Sp Terrace, L.P. v. Meritage Homes Of Texas, LLC

334 S.W.3d 275 (2010)

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Nature of the Case

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Facts

D entered into an earnest money contract with P to develop and sell ninety-six lots. The development plan required small and narrow lots, and P was one of a few builders who could construct houses to fit the particular lot sizes. D was required to improve the overall subdivision. and to file a subdivision plat by a December 31, 2005, substantial completion deadline. After substantial completion, P would then purchase the lots in a series of transactions. The total purchase price was $2,688,000. P deposited $268,000, as earnest money. If P did not achieve substantial completion by December 31, 2005, P could terminate the contract and recover its earnest money deposit. If P delayed D's performance of its contractual obligations, the substantial completion deadline would 'be extended to the extent of any such delay.' On November 30, d was ready to file the subdivision plat. P asked for changes to the plat, and it requested that D postpone filing the plat to accommodate those changes. D agreed but informed P that a six-month extension of the substantial completion deadline would be necessary to address these and any future changes to the development. The parties orally agreed to extend the substantial completion deadline, and P agreed to sign a written extension memorializing the oral modification. D mailed a written agreement to P before December 31, 2005. D never received a response. The parties continued to work together but on February 3, P informed D that, due to D's failure to meet the substantial completion deadline, P was terminating the contract and demanding the return of its earnest money deposit. P sued for breach of contract. D counterclaimed for breach of contract, alleging that P (1) delayed performance, (2) failed to cooperate, and (3) breached their oral agreement to extend the substantial completion deadline by six months, all of which entitled D to retain the earnest money deposit and recover actual damages in addition to the earnest money it kept. P argued that D's counterclaim failed as a matter of law because it did not state a claim for affirmative relief and the liquidated damages provision in the contract precluded D from recovering actual damages in excess of the earnest money deposit. D called P a liar about the contract extension and that the liquidated damages provision was unenforceable as a penalty. The trial court entered a final judgment in favor of P, awarding the $ 268,000 earnest money deposit as damages and the full amount of attorney's fees requested by P. D appealed.