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Print Page Fraud Claim Is Half-Baked
by Ron Davis

A tenant's charge of fraud against the new owner of a Texas shopping center has failed to pass a court test that requires written proof to support such a violation.

The shopping center is Red Oak Center, located in Houston, and the new owner, Columbia/HCA of Houston, Inc., bought the property to build a hospital on the site. Red Oak Center was thus destined for the wrecking ball.

First, however, Columbia/HCA had to relocate the tenants of Red Oak Center. The company's chief executive officer consequently began negotiations with the tenants for early termination of their leases, meeting with each to tell them that Columbia/HCA would buy out the remaining terms of their leases.

One of the tenant's, a bakery operator, rejected a buyout offer, however. He informed the Columbia/HCA CEO that he would prefer a payment for relocation costs. The CEO responded by touring the bakery and taking notes that outlined the details involved in a relocation.

The tenant later submitted an estimate of what he believed would be fair payment for relocation. Columbia/HCA rejected that estimate, contending that it was excessive. In fact, the estimate was 10 times the amount the bakery owed as rent for the remaining months of its lease.

Over the next few months, the tenant submitted other estimates, but Columbia/HCA also rejected them because they were higher than what other tenants were receiving from a buyout of their leases. Most other tenants left the shopping center after a few months, but the bakery tenant refused to move. Finally, Columbia/HCA informed the tenant that he could remain in the shopping center until his lease expired in a few months.

After it was evident that Columbia/HCA would not pay what the tenant wanted, he sued the company for fraud for failing to pay the tenant's relocation fees after agreeing to do so.

In Texas, proof of fraud requires that a promise or an agreement about the lease of real estate be in writing. So for Columbia/HCA to be obligated to pay the tenant's relocation expenses in exchange for the tenant's early surrender of his lease, there would have to be a written agreement so stating.

A Texas appellate court, in dismissing the charge of fraud, pointed out that no written agreement between Columbia/HCA and the tenant had ever existed.

The judges explained, "The notes taken by the Columbia/HCA CEO do not show that a specific agreement was reached. And the bid submitted by the tenant was nothing more than the initial starting point for the negotiations between the two parties. As such, neither document could constitute a binding written agreement."

(Columbia/HCA v. Tea Cake French Bakery, 8 S.W.3d 18 [Tex.App.--Houston 14th Dist.] 1999)

Decision: January 2000
Published: April 2000

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