Star Operations, Inc. v. Dig Tech, Inc.
| Decision Date | 27 July 2017 |
| Docket Number | NO. 03-15-00423-CV,03-15-00423-CV |
| Parties | Star Operations, Inc. and Great American Insurance Company of New York, Appellants v. Dig Tech, Inc., Appellee |
| Court | Texas Court of Appeals |
NO. 12-0-337, HONORABLE TODD A. BLOMERTH, JUDGE PRESIDING
This appeal arises out of a lower-tier subcontract related to a highway-construction project. Appellant Star Operations, Inc. was hired as a subcontractor by Central Texas Highway Constructors, the design-build contractor for the project, to build infrastructure for the illumination, signal, intelligent-transportation, and toll-collection systems as part of the construction of SH 130 toll-road Segments 5 and 6 southeast of Austin. Appellee Dig Tech, Inc. sued Star and its payment-bond surety, appellant Great American Insurance Company of New York, asserting that Star had breached an oral contract with Dig Tech. Dig Tech alleged that Star had hired it to perform some of the hole-boring work for the installation of electrical conduit needed for Star to complete its part of the construction project and that Star did not pay Dig Tech for the work it did. After a jury trial, the jury found in Dig Tech's favor and awarded Dig Tech the amount of its unpaid invoices, $228,524, and attorneys' fees. On appeal, Star and Great American Insurance raise fourteen issues challenging the judgment. For the reasons explained below, we will affirm the judgment in part, and we will reverse in part on the issue of court costs and remand the cause for further proceedings on that issue.
BACKGROUND
The Texas Department of Transportation (TxDOT) entered into a facility concession agreement (FCA) with SH 130 Concession Company, the developer, for SH 130 Concession to finance and perform the construction of SH 130 toll-road Segments 5 and 6 southeast of Austin and to grant SH 130 Concession the concession to lease the sections and toll them for 50 years after the project's completion.1 See generally Tex. Transp. Code §§ 223.201-.209 (). SH 130 Concession hired CentralTexas Highway Constructors as the design-build contractor on the project. As previously mentioned, Central Texas in turn hired Star as a subcontractor to build infrastructure for the illumination, signal, intelligent-transportation, and toll-collection systems. Star and Central Texas entered into two subcontracting agreements related to this work. As part of those agreements, Central Texas required Star to furnish a performance bond and a payment bond for each subcontract. Star's surety on the bonds is Great American. The payment bond at issue here provides that "Star Operations, Inc., as principal, . . . and Great American Insurance Company of New York, . . . as surety, . . . are held and firmly bound unto CENTRAL TEXAS HIGHWAY CONSTRUCTORS LLC as Obligee . . . for the use and benefit of Claimants as herein below defined in the amount of . . . $3,100,000.00 for the payment whereof Principal and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents."2 Central Texas alsoseparately hired Dig Tech as a subcontractor responsible for relocating and adjusting electric-distribution facilities owned by Bluebonnet Electric Cooperative. The contract at issue in this case is an oral lower-tier subcontract that Star later entered into with Dig Tech for some hole-boring work for the installation of electrical conduit that Star needed done to complete its part of the construction project.3
Dig Tech completed the requested work and sought payment for it from Star. Dig Tech sent Star a letter on March 13, 2012, requesting payment for the invoices that had been submitted before that time and copied Central Texas on the letter. After inquiry from Central Texas to Star on Friday, March 16, Star informed Central Texas that the invoices were set up to be paid the following Tuesday. On April 12, Central Texas's project-controls manager, Michael Kiehnau, emailed Star's president and founder, Lana Lewis, to inform her that Dig Tech's vice-president and owner, Mike Furry, had called Kiehnau to let him know that Star had not contacted Dig Tech about payment, and consequently, Dig Tech would be filing a bond claim. Kiehnau told Lewis, "I urge you to resolve this issue immediately." On April 23, Furry requested that Lewis send him Furry testified that he never received a copy of the contract from Lewis. On May 1, 2012, Dig Tech notified Star, Central Texas, and Great American of Dig Tech'sclaim via certified mail, return receipt requested, and further notified them that if all invoices were not paid in full, Dig Tech would file suit on the bond "on the 91st day after April 4, 2012, the last day on which Dig Tech's work or labor was done or performed."4 Dig Tech subsequently filed suit against Star and Great American, alleging claims for breach of contract (express or implied), quantum meruit, and attorneys' fees.
After a ten-day trial, the jury found that Dig Tech and Star Operations had an agreement that Dig Tech would perform hole-boring work for Star and Star would pay for that work, but Star failed to comply with its agreement to pay and its failure to comply was unexcused.5 The jury also found that although Dig Tech intentionally interfered with Star's subcontract with design-build contractor Central Texas, Dig Tech did so only because it had a good-faith belief that it had a right to threaten garnishment for the work it performed and any harm to Star did not result from any malice on the part of Dig Tech. The jury further found that Star, but not Dig Tech, had "unclean hands."
The jury awarded Dig Tech $228,524 for its unpaid work and also awarded attorneys' fees. The final judgment included an award of court costs, "including the cost of depositiontranscripts and subpoenas necessarily obtained for use in this suit," pursuant to Texas Rule of Civil Procedure 131. The trial court also ordered in the judgment that "Dig Tech substantially complied with the notice provisions of the McGregor Act in order to perfect its bond claim against Great American Insurance," and accordingly, Great American "is obligated under the terms of its bond to make the payments that Star Operations failed to make." Star and Great American appeal from the judgment.
ANALYSIS
Star and Great American challenge the judgment in fourteen issues. Seven issues flow from their contention that the trial court should have applied federal law to Dig Tech's contract claim. Issues eight through eleven concern the law related to Dig Tech's claim against the Great American payment bond and whether Dig Tech perfected its claim against the bond. In their twelfth issue, Star and Great American contend that the trial court erred by awarding damages to Dig Tech without any evidence of Dig Tech's actual damages as net loss after reduction of income-tax payments or unpaid income-tax liability, which they assert is required by Texas Civil Practice and Remedies Code Section 18.091. In issue thirteen, they challenge the trial court's award of attorneys' fees to Dig Tech based on their contention that Dig Tech failed to segregate recoverable attorneys' fees from unrecoverable attorneys' fees. In issue fourteen, Star and Great American argue that the trial court erred by awarding Dig Tech costs for copies of deposition transcripts as "taxable costs" when Dig Tech did not notice or initiate the depositions.Application of the Christian doctrine
The first seven issues are related to Star and Great American's contention that the trial court should have applied a federal-law principle, the Christian doctrine, to Dig Tech's contract claim because the highway project was federally funded. Star and Great American assert that the Christian case stands for the proposition that when the subject matter of a contract is governed by valid federal regulations, the regulations are incorporated into the contract as a matter of law, even if the parties had not agreed to be bound by them. See G. L. Christian & Assocs. v. United States, 312 F.2d 418, 424-26 (Ct. Cl. 1963), aff'd on reh'g, 320 F.2d 345 (Ct. Cl. 1963) (). According to Star and Great American, applying the Christian doctrine in this case means that Dig Tech failed to comply with three conditions precedent. They contend that federal law required Dig Tech to obtain a written contract with Star and to obtain approval from TxDOT for the oral contract with Star as conditions precedent to formation of an enforceable contract. They further contend that federal law required Dig Tech to provide statutorily compliant certified payrolls as a condition precedent to any liability arising from Star's failure to pay Dig Tech, and that the payrolls provided by Dig Tech were not statutorily compliant based on errors in the classification or pay rate of approximately four employees in a one-week period. Therefore, they argue that the trial court erred by refusing to submit jury questions on (1) Dig Tech's alleged failure to obtain a written contractwith Star, (2) Dig Tech's alleged failure to obtain approval from TxDOT for the purported oral contract with Star, and (3) Dig Tech's alleged failure to provide statutorily compliant certified payrolls. They also argue that the trial court erred in awarding...
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