Appellant, general contractor ARCO Construction Company, Inc., hired appellee, subcontractor Americon Services Company, Inc., to perform site work on a commercial construction project, pursuant to a written contract. When Americon did not receive payment as expected, it sued ARCO for breach of contract, failure to comply with payment obligations under Texas Property Code section 28.002 (“the Prompt Payment Act”), quantum meruit, sworn account, and trust fund violations. A jury found that ARCO violated the Prompt Payment Act by failing to timely pay sums due and awarded Americon: $61,417.70, plus interest and attorney’s fees. See Tex. Prop. Code Ann. § 28.002 (Vernon 2000). The jury found that Americon breached the contract but that its breach was excused, and the trial court rendered judgment that ARCO take nothing by its counterclaims.
In five issues, ARCO contends that the trial court erred (1) by granting relief under the Prompt Payment Act; (2) by “fail[ing] to award ARCO the damages awarded by the jury for Americon’s breach of contract”; (3) by “allowing Americon to draw adverse inferences” from ARCO’s redactions to its admitted bills for attorney’s fees; (4) by failing to properly apply the parties’ stipulated attorney’s fees; and (5) by concluding that Americon was entitled to recover on its alternative theories. The First Court of Appeals, in an opinion by Justice Laura Carter Higley, affirms.
ARCO Construction Company, Inc. v. Americon Services Company, Inc (Tex.App.- Houston [1st Dist.] May 15, 2008) (Higley) (construction law, Prompt Payment Act, attorney's fees)
OPINION EXCERPT
This case involves interpreting the Prompt Payment Act, and, therefore, we apply a de novo standard. City of San Antonio v. City of Boerne, 111 S.W.3d 22, 25 (Tex. 2003). We construe the statute as written and must, if possible, determine the legislature’s intent from the language that was used in the statute. Id. When determining legislative intent, the entire act, not isolated portions of the act, must be considered. Id. We look to the plain meaning of the words used in the statute and, if the meaning is unambiguous, interpret the statute so that it comports with the plain meaning expressed. Id.
Texas Property Code section 28.002 provides for prompt payment to contractors and subcontractors, as follows:
(a) If an owner or a person authorized to act on behalf of the owner receives a written payment request from a contractor for an amount that is allowed to the contractor under the contract for properly performed work or suitably stored or specially fabricated materials, the owner shall pay the amount to the contractor, less any amount withheld as authorized by statute, not later than the 35th day after the date the owner receives the request.
(b) A contractor who receives a payment under Subsection (a) or otherwise from an owner in connection with a contract to improve real property shall pay each of its subcontractors the portion of the owner’s payment, including interest, if any, that is attributable to work properly performed or materials suitably stored or specially fabricated as provided under the contract by that subcontractor, to the extent of that subcontractor’s interest in the owner’s payment. The payment required by this subsection must be made not later than the seventh day after the date the contractor receives the owner’s payment.
(c) A subcontractor who receives a payment under Subsection (b) or otherwise from an contractor in connection with a contract to improve real property shall pay each of its subcontractors the portion of the payment, including interest, if any, that is attributable to work properly performed or materials suitably stored or specially fabricated as provided under the contract by that subcontractor, to the extent of that subcontractor’s interest in the owner’s payment. The payment required by this subsection must be made not later than the seventh day after the date the contractor receives the owner’s payment.
Tex. Prop. Code Ann. § 28.002.
The plain language of section 28.002 demonstrates that its purpose is to ensure that contractors and subcontractors are promptly paid for valuable services and materials provided. See Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 620 (Tex. 2004) (noting that Texas contractors are statutorily required to promptly pay subcontractors proportionately from any amount paid by owner and attributable to work performed under subcontract).
Section 28.003 provides, in relevant part, that a good-faith dispute suspends these deadlines, as follows:
(b) If a good faith dispute exists concerning the amount owed for a payment requested or required by this chapter under a contract for construction of or improvements to real property, excluding a detached single-family residence, duplex, triplex, or quadruplex, the owner, contractor, or subcontractor that is disputing its obligation to pay or the amount of payment may withhold from the payment owed not more than 100 percent of the difference between the amount the obligee claims is due and the amount the obligor claims is due. A good faith dispute includes a dispute regarding whether the work was performed in a proper manner.
Tex. Prop. Code Ann. § 28.003(b). The plain language of section 28.003(b) demonstrates that its purpose is to protect a party from having to make payment under a contract when there is a good faith dispute regarding the obligation. See id. Such dispute includes, but is apparently not limited to, issues regarding work performance. Id.
The Act also provides that an amount withheld under this chapter begins to accrue interest on the day after the date on which the payment becomes due and bears interest at one-and-one-half percent each month. Id. § 28.004. A person may bring an action to enforce rights under this chapter, and the court may award costs and reasonable attorney’s fees as the court deems equitable and just. Id. § 28.005. Finally, the Act provides that it may not be interpreted to void a subcontractor’s entitlement to payment for properly performed work. Id. § 28.007.
Construing the Prompt Payment Act as a whole, as we must, its purpose is not only to ensure that contractors and subcontractors are promptly paid for valuable services and materials provided, but also to allow certain sums to be withheld from payment when those sums are the subject of a “good-faith dispute,” pending resolution of that dispute. Otherwise, for instance, a contractor could enjoy delayed payment of a substantial sum owed under a subcontract by raising dispute with a smaller portion of the subcontractor’s work. Clearly, this is the type of danger that the Prompt Payment Act is designed to protect against. See id. §§ 28.003 (permitting contractor to withhold only those sums that are subject of good-faith dispute), 28.007 (providing that Act may not be interpreted to void subcontractor’s entitlement to payment for properly performed work).
We conclude that the dispute at issue in the instant case, namely, whether there was a failure by ARCO to comply with the terms of the Contract, does not render the Prompt Payment Act inapplicable; rather, the situation presented herein represents the type of circumstance that the Act contemplates. The Act governs the timing of payment of undisputed funds to Americon and provides relief for ARCO in the form of allowing it to withhold funds that are the subject of a “good-faith dispute,” pending resolution of the dispute.
ARCO Construction Co., Inc. vs. Americon Services Co., Inc (Tex.App.- Houston [1st Dist.] May 15, 2008)(Higley) (construction law, Prompt Payment Act, attorney's fees) Before Justices Nuchia, Hanks and Higley
No. 01-06-00846-CV ARCO Construction Company, Inc. v. Americon Services Company, Inc.
Appeal from County Civil Court at Law of Harris County
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