Opinion filed July 30, 2015




                                      In The


        Eleventh Court of Appeals
                                   __________

                              No. 11-13-00156-CV
                                  __________

         TSL FOUR SUNS CONSTRUCTION, LLC, Appellant
                                         V.
         EAGLE REMEDIATION SERVICES, INC., Appellee


                      On Appeal from the 91st District Court

                              Eastland County, Texas

                         Trial Court Cause No. CV-1242506

                      MEMORANDUM OPINION
       This is an appeal from a judgment of the trial court in favor of Eagle
Remediation Services, Inc. in which it awarded Eagle money damages and
attorney’s fees on its breach of contract claim against TSL Four Suns Construction,
LLC. We affirm.
       As general contractor, TSL was in the process of constructing four residential
buildings for a senior living center. Prior to the completion of any of the buildings,
mold was discovered in the interstitial space between the first floor and the
underground garage in each of the four buildings. TSL contracted with Eagle to
remove the mold in two of the buildings. By June 23, 2010, Eagle completed the
work and requested payment of $197,103 for the mold removal. TSL paid the full
amount requested. At the time, both parties were under the impression that no state
sales tax was due on the services provided by Eagle. TSL assumed that the services
were excluded from taxation under Section 151.0048(b) of the Texas Tax Code
because they were performed as part of a new residential construction project.
       Over a year after Eagle had finished the mold remediation, the Texas State
Comptroller audited Eagle for sales tax compliance for the years 2008 through 2010.
The Comptroller made an initial determination that the services provided by Eagle
to TSL were subject to the state sales tax. Eagle notified TSL. In TSL’s response
to Eagle, it referenced “Sales Tax Collection Notice dated July 18, 2011” and
informed Eagle that TSL’s position was that the project was part of new residential
construction. Eagle presented TSL’s position to the Comptroller. After months of
discussions between the three parties, the Comptroller ultimately issued a tax
assessment of $16,261. Rather than pursue the matter to a hearing, Eagle paid the
tax and subsequently sent a request for payment to TSL for $19,513.20 ($16,261 for
the taxes plus a 20% markup).
      TSL refused to pay the $19,513.20 invoice. Eagle sued TSL for breach of
contract, to recover on a sworn account, and for unjust enrichment. After a bench
trial, the trial court entered judgment in favor of Eagle on its claim for breach of
contract.
       In six issues, TSL contends that the trial court erred when it (1) determined
that the mold remediation services were subject to state sales tax; (2) found that all
conditions precedent had been met by Eagle; (3) determined that Eagle had fully
performed under the terms of the contract; (4) failed to find that any further payment
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by TSL would violate the contract provision that the project’s cost would not exceed
$197,103; (5) determined that TSL breached the contract; and (6) found that Eagle
had suffered actual damages. In addition, TSL challenges several of the trial court’s
findings, specifically numbers three, four, five, twelve, nineteen, twenty-two,
twenty-four, twenty-six, twenty-seven, twenty-eight, and thirty-four.
      A trial court’s findings of fact in a bench trial are reviewed for legal and
factual sufficiency under the same standards used to review a jury’s answer.
Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). In considering a legal
sufficiency challenge, we review all the evidence in the light most favorable to the
trial court’s judgment and indulge every reasonable inference in its favor. City of
Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We credit any favorable
evidence if a reasonable factfinder could and disregard any contrary evidence unless
a reasonable factfinder could not. Id. at 821–22, 827. In reviewing a factual
sufficiency challenge, we consider all of the evidence and uphold the finding unless
it is so against the overwhelming weight of the evidence as to be clearly wrong and
unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We review a trial court’s
conclusions of law de novo. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d
789, 794 (Tex. 2002).
      We will first address TSL’s challenge to finding numbers three and four.
Finding number three states that “Plaintiff Eagle Remediation Services, Inc[.]
(‘Eagle’ or ‘Plaintiff’) and Defendant TSL Four Suns Construction, LLC (‘TSL’)
entered into a valid, existing contract and contract modification, which were
admitted into evidence as Plaintiff’s exhibit numbers 1 and 3.” Finding number four
states that “Eagle and TSL also entered into corresponding purchase order
agreements, which were admitted into evidence as Plaintiff’s exhibit numbers 2 and
4.” TSL contends that these findings misstate the evidence if the findings suggest
that Plaintiff’s Exhibit Nos. One and Three are independent from Plaintiff’s Exhibit
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Nos. Two and Four because the evidence showed that Plaintiff’s Exhibit Nos. One
through Four, taken together, constituted the agreement between the parties. Eagle
does not dispute that Plaintiff’s Exhibit Nos. One through Four constitute the
agreement of the parties. We do not read these findings to suggest that the purchase
orders are not part of the agreement, and we will treat the four exhibits, taken
together, as the contract between the parties.         Therefore, we overrule TSL’s
challenge to the trial court’s findings contained in numbers three and four.
        In its first issue, TSL asserts that the trial court erred when it determined that
the mold remediation services were taxable. In finding of fact/conclusion of law
number nineteen, the trial court found “that Texas State Sales Tax [was] applicable
to the services provided by Eagle to TSL and that the assessment by the Comptroller
was correct.” Whether the services provided by Eagle were taxable is a question of
law. We do not believe, however, that the issue of taxability was properly before
the trial court, nor do we believe that the issue is properly before us for review.
Normally, judicial review of administrative orders is not available unless all
administrative remedies have been pursued to the fullest extent. MAG-T, L.P. v.
Travis Cent. Appraisal Dist., 161 S.W.3d 617, 624 (Tex. App.—Austin 2005, pet.
denied). One exception to the exhaustion doctrine is when a pure question of law is
involved. Id. at 634 (citing Grounds v. Tolar Indep. Sch. Dist., 707 S.W.2d 889, 892
(Tex. 1986), abrogated on other grounds by Dubai Petroleum Co. v. Kazi, 12
S.W.3d 71 (2000)). However, “questions dedicated to an administrative agency as
part of its exclusive jurisdiction in a statutory scheme to interpret are not subject to
collateral attack in district court without first exhausting the administrative remedies
provided in the statutory scheme.” Id. at 635 (relying on Grounds, 707 S.W.2d at
892).
        Section 151.0101(b) of the Texas Tax Code provides that “[t]he comptroller
shall have exclusive jurisdiction to interpret Subsection (a) of this section.” TEX.
                                             4
TAX CODE ANN. § 151.0101(b) (West 2015). Subsection (a) defines “Taxable
services” to include “real property services.” Id. § 151.0101(a)(11). Because the
Comptroller has been given exclusive jurisdiction to determine whether a service is
a taxable real property service, TSL cannot collaterally attack the question of
whether the services were taxable. The Comptroller determined, during the audit,
that the mold remediation services were taxable and assessed a sales tax against
Eagle. Eagle did not pursue the Comptroller’s decision to a hearing. TSL was made
aware of the controversy, but TSL chose not to join Eagle in challenging the
Comptroller’s position or in pursuing its administrative remedies to the fullest
extent. Therefore, TSL is precluded from asserting that the services were not
taxable. Although it was not necessary for the trial court to determine the issue of
taxability, the trial court did not err when it followed the Comptroller’s ruling and
concluded that the services were taxable. We overrule TSL’s first issue.
      In its second issue, TSL argues that the trial court erred when it found that all
conditions precedent had been met by Eagle as stated in finding number two.
Similarly, TSL alleges in its third issue that the trial court erred when it determined
that Eagle had fully performed under the terms of the contract as the trial court stated
in finding number five. Because these issues are intertwined, we will address them
together.
      TSL asserts that Eagle was required, under the terms of the contract, to
provide “close out documents” within thirty days of the completion of the project
and that Eagle failed to do so when it did not send the invoice for sales tax until over
two years after the project had been completed. We agree.
      The contract does not define “close out documents”; however, Eagle’s
representative testified that an invoice would be considered a “close out document.”
She also agreed that, under the terms of the contract, Eagle was required to send the
invoice to TSL. There is no dispute that Eagle failed to send the invoice within thirty
                                           5
days of completion. At the time the project was completed, however, the parties did
not believe that the project was taxable. It was not until the Comptroller audited
Eagle that Eagle became aware that it needed to invoice TSL for the sales tax. As
the purchaser of Eagle’s services, TSL was responsible for any tax due on the
services. The tax due is a debt of the purchaser to the seller until paid, and the seller
can recover the taxes in the same manner as the original sales price. Id. § 151.052(a);
Davis v. State, 904 S.W.2d 946, 953 n.7 (Tex. App.—Austin 1995, no writ) (“If the
state collects the tax from the seller, the seller has a cause of action against the
purchaser to recover the tax it should have originally collected from the purchaser.”)
(citing TAX § 151.052(a)(3); Reaves & Becker Co. v. Wilkes Co., 392 S.W.2d 379,
380 (Tex. Civ. App.—Austin 1965, writ dism’d)). Eagle sent TSL the invoice for
sales tax at least twenty-eight months after the project was complete and two months
after the assessment was due to the Comptroller. While the audit does not excuse
Eagle from sending the invoice under the terms of the contract, it does explain why
Eagle did not comply with the terms.
      TSL argues that it was excused from paying the invoice regardless of whether
the requirement was a condition or a covenant. “A condition precedent is an event
that must happen or be performed before a right can accrue to enforce an obligation.”
Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992). The contract provides
that payment is due “within 30 days from owner[’]s receipt of close out documents
or progress billing applications.” We do not believe that payment is conditioned on
receipt of the invoice within thirty days of project completion; payment is
conditioned on receipt, but not on receipt within a specific time period. Therefore,
the trial court did not err when it found in finding number two that all conditions
precedent had been met. The trial court did err, however, when it found in finding
number five that “Eagle fully performed and satisfied its obligations, duties and
responsibilities pursuant to the contract, contract modification, and purchase orders.”
                                           6
      Although Eagle failed to fully perform its obligations under the contract, TSL
was not excused from paying the invoice unless Eagle’s breach of the provision that
required Eagle to send the invoice within thirty days was material. See Hernandez v.
Gulf Grp. Lloyds, 875 S.W.2d 691, 692 (Tex. 1994) (“A fundamental principle of
contract law is that when one party to a contract commits a material breach of that
contract, the other party is discharged or excused from any obligation to perform.”).
When determining whether a breach is material, we consider the following factors:
(1) the extent to which the injured party will be deprived of the benefit which it
reasonably expected; (2) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be deprived; (3) the extent
to which the party failing to perform will suffer forfeiture; (4) the likelihood that the
party failing to perform will cure his failure, taking account of the circumstances,
including any reasonable assurances; and (5) the extent to which the behavior of the
party failing to perform comports with standards of good faith and fair dealing. Id.
at 693, n.2 (citing RESTATEMENT (SECOND) OF CONTRACTS § 241 (1981)). “The less
the non-breaching party is deprived of the expected benefit, the less material the
breach.” Id. at 693.
      Eagle did not breach a contract term relating to its actual mold remediation
services. Eagle breached a term concerning when Eagle was required to send an
invoice. TSL argues that the breach was material because the breach was a delay of
over two years. TSL does not explain how the two-year delay prejudiced it in any
way except for its contentions that it was entitled to rely on the finality of Eagle’s
invoicing as of the end of the thirty day period and that it believed the project was
closed. As we have stated, TSL is the party that ultimately bears the responsibility
of paying the sales tax. Eagle’s failure to include the sales tax in the original invoice
was a result of both party’s belief that the services were not taxable. TSL has not
been deprived of any benefit under the contract. To the contrary, TSL has received
                                           7
a benefit from Eagle—Eagle paid TSL’s sales tax to the Comptroller in a timely
manner and avoided penalties that could have been assessed by the Comptroller. We
hold that Eagle’s breach was not material and, therefore, TSL was not excused from
paying the sales tax. TSL’s second and third issues are overruled.
      In its fourth issue, TSL contends that the trial court erred when it disregarded
the “cost not to exceed” term in the contract. TSL argues that it agreed to a maximum
cost of $197,103, that it paid that amount when Eagle sent the original invoice, and
that the trial court erred when it awarded damages in excess of the maximum amount
TSL agreed to pay. Eagle argues that the not-to-exceed term applied only to the
individual work line items and that it did not include sales tax as evidenced by the
purchase order.
      When we construe a contract, we must ascertain the true intentions of the
parties as expressed in the writing itself. J.M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 229 (Tex. 2003). To identify the intentions of the parties, “we must examine
and consider the entire writing in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless.” Id.
      The General Services Agreement provides that, “[u]nless expressly set forth,”
the proposal does not include sales tax and that the client will be invoiced sales tax,
when applicable, as a separate line item. The proposal did not incorporate or include
sales tax in the pricing. The Time & Material Fee Schedule provides: “The rates
contained in this schedule are exclusive of federal, state and local sales or use taxes
and any permits incident to performance of the work.” The fee schedule further
provides that “Eagle shall be compensated for all costs incurred for state, federal, or
local sales or use taxes, and/or the cost of any necessary permits on the basis of
Eagle’s cost plus twenty percent.” The purchase order provided that the work for
building four was a “T & M and a not to exceed $100,679” and that the work for
building two was a “T & M and a not to exceed $96,424.” The subtotal and the total
                                          8
were listed as $197,103. Neither the subtotal nor the total were designated as “not
to exceed” amounts. Sales tax was not included in the purchase order; the line for
sales tax was left blank.
      Because the General Services Agreement expressly states that the “Client will
be invoiced state sales tax, when applicable, as a separate line item” and because
neither the proposal nor the purchase order expressly includes or incorporates sales
tax in the not-to-exceed amounts, we hold that the sales tax is separate from those
amounts and that the trial court did not err when it did not apply the not-to-exceed
term to the sales tax. We also hold that the trial court did not err when it did not
apply the not-to-exceed term of the contract to the twenty percent markup. The basis
for the twenty percent markup was a provision in the Time & Material Fee Schedule.
However, the provision was not part of the section that listed the fees for time and
material; it was part of the section titled, “OTHER CHARGES AND TERMS,” and
was also part of the same paragraph that provided that “[t]he rates contained in this
schedule are exclusive of” taxes. The twenty percent markup could not be calculated
until the taxes were calculated, and thus, the markup, like the sales tax, was separate
from each line item that was designated as a “T & M and a not to exceed.” Therefore,
the trial court did not err when it did not apply the not-to-exceed term to the twenty
percent markup, nor did it err when it found in finding number twenty-four and
finding number twenty-eight that TSL was liable to Eagle for $3,252.20—the
amount of the twenty percent markup of the assessed sales tax. We overrule TSL’s
fourth issue.
      In its fifth issue, TSL contends that the trial court erred when it found that
TSL breached the contract. Although TSL did not dedicate a specific portion of its
argument section in its brief to this contention, TSL did challenge the trial court’s
findings as to the breach of contract claim. Specifically, TSL challenged the trial
court’s findings that TSL was liable for the sales tax (finding number twenty-two);
                                          9
that the invoice was correct, due, and owing from TSL to Eagle (finding number
twenty-six); and that TSL failed to pay the amount due under the contract and,
thereby, breached the contract with Eagle (finding number twenty-seven). As we
have already discussed, the Comptroller determined that Eagle’s services were
taxable, Eagle invoiced TSL for the sales tax due and owing, and TSL was not
excused from paying the sales tax despite Eagle’s delay in sending the invoice.
Eagle’s representative testified that TSL had not paid the sales tax invoice, and TSL
offered no evidence at trial that it had paid the sales tax on the project. Therefore,
the trial court did not err when it found that TSL was liable for the sales tax stated
in the invoice and that TSL breached the contract when it failed to pay the invoice.
We overrule TSL’s fifth issue.
      TSL asserts in its sixth issue that the trial court erred when it calculated
damages for Eagle. Specifically, TSL alleges that Eagle was required to prove the
actual time and materials expended on the project and that, because Eagle failed to
prove the actual cost of the project, the trial court could not calculate the amount of
taxes due. TSL paid the original invoice that did not include sales tax without
objection. There is no evidence that TSL requested a detailed invoice that included
the time and materials expended on the project, nor is there evidence that TSL
questioned the cost of the project. Eagle had no complaint about the payment of the
original invoice. The Comptroller assessed taxes on the sales price, the amount TSL
paid with no objection. In closing arguments, TSL’s counsel argued that Eagle had
not proven what the time and materials charges were and that there was no way for
the court to determine whether the taxes were not already encompassed in the
amount that Eagle charged for the work that it completed. As we have previously
stated, the General Services Agreement provided that taxes would be billed as a
separate line item and that the proposed cost did not include taxes unless the proposal
expressly included taxes. Neither the proposal nor the purchase order expressly
                                          10
incorporated taxes, and TSL did not present any evidence that the taxes were
included in the not-to-exceed amounts. The trial court was not asked to determine
the sales price, nor is that issue before us on appeal. The sales price billed was the
sales price paid, and the Comptroller assessed taxes on that amount. TSL’s sixth
issue is overruled.
      There are two other findings that TSL challenged that we have not addressed:
finding number twelve and finding number thirty-four. Finding number twelve
states that “Eagle requested that TSL pay the sales tax assessment or provide its basis
for any sales tax exemptions and/or exclusions that may apply to the services.” TSL,
in one sentence, argues that “[t]here is no evidence or insufficient evidence in the
record to support this finding.” We disagree. Eagle’s representative testified that
Eagle sent TSL a letter and explained that Eagle’s original invoice to TSL had been
selected by the Comptroller for audit and that the Comptroller found that sales tax
was due. In response to Eagle’s letter, TSL sent a letter to Eagle and said that the
work was done as residential new construction. Eagle’s representative testified that
other customers also provided Eagle with additional information to support an
exemption and that others just paid the tax. Eagle’s trial counsel testified that Eagle
asked TSL on numerous occasions to provide further information so that Eagle could
turn it over to the Comptroller in hopes to change the Comptroller’s initial
determination.     After many months of discussions between the parties, the
Comptroller decided that the original assessment of $16,261 would stand. Eagle
paid the assessment and sent TSL an invoice requesting payment. This evidence
supports the trial court’s finding; therefore, the trial court did not err when it entered
finding number twelve.
      As to finding number thirty-four in which the trial court found that “Eagle
[was] entitled to recover its Court costs expended in this case,” we hold that the trial
court did not err when it awarded costs against TSL. TSL does not make any specific
                                           11
argument as to why the trial court erred when it entered finding number thirty-four;
however, we assume that TSL complains about this finding because it believed that
it was not liable for the sales tax and, thus, did not breach the contract. Because we
have held otherwise, the trial court did not err.
      We affirm the judgment of the trial court.




                                                    JIM R. WRIGHT
                                                    CHIEF JUSTICE


July 30, 2015
Panel consists of: Wright, C.J.,
Willson, J., and Bailey, J.




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