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Pulte Homes of Texas, L.P. v. Texas Tealstone Resale, L.P.

Court of Appeals of Texas, Second District, Fort Worth

May 4, 2017

PULTE HOMES OF TEXAS, L.P. APPELLANT
v.
TEXAS TEALSTONE RESALE, L.P. D/B/A TEALSTONE RESALE, L.P.; TEALSTONE MANAGEMENT, L.P. D/B/A TEALSTONE CONTRACTORS, L.P.; AND TEALSTONE CONTRACTORS, INC. APPELLEES

         FROM THE 442ND DISTRICT COURT OF DENTON COUNTY TRIAL COURT NO. 15-09067-431

          PANEL: MEIER, GABRIEL, and SUDDERTH, JJ.

          MEMORANDUM OPINION [1]

          BONNIE SUDDERTH JUSTICE

         In two issues, Appellant Pulte Homes of Texas, L.P. (Pulte) appeals the trial court's order dismissing its claims against Appellees Texas Tealstone Resale, L.P. d/b/a Tealstone Resale, L.P.; Tealstone Management, L.P. d/b/a Tealstone Contractors, L.P.; and Tealstone Contractors, Inc. (collectively, Tealstone), arguing that the trial court erred by granting Tealstone's motion for no-evidence summary judgment. We reverse.

         Background

         This case arises out of a dispute related to the construction of townhouses and other buildings in a subdivision known as "Main Street Village." Pulte was the general contractor on the project and, in 2010, Pulte was sued by Main Street Village Homeowners Association, Inc. (the HOA) for defects in the design and construction of work performed at Main Street Village. Pulte settled that lawsuit (the HOA suit) in November 2014 by paying the HOA approximately $5.4 million.

         Pulte brought the underlying action against Tealstone in November 2013,[2]alleging that Pulte and Tealstone had executed a Contractor Base Agreement (CBA) for foundation construction and flatwork for five townhouse units at Main Street Village-units 350, 354, 358, 362, and 366-and that Tealstone was responsible for defects in the foundation and flatwork of those units. Pulte sought damages for negligence, breach of contract, and indemnity under the CBA by Tealstone, as well as attorneys' fees and costs incurred in both the HOA suit and the instant suit.

         In July 2014, Tealstone filed a no-evidence motion for summary judgment on all of Pulte's claims. On the breach of contract claim, Tealstone alleged that Pulte had no evidence that Tealstone had materially breached the contract or that Pulte had suffered any damages as a result of the breach. On the claim for indemnification, again, Tealstone alleged that Pulte had no evidence that the claimed damages arose out of Tealstone's performance of work under the contract, in addition to asserting that there was no evidence that Pulte provided notice or demand for indemnification prior to filing suit, as required under the CBA. On its claim for negligence, Tealstone argued that Pulte had no evidence that Tealstone breached a legal duty to Pulte or that any alleged breach proximately caused Pulte's injury. Finally, Tealstone alleged Pulte had no evidence of breach of contract to support an award of attorney's fees under chapter 38 of the civil practice and remedies code and that Pulte did not present its claim for fees to Tealstone.

         Pulte filed a response to Tealstone's motion, attaching five affidavits with supporting exhibits. Pulte also filed two supplemental responses to Tealstone's motion, discussed in more detail below. In total, Pulte filed nine affidavits[3] in response to Tealstone's motion and to support its claims against Tealstone.

         Tealstone objected to much of Pulte's evidence, and the trial judge sustained all but one of the objections, striking the bulk of Pulte's summary judgment evidence, and then granted Tealstone's motion for no-evidence summary judgment on all of Pulte's claims.

         I. Pulte's summary judgment evidence

         A. Bryson affidavit-Pulte's relationship with Tealstone

         In its initial response, Pulte filed an affidavit by Scott Bryson, Pulte's vice president and director of finance in the Dallas market as well as a custodian of records. In its second supplemental response, Pulte filed a second affidavit by Bryson that closely resembled the first but offered more facts. In its brief to this court, Pulte relies solely on the affidavit submitted as part of its second supplemental response. Thus, our references are limited to the second affidavit.

         As part of his duties, Bryson reviewed and maintained documents related to the Main Street Village project, including "construction cost control documents," financial statements, and the CBA Pulte entered into with Tealstone to perform foundation construction work and flatwork for Pulte. A CBA was attached to Bryson's affidavit as exhibit 1 and identified by Bryson as "the contract whereby Tealstone . . . agreed to perform foundation construction work and flatwork in 2003 for Pulte" at the Main Street Village project. The CBA provided that the work performed by Tealstone was to be "completed in the standards and quality which prevail among construction contractors of superior knowledge and skill" and in a workmanlike manner "according to the highest standard of the trade." The CBA also included the following indemnification provision:

Indemnification of Pulte by Subcontractor, Duty to Defend Contractor hereby agrees to save, indemnify, and keep harmless Pulte and its agents and employees against: all liability, claims, judgments, suits, or demands for damages to person[] or property arising out of, resulting from, or relating to Contractor's performance of the work under this Agreement ("Claims") unless such Claims have been specifically determined by the trier of fact to be the sole negligence of Pulte. Contractor's duty to indemnify Pulte shall arise at the time written notice of a Claim is first provided to Pulte regardless of whether claimant has filed suit on the Claim. Contractor's duty to indemnify Pulte shall arise even if Pulte is the only party sued by claimant and/or claimant alleges that Pulte's negligence was the sole cause of claimant's damages. Contractor's indemnification obligation shall include, but not be limited to, any Claim made against Pulte by: (1) a Contractor's employee or subcontractor who has been injured on property owned by Pulte; (2) a homeowner or association; and (3) a third party claiming patent, trademark or copyright infringement.

         In addition to attaching the CBA as Exhibit 1 to his affidavit, Bryson also attached cost control sheets reflecting payments Pulte claimed to have made to Tealstone for its work on the Main Street Village project.

Bryson further stated that Pulte was the sole defendant in the HOA lawsuit, that it was sued for damages in excess of $11 million, that Pulte paid $5,401,232.00 to settle the HOA suit, and that this amount was based upon Pulte's determination of the scope of necessary repairs to Main Street Village, including repairs necessary to the foundation and flatwork performed by Tealstone on units 350, 354, 358, 362, and 366.

         1. Tealstone's objections and the trial court's rulings

         Tealstone objected to the following statements in Bryson's amended affidavit on the basis that those statements were no more than unsupported "factual conclusions" because "there is no mention of Main Street Village in the [CBA], [nor] is there any mention of foundation construction work and flatwork" in it:[4]

1. I am custodian of records for Pulte and as part of my duties, I have control over copies of construction cost control documents as well as yearly and monthly financial statements for the Dallas market, including costs and expenses related to the construction of Main Street Village . . . and the Contractor Base Agreement between Pulte and [Tealstone] whereby Tealstone Contractor agreed to perform foundation construction work and flatwork work for payment by Pulte at the Main Street Village residential town home construction project in November and December 2003.
2. A true and correct copy of the Contractor Base Agreement between Pulte and Tealstone Contractor for its foundation construction work and flatwork performed during the construction of Main Street Village is attached hereto as Exhibit 1.
3. In my role as Director of Finance, I have personal knowledge of the history of foundation construction work and flatwork performed by Tealstone Contractor at Main Street Village, which includes the Contractor Base Agreement between Pulte and Tealstone Contractor for its work at Main Street Village. The Contractor Base Agreement attached hereto as Exhibit 1 is the contract whereby Tealstone Contractor agreed to perform foundation construction work and flatwork in 2003 for Pulte at Main Street Village.
4. The indemnity provision provides that Tealstone Contractors will indemnify Pulte in the event of a claim against Pulte arising out of or relating to Tealstone Contractor's work at Main Street Village.
5. Pulte is seeking indemnification under the Contractor Base Agreements from Tealstone Contractors for claims . . . that result from Tealstone Contractors' defective construction work and flatwork at the Main Street Village construction project in 2003.
6. Pulte hired Tealstone Contractor in 2003 to perform the foundation construction work and flatwork at 350 Main Street, 354 Main Street, 358 Main Street, 362 Main Street and 366 Main Street in Main Street Village as agreed to under the Contractor Base Agreement attached hereto as Exhibit 1.
. . . .
8. Tealstone Contractor performed the defective foundation construction work and flatwork at 350 Main Street, 354 Main Street, 358 Main Street, 362 Main Street and 366 Main Street in Main Street Village, which is one of the claims for defective work Plaintiff made in the lawsuit. See Exhibit 1 & 2.
9. Pulte settled the lawsuit in good faith by paying $5,401,232.00, which Pulte determined to be fair and reasonable under the circumstances considering the scope of damages determined by both the Plaintiff and Pulte's experts-including repairs to the foundation and flatwork that Tealstone Contractor's performed at 350 Main Street, 354 Main Street, 358 Main Street, 362 Main Street and 366 Main Street-coupled with the potential for an arbitration award in favor of the Plaintiff.

         Tealstone also objected to the above paragraph 5 on the basis that "Bryson is not an expert on construction work and flatwork and has no personal knowledge as to any allegedly defective work." The trial court sustained this objection.

         Additionally, Tealstone objected to the following statement as conclusory because it contained no evidence of alleged payments received by Tealstone and the cost control sheets attached were created more than 10 years after Tealstone would have provided the services:

Pulte paid Tealstone Contractor in November and December 2003 to perform the foundation construction work and flatwork . . . for Pulte at 350 Main Street, 354 Main Street, 358 Main Street, 362 Main Street, and 366 Main Street in Main Street Village.

         Tealstone's conclusory objection to the above was all sustained by the trial court.

         Finally, Tealstone objected to the affidavit in its entirety on the basis that there was "nothing to indicate any basis for Bryson's alleged 'personal knowledge.'" This objection was the only objection overruled by the trial court.

         B. Lee affidavits-Structural and cosmetic damage

         In his affidavit, Kerry Lee, a structural engineer and senior vice president at Nelson Architectural Engineers, Inc. (NAE), stated that he worked in the structural engineering industry performing services such as investigation and analysis of materials used in residential, commercial, and industrial construction. According to Lee, he performed an evaluation of the Main Street Village project that was used in the HOA suit. A copy of the report he prepared for that suit was attached as exhibit 1 to his affidavit (NAE report).

         The NAE report included aerial photos of the Main Street Village project as well as individual photos of and written observations about the townhome units. Lee observed fractures in the townhome unit foundations, and he measured those fractures. In the report, Lee also observed fractured and tilted flatwork in sidewalks, walkways, and alleyways throughout the project, as well as separations and distortion in multiple retaining walls. The report identified cracking and other evidence of distress in the exterior veneers of townhomes, including buckling, separations, nail pops, floor distress, staining, out-of-level floors, and inoperable doors inside units. Lee also reported deficiencies in the townhomes' roofs, and he evaluated grading and draining issues. The NAE report included repair recommendations for each problem addressed.

         Among his conclusions, Lee found that the foundations of 28 of the 33 townhomes had experienced a performance failure, that "multiple foundation systems" had also experienced a strength failure, and that the concrete flatwork had "failed to provide normally expected performance."

         Pulte subsequently supplemented Lee's affidavit with a second affidavit that provided Lee's curriculum vitae (Lee's Supplemental Affidavit). The NAE report was also incorporated into Lee's Supplemental Affidavit, which included illustrations, including engineering drawings for Main Street Village that had not been included as attachments to the original affidavit as well.

         1. Tealstone's objections and the trial court's ruling

         Tealstone argued that Lee's Supplemental Affidavit was irrelevant because (a) it did not refer to or mention Tealstone, (b) it was "prepared as a basis for an opinion of probable construction costs of repair," but contained "no such cost estimate," (c) the report stated that "the cause of the observed distress is indeterminate," (d) Lee did not access the interior of the relevant units, and (e) the affidavit "essentially negate[d] any alleged construction work by Tealstone . . . as a cause of the alleged foundation and flatwork failures." Tealstone further objected that Lee's Supplemental Affidavit contained hearsay and was supported by unauthenticated documents because Lee referred to a list of items he relied upon in making the report but did not attach those documents to his affidavit.

         The trial court granted all of Tealstone's objections to Lee's Supplemental Affidavit and thus struck all of Lee's substantive testimony, leaving only Lee's original affidavit, which proved up the NAE report.

         C. Lozos Affidavit-Repair costs

         Timothy J. Lozos was the technical director at NAE, and as part of his duties, he provided construction cost estimating and cost analysis services, including estimating remedial repair costs for residential, multi-family structures that had sustained damages resulting from construction defects. Lozos had prepared an estimate report for the HOA suit, and he attached it as an exhibit to his affidavit. In his report, Lozos estimated that the cost to repair Main Street Village in its entirety would total $11,694,241.97. Tealstone did not object to Lozos's affidavit.

         D. Marshall Affidavit-Foundation Repair Bid

         Fredrick S. Marshall was the president of Structural Repair, LLC, general partner for Advanced Foundation Repair, LP, and claimed over 23 years of experience in foundation repair. Marshall's affidavit provided individual repair cost bids for necessary foundation repairs for 26 separate buildings, including a repair cost bid of $76,425.00 for 350-366 Main Street, the building that Pulte claims Tealstone performed work on. Marshall's bid ...


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