Philadelphia Indemnity Insurance Company A/S/O Mirsan, L.P., D/B/A Sienna Ridge Apartments v. Carmen A. White ( 2017 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-12-00721-CV
PHILADELPHIA INDEMNITY INSURANCE COMPANY a/s/o Mirsan, L.P., d/b/a Sienna
Ridge Apartments,
Appellant
v.
Carmen A. WHITE,
Appellee
From the 57th Judicial District Court, Bexar County, Texas
Trial Court No. 2011-CI-16235
Honorable Peter Sakai, Judge Presiding
Opinion by: Marialyn Barnard, Justice
Sitting: Sandee Bryan Marion, Chief Justice
Marialyn Barnard, Justice
Luz Elena D. Chapa, Justice
Delivered and Filed: January 4, 2017
REVERSED AND REMANDED
Appellant Philadelphia Indemnity Insurance Company (“Philadelphia”), as subrogee of
Mirsan, L.P. d/b/a Sienna Ridge Apartments, sued appellee Carmen White for damages related to
an apartment fire allegedly caused by White. In the suit, Philadelphia alleged White breached
paragraph 12 of her apartment lease — which included a catch-all phrase that required White to
reimburse Philadelphia for any damages not due to Philadelphia’s negligence or fault — thereby
rendering her liable for the damages caused by the fire. After a jury found in favor of Philadelphia,
the trial court granted White’s motion for judgment notwithstanding the verdict (“JNOV”).
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Philadelphia appealed. A majority of a three-justice panel of this court affirmed the trial court’s
judgment in favor of White, holding paragraph 12 of the lease, the provision White was alleged to
have breached, is void as against public policy and unenforceable. 1 See Philadelphia Indem. Ins.
Co. v. White, 421 S.W.3d 252, 259 (Tex. App.—San Antonio 2013), rev’d, 490 S.W.3d 468 (Tex.
2016). Philadelphia filed a petition for review in the Texas Supreme Court, which was granted.
In its opinion, the supreme court affirmed the portion of our judgment that held the catch-all
provision in paragraph 12 of the lease is not ambiguous, an issue upon which both the majority
and dissent in this court agreed. See Philadelphia Indem., 490 S.W.3d at 477; see also 421 S.W.3d
at 256; id. at 260 n.2 (Barnard, J., dissenting). However, the supreme court reversed the portion
of our judgment that held paragraph 12 of the lease is void as against public policy and rendered
judgment that the lease provision is not unenforceable on public policy grounds. See Philadelphia
Indem., 490 S.W.3d at 491. Because this court’s majority opinion did not address White’s
remaining defenses to the enforcement of the lease, the supreme court remanded the matter back
to this court for consideration of those defenses. Id. On remand, we reverse the trial court’s
judgment and remand the matter to the trial court for entry of judgment in favor of Philadelphia in
accordance with the jury’s verdict.
BACKGROUND
White entered into a nine-month apartment lease at Sienna Ridge Apartments in San
Antonio, Texas. Before moving in, White signed a rental application and a lease contract prepared
by the Texas Apartment Association (“TAA”). After moving in, White received a brand new
washer and dryer from her parents. A few days later, a fire originated inside White’s dryer,
1
On original submission to this court, Chief Justice Sandee Bryan Marion, joined by Justice Luz Elena Chapa,
authored the majority opinion. Justice Barnard dissented, opining the trial court erred in granting White’s JNOV on
any of the grounds asserted by White.
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destroying her apartment and several adjacent units. White testified she had only used the dryer
two or three times prior to the incident. White admitted that on the day of the incident, she
overloaded the dryer with “a duvet, some sheets, a blanket, decorative pillows, and a standard or
queen-sized bed pillow.” White testified she did not wash the items beforehand, and did not read
the safety booklet that came with the dryer. A few moments after starting the dryer, White smelled
something, opened the dryer and saw flames inside the drum. She then called 911.
Mirsan filed a damage claim with its insurance carrier, Philadelphia, which adjusted and
paid the claim. Philadelphia then asserted its subrogation rights against White to recover damages.
Philadelphia initially sued White for negligence, alleging White failed to read the dryer’s
instruction booklet and loaded the dryer with prohibited items, namely a “foam pillow,” which
was a fire hazard. Subsequently, Philadelphia amended its pleadings to add a breach of contract
claim, alleging White violated paragraph 12 of the TAA lease by failing to timely reimburse Sienna
Ridge for damages caused by the fire.
White moved for summary judgment on Philadelphia’s breach of contract claim. The trial
court denied her motion, and the case proceeded to trial. At the close of Philadelphia’s case-in-
chief, White moved for a directed verdict on Philadelphia’s breach of contract claim. The trial
court denied White’s motion. The case was then submitted to the jury on both the negligence and
breach of contract claims. The jury found in favor of White on the negligence claim, but found in
favor of Philadelphia on the breach of contract claim, awarding Philadelphia all of its claimed
damages plus attorney’s fees.
Thereafter, Philadelphia filed a motion for entry of judgment, and White filed a motion for
JNOV. After a hearing on these motions and additional briefing, the trial court issued a letter
stating it was granting White’s motion for JNOV and denying Philadelphia’s motion for entry of
judgment. Ultimately, the court signed a final judgment, entering a take nothing judgment in favor
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of White. On original appeal to this court, we affirmed the trial court’s judgment. The supreme
court reversed the portion of our judgment holding paragraph 12 is void as against public policy,
remanding the matter back to this court to address White’s remaining defenses to the enforcement
of paragraph 12.
ANALYSIS
Standard of Review
A trial court may disregard a jury’s verdict and grant a motion for JNOV only when there
is no evidence to support the jury’s finding. Bank of Am., N.A. v. Eisenhauer, 474 S.W.3d 264,
265 (Tex. 2015) (citing Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex.
2009)); Perez v. Arredondo, 452 S.W.3d 847, 853 (Tex. App.—San Antonio 2014, no pet.); TEX.
R. CIV. P. 301. A trial court may also grant a JNOV if a directed verdict would have been proper
because a legal principle precludes recovery. We review a JNOV under a legal sufficiency or “no
evidence” standard of review, “meaning we credit evidence favoring the jury verdict if reasonable
jurors could, and disregard contrary evidence unless reasonable jurors could not.” Tanner, 289
S.W.3d at 830; Guzman v. Synthes, 20 S.W.3d 717, 719 (Tex. App.—San Antonio 1999, pet.
denied). If there is more than a scintilla of evidence to support the jury’s finding, then the JNOV
should be reversed. Tanner, 289 S.W.3d at 830 (citing Wal-Mart Stores, Inc. v. Miller, 102 S.W.3d
706, 709 (Tex. 2003) (per curiam)). More than a scintilla of evidence exists when the evidence
“rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.”
Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 347 (Tex. 2015); Ford Motor Co. v.
Ridgway, 135 S.W.3d 598, 601 (Tex. 2004).
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04-12-00721-CV
Application
Philadelphia contends once again the trial court erred in granting White’s motion for JNOV
and overturning the jury’s finding that White breached her apartment lease. As noted above,
Philadelphia alleges White breached paragraph 12 of the TAA lease, which states:
DAMAGES AND REIMBURSEMENT. You must promptly pay or reimburse us
for loss, damage, consequential damages, government fines or charges, or cost of
repairs or service in the apartment community due to: a violation of the Lease
Contract or rules; improper use; negligence; other conduct by you or your invitees,
guests or occupants; or any other cause not due to our negligence or fault. You
will indemnify and hold us harmless from all liability arising from the conduct of
you, your invitees, guests, or occupants, or our representatives who perform at your
request services not contemplated in this Lease Contract. Unless the damage or
wastewater stoppage is due to our negligence, we’re not liable for—and you must
pay for— repairs, replacements and damage to the following if occurring during
the Lease Contract term or renewal period: (1) damage to doors, windows, or
screens; (2) damage from windows or doors left open; and (3) damage from
wastewater stoppages caused by improper objects in lines exclusively serving your
apartment. We may require payment at any time, including advance payment of
repairs for which you’re liable. Delay in demanding sums you owe is not a waiver.
(emphasis added).
Philadelphia argues the catch-all provision in paragraph 12 — “or any other cause not due
to our negligence or fault”— rendered White liable for the damage caused by the dryer fire.
Philadelphia argues, based on the evidence presented at trial, there were only two possible causes
for the fire: White’s misuse of the dryer, or a defect in the dryer. Even though the jury found
White was not negligent, Philadelphia argues that because White owned the brand new dryer, and
the dryer fire admittedly caused the damage, she was required under paragraph 12 of the TAA
lease to pay for all damage. Philadelphia contends her failure to pay constituted a breach of
contract, as found by the jury.
Because the trial court did not specify the grounds for granting White’s JNOV motion, we
must uphold the trial court’s ruling if any of the remaining grounds — grounds other than those
disposed of by the supreme court — will support the judgment. See Fort Bend Cty. Drainage Dist.
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v. Sbrusch, 818 S.W.2d 485, 394 (Tex. 1991); Garza v. Cantu, 431 S.W.3d 96, 101 (Tex. App.—
Houston [14th Dist.] 2013, pet. denied). It is Philadelphia’s burden to discredit the remaining
grounds raised in White’s motion. See Sbrusch, 818 S.W.2d at 394; Garza, 431 S.W.3d at 101.
White contends, based on the supreme court’s decision, there are four remaining defenses
to enforcement of the lease that this court must consider: (1) lack of consideration; (2)
unconscionability; (4) lack of fair notice given the risk-shifting contractual clause; and (5)
improper creation of a new theory of strict liability. 2 See Philadelphia Indem., 490 S.W.3d at 475–
91. We address each in turn.
LACK OF CONSIDERATION
White contends she did not receive any “consideration” for agreeing to paragraph 12 of the
TAA lease. Philadelphia argues that although White pled “lack of consideration,” she waived the
issue by failing to request the trial court submit the issue to the jury. Moreover, Philadelphia
argues that when consideration is lacking, the entire contract is void, not just a portion of it, and
White cannot prove the TAA lease lacked consideration.
We first address Philadelphia’s waiver argument. Philadelphia argues lack of
consideration is an affirmative defense that goes to the question of contract formation, and is a
question of fact that must be submitted to the jury. See Burges v. Mosley, 304 S.W.3d 623, 628
(Tex. App.—Tyler 2010, no pet.). By failing to submit the issue to the jury, Philadelphia argues
White waived the issue, and therefore, it cannot serve as a basis to uphold the trial court’s grant of
her motion for JNOV.
2
As previously noted, White also originally claimed paragraph 12 was ambiguous and void as against public policy.
These defenses were the subject of the supreme court’s decision to affirm in part — as to ambiguity — and reverse in
part — as to the claim paragraph 12 was void as against public policy. See Philadelphia Indem., 490 S.W.3d at 477,
491. Thus, they need not be readdressed on remand.
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Although “failure of consideration is an affirmative defense,” see TEX. R. CIV. P. 94, lack
of consideration, as alleged here, is not. See Constr. Fin. Servs., Inc. v. Chicago Title Ins. Co., No.
04-12-00375-CV, 2013 WL 1846613 at *18 n.8 (Tex. App.—San Antonio May 1, 2013, pet.
denied) (mem. op.). Lack of consideration is not an affirmative defense because it does not provide
an independent reason to file suit against the plaintiff; rather, it goes directly to the plaintiff’s cause
of action. Id. Furthermore, this court has held that what constitutes consideration is a question of
law. Marx v. FDP, LP, 474 S.W.3d 368, 378 (Tex. App.—San Antonio 2015, pet. denied);
Brownwood Ross Co. v. Maverick Cty., 936 S.W.2d 42, 45 (Tex. App.—San Antonio 1996, writ
denied). Therefore, we hold the failure to submit the issue to the jury did not constitute waiver.
See Marx, 474 S.W.3d at 378; Brownwood Ross, 936 S.W.3d at 45.
Now we address White’s contention that there was a lack of consideration with regard to
the TAA lease. Consideration is a fundamental element of every valid contract. Alex Sheshunoff
Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 659 (Tex. 2006); Marx, 474 S.W.3d at 378.
Consideration is a bargained-for exchange of promises or return performance and consists of
benefits and detriments to the contracting parties. Marx, 474 S.W.3d at 378; McLernon v. Dynegy,
Inc., 347 S.W.3d 315, 335 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (citing Roark v.
Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991)). Lack of consideration refers to a
contract that lacks mutuality of obligation. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding,
289 S.W.3d 844, 857–58 n.26 (Tex. 2009); Fed. Sign v. Texas S. Univ., 951 S.W.2d 401, 409 (Tex.
1997). However, the existence of a written contract presumes consideration for its execution.
Frequent Flyer Depot, Inc. v. Am. Airlines, Inc., 281 S.W.3d 215, 224 (Tex. App.—Fort Worth
2009, pet. denied); see Fielding, 289 S.W.3d at 858 (holding it is presumed that when parties make
agreement they intend it to be effectual; contracts will be construed in favor of mutuality).
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The supreme court has held that by signing a contract, a party is presumed to have read and
understood its contents. See In re Prudential Co. of Am., 148 S.W.3d 124, 134 (Tex. 2004); see
also Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (holding Texas law presumes
party who signs contract has read it and knows of its contents). Our review of the TAA lease
signed by White shows it contains numerous mutual obligations between Sienna Ridge and White.
For example, the TAA lease required White to pay Sienna Ridge $845.00 per month in return for
Sienna Ridge permitting her to live on its premises. The lease also includes a list of responsibilities
for the owner of the property and the resident, including Sienna Ridge’s responsibility to “keep
common areas reasonably clean,” “maintain fixtures, hot water, heating, and A/C equipment,” in
return for White’s responsibility to pay rent and deposit, among other things. Therefore, we hold
there was no lack of consideration related to White’s signing of the TAA lease. See Am. Airlines,
Inc., 281 S.W.3d at 224. Accordingly, the trial court could not have granted White’s JNOV based
on lack of consideration.
LACK OF FAIR NOTICE
White argues paragraph 12 of the TAA lease failed to provide fair notice given the risk-
shifting nature of the catch-all provision in paragraph 12. Philadelphia argues this contention was
rejected by the Texas Supreme Court in Churchill Forge, Inc. v. Brown, 61 S.W.3d 368 (Tex.
2001), where the court analyzed and upheld a prior version of the same paragraph with regard to
a fair notice challenge.
As in the instant case, Churchill Forge involved an apartment fire allegedly caused by a
tenant, which extensively damaged the apartment complex. Id. at 369. The tenant’s mother co-
signed the lease with her son. Id. After the fire, the apartment complex sued the mother, asserting
the lease required her, as a co-tenant, to pay for any damages resulting from her son’s negligence.
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Id. The mother defended against the suit on several of the same grounds asserted by White in her
motion for JNOV, including lack of fair notice. See id. at 370.
The supreme court rejected the mother’s fair notice argument, noting the fair notice
doctrine covers only “contractual provisions relieving a party in advance of its own negligence.”
Id. at 373. Thus, as the court explained, the doctrine applies only when a party seeks release or
indemnity from the consequences of its own negligence. Id. at 373–74. In Churchill Forge,
Churchill Forge did not seek indemnity or release of its own negligence. Id. Similarly,
Philadelphia did not seek to release itself from the consequences of its own negligence, and it
neither sued White for indemnity nor did it assert any rights against White under a release. Thus,
White’s fair notice claim does not apply under the specific language set forth in Churchill Forge.
See id. at 374.
White admits fair notice under these circumstances is not “explicitly” required by the fair
notice doctrine, but argues this court should hold it applies given “the spirit of the purpose of the
doctrine.” However, as set out above and as White concedes, the supreme court has only applied
the requirements of the fair notice doctrine to indemnity agreements and releases “when such
exculpatory agreements are utilized to relieve a party of liability for its own negligence in
advance.” We decline to expand the law as suggested by White.
Accordingly, we hold White’s argument based on the fair notice doctrine did not preclude
recovery by Philadelphia, see Sbrusch, 818 S.W.2d at 394, and does not support the trial court’s
decision to grant White’s motion for JNOV.
UNCONSCIONABILITY
White also argues paragraph 12 of the TAA lease is unconscionable because it is a contract
of adhesion, and she had no choice but to sign the lease. We disagree.
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A contract is unenforceable if it is so one-sided that it is unconscionable under the
circumstances existing when the parties made the contract. In re Poly-America, L.P., 262 S.W.3d
337, 348 (Tex. 2008). Whether unconscionability exists in a contract is a question of law for the
court. Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 562 (Tex. 2006). Unconscionability is
determined in light of a variety of factors aimed to prevent oppression and unfair surprise; “in
general, a contract will be found unconscionable if it is grossly one-sided.” Poly-America, L.P.,
262 S.W.3d at 348.
In this case, the evidence shows White had the right to review the lease contract before she
signed it. In fact, White’s rental application included a statement that advised she could consult
an attorney in reviewing her lease. White testified she read the entire rental application before
signing it. White testified she did not feel the need to consult with an attorney prior to submitting
the rental application and did not have any questions about the application. White does not claim
she did not understand the lease. Therefore, we hold White has failed to show the TAA lease was
“grossly one-sided”. See Poly-America, L.P., 262 S.W.3d at 348. Accordingly, we hold White’s
unconscionability argument fails, and could not provide the trial court with a basis to grant her
motion for JNOV.
STRICT LIABILITY
Finally, White argues paragraph 12 of the TAA lease creates a “new theory of strict
liability” because a tenant would always be strictly liable for any damage regardless of cause and
origin. She states in her supplemental brief that “[t]enants have no excuse, remedy or defense for
not complying with Provision 12 of the TAA lease to indemnify the landlord for any damages to
the property not caused by the negligence of the landlord.” Based on the supreme court’s analysis
in its review of this case, we disagree.
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In its decision, the supreme court recognized the catch-all provision in paragraph 12 “is
susceptible of an application in contravention of” Chapter 92 of the Texas Property Code. See
Philadelphia Indem., 490 S.W.3d at 490 (emphasis added). However, such agreements between
tenants and landlords are not in violation of Chapter 92 if they are based upon “tenant-caused”
damages. Id. at 491. Thus, if a tenant proves and obtains an affirmative finding that she did not
cause the damage in question — either by negating her role in causing the damage or by
establishing an alternative cause of the damage — any lease provision requiring the tenant to pay
would be invalid. Id. at 490–91. In other words, if a tenant establishes she did not cause the
damage and obtains a finding thereon, the tenant thereby “establish[es] the factual predicate to
contractual invalidity,” precluding recovery by the landlord. Id. Thus, the provision does not
create a strict liability standard; rather, a tenant can avoid application of such a risk-shifting
provision by simply proving she did not cause the damage. See id. Here, White failed to establish
or obtain the required finding that she did not cause the damage to the property. See id.
Accordingly, because paragraph 12 does not create strict liability — White could have
avoided its application by procuring a finding that she did not cause the damage, we hold paragraph
12 of the TAA lease did not create a new theory of strict liability. Accordingly, the trial court
could not have granted White’s motion for JNOV on this basis.
CONCLUSION
Based on the foregoing, we hold White’s remaining grounds precluding enforcement of
paragraph 12 of the lease — those not addressed by the supreme court — did not entitle her to
JNOV. Accordingly, we reverse the trial court’s judgment and remand to the trial court for entry
of judgment in favor of Philadelphia in accordance with the jury’s verdict and this court’s opinion.
Marialyn Barnard, Justice
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