Houshang Solhjou, Ind., and D/B/A Melrose Mobile Home Park v. Harris County, Texas and the State of Texas

Opinion issued April 10, 2003 In The Court of Appeals For The First District of Texas NO. 01-01-00371-CV ____________ RITA KARBALAI, INDIVIDUALLY AND D/B/A CARBY MOBILE HOME PARK, Appellant V. HOUSHANG SOLHJOU, INDIVIDUALLY AND D/B/A MELROSE MOBILE HOME PARK, Appellee * * * * * HOUSHANG SOLHJOU, INDIVIDUALLY AND D/B/A MELROSE MOBILE HOME PARK, Appellant V. RITA KARBALAI, INDIVIDUALLY AND D/B/A CARBY MOBILE HOME PARK, Appellee On Appeal from the 61st District Court Harris County, Texas Trial Court Cause No. 2000-33731 MEMORANDUM OPINION Appellant/cross-appellee, Rita Karbalai, individually and d/b/a Carby Mobile Home Park (together “Karbalai”), challenges the trial court’s judgment following a bench trial concerning the operation of a sewage treatment plant owned and operated by appellee/cross-appellant, Houshang Solhjou, individually and d/b/a Melrose Mobile Home Park (together “Solhjou”), located on land adjacent to Karbalai’s mobile home park. In five issues, Karbalai argues that the trial court erred in: (1) essentially “transferring” civil and administrative penalties assessed against Solhjou for violations of environmental regulations in the operation of the plant into damages recoverable by Solhjou against Karbalai; (2) awarding damages to Solhjou for breach of contract; (3) finding that Karbalai’s acts and/or omissions proximately caused the violations in the operation of the plant; (4) rendering judgment without sufficient evidence to support its findings of fact and conclusions of law; and (5) failing to award damages to Karbalai on her claims for breach of contract and attorney’s fees. In two cross-issues, Solhjou appeals the trial court’s rulings (1) offsetting the amount of damages awarded to Solhjou with the amount of damages the trial court found were sustained by Karbalai due to Solhjou’s negligence and (2) denying an award of attorney’s fees to Solhjou on his breach of contract claim. We reverse and render in part and affirm in part. Facts and Procedural Background Karbalai’s late husband, John Karbalai, and Solhjou formed a partnership which owned and operated the Melrose Mobile Home Park. In 1990, as part of the settlement of a lawsuit filed by John Karbalai against Solhjou, the partnership was dissolved and its property and assets were divided. John Karbalai and Solhjou signed a settlement agreement which, among other things, divided the property containing the Melrose Mobile Home Park into two separate tracts. Under the terms of the 1990 settlement agreement, Solhjou kept the right to the name “Melrose Mobile Home Park” (Melrose), under which he continued to operate a mobile home park with approximately 60 units on his tract. Solhjou’s tract also contained the sewage treatment plant at issue. John Karbalai’s tract, located adjacent to Solhjou’s and containing approximately 25 units, was renamed Carby Mobile Home Park (Carby). The 1990 settlement agreement provided for the use and operation of the sewage treatment plant as follows: Solhjou shall own the Plant and for so long as he operates it, agrees to maintain the Plant and its collection system in good working condition and in compliance with all applicable statutes and regulations. Solhjou shall use reasonable skill and care in the operation and maintenance of the Plant. In the event service is interrupted, notwithstanding the fault of Solhjou, Solhjou agrees to use reasonable diligence in resuming said service, except as otherwise provided for herein. For so long as Solhjou, his successors or assigns[,] operates the Plant, Karbalai shall have use of the Plant and shall pay to Solhjou . . . [a $15.00] monthly [fee] for each active and in use hook-up to the Plant. Karbalai shall have the use of all Plant capability in excess of that being utilized for [Solhjou’s tract]. For so long as Solhjou, his successors or assigns[,] . . . operates the Plant, Karbalai shall have the right to utilize the Plant as provided for . . . above. (Emphasis added.) Solhjou and John Karbalai also signed a use agreement containing the same terms regarding “the use of that certain 40,000 gallon sewage treatment plant.” The Texas Natural Resource Conservation Commission (TNRCC) issued, and subsequently renewed, permits to Solhjou, as operator of the sewage treatment plant, to “treat and dispose of wastes” in accordance with the relevant provisions of the federal Clean Water Act and the Texas Water Code. The permit issued by the TNRCC authorized Solhjou to dispose of no more than 40,000 gallons of effluent per day from the plant, and the permit set limitations on the amounts and types of chemical and organic materials discharged from the plant. Solhjou hired Shannon Marsh, a certified sewage treatment plant operator employed by Aqua Pure, to oversee the day-to-day operations and maintenance of the plant. In 1996, John Karbalai asked Solhjou about the development of approximately 30 unoccupied lots at Carby and the process for hooking them up to the plant. Solhjou responded by offering either to allow John Karbalai to take over the operation and maintenance of the plant or to divide the operating and maintenance costs between them equally. John Karbalai died in 1997 and his wife, Rita Karbalai, succeeded to his interests in Carby. No expansion of Carby occurred until the summer of 1998, when Karbalai, with the assistance of her park manager, Ronnie Swint, began adding approximately 50 mobile home units to her tract, all of which were connected to the plant at issue. Karbalai also began submitting to Solhjou an increased number of hook-up fees to cover the added units. At the time the expansion of Carby began, Solhjou sent a letter to Karbalai noting the plant’s “limited capacity” and objecting to the expansion on the grounds that “our sewer plant cannot handle any more waste water than we presently have.” Solhjou also complained to Karbalai about the increase in the amount of hook-up fees she was paying as exceeding the amount required for Carby’s original 25 units and requesting that she “maintain the 25 existing spaces and do no[t] hook up new spaces” to the plant. However, Solhjou never returned any portion of the “excess” fees. In January 2000, Marsh informed Solhjou that, in accordance with their conversations “during the last six months,” in Marsh’s opinion, the plant had become “increasingly harder to operate” as a result of the Carby expansion and was “organically overloaded.” Marsh recommended the addition of a new clarifier and consultation with an engineer to review the plant design as corrective measures to bring the plant “back into compliance.” In a February 2000 letter, the City of Houston informed Solhjou that, based on its testing of effluent samples from the plant, the plant was out of compliance with two of the permitted discharge limits set by the TNRCC. In an April 2000 letter, the TNRCC informed Solhjou that its inspection identified several violations of the plant’s permit, dating back to April 1999, and that the TNRCC was initiating an enforcement action. In May 2000, the Harris County Pollution Control Division delivered a violation notice to Solhjou concerning its inspection of the plant informing him that the County’s inspection had determined that the plant was out of compliance with its permitted discharge limits. Harris County subsequently brought suit against Solhjou based on his alleged violations of provisions of the Water Code and the Health and Safety Code in the operation of the plant. Harris County sought civil penalties for the statutory violations and a temporary injunction to stop the discharge of all sewage from the plant and require that all wastewater flowing into the plant be pumped and hauled to an approved disposal site. The trial court granted the injunction, and Solhjou began paying for the pumping and hauling of all sewage flowing into the plant on July 1, 2000. Solhjou then filed a third-party petition asserting claims for breach of contract, trespass, and malice against Karbalai and Swint and seeking recovery of his costs and attorney’s fees. Solhjou also sought an injunction to force Karbalai to disconnect all Carby units from the plant and to pump and haul all sewage from those units. In response to Solhjou’s claims, Karbalai filed a general denial and a counterclaim for breach of contract, negligence, and gross negligence. Solhjou answered the counterclaim with a general denial and pleaded Karbalai’s contributory negligence as a defense. The parties subsequently entered into a Rule 11 agreement to disconnect the sewage disposal lines for all Carby units from the plant by July 25, 2000. Following a bench trial, the trial court found that Karbalai had breached the terms of the 1990 settlement agreement “by knowingly overloading [the plant] beyond the excess permitted” and was negligent in expanding the number of Carby units hooked-up to the plant and continuing to discharge sewage from those units into the plant “despite undocumented protests from Solhjou.” The trial court found that, “[A]s a direct and proximate result of [Karbalai’s] . . . breach of contract,” Solhjou sustained damages in the form of civil penalties and costs to pump and haul the sewage received by the plant during July 2000. The trial court awarded Solhjou damages equal to 59 percent of the civil penalties assessed against him, as well as a similar percentage of his pumping and hauling costs for the month of July 2000, for a total of $51,122.91. The trial court also found that Solhjou was negligent in his oversight of the operation of the plant and breached the terms of the 1990 settlement and use agreements by “ not maintaining and operating [the plant] adequately and reasonably, and in allowing permit violations . . . to occur . . . where he could have taken reasonable steps to prevent said violations” and in refusing to reconnect the 25 original Carby units to the plant after he was permitted to resume operating the plant. The court awarded Karbalai $26,968.75 as her costs for the pumping and hauling of waste from the 25 original Carby units after Solhjou resumed plant operations. As a result of this offset, the trial court awarded damages to Solhjou totaling $24,154.16. The parties stipulated that they each incurred reasonable attorney’s fees of $35,000 for trial and stipulated to fees of $10,000 for an appeal to the court of appeals and $5,000 for an appeal to the Texas Supreme Court. The trial court did not award attorney’s fees to either party. Breach of Contract In her second issue, Karbalai argues that the trial court erred in finding that she breached the 1990 settlement agreement and in awarding damages to Solhjou based on his breach of contract claims. The trial court found that Karbalai breached the terms of the settlement agreement by “knowingly overloading” the plant operated by Solhjou. The trial court also concluded that Karbalai breached the settlement agreement by introducing sewage into the plant “in excess of that allowed or contemplated by the settlement agreement.” Karbalai contends that Solhjou waived his breach of contract claim by accepting her payments for the hook-up of additional Carby mobile home units to the plant. The affirmative defense of waiver can be asserted against a party who intentionally relinquishes a known right or engages in intentional conduct inconsistent with claiming that right. Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996). A party may waive its contractual rights. Id. While a party’s express renunciation of a known right can establish waiver, its silence or inaction for so long a period of time as to show its intention to yield a known right is also enough to prove waiver. Id. Waiver is ordinarily a question of fact; however, where the facts and circumstances are admitted or clearly established, the question becomes one of law. Id. Here, Solhjou testified that, when he first received a check from Karbalai for monthly hook-up fees covering more than the original 25 units, he returned the check to her. However, he also testified that Karbalai subsequently re-sent the check to him, and he cashed it. Solhjou also admitted that, from 1998 until June 2000, he did not protest Karbalai’s payment of monthly hook-up fees for as many as 74 units, and that, in fact, he kept those fees. On cross-examination, Solhjou admitted that he was aware he did not have to keep the payments for the additional hook-up fees. Waiver is an affirmative defense that must be pled. Tex. R. Civ. P. 94. Solhjou argues that, because Karbalai did not plead the affirmative defense of waiver in her pleadings, she may not raise it as an issue on appeal. Karbalai concedes that she did not plead waiver in her answer or counterclaim, but she asserts that the issue of waiver was tried by consent. An affirmative defense my be tried by consent, even if it is not properly pleaded. Tex. R. Civ. P. 67; Johnston v. McKinney Am., Inc., 9 S.W.3d 271, 280 (Tex. App.—Houston [14th Dist.] 2000, pet. denied). A party who allows an issue to be tried by consent, and who fails to challenge the lack of a pleading before submission of the case, cannot later raise the pleading deficiency for the first time on appeal. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 495 (Tex. 1991); Nat’l Convenience Stores, Inc. v. Erevia, 73 S.W.3d 518, 522 (Tex. App.—Houston [1st Dist.] 2002, pet. denied). Here, Solhjou testified without objection, on direct and cross-examination, regarding his receipt and retention of the payments for the additional hook-ups, and his understanding that he was not required to keep such payments. The trial court also found that he accepted such payments. We conclude that the issue of waiver was tried by consent. We hold that Solhjou’s admitted inaction in keeping the additional monthly hook-up fees established, as a matter of law, his intention to waive any breach of contract claim he may have had arising from Karbalai’s connection of additional Carby mobile home units to the plant. We sustain Karbalai’s second issue. Negligence In her third issue, Karbalai contends that the trial court erred in finding that any acts or omissions by her constituted negligence, which proximately caused the violation of environmental regulations in the operation of the plant. In its findings of fact and conclusions of law, the trial court found both parties were negligent but made no findings or conclusions apportioning negligence between the parties. Moreover, the trial court did not award Solhjou any damages based on Karbalai’s negligence, but specifically identified the damages awarded to Solhjou as “a direct and proximate result of [Karbalai’s] breach of contract.” (Emphasis added.) Because the trial court did not award any damages to Solhjou based on its finding of negligence against Karbalai, we hold that any possible error by the trial court in finding Karbalai’s conduct negligent was harmless. Tex. R. App. P. 44.1(a). We overrule Karbalai’s third issue. Damages Awarded to Solhjou In her first issue, Karbalai argues that, in assessing damages, the trial court erred in essentially “transferring civil and administrative penalties assessed against Solhjou for violations of law in operating the sewage treatment plan[t] as damages against Karbalai.” Similarly, in her fourth issue, Karbalai contends that the trial court’s findings of fact “do not support its conclusions of law” with regard to the trial court’s award of damages in favor of Solhjou. Because the trial court did not award any damages to Solhjou based on its finding that Karbalai was negligent, and because we have held that the evidence established, as a matter of law, that Solhjou’s claims against Karbalai for breach of contract were barred by waiver, precluding Solhjou from recovering any damages on that claim, we need not address Karbalai’s first or fourth issues. Karbalai’s Counterclaims In her fifth issue, Karbalai argues that the trial court erred in “not awarding the appropriate damages after it found Solhjou had breached the Settlement Agreement and had negligently maintained and operated the plant.” Karbalai contends that she was entitled to more actual damages than the trial court awarded on her counterclaims against Solhjou for negligence and breach of contract. She also argues that she was entitled to recover her stipulated attorney’s fees as required by the 1990 settlement agreement. Actual Damages Karbalai’s conclusory argument on this issue is unsupported by any authority. In general, when a party does not provide us with argument sufficient to make an appellate complaint viable, we will not perform an independent review of the record and applicable law to determine whether the error complained of has merit. Maranatha Temple, Inc. v. Enter. Prods. Co., 893 S.W.2d 92, 106 (Tex. App.—Houston [1st Dist.] 1994, writ denied). Here, we construe Karbalai’s fifth issue as a legal sufficiency challenge to the trial court’s finding concerning the amount of actual damages sustained by Karbalai as a result of Solhjou’s “breach of contract and/or [his] negligence.” In an appeal of a judgment rendered after a bench trial, the trial court’s findings of fact have the same weight as a jury’s verdict. Amador v. Berrospe, 961 S.W.2d 205, 207 (Tex. App.—Houston [1st Dist.] 1996, writ denied). When challenged, findings of fact are not conclusive if, as in the present case, there is a complete reporter’s record. See id. When there is a reporter’s record, the trial court’s findings of fact are binding only if supported by the evidence. Id. If the findings are challenged, the court of appeals will review the sufficiency of the evidence supporting the findings. State Bar of Tex. v. Roberts, 723 S.W.2d 233, 235 (Tex. App.—Houston [1st Dist.] 1986, no writ). In reviewing a no-evidence point, we consider only the evidence and inferences that tend to support the finding, disregarding all evidence and inferences to the contrary. Best v. Ryan Auto Group, Inc., 786 S.W.2d 670, 671 (Tex. 1990); Vannerson v. Vannerson, 857 S.W.2d 659, 666 (Tex. App.—Houston [1st Dist.] 1993, writ denied). If there is any evidence of probative force to support the finding, i.e., more than a mere scintilla, we will overrule the point. Vannerson, 857 S.W.2d at 666. Here, the trial court awarded Karbalai damages in an amount equal to what the court determined was Karbalai’s share of the costs to pump and haul effluent from the sewage treatment plant beginning in July 2000 until the time of trial. Karbalai contends that this amount of damages was insufficient because it did not include her anticipated and expended costs to construct a new treatment plant for the Carby units, as well as the loss of rental income from the lots on which such a plant would need to be constructed. The record indicates that, after the plant was shut down, the parties entered into a voluntary agreement to temporarily cut off the Carby units from the sewage treatment plant and to cover their own costs of pumping and hauling the sewage from their respective units. With regard to Karbalai’s subsequent loss of rental income from approximately 20 vacant lots, Ronnie Swint, Carby’s manager, testified as follows: I made the decision not to renew leases. And as a result of that decision, the tenants became very nervous by living on a month-to-month tenancy. They expressed concern that the park was going to be shut down. There was a rumor that was floating. People started moving out, relocating their homes to other mobile home parks. Some of them were repossessed, too. Some of them just gave up and walked away. Based on this testimony, the trial court could have concluded that Karbalai’s loss of rental income was based upon the decision not to renew leases beyond one month increments, rather than negligence or a breach of contract on the part of Solhjou. With regard to the costs of constructing a new treatment plant to serve the Carby units, Swint testified that, with the exception of a $3,450 fee to prepare the site and pour a concrete slab of a new treatment plant, at the time of trial no other construction expenses had been incurred. Swint testified, without objection, that the remaining anticipated construction expenses were merely estimates provided to him by Shannon Marsh or other third parties. A trial court, when sitting as the trier of fact, is the sole judge of the credibility of the witnesses and the weight to be given their testimony. Villery v. Solomon, 16 S.W.3d 106, 110 (Tex. App.—Houston [1st Dist.] 2000, no pet.); Nordstrom v. Nordstrom, 965 S.W.2d 575, 580 (Tex. App.—Houston [1st Dist.] 1997, writ denied). Here, the trial court could have concluded that Swint’s second-hand estimates concerning the costs to construct a new treatment plant were neither reasonable nor credible. Disregarding all evidence and inferences to the contrary, we hold that the trial court’s award of actual damages to Karbalai was supported by more than a scintilla of evidence. See Vannerson, 857 S.W.2d at 666. We overrule this portion of Karbalai’s fifth issue. Attorney’s Fees The trial court did not award attorney’s fees to either party, having found that both were in breach of the contract. However, because we have held that Solhjou’s breach of contract claim against Karbalai was barred by waiver, leaving Karbalai’s breach of contract action as the only prevailing contractual claim, we render judgment for Karbalai for the amounts of attorney’s fees stipulated by the parties at trial. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (Vernon 1997). We sustain this portion of Karbalai’s fifth issue. Solhjou’s Cross-Issues In his first cross-issue, Solhjou argues that the trial court should not have applied an offset to the damages he was awarded because, under the terms of the parties’ Rule 11 agreement, Karbalai voluntarily disconnected the Carby units from the sewage treatment plant. We disagree. The Rule 11 agreement, which appears in the record, provided that, as of July 25, 2000, Karbalai would initiate her own sewage removal and disposal for all Carby units connected to the plant, not just those in excess of the original 25 units. However, the agreement also expressly provided that the parties agreed to preserve their respective claims and legal positions regarding their dispute. Thus, the letter did not act to waive any of the parties’ claims—it merely provided a temporary solution to the parties’ mutual need to remove and dispose of the sewage from their units, as the plant had been shut down by the TNRCC and Harris County at that time and could not be used by either party. Solhjou also contends that the trial court erred in finding that he was negligent in “his oversight of the operation of the plant” and in concluding that he was negligent in “his supervision of the operation of the [plant].” In its final judgment, the trial court awarded damages to Karbalai both for Solhjou’s breach of contract and for negligence. As noted above, we review a challenge to the legal sufficiency of the evidence to support a trial court’s finding of fact to determine whether there is any evidence of probative force to support the finding, disregarding all evidence and inferences to the contrary. Vannerson, 857 S.W.2d at 666. We review a trial court’s conclusions of law de novo. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 793-94 (Tex. 2002). Although we may not review conclusions of law for factual insufficiency, we may review the trial court’s legal conclusions drawn from the facts to determine their correctness. Id. Specifically, Solhjou argues that the trial court’s finding of fact and conclusion of law that he was negligent were improper and inconsistent with the trial court’s other findings of fact and conclusions of law that Solhjou’s retained plant operator, Marsh, was not negligent. We disagree. As indicated above, the evidence admitted at trial included letters sent from Marsh to Solhjou in 2000 requesting that Solhjou take certain steps necessary, in Marsh’s opinion, to bring the treatment plant “back into compliance.” It is undisputed that, other than minor repairs to the plant, the measures recommended by Marsh, which included installing an additional clarifier, converting the existing clarifier to aeration, and increasing the air supply to the plant, were not implemented. Therefore, we hold that the trial court’s findings of fact and conclusions of law, that Solhjou was negligent while Marsh was not negligent, were supported by the evidence and were not inconsistent. We overrule Solhjou’s first cross-issue. In his second cross-issue, Solhjou contends that he was entitled to recover his stipulated attorney’s fees. Because we have held that Solhjou’s breach of contract claim was barred by waiver, we overrule his second cross-issue. Conclusion We reverse that portion of the trial court’s judgment finding that Karbalai breached the contract with Solhjou, and we render judgment that Solhjou take nothing on his breach of contract claim against Karbalai. We also reverse that portion of the trial court’s judgment requiring Karbalai to bear the cost of her attorney’s fees, and we render judgment in favor of Karbalai on her claim for attorney’s fees in the amounts stipulated. We affirm the remainder of the trial court’s judgment. Terry Jennings Justice Panel consists of Chief Justice Radack and Justices Nuchia and Jennings.