Failure to Include Affirmative Defense Guts Damages Award

• Pages: 25-25
• Date: 01 April 2023
• Author: Susan F. Dent
• Subject Matter: Civil Law

In nding that a party failed to place the “materiality”

of a contractual breach before the jury, a state appel-

late court underscored the importance of comprehen-

sive jury charges and instructions. ABA Litigation

Section leaders agree that this case serves as a stark

reminder to consider all angles of a case—and all instruc-

tions—before submitting a breach of contract issue to a jury.

The conict in Earth Power A/C & Heat, Inc. v. John Page

began when John Page, a homeowner, contracted with a geo-

thermal HVAC company for the installation of heating and

air equipment within his home. The homeowner refused to

make the nal payment, alleging that Earth Power was dila-

tory in its installation of the system and failed to complete

the installation in a workmanship-like manner.

Earth Power then sued the homeowner for breach of con-

tract to recover the amount owed on its unpaid invoices. The

homeowner led an answer, asserting general afrmative

defenses, including repudiation, as well as several counter-

claims for violations of the Texas Deceptive Trade Practices

Act (DTPA) and fraud. The homeowner did not assert a coun-

terclaim for breach of contract.

At trial, a jury found that while both parties failed to

comply with the contract terms, the homeowner’s pay-

ment of invoices was not excused and Earth Power was

therefore entitled to almost $11,000 in damages. The court

also found that because Earth Power materially breached

rst, the homeowner was entitled to recover approximately

$3,000 in damages based on Earth Power’s violation of

the DTPA. However, the jury instructions did not include

any specic questions asking if either parties’ breach was

“material.”

On appeal, Earth Power contended that the homeowner

did not plead “prior material breach,” Earth Power did not

try the issue of “materiality” by consent, and, most impor-

tantly, that the homeowner neither requested nor secured a

jury nding that Earth Power’s breach was material. Texas’s

Fourteenth Court of Appeals agreed.

In reversing the trial court’s ruling, the appellate court

analyzed the issue of materiality under Texas law. In Texas,

as in many states, a material breach by one party to a con-

tract can excuse the other party from any obligation to

perform in the future. The question of whether a breach is

material is multi-faceted, and must be conclusively estab-

lished, the court reasoned. The court went on to state that

a contracting party’s assertion that it is excused from fur-

ther performance because of another party’s “prior material

breach” is an afrmative defense that must be requested as

a jury question or instruction, or else it is waived. The court

explained that the materiality of a contract breach is a fac-

tual question for the jury and, if it is not properly pleaded,

or not raised to the jury, there can be no nding of fact on

such an issue.

The appellate court agreed with Earth Power that the

defense was not presented to the jury, resulting in an errone-

ous judgment on the breach of contract damages. In apply-

ing a similar analysis to the DTPA award, the court reversed

this portion of the lower court’s judgment as well, nding

that the homeowner failed to present evidence supporting a

damages nding in his favor. The court of appeals reversed

the trial court’s judgment and ordered the homeowner to pay

Earth Power the damages awarded by the jury, plus attorney

fees.

Litigation Section leaders agree that this ruling is an

important reminder to carefully draft contracts and to

carefully review jury charges and instructions to include

any and all possible issues for adjudication. “The issue of

materiality is at the heart of a breach of contract dispute,”

notes LaFonda Willis, Washington, DC, liaison for the

Section’s Minority Trial Lawyer and The Woman Advocate

Committees. “Excuse of performance hinges on a nding of

material breach; therefore, it was incumbent upon the appel-

late court to analyze the element of materiality in this con-

tract law dispute,” Willis adds.

Section leaders advise that litigators should use the ele-

ments of a claim or defense to help inform their litigation

strategy. “To prepare jury instructions and questions, a litiga-

tor must determine each element of a claim or defense being

asserted and ensure that the instructions and questions cover

such elements, and should consider and determine these

elements during the early stages of a matter and continue

to develop them as the factual discovery progresses,” sug-

gests Kenneth M. Klemm, New Orleans, LA, cochair of the

Section’s Trial Evidence Committee.

Digital vers ions of all Civil Proc edure stories, i ncluding links to res ources and

authorities , are available at http://bit.ly/LN- civpro.

Failure to Include Afrmative Defense

Guts Damages Award

By Susan F. Dent, Litigation News Contribut ing Editor

SPRING 20 23 • VOL. 48 NO. 3

25 | ABA LITIGATION SECTIO N

CIVIL PROCEDURE UPDATE