MORGAN BUILDINGS AND SPAS, INC., Appellant v. HUMANE SOCIETY OF SOUTHEAST TEXAS, Appellee.
No. 09-06-439 CV.
Court of Appeals of Texas, Beaumont.
Submitted on Sept. 20, 2007. Opinion Delivered March 13, 2008.
Andrew G. Jubinsky, Andrew C. Whitaker, Figari & Davenport, LLP, Dallas, for appellant.
Kip K. Lamb, K. Leigh Parker, Jr., Mark W. Frasher, The Lamb Firm, Beaumont, for appellee.
Before McKEITHEN, C.J., GAULTNEY and KREGER, JJ.
OPINION
DAVID GAULTNEY, Justice.
Morgan Buildings and Spas, Inc. appeals a judgment in favor of the Humane Society of Southeast Texas based on breach of contract, breach of warranty, fraud, and violations of the Texas Deceptive Trade Practices Act (DTPA). We conclude Morgan breached the contract, but there is
THE SALE
The dispute arose from the purchase of a Morgan steel frame building. Cynthia Meyers, the former board president of the Humane Society of Southeast Texas, went to Morgan and identified a carport. Carey Sonnier, a Morgan assistant branch manager, approached Meyers and offered assistance. Meyers told Sonnier the Humane Society wanted to buy a building in which to store animal food and lawn equipment, and she told him the carport would be ideal if Morgan could add sides, a front and back, and double doors on both ends. She also told Sonnier that the Humane Society planned to install its pre-existing shelves inside against the walls.
Meyers told Sonnier the building needed to be secure. She wanted to prevent rodents from entering the building. Sonnier told her Morgan could add sides and doors, making the building secure. Morgan had a special insulation “to make sure that nothing could get into the building. [H]e said there was a certain way that the slab would be built to secure it so that rodents couldn‘t enter the building under the metal.” Sonnier told her the slab should be built with a “rat lip.”
After obtaining funding, Meyers returned to Morgan and told Sonnier the Humane Society was ready to buy the building. The building would have almond-colored sides with a green top and green trim. Meyers reiterated the Humane Society‘s other requests from the first meeting. Meyers testified that, by writing the check for the down payment,
THE WRITTEN PURCHASE AGREEMENT
The purchase agreement provided that the Humane Society agreed to purchase, and Morgan agreed to “manufacture, deliver and erect,” a steel frame building. The nominal “eave height” was listed as “6.” In Sonnier‘s handwriting, the “comments and specifications” section of the purchase agreement described the structure as: “14 × 32 × 6’ SFB (4-WALL) W/DBL SWING OPEN CUSTOM DOORS ON BOTH 14’ ENDS. ALMOND W/GREEN TRIM AND GREEN ROOF. *CUST.SLAB NEEDS TO BE 13’ 9” x 31‘*.”2 A sketch below this description depicted the width and length of the building. The actual width was to be 13’ 9“, and the actual length was to be 31‘.3
Above the signature line, the contract stated in larger uppercase letters: “read both sides before signing[.]” Below that statement, the agreement provided:
I acknowledge that the additional terms and conditions printed below and on the back of this agreement are agreed to as part of this agreement the same as if printed above my signature. By signing below, I am agreeing to purchase the described product, together with the optional equipment and accessories described hereon. This agreement contains the entire understanding between you and Morgan and no other representation or inducement, verbal or written, has been made which is not written hereon.
At the bottom of the first page of the contract was a second statement that the reverse side of the contract was part of the agreement. The contract contained a provision in larger bold uppercase letters, disclaiming express or implied warranties, and any incidental or consequential damages.
The purchase agreement disclaimed the authority of any agent, employee, or representative to bind Morgan to any affirmations, representations, or warranties not contained in the agreement. A merger and integration clause stated that the contract contained the entire agreement of the parties, there were no other promises, agreements, or warranties, and all previous contracts, offers, solicitations, bids, proposals, or communications were superseded unless expressly incorporated in the contract. Any modifications had to be in writing and were only binding if signed by all the parties to the contract.
THE DELIVERY
Morgan delivered a steel frame structure and completed its construction. Meyers explained that when she saw the building, “the sides were the wrong color, the roof was brought down all the way on the sides. There was no sides. It was roof all the way from the tiptop to the ground.” Meyers testified the metal on the north and south sides of the building was very rusted, the doors fit poorly, the locks did not work, the door on the south side of the building did not have a heavy-duty steel frame around it, the insulation was not present, there were gaps under the door and between the wall and the ceiling, there were holes in the roof where the builders had “missed” the rafter and had instead drilled into the roof, portions of the metal did not meet properly, and the building was the wrong color.
Meyers explained that the building was too short, and it contained internal bracing, which made it impossible to store anything over four-and-a-half feet tall against the walls on either side. The building she selected during her visit to Morgan did not contain this bracing. Meyers testified the Humane Society‘s shelving would not “even come close to fitting” inside the building Morgan provided because there are only about four-and-a-half feet on the side of the building before the internal bracing begins, and the building contains “bracing every 4 feet ... that was not on the original carport that we looked at there at Morgan Buildings.”
Because the building Morgan provided was not secure, the Humane Society could not store its lawn mower and lawn equipment in the building. The Humane Society ultimately purchased another building for $4,300, and eventually paid $5,500 to convert its cat patio into a food storage room. It attempted to store animal food in the Morgan building, but had to discard approximately one hundred bags of food due to rodent infestation. According to Meyers, the Morgan building has zero market value for storing animal food and the Humane Society could not store lawn equipment in the building.
Meyers immediately called Sonnier and told him the building Morgan installed was not the building the Humane Society ordered. Sonnier came to the Humane Society and assured Meyers “that everything would be fixed and would be made right, that they would come back and fix it.”
Meyers explained that Morgan cut the roof off so that sides could be put on the building, corrected the color by placing almond-colored sides on the building, and replaced the metal on the rusty doors. According to Meyers, there was a one to two-inch gap underneath the doors, allowing rodents to enter the building. The sides of the building did not fit properly onto the “rat lip” of the slab, and Morgan never installed heavy-duty metal for the locking mechanism.
Sonnier testified that he was the salesperson who assisted the Humane Society. He sold the Humane Society a steel frame carport. Sonnier discussed with Meyers the Humane Society‘s concerns regarding infiltration by weather and pests, and Sonnier knew the building was to be used to store animal food. Sonnier testified that
Paul Morrell, Morgan‘s operations manager, visited the building site several times. The third time Morrell went to the site, he discovered that the metal had been cut too short and did not reach the slab, the building was not watertight, and parts were missing from the building. He saw light coming in from the top of the building. He replaced the metal that was cut too short.
Morrell explained that a “Clear-Span building is a building that has no center supports, like a pole.” Morrell also testified that some of Morgan‘s carports do not require diagonal braces along each side, and that carports can be converted into buildings.
THE FINDINGS, CONCLUSIONS, AND JUDGMENT
The trial court made findings of fact and conclusions of law on the causes of actions asserted by the Humane Society. The court ordered Morgan to pay the Humane Society $4,495 for the cost of the Morgan building, $1,000 for the cost of lost animal food, $4,300 for the cost of the replacement building purchased to store the lawn equipment, $5,500 for the cost of remodeling existing structures to store animal food, statutory damages of $2,000, and attorney fees of $20,000 through trial, $11,000 should the case be appealed to the court of appeals, and $5,000 should the case be appealed to the Supreme Court.
BREACH OF CONTRACT
Morgan‘s first issue asserts the trial court erred in finding Morgan breached the contract. Morgan argues the written purchase agreement represents the parties’ complete, integrated contract, and any orally-agreed requirements for the structure are unenforceable. Morgan says it agreed to sell a 14’ by 32’ steel frame building with walls that were six feet high and double swing-open doors at both ends, and that is the building it delivered and installed.
An agreement is integrated if the parties intended a writing to be a final and complete expression of agreed terms. ISG State Operations, Inc. v. Nat‘l Heritage Ins. Co., 234 S.W.3d 711, 719 n. 10 (Tex. App.-Eastland 2007, pet. denied). A fully integrated written agreement is a final and complete expression of all the terms agreed upon by the parties. Id. A partially integrated agreement is a final and complete expression of all the terms addressed in that written agreement, but is not a final and complete expression of all the terms the parties have agreed upon. Id. A court considers the surrounding circumstances in determining whether, and to what degree, an agreement is integrated. See generally Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 731-32 (Tex.1981) (explaining that surrounding circumstances are considered in determining whether written agreement is complete and exclusive statement of terms).
The purchase agreement expressly provides that the writing includes all matters agreed upon. The inclusion of a merger or integration clause does not conclusively establish the written contract is fully integrated, however. See Bob Robertson, Inc. v. Webster, 679 S.W.2d 683, 688-89 (Tex.App.-Houston [1st Dist.] 1984, no writ). In Bob Robertson, the court held that the written contract was not integrated despite a merger clause in the written agreement. Id. at 688-89. The court stated that the “merger clause is contradicted by the instrument itself, which refers to delivery numerous times and yet contains no delivery date. It cannot be said that an oral agreement regarding time of delivery is inconsistent with the terms of the integrated agreement[.]” Id. at 689.
The agreement here is a contract for the sale of goods and is governed by article 2 of the Uniform Commercial Code as codified in chapter 2 of the Texas Business and Commerce Code. See
Section 2.202, the parol evidence rule applicable to the sale of goods, provides that a writing intended to be the final expression of an agreement may not be contradicted with evidence of any prior agreement or contemporaneous oral agreement.
In determining whether an agreement is integrated, the parol evidence rule does not bar the consideration of any evidence. See Sun Oil Co., 626 S.W.2d at 731-32; City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518-19 (Tex.1968). Initially, a court must decide whether the parol evidence rule is applicable. See Sun Oil Co., 626 S.W.2d at 731-32. Only when the rule is applicable does the rule affect whether evidence will be admitted. See Foreca, S.A. v. GRD Dev. Co., Inc., 758 S.W.2d 744, 746 (Tex.1988).
Morgan‘s brief to this Court explains that the Humane Society wanted to buy “a boxed-in carport.” The purchase agreement describes the structure with the letters “SFB,” a designation for “steel-frame building.” Morrell testified that “these buildings originated from carports. It‘s a boxed in carport.” The prospect form Sonnier filled out on Meyers‘s first visit to Morgan has the “carport” square marked with an “x” and the handwritten letters “SFB.”
Morrell explained that a boxed-in carport and a “historical” Morgan building are different. He testified that because customers wanted a carport configuration that rises up on the sides, closes in like a building, and has high ceilings, Morgan made boxed-in carports at customers’ requests. The steel frame building designated in the purchase agreement is a Morgan “boxed-in carport” product.
Considering the use of the term “steel-frame building,” and the meaning of that term as a “boxed-in carport,” it is apparent the parties intended the roof to be a carport roof.4 The purchase agree-
The height of the building delivered is a central issue in the parties’ contract dispute.5 The roof of a boxed-in carport, or steel frame building, has “eaves” that are extensions of the roof down the sides of the frame. The purchase agreement specifies the “eave height” is to be “6,” presumably 6 feet, as that is the designated height of the walls to be added. The purchase agreement does not specify how far the eaves are to extend down the side of the frame, and the agreed height of the structure cannot be determined from the purchase agreement.
The parties signed a separate document entitled “Clear Span Steel Building Specifications and Drawing.” Morgan argues this separate document was not part of the contract. Although the purchase agreement permitted a modification in writing signed by both parties, this document is not a modification of the purchase agreement. The specifications document references the purchase agreement number. The separate specifications document has a chart determining width and length dimensions, actual and nominal, and provides for a drawing of the location of “doors, windows or other features needed in building.” The document expressly reserves certain rights to Morgan, and is a further indication the written purchase agreement alone was not intended to be a complete and exclusive statement of all the terms of the parties’ agreement. The specifications document does not provide the intended height of the structure either, nor does it explain what “Clear Span” means and how the term defines the structure.
Considering the surrounding circumstances, we conclude the written purchase agreement was not intended to embody the complete and exclusive terms of the agreement of the parties, and is only partially integrated. See generally Magnolia Warehouse & Storage Co. v. Davis & Blackwell, 108 Tex. 422, 195 S.W. 184, 185 (1917) (written contract incomplete); see also Garner v. Redeaux, 678 S.W.2d 124, 128-29 (Tex.App.-Houston [14th Dist.] 1984, writ ref‘d n.r.e.). Under the parol evidence rule, the trial court could consider evidence of consistent additional terms to explain or supplement the terms of the written agreement. See
Furthermore, the trial court could reasonably conclude the use of the word “building” in the contract meant the structure was intended to provide protection from the weather. See generally Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex.1996) (terms are given their plain meaning unless the instrument shows the parties used them in a different sense); see also WEBSTER‘S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE 292 (2002). Consistently, Sonnier testified Morgan agreed to supply a weatherproof building. Morgan does not challenge the trial court‘s finding that the building Morgan delivered was not weatherproof.7 After Morgan constructed the building, it attempted to address the Humane Society‘s complaints, including the fact that the structure was not weatherproof. The roof had holes; the building had spaces that let in the rain.
The structure manufactured, delivered and erected was not the correct height or type, and was not weatherproof. Morgan did not deliver the structure it agreed to supply. Issue one is overruled.
FRAUD, DTPA, AND WARRANTY CLAIMS
Issues two, three, four and five assert that the trial court erred in ruling in favor of the Humane Society on the fraud, DTPA and breach of warranty claims.
The elements of a cause of action for common-law fraud are:
(1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.
In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex.2001). Failure to perform as promised, standing alone, is no evidence of fraud, although it may be considered with other facts to establish fraudulent intent. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986).
There is no evidence Morgan‘s agents knowingly made false representations to the Humane Society. We have determined Morgan breached the contract, and did not deliver the structure it agreed to deliver, but the fraud claim cannot be based solely on a failure to perform contractual promises. See id. The purchase agreement expressly provided that Meyers acknowledged she did not rely on extra-
Reliance is an element of a cause of action for the alleged violations of the DTPA “laundry list.” See
The purchase agreement disclaimed any warranties. The written disclaimer of warranties was preceded by a centered heading in bold print and uppercase letters, which stated, “No Warranty/No Consequential or Incidental Damages.”
Issues two, three, four and five are sustained.
DAMAGES AND ATTORNEY FEES
Issues seven and eight assert the trial court erred in awarding the Humane Society damages and attorney‘s fees. The Humane Society is entitled to recover damages from Morgan for breach of the contract. See
The damage award here is not supported by sufficient evidence, however, nor is it determined in a reasonable manner. Under the trial court‘s judgment, the Humane Society was given its purchase money back, the continued use of the structure, compensation for the cost of another building, and compensation for the remodeling of a third building. Double recoveries are not ordinarily allowed under law. See Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex.1995). Contract damage awards are not intended to be punitive, and a buyer generally must elect a remedy. See Amoco Prod. Co. v. Alexander, 622 S.W.2d 563, 571 (Tex.1981) (“Exemplary damages are not allowed for breach of contract.“); Foley v. Parlier, 68 S.W.3d 870, 882 (Tex.App.-Fort Worth 2002, no pet.) (explaining that plaintiff with inconsistent remedies must elect between them). It is not reasonable under the circumstances here to allow continued use of the purchased goods, recovery of the purchase money, and the cost of replacement goods in an amount twice the value of the goods purchased. See, e.g.,
Although the Humane Society argues and Meyers testified the building delivered has no value for the storage of food or lawn equipment, the Humane Society is making some other use of the building. The trial court refused to award damages for the cost of the concrete slab on which the building rests because the court found “the Humane Society is making some use of the slab, and will, in all likelihood continue to make some use of the slab.” The Morgan building on the slab is the “use” being made of the slab. The record does not include evidence of the value of the building as it is being used by the Humane Society.
Furthermore, the purchase agreement excludes consequential and incidental damages. See
The Humane Society is entitled to recover reasonable and necessary attorney fees incurred in pursuing breach of contract damages. See
The cause is remanded for a new trial. Issues seven and eight are sustained in part and overruled in part.8
CONCLUSION
We reverse the trial court‘s judgment. Judgment is rendered that the Humane Society of Southeast Texas take nothing from Morgan Building and Spas, Inc. on the DTPA, fraud, and warranty claims. The cause is remanded for a new trial on the breach of contract claim.
REVERSED, RENDERED IN PART AND REMANDED IN PART.
Concurring and Dissenting Opinion
STEVE McKEITHEN, Chief Justice.
Although I concur with part of the majority opinion, I respectfully dissent in part. Because I believe the contract includes a merger clause that is clear and unambiguous, and the parol evidence rule precludes consideration of the extra-contractual evidence upon which the majority relies, I would hold that Morgan did not breach the contract.
The purchase agreement Meyers signed with Morgan was on 8½” x 14” paper, and Meyers admitted she did not carefully read the document before she signed it. The purchase agreement provided that Humane agreed to purchase a 14’ x 32’ x 6’ steel-framed building with custom double swing-open doors on both ends. Above the signature line, the contract stated in large, upper-case letters: “read both sides before signing[.]” Below that statement, the agreement provided,
I acknowledge that the additional terms and conditions printed below and on the back of this agreement are agreed to as part of this agreement the same as if printed above my signature. By signing below, I am agreeing to purchase the described product, together with the optional equipment and accessories described hereon. This agreement contains the entire understanding between you and Morgan and no other representation or inducement, verbal or written, has been made which is not written hereon.
At the bottom of the first page of the contract was a second statement that both sides of the contract were part of the agreement. The contract further stated, “Morgan makes no representation or warranty of any kind, expressed [sic] or implied, as to merchantability, fitness for a particular purpose, [or] the compliance or
In addition, the contract stated, “[n]o agent, employee[,] or representative of Morgan has any authority to bind Morgan to any affirmation, representation[,] or warranty concerning the building(s) that is not specifically set forth on this Contract[,]” “[t]his Contract contains the entire agreement between Morgan and purchaser with respect to the building(s)[,]” “[t]here are no other promises, agreements[,] or warranties affecting the work to be performed hereunder[,]” and “[a]ll previous contracts, offers, solicitations, bids, proposals and communications relating to the building(s), oral or written, are hereby superseded except to the extent that they have been expressly incorporated into this written Contract.” Finally, the purchase agreement also provided that the contract “may not be modified other than in writing. Any such modification(s) will be binding on the parties only if signed by all the parties to this Contract.” On the same date that the parties entered into the purchase agreement, they also executed a document entitled “Clear Span Steel Buildings Specifications and Drawing” (“the specifications“). The specifications indicated that Humane was to provide the slab and the base rail, and Morgan was to install an actual-width 13’ 9” x 31’ x 6’ building with almond-colored siding and green roof and trim.9
As the majority acknowledges, the purchase agreement contains a merger clause, which states that the purchase agreement constitutes the entire agreement between the parties and supersedes any previous communications, contracts, offers, solicitations, and bids, as well as a provision stating that no representative of Morgan has the authority to make representations that would bind Morgan. The purchase agreement does not provide that the building will accommodate Humane‘s shelving; that it will not contain bracing; that it will be water proof, weather proof, and rodent proof; that the building will be secure from theft; or that the building will not be rusted. In fact, the purchase agreement contains no express warranties within its four corners. Therefore, the only way such terms could have become part of the parties’ agreement (either as a term of the contract or as a warranty) was via either Sonnier‘s representations or the model Meyers viewed at Morgan‘s place of business.
Section 2.313(a)(3) of the Texas Business and Commerce Code provides as follows:
(a) Express warranties by the seller are created as follows:
...
(3) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
As previously stated, the purchase agreement contained the following provision: “Morgan makes no representation or warranty of any kind, expressed or implied, as to merchantability, fitness for a particular purpose, [or] the compliance or conformity of the building(s) with any applicable zoning, building, electrical or plumbing code....”
[a] term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals ... is conspicuous. Language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color.
In this case, the written disclaimer of warranties was preceded by a centered heading in bold print and upper-case letters, which stated, “No Warranty/No Consequential or Incidental Damages,” and the disclaimer itself was written in bold print, all upper-case letters, and mentioned the word “merchantability.” Therefore, the disclaimer was conspicuous, and the model did not become part of the contract or create a warranty. See
With respect to Sonnier‘s alleged representations, the contract contains a clear and unambiguous merger clause, as well as a clause that provides Morgan will not be bound by its employees’ representations. In my view, the majority errs both by finding that despite the merger clause, the contract was not fully integrated, and by failing to give effect to the clause concerning representations made by Morgan‘s employees. In interpreting contracts, courts should favor an interpretation that does not render any of the contract‘s provisions meaningless. Coker v. Coker, 650 S.W.2d 391, 394 (Tex.1983). Under the majority‘s analysis, when an unambiguous contract is silent regarding an issue, terms not included within its four corners can be read into the contract because such terms do not contradict any express terms of the written agreement. Unlike the situation presented in Bob Robertson, Inc. v. Webster, 679 S.W.2d 683, 688-89 (Tex.App.-Houston [1st Dist.] 1984, no writ), the written contract in this case does not contain any provisions that contradict the merger clause. In addition,
CONCLUSION
I agree with the majority that the DTPA, fraud, and warranty claims have no merit. Because I also believe the breach of contract claim is without merit, I would reverse and render judgment that Humane take nothing from Morgan.
STEVE McKEITHEN
CHIEF JUSTICE