Landlord required to mitigate damages in breach-of-lease case

Houston Court of Appeals reverses summary judgment granted in favor of landlord in residential lease dispute, finding that landlord & landlady acted unreasonably with respect to mitigation of damages, and did not prove their damages. The opinion, written by Justice Hanks, also addresses the question of whether the mitigation issue must be pleaded by the defendant.

EXCERPT FROM THE OPINION IN

ONTIVEROS V. WILLIAMS (Tex.App.- Houston [1st Dist.] Feb. 11, 2010)

Damages for Breach of Contract

Rosales and Ontiveros pointed out in their response to the Williamses' Motion for Summary Judgment and in their appellate brief that genuine issues of material fact exist as to whether the Williamses (1) mitigated their damages and (2) improperly deducted amounts from the security deposit.

1. Mitigation

The Williamses argue that the issue of mitigation was not pled by Rosales and Ontiveros and, thus, shall not be considered by this Court on appeal.

Section 91.006 of the Texas Property Code requires a landlord to mitigate his damages after the breach of a lease and declares void any lease provision to the contrary. Tex. Prop. Code Ann. § 91.006 (Vernon 2007). When a tenant contends that the landlord has mitigated his damages, the breaching tenant need not plead the landlord's mitigation as an affirmative defense; rather, the tenant's evidence of the landlord's mitigation tends to rebut the amount of damages claimed by the landlord for the breach and may be admitted under a general denial. McGraw v. Brown Realty Co., 195 S.W.3d 271, 277-78 (Tex. App.--Dallas 2006, no pet.). Thus, it was not necessary for Rosales and Ontiveros to plead that the Williamses mitigated their damages, and the issue is properly before our consideration.

On the other hand, a tenant's contention that the landlord failed to mitigate his damages must be pleaded as an affirmative defense, and the filing of a general denial is usually not sufficient to raise the issue. Id. at 277; see Tex. R. Civ. P. 94 (party relying on affirmative defense must specifically plead defense). However, when a plaintiff in his pleadings anticipates defensive matters and pleads them, the defendant may rely upon defenses though his only pleading is general denial. Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex. 1991) (citing Raney v. White, 267 S.W.2d 199, 200 (Tex. Civ. App.--San Antonio 1954, writ ref'd)).

Here, the Williamses pled in "Plaintiff's [sic] Original Petition" that "Plaintiffs reasonably mitigated their damages." Although the Williamses, as plaintiffs, had no obligation to anticipate defenses and plead those issues, by anticipating the defense in their pleadings, they allowed the defendants to properly respond with a general denial. See id. Because the plaintiffs' petition claimed they reasonably mitigated damages, the defendants' filing of a general denial, "den[ying] each and every allegation of Plaintiffs' Original Petition," put failure to mitigate at issue in the case.

Moreover, even if the pleadings had not put mitigation at issue, both parties addressed the issue in their summary judgment pleadings and attached evidence, without objection from the Williamses. An unpleaded affirmative defense may serve as the basis for a summary judgment when it is raised in the summary judgment motion and the opposing party does not object to the lack of a Rule 94 pleading in either its written response or before the rendition of judgment. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 494 (Tex. 1991). In other words, trial by consent applies in the summary judgment context. Id.; see also Segal v. Emmes Capital, L.L.C., 155 S.W.3d 267, 298 (Tex. App.--Houston [1st Dist.] 2004, pet. dism'd). "The failure to plead an affirmative defense under rule 94 is an issue that must be raised in the trial court, or it may not be urged on appeal." Roark, 813 S.W.2d at 495.

Rosales and Ontiveros's response to the Williamses' Motion for Summary Judgment states facts raising the issue of mitigation and failure to mitigate. The Williamses filed a reply brief to Rosales and Ontiveros's response, but did not object or specially except. Thus, the issue of failure to mitigate was properly before the consideration of the trial court in deciding the motion and accordingly, is also properly before the consideration of this Court on appeal.

a) Actual Mitigation of Damages

Rosales and Ontiveros's response to the Motion for Summary Judgment and attached evidence creates a fact issue as to whether the Williamses actually mitigated their damages. The response states that Rosales and Ontiveros requested to stay in the house for an additional month but were told that they could only stay "until April 11, 2008 because the house had been rented to another tenant." In Rosales' affidavit, she states that Kimberly Williams told her that they "had to leave the house by April 11, 2008 because she needed two weeks to clean the house before the new tenants arrived." Additionally, the response alleges and the attached affidavit states that Rosales observed and spoke with the new tenant renting the house in May and June of 2008.

The Williamses argue in their appellate brief that the affidavits of Rosales and Ontiveros are self-serving conclusory statements based on supposition and hearsay and do not amount to more than a scintilla of evidence. However, the Williamses did not make these objections before the trial court. Because the objections to hearsay and speculation are objections to form, the Williamses waived them by failing to present the objection to the trial court. See Tex. R. Evid. 802; Pico v. Capriccio Italian Rest., Inc., 209 S.W.3d 902, 909 (Tex. App.--Houston [14th Dist.] 2006, no pet.). Hearsay, when not objected to, is relevant evidence that can be considered on appeal. Tex. R. Evid. 802.

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Thus, the statements in the affidavits attached to Rosales and Ontiveros's response are some evidence that the Williamses mitigated their damages for an amount greater than what they acknowledged in their motion for summary judgment.

b) Failure to Mitigate

While it is Rosales and Ontiveros's primary contention that the Williamses actually mitigated their damages by leasing the property to another tenant, the facts provided in response to the Williamses' Motion for Summary Judgment alternatively show that the Williamses failed to mitigate their damages. It is undisputed that Rosales and Ontiveros asked to stay in the apartment for an additional month but were only allowed to stay in the house until April 11. Because the landlords have an obligation to avoid waste, their refusal to allow Rosales and Ontiveros to stay at the house longer, if the property were not leased to another tenant, would constitute a failure to mitigate.

2. Amount of Damages

Rosales and Ontiveros also argue that the trial court erred in awarding the amount of damages claimed by the Williamses. None of the Williamses' pleadings or motions clearly document the calculation of their alleged damages. The trial court awarded $7,190 in damages on the breach of contract claim. Based on the Williamses' alleged damages in their motion, this figure appears to be the amount claimed for rent ($6,580) and the claimed amount for damage to the property and reletting fees ($610). The Williamses appear to have claimed $6,580 for rent based on four months of rent at a rate of $1,295 and four months of late fees of $350.

In their response to the Williamses' Motion for Summary Judgment, Rosales and Ontiveros stated that they "received a letter from Plaintiffs which indicated that she needed to leave the house by April 11, 2008 and how much Defendants [Rosales and Ontiveros] needed to pay for the rent of the house." Rosales and Ontiveros contend that they paid the Williamses an agreed amount of $558 to cover rent for April 1 through 11, which was accepted by the Williamses. Accordingly, there is a fact issue regarding the amount of rent actually owed.

Similarly, the Williamses have failed to conclusively prove the reasonableness of their claimed damages for reletting the property. In the affidavit of Kimberly Williams, she states that on April 28, 2008, she hired a staging company to enhance the attractiveness of the property, which cost $360. The terms of the contract called for the company to place a home manager in the house. In other words, Williams entered into an agreement to pay someone to occupy the house, rather than finding a tenant to pay her rent to occupy the house. Following this statement in the affidavit, she says she "aggressively marketed" the property. Because she does not state that she attempted to lease the property prior to entering the contract with the staging company, she has not shown that paying someone to occupy the house was reasonably necessary to find a new tenant.

Ontiveros v. Williams (Tex.App.- Houston [1st Dist.] Feb. 11, 2010)(Hanks) (breach of residential lease claim, mitigation of damages and failure to mitigate as affirmative defense, trial by consent in summary judgment context, partial summary judgment on liability only, proving amount of damages, attorney's fees)
REVERSE TRIAL COURT JUDGMENT AND REMAND CASE TO TRIAL COURT FOR FURTHER PROCEEDINGS:
Opinion by Justice George C. Hanks, Jr.
Before Justices Jennings, Hanks and Bland
01-09-00454-CV Francisca Rosales and Jose Ontiveros v. Kimberly Williams
Appeal from County Civil Court at Law No 3 of Harris County
Trial Court Judge: Hon. Linda Storey