COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS
§ CHRISTOPHER J. NELSON, Individually No. 08-21-00068-CV and d/b/a EXCLUSIVE POOLS, § Appeal from the Appellant, § 125th Judicial District Court v. § of Harris County, Texas BKM DEVELOPMENT, LP, § (TC# 2015-38993) Appellee. §
MEMORANDUM OPINION
This case arises from a pool remodel gone bad. Appellee BKM Development, LP (BKM)
sued Appellant Christopher J. Nelson and his company, Exclusive Pools, over renovation to
BKM’s swimming pool after local authorities closed the pool following a failed inspection. Based
on a bench trial, the trial court found for BKM and ordered Nelson to pay actual damages and
attorney’s fees. Nelson appeals the trial court’s judgment, arguing that the evidence is factually
insufficient to support: (1) Nelson’s material breach of the construction contract; and (2) the trial
court’s award of actual damages. For the following reasons, we affirm. 1
1 This case was transferred from our sister court in Houston (14th District), and we decide it in accordance with the precedent of that court to the extent required by TEX.R.APP.P. 41.3. I. BACKGROUND
A. Factual Background
BKM is a real-estate limited partnership that holds and manages commercial properties.
Adam Kliebert is its agent who had the authority to enter contracts on behalf of BKM. In May
2015, Kliebert hired Nelson and his company, Exclusive Pools, to renovate an existing pool at one
of BKM’s properties. The pool was located between a Montessori school operated by Kliebert’s
mother and a nightclub Kliebert owned and operated. The pool was used by the children at the
school during the summer. Kliebert wanted to remodel the pool so that it could also be used for
the nightclub. Kliebert’s vision was to construct a ledge to subdivide the existing pool into two
pools, one of which would be very shallow. Nelson, who told Kliebert that he was a professional
who had worked on thousands of pools, provided Kliebert with several price estimates for the pool
remodel.
The parties dispute which estimate the remodeling agreement was based on. According to
Kliebert, the initial estimate stated a total cost of $56,185 (Plaintiff’s Exhibit 4), but Kliebert and
Nelson negotiated for an ultimate contract price of $49,415 (Plaintiff’s Exhibit 5). BKM also
presented a third estimate from Nelson (Plaintiff’s Exhibit 6) that yielded a total contract price of
$51,685. As we explain below, this latter estimate formed the basis for the trial court’s award of
actual damages. Under all these estimates, Nelson would: (1) excavate dirt from the pool; (2)
reinstall rebar and a add a gunite sun shelf; (3) add new lighting, tile, coping, decking, and a
holding tank; (4) relocate pool equipment; (5) add new decking overlay and repair cracks on the
existing decking; and (6) resurface the pool with white marble plaster. The estimate also included
a payment schedule based on Nelson’s completion of specific tasks.
2 Problems arose during the construction process. BKM introduced a series of text messages
detailing repeated issues with the pool’s construction and operation, as well as Kliebert’s repeated
attempts to have Nelson rectify the issues. These text messages alluded to (1) the shallow end
improperly filling with water; (2) the lighting and coping not being completed; (3) the construction
falling behind schedule; (4) Nelson’s unapproved modifications of the contract’s provisions; and
(4) a crooked step in the pool. Kliebert also testified that the pool did not function properly as the
water level in one pool was too low while the other overflowed.
The pool remodel was never completed. Nelson testified that he stopped doing work on the
pool in late May 2015. In June, the City of Houston inspected the pool and ordered it shut because
it did not meet the City’s code requirements. The City issued an “Aquatic Facility Inspection
Report,” which required the pool to remain closed until Kliebert submitted plans for the pool
remodel, the plans were approved, and the pool passed inspection. Kliebert’s proposed plans were
ultimately rejected by the City. The parties also disagreed about whose responsibility it was to get
the permits for the pool remodel. Kliebert asserted that Nelson told him that he did not need permits
for the project because he was only remodeling the pool. Nelson, however, claimed that Kliebert
asked him not to acquire permits because Kliebert had an overall building permit that would cover
the pool remodel.
The parties also disputed what payments BKM made to Nelson. Kliebert testified that he
made all but the last two payments on the payment schedule. At one point in his testimony, he
made that claim while referring to Plaintiff’s Exhibit 5 (the $49,415 invoice) and at another point,
he repeated the claim while referring to Plaintiff’s Exhibit 6 (the $51,685 invoice). Kliebert
specifically recalled paying three of the invoices that Nelson provided, including the down
payment for the remodel, the gunite and light conduit, and tile and coping. Nelson acknowledged
3 that he received three checks from Kliebert, but claimed that he did not have a record of the total
amount that he received from Kliebert. At trial, neither party sought to admit copies of any actual
checks showing payments.
In June 2015, Nelson filed a mechanic’s and materialman’s lien against the property. By
this time, BKM was considering selling the property. BKM had to pay the amount of the lien
($8,183) to obtain a lien release to sell the property.
B. Procedural Background
BKM sued Nelson alleging breach of contract, breach of warranty, and violations of the
Texas Deceptive Trade Practices Act. It sought to recover the amount that it paid for the pool
remodel that was never completed, money lost because of the incomplete pool remodel, attorney’s
fees, court costs, and interest. At trial, Nelson argued that there was no evidence of an agreement
or contract between the parties. His other position was that BKM paid Nelson nothing and
consequently was not entitled to recover anything. Following a bench trial, the trial court rendered
judgment for BKM and awarded the company $38,763.75 in actual damages, attorney’s fees of
$19,250, along with interest, court costs, and conditional appellate attorney’s fees. Nelson filed a
request for findings of fact and conclusions of law and a notice of past due findings and
conclusions; no findings or conclusions are in our record. 2
On appeal, Nelson argues that the trial court’s judgment is not supported by factually
sufficient evidence. Specifically, Nelson argues that the trial court erred in deciding that Nelson
breached any contract with BKM because none of BKM’s complaints evidence a “material
breach.” Nelson further argues that the trial court’s actual damages award is unsupported by
2 Although Nelson points out that the trial court did not enter findings of fact or conclusions of law in response to his request, he does not argue that the trial court erred by doing so.
4 factually sufficient evidence because BKM did not prove the applicable measure of damages and
failed to prove that the damages sought were reasonable.
II. STANDARD OF REVIEW
When the trial court does not make express findings of fact, we imply that the trial court
made all findings necessary to support its judgment, provided that: (1) the necessary findings are
raised by the pleadings and supported by the evidence; and (2) the decision can be sustained by
any reasonable theory consistent with the evidence and applicable law. See Worford v. Stamper,
801 S.W.2d 108, 109 (Tex. 1990). The trial court’s findings of fact, express or implied, are
reviewable for factual sufficiency by the same standards applied in reviewing the evidence
supporting a jury’s answer. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). Our standard
of review is clear: “When reviewing an assertion that the evidence is factually insufficient to
support a finding, a court of appeals sets aside the finding only if, after considering and weighing
all of the evidence in the record pertinent to that finding, it determines that the credible evidence
supporting the finding is so weak, or so contrary to the overwhelming weight of all the evidence,
that the answer should be set aside and a new trial ordered.” Crosstex N. Texas Pipeline, L.P. v.
Gardiner, 505 S.W.3d 580, 615 (Tex. 2016). Stated otherwise, a reviewing court should only
reverse a verdict if it is so against the great weight and preponderance of the evidence as to be
manifestly unjust, or if the result shocks the conscience or clearly demonstrates bias. Pool v. Ford
Motor Co., 715 S.W.2d 629, 635 (Tex. 1986). “Under a factual-sufficiency review, the reviewing
court must not substitute its judgment for that of the fact finder, who ‘is the sole judge of the
credibility of witnesses and the weight to be given to their testimony.’” Matter of Estate of Masters,
No. 08-20-00156-CV, 2022 WL 2827022, at *3 (Tex.App.--El Paso July 20, 2022, no pet.),
quoting Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003).
5 III. MATERIAL BREACH
A. Applicable Law
A breach of contract claim requires proof of four elements: (1) the existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by
the defendant; and (4) damages sustained by the plaintiff from the breach. Houle v. Casillas, 594
S.W.3d 524, 556 (Tex.App.--El Paso 2019, no pet.). When one party to a contract commits a
material breach of the contract, the other party is discharged or excused from further performance.
Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 196 (Tex. 2004) (per
curiam). By contrast, a nonmaterial breach entitles the other party to sue for damages caused by
the breach but does not excuse future performance. Bartush-Schnitzius Foods Co. v. Cimco
Refrigeration, Inc., 518 S.W.3d 432, 436 (Tex. 2017). So, the question in cases like ours is often
which party breached the contract first, and whether the first breach was material. Mustang
Pipeline, 134 S.W.2d at 200. To answer the materiality questions, a trier considers these 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.” Id. at 199, citing Restatement (Second)
of Contracts § 241 (1981).
6 B. Analysis
The parties dispute who first committed a material breach. Nelson argues that there is
factually insufficient evidence that he materially breached the contract, which means BKM
breached first by failing to pay the full amount it owed under the contract. If true, that excused
Nelson’s full performance of his obligations. BKM counters that Nelson was the first party to
materially breach the contract by failing to ensure that the pool remodel resulted in a functioning
pool and failing to obtain proper construction permits from the City. We consider the evidence
against each Mustang Pipeline factor in turn.
1. BKM’s failure to receive the benefit under the contract
Nelson argues that BKM suffered only two deprivations caused by the lack of Nelson’s
full performance: (1) a two-week delay in completing the work and a five-day delay in submitting
plans for a permit; and (2) an additional $3,825.52 in costs for additional parts and work. Although
Nelson claims that the work would have been delayed by five days due to his failure to submit
work plans to the City, the record suggests that Nelson never submitted any plans to the City.
Kliebert was then required to submit his own plans. Nelson also told Kliebert that work permits
from the City were unnecessary, which along with a failed inspection, caused the City to shut down
construction and close the pool and render it useless either for the Montessori school or the
nightclub.
And while Nelson claims that BKM was only deprived of $3,825.52 in additional costs for
unanticipated parts and labor, an obvious third benefit that BKM was deprived of was the lack of
a functioning, usable pool. Kliebert testified that the pool constantly overflowed because the pool
lacked sufficient pumping. Half of the pool would then lack sufficient water and become unusable.
Along with Nelson’s failure to get proper permits, the deficient construction caused the City to
7 shut the pool down and forced BKM to purchase a $20,000 temporary pool for use by the
Montessori students.
In sum, the record contains evidence that Nelson’s substandard work caused the pool to
contain insufficient water for swimming and it failed inspection by the City. The pool was unusable
for its intended purpose. Because BKM failed to receive the benefit of the contract, this factor
favors Nelson’s material breach.
2. BKM’s compensation for the deprived benefit
Because Nelson did not adequately remodel the pool or acquire a work permit, the pool
was rendered unusable and was shut down by the City. This required BKM to hire others to draft
permit plans for the City and complete the pool remodel, and to purchase a temporary swimming
pool for the Montessori students. BKM eventually built another pool at a different location, which
cost around $100,000. Thus, this factor also weighs in BKM’s favor.
3. Nelson’s forfeiture
Nelson argues that he had started or completed most of the work associated with the
contract. Although we agree that Nelson started a significant portion of the work, as explained
above the evidence also shows that there were significant problems with the quality of the
construction.
4. Likelihood of Nelson’s curative measures
A series of text messages between Kliebert and Nelson showed that Kliebert tried to have
Nelson correct the deficiencies in the pool until at least June 8, 2015. At some point in June, Nelson
stopped coming to the worksite or performing any construction, and on July 15, 2015, he placed a
lien on BKM’s property. Nelson then accepted BKM’s payment of the lien amount in exchange
8 for releasing the lien. Thus, the record contains evidence that Nelson was unlikely to engage in
curative measures to remedy the issue with the pool.
5. Nelson’s good faith and fair dealing
The evidence shows that despite being paid thousands of dollars, Nelson failed to remodel
the pool in a manner that rendered it fit for its intended purpose, did not acquire proper permits for
the work, and eventually abandoned the project after repeated issues with construction arose.
Moreover, Nelson’s filing of a lien against BKM’s property when Kliebert stopped making
payments is evidence that Nelson did not intend to complete his obligations under the contract
despite his deficient performance. This factor favors BKM.
6. Substantial performance
Weaved into his argument, Nelson also contends that he substantially performed under the
contract, thereby excusing his breach. The “doctrine of substantial performance” is an equitable
doctrine adopted to allow a contractor who has substantially completed a construction contract to
sue on the contract rather than being relegated to a cause of action for quantum meruit. Turner v.
Ewing, 625 S.W.3d 510, 518 (Tex.App.--Houston [14th Dist.] 2020, pet. denied). “The doctrine
of substantial performance recognizes that the contractor has not completed construction, and
therefore is in breach of the contract” but “the owner cannot use the contractor’s failure to complete
the work as an excuse for non-payment.” Id. at 518. “In a substantial performance claim, the
contractor must prove three elements to prevail: its substantial performance, the amount unpaid
under the contract, and ‘the cost of remedying the defects due to his errors or omissions.’” Id.,
quoting Vance v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480, 483
(Tex. 1984).
9 But for much the same reasons already noted, the record does not support Nelson’s claim
of substantial performance. Instead, the evidence showed that the pool was practically unusable
for its intended purpose due to Nelson’s failure to properly remodel the pool. Kliebert testified that
the pool frequently overflowed, the lighting and other components were incorrectly installed, and
the pumps had to be repeatedly shut down. These issues were confirmed in text messages between
Kliebert and Nelson. The City shut down the pool indefinitely after Nelson failed to obtain permits
and the pool failed inspection. Because Nelson’s substandard performance significantly impaired
the purpose of the pool remodel, the doctrine of substantial performance does not apply to excuse
Nelson’s breach. See James Constr. Grp., LLC v. Westlake Chem. Corp., 650 S.W.3d 392, 406
(Tex. 2022) (recognizing that a party will not be excused from contractual duties if the party’s
performance severely impairs the purpose of underlying contract and causes prejudice to the
nonbreaching party).
In sum, the bulk of the Mustang Pipeline factors support a finding that Nelson first
committed material breaches of the contract by failing to adequately construct the pool or acquire
proper permits. Thus, factually sufficient evidence supports the trial court’s implied finding that
Nelson was the first party to have materially breached the contract. Nelson’s Issue One is
overruled.
IV. ACTUAL DAMAGES
Nelson also argues that the trial court’s actual damages award is not supported by factually
sufficient evidence. 3 In particular, Nelson contends that BKM failed to offer evidence establishing
3 We review a factual sufficiency challenge to an award of damages under the same test for any other factual sufficiency question. See DeNucci v. Matthews, 463 S.W.3d 200, 214 (Tex.App.--Austin 2015, no pet.).
10 the cost of correcting the deficient work on the pool, or the difference in value between the work
performed and the worth of the work if it had complied with the terms of the contract.
BKM could have pursued three measures of damage for breach of contract: expectancy,
reliance, or restitution. Atrium Med. Ctr., LP v. Houston Red C LLC, 595 S.W.3d 188, 193
(Tex. 2020). “Expectancy damages award a contract plaintiff the benefit of its bargain; reliance
damages compensate the plaintiff for out-of-pocket expenses; and restitution damages restore to
the plaintiff a benefit that it had conferred on the defendant.” Id. The trial court appears to have
based the damages on an out-of-pocket measure, which is “the difference between the value the
buyer has paid and the value of what he has received.” Arthur Andersen & Co. v. Perry Equip.
Corp., 945 S.W.2d 812, 817 (Tex. 1997). That is, the trial court calculated the value of what BKM
received minus what it paid to Nelson.
BKM contends it received nothing of value as it never obtained a functional pool. And
absent approval from the City, the pool was closed and unusable. There is sufficient evidence that
BKM received nothing of value. The question we focus on is what BKM paid to Nelson. In closing
argument, BKM contended that its evidence demonstrated its payment of approximately $37,000
“and change” to Nelson under the contract. This was supported by Kliebert’s testimony that he
made all but the last two of the six payments on the payment schedule for Plaintiff’s Exhibit 5 (the
estimate and payment schedule for $49,415). The first four payments under Plaintiff’s Exhibit 5
total $37,061.25. But at a later point in Kliebert’s testimony, he referred to Plaintiff’s Exhibit 6 the
document that he paid from. The trial court awarded $38,763.75 which would exactly match the
first four payments from Plaintiff’s Exhibit 6 (the $51,685 estimate and payment schedule). 4 At
4 The first four payments on the payment schedule were broken down this way: (1) twenty percent on the first day of work in the amount of $10,337; (2) fifteen percent upon completion of gunite and lighting in the amount of $7,752;
11 trial, Nelson acknowledged that Kliebert paid him three checks under the contract, but he did not
recall the total amount of the checks. Nelson also acknowledged that he received money from
BKM to release the lien for $8,183, but he still argued that the only evidence of BKM’s payment
was for $9,883, which was shown as being “Paid to Date” on an invoice.
So while the evidence conflicts, the trial court as the fact finder based its finding on the
latter testimony of Kliebert, which it had a right to do. We conclude that the evidence is factually
sufficient to support the $38,763.75 damage finding.
Nelson’s Issue Two is overruled.
V. CONCLUSION
We affirm the judgment below.
JEFF ALLEY, Justice
November 8, 2022
Before Rodriguez, C.J., Palafox, and Alley, JJ.
(3) twenty percent upon completion of cantilever and tile in the amount of $10,337; and (4) twenty percent upon completion of plaster in the amount of $10,337.