Bain & Schindele Tax Consulting, LLC v. EW Tax and Valuation Group, LLP
Dallas Court of Appeals , No. 05-23-00560-CV (August 7, 2024)
Justices Molberg, Nowell (Opinion, linked here), and Kennedy
Just over a year after the deal closed, Schindele started a new business and began providing tax services for several former BSTC clients. Upon learning of this, EW Tax stopped making its monthly payments under the note and sued for breach of contract; BSTC counterclaimed for the payments remaining under the note. After a bench trial, the district court found Schindele had materially breached the parties’ agreement by accepting work from BSTC clients within the non-soliciation period. But it nevertheless awarded BSTC about $275,000—the note balance minus (a) the payments EW Tax had already made and (b) the value of that portion of the “Restrictive” non-solicitation period lost to EW Tax by virtue of Schindele’s breach.
The Dallas Court of Appeals reversed and rendered judgment that BSTC take nothing on its claim. Although Schindele argued she had not solicited former BSTC clients, saying they had approached her, she and BSTC did not contest the trial court’s finding that she accepted work and payment from those former BSTC clients during the Restrictive Period. That was enough to support the trial court’s finding of material breach of this particular agreement, which expressly barred her from accepting work from former BSTC clients, as well as from soliciting such work. “It is a fundamental principle of contract law that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from further performance,” the appeals court observed. It therefore held Schindele’s material breach discharged EW Tax from its obligation to make any payments after the breach—even though those were obligations under the note, rather than the sales agreement itself.
