Western Skies Partnership/Physician's Healthcare Associates, L. C. and Physician's Healthcare Associates, P. A. v. Physician's Healthcare Associates, L. C. and Physician's Healthcare Associates, P. A./Western Skies Partnership

COURT OF APPEALS COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS WESTERN SKIES PARTNERSHIP/                   ) PHYSICIAN=S HEALTHCARE ) ASSOCIATES, L.C., and PHYSICIAN=S ) HEALTHCARE ASSOCIATES, P.A., ) No. 08-02-00231-CV ) Appellant/Cross-Appellees, ) Appeal from the ) v. ) 34th District Court ) PHYSICIAN=S HEALTHCARE ) of El Paso County, Texas ASSOCIATES, L.C., and PHYSICIAN=S ) HEALTHCARE ASSOCIATES, P.A./ ) (TC# 96-3096) WESTERN SKIES PARTNERSHIP,                   ) ) Appellees/Cross-Appellant. ) MEMORANDUM  OPINION This is a commercial lease dispute. Western Skies Partnership (AWestern Skies@) and Physician=s Healthcare Associates, L.C., and Physician=s Healthcare Associates, P.A. (APHA@) appeal and cross-appeal respectively from a jury finding that they both breached the lease. The jury awarded neither side any damages. PHA cross-appeals the trial court=s decision to award no money damages to either party. In this appeal, Western Skies raises four issues and PHA raises one issue. We have combined the issues to be: (1) The trial abused its discretion in allowing the tenant to offer proof that the landlord effectively mitigated any damages it would have otherwise suffered as a result of the tenant=s breach; (2) the trial court erred in denying the landlord=s motion for instructed verdict and submitting the question of the landlord=s breach of the lease to the jury; (3) the trial court abused its discretion in denying the landlord=s request, made at the conclusion of the evidence, to amend its pleading to assert the affirmative defense of excuse; and (4) who was the prevailing party in the suit? We affirm. On March 15, 1994, Western Skies and PHA entered into a commercial lease agreement. The term of the triple-net lease was seven years with a monthly rent of $2,563. The property required remodeling and Western Skies agreed to have his improvements done by an agreed date in 1994. PHA was to occupy the premises within 120 days of being notified by Western Skies that the premises were available. The lease included a clause that stated: ATermination of this Lease shall be Tenant=s exclusive remedy in the event of failure of Landlord for any reason whatsoever to complete construction or to have the premises ready for performance of Tenant=s work within the period herein provided.@ There was a ATime of Essence@ clause. As required, PHA paid a $2,500 deposit to Western Skies on the day the lease was signed. Western Skies did not contract anyone about doing the improvements on the property until April 27, 1994, a month after the lease had been signed; the actual work did not begin until May 6, 1994. That same month, May 1994, Western Skies suspected that PHA was not going to move into the premises and, in July 1994, Pete Sellers, the real estate broker who brokered the deal informed Western Skies that PHA was not going to occupy the premises. Mr. Sellers provided Western Skies with a proposal from Kenny Rogers Roasters franchise to Asub-lease@ the premises. Western Skies never provided PHA with notice that the improvements were complete as required by the lease, but Mr. Samuels testified that notice was not necessary because PHA knew that by July 2, 1994, the improvements had been completed. On December 20, 1995, Western Skies entered into a new lease with Souper Salad to occupy the premises. The new lease was for a term of ten years and called for an annual rent of $38,750.25, which would increase to $44,552.20 in the sixth year of the lease and a percentage of gross receipts. Wester Skies filed a lawsuit to recover damages caused by PHA=s breach of the lease. PHA denied Western Skies= allegation and filed a counterclaim. At trial, the jury found that both parties had breached the lease and refused to award any party damages. Both Western Skies and PHA filed a motion to disregard jury finding and for judgment in their favor. The trial court denied both motions and entered a judgment reflecting the jury=s findings. Both parties filed a motion for new trial which the trial court denied. DISCUSSION In Issue One, Western Skies argues that the trial court abused its discretion in admitting the evidence provided by David Lindau on the grounds that it was not relevant. As an extension to this argument, Western Skies argues that since PHA failed to prove that Western Skies failed to mitigate its damages, the instruction following Question 3 was improper.[1] PHA argues that Mr. Lindau=s testimony was relevant to the issue of Western Skies= duty to mitigate damages. Under Texas law, a landlord has a duty to make reasonable efforts to mitigate damages when a tenant defaults on the lease; the tenant bears the burden of proof to demonstrate that the landlord has mitigate or failed to mitigate damages and the amount by which the landlord reduced or could have reduced its damages. See Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 294, 299 (Tex. 1997). Under Tex.R.Evid. 410, evidence is relevant if it has any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. Mr. Lindau, a certified public account, testified as to the comparison of the present day value of the PHA and Western Skies lease, and the Souper Salad and Western Skies lease. He also testified as to the value of income stream of each lease. The Appellant objected, but the trial court overruled the objection stating that it felt that the Souper Salad lease was relevant on the mitigation issue. In this case, we agree with the trial court that Mr. Lindau=s testimony was relevant to the issue of mitigation and therefore admissible. See Tex.R.Evid. 410; Austin Hill Country Realty, Inc., 948 S.W.2d at 299. We overrule Issue One. In Issue Two, Western Skies argues the trial court erred in denying its Motion for Directed Verdict regarding PHA=s counterclaims. Western Skies argues that Section 3(b) of the lease which stated that the A[t]ermination of this Lease shall be Tenant=s exclusive remedy in the event of failure of Landlord for any reason whatsoever to complete construction or to have the premises ready for performance of Tenant=s work within the period herein provided,@ was the exclusive remedy available to PHA. Western Skies further states that PHA never terminated the lease, but instead, it chose to attempt to sublet the property, which Western Skies argues is inconsistent with PHA=s contention at trial that the premises were not ready for it to do its work and therefore the lease was never commenced. Western Skies contends that since PHA never pled the exclusive remedy provision or any other provision in the lease was unambiguous, the construction of the lease becomes a matter of law. See Vandergriff Chevrolet Company, Inc. v. Forum Bank, 613 S.W.2d 68, 70 (Tex.Civ.App.--Fort Worth 1981, no writ). An appeal from the denial of a motion for directed verdict is essentially a challenge to the legal sufficiency of the evidence. Kershner v. State Bar of Texas, 879 S.W.2d 343, 346 (Tex.App.--Houston [14th Dist.] 1994, writ denied). Therefore, we must review the denial of a directed verdict by considering all the evidence in the light most favorable to the nonmovant, disregarding all evidence to the contrary, and resolving all reasonable inferences in favor of the nonmovant. Russell v. City of Bryan, 919 S.W.2d 698, 705 (Tex.App.--Houston [14th Dist.] 1996, writ denied). To reverse the denial of a motion for directed verdict, the appellant must show the evidence conclusively proves a fact that establishes appellant=s right to judgment as a matter of law and there is no evidence to the contrary. Weidner v. Sanchez, 14 S.W.3d 353, 373 (Tex.App.--Houston [14th Dist.] 2000, no pet.). Having reviewed the entire record in the light most favorable to the nonmovant, we find that PHA did in fact raise the issue of the lease=s ambiguity. In its supplemental answer and special exceptions filed on November 1, 2001, PHA raised the lease=s ambiguity as an affirmative defense. The trial court also held that the term Aas agreed 1994@ made that section of the lease ambiguous. The presence of such conflicting evidence establishes that an instructed verdict would be improper and that Western Skies failed to establish its right to a judgment as a matter of law. See Weidner, 14 S.W.3d at 373. Issue Two is overruled. In Issue Three, Western Skies argues that the trial court abused its discretion by denying its request for leave of the court to file a trial amendment to assert the affirmative defense of excuse. Citing Greenhalgh v. Service Lloyds Ins., Co.,[2] PHA contends that Western Skies was proposing to assert a new defense and that therefore the amendment was presumptively prejudicial to PHA. We agree. Under Tex.R.Civ.P. 63, a trial court should grant an amendment unless the opposite party shows that filing the amendment operates as a surprise. See Tex.R.Civ.P. 63. A trial court has no discretion to refuse an amendment unless: (1) the opposing party presents evidence of surprise or prejudice; or (2) the amendment asserts a new cause of action or defense and thus is prejudicial on its face, and the opposing party objects to the amendment. See Greenhalgh, 787 S.W.2d at 939. The burden of showing an abuse of discretion lies on the party complaining of the trial court=s refusal to consider an amended pleading. See Hardin v. Hardin, 597 S.W.2d 347, 349 (Tex. 1980). The trial court=s ruling will not be disturbed unless the complaining party shows an abuse of discretion. Hardin, 597 S.W.2d at 349-50. The lawsuit was filed on August 15, 1996, and PHA filed its original counterclaim on February 14, 1997. In its pleading, PHA raised the issue of Western Skies= failure to perform the landlord=s work as required by the lease. PHA repeated these allegations in its successive allegations. Western Skies answered and specially excepted to the counterclaim in September of 1997. Western Skies never alleged excuse for its breach of the lease. It was not until November 2001, five days into the trial, after both sides had rested and closed, that Western Skies moved to amend its answer. Western Skies has made no showing as to why this new affirmative defense could have not been added earlier. In this case, the amended pleadings would assert for the first time the affirmative defense of excuse. As such, the pleadings established surprise as a matter of law and is simply no abuse of discretion in refusing the amendment. Issue Three is overruled. In Issue Four, each side asserts that it is the prevailing party in this suit. PHA asserts that it is the prevailing party on the grounds that Section 38 of the lease does not speak to the prosecution or defense of a counterclaim. Focusing on the word Abrought,@ PHA asserts that Western Skies was the party that brought the lawsuit and as such, PHA is the prevailing party because the suit was brought by Western Skies. In its brief, Western Skies relies on the opinion issued by this Court in Bacchus Industries, Inc.[3] We find that Bacchus Industries, Inc. is distinguishable from the case at hand. In Bacchus Industries, Inc., the trial court awarded money damages to one of the parties. See Bacchus Industries, Inc., 36 S.W.3d at 580. Additionally, as asserted by PHA, Bacchus Industries, Inc. is not applicable in this case because it addressed the issue of recovery of attorney=s fees by statute and not contract. See id. at 586. We have not found any supporting case law and the parties likewise concede that they have not found any either. So, what we have is that the jury found that both sides breached a contract and neither deserved any damages. Based on the jury findings, we find that there are only losers in this case and that neither party is entitled to attorney=s fees. We overrule Western Skies=s Issue Four and PHA=s counterclaim. We affirm the trial court=s judgment. May 13, 2004 DAVID WELLINGTON CHEW, Justice Before Panel No. 3 Barajas, C.J., Larsen, and Chew, JJ. [1] Question 3: What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Western Skies Partnership for its damages, if any, that resulted from such failure to comply? Consider the following elements of damage, if any, and none other. Loss of Rentals: Those rentals which would have been paid pursuant to the lease. Amount: $ 0 Incidental Damages: Those costs incurred by Western Skies Partnership to prepare the space for PHA=s work. Amount: $ 0 Mitigation Expenses: Reasonable and necessary costs incurred by Western Skies Partnership to lease the space to a new tenant. Amount: $ 0 Do not add any amount for interest on damages, if any. Do not include in your answer any amount that you find Western Skies could have avoided through reasonable efforts to mitigate its damages. You are instruct that a landlord has a duty to make reasonable efforts to mitigate damages when the tenant breaches the lease and abandons the property. [2] 787 S.W.2d 938, 939 (Tex. 1990). [3] Bacchus Industries, Inc. v. Frontier Mechanical Contractors, 36 S.W.3d 579 (Tex.App.--El Paso 2000, no pet.).