Solar Applications Eng'g, Inc. v. T.A. Operating Corp. - 327 S.W.3d 104 (Tex. 2010)

Rule:

Absent clear language that a lien release is a condition precedent to a general contractor performing under the contract and receiving the contract balance owed to it, a lien-release provision is a covenant. Parties are free to contract as they choose, and a party should not be denied the benefit it specifically bargained for in the lien-release provision.

Facts:

Solar Applications Engineering, Inc. d/b/a Wade Construction (Solar), the general contractor, and T.A. Operating Corporation d/b/a TravelCenters of America (TA), the owner, entered a contract to build a truck stop in San Antonio, Texas. After Solar substantially completed the project, disputes arose regarding the completion of certain remaining work and the attachment of liens on the property by subcontractors and Solar. TA eventually terminated the contract and refused to make final payment to Solar. Solar sued TA for breach of contract to recover the contract balance, and TA counterclaimed for delay and defective work. At trial, the court's jury charge focused primarily on damages. The verdict substantially favored Solar, with the jury awarding actual damages of $ 400,000 offset by $ 8,000 in defects and omissions. On appeal, TA argued that because Solar did not provide a lien-release affidavit, which TA argued was a condition precedent to final payment under the contract, Solar cannot recover for breach of contract. On rehearing, the court of appeals reversed the trial court's judgment, holding that the lien release provision was a condition precedent and that Solar failed to prove it complied with the lien-release provision. It rendered a take-nothing judgment in favor of TA.

Issue:

Was the lien-release provision a condition precedent to Solar’s recovery for breach of contract? 

Answer:

No.

Conclusion:

The court held that the lien-release provision was a covenant, not a condition precedent to Solar's recovery on the contract; as such, the failure to provide a lien-release affidavit as contemplated by Tex. Prop. Code Ann. § 53.085 did not cause Solar to forfeit final payment under the contract. Absent clear language that a lien release was a condition precedent to a general contractor performing under the contract and receiving the contract balance owed to it, a lien-release provision was a covenant. The court stated that to hold otherwise would contravene the Legislature's goal of allowing each party to avoid litigation by foreclosing on the lien or withholding the retainage.