594 S.W.3d 722
Tex. App.2019Background
- James Construction contracted to perform civil and mechanical work at a chlor-alkali plant; Westlake Chemical signed the construction contract in its own name but was found by the jury to be acting as agent for owner Westlake Vinyls. Primoris (James’s parent) signed an unconditional Guaranty for James’s performance.
- During the project James experienced repeated safety incidents, including an OSHA-cited fatality; Chemical intervened, removed substantial mechanical scope from James, and engaged Turner to complete the work.
- Chemical sued James (and Primoris on the Guaranty) for breach of the contract (intervention ¶17.2; termination ¶21.3; indemnity ¶19.1) and sought damages and attorney’s fees; James counterclaimed, including for breach of the consequential-damages waiver (¶26).
- A jury found James breached ¶17.2, ¶21.3, and ¶19.1 and awarded Chemical compensatory damages ($1,054,251.81 for the termination/intervention breach and $102,767.69 for indemnity) and attorney’s fees; the jury also found Chemical breached ¶26 and awarded James fees; the trial court entered judgment awarding Chemical damages and attorney’s fees against Primoris (but not James, an LLC), and awarded James damages on its counterclaim.
- On appeal the court: affirmed Chemical’s breach findings and awards (holding Chemical could recover Vinyls’s costs as agent and that Chemical substantially complied with notice), affirmed Primoris’s liability for Chemical’s fees under the Guaranty, but reversed and rendered a take‑nothing judgment on James’s ¶26 counterclaim (holding ¶26 is a waiver of consequential damages, not a covenant not to sue).
Issues
| Issue | Plaintiff's Argument (Chemical unless noted) | Defendant's Argument (James/Primoris) | Held |
|---|---|---|---|
| Liability and damages under termination provision (¶21.3) | James had serious safety violations; Chemical properly notified, terminated, took possession, and incurred extra costs to complete work (recoverable) | No evidence Chemical incurred the costs (Vinyls paid); notice requirements not strictly met; damages barred as consequential | Affirmed: jury verdict sustained. Chemical may recover Vinyls’s costs because Chemical sued as agent; damages (safety training, increased foreman costs) supported and are direct under ¶21.3 |
| Effect of written‑notice condition: strict vs substantial compliance | Substantial compliance suffices where actual notice was received and form caused no harm or impairment of the notice purpose | Contract required written notice; termination rights require strict written compliance | Adopted substantial compliance standard: actual notice + form that does not severely impair the provision’s purpose and causes no harm. Jury findings of substantial compliance sustained |
| Indemnity (¶19.1) for defense costs in wrongful‑death suit | James must indemnify Chemical for defense fees related to Price wrongful‑death suit | Chemical’s termination was a prior material breach excusing indemnity; damages expert unqualified/speculative | Affirmed: no prior material breach (condition‑precedent analysis); expert testimony adequate; indemnity award for fees sustained |
| Primoris’s liability for Chemical’s attorney’s fees under the Guaranty | Primoris unconditionally guaranteed James’s obligations and breached Guaranty; fees recoverable under Tex. Civ. Prac. & Rem. Code ch. 38 | Guaranty doesn't expand James’s obligations; cannot recover fees from an LLC; Louisiana choice‑of‑law bars fees without express provision | Primoris liable for Chemical’s fees under the Guaranty; judgment for fees against Primoris affirmed. Chemical cannot recover fees from James (LLC) under this court’s precedent |
| Nature of ¶26 (waiver vs covenant not to sue) (Chemical cross‑issue) | ¶26 is a waiver of consequential damages (an affirmative defense), not a covenant that bars suit or supports a breach claim for attorney’s fees | James: clause “no claim shall be made” is a covenant not to sue; thus James may recover fees for Chemical’s suit on consequential damages | Reversed on this counterclaim: ¶26 construed as a waiver of consequential damages (not a covenant not to sue); James’s breach claim under ¶26 fails and the judgment for James on that claim is rendered take‑nothing |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal‑sufficiency review and evidence standards)
- PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008) (notice‑prejudice rule; immaterial failure to comply with notice does not excuse performance absent prejudice)
- Prodigy Commc’ns Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374 (Tex. 2009) (applies PAJ rule to “as soon as practicable” clauses in claims‑made policies)
- Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812 (Tex. 1997) (distinguishing direct vs consequential damages)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (attorney’s‑fee segregation principle for recoverable vs unrecoverable claims)
- National Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015) (distinguishing a release/waiver that operates as an affirmative defense from an express covenant not to sue)
- Vast Constr., LLC v. CTC Contractors, LLC, 526 S.W.3d 709 (Tex. App.—Houston [14th Dist.] 2017) (chapter 38 cannot be used to recover attorney’s fees from an LLC; cited as controlling precedent here)
- Linch v. Paris Lumber & Grain Elevator Co., 15 S.W. 208 (Tex. 1891) (historical authority recognizing substantial compliance with certificate/condition provisions)