Solar Applications Engineering, Inc. v. T.A. Operating Corporation

327 S.W.3d 104 (2010)

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Nature of the Case

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Facts

P and D entered a contract to build a truck stop. The parties agreed on a construction schedule and P began work according to the schedule. D was required to provide monthly progress payments. When P believed the construction project ready for its intended use, that it is 'substantially complete,' it so notifies D and if D. agrees that the project is substantially complete, P issues a 'certificate of Substantial Completion' and attaches a list of items, referred to as the 'punch list,' to be completed or corrected before final payment. Upon written notice from P that the punch list is done and the project is complete, D conducts a final inspection with to identify any deficiencies, and P remedies those deficiencies. After P corrects the identified deficiencies, it may submit a 'final Application for Payment' that is accompanied by complete and legally effective releases or waivers of all lien rights ('lien-release affidavit'). Both parties agree that the project was substantially complete in August 2000. Disputes arose over the remaining items that needed to be completed before final payment. P then filed a lien against the project for $472,393, and subcontractors also filed liens against the property. D terminated P pursuant to the contract's 'for cause' termination provision contending that, among other things, P had failed to keep the project lien-free and failed to complete the punch list. D also notice P that it was asserting claims for $736,800.15 for D's failure to complete the construction project on time. The day after D terminated the contract, P provided an 'Application and Certificate for Payment' for $472,149. D refused to make payment, contending P had not complied with the lien-release provision by failing to submit a lien-release affidavit. D maintains that it has no obligation to make final payment on a building with outstanding construction liens. P sued for breach of contract under substantial performance for the unpaid balance of the contract, and D counterclaimed for alleged delays and defective work. The jury found for P awarding $392,000 in damages, which represented the balance due under the contract less an $ 8,000 offset to remedy all remaining 'punch list' defects and omissions found by the jury. D appealed and eventually, the court of appeals reversed and rendered judgment that P take nothing. The lien-release provision was a condition precedent and held that the doctrine of substantial performance did not excuse P's failure to provide a lien-release affidavit, and thus P forfeited final payment under the contract. P appealed.