Opinion
No. 05-04-00631-CV
Opinion Issued August 22, 2005.
On Appeal from the County Court at Law No. 1, Collin County, Texas, Trial Court Cause No. 004-37103.
Affirm in part; Reverse and Remand in part.
Before Justices WRIGHT, MOSELEY and LANG.
MEMORANDUM OPINION
Edward A. Town and Sharon McAdams Gunn-Town contracted with Bob Herring to build a house for them. Several months later, disagreements arose on various aspects of the construction. Accordingly, the Towns and Herring entered into an escrow agreement regarding the remaining payments owed and for the completion of the house. When Herring did not receive payment in accordance with his reading of the escrow agreement, Herring brought suit against the Towns for breach of contract. The Towns filed counterclaims alleging breach of contract. The trial court granted Herring's motions for summary judgment rendering judgment for Herring on his breach of contract claims and denying the Towns' counterclaims. In two points, the Towns assert the trial court erred in granting Herring's motions for summary judgment. We decide in favor of the appellants, the Towns, as to their first point, but against them as to their second point. Accordingly, we reverse and remand to the trial court for further proceedings to consider the Towns' counterclaim alleging breach of the house construction agreement. We affirm in all other respects.
I. Factual and Procedural Background
On September 23, 2001, the Towns and Herring signed a "Standard Form of Agreement between Owner and Contractor for a Small Project" for the construction of a $600,000 home. The house construction agreement included the construction specifications.
Disagreements arose between the Towns and Herring regarding the quality of and the state of completion of the construction work. As a result, the Towns and Herring signed an "Escrow Agreement" on October 31, 2002. The escrow agreement stated that: (1) the original $600,000 price in the September 2001 house construction agreement was increased to $614,890, including change orders, (2) the Towns had advanced $555,190 to the contractor in partial payment, (4) the balance of $59,700 would be placed in escrow, and (5) Bob Herring Construction Company, L.L.C. would be paid the balance when four stated conditions were fulfilled. The four conditions were: (1) the Towns and their architect, Phelps Wood, would jointly develop a "punch list" of items to be completed and corrected by the contractor, (2) Herring would certify in writing to the owners and the escrow agent that the home was complete in accordance with the terms of the contract, the "punch list" items were satisfied, and the terms set forth in the Tri-Party Agreement were performed, (3) Herring would provide evidence of payment of subcontractors, and (4) Phelps Wood would inform the escrow agent by letter that the home was complete in accordance with the terms of the contract, the "punch list" was satisfied, and that the quality of the work was "good." Additionally, the escrow agreement included the following language:
Contractor and Owners agree that this agreement has in all respects been duly authorized and executed and is a legal, valid, and binding instrument enforceable against all parties hereto; that this agreement does not conflict with, or result in the breach of, or cause a default under, any instrument to which any party hereto is bound.
Later, by letter dated December 20, 2002, Phelps Wood informed the escrow agent that the Towns' residence was complete, that the "punch list" was completed, and that the workmanship was "good." Herring applied to the escrow agent for the payment of the remaining $59,700. The Towns objected. However, by letter dated February 20, 2003, counsel for the Towns instructed the escrow agent to release $39,700 to "Bob Herring Construction."
On March 17, 2003, Bob Herring Construction, L.L.C. d/b/a Bob Herring Builder filed suit for breach of contract. The house construction agreement was not attached as an exhibit to its petition, but the escrow agreement was attached. The escrow agent interpleaded the $20,000 balance of the escrow funds.
In their answer, the Towns asserted Bob Herring Construction L.L.C. d/b/a Bob Herring Builder had no standing to sue them because they contracted with Bob Herring, individually. The record reflects all documents in this dispute were signed by Bob Herring in his individual capacity. The Towns counterclaimed that Bob Herring individually breached the house construction agreement and that he caused his "alter ego" to file suit against the Towns without basis in law or in fact. Although the original petition did not name Bob Herring individually as a plaintiff, the amended petition clarified that the suit was brought by both Herring L.L.C. and Herring, individually. In the suit, Bob Herring Construction, L.L.C. claimed to be a third party beneficiary under the escrow agreement. Herring Construction L.L.C. and Herring, individually, filed a motion for summary judgment on the breach of contract claim, and a supplemental motion for summary judgment against the Towns' counterclaims. The trial court granted Herring's motion for summary judgment for breach of contract under the escrow agreement and granted Herring's supplemental motion for summary judgment against the Towns' counterclaims. The Towns filed a timely notice of appeal.
II. Disposition of the Towns' Counterclaims
In their first point, the Towns assert that the trial court erred in granting Herring's supplemental motion for summary judgment against their counterclaims for breach of contract because that motion did not address their claim for breach of the house construction agreement. We agree.
In his supplemental motion for summary judgment, Herring did not specifically argue about whether he had or had not breached the terms of the house construction agreement. Rather, Herring posited "that even if Bob Herring did breach a prior contract, the Towns chose to accept any such breach by entering into a subsequent agreement — the Escrow Agreement — with Bob Herring. . . ." Herring argued that "any claims of breach that the Towns assert must be made in the context of a breach of the Escrow Agreement." Herring stated once the Towns "breached the Escrow Agreement they forfeited any legal right to maintain a suit against Bob Herring or the L.L.C. for breach of contract." The Towns' claims for breach of the house construction agreement were not otherwise addressed by Herring.
Although Herring's position is generally described by him as set out above, we conclude his position to be that the house construction agreement was merged into the escrow agreement. Merger refers to the extinguishment of one contract by its absorption into another contract and is largely a matter of the intention of the parties. Perlstein v. D. Steller 3, Ltd. 109 S.W.3d 36, 41 (Tex.App.-Corpus Christi 2004, pet. denied). Whether merger occurs, or whether another agreement is simply supplemental, is determined from the parties' intent. See Carr v. Weiss, 984 S.W.2d 753, 764 (Tex.App.-Amarillo 1999, pet. denied).
In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). In this case, we find no language expressing the intentions that the rights and remedies of the parties in the house construction agreement are absorbed, extinguished or merged into the escrow agreement. Rather, the escrow agreement provides that it "does not conflict with, or result in the breach of, or cause a default under, any instrument to which any party hereto is bound."
Accordingly, we conclude that Herring's supplementary motion for summary judgment did not address Towns' counterclaims regarded breach of the house construction agreement and the trial court erred in granting this motion against the Towns' counterclaims. We decide in Towns' favor on their first point.
III. Disposition of Herring's Claim Under the Escrow Agreement
In their second point, the Towns assert the trial court erred in granting Herring's motion for summary judgment regarding his claims under the escrow agreement. According to the Towns, Herring failed to establish that: (1) there was no genuine issue of material fact regarding the escrow agreement, and (2) he was entitled to judgment as a matter of law. On this point, we cannot agree with the Towns.
Herring moved for summary judgment on his breach of contract claim asserting that the conditions of the escrow agreement had been fulfilled and that, therefore, Herring was entitled to payment of the balance of the escrow account. Attached to the motion for summary judgment was a copy of the escrow agreement, Herring's letter stating the work was completed, evidence that all subcontractors had been paid, correspondence from the architect certifying that the construction was completed and that the workmanship was "good," and Herring's request for payment of the escrow account balance. On this record, we conclude Herring's evidence supported his claim that the conditions of payment of the balance of the escrow account had been met.
The Towns' response to the motion for summary judgment did not raise fact issues regarding the satisfaction of the four conditions for payment of the escrow account. Instead, they attempted to raise fact issues regarding the Towns' satisfaction with the completion of the house construction agreement. At the same time, the Towns acknowledged that the escrow agreement did "not require the consent of Mr. and Mrs. Town before their money is paid to Bob Herring. . . ." The Towns argued that Bob Herring Construction L.L.C. had no standing to bring suit because it was not a party to the contract, that Herring breached the house construction agreement, that his work was not complete, that they were "entitled to offset the cost to complete the construction of their house from any sums which Plaintiff Bob Herring claims to be owed to him," and that they were entitled "to judgment against Bob Herring if the cost to complete the construction . . . exceeds the $20,000 that has been paid by the Towns in escrow. . . ."
Important to our analysis is that the Towns assert the house construction agreement was not merged in the escrow agreement and no party has claimed that the escrow agreement is ambiguous. As explained above, we agree the parties did not state their intention to merge the two agreements, and that the Towns are free to pursue their counterclaims for breach of the house construction agreement upon remand to the trial court. However, the escrow agreement states clearly the conditions which must be satisfied before payment of the balance of the escrow account is to be made to Bob Herring Construction Company, L.L.C. Herring's summary judgment evidence showed that the conditions for payment were met and Towns offered no evidence which raised a material issue of fact as to whether those conditions had been met. Accordingly, the trial court did not err in granting Herring's motion for summary judgment that the $20,000 held in the court's registry be paid to Bob Herring Construction, L.L.C. We decide the Towns' second point against them.
IV. Conclusion
We reverse that portion of the trial court's judgment that ordered the Towns take nothing on their counterclaims, and awarded Herring attorney's fees of $12,375 in defense of those counterclaims. This case is remanded to the trial court for further proceedings consistent with this opinion. We affirm the judgment in all other respects.