City of Wolfe City v. Am. Safety Cas. Ins. Co.

• Decision Date: 09 February 2018
• Docket Number: No. 06-17-00075-CV,06-17-00075-CV
• Citation: 557 S.W.3d 699
• Parties: The CITY OF WOLFE CITY, Texas, Appellant v. AMERICAN SAFETY CASUALTY INSURANCE COMPANY, Appellee
• Court: Texas Court of Appeals

557 S.W.3d 699

The CITY OF WOLFE CITY, Texas, Appellant

v.AMERICAN SAFETY CASUALTY INSURANCE COMPANY, Appellee

No. 06-17-00075-CV

Court of Appeals of Texas, Texarkana.

Date Submitted: January 5, 2018

Date Decided: February 9, 2018

Daniel W. Ray, Scott, Ray & Sullivan, PLLC, Greenville, TX, for Appellant.

Byron C. Keeling, Anna Fredrickson, Keeling & Downes, PC, James D. Cupples, Sonia M. Mayo, Cupples & Associates, PLLC, Houston, TX, for Appellee.

Before Morriss, C.J., Moseley and Burgess, JJ.

OPINION

Opinion by Justice MoseleyWhen McKinney and McMillen, LLC (M&M), allegedly defaulted on its contract with the City of Wolfe City (the City) to provide it with a fully functioning, enhanced water distribution system with a fixed-base, automatic, meter-reading system, the City made demand on American Safety Casualty Insurance Company (American Safety), the issuer of M&M’s performance bond, to complete the project. After American Safety refused to complete the project, the City filed suit against it, M&M, and others,¹ alleging breach of contract and promissory estoppel. After an adequate time for discovery, American Safety filed traditional and no-evidence motions for summary judgment on the City’s contract and promissory estoppel claims, which were granted by the trial court. On appeal, the City complains that the trial court erred in granting both the traditional and no-evidence motions for summary judgment on its contract claims² and that it abused its discretion in denying the City’s motion for reconsideration. We agree that the trial court erred in granting the motions for summary judgment.

I. Background

In December 2011, the City entered into a contract (the Contract) with M&M to enhance its water distribution and treatment system. After change orders, the total value of the Contract was $839,665.30. American Safety issued a performance bond in favor of the City guaranteeing M&M’s performance under the Contract. As part of its work under the Contract, M&M was required to install 722 remote read water meters (meters) that would enable the City’s employees to read the meters from their vehicles, rather than visually reading each individual meter. In May 2012, the first change order was entered into by the City and M&M that required M&M to change the automatic meter-reader (AMR) system from a drive-by system to a fixed-base system in which a meter interface unit (MIU) attached to the meters would electronically transmit information from the meters to the City’s computer system. Under the Contract, any meter in this fixed-based AMR system was required to be compatible with the Datamatic Firefly MIU. M&M subcontracted with HD Supply Waterworks, Ltd., and/or HD Supply, Inc. (HD Supply), to supply the meters and the Datamatic MIUs. Apparently, HD Supply subcontracted with Datamatic, Ltd. (Datamatic), to supply and install the MIUs on the meters.

By March 27, 2013, most of the work under the Contract had been completed. On that date, Michael Tibbets, an engineer with Hayter Engineering (Hayter), the City’s engineer on the project, signed a certificate of substantial completion affirming that the work under the Contract was substantially complete. Attached to the certificate of substantial completion was a pre-final inspection punch list of items that needed to be corrected or completed within thirty days, including a requirement to "[b]ring the Datamatic remote read water meter system up to full functional status." On that date, at least eighty-five MIUs had not been installed. Tibbets testified that although not all of the MIUs had been installed, the part of the system that had been completely installed was functioning properly. Since the system was supposed to be expandable, and the City was not experiencing any problems, he believed he could say it was fully functional at that time. On April 17, 2013, Change Order No. 2 was executed by M&M, Hayter, and the City to add the installation of approximately eighty more meters and MIUs to the Contract and to extend the time for completing the project.

Shortly afterward, the City began experiencing significant problems with the system, including meters failing to correctly register the amount of water being used, meters running backwards, and meters randomly sending error messages. It is uncontested that a portion of the meter register heads and MIUs failed. The City worked with M&M and its subcontractors for several months in an attempt to resolve the ongoing problems, but the system was never fully functional. On November 4, 2013, the City made demand on American Safety under its performance bond. After M&M ceased working to resolve the problems with the AMR system, the City filed this suit on March 20, 2014.

After an adequate time for discovery, American Safety filed both traditional and no-evidence motions for summary judgment. In its no-evidence motion, American Safety asserted that there was no evidence that M&M breached the Contract and that there was no evidence that the problems experienced by the City were the result of a construction defect. In its traditional motion, American Safety argued that it was entitled to rely on Hayter’s certificate of substantial completion such that American Safety owed no further obligation to the City under its performance bond. After the City filed its responses and the trial court heard the arguments of counsel, the trial court entered its order granting both of American Safety’s motions.

II. Standard of Review

The grant of a trial court’s summary judgment is subject to de novo review by appellate courts. Provident Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211, 215 (Tex. 2003). In making the required review, we deem as true all evidence which is favorable to the nonmovant, we indulge every reasonable inference to be drawn from the evidence, and we resolve any doubts in the nonmovant’s favor. Valence Operating Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005). When the trial court does not specify the basis for its ruling, we must affirm a summary judgment if any of the grounds on which judgment was sought are meritorious. Merriman v. XTO Energy, Inc. , 407 S.W.3d 244, 248 (Tex. 2013).

"When a party moves for both traditional and no-evidence summary judgments, we first consider the no-evidence motion." First United Pentecostal Church of Beaumont, d/b/a the Anchor of Beaumont v. Parker , 514 S.W.3d 214, 219 (Tex. 2017) (citing Ford Motor Co. v. Ridgway , 135 S.W.3d 598, 600 (Tex. 2004) ). "If the non-movant fails to meet its burden under the no-evidence motion, there is no need to address the challenge to the traditional motion as it necessarily fails." Id. (citing Merriman , 407 S.W.3d at 248 ). "Thus, we first review each claim under the no-evidence standard." Id. A no-evidence summary judgment is essentially a pretrial directed verdict. Therefore, we apply the same legal sufficiency standard in reviewing a no-evidence summary judgment as we apply in reviewing a directed verdict. Wal-Mart Stores, Inc. v. Rodriguez , 92 S.W.3d 502, 506 (Tex. 2002). "We must determine whether the plaintiff produced any evidence of probative force to raise a fact issue on the material questions presented."

Woodruff v. Wright , 51 S.W.3d 727, 734 (Tex. App.—Texarkana 2001, pet. denied). The plaintiff will defeat a defendant’s no-evidence summary judgment motion if the plaintiff presented more than a scintilla of probative evidence on each element of its claim. King Ranch, Inc. v. Chapman , 118 S.W.3d 742, 751 (Tex. 2003) ; Rhine v. Priority One Ins. Co. , 411 S.W.3d 651, 657 (Tex. App.—Texarkana 2013, no pet.).

"Any claims that survive the no-evidence review will then be reviewed under the traditional standard." Parker , 514 S.W.3d at 219–20. To be entitled to traditional summary judgment, a movant must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c) ; Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 848 (Tex. 2009). Once the movant produces evidence entitling it to summary judgment, the burden shifts to the nonmovant to present evidence raising a genuine issue of material fact. Walker v. Harris , 924 S.W.2d 375, 377 (Tex. 1996). A defendant who conclusively negates a single essential element of a cause of action or conclusively establishes an affirmative defense is entitled to summary judgment on that claim. Frost Nat'l Bank v. Fernandez , 315 S.W.3d 494, 508 (Tex. 2010).

III. Analysis

Under the terms of its bond, American Safety bound itself to perform M&M’s contract with the City if M&M failed to do so. In addition, the bond specifically incorporated the terms of the Contract.³ As American Safety correctly states, American Safety is only liable to the City under its bond if M&M has breached the Contract. See Great Am. Ins. Co. v. N. Austin Mun. Util. Dist. No. 1 , 908 S.W.2d 415, 419 (Tex. 1995) ; Am. Empl'rs' Ins. Co. v. Huddleston , 123 Tex. 285, 70 S.W.2d 696, 697–98 (1934) ; Wright Way Constr. Co. v. Harlingen Mall Co. , 799 S.W.2d 415, 426 (Tex. App.—Corpus Christi 1990, writ denied) ; Bayshore Constructors, Inc. v. S. Montgomery Cty. Mun. Util. Dist. , 543 S.W.2d 898, 902 (Tex. Civ. App.—Beaumont 1976, writ ref'd n.r.e.). Therefore, in order to determine whether there is a scintilla of evidence showing that M&M failed to perform under the Contract and whether American Safety owed the City any obligation under its bond, we must examine the relevant terms of the Contract.

Paragraph 6.01(A) of the General Conditions provides that M&M, as the Contractor,

shall supervise, inspect, and direct the Work^{[4 ]} competently and efficiently, devoting such attention thereto and applying such skills and expertise as may be necessary to perform the Work in accordance with the Contract Documents. CONTRACTOR shall be solely responsible for the means, methods, techniques, sequences, and procedures of construction, but CONTRACTOR shall not be

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