Court of Appeals of Texas, Houston (1st Dist.).
Sue HOOVER, Appellant,
v.
SONIC DRIVE-IN OF CALDWELL, PTR, Edwin T. Krause, and Delma Krause, Appellees.
No. 01-93-00059-CV.
|
April 21, 1994.
Before HEDGES, DUGGAN and O’CONNOR, JJ.
OPINION
HEDGES, Justice.
*1 Sue Hoover appeals a judgment awarding damages and attorney’s fees to appellees, Sonic Drive-In of Caldwell PTR, Edwin Krause, and Delma Krause and denying recovery on her counterclaim. In 10 points of error, Hoover attacks the legal and factual sufficiency of the evidence to support the jury findings. We affirm.
Fact Summary
Appellant Hoover and William R. Kitts own a drive-in restaurant in Caldwell, Texas. Initially, Hoover’s deceased husband and Kitts entered into a franchise agreement with Sonic Industries, Inc. (“Sonic Industries”). Hoover succeeded to her husband’s partnership interest in the franchise in early 1985 and acquired Kitt’s interest in late 1990. By written agreement dated April 4, 1985, Hoover and John Krause entered into a lease agreement (the “Lease”) whereby he would rent the real property and operate the franchised operations in accordance with the franchise license agreement with Sonic Industries.
In February, 1989, John Krause orally assigned the Lease to appellees, Sonic Drive-In of Caldwell, PTR, a partnership comprised of Edwin T. Krause and Delma Krause (the “Assignment”). Although the Lease prohibited assignment without Hoover’s approval, her consent was not contemporaneously obtained. Hoover learned of the Assignment by September, 1989, and ratified it by letter dated May 16, 1990.
In December, 1989, Sonic Industries conducted an audit of the franchised operations for the years 1985 through 1989. The audit revealed a deficiency of $13,573 from past underpayment of fees, which Sonic Industries reported to Hoover by letter dated May 7, 1990. Hoover discussed the Sonic Industries deficiency with Ed Krause. In her May 16, 1990 ratification letter to appellees, Hoover acknowledged that “most of the deficiency was generated by John Krause.” She did not specifically request that appellees pay all or any portion of the outstanding amount due Sonic Industries. Hoover testified that she assumed Ed Krause had agreed to pay all the outstanding debt to Sonic Industries, while Ed Krause testified that he felt appellees were responsible for only the amount of deficiency accrued after the Assignment.
By letter dated October 25, 1990, Sonic Industries notified Hoover that the franchise agreement was still in default and threatened to revoke the franchise unless the sum of $13,933.39 was paid within 60 days. Hoover ultimately paid the past due amount in February, 1991, after she had taken over the operations.
In December, 1990, Hoover talked with Ed and Delma Krause about the Sonic Industries deficiency. She told Ed Krause that she wanted him to work as her employee, not as her lessee. She had her name and signature added to the signature card at First State Bank of Caldwell on appellees’ account. She was also given a key to the leased premises. Her intent was to see that all bills were paid, all repairs were made promptly, and to generally monitor the business. She testified that Ed Krause was not happy with her involvement in the business.
*2 On January 7, 1991, Hoover and Ed Krause again discussed the operation of the business. When their discussions broke down, Hoover entered the leased premises and began to operate the business. She testified that she considered Ed Krause to be her employee and she fired him. She also asserted a claim against appellees’ bank account funds.
After First State Bank of Caldwell filed a petition to interplead the funds into the registry of the court, appellees brought suit against Hoover for wrongful eviction, conversion, and tortious interference with a contract. Hoover counterclaimed for damages including the deficiency to Sonic Industries and repair to the restaurant premises. John Krause, the original lessee, was not a party to the suit.
In 10 points of error, Hoover challenges the legal and factual sufficiency of the evidence to support the jury findings. In points of error one, two, and three, she attacks the jury finding that Hoover failed to comply with the terms of the Lease. In points of error four through nine, she challenges the jury finding that appellees did not fail to comply with the Lease. In point of error 10, she argues that there is no evidence to support the jury award of damages for her failure to comply with the terms of the Lease.
The Lease
Pertinent portions of the Lease are as follows:
Article II.
….
The Lessee agrees to operate under the franchise owned by the Lessor and to promptly pay all charges from Sonic Industries, Inc. The Lessee will also agree than [sic] upon expiration of this lease the franchise will remain the property of the Lessor and any charges under the franchise, for sign rental or other taxes, fees, or levies may be deducted from the security deposit.
….
Article XXV. Default. The following events shall be deemed to be events of default by Lessee under this lease:
a. Lessee shall fail to pay any installment of rent hereunder and such failure shall continue for a period of ten (10) days after receipt of written notice thereof by Lessee;
b. Lessee shall fail to comply with any term, provision or covenant of this lease, other than the payment of rent, and shall not cure such failure within fifteen (15) days after written notice thereof to Lessee;
….
Upon the occurrence of any such events of default, Lessor shall have the option to pursue any one or more of the following remedies without any notice or demand unless otherwise specified above:
a. Terminate this lease in which event Lessee shall immediately surrender the leased premises to Lessor, and if Lessee fails to do so, Lessor may, without prejudice to any other remedy which he may have for possession or arrearages in rent, enter upon and take possession of the leased premises and expel or remove Lessee and any other person who may be occupying said premises or any part thereof, by force if necessary, without being liable for prosecution or any claim of damages therefor; and Lessee agrees to pay to Lessor on demand the amount of all loss and damage which Lessor may suffer by reason of such termination, whether through inability to relet the leased premises on satisfactory terms or otherwise;
*3 ….
Article XXVI. Waiver of Notice. Lessor shall give Lessee ten (10) days notice or demand to pay rent, and Lessee waives any other notice before filing suit under the laws of the State of these described premises. Notice shall be given by certified mail to the Lessee.
Standards of Review
Legal Insufficiency
In reviewing legal insufficiency points, this Court considers only the evidence and inferences, viewed in their most favorable light, that tend to support the jury finding and disregards all evidence and inferences to the contrary. Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988); Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987); Virani v. Syal, 836 S.W.2d 749, 750 (Tex.App.-Houston [1st Dist.] 1992, no writ). If there is any evidence of probative force to support the finding, the point must be overruled and the finding upheld. Id.; In re King’s Estate, 244 S.W.2d 660, 661 (Tex.1951). No evidence points of error must be sustained when the record discloses one of the following: (1) a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla of evidence; or (4) the evidence establishes conclusively the opposite of a vital fact. Perry v. Perry Bros., Inc., 753 S.W.2d 773, 775 (Tex.App.-Dallas 1988, no writ); Otis Elevator Co. v. Joseph, 749 S.W.2d 920, 923 (Tex.App.-Houston [1st Dist.] 1988, no writ).
Factual Sufficiency
In reviewing factual sufficiency challenges, this Court must first examine all of the evidence. Plas-Tex, Inc. v. United States Steel Corp., 772 S.W.2d 442, 445 (Tex.1989); Sosa v. City of Balch Springs, 772 S.W.2d 71, 72 (Tex.1989); Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 (Tex.1986); Glockzin v. Rhea, 760 S.W.2d 665, 666 (Tex.App.-Houston [1st Dist.] 1988, writ denied). Having considered and weighed all of the evidence, we will set aside the verdict only if the evidence is so weak, or the finding is so against the great weight and the preponderance of the evidence, that it is clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); Dyson v. Olin Corp., 692 S.W.2d 456, 457 (Tex.1985); Virani, 836 S.W.2d at 750-51; Otis Elevator Co. v. Joseph, 749 S.W.2d at 923. The appellate court cannot substitute its opinion for that of the trier of fact and determine that it would reach a different conclusion. Glockzin, 760 S.W.2d at 666.
Jury Finding that Hoover Did Not Comply With the Lease
In point of error one, Hoover asserts that there was no evidence to support the jury’s answer to question no. one that she failed to comply with the terms of the Lease. She cites that section of the Lease which provides that “the Lessee [appellees] agrees to operate under the franchise owned by the Lessor and to promptly pay all charges from Sonic Industries, Inc.” Hoover seems to argue appellees’ failure to promptly pay all charges due to Sonic Industries provides some evidence of her compliance with other terms of the Lease. We disagree. That section of the Lease treats only appellees’ performance and is therefore not germane to the question of Hoover’s fulfillment of her own obligations.
*4 We overrule point of error one.
In points of error two and three, Hoover contends that the jury finding of her failure to comply was contrary to the overwhelming weight and preponderance of the evidence and that there was insufficient evidence to support it. In support of these points, Hoover posits the following assertions:
a) Krause received the written notice from Sonic Industries, Inc. concerning the default;
b) Krause testified that he knew that there were obligations to Sonic Industries, Inc.;
c) Krause knew he had agreed to pay those obligations;
d) Hoover had provided Krause a copy of the letter from Sonic Industries which showed a deficit in excess of Thirteen Thousand Dollars ($13,000.00) owed;
e) Krause nonetheless failed and refused to pay these deficiencies.
We disagree that the evidence is legally insufficient to support the jury finding of Hoover’s failure to comply with the terms of the lease agreement. The record contains sufficient evidence that proper notice of the alleged breach was not given to Krause. Specific evidence is set forth in our following discussion of factual insufficiency under point of error two.
We further disagree that the evidence is factually insufficient to support the jury finding of Hoover’s noncompliance. The record contains the following evidence:
Hoover never gave a personal written notice of default as required by Article XXV(b) of the Lease.
Hoover did not make a clear and unequivocal demand or request that appellees pay the past due amount to Sonic Industries.
Appellees contradicted Hoover’s claim that she gave appellees a copy of the October 1990 Sonic Industries letter before the commencement of the lawsuit.
The ratification letter did not contain a specific demand that appellees pay the entire Sonic Industries deficiency.
The ratification letter acknowledged that John Krause was responsible for the majority of the past due amount.
The Sonic Industries’ September 10, 1990 and October 25, 1990 letters were addressed to Hoover and her partner, not to appellees.
Hoover terminated the Lease without any advance notice in violation of Article XXV(b).
The record contains sufficient evidence of Hoover’s obligations of written notice and demand under the Lease and her default under those obligations.
We overrule points of error two and three.
Jury Finding That Krause Complied With The Lease.
In her next five points of error, Hoover attacks the jury finding that appellees did not fail to comply with the terms of the Lease. In point of error eight, Hoover argues that there was no evidence to support the jury finding that appellees did not fail to comply with the terms of the Lease. In support of her argument, she contends that she provided appellees with written notice of the Sonic Industries’ deficiency charges in the form of copies of Sonic’s letters to her. She argues that appellees’ failure to pay this debt represented a default under the Lease.
*5 Ed Krause testified that he never received a written notice of default under the Lease and that Hoover never made written demand that he pay the entire Sonic Industries’ deficiency. All parties agree that the most appellees ever received was a copy of the Sonic Industries’ demand letter to Hoover. In her ratification letter, Hoover acknowledged that most of the Sonic Industries’ deficiency had been generated by John Krause. Ed Krause testified that appellees did not intend to assume liability for John Krause’s debts. We disagree that there is no evidence (1) that Hoover did not give proper written notice of default to appellees or (2) that appellees were not required to pay the entire Sonic Industries’ deficiency as a condition of the Lease.
We overrule point of error eight.
In point of error five, Hoover contends that there is no evidence to support the jury answer to question no. two that appellees did not fail to comply with the terms of the Lease. In support of her argument, she urges:
a) Krause refused to pay all charges from Sonic Industries, Inc.;
b) Krause had not paid taxes, including ad valorem taxes for 1990;
c) Krause did not pay the insurance which was required to be paid;
d) Krause did not maintain the premises in a good state of repair;
e) Krause allowed the drive-in restaurant to be used for other than drive-in purposes by utilizing a private office in the back and by storing personal property on the premises without authorization;
f) Krause failed to provide liability insurance as in required by Article XX of the Lease Agreement; and
g) Krause refused to pay attorney’s fees as provided pursuant to the Lease Agreement.” (limited to point of error four).
We disagree that these complaints establish that the jury finding to question no. two was erroneous as a matter of law.
The record contains the following evidence:
Sonic Industries drafted appellees’ bank account for the monthly fees.
The 1990 taxes were not due until January 31, 1991, after the date Hoover took possession of the business. All other taxes were current.
Appellees introduced a certificate of insurance that covered the property for the period November 1990 through November 1991.
Appellees won business awards for the operation of the restaurant in the months of June, 1989, and April, 1990.
Income statement showed amounts expended for repairs and maintenance.
Receipts for repairs and maintenance were admitted into evidence.
Hoover knew of the storage shelter and office construction and did not object.
Appellees attempted to make arrangements to pay their pro rata portion of Sonic Industries deficiency.
Appellees testified that they did not receive the October 25, 1990 letter from Sonic Industries until after litigation ensued, although Hoover testified that she sent them a copy of the letter in May, 1990.
Appellees testified that they did not agree to assume liability for John Krause’s past due debts under the franchise agreement, although Hoover testified that she had assumed they did.
*6 Appellees assumed the obligation to pay rent and charges that became due under the Lease from the date of the Assignment.
Hoover did not make a clear and unequivocal demand or request that appellees pay the past due amount to Sonic Industries.
Rental payments were current.
Other than the amount in dispute, the fees to Sonic Industries were current.
Appellees had allowed the workers’ compensation insurance to lapse; however, this insurance was not specifically required in the Lease, and Hoover had not given notice of default.
We have already rejected the argument that appellees’ refusal to pay all the Sonic Industries’ deficiency proved that there was no evidence that appellees did not fail to comply with the Lease. There is some evidence in the record that appellees had paid all taxes due at the time of the termination by Hoover, that appellees maintained the required insurance, and that appellees kept the premises in good repair. There is some evidence that the leased premises were not used for any purpose other than as a drive-in restaurant. Appellees were not liable for attorney’s fees unless Hoover established that she was entitled to exercise her remedies available upon appellees’ default. There is some evidence that Krause was not liable for attorney’s fees.
We overrule point of error five.
In point of error six and seven, Hoover argues that the evidence is factually insufficient to support the jury finding that appellees did not fail to comply with the Lease. As a basis for these points, she essentially repeats the allegations under point of error five with the distinction that she charges violations of the insurance provisions under the Franchise Agreement, as opposed to the Lease. Our review of this record persuades us that the evidence is factually sufficient to support the jury finding that appellees did not fail to comply with the terms of the Lease.
We overrule points of error six and seven.
In point of error nine, Hoover contends that there was no evidence to support the jury’s “affirmative finding” that she was not entitled to exercise her remedies under the Lease. We disagree that the jury made such an affirmative finding. To the extent that this point of error should be construed as an attack on the jury finding that appellees did not fail to comply with the Lease, we have considered and rejected this argument under point of error eight.
We overrule point of error nine.
In point of error four, Hoover argues that the failure of the jury to find that she was entitled to enter into the leased premises and perform appellees’ obligations was against the great weight and preponderance of the evidence. We disagree that the jury made such an affirmative finding. To the extent that this point should be considered as a factual sufficiency attack on the jury finding about appellees’ compliance, we disagree with Hoover’s contention.
We overrule point of error four.
Damage Award to Appellees
*7 In point of error 10, Hoover contends that there is no evidence to support the jury’s award of actual damages to appellees for her failure to comply with the terms of the Lease. Hoover claims an offset of appellees’ award against her damages. She is not entitled to an offset, however, because the jury assigned a value of “$0” to her damages in response to jury question number four.
An award of damages is strictly within the province of the jury. Appellees presented evidence of financial losses in excess of the jury award. There is evidence of lost profits, conversion of personal property, loss of income, and attorney’s fees. Income statements for the year 1990 showing a net profit of $47,947.64 and an itemization of personal property valued at $7,695 were admitted into evidence. Therefore, there is some evidence to support the jury’s award of actual damages.
We overrule point of error 10.
We affirm the judgment of the trial court.