*1 COMPANY, FRETZ CONSTRUCTION
Petitioner, BANK OF
SOUTHERN NATIONAL
HOUSTON, Respondent. B-9570.
No.
Supreme of Texas. Court
Nov. 1981. Rehearing Jan.
On *2 1972, was Joe approached by Fretz (Mr. building Stutts)
Ross about a Stutts building, 6-story now as the office known Houston, Woodlake, in Bank of Texas. into Fretz and Mr. entered a Stutts 1973, of struction in but because delays obtaining adequate in Mr. Stutts’ can- financing, eventually contract was 1974, per- celled. In Mr. Stutts secured a project for the in manent loan commitment Texas, Aqua-Con of Inc. the name of South presi- of which Mr. was (Aqua-Con), Stutts financing Mr. secured interim dent. Stutts of respondent from the Bank in the amount $3,050,000.00. The Bank а of issued letter Patterson, Bracewell & William Fred Ha- 1974, 21, intent to the loan on March make gans Cook, and Houston, B. Thomas for Stutts, president Aqua-Con, and Mr. as of petitioner. signed bearing loan documents that date Andrews, Kurth, Campbell Jones, & Fred naming general as Fretz contractor. Jr., Knapp, Houston, for respondent. Bank/Aqua-Con loan was “closed” around 1974. McGEE, Justice. During pre- this time in Fretz was Fretz (Fretz), Construction a Company paring begin project. construction on
general contractor, sued Southern National
building permit
Fretz obtained a
on March
of
(Bank),
Bank Houston
the interim lender
21 and
moved onto the site on March
on a construction project,
damages
for
for
approximate-
delivery
Fretz also received
of
contract,
of
breach
breach
third-party
of
$196,000
ly
project
worth of steel
for
beneficiary contract, promissory estoppel,
and
issues,
fraud. In
which it had ordered in 1973 under
special
answers to
jury
findings
previous
agreement.
returned
favorable
Fretz
construction
contract,
on its breach of
third-party bene-
Aqua-Con
wholly
owned Mr.
Since
ficiary, and
claims,
promissory estoppel
but Stutts,
Aqua-
Fretz was concerned about
failed to find all the elements needed for
ability
Con’s
the construction
theory.
Fretz’s fraud
The trial court disre-
work in
of the
Mr.
view
trouble
Stutts
garded
jury’s
answers under the con-
obtaining financing.
On
previously had
tract and fraud theories and
judg-
rendered
surety,
March 20 Fretz met with its
Trаvel-
ment in
of
favor
promissory
Fretz based on
(Travelers),
Indemnity Company
ers
and
estoppel.
parties appealed.
Both
The court
Fretz and Travel-
determined that both
of
appeals
civil
reversed the trial court’s
ers needed assurances from the
judgment on the promissory estoppel claim
employee
of
paid.
Fretz would
An
and
judgment
rendered
Fretz,
Hammerle,
Mr.
Mr. H.
Ben
contacted
against all claims.
fees would be out that fund. and the There the Bank. testimony required by also that Travelers would and Contractors require Bank with a from the those completion of Upon substantial payment assurances before it would issue project, re- Fretz submitted to performance bonds on Fretz. As a $274,604.30. quest final *3 result, following Mr. Kuhlman sent the let- however, $50,000.00, paid only Fretz was from the ter Bank to Travelers: the all remained from which was (LETTERHEAD OF SOUTHERN NA- proceeds. brought Fretz then this suit BANK) TIONAL the Bank. against 1974 adopted promis- the of Texas has doctrine L.Mr. L. Rhodes Restate- sory by as set forth the estoppel Surety Department White, 90. Wheeler of ment Contracts § Indemnity Traveler’s Company (Tex.1965). pro- 90 Section S.W.2d
P. 0. Box 1446 vides:
Houston, Texas 77001 should promise promisor A which the or reasonably expect tо induce action for- Dear Mr. Rhodes: and substantial ebearance of a definite Payment Re: and Performance Bonds promisee and part character on the of the Texas, Inc., Aqua-Con of South action or fore- which induce such does Houston, Texas —Owner binding injustice can be is if bearance Fretz Company— Construction prom- by of the only avoided enforcement Contractor. ise. $2,372,715.00, This confirm that issues, jury the special In answer represents the bonded сonstruction promis- necessary elements of all the found above-captioned project costs of the to be and the trial present sory estoppel were Texas, Inc., by Aqua-Con owned of South in favor judgment rendered thereon by has been set National aside Southern re- appeals civil Fretz. The court of of paid Bank of Houston Fretz judg- of the trial court’s portion this versed (Contractor) Company Construction Bank, for the ment and rendered progress payments as set out in the loan Bank any by made the promise documents and construction contract. No the doctrine conditional and taxes, fees, fees, in- brokerage inspection applicable. estoppel promissory surance, interest, any or other costs or or will by fees incurred borrowers lenders to and No. 9 was submitted Special Issue be removed from sum. as follows: by answered very truly,
Yours
preponderance
a
find from
youDo
National Bank
Kuhlman,
H.
III
evidence
Southern
/s/ H.
Company:
Fretz Construction
promised
KUHLMAN,
H. H.
III
sum of
(a)
aside the
That it would set
Vice President
paying
$2,372,715.00
purpose
for the
HHK:oc
for work
Company
Fretz Construction
picked up
from Mr. Kuhl-
office build-
Woodlake
on the Bank of
it,
Hammerle,
by
man’s office Mr.
who read
project?
ing construction
files,
a
for his
delivered
copy
made
it
not.”
“we
or “we do
Answer
do”
letter,
reading
it to Travelers. After
“WE DO.”
ANSWER:
signed
Fretz
delivered
fees, inspection
(b)
brokerage
Thаt
Fretz/Aqua-Con construction contract dat-
taxes,
insurance,
any
or
fees,
interest
payment
ed March
1974 and the
by borrow-
fees incurred
other costs or
performance
bonds issued
Travelers.
would
or lenders
[Aqua-Con]
ers
[Bank]
Fretz also made the Bank an additional
sum?
such
be removed from
perform-
beneficiary
payment
do not.”
“we do” or “we
signed
Answer
ance bonds
a Subordination
yond
Bank/Aqua-
ANSWER:
“WE DO.”
those contained in
agreements.
Con loan
obli-
That additional
The сourt
civil
held that
gation
specified
was to set aside
sum or
a
had properly
Bank
attacked the submis
money
payment
and to
sion of
9 in
Special Issue No.
it failed
expenditures
that fund from
for other costs
or
qualifying
contain the
conditional lan
The Bank
and fees.
admitted
guage set out
2April
in the
letter from the
never set
Bank
funds were
aside and that costs
to Travelers. The Bank contends
any
by Aqua-Con
made was
and fees incurred
progress payments
Fretz “in
as set out
tоtalling
out of
in the loan documents and construction con
$3,050,000.00
loan commitment.1 This
tract.” We hold that the Bank
promised
$2,182,386.64
left
to Fretz in-
$2,372,715.00
set aside
and that no other
promised
stead of the
costs or fees incurred
borrowers
$190,328.26 deficiency.
Bank —a
*4
paid
lenders would be
from such sum. The
promise
The Bank next
that any
contends
promise
“protect”
to set aside and
funds for
incorporated
made
terms
it
to Fretz
all the
payment
conditional,
to Fretz was not
and
the Bank/Aqua-
аnd conditions contained in
the omission
language
conditional
Fretz/Aqua-
Con loan
and the
was not error.
contract;
Con construction
that
those con-
Under the Bank/Aqua-Con
agree-
loan
Aqua-Con
ditions
both
by
were breached
ment,
agreed
the Bank
to loan
total
Fretz;
and
and was
it
therefore under no
Aqua-Con
required
and
to
was
obligation
to
Fretz
additional
$525,000.00
infuse an additional
into the
argument
amounts for which it sues. This
project. Out of this total
to be
misplaced.
is
to
Thе
made
Fretz
paid the
acquisition costs,
land
architectural
protect
towas
set aside and
certain funds.
fees,
fees, taxes, interest,
loan commitment
urged by
The conditions
Bank were
appraisal
fees,
and recording
and construc-
obligation
attached
to
to
Bank’s
ad-
tion
funding
costs. Conditions for
Aqua-Con,
vance these funds to
which in
loan, in the
form
progress
advances and
progress
turn
payments
would make
to
payments,
included
requirements
that
Fretz under the construction contract.
Aqua-Con
permanent
maintain a
take-out
essence, the Bank
that Fretz was
contends
commitment,
loan
Aqua-Con pay
that
all
damaged by
not
its failure to set aside and
taxes
due
the property, that all construc-
Aqua-Con’s
funds because
and
tion work be approved by the Bank’s in-
comply
Fretz’s
with the loan and
failures to
architect,
specting
that
contractor
agreements
construction
relieved the Bank
should obtain a paymеnt
performance
and
any money
obligation
of its
to advance
to
bond, and that
proceed according
the work
Fretz).
(for
Aqua-Con
to
The
to a designated schedule.
argument
the nature of confes-
separate
Bank contends it made no
argu-
It
presented
sion
avoidance/
Fretz;
promises
rather,
to
merely
it
ment as an affirmative defense in its mo-
firmed the fact that it was making a con-
verdict,
was over-
tion
directed
struction loan
Aqua-Con
to
it
by
ruled
the trial court.
would comply with the terms of that con-
struction loan
The Bank introduced evidence that
agreement. Mr. Kuhlman’s
its
assurances and the
to
breached the conditions of
construction
Travel-
ers, however,
by failing
complete
indicate that
the Bank
tenant
im-
undertaking an obligation
ap-
above and
an
provements
by failing
be-
obtain
following
1. The
disbursements were made from
Binder
30.00
Title
proceeds:
the loan
Recording
34.00
Fees
Taxes
125,456.15
8.00
Fees
$
Architectural
19,268.67
4,000.00
Interest
Appraisal
681,616.44
Land Release
30,500.00
Fees
Commitment
6,700.00
Attorney’s Fees
Citizens
payable jointly
to made
proval
inspect-
are
be
certificate from the Bank’s
Brownwood,
Bank,
and the
ing
proved
also
National
architect. The Bank
Campbell
Company.
Electric
Aqua-Con
agreement by
breached the loan
failing
permanent
financing
to maintain a
594. This Court
at
206 S.W.2d at
Id
by failing
pay property
commitment
Ross,
for the defendant
affirmed
however,
established,
that the
tаxes. Fretz
contained no
that the letter
Bank made loan extensions
Ross;
rather,
merely
the letter
con
breaches;
Aqua-Con’s
after
learned of
in the stated
the fact that contracts
firmed
improvement
was not
tenant
work
executed and
amount had been
completed by Fretz because there
no
Ross instructions
given
subcontractor
work; and that
required
tenants who
under the contracts be
payments due
$50,000
paid
the Bank
on Fretz’s last draw
and the
payablе jointly
the Bank
made
request without
certificate from
requiring a
also Farmers State
subcontractor.
See
the architect.
It
admitted
Bank,
Texas. The total amount
rather,
obligation
to
it was the Bank’s
$22,354.68.
tracts is
on
conditioned
which were
those funds
compliance with
Aqua-Con’s
Campbell
requested
Mr.
has
that we
Fretz’s
Thus, Stanley
contracts.
give you
respective
their
this letter with instructions
controlling.
is not
payments
these contracts
Furniture
all
to him under
Price,
agent
The final
case on which the Bank
is Hammerle and Mr.
an
relies
Savings
Travelers,
Briercroft
that Fretz
& Loan Ass’n v. Foster
told Mr. Kuhlman
Corp.,
pro-
Financial
could
(Tex.Civ.
needed these assurances before it
S.W.2d 898
ceed,
had
App.—Eastland
e.).
writ
and that Mr. Kuhlman
submitted
ref’d n. r.
There,
lender, Foster,
April
attorneys
the interim
2 letter
sued the
obligations
permanent
lender, Briercroft,
determine what additional
based on the
permanent
undertaking.
was
lender’s loan commitment which
developer.
never funded to the
Finally,
Bank contends
permanent
lender had sent a
Fos
improperly awarded the difference be
ter which confirmed that a loan commit
$2,372,-
original
price
tween
ment had been
made
that Briercroft
Fretz,
715.00 and the amount
“will
endeavor make this transaction ac
$2,264,226.00,
figure
because such
in
ceptable to your institution.”
Id. at 900.
$125,000.00.
cluded a contractor’s fee of
promise,
court held that this
was not
Furthermore,
there was evidence which in
emphasized
and further
there
$215,-
already expended
dicated Fretz had
promise by Briercroft
to protect Foster’s
prior
625.00
the Bank’s
letter.
interim
developer
on which Fos Damages
promisso
recoverable in a case of
ter could rely.
ry estoppel
profit
are not
promisee
only
expected, but
A
another’s inter
position he
necessary to restore him to the
est, which the court held was absent
would have been in
he
not acted in re
Briercroft, is precisely
prom
what the Bank
White,
promise.
v.
liance on the
Wheeler
Therefore,
ised to Fretz.
we hold that
(Tex.1965); E. F. Hutton &
thereon. provisions change orders and had dele-
Furthermore, there to support gated responsibility approving is evidence the such architect, jury’s finding the change inspecting the Bank should its orders to reasonably first expected rely approve have Fretz to on did fact the two who in оrder, promises. change its testimony change There was that Mr. The third orders. 484 prejudgment and its failure to award inspecting law approved by
which was not the architect, interest. was a credit of due, thereby reduced the total amounts action, to the As Fretz’s fraud cause of Furthermore, benefitting the the Bank. jury representation found that the Bank’s agree- work the oral performed pursuant to $2,372,715.00 to set aside to which was called for under ments work false made. Fretz Fretz was not when original the We hold that this is contract. point in its of error that contends eleventh jury’s findings
some the support evidence disregard failing court erred in the trial performance that Fretz’s was foreseeable. point, this answer. In order to sustain this repre proved such Fretz must show that Fretz also contends there is evi- some as a matter was false when made sentation on support jury’s findings dence to its Burden, 146 law. Texas & N.O.R.R. third-party beneficiary contract and (1947). 109, Tex. S.W.2d tract сauses of action. by Mr. a statement Fretz relies on 1, Special jury No. answer to Issue not funds were set aside that the Kuhlman agreed found that the Bank with Fretz to 2, (the his letter to April date of set and that no broker- aside aside. Travelers), were in fact never set fees, fees, taxes, insurance, age inspection however, evidence, was also There interest or fees incurred other costs and “set aside” funds representation to Bank’s removed or the Bank would be physically seg representation was not a from In Special that sum. Issue No. remaining pro regate these funds from jury comply found that the Bank failed to loan, Fretz did not and that ceeds of the with such and as a result Fretz to mean otherwise. understand it $108,489.00. damages jury suffered issue should be special jury’s answer to found, Special also in Issue No. its answers to oth conjunction with read 2 letter from the Bank Travelers it was found that special issues in which er primary was intended for the direct and agreed set aside promised and court, on benefit of Fretz. The trial costs and from other the funds motion, disregarded the Bank’s answers such, could have conclud fees. As Special Issues Nos. 1 and 3 and the court represen ed that the essence civil affirmed without discussion. pro really future tation Special Issue “set aside.” funds tect those We hold evidence discussed representation only into the inquired No. 5 support jury’s above is some evidence funds, whether the to set aside courts below erred in answers and that the pro it would falsely represented disregarding these answers. The Bank had costs and fees. from other tect those funds contended, alternatively points cross Thus, support the find evidence to we some appeals, of civil that the evidence *7 eleventh Fretz’s jury’s answer and overrule support jury’s an- was insufficient to Calvert, “No Evidence” point of error. See theory recovery of and that swers on each Points of Er Evidence” and “Insufficient great against weight such were answers (1960). ror, L.Rev. 363-64 38 Texas preponderance of the evidence. These ap- of civil of court that court. Be- points were not reached is remanded and the cause peals is reversed jurisdiction to cause we not have con- do in accord- that court for its consideration points, sider insufficient evidence Fretz’s opinion. ance with this promissory estoppel, and third- party beneficiary claims must remanded J., his WALLACE, *8 al., Respondents. et H. Jane BROWNING No. C-106. No. C-490. Supreme of Texas. Court
Supreme of Texas. Court 18, 1981. Nov. Nov. notes dissent. v. appeals. to the court of Stanfield (Tex.1971). We do O’Boyle,462 S.W.2d FOR REHEARING ON MOTION points of third reach Fretz’s second and McGEE, Justice. failure to concerning error the trial court’s has rehearing the Bank damages disregard jury’s answers as to In its motion for inspecting ar- pointed out that its correctly of larger a as a matter enter amount authority аpprove change chitect had no Price, Jr., Strasburger Brin, Royal H. & orders. The Bank reasserts its contention Spencer, Joseph W. Geary, Geary, Stahl & party change that was not a to the Street, orders Leroy G. Dal- Gerald P. Urbach and agreements, or the oral and that work per- Graves, las, Hearon, Dougherty, Moody & pursuant formed by Fretz thereto could not Hearon, Austin, Garwood, for peti- Robert reasonably have been foreseeable to it. We tionеrs. error, note our but find no which to basis on Jr., Ayres, Dal- Ayres, Kelsoe R. Jack & holding. alter our construction las, respondents. for tract, aware, specifi- which the Bank was provided cally change for orders. There ON MOTION FOR REHEARING evidence, however, PER CURIAM. would require prior ever approval any Rather, work done of type. appeal brought by Bank’s This arises from a suit primary agreement concern under the loan Browning against Jane H. and others Pat S. was that the work be done properly before Holloway alleged and others. The suit it would request authorize a Aqua- draw fraud, duties, negli- fiduciary breach of Con, who would then Fretz for the gence, and intentional infliction of mental fact, work inspecting done. the Bank’s judg- distress. The trial court rendered architect was change hired to review the enforcing prior agree- ment settlement orders and to advise the Bank as to their parties ment between the to the suit. The Thus, effect on the cost of construction. of civil appeals reversed and remand- any change orders or other additional costs ed the cause for a new trial. S.W.2d long foreseeable the Bank so as the application 611. We refused the Pat S. final cost of such work did not exceed a al., Holloway et no reversible error. previously expected sum. While such sum Our action is not interpreted to be as Bank/Aqua-Con under the approving or disapproving $3,050,000.00 project, the entirе the court presump- of civil that the to set aside tion embodied in section 419 of the Restate- payment to some evidence that the ment of apply Contracts does not under Bank could reasonably have foreseen con- these question. facts. We reserve that up struction costs to that amount. The Holloway The motion of Pat et S. al. amount jury, awarded when added óf rehearing application their for writ to the (through error is overruled. Aqua-Con) Fretz, does not exceed that amount. The motion for rehearing is overruled. Petitioner, TRAHAN, Jack F. v. Petitioners, al., et Pat S. HOLLOWAY TRAHAN, Respondent. Emma J.