The Lemoine Company of Alabama, L.L.C. ("Lemoine"), subcontracted with HLH Constructors, Inc. ("HLH"), for HLH to perform plumbing work on a construction project. HLH subsequently sued Lemoine, alleging, among other things, that Lemoine had not paid HLH the balance due under the subcontract. The trial court entered a judgment in HLH's favor, awarding damages, interest, and attorney fees. We reverse and remand.
Facts and Procedural History
Vista Bella, Inc., and Lemoine entered into a contract, by which Lemoine agreed to act as general contractor on a condominium-construction project in Baldwin County ("the project"). Lemoine subcontracted the plumbing work for the project to HLH.
During the course of construction, and pursuant to the terms of the general contract, Vista Bella withheld a 5% retainage
Also during the course of construction, and pursuant to the terms of its subcontract with HLH,
On July 3, 2007, a certificate of completion was issued for the project. On July 12, 2007, Lemoine billed Vista Bella for the retainage that had been withheld during construction. Vista Bella never paid the retainage. It appears that Vista Bella has paid Lemoine all amounts owed under the general contract, except for the retainage. Lemoine sued Vista Bella to recover the unpaid balance. Vista Bella failed to appear, and the trial court entered a default judgment in Lemoine's favor, awarding Lemoine $1,438,066.35 in damages, plus interest and costs. Lemoine states that, as of the date of trial in this case, Lemoine had not collected from Vista Bella any portion of the default judgment.
After the completion of the project, HLH sent Lemoine an application for payment of the balance outstanding under the subcontract.
In April 2008, HLH sued Lemoine and Vista Bella, alleging breach of contract and stating claims for "work and labor done and materials provided, open account, stated account, and under [§] 8-29-1, [Ala. Code 1975]." HLH's brief, at 9. HLH also sought to enforce a materialman's lien against Vista Bella.
Lemoine denied HLH's allegations and moved the trial court to "transfer HLH's materialman's lien against Vista Bella to a bond in the amount of $117,827.62 pursuant to [Ala.Code 1975,] § 35-11-233(b).... The trial court granted the motion." Lemoine's brief, at 2-3.
On appeal, Lemoine raises three issues: (1) whether Vista Bella's payment to Lemoine of the balance owed under the general contract was a condition precedent to Lemoine's obligation to pay HLH the balance owed under the subcontract; (2) whether the trial court erred in determining that the unpaid balance due from Lemoine to HLH under the subcontract was $90,102.95; and (3) whether the trial court erred in awarding HLH attorney fees and 12% interest pursuant to § 8-29-1 et seq., Ala.Code 1975.
Standard of Review
Espinoza v. Rudolph, 46 So.3d 403, 412 (Ala.2010).
Lemoine first argues that, "[p]ursuant to paragraph 5 of the subcontract, Vista Bella's payment to Lemoine of the unpaid balance due under the general contract was a condition precedent[
Although conditions precedent are not favored in contract law,
Lemoine argues that the language of paragraph 5 of the subcontract clearly indicates that HLH assumed the risk of nonpayment by Vista Bella and that,
Paragraph 5 provides, in pertinent part:
"`"When a court construes a contract, `the clear and plain meaning of the terms of the contract are to be given effect, and the parties are presumed to have intended what the terms clearly state.'"'" State v. Lorillard Tobacco Co., 1 So.3d 1, 7 (Ala.2008) (quoting H & S Homes, L.L.C. v. Shaner, 940 So.2d 981, 988 (Ala.2006), quoting in turn Polaris Sales, Inc. v. Heritage Imports, Inc., 879 So.2d 1129, 1133 (Ala.2003), quoting in turn Strickland v. Rahaim, 549 So.2d 58, 60 (Ala.1989)). HLH does not contest the validity of the subcontract, nor does it argue that the language of paragraph 5 is, standing alone, ambiguous. Moreover, Harrell Lloyd Harrellson, the owner of HLH, testified at trial that, although he "ma[de] certain changes or alterations" to the terms of the proposed subcontract with Lemoine before it was executed, he made no changes to the language of paragraph 5, and he raised no concerns at that time regarding the assignment of the risk of nonpayment from Lemoine to HLH. Thus, "`the circumstances [surrounding the execution of the subcontract] indicate that [HLH] has assumed the risk.'" Kruger, 829 So.2d at 739 (quoting Restatement (Second) Contracts § 227).
The facts of this case indicate that Lemoine and HLH "knowingly, clearly, and unequivocally enter[ed] into [the subcontract] whereby they agree[d] that the respective liability of the parties [would] be determined by some type of agreed-upon formula," Holcim, 38 So.3d at 729, namely, the condition precedent of paragraph 5; therefore, "Alabama law will permit the enforcement of [the subcontract] as written," id., and Vista Bella's payment to Lemoine under the general contract is an enforceable condition precedent to HLH's right to payment under the subcontract.
HLH argues that "[t]he subcontract here does not clearly indicate that HLH intended to shift the risk of loss from Lemoine to itself." HLH's brief, at 21. More specifically, HLH argues that the condition precedent in paragraph 5 conflicts with the "pay-when-paid" clause of paragraph 4 of the subcontract and that "the conflict should be resolved in favor of the prior clause." HLH's brief, at 22. Paragraph 4 provides, in pertinent part, that "a final payment, consisting of the unpaid balance of the Price, shall be made within 45 days after the last of the following to occur: (a) ...; (b) ...; (c) Final payment by [Vista Bella] to [Lemoine] under the Contract on account of the Work."
This Court has stated:
However, this Court's analysis in Kruger of the effect of a pay-when-paid clause does not apply in this case. In Kruger, the general contractor and its surety relied solely on the pay-when-paid clause in arguing that payment by the owner was a condition precedent to payment to Kruger under a subcontract. This Court rejected that argument, stating:
Kruger, 829 So.2d at 739 (emphasis added).
Here, however, the subcontract includes both a pay-when-paid clause, setting forth the timing of payment, and a pay-if-paid clause, setting forth the conditions under which HLH's right to payment arises. Unlike the pay-when-paid clause in Kruger, the pay-if-paid clause in this case expressly indicates that HLH's right to payment under the subcontract depends on Vista Bella's payment under the general contract. Indeed, here, HLH has "expressly assume[d] the risk of nonpayment by [Vista Bella]." Therefore, Kruger is distinguishable, and its analysis is inapposite in this case.
Moreover, this Court has held
Locke v. Ozark City Bd. of Educ., 910 So.2d 1247, 1251 (Ala.2005) (quoting H.R.H. Metals, Inc. v. Miller, 833 So.2d 18, 24 (Ala.2002), quoting in turn Loerch v. National Bank of Commerce of Birmingham, 624 So.2d 552, 553 (Ala.1993)).
Here, the plain and unambiguous language of paragraph 5 provides that, "[n]otwithstanding anything else in this Subcontract or the Contract Documents, the obligation of [Lemoine] to make any payment under this Subcontract ... is subject to the express and absolute condition precedent of payment by [Vista Bella]." Nothing in the subcontract contradicts the provisions of paragraph 5 or indicates that the parties intended to assign the risk of nonpayment in a manner different from that set forth in paragraph 5. Therefore, pursuant to the express terms of the subcontract, the timing mechanism of paragraph 4 is subject to the condition precedent of paragraph 5, and the two paragraphs are not in conflict.
Having determined that the condition precedent in paragraph 5 is enforceable, we now consider whether that condition has been satisfied. As noted previously, HLH does not dispute that Lemoine has paid all it owes HLH under the subcontract, "except the final retainage payment and payment for the disputed extra work." Lemoine's brief, at
However, any amount that Lemoine had been paid "for HLH's work above the cost of HLH's subcontract" is irrelevant to the question whether the condition precedent in paragraph 5 has been satisfied with regard to the retainage. The record indicates that, throughout the construction of the project, Vista Bella withheld a 5% retainage on the work performed under the general contract. That retainage included amounts Vista Bella owed Lemoine for plumbing work performed on the project, including the work done by HLH under the subcontract. The record also indicates that, during the course of construction, Lemoine withheld a 5% retainage with respect to the work performed by HLH under the subcontract. Thus, the retainage withheld under the terms of the subcontract appears to be part of the retainage withheld under the terms of the general contract.
It is undisputed that Vista Bella never paid Lemoine the retainage due under the general contract. Paragraph 5 of the subcontract provides that Lemoine "ha[s] no obligation to pay for any work done on this Project, until [it] has received payment for such work from [Vista Bella]." (Emphasis added.) Because Lemoine has not been paid the retainage under the general contract, the condition precedent in paragraph 5 has not been satisfied, and HLH is not entitled to final payment under the subcontract. Therefore, Lemoine has not breached the subcontract, and the trial court erred in awarding HLH damages on HLH's breach-of-contract claim.
Finally, HLH suggests, citing no authority, that it can recover based on a theory of quantum meruit, because "Lemoine... got the benefit of HLH's work and labor done and materials provided." HLH's brief, at 23. However, the acceptance of this argument would, as Lemoine argues, "render paragraph 5 of the subcontract meaningless." Lemoine's reply brief, at 5. Further, the argument is contrary to the well established principle that, "`[w]hen an express contract exists, an argument based on a quantum meruit recovery in regard to an implied contract fails.'" Mantiply v. Mantiply, 951 So.2d 638, 656 (Ala.2006) (quoting Brannan & Guy, P.C. v. City of Montgomery, 828 So.2d 914, 921 (Ala.2002)).
For these reasons, the trial court's judgment is reversed and the case is remanded for the entry of a judgment in favor of
REVERSED AND REMANDED.
COBB, C.J., and SMITH, PARKER, and SHAW, JJ., concur.
Section 8-29-6 provides, in pertinent part:
"`[W]hen a trial court enters a judgment in a case and does not make specific findings of fact, we must assume that the trial court found the facts necessary to support its judgment, unless the findings would be clearly erroneous and against the great weight of the evidence.'" Ex parte Gilley, 55 So.3d 242, 245 (Ala.2010) (quoting Lakeview Townhomes v. Hunter, 567 So.2d 1287, 1289 (Ala.1990)). To award interest and attorney fees pursuant to § 8-29-6, the trial court must have concluded that Lemoine did not make payment "in accordance with the payment terms agreed to by the contractor and subcontractor," which, in this case, would be the terms of the subcontract. Therefore, we will assume the trial court's award was based upon HLH's breach-of-contract claim.