Appellant, Appellee.

Transcription

1 NO CV IN THE COURT OF APPEALS FOR THE FIFTH COURT OF APPEALS AT DALLAS, TEXAS BRIGITTE SHAMOUN, Appellant, v. LISA R. SHOUGH, Appellee. On Appeal from the County Court at Law No. 5, Dallas County, Texas No. CC E, The Honorable Mark Greenberg, Presiding BRIEF OF APPELLANT BRIGITTE SHAMOUN ORAL ARGUMENT REQUESTED Jonathan J. Cunningham State Bar No C. Gregory Shamoun State Bar No SHAMOUN & NORMAN, LLP 1755 Wittington Place, Suite 200, LB 25 Dallas, Texas Telephone: (214) Facsimile: (214) Attorneys for Appellant Brigitte Shamoun

2 IDENTITY OF PARTIES AND COUNSEL Appellant Brigitte Shamoun certifies that the following is a complete list of the parties, attorneys, and any other person who has any interest in the outcome of this lawsuit: 1. Appellant Brigitte Shamoun was a Plaintiff/Counter-Defendant in the trial court. Brigitte Shamoun is represented by Jonathan J. Cunningham and C. Gregory Shamoun, SHAMOUN & NORMAN, LLP, 1700 Wittington Place, Suite 200, LB 25, Dallas, Texas, For ease of reference, within this Appellant s Brief, Brigitte Shamoun will be referred to as "Plaintiff" or Shamoun. 2. Appellee Lisa R. Shough was a Defendant/Counter-Plaintiff in the trial court. Lisa R. Shough is represented by Lawrence L. Mealer, LAW OFFICE OF LAWRENCE L. MEALER, 5353 Maple Ave., Suite 100, Dallas, Texas For ease of reference, within this Appellant s Brief, Lisa R. Shough will be referred to as Defendant or Shough. ii

3 REQUEST FOR ORAL ARGUMENT Pursuant to Texas Rule of Appellate Procedure 39.1, Appellant Brigitte Shamoun respectfully requests oral argument in this matter. This case involves important issues regarding statutory interpretation not yet addressed by the appellate courts of this State. iii

4 TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL. REQUEST FOR ORAL ARGUMENT. ii iv TABLE OF CONTENTS. v INDEX OF AUTHORITIES vi STATEMENT OF THE CASE ISSUES PRESENTED STATEMENT OF FACTS. 3 SUMMARY OF THE ARGUMENT.. 7 ARGUMENT... 9 A. Standards of Review B. Shough s Statutory Claim and The Finding of Bad Faith Issue.. 11 C. Shamoun s Statutory Claim and The Irreconcilable Conflict...16 D. The Competing Breach of Contract Claims E. The Evidence of Shough s Prior Material Breach Was Both Legally and Factually Sufficient CONCLUSION AND PRAYER.. 33 CERTIFICATE OF SERVICE APPENDIX iv

5 INDEX OF AUTHORITIES CASES Amos v. Ferretti, No CV, 2005 Tex.App. LEXIS (Tex.App. Austin, June 23, 2005, no pet.) (Mem. Op.) (Patterson, J., dissenting) Bender v. Southern Pacific Trans. Co., 600 S.W.2d 257 (Tex. 1980) , 11 Calabrian Chems. Corp. v. Bailey-Buchanan Masonry, Inc., 44 S.W.3d 276 (Tex.App. Beaumont 2001, pet denied) Croucher v. Croucher, 600 S.W.2d 55 (Tex. 1983) Dallas County v. Holmes, 62 S.W.3d 326 (Tex.App. Dallas 2001, no pet.) General Motors Corp. v. Paiz, No CV, 2000 Tex.App. LEXIS 7983 (Tex.App. Dallas, Nov. 29, 2000, no pet.) (not designated for publication) Hardy v Memorial, Ltd., 176 S.W.3d 266 (Tex.App. Houston [1 st Dist.] 2004, no pet.)... 12, 14, 19 Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) Marathon Corp. v. Pitzner, 106 S.W.3d 724 (Tex. 2003) Ortiz v. Jones, 917 S.W.2d 770 (Tex. 1996) Pala v. Maxim, No CV, 2002 Tex.App. LEXIS 1008 (Tex.App. Houston [1 st Dist.] Feb. 7, 2002, no pet.) (not designated for publication) , 14 Puckett v. Arvizu, No CV, 2010 Tex.App. LEXIS 8926 (Tex.App. Beaumont, Nov. 10, 2010, no pet. hist.) (mem. op.) v

6 Pulley v. Milberger, 198 S.W.3d 418 (Tex.App. Dallas 2006, pet. denied) , 15, 16, 17 Re/Max, Inc. v. Katar Corp., 961 S.W.2d 324 (Tex.App. Houston [1 st Dist.] 1997, pet. denied) STATUTES TEX. PROP. CODE TEX. PROP. CODE TEX. PROP. CODE TEX. PROP. CODE , 17. vi

7 STATEMENT OF THE CASE Plaintiff/Counter-Defendant Brigitte Shamoun ( Plaintiff or Shamoun ) originally filed this lawsuit against Defendant/Counter-Plaintiff Lisa R. Shough ( Defendant or Shough ) on October 24, 2005, asserting, mainly, causes of action for breach of contract and violation of the Texas Property Code. [CR Vol. 1, p. 13] On November 30, 2005, Defendant Shough filed a general denial a Counterclaim asserting causes of action for breach of contract and violation of the Texas Property Code. [CR Vol., p. 42] At time of trial, Plaintiff s live pleadings were her Plaintiff s Third Amended Original Petition and Affirmative Defenses, filed on April 2, [CR Vol. 1, p. 121] At time of trial, Defendant s live pleadings were her Defendant s First Original Amended Answer, Affirmative Defenses and Counter-Claim, filed on October 15, [CR Vol. 1, p. 137] Prior to trial, on April 21, 2009, Plaintiff filed a Motion for Summary Judgment, which was heard by the Court and taken under advisement on June 26, 2009, but not ruled upon. [CR Vol. 1, p. 08, 142] The case was tried to a jury beginning December 7, 2009, and the jury returned a verdict on December 8, [CR Vol. 1, p. 08] Plaintiff filed a Motion for JNOV on December 28, 2009, which was heard and denied by the Court on January 15, [CR Vol. 1, p. 10, Vol. 2, pp. 338, 368] Also on January 15, 2010, the Court issued its first Final Judgment. [CR Vol. 1, p. 364] Plaintiff filed a Motion for New Trial on February 15, 2010, which was heard by the Court on March 19, [CR Vol. 1, p. 10, Vol. 2, p. 369] On March 23, 1

8 2010, the Court issued its Amended Final Judgment. [CR Vol. 2, p. 396] Plaintiff filed a Motion for New Trial on April 22, 2010, which was overruled by operation of law. [CR Vol. 2, p. 399] It is from the Court s March 23, 2010 Amended Final Judgment that Plaintiff appeals. ISSUES PRESENTED FOR REVIEW 1. The jury s answers regarding the parties competing statutory violation claims irreconcilably conflict because there was no evidence, or in the alternative factually insufficient evidence, to support a finding of bad faith or to support a finding that Shough s deposit was not wrongfully retained. 2. The jury s answers regarding the parties competing breach of contract claims irreconcilably conflict because the jury awarded Shamoun damages for breach of contract as an offset to damages awarded to Shough for breach of contract without assigning liability for breach of contract on Shamoun s claims against Shough. 3. The jury s answers regarding Shough s breach of contract claim and statutory violation claim, as a matter of law, and in the alternative are so against the great weight and preponderance of the evidence, and thus insupportable in face of the admitted and uncontroverted evidence that Shough has at all times, and still, retains possession of the entire $5,800 of Shamoun s security deposit. As such, no evidence or in the alternative, factually insufficient evidence existed to support the 2

9 jury s finding of any damages on Shough s breach of contract and statutory violation claims. 4. They jury s answers regarding the parties competing breach of contract claims are insupportable because the evidence established, as a matter of law, Shough s prior breach of contract so as to relieve Shamoun of her obligations of performance under the lease. In the alternative, the jury s answers regarding the parties competing breach of contract claims are so against the great weight and preponderance of the evidence of Shough s prior breach of contract as to be manifestly unjust and caused an improper verdict. STATEMENT OF FACTS This is a case really about holding a landlord in a residential lease to adhere to the requirements and obligations of a written lease and the requirements of the Texas Property Code. In August 2004, Plaintiff Brigitte Shamoun ( Plaintiff or Shamoun ) leased a home Defendant Lisa Shough ( Defendant or Shough ). The term of the lease was for one year, commencing August 26, 2004 and ending August 31, 2005, with a monthly rent of $4800. [RR Vol. 2, Pltf. Exh. 1] At the time of leasing, Shamoun paid Shough $35,529 up front, for six months advance rent and a security deposit of $5,800, which included a pet deposit of $1, and security deposit of $4,800 [RR Vol. 2, Pltf. Exh. 1 and 2] 3

10 Shamoun s lease entitled her to possession of the home until August 31, [RR Vol. 2, Pltf. Exh. 1] Additionally, the lease required that all modifications be in writing [RR Vol. 2, Ptlf. Exh. 1], and the testimony at trial was undisputed that there were no written modifications to the lease. [RR Vol. 2, p. 35] Further, the express written provisions of the lease prohibited Shough from marketing the home, placing For Sale signs at the home, showing the home, or accessing the home for non-emergency purposes without written notice prior to July 31, [RR Vol. 2, Pltf. Exh. 1] On or before June 19, 2005, Shough and her agent began a course of marketing the home, placing For Sale signs at the home, and showing and access the home. [RR Vol. 2, pp , 59, 73, 124, Pltf. Exh. 3] In fact, on June 27, 2005, Shough contracted to sell the home, close, and deliver possession of the home to the buyer on July 29, 2005, a month before Shamoun s lease and right of possession would expire. [RR Vol. 2, Pltf. Exh. 5] During June 2005, Shough had oral conversations with Shamoun wherein Shough told Shamoun that Shough wanted to sell the home and have Shamoun move out of the home prior to the end of July [RR Vol. 2, p. 127] As a result of Shough s efforts to sell the home, including the disruption of Shamoun s exclusive right to possession and privacy due to showings and inspections, Shamoun acquiesced to Shough s demand and ultimately vacated and surrendered the home prior to July 21, [RR Vol. 2, p.162; RR Vol. 3, pp ] 4

11 On August 3, 2005, Shamoun s attorney provided a forwarding address for Shamoun and requested return of the security deposit in the amount of $5,800.00, comprising the $4, security deposit and $1, pet deposit. [RR Vol. 2, Pltf. Exh. 12] In addition to return of the paid security deposit, reimbursement of certain repairs made to the Heating and Air Conditioning and Pool/Spa were requested. [RR Vol. 2, Pltf. Exh. 12] On August 24, 2005, Shough corresponded to Shamoun s attorneys asserting that, despite breach of the lease agreement by Shough, Shamoun was required to and had not paid the $4, rent payment for July 2005, and that certain penalties and late charges were applicable. [RR Vol. 2, Pltf. Exh. 13] As such, Shough demanded $6, related to issues of rent. [RR Vol. 2, Pltf. Exh. 13] Further, Shough alleged that damages to the floors and carpet of the home had occurred and demanded $1, [RR Vol. 2, Ptlf. Exh. 13] All told, Shough refused to return any of Shamoun s security deposit, instead demanding that Shamoun tender a payment to Shough totaling $7, [RR Vol. 2, Pltf. Exh. 13] Shough demanded payment of $6, for payment of July rent, late fee and late charges, and additional payment of $1, purportedly for costs of repairs to a wood floor and carpet and general cleaning. [RR Vol. 2, Pltf. Exh. 13] Shamoun filed suit for breach of contract and statutory violation for wrongful retention of the security deposit. [CR Vol. 1, p. 11] Shough counterclaimed for breach of contract and statutory violation. [CR Vol. 1, p. 42] At trial, the Court submitted jury questions regarding the parties competing 5

12 breach of contract and statutory violation claims. [CR Vol. 1, pp ] 1 The jury found no liability for breach of contract by Shough. [CR Vol. 1, p. 306] The jury found liability for breach of contract by Shamoun and awarded $5,460 in damages. [CR Vol. 1, pp. 309, ] Further, the jury found that Shough wrongfully withheld the $1,000 pet deposit, although the jury also found that such withholding was not in bad faith. [CR Vol. 1, pp ] As to Shough s statutory violation claims, the jury found that Shamoun, in bad faith, withheld the last month s rent on grounds that the security deposit was security for unpaid rent, finding that Shamoun withheld $4,800. [CR Vol. 1, pp ] Based upon the Trial Court s interpretation of the jury answers, the Trial Court ultimately forced an election of remedies and entered its Amended Final Judgment, granting Shough judgment on Shough s statutory violation claims and awarding $11,400 as damages, comprising the $4,800 of withheld rent, offset by the $1,000 pet deposit wrongfully withheld, trebled ostensibly based upon the jury s finding of bad faith. [CR Vol. 2, pp ] Additionally, the court entered judgment for attorney s fees, in amounts previously stipulated by the parties. [CR Vol. 2, p. 397; RR Vol. 2, p. 13] 1 For the Court s convenience, a separate copy of the Charge of Court is provided in the Appendix to Appellant s Brief, at Tab 2. 6

13 SUMMARY OF THE ARGUMENT Although the Texas Property Code provides for a rebuttable presumption of bad faith regarding the statutory causes of action related to both a landlord s wrongful retention of a security deposit and a tenant s withholding of the last month s rent based upon the grounds that the security deposit is security for unpaid rent, when there is evidence admitted which rebuts the presumption, any finding of bad faith must then be supported by legally and factually sufficient evidence of actual bad faith. In the present case, there was evidence admitted which rebutted the presumption of bad faith regarding Shamoun s withholding of the July rent. And, since there was no legal or factually sufficient evidence adduced at trial to establish actual bad faith, the jury s finding of bad faith on the part of Shamoun is insupportable, particularly since it could only have been based upon applying a presumption which had been rebutted and rendered incapable of supporting a finding of bad faith. As a result, at a minimum, no trebling of any amount would be supportable. And, since it was admitted and undisputed that Shough still retained possession of Shamoun s $5,800, which exceeded the amount of any claimed unpaid rent, Shough had no damages for any putative statutory violation. Regarding Shamoun s claims of statutory violation against Shough, because there was no evidence, and certainly factually insufficient evidence, adduced to establish any damages for repairs, etc. which Shough could rightfully withhold from Shamoun s deposit, and since the statutory definition of security 7

14 deposit stipulates that such is not rent, there was no legal or factually sufficient evidence to support the jury s finding that only $1,000 (the pet deposit) was wrongfully withheld by Shough. Accordingly, the jury answer failing to find wrongful retention of the additional $4,800 of the security deposit was not supportable by any legally or factually sufficient evidence. As a result, the jury necessarily characterized the $4,800 as unpaid rent, which causes an irreconcilable conflict with the jury s answer that Shough wrongfully withheld the July rent in the amount of $4,800. In short, if the jury treated $4,800 of Shamoun s security deposit as the July rent, then the jury could not find that Shamoun wrongfully withheld the July rent. As to the parties competing breach of contract claims, the jury s finding of breach of contract as to Shamoun and damages award to Shough indisputably included an offset applied by the jury of the very amount sought by Shamoun as breach of contract damages against Shough for repairs to the spa, and thus constituted an award of damages to Shamoun for Shough s breach of contract without appropriately also finding and assigning liability for breach of contract to Shough. It is not the purview of the jury to apply potential offsets regarding competing claims of the parties; however, it is indisputably clear that the jury did just that in this case. Further, the evidence of Shough s prior material breach of the lease was established as a matter of law, or the jury s contrary finding was so greatly outweighed by such evidence, that the jury s finding that Shough did not breach 8

15 the lease prior to any putative breach by Shamoun is insupportable. Accordingly, for the reasons outlined above and explained in further detail below, the Amended Judgment of the Trial Court in this case should reversed and rendered, or in the alternative, reversed and a new trial ordered. ARGUMENT Although this case involves fairly straightforward facts, the resulting complexity is the product of the fact that the case involves the relatively uncharted waters in appellate jurisprudence of Section et seq. of the Texas Property Code, particularly dealing with claims for a landlord s wrongful retention of a security deposit and claims regarding a tenant s withholding of the last month s rent. The complexity is compounded by the jury s return of irreconcilable conflicting answers in its effort to return a verdict in this case. As a result, the jury s answers upon which the Amended Judgment in this case depends necessitates a reversal. A. Standards of Review The standards of appellate review for legal and factual sufficiency are well established. When an appellant attacks the legal sufficiency of an adverse finding on an issue for which she did not have the burden of proof, she must demonstrate that there is no evidence to support the adverse finding. See Croucher v. Croucher, 600 S.W.2d 55, 58 (Tex. 1983). An appellate court will sustain a no- 9

16 evidence point when: (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. Marathon Corp. v. Pitzner, 106 S.W.3d 724, 727 (Tex. 2003). When an appellant challenges the factual sufficiency of the evidence to support an adverse finding on which it did not have the burden of proof, the appellant must demonstrate there is insufficient evidence to support the adverse finding. Dallas County v. Holmes, 62 S.W.3d 326, 329 (Tex.App. Dallas 2001, no pet.). In reviewing a factual sufficiency challenge, an appellate court considers and weighs all of the evidence in support of and contrary to the jury s finding and will aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996). Regarding appellate review of irreconcilable conflict of jury answers, the appellate court applies a de novo standard of review. Bender v. Southern Pacific Trans. Co., 600 S.W.2d 257, 260 (Tex. 1980). The threshold question is whether the findings are about the same material fact. Id. A court may not strike down jury answers on the ground of conflict if there is any reasonable basis upon which they can be reconciled. Id. The court must reconcile apparent conflicts in the jury s findings if reasonably possible in light of the pleadings and evidence, the 10

17 manner of submission, and the other findings considered as a whole. Id. If the jury s findings concern the same material fact and there is no reasonable basis upon which the findings can be reconciled, the findings are in fatal conflict. Puckett v. Arvizu, No CV, 2010 Tex.App. LEXIS 8926 at *13 (Tex.App. Beaumont, Nov. 10, 2010, no pet. hist.) (Mem. Op.) (citing Bender, 600 S.W.2d at 260). Findings that fatally conflict destroy each other and leave no findings on the issues involved, at least to the extent of the conflict. [citation omitted] Generally, fatal conflicts require a new trial. Puckett, 2010 Tex.App. LEXIS 8926 at *14 (quoting Calabrian Chems. Corp. v. Bailey-Buchanan Masonry, Inc., 44 S.W.3d 276, 282 (Tex.App. Beaumont 2001, pet denied); General Motors Corp. v. Paiz, No CV, 2000 Tex.App. LEXIS 7983 at *7 (Tex.App. Dallas, Nov. 29, 2000, no pet.) (not designated for publication) ( If we determine that a fatal conflict exists, we must remand to the trial court for a new trial.). B. Shough s Statutory Claim and The Finding of Bad Faith Issue. In Jury Questions Nos. 12, 13 and 14 of the Charge, the jury purportedly found that Shamoun, in bad faith, withheld the $4,800 last month s (July) rent on the grounds that the security deposit she paid was security for unpaid rent, in violation of TEX. PROP. CODE [CR Vol. 1, pp ] There is a dearth of appellate jurisprudence on the issue, and most of the small number of cases actually involves claims for violation of TEX. PROP. CODE 11

18 and related to a landlord s wrongful retention of a security deposit. However, since both statutory causes of action provide for a rebuttable presumption of bad faith, the analysis is the same. The cases explain that the presumption of bad faith provided by the statute is sufficiently rebutted with evidence that the person acted without an intention to deprive the other party of a lawful right or to purposefully harm the other party. Pulley v. Milberger, 198 S.W.3d 418, (Tex.App. Dallas 2006, pet. denied); Hardy v Memorial, Ltd., 176 S.W.3d 266, 271 (Tex.App. Houston [1 st Dist.] 2004, no pet.). Accordingly, the statutory presumption only applies to support a finding of bad absent rebutting evidence. Pulley, 198 S.W.3d at 428; Hardy, 176 S.W.3d at 271. Importantly, the cases demonstrate that the evidence required to rebut the statutory presumption is relatively slight. For instance, regarding a landlord s retention of a security deposit, [e]vidence that a landlord had reason to believe he was entitled to retain a security deposit to recover reasonable damages is sufficient to rebut the presumption of bad faith created by the Texas Property Code. Pulley, 198 S.W.3d at 428. And, [o]ther evidence may include: (1) the landlord is an amateur lessor because the residence is his only rental property; (2) the landlord had no knowledge of the requirement to submit an itemized list of all deductions from the security deposit; (3) extensive damage was done to the residence; (4) the landlord attempted to do some of the repairs himself to save money; or (5) the 12

19 landlord had a reasonable excuse for the delay, e.g., he was on vacation. Id. at Likewise, in claims involving the statutory presumption against the tenant, the evidence sufficient to defeat the presumption is relatively slight. In Pala v. Maxim, the court noted the evidence adduced that the tenant denied she intended to cheat or harm [the] landlord by applying the security deposit, and explained that, because of her past dealings with [the] landlord, she felt he had taken advantage of here and doubted he would ever refund her deposit. Id., No CV, 2002 Tex.App. LEXIS 1008 at *15 (Tex.App. Houston [1 st Dist.] Feb. 7, 2002, no pet.) (not designated for publication). As such, the Houston Court of Appeals held such evidence as sufficient evidence of lack of bad faith in applying the tenant s security deposit to her last month s rent. Id. Similarly, in the present case, Shamoun testified that because of her experience with the constant interruptions of showings and inspections, etc., she had no enjoyment of the house and thought paying the July rent was ridiculous. [RR Vol. 2, p. 158] Further, Shamoun testified that, as a reason for not paying the July rent, she had felt used as a tool for the landlord to sell the house and felt she was taken advantage of when the landlord had people entering the home to perform inspections and repairs in anticipation of the sale of the house. [RR Vol. 2, p. 162] In fact, similar to Pala, the evidence was that Shamoun didn t think she owed the July rent because of what Lisa was putting you through and the fact that she already had your security deposit[.] [RR Vol. 3, p. 27] [emphasis added] 13

20 In fact, Shough s own attorney clearly established that, at most, the landlord s possession of Shamoun s security deposit was merely only one of the reasons the July rent was not paid [Shough s Attorney]: So there s no doubt then let s make sure. There s no doubt then that the fact that you were aware that Lisa was keeping your security deposit of $5,800 was a component, one reason that you weren t paying July s rent. That s correct? [Shamoun]: Well, I knew that she had my deposit. [Shough s Attorney]: And that was one of the reasons you didn t pay July rent? [Shamoun]: Correct. [RR Vol. 3, pp ] Much like the evidence related to a landlord sufficient to rebut the statutory presumption of bad faith, such as a belief of entitlement to retain the security deposit to recover reasonable physical damages to the property, and moreso similar to the evidence found to be sufficient in Pala, the evidence adduced at trial in this case sufficiently rebutted the presumption of bad faith granted by the statute. As a result of the destruction of the statutory presumption of bad faith, the burden then fell to Shough to adduce evidence of actual bad faith; that is, evidence of Shamoun s actual dishonesty in fact in the conduct of the transaction and intent to deprive Shough of a lawful right or harm Shough. See Hardy, 176 S.W.3d at 271. Particularly in light of the undisputed fact that Shough had possession of, and still has possession of $5,800 of Shamoun s money, which exceeded the amount of July rent, it is uncontroverted that absolutely no evidence 14

21 was adduced at trial that even attempted to establish any actual bad faith on Shamoun s part. As a result, because the statutory presumption was adequately and effectively rebutted, there was no legally sufficient evidence, and certainly no factually sufficient evidence, to support the jury s finding of bad faith in Jury Question No. 14. Accordingly, the jury s finding regarding Jury Question No. 14 must be disregarded. A question arises, then, as to what is the proper effect upon Shough s statutory claim and the jury s answers to Jury Questions Nos. 12 and 13. A strict reading of the statute reveals that any liability under is predicated upon a finding of bad faith. In other words, a finding of bad faith is necessary in order to have any liability or recovery under the statutory claim. So, to begin with, once the jury s insupportable bad faith finding is disregarded, the entire statutory claim is vitiated, requiring the Amended Judgment to be vacated. Alternatively, even if one was to analogize to the Texas Deceptive Trade Practices Act insofar that a finding of bad faith authorizes the trebling of the damages found by the jury, such that in this case if the finding of bad faith were disregarded, preventing a trebling, then even the jury s answer to Jury Question No. 14 could not stand in face of the undisputed fact that Shough has always been in possession of and remains in possession of $5,800 of Shamoun s money. [RR Vol. 2, p. 43] Accordingly, since the amount putatively found by the jury as damages is less than the amount still retained and in the possession of Shough, 15

22 then Shough could not have suffered any damages, and the answer required for Jury Question No. 13 would be $0.00. Again, the result would be this Court s reversal of the case and vacation of the Amended Judgment. 2 C. Shamoun s Statutory Claim and The Irreconcilable Conflict. Shamoun s statutory violation claims against Shough for wrongful retention of the security deposit were addressed in Jury Question Nos. 9, 10 and 11. By their answers to these questions, the jury found that Shough wrongfully withheld, albeit not in bad faith, only Shamoun s pet deposit of $1,000. [CR Vol 1, pp ] Texas Property Code provides a tenant with a cause of action against the landlord when the landlord fails to return a security deposit or to provide a written description of the damages and an itemized list of the deductions taken from the security deposit by the thirtieth day after the tenant surrenders the premises. Pulley, 198 S.W.3d at 426. In addition to rebutting the presumption of bad faith, in order to defend against the tenant s cause of action, the landlord has the burden to prove the retention of any portion of the security deposit was reasonable. Id. As noted in Pulley, Chapter 92, subchapter C of the Texas Property Code establishes two causes of action that permit a tenant to seek recovery of her security deposit from her landlord. The first cause of action involves a landlord s 2 The final alternative view that of reversing the election of remedies and revivor of the jury s verdict on Shough s breach of contract claim is addressed below. 16

23 bad faith retention of the security deposit and is established in (a). Id. at 428. The premise of the second cause of action is a landlord s bad faith failure to account for the security deposit. Id. Importantly, Even when a landlord defeats the presumption of bad faith in an action under section (a) as to the failure to return security deposits, the landlord has another hurdle. He must prove the retention of any portion of the security deposit was reasonable. Id. at 429. A landlord s retention of the security deposit may be reasonable if: (1) the tenant is legally liable for any physical damages to the property under the lease or as a result of breaching the lease; (2) the physical damages to the property did not exist before the tenant leased the premises; or (3) the physical damages to the property or charges are equal to or in excess of the security deposit or the amount deducted from the security deposit. Id. Further, When a landlord is sued under section (a), the landlord has the burden to prove that the retention of the security deposit was reasonable, not that the repair costs were reasonable. However, proof of the reasonableness of the repair costs may be necessary to satisfy the requirement of proving the reasonableness of the retention. Id. at 432 [emphasis in original]. Most importantly, it must be recognized that a security deposit is defined in the statute as any advance of money, other than an advance payment of rent, that is intended primarily to secure performance under a lease of a dwelling. TEX. PROP. CODE ; Pulley, 198 S.W.3d at 427 [emphasis added]. 17

24 Accordingly, in the present case, the jury found that Shough wrongfully retained only Shamoun s pet deposit of $1,000; however, the jury s answer can only be supported if Shough met her burden that she reasonably retained (and still retains the remaining $4,800 of the security deposit because Shamoun was liable for physical damages to the property equal to or exceeding $4,800. To the contrary, Shough failed to adduce any legally or factually sufficient evidence of repair costs or damages to the property attributable to Shamoun, much less in an amount equal to or exceeding $4,800 to justify the continued retention of Shamoun s security deposit. Accordingly, since there was no evidence, and certainly factually insufficient evidence, adduced by Shough establishing physical damages to the property or costs of repairs justifying the retention of the remaining $4,800 of Shamoun s security deposit, the jury was compelled to find in Jury Question Nos. 9 and 10 that Shough wrongfully retained the full $5,800 of Shamoun s security deposit. 3 Instead, the only explanation for the omission of the remaining $4,800 of the security deposit from the jury s answers to Jury Question Nos. 9 and 10 is that the jury wrongfully characterized and attributed Shamoun s security deposit as some form of advance payment of rent, contrary to the statutory definition of a security deposit. Simply, there is no evidence in the record of any physical 3 Admittedly, if the jury s failure to find bad faith Jury Question No. 11 vitiates the entire cause of action; then, likewise, Shough s statutory claim against Shamoun, as addressed above, is also entirely vitiated for lack of bad faith. It is axiomatic that where both claims are unsupported by a sufficient finding of bad faith, then either both claims should completely fail or, alternatively, by analogy to the DTPA, the lack of bad faith merely prevents a trebling of the actual damages for both claims. 18

25 damages to the property even being claimed, much less established by competent evidence, that equaled or exceeded $4,800, which happens to be the exact amount of the rent. It is clear, then, that the jury made no distinction, as the statute definitively does, that the issue and character of a security deposit is separate and distinct from the issue and character of any rent, either owed or not owed or paid or unpaid. 4 As a result, the problematic issue of irreconcilable conflict arises. Since the jury demonstrated by its answers to Jury Question Nos. 9 and 10 that it characterized the remaining $4,800 of Shamoun s security deposit as payment for rent, then such answers necessarily irreconcilably and fatally conflict with the jury s answers to Jury Question Nos. 12 and 13, because if the remaining $4,800 was rightfully retained by Shough as payment for July rent, then Shamoun cannot be liable for wrongfully withholding, whether in bad faith or not, $4,800 of July rent. And, further, if Shough rightfully retained the remaining $4,800 as payment for July rent, Shough cannot be owed and entitled to an additional $4,800 of wrongfully withheld or unpaid July rent. No reasonable mental gymnastics can credit the jury s omission of the remaining $4,800 from Shamoun s security deposit as a finding that it was rightfully retained, except by characterizing and 4 Because the statute makes such clear distinction and definition, the statute necessarily envisions the return of the security not withheld for physical damages to the property, regardless of whether there may be claim made by the landlord, as here, asserting the tenant s wrongful withholding of the last month s rent. This is alluded to in the Houston Court of Appeals decision in Hardy v Memorial Ltd., wherein the landlord contended that it was not required to return the unused portion of the security deposit because the tenant owed rent. The court held that regardless of the controversy concerning the amount of rent owed at the time the tenant surrendered possession of the premises, [u]nder the plain language of section , [the] landlord s duty to return the deposit was not excused. Id., 176 S.W.3d 266, 275 (Tex.App. Houston [1 st Dist.] 2004, no pet.). 19

26 applying it as payment for the July rent, which the jury was not allowed to do. Nonetheless, if it characterized and applied as rent to uphold the jury s finding that Shough only withheld the $1,000 pet deposit, then an irreconcilable and fatal conflict is established with the jury s finding that Shamoun wrongfully withheld the same $4,800 as July rent. Accordingly, since no evidence, and certainly factually insufficient evidence, was adduced to establish the reasonable retention of the remaining $4,800 of Shamoun s security deposit, the jury s answer to Jury Question No. 10 was compelled to be $5,800. Only then can the jury s answer to Jury Question No. 13 be credited. However, in doing so, when the trial court would perform its further duty to apply all applicable offsets regarding the competing statutory violation claims, the result would be a judgment granting recovery by Shamoun of $1,000 and a take-nothing regarding Shough. 5 Further, only by such application could the ever-present white elephant, the continuing present possession by Shough of the full $5,800 of Shamoun s money be accounted for and appropriately applied. Due to the demonstrated fatal irreconcilable conflict of the jury s answers to the Jury Questions regarding the competing statutory claims, the Trial Court s Amended Judgment should be reversed and reformed. Alternatively, at a minimum, since the jury s answers are not supported by legal and factually 5 The effect on the statutory recovery of attorney s fees becomes clear. Because the exact same amount of attorney s fees was stipulated to for both sides, either the trial court would enter a judgment granting recovery for both parties regarding their statutory claims, one party recovering $5,800 and one party recovering $4,800 and the attorney s fees amounting to a wash, or the trial court would apply offset of the awards prior to judgment and only one party, Shamoun, recover $1,000 damages and attorney s fees. 20

27 sufficient evidence without creating a fatal conflict, the case should be reversed and remanded for a new trial. D. The Competing Breach of Contract Claims. Because any vitiation of Shough s statutory violation claim would, in the least, invoke a revival of the jury s verdict regarding the breach of contract claims, it becomes necessary to additionally demonstrate that no judgment can be supported and rendered based upon the jury s answers to the competing breach of contract claims as well. In Jury Question No. 5, the jury found that Shamoun was liable for breach of contract. [CR Vol. 1, p. 309] In Jury Question No. 8, regarding damages for such breach of contract, the jury was instructed to only consider Damages in the form of rental payments and late payments that should have been paid by Brigitte Shamoun, if any. [CR Vol. 1, p ] In other words, at the time of submission, based upon the evidence adduced at trial, Shough was not seeking as breach of contract damages anything other than the asserted July rent and calculated late charges and fees stipulated in the lease. The evidence adduced at trial provided a definite calculation for the amount of the asserted July rent and late charges and fees which Shough was seeking. There was no amorphous range of damages being sought. The asserted damages relating to the rent were simple and calculated, as evidence by Shough s August 24, 2005 letter. Simply, the July lease payment was $4,800, with a late fee of $200 and late charges 21

28 amounting to $1,300, for a total of $6,300. [RR Vol. 2, Pltf. Exh. 13] As a result, according to the express instructions provided by the Trial Court, the jury was to mechanically apply those amounts to award damages for breach of contract in the amount of $6,300. Instead, the jury returned a verdict in Jury Question No. 8 of $5,460. No application of mental gymnastics related to the damages of rental payments and late payments that should have been paid by Brigitte Shamoun can result in the jury s given verdict. However, a singular calculation does result in the reason for the jury s answer, and it establishes that the jury created another irreconcilable conflict with its response. As part of Shamoun s breach of contract claims, Shamoun sought recovery for Shough s breach and retention of her security deposit and recovery for Shough s breach of contract in failing to reimburse Shamoun for repairs paid for by Shamoun to the spa in the residence. The adduced evidence was undisputed that Shamoun had not been reimbursed for those expenditures. [RR Vol. 2, p. 43; Vol. 3, pp. 6, 38, Pltf. Exhs. 15, 16] The $840 difference between the damages related to rent and late charges sought by Shough of $6,300 and the jury s damage award of $5,460 corresponds to the amounts related to repairs of the spa sought as breach of contract damages by Shamoun for reimbursement. Necessarily, then, in their answer to Jury Question No. 8, the jury awarded Shamoun the $840 repairs reimbursement damages as an offset to the $6,300 damages sought by Shough related to the rent and late charges. By doing so, albeit wrongfully, the jury 22

29 undertook on its own to award and offset damages sought by Shamoun on her breach of contract claim to the award of damages sought by Shough on her breach of contract claim. The irreconcilable and fatal conflict arises in the fact that the jury awarded such damages related to Shamoun s breach of contract claim against Shough without assigning the liability, as addressed in Jury Question No. 1, wherein the jury responded no as to Shough s breach of contract. Simply, legally, a jury cannot undertake upon itself to assign damages regarding one party s claim as an offset to the damages it awards to the other party s competing claim, without assigning the liability to the competing claims. The jury cannot answer no as to the liability on one party s claim and yet award that same party damages as an offset to the other party s claim. The purview of applying offsets to such competing claims lies solely with the trial court, otherwise, as seen here as result, a conflict arises within the jury s answers that proves fatal and necessitates reversal. 6 Further, the jury s award in Jury Question No. 9 wholly fails to account for the $5,800 of security deposit indisputably still retained and possessed by Shough. At a minimum, application of the possession of that money completely offsets the damages awarded in Jury Question No. 9, resulting in a $0 damages award for 6 In this regard, it is even impossible for this Court to simply reform the judgment to reflect a finding of liability for breach of contract as to both parties and apply the jury s answer to Jury Question No. 9 as the end-result after offsets because of the effect it would have upon the question of recovery of attorney s fees, particularly in light of the fact that the Court would also be required to apply the white elephant of the further offset of the $5,800of Shamoun s money which is indisputably still retained by Shough. Such application would result in, as mentioned further above, actually a recovery by Shamoun of the $340 difference. Continually, the effect of the application of the $5,800 possessed by Shough, and utterly ignored by both the jury and the Trial Court, demonstrates the necessity for reversal of the Amended Judgment. 23

30 Shough s breach of contract claim. More rightly, however, since the jury cannot wrongfully characterize and ascribe any part of the security deposit as rent, and because there was no legally or factually sufficient evidence to support any finding that Shough rightfully retained any of the security deposit, the jury s answer to Jury Question No. 1, there is no evidence to support, and such answer is certainly against the great weight and preponderance of the evidence as to be manifestly wrong and unjust, a finding of no liability against Shough on Shamoun s breach of contract claim regarding the continued wrongful retention and possession of Shamoun s $5,800 as a breach of contract. On the other hand, the evidence adduced at trial was both legally and factually sufficient to establish Shough s breach of contract, both as to the retention of the $5,800 security deposit and the $840 spa repairs, such that both liability and damages should have been awarded to Shamoun in the amount of $6,640 on Shamoun s breach of contract claim. Then, if the jury found liability and damages, presumably in the maximum amount of $6,300, on Shough s breach of contract claim, it would have been within the sole purview of the Trial Court to either enter judgment separately awarding each party recovery on the competing contract claims (as well as awarding both attorney s fees, which in practical effect would amount to a wash due to the stipulation of the parties at trial regarding fees) or to apply an offset and ultimately award only one party, presumably Shamoun, recovery of $340 on her breach of contract claim alone (with the resulting recovery of the stipulated attorney s fees). Instead, the jury created fatal 24

31 irreconcilable conflicts in its answers by mistakenly treating at least part of the security deposit as rent while at the same time awarding Shough breach of contract damages for the same rent and late charges, offset by an award in the amount of the spa repair damages sought by Shamoun, all without properly assigning the resultant liability and let the Trial Court do its job.all while additionally still wrongfully never recognizing nor applying the undisputed $5,800 of Shamoun s money still possessed by Shough. Nowhere in the jury s answers nor in the Trial Court s Amended Judgment is Shough s continued and present possession of Shamoun s $5,800 recognized or applied (appropriately or otherwise). The jury s mistakes in creating such fatal conflicting answers, as well as the Trial Court s failure to ever apply in any form or fashion, much less appropriately, the white elephant of the still-possessed $5,800, has resulted in an Amended Judgment that necessitates reversal and, as it stands, even creates a windfall for Shough. And, as Justice Patterson of the Austin Court of Appeals pointed out, It is axiomatic that equity abhors a forfeiture and will, likewise, avoid an unjust windfall. Amos v. Ferretti, No CV, 2005 Tex.App. LEXIS 4895 at *31 (Tex.App. Austin, June 23, 2005, no pet.) (Mem. Op.)(Patterson, J., dissenting). On relatively straightforward facts, due to the undeveloped nature of the jurisprudence of the statutory claims and because of the jury s clear indiscreet failure to simply do its job and allow the Trial Court to its job, a relative mire of confusing and complex set of irreconcilable and fatally conflicting jury answers 25

32 has resulted upon which the Trial Court s Amended Judgment cannot be supported and, at a minimum, requires reversal and remand for a new trial. E. The Evidence of Shough s Prior Material Breach Was Both Legally and Factually Sufficient. Finally, the evidence adduced at trial also demonstrates that the evidence of Shough s prior material breach of the lease agreement was both legally and factually sufficient such that the jury s answer to Jury Question No. 1 is insupportable. [CR Vol. 1, p. 306] Stated differently, the jury s negative answer to Jury Question No.1 (and necessarily the jury s negative answer to Jury Question No. 6) is not supportable because the evidence established conclusively the opposite of the fact found by the jury and because the jury s answer(s) regarding Shough s prior material breach was so against the great weight and preponderance of the evidence as to be manifestly wrong and unjust. [CR Vol. 1, pp. 306, ] It is well founded that a [m]aterial breach by one party to a contract excuses the other party from any obligation to perform. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 693 (Tex. 1994); Re/Max, Inc. v. Katar Corp., 961 S.W.2d 324, 327 (Tex.App. Houston [1 st Dist.] 1997, pet. denied). In this case, pursuant to the lease, Shamoun agreed to pay Shough $4,800 per month in rent. [RR Vol. 2, Pltf. Exh. 1] It was undisputed that Shamoun paid Shough $35,529 up front, which included $5,800 as a security and pet deposit and 26

33 pre-payment of rent for six months. [RR Vol. 2, Exhs. 1 and 2] The lease entitled Shamoun to possession of the residence until August 31, [RR Vol. 2, Pltf. Exh. 1] Importantly, the lease required all modifications to be in writing, and the undisputed evidence adduced at trial established that there were no written modifications to the lease. [RR Vol. 2, Pltf. Exh. 1] The lease also prohibited Shough from marketing, showing or accessing the residence prior to July 31, [RR Vol. 2, Pltf. Exh. 1] The evidence adduced at trial conclusively established that beginning on or before June 19, 2005, Shough and her agent began a course of marketing the home, placing For Sale signs and key boxes at the home, showing the home to potential buyers, and accessing the home, all without prior written notice or written consent. [RR Vol. 2, pp , 59, 73, 124, Pltf. Exh. 3] Also, the evidence adduced at trial conclusively established that on June 27, 2005, Shough contracted to sell the home, close, and deliver possession to a buyer on July 29, 2005 a month before Shough s lease and right to possession would expire, under the lease, on August 31, [RR Vol. 2, Pltf. Exh. 5] 27

34 The following evidence and testimony at trial conclusively established that Shough committed numerous substantial material breaches of the lease Controlling Lease Provisions (Quoted) [RR Vol. 2, Pltf. Exh. 1] 3.A. Primary Term: The primary term of this lease begins and ends as follows: Commencement Date: August 26, 2004 Expiration Date: August 31, NOTICES: All notices under this lease must be in writing and are effective when hand-delivered, sent by mail, or sent by facsimile A. Signs: Landlord may prominently display a For Sale or For Lease or similarly worded sign on the Property during the *LAST 30 DAYS of this lease or any renewal period. BREACH MATRIX Date of Breach June 27, 2005 June 21, 2005 Evidence/Testimony Presented at Trial Real Estate Sales Contract [RR Vol. 2, Pltf. Exh. 5] 1, 24: On June 27, 2005, Defendant entered the binding Real Estate Sales Contract, wherein Defendant agreed to sell the Home. 9: The Sales Contract states The Closing of the sale will be on or before July 29, 2005,... 10: The Sales Contract required: Seller shall deliver to Buyer possession of the Property in its present or required condition, ordinary wear and tear excepted: upon closing and funding (i.e., July 29, 2005) Property Inspection Report [RR Vol. 2, Pltf. Exh. 8] This Report was prepared for buyer J. May on July 1, Testimony of Defendant [RR Vol. 2, p. 48, 54] Defendant testified that Plaintiff never provided any written notice to Defendant that she would be vacating the Home one month prior to the expiration of the Lease. Residential Listing Agreement/Exclusive Right to Sell [RR Vol. 2, p. 124, Pltf. Exh. 3] 1., p. 8. On June 21, 2005, Defendant and Agent Barion entered into the binding Residential Real Estate Listing Agreement / Exclusive Right to Sell 4. The Listing Agreement authorizes Agent Barion to begin listing/marketing the Home on June 21, B. The Listing Agreement authorizes the following:... Broker may: (2) place a For Sale sign on the Property... Testimony of Defendant & Agent Barion Defendant and Agent Barion testified that on or about June 21, 2005, Defendant hired Agent Barion to list the home for sale and market the Home at the end of June. [RR Vol. 2, p. 105; Vol. 3, p. 85] Defendant and Agent Barion testified that on or about June 21, 2005, pursuant to Residential Listing Agreement, Agent Barion placed a For Sale sign in the front yard of the Home. [RR Vol. 2, p. 105, Vol.3, pp ] Defendant and Agent Barion testified that they never received any written agreement from Plaintiff allowing them to display a For Sale sign in the front yard prior to 30 days from the lease expiration date. [RR Vol. 2, pp , 145; Vol 3, pp ] Testimony of Plaintiff & G. Shamoun Plaintiff and G. Shamoun testified that the For Sale sign was placed on the property in June of 2005, that Plaintiff did not give permission for placement of the sign, and that Plaintiff complained to Agent Barion regarding the placement 28