Staff Industries, Inc. v. Hallmark Contracting, Inc.

• Decision Date: 14 January 1993
• Docket Number: No. 13-91-437-CV,13-91-437-CV
• Citation: 846 S.W.2d 542
• Parties: STAFF INDUSTRIES, INC., Appellant, v. HALLMARK CONTRACTING, INC., Appellee.
• Court: Texas Court of Appeals

Page 542

846 S.W.2d 542

STAFF INDUSTRIES, INC., Appellant, v. HALLMARK CONTRACTING, INC., Appellee.

No. 13-91-437-CV.

Court of Appeals of Texas Corpus Christi.

Jan. 14, 1993.

Rehearing Overruled Feb. 18, 1993.

Richard J. Hatch, Jr., Prichard, Peeler & Hatch, Corpus Christi, for appellant.

Curtis B. Dyer, Corpus Christi, Randal Patterson, Hollmann & Lyon, Inc., Odessa, for appellee.

Before NYE, C.J., and GILBERTO HINOJOSA and DORSEY, JJ.

OPINION

GILBERTO HINOJOSA, Justice.

Staff Industries, Inc., filed suit against Hallmark Contracting, Inc., for breach of a construction contract, and against King Construction Co. and United States Fidelity & Guaranty Co., for liability as principal and surety, respectively, under a Hardeman Act payment bond. ¹ After a bench trial, the court rendered a take-nothing judgment against Staff on all of its causes of action, but also entered a declaratory judgment that Hallmark owed Staff $55,619.71. Staff brings five points of error. Hallmark brings one cross-point.

The primary issue in the present case is whether a contract for the production and installation of an indeterminate amount of material at a unit price entitled the subcontractor to be paid for the amount of materials provided to the job site or only that amount actually used in construction without regard to excess material discarded as waste.

Hallmark and King together undertook a construction project to build a fish hatchery for the Gulf Coast Conservation Association (GCCA), with King being awarded the contract and furnishing the performance and payment bond, issued by USF & G, and Hallmark acting in all other respects as the general contractor. Staff, a subcontractor in the present case, contracted with Hallmark to produce and install a material, Hypalon, which was used to line the ponds at the fish hatchery. Staff produced and delivered over a million square feet of Hypalon to the job site for installation in the ponds by another subcontractor, Midessa Industrial Vinyl Company, hired by Staff.

For the entire project Staff billed Hallmark a total of $598,001.11. Hallmark paid Staff only $498,496.66, claiming that the remaining amount due Staff was being held as retainage. The amount being retained and due Staff is the primary controversy in the present suit. Staff claims the balance of $99,504.45 of the amount it billed, which was based on the amount of Hypalon delivered to the job site. Hallmark claims that Staff is due only $53,119.71, based on the amount of Hypalon actually installed in the ponds without regard to the excess material trimmed off and discarded as waste.

After a bench trial, the trial court entered a judgment which ordered that both Staff and Hallmark take nothing by their claims, but purported to render a declaratory judgment that Hallmark owed Staff $53,119.71 plus 10% pre-judgment interest from May 11, 1989, and $2,500 plus 10% pre-judgment interest from May 10, 1990.

By its fifth point of error, Staff complains that the trial court erred in failing to award Staff a contract balance of $99,504.45, since the contract and the evidence showed as a matter of law or, alternatively, by the overwhelming weight of the evidence, that Staff was entitled to be paid based on material delivered to the job site, rather than on material actually installed in the ponds.

In considering a "no evidence," "insufficient evidence" or "against the great weight and preponderance of the evidence" point of error, we will follow the well-established tests set forth in Pool v. Ford Motor Co., 715 S.W.2d 629 (Tex.1986); Dyson v. Olin Corp., 692 S.W.2d 456 (Tex.1985); Glover v. Texas General Indemnity Co., 619 S.W.2d 400 (Tex.1981); Garza v. Alviar, 395 S.W.2d 821 (Tex.1965); Allied Finance Co. v. Garza, 626 S.W.2d 120 (Tex.App.--Corpus Christi 1981, writ ref'd n.r.e.); and Calvert, No Evidence and Insufficient Evidence Points of Error, 38 Texas L.Rev. 361 (1960).

The present dispute involves a matter of contract interpretation. If a written contract is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law. A contract, however, is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of circumstances present when the contract was entered. When the contract contains an ambiguity, its interpretation becomes a question of fact based on the intention of the parties to it. Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex.1987); Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex.1983).

The intention of the parties is to be ascertained to the extent possible from the language of the contract itself, construed in connection with the circumstances surrounding the execution of the contract. Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 731 (Tex.1981); Richard Gill Co. v. Jackson's Landing Owners' Association, 758 S.W.2d 921, 925 (Tex.App.--Corpus Christi 1988, writ denied). These surrounding circumstances include what the particular industry considered to be the norm or reasonable and prudent at the time. KMI Continental Offshore Production Co. v. ACF Petroleum Co., 746 S.W.2d 238, 241 (Tex.App.--Houston [1st Dist.] 1987, writ denied). In addition, the conduct of the parties which indicates the construction they themselves placed on the contract may be considered in determining the parties' true intent with regard to an ambiguous provision. Consolidated Engineering Co. v. Southern Steel Co., 699 S.W.2d 188, 192-93 (Tex.1985); Richard Gill Co., 758 S.W.2d at 925.

In the present case, the purchase order under which Staff supplied Hypalon to Hallmark specified in pertinent part as follows:

For Furnishing all labor, materials, equipment, supervision, insurance, performance and payment bond, and appurtenances to complete the "Hypalon" Liner, all in strict accordance with the contract plans and specifications on the above mentioned project.

* * * * * *

As quoted $.5179 per square foot Not to exceed $610,061.00.

Hallmark contends that the provision for performance "in strict accordance with the contract plans and specifications" implies that the area specified in those plans and specifications to be covered with Hypalon is the amount for which Staff should be paid. Staff, however, points to a clause in the contract specifications concerning measurement and payment based on estimated quantities as follows:

It is understood and agreed that the actual amount of work to be done and material to be furnished under this contract may differ somewhat from these estimates, and that where the basis for payment under this contract is the unit price method, payment shall be for the actual amount of such work done and the material furnished.

Staff contends that the provision of payment for "material furnished" conclusively shows its entitlement to be paid for the square footage of Hypalon delivered to the construction site.

However, we find the plans and specifications to be of no help in interpreting the present method of payment under the purchase order between Staff and Hallmark. The purchase order clause requiring that the Hypalon be furnished in accordance with the plans and specifications does not mean that the amount of Hypalon to be delivered to the site should exactly match the dimensions of the ponds without including any amount for contemplated overlap and waste--all parties agreed at trial that a certain amount of such waste was to be expected. Rather, the present controversy centers around the method of payment, which the purchase order fails to specifically address.

Nor does the clause relied upon by Staff aid it. That clause is in the specifications in the contract between Hallmark & GCCA. The payment contemplated by this clause is in connection with "this contract" --specifically, the contract between GCCA and Hallmark as general contractor. Staff is not a party to that contract. The purchase order between Staff and Hallmark does not incorporate all aspects of the contract between GCCA and Hallmark, including the scheme for payment. The purchase order only requires that Hypalon be furnished in accordance with the contract specifications, that is, quality, quantity, etc.

Therefore, in the present case, the purchase order itself does not show whether payment is to be based on materials furnished or delivered to the job site or materials actually incorporated into the project. In addition, if we turn to the parties' expressed intent and the circumstances surrounding the purchase order, the evidence is conflicting concerning the proper method of payment.

The expressed intent of the parties regarding the method of payment was disputed at trial. While Fred Long, the district sales manager for Staff, contends that he had indicated to Red Hallmark, the principal of Hallmark, that payment would be based upon the unit price and the quantity of material shipped, Hallmark denies that he agreed to pay based on the amount of Hypalon furnished to the job site.

In addition, the conduct of the parties variously supports each of the two interpretations of the payment provisions of the purchase order. Long testified that the submittals, documents produced by Staff and indicating the quantity of materials to be produced and shipped, were periodically reviewed and approved by both the project engineer and Hallmark. These submittals represented the amount of materials delivered to the job site and for which Staff claims that payment is owed. Long testified that Hallmark initially paid Staff the amounts represented by the submittals and only refused to acknowledge the full amount of its debt according to the submittals at the conclusion of the project. On the contrary, however, Hallmark testified that Long had after completion of...