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Bailey v. Kliebert Development, LLC

Court of Appeals of Texas, Fourteenth District

March 7, 2017


         On Appeal from the County Civil Court at Law No. 3 Harris County, Texas Trial Court Cause No. 971598

          Panel consists of Justices Christopher, Jamison, and Donovan.


          Tracy Christopher Justice

         This is an appeal from a judgment rendered after a trial by jury. The dispositive issue is whether the trial court committed charge error when it submitted a question for breach of contract that was based on the parties' alleged oral agreement, rather than on their fully integrated written agreement. Concluding that the trial court did so err, we reverse the trial court's judgment and remand the case for additional proceedings consistent with this opinion.


         The Contract. Brandon Bailey entered into a contract to purchase a home from Kliebert Development, LLC. The contract was reduced to writing, and the parties' chosen terms were standard in nearly every way, except one. The parties inserted into their form contract a special provision, which read: "Builder to have salvage rights on materials removed from the home." Both parties agree that the "Builder" in this provision refers to Kliebert.

         To further describe Kliebert's salvage rights, the parties executed an amendment, which read: "Salvage rights to include: mantel in master, plumbing fixtures to include master bath fixtures (plumbing) and kitchen faucet. Bar sink and faucet." For ease of reference, we identify the objects listed in this amendment collectively as the "salvage items."

         After the parties closed on the property, a dispute arose over Kliebert's salvage rights. Kliebert anticipated that Bailey would remodel the home at some time before he moved in. Kliebert also anticipated that, as part of this remodel, Bailey would replace the salvage items because they did not comport with his design aesthetic. Kliebert wanted to reclaim the salvage items because they were brand new, except the mantel, which was an antique. If the salvage items were returned undamaged, Kliebert hoped to reuse them in another home that it was then constructing. Kliebert contacted Bailey about reclaiming the salvage items, but Bailey's responses were evasive.

         Bailey eventually moved into the home without tendering any of the salvage items to Kliebert. When Kliebert learned that the home was being occupied, Kliebert notified Bailey that the fixtures could not be installed in a new home if the fixtures were not in original condition. Believing that it had been entitled to a return of the fixtures in their original condition, Kliebert sent Bailey an invoice for more than $39, 000. This figure represented the supposed cost of both the fixtures and the mantel. Kliebert later increased this invoice to more than $59, 000.

         Bailey did not pay the invoice. Instead, he informed Kliebert that the salvage items would be available for pick up when they are actually removed from the home. Months later, Bailey removed the mantel and the kitchen fixtures, and he offered them to Kliebert. Bailey did not remove the remaining fixtures. Of those salvage items that were returned, Kliebert complained that the mantel had been damaged and that the kitchen fixtures were worthless.

         Kliebert sued for breach of contract, alleging that it had agreed to reduce the purchase price of the home by $50, 000 in exchange for Bailey's promise to return the salvage items. The contract did not memorialize the terms of this price-reduction agreement-at least, not in the promissory language of Kliebert's allegation. The contract merely reflected the final, bargained-for price of the home, which was $2.55 million. Nevertheless, Kliebert claimed that Bailey had breached the contract by failing to return all of the salvage items as he allegedly had promised.

         The Motion to Exclude. Before trial, Bailey filed a motion to exclude, wherein he identified the crux of the litigation as follows: "The parties disagree as to whether the special provision required the items to be removed or, rather, simply gave Plaintiff the salvage rights if the items were removed."

         Bailey then explained that Kliebert's case was based on an invalid theory. Bailey asserted that there was no separate agreement to reduce the purchase price of the home by $50, 000 in exchange for the salvage items. According to Bailey, there was only one agreement-the written contract that both he and Kliebert had signed.

         Bailey also explained that, during the negotiation phase, Kliebert had sought $2.6 million for the home, which is exactly $50, 000 more than the actual contract price. Bailey argued that if there was an oral agreement that he would remove the salvage items and return them to Kliebert in exchange for a reduction in Kliebert's desired price, then that oral agreement did not survive the written contract's merger clause. That merger clause provided: "This contract contains the entire agreement of the parties and cannot be changed except by their written agreement." In light of this clause, Kliebert explained that the written contract did "not expressly provide for any independently enforceable sub-agreement."

         Bailey concluded that Kliebert's contractual claim "fails as a matter of law, " but he had not previously requested a summary judgment on that point, and he did not request one in his motion to exclude. Instead, Bailey asked the trial court "to exclude Plaintiff's arguments as to the Plaintiff's breach of contract theory."

         When the trial court conducted a hearing on the motion to exclude, Bailey began the hearing with more legal points. He argued that Kliebert's case was based entirely on an oral agreement that "didn't make it into the written agreement." Bailey then addressed Kliebert's damages claim for $50, 000, which he characterized as a request for liquidated damages. Bailey said that this request was invalid because it, too, could not be found in the written contract.

         Kliebert responded that the oral agreement was "part of the contract." The trial court expressed concern with that position: "It sounds like to me you want to proceed with an oral and written contract. . . . If there is a merger clause in here and the contract is unambiguous, then you can't use parol evidence to describe or address the contents of the party's intention to include or not to include those items."

          Kliebert then asserted, for the first time, that the contract was ambiguous. Kliebert did not identify a particular word or phrase that it believed was subject to more than one reasonable interpretation. Rather, Kliebert argued that the contract was ambiguous because "it did not give a certain time frame" in which the salvage items must be removed.

         Bailey objected at this point, alerting the trial court that Kliebert had not pleaded an ambiguity. The trial court then asked Bailey for the relief that he sought, to which he answered: "The relief sought is that the plaintiffs do not present evidence or make an argument that the price of the home should have been $2.6 million."

         The trial court granted Bailey's motion, but it clarified that Kliebert would be allowed to present evidence that the fair market value of the salvage items was $50, 000 at the time of closing. Bailey responded, "If that's the argument, then I disagree, but I can live with that."

         The Trial. Kliebert ultimately presented evidence to the jury that the contract price should have been $2.6 million. Kliebert explained that it had reduced the contract price to $2.55 million because it had bargained with Bailey for a return of the salvage items, which Kliebert had valued at $50, 000. Kliebert also explained that the parties had reached an oral agreement that the salvage items were supposed to have been delivered immediately after the closing. Kliebert's co-owner testified as follows:

Q. You are alleging that basically there was an agreement that the salvaged items were to ...

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