Opinion issued July 1, 2004
In The
Court of Appeals
For The
First District of Texas
NO. 01-02-00812-CV
CITY OF HOUSTON, Appellant
V.
ALLCO, INC., Appellee
On Appeal from the 80th District Court
Harris County, Texas
Trial Court Cause No. 99-56191
MEMORANDUM OPINION
Allco, Inc. sued the City of Houston (“the City”) for breach of contract, alleging that the City failed to pay for “extra work” that Allco performed in conjunction with a contract between Allco and the City. The City appeals the trial court’s judgment awarding Allco damages. In deciding the City’s five issues raised on appeal, we determine (1) whether the City’s immunity from suit has been waived; (2) whether the trial court correctly interpreted the contract at issue; (3) whether the trial court’s findings of fact support its judgment; and (4) whether factually sufficient evidence exists to support the amount of damages awarded to Allco.
We affirm.
Factual and Procedural Background
In 1994, Allco entered into a contract (“the contract”) with the City to provide “sewer rehabilitation services.” In several of its provisions, the contract specified that Allco would not be entitled to compensation for “extra work,” i.e., work that was not already approved under the contract, unless Allco notified the City that extra work was required and received prior, written approval for the extra work from the City’s engineer.
Unrelated to the contract, residents of the Kennedy Heights region of Houston filed a toxic tort suit in 1995 against Chevron U.S.A., Inc. in Texas state court. The residents alleged that Chevron contaminated the soil in their neighborhoods with petroleum by-products. On July 10, 1995, the state court ordered the City to notify counsel for the tort plaintiffs of any sewer work being performed in the Kennedy Heights subdivision. That order was dissolved by further order on August 11, 1995.
In June 1996, Allco was conducting sewer rehabilitation work for the City under work order number 38 in the Crestmont subdivision—an area included within the scope of the Kennedy Heights tort litigation. At that time, the City had never informed Allco of the Kennedy Heights litigation filed in state court. Also unknown to Allco, another lawsuit had been filed by Kennedy Heights residents in Houston federal court. On June 18, 1996, at 5:10 p.m., a federal marshal served Allco with a temporary restraining order signed by the federal judge in the second Kennedy Heights suit. The order required Allco to cease further excavation work on the Crestmont project. At that time, Allco had 70 to 80 open trenches in the Crestmont subdivision. Allco faxed a copy of the temporary restraining order to the City’s public works department.
The following day, Allco entered into an agreed order, which required Allco to establish a plan to “rope off” the construction site and areas where the excavated dirt was stored and to provide the tort plaintiffs access to monitor the site. Allco hauled the dirt, which had been excavated prior to Allco’s receiving the restraining order, to an esplanade where the dirt was covered and a fence was erected.
Although the contract permitted Allco to use the excavated dirt to refill the trenches it had dug, Allco believed that the language of the agreed order, requiring it to secure the dirt, prevented Allco from using that dirt to refill the trenches. As a result, Allco purchased and trucked in new dirt—an expense it would not have normally incurred under the contract. During these activities, city inspectors were present at the work site.
On June 21, 1996, an assistant city attorney sent Allco a letter, demanding that Allco dispose of the “excess excavated material and debris.” If Allco did not do as requested, the assistant city attorney warned Allco that it would be in breach of contract. After receiving the letter, Allco paid for the transport and disposal of the excavated dirt. As part of the disposal process, Allco hired a company to test the excavated dirt to determine whether it was contaminated. By the end of July 1996, the excavated dirt had been trucked to a landfill for disposal at Allco’s expense.
On February 10, 1998, Allco submitted a claim to the City for the extra work associated with the Kennedy Heights litigation. The city attorney denied the claim six months later. In April 1999, Allco sought approval for the extra work from the City’s engineer. The City did not respond. Allco then filed suit against the City, alleging breach of contract and seeking $89,306.43 in damages for the extra work it had completed in the Crestmont subdivision. Following a bench trial, the trial court signed a judgment in favor of Allco. The court found that Allco was entitled only to part of the damages it requested. The trial court awarded the company $27,468.88, plus interest, representing the costs associated with testing, moving, and ultimately disposing of the excavated dirt.
The trial court also signed findings of fact and conclusions of law in support of its judgment. In its findings, the trial court acknowledged that the contract “provides for extra work and sets out the procedure to be followed in carrying out extra work.” The court also found that the contract “requires notice, relative to extra costs, and Allco used this format in complying with the claim filing process.” Relatedly, in finding of fact 23, the trial court found,
Allco concedes that no prior[,] written approval was sought and obtained for changes[.] Allco’s testifying representative stated he would not have gone on to the job in the first instance without a plan and approval from the City had the City informed Allco about the Kennedy Heights litigation[.] Had the City of Houston informed Allco of this litigation, Allco would have sought written authorization[.]
Relating to the costs that Allco incurred in testing and disposing of the excavated dirt, finding of fact 18(D) reads, in part, as follows:
While the [agreed order] did not specifically require Allco to truck the soil, Allco responded reasonably to that order in thinking that it was necessary to remove the soil[.] Additionally, Allco reasonably responded to the Assistant City Attorney’s directive not to breach the contract and to “remove excess excavated material and debris immediately.”
The trial court also filed the following three “conclusions of law,” which are actually findings of fact:
1.Since the engineer for the City of Houston never responded to the complaint and the claim from the date of the occurrence in [sic] June 18 and 19, 1996, up and until the date of trial, March 27, 2002, the Court assumed it would have been futile for Allco to attempt to obtain change orders in order to respond to the Court order that it was subjected to.
2.Allco reasonably relied upon its interpretation of the temporary restraining order, the agreed order of the Federal Court and the directive of the assistant city attorney of the City of Houston. Allco relied to its detriment in removing the dirt after June 21, 1996[.] The City should answer to Allco for its extra costs.
3.Given the issue of possible contamination brought to the attention of Allco, Allco’s conduct in response was reasonable and in the interest of public safety.
On appeal, the City challenges the trial court’s judgment in five issues.
Waiver of Immunity from Suit
In its first issue, the City contends that it is immune from suit. Allco responds that the City’s immunity from suit is waived by the clear and unambiguous language of article II, section 1 of the City’s charter, which provides that the City “may sue and be sued . . . in all courts and places and in all matters whatever . . . .” City of Houston Charter, art. II, § 1 (Act of 1905).
We recently addressed this same issue in United Water Services, Inc. v. City of Houston, holding that the “sue and be sued” language in the City’s charter waived its immunity from suit. No. 01-02-01057-CV, slip. op. at 21 (Tex. App.—Houston [1st Dist.] Apr. 29, 2004, pet. filed). Accordingly, we overrule the City’s first issue.
Breach of Contract
The Trial Court’s Contract Interpretation
In its second issue, the City contends that the trial court erred in interpreting the contract’s provisions governing the conditions under which Allco could receive compensation for conducting extra work. According to the City, the trial court concluded (1) that the contract did not require Allco to give notice to the director of public works before engaging in extra work and (2) that Allco was not required under the contract to obtain the director’s prior, written approval for the extra work.
We disagree with the City’s characterization of the trial court’s interpretation of the contract. A review of the trial court’s findings of fact reveals that the trial court recognized that the contract required Allco to give notice and receive approval from the City’s engineer. As discussed below, however, the findings also support a conclusion by the trial court that, under the particular facts of this case, Allco was excused from complying with these conditions for payment. Because we disagree with its characterization of the trial court’s contract interpretation, we overrule the City’s second issue.
Legal Theory Supporting Liability for Breach of Contract
In its third issue, the City contends that the evidence presented at trial was legally and factually insufficient to support the trial court’s conclusion of law number one, which provides that it would have been futile for Allco to seek approval from the City before engaging in the extra work.
We begin by noting that conclusion of law number one is actually a finding of fact. In any event, even if a court’s conclusions of law are erroneous, we will not reverse the court’s order if its controlling findings of fact will support the judgment under a correct legal theory. Westech Eng’g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.—Austin 1992, no writ). An incorrect finding of fact or conclusion of law does not warrant a reversal if the judgment is otherwise correct. Vaughn v. DAP Fin. Servs., Inc., 982 S.W.2d 1, 6 (Tex. App.—Houston [1st Dist.] 1997, no pet.). Reversal is only proper when the reviewing court is convinced that a different verdict would have been rendered but for the error. Id. at 6.
Whether the trial court correctly found that it would have been futile for Allco to seek approval is not determinative of whether Allco was entitled to compensation for the extra work. The trial court also made the following findings of fact that are controlling in this case: (1) Allco reasonably believed that the assistant city attorney instructed it to remove the soil; (2) Allco reasonably responded to the agreed order and the assistant city attorney’s directive in removing the excavated soil; (3) Allco detrimentally relied on the directive of the assistant city attorney and the agreed order in making its decision to remove the excavated dirt; (4) Allco would have sought written authorization from the City had the City informed Allco of the Kennedy Heights litigation; and (5) Allco acted reasonably and in the interest of public safety in removing potentially contaminated soil.
In this case, the aforementioned findings of fact support the trial court’s judgment. Although not expressly concluded by the trial court, these controlling findings support the legal theory that the City, by its conduct and the circumstances of this case, waived Allco’s obligation to give notice and obtain approval from the City’s engineer. This is true even assuming the obligation to give notice and obtain approval were conditions precedent to receiving payment.
A condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation. Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex. 1992); Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976). When a contract contains a condition precedent, the condition must either have been met or excused before the other party’s obligation can be enforced. Cal-Tex Lumber Co. v. Owens Handle Co., 989 S.W.2d 802, 809 (Tex. App.—Tyler 1999, no pet.).
A condition precedent may be waived and such waiver may be inferred from a party’s conduct. Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987); Bekins Moving & Storage Co. v. Williams, 947 S.W.2d 568, 576 (Tex. App.—Texarkana 1997, no writ). The performance of a condition precedent can be waived or modified by the party to whom the obligation was due by word or deed. Ames v. Great S. Bank, 672 S.W.2d 447, 449 (Tex. 1984). Waiver is an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. Mass. Bond & Ins. Co. v. Orkin Exterm. Co., 416 S.W.2d 396, 401 (Tex. 1967). Additionally, a condition precedent may be excused under certain circumstances. See Lesikar Constr. Co. v. Acoustex, Inc., 509 S.W.2d 877, 881 (Tex. Civ. App.—Fort Worth 1974, writ ref’d n.r.e.). Indeed, it is a rule of construction that a forfeiture by finding a condition precedent is to be avoided when possible under another reasonable reading of the contract. Schwarz-Jordan, Inc. v. Delisle Constr. Co., 569 S.W.2d 878, 881 (Tex. 1978).
Assuming the contract provisions at issue in this case are conditions precedent to the City’s contractual obligation to pay Allco for extra work, the controlling findings of fact in this case support a conclusion that the City waived performance of these conditions by its words and deeds. Specifically, the findings of fact relating to the City’s failure to inform Allco of the Kennedy Heights litigation and the assistant city attorney’s directive to dispose of the excavated soil support such conclusion.
Moreover, Allco is entitled to the compensation that it was awarded by the trial court because equity will not permit the enforcement of a forfeiture in an inequitable and oppressive manner. See Dewhurst v. Gulf Marine Inst. of Tech., 55 S.W.3d 91, 98 (Tex. App.—Corpus Christi 2001, pet. denied). Equity will relieve against a forfeiture whenever enforcement would be against good conscience. Id.; Gardner v. Platt, 68 S.W.2d 297, 299 (Tex. Civ. App.—Austin 1934, writ ref’d); Mo. State Life Ins. Co. v. Le Fevre, 10 S.W.2d 267, 270 (Tex. Civ. App.—Waco 1928, writ dism’d w.o.j.). The trial court found that Allco reasonably relied to Allco’s detriment on its interpretation that the agreed order required Allco to haul in new soil to fill the trenches. The trial court also found that Allco reasonably relied on the assistant city attorney’s directive to remove the excavated soil from the site. The trial court further found that, based on the threat of possible contamination, Allco’s conduct was reasonable and in the interest of public safety. As a result, the findings of fact show that Allco was caught between compliance with the agreed order, complying with the extra-work provisions of the contract, following the directive from the city attorney’s office, and acting in the interest of public safety. The trial court’s findings of fact support the interposition of equity in this case. See Jones v. Gibbs, 130 S.W.2d 265, 272-73 (Tex. 1939) (interposing equitable principles to excuse performance of condition in option contract).
We hold that the controlling findings of fact support the trial court’s judgment under a correct legal theory. We overrule the City’s third issue.
Findings of Fact Regarding Reasonableness of Allco’s Conduct and Reliance
In issue four, the City challenges the trial court’s “conclusions of law,” which are actually findings of fact, (1) that Allco reasonably relied to its detriment on the directive of the assistant city attorney and the agreed order in making its decision to remove the excavated dirt and (2) that Allco acted reasonably and in the interest of public safety in removing potentially contaminated soil.
The City contends that these findings of fact do not support Allco’s breach of contract claim, but could only support a cause of action not pled by Allco, such as fraud or promissory estoppel. We disagree. As discussed in conjunction with issue three, these findings of fact support recovery by Allco under its breach of contract claim. Thus, the City’s contention is without merit.
Although not brought as a formal legal or factual sufficiency challenge, the City also contends under this issue that “the facts do not support the trial court’s findings and conclusions.” We construe this as a factual sufficiency challenge.
Findings of fact in a bench trial have the same force and dignity as a jury verdict; thus, an appellate court reviews sufficiency challenges to findings of fact by the same standards as apply in reviewing a jury’s findings. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). In a factual-sufficiency review, we weigh all of the evidence in the record and overturn the finding only if it is so against the great weight and preponderance of the evidence as to be clearly wrong and unjust. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996).
Regarding the trial court’s finding that Allco reasonably relied to its detriment on the agreed order, the City asserts that the agreed order required nothing “more than that Allco allow the plaintiffs access to monitor and test the soil” and that the tort plaintiffs’ attorney told Allco that testing of the excavated soil was not necessary. The City mischaracterizes the agreed order. The order not only required Allco to provide the plaintiffs access to monitor and test the soil, but also required Allco to “rope off” and “protect” any area where excavated soil was stored. Even assuming that the tort plaintiffs’ counsel told Allco that the soil did not need to be tested, such evidence does not refute or undermine the trial court’s finding that Allco relied to its detriment on the agreed order in deciding to remove the excavated soil.
Regarding Allco’s reliance on the assistant city attorney’s letter, the City contends that the letter “simply reminded Allco of its responsibility under the contract not to let excess soil and debris accumulate after completion of a repair.” However, this contention fails to place the statement within the context of the entire letter. The City does not mention that the letter also warned Allco that its failure to remove the dirt could “adversely affect the health and safety of the citizens of Houston” and that such failure could put Allco in breach of the contract. When read in its entirety, the letter provides a sufficient basis for the finding of fact that Allco reasonably relied to its detriment on the assistant attorney’s letter in deciding to remove the excavated soil.
Lastly, the City argues that “the facts” do not support the trial court’s finding of fact that Allco acted reasonably and in the interest of public safety in removing the soil because the soil was later determined not to be contaminated. The trial court found that Allco acted reasonably based on “possible contamination,” not actual contamination. Moreover, the City’s position is belied by the language of the assistant city attorney’s letter to Allco which warned that the failure to remove the dirt could “adversely affect the health and safety of the citizens of Houston.” Accordingly, we hold that factually sufficient evidence exists in the record to support the challenged findings.
We overrule the City’s fourth issue.
Factual Sufficiency of Damages Evidence
In its fifth issue, the City contends that the evidence is factually insufficient to support the trial court’s award of damages to Allco. In particular, the City attacks the factual sufficiency of the evidence to support the trial court’s award of labor costs to Allco. In “additional findings of fact,” the trial court found that Allco was entitled to recover labor costs for only certain days that it was at the site. Specifically, the court found that Allco had presented sufficient proof to support an award of its labor costs for the following dates: June 22, 1996 and July 18, 19, and 22, 1996. For those dates, the trial court found that Allco was entitled to labor costs totaling $5,562.98. The trial court awarded these labor costs based on the testimony of Clyde Rice, who was Allco’s corporate representative, handwritten notes detailing the work that was done at the site, and invoices submitted by Allco to the City. The trial court disallowed labor costs sought by Allco for seven other days that it was working at the site.
In support of its factual sufficiency attack, the City first points out that Rice testified that the handwritten notes offered in support of Allco’s damages were not contemporaneously made with the work performed. However, the City provides no substantive argument explaining whether the notes were required to be contemporaneously made with the work performed or how this affects the probative value of the evidence.
The City also points out that inconsistencies exist between the handwritten notes and the invoices submitted by Allco to the City. The only examples cited by the City in its brief are alleged inconsistencies for June 17, 18, and 26, 1996—dates for which Allco was not awarded labor costs. These inconsistencies do not serve to undermine the weight of the evidence supporting the award of the labor costs for June 22, 1996 and July 18, 19, and 22, 1996.
The City correctly points out Rice testified that he could not determine from the payroll records which employees were working on the Crestmont project. Nonetheless, a combination of Rice’s independent recollection, the handwritten notes, and the invoices establish the number of employees working on the dates for which labor costs were awarded and provide a basis for the trial court’s award.
Lastly, the City complains that Allco was not entitled to “cleanup costs” for June 22, 1996 because such costs were not “extra” expenses, but, rather were included in work that Allco was required to complete under the contract, i.e., costs that were already “pay items” under the contract. Despite this general assertion, the City cites no record reference establishing that Allco charged the City for extra “cleanup costs” on June 22, 1996. To the contrary, Rice testified that, in relation to the extra work performed in the Crestmont subdivision, Allco did not charge the City for any “pay items” already covered by the contract. Rice testified that the only additional claims that Allco submitted to the City were for extra costs incurred as a result of the Kennedy Heights litigation.
Applying the appropriate standard of review, we hold that the evidence was factually sufficient to support the trial court’s award of labor costs to Allco. We overrule the City’s fifth issue.
Conclusion
We affirm the judgment of the trial court.
Laura Carter Higley
Justice
Panel consists of Justices Nuchia, Alcala, and Higley.