495 S.W.3d 514
Tex. App.2016Background
- After Hurricane Ike, Chambers County contracted Peleo to rebuild a firehouse funded by FEMA; Amundson Consulting (and Amundson) participated as consultant/representative and Dannenbaum was architect/contract administrator.
- Peleo submitted three payment applications; Dannenbaum certified 90% of the first two and never certified the third; Chambers County paid the certified amounts but withheld the uncertified 10% on the first two and made no payment on the third.
- On October 28, 2010, Amundson told Peleo to stop work, allegedly stating FEMA ordered a stop; Dannenbaum sent a stop-work letter; 40 days later Dannenbaum told Peleo to resume and Peleo responded by terminating the contract.
- Peleo sued Chambers County, Dannenbaum, Amundson, and Amundson Consulting asserting breach of contract, Prompt Payment Act, fraudulent and negligent misrepresentation; Dannenbaum was dismissed earlier for lack of certificate of merit.
- The trial court granted summary judgment for defendants on liability (including Chambers County and Amundson Consulting) and later, after a jury awarded damages to Chambers County, granted JNOV and rendered a larger verdict plus attorneys’ fees; this appeal and rehearing followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trial court erred by summary judgment dismissing Peleo’s breach of contract claim (failure to pay full invoices/retainage) | Peleo: County’s withholding of 10% on first two invoices and failure to timely pay constituted prior breach excusing Peleo’s termination | County: Only obligated to pay amounts certified by Dannenbaum; withholding authorized by contract/retainage or due to bona fide dispute; immaterial withholding | Reversed: summary judgment improper — fact issues exist whether County breached or withholding was authorized/material; Dannenbaum acted as County’s rep so County bears responsibility for certifications |
| Whether Chambers County proved entitlement to summary judgment on its breach claim (Peleo’s termination breached) | Peleo: Prior County breach excused Peleo’s termination | County: Peleo’s termination was a material breach; withholding was immaterial or authorized; procedural/contract remedies not followed by Peleo | Reversed: County did not establish liability as matter of law; fact issues remain on withholding, notice, and materiality |
| Whether summary judgment on Peleo’s Prompt Payment Act claim was proper | Peleo: Late partial payments and partial withholdings triggered interest/violations; no timely 21-day notice of bona fide dispute | County: Payments were timely after Dannenbaum certification; bona fide dispute existed; third invoice invalid because sent with termination | Reversed: summary judgment improper — statute imposes strict deadlines; County produced no 21-day dispute notices; evidence raises Prompt Payment Act issues |
| Whether summary judgment for Amundson/Amundson Consulting on fraudulent/negligent misrepresentation claims was proper | Peleo: Amundson falsely represented FEMA funding/stop order; Peleo justifiably relied when bidding and during performance | Amundson: Claims fail because Peleo’s contract breach precludes reliance, statements were not false or were County statements merged into contract | Reversed: summary judgment improper — factual issues on falsity, knowledge, reliance, intent, and merger clause does not bar fraud per Italian Cowboy doctrine |
| Whether attorneys’ fees and JNOV award should stand | Peleo: If liability reversed, JNOV and fee award must also be reversed | County: Award proper because it prevailed on liability below | Reversed: Because liability rulings reversed, remand required and damages/JNOV/fees reversed as well |
Key Cases Cited
- MMP, Ltd. v. Jones, 710 S.W.2d 59 (Tex. 1986) (movant must conclusively establish right to summary judgment)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal-sufficiency standard and reviewing evidence in light most favorable to nonmovant)
- Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004) (prior material breach excuses further performance)
- Mann Frankfort Stein & Lipp.Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (de novo review of summary judgment)
- King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (no-evidence standard and scintilla rule)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (merger clauses do not generally bar fraudulent inducement claims)