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United Commerce Centers, Inc. v. J.R. Birdwell Construction and Restoration

Court of Appeals of Texas, First District

April 25, 2019

UNITED COMMERCE CENTERS, INC., Appellant
v.
J.R. BIRDWELL CONSTRUCTION AND RESTORATION, Appellee

          On Appeal from the 122nd District Court Galveston County, Texas Trial Court Case No. 15-CV-0757

          Panel consists of Justices Lloyd, Kelly, and Hightower.

          MEMORANDUM OPINION

          Russell Lloyd, Justice.

         United Commerce Centers, Inc. is appealing the judgment rendered against it after a bench trial on J.R. Birdwell Construction and Restoration's breach of contract claim. On appeal, UCC argues that the trial court erred by rendering judgment against UCC on Birdwell's breach of contract claim because there is no evidence, or insufficient evidence, that UCC breached the contract and there is no evidence, or insufficient evidence, to support the trial court's award of $574, 951 to Birdwell. We affirm the trial court's judgment.

         Background

         In 2010, UCC purchased an insurance policy from Travelers Lloyds Insurance Company (Travelers) which covered wind and hail damage to a commercial building located in Dallas (the Building). After the Building's roof was damaged by wind and hail in 2011, UCC hired Birdwell as its general contractor and put Birdwell "in charge of the restoration and renovation of damages sustained to [the Building]" with respect to its roof damages (the Agreement).

         Under the terms of the Agreement, UCC warranted that it would file "a claim with [Travelers] for damages [it] believe[d] were caused by a peril covered by [its] insurance policy" and

If the insurance company agrees to pay the claim for damage to the property, [UCC is] required to have [Birdwell] perform such work at the prices determined by [Travelers]. [UCC] also agree[s] to allow [Birdwell] to perform any repairs ultimately prescribed by [Travelers], which includes the estimate of repair and [Travelers'] adjuster's report, as set forth in [Travelers'] claim file. By reference, said adjuster's report and estimate become part of this agreement. Material and labor specifications will follow upon [Travelers'] approval.

         UCC further agreed that, as its general contractor, Birdwell would "obtain any appropriate property insurance damage estimate and will perform any necessary restoration and/or renovation work in accordance with [Travelers'] determination" and "work with the Public Adjuster as a building consultant at no additional cost," if UCC elected to retain a public adjuster in the process. UCC agreed that it would "not have another person or entity perform any of the work included in this claim" and that all work "will be completed by [Birdwell]."

         The contract also states that "[t]he dollar amount of the Agreement is the amount allowed by [UCC's] insurance carrier for the approved scope of loss, which is equal to the Replacement Cost Value, plus any supplements in accordance with the provisions of this Agreement," and UCC "agrees and accepts that the Public Adjuster's Fee will be in addition to the costs to repair the building." The parties also interlineated the following terms: "Adjusters fee will be absorbed by J.R. Birdwell" and "Work will be performed for insurance proceeds."

         After Birdwell inspected the Building, Birdwell invited Clay Morrison, a public adjuster at Morrison & Morrison, Inc. (Morrison), to inspect the Building and provide a second opinion as to the damage. Morrison inspected the Building in September 2012 and confirmed that the Building had suffered extensive hail and wind damage. UCC subsequently hired Morrison to act as its public adjuster with respect to pursuing a claim with Travelers for damages to the Building.

         On January 26, 2013, Morrison notified Travelers of UCC's claim for damages to the Building. On January 31, 2013, Morrison and Birdwell attended an inspection of the Building with Travelers' adjuster, Kevin Brown. Birdwell took core samples from the Building's roof and shared those samples with Morrison and Brown. These core samples demonstrated to Brown, as he later wrote in Travelers' claim file, that all layers of the Building's roof were saturated and that the roof, therefore, should be replaced. Brown, who told Morrison during the inspection that he believed that the roof was a total loss, also prepared an estimate demonstrating his determination that the scope of loss was total and prescribed a complete removal andreplacement of the roof.

         Travelers removed Brown from the file and appointed a new adjuster to re-evaluate the loss. Travelers' second adjuster, Kirk Speary, determined that the roof did not need to be replaced because it could be repaired by coating it with foam. Pursuant to Speary's report, Travelers' paid UCC $235, 503.72 to cover the cost of repairing the roof. Travelers also paid UCC an additional $1, 000 after it determined that UCC had previously paid its deductible on a different claim.

         Morrison, UCC, and Birdwell agreed that Travelers' prescription to apply another layer of foam to the Building's roof would not be a proper repair. According to Morrison, such a repair would not only be ineffective, it would also violate local building codes. As a result, Morrison continued working on the claim for the rest of 2013, seeking to persuade Travelers to change its position.

         After UCC and Travelers were unable to resolve their disagreement over the scope of repair during the adjustment process, Morrison suggested that UCC meet with an attorney, Jeff Raizner, to discuss the possibility of filing a lawsuit against Travelers. According to Birdwell representative David Conrad, UCC was concerned about the costs associated with the litigation and had requested a meeting with Birdwell to discuss the amount of Raizner's attorney's fees and to determine whether there "would there be enough funds left for [Birdwell] to reroof [the] building correctly" if UCC retained Raizner to resolve its dispute with UCC.

         Conrad testified that he met with UCC's Grace Tsai[1] and Grace indicated that UCC would not retain Raizner's firm to pursue a lawsuit against Travelers unless Birdwell would agree that it would repair the damage to the Building for whatever amount Travelers paid in insurance proceeds, minus Morrison's and Raizner's fees. Birdwell agreed to Grace's requested modification. According to Conrad, he and Grace agreed that "once [UCC] had received the paperwork from [Travelers] or the public adjuster showing the amounts that [Travelers] decided to pay[, ] that [Birdwell] would roof [the Building] for the remaining amount that was left over after the attorney and the public adjuster were paid."

         Conrad further testified:

Q. All right. And so, did you talk about the economics of the transaction, how it would work out if there were a lawsuit?
A. Absolutely. We talked about that there's a PA fee. And now that if she decided to involve the attorney that there's going to be an attorney fee and that there will be enough money as long as the insurance company decides to total the whole roof and pay for the whole roof for us to roof it with her only paying her deductible.
Q. And did she ask you to agree to that?
A. Yes. We discussed it. Absolutely.
Q. And so, what did you say when she asked you that?
A. I told her that we could do it for the remaining amount.

         In April or May of 2014, UCC hired Raizner to pursue its dispute with Travelers. Raizner subsequently sent a demand letter to Travelers on UCC's behalf demanding $2, 739, 773.12 which would, among other things, cover the $1, 604, 990.55 needed to replace the roof.

         After UCC and Travelers were unable to resolve their dispute, UCC filed a lawsuit against Travelers in 2014 seeking to recover the replacement value of the roof and asserting various causes of action related to Travelers' handling of the insurance claim. During discovery in that case, UCC obtained Travelers' claim file, which included Brown's estimate and his report stating that the roof was a total loss and it needed to be replaced.

         The parties mediated their dispute and, as a result of mediation, Travelers and UCC executed a confidential settlement agreement on May 27, 2015 in which Travelers agreed to pay UCC an additional $2.5 million to settle all of UCC's claims, including its insurance claim, for a total of $2, 736, 503.72.[2]

         After UCC received its settlement payment, Conrad had multiple conversation with UCC's vice president, Joseph Tsai. about replacing the roof. Conrad testified:

Q. Okay. And what was the purpose of those communications?
A. Well, once they had received the paperwork from the insurance company or the public adjuster showing the amounts that the insurance company decided to pay that we would roof it for the remaining amount that was left over ...

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