Opinion
No. 09-09-00221-CV
Submitted on February 10, 2010.
Opinion Delivered May 13, 2010.
On Appeal from the 9th District Court, Montgomery County, Texas, Trial Cause No. 08-05-04760-CV.
Before McKEITHEN, C.J., KREGER and HORTON, JJ.
MEMORANDUM OPINION
Appellant Bright Now! Dental, Inc. appeals from the judgment entered in favor of Teligistics, Inc. in Teligistics's suit on a sworn account and for breach of contract. Bright Now raises four issues for our consideration. We reverse and remand for a new trial.
BACKGROUND
Teligistics and Bright Now entered into a telecommunications expense management agreement in May of 2005. The agreement covered the management and procurement of all of Bright Now's "telecom expenses" related to the following covered services: (1) long distance, (2) local dial tone, (3) internet access, (4) wireless voice and data, (5) frame relay, VPN, PIP, PVPN, or any LAN/WAN connectivity, and (6) audio, web, and video conferencing. Under the terms of the agreement, Teligistics agreed to do the following: create, manage, and implement requests for pricing using its proprietary knowledge; negotiate contract terms and conditions and market-based pricing for covered services for Bright Now; manage Bright Now's moves, adds, changes, and deletes (MACD's) through a central help desk environment; "provide and maintain . . . a web-based [i]nternet portal to view telecom billing invoices and . . . [Teligistics] generated reports for accounts payable, audit variance, traffic analysis, monthly spend analysis and other reports as may be required by [Bright Now] and/or generated by [Teligistics]"; "audit telecom provider(s) billing and invoice for accurate rates and charges based on current contract compliance, tariffs and taxes. . . . [and] facilitate the credit requests for these overcharges and track these credits and report to [Bright Now] on credit or refund status on a regular basis"; "provide technical, telecom technology and telecom financial management consulting as needed based on [Teligistics]'s proprietary applications, knowledge, resources and [Bright Now]'s needs."
The agreement provided that it would expire thirty-six months after its execution, and that Teligistics "may continue to provide services on a month-to-month basis upon expiration of the original term. . . ." In addition, under the terms of the contract, either party could terminate the agreement for cause, and the contract listed several specific circumstances that would constitute cause for termination. One of the enumerated reasons for which Teligistics could terminate the agreement for cause was if Bright Now "fails or consistently fails to pay [Teligistics's] invoice(s) within credit terms." The agreement also provided that "[e]ither party may terminate this Agreement at any time with 60 days written notice." Furthermore, the agreement provided that before Teligistics could terminate the agreement for cause, it had to provide written notice of its intention to invoke the clause, and Bright Now had a thirty-day "right to cure period[,]" and if Bright Now cured during this period, "Termination for Cause shall not be applicable." The contract obligated Bright Now to pay Teligistics's invoices within thirty days from the invoice date, and to pay interest charges of 1.5% per month on any outstanding balance over thirty days old. The contract specified that Bright Now would pay Teligistics either a variable monthly fee based upon the processing rate or $5,250.00 per month, whichever was greater, as well as a one-time setup charge of $10,500.00.
On April 16, 2008, an attorney for Bright Now sent a letter to the chief executive officer of Teligistics, stating that Bright Now did not intend to renew the parties' agreement when it expired on April 28, 2008. On April 21, 2008, Teligistics sent a letter to Bright Now in which Teligistics contended that the agreement required sixty days' notice of "termination" and stated that Teligistics was not required to forward to Bright Now any invoices it received after April 28, 2008. Teligistics also stated in the letter that, "effective immediately[,]" it would suspend login and access to its web portal platform; stop processing invoices at the close of business on April 28; and no longer support any MACD help desk functions "or offer provider support in areas of billing, credit/refund facilitation or any other support services." On April 28, 2008, Teligistics sent another letter to Bright Now, in which Teligistics noted that Bright Now owed Teligistics "$9,043.75 for March processing and $13,510.13 for April processing as well as a late charge/finance invoice for $96.79 for a total of $22,650.67. . . ." Teligistics attached its March and April invoices to the letter. The March invoice was dated April 11, 2008, and it indicated that payment in the amount of $9,043.75 was due on May 11, 2008. Teligistics's April invoice was dated April 28, 2008, and it stated that payment in the amount of $13,510.13 was due on May 28, 2008. Teligistics's April 28 letter stated that it constituted the final notice of the monies due.
On May 14, 2008, Teligistics sued Bright Now. Teligistics alleged causes of action on sworn account and for breach of contract in its third amended petition. Teligistics' third amended petition also stated that because its online tools were unavailable to Bright Now between April 23 and April 30, 2008, Bright Now was entitled to a credit in the amount of $2,110.22, and that Bright Now therefore owed Teligistics $22,040.45. In its verified answer, Bright Now entered a verified denial and asserted that "[o]nce the correct offsets and credits are applied to the account there are no sums due and owing to [Teligistics]." Among other things, Bright Now contended Teligistics violated the agreement by terminating its services and denying online access; that on the date of Teligistics's letter of April 21, March and April invoices attached to the letter were not yet owed; a credit of $2,110.22 was not appropriate compensation for the unavailability of Teligistics's network because the network was unavailable due to Teligistics's deliberate suspension of services rather than technical difficulties; and Teligistics owed Bright Now various credits for its failure or refusal to perform various services under the agreement.
Teligistics filed a traditional motion for partial summary judgment in which it asserted that it did not breach the parties' agreement, and requested that the trial court enter summary judgment against Bright Now on Bright Now's affirmative defenses. As summary judgment evidence, Teligistics included, among other things, a copy of the contract; the affidavit of its executive vice president, George R. Councill; copies of emails between representatives of Teligistics and Bright Now concerning past due invoices in 2007; and copies of Bright Now's letter of April 16 to Teligistics and Teligistics letter of April 21, 2008, to Bright Now. The trial court granted Teligistics's motion for partial summary judgment and entered an order in which it concluded, among other things, that Teligistics provided the required services to Bright Now and invoiced Bright Now for its services; that Bright Now "stood in actual breach and anticipatory breach" of the agreement, thereby permitting Teligistics to terminate the agreement; and that "the portal's availability or lack thereof does not constitute a breach, or material breach, of the Master Agreement." The trial court's summary judgment order stated that Bright Now's "affirmative defense of breach of contract is without merit and is therefore denied."
Teligistics also filed a traditional motion for partial summary judgment on its sworn account claim in which it sought summary judgment against Bright Now for $20,540.45 in actual damages, but Teligistics apparently did not seek a ruling on that motion.
The parties tried the remaining issues to the bench. Teligistics's senior vice president, George Councill, testified that he was unaware of any technical difficulties with Teligistics's network on April 21, 2008. Councill testified that the agreement requires Teligistics to make its online tools available to Bright Now. Councill also testified that although the online web portal was available on April 21, 2008, Teligistics suspended access for some of Bright Now's employees pursuant to Teligistics's letter. Shannon Broadbent, an accountant for Teligistics, testified that after April 21 Teligistics did not cut off access to its portal for all Bright Now employees; instead, Teligistics permitted two Bright Now employees who downloaded invoices on a daily basis to retain access to the portal until the evening of April 28. Broadbent also testified Bright Now was late in paying Teligistics's invoices for January and February of 2008.
After a bench trial, the trial court entered a judgment in favor of Teligistics and ordered Bright Now to pay Teligistics $22,650.67 in actual damages and awarded Teligistics attorney's fees in the amount of $52,000.00 for trial, $10,000.00 if the case was appealed to this Court, and $5,000.00 if the case is appealed to the Supreme Court. Bright Now then filed this appeal.
ISSUE TWO
Bright Now's second issue asserts that the evidence was legally and factually insufficient to support Teligistics's sworn account claim. Because Bright Now's legal sufficiency argument, if sustained, would result in rendition, we address issue two first. When, as here, the appellate record includes a clerk's record and a reporter's record, a party may challenge the trial court's implied findings of fact for legal and factual sufficiency. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002). In reviewing a legal sufficiency issue, we view the evidence in a light that tends to support the finding of the disputed fact and disregard all evidence and inferences to the contrary unless a reasonable fact-finder could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005); Bradford v. Vento, 48 S.W.3d 749, 754 (Tex. 2001).
To prevail in a cause of action on a sworn account, a party must show that services were performed; the account is just ( i.e. the prices were charged in accordance with the parties' agreement); all lawful offsets, payments, and credits have been applied to the account; and the account is unpaid. Worley v. Butler, 809 S.W.2d 242, 245 (Tex. App.-Corpus Christi 1990, no writ); see also TEX. R. CIV. P. 185. At trial, Teligistics introduced copies of the March and April invoices, as well as an invoice for finance charges on an overdue balance invoice. In addition, the affidavit of Councill was admitted into evidence. In the affidavit, Councill averred that he was familiar with Teligistics's invoices to its clients; that Teligistics's claim against Bright Now was true, just, and correct; that Teligistics kept a systematic record of its invoices to Bright Now; that the invoices attached to the affidavit were true and correct copies, and were unpaid; that the account was just and true; and that all just and lawful offsets, payments, and credits had been allowed. Therefore, we conclude that legally sufficient evidence supported Teligistics's claim. Accordingly, we overrule the legal sufficiency argument raised in issue two. Because of our disposition of issue one below, we need not address the factual sufficiency argument raised in issue two, as it would not result in greater relief.
ISSUE ONE
In issue one, Bright Now argues that the trial court erred by granting Teligistics's motion for partial summary judgment on the issue of Bright Now's affirmative defense of breach of contract. We review summary judgment orders de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). The movant for a traditional summary judgment must establish that no genuine issues of material fact exist and it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Id. at 549.
"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). In determining whether a failure to perform is material, courts may consider the extent to which the injured party will be deprived of a benefit it reasonably expected; the extent to which the injured party can be adequately compensated for the benefit of which he will be deprived; the extent to which the party who failed to perform or to offer to perform will suffer forfeiture; the likelihood that the party who failed to perform will cure its failure; and the extent to which the behavior of the party who failed to perform comports with standards of good faith and fair dealing. Id. at 199 (quoting RESTATEMENT (SECOND) OF CONTRACTS § 241 (1981)). The issue of whether a breach is material is generally a question of fact. Hudson v. Wakefield, 645 S.W.2d 427, 430 (Tex. 1983).
In its motion for partial summary judgment, Teligistics asserted that its denial of portal access was not a material breach because the agreement gave Bright Now a remedy for any lack of access and the agreement did not include lack of access as grounds for Bright Now to terminate the agreement for cause. Additionally, Teligistics contended that with the exception of portal access, it provided all required services under the agreement, and that it had the right to terminate the agreement because, among other reasons, Teligistics had failed to pay invoices within the credit terms. In its response to Teligistics's motion, Bright Now contended that it owed no payments as of Teligistics's April 21 letter, that Teligistics failed to provide written notice of default and did not provide an opportunity to cure, and that Teligistics cut off services because Bright Now notified Teligistics that Bright Now did not intend to renew the agreement. Bright Now further asserted that Teligistics materially breached the agreement, and that Teligistics's breach excused Bright Now's obligation to perform.
As previously discussed, the agreement required Teligistics to provide and maintain for Bright Now a web-based internet portal to view telecom billing invoices and other reports. The contract also stated that Teligistics
warrants that any online tools made available . . . during this engagement shall be maintained and available 100% of the time. In the event network availability is not available at any time, [Teligistics] will credit [Bright Now's] account an amount equal to the pro-rata share of the monthly expenses times the amount of time the network application was unavailable. [Teligistics] agrees to credit [Bright Now's] account for an entire 24 hour period for any network unavailability that exceeds 4 hours.
It is undisputed that with the exception of two Bright Now employees, Teligistics did not provide Bright Now access to Teligistics's web-based internet portal from April 23 to April 30. The summary judgment evidence established that Teligistics's web-based internet portal was not unavailable; rather, Teligistics intentionally cut off Bright Now's ability to access the portal to induce payment of the March and April invoices before they were due. The inclusion of the web-based internet portal among the specifically-enumerated services Teligistics was to provide and a warranty concerning the portal's availability "100% of the time" indicate that the availability of the portal was likely a material part of the contract, as does the inclusion in the agreement of a provision compensating Bright Now for any periods of time when the portal was unavailable.
Teligistics did not demonstrate that no genuine issues of material fact existed and that it was entitled to judgment as a matter of law with respect to Bright Now's affirmative defense of breach of contract. See TEX. R. CIV. P. 166a(c). In addition, because the trial court granted summary judgment in favor of Teligistics, Bright Now was deprived of the opportunity to present its theory that because Teligistics breached the contract by wrongfully failing to perform certain services, Bright Now was not liable to Teligistics for its sworn account claim or its breach of contract claim. See TEX R. APP. P. 44.1(a). For all of these reasons, we conclude that the trial court erred by entering a partial summary judgment in favor of Teligistics. We sustain issue one and remand the cause for a new trial on the merits.
While pronouncing its judgment, the trial judge stated, "[M]y rulings are limited in part by the partial summary judgment order."
ISSUES THREE AND FOUR
In its third and fourth issues, Bright Now argues that Teligistics failed to establish its claim for trial and appellate attorney's fees with legally and factually sufficient evidence. The trial court awarded attorney's fees to Teligistics pursuant to section 38.001 of the Texas Civil Practice and Remedies Code. See TEX. CIV. PRAC. REM. CODE ANN. § 38.001 (Vernon 2008) (providing for recovery of attorney's fees for, among other things, contract claims and suits on sworn account). Because of our disposition of issue one, Teligistics is no longer a prevailing party, and may not recover attorney's fees pursuant to section 38.001 at this time. See Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997) (To be entitled to a recovery of a statutory award of attorney's fees, a party must prevail on a cause of action for which attorney's fees are recoverable and recover damages.). Accordingly, we need not address the sufficiency of the evidence issues raised in issues three and four. We reverse the trial court's judgment and remand the cause for a new trial.
REVERSED AND REMANDED.