Koch v. Construction Technology, Inc.

924 S.W.2d 68 (1996)

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Nature of the Case

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Facts

On March 17, 1988, D and the MHA, Memphis Housing Authority, entered into a contract in which D agreed to make improvements to the Dixie Homes Housing Development. D subcontracted the painting portion of the project to P. D provided a performance and payment bond to him through FDCM. The subcontract included a “payment” clause. Partial payments subject to all applicable provisions of the Contract were to be made when and as payments are received by D. It also stated that P may be required as a condition precedent to any payment to furnish evidence satisfactory to D that all payrolls, material bills, and other indebtedness applicable to the work have been paid. P completed all work required by the contract on July 31, 1989; and he was paid $148,110.96 for this work. The amount of actual work performed exceeded this total, and D refused to make any additional payments. P brought an action against it for breach of contract. D cited the payment clause as an affirmative defense, alleging that D has not been paid in full by MHA and, therefore, is not obligated to pay P since payment to D by MHA is a condition precedent to D's obligation to pay P.” FDCM alleged that P's claim was barred by the six month limitations period applicable to statutory bonds and that Koch had failed to comply with the notice provisions applicable to such bonds. The court ruled in favor of D on interpretation of the payment clause and then from evidence awarded P $28,307.22 for work actually performed by P that D has been paid for. P filed a motion requesting that the trial court increase the judgment to $39,650.14, arguing that the uncontroverted evidence presented at trial in the instant case showed this to be the total amount due him under the subcontract. This was denied, and P appealed to the Court of Appeals.

The Court of Appeals affirmed the judgment. A “pay when paid” clause was a condition precedent to D's promise to pay. P appealed.