Opinion issued September 3, 2015
In The
Court of Appeals For The
First District of Texas ———————————— NO. 01-14-00317-CV ——————————— PELCO CONSTRUCTION COMPANY, Appellant V. CHAMBERS COUNTY, TEXAS, KURT AMUNDSON, AND AMUNDSON CONSULTING, INC., Appellees
On Appeal from the 344th District Court Chambers County, Texas Trial Court Case No. CV-26356
OPINION
Pelco Construction Company filed suit against Chambers County, Texas,
Kurt Amundson, and Amundson Consulting, Inc. over a construction contract.
Chambers County counter-sued. The trial court granted summary judgment on
liability in favor of Chambers County and Amundson Consulting on all claims in the suit. The parties then proceeded to trial on Chambers County’s damages for its
breach of contract claim. The jury awarded Chambers County $151,879.50. The
trial court granted Chambers County’s motion for judgment notwithstanding the
verdict and rendered a verdict of $404,179.31 in damages. In five issues on
appeal, Pelco argues the trial court erred by (1) granting summary judgment in
favor of Chambers County on both parties’ breach of contract claims, (2) granting
the judgment notwithstanding the verdict, (3) refusing to include a proper
mitigation question in the jury charge, (4) granting summary judgment on Pelco’s
claims against Amundson Consulting, and (5) awarding attorneys’ fees.
We reverse and remand for a new trial.
Background
In 2008, Hurricane Ike landed on the Texas coast. Among the damage, the
Oak Island firehouse was destroyed. Chambers County developed plans to rebuild
the firehouse based on funding from the Federal Emergency Management Agency
(“FEMA”). Chambers County solicited bids. As a part of that process, officials
from Chambers County along with representatives of its architect, Dannenbaum
Engineering Corp., and representatives of Amundson Consulting met with
representatives of Pelco to discuss the project. Pelco alleges that, during that
meeting, Amundson represented that FEMA had approved funding for the
construction project.
2 Pelco bid on the project and was awarded the contract. During construction
of the firehouse, Pelco submitted two applications for payment based on money it
had already expended and earned. More than two months after Pelco submitted the
first application for payment, Dannenbaum certified 90% of the application for
payment. Chambers County paid the certified amount three days before
certification. Over one month after Pelco submitted the second application for
payment, Dannenbaum certified 90% of the application for payment. Chambers
County paid the certified amount seven days after certification.
On October 28, 2010, Amundson called Pelco, instructing them to stop work
on the project. According to Pelco, Amundson stated that FEMA had ordered the
work to stop due to the project plans not being approved for funding. That same
day, Dannenbaum sent a letter to Pelco instructing Pelco to stop work on the
project. Dannenbaum explained in the letter that “[t]he ceasing of the construction
operation is required while required administrative paper work for the construction
of the project is reviewed and approved by FEMA.” Dannenbaum said it would
inform Pelco when work could resume.
Forty days later, Dannenbaum sent Pelco a letter instructing it to resume
construction on the project. Pelco sent Dannenbaum a letter in response giving
notice of its termination of the contract based on a certain provision of the contract.
3 Pelco subsequently filed suit against Chambers County, Dannenbaum,
Amundson Consulting, and Amundson. The trial court dismissed Dannenbaum
from the suit based on Pelco’s failure to file a certificate of merit, and we
affirmed. 1 Pelco asserted, among other things, a breach of contract claim against
Chambers County. Pelco asserted fraudulent misrepresentation and negligent
misrepresentation claims against Amundson and Amundson Consulting.
Chambers County asserted a breach of contract counter-claim against Pelco.
In the course of litigation, the parties filed multiple motions for summary
judgment. Ultimately, the trial court granted summary judgment against Pelco on
its breach of contract claim. It also granted summary judgment on liability in favor
of Chambers County on its breach of contract claim. Subsequently, the trial court
granted summary judgment in favor of Amundson and Amundson Consulting on
Pelco’s fraudulent misrepresentation and negligent misrepresentation claims.
After all of the motions for summary judgment, the only issue remaining
was Chambers County’s damages on its breach of contract claim. After a jury
trial, the trial court granted a motion notwithstanding the verdict and awarded
Chambers County its full claim for damages and attorneys’ fees.
1 See Pelco Constr., Inc. v. Dannenbaum Eng’g Corp., 404 S.W.3d 48, 57 (Tex. App.—Houston [1st Dist.] 2013, no pet.).
4 Summary Judgment
In its first issue, Pelco asserts that the trial court erred by granting summary
judgment on liability against Pelco and in favor of Chambers County on both
parties’ breach of contract claims. In its fourth issue, Pelco asserts that the trial
court erred by granting summary judgment against Pelco on its fraudulent
misrepresentation and negligent misrepresentation claims against Amundson and
Amundson Consulting.
A. Standard of Review
The summary-judgment movant must conclusively establish its right to
judgment as a matter of law. See MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.
1986). Because summary judgment is a question of law, we review a trial court’s
summary judgment decision de novo. See Mann Frankfort Stein & Lipp Advisors,
Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
To prevail on a “traditional” summary-judgment motion asserted under Rule
166a(c), a movant must prove that there is no genuine issue regarding any material
fact and that it is entitled to judgment as a matter of law. See TEX. R. CIV. P.
166a(c); Little v. Tex. Dep’t of Criminal Justice, 148 S.W.3d 374, 381 (Tex. 2004).
A matter is conclusively established if reasonable people could not differ as to the
conclusion to be drawn from the evidence. See City of Keller v. Wilson, 168
S.W.3d 802, 816 (Tex. 2005).
5 When it moves for summary judgment on a claim for which it bears the
burden of proof, a party must show that it is entitled to prevail on each element of
its cause of action. See Parker v. Dodge, 98 S.W.3d 297, 299 (Tex. App.—
Houston [1st Dist.] 2003, no pet.). The party meets this burden if it produces
evidence that would be sufficient to support an instructed verdict at trial. Id.
In contrast, a party moving for traditional summary judgment on a claim for
which it does not bear the burden of proof must either (1) disprove at least one
element of the plaintiff’s cause of action or (2) plead and conclusively establish
each essential element of an affirmative defense to rebut the plaintiff’s cause. See
Am. Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997). If the
movant meets its burden, the burden then shifts to the nonmovant to raise a
genuine issue of material fact precluding summary judgment. See Centeq Realty,
Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995).
After an adequate time for discovery, the party without the burden of proof
may move for a no-evidence summary judgment on the basis that there is no
evidence to support an essential element of the non-moving party’s claim. TEX. R.
CIV. P. 166a(i); Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008). Summary
judgment must be granted unless the non-movant produces competent summary
judgment evidence raising a genuine issue of material fact on the challenged
elements. TEX. R. CIV. P. 166a(i); Hamilton, 249 S.W.3d at 426. A non-moving
6 party is “not required to marshal its proof; its response need only point out
evidence that raises a fact issue on the challenged elements.” TEX. R. CIV. P. 166a
(Notes & Comments 1997).
A no-evidence summary judgment motion is essentially a motion for a
pretrial directed verdict. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 581 (Tex.
2006). Accordingly, we apply the same legal-sufficiency standard of review that
we apply when reviewing a directed verdict. City of Keller, 168 S.W.3d at 823.
Applying that standard, a no-evidence point will be sustained when (1) there is a
complete absence of evidence of a vital fact, (2) the court is barred by rules of law
or evidence from giving weight to the only evidence offered to prove a vital fact,
(3) the evidence offered to prove a vital fact is no more than a mere scintilla, or (4)
the evidence conclusively establishes the opposite of a vital fact. King Ranch, Inc.
v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003); see City of Keller, 168 S.W.3d at
810.
To determine whether there is a fact issue in a motion for summary
judgment, we review the evidence in the light most favorable to the non-movant,
crediting favorable evidence if reasonable jurors could do so, and disregarding
contrary evidence unless reasonable jurors could not. See Fielding, 289 S.W.3d at
848 (citing City of Keller, 168 S.W.3d at 827). We indulge every reasonable
7 inference and resolve any doubts in the non-movant’s favor. Sw. Elec. Power Co.
v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).
B. Pelco’s Breach of Contract Claims
It is undisputed that Pelco’s December 14, 2010 letter terminating the
construction contract would constitute a material breach of the contract. If there
was a prior material breach by Chambers County, however, then the December 14
breach was excused. See Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc.,
134 S.W.3d 195, 196 (Tex. 2004) (holding prior material breach by one party
excuses further performance of other party). Our inquiry is limited, then, to events
before December 14, 2010.
At trial, Pelco identified a number of actions taken by Chambers County that
it claimed constituted a prior material breach by Chambers County. On appeal,
Pelco limits its argument to Chambers County’s failure to pay the full amount
invoiced in Pelco’s first two requests for payment. Accordingly, we further limit
our review to whether Chambers County’s failure to pay the full amounts invoiced
constitutes a prior material breach. See Walling v. Metcalfe, 863 S.W.2d 56, 58
(Tex. 1993) (“We have held repeatedly that the courts of appeals may not reverse
the judgment of a trial court for a reason not raised in a point of error.”); In re
E.A.F., 424 S.W.3d 742, 749 (Tex. App.—Houston [14th Dist.] 2014, pet. denied)
(same).
8 As an initial matter, Chambers County argues that the trial court resolved
this issue as part of a no-evidence motion for summary judgment to which Pelco
did not respond. Accordingly, Chambers County argues, the trial court’s order on
this motion presents an independent basis for upholding the trial court’s ruling on
liability. We disagree that this motion asserted a no-evidence motion for summary
judgment on Pelco’s breach of contract claim.
The no-evidence motion does not indicate it sought summary judgment on
Pelco’s breach of contract claim. For example, it is entitled “Defendant Chambers
County, Texas’ No Evidence and Traditional Partial Motion for Summary
Judgment as to Plaintiff’s Contract Termination Rights and Defendant’s Breach of
Contract Claim.” While the title references Pelco’s rights to terminate the contract,
it only claims summary judgment on Chamber County’s breach of contract claim.
More significantly, the substance of the no-evidence motion establishes that
Chambers County did not move for summary judgment on Pelco’s breach of
contract claim. For a no-evidence motion for summary judgment, the movant must
“state the elements as to which there is no evidence.” TEX. R. CIV. P. 166a(i). This
rule “does not authorize conclusory motions or general no-evidence challenges to
an opponent’s case.” TEX. R. CIV. P. 166a (Notes & Comments 1997); accord
Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). In the motion,
Chambers County asserted in its paragraph establishing the law relevant to no-
9 evidence motions that “Pelco still has presented no evidence that it was entitled to
terminate the Contract under its terms.” For its breach of contract claim, however,
Pelco carried no burden of showing that it was entitled to terminate the contract.
Instead, it was required to prove that Chambers County breached the contract. See
Bank of Tex. v. VR Electric, Inc., 276 S.W.3d 671, 677 (Tex. App.—Houston [1st
Dist.] 2008, pet. denied) (holding elements for breach of contract include showing
plaintiff performed or tendered performance and defendant breached contract).
Similarly, in its request for relief, Chambers County asked the trial court to
“enter judgment in favor of Chambers County on its breach of contract claim
against Pelco holding that Pelco breached its Contract with Chambers County by
terminating the Contract and refusing to perform.” (Emphasis added.) Chambers
County makes no mention of Pelco’s breach of contract claim and does not ask for
relief on it.
Furthermore, shortly after it filed the no-evidence motion in question,
Chambers County filed a traditional and no-evidence motion for summary
judgment on Pelco’s breach of contract claim. Pelco responded to that motion.
Before it ruled on the no-evidence motion in question, the trial court had already
granted Chambers County’s motion for summary judgment on Pelco’s breach of
contract claim. Chambers County would have us hold, then, that the trial court’s
ruling on its motion for summary judgment on its breach of contract claim
10 constitutes a reconsideration of the claims that the court had already disposed of
and that had been presented by the party that had already prevailed. The record
does not support such a conclusion.
Turning to the traditional and no-evidence motion for summary judgment on
Pelco’s breach of contract claim, we must first consider whether Pelco carried its
burden on Chambers County’s no-evidence portion of the motion. See Merriman
v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013) (holding, when party
moves for summary judgment on both traditional and no-evidence grounds,
appellate courts first address no-evidence grounds).
One of the grounds presented by Pelco for why it could proceed on its
breach of contract claim was “Chambers County breached the contract by
withholding the retainage funds owed to Pelco.” All parties acknowledge that
Peclo submitted three requests for payment to Chambers County, that Chambers
County withheld 10% of the amount owed on the first two requests for payment,
and that Chambers County has not paid any of the third invoice. The
determination of whether timely performance—in this case, timely payment of full
amounts of the invoices submitted—is a material term of the contract is typically a
fact question for the jury. Breof BNK Texas, L.P. v. D.H. Hill Advisors, Inc., 370
S.W.3d 58, 64 (Tex. App.—Houston [14th Dist.] 2012, no pet.); Deep Nines, Inc.
v. McAfee, Inc., 246 S.W.3d 842, 846 (Tex. App.—Dallas 2008, no pet.); see also
11 N.Y. Party Shuttle, LLC v. Bilello, 414 S.W.3d 206, 215 n.1 (Tex. App.—Houston
[1st Dist.] 2013, pet. denied) (“The failure to make a complete payment when due
under a contract may constitute a material breach.”).
In its reply to Pelco’s response to the motion for summary judgment,
Chambers County asserts that it was only required to pay the amount certified by
Dannenbaum. Because Dannenbaum only certified payment of 90% of the first
two applications and because Dannenbaum never certified the third payment,
Chambers County argues that it has not breached the contract. The contract
provides, however, that [Dannenbaum] would “provide administration of the
Contract as described in the Contract Documents and will be the Owner’s
representative (1) during construction [and] (2) until final payment is due . . . .”
(Emphasis added.) It further provides that Dannenbaum, “as a representative of”
Chambers County was required to periodically visit the site “to endeavor to guard
[Chambers County] against defects and deficiencies in the Work.” (Emphasis
added.) Dannenbaum’s authority under the contract to certify less than the full
amount of the applications for payment is based on deficiencies in the work or
monetary claims from other parties. Certification of payment constituted a
representation by Dannenbaum to Chambers County “that the Work has progressed
to the point indicated and that . . . the evaluation of the Work is in accordance with
the Contract Documents.” Certification of payment, then, is part of Dannenbaum’s
12 administration of the contract, which Dannenbaum performed as Chambers
County’s representative. Accordingly, the responsibility to pay Pelco rests fully on
Chambers County and any actions taken or recommendations made by
Dannenbaum were performed as Chambers County’s representative.
In its brief on appeal, Chambers County argues Pelco cannot prevail because
it claims the breach was not material. For purposes of Pelco’s breach of contract
claim, we do not need to resolve this issue. The significance of a breach
constituting a material breach is that it excuses the non-breaching party from
continuing to perform the contract. Mustang Pipeline, 134 S.W.3d at 196. By
contrast, if a breach is determined to be immaterial, “the non-breaching party is not
excused from future performance but may sue for the damages caused by the
breach.” Levine v. Steve Scharn Custom Homes, Inc., 448 S.W.3d 637, 654 (Tex.
App.—Houston [1st Dist.] 2014, pet. filed); see also Allied Capital Partners, LP v.
Proceed Technical Res., Inc., 313 S.W.3d 460, 465 (Tex. App.—Dallas 2010, no
pet.) (holding material breach does not excuse prior, partial breach). Proof that
Chambers County’s failure to pay the full amounts of the invoices is not a material
breach, then, would not defeat Pelco’s claim for breach of contract.
Finally, for its traditional motion for summary judgment on Pelco’s breach
of contract claim, Chambers County argued that, as a matter of law, it did not
breach the portion of the contract requiring provision of reasonable evidence of
13 financial arrangements. Pelco’s complaint on appeal concerns breach of contract
based on Chambers County’s failure to fully pay Pelco’s invoices. This argument
does not implicate any requirement to provide reasonable evidence of financial
arrangements. Accordingly, this other argument does not defeat Pelco’s breach of
contract claim based on failure to pay the invoices.
We hold the trial court erred by granting summary judgment on Pelco’s
breach of contract claim. We sustain Pelco’s first issue as it relates to Pelco’s
breach of contract claim.
C. Chambers County’s Breach of Contract Claims
In a separate motion, Chambers County filed a traditional motion for
summary judgment on its own breach of contract claim. The motion identifies
Pelco’s termination of the contract as the basis for Chambers County’s breach of
contract claim. The motion asserts Chambers County was entitled to summary
judgment as to liability on this claim by purporting to defeat Pelco’s bases for prior
material breach.
Chambers County presented a number of arguments in its motion for why its
failure to pay the full amount of any of the applications for payment does not
constitute a material breach of the contract. First, Chambers County argues that
the third application for payment was submitted to Chambers County with Pelco’s
termination letter. We agree—and Pelco does not dispute—that, because the third
14 application was submitted along with Pelco’s termination letter, any failure by
Chambers County to pay any validly incurred costs included in the application
cannot constitute a prior material breach by Chambers County. See Mustang
Pipeline, 134 S.W.3d at 196 (holding prior material breach by one party excuses
further performance of other party). Our inquiry is limited, then, to Chambers
County’s withholding 10% from the first two payments.
Chambers County’s primary argument for why it has not breached the
contract based on withholding 10% from the payments to Pelco is that it was only
obligated under the contract to pay what Dannenbaum certified for payment. As
we have held, however, the contract established that Dannenbaum acted as
Chambers County’s representative when it certified the payable portion of Pelco’s
applications for payment. Accordingly, Chambers County bears the responsibility
for any error in certifying less than the entire amount of the applications.
Chambers County presents two further arguments for why withholding 10%
from the first two payments was not a breach: the contract permitted withholding a
“retainage fund” from each payment and Pelco’s work was defective, warranting
withholding certain payments. We hold that neither of these claims has been
established as a matter of law.
The only authority Chambers County cites to support its claims that the
contract authorized it to withhold 10% of each payment as a retainage fund is
15 contained in the provisions concerning “final completion and final payment.”
Under those provisions, “[n]either final payment nor any remaining retained
percentage shall become due until [Pelco] submits to” Dannenbaum certain
documentation. The same provisions require consent of the surety when “the
remaining balance for Work not fully completed or corrected is less than retainage
stipulated in the Contract Documents.” Similarly, the provision concerning the
application for payment requires the application to “reflect[] retainage if provided
for in the Contract Documents.” All of these provisions concern the effects if
retainage is permitted. They do not, themselves, permit retainage. Accordingly,
this does not establish as a matter of law that Chambers County was authorized to
withhold 10% on all requests for payment submitted by Pelco.
For its claim that the contract permitted withholding payment based on
defective work, the contract provides that, after Pelco submitted an application for
payment, Dannenbaum could “withhold a Certificate for Payment in whole or in
part, to the extent reasonably necessary to protect [Chambers County], if in
[Dannenbaum]’s opinion” certain contractually required representations could not
be made to Chambers County. In this circumstance, Dannenbaum was required to
notify Pelco and Chambers County of the problems “within seven days after
receipt of [Pelco]’s Application for Payment.” It is undisputed that Dannenbaum
never sent any notice of any problems, even beyond the seven-day limitation.
16 Moreover, Chambers County’s proof in its motion for summary judgment
that Pelco had performed defective work comes from seven lines in Amundson’s
deposition. In that portion of his affidavit, Amundson asserted that “[t]here were
[three] construction issues early on in the project.” Amundson described, “One of
them was the piers that supported the structure, they were too high. There wasn’t
the right amount of rebar in the piers. And the actual orientation was off in the
spacing.” Even assuming this testimony is sufficient to establish as a matter of law
that Pelco’s work was deficient, it does not establish the significance of the
deficiency or that the deficiency would warrant withholding at least 10% of each
application for payment.
Finally, Chambers County argues that its withholding 10% of the
applications for payment cannot defeat its breach of contract claim because
withholding 10% was not a material breach. “The materiality of a breach—the
question of whether a party’s breach of a contract will render the contract
unenforceable—generally presents a dispute for resolution by the trier of fact.”
Henry v. Masson, 333 S.W.3d 825, 835 (Tex. App.—Houston [1st Dist.] 2010, no
pet.); see also Mustang Pipeline, 134 S.W.3d at 199 (identifying seven-factor test
weighed in considering whether breach is material). Nevertheless, materiality can
be established as a matter of law in certain circumstances. See Mustang Pipeline,
134 S.W.3d at 199–200 (holding contract “time is of the essence” provision
17 established as a matter of law that party’s failure to meet deadline was material).
Chambers County asserts it established immateriality as a matter of law.
Chambers County asserts that the withholding was immaterial because the
amount withheld was so small, characterizing it as “2.6% of the Contract price for
which 23% had already been paid.” It asserts this is a nominal amount. See id. at
199 (identifying one factor for determining materiality as extent to which injured
party will be deprived of benefit it reasonably expected). Regardless of how little
the amount withheld is compared to the entire amount that eventually would have
been paid, it nevertheless remains 10% of the amount that Pelco identified as
money it had already expended and earned. Nothing in the case law supports
Chambers County’s claim that, as a matter of law, withholding 10% owed to a
contracting party is a nominal amount.
The Utah Court of Appeals case that Chambers County relies on does not
support its claim that it proved immateriality as a matter of law. In Pack, a dispute
arose over the re-shingling of a roof. Pack v. Case, 30 P.3d 436, 439 (Utah Ct.
App. 2001). After the work was done, the owner withheld $675 of the $8,775
billed. Id. The parties went to trial, and the owner prevailed. Id. at 439–40. On
appeal, the roofer claimed that withholding $675 was a prior material breach that
excused enforcement of the warranty provision of the contract. See id. at 440. The
18 Utah Court of Appeals upheld the trial court’s determination that withholding 7.7%
of the contract price did not constitute a prior material breach. Id. at 441–42.
Nowhere in Pack does the court hold that, as a matter of law, withholding
7.7% of the contract price is immaterial. Instead, the court of appeal reviewed the
factual determinations of the trial court after a full trial and upheld that factual
determination. See id. Accordingly, Pack has no bearing on whether withholding
10% from two applications for payment is immaterial as a matter of law.
Chambers County also argues that the amounts withheld were not material
because they were never permanent. Instead, the amounts would be paid once the
corrections to the work had been performed. This argument is premised on
Chambers County’s claim that there were, in fact, problems with Pelco’s work that
warranted withholding 10% of the applications for payment. This has not been
Lastly, Chambers County argues that Pelco’s failure to follow the procedure
under the contract for resolution of payment disputes prevents Pelco from claiming
the withholding is a material breach. Section 4.3 of the contract establishes the
procedure for certain disputes between the parties. The section defines a claim as
“a demand or assertion by one of the parties seeking . . . payment of money . . . .”
As an initial matter, it is not clear that this provision applies in this circumstance.
The section provides more specifically that “[i]f [Pelco] believes additional costs is
19 involved . . . [the] Claim shall be filed in accordance with this Section 4.3.” This
suggests that other claims for payment of money do not fall under this provision.
Otherwise, this requirement would be superfluous language. Seagull Energy E &
P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006) (holding courts
construe contract so that no provision is rendered meaningless).
Similarly, other provisions in the contract require resolution of disputes
pursuant to section 4.3. For example, section 8.3 of the contract concerns “delays
and extensions of time.” That section explicitly provides, “Claims relating to time
shall be made in accordance with applicable provisions of Section 4.3.” The
portion of the contract concerning applications for payment is article 9. No section
of article 9 requires disputes to be resolved pursuant to section 4.3. See Gilbert
Tex. Const., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex.
2010) (“Courts strive to honor the parties’ agreement and not remake their contract
by reading additional provisions into it.”). Instead, Article 9 contains its own
dispute resolution provision for any failure by Dannenbaum to timely issue a
certificate of payment or for any failure by Chambers County to timely pay the
amount certified.2
2 Although Pelco has raised complaints about Dannenbaum’s failure to timely issue a certificate of payment, this appeal is concerned with Dannenbaum’s certification—and Chambers County’s payment—of less than the entire amount requested by Pelco without any notice of problems with Pelco’s work.
20 Even assuming section 4.3 applies to the parties’ dispute, however, this does
not establish that any failure by Pelco to follow its procedures establishes that any
breach by Chambers County is immaterial. Section 9.4.1 provides that, if it
determined that there was a reason for withholding certification in whole or in part,
Dannenbaum was required to provide Pelco with notice of its reasons. Section
9.5.1 provides that, after notice of deficiencies was provided, Pelco and
Dannenbaum would discuss the matter to determine if they could agree on a
revised amount. If the parties cannot agree on a revised amount, Dannenbaum then
issues a certificate of payment for the lesser amount.
It is undisputed that Dannenbaum did not provide any notice to Pelco of any
deficiencies in Pelco’s work. Instead, Dannenbaum issued certificates of payment
for less than the entire amount without attempting to see if the matter could be
remedied by Pelco or if Pelco would agree that a lesser payment was warranted. In
order to determine immateriality under this argument, then, we would have to hold
that Dannenbaum’s failure to provide notice and to give Pelco a chance to correct
any mistakes was not material but that Pelco’s failure to follow the claims
procedure was material. Nothing in Chambers County’s motion for summary
judgment establishes this as a matter of law.
Accordingly, this dispute resolution provision is not applicable to the dispute at issue.
21 We hold that Chambers County did not establish liability as a matter of law
on its breach of contract claim. We sustain Pelco’s first issue as it relates to
Chambers County’s breach of contract claim.
D. Pelco’s Claims against Amundson & Amundson Consulting
In its fourth issue, Pelco asserts that the trial court erred by granting
summary judgment in favor of Amundson and Amundson Consulting 3 on Pelco’s
claims against them. After the trial court granted summary judgment on Pelco’s
and Chambers County’s motions for summary judgment, Amundson Consulting
filed a motion for summary judgment on Pelco’s claims against it for fraudulent
inducement and negligent misrepresentation.
The elements for fraudulent inducement are
(1) the defendant made a false material misrepresentation with knowledge that it was false when made or that the defendant asserted without knowledge of its truth or falsity, (2) the defendant intended the misrepresentation to be acted on, (3) the plaintiff relied on the misrepresentation, and (4) the misrepresentation caused injury.
Anglo-Dutch Petroleum Int’l., Inc. v. Case Funding Network, LP, 441 S.W.3d 612,
627 (Tex. App.—Houston [1st Dist.] 2014, pet. denied) (citing Formosa Plastics
Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex.
1998)).
3 For purpose of their motion for summary judgment, no distinction is created between Amundson and Amundson Consulting. Accordingly, we will refer to both parties collectively as Amundson Consulting.
22 The elements for negligent misrepresentation are
(1) the representation was made by a defendant in the course of his business, or in a transaction in which he had a pecuniary interest; (2) the defendant supplied false information for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffered pecuniary loss by justifiably relying on the representation.
Swank v. Sverdlin, 121 S.W.3d 785, 802 (Tex. App.—Houston [1st Dist.] 2003,
pet. denied) (citing Fed. Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442
(Tex. 1991)).
In its live pleading, Pelco identified two alleged fraudulent
misrepresentations by Amundson Consulting: that the construction project was
approved for funding by FEMA and that the order to stop working on the project
came from FEMA. Pelco’s claim for negligent misrepresentation was based only
on the alleged representation that FEMA had ordered the stop on the construction
project.
In its motion for summary judgment, Amundson Consulting argued that the
justifiable reliance and proximate cause elements of both claims failed as a matter
of law because the trial court had previously determined that Pelco was at fault for
the breach of the construction contract. Assuming without deciding that Pelco’s
claims against Amundson Consulting rely on a determination that Pelco was not at
fault for the breach of the construction contract, we have reversed the trial court’s
23 rulings on this matter. Accordingly, this can no longer apply as a basis for
summary judgment in Amundson Consulting’s favor.
For the negligent misrepresentation claim, Amundson Consulting also
argued that the claim failed based on Pelco’s live pleading. See Khan v. GBAK
Props., Inc., 371 S.W.3d 347, 357 (Tex. App.—Houston [1st Dist.] 2012, no pet.)
(holding summary judgment is appropriate when plaintiff pleads facts affirmatively
negating its cause of action). In this argument, Amundson Consulting relies on
two assertions in Pelco’s live pleading. The first assertion was that Amundson
Consulting had represented to Pelco on April 26, 2010—before Pelco entered into
the contract—that FEMA had approved funding for the project. The second
assertion was that “FEMA first disputed whether the last amendment to the design
was reimburseable” only after Pelco entered into the contract with Chambers
County. Based on this, Amundson Consulting asserts that Pelco’s pleadings
establish as a matter of law that Amundson did not know that his alleged
representation was false.
The fault with Amundson Consulting’s reasoning is that the pleading also
asserts that it was the “last amendment to the design” that Amundson Consulting
and others presented to Pelco on April 26, claiming that it had been approved by
FEMA for funding. While previous designs had been approved by FEMA at that
time, the one shown to Pelco on April 26 had not. Based on Pelco’s pleading, any
24 claim by Amundson Consulting that this amendment had been approved by FEMA
could have been false or made without knowledge of its truth or falsity. See
Anglo-Dutch Petroleum, 441 S.W.3d at 627.
Amundson Consulting further asserted in its motion for summary judgment
that “the alleged misrepresentation was not false, because the Project was
eventually constructed and reimbursed by FEMA.” Amundson Consulting cannot
establish that it did not make a false statement by claiming that the statement
became true at some point in the future. See id. (holding element of fraudulent
inducement is defendant made false material misrepresentation “with knowledge
that it was false when made” (emphasis added)).
Next, Amundson Consulting asserted that any representations it made were
on behalf of Chambers County and, accordingly, were integrated into the contract
between Pelco and Chambers County, which contains a merger clause.
“[F]raudulent inducement is almost always grounds to set aside a contract despite a
merger clause, but in certain circumstances, it may be possible for a contract’s
terms to preclude a claim for fraudulent inducement by a clear and specific
disclaimer-of-reliance clause.” Italian Cowboy Partners, Ltd. v. Prudential Ins.
Co. of Am., 341 S.W.3d 323, 332 (Tex. 2011). Standard merger clause provisions
that the contract supersedes prior representations is not sufficient to act as a bar to
a fraudulent inducement claim. Id. at 334. The merger clause in the contract
25 between Pelco and Chambers County simply provides that “[t]he Contract
represents the entire and integrated agreement . . . and supersedes prior . . .
representations . . . either written or oral.” We hold this is a standard merger
agreement and cannot defeat a fraudulent misrepresentation claim. See id.
Finally, Amundson Consulting asserted that the fraudulent inducement claim
fails because Pelco had no evidence that Amundson Consulting intended to induce
Pelco’s reliance. “Intent is a fact question within the realm of the trier of fact
because it is dependent upon the credibility of witnesses and the weight to be given
to their testimony.” Nwokedi v. Unlimited Restoration Specialists, Inc., 428
S.W.3d 191, 199 (Tex. App.—Houston [1st Dist.] 2014, pet. denied) (citing
Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986)). “Since intent
to defraud is not susceptible to direct proof, it invariably must be proven by
circumstantial evidence.” Spoljaric, 708 S.W.2d at 435. The fact that Amundson
Consulting made these representations in the context of a presentation seeking
Pelco’s bid on the construction contract is some circumstantial proof that
Amundson Consulting intended for Pelco to rely on its statements and to act on the
statements.
We hold Amundson Consulting failed to establish as a matter of law that
Pelco could not prevail on its fraudulent misrepresentation and negligent
26 misrepresentation claims against Amundson Consulting. We sustain Pelco’s fourth
issue.
Attorneys’ Fees
In its fifth issue, Pelco argues that, if we reverse the jury’s damage award,
we should also reverse the award of attorneys’ fees. Because we have reversed the
trial court’s determination of liability on Chambers County’s breach of contract
claim, the court’s damages award must also be reversed. 4 See TEX. R. APP. P. 44.1
(“The court may not order a separate trial solely on unliquidated damages if
liability is contested.”). Likewise, the attorneys’ fees award must also be reversed.
See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (Vernon 2015) (allowing
award of attorneys’ fees for breach of contract claim); MBM Fin. Corp. v.
Woodlands Operating Co., L.P., 292 S.W.3d 660, 666 (Tex. 2009) (holding, to
recover attorneys’ fees under section 38.001, litigant must prevail on breach of
contract claim). We sustain Pelco’s fifth issue.
Response to Dissent
The dissent identifies another matter that it claims was raised by Pelco and
was adequately developed by Pelco: Pelco’s Prompt Payment Act
claims. Chambers County sought and obtained summary judgment on these claims
in the same motion that it sought and obtained summary judgment on Pelco’s
4 Because we reverse the damage award, we do not need to reach Pelco’s remaining issues concerning error during the trial on damages. See TEX. R. APP. P. 47.1.
27 breach of contract claim. The motion, however, separately argued the grounds for
summary judgment on the breach of contract claim and on the Prompt Payment
Act claims. Likewise, Pelco responded to each claim separately and presented
different arguments for why each claim should survive.
On appeal, the entirety of Pelco’s analysis concerning this matter is a one-
sentence footnote, claiming “The trial court’s denial of Pelco’s motion for
summary judgment on its Prompt Pay claims was also error, which requires
reversal.” Rather than considering this lone passage as a side note among the
thirty-three substantive pages of the brief, the dissent would hold that the matter
has been raised and requires reversal. Even if we agreed that this sentence-long
footnote was Pelco’s attempt to challenge the trial court’s grant of summary
judgment on its Prompt Payment Act claims, we could not hold that this sentence
adequately developed the matter.
As stated, Chambers County raised grounds for granting summary judgment
on Pelco’s breach of contract claim separately from the grounds for granting
summary judgment on the Prompt Payment Act claims, and Pelco responded to the
claims separately. On appeal, Pelco does not address any of these individual
grounds for summary judgment on the Prompt Payment Act claims or any of its
individual responses. See Britton v. Texas Dep’t of Criminal Justice, 95 S.W.3d
676, 681 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (holding, to obtain
28 reversal, “an appellant must attack all independent grounds supporting a
judgment”). Likewise, Pelco does not explain whether it believes Chambers
County failed to carry its initial burden on the Prompt Payment Act claims, Pelco
carried its burden after it shifted, or both.
For the citation to legal authority, Pelco’s one citation to one of the statutes
in the Prompt Payment Act is contained in its argument that the Prompt Payment
Act served as a basis to establish breach of contract. But the failure to make
payments under the Prompt Payment Act does not establish a breach of
contract. See TEX. GOV’T CODE ANN. § 2251.051(a) (Vernon 2008) (providing
remedy for failure to make payments under act is suspension of
performance). Otherwise, Pelco provides no citation to the act or any case law
applying the act.
The dissent would hold that the arguments concerning breach of contract are
sufficiently analogous, but making an analogous argument on appeal is not
sufficient to address a separate matter before the trial court. See Wohlfahrt v.
Holloway, 172 S.W.3d 630, 639–40 (Tex. App.—Houston [14th Dist.] 2005, no
pet.) (holding argument on appeal must comport with argument raised before trial
court). Accordingly, even if we agreed with the dissent that Pelco attempted to
raise the grant of summary judgment on its Prompt Payment Act claims as an issue
on appeal, we cannot agree that the one sentence devoted to the matter was
29 sufficient to develop the argument. Consequently, we express no opinion on the
merits of whether summary judgment was appropriate for the Prompt Payment Act
claims.
Conclusion
We reverse the trial court’s rendition of summary judgment on Pelco’s
breach of contract claim, Chambers County’s breach of contract claim, and Pelco’s
fraudulent misrepresentation and negligent misrepresentation claims against
Amundson and Amundson Consulting. We remand for a new trial on these claims.
Laura Carter Higley Justice
Panel consists of Justices Jennings, Higley, and Huddle.
Justice Huddle, concurring in part and dissenting in part.