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Affirmed and Memorandum Opinion filed February = 27,=20 2007.

 

 

Fourteenth=20 Court of Appeals

____________

 

NO. 14-05-00908-CV

____________

 

GILBANE=20 BUILDING COMPANY, = Appellant

 

V.

 

TWO TURNERS=20 ELECTRIC COMPANY D/B/A TURNER ELECTRIC = COMPANY, = Appellee

 

 

On Appeal from the = 151st District Court

Harris County, = Texas

Trial Court Cause = No. 00-63143

 

 

M E M O R=20 A N D U M   O P I N I O N

Appellant,=20 Gilbane Building Company (AGilbane@), appeals=20 a judgment rendered on a jury=3Ds award of=20 damages in favor of appellee, Two Turners Electric Company d/b/a = Turner=20 Electric Company (ATurner=20 Electric@). =20 We affirm the trial court=3Ds=20 judgment.

Factual=20 and Procedural Background

In=20 December 1997 Clear Creek Independent School District = (ACCISD@) prepared=20 to build two schools: Space Center Intermediate and League City=20 Intermediate.  With each covering almost 170,000 square feet, = the=20 schools were large, nearly identical, projects.   CCISD = hired=20 Gilbane as the general contractor in charge of the construction of = both=20 schools. While Gilbane was a national building company, it was new = to=20 Texas school construction, having previously completed only two or = three=20 school projects. For the construction of these schools, Gilbane = served=20 exclusively as the project supervisor, hiring subcontractors to = handle all=20 aspects of the actual construction.  CCISD imposed an = absolute=20 deadline of July 1, 1999 for the completion of both schools.  = Based=20 on that deadline, Gilbane, as the general contractor, established = the=20 schedule for performance which included no overtime or compressed=20 time.  Gilbane then solicited bids from subcontractors based = on these=20 specifications of normal work weeks and approximately eighteen = months to=20 complete performance.

At the=20 time of the events at issue in the trial, Daryl Turner served as = the=20 president of Turner Electric.  Mr. Turner is a master = electrician who=20 has been in business since 1968.  Mr. Turner has extensive = experience=20 building schools as he has previously bid on and built = approximately=20 twenty-five new school jobs as well as numerous smaller school=20 projects.  As a result of this experience, CCISD certified = Turner=20 Electric as one of eleven electrical subcontractors pre-qualified = to bid=20 on CCISD construction projects.  Turner Electric submitted a = bid for=20 both schools.  Mr. Turner prepared these bids based on the = knowledge=20 and experience he gained as a master electrician working on = similar=20 projects, the schedule prepared by Gilbane for the construction, = as well=20 as Gilbane=3Ds=20 representations that normal construction practices would be = employed, and=20 the subcontractors would have approximately eighteen months to = complete=20 the construction of the schools.[1]

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

Gilbane=20 awarded the electrical subcontracts for both schools to Turner=20 Electric.  The two subcontracts contained nearly identical = language=20 and pursuant to their terms, Turner Electric contracted to perform = all=20 electrical work on both schools for a lump sum price.  = Despite the=20 fact both subcontracts called for Turner Electric to perform all=20 electrical work for a lump sum price, both subcontracts, as well = as the=20 prime contract between CCISD and Gilbane,[2]=20 envisioned there could be changes in the work and included = provisions on=20 how those changes would be compensated.  Section 8.4 of both=20 subcontracts provides that if the parties cannot agree on a method = to=20 compensate a subcontractor for additional work, this section would = apply.  Section 8.4 provided for compensation of the=20 subcontractor=3Ds costs=20 plus a reasonable allowance for overhead and profit.  In = addition,=20 section 8.4 defined costs as the Acost of=20 materials including sales tax and cost of delivery, cost of labor=20 including social security, old age and unemployment insurance and = fringe=20 benefits required by [a]greement or custom; workers or = workmen=3Ds=20 compensation insurance; bond premiums; rental value of equipment = and=20 machinery; and the additional costs of supervision and field = office=20 personnel directly attributable to the change.@  In=20 addition, Section 8.6 allows a subcontractor a five percent markup = for=20 work performed by a sub-subcontractor.

Serious=20 issues arose before and during the early stages of the projects = that=20 dramatically impacted the construction of both schools.  The = most=20 serious issue arose out of dimensional errors in the design = drawings for=20 the schools.  As a result of these dimensional errors, the = initial=20 production of structural steel was incorrectly fabricated.  = The=20 design errors resulted in the structural steel not matching up or = coming=20 together properly.  Correcting these design errors turned out = to be a=20 complicated and time consuming process.  The problem was so=20 significant that, as early as May 6, 1998, barely a week after = Turner=20 Electric had executed the two subcontracts for the schools, Baker=20 Concrete, the foundation subcontractor, wrote Gilbane Athe=20 dimensional mistakes . . . have been known for well over three=20 weeks.  To date, we still have no complete answers.  = This was=20 not intended to be a >Fast=20 Track=3D = project,=20 but at this point it should be treated as such by the design team = to=20 maintain progress.@  Two=20 days later, Gilbane wrote a letter to the architects on the = project=20 stating the dimension issue Aturned out=20 to be complicated and unavoidably disruptive@ = bringing=20 about a Asignificant=20 delay to the production and delivery of structural steel as a = direct=20 result of these dimensional problems.@ =20 Gilbane went on to notify the architects it was completely = suspending work=20 in the affected areas of the projects and told the architects = Awe are=20 unable to continue and we are being constructively delayed in our = efforts=20 with resulting impacts to project time and costs.@

While=20 Gilbane was not responsible for the dimension errors and the = initial=20 delays growing out of them, Gilbane made decisions in its handling = of the=20 dimension problem that directly and adversely impacted Turner=20 Electric=3Ds=20 performance of its duties under the subcontracts.  Each of = these=20 decisions resulted in Turner Electric=3Ds work=20 being compressed into a time significantly shorter than the amount = of time=20 originally envisioned for the work.

Initially,=20 Gilbane made the decision to give priority for the fabrication of = the=20 structural steel to a Houston Independent School District = (AHISD@) school=20 it was building even though the two CCISD schools had already been = delayed=20 while the dimensional issue was worked out by the architect and=20 engineers.  This resulted in even more delays in the = fabrication,=20 delivery, and erection of the structural steel.  Under the = original=20 construction schedule established by Gilbane, the erection of the=20 structural steel for Space Center was to have started in June 1998 = and=20 been completely installed by the middle of October 1998.[3] =20 Instead, as a result of the delays in the fabrication of the = structural=20 steel, as of September 1998, there was no structural steel on site = at=20 either school.  In addition, by March 1999, only four months = before=20 the schools were to be completed, there was still structural steel = being=20 erected at both schools.  This delay directly impacted Turner = Electric as much of its work, primarily the installation of = conduit and=20 electrical lines, must be attached to the structural steel and = therefore=20 cannot be performed before the steel itself is installed.  = The end=20 result of Gilbane=3Ds decision=20 to give the HISD school=3Ds=20 structural steel priority over the CCISD schools was the = compression of=20 Turner Electric=3Ds work=20 into a period of time significantly shorter than the originally = scheduled=20 eighteen months.

The next=20 decision to directly impact Turner Electric was = Gilbane=3Ds=20 unilateral decision to put up the interior masonry walls before = the=20 structural steel was in place in an effort to make up some of the = lost=20 time on the project.[4] =20 According to Tom Singer, Gilbane=3Ds former=20 senior project manager, Gilbane started looking for Asomething=20 [Gilbane] can do to move on that=3Ds=20 productive and at the same time is overall positive, that - - that = is, you=20 know, beyond 50 percent positive.@ =20 Gilbane made this decision without consulting the subcontractors, = despite=20 the fact that it impeded some subcontractors in the performance of = their=20 jobs.  Gilbane persisted in following through with the = decision even=20 though, according to Mr. Singer, Aeverybody=20 questioned it and the wisdom of it.@  As=20 a result of Gilbane=3Ds=20 decision, the interior masonry walls were built up to a height of=20 approximately seven feet.  This directly interfered with = Turner=20 Electric=3Ds=20 performance of its job as there was no longer an open runway the = length of=20 the building for the electricians to use motorized lifts to = install the=20 parallel runs of conduit and electrical line once the structural = steel was=20 in place.  Instead, the electricians had to resort to the = time=20 consuming and labor intensive process of using ladders, with the = necessity=20 of setting up and breaking down their equipment many times as they = moved=20 from room to room.  This not only slowed the pace of the=20 electricians=3D = work, but=20 also increased the number of electricians required to perform the = work=20 because of the slow pace and the compression of the time to = perform.=20

The third=20 Gilbane decision to directly impact Turner Electric=3Ds=20 performance was Gilbane=3Ds decision=20 to abandon the original sequence of constructing the = schools. =20 Originally, Gilbane intended to follow the Anormal@ = method=20 for constructing a large school building.  Under the = Anormal@ = method,=20 work starts at one end of the building and progresses through to = the other=20 end.  This method creates an efficient flow through the = project as it=20 allows each subcontractor to work in a single area until it is=20 complete.  This increases efficiency as it minimizes = repetitive=20 setting-up and breaking down of equipment as workers do not have = to move=20 back and forth from one area of the building to another, as well = as=20 minimizing the amount of interference caused by too many = subcontractors=20 working in a single area at the same time.  According to Mr. = Singer,=20 Gilbane, in an effort to do something other than Asit on our=20 hands,@ = decided=20 to require the subcontractors to work in any area of the schools = ready for=20 work.  In essence, Gilbane decided to work on both ends of = the school=20 buildings toward the middle.  Mr. Singer testified the only = advantage=20 created by this decision was it created the ability to work, but = it did=20 not allow the work to progress efficiently.  Turner Electric = was=20 adversely impacted in several ways by Gilbane=3Ds=20 decision.  First, the pace of the work slowed as the = electricians had=20 to move from one area to another and then back again.  = Second,=20 because there were more subcontractors working in a single area,=20 efficiency decreased as they got in each other=3Ds=20 way.  Finally, by leaving the middle of each school, the = section=20 containing the bulk of the main electrical equipment, until the = end,=20 Turner Electric=3Ds time to=20 complete its work was dramatically compressed as the electricians = had to=20 wait until the latter stages of the project, when the main = electrical=20 equipment was installed and functional, to perform much of their = work.=20

Gilbane=20 made the fourth decision impacting Turner Electric toward the end = of the=20 projects.  Grinnell Fire Systems (AGrinnell@) was a=20 direct subcontractor of Gilbane for the installation of the fire = alarm=20 systems at both schools.  In addition, Grinnell = sub-subcontracted=20 with Turner Electric for the installation of the data, sound, and=20 telephone systems.  As a result of Gilbane=3Ds earlier=20 decisions, Grinnell=3Ds work on=20 all of the systems had been compressed until the final months of = the=20 projects.  As the July 1 deadline approached, Gilbane decided = the=20 fire alarm systems were more important than the data, sound, and = telephone=20 systems, as, in Gilbane=3Ds view, if=20 each school had a functional fire alarm system, it increased the = chance=20 CCISD would accept the schools as complete even if significant = work=20 remained.  Therefore, Gilbane ordered Grinnell to devote all = its=20 attention and resources to the fire alarm systems and let the = systems=20 Turner Electric was responsible for, data, sound, and telephone,=20 wait.  This decision further compressed the time available = for Turner=20 Electric to complete its work.

As a=20 result of these decisions, Turner Electric=3Ds time to=20 perform the work required under its subcontracts with Gilbane was=20 significantly compressed.  Mr. Singer even admitted the = projects were=20 seriously compressed.  When a subcontractor=3Ds time to=20 perform is compressed, it means more work must be performed in a = shorter=20 amount of time.  This, in turn, requires the subcontractor to = institute overtime for existing workers, hire more workers, or = both,=20 raising the subcontractor=3Ds labor=20 costs.  In addition, as the number of workers goes up, = efficiency=20 goes down as it is difficult to supervise the larger number.  = Finally, the compressed time requires more subcontractors to work = in the=20 same areas at the same time in an effort to get the work done with = a=20 resulting impact on efficiency.

Faced with=20 a significantly compressed schedule, Turner Electric worked hard = to=20 complete the schools.  According to Fred Niccum, Head of = Facilities=20 for CCISD, the two buildings were a beehive of activity, even late = at=20 night and on weekends, as electricians worked to get the buildings = completed on time.  In spite of all the problems, = construction on the=20 two schools was sufficiently complete to allow Space Center to = open to=20 students on time with League City opening only three days = late. =20 However, there was still considerable work to be done even after = the=20 schools opened as there were entire areas of the schools that had = not yet=20 been closed in.  This work had to be completed in the = evenings and on=20 weekends, times that required the payment of overtime wages to the = workers.

As soon as=20 it became apparent that Turner Electric=3Ds labor=20 costs were going to rise significantly, Turner notified Gilbane = that=20 Turner Electric would not be responsible for paying the higher = costs=20 caused by others.  As the work continued, both Gilbane and = Turner=20 Electric documented Turner Electric=3Ds=20 increased labor costs with invoices, schedules of value, field = reports,=20 time cards, payroll records, and overtime authorizations.[5]=20

When a=20 subcontractor incurs increased costs as a result of a compressed = schedule,=20 it is not allowed to present a claim directly to the owner.  = Instead,=20 the subcontractor must present its claim to the general = contractor, which,=20 in turn, has a responsibility to pass that claim on to the owner = for=20 payment.  As the time approached to close out the two = projects,=20 Turner Electric submitted a claim to Gilbane to be paid for the = additional=20 labor costs it incurred as a result of the compressed = schedule.  At=20 this point, Gilbane made the final decision impacting Turner = Electric,=20 deciding not to present Turner Electric=3Ds claim to=20 CCISD for consideration.  Marshall Lightman, = Gilbane=3Ds vice=20 president and regional controller, testified that Gilbane does not = encourage the making of claims by subcontractors, as, in his = words,=20 Ait=3Ds not a=20 good practice.@ =20 Instead, even though Lightman admitted at trial that there were = still open=20 issues on Turner Electric=3Ds payment,=20 Gilbane represented to CCISD that all subcontractors had been = paid, and=20 collected its final payment on the projects.

Ultimately,=20 Turner Electric and Gilbane=3Ds=20 negotiations on those open issues broke down when Gilbane made = numerous=20 deductions on the amount owed to Turner Electric resulting in a = balance=20 due to Gilbane.  Litigation eventually resulted from this=20 dispute.  Turner Electric asserted both breach of contract = and fraud=20 causes of action against Gilbane.  Gilbane counterclaimed for = the=20 sums it claimed Turner Electric still owed.  The matter was = submitted=20 to a jury and the jury found in favor of Turner Electric on both = its=20 breach of contract and fraud causes of action, and against Gilbane = on its=20 breach of contract cause of action.  Turner Electric elected = to=20 recover on its breach of contract cause of action and the trial = court=20 entered judgment in favor of Turner Electric in the amount of=20 $532,504.75.  In addition, the judgment awarded Turner = Electric=20 $76,490.00 for attorney=3Ds fees=20 incurred through trial.  This appeal followed.  At oral = argument=20 Gilbane conceded there was evidence in the record supporting the=20 jury=3Ds finding=20 that Gilbane breached its agreements with Turner Electric and = therefore=20 the only contested issue in this appeal is the = judgment=3Ds award of=20 damages to Turner Electric.

The=20 Standard of Review

In this=20 appeal Gilbane challenges both the legal and factual sufficiency = of the=20 evidence presented at trial.  When both legal and factual = sufficiency=20 challenges are raised on appeal, we must first examine the legal=20 sufficiency of the evidence.  City of Houston v. = Cotton, 171=20 S.W.3d 541, 546 (Tex. App.CHouston=20 [14th Dist.] 2005, pet. denied) (citing Trimble v. Tex.=20 Dep=3Dt of=20 Protective & Regulatory Serv., 981=20 S.W.2d 211, 217 (Tex. App.CHouston=20 [14th Dist.] 1998, no pet.).  In conducting a legal = sufficiency=20 review, we must consider the evidence in the light most favorable = to the=20 verdict and indulge every reasonable inference that supports = it. =20 City of Keller v. Wilson, 168 S.W.3d 802, 821B22 (Tex.=20 2005); Harris County v. Vernagallo, 181 S.W.3d 17, = 24B25 (Tex.=20 App.CHouston=20 [14th Dist.] 2005, pet. denied); Prairie View A & M Univ. = v.=20 Brooks, 180 S.W.3d 694, 705 (Tex. App.CHouston=20 [14th Dist.] 2005, no pet.).  The evidence is legally = sufficient if=20 it would enable reasonable and fair-minded people to reach the = verdict=20 under review.  Keller, 168 S.W.3d at 823; = Vernagallo,=20 181 S.W.3d at 24; Brooks, 180 S.W.3d at 705.  This = court must=20 credit favorable evidence if reasonable jurors could, and = disregard=20 contrary evidence unless reasonable jurors could not.  = Keller,=20 168 S.W.3d at 822; Vernagallo, 181 S.W.3d at 24; = Brooks, 180=20 S.W.3d at 705.  The trier of fact is the sole judge of the=20 witnesses=3D = credibility and the weight to be given their testimony.=20  Keller, 168 S.W.3d at 819; Vernagallo, 181 = S.W.3d at=20 24; Brooks, 180 S.W.3d at 705.  This court cannot = substitute=20 our judgment for that of the jury, so long as the evidence falls = within=20 the zone of reasonable disagreement.  Keller, 168 = S.W.3d at=20 822; Vernagallo, 181 S.W.3d at 24; Brooks, 180 = S.W.3d at=20 705.  But if the evidence allows of only one inference, = neither=20 jurors nor the reviewing court may disregard it. =  Keller, 168=20 S.W.3d at 822; Vernagallo, 181 S.W.3d at 25; Brooks, = 180=20 S.W.3d at 705.

This court=20 may sustain a legal sufficiency, or no evidence, point only if the = record=20 reveals one of the following: (1) the complete absence of a vital = fact;=20 (2) the court is barred by rules of law or of evidence from giving = weight=20 to the only evidence offered to prove a vital fact; (3) the = evidence=20 offered to prove a vital fact is no more than a scintilla; or (4) = the=20 evidence conclusively proved the opposite of the vital fact.=20  Keller, 168 S.W.3d at 810; Brooks, 180 S.W.3d = at=20 705.

In=20 reviewing factual sufficiency, we must examine the entire record,=20 considering both the evidence in favor of, and contrary to, the = challenged=20 findings.  See Mar. Overseas Corp. v. Ellis, 971 = S.W.2d 402,=20 406B07 (Tex.=20 1998); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).  = We may=20 set aside the verdict for factual sufficiency only if it is so = contrary to=20 the overwhelming weight of evidence as to be clearly wrong and=20 unjust.  See Ellis, 971 S.W.2d at 406B07; Nip=20 v. Checkpoint Sys., Inc., 154 S.W.3d 767, 769 (Tex. = App.CHouston=20 [14th Dist.] 2004, no pet.).  However, we may not substitute = our=20 judgment for that of the jury, even if the evidence would clearly = support=20 a different result.  Nip, 154 S.W.3d at=20 769.

Discussion

A.     =20 Was Turner Electric=3Ds Proof of=20 Damages Sufficient?

In=20 Gilbane=3Ds first=20 issue, Gilbane raises several separate but related arguments that = Turner=20 Electric=3Ds proof of=20 its damages is legally and factually insufficient.  First, = Gilbane=20 asserts Turner Electric introduced insufficient evidence of a = causal nexus=20 between Gilbane=3Ds actions=20 and Turner Electric=3Ds=20 damages.  Second, Gilbane argues Turner Electric=3Ds damages=20 are based on an improper measure of damages: the so-called = ATotal Cost=20 Method.@ =20 Third, Gilbane alleges there was insufficient evidence of the=20 reasonableness of Turner Electric=3Ds=20 costs.  Finally, Gilbane argues the evidence was insufficient = to=20 establish the amount of overhead and profit attributable to Turner = Electric=3Ds=20 compression claim.  We address each argument in = turn.

1.      =20 Turner Electric Introduced Sufficient Evidence of a Causal Nexus = Between=20 Gilbane=3Ds Actions=20 and Turner Electric=3Ds=20 Damages.

A=20 subcontractor is entitled to recover damages from a contractor for = losses=20 due to delay and hindrance of its work if the subcontractor = proves: (1)=20 that its work was delayed or hindered; (2) that it suffered = damages as a=20 result of the delay or hindrance; and (3) that the contractor was=20 responsible for the act or omissions which caused the delay or=20 hindrance.  See Shintech v. Group Constructors, = 688=20 S.W.2d 144, 148 (Tex. App.CHouston=20 [14th Dist.] 1985, no pet.) (stating elements in a = contractor-owner=20 scenario).  In this first sub-issue, Gilbane argues there was = insufficient evidence connecting Gilbane=3Ds admitted=20 breaches with Turner Electric=3Ds damages.=20

In this=20 case the jury heard conflicting evidence relating to the various = problems=20 that resulted in Turner Electric=3Ds work on=20 the CCISD projects being compressed.  As laid out above, = Turner=20 Electric, through documents and the testimony of numerous = witnesses,=20 presented evidence of decisions, actions, or omissions by Gilbane = that=20 directly compressed the time available for Turner Electric to = perform its=20 contractual obligations with a resulting impact on Turner=20 Electric=3Ds=20 costs.  In turn, Gilbane presented evidence that Turner=20 Electric=3Ds problems=20 arose not from Gilbane=3Ds acts or=20 omissions, but from problems of Turner Electric=3Ds own=20 creation.  This evidence included testimony of (1) inadequate = staffing of the job by Turner Electric; (2) poor planning and = supervision=20 of Turner Electric=3Ds work=20 resulting from Turner Electric=3Ds decision=20 not to participate in the initial schedule planning session as = well as=20 occasional absences from weekly planning meetings during the = course of the=20 project; (3) Turner Electric=3Ds hiring=20 of lower quality and therefore less efficient electricians through = staffing agencies; and (4) Turner Electric=3Ds=20 tardiness in turning in required paperwork relating to the = products and=20 materials to be used in the CCISD projects for approval by the=20 architect.  Although Gilbane disputes it was responsible for = Turner=20 Electric=3Ds=20 compression damages, the jury found otherwise and there is = abundant=20 evidence to support its finding.  As there is more than a = scintilla=20 of evidence supporting the jury=3Ds finding,=20 the evidence is legally sufficient.  In addition, the = evidence is=20 factually sufficient as the finding is not so contrary to the = overwhelming=20 weight of evidence as to be clearly wrong and unjust.

2.      =20 Turner Electric=3Ds Damages=20 Were Based on the Contract Language Not the Total Cost=20 Method.

In its=20 second sub-issue Gilbane asserts that (1) Turner Electric used an = improper=20 measure of damages, the Total Cost Method, to calculate its = damages; and=20 (2) the evidence is legally and factually insufficient to satisfy = the=20 elements of the Total Cost Method.  We disagree Turner = Electric used=20 the Total Cost Method.

The=20 ultimate goal in measuring damages for a breach of contract claim = is to=20 provide just compensation for any loss or damage actually = sustained as a=20 result of the breach.  Mays v. Pierce, 203 S.W.3d 564, = 577=20 (Tex. App.CHouston=20 [14th Dist.] 2006, pet. denied).  In addition, the parties to = a=20 contract can agree to the remedy to be applied in the event the = agreement=20 is breached.  Shasteen v. Mid-Continent Refrigerator = Co., 517=20 S.W.2d 437, 440 (Tex. Civ. App.CDallas=20 1975, writ ref=3Dd=20 n.r.e.).  This agreement on damages will be enforced by the = courts=20 unless it is illegal or against public policy.  = Id.

Turner=20 Electric and Gilbane agreed on a measure of damages in the two=20 subcontracts in the event they could not agree on the amount of=20 compensation owed to Turner Electric.  There is no allegation = this=20 agreement is illegal or against public policy.  Far from = following=20 the Total Cost Method, which is universally disfavored according = to=20 Gilbane, Turner Electric=3Ds damages=20 track the language found in the subcontracts.[6] =20 As pointed out by Gilbane, section 8.4 of the subcontracts = provides that=20 in the event the parties cannot agree on a method to compensate = Turner=20 Electric for changes in the work, Turner Electric will be entitled = to (1)=20 a reasonable allowance for overhead and profit; (2) the cost of = materials=20 including sales tax and cost of delivery; (3) the cost of labor = including=20 social security, old age and unemployment insurance, and fringe = benefits;=20 (4) the cost of workers compensation insurance; (5) the cost of = bond=20 premiums; (6) the rental value of equipment and machinery; (7) the = additional costs of supervision and field office personnel = directly=20 attributable to changes in the work; and (8) a five percent markup = for=20 work performed by a sub-subcontractor.  As the dispute over = Turner=20 Electric=3Ds=20 compensation wound up in litigation, it is obvious the parties = could not=20 agree on Turner=3Ds=20 compensation, thus section 8.4 governs this dispute over Turner=20 Electric=3Ds=20 compensation.

Turner=20 Electric asked the jury to award the following as elements of its = damages=20 caused by Gilbane=3Ds breaches=20 of the subcontracts: (1) the net value of the written change = orders; (2)=20 the cost of the staffing service electricians directly hired by = Turner=20 Electric as a result of the compressed time to perform the = subcontracts;=20 (3) the five percent fee for supervising the electrical = sub-subcontractors=20 hired by Gilbane and Turner Electric as a result of the compressed = time to=20 perform the electrical work; and (4) Turner Electric=3Ds extra=20 regular and overtime costs caused by the compression of the = projects plus=20 a twenty percent burden, as allowed by the subcontracts.  = This burden=20 covers Turner Electric=3Ds profit=20 (five percent), overhead (ten percent), and the cost of taxes, = insurance=20 and supervision (five percent).  Each element of these = damages is=20 permitted by section 8.4 of the subcontracts between Gilbane and = Turner=20 Electric.  As Turner Electric=3Ds damages=20 were not calculated using the Total Cost Method but instead = tracked the=20 language in the subcontracts, we overrule Gilbane=3Ds second=20 sub-issue.[7]=20

3.      =20 The Evidence Was Legally and Factually Sufficient to Establish the = Reasonableness of Turner=3Ds=20 Costs.

In its=20 third sub-issue, Gilbane argues the evidence was insufficient to = establish=20 the reasonableness of Turner Electric=3Ds=20 damages.  Once again, we disagree.

In a=20 breach of contract case, a party seeking to recover its costs has = the=20 burden to prove that the damages sought are reasonable. =  See=20 Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 = S.W.3d=20 195, 200 (Tex. 2004). Evidence of the amounts charged and paid, = standing=20 alone, is no evidence that such payment was reasonable and = necessary.=20  Id. at 200B01. =20 In Mustang Pipeline the Supreme Court determined there was = no=20 evidence that Mustang=3Ds costs=20 were reasonable.  Id. at 201.  However, = Areasonable@ = and=20 Anecessary@ = are not=20 magic words that a witness must speak to support a = jury=3Ds=20 award.  Burke v. Union Pac. Res. Co., 138 S.W.3d 46, = 73 (Tex.=20 App.CTexarkana=20 2004, pet. denied).  Instead, a party need only present = sufficient=20 evidence to support a jury=3Ds finding.=20  Id. 

Initially,=20 as discussed in section A(1) above, there was substantial evidence = that=20 Gilbane=3Ds=20 decisions, actions, or omissions compressed the time available for = Turner=20 Electric to complete its work under the subcontracts.  As Mr. = Singer=20 testified, if a construction project gets compressed, the = compressed=20 subcontractors are going to experience increased costs.

There was=20 evidence that Turner Electric=3Ds original=20 bids were reasonable.  This includes Mr. Turner=3Ds=20 testimony that, based on his more than thirty years experience as = an=20 electrician, which includes the construction of twenty-five = schools, he=20 calculated the amount of time required to perform all of the = electrical=20 work in the two projects, right down to the installation of each = electric=20 plug and light fixture.  Then, using Gilbane=3Ds project=20 schedule and representations that Turner Electric would have the = full=20 contract time to perform its work, Mr. Turner determined Turner = Electric=20 could complete both projects using regular crews with no need to=20 supplement the number of electricians or any overtime work. =  In=20 addition, numerous witnesses testified that, barring compression = or other=20 disruption of the construction schedule, Turner Electric should = have been=20 able to complete both schools with no use of overtime or = supplemental=20 labor.  This constitutes some evidence that Turner=20 Electric=3Ds original=20 bid amount was reasonable.

Mr. Niccum=20 testified, Awithout a=20 doubt [compression of the projects] had implications=20 financially.@  For=20 Turner Electric, these financial implications were significant = increases=20 in the cost of labor to complete the projects.  Turner = Electric=20 introduced evidence demonstrating that the costs it incurred over = the=20 amount originally bid were reasonable and necessary as required by = Mustang Pipeline.  The evidence was undisputed that = CCISD had=20 imposed an absolute date of July 1, 1999 for substantial = completion of the=20 two projects.  If the deadline was not met, the offending = contractor=20 or subcontractor could be exposed to liquidated damages of $1,000 = per day=20 that the deadline was not met.  In addition, Mr. Turner = testified=20 Gilbane repeatedly told the subcontractors, including Turner = Electric,=20 there would be no extensions of time granted or requested from=20 CCISD.  When the time to complete the schools was compressed = as a=20 result of Gilbane=3Ds acts or=20 omissions, and faced with the absolute July 1, 1999 completion = date,=20 Turner Electric had no choice but to hire additional electricians = and work=20 overtime.[8] =20 As Mr. Turner testified, Turner Electric took the actions = necessary to=20 make certain it could provide the needed manpower for the two = jobs. =20 Mr. Turner testified that his labor cost was $19.00 per = hour.  At the=20 same time, Gilbane directly negotiated with two electrical = companies to=20 hire supplemental electricians at an hourly rate of $14.75.  = In=20 addition to the hourly rate, Gilbane agreed to pay the = supplemental=20 electricians a 50.15% burden amount plus overhead and = mark-up.  With=20 overtime, the cost of this supplemental labor exceeded $40.00 per=20 hour.

The=20 testimony recounted above constitutes some evidence that the costs = incurred by Turner Electric in completing the two projects were = both=20 reasonable and necessary.  See Burke, 138 S.W.3d at 73 = (concluding that evidence comparing the cost of successfully = repairing a=20 well with the cost of an unsuccessful repair attempt and the = original cost=20 of the well was sufficient for a rational jury to conclude the = cost of=20 repair was reasonable and necessary).  As there is more than = a=20 scintilla of evidence supporting the reasonableness of Turner=20 Electric=3Ds costs,=20 the evidence is legally sufficient.  In addition, while = Gilbane=20 argues the evidence is factually insufficient it fails to point = out any=20 contradictory evidence.  Accordingly, the evidence is = factually=20 sufficient as the finding is not so contrary to the overwhelming = weight of=20 evidence as to be clearly wrong and unjust.  We therefore = find the=20 evidence supporting the reasonableness and necessity of Turner=20 Electric=3Ds extra=20 labor costs is both legally and factually sufficient.  We = overrule=20 Gilbane=3Ds third=20 sub-issue.

4.      =20 The Evidence Supporting the Award of Overhead and Profit Was = Legally and=20 Factually Sufficient.

In=20 addition to granting the actual cost of the additional time worked = by=20 Turner Electric employees, the judgment also included the award of = a=20 twenty percent burden rate.  The burden includes compensation = for=20 profit (five percent), overhead (ten percent), and taxes, = insurance and=20 supervisor costs (five percent).  Turner Electric also = received a=20 five percent supervisory fee for the work performed by the various = contract electricians hired by Turner Electric and Gilbane.  = In=20 Gilbane=3Ds fourth=20 sub-issue, Gilbane attacks the sufficiency of the evidence = supporting the=20 judgment=3Ds award to=20 Turner Electric of specific percentage amounts within the burden = for=20 profit and overhead, as well as the award of the sub-subcontractor = supervisory fee to Turner Electric.

Initially,=20 Gilbane relies on the language in the subcontracts requiring the = payment=20 of overhead, profit, and a supervision fee only if the claims = arise out of=20 a written change order.  In Gilbane=3Ds view,=20 because there were no written change orders for the additional = labor=20 damages awarded in the judgment, then Turner Electric cannot = depend on the=20 language found in the subcontracts and instead must prove up its = actual=20 overhead and profit attributable to the compression of the = projects caused=20 by Gilbane.  However, Gilbane=3Ds reliance=20 on this requirement of a written change order is misplaced.  = When a=20 contractor breaches a construction contract, it relinquishes its=20 contractual procedural rights concerning change orders and claims = for=20 additional costs.  Shintech, 688 S.W.2d at 151.  = Thus,=20 the fact there was not a written change order authorizing all of = the=20 additional work performed by Turner Electric does not preclude an = award of=20 damages under the terms of the subcontracts authorizing = compensation for=20 additional work.

Section=20 8.4 authorizes a subcontractor to receive a five percent markup = for work=20 performed by a sub-subcontractor.  As the subcontracts = specifically=20 permit a five percent supervisory fee for work performed by a=20 sub-subcontractor, Gilbane=3Ds attack=20 on the inclusion of such a fee in the judgment is without=20 merit.

As for the=20 award in the judgment of ten percent for overhead and five percent = for=20 profit, Turner Electric had to introduce evidence establishing = that such=20 amounts were reasonable.  Here there was evidence supporting = that=20 determination.  First, the Space Center subcontract, in = sections=20 8.3(c) and 12, addressing an alternative method for compensating=20 additional work performed by Turner Electric, specifically calls = for the=20 payment of overhead in the amount of ten percent and a five = percent=20 profit.  This is some evidence that the parties, Gilbane and = Turner=20 Electric, considered such amounts reasonable.  In addition, = Mr.=20 Turner testified Gilbane and Turner Electric negotiated, and = agreed to,=20 the twenty percent burden rate, which includes overhead and = profit. =20 Finally, the fact Gilbane agreed to pay the contract electricians = it=20 directly hired to supplement the labor on the projects overhead of = ten=20 percent and profit of ten percent serves as further evidence that = the=20 rates awarded to Turner Electric were reasonable.  As there = is=20 legally and factually sufficient evidence supporting the award of=20 overhead, profit, and a supervisory fee to Turner Electric, we = overrule=20 the fourth and final sub-issue.

Having=20 overruled each sub-issue, we overrule Gilbane=3Ds first=20 issue on appeal.

B.     =20 Turner Electric Did Not Waive Its Claims or Fail to Comply With = Conditions=20 Precedent for Making a Claim.

In its=20 fourth issue, Gilbane makes two separate arguments.  First, = Gilbane=20 argues the evidence conclusively established that Turner Electric = waived=20 all claims for work that occurred prior to November 30, = 1999. =20 Second, Gilbane argues the evidence was insufficient to establish = that=20 Turner Electric complied with the conditions precedent for making=20 claims.  Again, we address each argument in turn.

1.      =20 Gilbane Waived its Affirmative Defense of Waiver.

Waiver is=20 the intentional relinquishment of a known right or intentional = conduct=20 inconsistent with claiming that right.  4901 Main, Inc. v. = TAS=20 Auto., Inc., 187 S.W.3d 627, 632 (Tex. App.CHouston=20 [14th Dist.] 2006, no pet.).  Waiver is an affirmative=20 defense.   Tex. R. Civ.=20 P. 94.  The failure to request a jury question on an=20 affirmative defense results in waiver by the party relying on it = unless=20 the issue is conclusively established.  Tex. R. Civ. P. =  279;=20 XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 632 (Tex.=20 App.CHouston=20 [14th Dist.] 2006, pet. denied).

Gilbane=20 did not request a jury question on its affirmative defense of = waiver and=20 therefore it must demonstrate that the evidence conclusively = establishes=20 waiver.  In support of its argument, Gilbane points to a = APartial=20 Release and Waiver of Lien and Affidavit of Bills Paid@ = (AReleases@) executed=20 by Turner Electric for both projects.  We disagree the = Releases=20 conclusively establish Turner Electric waived all claims for work = that=20 occurred prior to November 30, 1999.

The=20 language of the Releases themselves work against = Gilbane=3Ds=20 argument.  The Releases, which were executed on March 7, = 2000, state:=20 ASubcontractor=20 hereby waives, relinquishes and releases its lien, claims and = charges of=20 every nature which have arisen by Subcontractor . . . to the = extent such=20 monies have been paid . . .@  By=20 their plain language, the Releases exclude any sums that were = still owed=20 to Turner Electric as of March 7, 2000.  There was extensive=20 evidence, both testimony and documents, that, at the time Turner = Electric=20 executed the Releases, there were outstanding sums still owed to = Turner=20 Electric and that Gilbane had notice of those claims.[9] =20 Turner Electric had presented its claims for the additional labor = costs=20 caused by the compression of the projects to Gilbane prior to the=20 execution of the Releases.  Among the evidence showing this = was a=20 January 21, 2000 letter to Gilbane in which Turner Electric = notified=20 Gilbane that it was still owed $313,000 on the projects and that = amount=20 did not include any amount for overtime or outside labor as those = amounts=20 were still not finalized.  This evidence also includes the = testimony=20 of Mr. Lightman that he was aware at the end of the projects that = there=20 were outstanding issues on the payments due Turner = Electric.

As the=20 evidence does not conclusively establish waiver, Gilbane was = required to=20 submit a jury question on that issue.  As it failed to do so, = Gilbane=20 waived this affirmative defense for purposes of appeal.  = XCO Prod.=20 Co., 194 S.W.3d at 632.  We overrule Gilbane=3Ds first=20 sub-issue.

2.      =20 By Breaching the Subcontracts, Gilbane Relinquished Its = Contractual=20 Procedural Rights Concerning Change Orders and Claims for = Additional=20 Costs.

In this=20 sub-issue, Gilbane argues there is insufficient evidence to = establish that=20 Turner Electric complied with the subcontracts=3D = conditions precedent for submitting a claim.  Specifically, = Gilbane=20 argues there is no evidence that Turner Electric promptly = submitted a=20 written claim for compression costs as required by section 8.1 of = the=20 subcontracts.

Initially,=20 Gilbane=3Ds reliance=20 on this requirement of a written claim presented in a certain = format is=20 misplaced.  When a contractor breaches a construction = contract, it=20 relinquishes its contractual procedural rights concerning change = orders=20 and claims for additional costs. Shintech, 688 S.W.2d at = 151. =20 In addition, despite Gilbane=3Ds=20 assertion otherwise, there is nothing in the subcontracts = mandating a=20 particular form or deadline for the submission of a = claim.

Finally,=20 even if Gilbane had not relinquished its contractual procedural = rights by=20 breaching the subcontracts, there is evidence in the record that = (1) it=20 was standard practice in the construction industry for claims to = be made=20 at the end of projects as it is not until that point in time that=20 additional costs are known; (2) Turner Electric put Gilbane on = verbal and=20 written notice throughout the projects that it would not be = responsible=20 for additional costs caused by others involved in the projects; = and (3)=20 Turner Electric submitted to Gilbane a written claim that included = back-up=20 documentation for the amounts it was seeking.  In addition, = Mr.=20 Turner testified that, in his thirty years of experience in the=20 construction business, the type of documentation provided to = Gilbane was=20 sufficient to constitute a claim for delay costs.  As there = is more=20 than a scintilla of evidence demonstrating that Turner Electric = submitted=20 a claim to Gilbane for its compression costs, the evidence is = legally=20 sufficient.  While there was testimony that Turner Electric = did not=20 submit a claim, it was thus the jury=3Ds=20 responsibility to weigh the credibility of the witnesses and = decide the=20 weight to be assigned to their testimony.  The jury decided = this=20 issue against Gilbane.  As the evidence supporting the=20 jury=3Ds=20 determination is not so contrary to the overwhelming weight of = evidence as=20 to be clearly wrong and unjust, the evidence is factually=20 sufficient.  We overrule Gilbane=3Ds second=20 sub-issue.

Having=20 overruled both sub-issues within Gilbane=3Ds fourth=20 issue on appeal, we overrule Gilbane=3Ds fourth=20 issue.

 

C.     =20 Gilbane Waived Its Argument That the Judgment Should be=20 Modified.

In=20 Gilbane=3Ds sixth=20 issue, Gilbane asserts we should modify the amount of the judgment = as it=20 includes a double recovery because, in Gilbane=3Ds view, it=20 awards Turner Electric the value of the labor performed for change = orders=20 twice.  However, Gilbane cites no legal authority which = supports this=20 argument.  On appeal, an appellant=3Ds brief=20 must contain a clear and concise argument for the contentions made = with=20 appropriate citations to authorities and the record.  Tex. R. App. P.=20 38.1(h).  Failure to do so results in waiver of that = issue on=20 appeal.  Accordingly, Gilbane has waived this issue on appeal = and=20 therefore, we overrule its sixth issue.

 D.    =20 We Need Not Address Gilbane=3Ds Issues=20 Attacking the Jury=3Ds Fraud=20 Findings.

Turner=20 Electric sued Gilbane asserting causes of action for both breach = of=20 contract and fraud.  After the jury found in favor of Turner = Electric=20 on both causes of action, Turner Electric elected to recover under = its=20 breach of contract cause of action.  We have overruled all = issues=20 raised by Gilbane addressing the breach of contract cause of = action. =20 In its second, third, and fifth issues, asserting various = arguments,=20 Gilbane attacks the jury=3Ds fraud=20 findings. As we have overruled Gilbane=3Ds issues=20 attacking the judgment based on breach of contract, we need not = address=20 the fraud issues.  Tex. R.=20 App. P. 47.1.

Conclusion

Having overruled = all of=20 Gilbane=3Ds issues on appeal = necessary=20 for a final disposition of the appeal, we affirm the = trial=20 court=3Ds final = judgment.

 

 

 

/s/     =20 John S. Anderson

Justice

 

 

Judgment=20 rendered and Memorandum Opinion filed February 27, = 2007.

Panel consists of = Justices=20 Anderson, Hudson, and Guzman.


[1]  According to Mr. Turner, = Anormal construction = practices@ means the following: (1) the presence = of=20 structural steel prior to the electricians installing electrical = conduit=20 and wiring, creating a place for the electricians to attach the = conduit=20 and wiring; (2) the absence of interior walls when the = electricians were=20 installing electrical conduit and wiring allowing the electricians = to use=20 motorized scaffolding in straight runs across the building, thus=20 minimizing the time and number of electricians required to perform = this=20 task; (3) logical scheduling calling for construction from one end = of the=20 building to the other thereby minimizing repetitive set-up and = maximizing=20 completion of an area before moving to another; (4) proper = scheduling of=20 the work within the available eighteen months allowing Turner = Electric to=20 (a) use its own employees as opposed to more expensive and = inefficient=20 contract labor; and (b) not use overtime. 

[2]  The terms of the prime contract = were=20 incorporated into the two subcontracts signed by Turner Electric.=20

[3]  While only the Space Center = School schedule=20 was entered into evidence, the testimony was that the schedules = for the=20 construction of the two schools were similar.

[4]  Normal construction practice is = to begin=20 erecting the structural steel at one end of the building and then = progress=20 through the building to the other end.  Crafts, such as the=20 electricians and plumbers, which use the structural steel for = portions of=20 their work, then follow along behind the structural steel = installation=20 and, only when their work is complete, are the interior walls = built. =20 This procedure allows multiple crafts to work at the same time = without=20 impeding each other=3Ds work as they are in different areas of = the=20 building.

[5]  In response to the compressed = schedule,=20 Gilbane made the decision to hire two additional electrical =20 companies to supplement Turner Electric=3Ds crews.  Gilbane paid these two = companies=20 directly and therefore had knowledge of the costs and approved the = costs=20 prior to the performance of the work.  Turner Electric = supervised the=20 electricians provided by these two companies.  In addition, = as a=20 result of the compression, Turner Electric was forced to hire = additional=20 electricians through two staffing companies.

[6]  While Gilbane argues the Total = Cost Method=20 is universally disfavored, it cites a number of cases, many from = the=20 Federal Court of Claims, where the method has been applied to the=20 calculation of damages. Under these cases, the courts applying the = Total=20 Cost Method have required four indicia of reliability before = allowing its=20 use: (1) it is impossible or highly impracticable to prove the=20 contractor=3Ds actual losses directly; (2) the=20 contractor=3Ds bid or estimate was realistic and = reasonable;=20 (3) the contractor=3D