Hartford Fire Ins. v. C. Springs 300, Ltd.
| Decision Date | 16 April 2009 |
| Docket Number | No. 01-06-00065-CV.,01-06-00065-CV. |
| Citation | 287 S.W.3d 771 |
| Parties | HARTFORD FIRE INSURANCE COMPANY, Appellant, v. C. SPRINGS 300, LTD., Appellee. |
| Court | Texas Court of Appeals |
Bridget Chapman, James D. Cupples, Williams, Cupples & Chapman, L.L.P., Byron C. Keeling, Ruth Brett Downes, Keeling & Downes, P.C., Houston, TX, Christian J. Ward, Gregory S. Coleman, Yetter, Warden & Coleman, L.L.P., Austin, TX, James H. Moody, III, Quilling, Selander, Cummiskey & Lownds, P.C., Dallas, TX, for Appellant.
James E. Doyle, Kathleen Cynthia Pickett, Marianne Monir Ibrahim, Michael D. Robbins, Doyle, Restrepo, Harvin & Robbins, LLP, Jonathan B. Smith, Macey Reasoner Stokes, Baker Botts L.L.P., Houston, TX, for Appellee.
Panel consists of Chief Justice RADACK and Justices ALCALA and BLAND.
On this date, the court considered appellee's motion for rehearing and motion for en banc reconsideration. We deny the motion for rehearing, but withdraw our opinion and judgment of May 29, 2008 and issue this opinion in their stead. As we have issued a new opinion, we dismiss appellee's motion for en banc reconsideration as moot. See Brookshire Bros. v. Smith, 176 S.W.3d 30, 40 n. 2 (Tex.App.-Houston [1st Dist.] 2004, pet. denied) ().
The issue in this case is whether a three-sentence letter from a company in the business of issuing performance and payment bonds on construction projects creates an obligation on the part of the company to issue $17 million in bonds in connection with a construction project, or whether the letter was a "bondability letter" indicating to the owner of the construction project that its chosen builder had the necessary relationship with the company to obtain such bonds. We also consider whether the owner of the construction project can recover for fraud based on the same letter. We reverse and render.
The Vineyards construction project
Appellee, C. Springs 300, Ltd. [" "] is a limited partnership that was formed to construct, own, and operate an apartment complex in Colorado Springs, Colorado called "The Vineyards." C. Springs planned to finance The Vineyards as a "HUD transaction," meaning that its mortgage would be insured under a U.S. Department of Housing and Urban Development program.
On July 5, 2000, C. Springs selected Williams Company, a Houston contractor, to build The Vineyards. Having selected a contractor, C. Springs applied to HUD for HUD-guaranteed financing. On August 1, 2000, HUD issued a deficiency letter to C. Springs indicating that the application was incomplete. Among other things, HUD requested "an assurance of completion" from the contractor, Williams, by August 11, 2000.
C. Springs contacted Williams about obtaining the required information, and Williams, in turn, contacted FG Insurance Services ["FGI"], a Houston company that wrote surety bonds for several major surety companies, including appellant, Hartford Fire Insurance Company ["Hartford"]. Williams and FGI had a pre-existing business relationship.
On August 8, 2000, a Williams employee, Sherry Jett, contacted Kimberly Smith, an administrative assistant to Richard Heidbrink, an agent for FGI, and explained that Williams needed FGI to send a letter to C. Springs to show that Williams was a bondable company. After making some changes to a letter that Williams had used before, Smith received permission from Heidbrink to sign the letter as Hartford's attorney-in-fact.
The August 8, 2000 letter
The August 8, 2000 letter referenced "Vineyards at Colorado Springs Apartments" and provided in its entirety:
Williams Industries, Inc. is bonded through Hartford Fire Insurance Company which is A+ rated on AM Best. They have a bonding line of credit of $25,000,000 single and $100,000,000 aggregate. Upon receipt of an acceptable contract, Hartford Fire Insurance Company stands ready to issue 100% performance and payment bonds in the full amount of the contract.
After obtaining the August 8 letter, C. Springs and Williams continued toward finalizing a HUD construction contract, which was set to close in mid-December.
Williams's financial position declines
Because of problems on other construction projects, Williams's financial position began to decline. Williams lost approximately 1 million dollars between August and October 2000. On October 19, 2000, Hartford instructed FGI that it was "suspending all bond support of Williams Industries until further notice." In November 2000, Hartford decided that it would issue no further security bonds to Williams.
On November 7, 2000, a little over a month before the scheduled HUD closing, Williams informed C. Springs of problems securing performance and payment bonds for the project. Williams continued to assure C. Springs that it could work out its problems with obtaining the bonds, and the two parties continued to work toward the December HUD closing. However, on December 4, 2000, Williams informed C. Springs that it was not going to be able to secure the bonds by the end of 2000. As a result, C. Springs and Williams never signed a construction contract. On December 8, 2000, Smith, of FGI, send C. Springs a letter stating that "an acceptable contract was not received" and "[i]n the absence of a contract and application, Hartford Fire Insurance Company did not issue any bond in connection with the referenced project."
C. Springs hires another contractor and finishes the project
In late November 2000, after becoming aware of Williams's problem obtaining bonds, C. Springs began negotiating with another contractor, Global Construction ["Global"], to build the project. After Williams informed C. Springs on December 4 that it could not obtain the necessary bonds, C. Springs moved forward with the project using Global as contractor.
Global's insurance broker also sent a letter to C. Springs regarding its ability to obtain the bonds. The letter Global obtained provided, "Naturally, Liberty Mutual Insurance Company would expect that the execution of any final bonds would be subject to a review of the final contract terms and conditions."
In February 2001, C. Springs closed on the HUD contract with Global as its contractor. The contract price was $18.9 million dollars — $1.9 million dollars more than the $17 million dollars C. Springs had planned to pay Williams.
C. Springs files suit
C. Springs subsequently brought the underlying suit alleging breach of contract against Hartford and fraud against Hartford, FGI, Guaranty,1 Smith, and Williams. Essentially, C. Springs's petition alleged (1) that the August 8 letter was a contract, which Hartford breached by not later issuing the bonds; and (2) that Hartford, through its agents, had fraudulently misrepresented to C. Springs that it would issue the bonds.
The trial and jury verdict
C. Springs settled with Smith, nonsuited Williams, and proceeded to trial against the remaining defendants. Two liability questions were submitted to the jury as follows:
Question 1
Did the August 8, 2000 letter from Kimberly Smith to David Steidley constitute an agreement under which Hartford agreed that it would issue 100% performance and payment bonds for the full amount of the contract between Williams and C. Springs, if any, for the construction of the Vineyards project in Colorado Springs?
It is your duty to interpret the following language in the August 8, 2000 letter: "upon receipt of an acceptable contract." You must decide its meaning by determining the intent of the parties at the time the letter was written. Consider all of the facts and circumstances surrounding the making of the letter, the interpretation of the letter by the parties, and the conduct of the parties
* * * *
* * * *
Answer Yes or No:
Yes Yes
No ___
Question 5
Did one or more of the defendants commit fraud against C. Springs?
Fraud occurs when —
a. a party makes a material misrepresentation
b. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion.
c. the misrepresentation is made with the intention that it should be acted on by the other party, and
d. the other party relies on the misrepresentation and thereby suffers injury
"Misrepresentation" means:
A false statement of fact or
A promise of future performance made with an intent, at the time the promise was made, not to perform as promised.
A party's denial that he ever made a promise is a factor showing no intent to perform when he made the promise.
* * * *
Answer Yes or No for each of the following:
Hartford Yes
Guaranty No
FGI No
Kimberly Smith No
The jury awarded $4,278,117 for the difference between what C. Springs paid and would pay under the contract with Global and what it would have paid under a contract with Williams, including "interest expense" due to a difference in mortgage rates on debt incurred in connection with the project. The jury also awarded $362,345 in lost rentals from the Vineyards and $96, 507 for out-of-pocket expenses incurred by C. Springs. The total damages awarded was $4,736,969. The same measure of damages was awarded for both the contract claim and the fraud claim.
Hartford contends that the trial court erred in denying its motion for instructed verdict and submitting the contract issue to the jury because the August 8, 2000 letter was not, as a matter of law, an enforceable contract. Specifically, Hartford argues that the lack of an essential term causes the contract to fail under the statute of frauds.
Standard of review
A denial of a motion for directed verdict may be reversed when the evidence conclusively proves a fact that establishes a party's right to judgment as a matter of law, and there is no evidence to the contrary. See McCarley v. Hopkins, 687 S.W.2d 510, 512 (Tex.App.-Houston [1st Dist.] 1985, no writ). In reviewing the...
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