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Eun Bok Lee v. Ho Chang Lee
Citations: 411 S.W.3d 95; 2013 Tex. App. LEXIS 10444; 2013 WL 4430882Docket: 01-12-00117-CV
Court: Court of Appeals of Texas; August 20, 2013; Texas; State Appellate Court
Original Court Document: View Document
On August 20, 2013, the Court of Appeals for the First District of Texas issued an opinion in the case Eun Bok Lee v. Ho Chang Lee, stemming from a dispute after a 12-year leasing relationship. Ho Chang Lee, the tenant, sued Eun Bok Lee, the landlord, alleging breach of contract, wrongful eviction, conversion, theft, and unjust enrichment. The trial court ruled in favor of the tenant, but denied exemplary damages that the jury had recommended. The landlord appealed, contesting the sufficiency of evidence for the jury's findings on the tenant's claims, while the tenant appealed the denial of exemplary damages. The appellate court reversed the trial court’s decision regarding the treble statutory damages for the security deposit, remanded the case for recalculating prejudgment interest, and affirmed all other aspects of the judgment. The dispute involved whether certain equipment, including underground gasoline storage tanks, was sold or leased during the sale of a convenience store business. A 1993 Korean-language sales agreement indicated Eun Bok Lee sold his business, Lee’s Chevron, to Ho Chang Lee, alongside an English-language lease agreement with an addendum in Korean. Both parties presented differing English translations of the sales agreement regarding the ownership versus possession of items. The buyer-tenant’s translation indicated ownership transfer of various items, including cash registers and gasoline tanks, while the landlord’s translation suggested only possession was transferred. The buyer-tenant initially paid $120,000 for the business, plus an additional $20,000 to $30,000 for inventory. The contract also outlined terms for payment and transfer of possession. The buyer-tenant believed that the purchase price included various items, particularly underground storage tanks, due to the landlord's concerns about leakage liabilities. Conversely, the seller-landlord contended that the $120,000 purchase price was solely for the business operation rights, with equipment like the storage tanks being temporarily possessed by the buyer-tenant for the lease duration. The lease agreement stipulated a six-year term with a monthly rent of $3,500, specifying that all tenant-installed alterations, except trade fixtures, would become the landlord's property upon lease termination. Rent adjustments were to be documented in an attached addendum, which froze rent for three years and allowed annual adjustments thereafter based on inflation and other costs. The addendum set a security deposit at $3,500 and outlined insurance responsibilities for the landlord and lessee. Three years later, the landlord proposed a rent increase to $4,300, which the tenant contested as misaligned with the inflation index but ultimately accepted by signing the new contract. After the initial lease term expired in 1999, the lease was extended for another six years, during which the landlord raised rent three times, citing inflation rates. By 2005, as the lease approached completion, the tenant's and landlord's sons planned to transfer business ownership back to the landlord, agreeing to hire a professional for inventory valuation. They arranged to transfer possession on May 31, with the tenant expecting payment for items he believed were purchased, including inventory valued at $18,000. The tenant's son rejected a check from the landlord, claiming an additional $100,000 was owed for gasoline tanks and other equipment as stipulated in the sales contract. He provided the sales contract to support his demand, stating that the tenant expected compensation for these items before transferring the business. The landlord's son, unwilling to meet this demand, suggested a meeting between the fathers to resolve the issue. Following this, the landlord changed the locks on the store without prior notice to the tenant, effectively taking possession without payment for the inventory or equipment, and canceled the gas tank refill order. In a subsequent meeting, the tenant asserted ownership of the gasoline tanks and demanded payment, arguing that the original purchase price of $120,000 included the equipment. The landlord disagreed, believing the equipment was not sold but would be returned at the end of the lease. After the meeting, the tenant's lawyer sent a letter protesting the lock-out and early lease termination. The letter noted that the parties had agreed to apply a $3,500 security deposit towards the last month’s rent, yet the landlord had not issued a termination or vacate notice. The tenant demanded re-entry, complained about excessive rent charges, and sought reimbursement for overcharged rent and equipment. In response, the landlord demanded $10,151.61 for damages and unpaid rent, threatening to liquidate the tenant's inventory if not paid. The landlord and his son left the store closed until July 1, partly due to the inability to obtain a license for selling beer, which resulted in the power being turned off and damaging perishable goods. Ultimately, the landlord did not compensate the tenant for the inventory, which was either stored or liquidated before reopening the store in July. The landlord and his son then used the tanks and cooling system to operate the business. The tenant subsequently filed a lawsuit against the landlord, asserting various claims including breach of contract, conversion, theft, unjust enrichment, wrongful eviction, fraud, and promissory estoppel, while the landlord counterclaimed for breach of the lease agreement. The landlord presented evidence at trial claiming ownership of the gasoline tanks, including his registration as the 'owner/operator' with the Texas Commission of Environmental Quality from 2001 to 2005 and a property tax form from 1994 submitted by the tenant that did not list the tanks as part of his property. The jury found the landlord had overcharged the tenant for rent between 2001 and 2005, wrongfully retained the security deposit, unlawfully evicted the tenant, converted the tenant’s property, committed theft, and unjustly enriched himself. The jury awarded the tenant damages that included $3,500 for the security deposit, $16,968 for overcharged rent, $5,000 for wrongful eviction, and various amounts for converted property, totaling $155,902.60. The jury also granted attorney’s fees and $450,000 in exemplary damages. The trial court's judgment awarded $152,402.60 as the principal amount, $10,500 in statutory damages for the security deposit, $50,263.51 in prejudgment interest, and $55,000 in attorney’s fees, but did not specify the liability theory for the damages. The landlord appealed, focusing on the disputed ownership of the gas station's equipment, while the tenant cross-appealed, seeking an award for exemplary damages. The landlord conceded the jury had sufficient evidence regarding the tenant's purchase of the property as per the sales agreement but contested the legal sufficiency of the evidence for the jury’s findings on various claims. A party challenging the legal sufficiency of an adverse finding, where they did not bear the burden of proof, must demonstrate a lack of evidence supporting that finding. In reviewing legal sufficiency, courts favor evidence that a reasonable factfinder could accept and disregard opposing evidence unless it is irrefutable. A no-evidence challenge is upheld only if: 1) there is a complete absence of a vital fact; 2) the law prevents the court from considering the only evidence for a vital fact; 3) the evidence is merely a scintilla; or 4) the evidence conclusively contradicts the vital fact. The existence of more than a scintilla of evidence negates the challenge. The factfinder determines witness credibility and the weight of testimony, and if reasonable individuals could draw different conclusions from the evidence, jurors should be permitted to do so. When interpreting contracts, the primary goal is to ascertain the parties' intent as reflected in the contract. Ambiguity in a contract is a legal question subject to de novo review. A contract is deemed unambiguous if its terms have a definite legal meaning, which courts enforce as written. A contract is ambiguous only if its meaning remains uncertain after applying construction rules, or if it can reasonably be interpreted in multiple ways. Courts analyze all provisions of the contract in context to ascertain the parties' intent, considering the circumstances surrounding the agreement. Parol evidence is admissible only when a contract is deemed ambiguous by law. In this case, the jury determined that the landlord breached the lease agreement, awarding the tenant compensation of $16,968 for overcharged rent from 2001 to 2005 and $3,500 for the wrongful retention of the security deposit. The landlord disputes these findings, asserting that the tenant agreed to the rent increases during a lease extension in 1999, acknowledging a monthly rent of $4,300 since 1996, and that subsequent invoices included consumer price index (CPI) adjustments. Under the 1993 lease agreement, the rent, initially set at $3,500, could be adjusted as per an attached addendum. This addendum allowed for yearly adjustments after a three-year rent freeze, considering CPI increases, property tax, and insurance premiums. The landlord increased the rent to $4,300 in 1996 and then to $4,532 in 2000, $4,650 in 2001, and $4,750 from 2002 to 2005 based on claimed CPI increases. However, evidence presented by the tenant challenged these adjustments, including a Bureau of Labor Statistics report indicating that the landlord's cited inflation rates did not align with official CPI rates. Additionally, the landlord's testimony suggested that rent increases were not consistently calculated per the addendum's terms, leading to a jury conclusion that the landlord unilaterally increased rent without proper justification. Regarding the security deposit, the landlord contended there was no breach as both parties agreed to apply the deposit to the last month's rent, asserting no ambiguity existed in the lease. However, the tenant’s son testified that the tenant never received the security deposit back, indicating potential grounds for breach of contract. The tenant argued that they were not obligated to pay the last month's rent due to being wrongfully evicted on May 31 and ongoing disputes over the ownership of gas station equipment, which influenced the jury's decision to award the tenant the security deposit. The landlord's assertion that the security deposit of $3,500 could be applied to the rent was undermined by the circumstances of the eviction and the lack of conclusive evidence supporting the landlord's claim. The jury found sufficient evidence that the landlord breached the lease contract by failing to return the security deposit. Regarding statutory damages under Texas Property Code § 93.011, although the tenant did not initially seek these damages in their pleadings or jury instructions, they later requested them in a motion for judgment. The trial court awarded triple damages for the bad faith retention of the security deposit. The landlord contested this award, citing the absence of a pleading violation, lack of a jury finding on bad faith, and the issue not being tried by consent. The court emphasized that pleadings must notify adversaries of claims and that relief cannot be granted on unpleaded theories. It determined that the issue of bad faith retention was not raised in the pleadings and did not meet the criteria for trial by consent, which requires clear evidence of an unpleaded issue being actively tried without objection. Thus, the court overruled the landlord's points of error concerning the award for breach of contract but recognized the limitations in granting statutory damages. Evidence relevant to both pleaded and unpleaded issues can be admitted without objection, but the doctrine of trial by consent should only be applied when clearly justified. The trial court has broad discretion in determining if an unpleaded issue was tried by implied consent, but this should not be allowed in doubtful situations. While the jury charge addressed whether the landlord wrongfully retained the security deposit, Texas Property Code § 93.011 requires a finding of bad faith for damages, which is presumed if the landlord fails to return the deposit or provide an itemized deduction list within 60 days after the tenant vacates. The landlord can rebut this presumption with evidence, but in this case, no evidence was presented regarding bad faith, and the issue was not adequately tried by the parties. As a result, the judgment for treble statutory damages is reduced, with the tenant entitled only to the $3,500 value of the security deposit without trebling. Regarding wrongful eviction, the jury found that the landlord wrongfully evicted the tenant by changing the locks. The landlord disputed this finding, arguing that the tenant was delinquent in rent. However, evidence was not undisputed about the rent's delinquency at the time of the eviction, as testimony indicated ambiguity regarding the payment due date and the status of occupancy. Both parties had previously agreed to facilitate a business ownership transfer, with activities occurring during May that involved no clear evidence of delinquency prior to May 31. Thus, the jury's award of $5,000 in actual damages and $2,375 in rent was challenged by the landlord as potentially constituting double recovery. The landlord and tenant had an agreement to meet on May 31 for the landlord to compensate the tenant for inventory value. However, the landlord changed the locks without making the payment, failing to provide the required written notice with contact information for obtaining a new key as mandated by Texas Property Code § 93.002(f). This constituted wrongful eviction, supported by sufficient evidence when viewed favorably to the jury's finding. The tenant's son testified that the monthly profit was $10,000, and the landlord's attorney did not contest this figure. The jury determined that the wrongful exclusion resulted in $5,000 in damages, which was upheld as reasonable given the circumstances and the tenant's unrefuted testimony regarding additional damages incurred from needing a storage facility. The tenant's recovery of both rent and actual damages was deemed permissible under Texas law, which allows recovery of actual damages, one month’s rent or $500 (whichever is greater), attorney’s fees, and court costs, minus any owed rent. The jury also found that the landlord converted the tenant's property and committed theft, assessing damages based on the inventory and equipment's value. The landlord disputed the sufficiency of evidence for these findings, arguing that the lease returned ownership of the property post-abandonment and that the items in question were not personal property. The landlord contends that damages for certain converted items, specifically gasoline tanks and a walk-in cooler, should be reduced by the removal costs. For both conversion and theft claims, the plaintiff must demonstrate that the property in question is personal and not real property. Conversion is defined as the unauthorized control over someone else's personal property that is inconsistent with the owner's rights. To succeed in a conversion claim, the plaintiff must establish ownership or entitlement, the defendant's unlawful control, a demand for return, and the refusal to return the property. Under Texas law, a person committing theft is liable for resulting damages, with theft defined as unlawfully appropriating property with the intent to deprive the owner. The landlord argues against the jury's findings of conversion and theft, citing evidence of the tenant's abandonment of the property. Texas law permits landlords to remove and store abandoned tenant property, and if unclaimed within 60 days, to dispose of it. The lease agreement grants the landlord rights to enforce performance and terminate the lease upon notice of abandonment or default. The landlord claims superior rights to the items left on the premises after notifying the tenant of lease termination. However, there is a dispute regarding whether the tenant actually abandoned the property. Evidence supported the jury's finding that the tenant was wrongfully excluded, rather than having abandoned the premises. Although the landlord had the right to dispose of the property after 60 days, he admitted to liquidating the inventory within that timeframe. Additionally, the landlord's June 15 letter indicated he would only allow the tenant to retrieve his inventory after receiving a payment. The landlord's demands included charges for equipment, such as an ice cream freezer and cashier machine, which the tenant claimed were his, as well as disputed rent charges. Evidence suggested that the tenant had not abandoned the premises but had been excluded, supporting the jury's findings that the landlord had converted or stolen the tenant's personal property. The landlord contended that certain pieces of equipment—gas tanks, a walk-in cooler, and a vapor recovery system—could not be subject to conversion claims because they were fixtures, not personal property. Property affixed to realty becomes part of it if removal would cause material damage; whether property is a fixture involves examining the intent behind its attachment. Generally, a trade fixture, which a tenant attaches to realty for business purposes, can be removed at lease termination unless otherwise stated in the contract. In this case, the lease specified that trade fixtures would not become the landlord's property upon lease termination. The tenant argued that underground gasoline tanks were removable, but the landlord provided undisputed evidence that he installed them intending for them to be part of the premises. While the tenant’s son suggested removal was possible, he did not contest the landlord's intent in installing the tanks, which is crucial in determining fixture status. The tenant's intent regarding the installed equipment was demonstrated by the underground placement of the gasoline tanks and the testimony regarding the walk-in cooler and vapor recovery system. There was no evidence that the cooler or vapor recovery system was removable without damaging the premises, and the testimony indicated that the vapor recovery system was not recognized by the tenant’s son as removable. The landlord claimed these items were intended to be permanent fixtures that would remain after the lease. Consequently, the jury's finding that these items were personal property subject to conversion or theft claims lacked sufficient evidence. However, the jury's determination of their value under unjust enrichment was examined. Unjust enrichment applies when a person wrongfully benefits from another, necessitating the restoration of those benefits. This legal doctrine can also apply in scenarios where a contract is unenforceable or void. While unjust enrichment is an independent cause of action, it is not applicable when a valid contract exists governing the dispute. Given the unique circumstances of the case, unjust enrichment was deemed an appropriate remedy for the tenant concerning the value of the gasoline tanks, walk-in cooler, and vapor recovery system. Parties entered into a commercial lease agreement and a separate contract for the purchase of equipment for the gas station, which included items like a cashier machine, refrigerators, and gasoline tanks. The tenant paid the landlord $120,000 for this equipment. Upon lease expiration, the landlord retained all the equipment, which the jury found amounted to conversion and theft, but acknowledged that conversion does not apply to fixtures considered real property. The landlord benefited by using the tenant's equipment after the lease ended, leading the jury to conclude that it would be unconscionable for the landlord to keep the equipment without compensation. As a result, unjust enrichment was deemed an appropriate remedy, with damages assessed based on the value of the equipment retained. The landlord argued that the evidence did not support the damages awarded for unjust enrichment and claimed that express contracts covered the dispute. However, testimony indicated that the landlord used the retained equipment, and the costs to relocate the gasoline tanks were substantial, supporting the jury's valuation. Furthermore, the existence of express contracts did not bar the unjust enrichment claim, as they did not specifically address the recovery of the equipment in question, distinguishing this case from others where express contracts directly governed the disputed materials or services. If a contract does not cover the contested services or materials, a factfinder may allow recovery under equitable theories. In this case, the landlord and tenant did not agree on the transfer of the tenant's property following the lease termination of a gas station. Although a 1993 sales contract established ownership of the equipment, it did not obligate the landlord to pay for that equipment or prevent him from forcing the tenant to uninstall it upon lease termination. The landlord's actions regarding the tenant's inventory indicated that ownership issues were separate from the transfer dispute. The evidence supported findings of unjust enrichment, affirming the judgment that awarded damages for the value of the tenant’s equipment and personal property retained by the landlord under claims of conversion or theft. The court referenced the principle that a prevailing party can recover on the most favorable theory supported by evidence, but cannot recover multiple times for a single injury. Regarding attorney's fees, the landlord contended that a new trial was necessary due to the award of unsegregated fees. The tenant's attorney provided testimony estimating fees of $50,000 to $60,000, asserting that the work was interconnected, leading the jury to award $35,000, plus additional fees for potential appeals. The landlord did not preserve the challenge to the fees through proper objections, resulting in the court overruling the issue. In a cross-appeal, the tenant sought exemplary damages, having requested jury instructions. Although the jury assessed $450,000 in exemplary damages, the trial court did not award them, citing a failure to provide the correct legal standard in the jury instruction. Exemplary damages can only be awarded if the claimant demonstrates, through clear and convincing evidence, that the harm resulted from fraud, malice, or gross negligence, as per TEX. CIV. PRAC. REM. CODE ANN. 41.003(a). Alternatively, if a statute allows for exemplary damages, the claimant must still prove by clear and convincing evidence that the damages stem from the specified circumstances in the statute (Id. 41.003(c). The burden of proof lies with the party seeking the remedy, which includes requesting relevant jury instructions. During a jury charge conference, a discussion arose regarding whether the jury should be instructed to find clear and convincing evidence for exemplary damages in cases of intentional torts, such as conversion. The court indicated that the existing jury charge did not necessitate such a requirement. Consequently, the tenant's counsel felt no further instruction was needed, leading to the omission of the clear and convincing evidence standard from the jury charge. When a necessary element for a recovery theory is omitted without objection, the parties waive their right to have the jury determine that element. Without written findings on the omitted element, the trial court is presumed to have decided it to support its judgment. In this case, the trial court did not grant exemplary damages, and it is presumed that the court found against the tenant concerning the requirement of clear and convincing evidence for fraud, malice, or gross negligence. The landlord contends that the tenant did not preserve the issue for appeal due to a lack of proper objection to the jury charge concerning exemplary damages. The tenant contends that the trial court improperly ignored the jury's finding on exemplary damages. However, this assertion is incorrect. The party seeking exemplary damages was responsible for requesting appropriate jury instructions to secure such a remedy. The landlord was not obligated to provide a proper jury instruction to preserve any error since he did not challenge that aspect of the judgment. According to Texas Rule of Civil Procedure 278, a party must submit a written question to contest the judgment effectively. The trial court had the authority to disregard the jury's finding regarding exemplary damages because it was deemed immaterial due to a relevant statute. Prior case law supports that a jury's answer to an exemplary damages question is immaterial if proper objections are absent and requisite findings are not made. Consequently, the trial court's judgment on exemplary damages is affirmed, and the tenant's cross-appeal points are overruled. The court ruled that the tenant is not entitled to statutory damages, as this issue was neither pleaded nor tried, leading to a reduction of the damages for failure to return the security deposit from $10,500 to $3,500. The award of prejudgment interest is vacated, and the matter is remanded for recalculation. The panel included Chief Justice Radack and Justices Sharp and Massengale.