538 S.W.3d 189
Tex. App.2018Background
- First Cash leased space at Parkdale Shopping Center (2001) with lease term extending potentially to 2021; Landlords had contractual termination rights after casualty.
- Legacy Landlords notified First Cash of lease termination after a 2009 fire; First Cash vacated and relocated, suing in 2010 for breach of lease seeking rent-differential damages and costs to build out the new location.
- Parkdale was redeveloped (Walmart acquisition; demolition and new higher-quality retail space); Legacy Landlords later transferred remaining interest to Current Landlords (same owners).
- At trial the jury found Legacy Landlords breached the lease, awarded $182,400 in rent-differential damages and $130,000 for new-location build-out; awarded attorney’s fees, but trial court granted JNOV to deny fees against LLC defendants.
- The trial court granted a directed verdict for the Current Landlords; appeals and cross-appeal followed challenging attorney’s-fee denial, directed verdict, and sufficiency of the two damage awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LLCs are liable for contract attorney’s fees under Tex. Civ. Prac. & Rem. Code §38.001 | First Cash: “individual or corporation” should be read broadly (based on recodification history and comparable statutory usage) to include LLCs | Landlords: plain language limits recovery to natural persons or corporations; recodification intended to exclude governmental units, not expand to LLCs | Held: JNOV affirmed — LLCs are not liable under §38.001; statute read by plain meaning and recodification history supports exclusion of LLCs |
| Whether Current Landlords are liable as successors by conversion/reorganization | First Cash: Current Landlords are successor entities after conversion and thus liable for Legacy Landlords’ obligations | Landlords: no formal statutory plan of conversion; testimony alone insufficient to show statutory conversion/successor liability | Held: Directed verdict for Current Landlords affirmed — no evidence of a formal conversion under Business Organizations Code |
| Sufficiency of evidence for rent-differential damages ($182,400) | First Cash: market rents post-redevelopment were substantially higher (offering/asking evidence and negotiations) supporting jury award | Landlords: evidence was largely asking/offering, not completed comparable transactions; no competent evidence of required market value | Held: Reversed and remanded — some rent-differential damages existed but evidence insufficient to support the specific jury amount; new trial on liability and rent-differential damages ordered |
| Sufficiency of evidence for build-out costs ($130,000) | First Cash: actual expenditures to make the new location usable were incurred and caused by breach | Landlords: First Cash failed to prove costs were reasonable and necessary (relying on construction-contract damages precedent) | Held: Affirmed — award for build-out costs upheld; McGinty-type "reasonable and necessary" construction-contract rule inapplicable to lease-breach consequential damages |
Key Cases Cited
- Intercont'l Grp. P'ship v. KB Home Lone Star LP, 295 S.W.3d 650 (Tex. 2009) (American Rule and statutory/contract exceptions for attorney’s fees)
- Lake LBJ Mun. Util. Dist. v. Coulson, 839 S.W.2d 880 (Tex. App.—Austin 1992) (construing predecessor attorney’s-fees statute and recodification history)
- Fleming & Associates, LLP v. Barton, 425 S.W.3d 560 (Tex. App.—Houston [14th Dist.] 2014) (LLPs/LLCs not liable for attorney’s fees under §38.001)
- Alta Mesa Holdings, LP v. Ives, 488 S.W.3d 438 (Tex. App.—Houston [14th Dist.] 2016) (applying Fleming rule to LLCs)
- Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm'n, 518 S.W.3d 318 (Tex. 2017) (statutory construction principles; plain meaning and legislative intent)
- McGinty v. Hennen, 372 S.W.3d 625 (Tex. 2012) (distinguishing remedial and difference-in-value damages in construction-contract context)