Opinion issued December 22, 2015




                                    In The

                             Court of Appeals
                                    For The

                         First District of Texas
                           ————————————
                             NO. 01-14-00764-CV
                          ———————————
          MAGNOLIA FINLAY & ANDREW FINLAY, Appellants
                                       V.
                     ELIZABETH BLANTON, Appellee


            On Appeal from the County Civil Court at Law No. 1
                          Harris County, Texas
                      Trial Court Case No. 1047130


                         MEMORANDUM OPINION

      This lawsuit involves a dispute between parties to a residential lease. The

trial court entered a take-nothing judgment in landlord’s favor on the tenants’

claim that landlord did not return the tenants’ security deposit or provide an

accounting of deductions from deposit within 30 days of the tenants vacating the
premises. We reverse and render in part, and remand to the trial court for further

proceedings.

                                BACKGROUND

      On March 28, 2012, plaintiffs-appellants Magnolia Finlay and Andrew

Finlay entered into a one-year residential lease to rent a house on Hadrian Drive

from defendant-appellee Elizabeth Blanton.

A.    Justice Court Proceedings

      On May 5, 2014, the Finlays filed suit against Blanton in Justice Court

alleging that they paid a $1,500 security deposit, and that Blanton “did not return

the security deposit or made improper deductions to the security deposit.” As

damages, the Finlays sought the return of their deposit and, pursuant to section

92.109 of the Texas Property Code, $100.00 as a penalty, three times the

wrongfully withheld $1,500.00 security deposit, and court costs.

      Blanton filed an answer outlining the various ways that the Finlays allegedly

failed to comply with their lease obligations and contending that she was actually

owed $9,975 from the Finlays for late rent payment fees and other breaches. The

correspondence attached revealed the crux of the parties’ dispute in large part

centered around the Finlays mailing their rent check to Blanton in California three

times, instead of depositing the funds directly to Blanton’s bank account.




                                         2
      On March 24, 2014, the Justice Court entered judgment in the Finlays’

favor, awarding them $4,600.00 plus court costs. Blanton’s motion for new trial

was denied, with the court’s handwritten notation that Blanton had violated her

statutory duty to timely provide a written notice of deductions from the Finlays’

security deposit, thereby forfeiting her right to retain the deposit. Blanton appealed

to County Court.

B.    County Court Proceedings

      In the County Court proceedings, Blanton pleaded the following affirmative

defenses to the Finlay’s section 92.109 claims: (1) “Plaintiffs’ own acts or

omissions proximately caused or contributed to Plaintiffs’ injuries, if any,” (2)

“failure to mitigate damages,” (3) “unclean hands,” (4) “Defendant acted in good

faith at all times in retaining Plaintiffs’ security deposit for late charges in an

amount in excess of the deposit resulting from Plaintiffs’ intentional and willful

failure to adhere to the terms of the Lease Agreement,” and (5) “entitlement to

credits and offsets to any damages.”

      On August 12, 2014, the County Court ordered that the Finlays take nothing

against Blanton, and that Blanton take nothing against the Finlays. The Finlays

appealed here. Blanton did not appeal the trial court’s take-nothing judgment on

her counterclaim.




                                          3
                             ISSUES ON APPEAL

        The Finlays raise the following five issues in their appeal:

“ISSUE 1: Whether the trial court clearly abused its discretion misapplying
          Texas Property Code § 192.103 and 192.109, in a manner so
          arbitrary, subjective, unreasonable, or based on so gross and
          prejudicial an error of law under unfunded, untrue and
          inapplicable allegations to justify the landlord keeping the
          security deposit by:

            A. Allowing Blanton to calculate her 20-day vacation time, as 22–day
               late rent payment fees, on the basis that the check was in her
               mailbox, not deposited into her checking account, although rent
               payment was early, and the lease agreement states her physical
               address, as a second place of payment?

            B. Allowing Blanton to justify being an amateur landlord for failing
               to return the deposit and to furnish the required written itemization
               within 30 days after the property had been properly surrendered?

            C. Allowing Blanton to rebut bad faith without evidence presented to
               do so. Blanton did not suffer damages for not having the money
               deposited into her account at that particular time?”
“ISSUE 2: Whether the trial court failed to consider Plaintiff’s claims
          regarding Defendant’s violation of Tex. Prop. Code Ann. §
          92.052?”

“ISSUE 3: Blanton committed perjury by lying in trial and forgery by
          altering the contract.”

“ISSUE 4: Judicial Bias and Fraud. The trial court abused its discretion by
          excluding several Finlay’s Exhibits, as hearsay, and by not
          allowing (discriminating) Mr. Finlay to object it because of his
          slow speech due to his health condition. The Court Reporter
          missing key evidence, and dialogues.”

“ISSUE 5: Errors in the Lease Agreement and Breach of Contract
          Automatically Debunking Blanton’s claims.”
      Blanton raises the following “response to appellants’ issues presented”:
                                         4
      1.     “The trial court did not err in entering a take nothing judgment.”

      2.     “The trial court did not err in excluding inadmissible evidence and
             testimony.”

      3.     “Appellants did not raise the issues of untimely repairs, forgery, or
             errors in the lease in the trial court; therefore, these issues are
             improper on appeal.”

                               APPLICABLE LAW

      The Texas Property Code provides that a landlord is generally obligated to

refund a tenant’s security deposit within 30 days of the tenant vacating the

premises, with statutorily prescribed penalties for failure to do so:

      § 92.103. Obligation to Refund

       (a)   Except as provided by Section 92.107 [obligating tenant to
             provide forwarding address], the landlord shall refund a
             security deposit to the tenant on or before the 30th day after the
             date the tenant surrenders the premises.

      (b)    A requirement that a tenant give advance notice of surrender as
             a condition for refunding the security deposit is effective only if
             the requirement is underlined or is printed in conspicuous bold
             print in the lease.

      (c)    The tenant’s claim to the security deposit takes priority over the
             claim of any creditor of the landlord, including a trustee in
             bankruptcy.
TEX. PROP. CODE ANN. § 92.103 (West 2014).

      § 92.104. Retention of Security Deposit; Accounting

       (a)   Before returning a security deposit, the landlord may deduct
             from the deposit damages and charges for which the tenant is
             legally liable under the lease or as a result of breaching the
             lease.

                                           5
     (b)    The landlord may not retain any portion of a security deposit to
            cover normal wear and tear.

     (c)    If the landlord retains all or part of a security deposit under this
            section, the landlord shall give to the tenant the balance of the
            security deposit, if any, together with a written description and
            itemized list of all deductions. The landlord is not required to
            give the tenant a description and itemized list of deductions if:
            (1)   the tenant owes rent when he surrenders possession of the
                  premises; and

            (2)   there is no controversy concerning the amount of rent
                  owed.
TEX. PROP. CODE ANN. § 92.104 (West 2014).

     § 92.109. Liability of Landlord

      (a)   A landlord who in bad faith retains a security deposit in
            violation of this subchapter is liable for an amount equal to the
            sum of $100, three times the portion of the deposit wrongfully
            withheld, and the tenant’s reasonable attorney’s fees in a suit to
            recover the deposit.
     (b)    A landlord who in bad faith does not provide a written
            description and itemized list of damages and charges in
            violation of this subchapter:

            (1)   forfeits the right to withhold any portion of the security
                  deposit or to bring suit against the tenant for damages to
                  the premises; and

            (2)   is liable for the tenant’s reasonable attorney’s fees in a
                  suit to recover the deposit.

     (c)    In an action brought by a tenant under this subchapter, the
            landlord has the burden of proving that the retention of any
            portion of the security deposit was reasonable.

     (d)    A landlord who fails either to return a security deposit or to
            provide a written description and itemization of deductions on

                                          6
             or before the 30th day after the date the tenant surrenders
             possession is presumed to have acted in bad faith.

TEX. PROP. CODE ANN. § 92.109 (West 2014).

       “A tenant may establish a prima facie case of bad faith by showing that the

landlord failed to refund the deposit within 30 days or that it failed to provide the

itemized list of deductions within 30 days.” Hardy v. 11702 Memorial, Ltd, 176

S.W.3d 266, 271 (Tex. App.—Houston [1st Dist.] 2004, no pet.) (citing Wilson v.

O’Connor, 555 S.W.2d 776, 780–81 (Tex. Civ. App.—Dallas 1977, writ dism’d)).

Bad faith implies an intention to deprive the tenant of a lawfully due refund. Id.

“To defeat the presumption, the landlord must prove his good faith, i.e., ‘honesty

in fact in the conduct or transaction concerned.’” Id. (citing Wilson, 176 S.W.2d at

780–81). Absent rebutting evidence, the presumption that the landlord acted in bad

faith by failing to return the deposit or provide a written description and

itemization of deductions within 30 days after surrender compels a finding of bad

faith. Id.

                           STANDARD OF REVIEW

       Although couched in numerous subparts, the Finlays’ first issue rests upon

the two questions, i.e., (1) whether Blanton carried her burden of rebutting the

presumption of bad faith in retaining the Finlays’ security deposit without

providing a timely accounting of deductions, and (2) whether the Blanton carried

her burden of demonstrating that the retention of the Finlays security deposit was

                                         7
reasonable. By rendering a take-nothing judgment against the Finlays, the trial

court implicitly found that Blanton rebutted the presumption of bad faith and that

the Blanton proved that retention of the deposit was reasonable. The Finlays argue

that these findings are “against the great weight and preponderance of the

evidence, and is clearly wrong and unjust.” Their prayer requests that we reverse

and render judgment in their favor. Interpreting this as a challenge to the legal and

factual sufficiency of the evidence, we accordingly analyze whether the trial

court’s implied findings are supported under both standards.

      When the trial court acts as a fact-finder, we review its findings under the

legal and factual sufficiency standards. In re Doe, 19 S.W.3d 249, 253 (Tex.

2000); Vongontard v. Tippit, 137 S.W.3d 109, 112 (Tex. App.—Houston [1st

Dist.] 2004, no pet.). When, as here, a party who does not have the burden of

proof at trial challenges the legal sufficiency of the evidence, we consider all of the

evidence in the light most favorable to the prevailing party, indulging every

reasonable inference in that party’s favor and disregarding contrary evidence

unless a reasonable fact-finder could not. City of Keller v. Wilson, 168 S.W.3d

802, 827 (Tex. 2005); City of Houston v. Hildebrandt, 265 S.W.3d 22, 27 (Tex.

App.—Houston [1st Dist.] 2008, pet. denied) (citing Assoc. Indem. Corp. v. CAT

Contracting, Inc., 964 S.W.2d 276, 285–86 (Tex. 1998)). “If there is any evidence

of probative force to support the finding, i.e., more than a mere scintilla, we will


                                          8
overrule the issue.” Hildebrandt, 265 S.W.3d at 27 (citing Haggar Clothing Co.

v. Hernandez, 164 S.W.3d 386, 388 (Tex. 2005)).

      In reviewing a factual sufficiency challenge, we examine the entire record

and consider and weigh all the evidence, both in support of, and contrary to, the

challenged finding. See Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996);

Vongontard, 137 S.W.3d at 112. Having considered and weighed all the evidence,

we should set aside the verdict only if the evidence is so weak, or the finding is so

against the great weight and preponderance of the evidence, that it is clearly wrong

and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We cannot merely

substitute our opinion for that of the trier of fact and determine that we would

reach a different conclusion. Hollander v. Capon, 853 S.W.2d 723, 726 (Tex.

App.—Houston [1st Dist.] 1993, writ denied).

                                        EVIDENCE1

      In addition to the admission of several trial exhibits, three witnesses testified

at trial: (1) plaintiff Mrs. Finlay, (2) defendant Ms. Blanton, and (3) Blanton’s

attorney (as to his attorney’s fees).




1
      “The Finlays filed an appendix to their brief containing exhibits that they
      acknowledge are not in the record, and they “pray that this Court consider th[is]
      sworn evidence.” We do not, however, “consider documents attached to an
      appellate brief that do not appear in the record.” Till v. Thomas, 10 S.W.3d 730,
      733 (Tex. App.—Houston [1st Dist.] 1999, no pet.).

                                            9
A.    The Lease

      The parties’ lease, which was introduced at trial, was executed on March 23,

2012 and provides a term from March 28, 2012 through March 30, 2013. The

lease provides that monthly rent of $1,500.00 will be paid “so that the Landlord

receives the monthly rent on or before . . . the first day of each month during this

lease.”

      Under “Place of Payment,” there is a typed physical address listed for

Blanton in San Diego, California, as well as bank name handwritten beside it,

“USAA Federal Savings Bank,” with routing and account number.2                     Under

“Method of Payment,” there is a handwritten notation stating “see above,” with an

arrow pointing to the the previous section.

      The “Late Charges” section of the lease provides that if “Landlord does not

actually receive a rent payment in the full amount at the designated place of

payment by the 1st day of each month at 11:59pm, Tenant will pay Landlord for

each late payment (1) an initial late charge equal to . . . $50, and (2) additional late

charges of $25 per day thereafter until rent and late charges are paid in full.”

      Section 10 of the lease sets forth terms related to the security deposit, and its

payment and return:

2
      There is email correspondence between the Finlays and Blanton’s relator
      indicating that the handwritten bank account information was added after the lease
      was signed because Blanton wanted “to keep her banking information private until
      [she had] the deposit in hand.”
                                          10
SECURITY DEPOSIT:
A.      Security Deposit: On or before execution of this lease, Tenant
        will pay a security deposit to Landlord in the amount of $
        1.500.00. “Security deposit” has the meaning assigned to that
        term in §92.102, Property Code.
B.      Interest: No interest or income will be paid to Tenant on the
        security deposit. Landlord may place the security deposit in an
        interest-bearing or income-producing account and any interest
        or income earned will be paid to Landlord or Landlord’s
        representative.
C.      Refund: Tenant must give Landlord at least thirty (30) days
        written notice of surrender before Landlord is obligated to
        refund or account for the security deposit.
Notices about Security Deposits:
     (1) §92.108, Property Code provides that a tenant may not withhold
          payment of any portion of the last month’s rent on grounds that the
          security deposit is security for unpaid rent.
     (2) Bad Faith violations of §92.108 may subject a tenant to liability up
         to 3 times the rent wrongfully withheld and the landlord’s
         reasonable attorney’s fees.
     (3) The Property Code does not obligate a landlord to return or account
         for the security deposit until the tenant surrenders the Property and
         gives the landlord a written statement of the tenant’s forwarding
         address, after which the landlord has 30 days in which to account.
        ....

D.      Deductions

     (1) Landlord may deduct reasonable charges from the security deposit
         for:
        (a) damages to the Property, excluding normal wear and tear, and all
            reasonable costs associated to repair the Property;
        (b) costs for which Tenant is responsible to clean, deodorize,
           exterminate, and maintain the Property;
        (c) unpaid or accelerated rent;

                                    11
             (d) unpaid late charges;
             (e) unpaid utilities and utility expenses Landlord incurs to maintain
                utilities to the Property as required by this Lease;
             (f) unpaid pet charges;
             (g) replacing unreturned keys, garage door openers, security devices,
                or other components;
             (h) the removal of unauthorized locks or fixtures installed by Tenant;
             (i) Landlord’s cost to access the Property if made inaccessible by
                 Tenant;
             (j) missing or burned-out light bulbs and fluorescent tubes (at the
                 same location and of the same type and quality that are in the
                 Property on the Commencement Date);
             (k) packing, removing, and storing abandoned property;
             (I) removing abandoned or illegally parked vehicles;
             (m) costs of reletting (as defined in Paragraph 27), if Tenant is in
                default;
             (n) attorney’s fees, costs of court, costs of service, and other
                reasonable costs incurred in any legal proceeding against Tenant;
             (o) mailing costs associated with sending notices to Tenant for any
                violations of this lease;
             (p) any other unpaid charges or fees or other items for which Tenant is
                responsible under this lease; and
             (q) cost to restore walls, flooring, landscaping or any alteration to the
                Property not approved in writing by Landlord.
      (2)    If deductions exceed the security deposit, Tenant will pay to Landlord
            the excess within 10 days after Landlord makes written demand.

      The lease contains a “Default” section providing that “If Landlord fails to

comply with this lease, Tenant may seek any relief provided by law.” The default

section also grants permission to the Landlord to terminate the lease and accelerate

unpaid rents, as well as seek damages for repairs and reletting. The Finlays moved


                                         12
out on June 18, 2013, after Blanton gave them notice that they needed to pay

accrued late payment fees or move out.

      Six days before the Finlays moved out, they provided their forwarding

address by email and requested their security deposit be returned. Twelve days

after they moved out, they sent Blanton a certified letter again requesting return of

their deposit. That letter cited section 92.109 of the Texas Property Code and

informed Blanton that the Finlays would be seeking penalties under that section

equivalent to three times the amount of the security deposit if they did not timely

receive a return of their deposit or an itemized list of deductions Blanton was

retaining. It is undisputed that Blanton did not return the Finlays’ security deposit

or provide an itemized accounting detailing reasons for withholding funds.

      B.     Plaintiffs’ Testimony

      Mrs. Finlay testified that she and her husband insisted that there be a lease

clause permitting deposits into a bank account rather than mailing a check. After

Blanton provided information for an account with USAA, Mrs. Finlay requested

that Blanton instead open an account with Houston branches, such as Bank of

America.

      Mrs. Finlay testified that she understood from the terms of the lease that they

had agreed to pay the rent each month into Blanton’s account at USAA Federal

Savings Bank. She testified that the Finlays made their first month’s rent payment


                                         13
(April 2012) timely into the USAA account from their Bank of America account,

but had to pay fees to Bank of America. The second and third months (May &

June 2012), they mailed a check to Blanton’s San Diego address, as they

understood that to be an acceptable secondary method of payment under the lease.

      In the meantime, the parties continued to correspond about bank accounts.

The Finlays again requested that Blanton open a bank account with Bank of

America so that they could make a local Houston deposit. Several email chains

related to this issue were entered into evidence, in which the Finlays complained

that they had trouble transferring money from Bank of America to Blanton’s

USAA account and again reiterating their unwillingness to incur bank transfer fees.

The Finlays informed Blanton that if she was unwilling to come up with a solution,

they would continue to mail their rent, rather than directly deposit it.

      In June, 2012, Mrs. Finlay requested that Blanton open a Wells Fargo

checking account to receive the Finlays’ rent payments

      The record contains a July 13, 2012 email from Blanton providing her Wells

Fargo bank account number and stating that she would send a lease addendum

stating that the Finlays can pay their rent into her Wells Fargo account on or before

the 1st of each month beginning in August to “avoid late charges and default

issues.” Mrs. Finlay stated that the parties signed the addendum permitting the

Finlays to use a Wells Fargo account as the designated payment location, although


                                          14
there is not a copy in the trial court record. With the exception of October 2012,

the Finlays’ rent payments from August 2012 through June 2013 were made

through deposit into Blanton’s Wells Fargo account.

      Mrs. Finlay testified that the Finlays paid the rent late one time—in February

2013— because “there was apparently a discrepancy between payments with —

our bank.” Although she arranged to pay the rent on time that month, it was

received by Blanton three days late, so the Finlays “decided to pay the hundred-

dollar late fee” for that incident. She did not believe that any other valid late

charge was ever incurred under the lease.

      C.     Defendant’s Testimony

      Blanton testified that she is an amateur lessor who has never been a landlord

before. When she bought the Hadrian Drive property in 2010, she was not aware

of the Texas Property Code provision requiring that a detailed itemized deduction

list be provided explaining deductions from a tenant’s security deposit.

      Blanton spends a lot of time out of the country, so when Mrs. Finlay told her

that she would start mailing checks to Blanton’s address if Blanton would not open

a Bank of America account, Blanton gave the Finlays account information for an

LLC bank account at Wells Fargo and sent them a lease addendum permitting rent

to be paid at Wells Fargo. Blanton testified that the addendum was never returned

to her signed by the Finlays, despite email reminders. Blanton testified that at one


                                         15
time she began eviction proceedings, but abandoned them after realizing that

would adversely impact the Finlays’ credit score.

         Blanton also testified that she regularly sent emails to the Finlays regarding

the amounts that she believed they owed in late fees under the lease. Pursuant to

the lease, Blanton applied the Finlays’ payments first to late fees ($50 for first late

day, and $25 for each day thereafter) and then to rent, such that the Finlays were

never caught up. She calculated that, because of unpaid late fees, the Finlays owed

$9,416.66 in unpaid rent when they moved out, calculated as follows:

                     Initial   Other Late                         Balance
Month       Rent      Late     Fees (#days    Credits     Amount Forward Payment
             Due      Fee        x $25)                    Paid    Owed   Location
 Apr.       $1,500        $0            $0          $0     $1,500      $0 Realtor
 2012
 May        $1,500       $0             $0       -$150     $1,350        $0    USAA
 2012                                         cleaning
                                                 credit
 June       $1,500      $50 28x$25=$700                    $1,500      $750    Mailed
 2012
 July       $1,500      $50 29x$25=$725                    $1,500    $1,525    Mailed
 2012
 Aug.       $1,500      $50 29x$25=$725                    $1,500    $2,300    Wells
 2012                                                                          Fargo
 Sept.      $1,500      $50 28x$25=$700                    $1,500    $3,050    Wells
 2012                                                                          Fargo
 Oct.       $1,500      $50 29x$25=$725                    $1,500    $3,825    Wells
 2012                                                                          Fargo
 Nov.       $1,500      $50 28x$25=$700                    $1,500    $4,575    Wells
 2012                                                                          Fargo
 Dec.       $1,500      $50 29x$25=$725                    $1,500    $5,350    Wells
 2012                                                                          Fargo
 Jan.       $1,500      $50 29x$25=$725                    $1,500    $6,125    Wells
 2013                                                                          Fargo


                                             16
 Feb.       $1,500      $50 26x$25=$650           -$100      $1,600     $6,725   Wells
 2013                                           late fee                         Fargo
                                                    paid
 Mar.       $1,500      $50 29x$25=$725                      $1,500     $7,500   Wells
 2013                                                                            Fargo
 Apr.       $1,500      $50 28x$25=$700                      $1,550     $8,200   Wells
 2013                                                                            Fargo
 May        $1,500      $50 29x$25=$725                      $1,550     $8,925   Wells
 2013                                                                            Fargo
 June       $1,500      $50 19x$25=$475                    $1,033.34 $9,416.66   Wells
 2013                                                                            Fargo


        The monthly late fees stem from Blanton’s position that the payments were

not received at the “designated payment location” in June and July 2012. Then, for

each subsequent month, Blanton applied rent checks first to the accrued late fees,

resulting in additional late fees for the portions of the $1,500 payments that were

not applied to rent.

        The chart above was entered into evidence and Blanton testified that it “is a

fair and accurate itemization.” The calculations differ, however, from some of

Blanton’s email correspondence.3


        3
              For example, on June 17, 2012, Blanton wrote an email to Mrs. Finlay
indicating that she had June’s rent in hand at least by June 17, 2012, and that she would
not charge a late fee for June, but would on future mailed checks:

        I have been out of the country and per my instructions, the USPS held my
        mail during my absence. To my dismay, when I returned home I found
        your check in my on-hold mail instead of my USAA account for automatic
        payment of bills.
        Therefore, your June payment was late according to the Residential Lease
        (page 2, 5 A & C), which you signed. This is the last time I will allow a
        deviation.
                                           17
      Blanton testified that she was not claiming any deductions from the Finlays’

security deposit for damages to the house, only for accrued late charges that

resulted in unpaid rent because she applied each rent payment first to late charges.

Blanton testified to her belief that she “gave fair notice to the Finlays during the

course of the lease that they were incurring late charges” and that she did not act

“purposely, willfully or intentionally to cause the Finlays harm” or to harass them

in failing to provide an accounting of deductions from their security deposit.

      Blanton’s attorney also provided testimony that she incurred $5,057.96 in

reasonable and necessary attorneys’ fees.

A.    Sufficiency of the Evidence

      Blanton does not dispute that the bad-faith presumption in section 92.109 of



      Late charges will apply from now on as stipulated in the Residential Lease.

               In a July 21, 2012 email to the Finlays, Blanton states, with regard to the
June and July 2012 rent checks mailed to her house, “I had every legal right to charge late
fees for all the days your payment was not in my USAA account, but I chose to simply
remind you of your signed agreement.”

              In July 2012, the Finlays gave notice to Blanton that they would be out of
the country in October, so they would be mailing their rent to Blanton on October 1, 2012
rather than depositing it at Wells Fargo. On October 24, 2012, Blanton wrote Mrs. Finlay
an email stating that she was out of town on the first of October and was charging the
Finlays 23 days of late fees for October, because that is how long it took her to return
home, receive the check, and put it in the bank.

       The information in these emails is at odds with the chart entered into evidence,
which indicates Blanton assessed the Finlays late charges for 29 and 30 days in June and
July, and that October 2012 rent was deposited in Wells Fargo (rather than received in the
mail), and assessed a 30-day late fee.
                                            18
the Texas Property Code applies here. But she argues that the trial court properly

found that she rebutted the presumption of bad faith in retaining the Finlays’

security deposit and failing to provide an accounting because (1) “she had reason

to believe she was entitled to retain [the] security deposit to recover reasonable

damages,” (2) she “is an amateur lessor—because the residence is her only rental

property—and the landlord has no knowledge of the requirement to submit an

itemized list of deductions,” and (3) she believed she “gave fair notice to the

Finlays during the course of the lease that they were incurring late charges.” She

also contends that, because the Finlays “owed over nine thousand dollars in back

rent and late fees,” the retention of their security deposit was reasonable.

      1.     Reasonableness of Retention of Security Deposit

      A landlord has the statutory burden to prove that retention of a tenant’s

security deposit was reasonable. TEX. PROP. CODE ANN. § 92.109(c) (“In an action

brought by a tenant under this subchapter, the landlord has the burden of proving

that the retention of any portion of the security deposit was reasonable.); Pulley v.

Milberger, 198 S.W.3d 418, 431 (Tex. App.—Dallas 2006, pet. denied) (“As it

relates to the [tenants’] claims for bad faith failure to return the security deposit

under section 92.109(a), which seeks, in part, to recover their security deposit, we

will address the issue as a challenge to the trial court’s implied finding of fact that

[the landlord’s] retention of the security deposit was reasonable under section


                                          19
92.109(c)”).

      Deductions from a security deposit are reasonable for items the tenant is

legally liable for under the lease or by statute. Hardy, 176 S.W.3d at 273–75 (Tex.

App.—Houston [1st Dist.] 2004, no pet.). In this case, Blanton concedes that the

entire basis of her withholding the Finlays’ security deposit is the Finlays mailing

the rent to her California address rather than depositing in her bank account for

months two and three of the lease term. Blanton did not testify that these payments

arrived late, but rather that she was out of the country when they were mailed and

thus was unable to deposit them until her return. Given that the California address

is listed as one of the places of payment permitted in the parties’ lease, we

conclude that there no evidence to support the trial court’s implied finding that

Blanton’s retention of the Finlays’ deposit based on their mailing the rent

payments rather than directly depositing them was reasonable. Hardy, 176 S.W.3d

at 275 (“We conclude that there is no more than a scintilla of evidence that

landlord was entitled to any of the deductions taken from the security deposit”

because the “deductions were attempts to recover for items the tenant was not

legally liable for under the lease or Property Code”). Accordingly, we reverse the

portion of the trial court’s take-nothing judgment that denies recovery of Finlays’

security deposit, and render judgment that the Finlays recover their $1,500 security

deposit from Blanton.


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      2.     Bad Faith

      “A landlord who fails either to return a security deposit or to provide a

written description and itemization of deductions on or before the 30th day after

the date the tenant surrenders possession is presumed to have acted in bad faith.”

TEX. PROP. CODE ANN. § 92.109(d) (West 2014). Evidence that a landlord failed to

refund the deposit within 30 days or that it failed to provide the itemized list of

deductions within 30 days makes out a prima facie case of bad faith. Hardy, 176

S.W.3d at 271 (citing Wilson, 555 S.W.2d 780–81). Bad faith implies an intention

to deprive the tenant of a lawfully due refund. Id. at 271. “To defeat the

presumption, the landlord must prove his good faith, i.e., ‘honesty in fact in the

conduct or transaction concerned.’” Id. (citing Wilson, 176 S.W.2d at 780–81).

Absent rebutting evidence, the presumption that the landlord acted in bad faith by

failing to return the deposit or provide a written description and itemization of

deductions within 30 days after surrender compels a finding of bad faith. Id.

      Blanton contends that her evidence rebutted the bad faith presumption that

she retained the Finlays’ deposit in bad faith. She testified that she is an “amateur

lessor” and that she had been “[m]ore than accommodating” to the Finlays during

the course of their lease. Specifically, she tried to help them work out how to pay

rent to her USAA account and then allowed them to deposit money into her Wells

Fargo account. She started, and then stopped, proceedings to evict the Finlays


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because she read “where it could adversely affect their credit score and [she] didn’t

want to do that.” She testified that she had no “ill-will or malice towards the

Finlays” and that she believed that it was the Finlays that broke the lease by

mailing two rent checks.     She believed that because the “payments were not

received to the designated payment location,” the Finlays incurred late fees that

snowballed as she deemed every additional rent payment to be late and short, as it

went first to paying initial late fees. Finally, although she acknowledged that she

did not account for her retention of Finlays’ security deposit within 30 days of their

moving out, she testified to her belief that she “gave fair notice to the Finlays

during the course of the lease that they were incurring late charges.” She stated

she never acted purposefully to cause the Finlays harm or harass them.

      The Finlays point out that, although Blanton testified that she was an

amateur landlord and cites, in her appellee’s brief, her testimony that she “had no

knowledge of the requirement that you needed to submit an itemized list of

deductions,” there is evidence that she was aware of the statutory requirement at

the relevant times and simply chose not to comply with it. She testified that “when

she bought the property and became a landlord” (emphasis added), she was not

“aware of this statute in the Texas Property Code that required you to send an

itemized deduction 30 days after.” However, the lease Blanton entered with the

Finlays states “The Property Code does not obligate a landlord to return or account


                                         22
for the security deposit until the tenant surrenders the Property and gives the

landlord a written statement of the tenant’s forwarding address, after which the

landlord has 30 days in which to account.” (emphasis added).

      Blanton acknowledged that she received a certified letter from the Finlays

within 30 days of them moving out—i.e., during the window that she still had time

to comply with the requirement that she return the deposit or provide an

accounting—specifically citing section 92.109, and putting her on notice that the

Finlays would seek the statutory treble damages if she did not comply. When

asked why, after receiving that letter, she did not provide the Finlays an

accounting, Blanton responded “Because everything I sent [the Finlays], they

ignored.” She also stated that she did not comply because the Finlays “owed [her]

much more than the deposit.”

      The parties agree that, because of an issue with a bank transfer, the Finlays’

February 2013 rent was received by Blanton three days late.            The Finlays

accordingly paid a $100 late fee pursuant to the lease ($50 for the first day, and

$25 for subsequent days). The entire basis for Blanton’s calculation that the

Finlays owed over $9,000—thereby justifying her belief that she was entitled to

retain the Finlays’ deposit—was based upon rent in June and July 2012 being sent

physically to her California address, which is a designated “Place of Payment”

under the lease.    Because of those two mailed payments—which were in


                                        23
compliance with the lease terms (despite both parties preferring electronic bank

transfers)—Blanton assessed late charges for every single day for 13 months.

      Contrary to Blanton’s representation to the Finlays in an email that she

would not charge them late fees for mailing the rent checks in June and July of

2012, she assessed late fees for every day of both months (despite having received

the rent), which set off a chain of daily late charges for remainder of the Finlays’

tenancy.

      We have already concluded that, under the terms of the parties’ lease, the

trial court erred in finding that Blanton’s retention of the Finlays’ security deposit

was reasonable. Given the conflicting evidence on bad faith, we remand the

Finlays’ claim for statutory damages for bad faith retention of the security deposit

for additional proceedings in light of our holding that the deposit was wrongfully

withheld.

      We sustain the Finlays’ first issue in part and overrule it in part.

               ADMISSION OF EXHIBITS AND TESTIMONY

      In their fourth issue, the Finlays complain that the court excluded several

exhibits as hearsay. These exhibits include copies of payment receipts, bank

account statements, receipts for repairs, letters from Wells Fargo, screen shots of

bank transactions, United State post office certified mail delivery receipts, and

correspondence with the court reporter about the record. There was a discussion of


                                          24
these exhibits off the record, and then the court resumed with: “We are now back

on the record. I am admitting Plaintiffs’ Exhibits A, B, H, I, and J. And I am

sustaining the hearsay objection to C, D, E, F, G.”

      The trial court’s decision to admit or exclude evidence is reviewed under an

abuse of discretion standard. In re E.A.K., 192 S.W.3d 133, 140 (Tex. App.—

Houston [14th Dist.] 2006, pet. denied). A trial court abuses its discretion when it

rules without regard for any guiding rules or principles. Owens–Corning Fiberglas

Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998). We must uphold a trial court’s

evidentiary ruling if there is any legitimate basis for the ruling. Id. Hearsay is a

statement, other than one made by the declarant while testifying at the trial or

hearing, offered in evidence to prove the truth of the matter asserted. TEX. R. EVID.

801(d). The proponent of hearsay has the burden of showing that the testimony fits

within an exception to the general rule prohibiting the admission of hearsay

evidence. Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 908 n.5 (Tex.

2004).

      Here, there is no record of the hearing to discuss whether this evidence

should be admitted.     The Finlays provide no argument or authority for their

assertion that the trial court’s exclusion of these documents was an abuse of

discretion, nor do they claim that they presented to the trial court an exception to

the hearsay rule for any of these exhibits. In light of this, we will not hold that the


                                          25
trial court abuse its discretion in excluding these exhibits.

      Relatedly, the Finlays claim that the trial court improperly limited Mr.

Finlay’s objections and testimony. Specifically, they complain about the trial court

admonishing Mr. Finlay that he could not speak from the gallery of the courtroom

during his wife’s testimony (while she was on the stand) to answer a question that

was posed to her. They also complain that the court would not let Mr. Finlay

testify through “objections” while others were on the stand. Finally, they argue

that, while Mr. Finlay was cross-examining Blanton, the trial court improperly

limited his questions. Again the Finlays do articulate how the trial court allegedly

erred, nor how they were harmed. And again they cite no authority in support of

their argument. We will not hold that the trial court acted outside its discretion by

disallowing side-bar testimony or limiting Mr. Finlay’s cross-examination time.

      We overrule the Finlays’ fourth issue.

            ISSUES RAISED FOR THE FIRST TIME ON APPEAL

      In their second, third, and fifth issues, the Finlays raise arguments that were

not raised in trial court. Specifically they complain that Blanton did not make

timely repairs, Blanton made false statements at trial, Blanton submitted different

late fee calculations in the Justice Court than in the County Court, and that Blanton

committed forgery by adding an email address to the lease after the Finlays moved

out. We overrule the Finlays’ second, third, and fifth issues, as we do not consider


                                           26
such issues raised for the first time on appeal. E.g., Wells Fargo Bank, N.A. v.

Leath, 425 S.W.3d 525, 540 (Tex. App.—Dallas 2014, pet. denied) (holding claim

not raised in the trial court was waived, absent authority that would allow party to

raise issue for the first time on appeal); Haden v. David J. Sacks, P.C., 332 S.W.3d

503, 520 n.13 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (“We may not

address this contention because it was never presented to the trial court.”); In re

Marriage of Lendman, 170 S.W.3d 894, 898 (Tex. App.—Texarkana 2005, no

pet.) (“It is improper to present a new issue on appeal.”).

                                  CONCLUSION
      We reverse the trial court’s take-nothing judgment as the Finlays’ claim for

return of their security deposit and render judgment that the Finlays recover their

$1,500 deposit. We reverse and remand the remainder of the trial court’s judgment

for further proceedings.




                                               Sherry Radack
                                               Chief Justice

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



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