Perry Builders, Inc. v. Galvan
| Decision Date | 24 July 2003 |
| Docket Number | NO. 03-02-00091-CV.,03-02-00091-CV. |
| Parties | Perry & Perry Builders, Inc./Sergio Galvan d/b/a Galvan Plastering Company, Appellants, v. Sergio Galvan d/b/a/ Galvan Plastering Company/Perry & Perry Builders, Inc.; Our Lady's Maronite Catholic Church; and Insurance Company of the West, Appellees. |
| Court | Texas Court of Appeals |
Before Justices Patterson, Puryear and Aboussie.*
Perry & Perry Builders, Inc. ("Perry") appeals from a district court judgment favoring Sergio Galvan, doing business as Galvan Plastering Company. Perry, the general contractor on a construction project at Our Lady's Maronite Catholic Church, hired subcontractor Hebel SouthCentral, L.P. who in turn hired Galvan. Hebel failed to appear for trial, but Perry appeared. The jury found that Perry benefitted from Galvan's work and failed to compensate him with funds received from the church intended to pay the workers. The court awarded Galvan $86,937.18 in damages, plus interest, and up to $209,000 in attorney's fees against Perry; the court made the same award against Hebel, except that it awarded up to $231,000 in attorney's fees.
The parties raise several issues on appeal. Perry complains that the evidence is legally and factually insufficient to support the judgment and that the district court erred by awarding Galvan too much in attorney's fees and by refusing to award Perry attorney's fees for defeating some of Galvan's claims. Galvan complains that the district court erred by granting summary judgment that he take nothing on his third-party claims against the church and its surety, the Insurance Company of the West ("ICW") for foreclosure of lien, release of retainage, suit on payment, and conspiracy.
Because we conclude that the great weight and preponderance of the evidence is against the jury's failure to find that Perry spent the trust funds on job-related expenses, we will reverse the parts of the judgment awarding Galvan recovery under the trust-fund misapplication theory and awarding him attorney's fees, and remand these issues to the district court for further proceedings. We will affirm the judgment in all other respects.
The church hired Perry as general contractor on a building project. The contract provides that Perry retains eight percent of the cost of the work as its fee. The guaranteed maximum cost of $1.5 million could be (and was) adjusted by change orders.
Perry hired Hebel as a subcontractor to build exterior walls at the church. The walls required plastering. In its estimate to Perry, Hebel valued the plastering work at $45,000. Hebel hired Galvan to do the plastering on a cost-plus contract for a base amount of $84,000; the contract also contemplated Galvan doing additional unspecified work.(1)
Galvan testified that he performed all the work under the contract, as well as just under $24,000 worth of additional work. His invoice indicates that he billed Hebel a total of $107,937.18, for which Hebel paid him $45,000.(2) Hebel disputed the amount Galvan was due. When the dispute persisted, Galvan filed a mechanic's lien on the church's property.
Hebel filed this suit, seeking a declaratory judgment that Hebel owed Galvan nothing and that Hebel overpaid Galvan. Hebel accused Galvan of falsifying wage records to inflate his costs and, thereby, his fee. Hebel contended Galvan breached their contract.
Galvan countersued Hebel and sued Perry, the church, and ICW. Galvan alleged that Hebel breached their contract and sought, in the alternative, recovery in quantum meruit. Galvan alleged that Perry, the church, and ICW conspired with Hebel to deprive him of the funds. He sought foreclosure on his lien and payment from funds the church should have retained from its payments to Perry. Galvan alternatively sued for recovery in quantum meruit and for payment from a bond held by Perry as principal and ICW as surety. Finally, Galvan contended that Perry misapplied funds the church paid that Perry should have held in trust and used to pay him.
Perry, the church, and ICW filed motions for summary judgment against Galvan, contending that no evidence supported his claims. They contended that the existence of a payment bond prevented Galvan from foreclosing a lien on the church property and from suing for release of retainage because the bond released the church from having to retain funds. See Tex. Prop. Code Ann. § 53.201(b) (West Supp. 2003). They contended that Galvan could not recover on the payment bond because he did not provide timely or sufficient notice of his claim. They also argued that Galvan's contract with Hebel barred a quantum meruit recovery.
The court considered and disposed of the motions for summary judgment. The court ruled that Galvan take nothing on his claims against the church. The district court granted summary judgment against Galvan on his claims for foreclosure of lien, release of retainage, payment under the payment bond, attorney's fees under the Property Code, and civil conspiracy. The court further granted judgment against Galvan for his claims against ICW for misapplication of trust funds and quantum meruit debt. The case proceeded to trial on Galvan's claims against Hebel and Perry for recovery in quantum meruit and misapplication of trust funds, although only Galvan and Perry appeared at trial.
The jury made several findings. It found that Galvan performed $24,000 worth of compensable work for Perry. The jury also found that Perry intentionally or knowingly, directly or indirectly, retained, used, disbursed, or otherwise diverted trust funds without first fully paying all obligations due to Galvan, and that Perry did not use all the trust funds to pay expenses directly related to the construction. The jury found that Galvan was owed $62,937.18. The jury also found that Galvan incurred $109,000 in attorney's fees for trial, and could incur up to $100,000 in fees on appeal.
Based on the jury's findings, the district court awarded Galvan $86,937.18 in damages, plus $21,223.62 in prejudgment interest, against Perry and Hebel. The court awarded Galvan $131,000 in attorney's fees against Hebel and $109,000 in attorney's fees against Perry for work up to and including trial; the court assessed up to $100,000 in additional attorney's fees if the case proceeded to argument before the Texas Supreme Court. Adding $1793.80 in court costs, the district court concluded that Galvan was entitled to a single recovery of $340,954.60, with Perry liable for at most $318,954.60.
Both Perry and Galvan appeal the judgment.(3) Perry contends that the judgment incorrectly permits a double recovery for the same work under the quantum meruit and misapplication of trust fund theories. Perry also challenges the sufficiency of the proof of the essential elements of quantum meruit, the existence of trust funds in this case, and the permissibility of use of those trust funds. Perry complains that the court had no basis on which to make Perry jointly and severally liable with Hebel for the damages, and should have made an election of remedies for Galvan when he failed to make one himself. Perry further contends that the court erred by awarding attorney's fees against Perry and by failing to award Perry attorney's fees. Galvan complains that the district court erred by granting summary judgment against his claims for foreclosure of lien, release of retainage, suit on payment bond, and civil conspiracy against the church and ICW.
Challenges to sufficiency of evidence to support damage awards
We will begin with Perry's challenges to the sufficiency of the evidence to support the jury's findings and the court's judgment on both the quantum meruit and the misapplication of trust fund theories.
Quantum meruit
As part of his first issue, Perry contends that no evidence supports elements of the award based on quantum meruit. In evaluating a legal sufficiency challenge, we must view all of the evidence in the light most favorable to the prevailing party, indulging every reasonable inference in favor of the judgment. Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 285-86 (Tex. 1998). We will uphold the finding if more than a scintilla of evidence supports it. Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995).
Quantum meruit is an equitable theory of recovery that is based on an implied agreement to pay for benefits received. Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). The court instructed the jury on this theory as follows under question one:(4)
One party performs compensable work if valuable services are rendered or materials furnished for another party who knowingly accepts and uses them and if the party accepting them should know that the performing party expects to be paid for the work.
You are instructed that a party may recover only when there is no express contract covering the services or material furnished.
There is no dispute that Galvan performed work, that Perry accepted the work, and that Perry and Galvan had no contract. The dispute is whether Perry should have known that Galvan expected to be paid for the work.
Perry argues that there is no evidence that it knew that Galvan expected to be paid. Perry contends that it had no way of knowing what work was covered by Galvan's contract with Hebel, and so had no reason to know what work was outside the sub-subcontract's scope. Perry also complains that there was no evidence that Galvan obtained a change order to approve deviations from his contract with Hebel, and that Perry's onsite supervisor Rob Delameter was not authorized to bind Perry to pay for extra work. Perry also argues that there is no evidence that Galvan notified...
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