Beard Family Part. v. Commercial Indem.

• Decision Date: 29 August 2003
• Docket Number: No. 03-01-00443-CV.,03-01-00443-CV.
• Citation: 116 S.W.3d 839
• Parties: BEARD FAMILY PARTNERSHIP, Appellant, v. COMMERCIAL INDEMNITY INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

116 S.W.3d 839

BEARD FAMILY PARTNERSHIP, Appellant, v. COMMERCIAL INDEMNITY INSURANCE COMPANY, Appellee.

No. 03-01-00443-CV.

Court of Appeals of Texas, Austin.

August 29, 2003.

William W. Rittenhouse, William W. Rittenhouse, P.C., Austin, for appellant.

G. Stewart Whitehead, Karen G. Gantt, Winstead, Sechrest & Minick, P.C., Austin, for appellee.

Before Justices KIDD, PATTERSON and PURYEAR.

OPINION

Opinion by Justice PATTERSON.

This case involves a surety's rights and obligations under payment and performance bonds entered into pursuant to a construction contract. Appellee Commercial Indemnity Insurance Company ("Commercial Indemnity"), the surety, sued appellant Beard Family Partnership ("Beard"), the owner of land to be developed as a subdivision, for breach of contract and attorneys' fees based on Beard's failure to pay Commercial Indemnity the contract balance for the completed construction of a residential subdivision's infrastructure after the contractor defaulted. Following a jury trial, the jury specifically found that both parties failed to comply with the underlying construction contract, but that Commercial Indemnity substantially performed the contract. The jury awarded damages and reasonable attorneys' fees to Commercial Indemnity. Based on the jury's damages finding of $155,733.51, the court rendered judgment in favor of Commercial Indemnity, adding prejudgment interest in the amount of $43,571.25, attorneys' fees in the amount of $57,642.62, and a conditional award for attorneys' fees on appeal.

In ten issues Beard appeals, arguing that (i) the jury's findings are based on no evidence or insufficient evidence; (ii) Commercial Indemnity failed to comply with conditions precedent that precluded its recovery; (iii) the court erred in awarding attorneys' fees because Commercial Indemnity's expert witness was untimely disclosed; and (iv) the court erred in excluding Beard's evidence regarding its damages and settlement offer. Finding these grounds without merit, and addressing the arguments raised by the parties in their briefs and at oral argument, we affirm the judgment of the trial court.

FACTUAL BACKGROUND

Beard owned land in Austin, which was subdivided to be developed for residences. On February 6, 1995, Beard and Round Rock Construction entered into a contract for the construction of the subdivision's infrastructure, which included the streets, water, and wastewater and drainage facilities. Beard agreed to pay Round Rock $504,930.50 for the contractor's performance. The parties agreed in the contract that the work would be completed in 150 days and that liquidated damages would be $500 per day after 150 days.

The contract also provided for Round Rock to furnish performance and payment bonds to guarantee faithful performance of the job and payment of obligations arising under the contract. Commercial Indemnity issued performance and payment bonds to Round Rock pursuant to the contract. Under the performance bond, Commercial Indemnity guaranteed that if Round Rock failed to perform the contract, Commercial Indemnity would remedy the default. Under the payment bond, Commercial Indemnity guaranteed that if Round Rock failed to pay its suppliers of labor and materials furnished under the construction project, Commercial Indemnity would "promptly and faithfully pay claimants."

Round Rock began its work on the job during the first week of March 1995. The parties immediately discovered inconsistencies between the record drawings, also known as the "plans," and the topography of the field. Beard's engineer, Freddie Dippel, Jr. of the Cunningham-Allen engineering firm, met with Round Rock on March 16 to discuss the problems with the plans. Dippel acknowledged at trial that something was wrong "with regard to how natural ground was perceived in this set of plans." The elevations on the original plan were miscalculated by six to eight vertical feet. Dippel corrected the plans, adjusted the elevations according to the actual topography of the area, submitted the new plans for approval by the City on April 5, and received approval from the City on May 18. Pursuant to the adjusted plans, Round Rock regraded the project.

The change in the elevations on the original plans led to changes in other aspects of the job. On July 18, 1995, Round Rock agreed to a change order to install "dry" utilities in the subdivision. Although Cunningham-Allen had designed the infrastructure of the subdivision and received approval of the plans from the City in 1991, the plans had not included the "dry utilities," such as electricity, gas, telephone, and television cable. The City drafted the dry utilities plans after Cunningham-Allen presented its plans to the City. An additional sum of $29,450 was agreed upon to install underground electric lines, work that included excavation, backfill, conduit installation, pullboxes, and transformer pads. Because of the elevation changes to the original plans, the dry utilities plans did not mesh with the original plans.

Shortly thereafter, in late summer, John Schuler, Commercial Indemnity's president, learned that Round Rock was having problems meeting its payroll. When the job was close to completion in October 1995, Round Rock went out of business, defaulting on payment to numerous subcontractors and suppliers. At that time, Round Rock had submitted and Beard had paid on six applications for payments totaling over $400,000. Beard then made a claim on the performance bond. Commercial Indemnity took over the job, exercising its option under the performance bond to complete the contract by hiring a replacement contractor, Coleman Construction Company, to finish the work. Coleman hired many of Round Rock's employees. After Commercial Indemnity took over the job, unpaid subcontractors filed several liens. At trial, Schuler testified that all claims and liens were paid in October and November 1995.

In December 1995, Beard began selling lots to homebuilders. In mid-January 1996, the subdivision's streets were paved. Commercial Indemnity submitted applications for payment for the amount remaining on the contract, as well as for other work performed. An unpaid balance of $155,733.51 remained. By application dated December 13, 1995 ("Application No. 7"), Commercial Indemnity applied for payment in the amount of $30,391.20. By application dated March 20, 1996 ("Application No. 8"), Commercial Indemnity applied for payment in the amount of $125,342.91. Although Coleman finished the job and Dippel approved the applications for payment on March 22, 1996, Beard did not pay the amounts requested. The parties disagreed about when the construction was "substantially complete" as required by the contract: Commercial Indemnity contended that the project was substantially complete in December when Beard began selling the lots; Beard contended the job was at least 202 days late. Beard refused to pay the amount Commercial Indemnity claimed without some deduction for the delay and receipt of an all-bills-paid affidavit, which Beard requested and Commercial Indemnity failed to provide.

Commercial Indemnity then filed suit against Beard, seeking the unpaid balance of the contract in the amount of $155,733.51, plus additional damages in the amount of $60,000 for installation of the telephone and television cable outside the scope of the contract and upon Beard's request. Commercial Indemnity also sought attorneys' fees. In its defense, Beard contended that (i) Coleman finished the work 202 days beyond the 150-day period provided in the contract for completion of the project and that Commercial Indemnity was therefore responsible for the delay, and (ii) Commercial Indemnity failed to submit an all-bills-paid affidavit.

ANALYSIS

Substantial Performance

The jury expressly found that Commercial Indemnity substantially performed the construction contract and awarded contract damages in the amount of $155,733.51. It also found that Beard failed to comply with the construction contract. In its first and fourth issues, Beard asserts that, by Commercial Indemnity's failure to submit an all-bills-paid affidavit upon Beard's request, Commercial Indemnity failed to meet a condition precedent to being paid the balance under the contract. In these issues, Beard asks us to interpret the contract in question, which neither party asserts is ambiguous. The interpretation of an unambiguous contract is a question of law, to which we apply a de novo standard of review. MCI Telecomms. Corp. v. Texas Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex.1999); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983).

A condition precedent that affects a party's obligation to perform is an act or event that must occur after the making of a contract before a right to immediate performance arises and before there may be a breach of contractual duty. Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex.1992); Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976). Ordinarily, if the acceptance of a contract is conditioned upon the happening of a future event, the condition must be performed or fulfilled exactly as set forth in the contract before the promise can be enforced. See Centex, 840 S.W.2d at 956.

Beard thus argues that the contract creates a condition precedent requiring Commercial Indemnity to fulfill all terms and conditions of the underlying contract between Beard and Round Rock, including the provision of an all-bills-paid affidavit. The contract between Beard as Owner and Round Rock as Contractor provided:

¶ 9.10 FINAL COMPLETION AND FINAL PAYMENT

¶ 9.10.1.... The architect's final Certificate for Payment will constitute a further representation that conditions listed in subparagraph 9.10.2 as precedent to the Contractor's being entitled to final payment have been fulfilled.

¶ 9.10.2 Neither final payment nor any remaining retained percentage shall become due until the Contractor submits to the Architect...