Opinion
No. 04-04-00181-CV
Delivered and Filed: August 24, 2005.
Appeal from the 216th Judicial District, Gillespie County, Texas, Trial Court No. 9702, Honorable Stephen B. Ables, Judge Presiding.
Affirmed.
Opinion On Appellants' Motion for Rehearing.
Sitting: Alma L. LÓPEZ, Chief Justice, Sandee Bryan MARION, Justice, Phylis J. SPEEDLIN, Justice.
MEMORANDUM OPINION
In an opinion and judgment dated May 11, 2005, we affirmed the trial court's judgment. Guerrero McDonald Associates, Inc. and RLI Insurance Company (collectively, "GMA") filed a motion for rehearing and a motion for rehearing en banc. We deny the motions for rehearing, but withdraw our opinion and judgment of May 11, 2005 and issue this opinion and judgment in its place.
GMA appeals from the trial court's judgment on a jury verdict in favor of Phillip Graham d/b/a Graham Construction in a breach of contract suit. Because we conclude that the evidence is legally and factually sufficient to support the jury's finding that Graham Construction's failure to comply with the parties' agreement was excused, we affirm the trial court's judgment.
Background
In January 2002, the City of Fredericksburg hired GMA to act as general contractor for the construction of the Fredericksburg Visitor's Information Center. To complete the project, GMA accepted bids from subcontractors to handle various aspects of construction. Graham Construction submitted a bid for completion of site clearing and demolition, earthwork, cement concrete pavement, and cast-in-place concrete. GMA accepted Graham Construction's bid, and on January 28, 2002, sent Graham a letter of intent outlining the work to be done and acknowledging Graham Construction's bid of $133,802. The parties entered into a subcontract in mid-February. The construction schedule provided by GMA indicated that concrete work was to begin March 19, and end with the completion of a concrete slab by April 8, 2002.
On March 22, 2002, GMA represented to the City of Fredericksburg that GMA believed Graham was stopping work on the project over a dispute regarding the scope of the work under the agreement. GMA requested that the City ask for Phillip Graham's cooperation in keeping the project on schedule. On Monday, March 25, GMA reported to the City's architect that the project was back on schedule. Two days later, in a letter dated March 27, GMA expressed its concern to Phillip Graham that Graham Construction's "portion of the work on this project is falling behind schedule." Included with this letter was a modified schedule, which required the concrete formwork to be completed by Friday, March 29, and the concrete slab to be completed no later than April 12.
On Thursday, March 28, GMA faxed a letter to Phillip Graham in which it characterized a phone call Graham had made to the architect as a breach of contract. GMA's letter also referred Graham "to the attached letter from [our] attorney regarding [GMA's] last successful litigation against a subcontractor." On March 29, GMA faxed a termination letter to Phillip Graham stating, Paco said this morning that Graham Construction's personnel left the site, and a minimal amount of work was performed. It's clear to me that you have no intention of keeping to the construction schedule. This is 24-hour notice that you are being replaced as sitework [sic] and concrete subcontractor on this project. There will be another subcontractor on site on Monday.
On Monday, April 1, GMA reported to the architect that the project was six days behind schedule. While Phillip Graham was attending a meeting at the job site with the architect and GMA representatives, a replacement subcontractor, Kevin Cain, arrived at the job site with a crew at GMA's request to finish Graham Construction's portion of the project.
GMA brought suit against Phillip Graham d/b/a Graham Construction for damages it allegedly incurred when Graham breached the parties' agreement. Graham counterclaimed for damages he allegedly incurred when GMA terminated Graham Construction's contract and failed to pay Graham for the work that had been done. The jury found that Graham had breached the agreement, but that Graham's breach was excused. The jury further found that GMA had also breached the agreement, and awarded Graham damages plus stipulated attorney's fees and costs; the jury did not award any damages to GMA.
On appeal, GMA presents four issues: (1) the evidence is legally insufficient to support the jury's finding that Graham Construction's breach of the agreement was excused; (2) Graham is not entitled to recover any damages because its breach was not excused; (3) the evidence supporting the jury's finding that GMA was not entitled to any damages is legally and factually insufficient; and (4) the evidence is factually insufficient to support the jury's finding that Graham Construction's breach was excused. Based on a thorough review of the record before us, we affirm the trial court's judgment.
Was Graham's Failure to Comply Excused?
In its first and fourth issues, GMA argues that no reasonable basis exists to support the jury's finding that Graham Construction's failure to comply with the agreement was excused, and that any evidence in support of such a finding is so contrary to the overwhelming weight of the evidence that the finding is clearly wrong and manifestly unjust. GMA also asserts in its second issue that because Graham Construction's breach was not excused, Graham is not entitled to recover any damages.
The jury found in response to Question No. 2 of the court's charge that Phillip Graham d/b/a Graham Construction failed to comply with the agreement, but also found in response to Question No. 3 that Phillip Graham's failure to comply with the agreement was excused. The jury was instructed that Graham's failure to comply with the agreement was excused if: (1) GMA previously failed to comply with a material obligation of the agreement; (2) GMA prevented Graham from complying with the agreement; or (3) the agreement was made as a result of a mutual mistake. The jury was not asked, and did not specify, under which theory it determined that Graham's breach was excused. In response to Question Nos. 5 and 6, the jury found that GMA had also failed to comply with the agreement, and awarded Graham $60,811.00 in actual damages. The jury awarded no damages to GMA.
Mutual mistake was defined for the jury as resulting "from a mistake of fact common to both parties, if both parties had the same misconception concerning the fact in question."
GMA had the burden at trial to establish that Graham breached the contract between the parties, and Graham had the burden to establish that its breach, if any, was excused. When a party not bearing the burden of proof on an issue challenges the legal sufficiency of the evidence to support a finding on that issue, we consider all the evidence in the light most favorable to the jury's finding, disregarding all evidence and inferences to the contrary. Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); Potter v. GMP, L.L.C., 141 S.W.3d 698, 702 (Tex.App.-San Antonio 2004, pet. dism'd). If more than a scintilla of evidence exists to support the jury's finding, we uphold the finding. Potter, 141 S.W.3d at 702. In a factual sufficiency challenge, we examine the entire record to determine whether some probative evidence exists to support the jury finding. Id. We then determine whether the evidence supporting the finding is so weak or so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust. Id.
Based on the record before us, we conclude the evidence is both legally and factually sufficient to support the jury's finding that Graham's failure to comply with the agreement was excused. GMA argues Graham breached the agreement either by failing to properly man the site or by failing to complete the formwork by March 29. There was evidence presented that Graham had only three men present on the job site on March 27, two men present on March 28, and admittedly did not man the project site at all on Good Friday, March 29. The jury, however, also heard testimony that at no time between March 25 and March 29 did GMA indicate to Graham that the job site was not being properly manned. In addition, the jury heard the testimony of Kendnel Kasper, a superintendent for Huser Construction located in Kerrville, Texas, that based on his experience and examination of the daily log book, the site was properly manned at all times through March 28, 2002.
As to Graham's progress on the concrete formwork, evidence from the project log book indicated that on March 27, GMA's job site superintendent reminded Todd Graham, Phillip Graham's son, that work on the perimeter hard forming had not begun. In addition, the March 27th letter from GMA to Phillip Graham states that GMA is "concerned that your portion of the work on the project is falling behind schedule. The Electrical and Plumbing subcontractors need the concrete formwork in place before they can work on the items in the concrete slab." However, Randy Stehling, an architect on the project, testified that on March 25 the batter boards and string lines for the concrete formwork were in place. Both Kevin Cain, the replacement subcontractor, and Phillip Graham testified that it was common and usual practice for electricians and plumbers to take their measurements from the batter boards and string lines. Therefore, the jury had before it some evidence that Graham's failure to complete the formwork by March 29 did not delay or hinder the commencement of work by the electricians and plumbers.
In addition, the jury heard testimony that Graham still could have completed its portion of the project by the April 12 deadline despite the formwork not being completed by the March 29 interim deadline. Todd Graham testified that the ditching work was completed on Thursday, March 28, and that he planned to begin the hard forming on Monday, April 1. GMA presented evidence that no forms or reinforcing steel were on site as of March 29 (Good Friday), arguing this established that Graham was behind schedule. Todd Graham testified, however, that Graham Construction had the ability to properly cut and configure the rebar necessary for the hard formwork. He also indicated that it is customary to order the rebar on the day it is to be used to avoid weather damage and theft. When asked why the hard forming could not be done at the same time as the interior excavation and ditching, both Todd and Phillip Graham testified that the small area under construction and the varying nature of the different tasks and equipment precluded the overlap of work. Phillip Graham also testified that he did not envision any problem with completing the job by the April 12 deadline set in GMA's March 27 letter. Finally, the jury heard testimony that the March 29 interim deadline for the concrete formwork imposed by GMA in its March 27 letter was unrealistic and impossible for Graham to meet.
The jury could have reasonably concluded, based on the trial evidence, that GMA's termination of Graham on March 29, based on Graham's failure to meet the March 29 interim deadline, prevented Graham from completing the job by the April 12 deadline, thus excusing Graham from further performance. See Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex. 1994) (when one party to a contract commits a material breach of the contract, the other party is discharged or excused from further performance under the contract). As the trier of fact, it was the jury's role to judge the credibility of the witnesses, to assign the weight afforded their testimony, and to resolve inconsistencies within or conflicts among the witnesses' testimony. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003). The record contains legally and factually sufficient evidence to support the jury's finding that Graham's failure to comply with the agreement was excused.
GMA relies heavily on the Texas Supreme Court's decision in Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004) (per curiam), in support of its argument that Graham's breach was not excused because any breach by GMA occurred, if at all, only after Graham had materially breached the agreement by failing to staff the work site on March 29, and by failing to complete the concrete formwork by the March 29 interim deadline set in the modified schedule. The underlying facts in Mustang are somewhat similar to those in the instant case. In January 1997, Mustang Pipeline entered into a contract with Driver Pipeline under which Driver was to construct 100 miles of pipeline by April 30, 1997. Id. at 196. Approximately two months into the construction schedule, with only forty days remaining, Driver had completed only fifteen miles of pipeline and had suspended its operations due to inclement weather. Id. at 197. On March 17, Driver stated that it would not resume work on the pipeline, and Mustang's project engineer certified Driver as being in default under the contract. Id. Mustang hired a replacement pipeline builder to finish the project, which was completed in September 1997. Id.
Mustang sued Driver for breach of contract and Driver counterclaimed for wrongful termination. Id. The jury found that Driver had breached the contract, but also found that Mustang had breached because it was not justified in terminating the contract, and awarded damages to both parties; the trial court disregarded Mustang's damage award and entered judgment awarding Driver its actual damages, plus attorney's fees and interest. Id. The court of appeals affirmed the trial court, holding that Mustang could not recover any damages because it had failed to get an express jury finding that Driver's breach was material. Id. at 198. The Supreme Court, however, disagreed, holding that an express jury finding on materiality is not required when "time is of the essence," and because the contract clearly indicated time was of the essence and Driver failed to timely perform, Mustang was excused from any obligation to perform. Id. at 196.
GMA contends that the instant case closely parallels Mustang. Specifically, GMA asserts that its contract with Graham Construction specifically called for completion by a certain date and adherence to a schedule. GMA further asserts that when it realized Graham was behind schedule, it asked for and received assurances, and that when GMA terminated the contract, there was no chance that Graham Construction would be able to complete its portion of the project by the April 12 deadline. While there are some parallels between this case and Mustang, GMA fails to recognize the distinguishing factors.
In Mustang, the parties were operating under a very detailed fourteen-week schedule involving eleven-hour work days, seven days per week, to rapidly construct 100 miles of pipeline. Id. Both Mustang and Driver were well aware that time was of the essence under the circumstances and the express language of the contract; in fact, Driver had significantly increased its original bid upon being advised of the accelerated work schedule. Id. at 199. More than eight weeks into the schedule, Driver had completed only fifteen of the 100 miles of pipeline, had suspended operations, had stated that it was not prepared to resume work, and had been certified as in default by the project engineer. Id. at 197. Finally, the evidence indicated that, despite requests from Mustang for assurances, Driver failed to provide a revised plan as to how it would attempt to meet the construction deadline, and at the time of termination there was "virtually no chance that Driver would be able to cure its breach and complete the construction on time." Id. at 199-200.
The parties' contract in Mustang specifically stated, "all time limits stated in the Contract are of the essence to the Contract," and called for "100 percent completion of the pipeline system no later than April 30, 1997." Id. at 199. The contract further required the subcontractor to maintain sufficient manpower and equipment at all times to ensure "with ample margin for emergencies and unexpected events, . . . the work [is conducted] at a sufficient rate of progress to ensure completion within the time specified in the Contract." Id.
By contrast, in the instant case, the parties were initially operating under a general work schedule which provided only a March 19 commencement date and April 8 completion date for the concrete work. The contract indicates, and the parties do not dispute, that time was of the essence with respect to the ultimate completion date for Graham's work. Mary Guerrero-McDonald, president of GMA, testified that the original work schedule did not provide an interim completion date for the concrete formwork, and that the March 29 interim deadline was first set in GMA's March 27 letter to Phillip Graham. Graham testified that it was impossible to meet the newly imposed interim deadline, and that he believed no one in his industry could have completed the formwork on two days' notice. Moreover, the evidence does not establish that the interim deadline was in fact essential to timely completion of Graham's portion of the project. In addition, whereas the subcontractor in Mustang unequivocally stated that it had suspended work and did not intend to resume, Graham Construction made no such indications prior to its termination. The subcontractor in Mustang had also been certified in default by the project engineer prior to its termination, a condition which did not exist for Graham. To the contrary, the evidence showed that GMA asked for, and received, assurances from Phillip Graham that the project would be timely completed. Graham testified that before he received GMA's March 29 termination letter, he had a plan for the next several days of work which would have enabled him to complete Graham Construction's portion of the project by the April 12 deadline. In Mustang, there was evidence that Driver was so far behind schedule at the time of termination, it would have been impossible for it to complete the pipeline on time. Id. at 200.
Even though time was arguably of the essence with respect to Graham Construction's project as a whole, the evidence does not establish that time was of the essence with respect to the interim deadline or that Graham would necessarily have failed to complete its portion of the project on time. The record contains more than a scintilla of probative evidence that the interim deadline was unrealistic and impossible to meet, and that Graham still planned, and would have been able, to complete its project on time despite missing the interim deadline for the formwork. The jury could have found that GMA's termination of Graham prevented Graham from timely completing its obligation under the contract. Contrary to Mustang, the evidence in this case does not establish as a matter of law that Graham's failure to staff the work site on Good Friday, or its failure to meet the interim deadline, constituted a material breach that would have discharged GMA from its obligations under the contract. C.f., id. We hold there is legally and factually sufficient evidence to support the jury's finding that Graham's failure to comply with the contract was excused by GMA's action in terminating the contract. Because we uphold the jury's finding that Graham's failure to comply was excused, we overrule GMA's second issue asserting that Graham is not entitled to recover any damages because his breach was not excused. We overrule GMA's first, second and fourth issues.
On appeal, GMA challenged only Graham's right to recover damages, not the amount of the damages awarded.
Was GMA Entitled to Damages?
In its third issue, GMA contends that the evidence is legally and factually insufficient to support the jury's refusal to award GMA any damages for Graham's failure to comply with the contract. GMA argues that because it presented expert testimony specifying the costs and charges associated with completing Graham Construction's project and stating that the amounts were reasonable, the jury is bound by that expert testimony. GMA further contends that because experts for both sides presented evidence regarding the amount of damages that might be reasonable, GMA is therefore entitled to an award of at least some damages. We disagree.
GMA mischaracterizes its argument on appeal as a sufficiency challenge. The reason GMA was not awarded damages is not because it failed to present sufficient evidence of the amount or reasonableness of the damages it claimed. GMA was not awarded damages because the jury found Graham was not liable to GMA because Graham's failure to comply with its obligation under the contract was excused.
A party seeking to recover the costs of completion in a breach of contract case has the burden to prove that the damages sought were not only incurred, but were reasonable. Mustang, 134 S.W.3d at 200; see GATX Tank Erection Corp. v. Tesoro Petroleum Corp., 693 S.W.2d 617, 619 (Tex.App.-San Antonio 1985, writ ref'd n.r.e.). Evidence of the amounts charged or paid does not, standing alone, establish that such payments were reasonable and necessary. Mustang, 134 S.W.3d at 200-201 (citing Dallas Ry. Terminal Co. v. Gossett, 156 Tex. 252, 294 S.W.2d 377, 382 (1956)). Recovery of completion costs will be denied in the absence of sufficient evidence showing that the charges were reasonable and necessary. Id. at 201.
Here, the jury was asked to determine what amount of money, if any, would fairly and reasonably compensate GMA for its damages, if any, that resulted from Graham Construction's failure to comply with the agreement. The jury was instructed to consider only certain elements of damages including: "[t]he reasonable and necessary costs to complete or correct those portions of the construction job that [Graham] failed to perform or inadequately performed;" the "[r]easonable and necessary expenses incurred in hiring other subcontractors to complete or correct the work agreed to be done by [Graham];" and "[l]osses due to delay and hindrance of work" for which Graham was responsible. In declining to award any damages to GMA, the jury could have determined that GMA was not entitled to recover any damages at all because Graham's failure to perform was excused or because Graham was not responsible for any delay or hindrance of work. Therefore, having previously determined that the evidence adduced at trial was both legally and factually sufficient to support the jury's finding that Graham Construction's failure to comply with the agreement was excused, we uphold the jury's refusal to award damages to GMA. We overrule GMA's third issue.
Conclusion
We affirm the trial court's judgment.