D2 Excavating, Inc. v. Thompson Thrift Construction, Inc. et al

Filing 42

ORDER Granting 34 Defendants' Motion for Leave and Objections regarding summary judgment evidence; Granting 37 Plaintiff's Motion for Leave to File Amended Objections to Defendants' Motion for Leave; Denying 21 Motion for Summary Judgment.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(srussell, 2)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION

September 26, 2017
David J. Bradley, Clerk

D2 EXCAVATING, INC.,

§
§
Plaintiff,
§
VS.
§ CIVIL ACTION NO. 2:16-CV-538
§
THOMPSON THRIFT CONSTRUCTION, §
INC., et al,
§
§
Defendants.
§
ORDER
Before the Court are: (1) Defendants’ Motion for Summary Judgment (D.E. 21);
(2) Defendants’ Motion for Leave and Objections regarding summary judgment evidence
(D.E. 34); and (3) Plaintiff’s Motion for Leave to File Amended Objections to
Defendants’ Motion for Leave (D.E. 37). For the reasons set out below, the Court
GRANTS the motions for leave (D.E. 34 and 37) and DENIES the motion for summary
judgment (D.E. 21).
ALLEGATIONS
Plaintiff D2 Excavating, Inc. (D2) filed this action in state court against
Defendants Thompson Thrift Construction, Inc. and Fidelity and Deposit Company of
Maryland (jointly Thompson Thrift),1 alleging, in part, claims for breach of contract and
quantum meruit. Thompson Thrift removed the case to this Court pursuant to diversity
jurisdiction, 28 U.S.C. § 1332.
1

Thompson Thrift Construction, Inc. acted as the general contractor for Watermark at Timbergate Corpus Christi,
LLC, the owner of the project. Fidelity and Deposit Company of Maryland is sued as surety on a bond furnished to
guarantee payment of D2’s claim, thus discharging a mechanic’s lien D2 had filed against the project. D2’s claim
on the bond is not directly challenged in this summary judgment proceeding.

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D2 contends that Thompson Thrift solicited bids and executed a contract for the
excavation of a site on which an apartment complex would be built, representing that the
site was ―balanced.‖ After Thompson Thrift accepted D2’s bid and D2 began work, D2
discovered that the site was not balanced. Instead, it required additional excavation and
removal of soil. D2 claims that the additional work was not contemplated by the contract
and that Thompson Thrift requested that it be done, promising to execute change orders
so that D2 would be paid, as soon as the amount of work and the requisite charges were
determined. D2 claims that previous additional work was handled this way; change
orders were issued after-the-fact and payments were made. However, on this occasion,
D2 did the additional work requested, yet Thompson Thrift refused to execute the
promised change order and pay D2. See D.E. 1-2. D2 seeks to recover under a quantum
meruit theory or, alternatively, for breach of contract for the failure to pay the remaining
subcontract balance and the charges it agreed to pay through promised change orders. Id.
Thompson Thrift filed a counterclaim, alleging that D2 over-excavated the site and
then abandoned and did not complete the work required by the contract. As a result,
Thompson Thrift was required to hire a new excavation subcontractor to complete the
work and remediate the problems D2 created on the site. Thompson Thrift alleges claims
for breach of contract, breach of warranty, indemnification, filing a fraudulent lien, and
for declaratory relief that D2’s lien is invalid and unenforceable. See D.E. 14, 27, 33.
Before the Court is Thompson Thrift’s motion for summary judgment seeking to
eliminate D2’s claims through the allegedly comprehensive terms of their Subcontract
Agreement. D.E. 21. D2 has responded (D.E. 23) and both parties have filed replies
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(D.E. 25, 31). Since then, both parties have filed motions for leave to file additional
replies (D.E. 34, 37) and D2 opposes Thompson Thrift’s request for leave (D.E. 35).
This case is in its early stages. So that all of the parties’ arguments are before the Court,
the Court GRANTS the motions for leave (D.E. 34, 37).
STANDARD OF REVIEW
Summary judgment is proper if there is no genuine issue as to any material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
Ordinarily, a genuine issue exists ―if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.‖ Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). In that circumstance, the court must examine ―whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so onesided that one party must prevail as a matter of law.‖ Id. at 251–52. In making this
determination, the court must draw all justifiable inferences in favor of the party
opposing the motion. Caboni v. Gen. Motors Corp., 278 F.3d 448, 451 (5th Cir. 2002).
Here, however, Thompson Thrift has chosen to accept, for purposes of this
motion, that D2’s allegations are true, essentially conceding the existence of evidence
that would raise a disputed fact issue—if that fact issue is material and relevant to a
determination of the claims. In other words, Thompson Thrift has assumed the burden to
show that the contract documents, alone, eliminate all fact issues, regardless of what
other evidence may be offered. As the moving party, Thompson Thrift bears the initial
burden of showing the absence of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). If it fails to do so, its motion concedes that any
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material allegations of fact issues will preclude its summary judgment. Cf. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (placing the burden of
demonstrating evidence to raise a disputed issue of material fact on the non-movant).
DISCUSSION
Thompson Thrift’s argument—that the existence of the written contract renders
any fact issue moot—is true with respect to the quantum meruit theory, 2 so long as the
scope of the contract is comprehensive, governing the work at issue here. Black Lake
Pipe Line Co. v. Union Constr. Co., 538 S.W.2d 80, 86 (Tex. 1976), overruled on other
grounds, Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989).

―In

determining whether the work was required by the contracts we must determine (1)
whether the work was extra and (2) whether the contracts made provision for the type of
extra work performed.‖ Id.
As to the breach of contract claim, Thompson Thrift again relies on the
comprehensive scope of the contract. It argues that its requirement of written change
orders, issued in advance, precludes liability to pay D2 for any of its claims because D2
did not obtain such written change orders. D.E. 21-2, p. 7 (¶ 7). So both theories turn on
whether the haul-off of excess soil was extra work within the contemplation of the
contract and whether appropriate contingencies for payment were included in the
contract.

2

Under Texas law, ―[r]ecovery on an express contract and on quantum meruit are inconsistent. Where there exists
a valid express contract covering the subject matter, there can be no implied contract.‖ Woodard v. Sw. States, Inc.,
384 S.W.2d 674, 675 (Tex. 1964); Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 454 (5th Cir. 2001) (applying
Texas law).

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D2 alleged, and now argues, that the contract should be construed consistent with
industry usage to limit its scope. In that regard, calling the site ―balanced,‖ means that
there will be no removal of excess soil from the project site. Consequently, if excess soil
is generated that needs to be hauled away, that work is outside the scope of the work
governed by the contract and must be paid for separately.3
Thus the Court must determine whether the scope of the contract is broad enough
and certain enough to preclude consideration of contrary evidence regarding this industry
meaning.

Thompson Thrift represents, ―[I]t is undisputed that the parties’ contract

covered all excavation work and also contained provisions for extra work.‖ D.E. 21, p. 2.
This assertion is incorrect or misleading under the circumstances. The extent of the
scope of the work governed by the contract is hotly contested.
According to the Subcontract,4 its scope is set out in Exhibit B1, as revised by
Exhibit B2, which includes the provision: ―All spoils and excess soils created as a result
of execution of the work described herein and work by others shall be relocated on the
project site to location designated by TTC Superintendent.‖ D.E. 21-2, p. 30 (¶ 5(a)).
See also, id., p. 32 (¶ 4(f)). Exhibit B1 originally included a paragraph 5(a) subsidiary
provision: ―This is a balanced site. It shall be this subcontractor’s responsibility to
balance site. Change orders for import/export will not be accepted.‖ D.E. 21-2, p. 33 (¶
5(a)(i)).
3

Alternatively, D2 argues that Thompson Thrift waived any requirement for written change orders through its
course of performance and request for the removal of the soil while promising additional compensation for the work.
Because of the disposition of the question of the scope of the contract, the Court need not, and does not, address this
alternate summary judgment response.
4

Subcontract, D.E. 21-2, p. 5 (¶ 4).

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However, in Exhibit B2’s revision, the body of paragraph 5(a) is edited in a
manner not relevant here, but omits mention of the subsidiary provision with its absolute
language. Instead, as a ―New Item,‖ Exhibit B2 recites in more flexible terms: ―Site is
consider [sic] to be balanced and no import or export of material are anticipated.‖ D.E.
21-2, p. 30 (¶ 6(b)).
Thompson Thrift argues that the subcontract placed the burden on D2 to review
the matter and determine whether excess soil would be generated. By executing the
subcontract, it argues, D2 assumed the risk of any expense related to hauling off excess
dirt. The provision upon which Thompson Thrift relies for this argument reads:
Execution of this Agreement by the Subcontractor is a
representation that the Subcontractor has visited the Project
site, become familiar with local conditions under which the
Work is to be performed and correlated personal observations
with requirements of the Contract Documents. The Subcontractor shall evaluate and satisfy itself as to the conditions
and limitations under which the Work is to be performed,
including without limitation: (1) the location, condition,
layout, and nature of the Project site and surrounding areas;
(2) generally prevailing climatic conditions; (3) anticipated
labor supply and costs; (4) availability and cost of materials,
tools, and equipment; and (5) other similar issues.
Accordingly, Subcontractor shall not be entitled to an
adjustment in the Contract Price or an extension of time
resulting from Subcontractor’s failure to fully comply with
this paragraph.
D.E. 21-1, p. 6 (¶ 4). Thompson Thrift does not supply any basis for equating ―the
conditions and limitations under which the Work is to be performed‖ with essentially
second-guessing the engineering work that went into the generation of the contract
specifications that rendered a ―balanced site‖ representation.
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On the whole, the Court is not convinced that the contract language, on its face,
bears out Thompson Thrift’s argument that it governs the terms upon which excess soil
would be removed from the site. Instead, it anticipated that no excess soil would be
generated, leaving one to guess what might happen if it were generated.
While the contract language is less than convincing, this determination need not be
made in isolation. Also before the Court are D2’s factual allegations, assumed as true. If
those allegations may legally be considered to contradict the terms of the contract as
Thompson Thrift construes them, then summary judgment cannot issue.
Consideration of D2’s assertions, based on matters outside the four corners of the
subcontract, turns on the application of the parol evidence rule. As this Court is sitting in
diversity jurisdiction, the Court applies the parol evidence rule of Texas. Harville Rose
Serv. v. Kellogg Co., 448 F.2d 1346, 1349 (5th Cir. 1971). Under that rule, evidence
offered contrary to the apparent terms of an integrated contract5 is admissible only if the
contract is incomplete or ambiguous. Jack H. Brown & Co. v. Toys "R'' Us, Inc., 906
F.2d 169, 173 (5th Cir. 1990) (applying Texas law).
―In Texas, whether the language of a contract is ambiguous is a question of law for
the court.‖ Hennigan v. Chargers Football Co., 431 F.2d 308, 314 (5th Cir. 1970) (citing
City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968)).
Thompson Thrift observed that neither party has pled any ambiguity in the contract. D.E.
34, p. 3. See D.E. 1-2, 33, 39. However, ―A court may conclude that a contract is
5

Contracts are presumed integrated. N. K. Parrish, Inc. v. Sw. Beef Indus. Corp., 638 F.2d 1366, 1368-69 (5th Cir.
1981) (applying Texas law). Furthermore, the Subcontract Agreement contains an express integration clause. D.E.
21-2, p. 17 (¶ 22).

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ambiguous even in the absence of such a pleading by either party.‖ Sage St. Assocs. v.
Northdale Const. Co., 863 S.W.2d 438, 445 (Tex. 1993).
After describing the binding nature of all of the complementary contract
documents, the Subcontract Agreement recites,
The Subcontractor acknowledges and agrees that the Contract
Documents are sufficient to provide for the completion of the
Work and that the Work includes work whether or not shown
or described which reasonably may be inferred to be required
or useful for the completion of the Work in accordance with
applicable laws, standards, regulations, codes, and customary
standards of the construction industry.
D.E. 21-2, p. 5 (¶ 4) (emphasis added). This provision recognizes that the contract terms
are incomplete and subject to interpretation based on ―customary standards,‖ which by
definition either inserts ambiguity into the document or guarantees the consideration of
this extrinsic evidence.6
D2 has alleged that, in the construction site work industry, calling the project
―balanced‖ meant that import or export of dirt was not included. D.E. 1-2, p. 6. This is
consistent with at least some of the contract terms indicating that such work was not
anticipated. Thus there is a fact issue whether it was reasonable to infer that export of
soil was ―required or useful for the completion of the Work.‖ D.E. 21-2, p. 5 (¶ 4).
Because the subcontract is ambiguous and D2 has alleged a cognizable basis for
construing it to exclude the work at issue in this case, Thompson Thrift has failed to show
6

Industry standards may be considered to some extent even without an express reference to them or a finding of
ambiguity. See generally, Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 & n.5 (Tex. 1981) (permitting
consideration of certain surrounding circumstances even where contract is otherwise unambiguous); Intratex Gas
Co. v. Puckett, 886 S.W.2d 274, 278 (Tex. App.—El Paso 1994, no writ) (considering commercial context of the
transaction). By expressly incorporating them, the Court cannot find that the subcontract is unambiguous on its face
such that the standards expressly incorporated would have to be excluded.

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that it is entitled to judgment as a matter of law.

The terms of the Subcontract

Agreement, alone, do not pretermit D2’s claims.
This is not to say that the Court has found that the removal of excess dirt was
necessarily outside the scope of the contract. The motion, as written, does not require
such a finding and it would be improper on this summary judgment. The Court simply
accepts Thompson Thrift’s concession of this fact issue for purposes of its motion. In the
event D2 offers admissible evidence to support its allegations, the subcontract’s scope
will be a fact question for the jury to decide.
Because Thompson Thrift conceded the truth of D2’s allegations, the Court did
not consider the Affidavits of Skip Sandell or Rebecca Wahl. The objections to those
Affidavits are OVERRULED AS MOOT.
CONCLUSION
For the reasons set out above, the Court GRANTS the motions for leave (D.E. 34
and 37), OVERRULES AS MOOT the objections to D2’s evidence, and DENIES the
motion for summary judgment (D.E. 21) because Thompson Thrift has failed to
demonstrate that the terms of the Subcontract Agreement apply to the accumulation of
excess soil and its haul-off.
ORDERED this 26th day of September, 2017.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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