Zachry Constr. Corp. v. Port of Hous. Auth. of Harris Cnty.

• Decision Date: 29 August 2014
• Docket Number: No. 12–0772.,12–0772.
• Citation: 449 S.W.3d 98
• Parties: ZACHRY CONSTRUCTION CORPORATION, Petitioner, v. PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, Texas, Respondent.
• Court: Texas Supreme Court

449 S.W.3d 98

ZACHRY CONSTRUCTION CORPORATION, Petitioner

v.PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, Texas, Respondent.

No. 12–0772.

Supreme Court of Texas.

Argued Nov. 6, 2013.

Decided Aug. 29, 2014.

Rehearing Denied Dec. 19, 2014.

R. Wes Johnson, The Gardner Law Firm, San Antonio, TX, for Amicus Curiae, Associated Builders and Contractors of Texas.

Joe F. Canterbury Jr., Canterbury Stuber Elder Gooch, Surratt, Shapiro & Stein P.C., Dallas, TX, for Amicus Curiae, Associated General Contractors of Texas, Inc.

James Corbin Van Arsdale, Vice President & General Counsel, Austin, TX, for Amicus Curiae, Associated General Contractors–Texas Building Branch.

Robert H. Fugate, Assistant City Attorney, Arlington City Attorney's Office, Arlington, TX, for Amicus Curiae, City of Arlington, Texas.

Charles Steven Estee, Office of the Dallas City Attorney, Dallas, TX, Amicus Curiae, City of Dallas, Texas.

Christopher Bedford Mosley, Sr. Assistant City Attorney, Fort Worth, for Amicus Curiae, City of Fort Worth, Texas.

Malinda York Crouch, Sr. Assistant City Attorney, Houston, TX, for Amicus Curiae, City of Houston.

Robert Caput, DFW Airport, TX, for Amicus Curiae, Dallas/Fort Worth International Airport Board.

Vincent L. Marable III, Paul Webb, P.C., Wharton, TX, for Amicus Curiae, Electrical Contractors Association, National Systems Contractors Association.

Bruce S. Powers, Assistant County Attorney, Vincent Reed Ryan Jr., Houston, TX, for Amicus Curiae, Harris County, Texas.

Hugh Rice Kelly, Austin, TX, for Amicus Curiae, Texans for Lawsuit Reform.

Jose E. De La Fuente, Lloyd Gosselink Rochelle & Townsend, P.C., Austin, TX, for Amicus Curiae, Texas Aggregates and Concrete Association.

George S. Christian, Texas Civil Justice League, Austin, TX, for Amicus Curiae, Texas Civil Justice League.

John B. Dahill, Austin, TX, for Amicus Curiae, Texas Conference of Urban Counties.

Heather Mahurin, Austin, TX, for Amicus Curiae, Texas Municipal League.

Richard Gary Thomas, Thomas Feldman & Wilshusen, LLP, Dallas, TX, for Amicus Curiae, The American Subcontractors Association, Inc.

David A. Escamilla, Sherine Elizabeth Thomas, Austin, TX, for Amicus Curiae, Travis County, Texas.

Michael Keeley, Dallas, TX, for Amicus Curiae, Zurich Surety.

Amanda Bowman Nathan, Sydney Gibbs Ballesteros, Robin C. Gibbs, Michael Absmeier, Jennifer Horan Greer, Gibbs & Bruns LLP, Brandon Trent Allen, Reynolds, Frizzell, Black, Doyle, Allen & Oldham, L.L.P., Houston, TX, Douglas W. Alexander, Alexander Dubose Jefferson & Townsend LLP, Austin, TX, for Petitioner Zachry Construction Corporation.

David E. Keltner, Marianne M. Auld, Kelly Hart & Hallman LLP, Fort Worth, TX, Catherine B. Smith, Michael A. Heidler, Marie R. Yeates, William D. Sims Jr., Vinson & Elkins LLP, David Hurst Brown, Brown & Kornegay, LLP, Karen Tucker White, Karen T. White, P.C., Lawrence J. Fossi, Fossi & Jewell LLP, Houston, TX, for Respondent Port of Houston Authority of Harris County, Texas.

Opinion

Chief Justice HECHT delivered the opinion of the Court, in which Justice GREEN, Justice GUZMAN, Justice DEVINE, and Justice BROWN joined.

The common law permits a contractor to recover damages for construction delays caused by the owner, but the parties are free to contract differently. A contractor may agree to excuse the owner from liability for delay damages, even when the owner is at fault. The contractor thereby assumes the risk of delay from, say, an owner's change of plans, even if the owner is negligent. But can a no-damages-for-delay provision shield the owner from liability for deliberately and wrongfully interfering with the contractor's work? Before this case, a majority of American jurisdictions—including Texas courts of appeals, courts in all but one jurisdiction to consider the issue, and five state legislatures—had answered no. We agree with this overwhelming view and also conclude that the answer is the same if the owner is a local governmental entity for which immunity from suit is waived by the Local Government Contract Claims Act.¹

Contractors are usually paid as work progresses and, in exchange for payment, must waive liens and claims related to the work paid for. But does such a general waiver release a claim the contractor has already asserted? Not, we think, unless the claim is specifically mentioned or the intent to do so is clear.

Our conclusions require us to reverse the judgment of the court of appeals² and remand the case to that court for further proceedings.

I ³

Petitioner, Zachry Construction Corporation, contracted to construct a wharf on the Bayport Ship Channel for respondent, the Port of Houston Authority of Harris County, Texas. The wharf would be a concrete deck supported by piers, extending out over the water. It would be used for loading and unloading ships carrying containerized goods and would be long enough—1,660 feet—for two ships to dock stern to bow. It would be built in five sections, each 135 feet wide and 332 feet long. The channel was to be dredged to a depth of 40 feet beneath the wharf and surrounding area, and revetment placed along the shore beneath the wharf to prevent erosion. The total cost was $62,485,733.

The contract made Zachry an independent contractor in sole charge of choosing the manner in which the work would be conducted. Specifically, Section 5.10 of the contract provided:

The Port Authority shall not have the right to control the manner in which or prescribe the method by which the Contractor [Zachry] performs the Work. As an independent Contractor, the Contractor shall be solely responsible for supervision of and performance of the Work and shall prosecute the Work at such time and seasons, in such order or precedence, and in such manner, using such methods as Contractor shall choose....

The provision benefitted the Port, insulating it from the liability to which it would be exposed were it exercising control over Zachry's work.⁴ Still, the Port was fully engaged in reviewing Zachry's plans and overseeing construction.

Zachry's plan was innovative. It would use soil dredged from the channel to construct an 8–foot–wide earthen berm starting from the shore at either end of the worksite, extending out toward the center of the channel, then running parallel to the shore, forming a long, flat U-shaped wall in the channel around the construction area. Zachry would install a refrigerated pipe system in the wall and down into the channel floor that would carry supercooled brine, freezing the wall to make it impenetrable to the water in the channel. Zachry would then remove the water from the area between the wall and the shore. In this way, Zachry could work “in the dry”, using bulldozers and other land equipment for the excavation and revetment work. Another advantage to this freeze-wall approach was that it would lower diesel emissions and require fewer nitrous oxide credits under environmental laws, giving the Port more flexibility in other construction projects. Zachry believed this approach would make the work less expensive and allow it to be completed more quickly.

And time was of the essence to the Port. Work began in June 2004 and was to be completed in two years. But two sections of the wharf had to be completed within 20 months—by February 2006—so that a ship from China could dock, delivering cranes to be used on the wharf. Zachry agreed to pay $20,000 per day as liquidated damages for missing the deadlines.

Nine months into the project, the Port realized that it would need two 1,000–foot berths to accommodate the ships it ultimately expected to service. A sixth 332–foot section would have to be added to the wharf. As a practical matter, only Zachry could perform the additional work, and Zachry and the Port began discussions on a change order. To complete the two sections of the wharf needed by February 2006, and to continue to work “in the dry”, Zachry proposed to build another freeze-wall—a cutoff wall—though the middle of the project, perpendicular to the shoreline out to the existing wall, splitting the project into two parts. Zachry would finish the west end where the ship from China would dock, remove the wall barricading water from that area, then continue working on the east end “in the dry”.

The Port had reservations about this plan. Near the shore, the cutoff wall would have to be built through the area where piers had already been driven into the channel floor. The Port's engineers were concerned that freezing the ground near the piers might destabilize them, weakening the wharf and making it unsafe. But the Port was also concerned that if it rejected Zachry's plan, Zachry might simply refuse to undertake the addition of a sixth section. So the Port did not raise its concerns with Zachry. Zachry, for its part, had already identified the issue, but its own engineers had concluded that any piers that might be affected could be insulated from the frozen ground. Change Order 4, using Zachry's approach to add a sixth section of the wharf at a cost of $12,962,800, was finalized September 27, 2005.

Two weeks later, the Port ordered Zachry to revise and resubmit its plans without the cutoff wall. The practical effect of the Port's order was to refuse to allow construction of the cutoff wall. Zachry protested that, under Section 5.10 of the contract, the Port had no right to determine the method and manner of the work, but the Port would not budge. Zachry's only option was to finish the westmost sections in time for the ship from China to dock, then remove the wall altogether and continue to work “in the wet”, which would delay completion of the project and increase its cost.

In negotiating Change Order 4, the Port had promised not to impose liquidated damages for delay as long as the ship from China could dock when it arrived, though the Port had refused to put its promise in writing. Nevertheless, after the ship successfully docked, the Port began withholding liquidated damages from Zachry's payments. Eventually the Port desisted, but not...