Terrace v. Meritage Homes of Tex. Llc

• Citation: 334 S.W.3d 275
• Decision Date: 21 October 2010
• Docket Number: No. 01–09–00155–CV.,01–09–00155–CV.
• Parties: SP TERRACE, L.P. and Tyee Management, LLC, Appellants,v.MERITAGE HOMES OF TEXAS, LLC, Appellee.
• Court: Court of Appeals of Texas

334 S.W.3d 275

SP TERRACE, L.P. and Tyee Management, LLC, Appellants,

v.MERITAGE HOMES OF TEXAS, LLC, Appellee.

No. 01–09–00155–CV.

Court of Appeals of Texas, Houston (1st Dist.).

Oct. 21, 2010.

Michael C. O'Connor, O'Connor, Craig, Gould & Evans, P.C., Houston, TX, for Appellants.David Watkin Jones, Beck, Redden & Secrest, LLP, Houston, TX, for Appellee.Panel consists of Chief Justice RADACK and Justices BLAND and MASSENGALE.

OPINION ON REHEARING

JANE BLAND, Justice.

In this dispute over an earnest money contract to develop a plat of real estate, the trial court granted summary judgment in favor of Meritage Homes of Texas, LLC (Meritage) on its breach of contract claim against SP Terrace, LP, and Tyee Management, LLC (collectively, SP Terrace). The trial court summarily rejected SP Terrace's counterclaims for breach of contract against Meritage.

The contract called for SP Terrace to file a subdivision plat by December 31, 2005. SP Terrace concedes that it did not meet this deadline. But it argues that the contract extended the deadline, or alternatively that its compliance was excused. It claims fact issues exist on its affirmative defenses of oral modification, waiver, delay and interference by Meritage, on the amount of attorney's fees, and on its counterclaim against Meritage. We conclude that SP Terrace raises a fact issue on the issues of waiver and delay, but not as to contract modification or interference. We therefore reverse the trial court's summary judgment and remand the case for trial. We grant rehearing and withdraw our opinion and judgment dated May 6, 2010, to address an argument that SP Terrace raises in its motion for rehearing. Our disposition is unchanged.

Background

Underlying Facts

SP Terrace entered into an earnest money contract with Meritage to develop and sell ninety-six lots in a proposed Harris County subdivision. The development plan required small and narrow lots, and Meritage was one of a few builders who could construct houses to fit the particular lot sizes. The contract terms required SP Terrace to improve the overall subdivision. In particular, it required SP Terrace to file a subdivision plat with Harris County by a December 31, 2005 substantial completion deadline. After substantial completion, Meritage would then purchase the lots in a series of transactions. The total purchase price was $2,688,000. Meritage deposited ten percent of this price, $268,000, with SP Terrace as earnest money. If SP Terrace did not achieve substantial completion by December 31, 2005, Meritage could terminate the contract and recover its earnest money deposit. But, if Meritage delayed SP Terrace's performance of its contractual obligations, the substantial completion deadline would “be extended to the extent of any such delay.”

On November 30, representatives from Meritage and SP Terrace met to discuss the project. At this point, SP Terrace was ready to file the subdivision plat. Meritage asked for changes to the plat, and it requested that SP Terrace postpone filing the plat to accommodate those changes. SP Terrace agreed, but informed Meritage that a six-month extension of the substantial completion deadline would be necessary to address these and any future changes to the development. According to Tyler Todd, the president of Tyee Management, SP Terrace's general partner, and Kelly Smalley, the project manager, the parties orally agreed to extend the substantial completion deadline, and the representatives of Meritage agreed to sign a written extension memorializing the oral modification. Smalley mailed a written agreement to Meritage before December 31, 2005. She never received a response.

The parties continued to work together to make changes and improvements to the development into early February 2006. But on February 3, Meritage informed SP Terrace that, due to SP Terrace's failure to meet the substantial completion deadline, Meritage was terminating the contract and demanding the return of its earnest money deposit.

Procedural History

After SP Terrace refused to return the earnest money deposit, Meritage sued for breach of contract. SP Terrace counterclaimed for breach of contract, alleging that Meritage (1) delayed SP Terrace's performance, (2) failed to cooperate with SP Terrace, and (3) breached their oral agreement to extend the substantial completion deadline by six months, all of which entitled SP Terrace to retain the earnest money deposit and recover actual damages in addition to the earnest money it kept.

Meritage moved for traditional and no-evidence summary judgment on its claims against SP Terrace and on SP Terrace's counterclaim. Meritage contended that the parties never agreed to extend the substantial completion deadline. Meritage argued that SP Terrace's counterclaim failed as a matter of law because it did not state a claim for affirmative relief and the liquidated damages provision in the contract precluded SP Terrace from recovering actual damages in excess of the earnest money deposit. Meritage contended that SP Terrace's waiver defense failed because Meritage never renounced its right to terminate the contract, and the forty-eight days that had passed between the substantial completion deadline and the date Meritage demanded the return of its earnest money deposit was not long enough to show that Meritage intended to yield its right to terminate. Meritage argued that any oral modification of the contract is unenforceable because it materially altered the obligations of the underlying written contract. Meritage also noted that SP Terrace failed to present any evidence that the amount of liquidated damages was an unreasonable forecast of the amount of its damages.

SP Terrace responded with the Todd and Smalley affidavits to show that fact issues existed regarding (1) an agreement to extend the substantial completion deadline; (2) whether Meritage, through its oral agreement to extend the deadline and its continued work with SP Terrace after December 31, 2005, waived the deadline; and (3) whether Meritage breached its duties to cooperate with SP Terrace and to not delay or interfere with SP Terrace's performance of its contractual obligations. SP Terrace also argued that the liquidated damages provision of the contract, which limited SP Terrace's recovery to retention of the earnest money deposit, was unenforceable penalty because it hypothetically would allow the forfeiture of the deposit due to any breach by Meritage, including a trivial one.

The trial court granted Meritage's motions. Shortly thereafter, Meritage moved for entry of a final judgment, asking the trial court to award it $268,000 in damages, $71,170.50 in attorney's fees incurred in prosecuting its claims in the trial court proceedings, $40,000 in attorney's fees if SP Terrace appeals to an intermediate appellate court, and an additional $27,500 in attorney's fees if Meritage ultimately prevails after full briefing and oral argument to the Texas Supreme Court.

SP Terrace moved the trial court to reconsider the summary judgment. SP Terrace attached excerpts from the deposition of Michael Pizzitola, taken after the original submission of the summary judgment motions, to further support its contentions. SP Terrace also attached the affidavit of its counsel of record opposing Meritage's requested amount of attorney's fees. The trial court's docket sheet includes the following entry for December 8, 2008: “D. (seller) Motion for leave of court to file additional evidence granted.” The trial court did not memorialize the docket entry in any order, even though SP Terrace submitted a proposed order and requested that the trial court sign it. The trial court entered a final judgment in favor of Meritage, awarding the $268,000 earnest money deposit as damages and the full amount of attorney's fees requested by Meritage.

Discussion

Standard of Review

We review de novo the trial court's grant of a motion for summary judgment. Provident Life & Accid. Ins. Co. v. Knott, 128 S.W.3d 211, 215–16 (Tex.2003). After an adequate time for discovery, a party may move for no-evidence summary judgment if there is no evidence of one or more essential elements of a claim or defense on which the adverse party bears the burden of proof at trial. Tex.R. Civ. P. 166a(i). Once a party moves for no-evidence summary judgment, the burden shifts to the non-movant to present evidence raising a genuine issue of material fact on each element specified in the motion. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex.2006). We review the evidence in the light most favorable to the non-movant, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.2009) (citing City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005)).

When we construe a contract, we must “ascertain and give effect to the parties' intentions as expressed in the document.” Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 311–12 (Tex.2005) (per curiam). We consider the contract as a whole in order to give effect to all provisions of the contract. See id. at 312. We give contractual terms their plain, ordinary, and generally accepted meaning unless the contract shows that the parties intended a different meaning to control. See Heritage Res. v. NationsBank, 939 S.W.2d 118, 121 (Tex.1996).

Late–Filed Summary Judgment Evidence

SP Terrace initially contends that the trial court erred in granting summary judgment because the late-filed deposition testimony of Meritage's Michael Pizzitola creates fact issues. Texas Rule of Civil Procedure 166a(c) provides that “[e]xcept on leave of court, the adverse party, not later than seven days prior to the day of hearing may file and serve opposing affidavits or other written response.” Tex.R. Civ. P. 166a(c). A trial court may accept late-filed summary judgment...