Green Intern., Inc. v. Solis

• Decision Date: 02 October 1997
• Docket Number: No. 95-1278,95-1278
• Citation: 951 S.W.2d 384
• Parties: 40 Tex. Sup. Ct. J. 610 GREEN INTERNATIONAL, INC., f/k/a the Argee Corporation, and Seaboard Surety Company, Petitioners v. Frank SOLIS, individually and d/b/a Allied Steel General Contractors, Respondent.
• Court: Texas Supreme Court

Page 384

951 S.W.2d 384

40 Tex. Sup. Ct. J. 610

GREEN INTERNATIONAL, INC., f/k/a the Argee Corporation, and Seaboard Surety Company, Petitioners v. Frank SOLIS, individually and d/b/a Allied Steel General Contractors, Respondent.

No. 95-1278.

Supreme Court of Texas.

Argued Oct. 1, 1996.

Decided June 6, 1997.

Rehearing Overruled Oct. 2, 1997.

George C. Baldwin, Paula Fisher Baldwin, Austin, for petitioners.

Dwayne Hoover, Stephen D. Harrison, Patrick J. Maher, Fort Worth, Charles K. Kebodeaux, Beaumont, for respondent.

ENOCH, Justice delivered the opinion of the Court, in which PHILLIPS, Chief Justice, HECHT, CORNYN, SPECTOR, OWEN, BAKER and ABBOTT, Justices, join.

In Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505 (Tex.1993), we held that certain contractual provisions relieving a party in advance for its own negligence must be unambiguous and conspicuous. The principal issue in this case is whether the same rule applies to no-damages-for-delay clauses. The court of appeals held that it does. 932 S.W.2d at 60. We disagree. For this and other reasons, we reverse the judgment of the court of appeals.

The Argee Corporation, now known as Green International, Inc., was the general contractor for the construction of three prison projects for the State of Texas located near Snyder, Dayton, and Woodville. Green contracted with Frank Solis to provide the labor for the steel erection and a portion of the concrete. Solis completed his work for the Snyder Project, but abandoned the Dayton and Woodville Projects before they were completed.

Green sued Solis for breach of contract, fraud, and other claims which are not raised in this appeal. Solis counterclaimed against Green for breach of contract, conversion, fraud, and other claims also not raised in this appeal. Solis added Seaboard Surety Company, Green's surety, as a third party.

The jury found that (1) Green had not paid Solis the contract balance on the Snyder Project; (2) Solis had performed extra work on the Snyder and Dayton Projects for which Green failed to pay; (3) Green breached the subcontracts on the Snyder Project and the Dayton Project by failing to pay Solis, failing to timely purchase materials for Solis, failing to timely submit shop drawings, failing to timely schedule delivery of materials, failing to coordinate the work of other subcontractors, and failing to obtain timely resolution of conflicts in the plans and specifications; (4) Solis did not waive Green's breaches of contract; (5) Solis' failure to complete his work on the Dayton Project was excused by Green's failure to pay Solis; (6) Green's failure to pay Solis was not excused by Solis' actions; (7) Green wrongfully exercised dominion and control over Solis' equipment; (8) Green incurred zero damages from Solis' abandonment of the Woodville Project; (9) Solis' damages from Green's actions totaled $479,559, plus $175,000 in attorney's fees; and (10) Green perfected his bond claim against Seaboard for $95,253.

The trial court disregarded several of the jury's findings and rendered judgment that Solis recover $125,830 in actual damages against Green and that Solis recover $50,058 in actual damages against Seaboard jointly and severally with Green. Both Green and Solis appealed the trial court's judgment. The court of appeals reinstated most of the damages awarded by the jury. Green sought writ of error in this Court. Seaboard joins Green in its appeal to this Court.

I No-Damages-for-Delay Clause

Primarily, Green asserts that Solis cannot recover any of his damages resulting from Green's delay because such damages are precluded by the no-damages-for-delay clauses contained in the subcontracts. Solis responds that the subcontract provisions are unenforceable under Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.1993).

In Dresser, the contract provision at issue released Dresser from all liability claims caused by its own future negligence. Dresser, 853 S.W.2d at 507. We held that such extra-ordinary risk shifting clauses must meet certain fair notice requirements. Id. at 508. First, a party's intent to be released or indemnified from its own negligence must be clear and unambiguous. Id.; Enserch Corp. v. Parker, 794 S.W.2d 2, 8 (Tex.1990); Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex.1987). Second, the clause must be "conspicuous" as defined under the Uniform Commercial Code. Dresser, 853 S.W.2d at 508-11; TEX. BUS. & COM.CODE § 1.201(10).

However, our holding in Dresser is explicitly limited to releases and indemnity clauses in which one party exculpates itself from its own future negligence. Dresser, 853 S.W.2d at 507 & n. 1. Unlike the provision in Dresser, the subcontract agreement in this case provides in pertinent part:

Contractor [Green] ... shall not be liable to the Subcontractor [Solis] for delay to Subcontractor's work by the act, neglect or default of the Owner, Contractor, action of workmen or others, or any cause beyond Contractor's control.

This clause does not constitute the type of extraordinary risk-shifting found in Dresser. It is not an indemnity agreement because it does not shift Green's liability for third party claims to Solis. Dresser, 853 S.W.2d at 508. Also, this clause is not a release as defined in Dresser because it neither "extinguish[es] the claim or cause of action" nor establishes "an absolute bar to any right of action on the released matter." Id.

The distinction between Dresser and this case lies in the fact that Dresser concerned the shifting of tort and negligence damages, whereas the no-damages-for-delay clause shifts economic damages resulting from a breach of contract. We noted in Dresser that most contract clauses operate to transfer risk in some way. Dresser, 853 S.W.2d at 508. However, we were concerned with clauses that operate to shift risk in an extraordinary way, such as exculpating a party from the consequences of its own future negligence. Id. Here, the parties agreed that Solis would bear the risk that the projects would not be completed on time, even if Green caused the delay. This constitutes a very different type of risk-shifting than that found in Dresser where one party had to bear the risk that the other party might negligently damage or injure the oil well or equipment while conducting log tests. Solis and Green did not make a comparable risk-shifting agreement--if Green damaged Solis' equipment while building the prisons, this clause would not prohibit Solis from pursuing a claim against Green for Green's own negligence.

Furthermore, the concerns underlying the Dresser opinion are not present in this case. In Dresser, this Court was concerned with the injustice arising when a contracting party buries a provision substantially releasing itself from its own negligence in a way that is inconspicuous and does not provide fair notice to the other party. In the present case, there is no such injustice. Instead, both Green and Solis were experienced contractors familiar with the industry custom of allocating risk for delays.

In sum, we hold that the requirement of conspicuousness set forth in Dresser does not apply to no-damages-for-delay clauses. The court of appeals erred in concluding otherwise. Consequently, we must disregard the jury's finding of delay damages against Green because Solis waived delay damages when he signed the subcontracts containing the no-damages-for-delay provision.

II Exceptions to Enforcement of No-Damages-for-Delay Clause

Solis alternatively argues that even if the lack of conspicuousness does not invalidate the no-damages-for-delay clause, the jury award for delay damages should still be upheld. Solis asserts that Texas recognizes four exceptions to the enforcement of no-damages-for-delay clauses. These are when the delay: (1) was not intended or contemplated by the parties to be within the purview of the provision; (2) resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; (3) has extended for such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; or (4) is not within the specifically enumerated delays to which the clause applies. City of Houston v. R.F. Ball Constr. Co., 570 S.W.2d 75, 77 & n. 1 (Tex.Civ.App.--Houston [14th Dist.] 1978, writ ref'd n.r.e.).

The jury, in response to Question Eight, found that Solis incurred additional expenses on the Snyder and Dayton Projects because of Green's failure to timely deliver materials, failure to deliver properly fabricated materials, failure to provide proper access to the site, and failure to coordinate or resolve conflicts between the work of other subcontractors and Solis. In response to Question Twelve, the jury found that Solis' failure to continue work on the Dayton Project was excused by Green's previous failure to pay Solis. Furthermore, in response to Question Three, the jury found that Green did not materially comply with the Snyder and Dayton Subcontracts because it failed to timely purchase metal building material, timely submit shop drawings, timely schedule delivery of materials, coordinate work of other subcontractors, and timely resolve conflicts in plans and specifications. The court of appeals concluded that these jury findings supported two of the recognized exceptions: the delay was unintended by the parties, and the delay extended for an unreasonable amount of time. 932 S.W.2d at 61-62.

The court of appeals also concluded that the jury's findings supported an additional exception, i.e. active interference or other wrongful conduct. 932 S.W.2d at 62. The court of appeals reasoned that Green acted arbitrarily and capriciously because it acted willfully and unreasonably without due consideration and in disregard of Solis' rights. Id. The court of appeals stated that arbitrary and capricious acts are not protected by a no-damages-for-delay clause. Id.

The...