

Opinion issued July 29, 2010.

In The
Court of
Appeals
For The
First District
of Texas
————————————
NO. 01-09-00809-CV
———————————
Ashford Partners, Ltd., Appellant
V.
ECO
Resources, Inc.,
Appellee

 

 
On Appeal from the 400th District Court
Fort Bend County, Texas

Trial Court Case No. 03-DCV-133610
 

MEMORANDUM OPINION
This is a
suit for breach of a lease agreement.  TA/Sugar
Land-ECO, Ltd. (TASL) entered into a lease agreement with ECO Resources, Inc.
(ECO), a firm that provides water and wastewater treatment services to various
municipalities.  TASL agreed to build a
laboratory and office building to suit ECO’s needs, and ECO agreed to rent the
building for twenty-five years.  TASL
hired Terramark as the general contractor for the construction contract.  After ECO had moved into the building, TASL
assigned its interest in the lease to Ashford Partners, Ltd. (Ashford).  
When foundation problems appeared,
ECO contacted Ashford.  Ashford undertook
repair efforts and sued Terramark, the general contractor, for, among other things,
breach of its construction contract. 
Terramark joined ECO as a third-party defendant.  After Ashford brought a claim for declaratory
relief against ECO, ECO counterclaimed for breach of the lease.  
This appeal arises out the trial
court’s entry of judgment based on the jury findings in favor of ECO on its
counterclaim.  In seeking reversal,
Ashford contends that the trial court erred in entering judgment on the jury finding
that it failed to comply with the lease and in awarding ECO its attorney’s fees
because ECO and Ashford were not parties to the lease at the time of the breach.
 Ashford further contends that the trial
court erred in denying its motion for judgment notwithstanding the verdict
(jnov) because the evidence proves, as a matter of law, that ECO waived or is
estopped from pursuing its breach of contract claim.[1]  Finally, Ashford contends that the trial
court submitted an incorrect measure of damages to the jury.  We conclude that (1) an enforceable contract
existed between the parties at the time of the breach, (2) the trial court
correctly denied Ashford’s motion for jnov, and (3) the trial court submitted a
correct measure of damages.  We therefore
affirm.
Background
Lease terms
          The
lease contemplated that TASL would oversee construction of the building and
build out the interior according to space plans and specifications supplied by
ECO, referred to as “Tenant Finish Work.” 
These and other tasks were time-sensitive.  Exhibit D to the lease, entitled “Schedule of
Critical Dates,” set forth “critical dates relating to Lessor and Lessee’s
respective obligations with respect to construction of the Tenant Finish Work
for the Premises.”  
The schedule specified that the
Lessor is responsible for a November 1, 2001 “Estimated Completion Date.”  The significance of that date stemmed from
the fact that the lease would not come into effect until the building was
“substantially completed” and TASL had obtained a certificate of
occupancy.  The lease defined
“substantially completed” to mean that construction had been completed “in
accordance with the Plan subject only to completion of minor punch card items.”
Under the lease, TASL agreed to
notify ECO “in writing at least twenty (20) days in advance of the date that [TASL]
estimates construction of the Premises will be substantially completed in order
for [ECO] to plan and coordinate [its] move-in and occupancy of the premises .
. . .”  This provision was intended to
give ECO  time to install telephone lines,
computer cabling, and other utilities needed to operate its labs and offices
before furnishing the space.  
The lease gave TASL the
responsibility to determine when the building was “substantially completed,”
obtain certificates of occupancy, and notify ECO of those developments.  It declares: “[TASL] shall notify [ECO], in
writing, upon substantial completion of such improvements . . . .”  On September 28, 2001, ECO accepted the
building as “substantially completed,” and the lease term began on October 1,
2001.  
The notice of substantial
completion from TASL, in turn, triggered ECO’s contractual duty to “submit to [TASL]
a written punch list of items needing completion or correction.”  ECO submitted an eight-page punch list to
TASL on September 28, 2001.  ECO’s
actions gave effect to the following provision: 

Subject to the Lessor’s completion of such
punch list items, the taking of possession by [ECO] shall be deemed to
conclusively establish that the buildings and other improvements had been
completed in accordance with the Plans, that the Premises are in good and
satisfactory condition as of when possession was taken, and that Lessee has
accepted such buildings and other improvements. 

Among other tasks for completion,
the punch list submitted by ECO noted the need for caulking between the tilt
wall panels under grade.  Without that
caulking, water would flow underground between the tilt wall panels and under
the foundation.  
After timely receiving the punch
list from ECO, TASL was to “use reasonable efforts to complete such items
within thirty (30) days after the receipt of such notice. . . .”  On October 24, 2001, TASL transferred the
property and assigned its interest in the lease to Ashford.  
Deed of
trust assignment
Also in October, Ashford sent a letter
to ECO Resources entitled “Notice of Lease Assignment and Estoppel
Certificate,” which explained that it intended to assign its interest in the
lease by a deed of trust to the Lincoln National Life Insurance Company.  Ashford further declared that the “assignment
shall not impair or diminish any of [Ashford’s] obligations to [ECO] under the
Lease . . . .”  Following Ashford’s
agent’s signature comes a series of certifications, signed by both ECO and
Ashford’s guarantor, Southwest Water Company, including certifications that:
·       
Tenant is in possession and in full occupancy of the Premises . . . as of
September 28, 2001. . . .  Tenant has
accepted the Premises without exception, except for undisclosed defects, and
all requirements for the commencement and validity of the Lease, including
construction work, if any, required of the Landlord under the terms of the
Lease have been satisfied.
·       
The Lease contains all of the understandings and agreements between
Tenant and/or Guarantor and Landlord, and is in existence in full force and
effect, without modification, addition, extension, or renewal except as set
forth above.  
·       
There are no defaults or breaches under the Lease.
As of October 24, 2001, the date of
the lease assignment, TASL had not performed the task of caulking between the
tilt wall panels below grade, and Ashford did not undertake it either.  When ECO later observed cracking floors,
uneven and tilted floors, cracked walls, and other conditions related to
foundation problems, Ashford retained structural engineers to investigate.  In late 2003, those engineers discovered that
large amounts of water had migrated and become trapped under the building’s
foundation, which caused heaving and differential movement of the foundation
and exterior and interior walls. 
Ashford’s expert determined that the influx of water resulted from the
failure to caulk the tilt wall panels below grade, the same task ECO specified was
left to be done on the punch list.  
Discussion
I.       Breach of contract
          Ashford
challenges the determination that Ashford breached the lease by contending that
(1) ECO lacked standing to pursue its breach of contract claim against Ashford;
(2) no enforceable contract existed at the time of the breach as a matter of
law; and (3) the evidence is legally insufficient to support a finding that
Ashford breached the lease.  
          As
for Ashford’s standing challenge, we acknowledge that the question of whether a
party is entitled to sue on a contract is sometimes informally referred to as an
issue of standing.  Nevertheless, because
the issue does not affect the court’s jurisdiction, it is not truly one of
standing, but one on the merits of the contract claim itself.  See
Yasuda Fire & Marine Ins. Co. of Am. v. Criaco, 225 S.W.3d 894, 898 (Tex.
App.—Houston [14th Dist.] 2007,
no pet.) (citing, among other authorities, MCI
Telecomm. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650–54 (Tex.
1999)).  We therefore construe Ashford’s challenges
as a single challenge to the legal sufficiency of the evidence supporting the
jury finding that Ashford failed to comply with the lease. 
II.      Standard
of review
In reviewing Ashford’s challenge to
the verdict in favor of ECO, we may set aside that verdict as based on legally
insufficient evidence only if the evidence at trial would not enable reasonable
and fair-minded people to reach the verdict under review.  See City
of Keller, 168 S.W.3d at 827.  We review
the evidence in the light most favorable to the verdict, crediting evidence
that supports the judgment if reasonable jurors could and disregarding contrary
evidence unless reasonable jurors could not.  Id.;
see Ysleta Indep. Sch. Dist. v. Monarrez,
177 S.W.3d 915, 917 (Tex. 2005) (citing City
of Keller, 168 S.W.3d at 812).
We also review the trial court’s denial
of a motion for jnov under a legal sufficiency standard. See City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005); Whitney Nat’l Bank v. Baker, 122 S.W.3d
204, 207 (Tex. App.—Houston
[1st Dist.] 2003, no pet.).  When, as
here, a party does not submit an affirmative defense to the jury, we review the
record to determine whether the issue was disputed or whether the evidence
conclusively established the defense.  Baker, 122 S.W.3d at 207; see T.O. Stanley Boot Co. v. Bank of El Paso,
847 S.W.2d 218, 222–23 (Tex.1992) (holding that only disputed issues must be
submitted to jury). A motion for jnov should be granted when the moving party
has established each element of her defense so conclusively that reasonable
minds could not differ as to the truth of the controlling facts.  Baker,
122 S.W.3d at 207; see Brown v. Zimmerman,
160 S.W.3d 695, 702 (Tex. App.—Dallas
2005, no pet.).
III.     Contract interpretation
We construe a lease under the
well-established rules of contract construction.  See Luccia
v. Ross, 274 S.W.3d 140, 146 (Tex. App.—Houston [1st Dist.] 2008, pet. denied).  Our primary concern in interpreting a written
contract is to ascertain and to give effect to the parties’ intentions as
expressed in the document.  Seagull Energy E & P, Inc. v. Eland
Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Frost Nat’l Bank v. L&F Distribs., Ltd., 165 S.W.3d 310, 311–12
(Tex. 2005).  We consider the entire
writing and attempt to harmonize and to give effect to all of the provisions of
the contract by analyzing the provisions with reference to the whole agreement.
 Id.
at 312.  No single provision has controlling
effect.  J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).  “In harmonizing these provisions, terms stated
earlier in an agreement must be favored over subsequent terms.”  Coker v.
Coker, 650 S.W.2d 391, 393 (Tex. 1983). We construe contracts “from a
utilitarian standpoint bearing in mind the particular business activity sought
to be served” and “will avoid when possible and proper a construction which is
unreasonable, inequitable, and oppressive.”  Frost
Nat’l Bank, 165 S.W.3d at 312 (quoting Reilly
v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)).  If, after applying the pertinent rules of
construction, the contract can be given a definite or certain legal meaning, it
is unambiguous, and we construe it as a matter of law.  Id.  
          The
basis for the breach here was the failure to “cause the building to be
constructed in accordance with the Plans.” 
As Ashford observes, a breach of contract action accrues at the time of
the breach.  See Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002).  Ashford asserts that the breach occurred when
the building was constructed, which occurred before it acquired the lessor’s
rights under the assignment.  ECO, on the
other hand, points to the lessor’s obligation to complete the construction or
repair of the items on the punch list that ECO submitted to TASL.  The trial court’s judgment reflects the
adoption of ECO’s position, under which the lessor could not have failed to
comply with its obligation to use reasonable efforts to complete the itemized
repairs until, at the earliest, thirty days after ECO submitted the punch list—that is, October 28, 2001, six days after
Ashford became TASL’s successor-in-interest. 

          We
agree with the trial court.  The
construction Ashford advances would be correct under the facts only if the
lessor’s construction oversight duties ended when construction was
“substantially completed” and did not include the duty—arising after substantial completion—to “use reasonable efforts” to complete the
construction or repair of the items that ECO identified on the punch list
within thirty days of its submission.  “We
cannot adopt a construction that renders any portion of a [contract]
meaningless, useless, or inexplicable.”  Evanston Ins. Co. v. ATOFINA Petrochems.,
Inc., 256 S.W.3d 660, 669 n.27 (Tex. 2008); see Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462,
464 (Tex. 1998); Balandran v. Safeco Ins.
Co. of Am., 972 S.W.2d 738, 741 (Tex.1998). 
The “completion of . . . punch list items” is a construction-related
duty[2] that, under the contract’s
plain language, existed and had not yet been breached on the date TASL assigned
the lease to Ashford.  We therefore hold
that the evidence is legally sufficient to support the jury’s finding.
IV.     Ashford’s affirmative defenses
Ashford next contends that ECO
waived its breach of lease claim, or, alternatively, is estopped from pursuing
it.  
A.      Preservation of error
Before examining Ashford’s waiver
and estoppel contentions on their merits, we first consider ECO’s claim that
Ashford failed to preserve error on its affirmative defenses.  To preserve a complaint for appellate review,
a party must first present the issue to the trial court.  Tex.
R. App. P. 33.1(a).  The party
must show that (1) the complaint was made to the trial court by a timely
request, objection, or motion and (2) the trial court ruled on or refused to
rule on the request, objection, or motion. 
Id.  Accordingly, we address Ashford’s
legal-sufficiency complaints concerning its affirmative defenses only if it first
raised those complaints in (1) moving for a directed verdict; (2) objecting
to the submission of the jury question on breach of contract or tendering
substantially correct jury questions or instructions on its affirmative
defenses; (3) moving for judgment notwithstanding the verdict; (4) moving
to disregard the jury’s answer to a vital fact issue; or (5) moving for new
trial.  See Cecil v. Smith, 804 S.W.2d 509, 510–11 (Tex. 1991); Aero Energy, Inc. v. Circle C Drilling Co.,
699 S.W.2d 821, 822 (Tex. 1985); UPS,
Inc. v. Tasdemiroglu, 25 S.W.3d 914, 916 (Tex. App.—Houston [14th Dist.]
2000, pet. denied).  
In its motion to disregard jury
findings, or alternatively, for jnov, Ashford contended that ECO waived its
breach claim by taking possession of the premises under the lease, pointing to
the portion of section 1(A) that declares “the taking of possession by Lessee
shall be deemed to conclusively establish that the buildings and other
improvements have been completed in accordance with the Plans . . . .”  Ashford also raised the estoppel ground,
pointing to ECO’s acknowledgment that “all requirements for the commencement
and validity of the Lease, including all construction work, if any, required of
the Landlord under the terms of the Lease have been satisfied.”  We hold that, to the extent Ashford’s waiver
and estoppel complaints conform to the jnov grounds it urged in the trial
court, Ashford’s motion sufficiently preserved them for appeal.[3]
          B.      Proof
of waiver and estoppel
          The
Texas Supreme Court concisely set forth the definitions and elements of both
waiver and estoppel in Ulico Casualty Co.
v. Allied Pilots Association, 262 S.W.3d 773 (Tex. 2008), declaring that
the doctrines of waiver and estoppel are
frequently referenced together, but they are different.  Waiver is the intentional
relinquishment of a right actually known, or intentional conduct inconsistent
with claiming that right.  The elements
of waiver include (1) an existing right, benefit, or advantage held by a party;
(2) the party’s actual knowledge of its existence; and (3) the party’s actual
intent to relinquish the right, or intentional conduct inconsistent with the
right.  Estoppel, on the other hand, generally
prevents one party from misleading another to the other’s detriment or to the
misleading party’s own benefit.  
Id. at 778
(citations omitted).  “The doctrine of
equitable estoppel requires: (1) a false representation or concealment of
material facts; (2) made with knowledge, actual or constructive, of those
facts; (3) with the intention that it should be acted on; (4) to a party
without knowledge or means of obtaining knowledge of the facts; (5) who
detrimentally relies on the representations.” 
Ulio Cas. Co., 262 S.W.3d at
778 (quoting Johnson & Higgins of
Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515–16 (Tex. 1998)
(internal quotations omitted)).  
We first address Ashford’s argument
that ECO waived its breach claim by taking possession of the premises under the
lease.  In relying on section 1(A) of the
lease, Ashford omits to mention the very language that precludes any finding of
waiver based on that term.  The complete
sentence Ashford relies on reads: “Subject
to the Lessor’s completion of such punch list items, the taking of
possession by [ECO] shall be deemed to conclusively establish that the
buildings and other improvements had been completed in accordance with the
Plans.”  (emphasis added). The taking of
possession, therefore, deemed completion in accordance with the Plans except for items specified on the punch
list.  The jury findings stand
exclusively on Ashford’s failure to cause completion of a punch list item.  The plain language of the lease renders
Ashford’s position untenable.
          Ashford’s
position on the estoppel certificate language it selectively quotes is equally
unmeritorious.  Under that provision, ECO
certified: “all requirements for the commencement and validity of the Lease, including construction work, if any,
required of the Landlord under the terms of the Lease have been satisfied.”  Under a reasonable interpretation of the
lease, “construction work . . . required of the Landlord under the terms of the
Lease” includes the punch list items. 
Consequently, we hold that the trial court correctly denied Ashford’s
motion for jnov.  Further, because the
trial court properly rendered judgment in favor of ECO on its breach of
contract claim, the trial court correctly awarded ECO its attorney’s fees.  
IV.     Measure of damages
          Ashford
next contends that the trial court submitted an incorrect measure of damages to
the jury.  The trial court charged the
jury:
What sum of money, if any, if paid now in
cash would fairly and reasonably compensate ECO Resources for the damages, if
any, that resulted from Ashford’s failure to comply with the Lease?
Consider the following elements of damages,
if any, and none other:
The difference, if any, between the rent
required under the Lease and the rental value of the Leased Space in its actual
condition.
Ashford asserts that the trial court should have
submitted ECO’s damages claim under the measure applicable to defective
construction claims—“the
reasonable cost of remedying the defects when, as here, they can be remedied
without impairing the building as a whole.” 

We disagree.  “In a suit for damages on account of the
breach of an agreement for the rental of real estate the usual measure of the
damages recoverable is the difference between the agreed rental and the
reasonable cash market value of the leasehold.” 
Rainwater v. McGrew, 181
S.W.2d 103, 105–06 (Tex. Civ. App.—Waco 1944, writ ref’d w.o.m.) (citing, among
other cases, Graves v. Brownson, 120
S.W. 560 (Tex. Civ. App. 1909, writ ref’d)). 
Like the construction defect theory of recovery, the cases Ashford
relies on are inapposite.  The cases Ashford
cites involve contracts between builders and property owners, not lessor and
lessees.  See, e.g., Samuel v. KTVU P’ship, No. 08-02-00010-CV, 2003 WL 22405384,
at *1 (Tex. App.—El Paso
Oct. 22, 2003, pet. denied) (mem. op.) (“Texas courts have recognized that the
proper measure of damages when the injury
to realty is repairable is the reasonable cost of repairs necessary to
restore the property to its prior condition.” (emphasis added)).  The nature of the problem that underlies the
breach does not change the nature of the parties’ contractual
relationship.  Here, the cost of property
repair would inure to the benefit of lessor Ashford—it would not compensate lessee ECO for the
difference between the condition of the leased premises as promised and their
actual value during the lease term.  The
market value measure, in contrast, accounts for that difference.  See,
e.g., Mays v. Pierce, 203 S.W.3d 564, 577 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) (“The
normal measure of damages in a breach of contract case is the benefit of the
bargain, the purpose of which is to restore the injured party to the economic
position it would have been in had the contract been performed.”).  Accordingly, we conclude that ECO was
entitled to have the trial court submit that measure of damages.


 
Conclusion
          We
hold that the trial court correctly entered judgment on the jury finding that
Ashford failed to comply with the lease because the evidence and the language
of the lease support that finding, and Ashford failed to show that it was
entitled to its waiver or estoppel affirmative defense as a matter of law.  For the same reasons, the trial court correctly
awarded ECO its attorney’s fees on its breach of contract claim.  We further hold that the evidence and the law
support the measure of damages submitted to the jury.  We therefore affirm the judgment of the trial
court.
 
                                                                   Jane
Bland
                                                                   Justice

 
Panel
consists of Chief Justice Radack and Justices Bland and Sharp.
 




[1]           Ashford
also contends ECO cannot recover from Ashford because ECO lacked privity of
estate with Ashford.  We do not address
this issue because neither ECO’s live pleadings nor the trial court’s judgment
refer to a claim or ground of recovery under that theory.


[2]
          See, e.g.,
Tennessee Gas Pipeline Co. v. Technip USA Corp., No. 01-06-00535-CV, 2008
WL 3876141. at *2 (Tex. App.—Houston [1st Dist.] Aug. 21, 2008, pet. denied)
(mem. op.) (concluding that notice of failure “to remedy past punch list items
and other construction defect items” was given too late to come within time
period applicable to notice of defects for warranty coverage); Coastal Chem, Inc. v. Brown, 35 S.W.3d
90, 94–95 (Tex. App.—Houston [14th Dist.], 2000, pet. denied) (interpreting
contract that defines “substantially complete” as “occur[ing] when the plant,
unit or facility has been erected in accordance with the Contract and
applicable codes and all work necessary for safe start-up has been completed,
excluding non-essential punch list work such as painting, insulation and
incidental construction, and pre-commissioning activities have been completed .
. . .”); Sw. Progressive Enters., Inc. v.
R. L. Harkins, Inc., No. 08-00-00294-CV, 2002 WL 358830, at *5 (Tex. App.
—El Paso Mar. 7, 2002, no pet.) (mem. op.) (“A punch list is a document created
in connection with a walk-through by the owner or architect and
contractor.  The punch list may include
clean up and touch up work, as well as work that is unacceptable in quality to
the owner, contractor, or architect.”).  


[3]
          ECO also suggests that the language in Ashford’s
pleadings limits the assertion of its waiver and estoppel defenses, but ECO
waived any complaint about the limitations of that language when it responded
in full to Ashford’s waiver and estoppel complaints in its motion to disregard
jury findings and for jnov.  See Roark v. Stallworth Oil & Gas, Inc.,
813 S.W.2d 492, 495 (Tex. 1991) (holding that party who allows issue to be
tried by consent cannot later raise pleading deficiency for first time on
appeal) (citing Tex. R. Civ. P.
67, 90).


