitting the evidence; (2) the erroneously admitted evidence was controlling on a
material issue dispositive of the case and was not cumulative; and (3) the error probably
caused rendition of an improper judgment in the case. See Tex. Dep’t of Transp. v. Able,
35 S.W.3d 608, 617 (Tex. 2000); Van Heerden, 321 S.W.3d at 875. If there is a
legitimate basis for the trial court’s evidentiary ruling, the appellate court must uphold
it. Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998); Van
Heerden, 321 S.W.3d at 875.
On October 27, 2010, during the trial on the merits, Advisors and Hill offered into
evidence a list of the moving expenses they incurred as a result of Breof’s breach. Breof
objected on the grounds it had asked for—but not received—evidence of moving
expenses in a request for disclosures. The trial court sustained the objection. On October
28, Advisors and Hill showed the trial court a copy of Hill’s responses to requests for
disclosure. Contrary to the position taken by Breof, those responses contained evidence
of moving expenses. Advisors and Hill moved to supplement the trial record with the list
of moving expenses, and the trial court granted the motion without objection from Breof.
When an objection to evidence is properly made, the subsequent presentation of
(Tex. 1930). Accordingly, Hill earned his commission when he signed the lease on behalf of Advisors,
and his right to that commission is unaffected by the date or time he deposited the check.
12
essentially the same evidence without objection waives any complaint regarding the
admission of the evidence. Marling v. Maillard, 826 S.W.2d 735, 739 (Tex. App.—
Houston [14th Dist.] 1992, no writ). By failing to object to the motion to supplement the
record, Breof failed to preserve its objection on appeal. See id.
For the first time in its motion for new trial, Breof argued that the list of expenses
was erroneously admitted because Advisors and Hill failed to both draw a connection
between the list of moving expenses and their damages counterclaim, and show how the
list was relevant. But Breof’s objection was untimely and failed to preserve the complaint
for appellate review. See Millwee v. Capstar Commercial Real Estate Services, Ltd., 337
S.W.3d 517, 521–22 (Tex. App.—Dallas 2011, no pet.). To hold otherwise would allow
Breof to agree to the list’s relevance, wait for an unfavorable verdict, and then complain
about the list’s relevance. See id. at 521.
Concluding that the moving expenses were properly admitted, we turn to article
15.4 of the lease. It provides, in relevant part: “At no time shall Landlord be responsible
or liable to Tenant for any lost profits, lost economic opportunities or any form of
consequential damage as the result of any actual or alleged breach by Landlord of
Landlord’s obligations under this [l]ease.” Breof argues that this article shields it from
any liability for moving expenses. But because Breof raises this argument for the first
time on appeal, it has waived any error. See, e.g., Murphy v. Canion, 797 S.W.2d 944,
950 (Tex. App.—Houston [14th Dist.] 1990, no writ).
Before this appeal, Breof mentioned article 15.4 only once—in its answer to
Advisors’ counterclaims. The section of the answer mentioning 15.4, entitled “Verified
Defense,” provides in its entirety: “Additionally and or alternatively, without waiver of
any of the above and foregoing, pursuant to Tex. R. Civ. P. 93, [Breof] alleges that the
[l]ease prohibits [Advisors] from suing [Breof] for certain consequential damages
including lost profits or lost economic opportunities as set out in paragraph 15.4 of the
[l]ease.” But this general language does nothing to make the trial court aware that Breof
believed the moving expenses qualified as consequential damages. See Tex. R. App. P.
13
33.1. Moreover, Breof made no effort to bring the argument to the trial court’s attention.
It did not mention paragraph 15.4 in the trial on the merits, in its motion for new trial, or
at the hearing on its motion for new trial. “With literally hundreds and perhaps thousands
of cases on their docket, it is only reasonable that we require litigants to affirmatively
direct the judge’s attention to their complaints so the court can make a deliberate
decision.” Cecil v. Smith, 804 S.W.2d 509, 515 (Tex. 1991) (Cornyn, J., dissenting). We
overrule Breof’s fifth issue.
***
For the foregoing reasons, we affirm the trial court’s judgment.
/s/ Jeffrey V. Brown
Justice
Panel consists of Justices Seymore, Brown, and Christopher.
14