Solar Applications Engineering, Inc. v. T.A. Operating Corp.
327 S.W.3d 104
| Tex. | 2010Background
- Solar, a general contractor, and TA, the owner, contracted to build a truck stop in San Antonio for about $4 million.
- Project was substantially complete in August 2000; punch list items remained and liens were filed by Solar and subcontractors.
- TA terminated Solar for cause and withheld final payment, citing failure to keep the project lien-free and punch-list deficiencies.
- Solar sued for breach of contract to recover the contract balance; TA counterclaimed for delays and defective work.
- At trial, damages were awarded to Solar; on appeal, TA argued lien-release affidavit was a condition precedent to final payment and recovery.
- Texas Supreme Court held the lien-release provision is a covenant, reversed the appellate court, and remanded for proceedings consistent with this opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the lien-release provision a condition precedent to recovery? | Solar argues no conditional language; provision is covenant. | TA argues statute and contract make lien-release a condition precedent. | No; provision is a covenant, not a condition precedent. |
| Does interpretation avoid forfeiture and align with statutory lien scheme? | Covenant interpretation avoids forfeiture. | Condition precedent interpretation yields forfeiture. | Covenant reading avoided forfeiture and aligned with lien statutes. |
| What is the effect on final payment pending lien resolution? | Solar entitled to balance subject to lien release. | TA may withhold final payment until lien-release affidavit is provided. | Remand for trial to confirm liens are satisfied before final payment. |
Key Cases Cited
- Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992) (defining condition precedent elements and remedies)
- Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945 (Tex. 1990) (absence of conditional language implies covenant, avoid forfeiture)
- Lesikar Constr. Co. v. Acoustex, Inc., 509 S.W.2d 877 (Tex.Civ.App.-Fort Worth 1974) (all-bills-paid not generally a condition precedent to payment)
- Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1 (Tex. 1976) (interpretation favors promises over forfeiture when ambiguity exists)
- Landscape Design v. Harold Thomas Excavating, 604 S.W.2d 374 (Tex.Civ.App.-Dallas 1980) (absence of explicit conditional language suggests covenant)