Court Opinion

ID: 2875792
Source: CourtListenerOpinion
Date Created: 2015-09-06 06:38:51.903297+00
Date Added: 2024-06-11T11:35:35.423581
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                         NO. 03-08-00677-CV

        Mestizo Enterprises, Inc.; Gelacio Meraz; and Wil Construction, Appellants

                                                  v.

                       Safeco Insurance Company of America, Appellee

    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
    NO. D-1-GN-08-003651, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING

                            MEMORANDUM OPINION

               Mestizo    Enterprises,    Inc.   (“Mestizo”),   Gelacio   Meraz    (“Meraz”),    and

Wil Construction (“Wil”) (collectively, “Appellants”) appeal the trial court’s judgment granting the

no-evidence and traditional motion for summary judgment filed by Safeco Insurance Company of

America (“Safeco”) for failure to comply with the notice requirements of Chapter 2253 of the

Texas Government Code, also known as the McGregor Act.                See Tex. Gov’t Code Ann.

§§ 2253.001-079 (West 2008). On appeal, Appellants argue that Safeco waived its rights to require

compliance with the notice provisions of the Act. Because we hold that a genuine issue of material

fact exists with regard to whether Safeco waived its rights to insist upon compliance with the notice

requirements of the McGregor Act, we reverse the trial court’s judgment.

                                          BACKGROUND

               K-Bar Services, Inc. (“K-Bar”) contracted with the Texas Department of

Transportation to complete a road construction project in Travis County. K-Bar subcontracted the
project to Blue River Construction (“Blue River”), which in turn subcontracted the majority of the

project to Appellants.      Appellants worked on the project from June 26, 2005 through

November 3, 2005, at which point construction was halted following the discharge of K-Bar as the

prime contractor.

               As prime contractor on a public work project, K-Bar had obtained a statutorily

required payment bond from Safeco. See Tex. Gov’t Code Ann. § 2253.021. The purpose of

requiring such a bond is to protect subcontractors and suppliers, who may not place a lien on a public

building. Ramex Constr. Co. v. Tamcon Servs., Inc., 29 S.W.3d 135, 139 (Tex. App.—Houston

[14th Dist.] 2000, no pet.). On October 31, 2005, K-Bar was terminated as prime contractor for the

project, and Safeco took over as prime contractor. In November 2005, Wilberto Montiel, owner of

Wil, attempted to place a claim on the payment bond, asserting nonpayment of $101,560.60 for work

done between June and November 2005. According to Montiel, he was acting as agent for the other

Appellants, Mestizo and Meraz, when he attempted to place the claim. Montiel sent a claim letter

to Safeco on November 2, 2005. In a sworn affidavit, Montiel stated that at some point in mid-

November he also handed a copy of the claim to James Kalisek, K-Bar’s general manager, at the

construction site. Kalisek denies receiving the claim at that time, asserting instead that K-Bar did

not receive notice of the claim until January 2006.

               After receiving Montiel’s claim, Safeco claims representative Jeremy Medeiros

responded with two letters. The first, dated November 14, 2005, acknowledged receipt of the claim

materials sent by Montiel. The second, dated December 13, 2005, again acknowledged receipt of

Montiel’s letter and also requested additional materials to “facilitate our independent investigation

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of the claim.” Each letter also contained language reserving Safeco’s rights to insist upon

compliance with notice requirements mandated by Texas law, although subsequent e-mail

correspondence sent by Safeco to Montiel lacked similar language. In December 2005, Safeco and

Wil entered into negotiations for a completion agreement, under which Wil would complete the

construction project as prime contractor. One of the terms of the completion agreement was the

settlement of Wil’s claim on the payment bond for the total of $80,000. The parties negotiated

extensively over the draft completion agreement, but, according to Montiel, Safeco raised the amount

of the statutorily required payment bond from $200,000 to $320,000 on the eve of signing. See

Tex. Gov’t Code Ann. § 2253.021. Montiel was unwilling to comply with the increase in the

amount of the bond, and the agreement went unsigned.

               After termination of negotiations for the completion agreement, Safeco rejected Wil’s

claim on the payment bond for failure to comply with the statutory notice requirements of the

McGregor Act. Specifically, Safeco contended that Appellants failed to provide timely notice to the

surety and the prime contractor,1 failed to provide additional notice to the prime contractor,2 and

       1
          Under the McGregor Act, notice of claim on a payment bond must be mailed to the prime
contractor and surety “on or before the 15th day of the third month after each month in which any
of the claimed labor was performed or any of the claimed material was delivered.” Tex. Govt. Code
Ann. § 2253.041(b) (West 2008). Safeco asserts that Appellants, who worked on the project from
June 26, 2005 to November 3, 2005, did not send notice to K-Bar, the prime contractor, until
January 2006, and to Safeco, the Surety, until November 2, 2005. Appellants concede that they did
not provide notice to Safeco until November 2, 2005, but contend that Montiel hand-delivered notice
to Kalisek, K-Bar’s general manager, in mid-November of 2005. Appellants also contend that, at
the time they provided notice to Safeco, Safeco was serving as the prime contractor on the project.
Consequently, Appellants argue that their notice to Safeco operated as notice to both the surety and
the prime contractor.
       2
           Under the McGregor Act, a payment bond beneficiary without a direct contractual
relationship with the prime contractor must “mail to the prime contractor written notice of claim for
any unpaid public work labor performed . . . on or before the 15th day of the second month after each

                                                 3
failed to send notice by certified or registered mail.3 After Safeco refused to pay the claim,

Appellants filed suit against Safeco and others for amounts allegedly owed under the contract. The

district court granted Safeco’s motion for no-evidence and traditional summary judgment. The

action against Safeco was severed, and this appeal followed.

                                   STANDARD OF REVIEW

               Because the propriety of a summary judgment is a question of law, we review the

trial court’s decision de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).

To be entitled to summary judgment, the movant must establish that no genuine issue of material fact

exists and that the movant is entitled to judgment as a matter of law. Tex. R. Civ. P. 166(c). In our

de novo review of a summary judgment, “we indulge every reasonable inference and resolve

any doubts in the nonmovant’s favor.” Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215

(Tex. 2002).

                                          DISCUSSION

               In their first issue on appeal, Appellants argue that a genuine issue of material fact

exists with regard to whether Safeco waived its right to assert the defense of improper notice under

month in which the labor was performed.” Id. § 2253.047(c). Again, Safeco asserts that Appellants,
who worked on the project from June 26, 2005 to November 3, 2005, did not send notice to K-Bar,
the prime contractor, until January 2006. Appellants contend that Montiel hand-delivered notice to
Kalisek, K-Bar’s general manager, in mid-November of 2005, and that their November 2, 2005
notice to Safeco operated as notice to both the surety and the prime contractor.
       3
           Any notice required by the McGregor Act “to be mailed must be sent by certified or
registered mail.” Id. § 2253.048. Safeco asserts that Appellants did not send any notice by certified
or registered mail. Appellants concede that they did not provide notice by certified or registered
mail, but argue that their “substantial compliance” with the delivery requirements, including sending
notice to Safeco by regular mail and hand-delivering notice to K-Bar, cures any defect.

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the McGregor Act.4 Texas courts have consistently held that, “[b]ecause the Act is remedial in

nature, ‘it is to be given the most comprehensive and liberal construction possible.’” Redland Ins.

Co. v. Southwest Stainless, L.P., 181 S.W.3d 509, 512 (Tex. App.—Fort Worth 2005, no pet.)

(quoting Featherlite Bldg. Prods. Corp. v. Constructors Unlimited, Inc., 714 S.W.2d 68, 69

(Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.)); see also Dealers Elec. Supply Co. v.

Scoggins Constr. Co., 52 Tex. Sup. J. 1088, 2009 Tex. LEXIS 475, at *6 (Tex. July 3, 2009) (“It is

        4
          Appellants’ original brief contains two numbered issues, the first stating that Safeco waived
its rights under the McGregor Act, and the second stating that Appellants’ arguments “raise, at a
minimum, a fact issue, which is sufficient to prevent summary judgment against them.” For
two reasons, we address only the first issue.

        First, though the second issue is structured as a “general” point of error raising all arguments
made in the trial court during summary judgment proceedings, see Malooly Bros., Inc. v. Napier,
461 S.W.2d 119, 121 (Tex. 1970), Appellants’ briefing of this issue concerns only their waiver
defense. When appellants present a general point of error but do not brief specific grounds raised
during summary judgment proceedings, appellate courts have discretion to choose whether to address
grounds raised in the trial court but not specifically argued on appeal. See Stevens v. State Farm
Fire & Casualty Co., 929 S.W.2d 665, 670 (Tex. App.—Texarkana 1996, writ denied) (asserting
appellate court’s “discretion to refuse to consider [appellant’s] unargued bases for reversing the
judgment” even when appellant presents general point of error). Consequently, as Appellants do not
address arguments other than waiver in their original brief, we need not consider any additional
issues raised before the trial court.

        Second, our ruling for Appellants on the issue of waiver reverses the summary judgment
order in its entirety, obviating the need to reach additional issues raised by Appellants. While Texas
appellate courts may in some instances limit the issues on remand, “‘the cases are rare and very
exceptional in which [courts are] warranted in limiting the issues of fact.’” Hudson v. Wakefield,
711 S.W.2d 628, 631 (Tex. 1986) (quoting Cole v. Estell, 6 S.W. 175, 177 (Tex. 1887)). Limited
remands from summary judgment appeals are particularly uncommon, due to the limited nature of
the appeal itself: the trial record is not fully developed, parties may change theories during trial, and
appellate courts must evaluate facts in the light most favorable to nonmovant. See id. Accordingly,
as we reverse the order in its entirety and without additional instruction, we need not reach other
arguments supporting Appellants’ position. See Rodriguez v. Classical Custom Homes, Inc.,
176 S.W.3d 928, 933 (Tex. App.—Dallas 2005, no pet.) (reversing summary judgment order in
breach of contract case on basis of waiver and consequently finding it “unnecessary to address the
remainder of [appellants’] issues on appeal”).

                                                   5
well-recognized that the McGregor Act is remedial in nature, and should be liberally construed to

achieve its purposes.”)

               The purpose of the Act is to provide protection to subcontractors and suppliers, who

cannot place liens on public buildings. Ramex, 29 S.W.3d at 139 (“Because a subcontractor or

supplier may not place a lien against a public building, the legislature passed what has become

known as the McGregor Act, which requires contractors to secure a bond to ensure payment.”).

Accordingly, courts have held that the notice requirements should be read “to provide a simple and

direct method of giving notice and perfecting claims.” Argee Corp. v. Solis, 932 S.W.2d 39, 53

(Tex. App.—Beaumont 1995), rev’d on other grounds, 951 S.W.2d 384 (Tex. 1997) (“We do not

perceive the legislative purpose behind the McGregor Act to be that of creating technical tricks, traps

and stumbling blocks to the filing of legitimate notices of claims.”).

               While the McGregor Act imposes certain notice requirements on the claimant, Texas

courts have long recognized that such requirements may be waived. See Miner-Dederick Constr.

Corp. v. Mid-County Rental Serv., Inc., 603 S.W.2d 193, 199-200 (Tex. 1980) (holding that notice

requirements of McGregor Act may be waived); see also Graham v. San Antonio Mach. & Supply

Corp., 418 S.W.2d 303, 310-11 (Tex. Civ. App.—San Antonio 1967, writ ref’d n.r.e.) (holding that

timely notice requirement of McGregor Act, like other notice requirements of Act, may be waived).

Under Texas law, “[w]aiver is defined as an intentional relinquishment of a known right or

intentional conduct inconsistent with claiming it.” Enserch Corp. v. Rebich, 925 S.W.2d 75, 82

(Tex. App.—Tyler 1995, writ dism’d) (citing Massachusetts Bonding & Ins. Co. v. Orkin

Exterminating Co., 416 S.W.2d 396, 401 (Tex. 1967)). “The key element . . . in establishing waiver

                                                  6
is . . . the intent of the alleged waiving party.” Id. In the absence of direct evidence of intentional

waiver, waiver by implication may be inferred from the party’s intentional conduct. Id. However,

“waiver by implication should not be inferred contrary to the intention of the party whose rights

would be injuriously affected thereby, unless the opposite party has been misled to his or her

prejudice.” Cecil Pond Const. Co. v. Ed Bell Invs., Inc., 864 S.W.2d 211, 215 (Tex. App.—Tyler

1993, no writ).

                  As a general matter, “the ground most frequently relied upon by the [waiver] cases

[is] that the notifier has been lulled into a sense of security concerning the sufficiency of his

notification and was thus led into failure to give another notification within the time prescribed by

the statute.” United Benefit Fire Ins. Co. v. Metropolitan Plumbing Co., 363 S.W.2d 843, 848

(Tex. Civ. App.—El Paso 1962, no writ). For the purposes of the McGregor Act, waiver occurs

when “the surety after receiving a defective or improper notice has by its own affirmative acts and

conduct created an impression that the notice given is adequate.” Tex-Craft Builders, Inc. v. Allied

Constr., 465 S.W.2d 786, 793 (Tex. Civ. App.—Tyler 1971, writ ref’d n.r.e.).

                  Such an impression may be created when “the surety makes some response to the

defective notification.” Id.; see also United Benefit, 363 S.W.2d at 848 (“Acts most frequently held

to constitute such grounds have arisen in cases where, in addition to the failure to object, there

is—on the part of the noticee—a promise to act, or action, in response to the defective

notification.”). For example, a surety may waive its rights to notice when it leads the claimant “to

believe its claim was approved by [the surety] and would be paid.” General Ins. Co. v. Smith

& Wardroup, Inc., 388 S.W.2d 262, 264 (Tex. Civ. App.—Amarillo 1965, writ ref’d n.r.e.); see also

                                                  7
Texarkana Constr. Co. v. Alpine Constr. Specialities, Inc., 489 S.W.2d 941, 944 (Tex. Civ.

App.—Texarkana 1972, writ ref’d n.r.e.) (holding that surety’s promise to pay claim and request of

claim documentation constituted waiver of McGregor Act notice requirements). Settlement

negotiations may also serve as evidence for the defense of waiver. See Graham, 418 S.W.2d at 311

(explaining that “extensive negotiations entered into by the obligor looking toward settlement of a

claim is admissible and can support a finding of waiver of the right to object to a failure to give

notice of claim within the time required”).

               Acts of the surety indicating the intention to preserve legal rights, on the other hand,

undermine the defense of waiver. One way in which parties may reserve their rights is in writing.

See Consolidated Eng’g Co. v. Southern Steel Co., 699 S.W.2d 188, 191 (Tex. 1985) (holding

waiver defense was invalid in breach of contract case when “written correspondence between the

parties reveals that, despite their mutual endeavor to continue performance, they intended to preserve

all of their legal rights”); Bluebonnet Sav. Bank F.S.B. v. Grayridge Apartment Homes, 907 S.W.2d
904, 911 (Tex. App.—Houston [1st Dist.] 1995, writ denied) (explaining that bank’s repeated

assertions that “‘passing’ the various foreclosure sales was not a waiver of any debt or of any future

right to foreclose” defeated waiver defense). Further, while a “party’s silence or inaction for a

period of time long enough to show an intention to relinquish the known right . . . may be sufficient

to prove a waiver,” Horton v. DaimlerChrysler Fin. Servs. Ams., LLC, 262 S.W.3d 1, 6

(Tex. App.—Texarkana 2008, no pet.), “the fact that a surety remains passive or silent after learning

of . . . an act or omission on the part of the obligee does not constitute such acquiescence or consent

as to preclude the surety from asserting” its legal rights. United Benefit, 363 S.W.2d at 848.

                                                  8
               Appellants maintain that Safeco took actions inconsistent with a reservation of rights

and therefore waived the enforcement of those rights. They argue that Safeco, in responding to the

claim materials and requesting additional documents, indicated that the claim was valid and

actionable. They also assert that the settlement negotiations between the parties indicated that

Safeco found the claim valid. According to Appellants, Safeco’s actions during completion

negotiations, which included sending Montiel a receipt for the agreed-upon settlement amount of

$80,000, constitute behavior inconsistent with enforcing notice rights.

               Safeco responds that the letters it sent in response to Montiel’s claim materials

included language that specifically indicated that it was reserving its right to enforce the notice

provisions of the McGregor Act. In the first response from Safeco, Medeiros wrote, “This

acknowledgment is not to be deemed a waiver of any of the terms or conditions of the bond or the

statutes and laws pertaining thereto. We specifically reserve any and all rights and defenses that we

may have under the terms of our bond or under the law.” In the second letter, Medeiros wrote:

       This correspondence and all prior or subsequent communications and/or investigative
       efforts are made with the express reservation of all rights and defenses that Safeco
       Insurance Company of America or K-Bar Services, Inc. has or may have at law, in
       equity, or under the terms and provisions of the bond and contract documents. This
       reservation includes, without limitation, defenses that may be available under any
       applicable notice and suit limitation provisions.

Safeco asserts that these reservations of rights defeat a waiver defense, even though such reservations

were absent from subsequent correspondence between the parties (including e-mails sent by Safeco

to Montiel during completion negotiations).

                                                  9
               Further, Safeco argues that settlement of the claim was discussed only in the context

of the completion agreement and should have been understood as conditional upon the successful

negotiation of the completion agreement. Safeco maintains that its negotiation of the claim as part

of the completion agreement does not support the inference that it waived notice of the claim, despite

the fact that the settlement negotiations included investigation of the claim by Safeco, discussion of

the details of the claim with Montiel, and calculation of the proper settlement amount for

services rendered.

               Based on the record before us, we cannot conclude as a matter of law that Safeco did

not waive its rights to insist on compliance with the notice requirements of the McGregor Act. The

question of waiver by inference is necessarily fact-bound, and “the question of waiver is one of fact

for the trier of fact when it is a matter of inference.” Robinson v. Robinson, 961 S.W.2d 292, 300

(Tex. App.—Houston [1st Dist.] 1997, no writ) (citing Ford v. Culbertson, 308 S.W.2d 855, 865

(Tex. 1958)). Here, as in Ford, “the facts set out above would permit reasonable minds to differ as

to the inferences to be drawn from such facts,” and consequently summary judgment is

inappropriate.5 308 S.W.2d at 865. In particular, the facts showing that Safeco responded to the

submitted claim material, investigated the claim, negotiated the claim, and sent Montiel a receipt for

payment on the claim may lead to an inference that Safeco waived enforcement of the notice

       5
          Texas courts have held that “while waiver is normally considered a question of fact, it may
become a question of law if the facts and circumstances are clearly established.” Ostrowski
v. Ivanhoe Prop. Owners Improvement Ass’n, 38 S.W.3d 248, 255 (Tex. App.—Texarkana 2001,
pet. denied). Here, however, disagreements between the parties, particularly regarding differences
in the understanding of the “conditional” context of the settlement/completion negotiations, preclude
such an approach.

                                                 10
requirements, even in light of the language reserving rights in Safeco’s letters and the fact that the

settlement discussions took place as part of negotiations for a completion agreement. These are

issues for the finder of fact to resolve.

                                            CONCLUSION

                Because we have determined that the trial court erred in granting Safeco’s motion for

no-evidence and traditional summary judgment, the trial court’s judgment is reversed and the case

is remanded for further proceedings.

                                               __________________________________________

                                               Diane M. Henson, Justice

Before Chief Justice Jones, Justices Puryear and Henson

Reversed and Remanded

Filed: November 13, 2009

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