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Affirmed in=20 Part; Reversed and Remanded in Part; and Opinion filed October 30,=20 2007.

 

 

 

In The

 

Fourteenth=20 Court of Appeals

____________

 

NO. 14-06-00703-CV

____________

 

DESIGN=20 ELECTRIC, = Appellant

 

V.

 

CADENCE=20 MCSHANE CORPORATION, = Appellee

 

 

On Appeal from the = 281st District Court

Harris County, = Texas

Trial Court Cause = No. 2004-18475

 

 

O P I N I=20 O N

Following=20 a bench trial in this construction contract case, the trial court = (1)=20 rendered judgment for appellee, Cadence McShane Corporation = (ACadence@), on its=20 claim for breach of contract against appellant, Design Electric=20 (ADesign@), (2)=20 sustained all of Cadence=3Ds=20 affirmative defenses to Design=3Ds claims=20 against Cadence, and (3) rendered judgment in favor of Cadence on = all of=20 Design=3Ds claims=20 against Cadence and all of Design=3Ds=20 affirmative defenses to Cadence=3Ds=20 claims.  The court adjudged Cadence was entitled to receive a = $300,000 credit from Design,[1]=20 and Design was entitled to receive $240,000 in retainage from=20 Cadence.  Determining Cadence was the prevailing party and = was=20 entitled to attorneys=3D = fees of=20 $286,945.50, the trial court Aadjudged=20 that after all just and lawful offsets,@ = Cadence=20 was entitled to a net award of $15,183.50[2]=20 with post-judgment interest and additional attorneys=3D = fees in=20 the event of an unsuccessful appeal by Design.

We=20 conclude no evidence supports several of the trial = court=3Ds findings=20 of fact necessary to support some portions of its judgment and its = determination Cadence was the prevailing party.  We therefore = affirm,=20 in part, and reverse and remand, in part.

Factual=20 and Procedural Background

In=20 February 2000, Premier Towers, L.P., contracted with Cadence to = act as=20 general contractor for a condominium project in Houston = (Athe=20 Project@).[3] =20 The Project was designed to include a service entrance = buswayCequipment=20 that brings electricity from a transformer vault into the = switchgear,=20 which then distributes electricity through the building. The=20 Project=3Ds=20 electrical engineer originally specified a current limiting, high=20 reactance busway capable of reducing 245,000 incoming amperes to = 200,000=20 amperes.  Such a busway must be custom built and is more = expensive=20 than a standard I-line busway.

Design was=20 the successful bidder on the Project=3Ds core=20 electrical work, which included the service entrance busway, and = Design=20 and Cadence executed a subcontract on August 15, 2000, with an = effective=20 date of June 27, 2000.  Design=3Ds bid of=20 $1,441,203 for the core electrical work was based, in part, on a = quote=20 from Design=3Ds=20 supplier, Rexel Summers (ARexel@).[4] =20 Rexel=3Ds quote of=20 $476,000 was based on a bill of materials provided by Design and = derived=20 from the then-existing plans and specifications.  The bill of = materials included sixty feet of current limiting, high reactance=20 busway.

At some=20 point, Design told Cadence that, if the busway were changed to = eliminate=20 the requirement of a current limiting, high reactance busway, the = savings=20 would be in the range of $250,000B$300,000=20 to $500,000.[5] =20 Based on talks with manufacturers, the Project=3Ds=20 electrical engineer believed the savings would be in the magnitude = of=20 $400,000 and changed the service busway requirements, eliminating = the=20 current limiting, high reactance busway.[6] =20 A main reason for the change was to save = money.

Under the=20 subcontract, full credit was expected for any deleted work and,=20 AWhen=20 quoting change proposals, Subcontractor shall provide a detailed, = itemized=20 breakdown of cost in support of change proposal [sic], whether=20 additive or deductive.  A single lump sum price = without=20 any description, itemization or explanation will not be=20 accepted.@  On=20 August 18, 2000, Rexel issued Design a $128,000 deductive credit = from the=20 $476,000 specified in its original quote.  Several weeks = later,=20 Design orally advised Cadence the credit resulting from the = changed busway=20 specification would be $120,000.  Cadence and Design disputed = the=20 amount of the credit for two years, with Cadence repeatedly asking = Design=20 for information.

On=20 December 22, 2000, Cadence and Premier executed a contract = modification=20 setting the guaranteed minimum price (AGMP@) for the=20 Project.  Cadence and Premier included a $300,000 reduction = to the=20 GMP for the savings associated with the less expensive = busway. =20 Before signing the modification, Cadence did not request that = Design=20 provide any firm or written pricing representation for the savings = resulting from the revised busway specification, and no agreement = existed=20 between Cadence and Design for any particular amount of savings, = credit,=20 or cost reduction resulting from the busway change.

By January=20 2002, the busway had been installed.  On October 6, 2002, = Cadence=20 issued a change order which modified the subcontract by including = a=20 $300,000 credit for the less expensive busway.  From that = time,=20 Design noted its dispute on change orders reflecting the $300,000 = credit,=20 but Design continued its work on the Project and continued = submitting=20 payment requisitions. 

In January=20 2003, Design provided Cadence with documents from Rexel indicating = a=20 January 24, 2000 Abase=20 bid@ = of =20 $476,000 and an August 18, 2000 Adeduct@ = of=20 $128,000 Afor=20 current limiting buss duct change.@  In=20 February 2003, Design included a $120,000 buss duct credit on an = invoice=20 to Cadence.[7] =20 Neither the documents nor the invoice separated the components, if = any, of=20 the credit.

The=20 Project was substantially complete by early fall 2003.  On = October 1,=20 2003, Cadence certified to Premier that, except for $100,000, all=20 remaining amounts under the general contract were due and = payable.[8]

<= SPAN=20 style=3D"FONT-SIZE: 13pt; LINE-HEIGHT: 150%; FONT-FAMILY: = Shruti">

As amended=20 by authorized change orders, the final amount of the = Cadence/Design=20 subcontract was $4,065,303.[9] =20 In addition, Design contended it had performed $43,496.72 of  = work=20 not reflected by change orders.[10] =20 Cadence conceded additional changes amounting to $35,250.[11] =20 Over the period of the subcontract, Cadence paid Design a total of = $3,588,791.[12]=20 During 2003 and 2004, Design filed six lien affidavits against the = Project.  In its supporting affidavits, Design claimed = nonpayment of=20 amounts owed it by Cadence.  In late 2003 or early 2004, = Premier=20 first learned Cadence was withholding contract funds from Design = and that=20 Cadence disputed the amount of credit for the busway.

Premier=20 made its final payment to Cadence on March 24, 2004.  The = payment=20 included all of the general contract amount, less $240,000 in = retainage.[13] =20 Under an agreement Premier and Cadence had executed the previous = month,=20 Premier was to withhold $240,000 Afor the=20 Design Electric lien,@ = paying=20 the $240,000 on or before the earlier of the following: (a) = ADesign=20 Electric executes a full and final release of the = project@; (b)=20 A[t]he=20 statute of limitations has expired on Design Electric=3Ds bond=20 claims without Design Electric filing suit against the = owner@; (c)=20 A[t]he=20 matter is resolved by settlement.@

On April=20 8, 2004, Design sued Cadence for breach of contract, substantial=20 completion, quantum meruit, violations of the Prompt Payment = Act,[14]=20 foreclosure of lien, and attorneys=3D = fees.  In subsequent petitions, Design added claims for = breach of=20 construction trust and for an accounting, and eliminated lien=20 foreclosure.[15] =20 In its answer, Cadence alleged failure of conditions precedent and = asserted numerous affirmative defenses including  waiver, = estoppel,=20 fraud, good faith dispute, offset, and unclean hands.  = Cadence also=20 counterclaimed against Design, suing for breach of contract, = fraud, unjust=20 enrichment, invalid liens, and attorneys=3D = fees.=20

Following=20 a four‑day bench trial beginning on September 13, 2005, the = parties=20 submitted written closing arguments.  In its argument, = Cadence argued=20 that deletion of the current limiting, high reactance busway = reduced the=20 contract amount by $690,547.83.

The trial=20 court entered judgment, and on May 15, 2006, entered a modified = final=20 judgment.  The trial court (1) rendered judgment for Cadence = on its=20 claim for breach of contract against Design, (2) sustained all of=20 Cadence=3Ds=20 affirmative defenses to Design=3Ds claims,=20 and (3) rendered judgment in favor of Cadence on all = Design=3Ds claims=20 against Cadence and all Design=3Ds=20 affirmative defenses to Cadence=3Ds=20 claims.  The trial court adjudged Cadence was entitled to = receive a=20 $300,000 credit from Design, and Design was entitled to receive = $240,000=20 in retainage from Cadence.  Concluding Cadence was the = prevailing=20 party and was entitled to attorneys=3D = fees of=20 $286,945.50, the trial court Aadjudged=20 that after all just and lawful offsets,@ = Cadence=20 was entitled to a net award of $15,183.50 with post-judgment = interest and=20 additional attorneys=3D = fees in=20 the event of an unsuccessful appeal by Design.  The trial = court=20 subsequently entered fifty-three findings of fact and seventeen=20 conclusions of law.

 

Issues=20 Presented and Standards of Review

The real=20 dispute in this appeal is over the trial court=3Ds award of=20 attorneys=3D = fees to=20 Cadence and its denial of attorneys=3D = fees to=20 Design.  Resolution of this dispute rests, in part, on a=20 determination of who was the prevailing party below.  The = matter is=20 complicated by the fact that the trial court=3Ds net=20 award to Cadence reflects an award to Design of between $271,762 = and=20 $511,762 before the offset for Cadence=3Ds=20 attorneys=3D = fees.[16] =20 Yet, the trial court found for Cadence on its breach of contract = claim=20 against Design and on its affirmative defenses to all of=20 Design=3Ds claims=20 and against Design on all of its claims.  So, on appeal as = below, a=20 simple controversy has grown hydra-like into a multi-headed = beast.[17]

Design=20 presents the following five issues for review: (1) whether Design = proved,=20 as a matter of law, its Prompt Payment Act claim against Cadence = for=20 withholding $271,762 in excess of the maximum amount involved in a = bona=20 fide dispute; (2) whether Design proved, as a matter of law, its = breach of=20 contract claim against Cadence, given the trial court=3Ds finding=20 Cadence still owed Design $511,762 under the subcontract; (3) = whether the=20 trial court erred in awarding Cadence its attorneys=3D = fees and=20 in denying Design its attorneys=3D = fees; (4)=20 whether there was legally or factually sufficient evidence to = support the=20 trial court=3Ds finding=20 Cadence was entitled to a $300,000 credit; and (5) whether there = was=20 legally or factually sufficient evidence to support the trial=20 court=3Ds findings=20 Cadence had established its defenses of waiver, estoppel, and = unclean=20 hands.  Design, however, addresses these issues in nine = arguments.[18]

=

In issues=20 one and two, then, Design challenges the legal sufficiency of the = evidence=20 to support selected findings of fact.  In issues four and = five,=20 Design challenges the legal and factual sufficiency of the = evidence to=20 support selected findings of fact.

Findings=20 of fact in a bench trial have the=20 same force and dignity as a jury=3Ds verdict=20 on jury questions.  Arrellano v. State Farm Fire and Cas. = Co.,=20 191 S.W.3d 852, 855B56 (Tex.=20 App.CHouston=20 [14th Dist.] 2006, no pet.).  We conduct a legal and factual=20 sufficiency review of a trial = court=3Ds findings=20 by the same standards we apply when reviewing evidence supporting = a=20 jury=3Ds=20 answer.  Id. at 856.  If a party attacks the = legal=20 sufficiency of the evidence supporting an adverse finding on an = issue on=20 which it did not have the burden of proof, the party must = demonstrate on=20 appeal no evidence supports the adverse finding.  = Id. =20 When a party attacks the legal sufficiency of an adverse finding = on which=20 it had the burden of proof, it must demonstrate the evidence = establishes,=20 as a matter of law, all vital facts in support of the issue.  = Dow=20 Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001).  We = first=20 examine the record for evidence supporting the finding, while = ignoring all=20 evidence to the contrary.  Id.  If no evidence = supports=20 the finding, we then examine the entire record to determine = whether the=20 contrary proposition is established as a matter of law. =20 Id.  We may sustain the issue only if the contrary = proposition=20 is conclusively established.  Id.  When a party = attacks=20 the factual sufficiency of a finding, we set aside the finding = only if it=20 is so contrary to the overwhelming weight and preponderance of the = evidence that it is clearly wrong and manifestly unjust.  = Id.=20 at 242.

In issue=20 three, Design challenges the trial court=3Ds award of=20 attorneys=3D = fees to=20 Cadence and its failure to award attorneys=3D = fees to=20 Design.  The availability of attorneys=3D = fees=20 under a particular statute is a question of law for the = court. =20 Holland v. Wal‑Mart Stores, Inc., 1 S.W.3d 91, = 94 (Tex.=20 1999).  Under Texas Civil Practice and Remedies section = 38.001, the=20 award of reasonable attorneys=3D = fees to=20 the prevailing party in a breach of contract case is mandatory if = there is=20 proof of the reasonableness of the fees.  Budd v. Gay, = 846=20 S.W.2d 521, 524 (Tex. App.CHouston=20 [14th Dist.] 1993, no writ); see Tex. Civ. Prac. & Rem. = Code=20 Ann. ' = 38.001=20 (Vernon 1997).  The amount of the award, however, lies within = the=20 discretion of the court.  Budd, 846 S.W.2d at = 524.

Under the=20 Prompt Payment Act, Athe court=20 may award costs and reasonable attorneys=3D = fees as=20 the court determines equitable and just.@ =20 Tex. Prop. Code = Ann.=20 ' = 28.005=20 (Vernon 2000).  Such an award is discretionary.  = See=20 Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998) (stating = statutes=20 providing Athe court=20 >may=3D = award=20 attorney fees@ = afford=20 trial court a measure of discretion in deciding whether to award = attorney=20 fees).  A trial court abuses its discretion if it acts in an=20 arbitrary or unreasonable manner without reference to any guiding = rules or=20 principles.  Downer v. Aquamarine Operators, Inc., 701 = S.W.2d=20 238, 241B42 (Tex.=20 1985).

Analysis

Issues Four and = Issue Five=20 (partial):  Sufficiency of the Evidence to Support a Busway = Credit of=20 $300,000

 

In issue=20 four, Design contends the evidence was legally and factually = insufficient=20 to establish $300,000 as the amount of the busway credit.  = Design=20 argues that the only evidence showed the credit should have been = $120,000=20 or $128,000.[19] =20 As part of issue five, Design argues the evidence was legally and=20 factually insufficient to support the trial court=3Ds finding=20 Cadence established its affirmative defense of estoppel and = Cadence=20 substantially relied to its detriment on Design=3Ds=20 representations the service busway cost $10,000 per linear foot = and Design=20 would return savings of at least $300,000 if the high reactance = busway=20 were deleted.

Although=20 the amount of the busway credit is not the main issue, it pervades = the=20 calculations in this case.  We therefore begin with these=20 issues.  We conclude the evidence was legally and factually=20 sufficient to support the trial court=3Ds finding=20 Design is estopped from claiming a busway credit in an amount less = than=20 $300,000.[20]

For=20 Cadence to prevail on its affirmative defense that Design is = equitably=20 estopped from asserting its claim regarding the amount of the = busway=20 credit, Cadence was required to produce evidence of the following: = (1) a=20 false representation or concealment of material facts, (2) made = with=20 actual or constructive knowledge of those facts, (3) with the = intention=20 that the representation should be acted on, (4) the representation = was=20 made to a party who was without knowledge or means of obtaining = knowledge=20 of the real facts, and (5) the party to whom the representation = was made=20 detrimentally relied on the representations.  See Johnson = &=20 Higgins of Tex., Inc., v. Kenneco Energy, Inc., 962 = S.W.2d 507,=20 515B16 (Tex.=20 1998).[21] =20 Cadence produced the following evidence:

$       =20 At some point, Design told Cadence that, if the busway were = changed to=20 eliminate the requirement of a current limiting, high reactance = busway,=20 the savings would be in the range of $250,000B$300,000 to=20 $500,000;

$       =20 Premier would not have eliminated the requirement of a current = limiting,=20 high reactance busway and relinquished future capacity if the = savings were=20 only $120,000;

$       =20 As of August 18, 2000, Design had information from Rexel = indicating a=20 busway credit of only $128,000;

$       =20 Cadence repeatedly asked Design to provide documentation of the = difference=20 in price between the current limiting, high reactance busway that = was used=20 in the subcontract price and the cost of the less expensive busway = Design=20 actually installed;

$       =20 Design repeatedly represented to Cadence it would provide the = proper=20 documentation, but it did not provide Cadence with anything in = writing=20 until January 2003;

$       =20 Distributors provide lot, as opposed to itemized, pricing because = they=20 must check several different options to secure pricing and put = their own=20 price together; they then Ahold that = close@ until the project = is awarded=20 or narrowed down;

$       =20 Deon Snider recalled a discussion in which comments were made = about=20 Cadence trading savings on this project for losses on an Austin = project;[22]

$       =20 Design had done Aa wonderful job = documenting=20 everything else in the project, but when it got down to this = single issue,=20 all [Cadence] got was a stiff arm@;

$       =20 Relying on Design=3Ds representations = that the=20 cost reduction resulting from the use of a standard busway would = be in the=20 range of $250,000B300,000 to = $500,000, Premier=20 and Cadence used a conservative figure of $300,000 for the credit = in the=20 Project=3Ds budget and in the = guaranteed maximum price contract;

$       =20 To cover its $300,000 exposure with Premier under the = Project=3Ds guaranteed = maximum price,=20 Cadence issued a change order of $300,000 reflecting the savings = from the=20 use of the less expensive busway, based on Design=3Ds prior = representations and=20 Design=3Ds failure to = provide cost=20 documentation.

 

Thus, the=20 evidence established (1) Design, at a minimum, concealed = Rexel=3Ds=20 quotation of a busway credit of $120,000 after it had previously=20 represented the savings would be as much as $500,000; (2) Design=20 necessarily had knowledge of those facts; and (3) in setting the = GMP for=20 the project, Cadence detrimentally relied on the representation of = a=20 $250,000B$300,000=20 to $500,000 savings.  Additionally, the importance of savings = to=20 Premier, the project owner, supported the element that Design = intended=20 Cadence act on its representation by conveying the information to = Premier.=20  Finally, the distributors=3D = practice=20 of Aholding=20 close@ = to their=20 pricing and Cadence=3Ds repeated=20 requests for documentation from Design supported the element that = Cadence=20 was without knowledge or means of obtaining Rexel=3Ds pricing=20 for the original busway or the credit.

Accordingly,=20 we conclude the evidence was legally and factually sufficient to = support=20 the trial court=3Ds finding=20 that Design is estopped from claiming a busway credit of less than = $300,000.  We overrule Design=3Ds fourth=20 issue and that portion of its fifth issue challenging the trial=20 court=3Ds finding=20 of estoppel against Design.

Issue=20 One:  Prompt Payment Act Claim

Issue and=20 overview of arguments.  In=20 issue one, Design challenges the trial court=3Ds finding=20 that Design=3Ds Prompt=20 Payment Act claim was defeated Abecause at=20 all times, there was a good faith dispute regarding the amount, if = any,=20 owed to Design, and because of Design=3Ds prior=20 breach of contract.@[23] =20 Design contends it proved its Prompt Payment Act claim as a matter = of law=20 and requests we render judgment for Design and award it a = specified amount=20 of interest based on Cadence=3Ds=20 allegedly improper withholding of $271,762.  Cadence responds = that=20 Design=3Ds Prompt=20 Payment Act claim fails because (1) Design was not entitled to = payment=20 because it did not meet two conditions precedent, and (2) a good = faith=20 dispute existed as to the entire $811,762 Cadence withheld.  = We agree=20 Design proved its Prompt Payment Act claim as a matter of law, but = disagree with its request for rendition for the specified amount = of=20 interest.

Uncontested=20 evidence Cadence withheld a total of $811,762 of the final = contract=20 amount, i.e., at least $271,762 more than the total of the busway = credit=20 and Premier=3Ds=20 retainage.  =20 Property Code section 28.002 provides in relevant part:

(a) If an owner or = a person=20 authorized to act on behalf of the owner receives a written = payment=20 request from a contractor for an amount that is allowed to the = contractor=20 under the contract for properly performed work or suitably stored = or=20 specially fabricated materials, the owner shall pay the amount to = the=20 contractor, less any amount withheld as authorized by statute, not = later=20 than the 35th day after the date the owner receives the=20 request.

(b) A contractor = who receives=20 a payment under Subsection (a) or otherwise from an owner in = connection=20 with a contract to improve real property shall pay each of its=20 subcontractors the portion of the owner=3Ds payment, = including=20 interest, if any, that is attributable to work properly performed = or=20 materials suitably stored or specially fabricated as provided = under the=20 contract by that subcontractor, to the extent of that=20 subcontractor=3Ds interest in the=20 owner=3Ds payment.  = The payment=20 required by this subsection must be made not later than the = seventh day=20 after the date the contractor receives the owner=3Ds = payment.

 

Tex.=20 Prop. Code Ann. = ' = 28.002(a)B(b)=20 (Vernon 2000).

Premier=20 made its final payment, minus $240,000 in retainage, to Cadence on = March=20 24, 2004.  Uncontested evidence established = Design=3Ds work=20 under the subcontract and authorized change orders totaled = $4,100,553.[24] =20 The parties agreed Cadence had paid Design only $3,588,791 before=20 commencement of the trial.  Thus, after taking into account = the=20 $300,000 credit Cadence claimed for the busway change and the = $240,000 in=20 retainage it requested Premier to keep, Cadence was still = withholding an=20 additional $271,762 for a total of $811,762.

Conditions=20 precedent. =20 Cadence argues Design is not entitled to any of the $811,762 = because=20 Design failed to meet two conditions precedent.  Cadence = refers to=20 Design=3Ds not=20 having provided documentation for the busway credit and to=20 Design=3Ds not=20 having released its liens on the property.[25]

=

Conditions=20 precedent are acts or events that occur subsequently to the = formation of a=20 contract and that must occur before there is a right to immediate=20 performance and before there can be a breach of contractual = duty. =20 McMahan v. Greenwood, 108 S.W.3d 467, 484 (Tex. = App.CHouston=20 [14th Dist.] 2003, pet. denied).  When a plaintiff alleges = all=20 conditions precedent have been performed, it must prove the = performance of=20 only those conditions precedent the defendant specifically = denies. =20 Lidawi v. Progressive County Mut. Ins. Co., 112 S.W.3d 725, = 729 n.1=20 (Tex. App.CHouston=20 [14th Dist.] 2003, no pet.).   Thus, when the plaintiff = makes a=20 general allegation all conditions precedent have been performed, = the=20 burden of pleading, but not burden of proof, shifts to the=20 defendant.  Id.

To=20 determine whether a condition precedent exists, a court must = ascertain the=20 intention of the parties, and it can do so only by looking at the = entire=20 contract.  McMahan, 108 S.W.3d at 484 (citing = Criswell v.=20 European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 = (Tex.=20 1990)).  Normally, to create a condition precedent, parties = to an=20 agreement must use a term such as Aon=20 condition that,@ = Aif,@ = Aprovided=20 that,@ = or some=20 similar conditional phrase.  Id.  Conditions = precedent=20 are not favored in the law, and courts tend to construe contract=20 provisions as covenants rather than as conditions.  = Id.=20 (citing Criswell, 792 S.W.2d at 948).

In support=20 of its contention that documentation of the busway credit was a = condition=20 precedent to Cadence=3Ds=20 obligation to pay, Cadence points to the following language in the = subcontract:  AWhen=20 quoting change proposals, Subcontractor shall provide a detailed, = itemized=20 breakdown of cost in support of change proposal [sic], whether=20 additive or deductive.  A single lump sum price = without=20 any description, itemization or explanation will not be=20 accepted.@ =20 This language does not in any manner tie payment to provision of=20 documentation for a change order, much less condition payment on = provision=20 of such documentation.  When the parties intended an event to = be a=20 condition precedent, they inserted the term Acondition=20 precedent@ = in the=20 subcontract.[26] =20

Cadence=20 also argues Design failed to fulfill a condition precedent by not=20 releasing Design=3Ds liens on=20 the property until shortly before trial.  Cadence, however, = did not=20 plead release of lien as a condition precedent.  In its = seventh=20 amended answer, Cadence alleged only ADefendants=20 plead the affirmative defense of failure of conditions = precedent. =20 Cadence McShane has not received payment from the Owner for all = amounts=20 claimed by Design Electric.  Additionally, Design Electric = has not=20 completed and submitted all project documentation.@[27] =20 Because Cadence did not plead lien release as a condition = precedent,=20 Design never had the burden of proof to establish that condition = had been=20 satisfied.  See Tex.=20 R. Civ. P. 54 (AWhen such=20 [conditions precedent] have been so plead [sic], the party so = pleading=20 same shall be required to prove only such of them as are = specifically=20 denied by the opposite party.@).

Even were=20 we to conclude Design sufficiently pleaded release of lien as a=20 condition  precedent, the only contract language conditioning = payment=20 on release of liens involves liens filed by those providing = supplies or=20 services to Design:

Contractor may, as = a=20 condition precedent to any payment, require Subcontractor to = submit=20 satisfactory evidence of payments of, and waivers of, and releases = from,=20 any and all claims by any persons, firms or corporations having = performed=20 work or labor, supplied services, or supplied material for = Subcontractor.=20  Such evidence, waivers and releases must in any event be = submitted=20 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=20 issuance of a certificate of occupancy, provided as a condition = precedent,=20 like payment has been made by Owner to Contractor (unless, and = only unless=20 Owner=3Ds failure to pay = Contractor=20 is the result of default by Contractor unrelated to=20 Subcontractor=3Ds performance = hereunder, it=20 being expressly understood that any other basis for such = non-payment by=20 Owner including the bankruptcy or insolvency of Owner will not = excuse this=20 condition precedent).

 

The=20 preceding paragraph, although clearly setting a condition = precedent to=20 final payment, does not refer to Design=3Ds liens,=20 but to liens filed by Design=3Ds=20 subcontractors.[28] =20 This paragraph does not render release of Design=3Ds liens on=20 the Project a condition precedent to payment.

Good faith=20 dispute and amount in question. =20 Property Code section 28.003(b) provides in relevant = part:

If a good faith = dispute=20 exists concerning the amount owed for a payment requested or = required by=20 this chapter under a contract for construction of or improvements = to real=20 property, excluding a detached single‑family residence, = duplex, triplex,=20 or quadruplex, the owner, contractor, or subcontractor that is = disputing=20 its obligation to pay or the amount of payment may withhold from = the=20 payment owed not more than 100 percent of the difference = between the=20 amount the obligee claims is due and the amount the obligor claims = is=20 due.

 

Tex.=20 Prop. Code Ann. = ' = 28.003(b)=20 (Vernon 2000) (emphasis added).  The parties agree Cadence = was=20 justified in withholding some payment under this section.  = They=20 disagree, however, regarding the amount.

Design=20 contends there is no evidence to support a good faith dispute = concerning=20 at least $271,762 of the amount withheld (accepting a busway = credit of=20 $540,000) and up to $511,762 of the amount withheld (accepting the = trial=20 court=3Ds finding=20 of a busway credit of $300,000).  Put differently, Design = argues=20 Cadence wrongfully withheld at least $271,762 and possibly as much = as=20 $511,762.

Cadence=20 argues it was entitled to withhold the entire $811,762.  = Cadence=20 bases this contention on its claim Design was not entitled to any = payment=20 because of Aits=20 failure to provide documentation showing the amount of credit due = for the=20 less expensive busway and its failure to provide lien releases, = both=20 conditions precedent to payment.@  We=20 have, however, rejected Cadence=3Ds argument=20 that these acts were conditions precedent to payment.  = Accordingly,=20 we reject Cadence=3Ds argument=20 it was entitled to withhold the entire $811,762.

We hold=20 the good faith dispute extended only to each party=3Ds claim of=20 the credit due for the elimination of the busway.  = Accordingly, we=20 sustain Design=3Ds issue=20 one.

Nevertheless,=20 we conclude it is inappropriate to render judgment under the = Prompt=20 Payment Act as Design requests.  In its prayer for relief = under the=20 Prompt Payment Act, Design states:

Cadence has = wrongfully=20 withheld funds that [Premier] forwarded to it that should have = been paid=20 to Design. That failure continues through the filing of this brief = C Cadence has never = tendered=20 any amount of the $811,000 it owes Design.  Section 28.004 of = the Act=20 provides that interest accrues at one and half percent per month = (eighteen=20 percent per year) and starts accruing on the day after the date on = which=20 the payment becomes due.  Design=3Ds payment became = due at the=20 very latest on March 24, 2004, the date that Premier made its = final=20 payment to Cadence.  Thus, this Court should render judgment = for=20 Design and award it pre‑judgment interest at one and half = percent per=20 month on $271,762 ($134.02 per day) from February 8, 2004 [sic] = until the=20 time of the Court=3Ds judgment and = normal=20 interest on the remaining $240,000 due under Design=3Ds = subcontract.  Under=20 the Act, Design is also entitled to an award of = attorney=3Ds fees.  = (Footnote and=20 record citations omitted.).

 

An award=20 of interest on $217,762 assumes Cadence, at the point of final = payment,=20 was claiming it was due $540,000 for the busway credit.  = Design=20 apparently bases this assumption on Cadence=3Ds request=20 that Premier withhold $240,000 in retainage.  There is no = evidence,=20 however, that all of the $240,000 in retainage was attributable to = what=20 Cadence claimed was due for the busway credit.  Instead, the=20 agreement between Premier and Cadence provided:

Owner agrees to = make payment=20 or cause payment to be made of the $240,000 withheld for the = Design=20 Electric lien, or such lesser amount as it [sic] finally = determined to be=20 owed to Design Electric by Owner or Contractor, to Contractor on = or before=20 the earlier of the following:

a)      =20 Design Electric executes a full and final release for the=20 Project;

b)      =20 The statute of limitations has expired on Design = Electric=3Ds bond claims = without Design=20 Electric filing suit against Owner;

c)      =20 The matter is resolved by settlement.

 

When=20 Design questioned Cadence Vice President Craig Hudeck whether the = only=20 reason Premier was withholding the $240,000 was because of the = dispute=20 about the proper busway credit, Hudeck responded, AI=20 don=3Dt know if=20 that=3Ds the only=20 reason.@[29] =20 Thus, the $240,000 does not support the assumption that Cadence, = at the=20 point of final payment, was claiming a busway credit of = $540,000. =20 Additionally, the uncontroverted evidence showed that, as of = December 22,=20 2000, Cadence was representing to Premier the busway credit was = $300,000;=20 and on October 6, 2002, Cadence issued a change order modifying = its=20 subcontract with Design to include a $300,000 credit for the=20 busway.

The trial=20 court=3Ds findings=20 of fact and conclusions of law also support the conclusion = Cadence, in=20 good faith, could claim only $300,000 for the busway credit.  = The=20 trial court found, AThe=20 correct credit for the elimination of the current limiting high = reactance=20 busway is $300,000.@ =20 Additionally, the trial court concluded Cadence was entitled to = $240,000=20 from Premier, and Design was entitled to $240,000 from = Cadence.

In finding=20 Design=3Ds Prompt=20 Payment Act claim was defeated because at all times there was a = good faith=20 dispute regarding the amount owed Design, the trial court = implicitly found=20 there was a good faith dispute regarding the entire = $811,762.  As=20 discussed above, to the extent that finding was based on failure = of=20 conditions precedent, it was in error.

Because=20 the trial court found there was a good faith dispute regarding the = entire=20 amount, it did not find an amount attributable to the dispute over = the=20 busway credit or what amounts Cadence was withholding in addition = to the=20 amount attributable to the busway credit dispute.  Because = the trial=20 court found a good faith dispute existed at all times, it did not = make any=20 findings regarding when Cadence owed Design amounts over the = amount=20 attributable to the busway credit dispute.

Accordingly,=20 we remand Design=3Ds Prompt=20 Payment Act claim to the trial court to make additional findings = regarding=20 (1) the amount in good faith dispute over the busway, (2) the = amounts=20 Cadence owed Design over the amount attributable to the busway = dispute,=20 (3) the date on which those amounts became due, and (4) the = section 28.004=20 interest on those amounts.[30] =20 We further remand for the trial court to render judgment awarding = Design=20 the section 28.004 interest due Design and to consider, in its = discretion,=20 an award of attorney=3Ds fees=20 under Property Code section 28.005. =20 See Tex. Prop. = Code=20 Ann. '' = 28.004,=20 .005 (Vernon 2000); Bocquet, 972 S.W.2d at 20.

In sum, we=20 sustain Design=3Ds issue=20 one and remand for a determination of the amounts due Design under = the=20 Prompt Payment Act.

Issue Two: =20 Design=3Ds Claim for Breach = of=20 Contract

 

The=20 arguments.  In=20 issue two, Design contends it proved its breach of contract claim = against=20 Cadence as a matter of law.  Design also contends there is no = evidence it materially breached the subcontract in a manner that = would=20 excuse Cadence from performing.  As part of issue two, Design = argues,=20 even if Design breached the subcontract, Cadence was liable under = the=20 doctrine of substantial performance.[31]

=

In=20 response, Cadence relies in part on its contention Design failed = to=20 satisfy conditions precedent to payment, a contention we rejected=20 above.  Cadence also recasts its argument regarding the = conditions=20 precedent and contends Design=3Ds failure=20 to provide documentation showing the cost of the installed busway = and=20 failure to provide the lien releases until just before trial = constituted=20 material breaches on Design=3Ds part=20 causing damage to Cadence.  Cadence did not plead prior = breach as an=20 affirmative defense and does not respond to Design=3Ds argument=20 that its alleged breaches do not rise to the level of an = affirmative=20 defense.  Nevertheless the trial court found Cadence had = established=20 its affirmative defense of prior breach and Design challenges this = finding=20 on appeal.  Therefore, in an abundance of caution and after=20 discussing the evidence establishing Cadence=3Ds breach,=20 we address whether Design=3Ds failure=20 to document adequately the busway change rose to the level of an=20 affirmative defense that would defeat Design=3Ds breach=20 of contract claim.[32]

Cadence=3Ds=20 breach.  The=20 subcontract required Design to perform electrical work on the = Project and=20 required Cadence to pay Design