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8305 Broadway Inc. v. J&J Martindale Ventures, LLC

Court of Appeals of Texas, Fourth District, San Antonio

June 28, 2017

8305 BROADWAY INC. and Changing Surface, Inc., Appellants
v.
J&J MARTINDALE VENTURES, LLC d/b/a Big Hops Growler Station, Appellee

         From the County Court at Law No. 10, Bexar County, Texas Trial Court No. 386551 Honorable David J. Rodriguez, Judge Presiding

          Sitting: Sandee Bryan Marion, Chief Justice Marialyn Barnard, Justice Patricia O. Alvarez, Justice

          MEMORANDUM OPINION

          Marialyn Barnard, Justice

         8305 Broadway Inc. and Changing Surface, Inc. appeal a judgment signed by the trial court after a bench trial. Changing Surface contends the trial court erred in awarding J&J Martindale Ventures, LLC $3, 090.00 in damages for loss of value and the evidence is insufficient to support the trial court's award of $1, 573.48 in lost profits. 8305 Broadway contends the trial court erred in refusing to award it attorney's fees. We reverse the portion of the trial court judgment awarding Martindale $3, 090.00 in damages for loss of value and $1, 573.48 in lost profits and render judgment that Martindale is only awarded $3, 065.52 in damages. The remainder of the trial court's judgment is affirmed.

         Background[1]

         The underlying lawsuit arose out of disputes relating to a commercial property lease and a contract to build out the leased space. In December of 2012, Martindale and 8305 Broadway signed a lease for a commercial space. Martindale intended to use the space to operate a "Growler Station" where customers are allowed to sample craft beer on tap and to take beer home in closed containers called growlers. Renovations to the leased space were necessary in order to make the space suitable to operate a Growler Station.

         8305 Broadway was jointly owned by Jo Ann Karambis and her mother. Karambis also owned Changing Surface, a contractor engaged in renovating leased space. Karambis was the president of and controlled the operations of both entities.

         Karambis rejected several bid proposals Martindale obtained from other contractors to renovate the space. Believing Karambis would reject any bid proposal other than one submitted by her own company and wanting to open for business, Martindale entered into a contract with Changing Surface on January 4, 2013, agreeing to pay Changing Surface $31, 750 for the necessary renovations. The contract stated the renovations would be complete in three to four weeks.

         On February 13, 2013, the posting of Martindale's liquor license was complete, and it was eligible to begin sales. Although Martindale had paid the full contract price for the renovations by January 18, 2013, the renovations were not complete. Sometime in February of 2013, subcontractors began walking off the job. On or about February 28, 2013, Changing Surface claimed the renovations were complete; however, the city's inspectors refused to issue a certificate of occupancy because the work was not up to city code and had been performed without obtaining the necessary permits. Martindale expended $3, 065.52 to complete the work and obtain the necessary permits.

         Martindale finally opened for business on March 18, 2013. Around that same date, Changing Surface presented Martindale with a change order, claiming Martindale owed Changing Surface an additional $7, 225.00 for the renovations. Martindale refused to pay the change order.[2]

         On March 28, 2013, Changing Surface filed a lien against the property in the amount of the change order. On March 29, 2013, 8305 Broadway sent Martindale a letter stating Martindale violated the lease agreement by causing a lien to be filed against the property. As a result, 8305 Broadway seized Martindale's security deposit and ordered Martindale to pay the remaining balance of the lien and replenish the security deposit or face eviction. This demand and seizure were contrary to the provisions in the lease which gave Martindale twenty days after receipt of a demand from 8305 Broadway to take action to discharge a lien Martindale caused to be filed against the property. After receiving 8305 Broadway's letter, Martindale retained counsel and filed the underlying lawsuit.

         In April of 2014, the entire property on which the leased space was situated experienced a sewer leak. The cost of the repair totaled $30, 483.66 of which insurance paid $14, 269.00, leaving a balance of $16, 214.66. On August 15, 2014, 8305 Broadway sent Martindale a letter, representing the total cost of the repair was $35, 179.00, and demanding Martindale pay 30% of the $21, 910.00 that was not paid by insurance.[3] 8305 Broadway also demanded payment for additional common expenses incurred in 2013 in the amount of $1, 780.50. This amount erroneously included a charge for life insurance and charges for legal fees for which Martindale was not responsible.

         Before trial, Martindale and 8305 Broadway stipulated that Martindale was liable for a breach of the lease as it related to unpaid rents and owed 8305 Broadway $7, 875.25 in unpaid rent. They further stipulated the trial court would determine the amount of attorney's fees to be awarded to 8305 Broadway, if any, and both parties were permitted to submit evidence regarding the attorney's fees incurred and any defenses to the award of attorney's fees.

         After a bench trial, the trial court found Changing Surface breached its agreement with Martindale and awarded Martindale a total of $7, 229.00[4] in damages, consisting of: (1) $3, 065.52 in damages for the costs necessary to complete the renovations; (2) $3, 090.00 in loss of value of the contract based on Changing Surface's failure to complete the work in the timeline promised; and (3) $1, 573.48 in lost profits. Based on the parties' stipulation, the trial court awarded 8305 Broadway $7, 875.75[5] in damages which was then reduced by the $3, 000 security deposit 8305 Broadway seized. The trial court refused to award 8305 Broadway attorney's fees, making various findings of fact and conclusions of law in support of its refusal.

         Changing Surface's Appeal

         Changing Surface first contends the trial court erred in awarding Martindale $3, 090 for "loss of value." Changing Surface notes the $3, 090 award was based on the trial court's finding that Martindale was required to pay $3, 090 in rent between February 13, 2013, when it could begin sales under its liquor license, and March 18, 2013, when it was able to open for business. Changing Surface also contends the evidence is insufficient to support the trial court's award of lost profits.

          Three general damage measures exist for breach of contract claims: expectancy, reliance, and restitution. Chung v. Lee, 193 S.W.3d 729, 733 (Tex. App.-Dallas 2006, pet. denied); O'Farrill Avila v. Gonzalez, 974 S.W.2d 237, 247 (Tex. App.-San Antonio 1998, pet. denied). Expectancy damages award the benefit of a plaintiff's bargain, while reliance damages compensate for the plaintiff's out-of-pocket expenditures. Geis v. Colina Del Rio, LP, 362 S.W.3d 100, 112 (Tex. App.-San Antonio 2011, pet. denied). "Benefit of the bargain" damages "'serve to protect the promisee's 'expectation interest, ' or his interest in having the benefit of his bargain by being put in as good a position as he would have been had the contract or promise been performed.'" Transitional Entity LP v. Elder Care LP, No. 05-14-01615-CV, 2016 WL 3197160, at *6 (Tex. App.-Dallas May 27, 2016, no pet.) (mem. op.) (quoting Bechtel Corp. v. CITGO Products Pipeline Co., 271 S.W.3d 898, 927 (Tex. App.-Austin 2008, no pet.)). Lost profits is one example of expectancy damages because "benefit of the bargain" damages "'compensate[] for the profits that would have been made if the bargain had been performed as promised.'" Id. (quoting Formosa Plastics Corp. USA v. Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 55 (Tex. 1998)).

         In this case, Changing Surface does not challenge the trial court's award of reliance damages which awarded Martindale the out-of-pocket expenses it incurred in completing the renovations. Instead, Changing Surface contends the trial court could not award Martindale his ...


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