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Vast Construction, LLC v. CTC Contractors, LLC

Court of Appeals of Texas, Fourteenth District

July 6, 2017

VAST CONSTRUCTION, LLC, Appellant
v.
CTC CONTRACTORS, LLC, Appellee

         On Appeal from the 55th District Court Harris County, Texas Trial Court Cause No. 2014-21652

          Panel consists of Chief Justice Frost and Justices Brown and Jewell.

          OPINION

          Kevin Jewell Justice.

         In this contract dispute between a general contractor, CTC Contractors, LLC, and a subcontractor, Vast Construction, LLC, appellant Vast challenges the judgment in favor of appellee CTC. The judgment is based on a jury finding that Vast failed to comply with the subcontract. First, Vast asserts that it is entitled to either (1) rendition of judgment in its favor because it established as a matter of law that it did not breach the contract, or (2) reversal of the judgment and remand for a new trial based on various evidentiary or charge-error issues. Second, Vast contends that it established, as a matter of law, that CTC violated the prompt payment to contractors and subcontractors provisions of the Texas Property Code. Third, Vast urges that the trial court reversibly erred by refusing to include a jury question on its Texas Construction Trust Fund Act claim. Fourth, Vast asserts that the trial court erred in awarding attorneys' fees to CTC under Texas Civil Practice and Remedies Code Chapter 38. Finally, Vast asserts that it was entitled to attorneys' fees under the prompt-payment provisions of the Texas Property Code.

         We agree with Vast that the trial court erred by awarding attorneys' fees against it under Civil Practice and Remedies Code section 38.001 because that statute authorizes an award of reasonable attorneys' fees against only individuals and corporations, and Vast, a limited liability company, is neither an individual nor a corporation. We therefore modify the trial court's judgment to remove all portions awarding attorneys' fees to CTC. Rejecting Vast's other issues that we find dispositive, we affirm the judgment as modified.

         Background

         In December 2013, CTC became the general contractor for the construction of a Johnstone Supply store on property owned by Carroll Ventures, LLC in Houston, Texas. The construction site was located on the corner of North Shepherd Drive and Cornish Street. An integral part of the construction project was the expansion of Cornish Street to ease traffic flow and improve surrounding infrastructure (the "Cornish Street Project"). The Cornish Street Project included flood control measures, water and sewage work, installation of a fire sprinkler line, sidewalk construction, and widening of Cornish Street to allow truck access to the store.

         CTC requested proposals to complete the Cornish Street Project. Vast submitted a written proposal to complete the Cornish Street Project for a total of $355, 000. Vast's proposal covered furnishing "the equipment, labor[, ] and materials needed to complete the scope of work listed." The proposal also excluded certain identified tasks, the most relevant of which for our purposes is "permits."

         CTC and Vast signed a subcontractor agreement in February 2014 (the "Subcontract"). The scope of work attached to the Subcontract described the work to be completed on site as "concrete and asphalt paving, water, sewer[, ] and storm sewer." This scope of work was to be completed by April 10, 2014. The Subcontract further included the following relevant provisions:

All work order additions and or omissions must be approved by Contractor. Subcontractor will accept all financial responsibility for any work performed by Subcontractor that is not covered in this agreement or that is not approved by Contractor.
***
Subcontractor is required to meet all reasonable completion schedules set forth by the Contractor[;] therefore Subcontractor agrees to supply as many workers as need, or work as many hours as needed, to meet these completion schedules as well.
***
CANCELLATION/TERMINATION. In the event that the "Scope of Work" is canceled[, ] Subcontractor will be compensated for any work completed based on the breakdown of its bid. If the work completed is not covered in Subcontractor's bid then Contractor reserves the right to compensate Subcontractor based on a percentage scale of work completed up to the cancellation date. Contractor reserves the right to terminate this agreement at any date, with no further compensation, if Contractor determines that Subcontractor is not performing its obligations to fully meet this agreement, also Subcontractor agrees to reimburse Contractor for all cost[s] incurred by Contractor due to Subcontractor negligence.
REMEDIES. In addition to any and all other rights a party may have available according to law, if a party defaults by failing to substantially perform any provision, term or condition of this Contract (including without limitation the failure to make a monetary payment when due), the other party may terminate the Contract by providing written notice to the defaulting party. This notice shall describe with sufficient detail the nature of the default. The party receiving such notice shall have 10 working days from the effective date of such notice to cure the default(s). Unless waived by the party providing notice, the failure to cure the default(s) within such time period shall result in the automatic termination of this Contract.
ENTIRE AGREEMENT. This Contract contains the entire agreement of the parties, and there are no other promises or conditions in any other agreement whether oral or written concerning the subject matter of this Contract. This Contract supersedes any prior written or oral agreement between the parties.

         The Subcontract was silent concerning which party was obligated to secure permits necessary to complete the scope of work. However, Vast applied for and obtained an excavation permit, a sidewalk impairment permit, and a storm water line system permit from the City of Houston. One other permit-a lane closure permit-also was critical to completing the Cornish Street Project. Vast began processing the lane closure permit with the City around February 18, 2014. Securing the permit required a traffic control plan, which the City of Houston had approved in November of 2013.[1] Although the City initially denied the lane closure permit, [2] the City, CTC, and CSF personnel continued to communicate about adjusting the traffic control plan to secure approval.

         Vast submitted a bill to CTC on February 19 for $38, 400 for "mobilization costs." CTC submitted a payment application that included this invoice (among others) to Carroll Ventures for payment on February 25. CTC received Carroll Ventures's payment on this application on March 14, but CTC did not remit any funds to Vast.

         Meanwhile, Vast began "pulling people off' the Cornish Street Project in late February. On March 13, 2014, while discussions still were underway among the City, CTC, and CSF regarding the lane closure permit, Vast contacted the City of Houston and cancelled its maintenance bond and all the permits it had obtained previously. All work on the Cornish Street Project came to a halt that day.

         Vast's work stoppage is undisputed in the record. CTC's president, Josh Crescenzi, testified that Vast abandoned work on the Cornish Street Project because Vast desired to pursue more profitable endeavors. The record does not indicate that Vast contended it abandoned the project because CTC was in breach. And, there is no evidence that Vast invoked the Subcontract's notice-of-default and termination procedures before Vast stopped work on the project on March 13.

         On March 23, CTC notified Vast that Vast was in default on the Subcontract for Vast's alleged: (1) failure to prosecute work on the Cornish Street Project in accordance with the Subcontract documents and schedule; (2) failure to strictly comply with all provisions of the Subcontract; and (3) delay, interference, or stoppage of CTC's operations or of any other subcontractor work.

         CTC requested bids from replacement subcontractors for the Cornish Street Project shortly after Vast revoked the permits. After receiving multiple proposals, CTC selected A&M Contractors to finish the Cornish Street Project and entered into a contract with A&M on April 1, for a total cost of $446, 900. CTC's contract with A&M expressly provided that A&M was responsible for obtaining the necessary permits. The contract also required A&M to obtain a performance bond, which Vast had not been required to obtain.

         On April 14, Vast notified CTC that CTC was in default for CTC's failure to secure required permits necessary for Vast to commence work; failure to timely provide plans; failure to secure approval of a traffic detour plan; failure to pay Vast's February invoice; and refusal to hold necessary performance meetings. In the notice, Vast alleged that it had "attempted to assist CTC" by: (1) securing permits it was not obligated to secure because of CTC's inability to obtain them; (2) sending workers to mobilize and prepare the site at CTC's request; (3) working at the site for two weeks at CTC's request; (4) providing CTC sufficient time to acquire approval of the traffic control plan, which CTC was unable to accomplish; (5) negotiating with CenterPoint Energy regarding relocation of electrical poles, which Vast was not obligated to do; and (6) offering to meet with CTC to negotiate timeline changes that "had become necessary due to delays caused by CTC."

         On April 17, 2014, CTC sued Vast for breach of contract, seeking the difference between Vast's Subcontract amount and the amount CTC paid to have the Cornish Street Project completed. CTC paid A&M approximately $477, 000, and paid other subcontractors over $60, 000, to complete the Cornish Street Project. CTC alleged that Vast failed to timely prosecute its work, failed to strictly comply with the Subcontract, "delayed, interfered and/or stopped CTC's operations, " and "abandoned the project." CTC asserted that Vast had a contractual duty to obtain, but failed to obtain, all necessary building permits and then revoked those permits it had secured. CTC alleged that Vast's conduct caused all construction activities to stop until the permits could be reissued. CTC also sought attorneys' fees under Civil Practice and Remedies Code Chapter 38. In response, Vast denied liability and asserted counterclaims for breach of contract, declaratory relief, and violations of the prompt payment to contractors and subcontractors provisions of the Texas Property Code[3] and the Texas Construction Trust Fund Act.[4]

         During the jury trial, CTC's Crescenzi, testified that Vast was required to secure permits. Crescenzi also testified that Vast never objected to obtaining permits. Based on Crescenzi's testimony and the fact that Vast's original proposal expressly excluded permits from the scope of its bid, Vast offered its proposal into evidence on several occasions. CTC opposed admission based on the parol evidence rule and the merger clause (the "entire agreement" clause excerpted above) contained in the Subcontract. In response, Vast asserted two grounds for admission: (1) to impeach Crescenzi, and (2) because CTC had opened the door to the proposal's admission. The trial court denied Vast's requests to challenge Crescenzi with the proposal or otherwise introduce the proposal into evidence. Both parties presented expert evidence of industry custom and standards as to whether a subcontractor, like Vast, or a general contractor, like CTC, was responsible for obtaining permits. Despite the focus on permitting, however, it was undisputed that Vast abandoned the Cornish Street Project. Crescenzi detailed Vast's decision to pull off the job and cancel permits and bonds; Vast's president, Creig Cox, acknowledged that Vast had left the project entirely by mid-March.

         The jury charge included separate broad-form questions on whether Vast or CTC failed to comply with the Subcontract, along with related questions on excuse and damages, respectively, as to each party. During the charge conference, Vast requested an instruction on materiality of its alleged breaches, as well as a question on its Trust Fund Act claim. The trial court refused both requests. The jury found that Vast failed to comply with the Subcontract and awarded CTC $91, 900 in actual damages. The jury also found that CTC did not breach the Subcontract, a finding Vast does not challenge on appeal. The trial court signed a judgment in favor of CTC in which it awarded CTC the damages as found by the jury and awarded CTC $190, 000 in attorneys' fees for trial, as well as conditional appellate attorneys' fees. The trial court denied Vast's motion for judgment notwithstanding the verdict. This appeal timely followed.

         Issues Presented

         Vast's first issue includes several arguments. Vast contends that: (a) Vast established as a matter of law that it was not required to obtain permits, and thus, Vast did not breach the contract; (b) the trial court erred in excluding Vast's bid proposal in light of Crescenzi's testimony that Vast never informed CTC that Vast was not required to obtain permits; (c) the trial court erred in refusing to instruct the jury on materiality; and (d) the damages awarded are not supported by legally or factually sufficient evidence. In issue two, Vast asserts that it established as a matter of law that it was entitled to recover on its claim under the prompt payment to contractors and subcontractors provisions of the Texas Property Code (the "prompt-payment provisions"). Vast asserts that the trial court erred in denying its requested question on its Texas Construction Trust Fund Act claim in its third issue. In its fourth issue, Vast urges that the trial court erred in awarding attorneys' fees to CTC under section 38.001 of the Texas Civil Practice and Remedies Code. Finally, in issue five, Vast argues it is entitled to attorneys' fees under the prompt-payment provisions. We address each of these issues in turn.

         Analysis

         A. Breach of Contract Claim

         Vast first challenges the jury's finding in Question 1 that it failed to comply with the Subcontract. Focusing on the Subcontract's silence as to the burden to obtain permits, Vast contends that it established, as a matter of law, that it did not breach the Subcontract because the Subcontract did not require Vast to obtain permits.[5] Thus, Vast requests the court to reverse and render judgment in Vast's favor on CTC's breach of contract claim.

         1. Standard of Review

         Vast does not articulate a standard of review in its brief, but its challenge to Question 1 touches two distinct elements of a breach of contract claim: a valid contractual duty and breach of that duty.[6] An analysis of each element potentially implicates two separate standards of review. Generally, a court determines what conduct is required by the parties-i.e., what duties exist under a contract. See, e.g., Meek v. Bishop Peterson & Sharp, P.C., 919 S.W.2d 805, 808 (Tex. App.- Houston [14th Dist] 1996, writ denied). But, insofar as a dispute exists concerning the failure of a party to perform a contract, the court submits the disputed fact questions to the fact finder. See id. Thus, the issue of whether a contract imposes a particular duty on a party is most often a legal question we review de novo, [7] while whether a party has failed to perform under the contract is a factual matter that we review under traditional evidentiary sufficiency standards. Trinity Materials, Inc. v. Sansom, No. 03-11-00483-CV, 2014 WL 7464023, at *10 (Tex. App.-Austin Dec. 31, 2014, pet. denied) (mem. op.) (explaining that conduct required by parties under a contract is a legal question and any dispute concerning failure of party to comply with contact is a fact question for the jury).

         Vast's core argument is that it cannot be held liable for failing to comply with the Subcontract because it had no contractual duty to obtain permits as a matter of law, thus negating the required element of duty. Ultimately, whether we evaluate Vast's argument under a de novo standard or an evidentiary sufficiency standard is not outcome determinative. As explained below, we need not evaluate de novo whether the Subcontract imposed a duty on Vast to secure permits for the Cornish Street Project. Assuming Vast had no duty to secure the permits, as Vast contends, the Subcontract clearly imposed other duties, including the duty to perform the tasks even Vast agrees were included in the Subcontract's scope of work. And, Question 1 did not ask the jury whether Vast failed to comply with the Subcontract by not obtaining permits; rather, Question 1 simply asked the jury whether Vast failed to comply with the Subcontract. And, Vast has not argued that Question 1, as worded, was erroneous; thus, the charge as submitted governs this case through appeal. See Hammerly Oaks, Inc. v. Edwards, 858 S.W.2d 387, 393-94 (Tex. 1997). Accordingly, we evaluate only whether legally sufficient evidence exists to support the jury's affirmative answer to Question 1 on any valid basis. See In re A.V., 113 S.W.3d 355, 362-63 (Tex. 2003).

         When reviewing the legal sufficiency of the evidence, we view the evidence in the light most favorable to the judgment and indulge every reasonable inference that would support it. City of Keller v. Wilson,168 S.W.3d 802, 822 (Tex. 2005). We credit favorable evidence if a reasonable fact finder could and disregard contrary evidence unless a reasonable fact finder could not. Id. at 807, 827; St. Germain v. St. Germain, No. 14-14-00341-CV, 2015 WL 4930588, at *2 (Tex. App.-Houston [14th Dist] Aug. 18, 2015, no pet.) (mem. op.). If there is more than a scintilla of evidence to support the judgment, we must uphold it. Coffman v. Melton,448 S.W.3d 68, 71 (Tex. App.-Houston [14th Dist.] 2014, pet. denied). More ...


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