G. C. Buildings, Inc. v. RGS Contractors, Inc. ( 2014 )

AFFIRMED; Opinion Filed October 13, 2014.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-00151-CV
G.C. BUILDINGS, INC., Appellant
V.
RGS CONTRACTORS, INC., Appellee
On Appeal from the 191st Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-03-04559-J
MEMORANDUM OPINION
Before Justices Francis, Lang-Miers, and Myers
Opinion by Justice Myers
G.C. Buildings, Inc. appeals the trial court’s judgment that it take nothing on its claims
against RGS Contractors, Inc. for breach of contract following a trial before the court. Appellant
brings four issues on appeal contending (1) appellant provided evidence on each element of its
contract cause of action and there was no contrary evidence; (2) appellant is not estopped from
pursuing damages; (3) appellant did not assign its claims to the United States Department of
Housing and Urban Development (HUD); and (4) certain of the trial court’s “findings” were not
proper findings of fact. We affirm the trial court’s judgment.
BACKGROUND
In 1997, appellant hired appellee to build an apartment complex on property owned by
appellant in Oklahoma. The project was financed by a $7 million loan from GMAC Commercial
Mortgage, and that loan was insured by HUD. The contract called for completion of work by
February 1, 1999. Due to a fire, the parties extended the completion date to May 4, 2000.
Although the buildings were substantially completed and possession was turned over to appellant
by June 8, 2000, there was an extensive punch list of problems with the individual units that
prevented most of them from being leased. The contract provided that the date of final
completion was “the date the HUD representative signs the final HUD Representative’s Trip
Report.” The final trip report was signed on October 12, 2000, 161 days after May 4.
From May to December 2000, appellant made monthly (and occasionally bimonthly)
interest payments on the loan, averaging about $46,520 per month and totaling $372,156.14.
Appellant’s income from rentals was $1,500 in June 2000 and by August 2000 had risen to
$9,000. Appellant’s chief financial officer testified that if all the apartments had been rentable in
May 2000, the rental income would have been $77,400 per month. In January 2000, appellant
defaulted on the loan and abandoned the property to GMAC and HUD.
The contract between appellant and appellee contained a liquidated-damages provision
stating that if the construction was not completed timely, the amount appellee would be paid
under the contract
shall be reduced by $2,101.68, as liquidated damages, for each day of delay until
the date of final completion. When the Owner cost certifies to HUD, the actual
cost of interest, taxes, insurance, mortgage insurance premiums, and construction
and permanent loan extension fees, as approved by the Commissioner, for the
period from the scheduled date of completion through the date construction was
actually completed, shall be determined. The lesser of the liquidated or actual
damages shall be applied.
Appellant did not certify to HUD “the cost of interest, taxes, insurance, mortgage insurance
premiums, and construction and permanent loan extension fees . . . from the scheduled date of
completion through the date construction was actually completed.” Instead, appellant approved
appellee being paid with no deduction for actual or liquidated damages for the delay.
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In May 2003, appellant brought suit against appellee, alleging appellee breached the
contract by not finally completing construction by May 4, 2000. Appellant sought “liquidated
damages of $2,101.68 per day for each day of delay until final completion or the actual cost of
interest, taxes, insurance, mortgage insurance premiums and extension fees, whichever is less.”
Alternatively, appellant sought “its actual damages based on the General Conditions and
applicable common law.”
During trial, appellant presented evidence that it made interest payments after May 4,
2000 on the loan of $372,156.14. Appellant calculated the amount of liquidated damages as
$338,370.48. Appellant’s chief financial officer testified appellant would have had to make the
interest payments regardless of whether the project was timely completed. The trial court
concluded that appellant “has failed . . . to establish a proper measure of damages against”
appellee.”
DAMAGES
In its first issue, appellant contends it “provided evidence on each element of its contract
cause of action and there was no contrary evidence.” We interpret appellant’s issue as
contending that appellant proved its breach-of-contract cause of action as a matter of law, and
that the trial court’s determination that appellant did not prove its cause of action was against the
great weight and preponderance of the evidence.
When reviewing a trial court’s findings of fact and conclusions of law for legal and
factual sufficiency, we apply the same standards used in reviewing the evidence supporting jury
findings. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). When an appellant attacks the
legal sufficiency of the evidence to support an issue on which the appellant had the burden of
proof, the appellant must show the evidence establishes, as a matter of law, all vital facts in
support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). In reviewing
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a “matter of law” challenge, we first examine the record for evidence supporting the finding, and
then examine the entire record to determine if the contrary proposition is established as a matter
of law. Id. We sustain the point of error only if the contrary proposition is conclusively
established. Id.
When a party attacks the factual sufficiency of an adverse finding, it must demonstrate
the adverse finding is against the great weight and preponderance of the evidence. Id. at 242.
We must consider and weigh all of the evidence and can set aside the finding only if the evidence
is so weak or if the finding is so against the great weight and preponderance of the evidence that
it is clearly wrong and unjust. Id.
One of the elements of a claim for breach of contract that appellant had the burden of
proving is that the breach of the contract caused appellant’s damages. See Marquis Acquisitions,
Inc. v. Steadfast Ins. Co., 409 S.W.3d 808, 813 (Tex. App.—Dallas 2013, no pet.) (elements of
breach of contract are “(1) a valid contract; (2) performance or tendered performance by the
plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff
as a result of the breach.”). To recover damages for breach of contract, appellant had to prove it
suffered some pecuniary loss as a result of the breach. S. Elec. Servs., Inc. v. City of Hous., 355
S.W.3d 319, 324 (Tex. App.—Houston [1st Dist.] 2011, pet. denied). The “losses must be the
natural, probable, and foreseeable consequence of the defendant’s conduct.” Id. (citing Mead v.
Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981)). The absence of a causal connection
between the alleged breach and the damages sought will preclude recovery. Id.
In its brief on appeal, appellant argues it
submitted evidence based on an out of pocket measure of damages premised on
its interest payments prior to final completion and ending when it abandoned the
project. Those amounts are set forth in GCB exhibits 8 and 9 and aggregate
$372,156.14. Alternatively, GCB submitted evidence of liquidated damages of
$338,370.48 per Article 2E [sic] of the Construction Contract.
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Appellant’s chief financial officer testified that appellant had to make those interest payments
regardless of whether the apartments were timely completed:
Q. After May [4, 2000], you were already obligated to make interest payments
under the mortgage, were you not?
A. Yes.
....
Q. GCB would have been making interest payments to GMAC regardless of how
many apartments were available for occupancy, correct?
A. Yes, we have a commitment to pay GMAC for the money we borrowed from
them.
....
Q. Okay. That represent[s] interest payments on the loan that you would have
been making anyway, sir; isn’t that right?
A. Yes.
Because appellant had to make the interest payments regardless of whether the construction was
timely, the interest payments were not the consequence of appellee’s alleged failure to timely
complete construction. The interest payments were not the result of the breach of the contract
and were not “the natural, probable, and foreseeable consequence” of any breach by appellee for
untimely completing the construction. Mead, 615 S.W.2d at 687. We conclude the evidence is
legally and factually sufficient to support the trial court’s determination that appellant failed to
prove the interest payments were damages from appellee’s untimely completion of the
construction.
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Appellant also argues it is entitled to liquidated damages under “Article 2E of the
Construction Contract.” Article 2E does not concern liquidated damages. 1 However, article 2C
addresses liquidated damages. That provision states,
C. If the work is not brought to final completion in accordance with the Drawings
and Specifications, including any authorized changes, by the date specified above,
or by such date as to which the contract time may be extended, the maximum sum
stated in Article 3A(1) below shall be reduced by $2,101.68, as liquidated
damages, for each day of delay until the date of final completion. When the
Owner cost certifies to HUD, the actual cost of interest, taxes, insurance,
mortgage insurance premiums, and construction and permanent loan extension
fees, as approved by the Commissioner, for the period from the scheduled date of
completion through the date construction was actually completed, shall be
determined. The lesser of the liquidated or actual damages shall be applied. The
applicable amount shall be reduced by the project’s net operating income.
Thus, the contract provided that if appellee did not complete construction timely, then the
amount appellee would be paid under the contract would be reduced by either the liquidated
damages amount or the amount that appellant certified to HUD was the cost of the interest, etc.,
during the delay, whichever was less. Appellant did not certify to HUD that it had any costs for
interest, etc. during the delay, so appellant was not entitled to have the amount appellee was paid
reduced by the amount of the liquidated damages. The contract did not provide for recovery of
liquidated damages for delay outside of the procedure set forth in article 2C of the contract.
We conclude the trial court’s determination that appellant failed to prove its damages
from breach of contract was supported by legally and factually sufficient evidence. We overrule
appellant’s first issue.
In the second and third issues, appellant contends it was not estopped from pursuing
damages and that it did not assign its breach-of-contract claim to HUD. Because we have
1
Article 2E provides, “E. The date of final completion shall be the date the HUD representative signs the final HUD Representative’s Trip
Report provided that the trip report is subsequently endorsed by the Chief Architect.”
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determined appellant failed to prove the element of damages, determination of these issues is not
necessary for final disposition of the appeal. Accordingly, we do not address these issues. See
TEX. R. APP. P. 47.1 (opinion must address “every issue raised and necessary to final disposition
of the appeal”).
FINDINGS OF FACT
In its fourth issue, appellant contends that the trial court’s findings of fact 12 through 15,
21, 22, and 24 were not findings of fact. Appellant asserts these “findings” are legal conclusions
or the trial court’s legal interpretation of the contracts. Appellant did not object to any of the
findings, he cites no authority for the proposition that the mislabeling of conclusions of law as
findings of fact is reversible error, and he provides no argument explaining why the mislabeling
constitutes reversible error. When a conclusion of law is mislabeled as a finding of fact, the
mislabeled conclusion is reviewed de novo instead of for evidentiary sufficiency. See In re
Office of Attorney Gen. of Tex., 264 S.W.3d 800, 804 n.3 (Tex. App.—Houston [1st Dist.] 2008,
orig. proceeding); Nikolai v. Strate, 922 S.W.2d 229, 237 n.1 (Tex. App.—Fort Worth 1996, writ
denied).
Appellant also asserts there was no evidence to support these findings. For purposes of
this appeal, only finding 24 is relevant because it concerns appellant’s proof of damages. The
relevant portion of that finding states, “GCB’s only offer of alleged damages is certain interest
payments made by GCB on the loan. In that regard, GCB agrees that it would have had to pay
those same interest payments on the loan any way, regardless of whether there was delay under
the Contract or not.” That finding of fact was supported by the testimony of appellant’s chief
financial officer, who testified appellant had to make the interest payments regardless of whether
the apartments were timely constructed. This finding was supported by legally and factually
sufficient evidence.
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We conclude appellant has not shown reversible error in this issue. We overrule
appellant’s fourth issue.
CONCLUSION
We affirm the trial court’s judgment.
/Lana Myers/
LANA MYERS
JUSTICE
130151F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
G.C. BUILDINGS, INC., Appellant On Appeal from the 191st Judicial District
Court, Dallas County, Texas
No. 05-13-00151-CV V. Trial Court Cause No. DC-03-04559-J.
Opinion delivered by Justice Myers. Justices
RGS CONTRACTORS, INC., Appellee Francis and Lang-Miers participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellee RGS CONTRACTORS, INC. recover its costs of this
appeal from appellant G.C. BUILDINGS, INC.
Judgment entered this 13th day of October, 2014.
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