### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-10-00656- CV

DK H Hom es, LP , Appellan t

v. Beth A. Kilgo and Bill y R. Kilgo, App ellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 353 RD JUDICI AL DISTRICT NO. D-1 -GN-1 0-0 0020 0, H ONO RAB LE RHO NDA HURLEY , JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

DK H Ho m es, L P (“D KH”) sued Beth and Billy Kilgo (“the Kilgos”) for breac h o f contra ct alleg ing that the Kilgos failed to comply with a contra ctual obligation to build a new home, using DKH as the builder, on a lot they purcha sed from DKH. Af ter a bench trial, the court found that the contra ct betwee n DKH and the Kilgos did not contain an enfor cea ble obligation to construct

a home and that DKH’ s evidenc e of lost profits was too speculative to support an awa rd of damag es. The trial c ourt rende red a take- nothing judg ment in f avor of the Kilgos, and this appeal followe d. We will affirm.

BACK GR OUND

The Kilgos and DKH ex ecute d an Unimproved Property Contract (“the C ontrac t”)

on September 5, 2007, pursuant to which DKH agree d to sell, and the Kilgos ag ree d to buy , an unimprov ed l o t i n Travis County (“the L ot”) for $200,000 with a closing date on or befor eSeptember 28, 2007. The Contract included Addendum A, which was titled Ex clusive Construction

Option and Right of First Refusal Ag ree ment (“the Ag ree ment”). The Ag ree ment was executed by DKH a nd the Kilg os on September 4, 2007 a nd includes the followingpara g raphs:

2. Commencement of Construction: [The Kilgos] ag ree to commence construction of a single family residenc e (and its attache d or detac hed g ara g e) on the Prop er t y (the “Residenc e”) , in compliance with para g raph 3 below, within twelve (12) months af ter the date of this Ag ree ment. 3. Ex clusive Build er : [The Kilgos] ag ree that they will exclusively utiliz e [DKH] as the contra ctor for construction of the Residence , and all rela ted improvements to the Property , pursuant to the terms of [DKH]’s then-c urre nt form of standard v ariable price residential construction contra ct, providing for a total contra ct price including reimburse ment of actua l construction costs, pay ment of g ener al overhe ad and supervision of three perc ent (3%) of the actual construction costs and a n ad d i tional contra ctor’s profit of fifteen perc ent (15%) of the actua l construction costs of the Residence (and all related improvements to the Proper ty) (i.e., “ cost plus”).

DKH contends that it discounted t he L ot’s purcha se price by $25,000 in exc h ange for the Kilgos’ execution of the Ag ree ment and that it would not have enter ed into the Contract without the executed Ag ree ment. I t is undisputed that the parties closed on the sale of the L ot in a timely fashion and that the Kilg os paid the full purc hase pr ice of $200,000. In the spring of 2009, DKH contac ted the Kilgos to inquire as to the status of building

a house on the L ot. At that time, the Kilgos informed DKH that they wer e not planning to build on the L ot, but inst ead ha d boug ht a diffe rent lot a nd wer e planningto build a house on that lot using

a differ ent buil d er as t h e contra ctor. In J anuar y 2010, DKH sued the Kilgos alleg ing that they brea ched their ag ree ment to build a house on the L ot and seeking to rec over either actua l damag es, liquidated damag es under a provision of the Agree ment, or specific perf ormanc e of the promise to 2b u i l d the house. After a bench trial, the court rende red a take- nothing judgme nt in fav o r o f t h e

Kilgos based on its conclusion t hat t he Agr eeme nt was unenforc eable and that the e vidence DKH prese nted in support of its damag es claim was too speculative to support an awa rd of damag es. The trial court filed finding s of fac t and conclusions of law in support of th e j u d gm en t
. I n its first three issues on appea l, DKH challeng es the following conclusions made by the trial court: (1) the Ag ree ment is unenfor ce ab l e as a matter of law beca use it does not contain cer tain disclosures require d by statute to be included in resi d en t i al co nstruction contra cts; (2) the Ag ree ment is unenfor cea

ble beca use it does not contain the essential elements of a contra ct to build a home; and (3) the Ag ree ment is an unenfor cea b l e agr ee m ent to ag ree to enter into a residential construction contra ct i n the future. In its fourth and fifth i ssues, DKH challenges the trial court’s findings that the evidenc e of DKH’ s los t p ro fi ts was speculative and that a liquidated damag es provision contained in the Ag ree ment was unenfor cea ble. In its six th issue, DKH complains that the trial court

err ed by excluding testimony reg arding damag es DKH suffe red due to the Kilgos’ alleg ed failure to mediate the dispute.

STANDARD OF REVIEW

We revie w conclusions of law de novo to deter mine whether they are leg ally corr ect. Goodenbour v. Goodenbour , 64 S.W .3d 69, 76 (Tex. App.—Austin 2001, pet. denied)

. We evaluate the trial court’s leg al conclusions independe ntly to deter mine whether the trial court corr ectly drew the leg al conclusions from the fac ts. Dallas Morning News v. Board of Trustees , 861 S.W .2d 432, 536 (Tex. App.—Dallas 1993, writ denied)

. I f the revie wing court deter mines a conclusion of law

3is err oneous, but the trial court rende red the proper judgme nt, the err oneous conclusion of law does

not require reve rsal. BMC Software Belg., N.V. v. Marchand, 83 S.W .3d 789, 794 (Tex. 2001).

The trial court’s ad m i s s ion or exclusion of evidenc e is revie wed under an abuse- of-discr etion standard. City of Brownsville v

. Alvarado , 897 S.W .2d 750, 753 (Tex. 1995). The trial court abuses its discretion when it acts in an arbit ra ry or unrea sonable manner without ref ere nce to any g uiding rules or principles. Jelinek v. C asas , 328 S.W .3d 5 26, 539 (Tex. 2010). For the ex clusion of evidenc e to constitute reve rsible error, the complaining party must show that (1) the trial court committed err or and (2) the err or probab l y cause d the rendition of an improper judgme nt. State v. Central Expressway Sign Assocs. , 302 S.W .3d 866, 870 (Tex. 2009) (citing McCraw v. Maris , 828 S.W .2d 756, 757 (Tex. 1992)). The exclusion or admission of evidence is likely harmless if the evidenc e was cumulative or the rest of the evidenc e was so one-sided that the

er ro r likely made no differ ence in the judgme nt. Reliance Steel & Aluminum Co. v. S ev ci k , 267 S.W .3d 867 (Tex. 2008). But if err oneously admitted or excluded evidenc e was cruc ial to a key issue, the er

ror is likely

harmful. Id.

DISCUSSIO N DKH sued the Kilgos fo r b re ach of contra ct arising out of their failure to build a h o u s e o n the L ot—using DKH as the construction contra ctor—within 12 months of signing th e Ag ree men t
. DK H’ s cl aim in this reg ard is depende nt on a finding t hat t he Kilgos enter ed int o an enfor cea ble contract for DKH to build them a home. The trial court f ound that the Kil g os did not and rende red a take- nothing judgme nt in their favor

. We first consider whether the trial court

4err oneously conclude d that the Kilgos wer e not obligated to construct a house on the L ot using DKH

as the c onstruction contra ctor.

DKH contends that the construction obligation is contained in the Ag re em en t
. The trial court, howeve r, conclude d that t h e Agr ee m ent did not constitute an enfor cea ble contra ct to construct a house. First, the trial court conclude d that the Ag ree ment was unenfor cea ble beca use it did not “ contain the essential elements of a contra ct to build a home.” We ag ree . To be enfor cea ble, a contra ct must be sufficie ntly definite in its terms that a court can understand what the promisor undertook. T. O. Stanley Boot Co. v. Bank of El Paso , 847 S.W .2d 218, 221 (Tex. 1992). The mater i al t er m s of the contra ct must be ag ree d on befor e a court can enfor ce it. Id. I f an alleg ed ag ree ment is so indefinite as to make it impossibl e for a cour t to fix the leg al obliga tions and l i ab i l i t i es of the parties, it cannot constitute an enfor cea ble contra ct. University Nat’l Bank

v. Ernst & W

hinney , 773 S.W .2d 707, 7 1 0 (T ex . App.—San Antonio 1989, no writ). A lack of def initeness in an agr eeme nt may conce rn various elements, including t ime of performanc e, price to be paid, work to be done, or service to be done. Gannon v. B a ke r , 830 S.W .2d 706, 709 (T ex . Ap p.—Houston [1st Dist.] 1992, writ denied) ; Terrell v. Nelson Puett Mortgage Co . , 511 S.W .2d 366, 369 (Tex. Civ. App.—Austin 1974, writ ref’d n.r .e.).

Whether an ag ree ment has all the e ssential terms to be an enfor cea ble ag ree ment is

a question of law. See Americ a ’s Favorite Chicken Co. v. Samaras , 929 S.W .2d 617, 625 (Tex. App.—San Antonio 1996, writ denied)

. Eac h contra ct should be considere d separ ately to deter mine its materia l terms. See T. O. Stanley Boot Co ., 8 4 7 S .W.2d at 221 (citing Bridewell v. Pritchett , 562 S.W .2d 956, 958 (Tex. Civ. App.—For t Worth 1978, writ ref

’d n.r.e.) ). We c onclude that the

5Ag ree ment at issue does not include terms essential to an ag ree ment to construct a house. For

example, the Ag ree ment does not include any of the information essential to define the undertaking such as the siz e of the house contemplated, the price of the house on a per- square -foot or other basis,

or the time for completing construction. In fac t, DKH’ s principal Keith Husband acknow ledg ed at trial that the Ag ree ment lacke d sever al elements he considered es s enti al to a contra ct to build a house, including a construction budg et, plans and specific ations for the home to be built, a method for handling chang e orders, and completion dates or estimated completion dates. The Agr eeme nt ref ers only to the construction of “a single family residenc e” for an undeter mined price

. The missing elements are essential terms of a contra ct to build a house; without them, the Ag ree ment is too indefinite to constitute an enf orce able a g ree ment. DKH contends that the Ag ree ment did not include these essential terms beca use the parties co n t em p l ated enter ing into a separ ate residential construction contra ct “once the Kilgos finalized their plans on what house they wanted to bu i l d o n t h e p ro perty .” I f that is the case , howeve r, t he Agr eeme nt is simply an agr eeme nt to make a future contrac t. To be e nforc eable , an ag ree ment to enter into a future contra ct must specify all its materia l and essential terms, leaving

n o n e t o be ag ree d on as the result of future neg otiations. See Ski River Dev ., Inc. v. Mc Ca l l a , 167 S.W .3d 121, 135 (Tex. A pp.—Waco 2005, pet. denied) (citing Parker Chiropractic Re search F o u n d

. v. F

a irmont Dallas Hotel Co. , 500 S.W .2d 196, 201 (Tex. Civ. App.—Dallas 1973, no writ)). When an essential term is left open for future neg otiation, the parties have nothing more than

an unenfor cea

ble “agree ment to agree .” See Oakroc k Exploration Co. v. Kill am , 87 S.W .3d 685, 690 (Tex. App.—San Antonio 2002, pet. denied)

. As previously stated, the Ag ree ment here lack s s e v era l

6of the terms essential to a contra ct t o b u i ld a home. Consequently , it does not constitute an

enfor cea ble agr eeme nt to enter into a future contract but is instead an unenf orce able a g ree ment to ag ree . The trial court prop er l y conclude d that if, as DKH contends, Addendum A is not the

co n s t ru cti on contra ct itself, it is simply an “‘a g ree ment to ag ree ’ in the future to a residenti al construction contra ct and is unenfor cea ble.” We overr

ule DKH’ s second and third appellate issues. In its first issue, DKH cha lleng es the trial c ourt’s conc lusion that the Ag ree ment is not enfor cea

ble because it does not contain the disclosures then r equire d by statute to be included in a contra ct for construction of a new home. See Act of May 24, 2007, 80th L eg ., R.S., ch. 843, § 30, 2007 Tex. Gen. L aws 1752, 1761 (expired S ept. 1, 2009) (contrac t for new construction not enfor cea ble unles s i t co ntains builder’s name and cer tificate of reg istration and cer tain notice provisions). DKH does not dispute that the disclosures are missing from t h e Ag ree ment, but contends that the disclosures wer e not require d beca use the Ag ree ment is not a res i d enti al constructi o n co n trac t subject to the statute. Having alre ady conclude d that the Ag ree ment is not enforcea ble beca use it lacks essential terms or is at best an unenfor cea ble ag ree ment to ag ree , we need n o t addre ss whether the Ag ree ment is unenfor cea ble for this additional rea son—failure to contain statutorily

require d notice provisions. Having conclude d that t h er e was no enfor cea ble contra ct obligating the Kilgos to construct a home on the L ot using DKH as the construction contra ctor, there could be no brea ch of such a contra ct and DKH was not entitled to rec over damag es under that theory

. Consequently , we need not addre ss DKH’ s fourth and fifth issues challeng ing the district co u rt ’s conclusions that DKH’ s “evide nce reg arding lost profits was speculative and [i t] was not entitled to an aw ar d o f

7expectancy damag es” and that “the liquidated damag es clause in [t h e Agree ment] is an illega l

penalty and unenfor cea

ble.” The trial court proper ly rende red a take- nothing judgme nt ag ainst DKH on its breac h-of- contra ct ca use of a ction. In its six th issue, DKH complains of the trial court’s ref usal to permit Keith Husband, DKH’ s principal, to te stify reg arding damag es arising out of the Kilgos’ alleg ed failure to me diate this dispute. The trial court expressly found that “the parties and their attorney s met prior to the time suit was filed in an attempt to resolve their diff ere nces,” and “[ t] he mediation provisions found in [t he Ag ree ment] wer e not materia lly brea ched by any of the parties.” Given that the Ag ree ment was unenfor cea

ble, fa ilure to mediate c ould not constitute a materia l br eac h and exclusion of e vidence

o f s u ch failure could not be harmful err or. Assuming the Ag ree ment did contain an enfor ceabl e mediation ag ree ment, howeve r, would not chang e the result. The trial court conclude d that neither the Kilgos nor DKH failed to comply with t h eir mediation obligations. DKH does not challeng e these finding s. When, as here , finding s of fact are filed, unchalleng ed finding s are binding on the appellate court unless the contra ry is established as a matter of law, or there is no evidenc e to support the finding

. See McG alliard v. Kuhlman , 722 S.W .2d 694, 696-97 (Tex. 1986). Husband testified at trial that he met with the Kilgos and their attorney prior to DKH’ s filing suit, but the parties wer e not able to rea ch an ag ree ment on how to resolve their differ ence s. He also testified that there wer e further attempts to neg otiate a resolution even afte r suit was filed. DKH makes no eff ort in its brief to e stablish that, as a matter of law, the Kilgos failed to neg otiate with DKH in a n eff ort to r esolve this dispute, and there is evidenc e to support the trial court’s finding that the Kilgos did not brea ch

an ag ree ment to neg otiate. The Ag ree ment require s that “the dispute shall be submitt ed to mediation

8befor e resor ting to litigation.” W h i l e Husband testified that DKH reque sted mediation and the Kilgos declined, there is no evidenc e that DKH attempted to compel mediation befor e or afte r filing suit. In any event, the trial court did not abuse its discretion in ref using to admit testimony from Husband reg arding the damag es alleg edly arising from any brea ch of an agree ment to mediate. DKH argued that, as a result of the failure to mediate the ca s e, i t i n curr ed attorney ’s fee s in prosec uting its brea ch-of -contra ct claim ag ainst the Kilgos and attempted to testify reg arding the amount of those fe es. Counsel for the Kilgos obje cted to Husba nd’s testimony

on the g round that it called for

speculation. The trial c ourt sustained the objec tion and excluded the testimony . This

was not an abuse of discretion. DKH’ s claim that the attorney ’s fee s it has incurre d in prosec uting this suit resulted from the Kilgos’ failure to mediate presuppose s that the parties would have rea ched

an ag ree ment had they mediated the case . T h at t h e p arties would have rea ched an ag ree ment in mediation is pure speculation, and any testimony to the eff ect that the failure to mediate nece ssarily

ca u s ed DK H t o incur attorney ’s fee s for filing suit is too speculative to constitute rele vant or probative e vidence . We overrule DKH’ s six th issue.

CONCLUSION The trial court did not err in concluding that the ag ree ment on which DKH bases its brea ch-of -contra ct cause of action is unenfor cea ble. The trial court did not abuse its discretion in excluding testimony reg arding damag es arising from the Kilgos’ alleg ed failure t o mediate this dispute. Consequently , we a ffirm the tria l court’s judg ment.

9_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ J . Woodfin J ones, Chief Just ice Be fore Chief J ustice Jones, J ustices Henson a nd Goodwin Affir med Filed: May

11, 2011

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