Rosalie Graf Schneider v. Charles Whatley and Virginia Whatley

Citation: 535 S.W.3d 236Docket: 08-14-00300-CV

Court: Court of Appeals of Texas; November 28, 2017; Texas; State Appellate Court

Original Court Document: View Document

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Charles Andrew Whatley and Virginia Graf Whatley sought relief from Rosalie Graf Schneider under Texas Property Code Section 92.109 for the wrongful retention of their security deposit. Schneider counterclaimed for breach of contract. Following a bench trial, the court ruled against Schneider, ordering her to pay $100 plus three times the withheld security deposit amounting to $1,990, and awarded attorneys' fees of $3,000 to the Whatleys. Schneider contested the ruling, asserting insufficient evidence of her bad faith under Section 92.109(a). 

The lease commenced in June 2012, with the Whatleys paying a $2,650 security deposit. They provided notice to vacate by June 30, 2013, after which Schneider moved in a new tenant. On July 10, 2013, Schneider sent the Whatleys a notice detailing repair costs totaling $3,142.56, claiming they owed her $492.56 after deducting the security deposit. The Whatleys’ attorney informed Schneider of improvements made at their own expense, which Schneider had previously acknowledged positively. They demanded the return of their security deposit, less reasonable repair costs, as stipulated by Sections 92.102 and 92.103 of the Property Code.

The case initially went to justice court in December 2013, resulting in a judgment against Schneider, who then appealed. The case was retried in county court in August 2014, with testimony from seven witnesses. The trial revealed that the lease allowed deductions for reasonable repair costs but required landlord approval for alterations, which Schneider had not provided in writing. The Whatleys argued they had received Schneider's verbal or email consent for modifications. Schneider acknowledged being informed of the work done but felt unable to alter existing changes. The trial court ultimately affirmed the judgment against Schneider.

Schneider sought to return her home to its original condition after the Whatleys vacated, obtaining repair estimates that supported her demand for additional payment beyond the security deposit, which she claimed was insufficient to cover $3,065 in repairs. Although Charles Whatley acknowledged that the lease prohibited the removal of installed fixtures, the relationship with Schneider soured following financing rejections. The trial court determined that Schneider could retain $660 for specific alterations but must return the remaining security deposit of $1,990, citing violations of the Property Code for not refunding the full amount. The court imposed damages of $100 plus triple the unreturned deposit, awarded attorneys' fees to the Whatleys, and ruled against Schneider without an express finding of bad faith. Schneider challenged the sufficiency of evidence supporting the trial court's implied finding of bad faith, referencing the Texas Property Code which requires a landlord to refund security deposits within 30 days and provide itemized deductions if any amount is retained. The burden of proof lies with the landlord to justify the retention of the deposit.

A landlord can claim reasonable repair costs when there are no permanent damages to the premises and if actions to seek damages occur after the lease term ends, as established in Pulley v. Milberger. However, landlords cannot use a security deposit for normal wear and tear, which is defined as deterioration from intended use and does not include damage from negligence or abuse. If a landlord wrongfully retains a security deposit in bad faith, they are liable for $100, triple the amount wrongfully withheld, and the tenant’s attorney fees. A landlord is presumed to act in bad faith if they do not return a security deposit or provide itemization within 30 days after a tenant vacates, although this presumption was not applicable in this case as the landlord provided required documentation on time. The tenant, the Whatleys, needed to prove bad faith at trial, which involves dishonest disregard for tenant rights or intent to deny a lawful refund. The mere retention of the deposit beyond the 30-day period does not necessarily imply bad faith. The trial court determined that certain deductions from the security deposit were reasonable but found that a large portion was wrongfully withheld. The court concluded that the Whatleys met all lease conditions and were entitled to a full refund. Findings of fact by the trial court form the basis for judgment, and any omitted essential elements may be inferred if supported by evidence, unless additional findings are requested in a timely manner.

In *Cities Services Co. v. Ellison*, the court addressed the implications of failing to request additional findings in an appeal, as established in *Poulter v. Poulter*, which indicates that such omissions can result in waiving critical grounds for recovery. The case revealed a deemed finding of bad faith against Schneider, who did not seek further fact findings to contest this. Despite authorizing the contractor to allow current tenants' belongings on towel bars, Schneider sought their removal, claiming disuse. She also preferred to restore the home's original colors despite allowing the tenants to paint it, and aimed to recover costs for cleaning a stained garage carpet and removing installed garage shelves, although her own items were stored there. Contradictory testimony regarding window blinds and a thank-you email for repairs performed by the tenants undermined Schneider's claims. The trial court, as fact finder, was entitled to evaluate all evidence and witness credibility, leading to the conclusion that Schneider acted in bad faith toward the Whatleys. The appellate court affirmed the trial court's judgment, overruling the sole issue on appeal.