Amx Enterprises, L.L.P. v. Master Realty Corp., 2-07-239-CV.

• Citation: 283 S.W.3d 506
• Decision Date: 09 April 2009
• Docket Number: No. 2-07-239-CV.,2-07-239-CV.
• Parties: AMX ENTERPRISES, L.L.P., f/k/a AMX Enterprises, Inc., Appellant, v. MASTER REALTY CORP., Appellee.
• Court: Court of Appeals of Texas

283 S.W.3d 506

AMX ENTERPRISES, L.L.P., f/k/a AMX Enterprises, Inc., Appellant, v. MASTER REALTY CORP., Appellee.

No. 2-07-239-CV.

Court of Appeals of Texas, Fort Worth.

April 9, 2009.

Griffith, Jay & Michel, LLP, Thomas M. Michel, Kelly E. DeBerry, Forth Worth, David Kallus, The Woodlands, for Appellant.

Barlow, Garsek & Simon, LLP, David D. Rapp, Paul J. Vitanza, Fort Worth, for Appellee.

PANEL: GARDNER and WALKER, JJ.

OPINION ON REHEARING

ANNE GARDNER, Justice.

We grant Appellant AMX Enterprises, L.L.P.'s motion for rehearing in part, deny it in part, withdraw our opinion and judgment of January 8, 2009, and substitute the following. The only changes from our original opinion are the additions of this paragraph and the last sentence of this opinion on rehearing.

Among the issues in this case are three questions of first impression: Whether a trial court may toll the accrual of statutory interest under the Prompt Payment to Contractors Act¹ for periods of delay attributable to the claimant; whether a contractor who prevails on a claim under the Act may recover both 18% prejudgment interest under the Act and common law prejudgment interest; and whether attorney's fees for in-house counsel should be calculated under the "market rate" method or the "cost-plus" method. We answer "no" to the first question, "no" to the second, and "market rate" to the third. We affirm the trial court's judgment in part, reverse and render in part, and remand for a new trial on attorney's fees.

Background

In April 2002, Appellee Master Realty Corp. ("MRC") hired Appellant AMX to remediate flood damage in a hotel owned by MRC for the contract price of $469,834. During its work on the project, AMX submitted three invoices to MRC, as follows: An invoice for $46,983 dated October 14, 2002; an invoice for $305,392.10 dated November 11, 2002; and an invoice for $117,458.90 dated January 31, 2003. Together, the invoice amounts equal the contract price of $469,834. MRC paid AMX $46,983 on November 4, 2002; $200,000 on February 19, 2003; and $175,951 on March 10, 2003, for a total payment of $422,934, leaving a balance on the contract price of $46,900.

On October 23, 2003, AMX sued MRC for breach of contract, violation of the Prompt Payment to Contractors Act, judicial foreclosure of its constitutional lien, and attorney's fees. MRC filed a general denial.

MRC sold the hotel to Composite Investments, Inc. in July 2004 and, because of AMX's lien on the property, placed $93,800 in an escrow account to facilitate the sale. AMX joined Composite as a defendant, seeking judicial foreclosure of the lien AMX had placed on the property, but AMX later agreed to dismiss its lien with prejudice in exchange for Composite's depositing $93,800 into the trial court registry.

AMX and MRC tried their dispute to a jury in September 2006. The parties stipulated the facts related to AMX's Prompt Payment to Contractors Act claim, namely, the dates and amounts of AMX's invoices and of MRC's payments. The jury rendered a verdict in favor of AMX for $46,900. The parties agreed to submit the issue of attorney's fees to the court.

AMX moved for the entry of judgment on the verdict, seeking a judgment of $46,900 in contract damages awarded by the jury; statutory interest under the Prompt Payment to Contractors Act in the amount of $46,452.86; common law prejudgment interest; attorney's fees in an amount between $221,768.49 and $254,110.16, of which an amount between $194,049.99 and $226,391.66 was attributable to work done by AMX's in-house counsel; court costs; and postjudgment interest.

The trial court entered judgment on May 31, 2007. The judgment awarded AMX $46,900 in contract damages, $18,758.43 in statutory interest under the Prompt Payment to Contractors Act, no common-law prejudgment interest, and no attorney's fees. Upon AMX's request, the trial court made findings of fact and conclusions of law. Among other things, the trial court found that AMX had "caused significant periods of delay" in the litigation totaling 745 days and that AMX had failed to prove that it had actually incurred the attorney's fees it claimed. AMX filed this appeal.

Discussion

I. Tolling of prejudgment interest under the Prompt Payment to Contractors Act

In its first issue, AMX argues that the trial court erred by tolling the accrual of prejudgment interest under the Prompt Payment to Contractors Act for litigation delays that the trial court attributed to AMX.

The Prompt Payment to Contractors Act provides that an owner of real property who receives a written payment request from a contractor for an amount that is allowed under a contract for properly performed work or suitably stored or specially fabricated materials must pay the amount, less any amount withheld as authorized by statute, not later than the thirty-fifth day after the date the owner receives the request. Tex. Prop.Code Ann. § 28.002(a). Section 28.004, captioned "Interest on Overdue Payment," provides as follows:

(a) An unpaid amount required under this chapter begins to accrue interest on the day after the date on which the payment becomes due.

(b) An unpaid amount bears interest at the rate of 1 1/2 percent each month.

(c) Interest on an unpaid amount stops accruing under this section on the earlier of:

(1) the date of delivery;

(2) the date of mailing, if payment is mailed and delivery occurs within three days; or

(3) the date a judgment is entered in an action brought under this chapter.

Id. § 28.004. Significantly, the Act contains no provision for tolling the accrual of interest during periods of litigation delay, and no court has held that a trial court may toll interest accruing under the Act.

MRC contends that the interest provided by the Act is simply prejudgment interest and that a trial court has the equitable power to toll its accrual. In support of its equitable-tolling argument, MRC cites Helena Chemical Company v. Wilkins ("Wilkins I"), in which the San Antonio court held that a trial court may, in its discretion, issue orders tolling prejudgment interest during periods of delay. 18 S.W.3d 744, 760 (Tex.App.-San Antonio 2000), aff'd, 47 S.W.3d 486 (Tex.2001) ("Wilkins II"). Wilkins relied on former finance code section 304.108(b), which specifically authorized prejudgment interest tolling in wrongful death, personal injury, and property damage cases. Id.; see Act of May 22, 1997, 75th Leg., R.S., ch. 1008, § 1, 1997 Tex. Gen. Laws 3091, 3436, repealed by Act of May 16, 2003, 78th Leg., R.S., ch. 204, § 6.03, 2003 Tex. Gen Laws 847, 862. Although the legislature repealed section 304.108(b) in 2003, MRC argues that Wilkins is still good law because the supreme court has not overruled its affirmance of the court of appeals's opinion. But the question of interest tolling was not appealed to the supreme court. Wilkins II, 47 S.W.3d at 491. Thus, the supreme court's affirmance does not add precedential weight to the San Antonio court's opinion in Wilkins I, and the repeal of the statute on which Wilkins I relied destroys its value as persuasive authority. On a more fundamental level, even if former finance code section 304.108(b) were still in effect, it applied only to wrongful death, personal injury, and property damage cases and thus would not justify tolling in this contract case.

Because no authority supports the tolling of prejudgment interest accruing under the Act, we hold that the trial court erred by failing to award AMX the full amount of interest mandated by property code section 28.004. We must now calculate the amount of interest the trial court should have awarded under the Act on AMX's three invoices.

MRC paid AMX's first invoice within thirty-five days, so no interest accrued on that invoice. AMX's second invoice, dated November 11, 2002, was for $305,392.10. Interest accrued on the full invoice amount from December 17, 2002, until MRC made a partial payment of $200,000 on February 19, 2003, a span of sixty-four days. Sixty-four times the statutory interest rate (1.5% per month equals 18% per annum equals .05% per day) times the invoice amount is $9,638.68.

Interest continued to accrue on the $105,392.10 balance on the second invoice from February 20 until MRC made its $175,951 payment on March 10, 2003, a total of eighteen days, for additional interest of $935.54.

Interest began to accrue on AMX's third invoice, for $117,458.90, on March 8, 2003. When MRC made its $175,951 payment on March 10, 2003, the total due on the third invoice had accrued $115.85 in interest.

The $46,900 balance due on the third invoice continued to accrue interest until the trial court entered judgment on May 31, 2007, 1,542 days later, during which time an additional $35,664.56 in interest accrued.

Thus, the total prejudgment interest due to AMX under property code section 28.004 is $9,638.68 plus $935.54 plus $115.85 plus $35,664.56 for a total of $46,354.62. We sustain AMX's first issue, reverse the trial court's award of $16,792.38 in statutory interest, and render judgment in favor of AMX for statutory interest in the sum of $46,354.62.

II. Common law prejudgment interest

In its second issue, AMX argues that the trial court erred by failing to award it common law prejudgment interest on the $46,900 in contract damages awarded by the jury in addition to statutory interest under property code section 28.004. AMX contends that interest under section 28.004 is "penalty interest," not "prejudgment interest," and that a prevailing contractor may therefore recover both forms of interest.

Prejudgment interest serves two purposes. First, it compensates a claimant for lost use of the money due as damages during the lapse of time between the accrual of the claim and the date of judgment. Battaglia v. Alexander, 177 S.W.3d 893, 907 (Tex.2005); Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex.1998); see also Tex. Fin.Code Ann. § 301.002(a)(4) (Vernon...