Opinion
No. 14-07-00068-CV
Opinion filed November 6, 2007.
On Appeal from the 55th Judicial District, Harris County, Texas, Trial Court Cause No. 04-13358.
Panel consists of Chief Justice HEDGES and Justices ANDERSON and SEYMORE.
MEMORANDUM OPINION
Appellants, Ruben and Nicole Casarez, sued Alltec Construction, Co. (Alltec) and Robert Stoll for breach of contract, fraud, and violations of the Texas Deceptive Trade Practices Act. Alltec and Stoll filed a counterclaim alleging breach of contract and unjust enrichment. A jury found both parties had breached the construction contract, neither Alltec nor Stoll committed fraud or violations of the Texas DTPA, and neither party was damaged. The trial court subsequently signed a take nothing judgment. On appeal, appellants claim the trial court erred in submitting the question regarding whether appellants breached the contract because the evidence conclusively established Alltec breached the contract first, thereby excusing appellants' performance. Appellants also argue the evidence is legally and factually insufficient to support the breach of contract and no damage jury verdicts against them. We reverse and render in part and reverse and remand in part.
FACTUAL AND PROCEDURAL BACKGROUND
In June 2001, Tropical Storm Allison hit the Houston area and flooded appellants' house with approximately two feet of water. Since their house was located below the flood plain and because they had experienced similar trouble in the past, appellants decided something had to be done. While contemplating their options, appellants were introduced through a mutual acquaintance to Robert Stoll, the owner of Alltec. Stoll proposed a plan to appellants which would enable them to keep their old house, which was appellants' main goal. Stoll's proposal was to lift the frame of the house off the slab and get the frame of the house out of the flood plain. Appellants agreed to hire Alltec and Stoll for the job.
Around November 2001, Stoll began performing a feasibility study to determine whether it was possible to lift such a large house. Stoll testified this method of lifting appellants' house was new, so he built a prototype before beginning work on the house. According to Stoll, the prototype was successful, so Alltec went forward with the work on appellants' house. Although appellants were aware of the feasibility study and prototype, they both testified Stoll represented to them he had performed this process before. After the feasibility study was completed, Alltec began preliminary work on appellants' house, and in October 2002, appellants signed a contract with Alltec. The parties agreed the price for Alltec's work would be $400,000, time was of the essence, and the work would be substantially completed by July 1, 2003. Alltec did not actually begin working on the project until December 2002 because appellants were waiting for funding approval.
By April 2003, Alltec was approximately one month behind schedule. Around May or June 2003, Stoll approached appellants and informed them he was out of money and unable to continue work unless appellants paid approximately $28,000 out of sequence. Stoll asked appellants to directly pay $8,000 to the plumber, $6,000 to the electrician, and $14,000 to Juan Duran. Each of these people were subcontractors for Alltec, and under the contract, it was Alltec's responsibility to pay them. In addition, appellants had already paid Alltec a portion of the money owed to the plumber, but Alltec put the money into its account and used it for something else. Therefore, Alltec was unable to pay the plumber and was essentially asking for double payment by the appellants. Appellants refused to pay the additional money to Alltec.
At this point, Alltec could not go forward with the project. As a solution, Stoll proposed to appellants the option of having Duran, one of Stoll's subcontractors, finish the work independently. Stoll proposed the option of appellants paying Duran directly and Stoll staying on the project solely as a consultant. Appellants were not willing to entrust the completion of the work to Duran, so they decided not to go forward with the proposal.
At some point after Alltec informed appellants it could not go forward, appellants sent Alltec and Stoll a termination letter. According to the construction contract entered into by appellants and Alltec, section 19.2 allows the owner to terminate the contract with the contractor for a number of reasons. However, under section 19.2.2, the owner was required to obtain certification by the architect that sufficient cause existed to justify the termination. During trial, Rueben Casarez testified that after Stoll refused to go forward with the contract, he did in fact send a termination letter. But, he also testified the architect certified sufficient cause existed to justify the termination before he sent the letter. However, Stoll testified he received a termination letter from appellants but also testified the architect never certified sufficient cause existed to justify the termination. In addition, Kamran Mouzoon, the architect on the project, never testified that he certified sufficient cause existed to terminate the contract. In fact, Mouzoon testified there was no cause for stopping the project and no reason he could think of to put the project on hold. He also testified he was unaware of Stoll's refusal to go forward unless appellants paid him more money and his failure to pay the plumber.
In July 2003, Stoll sent appellants another draw request for work that had been done on their home and work yet to be done on their home. Rueben testified he did not pay the request because the contract was terminated at that point and because the architect had not certified the payment, which was a requirement under the contract.
Because appellants' house was uncompleted and Alltec could not finish it, appellants contacted four contractors to look at the house and bid on the cost of completion. Rueben testified two of the contractors refused to go forward with the work based on their assessment, and two of the contractors placed a bid. Rueben also testified the two contractors who placed bids were unwilling to do the work for the $180,000, which was appellants' remaining balance on their contract with Alltec, and were unwilling to warrant the work. After taking bids from contractors and hiring inspectors to look at the house, appellants decided it made more economic sense to tear the house down and start over. Appellants eventually demolished their old house and hired a new contractor to build a new house.
In May 2004, appellants sued Alltec and Stoll for breach of contract, fraud, and violations of the Texas Deceptive Trade Practices Act. Alltec and Stoll filed a counterclaim alleging breach of contract and unjust enrichment. After a three day trial, the jury found both parties breached the construction contract, neither Alltec nor Stoll committed fraud or violations of the Texas DTPA, and neither party suffered damages. Appellants filed a Motion for Judgment Notwithstanding the Verdict or, alternatively, a Motion for New Trial. The trial court denied both. The trial court subsequently signed a take nothing judgment. Appellants appealed, and after filing their notice of appeal, Stoll filed for bankrupt, causing an automatic stay of the appeal. Stoll was later discharged, the appeal against him was dismissed, and the appeal against Alltec was severed and reinstated.
DISCUSSION
A. Charge Error
In their first issue, appellants contend the trial court erred in submitting the question regarding whether appellants breached the contract because the evidence conclusively established Alltec breached the contract first, thereby excusing appellants' performance. Also within their first issue, appellants contend the evidence is legally and factually insufficient to support the jury's finding that appellants breached the contract. We will address the jury charge issue first. Because the jury charge issue is dispositive of the appeal, we will not address appellants' other issues. Tex. R. App. P. 47.1.
Appellants also mention in their brief the trial court should not have overruled Appellants' motion for directed verdict on Alltec's breach of contract claim and should have disregarded the jury's answer when asked to do so in Appellants' post-verdict motions. Since these claims can properly be reviewed under a similar analysis, we will not address them specifically.
1. Standard of Review
We review the trial court's submission of instructions and jury questions under an abuse of discretion standard. Toles v. Toles, 45 S.W.3d 252, 263 (Tex.App.-Dallas 2001, pet. denied). The trial court has broad discretion in submitting jury questions so long as the questions submitted fairly place the disputed issues before the jury. Id. (citing Varme v. Gordon, 881 S.W.2d 877, 881 (Tex.App.-Houston [14th Dist.] 1994, writ denied)). A trial court abuses its discretion by acting arbitrarily, unreasonably, or without consideration of guiding principles. Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex. 2003).
If a trial court abuses its discretion when it submits a question or instruction, we do not reverse in the absence of harm. See Tex. R. App. P. 44.1(a); 4901 Main, Inc. v. TAS Automotive, Inc., 187 S.W.3d 627, 631 (Tex.App.-Houston [14th Dist.] 2006, no pet.). Harm occurs when the error in the charge probably caused the rendition of an improper judgment, or prevented appellant from properly presenting the case to the court of appeals. Tex. R. App. P. 44.1(a); 4901 Main, 187 S.W.3d at 631. To determine harm, the appellate court must consider the entire record, including the parties' pleadings, the evidence, and the charge. 4901 Main, 187 S.W.3d at 631. Submission of an improper jury question can be harmless error if the jury's answers to other questions render the improper question immaterial. City of Brownsville v. Alvarado, 897 S.W.2d 750, 752 (Tex. 1995); Rebel Drilling Co. v. Nabors Drilling USA, Inc., No. 14-02-00841-CV, 2004 WL 2058260, at *8 (Tex.App.-Houston [14th Dist.] Sept. 16, 2004, no pet.) (mem. op.). A jury question is considered immaterial when its answer can be found elsewhere in the verdict or when its answer cannot alter the effect of the verdict. Alvarado, 897 S.W.2d at 752; Rebel Drilling, 2004 WL 2058260, at *8. Submission of an immaterial issue is not harmful error unless the submission confused or misled the jury. Alvarado, 897 S.W.2d at 752; Rebel Drilling, 2004 WL 2058260, at *8. When determining whether a particular question could have confused or misled the jury, we "consider the probable effect on the minds of the jury in the light of the charge as a whole." Alvarado, 897 S.W.2d at 752; Rebel Drilling, 2004 WL 2058260, at *8.
2. Analysis
We must first determine whether the trial court abused its discretion when it submitted the question regarding whether appellants breached the contract. 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) (citing Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex. 1994)). Thus, when a party to a contract fails to perform its obligations under that contract, it may not thereafter enforce the remaining terms of the contract against the other party. Nova Info. Sys. v. Nidhi Roneil, Inc., No. 14-05-00845-CV, 2007 WL 925813, at *4 (Tex.App.-Houston [14th Dist.] March 29, 2007, no pet.) (mem. op.). Because we are dealing with dual findings that both parties breached the agreement, we must determine whether it was conclusively established that Alltec materially breached the contract first. Hooker v. Nguyen, No. 14-04-00238-CV, 2005 WL 2675018, at *8 (Tex.App.-Houston [14th Dist.] Oct. 20, 2005, pet. denied) (mem. op.).
During trial, both sides testified that after Alltec ran into serious financial difficulties, Stoll informed appellants he was unable to continue the project unless appellants paid additional money to its subcontractors. Rueben testified "[Stoll] told me that he had run out of money, [he] couldn't go forward unless I gave him some more money." Rueben again testified on cross-examination "[Stoll] told me he wouldn't — could not go further — he wouldn't work any more unless we paid him the additional amount." When Stoll was examined by appellants' attorney, Stoll admitted he told appellants Alltec could not continue unless additional payments were made to the subcontractors. Stoll also admitted his company could not comply with the contract, and it was necessary for appellants, Stoll, and Duran to make some other arrangements for the job to be completed. In addition, Stoll's lawyer admitted in his closing argument that Stoll breached the contract. Stoll's lawyer stated the following:
[W]e didn't come in here to say that Bob didn't breach the contract. We're not saying that. We told you that he ran into financial difficulties that had nothing to do with the Casarezes and nothing to do with him. It was beyond his control. And the minute he saw that happening, he didn't try to hide it. He didn't try to do things to alter budgets. He went straight to Mr. Casarez and said look, I've got a problem here. I don't have any money. The money that you put inside my account that should have gone to one of my subcontractors isn't there.
Also, the jury found Alltec failed to comply with the construction contract, and this finding is not challenged on appeal.
The record not only establishes Alltec breached the contract but it also establishes Alltec's breach occurred before appellants' alleged breach. During trial, Rueben testified he sent the termination letter after Stoll informed him he could not go forward with the contract. In addition, Stoll admitted in cross-examination at the time he received the termination letter from appellants he had already informed appellants of his inability to finish the job. Next, we must determine whether Alltec's breach was material. Pursuant to Mustang Pipeline, we consider the circumstances listed in the Restatement and cited by the supreme court that are significant in determining whether a failure to perform is material. See Mustang Pipeline, 134 S.W.3d at 199; Hooker, 2005 WL 2675018, at *8. The Restatement lists the following factors:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Mustang Pipeline, 134 S.W.3d at 199; Hooker, 2005 WL 2675018, at *8; Restatement (Second) of Contracts § 241 (1981). The Restatement also sets forth factors significant in determining whether a party's duties are discharged under a contract due to the other party's material breach:
(1) the extent to which it reasonably appears to the injured party that delay may prevent or hinder him in making reasonable substitute arrangements;
(2) the extent to which the agreement provides for performance without delay, but a material failure to perform or to offer to perform on a stated day does not of itself discharge the other party's remaining duties unless the circumstances including the language of the agreement, indicate that performance or an offer to perform by that day is important.
Mustang Pipeline, 134 S.W.3d at 199; Hooker, 2005 WL 2675018, at *8-9; Restatement (Second) of Contracts § 242 (1981).
The record establishes Alltec's breach was material. Appellants reasonably expected Alltec to produce a livable house by July 1, 2003. Appellants were deprived of that benefit when Alltec refused to complete the project under the original financial terms. According to the contract, Alltec was to achieve "substantial completion" of the work not later than July 1, 2003. The parties defined substantial completion as "the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use." By May 2003, the project was already over one month behind schedule. Sometime at the end of May or beginning of June 2003, Alltec informed appellants his business was in financial trouble and he could not complete the project without an additional payment of $28,000. Appellants refused to pay the additional money, and Alltec stopped work. At the point Alltec stopped work, the house was unusable and unlivable. Alltec never achieved substantial completion. In fact, because appellants were unable to find another general contractor who was willing to do the work for the amount left in appellants' contract and to warrant the work, the completion date of July 1, 2003 was not met. Despite Stoll's offer to stay on the project as a consultant, Alltec neglected to cure its failure to perform. Furthermore, Alltec's behavior did not comport with standards of good faith and fair dealing by demanding more money than the contract required and refusing to go forward with the project unless appellants made extracontractual payments.
The record conclusively establishes Alltec never achieved substantial completion. Other courts in Texas have held that if there is a material breach of a contract, that contract has not been substantially performed. Hooker, 2005 WL 2675018, at *10 (citing Cont'l Dredging v. De-Kaizered, 120 S.W.3d 380, 394 (Tex.App.-Texarkana 2003, pet. denied); Patel v. Ambassador Drycleaning Laundry Co., 86 S.W.3d 304, 309 (Tex.App.-Eastland 2002, no pet.)). Therefore, the converse should apply; that is, if a party fails to substantially perform, its breach of the contract is material. Hooker, 2005 WL 2675018, at *10; see 49 David R. Dow Craig Smyser, Texas Practice: Contract Law § 9.3 (2005).
Based on the facts before us, we find there is no room for ordinary minds to differ as to the conclusion to be drawn. See Triton Oil Gas Corp. v. Marine Contractors Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982). Accordingly, we hold Alltec committed a material breach as a matter of law; as a result, appellants were thereafter discharged from their duties under the contract. See Mustang Pipeline, 134 S.W.3d at 200; Hooker, 2005 WL 2675018, at *10. If an issue is conclusively established as a matter of law, the question should not be submitted to the jury. See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 223 (Tex. 1992). Accordingly, it was an abuse of discretion for the trial court to submit the question to the jury.
Next, we must determine whether the error in the jury charge was harmful. Appellants argue this error provided the basis for the improper take nothing judgment entered against them. We agree.
In this case, the jury's finding in Question 5(a) that Alltec breached the contract, rendered the submission of Question 5(b), which focused on whether appellants breached the contract, immaterial. See Alvarado, 897 S.W.2d at 752-53 (finding the jury's assignment of zero negligence to the City rendered the following questions regarding appellant's negligence immaterial). As discussed above, once it was determined Alltec breached the contract, appellants breach was irrelevant because they were excused. See id. However, we find the error harmful because submission of the question regarding appellants' breach of the contract confused or misled the jury. In considering the probable effect on the minds of the jury, we have determined that submission of the question misled the jury into thinking appellants' breach of the contract vitiated their entitlement to damages. Therefore, we find the error probably caused the rendition of an improper take nothing judgment against appellants. Accordingly, we reverse the take nothing judgment against appellants and remand for a new trial. See Mustang Pipeline, 134 S.W.3d at 200 (implying harmful error by reversing the trial court's judgment); Hooker, 2005 WL 2675018, at *10 (implying harmful error by reversing the trial court's judgment).
Because we find the submission of Question 5(b) was harmful error, requiring remand for a new trial, we need not address appellants' remaining issues.
CONCLUSION
We reverse and render judgment that appellants did not breach the contract as a matter of law. We also reverse that portion of the judgment awarding appellants zero damages and no attorney's fees. We affirm the judgment of the trial court in all other respects. We remand the cause for consideration of the issues of appellants' damages and attorney's fees. See Tex. R. App. P. 44.1(b).