Opinion
NO. 01-18-00063-CV
08-14-2018
KENNEY NGUYEN D/B/A THE TURNKEY CONSTRUCTION, Appellant v. FANTASIAS CAFÉ INC., Appellee
On Appeal from the 368th District Court Williamson County, Texas
Trial Court Case No. 16-1260-C368
MEMORANDUM OPINION
Fantasias Café Inc. contracted with Kenney Nguyen, d/b/a The Turnkey Construction, for interior construction and remodeling of a commercial space that Fantasias planned to use as a restaurant. Their business relationship later deteriorated, and Fantasias sued Nguyen for breach of contract. The trial court granted Fantasias summary judgment on its contract claim, holding that Fantasias established the elements of its claim as a matter of law. We reverse and remand.
The trial court also granted Fantasias a no-evidence summary judgment on Nguyen's contract counterclaim. Nguyen does not challenge that ruling.
Background
Fantasias and Nguyen entered into a contract for the interior construction and remodeling of commercial space that Fantasias had been leasing for its restaurant. The contract called for Nguyen to complete certain benchmarks. When each benchmark was completed, Fantasias would pay Nguyen a dollar amount associated with that benchmark. The total contract price was $215,000, and each of the benchmark payments added together equaled $215,000. The contract required that the project "shall be substantially completed on or before Aug. 16, 2016. Time is of the essence."
According to an affidavit by Fantasias's owner, as August 16 approached, it became clear that Nguyen would not timely finish the project. The parties entered into an amendment to their contract. The amended contract set out new benchmarks and associated payments, required Nguyen to provide Fantasias with "a schedule of items to be in work progress and be completed (including inspections)," and set a new completion date of September 12. The full contract price remained $215,000, and the new benchmark payments all together equaled $215,000.
The amendment also allowed Fantasias to suspend, cancel, or terminate the contract if the project was behind schedule or if Nguyen did not meet the September 12 deadline. If the project was not complete by that date, then the amendment allowed Fantasias to recover $250 per day from Nguyen until the project was completed. September 12 came and went without completion of the project. By that time, Fantasias had paid Nguyen $180,000 out of the total $215,000. Fantasias terminated the contract in a letter dated October 18.
Fantasias sued Nguyen for breach of contract. Fantasias moved for a traditional summary judgment on its contract cause of action. Fantasias asked the court to award it contract damages calculated by adding together the amounts that Fantasias paid other contractors to complete Nguyen's work, paid for equipment needed to fix or complete Nguyen's work, paid Nguyen's subcontractors who claimed that Nguyen had not yet paid them out of the $180,000 Nguyen collected from Fantasias, and the daily delay amounts specified in the contract. Nguyen did not file a written response. Fantasias's summary-judgment attachments included Nguyen's interrogatory responses, two of which suggest that Nguyen completed three benchmarks after September 12 and that he believed he was owed the remainder of the specified benchmark prices associated with those completed benchmarks.
The trial court granted Fantasias a summary judgment on its contract claim and awarded its requested damages. Nguyen filed a motion for new trial, but the trial court denied it. This appeal follows.
Nguyen filed this appeal in the Court of Appeals of Texas for the Third District, but the Supreme Court transferred the appeal to this court. Misc. Docket No. 18-9010 (Tex. Jan. 12, 2018); see TEX. GOV'T CODE § 73.001 (authorizing such transfer); id. § 73.002(a) (granting jurisdiction of transferred case to court to which case is transferred). We therefore "must decide the case in accordance with the precedent of the transferor court under principles of stare decisis if [this] court's decision otherwise would have been inconsistent with the precedent of the transferor court." TEX. R. APP. P. 41.3. We are unaware of any conflict between the Third Court of Appeals's precedent and that of this court on any relevant issue. See, e.g., White Lion Holdings, L.L.C. v. State, No. 01-14-00104-CV, 2015 WL 5626564, at *2 n.3 (Tex. App.—Houston [1st Dist.] Sept. 24, 2015, pet. denied).
Legal Sufficiency of Elements of Contract Cause of Action
Nguyen contends that Fantasias's motion and evidence are legally insufficient to support the summary judgment on Fantasias's contract cause of action.
I. Standard of review and applicable law
We review summary judgments de novo. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). The movant must show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). When a plaintiff moves for summary judgment on the plaintiff's contract cause of action, the plaintiff must show that he or she is entitled to prevail on each element of the cause of action. Wilson v. Thomason Funeral Home, Inc., No. 03-02-00774-CV, 2003 WL 21706065, at *6 (Tex. App.—Austin July 24, 2003, no pet.) (mem. op.). The plaintiff makes the required showing on an element when "ordinary minds cannot differ regarding the conclusion to be drawn from the evidence" for the element. See Hall v. Lone Star Gas Co., 954 S.W.2d 174, 176 (Tex. App.—Austin 1997, pet. denied).
If the plaintiff conclusively establishes his or her cause of action, then the burden shifts to the nonmovant, who then must disprove or raise a fact issue on at least one element. See Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014). If the nonmovant fails to raise any issue in response to the motion, such as by failing to file any written response at all, then the nonmovant is limited on appeal to challenging only the legal sufficiency of the grounds raised by the movant. See TEX. R. CIV. P. 166a(c); Amedisys, 437 S.W.3d at 512; Hinojosa Auto Body & Paint, Inc. v. FinishMaster, Inc., No. 03-08-00361-CV, 2008 WL 5210871, at *7 (Tex. App.—Austin Dec. 12, 2008, no pet.) (mem. op.). However, summary judgments must stand on their own merits: the nonmovant's failure to respond cannot supply by default the proof necessary to establish the movant's right to judgment as a matter of law. Amedisys, 437 S.W.3d at 511-12.
In reviewing a summary judgment, a reviewing court takes the nonmovant's evidence as true, indulges every reasonable inference in the nonmovant's favor, and resolves all doubts in the nonmovant's favor. Cal. Ins. Guarantee Ass'n v. Hill Bros. Transp., Inc., 497 S.W.3d 67, 75 n.6 (Tex. App.—Austin 2016, no pet.).
To prevail on a contract cause of action, a plaintiff must prove (1) the existence of a valid contract, (2) the plaintiff's performance or tender of performance, (3) the defendant's breach, and (4) the plaintiff's damages as a result of the breach. See N.Y. Life Ins. Co. v. Miller, 114 S.W.3d 114, 121 (Tex. App.—Austin 2003, no pet.).
A reviewing court determines the rights and liabilities of a contract's parties by giving legal effect to the contract as written. Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex. 1983). Interpreting unambiguous contract language is a question of law. See Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015).
The second element of a breach-of-contract claim requires a plaintiff to have performed or offered to perform the plaintiff's own obligations under the contract, unless excused by the defendant's material breach. See Carr v. Norstok Bldg. Sys., Inc., 767 S.W.2d 936, 939 (Tex. App.—Beaumont 1989, no writ); Lanford v. Parsons, 237 S.W.2d 425, 427-28 (Tex. Civ. App.—Austin 1951, writ ref'd n.r.e.). Performance ordinarily must be the exact performance called for by the contract. See Kitten v. Vaughn, 397 S.W.2d 530, 533 (Tex. Civ. App.—Austin 1965, no writ); see also Berman v. Rife, 644 S.W.2d 574, 577 (Tex. App.—Fort Worth 1982, writ ref'd n.r.e.).
Neither party seeks application of the doctrine of substantial performance, and Fantasias did not raise the doctrine in its motion for summary judgment. See TEX. R. APP. P. 38.1(f), (i), 38.2(a)(1); TEX. R. CIV. P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex. 1993).
Nguyen concedes that he breached the contract because he did not complete the project by the September 12 amended deadline. Breaches of a contract are divided into two categories: material and nonmaterial. When a party to a contract commits a material breach of the contract, the non-breaching party is excused from further performance. Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc., 518 S.W.3d 432, 436-37 (Tex. 2017) (per curiam). But after a nonmaterial breach, the non-breaching party is not excused from further performance although it may still sue for damages caused by the breach. Id. Thus, after a material breach, the non-breaching party has a choice: either continue performing under the contract or cease performing and terminate the contract. Eco Built, Inc. v. Lulfs, No. 03-08-00427-CV, 2010 WL 3629821, at *6 (Tex. App.—Austin Sept. 17, 2010, no pet.) (mem. op.); Gupta v. E. Idaho Tumor Inst., Inc., 140 S.W.3d 747, 756 (Tex. App.—Houston [14th Dist.] 2004, pet. denied). "If the non-breaching party elects to treat the contract as continuing and insists the party in default continue its performance, the previous breach constitutes no excuse for nonperformance on the part of the party not in default, and the contract continues in force for the benefit of both parties." Eco Built, 2010 WL 3629821, at *6; accord Gupta, 140 S.W.3d at 756-57. Choosing this route "does not affect whether the non-breaching party can sue for a former or future breach. The election affects only whether the non-breaching party itself is then required to perform fully. If the party continues performance, it obligates itself to fully perform." Gupta, 140 S.W.3d at 757 n.7 (internal citations omitted).
Whether a breach is material is a question for the factfinder. See Hudson v. Wakefield, 645 S.W.2d 427, 430 (Tex. 1983); MHI P'ship, Ltd. v. DH Real Estate Inv. Co., No. 03-04-00485-CV, 2008 WL 3877717, at *6 (Tex. App.—Austin Aug. 20, 2008, pet. denied) (mem. op.).
II. Fantasias did not prove that it is entitled to judgment as a matter of law on the performance element of its contract cause of action
Even though Nguyen did not file any written summary-judgment response, the summary judgment still must stand on its own merits. See TEX. R. CIV. P. 166a(c); Amedisys, 437 S.W.3d at 511-12. We therefore review the record for whether Fantasias established as a matter of law the elements of its contract cause of action, beginning with the element Nguyen primarily challenges—performance.
Nguyen contends that Fantasias failed to prove its own performance as a matter of law in part because Fantasias failed to make three benchmark payments called for by the contract. The contract, as amended, required Fantasias to pay Nguyen certain sums after each of 18 benchmarks were met. The benchmark payment amounts added together equal the total contract price of $215,000. Fantasias paid Nguyen for satisfying 14 of the benchmarks that were timely completed. But Fantasias did not pay for four benchmarks:
k) $3,000 after passing all Gas line Rough inspections
l) $6,000 after passing all fire Sprinkler Rough inspections
. . . .
o) $5,000 after passing all Gas Test, Gas Service inspections
. . . .
r) $21,000 after passing final inspections and Certificate of Occupancy, Punch List, and after Owners received TI (Tenant Improvement) payment from the Landlord.
Fantasias attached to its motion Nguyen's interrogatory answers. In one answer, Nguyen averred that Fantasias had paid him $180,000 under the contract. In another, Nguyen averred that Fantasias still owed him benchmark payments "k," "l," and "o." He explained that benchmark payments "k," "l," and "o" were due to him on October 7, 10, and 13, respectively. Also, neither party disputes that benchmark payment "r" was never paid. Fantasias's $180,000 payment to Nguyen equals the sum of all benchmark payments besides "k," "l," "o," and "r."
Fantasias contends both that it established its performance as a matter of law and that the unpaid benchmark payments never came due, excusing Fantasias from performing those. As proof of performance, Fantasias points to its $180,000 payment to Nguyen. And Fantasias contends that Nguyen's breach excused Fantasias from having to perform benchmark payments "k," "l," or "o." Specifically, Fantasias contends that, because Nguyen did not complete the project by the September 12 completion date, it did not owe benchmark payments that Nguyen claims came due after that date.
Fantasias also points to a separate payment of $1,300 for purchase of a "Hood Air Plenum." But this payment was not for benchmarks "k," "l," or "o"; it was for a separate obligation for Fantasias under the contract.
Fantasias's summary-judgment evidence did not show that Nguyen's failure to timely complete the work associated with benchmark payments "k," "l," and "o" was a material breach. If Nguyen's prior breach was nonmaterial, then Fantasias was not excused from the further performance of making benchmark payments "k," "l," and "o." See Bartush-Schnitzius Foods, 518 S.W.3d at 436-37. Nguyen's interrogatory answer suggests that he completed the work called for in those benchmarks: he describes each of the three payments as being "due" and says that Fantasias "skipped paying us three items due." Because we must indulge every reasonable inference and resolve all doubts in Nguyen's favor, we take Nguyen's interrogatory response to mean that he completed the work called for by benchmarks "k," "l," and "o," after the amended September 12 deadline. See Cal. Ins. Guarantee Ass'n, 497 S.W.3d at 75 n.6. For these purposes, we cannot conclude as a matter of law that, if Nguyen's breach was nonmaterial, then Fantasias performed under the contract. See Bartush-Schnitzius Foods, 518 S.W.3d at 436-37; Carr, 767 S.W.2d at 939; Kitten, 397 S.W.2d at 533; Lanford, 237 S.W.2d at 427-28.
Notably, none of Fantasias's other summary-judgment evidence contradicts this conclusion. The owner of Fantasias averred only that "final punch list items, and final inspections, and the receipt of the tenant improvement dollars" were not complete and that Nguyen "never completed the project." This does not establish as a matter of law that Nguyen did not complete benchmarks "k," "l," and "o." The reference to "final inspections," punch list, and tenant improvement dollars tracks the language of benchmark "r," which is not the subject of Nguyen's challenge.
If, on the other hand, Nguyen's breach was material, then Fantasias still fell short of its summary-judgment burden. Its summary-judgment evidence suggests that, after September 12, Fantasias elected "to treat the contract as continuing" and insisted that Nguyen continue performing. See Eco Built, 2010 WL 3629821, at *6; accord Gupta, 140 S.W.3d at 756-57. Nguyen's interrogatory answer suggests that Nguyen performed the work called for by benchmarks "k," "l," and "o." And Fantasias did not purport to terminate the contract until October 18. Because we must indulge every reasonable inference in Nguyen's favor, we conclude that the summary-judgment evidence raises a fact issue on whether Fantasias elected to treat the contract as continuing and insisted that Nguyen continue performing even after the September 12 deadline. Insistence by Fantasias that Nguyen continue performing would require Fantasias to continue performing too. See Eco Built, 2010 WL 3629821, at *6; Gupta, 140 S.W.3d at 756-57 & n.7.
III. Rule of Civil Procedure 54 does not apply
Fantasias argues that Nguyen's legal-sufficiency challenge on the performance element is really "an argument of a failure of a condition precedent" to its "right to bring the action in the first place," and therefore is governed by Rule of Civil Procedure 54. Fantasias contends that Nguyen failed to specifically deny Fantasias's performance under Rule 54, and that he therefore may not raise this challenge on appeal.
The plain language of Rule 54 simply is not addressed to elements of a cause of action; it addresses conditions precedent. Therefore, a plaintiff generally must prove the performance element of the plaintiff's contract cause of action notwithstanding Rule 54. See S.M. Wilson & Co. v. Urban Concrete Contractors, No. 04-06-00227-CV, 2007 WL 1423881, at *3 (Tex. App.—San Antonio May 16, 2007, pet. denied) (mem. op.) (addressing appellant's sufficiency issue despite appellee's Rule 54 argument because sufficiency issue "involves the lack of an essential element of the contract, not a condition precedent to the underlying contract"); J.P. Ryan Enters., Inc. v. Matthaei, No. 09-06-00237-CV, 2007 WL 1219443, at *1, 5-6 (Tex. App.—Beaumont Apr. 26, 2007, no pet.) (mem. op.) (concluding that trial court erred in ruling that Rule 54 made it unnecessary for plaintiff to prove performance of contract: "the trial court applied Rule 54 to not only relieve the plaintiff of the burden of proving the occurrence of conditions precedent, but also relieved the plaintiff of the burden of proving the elements of his cause of action . . .").
Fantasias cites the application of Rule 54 in Bencon Management & General Contracting, Inc. v. Boyer, Inc., 178 S.W.3d 198 (Tex. App.—Houston [14th Dist.] 2005, no pet.). Subcontractor Boyer sued contractor Bencon for breach of the parties' subcontract. The court held that Boyer did not have to prove compliance with certain conditions precedent because Bencon had not complied with Rule 54. The conditions precedent at issue were "based on article 8 of the Prime Contract, entitled 'Invoicing and Payment'" and concerned "how Bencon should invoice" the property owner and "how and when" the property owner should pay Bencon. Id. at 205 n.3. Notably, after rejecting Bencon's conditions-precedent contention on Rule 54 grounds, the court proceeded to address Bencon's separate appellate issues on the legal sufficiency of the evidence supporting Boyer's performance of the subcontract. Compare id. at 203-05 (resolving, under Rule 54, whether Boyer had "to prove compliance with various alleged conditions precedent"), with id. at 205-08 (resolving Bencon's legal-sufficiency challenge about whether "Boyer timely performed under the Subcontract"). The court's distinct treatment of conditions precedent from the performance element of Boyer's contract claim undermines Fantasias's contention.
Rule 54 does not relieve a plaintiff from proving the elements of the plaintiff's contract cause of action, including performance. See Mills v. Graham Mortg. Corp., No. 05-13-00707-CV, 2014 WL 2916870, at *2-4 & n.3 (Tex. App.—Dallas June 24, 2014, no pet.) (mem. op.) (reversing summary judgment for plaintiff, over plaintiff's Rule 54 argument, on legal-sufficiency grounds because plaintiff had not proven all elements of its cause of action, notwithstanding defendant's failure to specifically deny conditions precedent). Fantasias's reliance on Rule 54 is misplaced.
We sustain Nguyen's legal-sufficiency issue.
Conclusion
We reverse the judgment of the trial court and remand for trial. We deny all pending motions as moot.
Harvey Brown
Justice Panel consists of Justices Higley, Brown, and Caughey.