In this commercial lease dispute, the First Court of Appeals, in a memo op. authored by Justice Hanks, affirms judgment for landlord on breach of lease damages and attorney's fees.
Narsi v. Weingarten Realty Investors, No. 01-06-00690-CV (Tex.App.- Houston [1st Dist.] Nov. 29, 2007)(Hanks) (lease law, landlord-tenant disputes, breach of commerical lease, interpretation of lease, renewal, lockout, mitigation defense, attorney's fees)
Opinion by Justice Hanks Before Justices Taft, Hanks and Higley
Full case style: Amirali M. Narsi v. Weingarten Realty Investors
Appeal from 189th District Court of Harris County (Hon. William R. Burke, Jr.)
Disposition: Trial court's judgment for landlord affirmed
MEMORANDUM OPINION BY JUSTICE GEORGE C. HANKS, JR.
Weingarten Realty Investors sued Amirali M. Narsi for breach of a lease. After a bench trial, the trial court found that the lease was ambiguous and issued a final judgment in favor of Weingarten. Rajab A. Rahim and Ahmed Bhai Mamji were also parties to the suit with Narsi. Rahim and Mamji did not appeal the final judgment.
On appeal, Narsi argues that the final judgment was improper because (1) the trial court misconstrued the plain language of the Original Lease, Renewal Agreement, and Lease Assignment; (2) the trial court failed to have Weingarten mitigate its damages; and (3) the trial court granted attorney’s fees without evidence showing that they were reasonable and necessary. We affirm.
Jenny Hyun, associate counsel for Weingarten, testified that, in 1995, Weingarten entered into a commercial lease (“the Original Lease”) with Narsi, who was going to open a Dollar Store. The Original Lease was to remain in effect until November 30, 1998. In 1998, the parties extended the lease (“the Renewal Agreement”) until November 30, 2001. Hyun testified that, before the Renewal Agreement expired, Narsi assigned the lease to Ahmed Mamji, who was going to take over the Dollar Store. Their “Lease Assignment, Assumption & First Amendment to Lease” (“the Lease Assignment”) prolonged the Renewal Agreement until November 30, 2006. After the Renewal Agreement term expired, Mamji defaulted on the Lease Assignment. Weingarten locked Mamji out of the premises, relet the premises, and sued Narsi, alleging that he was liable for the time remaining on the Lease Assignment.
Paragraph 4 of the Lease Assignment states as follows:
[Mamji] does hereby accept this Assignment, assume and agree to perform the covenants, duties and obligations of “Tenant” under said Lease Contract (including the payment of rent), and agrees to be bound by all of such covenants, duties and obligations of Tenant as fully to the same extend as if [Mamji] had been the original party designated as “Tenant” thereunder; and [Mamji] shall be fully, directly and primarily liable for the performance thereof, and it is agreed that the liability of [Narsi] and [Mamji] is joint and several and may be enforced against either without any nature of notice to, demand upon, proceeding against or judgment against the other.
(Emphasis added.) Paragraph 5 provides as follows:
[Weingarten] hereby consents to this Assignment with the express understanding that this Assignment shall in no way relieve [Narsi] of liability for the performance of the covenants, duties and obligations of [Mamji] under said Lease Contract, including liability for the full amount of rental and any additional charges, provided to be paid by [Mamji] to [Weingarten] pursuant to said Lease Contract; and [Narsi] shall continue to be directly and primarily liable to [Weingarten] for the performance of all covenants, duties and obligations of [Mamji] under such Lease Contract, including payment of rental, and such liability shall remain and continue in full force and effect as to any further assignment or transfer of the Lease Contract, whether or not [Narsi] shall have received any notice or consented to such assignment or transfer, and whether or not [Weingarten] may subordinate any of its liens and/or security interests, contractual or statutory; provided, however, that any sum paid by [Mamji] to [Weingarten] shall be credited on the aforesaid obligation of [Narsi]. [Weingarten] shall not be obligated to give any notice to [Mamji] which is not presently provided for as a duty of [Weingarten] under said Lease Contract. (Emphasis added.)
The parties disagree with respect to the definition of the term “lease contract.” The trial court found the Lease Assignment to be ambiguous and stated that the court believed that Weingarten intended Narsi to be the guarantor, but it was not sure if the leases were enough to “get them there.” The trial court also considered the fact that Weingarten drafted the Lease Assignment. After deliberation, the trial court awarded Weingarten $347,274.35. The principal sum was $214,217.89, and prejudgment interest accrued at 18%.
In his first and second issues, Narsi contends that the trial court erred in granting final judgment
in favor of Weingarten because ambiguity exists regarding whether, under the terms of the Lease Assignment, Narsi’s liability extended beyond November 30, 2001—the end of the Renewal Agreement. Weingarten asserts that there is no ambiguity and all parties agreed to the intent of the Lease Assignment. The Lease Assignment at issue provides that:
WHEREAS, by Lease Contract (the “Original Lease”) dated September 8, 1995, WEINGARTEN REALTY INVESTORS, therein and herein referred to as “Landlord,” leased to AMARALI [sic] M. NARSI and RAJAB A. RAHIM, therein called “Tenant” and hereinafter called “Assignor,” a storeroom . . . for a term commencing November 21, 1995, and terminated November 30, 2001, reference being here made to such Lease Contract for all relevant purposes; and
WHEREAS, the Original Lease was amended by a Renewal Letter Agreement dated September 30, 1998 (said Original Lease, together with the Renewal Letter Agreement shall hereinafter be referred to as the “Lease Contract”);[ The Original lease was to terminate on November 30, 1998, and the RenewalAgreement renewed the lease until November 30, 2001.] and
. . .
[Narsi] does hereby sell, assign and transfer unto Assignee [Mamji], effective April 1, 2001 (hereafter called “Effective Date”), all of [Narsi’s] leasehold interest under the aforesaid Lease Contract herein above referred to for the entire remainder of the lease term (such period being sometimes herein referred to as the “assignment period”).
Absent ambiguity, we interpret a contract as a matter of law. DeWitt County Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 100 (Tex. 1999). “Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). “If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.” Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). “An ambiguity exists only if the contract language is susceptible to two or more reasonable interpretations.” Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). The language in a contract is to be given its plain grammatical meaning unless doing so would defeat the parties’ intent. DeWitt County Elec. Coop., 1 S.W.3d at 101. We presume that the parties intended every clause to have an effect. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996).
In our analysis, we must determine whether the parties have contracted to extend Narsi’s obligation in the lease contract through the assignment period of the Lease Assignment. Narsi contends that the “Lease Contract” expired by its terms on November 30, 2001—at the end of the Renewal Agreement—and that the Lease Assignment does not keep Narsi liable for any extension of the lease contract. Weingarten, on the other hand, contends that Narsi remains liable for the entire remainder of the assignment period—November 30, 2006.
If a contract is worded so that a court may properly give it a definite or certain legal meaning or interpretation, then it is not ambiguous. Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996). A contract is ambiguous only when there exists a genuine uncertainty as to which of two meanings is proper. Columbia Gas, 940 S.W.2d at 589. However, an ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). In order for an ambiguity to exist, both interpretations must be reasonable. Nat’l Union Fire Ins. Co. v. CBI Industries, Inc., 907 S.W.2d 517, 520 (Tex. 1995).
Narsi argues that the Lease Assignment extends the lease to November 30, 2006, but does not extend the “lease contract,” which is a defined term. We disagree. The term “lease,” which is used throughout the Lease Assignment, is defined in the Renewal Agreement as follows:
Reference is made to the captioned Lease Contract dated September 8, 1995, together with all subsequent amendments and extensions thereto, collectively herein referred to as “Lease,” for a term which commenced November 21, 1995, and shall terminate November 30, 1998.
Almost three years later, on May 22, 2001, the Lease Assignment references the term “lease” as follows:
The term of the Lease is hereby extended through November 30, 2006, unless sooner terminated in accordance with the terms and conditions set forth in the Lease.
Paragraph 2 of the Lease Assignment also uses the term “lease”:
Commencing December 1, 2001, Tenant shall pay to Landlord, as Minimum Rent, in accordance with the terms and conditions of Article IV of the Lease, the following . . . .
Only the Original Lease contains “articles.” Furthermore, paragraph 12 of the Lease Assignment states “all defined terms used herein shall have the same meaning as when used in the Lease unless another meaning is clearly indicated.” The term “lease” in the Lease Assignment refers to the Original Lease and the Renewal Agreement. Consequently, the phrase “entire remainder of the lease term” in the Lease Assignment refers to the lease’s extension through November 30, 2006. When the lease contract phrase is read in the context of the assignment period contained in the Lease Assignment, its meaning becomes clear—Narsi remains liable through the Lease Assignment’s extension of the lease contract.
We overrule Narsi’s first and second issues.
Mitigation of Damages
In his third issue, Narsi complains that Weingarten failed to mitigate its damages. Weingarten asserts it properly mitigated its damages.
A landlord has a duty to make reasonable efforts to mitigate damages when the tenant breaches the lease and abandons the property. Tex. Prop. Code Ann. § 91.006 (Vernon 2007); Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 299 (Tex. 1997). However, the landlord is not required to fill the premises with any willing tenant; the replacement tenant must be suitable under the circumstances. Austin Hill, 948 S.W.2d at 299. The landlord’s failure to use reasonable efforts to mitigate damages bars the landlord’s recovery against the breaching tenant only to the extent that damages reasonably could have been avoided. Id. The tenant bears the burden to prove that the landlord has mitigated or failed to mitigate damages and the amount by which the landlord reduced or could have reduced its damages. Id.
Pursuant to section 16.02 of the Original Lease, Weingarten does not have the duty to relet the leased premises, but it does have a duty to “diminish by any net sums thereafter received by Landlord through reletting the Lease Premises during said period.”
According to section 91.006 of the Texas Property Code, a landlord has a duty to mitigate damages, “a provision of a lease that purports to waive a right or to exempt a landlord from liability or duty under this section is void.” Tex. Prop. Code Ann. § 91.006 (Vernon 2007).
The Original Lease was signed before section 91.006 of the Texas Property Code was enacted, but the Renewal Agreement was signed afterwards. Assuming without deciding that section 91.006 applies here, Weingarten gave Narsi offsets and credits once its new tenant moved in. Mamji tried to bring in a third party by the name of Fatehali Chatoor to take over the lease. Weingarten did not have a duty to accept the tenant presented by Mamji. Narsi failed to present credible evidence to the trial court to demonstrate that Weingarten failed to mitigate its damages.
Because Weingarten did not have a duty to accept the third party tenant Mamji presented, and because Weingarten gave Narsi offsets and credits once a new tenant moved in, we hold that Weingarten properly mitigated its damages.
We overrule Narsi’s third issue.
In his fourth issue, Narsi argues that Weingarten is not entitled to recover attorney’s fees because there was no evidence or expert testimony verifying that the fees were reasonable and necessary. We use an abuse of discretion standard of reviewing attorney’s fees awards in non-declaratory judgment actions. See Ridge Oil Co. v. Guinn Invs. Inc., 148 S.W.3d 143, 163 (Tex. 2004).
Weingarten asserts that it is entitled to attorney’s fees because it won its breach of contract claim against Narsi. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (Vernon 1997) (attorney’s fees recoverable for breach of contract claim).
When a prevailing party in a breach of contract suit seeks attorney’s fees, section 38.001 mandates an award of reasonable fees if there is proof that the fees are reasonable. See Atlantic Richfield Co. v. Long Trusts, 860 S.W.2d 439, 449 (Tex. App.—Texarkana 1993, writ denied); Budd v. Gay, 846 S.W.2d 521, 524 (Tex. App.—Houston [14th Dist.] 1993, no writ). A trial court has the discretion to fix 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. See Budd, 846 S.W.2d at 524. The party seeking to recover attorney’s fees carries the burden of proof. See Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 8, 10 (Tex. 1992).
Weingarten’s attorney, Richard Howell, testified that he had expended approximately $13,000 at the rate of $225 per hour. Howell also testified that the services provided and the hourly rates were reasonable based on the issues involved in the case. Finally, Howell testified that $2,500 was a reasonable legal fee to charge if the case was appealed to this court; and $5,000 would be a reasonable fee if a petition for review is filed with the Texas Supreme Court. Howell’s testimony was uncontroverted.
What amount of attorney’s fees is reasonable is a question of fact. See Int’l Sec. Life Ins. Co. v. Spray, 468 S.W.2d 347, 349 (Tex. 1971). But where, as here, trial counsel’s testimony concerning attorney’s fees for the trial of a case is clear, positive and direct, and uncontroverted, the court takes it as true as a matter of law. See Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990). This is especially the case where the opposing party had the means and opportunity to challenge the testimony and failed to do so. See id.; see also Tex. Civ. Prac. & Rem. Code Ann. § 38.003 (Vernon 1997) (stating rebuttable presumption that usual and customary attorney’s fees are reasonable).
Because Narsi failed to take the available opportunity to question or controvert Howell’s testimony, we hold that the testimony established Weingarten’s reasonable and necessary legal fees through trial of the case as a matter of law.
We overrule Narsi’s fourth issue.
We affirm the judgment of the trial court.
George C. Hanks, Jr.
Panel consists of Justices Taft, Hanks, and Higley.