### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-11-00580- CV

Liaq uat Ali Khan, App ellant

v. Nizarali Me knojiya, Ap pellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 200 TH JUDICI AL DISTRICT NO. D-1 -GN-0 8-0 0193 1, H ONO RAB LE LO RA J. LI VINGSTO N, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

L andlord L iaquat Ali Khan sued tenant Nizarali Meknojiy a for brea ch of the parties’

commerc ial lease

. I n the suit, Khan s o u gh t damag es pursuant to the lease ’s holdover provision, contending that Meknojiy a beca me a holdover tenant as a result of Khan’ s termination of the lease

. Meknojiy a moved for summary judgme nt on the sole g rou n d t hat Khan’ s rec overy under the holdover provision is barr ed as a matter of law beca use it repr esents an unenfor cea ble penalty in the form of “double- rent.” The trial court g rante d partial summary judgme nt in favor of Meknojiy a, and fo l l o wing a bench t rial onl y on attorney ’s fees, t he court rende red a final j udg ment that Khan take nothing on his claims and that Meknojiy a recove r attorney ’s fees. Be cause we conclude that the holdover provision is not an unenfor cea ble penalty , we reve rse the trial court’s judgme nt and

rema nd the ca se for

further proce eding s.BACK GR OUND Khan owns commerc ial proper ty located in Austin, Texa s
. I n 1 9 9 6, Khan and Meknojiy a enter ed into a written lease ag ree ment, and Mekn o jiy a beg an opera ting a convenie nce
store on the lease d premises. The parties rene g otiated their lease (“the lease ”) in Marc h 2002. The

rene g otiated lease require d Meknojiy a to pay $4,500 per month in “base rent” and included the following para g raph, w hich the par ties ref er to a s a “holdove r provision”:

2.07 Holding Over

. I f Tena nt does not vacate the L eas ed P re m ises upon the expiration or ear lier termination of the L ease , Tena nt shall be a tenant at suffe ranc e fo r the holdover period and all of the terms and provisions of this L eas e s h al l b e applicable during that period, e x cept that Te nant shall pay L andlord (in a ddition to additional rent pay able under this L ease and any other sums pay able under this L ease ) as base renta l for the period of such holdover an amount equal to two times the base rent which would have been pay able by Tena nt ha d the holdover period been a part of the orig inal terms of the L ease (without waiver of L an d l o rd’s rig ht to rec over damag es as pe rmitted by

law).

Acc ording to Khan, Meknojiy a committed a series of brea ches following execution of the 2002 lease

. For instance, Khan contends that Meknojiy a (1) failed to obtain or rene w require d insurance , (2) failed to provide the require d insurance documentation, and (3) permitted a
corpor ation owned by other individuals to opera te the convenie nce store without obtaining Khan’ s prior written consent. Khan notified Meknojiy a in writing , throug h counsel, that Meknojiy a was in defa ult of the lease and that Khan was exercising his option to terminate the lease eff ective May 1,
2 0 0 2

. N e v e r

th e le s s , d e s p it e a d d it io n a l n o ti c e s o f d e f a u lt , M e k n o ji y a c o n ti n

u e d to o c c u

p y th e p r e mi s e s and to pay $4,500 per month until J anuar y 2, 2007, the date the lease was set to have expired by its
own terms.

2Khan subsequently sued Meknojiy a for brea ch of the lease , as s er t i n g that upon

Meknojiy a’s br eac h of the lease and Khan’ s notification that the lease was ter minated, Meknojiy a occupie d the proper

ty as a tena

nt at suffe ranc e. See ICM Mortg. Corp. v. Jacob , 902 S.W .2d 527,
530 (Tex. App.—El Paso 1994, writ denied) (citing Restatement (F irst) of Property § 22 (1936)) (“A
tenant at suffe ranc e is a person who has been in la wful possession of proper ty but w ho wrong fully

rema ins as a holdover afte r his rig ht to possession has expired.”). Khan soug ht damag es in an
amount equal to the differ ence that Meknojiy a actua lly paid during the alleg ed holdover period and the amount that Meknojiy a wa s require d to pay for the sa me time period unde r par ag raph 2.07. Khan moved fo r p a

r ti a l s u mm a r y ju d g me n

t, asser ting that he conclusively established all elements of his claim for brea ch of t h e lease

. Meknojiy a filed a response and subsequently 1
moved for summary judgme nt asser ting that Khan’ s rec overy was barr ed as a matter of law beca use the doubl e-r ent rate under parag raph 2.07 constitutes an unenforc eable penalty

. After conducting

a hear ing, the trial court g rante d Meknojiy a’s motion for summary judgme nt but denied Khan’ s motion. Following a bench trial on Meknojiy a’s rema ining counter claim for attorney ’s fee s, the trial
court rende red a final judgme nt incorporating the trial court’s order g ranting summary judgme nt in favor of Meknojiy a and order ing Khan t o p ay $60,191.71 in attorney ’s fee s. I n three issues on 2

Khan also asked the trial court to re n d er s u m m ar y judgme nt that he was entitled to 1 attorney ’s fe es, but to rese rve judg ment on the amount of fe es for a sepa rate hear ing. Parag raph 13.03 of

the lease states: 2 Attorney ’s Fe es. The preva iling party in any leg al proce eding broug ht under or with a rela tion to this ag ree ment shall be entitled to rec over form the non-pre vailing party , their rea sonable attorney [’s] fee s, court costs and expenses, including but not limit ed to travel a nd witness costs. 3appea l, Khan arg ues that the trial court err ed in g ranting summary judgme nt in favor of Meknojiy a

and conse quently , in awar ding Me knojiy a attorne y ’s fe es as the pr evailing party

.

STANDARD OF REVIEW
We revie w a trial court’s ruling on summary judgme nt de novo. Valence Operating
Co. v. Dorsett , 164 S.W .3d 656, 661 (Tex. 2005). A moving party is entitled to summary judgme nt if (1) there are no g enuine issues of materia l fac t and (2) the movant i s en t itled to judgme nt as a matter of la

w. Tex. R. C iv. P. 166a(c). A party who m oves for traditional summary judgme nt on another party ’s claim is entitled to summary judgme nt when he neg ates at least one essential element of that claim or conclusively establishes eac h element of an aff irmative defe nse. Scienc e Spectrum,
Inc. v. Ma r t i n ez , 9 4 1 S.W .2d 910, 911 (Tex. 1997). When revie wing the trial court’s summary judgme nt ruling , we take as true all evidenc e favor able to the nonmov an t , an d we indulge ever y

rea sonable infere nce and resolve any doubts in the nonmovant’s favor

. Valence Operating Co. , 164 S.W .3d at 661.

I n part, Khan’ s arg

uments on appea l raise matters o f co n t ract construction. I n construing a written agr ee m en t , we must asce rtain and g ive eff ect to the parties’ intentions as expressed in the ag ree ment. Frost Nat’l Bank v. L & F Distribs., Ltd. , 165 S.W .3d 310, 311-12 (Tex. 2005) (per curia m). We consider the ag ree ment as a whole and attempt to harmonize and g ive eff ect to all provisions of the contra ct. Id

. I f the contra ct lang uag e can be g iven a cer tain or definite leg al meaning , then the lang uag e is not ambig uous, and this Court will construe the contra ct as a
matter of law. SAS Inst., Inc. v. B r ei t enfeld , 167 S.W .3d 840, 841 (Tex. 2005) (quoting Coker v. Coker , 650 S.W .2d 391, 393 (Tex. 1983)).

4DISCUSSIO N Meknojiy a m oved for traditional summary judgme nt on the sole g round that the lease ’s h o l dover provision, calling for double rent, is an unenfor cea ble liquidated-dama g es
p r o v is io n , i. e
. a p e n a lt

y . T h is a s s e r

ti o n b y M e k

n o ji y a is a n a f f ir ma ti v e d e f e n s e th a t h e h a d th e b u

r d e n of pleading and proving

. See Phillips v. Phillips , 820 S.W .2d 785, 788 (Tex. 1991). As a result, to be entitled to summary judgme nt, Meknojiy a had to conclusively establish ever y element of this defe nse. See R

yland Grp., Inc . v. Hood , 924 S.W .2d 120, 121 (Tex. 1996) (per curia m). “The universal rule for measuring damag es for the brea ch o f a contra ct is just
compensa tion for the loss or damag e actua lly sustained.” Phillips , 820 S.W .2d at 788. Acc ording ly , a li quidated-da

mag es provisi on is not enfor cea ble i f, i n eff

ect, it is a pena lty

. See id. (“Whether a
contra ctual provision is an enforce able liqui dated damag es pr o v i s i o n o r an unenfor cea ble penalty is a question of law for the court to decide .”). A liquidated-dama g es provision is e nforc eable only
if a court finds that (1) the harm cause d by the brea ch is incapa ble or diffic u l t o f es t i m ati on, and (2) the amount of l iquidated damage s called for is a re asonable fore cast of just compe nsation. Id.
W hether a liquidated-dama g es provision is an unenfor cea ble penalty is a question of law for th e court, althoug h sometimes fac tual issues must be resolved befor e the court can decide the leg al question. Id.
I n his first and second issues on appea l, Khan arg ues that the t ri al court err ed in
g r a n ti n g M e k n o ji y a ’ s s u mm a r y -judg ment motion beca

use Meknojiy a failed to conclusively es ta b li s h th e e s s e n ti a l e le me n ts o f h is a f f ir ma ti v e d e f e n s e o f p e n a lt

y . Sp e c if ic a ll y , K h a n a r g u e s th a t, a s a ma tt e r of law, para g raph 2.0 7 is not an unenfor cea ble penalty provision beca use it is not a liquidated5damag es provision at a ll. I nstead, acc ording to Khan, para g raph 2.07 simply sets forth the parties’

a g r e e d r e n ta l r a

te f o r a n y h o ld o v e r p e r io d

. B a s e d o n th e u n a mb ig u o u s la n g u a g e o f th e le a s e , w e a g r e e
. Whether a contra ct t erm is a li q u i d at ed-da mag es provisi on is a question of l aw for the court. Valence Operating Co. , 164 S.W .3d. at 644. “The term ‘liquidated damag es’ ordinarily ref ers to a n acc eptable measure of damag es that parties stipulate in advanc e will be assessed in the
event of a contra ct brea ch.” Flores v. Millennium Interests, Ltd. , 185 S.W .3d 427, 431 (Tex. 2005).
Her e, para g raph 2.07 sets an ag ree d-upon renta l rate for situations in which the tenant has failed to

surre nder the lease d premises upon expiration of the lease term or ear lier termination by one of the parties. The provision itself descr ibes the amount due during the holdover period as “base renta l for the period of such holdover.” Fur ther, parag raph 2.07 states t hat pay ment of s u ch rental amounts do not waive the landlord’s rig ht to rec over “dama g es as permitted by law.” I n other words, based

on the plain lang uag e of the lease , there is no indication that the parties intended the amounts owed under para g raph 2.07 as a me ans of f orec asting damag es in the event of a brea ch. And, while rent under pa rag raph 2.07 ma

y , in c erta in c ircumstance s, form the basis of measuring damag es, it does
not independe ntly set a damag es amount or attempt to calc ulate damag es. Simpl y put, any amount owed u n d er p ara g raph 2.07 does not equate to a stipulated measure of damag es; rathe r, it is an
ag ree d-upon re ntal amount that is due under pa rticular c ircumstance s. Our conclusion that para g raph 2.07 of the lease is not a l i q u idated-da mag es
p rovision, and there fore is not a penalty , is consistent with that of our sister court of appe al s i n Dallas in analy

zing whether a simil ar clause opera ted as a penalty provision. See Meridien Hotels,
Inc. v. LHO Fin. P’ship I, L.P. , 255 S.W .3d 807 (Tex. App.—Dallas 2008, no pet.). I n Meridien

6Hotels , the landlord lease d hotel space to the tenant under a lease that require d the tenant to pay 1.5

times the base renta l amount if the tenant rema ined in the space upon termination of the lease by one of the parties or the lease term’s expiration

. Id. at 822. The landlord sent the tenant a notice of 3
termination of the lease , but the tenant rema ined in the hotel space any way
. Id. at 814. The landlord
eventua lly sued the tena

nt, seeking multipl e ty

pes and a mounts of damag es, including $2,130,136 in holdover re nt, plus prejudg ment interest, all of w hich the trial c ourt awa rded. Id. The tenant appea led, claiming that the holdover rent p rovision was an unlawful penalty and that, as a result, the trial court err ed in awa rding pre- judgme nt interest on that amount. Id. at 822. Concluding that the holdover renta l rate did not constitute a penalty , the court of appea ls conclude d that the provision “does not punish appellants; it instead require s that if appellants make the decision to hold o v er b ey ond the term of the lease , they must pay a highe r rate for doing so. Appellants wer e on notice that [t he landlord] considere d the lease terminated, y et they chose to stay , having ag ree d in the lease to pay 1.5 times the usual rent for doing so.” Id.
L ik ew i s e, in this case , para g raph 2.07 of the parties’ lease ag ree ment sets out in ad v ance the rent to be paid should the tenant choose to rema in on the premises afte r one of th e

Specifica lly , the l ease at i ssue in Meridien Hote ls, Inc. v. LHO F inancing Partnership I, 3 L.P. , contained the following provision: Any holding over by Tena nt afte r t h e ex p iration or sooner termination of this Agr eement shall be trea ted as a daily tenanc y at suffe ranc e at a rate equal to one and one-half (1.5) t imes the R ent and other charg es herein provided (pror ated on a daily basis).
255 S.W .3d 807, 822 (Tex. App.—Dallas 2008, no pe t.)

7parties terminates t he lease or the l ease expires by its own t erms, cr eating a tena ncy at suffe ranc e. Upon expiration or termination of the lease , the tenant must de cide whether to (1) leave the lease d
prem i s es (a s s uming he is not forc ibly remove d) or (2) hold over under the lease as a tenant at suffe ranc e and pay additional rent at the ag ree d holdover rate

. Such additional rent is not a penalty ; in f act, it doe s not r epre sent liquidated damag es at all. Rather, the a dditional rent is the ag ree d-to, barg ained- for a

mount of rent due a

nd owing in the event of

a holdover

. 4
Be cause para g raph 2.07 of the parties’ lease ag ree ment is not a liquidated-dama g es provision, it cannot be an unenfor cea ble penalty , as a matter of law. We there fore conclude that the trial court err ed in g ranting summary judgme nt in favor of Meknojiy a on this ground. I n addition,

Meknojiy a relies on Phillips v. Phillips , 820 S.W .2d 785 (Tex. 1991), for the proposition 4 that a contra ctual provision in which one party ag ree s to pay the other some multipl e of damag es is an unenfor cea

ble penalty

. Phillips is a classic illust ration of a liquidat ed -dama g es provision that constitutes an unlawful penalty

. I n the midst of divorce proce eding s, a husband and wife ag ree d to cre ate a limit ed partne rship rathe r than divide their substantial assets. Id. at 786-87. The ag ree ment contained the following provision: “I f the g ener al partne r brea ches his trust here under, he shall pay t o t h e l imited partne r as liquidated damag es ten times the amount she loses as a result o f s u ch brea ches of trust.” Id. at 787. I n other wor ds, once a ctual damag es wer e established for brea ch of the parties’ contra ct, they would be multipl ied by ten to r eac h the damag es awa rd. Id

. at 789. The supreme court held that this provision was an unenfor cea ble penalty provision, rathe r than an enfor cea ble liquidated damag es provision. Id

. Meknojiy a’s relianc e on Phillips in this case is misplaced. First, unlike para g raph 2.07, the provision at issue in Phillips was undisputedly a liquidated-dama g es provision. As previously discussed, para g raph 2.07 is not a liquidated-dama g es provision at all, but instead is a renta l amount that is trig g ere d if and when the lease expires or is terminate d

. Second, the liquidated-dama g es provision at issue in Phillips was an unenfor cea ble penalty on its fac e beca use the amount awa

rded by the provisi on was computed by multipl y ing actual damag es (once e s t ab l ished). See id

. at 789. Her e, para g raph 2.07 does not require a separ ate deter m i n at i o n of damag es or the application of any multipl ier to that amount. Thus, even if we wer e to conclude that para g raph 2.07 is a liquidateddamag es provisi on, unlike the court in Phillips we could not conclude that it constitut es a pe nalty on its face

. 8beca

use Meknojiy a should not have preva iled on su m m ar y j u d gm ent, it follows that he was not entitled to attorney ’s fe es. We sustain appellant’s f irst and sec ond issues on appea l. 5

CONCLUSION
Be cause we conclude that the trial court er re d in g ranting summary judgme nt, we

reve rse the trial court’s judgme nt and awa rd of attorney ’s fee s in f

avor of Meknojiy a. We r emand the ca se to the trial cour

t for fur ther proc eeding s consistent with this opi nion.

__________________________________________ Scott K. Field, Just ice
Be fore Chief J ustice Jones, J ustices Goodwin and F ield
Reverse d and Remande d Filed: June 28, 2013

I n his third issue o n ap p eal, Khan arg ues that, even if the double-re nt rate set forth in 5 para g raph 2.07 repr esents liquidated damag es, Meknojiy a failed to satisfy his burden to establish that it is an unenfor cea

ble penalty

. Having sustained Khan’ s first and second issues on appea l, w e do not addre ss this i ssue. See Tex. R. App. P . 47.1. 9