Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc.
518 S.W.3d 432 (2017)
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Rule of Law:
A party's material breach of contract excuses the other party's future performance but does not retroactively discharge a claim for damages arising from the other party's prior, non-material breach. When both parties have breached, both may be entitled to recover damages for the harm caused by the other's failure to comply.
Facts:
- In 2010, Bartush-Schnitzius Foods Co. (Bartush) planned to produce seafood dips, which required its facilities to maintain a temperature of 38 degrees or lower.
- Bartush contracted with Cimco Refrigeration, Inc. (Cimco) to install a new refrigeration system capable of meeting this requirement.
- After installation, the system installed by Cimco failed to maintain the target temperature, resulting in ice formation on fan motors, which caused them to overheat and fail.
- Bartush had paid Cimco $306,758 of the total contract price but withheld the final payment of $113,400 due to the system's failure.
- After Cimco failed to provide a workable repair plan, Bartush hired another company, Jax Refrigeration, to install a new defrost unit for $168,079, which successfully resolved the temperature issue.
Procedural Posture:
- Cimco sued Bartush in trial court to recover the unpaid balance of the contract.
- Bartush filed a counterclaim against Cimco for breach of contract.
- A jury found that both parties failed to comply with the agreement, that Cimco breached first, and that Bartush’s failure to pay was not excused.
- The jury awarded $113,400 in damages to Cimco and $168,079 in damages to Bartush.
- The trial court entered a final judgment awarding damages only to Bartush.
- Cimco, as appellant, appealed to the court of appeals, which reversed the trial court's judgment.
- The court of appeals remanded for entry of judgment solely in Cimco’s favor, ordering that Bartush take nothing.
- Both Bartush and Cimco petitioned the Supreme Court of Texas for review.
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Issue:
Does a party's subsequent, unexcused breach of contract negate their right to recover damages for the other party's prior, non-material breach of the same contract?
Opinions:
Majority - Per Curiam
No. A subsequent breach of contract, even if material, does not discharge liability for a prior, non-material breach. The jury found that Cimco committed a non-material breach first by providing a faulty system. While this non-material breach did not excuse Bartush's future performance (i.e., making the final payment), it did not eliminate Bartush's right to sue for the damages caused by Cimco's initial failure. The court of appeals erred by holding that Bartush's later failure to pay retroactively excused Cimco's prior breach. A material breach excuses future performance, not past performance, meaning Bartush's claim for damages caused by Cimco's initial breach remained viable even though Bartush later breached by nonpayment.
Analysis:
This decision clarifies the legal consequences of sequential breaches of contract, distinguishing between material and non-material breaches. It establishes that a subsequent material breach does not act as a complete defense to liability for a prior non-material breach. The ruling reinforces that contract remedies aim to compensate each party for the damages they actually suffered, allowing for offsetting damage awards when both parties are found to be in breach. This prevents a party who commits a minor breach from being completely deprived of their contractual rights if the other party responds with a major, unexcused breach.
