Vance v. My Apartment Steak House of San Antonio, Inc.

• Decision Date: 23 May 1984
• Docket Number: No. C-2623,C-2623
• Citation: 677 S.W.2d 480
• Parties: John H. VANCE, D/B/A Vance Construction Co., Petitioner, v. MY APARTMENT STEAK HOUSE OF SAN ANTONIO, INC., Respondent.
• Court: Texas Supreme Court

Page 480

677 S.W.2d 480

John H. VANCE, D/B/A Vance Construction Co., Petitioner, v. MY APARTMENT STEAK HOUSE OF SAN ANTONIO, INC., Respondent.

No. C-2623.

Supreme Court of Texas.

May 23, 1984.

David W. Rogers, San Antonio, for petitioner.

Charles E. Davis, San Antonio, for respondent.

BARROW, Justice.

This is an appeal by John H. Vance, d/b/a Vance Construction Company (Vance) from a take-nothing judgment rendered in his suit against My Apartment Steak House of San Antonio, Inc. (Steak House) to recover on a construction contract. The court of appeals affirmed. We reverse the judgments of the lower courts and remand the cause to the trial court.

In March of 1978, Vance entered into a construction contract with Steak House whereby Vance agreed to construct a restaurant to be completed by August 10, 1978 in return for payment of $116,000. Various delays occurred for which each party blames the other. Finally, on September 25, 1978, Steak House notified Vance the contract was terminated and thereafter denied him access to the property for further work. It is undisputed that the contract was not fully performed although the restaurant had been substantially completed. The sum of $20,000 was withheld by Steak House from the contract price.

One subcontractor, Consolidated Interior Systems, Inc., was not paid, and it brought this suit against both Vance and Steak House seeking to recover the sum of $2,484. Vance answered and filed a cross-action against Steak House seeking to recover the sum of $8,298 remaining due and owing under the original contract. In his petition, Vance conceded that the contract had not been fully performed, but urged that he was prevented by Steak House from completing the contract. Steak House then filed a cross-claim against Vance seeking the sum of $43,488.75 for defective construction and failure to complete the contract. It was stipulated by all parties that Consolidated Interiors was entitled to recover on its claim, and it is not a party to this appeal.

At the conclusion of all evidence, the trial court granted motions for instructed verdict against both Vance and Steak House on the cross-actions filed by each. Only Vance perfected an appeal. The court of appeals affirmed after concluding that Vance had failed to prove the cost of remedying the defects or omissions necessary to make the building conform to the contract.

At the outset, we shall restate the well-established Texas rules concerning the measure of damages in a building contract dispute such as this. We first note that both Vance and Steak House are alleged to have breached their contract. They both have filed affirmative claims for relief via their cross-actions. Moreover, the evidence indicates that Vance did substantially perform the contract and that all of the building defects were remediable.

When a contractor has substantially performed a building contract, he is entitled to recover the full contract price less the cost of remedying those defects that are remediable. Atkinson v. Jackson Bros., 270 S.W. 848, 850 (Tex. Comm'n App. 1925, holding approved); Dietz Memorial Co. v. Texas Steel Bldg. Co., 578 S.W.2d 872, 875 (Tex.Civ.App.--Waco 1979, writ ref'd n.r.e.); Perryman v. Sims, 506 S.W.2d 753, 756 (Tex.Civ.App.--Tyler 1974, writ ref'd n.r.e.); 3A A. Corbin, Corbin on Contracts § 709, at 334-37 (1964 and Supp.1984); J. Calamari & J. Perillo, Contracts § 11-22, at 412 (2d ed. 1977); Guittard, Building Contracts: Damages and Restitution, 32 Tex.B.J. 91, 122 (1969). ¹

Steak House also has a claim for damages under Texas law. The measure of damages for an owner when the contractor is alleged to be in breach of a construction contract is the cost of completing the job or of remedying those defects that are remediable. If only part of the contract price has been paid to the contractor, then the amount of the owner's damages is credited against the balance of his payments still unpaid. Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 164 (Tex.1982); Graves v. Allert & Fuess, 104 Tex. 614, 142 S.W. 869, 870 (1912); 3A A. Corbin, Corbin on Contracts § 1089, at 485-92 (1964 & Supp.1984); J. Calamari & J. Perillo, Contracts § 14-29, at 560 (1977); Guittard, Building Contracts: Damages and Restitution, 32 Tex.B.J. 91, 118-20 (1969).

The formulae of recovery we have just set forth comprise the damage elements of the contractor's and the owner's causes of action. It is a well accepted postulate of the common law that a civil litigant who asserts an affirmative claim for relief has the burden to persuade the finder of fact of the existence of each element of his cause of action. Grieger v. Vega, 153 Tex. 498, 271 S.W.2d 85, 89-90 (1954); Albright v. Long, 448 S.W.2d 564, 565 (Tex.Civ.App.--Amarillo 1969, no writ). Therefore, when Vance alleged facts entitling him to recover for his performance and his allegations were denied by Steak House, Vance was placed in the position of having to prove every fact essential to his case. Shell Chemical Co. v. Lamb, 493 S.W.2d 742, 744 (Tex.1973).

The primary contention raised by Vance is that this Court should re-examine the holding in Atkinson v. Jackson Bros., 270 S.W. 848, and shift the burden of proof on the cost of remedying building defects to the owner in all instances, even when the contractor is asserting a claim for relief. After consideration of the arguments for and against this change, we decline to overrule Atkinson.

The Atkinson court correctly stated that the doctrine of substantial performance is merely an equitable doctrine that was adopted to allow a contractor who has substantially completed a construction contract to sue on the contract rather than being relegated to his cause of action for quantum meruit. The doctrine does not, however, permit the contractor to recover the full consideration provided for in the contract. By definition, this doctrine recognizes that the contractor has not totally fulfilled his bargain under the contract--he is in breach. Nonetheless, he is allowed to sue on the contract, but his recovery is decreased by the cost of remedying those defects for which he is responsible. "To allow full recovery without deductions for defects is to award compensation for something [the contractor has] not done." Id. at 851.

The court in Atkinson announced the following rule "for measuring compensation or damages ... to both the contractor and the owner:"

In cases of substantial performance, the amount recoverable by the contractor is the contract price, less the reasonable cost of remedying the defects or omissions in such a way as to make the building conform to the contract. This deduction measures the damages allowed the owner for failure on the part of the contractor to fully comply with the specifications.

Id. The court concluded that when a contractor seeks recovery on a substantial performance theory he has the burden to prove the reasonable cost of remedying the defects. Because the cross-plaintiff contractor failed to present any evidence on the damage element of its cause of action, the Commission held that it was not entitled to recover.

We recognize that some courts and commentators argue in favor of placing the burden of proving the cost of defects on the owner in all instances; however, we have concluded that the rationale underlying such a change in our law does not justify the proposal. One reason suggested for placing the burden of proof upon the owner is that the owner is in a better position to know of the existence and extent of defects and the cost of remedying such defects. While this may be true in some instances, the Texas Rules of Civil Procedure contain various tools by which a contractor may require the owner to define and enumerate the alleged defects in a building. See Tex.R.Civ.P. 166b-169. Further, the contractor may obtain the right to enter the owner's premises for the purpose of inspecting and observing what defects are present. Tex.R.Civ.P. 166b(2)(c). Therefore, we refuse to conclude that a lack of access or control justifies changing the Atkinson rule.

On a related point, it has been urged that the owner may establish a defense to the contractor's cause of action simply by raising a fact issue concerning a defect not addressed by the contractor. Again, our rules of discovery permit a party to limit his opponent to certain facts and defenses. See Tex.R.Civ.P. 166b-169. Under these rules, a contractor would be allowed to require the owner to set forth his list of alleged defects. Thereafter, the contractor may forego any discussion of undisputed defects at trial simply by proffering the interrogatories or other discovery into evidence. This will effectively preclude the owner from raising an issue on a defect not previously disclosed to the contractor.

We today reaffirm the holding in Atkinson. Therefore, when a breaching contractor brings suit to recover for his substantial performance and the owner alleges remediable defects in the construction, the contractor is required to prove that he did substantially perform, the consideration due him under the contract, and the cost of remedying the defects due to his errors or omissions.

We must now decide whether the court of appeals was correct in affirming the trial court's action in directing a verdict in favor of Steak House against Vance. A defendant is entitled to a directed verdict only when reasonable minds could reach but one conclusion under the available evidence. That is, there must be no evidence to raise a fact issue regarding the cost of remedying the defects in Steak House's building. In our review, we must consider all of the evidence in the light most favorable to Vance, disregarding all contrary evidence and inferences. See Williams v. Bennett, 610 S.W.2d 144, 145 (Tex.1980).

The record of this case is replete with testimony and other evidence concerning the cost of repairing the defects alleged to have been left by...