Petition for Review from the Court of Appeals for the Second
District of Texas
contract dispute involves competing breach claims by a
food-product manufacturer, Bartush-Schnitzius Foods Co.
(Bartush), and a refrigeration contractor, Cimco
Refrigeration, Inc. (Cimco). The jury found that both parties
failed to comply with their agreement and assessed damages
accordingly, but the trial court rendered judgment solely for
Bartush. The court of appeals reversed and remanded for entry
of judgment solely in Cimco's favor. We hold that neither
the trial court nor the court of appeals properly effectuated
the jury's verdict. We reverse the court of appeals'
judgment and remand the case to that court to consider
2010, Bartush planned to expand its line of food products to
include seafood dips. Manufacturing the dips required
Bartush's production facilities to maintain a constant
temperature no higher than thirty-eight degrees-lower than
Bartush's existing refrigeration system could sustain.
Bartush therefore contracted with Cimco to install a new
system. Cimco sent Bartush an offer letter with three quoted
options. The offer letter did not reference a particular
temperature range. Bartush orally selected the most expensive
of the three options, confirming the selection via email.
Bartush then began paying Cimco in agreed-upon installments.
installation, Bartush started to operate the new system at a
temperature setting of thirty-five degrees. However, this
resulted in ice forming on the fan motors because the
system's defrost unit was not designed to support
operation at such a low temperature. The ice caused the
motors to overheat and fail, leading to higher temperatures
that at times climbed into the 50s and 60s. When Bartush
discovered the problem, it had already paid Cimco $306, 758
on the contract but still owed $113, 400. Bartush
communicated with Cimco about a repair, but after several
weeks without receiving what it considered a workable plan,
Bartush withheld further payment and contacted an independent
refrigeration engineer. The engineer recommended a
warm-glycol defrost unit, and Bartush contracted with Jax
Refrigeration, Inc. to install the unit at a cost of $168,
079. After the warm-glycol defrost unit was installed, the
system was able to maintain the target temperature of
response to Bartush's nonpayment, Cimco sued Bartush to
recover the balance owed on the contract. Bartush
counterclaimed for breach of contract, seeking damages for,
among other things, the costs associated with the warm-glycol
defrost unit. Bartush also alleged that its failure to
pay was justified by Cimco's prior material breach. Cimco
asserted that the equipment it installed was exactly as
described in the accepted purchase order and denied that it
had made any guarantee regarding the equipment's capacity
to maintain a specific temperature.
parties' claims were tried to a jury. The jury answered
the relevant liability portions of the charge as follows:
"YES" to Question 1, which asked whether Bartush
failed to comply with the agreement; "YES" to
Question 2, which asked whether Cimco failed to comply with
the agreement; "CIMCO" to Question 3, which asked
who failed to comply with the agreement first; and
"NO" to Question 4, which asked whether
Bartush's failure to comply was excused. The jury awarded
Bartush $168, 079 in damages (the cost of installing the
warm-glycol defrost unit), plus $215, 000 in trial and
conditional appellate attorney's fees. The jury also
awarded Cimco $113, 400 (the balance due on the contract).
The jury did not answer the question regarding Cimco's
attorney's fees because the question was conditioned in
part on a finding that Bartush breached first.
the jury's findings that both parties failed to comply
and Bartush's failure to comply was not excused, the
trial court stated in its final judgment that "it
appears to the Court that the verdict of the jury was for
[Bartush] and against [Cimco], " and rendered judgment
in Bartush's favor for $168, 079 in damages, plus pre-
and post-judgment interest, costs, and attorney's fees.
The judgment awarded nothing to Cimco, and Cimco appealed.
court of appeals reversed and remanded to the trial court for
entry of judgment that Bartush take nothing and that Cimco
recover $113, 400 in damages, plus interest and costs. ___
S.W.3d ___ (Tex. App.-Fort Worth 2015). The court of appeals
held that the jury's express finding that Bartush's
failure to comply was not excused necessarily included an
implied finding that Cimco's prior breach was
nonmaterial. Id. at ___. The court further held that
Bartush's failure to pay the balance due was a material
breach of the contract as a matter of law, which rendered
irrelevant the jury's finding that Cimco breached first
and precluded Bartush's recovery. Id. Finally,
the court of appeals held that Cimco waived its challenge to
the jury's failure to award attorney's fees.
Id. at ___ n.9.
parties filed petitions for review. Bartush argues the trial
court's judgment should be reinstated because Cimco's
"first" breach was material as a matter of law and
thus excused Bartush's subsequent failure to comply with
the agreement. Alternatively, Bartush argues that both
damages awards should be given effect, resulting in
Bartush's net recovery of $54, 679 in compensatory
damages. Cimco responds that the court of appeals correctly
concluded that Bartush's material breach excused
Cimco's nonmaterial breach. In a cross-petition, Cimco
challenges the court of appeals' holding that Cimco
waived error regarding the jury's failure to award
first address Bartush's argument that the trial court
properly rendered judgment entirely in its favor because
Bartush's failure to comply (i.e., nonpayment) was
excused as a matter of law by Cimco's prior material
breach. "It is a fundamental principle of contract law
that when one party to a contract commits a material breach
of that contract, the other party is discharged or excused
from further performance." Mustang Pipeline Co. v.
Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004)
(citing Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d
691, 692 (Tex. 1994)). By contrast, when a party commits a
nonmaterial breach, the other 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. denied).The latter principle is consistent with
settled Texas law regarding the elements of a contract claim.
The claim requires a finding of breach, not a finding of
material breach. See, e.g., Mays v. Pierce,
203 S.W.3d 564, 575 (Tex. App.-Houston [14th Dist.] 2006,
pet. denied) ("A breach of contract occurs when a party
fails or refuses to do something he has promised to
do."). Accordingly, a material breach by Cimco would
have excused Bartush from making further contractual
payments, while a nonmaterial breach would have simply given
rise to a claim for damages.
case, as noted, the jury found that both parties failed to
comply with the agreement. The jury was instructed that
Bartush's failure to comply was excused if Cimco
previously "failed to comply with a material obligation
of the same agreement, " and listed five nonexclusive
"circumstances to consider in determining whether a
failure to comply is material." Although the jury found
that Cimco failed to comply first, it also found that
Bartush's breach was not excused. To make the latter
finding, the jury must have concluded that Cimco's prior
breach was not material. We therefore agree with the
court of appeals that the jury made such an implied finding.
the jury's implied finding of nonmateriality, Bartush
argues that Cimco's failure to provide a refrigeration
system capable of maintaining a temperature of thirty-five
degrees was a material breach as a matter of law, excusing
Bartush from further performance. We disagree. Generally,
materiality is an issue "to be determined by the trier
of facts." Hudson v. Wakefield, 645 S.W.2d 427,
430 (Tex. 1983). Like other issues of fact, materiality may
be decided as a matter of law only if reasonable jurors could
reach only one verdict. See City of Keller v.
Wilson, 168 S.W.3d 802, 822 (Tex. 2005) ("If the
evidence at trial would enable reasonable and fair-minded
people to differ in their conclusions, then jurors must be
allowed to do so.").
Mustang Pipeline, we outlined several factors
enumerated in the Restatement that are "significant in
determining whether a failure to perform is material."
134 S.W.3d at 199 (citing Restatement (Second) of ...