Opinion
01-18-00913-CV
07-21-2022
JIM KELLY, KARL BALDWIN, AND WOOD MASTER HOMES, Appellants v. KAREN TRACY, Appellee
On Appeal from the County Civil Court at Law No. 1 Harris County, Texas Trial Court Case No. 1091620
Panel consists of Chief Justice Radack and Justices Rivas-Molloy and Guerra.
MEMORANDUM OPINION
Amparo Guerra Justice
Appellants, Jim Kelly, Karl Baldwin, and Wood Master Homes ("Wood Master") (collectively, "appellants"), sued appellee Karen Tracy for breach of contract and quantum meruit arising out of a construction contract for the repair of Tracy's home that flooded in April 2016. After the close of appellants' evidence, the trial court granted Tracy's motion for directed verdict. In three issues, appellants complain: (1) that the trial court erred in entering the directed verdict on their breach of contract and (2) quantum meruit claims, and (3) that the trial court's final judgment vacated an interlocutory partial summary judgment order awarding Tracy attorney's fees.
Kelly is an individual doing business as Wood Master. Kelly sued Tracy in April 2017. Tracy then filed a third-party petition (as well as an answer and counterclaim) against Baldwin and Wood Master. Thereafter, Kelly, Baldwin, and Wood Master collectively filed a second amended petition as "plaintiffs," which was the live pleading at the time of trial.
During this appeal, Tracy passed away. This Court abated the appeal for a hearing in the trial court to determine whether any heir or personal representative could be substituted for Tracy. On February 25, 2020, the Harris County Probate Court No. 2 appointed Gus Tamborello as the Dependent Administrator of Tracy's estate. Following reinstatement of this appeal, Tamborello filed an appellee's brief. Under Texas Rule of Appellate Procedure 7.1(a)(1), "the appellate court will proceed to adjudicate the appeal as if all parties were alive. The appellate court's judgment will have the same force and effect as if rendered when all parties were living. The decedent party's name may be used on all papers." Tex.R.App.P. 7.1(a)(1).
We agree that the trial court erred in granting a directed verdict on appellants' breach of contract and quantum meruit claims. Accordingly, we reverse and remand this case for a new trial.
Factual Background
Kelly and Baldwin are partners in Wood Master, a construction business. In April 2016, Wood Master was repairing flood-damaged homes in Tracy's neighborhood when Tracy approached Baldwin and asked him to examine her house, which had sustained flood damage. ServiceMaster was working on the remediation and demolition work on her house, and Tracy wanted Wood Master to perform the repairs. Tracy's insurance company, Colonial Claims, had provided her with a list of authorized repairs and the prices it would pay for those repairs ("Insurance Estimate"). Baldwin did not immediately accept the job.
About a month later, Tracy again asked Baldwin to take on her project. By this point, ServiceMaster had completed the remediation and demolition work. When Tracy asked Baldwin "how things . . . worked," Baldwin answered that Wood Master "went off the insurance adjuster's list [the Insurance Estimate] and that's how we charge." Tracy did not show Baldwin the Insurance Estimate, so the parties did not reach an agreement at that time. After Tracy approached Baldwin a third time and "begg[ed]" him to take on her project, he agreed. Tracy gave Baldwin the Insurance Estimate for her repairs, and Baldwin again explained that Wood Master "worked off of" the Insurance Estimate, meaning Wood Master would perform the repairs identified on the Insurance Estimate and charge her what the insurance company had agreed to pay for each task.
Baldwin testified the parties orally agreed Wood Master would perform the work identified on the Insurance Estimate and Tracy would pay "[e]xactly what's on" the Insurance Estimate, which totaled $86,194.24. Baldwin stated that Tracy "understood that right up front." Ron Childers, a Wood Master employee responsible for "[i]nsurance paperwork and billing," confirmed the parties' agreement to perform the work "at the insurance adjuster's [estimate.] It's never above or below." The parties also orally agreed Wood Master would re-tile Tracy's entryway, which was not included in the Insurance Estimate, for an additional fee. Wood Master provided Tracy with the fee for the tile work before it started.
Though Tracy admitted she and Wood Master had an oral agreement for Wood Master to complete "the work that the insurance company had asked to be completed and it had approved," she claimed Wood Master agreed to charge "at or below" or "not to exceed" the amounts on the Insurance Estimate. Tracy also claimed that Wood Master agreed to repair her decking, a plumbing leak, a gas leak, and her roof, "at no additional charge."
Baldwin testified that the agreement obligated Tracy to pay Wood Master as the invoices became due. Because Wood Master did not send invoices "every time [they] paint a bedroom," however, the expectation was that Tracy would pay after she "got paid from the insurance company."
On August 2, Wood Master emailed Tracy two documents for her to "sign, scan, and return"-a third-party authorization and a written contract memorializing the agreement. The written contract stated that Wood Master agreed to "furnish all labor and materials to complete . . . [a]ll repairs, mitigation and construction as outlined in Colonial Claims estimate as outlined in '374471-TRACY' dated 06/13/2016." The written contract also directed Tracy to "[p]lease sign and date below." It contained a signature block for Tracy that stated:
ACCEPTANCE - THE ABOVE PRICES, SPECIFICATIONS AND CONDITIONS ARE SATISFACTORY AND ARE HEREBY ACCEPTED. YOU ARE AUTHORIZED TO DO THE WORK AS SPECIFIED. PAYMENT WILL BE MADE AS OUTLINED ABOVE.
Baldwin testified that this was a "common standard document" for jobs "this big." And according to Kelly, it was Wood Master's standard procedure to require a written contract, except for repeat customers. Kelly also testified that, when working on insurance jobs, Wood Master typically does not require the customer to pay up front but instead will "take the job on as long as they agree to pay us what the insurance pays them for the work that we are doing" and require that the customer sign a written contract signifying their agreement. Kelly further testified that Wood Master usually does not start work on a job until they obtain a signature on the written contract, but they did so for Tracy because she was a referral.
Baldwin testified it was Tracy's obligation to execute a written contract memorializing their oral agreement. According to Kelly, Tracy's signature on the written contract would indicate that she agreed to "how she would pay" and give Wood Master "confidence that she was . . . going to pay." Kelly testified that Wood Master started the work expecting that Tracy would comply with the agreement. Tracy, in contrast, testified she never agreed to sign a written contract.
Although Tracy signed and returned the third-party authorization the next day, August 3, she did not sign the contract. She explained: "I understand what you are doing on the other form [the contract] but it appears to be a blank check to me. I hope the authorization works." Childers testified that he understood Tracy's concern to be that the written contract did not list a "total dollar amount" that would be due, meaning Tracy believed Wood Master could "charge [her] anything." He testified that he explained to Tracy that Wood Master would not charge "anything more than what the insurance company pays." According to Childers, "[t]he number entered here [on the written contract], if there was a number, would have been exactly what the insurance adjuster would have came [sic] up with, his estimate. We work off of his numbers. We work off of what the insurance company pays." Tracy did not attempt to resolve this issue, but instead permitted Wood Master to start the work on August 4, 2016.
Before Wood Master requested any payment, Tracy voluntarily paid $10,000 on the day Wood Master began the work. Wood Master worked on Tracy's house for three to four weeks, and, according to Wood Master, the work went smoothly. During this time, Wood Master asked Tracy "numerous times" to sign the written contract, but she always avoided doing so.
In contrast, Tracy complained that subcontractors were being pulled from her house to work on other projects. And she noticed problems with Wood Master's work within a week, including misaligned kitchen cabinets, damage to a kitchen window and the air conditioning unit, and a caulked or painted shower drain.
Shortly after Wood Master began work on Tracy's home, Wood Master became aware that Tracy "was not happy with" and "did not want to pay ServiceMaster." Because Wood Master did similar demolition and "dry-out" work as ServiceMaster, Tracy asked Childers to review whether ServiceMaster's "were in line with what the insurance company was paying" and provided him with her list of reasons why "she should not have to pay [ServiceMaster] their full amount." In her email to Childers, Tracy included "bullet points" for Childers to raise with ServiceMaster, stating that her "objective [wa]s to negotiate the price." Tracy suggested making complaints about the quality of ServiceMaster's work, "Price Gouging," and ServiceMaster's unwillingness to "compromise their excessive pricing" to get a reduction of the bill. At trial, however, Tracy admitted (1) she permitted ServiceMaster to perform the work without an agreement on the cost, (2) ServiceMaster completed the work, and (3) she had no complaints about the quality of ServiceMaster's work.
Around August 24, after Childers made multiple attempts to obtain Tracy's signature, Baldwin again presented Tracy with the written contract and asked her to sign it. Tracy "already knew it was a problem" that she had not signed the contract, but Baldwin reiterated that to her and told her "you need to sign it." Tracy again claimed she did not have time to sign it. According to Tracy, she asked for additional time to review the written contract before signing. According to Baldwin, Tracy did not (1) indicate that the contract did not accurately reflect their agreement, (2) complain about Wood Master's work, or (3) give any reason why she would not sign the contract. It appeared to Baldwin that Tracy wanted Wood Master to continue working on her home.
Wood Master wanted the written contract so it would have assurance that Tracy "was going to pay" for its work. Tracy's continued refusal to sign the contract "worr[ied]" Baldwin, and Wood Master suspended work on her project after she refused to sign at Baldwin's urging at the end of August. Baldwin testified Wood Master would have completed the project had Tracy signed the contract, but she never did. Baldwin admitted that Wood Master "walked the job" before it completed the work listed in the Insurance Estimate and before Tracy had failed to pay an invoice. He claimed it was Tracy's refusal to sign the contract that prevented Wood Master from completing the work.
Around August 28, after Wood Master walked off the job, Baldwin presented Tracy with an invoice for the work Wood Master had completed to date, which totaled $26,281.18 and included a credit for the $10,000 Tracy voluntarily paid when the work began ("August 28 Invoice"). The amounts invoiced were taken directly from the Insurance Estimate. Baldwin and Childers testified, however, that the August 28 Invoice erroneously omitted some of the completed work. After receiving the August 28 Invoice, Tracy offered to pay an additional $10,000, for a total of $20,000. Wood Master did not agree to accept the $10,000 payment as payment in full, and Tracy never paid the invoice.
The parties also disputed how much work was completed at the time Wood Master suspended its performance. Tracy testified that she had complaints about almost every line item in the August 28 Invoice, including that the drywall was not complete and portions needed to be repaired or redone, that Wood Master did not use stain grade wood as promised, that her kitchen cabinets did not line up, and that Wood Master took cabinet shelves, doors, and hardware for which Tracy had paid. She also presented evidence that she incurred $9,407.07 in costs to correct Wood Master's work on her home. Baldwin either denied Tracy's claims outright or offered explanations for any perceived defect in Wood Master's performance.
Later, Wood Master submitted a revised invoice that included (1) the completed work omitted from the August 28 Invoice and (2) late charges beginning in November 2016. This invoice totaled $35,812.11 (after crediting the $10,000 down payment). Wood Master thereafter sent Tracy a final revised invoice ("Final Invoice") for all the completed work, plus late charges, which totaled $42,190.04 and reflected $46,370.76 for work completed, minus the $10,000 down payment, plus $5,819.28 in late charges. At trial, Kelly testified that Wood Master was not seeking to recover the late charges, and therefore was only seeking to recover a total of $36,370.76 for the work it completed.
Tracy has paid Wood Master only the $10,000 down payment. At trial, she admitted that she owed Wood Master some money for the work performed. She testified that she did not know the amount she owed but would determine it using the amounts on the Insurance Estimate.
Procedural History
On October 25, 2016, Wood Master and Kelly filed a "Mechanic's and Materials Lien" against Tracy's property in the Harris County Property Records, claiming Tracy owed an unpaid balance of $26,281.18 ("Lien"). On April 5, 2017, Kelly filed suit against Tracy, asserting causes of action for breach of contract, quantum meruit, and promissory estoppel.
Tracy answered and filed a counterclaim and a third-party petition against Baldwin and Wood Master. Tracy identified various deficiencies in the Lien and sought a declaratory judgment that the Lien was invalid and unenforceable. Tracy also moved for partial summary judgment based on the Lien's alleged deficiencies. Although Wood Master released the Lien before Tracy moved for summary judgment, the trial court granted her motion and awarded her $4,500 in attorney's fees.
The case proceeded to trial. At the close of appellants' case, Tracy moved for a directed verdict on the ground that the evidence conclusively established that Wood Master "breached first." The trial court did not explicitly grant a directed verdict as to appellants' quantum meruit claim, though after hearing argument from the parties with respect to that claim, stated "I said I have issued a directed verdict. We are done." The trial court entered a final judgment ordering that "[appellants] take nothing from [Tracy] and that each party [was] responsible for their own costs and fees incurred." The judgment stated that it finally disposed of "all claims and parties" and was "appealable." It did not expressly incorporate the prior partial summary judgment order, award Tracy any relief on her counterclaims, or award Tracy attorney's fees.
Appellants appealed. Tracy did not.
Standard of Review
A trial court may direct a verdict in favor of a defendant when: (1) a plaintiff fails to present evidence raising a fact issue essential to the plaintiff's right of recovery; or (2) the plaintiff admits or the evidence conclusively establishes a defense to the plaintiff's cause of action. Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000). A directed verdict is appropriate when reasonable minds can draw only one conclusion from the evidence. Smith v. Aqua- Flo, Inc., 23 S.W.3d 473, 476 (Tex. App.-Houston [1st Dist.] 2000, pet. denied). We therefore determine whether there is more than a scintilla of evidence to raise a fact issue on the elements of the plaintiff's claims. See Coastal Transport Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 233 (Tex. 2004). A directed verdict is improper if there is conflicting evidence of probative value on any theory of recovery, and the case must be remanded for the jury's determination of that issue. Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994). We must "consider all of the evidence in a light most favorable to the party against whom the verdict was instructed and disregard all contrary evidence and inferences; we give the losing party the benefit of all reasonable inferences created by the evidence." Id.
Directed Verdict - Breach of Contract
In their first issue, appellants argue that the trial court erred in directing a verdict on their breach of contract claim. At the close of appellants' case, Tracy moved for a directed verdict on the ground that "the only evidence and testimony we have here is that [appellants] breached first." The trial court granted the directed verdict on the breach of contract claim but did not provide its reasons for doing so.
Appellants raise a number of arguments in support, including that the jury reasonably could have found that Wood Master substantially complied with the contract and that Tracy committed the first material breach by repudiating the contract when she refused numerous attempts by appellants to obtain her signature. Appellants contend that their request for Tracy's signature was a request for adequate assurances, and her refusal to sign indicated that she would not perform the contract in the future. Appellants assert that this excused them from performing the remainder of their obligations under the contract and, therefore, the trial court erred in directing a take-nothing verdict on their breach of contract claim.
In response, Tracy first argues that appellants cannot rely on the doctrine of substantial performance because they failed to plead or prove that theory of recovery. She next argues that her failure to sign a written contract was not a repudiation of the contract because her only obligation under the contract was to "pay money when it was due" and her signature was not required to create a valid contract. She also contends the uncontroverted evidence at trial established that appellants abandoned their work on her home before it was complete and before she failed to pay an invoice. Thus, according to Tracy, appellants breached the contract first when they "walked off the job" and the trial court properly granted a directed verdict on breach of contract. Tracy also argues that, even if appellants did not commit the first material breach, they failed to present evidence of their damages.
A. Applicable Law
To prevail on a breach of contract claim, a plaintiff must establish that (1) there is a valid, enforceable contract; (2) the plaintiff performed, tendered performance, or was excused from performing its contractual obligations; (3) the defendant breached the contract; and (4) the defendant's breach caused the plaintiff injury. Winchek v. Am. Express Travel Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.-Houston [1st Dist.] 2007, no pet.).
"It is a fundamental principle of contract law that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from further performance." Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam); New York Party Shuttle, LLC v. Bilello, 414 S.W.3d 206, 216 (Tex. App.-Houston [1st Dist.] 2013, pet. denied). If the non-breaching party continues to insist on performance by the party in default, the previous breach by the breaching party is not an excuse for nonperformance by the non-breaching party and the contract continues in full force. Bilello, 414 S.W.3d at 216. The non-breaching party, therefore, must choose between continuing performance and ceasing performance. Id.
Repudiation or anticipatory breach of contract is "a positive and unconditional refusal to perform the contract in the future, expressed either before performance is due or after partial performance." Van Polen v. Wisch, 23 S.W.3d 510, 516 (Tex. App.-Houston [1st Dist.] 2000, no pet.). To constitute a repudiation or anticipatory breach, the party to the contract must have absolutely repudiated the contract without just cause. Id. An anticipatory repudiation of the contract gives the nonrepudiating party the option to treat the repudiation as a breach or ignore it and await the agreed upon time of performance. Bumb v. Intercomp Techs., L.L.C., 64 S.W.3d 123, 124 (Tex. App.-Houston [14th Dist.] 2001, no pet.).
B. Analysis
To be entitled to reversal on their breach of contract claim, appellants must have introduced at least some evidence of each of the above elements. See Winchek, 232 S.W.3d at 202. The parties both agree that there was evidence introduced of a valid contract but contest the remaining elements of breach of contract. Applying the standard of review, we conclude that appellants presented sufficient evidence to raise a fact question on each of the elements of their breach of contract claim.
1. Substantial Performance
First, we address Tracy's argument that appellants may not rely on the substantial performance doctrine in support of their breach of contract claim. Tracy argues that appellants are precluded from asserting substantial performance on appeal because they failed to plead it as a separate cause of action or affirmative defense. We disagree.
When a contractor has substantially performed a building contract, he is entitled to recover the full contract price less the cost of remedying non-material defects that are remedial. Vance v. My Apartment Steak House, 677 S.W.2d 480, 481 (Tex. 1984) (citing Atkinson v. Jackson Bros., 270 S.W. 848, 850 (Tex. Comm'n App. 1925)). Where a contract has not been fully performed, substantial performance is regarded as a condition precedent to the right to sue on that contract. Atkinson, 270 S.W. at 850; RAJ Partners, Ltd. v. Darco Constr. Corp., 217 S.W.3d 638, 643 (Tex. App.-Amarillo 2006, no pet.); Carr v. Norstok Bldg. Sys., Inc., 767 S.W.2d 936, 940 (Tex. App.-Beaumont 1986, no writ).
In Vance, the Texas Supreme Court acknowledged Atkinson as correctly stating that "the doctrine of substantial performance is merely an equitable doctrine that was adopted to allow a contractor who has substantially completed a construction contract to sue on the contract rather than being relegated to his cause of action for quantum meruit." Vance, 677 S.W.2d at 482. This doctrine recognizes that the contractor has not totally fulfilled his obligations under the construction contract and is, therefore, technically in breach of contract. Id. However, the doctrine assumes the breach is immaterial if there is substantial performance. Gentry v. Squires Constr., Inc., 188 S.W.3d 396, 404 (Tex. App.-Dallas 2006, no pet.) (citing Atkinson, 270 S.W. at 851). To allow for this lack of full performance, "the amount recoverable by the contractor is the contract price, less the reasonable cost of remedying the defects or omissions in such a way as to make the building conform to the contract." Vance, 677 S.W.2d at 482 (quoting Atkinson, 270 S.W. at 851). It is the burden of the contractor to plead and prove his entitlement to recovery under a theory of substantial performance. Carr, 767 S.W.2d at 940.
Here, appellants alleged in their second amended petition that because of Tracy's actions, they were "prevented from fully performing the contractual obligations." But they also alleged in the second amended petition that "[a]ll conditions precedent . . . have been performed or have occurred."
As explained, substantial performance is regarded as a condition precedent to the right to sue on a contract. Atkinson, 270 S.W. at 850; Carr, 767 S.W.2d at 940; see also Pepi Corp. v. Galliford, 254 S.W.3d 457, 463 (Tex. App.-Houston [1st Dist.] 2007, pet. denied) ("Substantial performance is a condition precedent to recovery under an express contract."). When a party avers generally, as appellants did in their second amended petition, that all conditions precedent have occurred or have been performed, the issue of substantial performance is sufficiently raised. See Tex. R. Civ. P. 54 ("In pleading the performance or occurrence of conditions precedent, it shall be sufficient to aver generally that all conditions precedent have been performed or have occurred."); Atkinson, 270 S.W. at 850 "[A] contractor who has in good faith substantially performed a building contract is permitted to sue under the contract, substantial performance being regarded as full performance, so far as a condition precedent to a right to recover thereunder is concerned."); cf. Geotech Energy Corp. v. Gulf States Telecomms. & Info. Sys., Inc., 788 S.W.2d 386, 390 (Tex. App.-Houston [14th Dist.] 1990, no writ) (a pleading of full performance supports the submission of a substantial performance issue); Zion Missionary Baptist Church v. Pearson, 695 S.W.2d 609, 611 (Tex. App.-Dallas 1985, writ ref'd n.r.e.) (same); Del Monte Corp. v. Martin, 574 S.W.2d 597, 599 (Tex. App.-San Antonio 1978, no writ) (same).
We note that Tracy filed only a general denial and did not specially except to appellants' petition or specifically deny the occurrence of all conditions precedent. See Tex. R. Civ. P. 54 ("When such performances or occurrences [of conditions precedent] have been so plead, the party so pleading same shall be required to prove only such of them as are specifically denied by the opposite party."); Brumley v. McDuff, 616 S.W.3d 826, 831 (Tex. 2021) ("In the absence of special exceptions or other motion challenging the sufficiency of the pleadings, we construe a petition liberally in favor of the pleader.").
In addition, when issues not raised by the pleadings are tried by consent, expressly or implicitly, they are to be treated in all respects as if they had been raised in the pleadings. See Tex. R. Civ. P. 67. An issue is tried by consent if the presentation of evidence puts the parties on notice that recovery under the unpled theory is conceivable, and the other party fails to make an appropriate complaint. Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993).
Here, a significant portion of the evidence centered around the nature and degree of the work completed by Wood Master. Baldwin testified in detail about the work that was completed at the time Wood Master suspended its performance and provided explanations for the work Tracy claimed was not completed to her satisfaction. Tracy too testified at length about the problems with Wood Master's work, and stated that although Wood Master completed some work, not all of it was "up to [her] standard." She also testified about the costs she incurred to remedy issues with Wood Master's work and complete the work on her home.
We also note that, due to the conflicting nature of the evidence presented at trial, whether Wood Master substantially performed under the contract, and thus committed an immaterial versus material breach, would be a question of fact for the jury. Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc., 518 S.W.3d 432, 436 (Tex. 2017) ("Generally, materiality is an issue to be determined by the trier of facts.").
We therefore reject Tracy's contention that appellants may not rely on the doctrine of substantial performance.
2. First Breach
We turn to whether appellants presented evidence sufficient to raise a fact question on whether Tracy committed the first material breach of the contract, thereby excusing further performance by appellants (elements two and three of their breach of contract claim). Tracy claims that the uncontroverted evidence at trial showed:
• Tracy's only obligation under the contract was to pay money when it was due.
• When Wood Master walked off the job, Tracy had not yet failed to pay an invoice.
• Tracy's signature on the written contract was not a contract term, and Tracy never agreed to sign a written contract.
Thus, according to Tracy, her refusal to sign the written contract could not have been a repudiation of the parties' agreement.
Appellants presented evidence that Wood Master and Tracy orally agreed that Wood Master would complete the various items listed on the Insurance Estimate. Baldwin testified that the parties agreed Wood Master would perform the work identified on the Insurance Estimate and that Tracy would pay "[e]xactly what's on" the Insurance Estimate, which totaled $86,194.24. Baldwin stated that Tracy "understood that right up front" and was obligated to pay Wood Master as the invoices became due or when she received the funds from the insurance company. However, Baldwin also testified it was Tracy's obligation to execute a written contract memorializing their oral agreement. He further testified that the written contract itself directed Tracy to "[p]lease sign and date below" and contained a signature block for her.
According to Kelly, it was Wood Master's standard procedure to require a written contract, unless the person was a repeat customer. Kelly also testified that, when working on insurance jobs, Wood Master typically does not require the customer to pay up front but will "take the job on as long as they agree to pay us what the insurance pays them for the work that we are doing" and require that the customer sign a written contract signifying their agreement. Kelly further testified that Wood Master usually does not start work on a job until they obtain a signature on the written contract. Because Tracy was a referral, however, they did so in her case. According to Kelly, Tracy's signature on the written contract would indicate to Wood Master that Tracy "would be agreeing to how she would pay," and give Wood Master "confidence that she was . . . going to pay." Kelly testified that Wood Master started the work expecting that Tracy would comply with the agreement. In the three to four weeks Wood Master was working on Tracy's house, Wood Master asked Tracy "numerous times" to sign the written contract, but she always avoided doing so. Baldwin testified that when he presented the written contract to Tracy for the last time on August 24, she again refused to sign. Her refusal to sign the contract "worr[ied]" Baldwin, and he "packed up [his] tools and cleaned up the house . . . and left."
Furthermore, appellants presented evidence that Tracy had previously disputed the amount owed to another contractor that performed work on her home. Specifically, Wood Master learned that Tracy "was not happy with" and "did not want to pay ServiceMaster," the demolition and remediation company. Tracy asked Wood Master to review ServiceMaster's prices to make sure they "were in line with what the insurance company was paying" and requested that Wood Master "negotiate the price" on her behalf. Tracy suggested making complaints about the quality of ServiceMaster's work, "Price Gouging," and that ServiceMaster was "[u]nwilling to compromise their excessive pricing" to get ServiceMaster to reduce its bill.
Although the parties presented conflicting evidence as to whether Tracy was obligated to sign the contract and whether breach of any such obligation was material, the standard of review compels us to view the evidence in a light most favorable to appellants. Appellants presented at least some probative evidence that Wood Master routinely required signatures from their customers, that one of Tracy's obligations under their agreement was to sign a formal written contract, and that Wood Master proceeded with the work on Tracy's home with the understanding that she would sign the contract. That evidence, coupled with the evidence that Wood Master knew Tracy previously tried to avoid paying another contractor and was worried by her repeated refusal to sign, was at least some evidence that Tracy's refusal to sign the written contract was a repudiation of the parties' agreement and of her intent not to perform the contract in the future. See Van Polen, 23 S.W.3d at 516. From this evidence, a jury reasonably could find that Tracy-rather than Wood Master-committed the first material breach of the parties' agreement, thereby excusing Wood Master from further performance. Because reasonable minds could differ, appellants presented sufficient evidence to raise a fact question on the second and third elements of their breach of contract claim. See Smith, 23 S.W.3d at 476 ("A directed verdict is appropriate when reasonable minds can draw only one conclusion from the evidence.").
3. Damages
Tracy next argues that, even if Wood Master did not commit the first material breach, appellants still were required to present evidence of the damages sustained as a result of her alleged breach and failed to do so because they could not rely on the doctrine of substantial performance. But as discussed above, appellants pleaded and presented some of evidence of substantial performance at trial.
When a contractor has substantially performed under a construction contract, it is entitled to recover the full contract price less the cost of remedying those defects that are remediable. Vance, 677 S.W.2d at 481. As Tracy admits in her brief, "[t]he only evidence at trial illustrated that there was competing evidence regarding the degree to which Wood Master had performed." Thus, it was up to the jury to determine whether Wood Master substantially performed. See Szczepanik, 883 S.W.2d at 649 (recognizing province of jury to resolve conflicting evidence). And Wood Master presented at least some probative evidence of its damages.
Appellants presented evidence of the unpaid contract price for the work Wood Master performed, which was $36,370.76. Wood Master also presented evidence of the full contract price, $86,194.24. Tracy presented evidence that she paid $9,407.07 to remediate or fix Wood Master's allegedly defective work. Thus, Wood Master presented at least some evidence of its damages. See Vance, 677 S.W.2d at 481 (damages for substantial performance are full contract price less cost of remedying remedial defects).
Defendant's Exhibit 11 reflects that Tracy sought to recover $9,407.07 for costs incurred to remediate or fix Wood Master's work on her home. Appellants dispute that these are all remedial costs, as some of them are for damage allegedly done by Wood Master, as opposed to what it cost to complete the work for which Wood Master billed. Whether the costs identified by Tracy would qualify as remedial costs would be a question for the jury.
Because appellants presented at least some probative evidence on each element of their breach of contract cause of action, we hold that the trial court erred in granting a directed verdict against them on this claim.
We sustain appellants' first issue.
Directed Verdict - Quantum Meruit
In their second issue, appellants contend that the trial court erred in granting a directed verdict on their quantum meruit claim. Tracy asserts that appellants cannot recover under a quantum meruit theory because there was an express contract. Alternatively, Tracy asserts that even if the express contract does not bar recovery, appellants failed to present evidence of the appropriate measure of damages. She further asserts that appellants cannot recover on their quantum meruit claim because of unclean hands.
Appellants do not dispute that there was an express contract covering the services they provided to Tracy, but instead argue that an express contract does not bar their claim because they presented sufficient evidence that an exception to that general rule applied. They further argue that they presented sufficient evidence of all the quantum meruit elements, including damages, and that the directed verdict cannot be affirmed based on unclean hands because Tracy failed to plead this affirmative defense.
A. Applicable Law
Quantum meruit implies a contract in circumstances where the parties neglected to form one, but equity nonetheless requires payment for beneficial services rendered and knowingly accepted. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 740 (Tex. 2005). The elements of quantum meruit are: (1) the plaintiff furnished valuable services or materials (2) for the defendant (3) which the defendant accepted, used, and enjoyed (4) under circumstances reasonably notifying the defendant that the plaintiff was expecting to be paid. Vortt Expl. Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990).
"A party generally cannot recover under quantum meruit where there is a valid contract covering the services or materials furnished." Kellogg Brown & Root, 166 S.W.3d at 740. "The rationale behind this rule [known as the express-contract rule] is that parties should be bound by their express agreements and that recovery under an equitable theory is generally inconsistent with the express agreement when a valid agreement already addresses the matter." Dardas v. Fleming, Hovenkamp & Grayson, P.C., 194 S.W.3d 603, 620-21 (Tex. App.-Houston [14th Dist.] 2006, pet. denied).
The Supreme Court of Texas has recognized three exceptions to the general rule that an express contract bars recovery under quantum meruit. See Truly v. Austin, 744 S.W.2d 934, 936-37 (Tex. 1988). "First, recovery in quantum meruit is allowed when a plaintiff has partially performed an express contract but, because of the defendant's breach, the plaintiff is prevented from completing the contract." Id. at 936. Second, "[r]ecovery in quantum meruit is sometimes permitted when a plaintiff partially performs an express contract that is unilateral in nature." Id. at 937. Third, a breaching plaintiff in a construction contract can recover the reasonable value of services less any damages suffered by the defendant if the defendant accepts and retains "the benefits arising as a direct result of the [plaintiff's] partial performance." Id.
B. Analysis
1. Express Contract
Here, if the jury were to find that Wood Master could not recover on its breach of contract claim either because Wood Master did not substantially perform the contract before Tracy breached or that Wood Master, not Tracy, committed the first material breach, Wood Master may still be able to recover on its alternative quantum meruit claim despite the existence of an express contract. See Murray v. Crest Constr., Inc., 900 S.W.2d 342, 345 (Tex. 1995) (contractor that had not substantially performed could not recover under contract but could bring cause of action in quantum meruit); Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex. 1990) (same); see also Pepi Corp., 254 S.W.3d at 463 ("Each of the exceptions [to the express contract rule] relates to an inability to recover under contract because of a failure of this condition precedent [substantial performance]-either because of a breach preventing completion of the condition precedent or because of a lack of any legal obligation that creates the condition precedent.")
We note Tracy admitted in her answer that if appellants "breached the contract after partially performing it, [they] can recover in quantum meruit for the materials and services provided, offset by the damages to Tracy from [appellants'] breach."
Under the first exception to the express contract rule, there is at least some evidence that Wood Master partially performed under the contract (by rebuilding cabinets in Tracy's kitchen and living room, putting up new drywall, retiling Tracy's bathroom, replacing baseboards and trim, and rehanging doors), but that its further performance was prevented by Tracy's breach (her failure to sign the contract). See Truly, 744 S.W.2d at 936. Alternatively, even if Wood Master was the breaching party, there is at least some evidence under the third exception that Wood Master partially performed its obligations under the contract and that Tracy accepted and retained the benefits of Wood Master's partial performance. See id. at 937. Tracy testified that she owed Wood Master for some, but not all, of the work it performed. For example, Tracy testified that Wood Master did replace some drywall and agreed that she owed Wood Master for some, but not all, of that drywall work. She also acknowledged that Wood Master "partially" finished "removing and replacing the interior doors" and that she owed "some" of the $5,613.54 Wood Master charged for that work. Because there was at least some evidence that an exception to the express contract rule applied, we conclude that appellants' quantum meruit claim is not barred by the existence of an express contract.
2. Elements of Quantum Meruit
Additionally, we conclude that appellants presented sufficient evidence to raise a fact issue as to the elements of their quantum meruit claim, including damages. The evidence detailed above was sufficient to raise a fact issue as to whether appellants furnished valuable services or materials to Tracy which she accepted, used, and enjoyed. See Vortt Expl., 787 S.W.2d at 944. There was also ample evidence that Tracy knew appellants expected to be paid for the work-the parties agreed that Tracy would pay for the work as described on the Insurance Estimate, though they disputed whether it would be for the price listed on the Insurance Estimate or "not to exceed the amount" listed in the Insurance Estimate. Further, Tracy paid Wood Master $10,000 in advance. She testified that this payment represented the "first payment" and that she knew there would be additional payments due. Finally, Tracy admitted Wood Master was entitled to at least some additional compensation for the work it performed. Thus, there was at least some evidence presented as to each element of quantum meruit. See Vortt Expl. Co., 787 S.W.2d at 944.
As to damages, the proper measure of recovery for quantum meruit is the reasonable value of the services or materials rendered. Hill v. Shamoun & Norman, LLP, 544 S.W.3d 724, 733 (Tex. 2018). Tracy argues that appellants presented no evidence of the reasonable value of the services and materials rendered because they could not quantify how much was spent on labor or materials. We disagree.
There was at least some evidence that what appellants sought to recover-the amounts listed in the Insurance Estimate for the services Wood Master performed- represented the reasonable value of these services. Childers testified that the Insurance Estimate was generated by "Xactimate," which is a form "written by the federal government for insurance purposes for pricing on car accidents, houses, everything." Childers further testified that this program estimates price and depreciation based on zip code: "Everyone's will be different in the entire United States." The Insurance Estimate included an itemized list of the work that needed to be done, the quantity (expressed in square or linear feet), the unit price the insurance company would pay per square or linear foot, a percentage of overhead and profit on certain items, and recoverable depreciation. Baldwin testified that the Insurance Estimate was a standard estimate in his line of work.
Wood Master's Final Invoice listed all the work Wood Master completed before suspending its performance and reflected the price for each service. Childers testified that these prices were taken directly from the Insurance Estimate. Baldwin testified that the prices Wood Master charged were the prices the insurance company agreed to pay. Finally, after agreeing that Wood Master is entitled to some amount of additional compensation for the work it performed, Tracy testified that she would calculate that number based on the amounts listed in the Insurance Estimate. She further testified that she believed $20,000, which included her original payment of $10,000, was a "fair amount" based on the work Wood Master completed.
The above evidence, which included evidence of what the insurance company agreed to pay for similar services, the contract price, and what Tracy believed would be a reasonable value for the services completed by Wood Master, was sufficient to allow a jury to determine the issue of fair and reasonable compensation for the services and materials provided by Wood Master. See E&A Utils., Inc. v. Joe, No. 14-08-00890-CV, 2010 WL 2901711, at *3 (Tex. App.-Houston [14th Dist.] July 27, 2010, no pet.) (mem. op.) (testimony that amount invoiced was "fair amount" for services and materials provided was some evidence of reasonable value for the work performed, even though invoice did not itemize value or price of services and materials); Brender v. Sanders Plumbing, Inc., No. 02-05-067-CV, 2006 WL 2034244, at *4 (Tex. App.-Fort Worth July 20, 2006, pet. denied) (mem. op.) ("To establish the right to recover reasonable charges [under quantum meruit theory], a claimant need not use the word 'reasonable'; a claimant need only present sufficient evidence to justify a jury's finding that the costs were reasonable."); Insignia Capital Advisors, Inc. v. Stockbridge Corp., No. 08-01-00119-CV, 2002 WL 1038805, at *3 (Tex. App.-El Paso May 23, 2002, pet. denied) (mem. op., not designated for publication) (evidence of quantum meruit damages can include "[e]vidence of what others received for like services . . . or opinion of witnesses who are familiar with the value of such services, including the opinion of the person performing the service and possibly even the person benefiting); Montclair Corp. v. Earl N. Lightfoot Paving Co., 417 S.W.2d 820, 831 (Tex. App.-Houston 1967, writ ref'd n.r.e.) ("Certainly the contract price is evidentiary of the reasonable value of what is furnished.").
3. Unclean Hands
Finally, Tracy argues that the trial court correctly granted a directed verdict on appellants' quantum meruit claim because appellants had unclean hands. We disagree. As appellants point out, unclean hands is an affirmative defense that must be plead or it is waived. Tex.R.Civ.P. 94; Four Points Bus., Inc. v. Rojas, No. 01-12-00413-CV, 2013 WL 4676314, at *6 n.1 (Tex. App.-Houston [1st Dist.] Aug. 27, 2013, no pet.) (mem. op.). Tracy did not raise unclean hands in her pleadings or with the trial court. Therefore, she has waived it.
The only affirmative defenses included in Tracy's First Amended Answer were discharge due to appellants' prior material breach, offset, waiver, and failure to mitigate damages.
We note the issue of whether an individual has engaged in unlawful or inequitable conduct is a fact question for the jury. See Grant v. Laughlin Env't, Inc., No. 01-07-00227-CV, 2009 WL 793638, at *11 (Tex. App.-Houston [1st Dist.] Mar. 26, 2009, pet. denied) (mem. op.) (holding trial court did not err asking jury to determine whether plaintiff's conduct "constituted unclean hands" because "whether an individual has engaged in unlawful or inequitable conduct is a fact question").
Because appellants presented at least some probative evidence on each element of their quantum meruit claim, including evidence of the appropriate measure of damages, we hold that the trial court erred in granting a directed verdict against them on this claim.
We sustain appellants' second issue.
Appellants raise a third issue complaining that the trial court's interlocutory partial summary judgment order awarding Tracy attorney's fees was vacated when the trial court entered a final judgment that did not incorporate the prior order or otherwise award Tracy attorney's fees or other relief. Appellants also contend that, to the extent the partial summary judgment order was not vacated by the final judgment, the relief granted to Tracy in that order, including the attorney's fees, was improper. In the partial summary judgment order, the trial court declared a mechanic's lien filed by Wood Master and a Notice of Lis Pendens filed on behalf of Kelly invalid and unenforceable and awarded Tracy $4,500 in "reasonable and necessary attorney's fees." Following the bench trial, the trial court entered a final judgment which ordered that appellants take noting from Tracy, but also ordered that "each party is responsible for their own costs and fees incurred." Thus, contrary to the partial summary judgment order previously entered, the final judgment did not award Tracy attorney's fees. Tracy concedes in her appellate brief that the final judgment in this case did not award her attorney's fees, and that the final judgment superseded the previous partial summary judgment order. We agree and conclude that the final judgment was inconsistent with, and therefore necessarily vacated, the trial court's prior partial summary judgment order by not incorporating the interlocutory summary judgment, which awarded Tracy attorney's fees, into the final judgment, which ordered each party to bear their own costs and fees. See Urelift Gulf Coast, L.P. v. Bennett, No. 14-13-00949-CV, 2015 WL 495020, at *2 (Tex. App.-Houston [14th Dist.] Feb. 5, 2015, no pet.) (mem. op.) (holding trial court vacated prior summary judgment order, which rendered declaratory judgment in favor of defendant but concluded defendant was not entitled to attorney's fees, by conducting trial on claims for declaratory relief and rendering final judgment and awarding attorney's fees to defendant, without incorporating interlocutory summary judgment into final judgment); see also Roccaforte v. Jefferson Cnty., 341 S.W.3d 919, 924 (Tex. 2011) (holding final judgment impliedly and necessarily replaced interlocutory summary judgment which merged into judgment); Hernandez v. Ebrom, 289 S.W.3d 316, 319 (Tex. 2009) (concluding appeals of some interlocutory orders are mooted by subsequent orders); Deep Water Slender Wells, Ltd. v. Shell Intern. Exploration & Production, Inc., 234 S.W.3d 679, 695-96 (Tex. App.- Houston [14th Dist.] 2007, pet denied) (holding trial court necessarily vacated its prior summary-judgment order by signing inconsistent order dismissing all claims based on forum-selection clause); Quanaim v. Frasco Rest. & Catering, 17 S.W.3d 30, 39-40 (Tex. App.-Houston [14th Dist.] 2000, pet. denied) (holding second judgment vacated inconsistent first judgment, even though trial court did not refer to first judgment or expressly state intention to vacate it in second judgment); see also Dickson & Assocs. v. Brady, 530 S.W.2d 886, 887 (Tex. App.-Houston [1st Dist.] 1975, no writ) (holding terms of final judgment control over those in interlocutory summary judgment). Because the final judgment did not include an attorney's fee award to Tracy, to the extent she wanted to challenge this lack of award, Tracy would have had to file a notice of appeal. See Tex. R. App. P. 25.1(c) ("A party who seeks to alter the trial court's judgment or other appealable order must file a notice of appeal."). She did not do so. Accordingly, as the final judgment did not include an award of attorney's fees to Tracy, we do not address the merits of appellants' third issue related to the propriety of the relief awarded in the trial court's partial summary judgment order.
Conclusion
Because appellants presented more than a scintilla of evidence to raise a fact issue on the elements of their breach of contract and quantum meruit claims, the trial court erred in granting a directed verdict. We reverse the judgment of the trial court and remand for a new trial.