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Skyline Commercial, Inc. v. ISC Acquisition Corp.

Court of Appeals of Texas, Fifth District, Dallas

June 22, 2018


          On Appeal from the 160th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-15-00305

          Before Justices Francis, Brown, and Stoddart



         Appellant Skyline Commercial, Inc. (Skyline) appeals from a final judgment rendered on a jury verdict in favor of appellee ISC Acquisition Corporation d/b/a ISC Building Materials (ISC). In five issues, Skyline contends there was insufficient evidence to support ISC's quantum meruit claim and the trial court erred in submitting the quantum meruit claim, distributing peremptory challenges, refusing to allow Skyline to litigate its counterclaims for attorney's fees as sanctions, and awarding ISC attorney's fees when there was no presentment or proper segregation of claims. For the following reasons, we affirm the trial court's final judgment.


         During 2013, Skyline was general contractor on the Vistas at San Marcos (Vistas), a student housing construction project. Norwegian Drywall America, LLC (Norwegian) was one of Skyline's subcontractors on the project and contracted to "[p]rovide all necessary labor, materials and equipment to complete the Drywall Scope, in its entirety." Norwegian ordered some of the drywall materials for Vistas from ISC, a building materials supplier, pursuant to a 2012 credit application.

         Norwegian had trouble meeting its obligations under its contract with Skyline. On March 29, 2013, Skyline sent Norwegian a "forty-eight (48) hours notice" letter pursuant to their contract, advising that Norwegian was behind schedule and needed to timely rectify the situation. The following month, as ISC began to supply drywall materials for Vistas, Skyline requested information from ISC about setting up joint check payments for the materials. According to Skyline owner Steven Haug, there was no joint checking agreement between Skyline and ISC. However, Skyline had reached a point where it was "cautious" about sending payment to Norwegian only and wanted to protect the supplier. Thereafter, Skyline issued joint checks payable to both Norwegian and ISC.

         On May 21, 2013, Haug met with Norwegian's owner Roy Finney, labor coordinator Frank Saucedo, and foreman James Saucedo to discuss Norwegian's progress on Vistas. Frank and James related that they did not have enough manpower to meet the drywall deadline on the project's two buildings. According to Haug, they agreed that Norwegian would finish the first building, where some drywall work remained, and he would hire another drywall subcontractor to work on the second building, where drywall work had yet to begin. Haug testified that Finney's only reaction was, "You're going to do what you're going to do."

         In light of their discussion, Haug sent Norwegian a second forty-eight-hour notice on May 23. A week later, Frank called Haug to advise that Finney did not have the money and was not going to pay Norwegian's crew anymore. Haug testified he had two options under the contract - either to terminate Norwegian or to supplement, meaning to provide the labor and materials Skyline deemed necessary and deduct the costs from amounts owed under the contract. Haug called Finney, who said, "That's it, we're done, we're gone." Haug then informed Frank that Skyline would be covering payroll for the work. Haug said he did not hire Frank, or anyone else on the crew, to be a Skyline employee.

         Frank also testified about his discussions with Haug. According to Frank, he told Haug the crew needed to be paid or he would have to "pull them out." In response, Haug said, ". . . I'm the gentleman that's paying the bills, keep it going." Frank testified that, "at that point, we started working for Skyline." Frank told both Finney and Tom Taggart, manager of ISC's Austin supply house, what had transpired.

         Thereafter, Frank and a crew completed drywall work on the first building. Frank submitted a weekly payroll request to Skyline, which was paid. He also continued to order materials from ISC. Frank did not remember ever submitting a bill to Skyline for anything other than labor. But, when asked who was responsible for paying for materials, Frank testified, "I talked to [Finney], I had talked to [Taggart], and I had talked to [Haug]. And [Haug] said, 'I'm paying the bill, keep them going.'"

         Haug, on the other hand, testified he understood that all of the drywall material required to complete the first building was already inside the building, and a May 30, 2013 Norwegian application for payment indicates that the "scheduled value" for materials for the first building were "completed and stored to date." Haug testified he never told Frank that he would pay for materials and never had any discussions regarding drywall materials until after work on the first building was completed.

         Taggart, a primary ISC contact for Norwegian, testified that he understood ISC sold Norwegian materials for Vistas from May through September 2013. He had no reason to think otherwise and, if he did, he would have tried to get a credit agreement with Skyline. Taggart did not recall Frank telling him that Norwegian had been terminated from Vistas. The outstanding ISC invoices for Vistas indicated the materials were sold to Norwegian. Taggart contacted Norwegian's Finney to try to collect on the past due amounts. He did not contact Skyline and did not recall Finney ever telling him Skyline bought the materials. But Taggart said ISC's credit department handled accounts receivable, and he would not know what the department was working on unless it brought him in.

         Janet Flores, ISC's office manager during the Vistas project, testified that although Norwegian, and not Skyline, was ISC's customer, Skyline paid for the materials by way of joint check issued to Norwegian and ISC. Sue Hill, a Skyline accounts payable employee, contacted Flores to see how much ISC was owed, and Flores provided invoices to Hill. In September 2013, when the June 2013 invoice became ninety-days overdue, Flores became involved in efforts to collect payment. She met with Frank, who had been purchasing the materials. Frank told her Norwegian had been kicked off the job, he was working for Skyline, and he had been ordering materials for Skyline for three months. Frank advised that Skyline was going to pay for the materials and she should call Haug. Flores testified that if anyone had given ISC this information earlier, she would have changed the invoices to reflect that Skyline received the materials.

         According to Flores, Haug confirmed that Norwegian was off the job and Skyline was having someone else complete the work. Haug told Flores Skyline would pay for materials Frank ordered and to send Haug the invoices. Flores forwarded the outstanding invoices for June through September 2013, but never received payment. Flores described a conversation with Haug in a November 19, 2013 email to Norwegian, writing that Haug could not understand why Norwegian had continued to order material, but he "finally agreed and said he knows they owed it and would pay . . .." On February 10, 2014, Flores resent the invoices to Skyline at Haug's request, notifying him it was her final attempt to collect payment before she was required to forward the matter to ISC's attorney.

         Haug confirmed having conversations with Flores but denied saying he would pay for materials ordered after May 2013. He testified that Skyline expected to pay, but only once, for materials used on Vistas. Haug understood that ISC had never been paid but believed Norwegian should pay for the materials.

         ISC brought this action against Norwegian and Skyline to recover $66, 945.55, the sum owed for the materials it supplied for Vistas from June through September 2013. ISC asserted claims for breach of contract, quantum meruit, and unjust enrichment against both Skyline and Norwegian and a prompt pay violation against Skyline. Skyline pleaded an express-contract affirmative defense to ISC's quantum meruit claim as well as a counterclaim against ISC for sanctions under Texas Rule of Civil Procedure 13 and Texas Civil Practice and Remedies Code chapter 10 and attorney's fees under Texas Rule of Civil Procedure 215.4(b). Skyline also asserted a cross-claim against Norwegian for damages resulting from Skyline's supplementation of Norwegian's work to complete the project, and Norwegian asserted a cross-claim against Skyline for an equitable accounting regarding materials provided by ISC from May 1, 2013. Skyline and Norwegian reached a settlement on their cross-claims during trial. Also during trial, ISC nonsuited all of its claims against Norwegian and the Finneys except for the breach of contract claim.

         After hearing the evidence, the jury found that Norwegian failed to comply with its 2012 credit application with ISC, but awarded no damages for the breach. The jury also found in favor of Skyline on ISC's breach of contract and prompt payment claims, but found in favor of ISC on its quantum meruit claim and awarded ISC $66, 945.44 as damages, $62, 000 in attorney's fees, and $30, 000 in contingent appellate attorney's fees.


         In its first issue, Skyline maintains it is entitled to judgment notwithstanding the verdict on ISC's quantum meruit claim because, as Skyline asserted in an affirmative defense, an express contract governed the subject matter of the dispute.[1] Skyline also argues the claim must fail because ISC cannot meet the reasonable notification element of a quantum meruit claim.

         We review a trial court's denial of a motion for judgment notwithstanding the verdict under the legal sufficiency standard. City of Keller v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005). We review questions of law de novo. See In re Humphreys, 880 S.W.2d 402, 404 (Tex. 1994). Evidence is legally insufficient to support a jury finding if (1) the record discloses a complete absence of evidence of a vital fact, (2) rules of law or of evidence bar the court from giving weight to the only evidence offered to prove a vital fact, (3) no more than a mere scintilla of evidence is offered to prove a vital fact, or (4) the evidence conclusively establishes the opposite of a vital fact. Crosstex N. Tex. Pipeline, L.P. v. Gardiner, 505 S.W.3d 580, 613 (Tex. 2016) (citations omitted). We "consider evidence favorable to the finding if a reasonable factfinder could and disregard evidence contrary to the finding unless a reasonable factfinder could not." Id. Jurors are the sole judges of the witnesses' credibility and the weight to be given their testimony. McCullough v. Scarbrough, Medlin & Assocs. Inc., 435 S.W.3d 871, 892 (Tex. App.-Dallas 2014, pet. denied). Legally sufficient evidence supports a jury's finding if there is more than a scintilla of evidence on which a reasonable juror could find the fact to be true. Gardiner, 505 S.W.3d at 613.

         Quantum meruit is an equitable and alternative theory of recovery intended to prevent unjust enrichment. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 740 (Tex. 2005). The law implies a promise to pay for materials furnished or services rendered that are knowingly accepted. Vortt Exploration Co., Inc. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). To recover, a claimant must prove it (1) provided valuable services and/or materials, (2) to the party sought to be charged, (3) which were accepted, used, and enjoyed by that party, (4) under such circumstances as reasonably notified the party that the claimant, in performing, expected to be paid by the party. Id.; Fulgham v. Fischer, 349 S.W.3d 153, 159 (Tex. App.-Dallas 2011, no pet.).

         Generally, a party may recover under quantum meruit only when there is no express contract covering the services or materials furnished.[2] Hill v. Shamoun & Norman, LLP, 544 S.W.3d 724, 737 (Tex. 2018); Kellogg Brown & Root, 166 S.W.3d at 740. The express contract bar applies not only when the plaintiff seeks to recover in quantum meruit from the party with whom it expressly contracted, but also when the plaintiff seeks recovery from a third party foreign to the original contract but who benefitted from its performance. See W&W Oil Co. v. Capps, 784 S.W.2d 536, 537 (Tex. App.-Tyler 1990, no writ) (citing Black Lake Pipe Line Co. v. Union Const. Co., 538 S.W.2d 80 (Tex. 1976), overruled on other grounds by Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1985)). The trial court decides, and we review de novo, the legal question of whether an express contract covers the services or materials at issue. Hill, 544 S.W.3d at 737; Christus Health v. Quality Infusion Care, Inc., 359 S.W.3d 719, 724 (Tex. App.-Houston [1st Dist.] 2011, no pet.); Gulf Liquids New River Project, LLC v. Gulsby Eng'g, Inc., 356 S.W.3d 54, 70 (Tex. App.-Houston [1st Dist.] 2011, no pet.). "When the evidence shows that no contract covers the service at issue, then the question of whether a party may recover in quantum meruit is for the trier of fact." Gulf Liquids, 356 S.W.3d at 70.

         Express ...

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