Opinion
No. 14-06-00703-CV
Opinion filed October 30, 2007.
On Appeal from the 281st District Court Harris County, Texas Trial Court Cause No. 2004-18475.
OPINION
Following a bench trial in this construction contract case, the trial court (1) rendered judgment for appellee, Cadence McShane Corporation ("Cadence"), on its claim for breach of contract against appellant, Design Electric ("Design"), (2) sustained all of Cadence's affirmative defenses to Design's claims against Cadence, and (3) rendered judgment in favor of Cadence on all of Design's claims against Cadence and all of Design's affirmative defenses to Cadence's claims. The court adjudged Cadence was entitled to receive a $300,000 credit from Design, and Design was entitled to receive $240,000 in retainage from Cadence. Determining Cadence was the prevailing party and was entitled to attorneys' fees of $286,945.50, the trial court "adjudged that after all just and lawful offsets," Cadence was entitled to a net award of $15,183.50 with post-judgment interest and additional attorneys' fees in the event of an unsuccessful appeal by Design.
Design disputed only $172,000 to $180,000 of this amount.
This figure reflects the following calculations:
- 240,000.00 - 286,945.50
We conclude no evidence supports several of the trial court's findings of fact necessary to support some portions of its judgment and its determination Cadence was the prevailing party. We therefore affirm, in part, and reverse and remand, in part.
FACTUAL AND PROCEDURAL BACKGROUND
In February 2000, Premier Towers, L.P., contracted with Cadence to act as general contractor for a condominium project in Houston ("the Project"). The Project was designed to include a service entrance busway — equipment that brings electricity from a transformer vault into the switchgear, which then distributes electricity through the building. The Project's electrical engineer originally specified a current limiting, high reactance busway capable of reducing 245,000 incoming amperes to 200,000 amperes. Such a busway must be custom built and is more expensive than a standard I-line busway.
For clarity, we will refer to the contract between Premier and Cadence as "the general contract," and the contract between Cadence and Design as the "subcontract."
Design was the successful bidder on the Project's core electrical work, which included the service entrance busway, and Design and Cadence executed a subcontract on August 15, 2000, with an effective date of June 27, 2000. Design's bid of $1,441,203 for the core electrical work was based, in part, on a quote from Design's supplier, Rexel Summers ("Rexel"). Rexel's quote of $476,000 was based on a bill of materials provided by Design and derived from the then-existing plans and specifications. The bill of materials included sixty feet of current limiting, high reactance busway.
In addition to the core building, Design's contract with Cadence included common areas, five garage levels, and a generator, for a total of $1,722,795.
At some point, Design told Cadence that, if the busway were changed to eliminate the requirement of a current limiting, high reactance busway, the savings would be in the range of $250,000-$300,000 to $500,000. Based on talks with manufacturers, the Project's electrical engineer believed the savings would be in the magnitude of $400,000 and changed the service busway requirements, eliminating the current limiting, high reactance busway. A main reason for the change was to save money.
Fred Haranda, Design's estimator for the Project, was the most frequently cited source of this information.
This engineer testified he understood the cost savings would be $10,000 per foot. The $400,000 savings would therefore reflect a forty foot busway. Design's bill of materials, however, requested a sixty foot busway.
Under the subcontract, full credit was expected for any deleted work and, "When quoting change proposals, Subcontractor shall provide a detailed, itemized breakdown of cost in support of change proposal [sic], whether additive or deductive. A single lump sum price without any description, itemization or explanation will not be accepted." On August 18, 2000, Rexel issued Design a $128,000 deductive credit from the $476,000 specified in its original quote. Several weeks later, Design orally advised Cadence the credit resulting from the changed busway specification would be $120,000. Cadence and Design disputed the amount of the credit for two years, with Cadence repeatedly asking Design for information.
On December 22, 2000, Cadence and Premier executed a contract modification setting the guaranteed minimum price ("GMP") for the Project. Cadence and Premier included a $300,000 reduction to the GMP for the savings associated with the less expensive busway. Before signing the modification, Cadence did not request that Design provide any firm or written pricing representation for the savings resulting from the revised busway specification, and no agreement existed between Cadence and Design for any particular amount of savings, credit, or cost reduction resulting from the busway change.
By January 2002, the busway had been installed. On October 6, 2002, Cadence issued a change order which modified the subcontract by including a $300,000 credit for the less expensive busway. From that time, Design noted its dispute on change orders reflecting the $300,000 credit, but Design continued its work on the Project and continued submitting payment requisitions.
In January 2003, Design provided Cadence with documents from Rexel indicating a January 24, 2000 "base bid" of $476,000 and an August 18, 2000 "deduct" of $128,000 "for current limiting buss duct change." In February 2003, Design included a $120,000 buss duct credit on an invoice to Cadence. Neither the documents nor the invoice separated the components, if any, of the credit.
Design kept $8,000 of the $128,000 for overhead or additional costs incurred to help facilitate the changes.
The Project was substantially complete by early fall 2003. On October 1, 2003, Cadence certified to Premier that, except for $100,000, all remaining amounts under the general contract were due and payable.
Only $10,000 of this amount, for the security package, might have involved Design's work.
As amended by authorized change orders, the final amount of the Cadence/Design subcontract was $4,065,303. In addition, Design contended it had performed $43,496.72 of work not reflected by change orders. Cadence conceded additional changes amounting to $35,250. Over the period of the subcontract, Cadence paid Design a total of $3,588,791. During 2003 and 2004, Design filed six lien affidavits against the Project. In its supporting affidavits, Design claimed nonpayment of amounts owed it by Cadence. In late 2003 or early 2004, Premier first learned Cadence was withholding contract funds from Design and that Cadence disputed the amount of credit for the busway.
This amount incorporates the $300,000 busway credit.
On appeal, Design does not challenge the trial court's failure to award this amount.
Cadence actually conceded additional changes amounting to $35,256, but, in their appellate briefs, both parties based their calculations on $35,250, so we will do the same.
The evidence reflects an undisputed amount of $3,588,797. In a letter to the court, however, Design represented this amount as $3,588,791, and that amount remained in the court's calculations. To avoid even further confusion, we will refer to the paid amount as $3,588,791.
Premier made its final payment to Cadence on March 24, 2004. The payment included all of the general contract amount, less $240,000 in retainage. Under an agreement Premier and Cadence had executed the previous month, Premier was to withhold $240,000 "for the Design Electric lien," paying the $240,000 on or before the earlier of the following: (a) "Design Electric executes a full and final release of the project"; (b) "[t]he statute of limitations has expired on Design Electric's bond claims without Design Electric filing suit against the owner"; (c) "[t]he matter is resolved by settlement."
The "total completed and stored to date" on Cadence's application for payment was $41,452,466 — the same amount as on the application for payment accompanying its October 1, 2003, certification that all amounts were due and payable. The retainage, however, had increased from $100,000 in October 2003 to $240,000 in February 2004.
On April 8, 2004, Design sued Cadence for breach of contract, substantial completion, quantum meruit, violations of the Prompt Payment Act, foreclosure of lien, and attorneys' fees. In subsequent petitions, Design added claims for breach of construction trust and for an accounting, and eliminated lien foreclosure. In its answer, Cadence alleged failure of conditions precedent and asserted numerous affirmative defenses including waiver, estoppel, fraud, good faith dispute, offset, and unclean hands. Cadence also counterclaimed against Design, suing for breach of contract, fraud, unjust enrichment, invalid liens, and attorneys' fees.
See TEX. PROP. CODE ANN. §§ 28.001-.010 (Vernon 2000). We shall refer to these sections as the Prompt Payment Act.
On July 28, 2005, Design filed its final release of liens.
Following a four-day bench trial beginning on September 13, 2005, the parties submitted written closing arguments. In its argument, Cadence argued that deletion of the current limiting, high reactance busway reduced the contract amount by $690,547.83.
The trial court entered judgment, and on May 15, 2006, entered a modified final judgment. The trial court (1) rendered judgment for Cadence on its claim for breach of contract against Design, (2) sustained all of Cadence's affirmative defenses to Design's claims, and (3) rendered judgment in favor of Cadence on all Design's claims against Cadence and all Design's affirmative defenses to Cadence's claims. The trial court adjudged Cadence was entitled to receive a $300,000 credit from Design, and Design was entitled to receive $240,000 in retainage from Cadence. Concluding Cadence was the prevailing party and was entitled to attorneys' fees of $286,945.50, the trial court "adjudged that after all just and lawful offsets," Cadence was entitled to a net award of $15,183.50 with post-judgment interest and additional attorneys' fees in the event of an unsuccessful appeal by Design. The trial court subsequently entered fifty-three findings of fact and seventeen conclusions of law.
ISSUES PRESENTED AND STANDARDS OF REVIEW
The real dispute in this appeal is over the trial court's award of attorneys' fees to Cadence and its denial of attorneys' fees to Design. Resolution of this dispute rests, in part, on a determination of who was the prevailing party below. The matter is complicated by the fact that the trial court's net award to Cadence reflects an award to Design of between $271,762 and $511,762 before the offset for Cadence's attorneys' fees. Yet, the trial court found for Cadence on its breach of contract claim against Design and on its affirmative defenses to all of Design's claims and against Design on all of its claims. So, on appeal as below, a simple controversy has grown hydra-like into a multi-headed beast.
The variation in the calculation of the award to Design rests on how one characterizes the $240,000 Premier withheld at Cadence's request.
As Cadence observed in the trial court, "As of today [November 11, 2005], these two Parties have incurred combined attorney fees exceeding $540,000 to fight over . . . $180,000."
Design presents the following five issues for review: (1) whether Design proved, as a matter of law, its Prompt Payment Act claim against Cadence for withholding $271,762 in excess of the maximum amount involved in a bona fide dispute; (2) whether Design proved, as a matter of law, its breach of contract claim against Cadence, given the trial court's finding Cadence still owed Design $511,762 under the subcontract; (3) whether the trial court erred in awarding Cadence its attorneys' fees and in denying Design its attorneys' fees; (4) whether there was legally or factually sufficient evidence to support the trial court's finding Cadence was entitled to a $300,000 credit; and (5) whether there was legally or factually sufficient evidence to support the trial court's findings Cadence had established its defenses of waiver, estoppel, and unclean hands. Design, however, addresses these issues in nine arguments.
Design presents the following nine arguments: (1) the trial court erred in failing to find Cadence violated the Prompt Payment Act by withholding $811,000 for, at most, a $540,000 dispute; (2) Design proved as a matter of law that Cadence breached the subcontract and owes Design $683,762; (3) the trial court abused its discretion in awarding Cadence its attorneys' fees and in not awarding Design its attorneys' fees; (4) no evidence supports the trial court's finding Design materially breached the subcontract; (5) no evidence supports Cadence's credit against the undisputed amounts owed under the subcontract; (6) Design proved as a matter of law that Cadence was liable under the doctrine of substantial performance; (7) no evidence supports Cadence's waiver defense; (8) no evidence supports Cadence's estoppel defense; and (9) no evidence supports Cadence's unclean hands defense.
In issues one and two, then, Design challenges the legal sufficiency of the evidence to support selected findings of fact. In issues four and five, Design challenges the legal and factual sufficiency of the evidence to support selected findings of fact.
Findings of fact in a bench trial have the same force and dignity as a jury's verdict on jury questions. Arrellano v. State Farm Fire and Cas. Co., 191 S.W.3d 852, 855-56 (Tex.App.-Houston [14th Dist.] 2006, no pet.). We conduct a legal and factual sufficiency review of a trial court's findings by the same standards we apply when reviewing evidence supporting a jury's answer. Id. at 856. If a party attacks the legal sufficiency of the evidence supporting an adverse finding on an issue on which it did not have the burden of proof, the party must demonstrate on appeal no evidence supports the adverse finding. Id. When a party attacks the legal sufficiency of an adverse finding on which it had the burden of proof, it must demonstrate the evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). We first examine the record for evidence supporting the finding, while ignoring all evidence to the contrary. Id. If no evidence supports the finding, we then examine the entire record to determine whether the contrary proposition is established as a matter of law. Id. We may sustain the issue only if the contrary proposition is conclusively established. Id. When a party attacks the factual sufficiency of a finding, we set aside the finding only if it is so contrary to the overwhelming weight and preponderance of the evidence that it is clearly wrong and manifestly unjust. Id. at 242.
In issue three, Design challenges the trial court's award of attorneys' fees to Cadence and its failure to award attorneys' fees to Design. The availability of attorneys' fees under a particular statute is a question of law for the court. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999). Under Texas Civil Practice and Remedies section 38.001, the award of reasonable attorneys' fees to the prevailing party in a breach of contract case is mandatory if there is proof of the reasonableness of the fees. Budd v. Gay, 846 S.W.2d 521, 524 (Tex.App.-Houston [14th Dist.] 1993, no writ); see TEX. CIV. PRAC. REM. CODE ANN. § 38.001 (Vernon 1997). The amount of the award, however, lies within the discretion of the court. Budd, 846 S.W.2d at 524.
Under the Prompt Payment Act, "the court may award costs and reasonable attorneys' fees as the court determines equitable and just." TEX. PROP. CODE ANN. § 28.005 (Vernon 2000). Such an award is discretionary. See Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998) (stating statutes providing "the court `may' award attorney fees" afford trial court a measure of discretion in deciding whether to award attorney fees). A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).
ANALYSIS
Issues Four and Issue Five (partial): Sufficiency of the Evidence to Support a Busway Credit of $300,000
In issue four, Design contends the evidence was legally and factually insufficient to establish $300,000 as the amount of the busway credit. Design argues that the only evidence showed the credit should have been $120,000 or $128,000. As part of issue five, Design argues the evidence was legally and factually insufficient to support the trial court's finding Cadence established its affirmative defense of estoppel and Cadence substantially relied to its detriment on Design's representations the service busway cost $10,000 per linear foot and Design would return savings of at least $300,000 if the high reactance busway were deleted.
In its issues presented, Design represents that the only evidence established a credit of $120,000; in its argument, it represents the only evidence established a credit of $128,000. Although there was evidence showing the price of the installed busway as $36,892.17, there is no evidence regarding how much of Design's original bid was attributable to the current limiting, high reactance busway originally specified. The only evidence of the reduction attributable to the busway change were Rexel's memo to Design indicating a $128,000 deduct and a handwritten calculation on a core building recap. The trial court found these documents did not constitute credible proof of the amount of the credit.
Although the amount of the busway credit is not the main issue, it pervades the calculations in this case. We therefore begin with these issues. We conclude the evidence was legally and factually sufficient to support the trial court's finding Design is estopped from claiming a busway credit in an amount less than $300,000.
The trial court found, "Cadence McShane's affirmative defense of estoppel is established. Cadence McShane substantially relied to its detriment on Design Electric's representations that the service busway cost $10,000 per linear foot and that Design Electric would return savings of at least $300,000 if the high reactance busway was deleted."
For Cadence to prevail on its affirmative defense that Design is equitably estopped from asserting its claim regarding the amount of the busway credit, Cadence was required to produce evidence of the following: (1) a false representation or concealment of material facts, (2) made with actual or constructive knowledge of those facts, (3) with the intention that the representation should be acted on, (4) the representation was made to a party who was without knowledge or means of obtaining knowledge of the real facts, and (5) the party to whom the representation was made detrimentally relied on the representations. See Johnson Higgins of Tex., Inc., v. Kenneco Energy, Inc., 962 S.W.2d 507, 515-16 (Tex. 1998). Cadence produced the following evidence:
Design cites Bocanegra v. Aetna Life Insurance. Co., for the proposition that, absent deception, there can be no estoppel. 605 S.W.2d 848, 851 (Tex. 1980). The focus of Bocanegra was the defense of election. In the course of distinguishing election from other equitable defenses, the court stated, "[e]quitable estoppel differs from [election, judicial estoppel, ratification, waiver, and satisfaction] because it requires some deception that is practiced upon a party who relies upon it to his prejudice." Id. The proposition was not germane to the decision, and no published case has cited Bocanegra for this proposition. In the cases cited in Bocanegra, the courts simply discuss the elements of equitable estoppel set forth above. See Barfield v. Howard M. Smith Co. of Amarillo, 426 S.W.2d 834, 838 (Tex. 1968) (discussing elements and stating when real facts were known to person or were open for his convenient ascertainment, he was not justified in relying on representation pertaining thereto and cannot effectively say he was misled or deceived by such representations); Concord Oil Co. v. Alco Oil Gas Corp., 387 S.W.2d 635, 639 (Tex. 1965) (stating essential element of estoppel is party relying on estoppel must have acted on it to his prejudice and party seeking advantage estoppel must establish that he has been misled to his injury); Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929, 932 (1952) (listing elements). We therefore conclude deception is encompassed in the five elements of estoppel discussed above.
$ At some point, Design told Cadence that, if the busway were changed to eliminate the requirement of a current limiting, high reactance busway, the savings would be in the range of $250,000-$300,000 to $500,000;
$ Premier would not have eliminated the requirement of a current limiting, high reactance busway and relinquished future capacity if the savings were only $120,000;
$ As of August 18, 2000, Design had information from Rexel indicating a busway credit of only $128,000;
$ Cadence repeatedly asked Design to provide documentation of the difference in price between the current limiting, high reactance busway that was used in the subcontract price and the cost of the less expensive busway Design actually installed;
$ Design repeatedly represented to Cadence it would provide the proper documentation, but it did not provide Cadence with anything in writing until January 2003;
$ Distributors provide lot, as opposed to itemized, pricing because they must check several different options to secure pricing and put their own price together; they then "hold that close" until the project is awarded or narrowed down;
$ Deon Snider recalled a discussion in which comments were made about Cadence trading savings on this project for losses on an Austin project;
The testimony was as follows:
Q [counsel for Cadence]. Sir, isn't it true that you have a vague recollection of Haranda — Mr. Haranda suggesting that Cadence McShane trade savings for losses — losses on an Austin project for savings on this project?
A [Snider]. I do vaguely recall a small portion of a discussion that was made. I don't remember who was there, but I do recall some comments being made.
$ Design had done "a wonderful job documenting everything else in the project, but when it got down to this single issue, all [Cadence] got was a stiff arm";
$ Relying on Design's representations that the cost reduction resulting from the use of a standard busway would be in the range of $250,000-300,000 to $500,000, Premier and Cadence used a conservative figure of $300,000 for the credit in the Project's budget and in the guaranteed maximum price contract;
$ To cover its $300,000 exposure with Premier under the Project's guaranteed maximum price, Cadence issued a change order of $300,000 reflecting the savings from the use of the less expensive busway, based on Design's prior representations and Design's failure to provide cost documentation.
Thus, the evidence established (1) Design, at a minimum, concealed Rexel's quotation of a busway credit of $120,000 after it had previously represented the savings would be as much as $500,000; (2) Design necessarily had knowledge of those facts; and (3) in setting the GMP for the project, Cadence detrimentally relied on the representation of a $250,000-$300,000 to $500,000 savings. Additionally, the importance of savings to Premier, the project owner, supported the element that Design intended Cadence act on its representation by conveying the information to Premier. Finally, the distributors' practice of "holding close" to their pricing and Cadence's repeated requests for documentation from Design supported the element that Cadence was without knowledge or means of obtaining Rexel's pricing for the original busway or the credit.
Accordingly, we conclude the evidence was legally and factually sufficient to support the trial court's finding that Design is estopped from claiming a busway credit of less than $300,000. We overrule Design's fourth issue and that portion of its fifth issue challenging the trial court's finding of estoppel against Design.
Issue One: Prompt Payment Act Claim
Issue and overview of arguments. In issue one, Design challenges the trial court's finding that Design's Prompt Payment Act claim was defeated "because at all times, there was a good faith dispute regarding the amount, if any, owed to Design, and because of Design's prior breach of contract." Design contends it proved its Prompt Payment Act claim as a matter of law and requests we render judgment for Design and award it a specified amount of interest based on Cadence's allegedly improper withholding of $271,762. Cadence responds that Design's Prompt Payment Act claim fails because (1) Design was not entitled to payment because it did not meet two conditions precedent, and (2) a good faith dispute existed as to the entire $811,762 Cadence withheld. We agree Design proved its Prompt Payment Act claim as a matter of law, but disagree with its request for rendition for the specified amount of interest.
In addition to challenging this finding, Design challenges, among others, the following findings related to Cadence's defenses of failure of conditions precedent and good faith dispute: "26. Cadence McShane's withholding payment of money that may otherwise be due, is excused by each of Design Electric's failure [sic] to comply with material obligations under the parties' agreement"; "29. Design Electric failed to comply with these agreements to provide documentation of the full credit for the deletion of the high reactance busway"; "30. Design Electric's failure [sic] to comply were material breaches of the contract"; "48. Cadence McShane's affirmative defense of failure of conditions precedent is established. Specifically Design Electric failed to provide all required contract documentation and to release its liens."
Uncontested evidence Cadence withheld a total of $811,762 of the final contract amount, i.e., at least $271,762 more than the total of the busway credit and Premier's retainage. Property Code section 28.002 provides in relevant part:
(a) If an owner or a person authorized to act on behalf of the owner receives a written payment request from a contractor for an amount that is allowed to the contractor under the contract for properly performed work or suitably stored or specially fabricated materials, the owner shall pay the amount to the contractor, less any amount withheld as authorized by statute, not later than the 35th day after the date the owner receives the request.
(b) A contractor who receives a payment under Subsection (a) or otherwise from an owner in connection with a contract to improve real property shall pay each of its subcontractors the portion of the owner's payment, including interest, if any, that is attributable to work properly performed or materials suitably stored or specially fabricated as provided under the contract by that subcontractor, to the extent of that subcontractor's interest in the owner's payment. The payment required by this subsection must be made not later than the seventh day after the date the contractor receives the owner's payment.
TEX. PROP. CODE ANN. § 28.002(a)-(b) (Vernon 2000).
Premier made its final payment, minus $240,000 in retainage, to Cadence on March 24, 2004. Uncontested evidence established Design's work under the subcontract and authorized change orders totaled $4,100,553. The parties agreed Cadence had paid Design only $3,588,791 before commencement of the trial. Thus, after taking into account the $300,000 credit Cadence claimed for the busway change and the $240,000 in retainage it requested Premier to keep, Cadence was still withholding an additional $271,762 for a total of $811,762.
$4,065,303 (final subcontract amount after deducting a 300,000 credit for the busway change) + $35,250 (amount of additional work Cadence conceded Design had completed) = $4,100,553.
Conditions precedent. Cadence argues Design is not entitled to any of the $811,762 because Design failed to meet two conditions precedent. Cadence refers to Design's not having provided documentation for the busway credit and to Design's not having released its liens on the property.
In a footnote, Cadence observes, "The subcontract provides that `as a condition precedent to any such payment [by Cadence to Design], like payment has been made by [Premier] to [Cadence].' . . . Because Premier withheld $240,000 from Cadence, Design was not yet entitled to this sum." Premier withheld this amount based on an agreement between Premier and Cadence executed in February 2004. In October 2003, however, Cadence had requested a retainage of only $100,000 from the final amount due and owing, and only $10,000 of that $100,000 even arguably involved Design's work. Thus Cadence's, and not Design's, action made it impossible for the condition in question to occur. See Ebberts v. Carpenter Prod. Co., 256 S.W.2d 601, 618 (Tex.Civ.App.-Beaumont 1953, writ ref'd n.r.e.) (stating, when promissor's own act makes it impossible for condition on which promise depended to occur, the particular condition is discharged and promissor becomes absolutely bound to give promised performance). We have found no authority that would allow a general contractor to subvert the Prompt Payment Act by agreement with the owner for additional retainage not warranted by a defect in the subcontractor's work.
Conditions precedent are acts or events that occur subsequently to the formation of a contract and that must occur before there is a right to immediate performance and before there can be a breach of contractual duty. McMahan v. Greenwood, 108 S.W.3d 467, 484 (Tex.App.-Houston [14th Dist.] 2003, pet. denied). When a plaintiff alleges all conditions precedent have been performed, it must prove the performance of only those conditions precedent the defendant specifically denies. Lidawi v. Progressive County Mut. Ins. Co., 112 S.W.3d 725, 729 n. 1 (Tex.App.-Houston [14th Dist.] 2003, no pet.). Thus, when the plaintiff makes a general allegation all conditions precedent have been performed, the burden of pleading, but not burden of proof, shifts to the defendant. Id.
To determine whether a condition precedent exists, a court must ascertain the intention of the parties, and it can do so only by looking at the entire contract. McMahan, 108 S.W.3d at 484 (citing Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex. 1990)). Normally, to create a condition precedent, parties to an agreement must use a term such as "on condition that," "if," "provided that," or some similar conditional phrase. Id. Conditions precedent are not favored in the law, and courts tend to construe contract provisions as covenants rather than as conditions. Id. (citing Criswell, 792 S.W.2d at 948).
In support of its contention that documentation of the busway credit was a condition precedent to Cadence's obligation to pay, Cadence points to the following language in the subcontract: "When quoting change proposals, Subcontractor shall provide a detailed, itemized breakdown of cost in support of change proposal [sic], whether additive ordeductive. A single lump sum price without any description, itemization or explanation will not be accepted." This language does not in any manner tie payment to provision of documentation for a change order, much less condition payment on provision of such documentation. When the parties intended an event to be a condition precedent, they inserted the term "condition precedent" in the subcontract.
We count at least eight occurrences of "condition[s] precedent" in the four-page body of the subcontract.
Cadence also argues Design failed to fulfill a condition precedent by not releasing Design's liens on the property until shortly before trial. Cadence, however, did not plead release of lien as a condition precedent. In its seventh amended answer, Cadence alleged only "Defendants plead the affirmative defense of failure of conditions precedent. Cadence McShane has not received payment from the Owner for all amounts claimed by Design Electric. Additionally, Design Electric has not completed and submitted all project documentation." Because Cadence did not plead lien release as a condition precedent, Design never had the burden of proof to establish that condition had been satisfied. See TEX. R. CIV. P. 54 ("When such [conditions precedent] have been so plead [sic], the party so pleading same shall be required to prove only such of them as are specifically denied by the opposite party.").
On appeal, to establish it pleaded release of lien as a condition precedent, Cadence relies on its invalid bond claim. In that claim for declaratory judgment, Cadence alleged, "Design Electric filed liens and affidavits to collect on a payment bond issued by Safeco. Design Electric failed to properly perfect the claims per statute. Defendants seek a declaration that the bond claims are invalid. . . ."
Even were we to conclude Design sufficiently pleaded release of lien as a condition precedent, the only contract language conditioning payment on release of liens involves liens filed by those providing supplies or services to Design:
Contractor may, as a condition precedent to any payment, require Subcontractor to submit satisfactory evidence of payments of, and waivers of, and releases from, any and all claims by any persons, firms or corporations having performed work or labor, supplied services, or supplied material for Subcontractor. Such evidence, waivers and releases must in any event be submitted as a condition precedent to final payment which shall be made upon completion of the Work to the satisfaction of Contractor and after approval by all governmental authorities having jurisdiction and the issuance of a certificate of occupancy, provided as a condition precedent, like payment has been made by Owner to Contractor (unless, and only unless Owner's failure to pay Contractor is the result of default by Contractor unrelated to Subcontractor's performance hereunder, it being expressly understood that any other basis for such non-payment by Owner including the bankruptcy or insolvency of Owner will not excuse this condition precedent).
The preceding paragraph, although clearly setting a condition precedent to final payment, does not refer to Design's liens, but to liens filed by Design's subcontractors. This paragraph does not render release of Design's liens on the Project a condition precedent to payment.
Accordingly, TA Operating Corp. v. Solar Applications Engineering, Inc., 191 S.W.3d 173, (Tex.App.-San Antonio 2005, pet. granted), is distinguishable from the present case.
Good faith dispute and amount in question. Property Code section 28.003(b) provides in relevant part:
If a good faith dispute exists concerning the amount owed for a payment requested or required by this chapter under a contract for construction of or improvements to real property, excluding a detached single-family residence, duplex, triplex, or quadruplex, the owner, contractor, or subcontractor that is disputing its obligation to pay or the amount of payment may withhold from the payment owed not more than 100 percent of the difference between the amount the obligee claims is due and the amount the obligor claims is due .
TEX. PROP. CODE ANN. § 28.003(b) (Vernon 2000) (emphasis added). The parties agree Cadence was justified in withholding some payment under this section. They disagree, however, regarding the amount.
Design contends there is no evidence to support a good faith dispute concerning at least $271,762 of the amount withheld (accepting a busway credit of $540,000) and up to $511,762 of the amount withheld (accepting the trial court's finding of a busway credit of $300,000). Put differently, Design argues Cadence wrongfully withheld at least $271,762 and possibly as much as $511,762.
Cadence argues it was entitled to withhold the entire $811,762. Cadence bases this contention on its claim Design was not entitled to any payment because of "its failure to provide documentation showing the amount of credit due for the less expensive busway and its failure to provide lien releases, both conditions precedent to payment." We have, however, rejected Cadence's argument that these acts were conditions precedent to payment. Accordingly, we reject Cadence's argument it was entitled to withhold the entire $811,762.
We hold the good faith dispute extended only to each party's claim of the credit due for the elimination of the busway. Accordingly, we sustain Design's issue one.
Nevertheless, we conclude it is inappropriate to render judgment under the Prompt Payment Act as Design requests. In its prayer for relief under the Prompt Payment Act, Design states:
Cadence has wrongfully withheld funds that [Premier] forwarded to it that should have been paid to Design. That failure continues through the filing of this brief — Cadence has never tendered any amount of the $811,000 it owes Design. Section 28.004 of the Act provides that interest accrues at one and half percent per month (eighteen percent per year) and starts accruing on the day after the date on which the payment becomes due. Design's payment became due at the very latest on March 24, 2004, the date that Premier made its final payment to Cadence. Thus, this Court should render judgment for Design and award it pre-judgment interest at one and half percent per month on $271,762 ($134.02 per day) from February 8, 2004 [sic] until the time of the Court's judgment and normal interest on the remaining $240,000 due under Design's subcontract. Under the Act, Design is also entitled to an award of attorney's fees. (Footnote and record citations omitted.).
An award of interest on $217,762 assumes Cadence, at the point of final payment, was claiming it was due $540,000 for the busway credit. Design apparently bases this assumption on Cadence's request that Premier withhold $240,000 in retainage. There is no evidence, however, that all of the $240,000 in retainage was attributable to what Cadence claimed was due for the busway credit. Instead, the agreement between Premier and Cadence provided:
Owner agrees to make payment or cause payment to be made of the $240,000 withheld for the Design Electric lien, or such lesser amount as it [sic] finally determined to be owed to Design Electric by Owner or Contractor, to Contractor on or before the earlier of the following:
a) Design Electric executes a full and final release for the Project;
b) The statute of limitations has expired on Design Electric's bond claims without Design Electric filing suit against Owner;
c) The matter is resolved by settlement.
When Design questioned Cadence Vice President Craig Hudeck whether the only reason Premier was withholding the $240,000 was because of the dispute about the proper busway credit, Hudeck responded, "I don't know if that's the only reason." Thus, the $240,000 does not support the assumption that Cadence, at the point of final payment, was claiming a busway credit of $540,000. Additionally, the uncontroverted evidence showed that, as of December 22, 2000, Cadence was representing to Premier the busway credit was $300,000; and on October 6, 2002, Cadence issued a change order modifying its subcontract with Design to include a $300,000 credit for the busway.
Design does not challenge the trial court's finding Premier Towers withheld the $240,000 "as a result of liens filed by Design Electric and the credit dispute."
The trial court's findings of fact and conclusions of law also support the conclusion Cadence, in good faith, could claim only $300,000 for the busway credit. The trial court found, "The correct credit for the elimination of the current limiting high reactance busway is $300,000." Additionally, the trial court concluded Cadence was entitled to $240,000 from Premier, and Design was entitled to $240,000 from Cadence.
In finding Design's Prompt Payment Act claim was defeated because at all times there was a good faith dispute regarding the amount owed Design, the trial court implicitly found there was a good faith dispute regarding the entire $811,762. As discussed above, to the extent that finding was based on failure of conditions precedent, it was in error.
Because the trial court found there was a good faith dispute regarding the entire amount, it did not find an amount attributable to the dispute over the busway credit or what amounts Cadence was withholding in addition to the amount attributable to the busway credit dispute. Because the trial court found a good faith dispute existed at all times, it did not make any findings regarding when Cadence owed Design amounts over the amount attributable to the busway credit dispute.
Accordingly, we remand Design's Prompt Payment Act claim to the trial court to make additional findings regarding (1) the amount in good faith dispute over the busway, (2) the amounts Cadence owed Design over the amount attributable to the busway dispute, (3) the date on which those amounts became due, and (4) the section 28.004 interest on those amounts. We further remand for the trial court to render judgment awarding Design the section 28.004 interest due Design and to consider, in its discretion, an award of attorney's fees under Property Code section 28.005. See TEX. PROP. CODE ANN. §§ 28.004, .005 (Vernon 2000); Bocquet, 972 S.W.2d at 20.
In addition to requesting we calculate interest on $271,762, Design requests the interest accrue from February 8, 2004. Under Property Code section 28.002(b), Cadence was required to pay Design not later than the seventh day after Cadence received Premier's payment. TEX. PROP. CODE ANN. § 28.002(b) (Vernon 2000). Given that Premier paid Cadence on March 24, 2004, then Cadence's final payment to Design was due no later than March 31, 2004, and interest would begin to accrue the following day, April 1, 2004. See TEX. PPROP. CODE ANN. § 28.004(a) (Vernon 2000). Design's request that interest accrue beginning February 8, 2004 is without basis in fact or law.
In sum, we sustain Design's issue one and remand for a determination of the amounts due Design under the Prompt Payment Act.
Issue Two: Design's Claim for Breach of Contract
The arguments . In issue two, Design contends it proved its breach of contract claim against Cadence as a matter of law. Design also contends there is no evidence it materially breached the subcontract in a manner that would excuse Cadence from performing. As part of issue two, Design argues, even if Design breached the subcontract, Cadence was liable under the doctrine of substantial performance.
Design points to the trial court's finding Cadence owed Design $511,762 after applying the $300,000 credit for the busway change — a finding at odds with the trial court's findings against Design on its claims and in favor of Cadence on its defenses.
In response, Cadence relies in part on its contention Design failed to satisfy conditions precedent to payment, a contention we rejected above. Cadence also recasts its argument regarding the conditions precedent and contends Design's failure to provide documentation showing the cost of the installed busway and failure to provide the lien releases until just before trial constituted material breaches on Design's part causing damage to Cadence. Cadence did not plead prior breach as an affirmative defense and does not respond to Design's argument that its alleged breaches do not rise to the level of an affirmative defense. Nevertheless the trial court found Cadence had established its affirmative defense of prior breach and Design challenges this finding on appeal. Therefore, in an abundance of caution and after discussing the evidence establishing Cadence's breach, we address whether Design's failure to document adequately the busway change rose to the level of an affirmative defense that would defeat Design's breach of contract claim. Cadence's breach. The subcontract required Design to perform electrical work on the Project and required Cadence to pay Design "for the full and complete performance of all of [Design's] obligations hereunder." Cadence concedes Design "substantially completed its work on the Project." Cadence Vice President, Craig Hudeck, testified Design had no remaining work to complete and there were no deficiencies in the work it performed. This evidence is undisputed.
As we discussed above, the provision regarding the release of liens did not apply to Design's liens against the property.
After applying a $300,000 busway credit, the trial court found Design was still owed $271,762 for work done on the subcontract and was also entitled to the $240,000 retainage. Thus, the trial court found Cadence had not paid Design $511,762 of the subcontract amount. Except for disputing the amount of credit for the busway, the parties appear to agree the evidence conclusively established at least this amount. Therefore, unless Cadence established an affirmative defense, Design established its breach of contract claim as a matter of law. We turn now to the legal question of whether Design's breaches could provide Cadence with an affirmative defense.
Prior breach as an affirmative defense. Not every breach of contract rises to the level of an affirmative defense. Hollander v. Capon, 853 S.W.2d 723, 725 (Tex.App.-Houston [1st Dist.] 1993, writ denied). Covenants in a contract must be mutually dependent for breach of one covenant to constitute a bar to a party's right to recover on another covenant. See Hanks v. GAB Bus. Servs., Inc., 644 S.W.2d 707, 708 (Tex. 1982) (stating prerequisite to remedy of excuse of performance is that covenants must be mutually dependent promises). Mutually dependent covenants relate to the entire consideration on both sides, so each covenant is such an indispensable part of what both parties intended that the parties would not have entered into the contract with the covenant omitted. Greenstein v. Simpson, 660 S.W.2d 155, 160 (Tex. App-Waco 1983, writ ref'd n.r.e.).
When obligations imposed on one party are independent of, or subsidiary to, obligations imposed on the other party, one party's breach does not constitute a repudiation of a contract excusing the other party from continued performance. Earl Hayes Rents Cars Trucks v. City of Houston, 557 S.W.2d 316, 320 (Tex.Civ.App.-Houston [1st Dist.] 1977, writ ref'd n.r.e.) (citing Scarborough v. Arrant, 25 Tex. 129 (1860)). When a covenant relates only to part of the consideration on both sides and damages may compensate for a breach, it is to be regarded as an independent covenant, unless this construction is contrary to the expressed intent of the parties. Hanks, 644 S.W.2d at 708. The prevailing rule is that, when a promise is to be performed in the course of the performance of the contract, and after some of the consideration of which it forms a part has been given, it will be regarded as subsidiary and its breach will not effect a discharge. Earl Hayes, 557 S.W.2d at 321.
Hollander v. Capon is instructive. After Rita and Sim Capon divorced, Rita secured custody of their four children. Hollander, 853 S.W.2d at 724. Rita was subsequently killed in an automobile accident, and Rita's brother, Richard Hollander, became the children's legal guardian. Id. Capon and Hollander then entered into a multiple paragraph support agreement, under which Capon would pay weekly child support, until each child turned twenty-one or was otherwise emancipated. Id. Capon agreed to pay the full cost of a college education, provided he was financially able to do so. Id. In a single paragraph, Hollander agreed to encourage the children to maintain a healthy and positive relationship with their father. Id. at 725.
Capon's payments were very sporadic, and Hollander sued to enforce the agreement. Id. at 724. Just before trial, Capon attempted to raise breach of contract as an affirmative defense, and the trial court refused to permit Capon to amend his answer. Id. at 725. The court of appeals held the trial court erred in not permitting the amendment, but the error was harmless. Id. at 725-26. Relying on Hanks, the appellate court explained:
It is uncontested that Hollander provided the children with care, sustenance, housing, and education, and, in return, Capon agreed to pay child support. The "breach of contract" Capon attempted to allege as an affirmative defense was that Hollander failed to encourage a healthy and positive relationship between the children and Capon.
. . .
Capon, the natural father, entered into a written agreement to pay a certain amount per month in child support to Hollander, the legal guardian of the children, who housed, fed, educated, and took care of the children. If Hollander failed to "encourage the children to maintain a healthy and positive relationship" with Capon, perhaps Capon could recover damages for Hollander's failure to perform as agreed, but Capon would not be relieved of his contractual support obligations.
Id. at 725-26 (citing Hanks, 644 S.W.2d at 708).
Therefore, Hollander's covenant to encourage the children to maintain a healthy and positive relationship with their father related only to part of the consideration on both sides, and damages might compensate for a breach. Similarly, Design's covenant to provide specified documentation for a change order related only to part of the consideration on both sides, and Cadence has sued for damages related to that breach. See Hanks, 644 S.W.2d at 708. Design's obligation to provide documentation for busway change was independent from Cadence's obligation to pay Design for work done. Design's failure to document the busway change adequately did not excuse Cadence from paying $511,762, the subcontract amount due after the busway credit.
In its breach of contract argument, Design argues Cadence owes it $683,762. This amount assumes a busway credit of $128,000. We have held Design is estopped from claiming a busway credit of less than $300,000, a credit reflected in the trial court's award of $511,762 to Design.
Accordingly, we conclude Cadence presented no evidence to establish prior breach as an affirmative defense. We sustain Design's issue two and need not reach Design's argument regarding substantial performance.
Issue Five: Cadence's Affirmative Defenses of Waiver and Unclean Hands.
In issue five, Design challenges the legal and factual sufficiency of the evidence to support Cadence's affirmative defenses of estoppel, waiver, and unclean hands. In our discussion of issue four, above, we concluded the evidence was legally and factually sufficient to support the trial court's finding Design was estopped from claiming a busway credit of less than $300,000. We turn now to waiver and unclean hands.
Waiver. The trial court found, "Cadence McShane's affirmative defense of waiver is established. By failing to timely submit billings that accurately reflected the work performed in a draw period, Design Electric waived its rights, if any, to complain of nonpayment."
Waiver is an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003). Waiver is largely a matter of intent, and for implied waiver to be found through a party's actions, intent must be clearly demonstrated by the surrounding facts and circumstances. Id. If the person charged with waiver says or does nothing inconsistent with an intent to rely upon a right, there can be no waiver of such right. Id. Waiver is ordinarily a question of fact, but when the surrounding facts and circumstances are undisputed, the question becomes one of law. Id. at 156-57.
It is undisputed Design substantially completed its work on the Project in a satisfactory manner. Design consistently submitted payment applications.
Failure to document the busway change in an adequate and timely manner is the only evidence of "waiver" to which Cadence points. Under issue one, above, we held that documentation of the busway credit was not a condition precedent to payment. Under issue two, we held documentation was independent from Cadence's obligation to pay Design for work done. Design's failure to document the busway does not constitute evidence that it waived its right to payment for work done.
Unclean hands. The trial court found, "Cadence McShane's affirmative defense of unclean hands is established. Design Electric's concealing information necessary to determine the full credit for eliminating the current limiting high reactance service entrance busway and providing incorrect information bar any complaint by Design Electric that Cadence McShane did not make payment."
The clean-hands doctrine is "[t]he principle that a party cannot seek equitable relief or assert an equitable defense if that party had violated an equitable principle, such as good faith. . . . Such party is described as having `unclean hands.'" BLACK'S LAW DICTIONARY 268 (8th ed. 2004). When seeking an equitable remedy, a party must do equity and come to the court with clean hands. Breaux v. Allied Bank, 699 S.W.2d 599, 604 (Tex.App.-Houston [14th Dist.] 1985, writ ref'd n.r.e.).
A court should not apply the clean hands maxim when the defendant has not been seriously harmed and the wrong of which it complains can be corrected without applying the doctrine. In re Jim Walter Homes, Inc., 207 S.W.3d 888, 899 (Tex.App.-Houston [14th Dist.] 2006, orig. proceeding). More importantly for the present case, the "clean hands" maxim is strictly an equitable doctrine and not applicable outside equitable proceedings. Furr v. Hall, 553 S.W.2d 666, 672 (Tex.Civ.App.-Amarillo 1977, writ ref'd n.r.e.); Ligon v. E.F. Hutton Co., 428 S.W.2d 434, 437 (Tex.Civ.App.-Dallas 1968, writ ref'd n.r.e.); Greever v. Persky, 156 S.W.2d 566, 569 (Tex.Civ.App.-Fort Worth 1941), aff'd 140 Tex. 64, 165 S.W.2d 709 (1942).
Except for the finding on substantial performance, which we need not reach, Design is not contesting the trial court's findings on its equitable claims. Design is also not contesting the trial court's findings against Design on Design's equitable defenses of waiver, estoppel, and ratification.
In Steubner Realty 19, Ltd., v. Cravens Road 88, Ltd., this court concluded the doctrine of unclean hands was available to counter an estoppel defense raised in an action at law. 817 S.W.2d 160, 165 (Tex.App.-Houston [14th Dist.] 1991, no writ).
The issue before us, therefore, is the legal and factual sufficiency of the evidence to support Cadence's unclean hands defense solely as it relates to Design's statutory claim under the Prompt Payment Act and Design's common law claim for breach of contract. These are not equitable actions, and Cadence's clean hands defense is inapplicable. See Furr, 553 S.W.2d at 672; Ligon, 428 S.W.2d at 437; Greever, 156 S.W.2d at 569; see also Sammons Enters., Inc. v. Manley, 540 S.W.2d 751, 757 (Tex.Civ.App.-Texarkana 1976, writ ref'd n.r.e.) (concluding appellant's unclean hands argument lacked merit because action was one at law for breach of contract damages). Cadence's evidence in support of its clean hands defense is therefore legally insufficient to defeat Design's Prompt Payment Act and breach of contract claims.
We overrule Design's fifth issue insofar as it relates to the sufficiency of the evidence to support Cadence's estoppel defense. We sustain Design's fifth issue insofar as it relates to the sufficiency of the evidence to support Cadence's waiver and unclean hands defenses.
Issue Three: Attorneys' Fees
We arrive, at last, at the gravamen of the appeal. In issue three, Design argues the trial court erred in awarding Cadence its attorneys' fees and in denying Design its attorneys' fees. We have discussed Prompt Payment Act attorneys' fees in issue one above and have remanded for the trial court to consider, in its discretion, an award of attorney's fees under Property Code section 28.005. See TEX. PROP. CODE ANN. § 28.005. Accordingly, we confine our discussion of Design's third issue to attorneys' fees under Texas Civil Practice and Remedies section 38.001, which provides, "A person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for . . . performed labor . . . or . . . an oral or written contract." TEX. CIV. PRAC. REM. CODE ANN. § 38.001 (Vernon 1997).
To recover attorneys' fees under section 38.001, a party must (1) prevail on a cause of action for which attorneys' fees are recoverable and (2) recover damages. Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). A party must also meet the procedural requirements of section 38.002, which are (1) the claimant's representation by an attorney; (2) presentation of the claim to the opposing party or to its duly authorized agent; and (3) payment for the just amount owed not being tendered before the expiration of the thirtieth day after presentation of the claim. TEX. CIV. PRAC. REM. CODE ANN. § 38.002 (Vernon 1997).
The prevailing party is one who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not to the extent of its original contention. FDIC v. Graham, 882 S.W.2d 890, 900 (Tex.App.-Houston [14th Dist.] 1994, no writ). Put differently, the prevailing party is the one vindicated by the trial court's judgment. 4901 Main, Inc. v. TAS Auto., Inc., 187 S.W.3d 627, 634 (Tex.App.-Houston [14th Dist.] 2006, no pet.). Determination of whether a party is the prevailing or successful party must be based on success on the merits. Id. To be considered the prevailing party, one must recover money or at least something of value. Butler v. Arrow Mirror Glass, Inc., 51 S.W.3d 787, 797 (Tex.App.-Houston [1st Dist.] 2001, no pet.); see Williams v. Compressor Eng'g Corp., 704 S.W.2d 469, 474 (Tex.App.-Houston [14th Dist.] 1986, writ ref'd n.r.e) (upholding award of attorneys' fees when employer was granted injunction, but not damages, against former employee for breach of covenant not to compete). A net recovery, however, is not necessary to obtain attorneys' fees under section 38.001. See McKinley v. Drozd, 685 S.W.2d 7, 10-11 (Tex. 1985) (construing predecessor to section 38.001).
In its breach of contract claim, Design was seeking the amount Cadence still owed it under the subcontract. At the time of trial, Design was withholding $811,772 of the subcontract amount. This amount included a $300,000 credit for the busway change and the $240,000 Premier was retaining at Cadence's request.
This figure is based on Cadence's concession of additional work valued at $35,250, rather than Design's contention of additional work valued at $ 43,947. The trial court's award incorporated Cadence's value, and Design does not contest this amount on appeal.
As we held above, Design established its breach of contract claim against Cadence. The trial court awarded Design the $240,000 in retainage plus an additional $271,762.
Cadence contends Design's entitlement to a portion of retained funds was not an award of damages for purposes of determining who was the prevailing party. In support it cites Criton Corp. v. Highlands Ins. Co., 809 S.W.2d 355 (Tex.App.-Houston [14th Dist.] 1991, writ denied)); and Davis Masonry, Inc. v. B-F-W Construction Co., 622 S.W.2d 144 (Tex.Civ.App.-Waco 1981, no writ). In both of those cases, the trial court found the subcontractor had breached the contract and the general contractor was entitled to an amount necessary to complete the work. See Criton Corp., 809 S.W.2d at 357; Davis Masonry, 622 S.W.2d at 146. Any retained amount due the subcontractor was reduced by the amount due the general contractor for its reasonable expenses to complete the work. In Criton Corp., this court observed, "Where a general contractor recovers the amount necessary to complete the contract less the amount the general contractor retains, the general contractor is the prevailing party entitled to attorneys' fees." 809 S.W.2d at 357. Criton and Davis Masonry do not support Cadence's contention.
The trial court also found Cadence was entitled to a $300,000 busway credit. This amount, however, was only $172,000 to $180,000 more than the amount Design had conceded for the credit, but was considerably less than the $690,547.83 Cadence at one point represented it was due.
Although the busway credit affected the amount of Design's recovery on its breach of contract claim, we cannot say the busway credit was the main issue in the trial or that Cadence was vindicated in relation to that issue when the judgment granted it a credit of only $172,000 to $180,000 more than that conceded by Design. We hold the trial court erred in (1) determining Cadence was the prevailing party, (2) awarding Cadence section 38.001 attorneys' fees, and (3) not considering whether, or in what amount, Design was entitled to section 38.001 attorneys' fees.
Accordingly, we sustain Design's issue three. We remand with instructions that the trial court consider (1) whether Design met the section 38.002 requirements, and (2) if so, the reasonable fees it should recover.
CONCLUSION
We overrule Design's issue four and that part of issue five relating to Cadence's estoppel defense. We therefore affirm the trial court's judgment to the extent it applies a busway credit of $300,000.
We sustain Design's issue one and reverse the trial court's judgment in favor of Cadence and against Design on Design's Prompt Payment Act claim. We remand Design's Prompt Payment Act claim to the trial court to make additional findings regarding (1) the amount in good faith dispute over the busway, (2) the amounts Cadence owed Design over the amount attributable to the busway dispute, (3) the date on which those amounts became due, and (4) the section 28.004 interest on those amounts. We further remand for the trial court to render judgment awarding Design the section 28.004 interest due Design and to consider, in its discretion, an award of attorney's fees under Property Code section 28.005.
As we previously noted, Design's request that interest accrue beginning February 8, 2004 is without basis in fact or law. See n. 30, supra.
We sustain Design's issue two and its issue five relating to Cadence's waiver and unclean hands defense. We therefore reverse the trial court's judgment in favor of Cadence and against Design on Design's breach of contract claim. We affirm the trial court's judgment to the extent it awarded Design $511,762 in damages for that claim.
We sustain Design's issue three. We reverse the trial court's judgment awarding Cadence its attorneys' fees and denying Design its attorneys' fees. We remand with instructions that the trial court consider (1) whether Design met the requirements of Civil Practice and Remedies Code section 38.002, and (2) if so, the reasonable fees Design should recover.
$511,762.00 amount Cadence owed Design for work done the amount Premier was retaining 271,762.00 amount Cadence owed Design after passing on the Premier retainage attorneys' fees Design owed Cadence $ 15,183.50 amount to Cadence after offset for attorneys' fees.