JAMES CONSTRUCTION GROUP, LLC AND PRIMORIS SERVICES CORPORATION, Appellants/Cross-Appellees
WESTLAKE CHEMICAL CORPORATION, Appellee/Cross-Appellant
Appeal from the 334th District Court Harris County, Texas
Trial Court Cause No. 2014-72717
consists of Chief Justice Frost and Justices Jewell and
Construction Group, LLC ("James"), Primoris
Services Corporation ("Primoris"), and Westlake
Chemical Corporation ("Chemical") appeal a judgment
adjudicating their respective contract claims, which arose
out of a construction agreement between Chemical and James.
Following a jury trial, the trial court signed a judgment
awarding Chemical $1, 157, 019.50 in breach-of-contract
damages against James and Primoris, jointly and severally,
and $2, 923, 600.50 in attorney's fees against Primoris
only. The judgment also awards James $1, 270, 962.89 in
breach-of-contract damages against Chemical on James's
counterclaim. Each party raises multiple issues on appeal.
For the reasons explained below, we modify the judgment and
affirm the judgment as modified.
and James signed a construction contract providing for James
to perform over $500 million in civil and mechanical
construction work at a chloralkali chemical plant owned by
Westlake Vinyls Company, L.P. ("Vinyls"). Although
Chemical signed the contract in its own name, Vinyls
authorized Chemical to sign it on Vinyls's behalf, and
the jury found that Chemical was acting as Vinyls's agent
in entering the contractual relationship. In a separate
agreement (the "Guaranty"), James's parent
company, Primoris, unconditionally guaranteed James's
performance under the construction contract.
various disputes during the project Chemical filed this
lawsuit, and the parties asserted breach-of-contract claims
against each other. We first summarize the general nature of
the claims at issue and then detail additional pertinent
facts in connection with their related issues.
Summary of Chemical's claims
claims against James mainly involve allegations that James
breached contract provisions requiring it to perform work
safely and to compensate Chemical for remedial or termination
costs resulting from unsafe work. Chemical contends that due
to James's safety violations Chemical intervened and
terminated some or all of James's scope of work in
accordance with Chemical's contract rights. Chemical
sought to recover damages allegedly incurred in exercising
those rights and hiring others to complete the job.
claims are grounded on two key contract provisions. First,
paragraph 17.2, entitled "Inspection and
Intervention," provides that Chemical may
"intervene in any appropriate way" if, in its
reasonable opinion, James performs its contractual duties in
an unsafe manner. In that instance, Chemical has the right to
require James to take immediate remedial action to
Chemical's satisfaction. James is solely accountable for
all costs associated with such intervention and remedial
action, whether those costs are incurred by Chemical, James,
or any third party.
section, paragraph 21, applies to "Termination and
Substitute Performance." Specifically, paragraph 21.3
enumerates Chemical's right to terminate the contract for
James's default, including for serious safety violations.
Paragraph 21.3 sets forth the relevant contractual sequence
of events as follows: if Chemical determines in its
reasonable opinion that James has "serious safety
violations," then Chemical may so notify James. Upon
notification, James must begin to remedy the defect cited
within a certain period. If Chemical is not reasonably
satisfied with the pace or quality of the remediation effort,
Chemical must notify James of that fact and may elect to
terminate the contract or a portion of the work by providing
notice to that effect. After providing notice, Chemical has
the right to take unrestricted possession of the work or
portion terminated and pay for its completion. Any extra cost
in excess of the contract price incurred by Chemical in
completing the terminated work is at James's expense.
also asserts a claim under the contract's indemnity
provision, paragraph 19.1. Chemical avers that James's
employee died while performing work under the contract, that
Chemical incurred expenses in defending a wrongful-death
claim asserted by the employee's family, and that James
breached paragraph 19.1 by failing to indemnify Chemical for
its costs resulting from the claim.
trial, Chemical contended its damages resulting from
James's breaches exceeded $8.5 million.
Chemical sued Primoris for breach of the Guaranty, contending
that Primoris was liable for all contract damages owed by
Summary of James's claims
counterclaims also rest in part on paragraph 21.3. James
alleges that Chemical breached paragraph 21.3 by (1)
improperly terminating James's work because
Chemical's grounds for termination were unreasonable, and
(2) failing to provide the notice paragraph 21.3 requires.
also contends that Chemical violated paragraph 26 of the
contract, which is entitled "Waiver of Consequential
Damages" and states among other things that neither
party shall be liable to the other for any
"consequential, incidental, indirect or punitive damages
of any kind or character," and "no claim shall be
made" by either party against the other for such damages
regardless of the legal theory supporting the claim.
According to James, all of Chemical's asserted contract
damages are consequential in nature and barred by paragraph
Summary of the jury findings and judgment
a multi-week trial, a jury made the following relevant
1. Chemical entered into the construction contract in its own
name but with authority to act on behalf and for the benefit
of Vinyls. The jury also found that James was estopped from
denying that Chemical entered into the construction contract
with Vinyls's authority and on Vinyls's behalf.
2. James failed to comply with paragraph 17.2, the
"intervention" provision. The jury awarded Chemical
$1, 054, 251.81 as a result of this breach.
3. James failed to comply with paragraph 21.3, the
"termination" provision; and Chemical substantially
complied with that paragraph's notice provisions. The
jury awarded Chemical $1, 054, 251.81 as a result of this
breach. Due to the jury's findings in
Chemical's favor, it did not answer a series of questions
on James's counterclaims under paragraph 21.3.
4. James failed to comply with paragraph 19.1, the
"indemnity" provision. The jury awarded Chemical
$102, 767.69 as a result of this breach.
5. Chemical incurred $2, 923, 600.50 in reasonable and
necessary attorney's fees through trial and would incur
up to an additional $450, 000 in attorney's fees in the
event of appeal.
6. Chemical failed to comply with paragraph 26, the waiver of
consequential damages provision. The damages awarded for this
breach were divided into two categories. The jury awarded
James $238, 778.26 for attorney's fees incurred in
defending against "chlorine costs" asserted by
Chemical. Additionally, the jury awarded James a
total of $1, 032, 184.63 for attorney's fees incurred
through trial (plus $62, 500 in appellate fees) in defending
against "consequential damages other than chlorine
costs" asserted by Chemical.
several post-verdict motions, the trial court signed an
amended judgment incorporating the above findings. The
judgment grants recovery to Chemical against James and
Primoris, jointly and severally, for contract damages of $1,
157, 019.50, plus interest and taxable court costs. The
judgment grants recovery to Chemical for its attorney's
fees of $2, 923, 600.50 against Primoris only, based on the
Guaranty, plus conditional appellate attorney's
fees. The judgment grants recovery to James
against Chemical for contract damages of $1, 270, 962.89,
plus conditional attorney's fees on appeal. All parties
and Primoris present seven issues for review. Because many of
their arguments overlap, we refer to James and Primoris
collectively as "appellants" when discussing their
joint contentions. In their first three issues, appellants
argue that the trial court erred in rendering judgment for
Chemical on Chemical's claims under the contract's
termination (paragraph 21.3), intervention (paragraph 17.2),
and indemnification (paragraph 19.1) provisions. In issues
four and five, Primoris challenges the trial court's
award of attorney's fees to Chemical. James urges in
issue six that the trial court erred in refusing to award it
prejudgment interest on its counterclaim for breach of
paragraph 26. Finally, in issue seven James complains that
the trial court erred in rendering a take-nothing judgment in
Chemical's favor on James's counterclaim under
challenges the judgment in two cross-issues. First, Chemical
contends the trial court erred in rendering judgment for
James on James's counterclaim for breach of paragraph 26.
Second, Chemical argues that the trial court erred in holding
only Primoris liable for Chemical's attorney's fees,
when James should be liable for the fees as well.
begin with appellants' complaints.
Termination - Paragraph 21.3
issue one, appellants challenge the judgment against them on
Chemical's claim for breach of the contract's
termination provision. Appellants contend that: (1) no
evidence supports the jury's liability finding; (2)
Chemical failed to comply with all conditions precedent to
its right to terminate the contract for default and recover
damages because it did not strictly comply with paragraph
21.3's notice provisions, and alternatively the
jury's substantial compliance findings regarding notice
are unsupported by evidence or pleading; and (3) the
jury's damage awards are either unsupported by evidence
or barred by paragraph 26.
Standards of review
reviewing the legal sufficiency of the evidence, we view the
evidence in the light most favorable to the judgment and
indulge every reasonable inference that would support it.
City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.
2005). We credit favorable evidence if a reasonable fact
finder could and disregard contrary evidence unless a
reasonable fact finder could not. Id. at 807, 827;
Vast Constr., 526 S.W.3d at 719. If there exists
more than a scintilla of evidence to support the judgment, we
must uphold it. Coffman v. Melton, 448 S.W.3d 68, 71
(Tex. App.- Houston [14th Dist.] 2014, pet. denied). More
than a scintilla of evidence exists when the evidence
supporting the finding rises to a level that would enable
reasonable and fair-minded people to differ in their
sustain a legal sufficiency or "no evidence"
challenge only when: (1) the record discloses a complete
absence of evidence of a vital fact; (2) the court is barred
by rules of law or of evidence from giving weight to the only
evidence offered to prove a vital fact; (3) the evidence
offered to prove a vital fact is no more than a mere
scintilla; or (4) the evidence establishes conclusively the
opposite of the vital fact. Regal Fin. Co. v. Tex Star
Motors, Inc., 355 S.W.3d 595, 603 (Tex. 2010) (citing
Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706,
711 (Tex. 1997)). We apply this standard mindful that the
jury is the sole judge of the credibility of the witnesses
and the weight to be given to their testimony. See City
of Keller, 168 S.W.3d at 819, 822.
construe contracts as a matter of law, absent ambiguity.
Moayedi v. Interstate 35/Chisam Rd., L.P., 438
S.W.3d 1, 7 (Tex. 2014). Our primary concern is to ascertain
and give effect to the parties' true intentions as
expressed in the agreement. El Paso Field Servs., L.P. v.
MasTec N. Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012). We
consider the entire writing and attempt to harmonize and give
effect to all the provisions of the contract by analyzing
them mindful of the whole agreement. See Frost Nat'l
Bank v. L & F Distribs., Ltd., 165 S.W.3d 310,
311-12 (Tex. 2005) (per curiam). "No single provision
taken alone will be given controlling effect; rather, all the
provisions must be considered with reference to the whole
instrument." J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223, 229 (Tex. 2003).
Legal sufficiency challenge to the liability finding
first part of their first issue, appellants challenge the
legal sufficiency of the evidence to support the jury's
liability finding in response to question 3D, which asked
whether James breached paragraph 21.3. As relevant, paragraph
21 TERMINATION AND SUBSTITUTE PERFORMANCE
21.3 Right of Company to Terminate for Contractor
Default. If [Chemical] discovers or determines, in its
reasonable opinion that:
21.3.2 [James] has serious safety violations; . . .
then [Chemical] may so notify [James]. Upon receipt of any
such notice, [James] shall begin to remedy the breach or
defect cited within seventy-two (72) hours. If at any time,
[Chemical] is not reasonably satisfied with the pace and the
quality of the remediation effort, [Chemical] will so notify
[James] and [Chemical] may thereafter, at its sole
discretion, elect to either terminate this Contract or a
portion of the Work by providing notice to that effect. After
providing such notice, [Chemical] shall have the unrestricted
right to take possession of the Work or the portion thereof
terminated and to purchase and/or hire materials, tools,
supervision, labor, and equipment for the completion of the
Work or of the unremedied condition, as [Chemical] elects.
Any extra costs in excess of the Contract Price incurred by
[Chemical] in this regard shall be at the expense of [James].
This right is in addition to any other remedies [Chemical]
may have hereunder.
question 3D, the jury was asked:
Did James fail to comply with Section 21.3 of the
You are instructed that James failed to comply with Section
21.3 of the Construction Contract if all of the following
• Westlake Chemical discovered or determined in its
reasonable opinion that James had serious safety violations,
• Westlake Chemical was not reasonably satisfied with
the pace and the quality of the remediation effort; and
• Westlake Chemical terminated the Construction Contract
or a portion of the Work, and took possession of the Work or
the portion thereof terminated and purchased and/or hired
materials, tools, supervision, labor, and equipment for the
completion of the Work; and
• James has not paid Westlake Chemical for some or all
of the extra costs in excess of the Contract Price incurred
by Westlake Chemical in regards to taking possession of the
Work or the portion thereof terminated and purchasing and/or
hiring materials, tools, supervision, labor, and equipment
for the completion of the Work.
jury found that James failed to comply with paragraph 21.3.
In response to the next question, question 3E, the jury
awarded Chemical $1, 054, 251.81 as fair and reasonable
compensation for James's failure to comply. The damages
were divided into two categories: (1) $211, 836.81 in
"safety training costs," and (2) $842, 415 in
"increased foreman costs."
recover on a breach-of-contract claim, a party must prove:
(1) the existence of a valid contract, (2) the party
performed, tendered performance, or was excused from doing
so, (3) the other party breached the contract, and (4)
damages resulting from the breach. See Vast Constr.,
526 S.W.3d at 718 n.6; Aguiar v. Segal, 167 S.W.3d
443, 450 (Tex. App.-Houston [14th Dist] 2005, pet. denied).
essence of appellants' point is that there is no evidence
that Chemical incurred any termination costs. Emphasizing the
charge instruction that an affirmative answer to question 3D
must be predicated on proof that the extra costs were
"incurred by Westlake Chemical," appellants say the
jury finding is not supported by legally sufficient evidence
because all the costs awarded were incurred by
Vinyls, not Chemical. In response, Chemical argues
that it is legally entitled to recover damages incurred by
Vinyls because Chemical is Vinyls's agent with respect to
the construction contract, as the jury found.
are correct that Vinyls incurred the termination costs
underlying the jury's award. Andrew Kenner, who served as
vice-president of manufacturing for both Chemical and Vinyls,
testified that Vinyls controlled the construction project on
its property and "paid the bills." Of the damages
sought, Kenner stated that the only portion paid by Chemical
was the cost related to the indemnification claim based on
the death of James's employee. He said all other damage
elements were based on costs paid by Vinyls. Further, it is
undisputed that Turner Industries, which replaced James as
the mechanical contractor on the project, operated under a
contract with Vinyls, not Chemical. Bryan Byrd,
Chemical's damage expert, stated that the payments to all
major contractors, including Turner, came from Vinyls, even
though other documents referenced Chemical. Byrd did not
distinguish between Vinyls and Chemical for purposes of his
review and considered both entities simply as
also true that Vinyls and Chemical are distinct corporate
entities and they are correctly treated as such in the jury
charge. But we ultimately conclude nonetheless
that question 3D's reference only to Chemical and not
Vinyls does not permit us to sustain appellants' legal
sufficiency challenge under the present circumstances. We
reach this conclusion for several reasons.
appellants do not challenge the agency findings on appeal, so
the relationship between Vinyls as principal and Chemical as
agent is established conclusively, and we are bound by those
findings. See, e.g., IKB Indus. v. Pro-Line
Corp., 938 S.W.2d 440, 445 (Tex. 1997) (appellate courts
are bound by unchallenged jury findings); Carbona v. CH
Med., Inc., 266 S.W.3d 675, 687 (Tex. App.-Dallas 2008,
no pet.); OXY USA, Inc. v. Cook, 127 S.W.3d 16, 21
(Tex. App.-Tyler 2003, pet. denied). We measure the
sufficiency of the evidence by the charge as given. See
Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271
S.W.3d 238, 254 (Tex. 2008); TecLogistics, Inc. v.
Dresser-Rand Grp., Inc., 527 S.W.3d 589, 595 (Tex.
App.-Houston [14th Dist.] 2017, no pet.). In doing so, we
consider unchallenged and binding jury findings in one part
of the charge to the extent they are relevant when we review
the evidentiary sufficiency of other findings. See
Venture v. UTSW DVA Healthcare, LLP, 559 S.W.3d 155, 160
(Tex. App.-Dallas 2015) (noting unchallenged findings on
prior material breach were binding and defeated
appellant's challenges to other findings), aff'd
in part, rev'd in part on other grounds, 578 S.W.3d
469 (Tex. 2019); see also Eagle Oil & Gas Co. v.
TRO-X, L.P., 416 S.W.3d 137, 148-49 (Tex. App.-Eastland
2013, pet. denied) (reviewing legal sufficiency challenge,
court examined instructions from charge as a whole, not only
instructions in the question at issue; charge as a whole was
pertinent to issue). We thus consider the jury's agency
findings and their legal consequences in our no-evidence
review of question 3D, and appellants do not contend that we
should do otherwise.
agent, Chemical is Vinyls's fiduciary. Johnson v.
Brewer & Pritchard, P.C., 73 S.W.3d 193, 200 (Tex.
2002) (agency is special relationship that gives rise to a
fiduciary duty); see Robles v. Consol. Graphics,
Inc., 965 S.W.2d 552, 558 n.4 (Tex. App.-Houston [14th
Dist.] 1997, pet. denied); Rauscher Pierce Refsnes, Inc.
v. Great Sw. Sav., F.A., 923 S.W.2d 112, 115-16 (Tex.
App.-Houston [14th Dist.] 1996, no writ); West v.
Touchstone, 620 S.W.2d 687, 690 (Tex. App.-Dallas 1981,
writ ref'd n.r.e.) ("the relationship between an
agent and principal is a fiduciary one"); Restatement
(Third) of Agency § 1.01 (2006). Once the
principal-agent relationship is established, the agent's
acts are the principal's acts for the limited purpose and
scope of the agency relationship authorized by the principal.
What a principal does through an agent it does itself.
Shaw v. Kennedy, Ltd., 879 S.W.2d 240, 245 (Tex.
App.-Amarillo 1994, no writ). Thus, agent and principal
generally are considered one and the same with respect to
acts within the relationship's scope. See Holloway v.
Skinner, 898 S.W.2d 793, 795 (Tex. 1995) (stating that
agent cannot tortiously interfere with principal's
contract because agent and principal are "one and the
jury found, Chemical signed the construction contract on
behalf and for the benefit of Vinyls. Historically in Texas,
agents cannot sue on contracts entered into on their
principal's behalf. See Tinsley v. Dowell, 26
S.W. 946, 948 (Tex. 1894). But the Supreme Court of Texas has
long recognized four exceptions to this rule: (1) when the
agent contracts in his own name; (2) when the principal is
undisclosed; (3) when the agent is authorized to act as owner
of the property; and (4) when the agent has an interest in
the contract's subject matter. Id. The first
exception applies here because Chemical undisputedly signed
the construction contract in its own name. An agent may sue
in his own name when the agent contracts in his own name.
See Perry v. Breland, 16 S.W.3d 182, 187 (Tex. App.-
Eastland 2000, pet. denied). In Texas, a contracting
agent's right to enforce a contract on the
principal's behalf has arisen in the context of standing
challenges, and in response to arguments that the
principal is an indispensable party. In each
circumstance, courts have held that an agent who is a
contracting party may sue in the agent's own name on the
principal's behalf. Thus, when, as here, the agent is a
party to a contract for a disclosed principal, the agent may
sue on the contract in the agent's name, the
principal's name, or both. See Restatement
(Third) of Agency § 6.01 cmt. e (2005). Chemical, the
named plaintiff, pleaded that it brought suit as agent of
Vinyls and on Vinyls's behalf.
the point, an agent's right to enforce the contract by
legal action on the principal's behalf includes the right
to recover damages suffered by the principal alone.
See Restatement (Second) of Agency § 364 cmt. k
("If the agent brings an action in his own name but on
account of the principal, he sues as a fiduciary and hence he
recovers the full measure of damages although he is
personally caused no pecuniary loss by the failure of the
third person to perform."); see also Brooks v.
Hollaar, 297 P.3d 125, 129 (Alaska 2013) (agent may sue
on contract in own name to recover principal's damages)
(citing Restatement (Second) of Agency § 364 cmt.
k). In a non-precedential opinion,
Texas Utilities Fuel Co. v. Marathon Oil Co., No.
11-98-00079-CV, 2000 WL 34234653 (Tex. App.-Eastland Mar. 9,
2000, no pet.) (not designated for publication),
 Texas Utilities Fuel Company
("TUFCO") contracted to purchase gas from the
defendant Marathon, but the gas was to benefit and be used by
TUFCO's sister company, Texas Utilities Electric Company
("TU Electric"). TUFCO sued on the contract,
claiming Marathon breached. The trial court granted summary
judgment for Marathon on the ground that TUFCO suffered no
damages because TUFCO was reimbursed by TU Electric for its
costs in supplying gas to TU Electric. Id. at *9.
Marathon argued that TU Electric was never mentioned in the
pleadings, and that "the pleadings seek only damages
claimed to have been suffered directly by TUFCO, not TU
Electric." Id. The court of appeals reversed
the summary judgment. The court noted that although TUFCO
sued in its own name, the record showed it was acting as the
agent of TU Electric. Id. "At the very
least," the court said, "this summary judgment
evidence creates a fact issue as to whether TUFCO purchased
gas under the contract as TU Electric's agent."
Id. The court held that if TUFCO purchased the gas
as an agent for TU Electric, TUFCO could still bring the
lawsuit because "an agent who is a party promisee on a
contract made by him on behalf of his principal may bring
suit on that contract in his own name." Id.
(citing Lubbock Feed Lots, Inc. v. Iowa Beef Processors,
Inc., 630 F.2d 250, 258 (5th Cir. 1980)). We conclude
that Chemical may sue on Vinyls's behalf to recover
contract damages even though Vinyls alone incurred them.
neither present contrary authority nor dispute the legal
effect of the jury's agency findings. They characterize
the agency findings as irrelevant, but we disagree.
Chemical's status as Vinyls's agent, coupled with
Chemical's signing of the construction contract in its
own name, means that Chemical is a party to the contract;
that Vinyls is a party to the contract; that Chemical is
entitled to sue on the contract in Vinyls's name, in
Chemical's name, or both; and that Chemical may recover
in its own name Vinyls's damages. We have not
located and the parties have not cited a case involving this
issue that proceeded to jury verdict, so we have no guide
against which to compare the present charge instructions when
an agent sues to recover damages incurred only by the
principal. But no party claims the instruction accompanying
question 3D is defective in wording, and it contains language
consistent with the effect of the jury's agency findings
in questions 1A and 1B. Based on those findings, Vinyls and
Chemical are considered one and the same at least for the
purpose of enforcing the contract rights at issue. See
Holloway, 898 S.W.2d at 795. If Chemical can sue in
its own name to recover Vinyls's damages, then it is
entitled to a jury question in its own name to secure a
judgment in its own name. Otherwise, there would be little
point to recognizing a contracting agent's right to sue
in its own name to recover the principal's contract
damages. Chemical recovers as Vinyls's
fiduciary or trustee,  and thus the
recovery is rightfully Vinyls's-a result not materially
different than if question 3D had referred to costs
"incurred by Westlake Vinyls" instead of
"incurred by Westlake Chemical."
these reasons, we overrule appellants' legal-sufficiency
challenge to the jury's finding in response to question
Challenge to findings that Chemical substantially
complied with notice conditions
next part of their first issue, appellants contend that
Chemical may not recover under paragraph 21.3 because it
failed to strictly comply with that paragraph's notice
provisions, which they claim are conditions precedent to
recovery for breach. Alternatively, appellants argue that to
the extent Chemical may satisfy paragraph 21.3's notice
requirements by substantial compliance, the evidence is
legally insufficient to support the jury's findings that
Chemical substantially complied.
Strict compliance versus substantial compliance
questions 3A, 3B, and 3C, the jury found that Chemical
substantially complied with each of the three notice
provisions referenced in paragraph 21.3.The jury
instruction regarding substantial compliance was the same in
each question, though tailored to the substance of each
Answer "Yes" or "No" as to each of the
following grounds on which you may find that Westlake
Chemical provided notice regarding this notice provision of
Section 21.3 of the Construction Contract:
Westlake Chemical notified James in "substantial
compliance" with this notice provision?
You are instructed that Westlake Chemical notified James in
"substantial compliance" with this notice provision
if all of the following circumstances occurred:
• James received actual notice from Westlake Chemical
[Question 3A] Westlake Chemical had discovered or determined,
in its reasonable opinion, that James had serious safety
[Question 3B] Westlake Chemical was not reasonably satisfied
with the pace and the quality of the remediation effort
[Question 3C] Westlake Chemical had elected in its sole
discretion to terminate the Construction Contract or a
portion of the Work, and
• the form of actual notice to James did not severely
impair the purpose of this notice provision and caused no
harm to James.
Answer "Yes" or "No."
contend that Texas law mandates strict compliance with notice
provisions in construction contracts. This contract requires
notices to be written. Because no notices were
communicated in writing, appellants argue that Chemical did
not strictly comply with the notice conditions, and
consequently appellants cannot be liable for breach.
Appellants do not contend that Chemical failed to strictly
comply in any other respect. According to appellants, the
jury's substantial compliance findings are therefore
immaterial. Appellants cite this court's decisions in
Arbor Windsor Court, Ltd. v. Weekley Homes, LP, 463
S.W.3d 131, 136-41 (Tex. App.-Houston [14th Dist.] 2015, pet.
denied); Cajun Constructors, Inc. v. Velasco Drainage
District, 380 S.W.3d 819, 825-26 (Tex. App.-Houston
[14th Dist.] 2012, pet. denied); and Emerald Forest
Utility District v. Simonsen Construction Co., 679
S.W.2d 51, 54 (Tex. App.-Houston [14th Dist.] 1984, writ
ref'd n.r.e.). Appellants also cite Ogden v.
Gibraltar Savings Association, 640 S.W.2d 232, 233-34
(Tex. 1982), and Shumway v. Horizon Credit Corp.,
801 S.W.2d 890, 893 (Tex. 1991), in support of the
proposition that Texas courts consistently require strict
compliance with written-notice requirements attendant to
contractual forfeiture and termination provisions.
turn, Chemical insists that Texas law recognizes the doctrine
of substantial compliance with respect to contractual notice
provisions. Chemical cites three Dallas Court of Appeals
opinions-Burlington Northern Railroad Co. v. General
Projection Systems, Inc., No. 05-97-00425-CV, 2000 WL
1100874, at *5 (Tex. App.-Dallas Aug. 8, 2000, pet. denied)
(not designated for publication); Texas Utilities
Electric Co. v. Aetna Casualty & Surety Co., 786
S.W.2d 792, 793-94 (Tex. App.-Dallas 1990, writ denied);
Barbier v. Barry, 345 S.W.2d 557, 562 (Tex.
App.-Dallas 1961, no writ)-and the Fifth Circuit's
decision in South Texas Electric Co-op. v. Dresser-Rand
Co., 575 F.3d 504, 507 (5th Cir. 2009).
parties agree that paragraph 21.3's notice provisions are
conditions, not covenants. Paragraph 21.3 imposes
two potential duties on James but only if certain events
occur. The first duty is to begin remedying safety
violations. If Chemical desired to trigger James's
remediation duty, the triggering conditions are that Chemical
must have first discovered or determined in its reasonable
opinion that James has serious safety violations, and it must
have so notified James. James is then required to begin
remediation of the defects cited within seventy-two hours
after receiving Chemical's notice. The second potential
duty is to pay for post-termination costs above the contract
price. That duty is triggered if: (1) Chemical is not
reasonably satisfied with the pace and quality of the
remediation; (2) Chemical notifies James of its
dissatisfaction; and (3) Chemical notifies James that it
elects to terminate the contract or a portion of the work.
The question we must decide is whether James's duties to
begin remediation and then pay for post-termination costs
above the contract price are invoked if Chemical did not
strictly comply with the conditions by providing notices in
writing, as paragraph 9.1 requires, but instead substantially
complied because James received non-written notice, the form
of which did not severely impair the provision's purpose
and caused James no harm.
Supreme Court of Texas has considered whether a failure to
comply with certain notice conditions precedent excuses the
other party's performance or precludes liability for
failure to perform. Most recently, the issue has arisen in
the insurance context. E.g., Prodigy
Commc'ns Corp. v. Agric. Excess & Surplus Ins.
Co., 288 S.W.3d 374 (Tex. 2009); PAJ, Inc. v.
Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008). In
PAJ, the court considered the effect on commercial
general liability coverage when an insured fails to timely
notify the insurer of a claim but the insurer suffers no
harm. PAJ, 243 S.W.3d at 632. The court held that a
failure to comply with a timely-notice provision does not
excuse the insurer's performance if the insurer is not
prejudiced by the delay. Id. at 636-37. The ruling
rested in large part on fundamental contract law that
material breaches excuse the other party's performance,
but immaterial breaches do not. Id. at 633. In that
case, the parties disputed whether the notice provisions were
conditions precedent or covenants, but the court applied
basic contract law of immateriality regardless of the
character of the provision. Id. at 636-37.
Additionally, the court noted that the timely-notice
provisions were not essential to the overall bargain, and
that excusing performance altogether for de minimus
deviations from notice requirements would be
"draconian." Id. at 636.
Prodigy, the court considered whether
PAJ's holding would apply to a claims-made (as
distinguished from an occurrence-based) insurance policy
containing an "as soon as practicable"
timely-notice provision. Prodigy, 288 S.W.3d at 375.
There the policy required that the insured give notice of a
claim "as soon as practicable . . ., but in no event
later than ninety (90) days after the expiration of the
Policy Period or Discovery Period." Id. at 378.
The contract clearly described the notice provision and
reporting period provision as conditions precedent.
Id. The parties disputed whether notice of the claim
was given "as soon as practicable," but the insurer
admitted it suffered no prejudice. The court held that
PAJ's "notice-prejudice" rule also
applied to the "as soon as practicable" notice
provision in the claims-made policy at issue in
Prodigy. Id. at 382. The principal reason
for the court's holding was because the "as soon as
practicable" notice clause was not essential to the
bargain in that case. Id. Thus, the insured's
failure to comply with the timely-notice condition did not
excuse the insurer's performance. Id.
another insurance dispute pre-dating PAJ and
Prodigy, the supreme court addressed an
insured's failure to comply with proof-of-loss conditions
precedent in a policy providing disability benefits. See
Am. Teachers Life Ins. Co. v. Brugette, 728 S.W.2d 763
(Tex. 1987). There the insured raised theories that he
substantially complied with the conditions, or the insurer
waived them. Id. at 764. The court held that it was
the insured's burden to secure jury findings on
substantial compliance, absent conclusive evidence in his
favor, and because he failed to do so he was not entitled to
prevail. Id. Brugette recognizes that an
insured may satisfy a proof-of-loss condition precedent by
establishing he substantially complied with the condition.
these informative examples, we learn, in the insurance
context at least, that a party will not lose the benefit of
its bargain for immaterial or non-prejudicial non-compliance
with timely-notice provisions, see PAJ, 243 S.W.3d
at 636-37, including when those notice provisions are
conditions precedent. See Prodigy, 288 S.W.3d at
382. Under Prodigy's reasoning, when a
triggering condition is not essential to the overall bargain,
a party's failure to fully satisfy that condition does
not necessarily excuse the other's party's obligation
that would be triggered by the condition's occurrence.
See id. This reasoning is consistent with other
statements of a similar principle grounded in the
Restatement: the non-performance of a condition precedent is
excused if the condition's requirement "(a) will
involve extreme forfeiture or penalty, and (b) its existence
or occurrence forms no essential part of the exchange for the
promisor's performance." Lesikar Constr. Co. v.
Acoustex, Inc., 509 S.W.2d 877, 881 (Tex. App.-Fort
Worth 1974, writ ref'd n.r.e.) (citing Restatement
(First) of Contracts § 302). Brugette clearly
acknowledges an insured's right to recover on an
insurance policy if the insured substantially complies with a
proof-of-loss condition precedent.
supreme court also has considered the issue in the
construction context, though not recently. Over a century
ago, the high court upheld a contractor's recovery for
breach of contract despite the contractor's failure to
strictly comply with a contract condition requiring it to
produce an architect's certification that work performed
complied with specifications. See Linch v. Paris Lumber
& Grain Elev. Co., 80 Tex. 23, 15 S.W. 208 (1891).
In Linch, the contractor allegedly completed the
first stage of construction but the owner refused full
payment, contending that the work and materials did not
strictly comply with the contract. The contractor sued for
breach though it had not complied with the condition that it
first secure an architect's certification. The jury
found for the contractor and the trial court rendered
judgment in its favor. Id. The owner complained on
appeal about jury-charge instructions that permitted recovery
upon substantial compliance with the contract's terms. In
particular, the owner argued that the contractor was not
entitled to recover because the certificate condition had not
been satisfied. Id. at 213. The court rejected the
argument and concluded that less than strict compliance with
the certificate condition did not defeat the contractor's
right of recovery. Id. Not long after
Linch, the supreme court stated in Perkins v.
Locke, 88 Tex. 66, 29 S.W. 1048 (1895), that substantial
compliance with a contract's certificate provision would
suffice, though in Perkins the certificate did not
substantially comply with the contract. Id. at 1050.
cite the supreme court's decisions in Ogden and
Shumway as supporting their contention that parties
must strictly comply with written notice requirements
attendant to contractual termination provisions. But
Ogden and Shumway discussed and applied
equity and Uniform Commercial Code (UCC) rules uniquely
applicable to acceleration and notice-of-acceleration
provisions in promissory notes. Shumway, 801 S.W.2d
at 893-94; Ogden, 640 S.W.2d at 234-35. In
Ogden, the court held that the note holder's
letter "gave no clear and unequivocal notice" that
it would exercise its option to accelerate the note.
Ogden, 640 S.W.2d at 234. Thus, the notice of
acceleration was insufficient and the maker could recover for
wrongful foreclosure. Later, in Shumway, the court
held that promissory note makers can waive presentment,
notice of intent to accelerate, and notice of acceleration,
which, to be effective, also must be expressed in clear and
unequivocal language. Shumway, 801 S.W.2d at 893.
But the court later clarified Ogden in Jasper
Federal Savings & Loan Association v. Reddell, 730
S.W.2d 672 (Tex. 1987), in which the court held, in a
deed-of-trust dispute, that actual knowledge of the right to
reinstate after acceleration was sufficient despite a notice
provision in the deed. Id. at 675. In distinguishing
Ogden, the court in Jasper observed that
the bank never contended that Ogden had actual knowledge of
its intent to accelerate. Id. Jasper also
relied on the court's decision in University Savings
Association v. Springwoods Shopping Center, 644 S.W.2d
705 (Tex. 1982), upholding a foreclosure sale in which there
had been no compliance with provisions relating to the
recording of the appointment of the substitute trustee before
sale. See Jasper, 730 S.W.2d at 675. The court held
the borrower's actions for wrongful foreclosure were
barred by his actual notice of the substitution and identity
of the substitute trustee, and the time and place of the
sale, when no prejudice resulted from the failure to comply
with the recordation provision in the deed of trust.
Id. (citing Univ. Savings, 644 S.W.2d at
addition to the above authority, several Texas intermediate
appellate courts have held, stated, or assumed that the
substantial compliance doctrine applies to contract
conditions precedent, including those containing notice
provisions. In a notably comparable context, the Eastland
Court of Appeals applied the substantial compliance doctrine
to cancellation notice provisions in a construction contract
and held that the terminating party substantially complied
with the notice provision even though the notice was
untimely. S. Mortg. Co. v. McGregor, 279 S.W. 860,
861 (Tex. App.-Eastland 1926), aff'd, 286 S.W.
1086 (Tex. Comm'n App. 1926, judgm't adopted).
Additionally and outside the construction context, the Dallas
Court of Appeals has applied the substantial compliance
doctrine to cancellation notice provisions in a contract to
install audiovisual equipment,  a licensing agreement,
 a contract to supply electrical
power to a commercial business,  and an employment
contract. Our court and the San Antonio Court
of Appeals have explicitly or implicitly applied the
substantial compliance doctrine to notice provisions in lease
agreements and in other contexts.
cite Texas intermediate appellate court decisions that are
less clear, relying heavily on this court's opinion in
Emerald Forest. 679 S.W.2d at 51. There, Emerald
Forest Utility District sued an engineer and construction
company after an underground sewer system built by the
construction company failed. Id. The jury found that
the line failed because the engineer's design was
insufficient to deal with underground wet sand conditions
discovered during construction. Id. at 52. The jury
also found that the utility district failed to provide
sufficient plans to the construction company. Id. We
reversed and held that the construction company was liable
for breach of its promise to deliver a working sewer system
because the company was in a position to discover the
insufficient soil conditions before it executed the contract,
and it agreed to investigate and apply its independent
judgment concerning worksite conditions. Id. at 53.
The company argued that it could not be liable on that ground
because it notified the engineer and utility district of the
wet sand conditions and requested a substitute design.
Id. at 54. This court said that the construction
company could not avoid contract liability because the record
did not show that the company gave written notice of the
subsurface conditions varying from the original
specifications, as the contract required.
Id. As we stated, "[w]hen a contract provides
for a particular form of notice, compliance with such
provisions is a condition precedent to invoking the contract
rights which are conditioned on the notice."
Id. (citing Handelman v. Handelman, 608
S.W.2d 298 (Tex. App.-Houston [14th Dist.] 1980, writ
ref'd n.r.e.)). We did not, however, discuss or mention
the doctrine of substantial compliance as applied to the
contract conditions, and it does not appear the construction
company raised the issue. We will not construe Emerald
Forest as holding that substantial compliance never
applies to notice conditions precedent when it is not clear
that the issue was raised, considered, and expressly rejected
by our court in that case.
disagree with appellants that our decisions in Arbor
Windsor and Cajun Constructors compel us to
deny Chemical's recovery absent strict compliance with
the contract's notice provisions. In Arbor
Windsor, we stated that Arbor Windsor had the burden to
prove that it was excused from sending a notice of default to
Weekley as a condition precedent to its right to invoke
contractual remedies for default, and also had the burden to
obtain a jury finding of excuse. Arbor Windsor, 463
S.W.3d at 142. Arbor Windsor neither obtained a jury finding
that it was excused nor argued that it conclusively
established it was excused from sending notice of default.
Id. Here, in contrast, Chemical secured findings
that it substantially complied with the notice provision.
Indeed, by observing that Arbor Windsor could have proven it
was excused from complying with the notice provision there at
issue, our court necessarily recognized that a failure to
strictly comply with the notice condition precedent would not
always foreclose recovery, just that Arbor Windsor had not
made the necessary showing in that case. In Cajun
Constructors, we affirmed a summary judgment against a
party seeking recovery for breach of contract because the
plaintiff did not present evidence that it complied with the
contract's notice requirements, which we held to be
conditions precedent to bringing suit. Cajun
Constructors, 380 S.W.3d at 825-26. As in Emerald
Forest, however, the parties in Cajun
Constructors did not raise the issue of substantial
compliance and the court did not discuss it.
not bound by the Fifth Circuit's interpretation of state
law, but we note that court has characterized as
"well-established Texas law" the
"applicability of the doctrine of substantial compliance
to contractual notice provisions." S. Tex. Elec.
Co-op., 575 F.3d at 507 (citing Barbier, 345
S.W.2d at 562, and Tex. Utilities Elec. Co., 786
S.W.2d at 794). No Texas state case is more factually on
point than South Texas. In that case, which involved
manufacture of a turbine, Dresser, like James, was required
to correct defects after receiving written notice.
Id. at 506. Despite many problems, and Dresser's
awareness of them, Dresser did little to remedy the issues.
South Texas employed others to perform repairs without
providing Dresser written notice. Id. South Texas
sued for its repair costs; the jury found Dresser was liable
for breach, and that South Texas substantially complied with
the notice provision. Id. On appeal, Dresser, again
like James, argued that the court erred in submitting the
substantial compliance issue to the jury because Texas law
required strict compliance with the notice provision.
Id. at 507. The Fifth Circuit disagreed and reasoned
that the notice provision's purpose was served by
Dresser's actual knowledge of the problems and was not
impaired by South Texas's failure to strictly comply.
See id. at 508-09.
light of the above authority, we reject appellants'
argument that Texas law categorically requires strict
compliance with written notice conditions precedent in
construction contracts. We hold that Chemical's failure
to strictly comply with the written notice provisions
required by paragraphs 9.1 and 21.3 does not compel reversal,
and that Chemical's substantial compliance suffices to
support recovery if the evidence shows that James received
actual notice, and that the form of the notice did not
severely impair the notice provision's purpose and caused
James no harm. We turn to whether the evidence in fact
supports these findings.
Legal sufficiency challenge to the jury's substantial
contend that no legally sufficient evidence supports the
jury's substantial compliance findings in questions 3A,
3B, and 3C, and that those findings lack support because
Chemical's notices of default and termination were not
clear and unequivocal. As to questions 3A and 3B, appellants
argue more particularly that Chemical's communications
were insufficiently specific to constitute actual notice of
any of the mentioned events. Appellants say there was no
specific mention of any safety violations or that Chemical
was unsatisfied with the pace or quality of James's
remedial efforts. Also, James could not determine from the
communications when the seventy-two-hour period to institute
remedial measures began after the first notice. Regarding
question 3C, appellants argue that an April 2013 meeting
about James's deficient safety performance was vague, and
that Chemical never actually informed James that it was being
"terminated" for "default."
issue requires us to examine whether the evidence supports
the jury's findings. As stated, we view the evidence in
the light most favorable to the judgment and indulge every
reasonable inference that would support it. City of
Keller, 168 S.W.3d at 822. We credit favorable evidence
if a reasonable fact finder could and disregard contrary
evidence unless a reasonable fact finder could not.
Id. at 807, 827. If more than a scintilla of
evidence supports the judgment, we must uphold it.
Coffman, 448 S.W.3d at 71. More than a scintilla of
evidence exists when the evidence supporting the finding
rises to a level that would enable reasonable and fair-minded
people to differ in their conclusions. Id.
question 3A, the jury found that Chemical provided notice to
James that Chemical had discovered or determined, in its
reasonable opinion, that James had serious safety violations,
in that: (1) James received actual notice of that fact from
Chemical; and (2) the form of actual notice did not severely
impair the notice provision's purpose and caused James no
was responsible for performing its work safely. However,
during the project, James incurred multiple OSHA-recordable
safety incidents, as well as numerous documented "near
miss" incidents. For example, on September 25, 2012, one
of James's workers broke his leg while on the jobsite. A
root cause of this incident involved lack of communication
between an operator and a flagger. Several other near-miss
incidents occurred that also could be attributed to
James's failure to have appropriate flagging or spotting
months after the worker injured his leg, another significant
safety incident resulted in a fatality. In December 2012, one
of James's employees, Gregory Price, sustained a head
injury from a fall on the job and later died. OSHA cited
James for a "serious" safety violation for this
fatality, which resulted from a lack of appropriate flagging
following the Price incident, Chemical's project manager,
Abram Kuo, expressed Chemical's displeasure over
James's safety performance to James's site manager,
Rusty DeBarge. Kuo copied DeBarge on an email in which Kuo
explained that the parties needed "to develop [a]
preventive safety mind set with some extraordinary measure[s]
on job safety." Further, Kuo stated in the email that he
would be on site January 2, 2013, to review the "safety
performance and counter measures for safety prevention,"
and that James's management had been asked to attend that
meeting. In a prior email in the chain on which DeBarge was
copied, Kenner stated: "James Construction needs to show
us how they will really prevent this and other types of
incidents. [The Price fatality] was completely
preventable." In a separate email between Kuo and
Kenner, Kuo confirmed that he had spoken with DeBarge and
"expressed our displeasure over the incidents and safety
performance of James." According to Kuo, at the January
2 meeting, site teams from both James and Chemical sat down
and discussed the safety incidents that had occurred,
including the Price fatality, and Chemical stressed "how
important [it was] to have [James] improve [its] safety
performance on the job." After that meeting,
Chemical's technology manager, Scott Campbell, met with
DeBarge and asked James to document its safety procedures
before and after the fatality, and told James that "we
wanted to see their program improve greatly."
Chemical's project team met and discussed how they could
help James improve its safety performance. The team discussed
whether the project was "too big for James" and
talked about carving out portions of the work to help James
improve its safety performance.
response to James's actual knowledge that Chemical
determined it had serious safety violations, James in fact
began remedial measures, thus demonstrating that this
knowledge satisfied the notice provision's purpose. On
January 9, DeBarge sent Chemical an email summarizing some of
the post-accident measures implemented. DeBarge also
stated subsequently in another email that because of the
Price fatality, James "would never consider ourselves
successful in a general sense of safety on this
conclude the above evidence is more than a scintilla that:
(1) James received actual notice from Chemical that Chemical
had discovered or determined, in its reasonable opinion, that
James had serious safety violations; and (2) the form of
actual notice (email and oral) did not severely impair the
notice provision's purpose and ...