Fifth Circuit Upholds Use of Contractual Interim Orders and Progress Payments to Preclude Contractors from Obtaining Further Payment for Extra Work
Addicks Servs., Inc. v. GGP-Bridgeland, LP, 2010 WL 4250054 (5th Cir. Feb. 8, 2010)
This case shows the effectiveness that explicit waivers and progress payments can have on precluding contractors from obtaining further pay for alleged extra work. A contractor sought damages for extra work and delay costs incurred in performing excavation and grading work for a developer. The Fifth Circuit, applying Texas law, granted summary judgment in favor of a developer because the interim waivers and accompanying progress payments unambiguously released any outstanding claims for payment of extra work performed before the date of each interim waiver.
Addicks Services, Inc. (“Addicks”) contracted with GGP-Bridgeland, LP (“GGP”) to perform excavation and grading work for $4, 582,721.79 to be paid in part in monthly progress payments. The contract stipulated that Addicks submit a written application for a progress payment with details of the work completed thus far accompanied by an executed lien waiver (“Interim Waiver”) that would relieve Addicks’s mechanic’s and materialman’s lien on the project as of the date on the Interim Waiver.
During the course of completing the project, Addicks submitted several change orders, per the contract, to account for necessary additional work and changes to the contract price. Addicks asserted that GGP would not allow it to include additional work on the payment applications unless such additional work was reduced to a change order. GGP only approved a few of these change orders. While many of these change orders were pending, Addicks submitted applications for progress payments and executed the Interim Waivers, which for the most part included a corresponding payment amount to the application. Although the Interim Waivers provided a blank space for Addicks to except from release any claims, Addicks never listed any claims for extra work in this space.
After the project was certified complete, Addicks filed a claim for amounts owed from GGP for extra work. GGP was granted summary judgment on claims for work performed prior to the last Interim Waiver. Addicks made three arguments why the Interim Waivers should not be enforced to bar payment of its claims: 1) ambiguity, 2) waiver, and 3) estoppel.
First, Addicks argued that the Interim Waivers were ambiguous; thus, it could introduce the parties’ course of performance that GGP would not allow Addicks to include claims for additional work on the payment applications. The Fifth Circuit held that the Interim Waiver unambiguously released all of Addicks claims for additional work up to the date of the last Interim Waiver, especially in light of the following language including extra work: “[Addicks] specifically waives, quitclaims, and releases any claim for damages due to delay, hindrance, interference, acceleration, inefficiencies or extra work or any other claim of any kind.” The court distinguished these facts from two other cases. In Green International, Inc. v. Solis, a dispute arose between a contractor and subcontractor regarding compensation for extra work. That waiver, however, did not include language regarding extra work, and the contractor approved change orders for extra work after the dates of the waiver rather than before the waiver’s execution. In Gilbane Building v. Two Turners Electric Co., the waiver included limiting language that released claims to the extent such monies have been paid. The Interim Waiver executed by Addicks included no such limitation.
Moreover, Addicks argued that the lack of a Final Waiver meant that claims for extra work could not ultimately be resolved. The court also rejected this argument because the Interim Waiver provided blank space to note any additional work Addicks was excepting from the release. Any lack of a Final Waiver did not affect the release of any claims as of the date of each Interim Waiver.
Addicks also argued that Texas Property Code section 53.152 supports its claim that the release only applies to amount paid. The Court dismissed this argument because the statute only provides a minimal obligation on contractors to release liens notwithstanding broader releases that can be contracted for between parties.
Addicks’ ambiguity argument failed because if Addicks wanted to except the extra work performed from being released, it could have done so. The court simply could not turn back the clock and insert exceptions for Addicks where it failed to do so in the blank space provided in the Interim Waiver.
Second, Addicks argued that GGP waived its right to rely on the Interim Waiver when it negotiated with Addicks regarding extra work, issued change orders, and paid some of the claims even though an Interim Waiver had previously been executed. This argument failed because GGP followed each payment for extra work with an Interim Waiver releasing the claim, which was consistent with the contract’s processes.
Third, Addicks argued that promissory estoppel should prevent enforcing the Interim Waivers, relying on an affidavit of its President and voicemail transcripts of a GGP project manager that GGP would resolve the claims for extra work at a later date. However, the court noted that this evidence was too vague and indefinite to prove promissory estoppel. The project manager’s comments only reflected an assurance of an ongoing negotiation process rather than a definite promise to pay for the extra work. Accordingly, the Fifth Circuit affirmed summary judgment in favor of GGP on the claims proceeding the dates of the Interim Waivers.