Hartford Fire Ins. Co. v. City Of Mont Belvieu

• Decision Date: 13 July 2010
• Docket Number: No. 09-40586.,09-40586.
• Citation: Hartford Fire Ins. Co. v. City of Mont Belvieu, 611 F.3d 289 (5th Cir. 2010)
• Parties: HARTFORD FIRE INSURANCE COMPANY, Plaintiff-Appellant,v.CITY OF MONT BELVIEU, TEXAS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

611 F.3d 289

HARTFORD FIRE INSURANCE COMPANY, Plaintiff-Appellant,v.CITY OF MONT BELVIEU, TEXAS, Defendant-Appellee.

No. 09-40586.

United States Court of Appeals Fifth Circuit.

July 13, 2010.

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James D. Cupples, Williams, Cupples & Champman, Houston, TX, Byron Charles Keeling(argued), Keeling & Downes, P.C., Houston, TX, for Plaintiff-Appellant.

J. Grady Randle(argued), Christopher Len Nichols, Randle Law Office Ltd., L.L.P., Houston, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before JONES, Chief Judge, and BENAVIDES and PRADO, Circuit Judges.

EDITH H. JONES, Chief Judge:

A performance bond guarantees the timely completion of a construction project for the benefit of the project's owner.The Hartford Fire Insurance Company issued such a bond to a construction company on a project for the City of Mont Belvieu, Texas.When the builder failed to complete punch list items and warranty work, the City sued Hartford for compensation under the bond, and a jury found in favor of the City, awarding nearly $500,000 in damages.Hartford now appeals the district court's denial of its motion for judgment as a matter of law.Because the City's claim was barred by the applicable statute of limitations, and no act of Hartford excuses the City's failure to bring suit within the limitations period, we sustain Hartford's position and reverse and render the judgment.

I.BACKGROUND

In 1998, Hartford issued a payment bond and a performance bond to Williams Industries, a general contractor, for the construction of the Eagle Pointe public recreational facility in Mont Belvieu.These bonds are required by Texas law for most public work contracts, and their terms are largely defined by statute.Tex. Gov't Code § 2253.021 et seq.(Vernon 2008).

The construction process was tumultuous, with many delays and change orders occasioned by architectural flaws and mid-course alterations to the plans.As the facility neared completion in mid-2001, the City issued a certificate of occupancy and took possession in May.By July 2002, Eagle Pointe was open and operating.

At that time, however, a number of “punch list” items-repairs and the like-remained incomplete.This was due in part to Williams's financial difficulties.In addition, the company had neglected to pay some of its subcontractors, and they filed payment bond claims with Hartford.Hartford therefore advised the City to “exercise reasonable caution in the payment of any further contract funds to Williams because of Williams' alleged non-payment of subcontractors and suppliers.”Hartford feared that Williams would go under, leaving it responsible for the bond claims.

The document at the heart of this case is Change Order 67, executed by the City and Williams on July 2, 2002, to resolve the various disputes between them.Under this agreement, the City paid Williams $674,628.50.That sum covered the expense of changes requested by the City and included an “equitable adjustment,” subject to the following terms:

Whereas the City and Williams Industries have reached an agreement to cover the cost of all current and future claims which Williams Industries has or may have.And whereas Williams Industries and in turn its Bonding Company-The Hartford Fire Insurance Company[-] have agreed that all warranties will remain in force.And also, that Williams Industries will pursue completion of remaining punch list and/or warranty items or compensate the City for expenditures which the City may have to make to achieve the required repairs (with the exception of recently completed repairs at the Wave Pool caisson grates).The City agrees to pay Williams Industries an additional $214,359.29.

In calculating the total due Williams, Change Order 67 offset against the City's obligation a charge of $231,000 in liquidated damages for Williams's delinquency in completing the project.To determine this charge, the change order stipulated that, while the contract had mandated completion by February 14, 2001, “[t]he actual completion date was July 19, 2001.”The cover page of the change order described this as the “date of Substantial Completion.”

On July 9, 2002, the City forwarded Change Order 67 to Hartford.Attached were a check for the full $674,628.50, made out to Williams and Hartford jointly, and a cover letter.The cover letter stated that the City “will continue to look to Williams and ultimately the Hartford for any punch list items and warranty claims that remain unresolved.”Hartford cashed the check and used the proceeds to settle payment bond claims and reimburse its own adjustment costs.

Over the following months, Williams continued to falter, ultimately failing to complete many of the punch list items and warranty repairs that it had agreed to do.On October 30, 2002, the City sent a letter to Hartford stating as much, and after sending an engineer to assess the situation, Hartford responded in a March 19, 2003, letter by its attorney, James Cupples.The letter agreed to reimburse the City up to $32,000 to resolve several claims.For the other claims, it requested additional information from the City and stated that Hartford was “committed to investigate and provide the City its conclusions on the remaining work items.”The letter concluded with this statement: “it [Hartford] continues to reserve all of its rights and defenses in this matter and it is without waiver of same.”

On June 3, 2003, the City promised in writing to supply more details on its claims and cost documentation, and it did so, in November 2003.According to Hartford, the City's documentation stated claims that were far more extensive, amounting to nearly $500,000, than those the City had identified in 2002.Hartford did not respond to the City's documentation.

The parties' next contact occurred in October 2004, in a letter from the City's attorney to Hartford.It stated:

The City of Mont Belvieu is concerned about the possible statute of limitations and I am requesting a tolling agreement from you.If there is no agreement reached prior to October 30, 2004, I will be forced to file suit against Hartford for not performing under the bond.Please let me know if you are agreeable to entering into a tolling agreement and how quickly Hartford can process these claims and get them resolved.It has now been nearly two years since the initial claim was made.

Cupple's response was non-responsive.It stated that Hartford was still awaiting documentation on the City's actual expenditures and “stands ready to proceed with the process as soon as we can get the data.”No mention was made of the statute of limitations or tolling.

Settlement discussions between the City and Hartford were unsuccessful, and Hartford filed suit in July 2007, seeking a declaration that any claims on the performance bond by the City were barred by the statute of limitations.The City counterclaimed for payment under the performance bond.Hartford moved unsuccessfully for summary judgment, and subsequently for judgment as a matter of law.The district court concluded that the City had raised genuine issues of material fact on two potential defenses to the running of the limitations period: quasi-estoppel and promissory estoppel.The case proceeded to trial, and the jury found that Hartford had breached its performance bond; Mont Belvieu filed its claim more than one year after final completion of the Eagle Pointe project; this failure was excused by both promissory estoppel and quasi-estoppel; and Mont Belvieu was due damages of $468,492.01.In addition, the district court awarded Mont Belvieu $218,747.65 in attorney's fees and $260,704.62 in prejudgment interest.

Hartford timely appealed.

II.STANDARD OF REVIEW

When a case has been tried by a jury, a motion for judgment as a matter of law is a challenge to the legal sufficiency of the evidence underlying the jury's verdict.Streber v. Hunter,221 F.3d 701, 721-22(5th Cir.2000).Our review of a district court's ruling on a motion for judgment as a matter of law is de novo, applying the same standard as used by the district court, and we consider the evidence, draw inferences from it, and resolve credibility determinations in the light most favorable to the non-moving party.Id.The motion should be granted only when the facts and inferences are so strongly and overwhelmingly in the movant's favor that reasonable jurors could not reach a contrary verdict.Id.

III.DISCUSSION

Hartford raises several issues on appeal: that the evidence at trial was legally insufficient to support the jury's finding that the City's failure to file its claim within the limitations period was excused by promissory estoppel or quasi-estoppel; that the performance bond expired at the time of substantial completion, ending Hartford's obligation to the City; and that the district court erred in its award of attorney's fees and calculation of prejudgment interest.The City responds that the limitations period never began to run.Because we find against the City on that issue, and in Hartford's favor on promissory estoppel and quasi-estoppel, we need not address the remaining issues.¹

A.Statute of Limitations

Before considering the City's defenses to Hartford's argument that its claims are time-barred, we must determine whether those defenses are necessary at all.If Williams never attained final completion of the Eagle Pointe project, as the City asserts, the limitations period never commenced.

Texas law mandates that a “governmental entity that makes a public work contract with a prime contractor shall require the contractor, before beginning the work, to execute to the governmental entity: (1) a performance bond if the contract is in excess of $100,000 ....”§ 2253.021(a).This bond is “solely for the protection of the state or governmental entity awarding the public work contract.”§ 2253.021(b).It is also, by statute,...