ACCEPTED 14-17-01010-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 5/16/2018 4:34 PM CHRISTOPHER PRINE CLERK

No. 14-17-01010-CV

FILED IN 14th COURT OF APPEALS IN THE FOURTEENTH COURT OF APPEALSHOUSTON, TEXAS 5/16/2018 4:34:40 PM CHRISTOPHER A. PRINE Clerk SCHEAR HAMPTON DRYWALL, LLC,

Appellant,

V.

FOUNDERS COMMERCIAL, LTD,

Appellee.

On Appeal from the 61st Judicial District Court Harris County, Texas Cause No. 2015-22140

BRIEF OF APPELLANT

Jeffrey S. Lowenstein Texas Bar No. 24007574 [email protected] Bell Nunnally & Martin LLP 3232 McKinney Avenue, Suite 1400 Dallas, Texas 75204-2429 Telephone: (214) 740-1400 Telecopy: (214) 740-1499 COUNSEL FOR APPELLANT CERTIFICATE OF PARTIES The following is a complete list of all parties to the trial court’s judgment and the names and addresses of all trial and appellate counsel.

APPELLANT SCHEAR HAMPTON DRYWALL, LLC

Represented at trial by: Represented in this appeal by:

Carl W. Thompson Jeffrey S. Lowenstein The Law Office of Carl Thompson, PC Bell Nunnally & Martin LLP 2550 Gray Falls, Suite 200 3232 McKinney Avenue, Suite 1400 Houston, Texas 77077 Dallas, Texas 75204-2429

Keith Coulter Coulter, P.C. 3306 Sul Ross Street Houston, Texas 77098

APPELLEE FOUNDERS COMMERCIAL, LTD.

Represented at trial and this appeal by:

J. W. Beverly Ferguson Braswell Fraser Kubasta PC 9 Greenway Plaza, Suite 500 Houston, Texas 77046

BRIEF OF APPELLANT PAGE ii TABLE OF CONTENTS

PAGE

CERTIFICATE OF PARTIES .................................................................................. ii TABLE OF AUTHORITIES .....................................................................................v STATEMENT OF THE CASE .................................................................................. 1 ISSUES PRESENTED...............................................................................................1 STATEMENT OF FACTS ........................................................................................2 PROCEDURAL BACKGROUND ............................................................................ 4 SUMMARY OF ARGUMENT .................................................................................5 STANDARD OF REVIEW .......................................................................................6 ARGUMENT AND AUTHORITIES ........................................................................ 7 I. THE FINAL JUDGMENT FAILED TO FORECLOSE THE LIEN. ............ 7 II. THE EVIDENCE AND LAW DID NOT SUPPORT THE TRIAL COURT REDUCING THE LIEN TO $21,678.32.......................................... 9 A. There was legally and factually insufficient evidence that Schear Hampton was only owed $36,678.32 by CSI........................................ 9 B. Founders could not recover damages from Shear Hampton or an offset of the lien amount as a matter of law. .......................................13 Schear Hampton and Founders were not in privity. ................. 15

Founders was not a third-party beneficiary of the Subcontract................................................................................16

C. There was legally and factually insufficient evidence supporting a $15,000 damages award and/or offset of the lien.............................20 III. THE TRIAL COURT’S DENIAL OF ATTORNEYS’ FEES TO SCHEAR HAMPTON WAS CONTRARY TO LAW AND RELIED ON THE IMPROPER PARTIAL INVALIDATION OF THE LIEN. ......... 21

BRIEF OF APPELLANT PAGE iii PRAYER ..................................................................................................................23 CERTIFICATE OF COMPLIANCE .......................................................................24 CERTIFICATE OF SERVICE.................................................................................25 INDEX TO APPENDIX ..........................................................................................26

BRIEF OF APPELLANT PAGE iv TABLE OF AUTHORITIES

Page(s) Cases B & C Constr. Co. Grain Handling Corp., 521 S.W.2d 98 (Tex.Civ.App.—Amarillo 1975, no writ) ..................................14

Bass v. City of Dallas, 34 S.W.3d 1 (Tex.App.—Amarillo 2000, no pet.) .............................................15

BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789 (Tex. 2002)...................................................................................7 Cain v. Bain, 709 S.W.2d 175 (Tex. 1986) (per curiam) ........................................................... 6

Crawford Services, Inc. v. Skillman Intern. Firm, L.L.C., 444 S.W.3d 265 (Tex. App.—Dallas 2014, pet. dism’d) .....................................8 First Nat’l Bank in Graham v. Sledge, 653 S.W.2d 283 (Tex. 1983) ................................................................................8 Fulgham v. Fischer, 349 S.W.3d 153 (Tex. App.—Dallas 2011, no pet.) ........................................6, 7

Hou–Tex, Inc. v. Landmark Graphics, 26 S.W.3d 103 (Tex.App.—Houston [14th Dist.] 2000, no pet.) ......................15

LAN/STV v. Martin K. Eby Const. Co., Inc., 435 S.W.3d 234 (Tex. 2014) ..............................................................................15

Thomson v. Espey Huston & Associates, Inc., 899 S.W.2d 415 (Tex. App.—Austin 1995, no writ) .............................13, 14, 15

Trans–Gulf Corp. v. Performance Aircraft Servs., Inc., 82 S.W.3d 691 (Tex.App.—Eastland 2002, no pet.) ..........................................15 Zieben v. Platt, 786 S.W.2d 797 (Tex. App.—Houston [14th Dist.] 1990, no writ) ..................... 6

BRIEF OF APPELLANT PAGE v Statutes TEX. PROP. CODE § 53.024 .............................................................................9, 10, 19 TEX. PROP. CODE § 53.153 .......................................................................................16

TEX. PROP. CODE § 53.156 .................................................................................21, 22

TEX. PROP. CODE. § 53.160(b) .................................................................................19 TEX. PROP. CODE ANN. § 53.158 ................................................................................7 Texas Property Code Chapter 53 ...........................................................................5, 7

Other Authorities Corbin on Contracts § 779D, at 46-47 (1951) ........................................................13

BRIEF OF APPELLANT PAGE vi TO THE HONORABLE FOURTEENTH COURT OF APPEALS:

Appellant SCHEAR HAMPTON DRYWALL, LLC (“Schear Hampton”),

plaintiff in the proceedings below, appeals the Final Judgment signed on October 2,

2017 (the “Judgment”), following a bench trial in Cause No. 2015-22140, in the 61st

Judicial District Court of Harris County, Texas. CR 204.1

STATEMENT OF THE CASE This case was filed by Schear Hampton to foreclose a statutory mechanic’s

and materialman’s lien for construction work it performed on property owned by

Appellee FOUNDERS COMMERCIAL, LTD (“Founders”). CR 5. The case was

tried to the bench. CR 204. The trial court signed the Judgment. App. A; CR 206.

The trial court issued Findings of Fact and Conclusions of Law. App. B; CR 212-

14. Schear Hampton appealed. CR 221.

ISSUES PRESENTED 1. Did trial court err in failing to foreclose Schear Hampton’s lien? 2. Did the trial court err in reducing and/or partially invalidating Schear Hampton’s Lien?

1 “CR” refers to the consecutively-numbered pages in the Clerk’s Record. “RR” refers to the Reporter’s Record. The Reporter’s Record consists of thirteen volumes. Volumes 2 through 6 are transcripts of the bench trial. Volumes 7 through 11 are Plaintiff’s trial exhibits. Volumes 12 and 13 are Defendant’s trial exhibits. Each reference to the trial transcript includes the volume number before “RR,” the page number after “RR,” and the lines upon which the referenced material appears after the colon. Thus, a reference to volume two, page three, line four is “2 RR 3:4.” Each reference to a trial exhibit includes the volume number before “RR” and either “PX” (Plaintiff’s Exhibit) or “DX” (Defendant’s Exhibit) after “RR” followed by the exhibit number. Thus, a reference to Plaintiff’s Exhibit 2 in volume 7 is “7 RR PX 2.”

BRIEF OF APPELLANT PAGE 1 3. Did the trial court err in denying Schear Hampton an award of attorneys’ fees?

STATEMENT OF FACTS 1. On January 26, 2012, Founders, as owner, entered into a contract (the

Prime Contract”) with Construction Supervisors, Inc. (“CSI”), as general contractor,

for the construction of a facility in Houston, Harris County, Texas known as The

Abbey at Westminster Plaza (the “Abbey”). CR 209.

2. On or about January 10, 2014, CSI entered into a subcontract (the

“Subcontract”) with Schear Hampton to perform certain work, including the

application of stucco, which was part of CSI’s obligation to Founders pursuant to

the Prime Contract. App. C; CR 209.

3. The stucco work was initially to be performed by Target Masonry

(“Target”), but Target abandoned the project after it had completed less than half of

the work. Schear Hampton was hired to finish Target’s scope of work. 3 RR 106:12-

107:15.

4. The original Subcontract contemplated a turnkey solution from Schear

Hampton for a defined scope of work for a total of $235,000. App. C; 2 RR 67. As

work proceeded, it became apparent that CSI and/or Founders needed to broaden the

scope of Schear Hampton’s work due to CSI’s failure to provide essential equipment

for Schear Hampton’s work and as a result of Target’s shortcomings in its services.

7 RR PX 4-19; 2 RR 94:24-95:13, 96:4-7. Schear Hampton issued change orders and

BRIEF OF APPELLANT PAGE 2 work orders/field change orders for these added services. The approved additional

equipment and services totaled $155,967, bringing the total contract value to

$390,967.00. 7 RR PX 4-19; 2 RR 115:2-5; 11 RR PX 74.9.

5. The main Subcontract document was a standard form. App. C; 3 RR

113:22-25; 7 RR PX 2. The Subcontract was customized for the Schear

Hampton/CSI relationship through the addition of an “Additions to Contract”

addendum which was signed by CSI and Schear Hampton. The “Additions to

Contract” provided, in pertinent part, that:

“4. W.O. [write offs], extras, back charges, etc., only by G.C. [CSI] & subcontractor [Schear Hampton] signed change order. . .

10. No 3rd party contingencies or contracts.

11. This is a complete contract. Those things typed or hand written provisions shall control and be prevailing on all parties if in conflict of this contract.”

App. C (last page); 3 RR 120:24-121:12.

6. Schear Hampton completed all work under the Subcontract, including

“punch list” items outlined by CSI. 2 CSI failed to pay the complete amounts due

under the Subcontract. The balance owed to Schear Hampton by CSI for work on

the Abbey performed by SHD is $152,173.60. 11 RR PX 74.9.

2 The trial court found that Shear Hampton failed to perform some of its work in accordance with its obligations pursuant to the Subcontract and failed to complete certain punch list items in accordance with the provisions of the Subcontract. CR 209-210. The trial court’s finding was not supported by the evidence as demonstrated infra.

BRIEF OF APPELLANT PAGE 3 7. Schear Hampton, however, had no contract with Founders (App. C) and

there was no evidence of a change order authorizing back charges or write offs for

any alleged damage caused by Schear Hampton to the Abbey, which was required

by the addendum to the Subcontract. Id.

8. On or about January 30, 2015, Schear Hampton filed an Amended

Affidavit for Mechanic’s and Materialman’s Lien (the “Lien”) among the real

property records of Harris County, Texas, claiming a lien against the Abbey in the

amount of $152,173.60. CR 210.

PROCEDURAL BACKGROUND Schear Hampton filed Plaintiff’s Original Petition on April 16, 2015. CR 2.

Founders answered and filed counterclaims on May 20, 2015. CR 9, 11. Founders

filed a third party petition against CSI on January 7, 2016. CR 17. A no-answer

default judgment was entered against CSI on March 14, 2016. CR 36. The claims

between Schear Hampton and Founders were presented at a bench trial from August

14 to 22, 2017. See RR volumes 2 through 6. Schear Hampton requested Findings

of Fact and Conclusions of Law on October 12, 2017. CR 207. The trial court

signed the Judgment on October 2, 2017 (CR 204) and Findings of Fact and

Conclusion of Law on October 26, 2017. CR 212. Schear Hampton filed its notice

of appeal on December 27, 2017. CR 221.

BRIEF OF APPELLANT PAGE 4 SUMMARY OF ARGUMENT The Judgment incorrectly addressed the claims in the case as if it involved

cross-claims between two parties to a construction contract. There was no contract

between Schear Hampton and Founders. The sole proper claim between them was

Schear Hampton’s claim for foreclosure of its statutory lien. Chapter 53 of the Texas

Property Code dictates the available remedies under that statute: (1) foreclosure of

the lien, (2) calculation of the amount owed to the subcontractor, (3) calculation of

the amount recoverable against the owner, and (4) an award of equitable and just

attorneys’ fees.

The Judgment failed on all counts. It did not foreclose the lien. It

miscalculated the amount owed to Schear Hampton. It failed to address the amount

recoverable under the lien. And it failed to award equitable and just attorneys’ fees.

Further, the Judgment improperly awarded damages to Founders and partially

voided the lien based on those damages based on contract/negligence claims against

Schear Hampton by Founders, which were unavailable to Founders as a matter of

law.

Schear Hampton is entitled to judgment rendered in its favor foreclosing the

Lien at its full value of $152,173.60. Schear Hampton is also entitled to a renderd

judgment that Founders take nothing by its counterclaim. Remand is required to

BRIEF OF APPELLANT PAGE 5 allow the trial court to properly consider the just and equitable attorneys’ fees to

which Schear Hampton is entitled.

STANDARD OF REVIEW In an appeal from a bench trial, the trial court's findings of fact have the same

weight as a jury verdict and are reviewed under the same legal and factual

sufficiency of the evidence standards used when determining if sufficient evidence

exists to support an answer to a jury question. Fulgham v. Fischer, 349 S.W.3d 153, 157 (Tex. App.—Dallas 2011, no pet.). When the appellate record contains a

reporter's record as it does in this case, findings of fact are not conclusive and are

binding only if supported by the evidence. Id. All evidence is examined and the

finding is set aside only if the evidence is so weak or the finding so against the great

weight and preponderance of the evidence that it is clearly wrong and unjust. Zieben

v. Platt, 786 S.W.2d 797, 799 (Tex. App.—Houston [14th Dist.] 1990, no writ); see

also Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).

When an appellant challenges the legal sufficiency of an adverse finding, it

must demonstrate there is no evidence to support the adverse finding. Id. When

reviewing the record, the court of appeals determines whether any evidence supports

the challenged finding. Id. If more than a scintilla of evidence exists to support the

finding, the legal sufficiency challenge fails. Id.

BRIEF OF APPELLANT PAGE 6 Conclusions of law are reviewed de novo. See BMC Software Belg., N.V. v.

Marchand, 83 S.W.3d 789, 794 (Tex. 2002). This Court is not bound by the trial

court's legal conclusions, but the conclusions of law will be upheld on appeal if the

judgment can be sustained on any legal theory supported by the evidence. Fulgham,

349 S.W.3d at 157-58.

ARGUMENT AND AUTHORITIES

I. THE FINAL JUDGMENT FAILED TO FORECLOSE THE LIEN. There was no privity of contract between Schear Hampton and Founders. CR

10. Schear Hampton’s remedy against Founders for the unpaid amounts on the

Subcontract with CSI, was a suit to foreclose its statutory lien. Founders sole basis

for its claims back against Schear Hampton were claims for breach and negligence.

CR 11-13. As discussed in more detail infra, Founders is not entitled to recover

under either theory as a matter of law. Founders remedies were limited to its claims

against CSI. Founders appropriately sued and obtained a default judgment against

CSI for the alleged construction related deficiencies. CR 25-38.

The issues properly before the trial court were the limited procedures and

remedies available under Chapter 53 of the Texas Property Code.

To enforce a mechanic's lien, the lienholder must file a lawsuit and obtain a

judgment from a court of competent jurisdiction foreclosing its statutory lien. TEX.

PROP. CODE ANN. § 53.158. To prevail on its claim, the lienholder must prove it

BRIEF OF APPELLANT PAGE 7 performed the labor or furnished the materials and the debt is valid. Crawford

Services, Inc. v. Skillman Intern. Firm, L.L.C., 444 S.W.3d 265, 268 (Tex. App.—

Dallas 2014, pet. dism'd). In addition, the statutory lienholder must establish it

substantially complied with the statutory requirements for perfecting a lien. Id.,

citing First Nat'l Bank in Graham v. Sledge, 653 S.W.2d 283, 285–86 (Tex. 1983)

(statutory lienholder's rights “totally dependent on compliance with the statutes

authorizing the lien”). Pursuant to the statutory scheme, the trial court determines

whether the debt is valid and the lien is perfected. Crawford, 444 S.W.3d at 268

(recognizing that issues in foreclosure suit are whether debt and lien are valid).

Once the trial court determines that the lienholder has a valid debt and a

perfected mechanic's lien, it does not have discretion under Section 53.154 to deny

a judgment of foreclosure and order of sale of the property subject to the lien.

Crawford, 444 S.W.3d at 271.

Here the trial court found that the lien was valid and enforceable, but the

Judgment was incorrect as a matter of law because it failed to foreclose the lien. The

Judgment also incorrectly calculated the amount of the lien and assessed damages in

Founders’ favor. Those issues are addressed below. This Court should render

judgment foreclosing the lien.

BRIEF OF APPELLANT PAGE 8 II. THE EVIDENCE AND LAW DID NOT SUPPORT THE TRIAL COURT REDUCING THE LIEN TO $21,678.32.

A. There was legally and factually insufficient evidence that Schear Hampton was only owed $36,678.32 by CSI.

The amount of a lien claimed by a subcontractor may not exceed:

(1) an amount equal to the proportion of the total subcontract price that the sum of the labor performed, materials furnished, materials specially fabricated, reasonable overhead costs incurred, and proportionate profit margin bears to the total subcontract price; minus

(2) the sum of previous payments received by the claimant on the subcontract.

TEX. PROP. CODE §53.024.

The original amount owed under the Subcontract was $235,000. App. C, sec.

10. CSI requested and authorized a series of change orders and work tickets for

work beyond Schear Hampton’s original scope of work. 7 RR PX 4-19. After

applying the change orders and work tickets, the total amount owed under the

Subcontract was $390,967.00. 11 RR PX 74.9. And Schear Hampton presented

evidence that it earned 100% of the contract price. Id.; 3 RR 42:5-48:24, 50:17-25;

70:12-19, 152:2-23; 10 RR PX 68.

The payments received by Schear Hampton totaled $238,793.40. 11 RR PX

74.9. The payments to Schear Hampton were corroborated by substantial evidence.

Schear Hampton’s financial records showed all the payments it received from CSI

and established that the last payment it received was in August 2014. 8 RR PX 21

BRIEF OF APPELLANT PAGE 9 (first 4 entries under “Sales”). John Black, CSI’s president, confirmed CSI stopped

making payments to Schear Hampton in September 2014. 3 RR 142:6-15. Schear

Hampton’s financials showed that the total of the payments received by Schear

Hampton was $241,436.40. 8 RR PX 21

In November 2014, after the date CSI admits it had made its final payment to

Schear Hampton, Schear Hampton submitted a pay application to CSI showing it

had been paid a total of $238,793.40 as of November 2014 and that it was owed a

net of $152,173.60. 11 RR PX 74.9. There was no evidence or testimony that Schear

Hampton’s November 2014 Pay Application was inaccurate. And, because there

were no additional payments made to Schear Hampton, Plaintiff’s Exhibit 74.9

reflects the proper amount of the debt on the lien.

Nonetheless, the trial court found that “The Balance owed to [Shear Hampton]

by CSI for work on the The Abby performed by [Schear Hampton] is $36,678.32.”

CR 212 (¶3). The trial court failed to calculate the amount of the lien in accordance

with the lien statute. TEX. PROP. CODE §53.024. Specifically, the trial court did not

make a finding as to the amount of the Subcontract, how much of the Subcontract

was earned, or the total of payments to Schear Hampton. The trial court made no

finding as to how it calculated $36,678.32 as the amount owed.

The only information in the record where the trial court could have found the

amount it did award was in Defendant’s Exhibit 41 which showed payments to

BRIEF OF APPELLANT PAGE 10 Schear Hampton totaling $330,104.92 by April 15, 2015, resulting in a net owed to

Schear Hampton of $36,678.32. 13 RR DX 41. This was $92,000 more than Schear

Hampton was paid. There is simply no evidence of when, how, or by whom there

was an additional nearly $92,000 paid to Schear Hampton by CSI after November

2014 when Schear Hampton sent its last pay application (11 RR PX 74.9), CSI

admitted it made no payments to Schear Hampton after September 2014. 3 RR

142:6-15. And there was no evidence that Founders made any payments to Schear

Hampton.

Exhibit 41 is dated after Schear Hampton filed its lien and sent written demand

and was clearly created for the litigation by Founders. CR 19. Notably, Founder’s

third party petition against CSI, confirms the impossibility of Exhibit 41’s accuracy.

The following month, on December 15, 2014, Schear Hampton provided notice of debt and an affidavit lien to CSI, The Abbey, and Founders, claiming an unpaid balance of $152,173.60. On January 16, 2015, Schear Hampton filed an Affidavit for Mechanic’s and Materialman’s Lien at Harris County Real Property Record No. 20150020430 claiming $152,173.60. And finally, on March 26, 2015, Schear Hampton sent a written demand for payment of this claimed debt to Founders and to CSI.

CR 19. These judicial admissions were filed 8 months after Schear Hampton filed

the lawsuit. Founders makes no reference to the alleged inaccuracy of the lien

amount or the inaccuracy of the unpaid balance. Further, even in its First Amended

Counterclaim against Schear Hampton, when requesting a reduction of the lien,

Founders makes no mention that there was a miscalculation of the amount claimed

BRIEF OF APPELLANT PAGE 11 in the lien. CR 50-54. There is also no testimony that Schear Hampton was paid

anything after August 2014.

Defendant’s Exhibit 41 was presented through John Black, the President 3 of

CSI. There was no foundation laid for the document or Mr. Black’s personal

knowledge of the information in the document. There was also no evidence of who

prepared the document, the accuracy of any of the information in the document, or

any other indicia to credit the document as accurate. There was certainly no evidence

that Defendant’s Exhibit 41 was prepared or submitted by Schear Hampton. 2 RR

108:18-109:7; 11 RR PX 74.1-74.9. Notably, Defendant’s Exhibit 41 does not have

an electronic signature of Schear Hampton’s owner, Jim Smith, which all other pay

applications submitted by Schear Hampton did have. Also, the details on the second

page of Defendant’s Exhibit 41 do not match the details on any other pay application

that Schear Hampton did prepare. Id.

Therefore, there is no evidence that Schear Hampton was paid $330,104.92.

Alternatively, the great weight of evidence does not support the trial court’s Finding

of Fact that Schear Hampton was only owed $36,678.32. Further, the trial court’s

conclusion of law that the lien was partially invalid as a result of that finding was

not supported by the evidence.

3 John Black is identified as the President of CSI on the Subcontract. 7 RR PX 3

BRIEF OF APPELLANT PAGE 12 B. Founders could not recover damages from Shear Hampton or an offset of the lien amount as a matter of law. In the construction context, a property owner is ordinarily not a third-party

beneficiary of a contract between the general contractor and a subcontractor.

Thomson v. Espey Huston & Associates, Inc., 899 S.W.2d 415, 419–20 (Tex. App.—

Austin 1995, no writ). The relationships between property owners, general

contractors, and subcontractors are well established under generally prevailing

contract principles. Id. A leading treatise on contract law explains:

Such contracts [between a principal building contractor and subcontractors] are made to enable the principal contractor to perform; and their performance by the subcontractor does not in itself discharge the principal contractor's duty to the owner with whom he has contracted. The installation of plumbing fixtures or the construction of cement floors by a subcontractor is not a discharge of the principal contractor's duty to the owner to deliver a finished building containing those items; and if after their installation the undelivered building is destroyed by fire, the principal contractor must replace them for the owner, even though he must pay the subcontractor in full and has no right that the latter shall replace them. It seems, therefore, that the owner has no right against the subcontractor, in the absence of clear words to the contrary. The owner is neither a creditor beneficiary nor a donee beneficiary; the benefit that he receives from performance must be regarded as merely incidental.

See id., citing Arthur L. Corbin, Corbin on Contracts § 779D, at 46–47 (1951).

This general rule is grounded in the respective interests of the property owner,

general contractor, and subcontractors. The contract between the property owner and

the general contractor gives the property owner the right to a finished building.

Subsequent contracts between the general contractor and subcontractors add nothing

BRIEF OF APPELLANT PAGE 13 to this entitlement; the owner is still entitled to the same building, regardless of the

means by which it is constructed. These same subcontracts, however, are vital to the

interests of the general contractor, who has assumed the obligation to deliver a

finished building. In most cases, subcontracts will be necessary to enable the general

contractor to deliver the building and avoid liability for breach of contract. This need,

rather than the interests of the property owner who is entitled to a finished building

both before and after the subcontract, is the primary motivation for subcontracting.

Thomson, 899 S.W.2d at 419.

For their part, subcontractors are selected by the general contractor. Usually,

it is the general contractor who assigns them tasks, negotiates and signs their

contracts, monitors their performance, and pays them on completion. If the

subcontractors' performance falls short of what the owner is entitled to, it is the

general contractor who has to make up the difference. From the subcontractors'

perspective, as well as the general contractor's, subcontracts are intended primarily

to benefit those parties rather than the property owner. Therefore, absent clear

evidence to the contrary, a property owner is not a third-party beneficiary of

a contract between the general contractor and a subcontractor. See id. at 420, citing

B & C Constr. Co. v. Grain Handling Corp., 521 S.W.2d 98, 101 (Tex.Civ.App.—

Amarillo 1975, no writ).

BRIEF OF APPELLANT PAGE 14 The economic loss rule has been applied to deny recovery of purely economic

losses in actions for negligent performance of services. LAN/STV v. Martin K. Eby

Const. Co., Inc., 435 S.W.3d 234 (Tex. 2014). That is, a plaintiff cannot maintain a

tort cause of action against a defendant when its damages are only for economic

losses caused by the failure to perform a contract. Bass v. City of Dallas, 34 S.W.3d 1, 8 (Tex.App.-Amarillo 2000, no pet.). So, “if a contractual duty is negligently

performed, causing only economic loss, only a breach of contract action may be

maintained, and an action in tort for negligence is precluded.” Id. “Economic loss”

has been defined as “ ‘damages for inadequate value, costs of repair and replacement

of the defective product, or consequent loss of profits—without any claim of

personal injury or damage to other property. . .’ ” Id. at 9

(quoting Thomson, 899 S.W.2d at 421). The economic loss rule not only applies to

bar claims against those in a direct contractual relationship but also applies to

preclude tort claims between parties who are not in privity. See id. at 8–9; Trans–

Gulf Corp. v. Performance Aircraft Servs., Inc., 82 S.W.3d 691, 695 (Tex.App.—

Eastland 2002, no pet.); Hou–Tex, Inc. v. Landmark Graphics, 26 S.W.3d 103, 106–

07 (Tex.App.—Houston [14th Dist.] 2000, no pet.).

Schear Hampton and Founders were not in privity.

It is undisputed here that there was no contract between Schear Hampton and

Founders, the owner. CR 50. Because there is no contractual privity between Schear

BRIEF OF APPELLANT PAGE 15 Hampton and Founders as outlined in the discussion above, the sole remedies

between them are limited to the lien statute. 4 Founders’ defenses under that statute

are limited to pursuing CSI (the general/original contractor) to make Founders

whole. TEX. PROP. CODE. § 53.153. The statute does not permit Founders to claim

damages against Schear Hampton. Founders appropriately pursued this remedy in

filing a third party petition against CSI. And, Founders obtained a default judgment

against CSI. CR 25-38.

Founders was not a third-party beneficiary of the Subcontract. The trial court found that:

4. [Shear Hampton] failed to perform some of its work in accordance with its obligations pursuant to the Subcontract and failed to complete certain punchlist items in accordance with the provisions of the Subcontract.

5. [Shear Hampton] failed to exercise ordinary care in the performance of some of its obligations pursuant to the Subcontract, which caused damages to the Abbey.

6. Founders incurred damages in the amount of $15,000.00 as a result of the conduct by [Shear Hampton] SHD set forth in Paragraphs 4 and 5 above.

CR 212-13.

4 The trial court found that Founders damages were a result of Schear Hampton’s failure to perform under the Subcontract (CR 209-210) and Schear Hampton failed to exercise ordinary care in the performance of its obligations under the Subcontract. CR 210. These findings fall squarely within the economic loss rule because they all relate back to Schear Hampton’s performance under the Subcontract.

BRIEF OF APPELLANT PAGE 16 The only agreement signed by Schear Hampton was the Subcontract with CSI.

Nothing in the Subcontract identifies Founders as a third party beneficiary and the

Addendum to the Subcontract expressly prohibits any claim by a non-party to the

agreement. Specifically, the Addendum states that:

“4. W.O. [write offs], extras, back charges, etc., only by G.C. [CSI] & subcontractor [Schear Hampton] signed change order. . .

10. No 3rd party contingencies or contracts.

11. This is a complete contract. Those things typed or hand written provisions shall control and be prevailing on all parties if in conflict of this contract.”

App. C.

The sole claims pled by Founders against Schear Hampton to support the

$15,000 award of damages against Schear Hampton was Negligence and Breach of

Contract. CR 51-52. The trial court awarded $15,000 in damages based on its

findings that Schear Hampton “failed to perform some of its work in accordance

with its obligation pursuant to the Subcontract” and “Schear Hampton failed to

exercise ordinary care in the performance of some of its obligations pursuant to the

Subcontract.” CR 212-13.

Founders had no standing to assert and was not entitled to bring a damages

claim against Schear Hampton for the alleged damages caused by Schear Hampton

to the Abbey. Founders was a stranger to the Subcontract. Further, nothing in the

Subcontract states that Founders is a third party beneficiary to the Subcontract. And

BRIEF OF APPELLANT PAGE 17 the Addendum to the Contract limits the circumstances of when Schear Hampton

will be responsible for a back charge or write off to circumstances when there is a

signed change order authorizing such back charge or write off. Additionally the

Addendum states that there are no “3rd party contingencies or contracts,” which is

an express rejection of 3rd party beneficiary status to anyone.

In its counterclaim, Founders cited to paragraphs 3.1, 10, 23, 32, and 35 of the

subcontract and claimed these provisions “expressly identified [Founders] as a third-

party beneficiary.” CR 52. With the exception of paragraph 32 relating to warranty,

each of the cited provisions expressly identify duties Schear Hampton owed

exclusively to CSI – 3.1 (“Subcontractor Work” - makes no reference to Founders),

10 (“Subcontract Sum and Payment” – identifies remedies available to Contractor

(CSI) in the event Schear Hampton’s work is defective or causes damages to other

work, but does not give any rights to Founders), 23 (“Clean-up” – requires Schear

Hampton to pay CSI if it does not clean up its work and CSI has to incur the cost of

clean-up, but does not create any obligation to Founders), 35 (“Default; Termination;

Termination for Convenience” – identifies the conditions under which CSI could

terminate the Subcontract).

The warranty provision (paragraph 32) is the sole provision in the Subcontract

where Schear Hampton purports to obligate itself directly to Founders. First, the

warranty provision is not enforceable by Founders because such enforcement

BRIEF OF APPELLANT PAGE 18 conflicts with the limitations to 3rd party rights in the Addendum, which expressly

trumps in the event of a conflict. Second, even if the warranty did apply, there was

no evidence Founders or CSI made a warranty claim or that Schear Hampton was

given the opportunity to perform the warrantable work. Further, even if the warranty

was breached, the sole remedy is reduction in the amounts owed Schear Hampton

by the actual cost of the warranty service funded by CSI. There is no evidence of

CSI’s out of pocket costs, if any.

Finally, regardless of the legal basis for an award of damages to Founders,

there was no basis in law to reduce the lien by the amount of the damages.

Section 53.024 of the Texas Property Code sets forth how the amount of a lien of a

subcontractor is to be calculated. There is no deduction in that provision for alleged

damages caused by the subcontractor to the project. Further, the Court’s conclusion

that the lien was partially invalid because of the deductions is not supported by the

statute or any other law. The validity of the lien is dictated by the lienholder’s strict

adherence to the procedural requirements of the statute. TEX. PROP. CODE. §

53.160(b) (detailing the grounds for objecting to the validity of a lien). None of

those issues were raised here. A counterclaim for damages or offset is not a statutory

basis for invalidating a lien. Therefore, the trial court’s conclusion of law that the

lien was partially invalid was erroneous as a matter of law.

BRIEF OF APPELLANT PAGE 19 C. There was legally and factually insufficient evidence supporting a $15,000 damages award and/or offset of the lien. Even if there were legal grounds to award Founders damages or an offset

against Schear Hampton, there is no evidence to support the award of $15,000.

CSI’s assistant superintendent (Randy L. Horst, Jr.) on the Abbey Project and

CSI’s president (John Black) testified that Schear Hampton completed its scope of

work and all punch list items that were identified for Schear Hampton. 3 RR 42:5-

48:24, 50:17-25; 70:12-19, 152:2-23; 10 RR PX 68.

Horst, as assistant superintendent on the Abbey Project, was responsible for

daily reports, daily communications with all the subcontractors, making sure they

follow through with all the given tasks, scheduling and performance and making

sure they were up to par, including Schear Hampton. 3 RR 43:5-20. Horst created

and oversaw completion of the punch list items identified in Plaintiff’s Exhibit 68.

3 RR 43:21-44:4; 10 RR PX 68. Therefore, CSI, the general contractor, the sole

party with a contractual relationship with Schear Hampton, admitted that Schear

Hampton completed its scope of work under the Subcontract to the satisfaction of

CSI, including the punch list items. If CSI admits that Schear Hampton fully

performed, it defies logic that Founders, as an alleged third-party beneficiary, could

claim Schear Hampton did not finish.

Further, there is no evidence that Schear Hampton caused any of the damages

claimed. Founders presented Dave Sherman (an offsite construction consultant that

BRIEF OF APPELLANT PAGE 20 represented Founders). Sherman claimed that there was a variety of issues with

stucco related work but there was no evidence of a causal link between the items

Sherman noted and Schear Hampton’s work. Sherman confirmed his testimony was

speculative and that he relied on contractors to oversee the work of subcontractors.

5 RR 38:10-18; 4 RR 145-46; 150:3-8. Sherman also admitted that some of the

defective work that he believed to be within Schear Hampton’s scope was actually

the work of Schear Hampton’s predecessor Target Masonry and that damages

associated with that work were part of the $70,000 he claimed Schear Hampton owed

Founders. 5 RR 48:15 – 49:4, 58:4-25.

Further there was no evidence of a change order authorizing a back charge

against Schear Hampton for $15,000, which is a requirement of the Subcontract. 7

RR PX 3. Therefore, Founders’ claim for the damages/back charge is prohibited as

a matter of law by the Subcontract.

III. THE TRIAL COURT’S DENIAL OF ATTORNEYS’ FEES TO SCHEAR HAMPTON WAS CONTRARY TO LAW AND RELIED ON THE IMPROPER PARTIAL INVALIDATION OF THE LIEN. In any proceeding to foreclose, “the court shall award costs and reasonable

attorney's fees as are equitable and just.” TEX. PROP. CODE § 53.156. Although the

trial court found that CSI owed Schear Hampton more than $36,000 pursuant to the

Subcontract, the trial court found that “[n]either [Schear Hampton] nor Founders is

entitled, pursuant to the provisions of either the Texas Property Code or the Texas

BRIEF OF APPELLANT PAGE 21 Declaratory Judgments Act, to a recovery of attorney’s fees.” CR 214. 5 While the

declaratory judgments act states that fees “may” be awarded, the lien statute says

that the trial court “shall” award fees as are equitable and just. TEX. PROP. CODE §

53.156. The trial court did not state why it found that Schear Hampton was not

“entitled” to fees under the Property Code. If that was intended as a statement of the

law, then it was incorrect as a matter of law. Alternatively, if the trial court’s

intention was a discretionary finding that awarding any fees to Schear Hampton

would not be equitable and just, then the fees award should be remanded for

reconsideration after the Court corrects the errors outlined above.

5 It’s unclear how the trial court worked the Declaratory Judgments Act into its findings and judgment, but that act is inapplicable to the calculation of a statutory lien.

BRIEF OF APPELLANT PAGE 22 PRAYER WHEREFORE, Appellant Schear Hampton Drywall, LLC is entitled to

judgment rendered in its favor foreclosing the Lien at its full value of $152,173.60.

Schear Hampton is also entitled to a judgment rendered that Founders take nothing

by its counterclaim. Alternatively, the calculation of the amount of the lien should

be remanded for the trial court to consider the proper calculation of the lien under

the lien statute. Remand is also required to allow the trial court to properly consider

the just and equitable attorneys’ fees to which Schear Hampton Drywall, LLC is

entitled.

Respectfully submitted,

By: /s/Jeffrey S. Lowenstein Jeffrey S. Lowenstein Texas Bar No. 24007574 [email protected]

Bell Nunnally & Martin LLP 3232 McKinney Avenue, Suite 1400 Dallas, Texas 75204-2429 Telephone: (214) 740-1400 Telecopy: (214) 740-1499

COUNSEL FOR APPELLANT

BRIEF OF APPELLANT PAGE 23 CERTIFICATE OF COMPLIANCE The undersigned hereby certifies that this document was produced on a computer using Microsoft Word 2016. The document contains 4,307 words according to the computer software’s word-count function, excluding the sections of the document listed in Texas Rule of Appellate Procedure 9.4(i)(1).

/s/ Jeffrey S. Lowenstein Jeffrey S. Lowenstein

BRIEF OF APPELLANT PAGE 24 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing

was delivered to the following persons on May 16, 2018, through the

EFILE.TXCOURTS.GOV electronic filing system:

VIA EFILE.TXCOURTS.GOV J. W. Beverly Ferguson Braswell Fraser Kubasta PC 9 Greenway Plaza, Suite 500 Houston, Texas 77046

/s/ Jeffrey S. Lowenstein Jeffrey S. Lowenstein 3903520_1.docx / 11297.1

BRIEF OF APPELLANT PAGE 25 INDEX TO APPENDIX

A. Final Judgment [CR 204]

B. Findings of Fact and Conclusions of Law [CR 212]

C. Construction Supervisors, Inc. Subcontract [7 RR PX 3]

D. TEXAS PROPERTY CODE SECTION 53.024, 53.153, 53.156, 53.158, AND 53.160(b)

BRIEF OF APPELLANT PAGE 26 9/12/2017 3:39:23 PM Chris Daniel - District Clerk Harris County Envelope No: 19384343 By: KIRBY, TERESA A Filed: 9/12/2017 3:39:23 PM Pgs - 3 CAUSE NO. 2015-22140 8 BP SCHEAR HAMPTON DRYWALL, LLC, § IN THE DISTRICT COURT OF 8A Plaintiff , § CRLPZ § SALPZ V. § HARRIS COUNTY, TEXAS s£

FOUNDERS COMMERCIAL, LTD , . § Defendant . § 61ST JUDICIAL DISTRICT

FINAL JUDGMENT

On August 14, 2017, this case was called for trial . Plaintiff , Schear Hampton Drywall ,

LLC, appeared and announced ready for trial . Defendant and Counterclaimant , Founders

Commercial, Ltd ., also appeared and announced ready for trial. Third -Party Defendant

Construction Supervisors, Inc., an interlocutory default judgment having been previously entered

against it , failed to appear for trial.

All matters in controversy, legal and factual, were submitted to the Court for its

determination, no jury having been requested . After hearing the evidence and arguments of

counsel, and considering applicable legal principles , the Court is of the opinion that

Plaintiffs lien Is partially valid in the amount of $38,678.32. The Court further finds that Defendant is entitled to .. .; u: ) recover $15,000 in damages ori its counterclaim against Plaintiff. Based on same, the Court is of the opinion that ' the following judgment should be entered, and if is therefore ORDERED, ADJUDGED and DECREED that:

1. Plaintiff Schear Hampton Dry wall, LLC recover judgment against Defendant

Founders Commercial, Ltd . in the amount of $21 ,678.32.

2. Defendant Founders Commercial, Ltd . recover a default judgment against third -

party Defendant Construction Supervisors , Inc. in the amount of $21,678.32.

3. Pursuant to the Texas Uniform Declaratory Judgments Act, the Court declares that

the lien filed of record by Plaintiff Schear Hampton Dry wall , LLC against the property known as

The Abbey at Westminster Plaza, located at 2855 Westminster Plaza Dr., Houston, Texas 77082,

204 is partially null and void and of no force and effect , to the extent it exceeds the amount of

$21,678.32 , This declaration of partial invalidity specifically includes the Affidavit for

Mechanic’ s and Materialman’ s Lien filed by Plaintiff Schear Hampton Dry wall , LLC on or about

January 16, 2015, with the Harris County Clerk’ s file number 20150020430 , and the Amended

Affidavit for Mechanic’ s and Materialman’ s Lien filed by Plaintiff Schear Hampton Drywall, LLC

on or about January 30, 2015, with the Harris County Clerk’ s file number 20150041298 ( the

"Liens” ).

4. If the judgment awarded to Schear Hampton Drywall, LLC is not paid when final,

then Schear Hampton Drywall, LLC may conduct a foreclosure sale in compliance with the

provisions of the Texas Property Code, with respect to the real property identified in the Liens.

5. Plaintiff Schear Hampton Drywall, LLC is further awarded pre-judgment interest

on the amount of $21,678.32 at 5% interest per annum from May 20, 2015 until paid .

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fees and 12. Each party shall bear its own costs of court incurred herein .

13. This judgment disposes of all claims asserted by the parties in this case.

DATED this day of , 2017 in Houston, Texas .

7 Signed: i

10/2/ 2017 JUDGE PRESIDING

n \

206 10/24/2017 11:32 AM Chris Daniel - District Clerk Harris County Envelope No. 20265266 By: TERESA KIRBY Filed: 10/24/2017 11:32 AM

CAUSE NO . 2015-22140

SCHEAR HAMPTON DRYWALL, LLC

v.

FOUNDERS COMMERCIAL, LTD. § § § § §

FINDINGS OF FACT AND CONCLUSIONS OF LAW IN THE DISTRICT COURT OF

HARRIS COUNTY, TEXAS

61st JUDICIAL DISTRICT ^ CXP

This case was tried to the Court by agreement of all parties. The Court makes the following

findings of fact and conclusions of law with respect to the claims asserted by the various parties

herein.

FINDINGS OF FACT

1. On January 26, 2012, Founders Commercial, Ltd. (“ Founders” ), as owner, entered

into a contract (the “ Prime Contract” ) with Construction Supervisors, Inc. (“ CSI” ), as general

contractor, for the construction of a facility in Houston, Harris County, Texas known as The Abbey

at Westminster Plaza (the “ Abbey” ) .

2. On or about January 10, 2014, CSI entered into a subcontract ( the “ Subcontract” )

with Schear Hampton Drywall, LLC (“ SHD” ) to perform certain work, including the application

of stucco, which was part of CSI’ s obligation to Founders pursuant to the Prime Contract.

3. The balance owed to SHD by CSI for work on The Abbey performed by SHD is

$36,678.32.

4. SHD failed to perform some of its work in accordance with its obligations pursuant

to the Subcontract and failed to complete certain punchlist items in accordance with the provisions

of the Subcontract.

RECORDER'S MEMORANDUM This instrument is of poor quality at the time of imaging 212 *

5. SHD failed to exercise ordinary care in the performance of some of its obligations

pursuant to the Subcontract, which caused damages to the Abbey. \

6. Founders incurred damages in the amount of $15,000.00 as a result of the conduct

by SHD set forth in Paragraphs 4 and 5 above.

7. On or about January 30, 2015, SHD filed an Amended Affidavit for Mechanic’ s

and Materialman’ s Lien (the “ Lien” ) among the real property records of Harris County, Texas,

claiming a lien against the Abbey in the amount of $152,173.60.

8. SHD failed to prove that it was due the sum of $152,173.60 for work performed at

the Abbey. The evidence established that SHD was due the net sum of $21,678.32 for work

performed at the Abbey.

9. SHD’ s Lien claim is invalid to the extent it exceeds the sum of $21,678.32.

10. It would be neither equitable nor just for either Founders or SHD to recover < attorney’ s fees against the other party.

CONCLUSIONS OF LAW

11. The Subcontract constitutes a valid and binding contract between SHD and CSI, in

accordance with the written terms thereof.

12. The Lien against the Abbey is partially null and void and of no force and effect, to

the extent it exceeds the amount of $21,678.32.

13. After applying an offset in favor of Founders in the amount of $15,000, SHD is

entitled to a net recovery in the amount of $21,678.32, and a mechanic’s lien in such amount only.

14. In the event Founders does not pay SHD the principal amount due on the Judgment

when it becomes final, SHD may foreclose the Lien in accordance with applicable provisions of

the Texas Property Code.

2

213 15. Neither SHD nor Founders is entitled, pursuant to the provisions of either the Texas

Property Code or the Texas Declaratory Judgments Act, to a recovery of attorney’ s fees.

16. SHD is not entitled to recovery on its claim for quantum meruit.

17. CSI was duly served with Founders ’ third-party action against CSI, but defaulted

and failed to appeal- or answer, leading to the entry of an interlocutory default judgment.

18. By defaulting, CSI admitted all of the factual allegations set forth in such third-

party action.

19. Pursuant to the Prime Contract and applicable provision of the Texas Property

Code, CSI is responsible for indemnifying Founders for the net amount of $21,678.32 awarded to

SHD.

DATED the day of 0 C "Vpk>g v' ^ , 2017.

3

214 COMPLfffD CONSTRUCTION SUPERVISORS, INC. SUBCONTRACT Secti<>n 1 . . . JOB! 4237 CODE: 4 0 7 This Subcontract is made and entered jnto by and between the Contractor and Subcontractor listed below on the date ~s.et forth below. The parties agree as frillOWl:i: Contractor hlils entefr~ into a contract (the "Contract")· dated January 26, 2012 with Owner to perform certain labor end furnish certain matetfals for the erection; C()nstructiori and completion ·of the Project In accordance with the pfans, speciflcations, addenda, all applicable safety rules and r~ulaUons arid any general, special and supplementary conditions of the Coottact, aU of whtch artil made part of sald Contract ui'ld all of which are now made part of this Subcontract, said Contract, plans, specifications, addenda· and other documeiits set forth above being hereinafter referred to as the "Contract Documents• ..

-CoNTRACioR: Construction Supervisors, Inc. M=E==A=R.,.H~A=!:M-PI-O~N!o!D SUBCONTRACTOR: ===S=C,.. l.,,,N..,C..,;== !!,!Rl,!!,yw...,,._A..,L..,L..,,

ADoRESs: 11111 Katy frwy,, #120. Houston, TX 77079 ADo~ss: 925 S Mason Rd,, #'(01. Katy, Texas 77450·38¾

TELEPHONE: (113} 667-0123 · Fax'713) 667~3064 T!LEPHONE: (832)449-3744 (fax: (832) 449-3734) DATE: January 10, 2014 DESCIWTION: The Abbey at Westminster Plaza; Phase JI; Houston. Texas OWNE~:Founders Commefcla!, Ltd., dba The-Abbey at Westminster P.laza, 61"'01 S. Broadway Aye, Tyler, TX · 76703.Joe Nur.ieim:4237 JOB ADDRESS; 2855 Westminster Plaza. Houston, Texas 77082 PLANS &si>'i:ci11c..T10Ns El(Tln..eo: The Abbey at Westminster Pina, Phas-e 11, Houston. Texas PREPARED ev: Ted TrnJt Architect & Associates, Ltrf DATED: See Item Number 3.11

S~ction 2. Items # A, B, C, D, & E from Section 33 apply to this Subcontract, but the other item from Section 33(1) does not apply.

Section 3.1 SLibcontracl Work: Subcontractor agrees to furnish all necessary sknled labor, materials, equipment, supervision, services, supplies, and insurance for STUCCO. LABOR &· IIIIATERJAL, In strict ~~orciance with the Contract Documents and subject to the entire satisfaction and appr~val of tn~ Owner, Lender, Architect, Engineer and Contractor or their authorized representatives (the "Subcontract Work") for the amount shown i.n Section 10 hereof. Subcontractor shall, for· no additional compensation, furnish all necessary an_d at_tendant accessories incidentally required for a complete instaflalion of the Subco~ct Work. · .

3.2. The Subcontract Work specifically includes, bu'fis not limited to:

a. Furnish all labor, tools, materials, ~ervlces and equipment, etc., required to fulfill this Subconl~ In It~ ,otirety; per the pla"s and speclf't<:atlons and other ~ntraci Docum,mts~ b,: Clean up and removal to onliilte dumpster provided by General Contractor of all debris caused by work cov~ -.inderthfs Subcontract, . c. Complian~ with Sec:Uon 1A.OB (Shop drawings and ._submittals) of 'the specifications and submittal of .alJ required data for approval. d. All warranties, which begin on the date of substantlal completion as designated by the Owner, as described In Section 32. e. All pay applications-must be In Constri.ictlon, Supervisors; inc. main office by NOON every other Wedm~sday. · · f. Specifi~tlorl Section SE - Furring ~md Lath. g. Specifl~ion Section 9F - Plaster (Stucco). h; Fµmlsh and Install Stucco in compliance with plans and specifications fot a complete turnkey Jobt lnclUdlng but not limited to the following: 1. Includes an onslte superintendent. 2. All plaster accessions are galvanized. 3. All work Is based on Industry standards ,or mat~rlals, workmanship, and tolerances. 4. All subS.trate and prerequisite work to ~e complete and rea~y to receive this subcontractors work. 5. Deduct $6 per square foot for stucco already completed. 6. Includes paper backed lath. Federal ID: XX-XXXXXXX Vendor: SCHEHA SCHEAR HAMPJON DRVWALL INC, P.aqe 1 of 13- Subcontr&et 1142:;t~ Founders 000241 7. All accessories to be:galvanlzed. 8. Based on the most current set of plans.. 3.3 It is undel'$to~d and agreed that the Subcontract Work does not Include: a. Sealants or caulking of any kind. b. Site trash chute/dumpsters for any waste or trash separation requirements. c. Control llnesJ elevation benchmark,& and scaffoiding to accomplish th{s subcontractors work (provided by others). d. Eiectric/power, water; and a~s (by others). e. Shop drawlri:9$; sea(ants, backstop membrane; metal ceiling edges/stops. or vapor retarder of any ,klhd, f. Scaffolding (provfded arid Installed by others).

3.4. Subcontractor·shall provide Insurance certificates as shown In Section 16 of this Contract.

3.5. In addition to the foregoing insurance certificates; TEXAS WORKER'S COMPENSATION COMMISSION 85 FORM is enclosed for your 'signature, and must be returned With' your signed Subcontract

3.6. A copy of CONSTRUCTION SUPERVISORS INC SAFETY PROGRAM is included with, and becomes a part of; this Subcontract. This SAFETY PROGRAM contains CONSTRUCTION .SUPERVISORS INC, DRUG AND ALCOHOL POLICY, The Program Is accepted by the·Subcontractor and SUbconfracfor agr~ to adhere to it as a minimum standard for this Project. ·

3]. This Subcontractor is fully responsible for loss and /or damage to his material and the Subcontract Work, from whatever cause, pnor- .to installation, connection, and acceptance of same by 'Confractor, regardless of whatever Builder's Risk Insurance may be in effect on the Project. Should the Subcontractor have a loss after instadatlon, connection, and acceptance of work by Contractor, · the Subcontractor will bear and be responsible for losses· occasioned by Whatever deductibles may apply lo whatever Builder's Risk Insurance may be in effect on the Project.

-3,8. Subcontractor shall irnmedlately, submit to Contractor's job siJperlrttehdent ln writing, the name, address and home telephone number. of Subcontractot's designated project superintendent and of aii alternate contact to be used during the absence bf the project superintendent.

3,9. Th~ attached schedl.Jle·c:,f values, once approved by Contractor, shall be u~ed as the.'basis of monthly payments o .the Subcontractor. · It Is u·nderstood that thfs is not a unit prfce contract and lhe sthedule ofvalues has no bearing ot on ttie -~ctual values work p~rformed or to JJ,e performed. Please us8' the "Subcontractor Application tor Payment~ form each time you-submit a draw for paym~nt ·

youR DRAW Will NOT BE PROCESSED UNLESS II rs SUBMIU§Q ON THE ATTACHED FORM. 3.10. Please m'3il .application for paymeht for approval and/or payment to:. · ·· Construction Supervisors, Inc., 11111 Katy Freeway, Suite 120~ Houston, Texas 77079~2114.

Federal ID:. 27·1321033 SCHEAR HAMPTON DRVWALL INC. Vendor: SC HEHA P@e12 pf 13 - Subcontract #4237-§4

Founders 000243 3.11. Architectural & Civil Plans issued by the Architect: Issue for Permit dated 10/31/11 unless otherwise noted. Sheets: Index; C1 & C2 dated 9/29/11; C3 dated 11/3/11; C4 dated 9/29/11; C5 & C6 dated 11/3/11; C7 dated 9/29/11; CB, C9, C10, & C11 dated 11/3/11; C12, C13, :C14, C15, C16, C17, 018, & C19 dated 9/29/11; L1.01, L1.02, L1.0~. L1.04, L2,01 , L2.02, L.2.03, L2.04, L2.05, l2.06, L3.01, l3.02, L4 01, L4.02, _L4.03, .L4.0.4, l5.01, LS.02, L6.01, & LS1 .01 dated 11/14/11; AO.O, ·AO.Oa, AO.Ob: A0.1 , Ao·.2, AO.a, A0.;3a, AO.ab, A0.4, A0.4a, A0.4b, A0.4c, A0.4d_, A0.5, . .A1.0, A1.0a, A1 :1, A1.1ct, A1.1b, A1.2, A1.2a, A1 .2b, A1 .3: A1 .4, A1.5, A1.e. A1.7, A1 .8, A1.9, A2.1, A2.1a, A2.2, A2.28, A2.3, A2.4, A.2.5, A2.6, A2.7, A2.8, A2.9. A2.1Q, A2.11, A3.1, A3.1a, A3.1b, A3.1c, A3.1d, A3:1e. A3,1f, A3.2, A3.2a, A3.2b, A3.2c, A3..2d, A3.2e, A3.3, A3.3a, A3.3b, A3.3d, A3.3d, A3,3e, A3.4, A3.ita, A3.4b, A3.4c, A3.4d, A3.4e, A3.5, A3.6,-A3.7,A3.8, A,3.9, A4.6, A4.1, A4.2; A4.3, M.4.A4.5_,_ &A4.6; A4.7 d;ated 4/27/07; A5.0, A5.1, AS:2, A5,3, A.5.4, A6.0, A6.1, A10.1, A10.1a, A10,1b, A10.2, A10.2a, A10.2tr, A10.3, A11 .1, A11.2;_A11 .3, A11 4, A11.5, A11.6, A12,1, A12.2, A12.2a, A12,3, A12.3a, A12.4, A12.5, A12.6, A12.7, A12.8, &A12.9; so.oo. s1 .00. S1 .01, S1.02, 51.03, S1.10, $1.11, S1.12, 52.00, S2.01, S2.02, S2,03, S2.04, S2.05, $2.0_6, S3.10, -S3.10A, S3.10C, 83.100, $3.20, S3.2<'.IA. S3.208, S3.if)C, S3.20D, S4.10, S4.10A, S4.10C, S4.100, S4.20, S4,20A, 84.208, S4.20C;· S4.20D; 54.30, $4;30A, S4.308, S4.30C, S4'.30D, S5'.10, S5.1-0A, $5,10C, $5.10D., S5,20, S5.20A, SS.2013, $5.20C, 55,200, S6.10, S6.10A, S6.-10B, S6.10C, 56.100, S7.01. S7,02, S7.03, S7.04, 57.05, ST.®, S7.07, .S7,:10, S7:11, S7.12, $7.13, S7-14; $7:15, S7.16, $1.17, S7.18, 57..19, S7.20, S7.21, S8.00, S8°.10, S8."11 , S8;21, $8.21, sa.M, S8.31; S8.3?, $8.40, S8.41, S8.42, S9.01, $9.02, S9:03, S9.04, $9.05, S9,06; $9.07. $9,08, sro,01. 510.02, SC1.01, SC1.02, SC2.01, SC2.02, SC2.03, SC3.10, SC5.10, sca.10, MEP-01, MEP~2; MEP~3; M-1.0, M-,1;1, M-2;0, M.:2,1, M~2.2, M~2.3, M-2.4, M-3.1, M-3.2, MP3;1, MP3.2, M-4;1.1, M-4.2.1, M-4.3.1 1 M-4.4.1, M-4.1.2, M-4.2.2, M-4.3.2, M-4.4,2, M- 4.1.3, M-4.2.3, M4:3:3, .M-4.4.3, M-4 ..1.4, M-4.2.4, M-4.3.4, M4.3.5, M-4.4.4, M-4.4.5, MP~4.1.1, MP-4.2.1, MP-4.3.1, MP-4.4.1, M-5.0.0, M-5.0.1, M-5.0.2, M-5.1.0, M"'5.1.1, M-5.1.2, M-5.1.3; M-5.1.4, M-5.2:0, M-5.2.1, M-5,2.2, M-!t2.f M-5.2A,·M-5.3.0, M-5.3.1, M-5.3.2, M-5.4.0, M-6.1 , E-1,0, 'E-1 .1, E.~.o. E-2.1, E-:2:2, e.:2:·3, ~-2.~. E-3.1.1, E-3.2.1, Ee. 3.1.2, E-3.2.2, E-4.1.1, E-4.2.1, E-4.3.1, E-4.4.1 , E-4.1.2, E-4.2.2, E-4.3.2, E--4.4.2, E-4.1 .3, E-4.2.3 E-4.3.3, E-4.4,3, E-4.1.4, E-4.2.4, E-4.3.4, E-4.4.4, E-5.1, E~5.2, E-5.3, E-5.4,.E-5.5, E-5.6, E-5.7, E-5.8,.E-6.1, E-6.2, P-·1.0, p:..1,1, P- 2,0, P-2.1, P-2.2, P-'2.3, P-2,-4, P-3.U, P-3.1.2, P-3.1.3, P-3;2.1., P-4.U, P-4.2.1, P-4.3.1; P-4.4.1, P-4.1.2, p ..,1,;2.2, P-4.3.2, P-4.4.2, .P-4;1.a, P~.2;3, P-4.3.3, P-4.4.3; P.-4.1 .4, P-4.2.4, P-•(3.4, P-4.4.4. PU-4.1.1, PU-4.3.1, PU-4.1.2, PU-4.2 ..2, Pl,J-4.3.2, PU-4;4.2, PU-4.4.3, PU'-4..4.4, P-5.0, P-5.1, P-5.'2, P-5.3, P-5.4, P-5.5, P-5.6_, P,-5.7, P-5.8, P..:6.1, & p.5;2 dated. 11/14/H;' FP1_, FP2, FP3, FP4, Ff'5, & FP6 dated 9113/11; K1, K2, K3, K..:1A, K-2A, & K-3A dated 9/20/11. Spe<:ificaticins·dated 10/J1/11. Addeni:lum #1 dated 12/07/11. Adderidum #2 dated 12115/11.

Federal ID: XX-XXXXXXX SCHEAR HAMPTON DRYWN,.L. INC, ·vendor: . SCHEHA Page 3 of 13-Syhcontracl #4237-64

Founders 000244 Section 4. Time ls of 1he essence of this .Subcontract. Subcontractor agrees to commence the Subcontract Work oh 'Contractors notice ·to proceed and to complete first that part of the Project wtlich the .Contractor must or desires completed first, and Subcontractor shall keep up with the Contractor's progress schedule and agrees to-complete the Subcontract Work within the original Contract time plus any extension o(Contract time allowed by the Owner.·The Sub¢<>ntractor shall keep itself thoroughly informed as to the l)rogress of the job; begin work upon hotffication by the Contractor and prosecute· the work contlm.iously ahd uninterruptedly with an possible speed. The Subcontractor, · however shall not be hefd responsible for any delays caused by the neglect of the Contractor. The Subcontractor agrees to prosecute the Subcontract Work, and the several parts thereof at such times and in such order as the Coritractot ccmsiders necessary to keep the same sufficiently In advance of the other parts of the building and to avoid any delay i_n the completio~ of the construction as a Whole. Subcontractor is uncondiflonatly obligated to provide .suffr<:ierrt matenals; equipment and. a labpr fotce consisting of' a sufficle.nt numbeF of f'.iroperly skilled workers to meet the Project schedule then applialble to the Subcontr~l Work. CbntractQr has sole discretionary authority .to require Su~contraetor to suppl~ment its labor force, order m:ertirpe, or oth43_rwise accelerate 'its p·ertormance. to 1he extent deemed neeessaty by Contractor to ensure that 1he Subcontracl'Work progresses ln ac:c.ordance ·wl!h the Project schedule. Th~ Subcontrac_tor shall reimburse the Contractor for any 1oss, dc)mage, or extra expense paid ,or Incurred by the Contractor; including but not limited to fiquld13ted damages assessed ag~lnst contractor 1:,y Owner, Which are due to Subcontractor's failure to del_iver any and all materials as required, or fo properiy perform any and all work in keeping wit~ the progress of the Contractor's schedule, or to properly ~rform any term, covenant _or condition contained in this Subcontract, or which is due to the br,;,~ch of any of the provisions of ~is Suooontract. It Is further agreed that If the Subcontractor fails or refuses 1o proceed with the .Subcontract Work, ~s d!rected by the Contractor, or fails to perform said Subcontract Work in accc;,rdance herewith; _in whole or in part, or taus fo perform any term, covenant or condition contained in his Subcontract ihe Contractor may upon written notice to the Subconttaclor's last known address take any steps he deems advisable to secure necessary labor or materials by contract or otl)etwlse. and may take over au or ahy part of the Subcontractor's equ"ipment, materials, etc.,. and may prosecute _the Subcontract Work to completion. In case the Contractor deems l his procedure necessary for proper conduct of lhe Subcontract Work, all monies expended therefor shall be deducted from 1he .Subcontract Sum herein stated, ~na Jf such expendifufes exceed the amountotherwise dlie to the Subcontractor hereunder1the Subcontractor agrees to pay to the Contractor oh dem.and the full amount.of such excess, together with interest thereon at the rate of six percent per annum, until paid,. and Contractor shall have the right to offset such amounts against payments then or thereafter due Subcontractor undet this Subcontract-or ,any other agreement with Ctintractor,

Section 5. Taxes. The Subcontract Sum includes all taxes applicable to the Subcontract Work. . . Section s~ Applicable Laws and Codes. The Subcontract Work shall meet applicable local laws, ordinances; regulations and code requirements and Subcontractor is entirely responsible for having included the cost of all material, services, et:iliipment and labor to satisfy these laws, ordinances, regulations and code requirements wnether shown on the Contract Documents·or nol.

Section 7. Execution of this Subcontract signifies acceptance ·of all provisions of this Subcontracl lncluding alt Exhibits attached hereto. · ·

Section 8. Subcontractor is responsible t6 the job superintendent for scheduling of work and/or materl~ls, byt ~ny directives received by this Subcontractor from the Contractors Home Office personnel shait govern in case of conflict with the dlrections of the job superintendent · · ·

Section 9. Safety. Environmental. Governing Authorities: (a} The Subcontractor shall comply with all Local, State, Federal, and/or any Governing Authority ordinances; codes, regulations and laws pertaining to the project for the duration of the contract and warranty period. Subcontractor understands that this contract may be terminated if any Governing Authority determines that any .breach of applicable codes, ordhianees, regulations and la1NS· has occurred and/or has not been corrected to the satisfaction of the Governing Authority. (b) · Subcontractor will observe Contractor's basic safety policies and procedures and all applicable provisions of lhe Occupational SafeJy and Health.Act of 1970 and the regulations thereto and shall assist in maintaining working . cohditions wlilch are free of unsanitary, hazardous, or dangerous conditions and shall assist In protecting the health and safety of any laborer or mechanic employed in the pe_rformance of this conlract. Subcontractors performing work that requires the presence of a compelent person {trenchlngtexcavallon, scaffolding,. etc.), shall provide and maintain the appropriately trained competent person throughout the duration of the work. Subcontractor shall Indemnify; defend and save harmless the Contractor and Owner from all liability and/or loss, without liml~ lncurred In whole or in part, directly or tndlrectly, as a result of any breach of the obligations in this Section 9(a) by Subcontractor, its agents, employees, matetialmen -and subcontractors. If any unsafe act oi' failure to adhere· to OSHA or any other applicable FederaflD: 27·1321033 SCHl;AR HAMPTON DRVWALL, INC; Vendor~ SCHEHA Page 4 of 13- Subcontract #4237-64

Founders 000245 law, code, regulation or ordinance by Subcontractor results in the assessment of a civil penalty .against Contractor, Subcontractor shall reimburse Contractor the amount paid therefore by Contractor on demand of Contractor and Contractor. shall have the right to offset such amounts against payments then or thereafter due Subcontractor under this Subcontract or any other agreement with Contractor. (c) No alcoholic beverages, non-prescription drugs, or unsafe practices will be allowed on the job site. Subcontractor shall dlsrnl~ anyone participating in any of the above froin the job slte for the duration of the Project. Only prescription drugs with a doctor's a:uthorlzatlori to perform consttuctlon activities will b~ allowed on the job site. Violation of this provision Is a material breach of tflis. Subcontract. The use, possession, sale, transfer, purchase or being under _the infh.1ehce ·of afoohoi, drugs or ~ny other illegal or unlawful su6stance by· Subcontractor or Subcontractor's employees, or Subcontraqtor's sub:subcontractors and employees at any time. at the Job or while on · company business is. prohibited, . (d) Subcontre.ctor understands the terms and conditions of the general National PolluU:int Disch~ge Elimination System {NP0ES) permit or Texas Pollutanl Discharge EliminatiQn System (TPDES) permit, as applicable, or local variants thereof that $l!thorizes stormwater di$charges 1as$9Clated with rndustrlal activity from the construction site. Subcontractor shall comply wit/1 the Stormwater Prevention Plan for the Pto)ect and· shall Indemnify, defend and hold Contractor hamiless of and from any and all claims asserted against c:;ontractor attributable to Subcontractor's acts or omissions with regard to the Stormwater Prevention Plan or the NP.DES iiermit dr TPDES permit or Ip.cal variants thereof. If any such act or om.issicm results in the a~ssrnent of a civil peh;alty against. Contracior, Subconlr~ctor shall reimburse Contractor the amount paid 'therefor by Contractor OI} _demand of Contractor and Cont,aotor shall have the right to offset such amounts against payments then or thereafter due Subcontractor under this Subcontract or any other agreement with Contractor. {e) Employment Eligibility Verification and Indemnification: Construction Supervisors, Inc, (hereinafter UCSI") requires that suMonttactors providing services to CSI are in compliance with the Immigration Reform and Control Act of 1986, as amended, and the regulations promulgated thereunder, and that only individuals lawfully auth_orized to work In the United States are used to provide services to CSI by subcontracfors. Accordingly, Subcontractor represents and warrants the following: (1) Subcontractor has complied, and shall at all times during the term of this Contract Is In complete compliance, wlth all immigration laws; statutes, rules, and codes, Including, without limitation, the Immigration Reform and Control. Act of 1986, as amended, and the Illegal Immigration Reform and immigrant Responsibility Act of 1996; as amended, and any successor statutes thereto -and all orders and regulations promulgated thereunder, Tncludlng, but hot llmitec:Uo, the prohibition against unrawful employment of unauthorized alien$ as defined in 8 U.S.C. Section 1324a, and the prohibitions against unfair' immigration-related employment practices a defined ,;:1t a u.s.c. Section 1324b (herelt"laftet t:ollective\y referred to as "11:lCA"). (2) Subcontractor further represents and warrant$ that au emplc::>yees of SubCOntractor's business being used to provide services to CSI were hired In ·compliance With IRCA and will CQritinue to be employed in compliance With IRCA (including, but not limited fo, timely 1-9 verification and re-verification), and that each employee us~d by sub<;j)ntractbr to l)r:ovide services to CSI Is authoriied to b.E! employed in'the Uhlled States ~nd will maintain such.employmenLaulharization for as long as the employee ls performing servf~es for CSL (3) SubcontraQ.tot agrees and warrants that it has established inlemal safeguards and reporting policies to ensure continued compliance with lmmjgratlon laws and.'to encourage Its employees' to promptly_ report any su~pected violations <lf immigration law to subcdn.tractor's management Subcontractor further warrants .1;1nd agr~s that It will re~pond in a timely f$s'1ion tq ar,y in$pection or ~udit requests related to its lmmlgration-related documents; including requests for inspection from CSI or any fedefal agency authorized to Inspect ot audit such documents, During ti\~ t~rm of this Contraet, Subcontractor shall, and shall cause its directors, officers, managers, 13gents and employees and ~u~contraclors to, fully eo9perate In all reSpects with any audit, fnqufry, inspeotion or investigation that may be conducted by the United ·states Citizenship and immigration · Setvice ("USCIS~) the Department of' Labor ("DOL»), or any other governmental agency or authority of Subcontractor or any of its employees, Subcontractor shall immediat~ly no~fy CSl's authqrized representative of any unscheduled Inspection, raids, investigations, inquiries; visits or audits conducted by the USCIS, 0OL, or any other govemmental agency or authority related to environmental, irnmigratfon; or employee safety issues of Subcontra<:tor, its agents, emproyees, or sub-Subcontractors. Subcontractor certifies that during the term of {his Contract ihat an audit of 1-9 Forms for its employees will be conducted and that it wUI promptly correct any deficiencies _ ldenilfled during the audlt. (4) Subcontractor agrees to Indemnify and to hold and save csl harmless from and against any and all Judgments, decrees, fines, penalties, costs, expenses, losses or liabilities, Including attorneys' fee and legal costs that CSI may incur as a direct <)r indirect result of subcontractor's breach of the foregoing representation or warranties. Subcontractor further agrees that subcontractor wlll, upon request of est ,and at subcontractor's own expense, defend or assist In the defense of any suit ()r action or investigation that may be brought against CS·I due to allegations which, if true, would be a breaeh by .subcontractor of the foregoing representations or warranties. (5) See attached Certification of Compliance Affidavit, complete by an Officer and returned with your subcontract as evidence. of compliance with provisiMs of the Federal hi1migration and Control Act of 1986.

Federal ID: XX-XXXXXXX SCljEAfi HAMPTON DRYWALL INC, Vendor: SCHEHA Page § gf 13 - Subcontract #4237;§;4

Founders 000246 Section 10. Subcontract Sum and Payment.. .The Contractor agrees to pay the Subcontractor for thei ull and faithful performance of the Subcon~ract work the sum of JWO HUNDRED THIBIX·EIYE THOUSAND DOLLARS (f235,000.00), in current funds, subject to additions and deductions for charges as may be agreed upon or provided for herein. Provided, that no payments will be made .unless ,this Subcontractor's ·rate of progress; work done and material furnished are sattsfactory to the Contractor and as herein agreed upon. Payments a,re to be macfe as follows:

Draw raqueats ace to be submitted by NOON eyery other Wednesday for work completed through that date. Payme"nt wm be made on 1he Friday following the padgd· cgyered by tt,a Apnucatloo for Payment. tass 1Q% retaloage. provided payment far sam& bas hfi11Q rpage by owner. Ibe uttaJoar,o wm be pald within 30 gays after accepJ!!ope 1>y the Owner. proy1ded payment fqr samp has bean rnage by owner, contractor may req'uire Subcontractor 10 furnis'1 evidence satfsfE!ctory to Contractor, In the form of sworn affidavits, if requested, th?t all claims for labor, services, equipment and materials have been paid. If ~hall ~e a condition precedent to Contractor's obligation lo make each pay.ment:(progress Or final) to Subcontractor hereundet 1t'fa1 the funds for such payment have fil'Sl be:en paid by Owner ta Contractor. !tis the lnt_ent ·of the parties thafif. payment from th·e Owner for au or a l)Orlion of the Subcontract Work Is never received by Contractor, .then Contractor wUI never have ·ans, obligation to pay the Subcontractor fQr such portion of \he·Subcontract Work not paid r;,y Owner. S!Jbconfractor ha"s ~Pressly assomed the risk of Owner nonpayment and the Subcontract Sum in this paragraph 10 reflects the ass_umption of lhat,risk,

Contracfor shall be entitled to wi1hhold payments (whether progress or final) from Subconfrat:ior under the Subcontract to such extent as may be necessary, In Contractor's sole opinion, to protect the Coritractor aod/or Owner from loss on account of, but not limited to1 the following; (i) defective wor~ not remedied; (ii) third-parfy claims filed or reasonable evidence indicating the probabltity of the filing of such cll;llms; (iii) fE1llure of the Subcontractor :to make payments properly and timely to lts·suppllers, materlalmen or subcontractors or for labor, services, materials or equipment, (fv) evidence that the Subcontract Work ~nnot be completed for the unpaid balance of the Subcontract Sum, (vl damage caused by Subcontractorto the Owner, Contractor or other subcontractor; (vi) evlclence that the Subcontract Work cannot be completed within {he Project schedule; (vii) evidence that tne Subcontractor Is not able to provide adequate assurance of future performance with regard to the performance of correctable warranty work requlred by the Contracl Documents; or (Viii) any br~ach of a provision of this SLibcontraci.

Section 11. Flow Down; Subcontractor has read and is thoroughly familfar with the Contract Documents and agrees to be bound to Contractor by the 1enns of said Contract Dociinie~s insofar as they relate ih any part or in any way to the Subcontract Work undertaken herein and to assume towards Contractor in connection with the Subcontract Work, all of the obligations and responsibHitieS' which Contractor by those documents assumes towards the Owner or anyone else. The ·Subcontractor shall communicate about matters arising out of or relatin.9 to the Subcontract Work,, the Contractor's work, fhe Contract Documents or this Subcontract only with the Contracior and not with -the OWner or the Architect. In the event of a conflict between the terms of this Subcontn,ct and the ·other Coniract Documents, this Subcontract shall contfo1. ·

Sedlon 12. Appllcations for Payment. Releases. Lien-Free Project 12.1 The Subcontractor shall submit to the Contractor's Home Office, requisition for payment, covering the value of the Subcontract Wotk completed to the satisfaction of the Owner during that month in accordance with the approved Schedule of va1ugs (Section 3,8. of the Subcontract) and Section 10 above. If said requisitions are not delivered by the Subcontractor as per Section. 3 and Section 10, payment maybe withheld for an additional 30 days.

12.2 The Subcontractor shall furnish the Ctmtractot with such partial releases and,waivers of lien, iri a form approved by Contractor, from Subcontractt>t and its materialmen and ci'edit6rs as the Conttactor, may request from time to time on labor and/or material and/or other claims, and filial releases and waivers of lien ~t the time of final payment on this Subcontract.

1Z,3 The Subcontractor sh,all furnish, if requested by the Contractor, sworn affidavits from time to time, in accordance with ihe form provided by the ·Contractor, which shall state -amounts due or to become du&, amounts paid, ·and any other Information clearly to indicate the financial condition of the Subcontractor, insofar as it relates to labor, equipment and material furnished, and to be furnished, u_nder this ~ubcontract, and the CQntractol may take i:;uch steps as it may deern necessary to protect itseff agains1 any claims_. . . 12.4 $ubcontractor agrees to ~um the Subcontract Work over to Contractor In good condition ~nd ·free and clear from all ~laims, encumbrances and liens for labor, services, or materials, and should Subcontractor, dliiing the-progress of said Work or at any tirne thereafter, faii to pay for all labor, services and materials used or purchas~ for use in connection with the pro~ecution of said Work, Contractor may at its option and without notice to Subc:onlraclor, pay-all such claims and charge the amounts thereof to Subcontractor and Contractor shall have the right to offset such Federal ID: XX-XXXXXXX §CHEAR.HAMPTON DRVWALL. INC, Vendor: SCHEHA page 6 of 13 -- Subcogtract 14237-64

Founders 000247 amounts against payments then or thereaftE!r due Subi:ontractdr under this Subcontract or any other agreement With Contr.,idor. In the eve.ni suit is filed by any pel'$on, firm or corporation asserting s claim or lieh for labor, services or materials 1,1sed or purchased for use in the Work covered by this Subcontract, Subeontraotorwm, at Its own cost.and expef!S8, incfudJng counsel fees, defend .$uch suit and pay any jl,Jdgem!,lnt rendered ther¢hi, Subcontractor; for lts~lf•. .its successors and assigns, does hereby further expressly subordinates ahy and all claim of lien, _ lien _pr right to li~n for labor performed or materials furnished by it hereunder which II may·now or at any time .hereafter have or J:ie entftled to assert against Contractor, Owner.or the Project In any manner connected wlth Qr p_ :rlslng_'out of his furnishing of labor and materials for the performance of lhat portion of the IJYork covered by this Sub~onlract or otherwise, whether any such cf aim of lien, lien or right to lien be contractual or ~rise under the provisions of any staMe or law whatever of the in state which the Work is to be performed, to any lien or deed of trust of any Lender for tl)e Project

12.5 The Subcontractor agrees that monies teceived for the performance of this Subcon_ tract ·shall be applied fo the cost of performing the Subcontract Work and said monies shall not be diverted to satlsfy other Qbligalions of the Subcontractor. Section 13. The Subcontractor shall indemnify; defend and hold harmless the Owner and Contractor against all costs or claims for transportation, freight and express, on men, materials and equipment to and/or from the job, and for all other incidental expenses I.n connection with the Subcontract Work, and to prepay the transportation charges on all materials, etc., shipped.

Section _14. Prpvailing Wage. The .Subcontractor shall pay the scale of wages prescribed_ in the Contract, or the scale 'prescribe cf by law in case the Contract provides no such scale. If the Subcontractor shall faQ in any respect _to perform the covenants ciQntained in this section, the Contractor shall have the option to tennlnate Utis Subcori!ract forthwith. If the Sobcoritractor's.failuhi to pay the scale of wages prescribed in the Contract with the scale prescribed by law results in the ~sessment of any charges, penalties or fines against Contractor, Subcontractor shall reimburse Contractor the amount paid therefor by Contract6r on demand of Contractor; and Contractor shall have the right to offset such amounts against payments then or ther'eafter due Subcontractor under this Subcontract or any other agreement with Contractor. ·

Section .15. Changes. Contractor ·may require changes In, deviations from, additrons to, and omissions from, tt)e Subcontract Work, and the Subcontract Sum shall be adjusted accordingly. Before proceeding with any change, deviation, addition or ortiisskm, the Subcontractor wm 'first obtain written authorization ·from the Contractor, which authorization will state the amount, lf-ahy, by Which the Subeontract Sum will be adjusted. The Subcontractor shall have no dealings wllh the owner, or his authorized representatives In regard to changes, extras or omissions In. cofinecticm with the Subcontract Wotk, but · shall deal only. with the Contractor. Contractor;s written order for chan'ges, deviations, additions or omissions to the Subcontract Work sbail ha an express condition precedent to Subcontraetor's right', If any; to receive payment for any such change, deviation, addition or omission. Subcontractor's right to payment.for changes, deviations, additions or omissions .is furthe.r subject to the· cond.itions In Section 10 of the Subcontract. ·

Section 1ft Insurance. Siee Exhibit "A", incorporated herein (ully by reference, for in~lirance. tequiremerits,

Section 17. Appl~ble Jaws, taxes and permits. {a) Subcontractor shall comply with all fedei-at, state and municipal laws, codes, reguiatlons and ordinances effective wliere the Subcontract Worn is to ~ performed, and shall pay all taxes and contributions imposed or required by any1aw for any employment insurance, pensions, old age retirement funds; or simHar purposes, In respect lo the Subcontract Work and the employees of Subcontra~tor in the performance of said Subcontract Work. (b) Subcontractor accepts exclusive liability for all taxes and contributions required of the Contractor or Subcontractor by the Federal Social Security Act .and the unemployment compensation law. Qr any similar law of A:lny state, in respect to the employees of Subcontractor. In the performance of the Subcomract Work and agrees to furnish Contractor with suitable written evidence that Subcontractor has been authorized to accept su~h llabllityi if Subcontractor fails to furnish such evidence prior to beginning of said Subcontract Work, Contractor may; at its option, pay or reserve for payment said taxes and contributions and deduct the amount so paid or reserved from payments or due thereafter to become due to Subcontractor. Subcontractor agrees to protect and hold harmless ·Contractor against all liability in respect to said employees undet ahy of said laws. (c) Subcontractor shall secure and pay for any and all permits and licenses required for the prosecution of the Subcontract Worl< covered by this contract

Section 18. The Subcontractor shall route all equipment and materials to be used in the e)(ecufion of this Subcontract as designated by the Contractor, providing the transportation cosis are not increased by so doing. It is Federal ID: XX-XXXXXXX SCHEAR HAMf'ION DBVWALL, INC. Vendor: SCHEHA .eage 7 of 13 - Subcontract #4237-64

Founders 000249 expressly agreed that the carrier so designated shall be the agent of the Subcontractor and not the agent of the Contractor.

Section 19. Assignmeot. It is expressly understood and agreed that the Subcontractor's ·responsibjlities · and obligations in the Subcontract are nondelegable personal services ~rid ~hat the Subcontractor shall not sublet, as$ign or transfer this Subcontract or any part thereof, Including any monies due or to become due lo Subcontractor · hereunder, without Contractor's prior written consent. Contractor may t:ondliionally assign this·Subcontract to Owner or any Project Lender.

S.ectlon 20. Prot8ctlon of Work. The Subcontractor shall effectually secure and protect its materfats and 1N0rl<, and shall bear and be tlable for all loss and/or damage or any kind In connection therewith at any time prior to the final completion and acceptar)oe thereo1, unless said loss or damage Is caused by direct: negligence of the Contractor and subject to the provisions of Section Z4 hereof, to the extent they apply. The Subcontractor shall relm-burse the Conlractor orf demarid fur any breakage or other damage to other work or materials occasioned by the Subcontractor in the execution of this Subcontract.

Section 21. If the Subcontractor -deems that surfaces or work to -which the Subcontract Work is to be applied or to affixed is unsatisfactory or unsuitable, written notification of said condition shall be given the Contractor, otherwise Subcontractor shall have no claim for extra compensation or non.,responsibility in connection therewith; ·

Section 22. Temporary Services, Utilities, Use of Equipment. When needed ·by it, Subcontractor shall furnish the following facilities for Its own use, or pay its pro-rata share o1 same for the entire construction period: temporary toilets, Jqb sheds, storage and warehouse space, temporary water, power, heat, gas and telephone , drinking water, scaffolding, barricades, night watchman, shoring and underpinning, vertical transportation, hoisting equipment. and any other service ot facjljty applicable to his particular scope of work. If Subcontractor uses any equipment owned or rented by Contractor, Subcontractor shall indem'tilfy, defend and hold haTTl'lless Contractor of and from any and all liability for claims which may result from ·Subamtractors use of such equipment. This shall Include relmburs~ment by Subcontractor for l.oss· or damage to the equipment itself. Subcontractor shall addltlonally ensure that any employee assigned to operate such eq~ipment s"an be fully trained in the safety a'nd proper' opetatton of the equipment.

Sectlon.23. Clean-Up. The SL!bcOl'ltractor shall c1ean lip and remove from the sUe as directed by the Contractor, all rubbish and debris resulting.from tlie Subcontract Wor1c It shall als-o clean up to. the satisfaction of the Owner, Architect and Contractor, all dirt, grease, marks, etc., from walls, ceilings, floors, fixtures, etc., deposited or placed the~n as a result of the Subcontract Work. If the Subcontractor refuses or fails to perform this cleaning as directed by the Con~tor, the Contractor st1aiJ t,ave the right and power to proceed with said cleaning, and the-Subcontractor will on demand r~p.ay to tha Contractor the a·ctual cost of sald labor plus. a per~ntage of suctt cost to caver supervision, lnsur$Tlce, overhead, etc.

Section 24; Builder's Risk insurance: Oeciuctibtes: It is understood arid ;agreed It has been the practice of lhe Contractor to carry Builder's Risk Fite Insurance In the amount '.of his eslltnate Qf {ull Insurance to Insurable value, Including -subcontracts. To the extent' that -suchjnsyrance js carried by the Contractor under· the Contract; the ctor will h~ve an interest in the Insurance policy; however, the provisloris of this Section do not require the Subct>ritr!;!_ Contractor to carry any insurance whatso~ver for the benefit of the Sub:.c,ontractcir. Subcontraclpr assumes the responsibility to determine whether Builder's Risk lnsuran~ is in force, its limits and deductibles. Subcont111ctor is fully responsibie for loss and damage to its _property on the site; Including tools..and equipment, and sflall · take necessary preqautlons to prevent vanclalism, theft, burglary, pilferage and unexplained disapp~arance Qf property. Any Insurance covering Subcontra¢tor's or its sut>-;subcontracto~· property shall b.e Subcontractor's and its sub- subcontractors' sole an.;! complete m~ns of recovery for aoy suet) loss. To the extent any loss Is not covered by said insurance or is subject to any deductible or co-insurance, Sub·contractor shall not be reimbursed for same. Should Subcontractor or its sut>-;subcontractors choose to self-Insure this. risk, it Is expressiy agreed that Subcontractor hereby waives, and shall -0ause its sub-subcontractors to waive, any ctalm for damage or loss to said pr~perty In favor of Owner and Contractor. Subcontrador·shall bear all deductibles with respect to the Subcontract Work rn connection with any Builder's Risk Insurance. In the event the Contractor procures BuUi;ler's Risk Insurance, and only In such event, the Subcontractor agrees ·to submit immediately,, for the purpose of determining yalues under the insurance coverage, a complete breakdown of the Subcontract Sum shoWing materials; labor, expend~ble tools, supplies or any other thing or article of value, the cost of which is included in ihe Subcontract Sum stated ih 1hfs Subcontract

Section 25. Shop Drawings: Submlttals:. Subcontractor shall submit to Contractor with such pron,ptness as to cause no delay In the Subcontract Work or In the work of Confractor or any other sub90ntractor all shop or setting drawfngs, material submittals, samples, mock-ups, product data and schedules re·quired for the Subcontract Work (collectively Federal ID: XX-XXXXXXX SCHEAR HAMPTON DRVWALL, INC, Vendor: SCHEHA Rage 8 of 13 - Subcontract #4237-!H

Founders 000250 referred to in this section as "Submittals) and Contractor shall pass upon such Submittals. with reasonable promptness, making desired corrections, including, but not limited tq, corrections relating to design and artistic effect, Contractor's, Owner's, Architect's or Engineer's approval of such ·submlttals shall not, however, relieve Subcontractor from responsibility for deviations frorii the Contract Documents, unless Suboonlfactor has in writing called Contractol"s attention 1o such deviations at the lime of the submission of such Submittals to Contractor, and secured Contractor's written approval to any such deviations, nor shall Contractor•s, Owner's, or Architect's or Engineer's approval of any such Submlttals, relieve Sllbcontractor from responsibility for efi'Ors in such Submittals. Subcontractor will be required to submit ~ minimum of (6) copies of all shop drawings. By submitting SUbmittals, the Subcontractor represents that the Subcontractor has determined and ve'rified materials, field measurements a'nd field construction criteria related thereto and has checked and cOcirdinated the information contained within such St.ibmittals with the requirements of fhe Work and of the Contract Documents. All transportation costs on samples and drawings furn!Shed by the Sullcontractor shall be pald by Subcontractor.

Section 26. Project 'Close~oot.. The .Subcontractor shall furnish all guaranties, bonds1 training, O&M manuals, operating instructions,. etc., as required by the Contract Documents with respect to the Subcontract Work as a cdndition preceden~ to Final Payment Subcontractor shall fully complete to the owner's·and Contractor"s satisfaction ~II punchlist work within thirty (30) days of Substantial Completion or such lesser· time as may be required 'by the Contract Documents.

Sectlon 27. Dispute Resolution. If at any time any controversy shall arise between the Contractor and the Subcontractor arising out Of or reratlng to the Subcontract Work or the Subcontract, and which the parties hereto do not promptly adjust and determine, or which the owner or his authorized representatives cannot decide to the satisfaction of both parties herelo, then the written orders of the Contractor shall be foflowed and Subcontractor shall co'ntin.ue with the $ubconttact Work and sa1~ controversy shall be decided' by binding arbitration pursuant to the Constructio11 Industry R~!es or the American Arbitration As$ociation then in effect at the end of the work, and before flnal -settlement is made t:!etween lhe Conttactor and Subcontractor and the parties agree to be bound by any award granted iherein. Any such ;:iward may !)e enforted In a court of competent' jurisdiction. Th1:1 parties agree that the Subcontract shall be governed by the laws of the State of i ex~s and that venue for any controversy arising hereunder shall He In Harris Co1,,nty, Texas. Subcontractor consents to be joined Jn any ~rbitr:ation proceecHr'lg qetween Owner and Contractor that, in whole or in part, arises out of or relates to the Subcontract ot th~ Subcontract Work.. Provided, however, ihat if any lawsuit or lawsµits between the -OWner and Contractor or the Contractor and any third party involve, arise 011t of or relate to the Subcontract Work or th~ Subcontract, and the Contract db~s not provide for arbitration or there 'is no arbitration agreement between Contractor and such third party, Subcontractor agrees that the foregoing arbitration_ agreement shall not be enforcett and that Contractor may Join SuDContractor 1n the said lawsuit or lawsuits.

Section 28. INDEMNIFICATION. TO THE FULLEST EXTENT.PERMITTED BY I.AW, THE SUBCONTRACTOR, EJCi>RESSLY AGREES TO DEFEND (AT THE SUBCONTRACTOR'S EXP1ENSE AND WITH LEGAL COUNSEL ACCEPTABLE TO THE CONTRACTOR), lt.lDEMNIFY AND HOLD HARMLESS OWNER, CONTRACTOR, ARCHITECT, ARCHITECT'S CON$ULTANTS, ENGINEER, CONSTRUCTION MANAGER, LENDER AND ANY ~~R PARTY WHICH CONTRACTOR HAS AGREED TO INDEMNIFY AS NAMED OR REFERENCED IN THE PROJECT CONTRACT DOCUMENTS MADE A PART OF THIS SUBCONTRACT AND THEIR RESPEC11VE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, SUC'CESSORS, AFFILIATES AND ASSIGNS (HEREINAFTER COLLECTIVELY THE !<.JNDEMNIFIED PARTIESn) FROM AND AGAINST ANY AND AU CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, DAMAGES, UABILITtES, flNES, PENALTIES A.ND EXPENSES OF AJ.rf KIND WHATSOEVER INCLUDING wniioOT LIMITATION, ARBITRATION OR COURT COSTS AND ATTORNEYS FEES, FOR ANY INJURIES TO ANY PERSON {INCLUDING RESULTING DEATH) OR. ANY AND Au. DAMAGES TO PROPERTY INCLUDING LOSS OF USE THEREOF, ARISING OUT OF, OCCASIONED, CONTRIBUlED TO OR IN ANY WAY CAUSED OR ALLEGED TO ARISE OUT OF,. BE OCCASIONED,. CONTRIBUTED TO OR IN .ANY WAY CAUSED, IN WHOLE OR IN PART, BY THE ACTS OR NEGLIGENCE OF SUBCONTRACTOR, ITS EMPLOYEES, AGENTS, REPRESENTATIVES, SUBCONTRACTORS OR SUPPLIERS OR THEIR AGENTS OR EMPLOYEES OR ANYONE ELSE FOR WHOSE ACTS THEY MAY BE LIABLE, OR IN ANY WAY ARISING OUT OF, CONNECTED WITH OR INCIDENT TO OR, ALLEGED. TO ARISE OUT OF; BE CQNNECTED WITI:f OR INCIPENT TO THE PERFORMANCE OF THE WORK COVEm:D BY THIS suacONTRACT BY WHOMEVER PERFORMED. REGARDLESS OF WHETHER SUCH INJURY; DEATtl OR DAMAGE IS CAUSED JN WHOLE OR IN PART BY ANY NEGLIGE'Ni' ACT OR OMISSION OF ANY ONE OR MORE OF THE "INDEMNIFIED PARTIES", THEIR OFFICERS, AGENTS AND EMPLOYEES; SUCH OSUGATIONS SHALL NOT EIE . CONSTRUED TO NEGATE, ABRIDGE, OR REDUCE OTHER RIGHTS OR OBLIGATIONS OF INPEMNITY WHICH WOULD OTHERWl~E EXIST AS TO A PARTY OR PERSON DESCRIBED iN THIS PARAGRAPl-t,

The defense and indemnification obligations under this Subcontract shall not be restrictecl in any way by any limitation on the amourit or type of damages, compensation or benefits payable by or for the Subcontractor under workers' compensation act, disabUity benefit act, or other employee benefit act and shall extend to and include any actions brought

Federal ID: XX-XXXXXXX SCHEAR HAMPTON DRYWALL INC, Vendor: SCHEHA Pag@ Qgf13- SubcQntraqt #4237-64

Founders 000251 by or in the name of any employee of the Subcontractor or of any thlrd party to whom the Subcontractor may subcontract a part or all of the Subcontract Work.

The defense and indemnification obligations under this Subcontract are not intended to and shall not require · Subcontractor to indemnify or hold· ·harmless a (egistered architect, licensed engineer or -an agent, servant or . employee of ·a reglslered architect or llcensecl. engineer from liability for damage that is (1) caused by or results from: {a) defects In plans, designs or speclflcatlons prepared, approved or used by the architect or engrneer; or (b} the. negligence of the arcl111ect 6r engineer In the tendlllon or conduct pf professional dutle:; called for or arlslng out of the construction contract and the plans, designs or specificatioris that are a part of the construction contract: and {2) arjs1:1s from personal irijtlry or death, property injury; or any other expense that arises from personal injury, death or property injury. · · · · · These in9ernnl(Y obligations sliaiJ surviVe termination of this $Oboontrac,.

S~l.on 29. The Subcontra~or shall not place on the Project any eq'l.iipmenl. of Which 1t ls not sole owner unless it obtains 'Written permissron from the contractor.

Se:ctlon 3.0. Antl-dlscrlmfnation, (a) The Sut)c()ntractor, in performing the Subcontract' work, shall not dlscrlmlnate ·against any employees or applicants for employment because of race, creed, color, national origin, or sex. (b) The Subcontractor agrees that the provlsfons bf subseption (a) above will .also be Inserted In an of ns subcontr:acts. For the purpose of this section, a . H.subcontract" Is' defined as any contract entered Into by the subcontractor with any individual, partliershlp, associat101n, corpO{Qtl90, estate or trust, or other business enterprise or other legal entity, for a specific part·of !he wor.k to be p~rformed ln·connection wlfu the $Upplles or services furnished ~noer !his Subcontract;.provided, however, that a contract for the furnishing of standard or commercial artrcles or raw m~ttirials shall not be considered as a subcontract.

Section 31. Delays. . (a) Contractor shal.1not be liable to Subcontr:::tctor for any delay, ~indrance or Interference 10 the Subeontract Work resuiting from th.e act, negligence or default of the Owner or the Architecl, orby reason of fire or other casualty, or 9n accounl of riots, strikes or other combined action of the workmen or other:$, or·on account of any acts of Goc;I or any other cause beyond Contractor's control or on a~eo.unt of any. circumstances caused or coritribt.it¢d to by this Subconiractor. . . .. . . {b) Should Contractor delay; hinder or interfere with the Subcontract Work, then and In such event Contraptor shall owe Subcontractor therefor only an extension of time for completton equal, to th~ delay caused,, and lhen only If written claim Is made toContractor within forty-eJght (48) hours from the beginning of ths delay, hindrance or interference. Subcontractor shall not be en fitted lo· any claim for damages or Increased costs occasioned by any suoh delay. · ·

S.C:ti<>n 32. Warranty. S_ubcontractor warrants to the Owner; the Architect and the Conb1lctor that all materials and and that all Sub~ntract We>tk shail be of good quality, equipment furnished shall be new unless otherwise specified, _ free from 'faults and defect$ and in conformance with the Cpntract Documeofs'. Subcontractor :Sharf at its sole qost, ins-pect the SubcontractWorl<' in place upon the request by Ownl:lr, Architect or Coi:itractor to investigate any alleged . defect in the Subcontract WorJ< and shall promptly rep(a~ defective materials, workmanship and equipment and re- execute. defective. work as required of the Contractor under the' Contract Documents. If within l'.>ne (1) year from the date of substantial completion of lhe Project, or such longer period of time as may be prescribed by law or by the lenns of any applicable speclal warranty required by the Contract Docu01ents, any of the Subcontract Work Is found to be defective or not in accordance with the Contract Documents, Subcontractor shall, at Its sole cost, correct it and any otiier work affected thereby promptly after receipt of a written notice from the Contractor Io do so. Thfs one year time period for correction by Subcontractor is in addition to, and not in lieu of; all warranties that exist at common law or by statute. These warranty obUgatlons shall survive the termination of the Subcontract. In the event Subcontractor fails . to perform duririg said warranty period, Contractor may, at its discretion, use other means to provide the warranty service and <leduct cost of same from funds then or thereafter due Subcontractor under this or any other agreement With Contractor.

Sktion 33. (a) Subcontractor agrees fo work its crews on Saturday If requesteq by General ~ntractor. (b) Subcontractoragrees to proceed with its phase of-the work in the event of picketing or strike. Federal 10: 27•1321033 $CHEAR HAMPTON DRYWALL INC Vendor: SCHEHA ppge 1o of 13 - Subcontract #4231-64

Founders 000252 (c) Subcontractor agrees lo furnish, upon completion of he Subcontract Work, an.d prior to final payment t11erefor, a letter from lhe. manufacturer (s) of all major pieces of equipment .furnished by him stating that the installation thereof has been done In accorda'nce with recommendation of said cnanufacturer(s) and that said manufacturer(s) will honor any,and all warranHes and/or guarantees normally gfyen on their equipment. (d) Subcontractor will submit labor and/or materiar releases with each payment request. (e) Subcontractor' will furnish Contractor with a copy of its authorization to do business in lhe municipality in which the Subcontract Work is located. (f) Subcontractor shall furnish separate Performance and Payment Boncls covering 1he Subcontract at Its sole expense. Said bonds shallbe delivered to Contractor prior to the first payment request and shall be fo a form and with a surety acceptable to Contractor.

Sectfoh 34. Inspection of Work: Defecljye Work. Subcontractor shall provide sufficient safe and proper facilities_ at all times. for the Inspection of the ,Subcontract Work by Owner, Lenders. Contractor; any Archiiect, Ehgineer or other design consultant emploY6d In connecilon with: the Work or their authorized representatives, and -shall within twenty- four (24) hours-after receiving "'M'itten notice from Contractor to that effect, proceed -to take down all portions of the Subcontract Work and remove from the grounds and buildings all material, whether worked or unworked, which Contractor or any such owner , Architect, Engineer or other design consultant shall condemn as unsound or irnproper or as falling to conform In anyway to the Contract Documents, and shall make good alf such work oondemned and all other work damaged or destroyed in removing or making good such t:ond.emned work. However Subcontractor shall not remove any other materials · from the building site withollt Contractor's written permis"S1on. Should the Subcontriictor refu:se or neglect to proCE$! at once with the correction or rejected or defei:tive· materials and/or workmanship aftt;ir receiving notice to do so, it is agreed that the· Contractor shall have the right and power to have the defects remedied Qr changes made at the expense of the Subcontractor, and the Subi:ontractor agrees to pay to the Contractor on demand any and all loss and/or expense paid or incurred by the Contractor in remedying such defects and/or making such changes, together with Interest thereon at the rate of six per cent per annum, Liritll paid. Contractor shalf be entiUed to deduct such loss ~nd/or expense from sums then or thereafter due Subcontractor under this Subcontract or any other agreement with Contractor. ·

Section 35. Defauit; Termination: Termination for Convenience. (a) Sho.uld Subcontractor at any time refuse or. n~gte·Qt in ~ntractor's opinion to $Uppty a sufficient number of properly quaflfled workmen- or a sufficient quantity of mater~is of proper quality, or abandon the Subcontract Work or fail in Bf!Y respe_pt to prosecute the Subcontract Wor1t with promptness and diligence, or fail in the- performance of any of the agreements hEfrein contained, Contraclor may, at its option arid without prejudice to any 9ther remedy It may have, after forty-eight (48) hours' wrilten notice· 1o Subcontractor a) supplement Subcontractor's forces and provide any such labor, ~qulpmenf and materi;als -a11d deduct the ~t thereof fr9m any money then du~ or thereafter to become due to Subcontractor under this Subcontract or any other agr~erpent.with Contractor; or b) Con.tractor may, at its option and without prejudice to any other remedy it may have, te,rmlnate this Sub.conltacl or any part thereof and for the purpose of ·completing and/or correcting the -Subcontract' Work, Contractor shall have the rigfit to ta\<e possessjon of all the materials; equipment tools and appliances belonging to Subcontractor at lhe_site· of the work t9gether With any speclal'ly ordered or fabricated materials or equipment for tile Project, and Contractor may eltl"!er cotnplet~ and/Qr correct said Subcontract work itself or may employ, or contract with-, any othet pers·on or persons to complete andfor correct said Subcontract Work aild provide the materials therefor applying the then unpaid portion of th~ amount to be paid under this Subcontract toward the payment of all costs of such completfon and/or correction; and in case of such termination of this Subcontract, Subcontractor shall not be entitled to receive any further payment under this Subcontract :Until said Subcontract Work shall have been finished completely and payment therefor made by Owner, at which time if the balance of the unpaid portion of the amount to be paid under this Subcontract then remaining exceeds the charges, expenses and any damages sustained by Contrattor in completing and/or correcting said work or as a result of such default by Subcontractor, such ej(cess shall be paid by Contractor to Subcontractor, but if such charges, expenses and d_a,mages. shall exceed Sl!ch balance, Subcontractor arid its surety shall forthwith pay the difference to Contractor upon demand and Contractor may deduct such difference from any payments otherwise due or to become due to Subcontractor under th1!$ Subcontract or any other agreement with Contractor. . (b) Contractor may, i:!t its sole discretion, by written notice to Subcontractor, terminate this Subcontract, in whole or In part, when Contractor determines that it Is in the best Interest of Contractor to do so. Upon receipt of twe·nty-four (24) hours written notice from Cohtractor, Subcontractor· shall take all reasonable measures after consultatron with Contracto.r to term:lnate 01 assign to Contractor all subcontracts, purchase orders, or other commitments related lo the Subcontract Work or tlie Project on terms and conditions acceptable. to Contractor. Subctintractor will be paid for all reasonabre epsts of all work and/or services performed and materials furnished under the Subcontract 1ncluclihg reasonable overhead and profit on all Work and/or services performed and materials furnished hereunder, subject to any reasonable backcharg~s of CQntractor attributable to Subcontractor's failure to comply with any of the provisions of this Subcontract and further subject tQ the other term, of lhiS Subcontract

Federal ID: 27-13'21033 SCHEAR HAMPTON QRVWALL. iNC. Vendor: SCHEHA Page 11 of 13 - Subcontract #4237-64

Founders 000253 regarding payment. In no event will Subconlractor received any payment or compensation whatsoever for interruption of business or lost business opportunities, any other ftem of consequential dama9es, for overhead or loss of profits on the unperft>mied Subcontraet Work and/or services snd unfurnished materials or for any intimgible, impact or similarly described costs, damages or expenses and under rio circumstances ·shall th·e total sum paid to or received by Subcontractor under ttils ·subcontract exceed thE! Subcontract Sum. {c) Contractor's exercise of its rights of termination hereunder shall be hi addition to and .not in lieu of any other remedies oi ·nghts of Contractor under this Subcontract ·or at law. In the event this Subcontract is termhiated for cause or for convenience, Subcontracto'r agrees to assign to Contractor or others;. Subcontractor's rights under any purchas¢ order or subcontraqt related to the Subcontract Work. (d) it Is recognized that: if an order for relief Is entered on behalf of ~ubcontractor pursuant to Title 7 or Titte; 11 of the United S~tes Bankruptcy Code~ if another similar or<1er is' entered under any other Oeb1or relief l~ws, if Subcontractqr makes a General Assignment for the. peliefitof its Creditors, if a Recelver i~ appointed for the benefit of its Creditors, or if a Receiver is :appointed on a~punt of its insolvency. any such event ~utq impair or frustrate Subcontractor's pe~ormance of this Subcontract. · Aocordlngly, it Is agreed that upon the QCcl!rtence of any such even~ Contractor shafl be entitled to request of Subcoritractor or its successor-In-interest adequate assurance of f1.,1ture perfonnanoe in accordan·ce with ihe terms and conditions of the Subconb'act. Failure to comply wtth s_µch request within ten (10) days of the delivery of the request shall entitle Contractor to terminate the Subcontract ano to the rights set forth above- in Section 35(a) hereof. !nail events, abserit r~eipt of adeq1Jate assu~nce of performance and actual perfomiance In accordance therewith, Contractor shall be entitled to proceed with the Work with Its own forces or with other subcontractors, atSubcontractor's expense.·

Section 36~ Lle[hfree Profect; Indemnity from Liens and Claims, Patents. S!Jbcontracior shall defend, indemnny and si;ive harmiess Contractor E!nd Owner from .. any and all la.borer's, materialm~n'.s ~nd mechanic's liens upon the property and premises <;>n Which' the Subeontractor Work ls being performed that arise _out of suq~ work, and shall. keep such property free and clear of all liens, clatms and en~mbrances. arising out of the perforrnanc~ of 1hls: Subcontract Subcontractor -shall defend, indemnify and save hannless Contractor a_nd Its surety from any cla'lms or causes of action asserted against Contractor's surety bonds issued in connection with the Project Subcontractor shall defend, indemnify and save harmless Contractor and Owner fr-om any claims or suits for Infringement of patents or violation of patent rights by Subcontractor. If Subcontraetor fails to do any of the ioregoing, Contractor may deduct from sums then or thereafter due Subcontractor under this Subcontract or other agreement with Contractor such amounts as Contractor may deem appropriate to defend, indemnify and save hamiless Contractor and- Owner from such liens, claim, encumbrances and suits. ·

Sectlon 37. Cutting and Patching .. Subcontractor shall do all cutting, fitting, patching, digging and back filling of the Subcontract Work undertaken herein that may be required to make Its several parts come together properly and fil 'it to receive or be received by work of Contractor or any other subcontractor shown upon, or reasonably Implied by, the Contract Documents for the completed structure.. Any cost caused by defective or ilf,.fimed work of Subcontractor shall be bome hy Subcontractor. Subcontractor .shall not endanger any work by cutting, excavating or otherwise altering the Subcontract Work undertaken herein and shail not cut or alter the work of Contractor or any other subcontractor save with the prior written consent of Contractor.

Section 38. Independent Contractor. Subcontractor shall be an independent contractor under this Subcontrac~ and shall assume all of the rights, obligations, and llabilltres applicable to it as such an independent ·contractor hereunder. Subcontractor Is. responsible for the means, methods, and details of the Subcontract Wcirk.

Section 39, No payment made under this Subcontract shall be construed 1o be an acceptance by Contractor or Owner of defective work, Improper materlals or work thal does not conform lo the Contract Documents.

Section 40. Maintenance of Records: Audit. Subcontractor shall keep and ·maintain full and detailed records and accounts of all materials, equipment and labor furnished, delivered, fabricated, used, consumed andfor incorporated into the Subcontract Work. Contractor shall be given complete and convenient access to all of Subcontracto(s records, books, correspondence, instructions. drawings, receipts, vouchers, memoranda and similar documents and data relating to the Subcontract and the Subcontract Work. Subcontractor shall maintain and preserve all such records and documents for a period 1>f three (3) years after final payment hereunder and shall make such records and documents, avallable to Contractor at :any time Within this three-year period.

Section 41. Inspection of Site. Subcontractor represents that it has examined all of the Contract Documents which relate to the Subcontract Work and is,fully acquainted with all of the physical conditions surrounding the job site (as that. term may be defined 1n the Contract) insofar as the same affects or relates io the performance .of the Subcon_ iract Work, and has made all necessary investigations essential to the full understanding of any and all difficulties that may Federal ID; XX-XXXXXXX SCHEA(tHANPICN PBYWAlzL. INC, Vendor: SCHEHA Paw; 12 at 13 - Subcontract #4237::§4

Founders 000254 be encountered In the performance of the Subcontract Work. Subcontractor assumes any and all risks incident to any variance between ihe actual physical conditions at the Job site affecHng the Subcontract Work and those set out in the Contract Documents. · ·

Section 42. Notice. All notices to Contractor due under the Subcontract shall be addressed to Contractor at Its offices as appears on the first page hereof. All notices 1D be given Subcontractor shall be addressed to Subcontractor at the ¢rice of SUbcontractor as appears on the first page hereof.· Notices may be delivered by U.S. Mail, hand delivery or facsimfle. It Is understood and agreed that the effective date of any such notice shall be: (i} two (2) days after the date the notice is posted with the U.S. Mail, (Ji} the date of hand delivery, or (iii) the date fhe facsimile is transmitted, but any notice by facslmlle shall be deemed to be given on the foltowing calendar day if sent after 5:00 p.m.

Section 43. Seyerabilily. The provisions of this Subcontract shall be applied and Interpreted In a manner consistent with each other so as to carry out the purposes and intent of the parties, but if for any reason any provision or part thereof is unenforceable or invalid, such provisions or parts thereof shall be deemed severed from this Subcontract and the remaining provisions .shall be carried out with the same force and effect as if the severed provision or part thereof had not been part of this Subcontract.

Section 44. Headings. The headings of the paragraphs sre included solely for the convenience of reference and if there is any conflict between the hea~lngs an~ the text of thl~ Subcontract, the text of this Subcontract shall con"trol.

Sectlon 45. Non~Waiver. The wavier of any breach hereof shall not constitute a waiver of any subsequent breach by the same or other provision hereof. Failure by the Contractor in any instance to insist upon observance or performance by Subcontractor shall not be deemed a waiver by Contractor of any such observance or performance. No waiver wttl be binding upon Contractor unless In writing and then Will be for the particular Instance only. Payment of any sum by Contractor to Subcontractor with knowledge of any breach or default will not be deemed any waiver ~f such breach ~r any other breach.

Section 46. Entire Agreement. This Subcontract and the Contract Documents insofar as they relate in any part or any way to· the Subcontract Work, constitute the entire agreement between parties hereto, and . it is expressly understood and agreed that there are no oral or written agreements or promises by and between said parties except as aforesaid and that any additions thereto. or changes therein shall be in wrlUng.

NOTE: . Subcontractor must file proof of Jnsurance with Contractor prior to starting work and as a conditfon precedent to payment. All invoices must be signed "AP~ROVED" by Job superintendent prior to submission for payment. ·

· IN WITNESS WHEREOF, the parties hereto have · executed this agreement for themselves, their heirs, executors, successors, administrators and assigns, on the day and year first above written. . . SUBCONTRACTOR: CONTRACTOR:

Federal 10: XX-XXXXXXX SCHJ;AB HAMPTON Qft)'WALL, INC Vendor: SCHEHA Paae 13 of le - Subpoptract #4237-64

Founders 000255 Scheat Hampton Drywall, Inc. Subcontract #4237-64 Additions to Contract

· 1. Agreed upon schedule. 2. Rfght to piece work & subcontractor will maintain 1-9 forms. 3. Right to stop work for fack of payment or unsafe conditions. . 4. w.o., extras, back charges, etc., onry by G.C. & subcontractor signed change order. S. Waivers upon payment or conditional waivers as per Texas stat_ue. 6. Submittal approval is acceptance of product application/substitµtion as long as substitution Is clearly identified in submittals. 7. Insurance umbrella is {excess} $2,000,000.00, insurance as attached. 8. Payment guaranteed by the 30th of the month following billing. 9. Retention is 5% on labor and material and paid with 30 days of scope completion, and the following 5% to be paid when General Contractor gets paid. 10. No 3 rd party contingencies or contracts. . 11. This Is a comp!ete contract. Those things typed or hand written provisions shall control and be prevailing on all parties if in conflict of this contract. 12. Subcontractor Is not responsible for others damaging work, rnaterial, or equipment.

SCHEAR HAMPTON DRY'WALL, INC. CONSTRUCTION SUPl:RVISORS, INC.

~?J ~ C - i a Jim Smith, Partner

. • i

Founders 000242 PROPERTY CODE CHAPTER 53. MECHANICS,CONTRACTOR'S,OR MATERIAL...Page 1 of61

PROPERTY CODE

TITLE 5. EXEMPT PROPERTY AND LIENS

SUBTITLE B. LIENS

CHAPTER 53. MECHANIC'S, CONTRACTOR'S, OR MATERIALMAN'S LIEN

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 53.001. DEFINITIONS. In this chapter: (1) "Contract price" means the cost to the owner for any part of construction or repair performed under an original contract. (2) "Improvement" includes: (A) abutting sidewalks and streets and utilities in or on those sidewalks and streets; (B) clearing, grubbing, draining, or fencing of land; (C) wells, cisterns, tanks, reservoirs, or artificial lakes or pools made for supplying or storing water; (D) pumps, siphons, and windmills or other machinery or apparatuses used for raising water for stock, domestic use, or irrigation; and (E) planting orchard trees, grubbing out orchards and replacing trees, and pruning of orchard trees. (3) "Labor" means labor used in the direct prosecution of the work. (4) "Material" means all or part of: (A) the material, machinery, fixtures, or tools incorporated into the work, consumed in the direct prosecution of the work, or ordered and delivered for incorporation or consumption; (B) rent at a reasonable rate and actual running repairs at a reasonable cost for construction equipment used or reasonably required and delivered for use in the direct prosecution of the work at the site of the construction or repair; or (C) power, water, fuel, and lubricants consumed or ordered and delivered for consumption in the direct prosecution of the work. (5) "Mechanic's lien" means the lien provided by this chapter.

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reclaimed from overflow, or the railroad and all of its properties, and to each lot of land necessarily connected or reclaimed. (b) The lien does not extend to abutting sidewalks, streets, and utilities that are public property. (c) A lien against land in a city, town, or village extends to each lot on which the house, building, or improvement is situated or on which the labor was performed. (d) A lien against land not in a city, town, or village extends to not more than 50 acres on which the house, building, or improvement is situated or on which the labor was performed.

Acts 1983, 68th Leg., p. 3536, ch. 576, Sec. 1, eff. Jan. 1, 1984.

Sec. 53.023. PAYMENT SECURED BY LIEN. The lien secures payment for:

(1) the labor done or material furnished for the construction or repair; (2) the specially fabricated material, even if the material has not been delivered or incorporated into the construction or repair, less its fair salvage value; or (3) the preparation of a plan or plat by an architect, engineer, or surveyor in accordance with Section 53.021(c). Acts 1983, 68th Leg., p. 3536, ch. 576, Sec. 1, eff. Jan. 1, 1984. Amended by Acts 1995, 74th Leg., ch. 851, Sec. 2, eff. Sept. 1, 1995.

Sec. 53.024. LIMITATION ON SUBCONTRACTOR'S LIEN. The amount of a lien claimed by a subcontractor may not exceed: (1) an amount equal to the proportion of the total subcontract price that the sum of the labor performed, materials furnished, materials specially fabricated, reasonable overhead costs incurred, and proportionate profit margin bears to the total subcontract price; minus (2) the sum of previous payments received by the claimant on the subcontract.

Acts 1983, 68th Leg., p. 3536, ch. 576, Sec. 1, eff. Jan. 1, 1984.

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loss it suffers or incurs. That priority does not excuse the surety from paying any obligations that it may have under its payment bonds.

Acts 1983, 68th Leg., p. 3548, ch. 576, Sec. 1, eff. Jan. 1, 1984. Amended by Acts 1989, 71st Leg., ch. 1138, Sec. 20, eff. Sept. 1, 1989.

Sec. 53.152. RELEASE OF CLAIM OR LIEN. (a) When a debt for labor or materials is satisfied or paid by collected funds, the person who furnished the labor or materials shall, not later than the 10th day after the date of receipt of a written request, furnish to the requesting person a release of the indebtedness and any lien claimed, to the extent of the indebtedness paid. An owner, the original contractor, or any person making the payment may request the release.

(b) A release of lien must be in a form that would permit it to be filed of record.

Acts 1983, 68th Leg., p. 3548, ch. 576, Sec. 1, eff. Jan. 1, 1984. Amended by Acts 1989, 71st Leg., ch. 1138, Sec. 21, eff. Sept. 1, 1989.

Sec. 53.153. DEFENSE OF ACTIONS. (a) If an affidavit claiming a mechanic's lien is filed by a person other than the original contractor, the original contractor shall defend at his own expense a suit brought on the claim. (b) If the suit results in judgment on the lien against the owner or the owner's property, the owner is entitled to deduct the amount of the judgment and costs from any amount due the original contractor. If the owner has settled with the original contractor in full, the owner is entitled to recover from the original contractor any amount paid for which the original contractor was originally liable.

Acts 1983, 68th Leg., p. 3548, ch. 576, Sec. 1, eff. Jan. 1, 1984.

Sec. 53.154. FORECLOSURE. A mechanic's lien may be foreclosed only on judgment of a court of competent jurisdiction foreclosing the lien and ordering the sale of the property subject to the lien.

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Acts 1983, 68th Leg., p. 3549, ch. 576, Sec. 1, eff. Jan. 1, 1984.

Sec. 53.155. TRANSFER OF PROPERTY SOLD. If the house, building, improvement, or any piece of railroad property is sold separately, the officer making the sale shall place the purchaser in possession. The purchaser is entitled to a reasonable time after the date of purchase within which to remove the purchased property.

Acts 1983, 68th Leg., p. 3549, ch. 576, Sec. 1, eff. Jan. ,1, 1984.

Sec. 53.156. COSTS AND ATTORNEY'S FEES. In any proceeding to foreclose a lien or to enforce a claim against a bond issued under Subchapter H, I, or J or in any proceeding to declare that any lien or claim is invalid or unenforceable in whole or in part, the court shall award costs and reasonable attorney's fees as are equitable and just. With respect to a lien or claim arising out of a residential construction contract, the court is not required to order the property owner to pay costs and attorney's fees under this section. Added by Acts 1984, 68th Leg., 2nd C.S., ch. 18, Sec. 4(a), eff. Oct. 2, 1984. Amended by Acts 1989, 71st Leg., ch. 1138, Sec. 22, eff. Sept. 1, 1989. Amended by: Acts 2011, 82nd Leg., R.S., Ch. 51 (S.B. 539), Sec. 1, eff. September 1, 2011.

Sec. 53.157. DISCHARGE OF LIEN. A mechanic's lien or affidavit claiming a mechanic's lien filed under Section 53.052 may be discharged of record by: (1) recording a lien release signed by the claimant under Section 53.152; (2) failing to institute suit to foreclose the lien in the county in which the property is located within the period prescribed by Section 53.158, 53.175, or 53.208; (3) recording the original or certified copy of a final judgment or decree of a court of competent jurisdiction providing for the discharge;

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(4) filing the bond and notice in compliance with Subchapter H; (5) filing the bond in compliance with Subchapter I; or (6) recording a certified copy of the order removing the lien under Section 53.160 and a certificate from the clerk of the court that states that no bond or deposit as described by Section 53.161 was filed by the claimant within 30 days after the date the order was entered.

Added by Acts 1989, 71st Leg., ch. 1138, Sec. 23, eff. Sept. 1, 1989. Amended by Acts 1997, 75th Leg., ch. 526, Sec. 15, eff. Sept. 1, 1997.

Sec. 53.158. PERIOD FOR BRINGING SUIT TO FORECLOSE LIEN. (a) Except as provided by Subsection (b), suit must be brought to foreclose the lien within two years after the last day a claimant may file the lien affidavit under Section 53.052 or within one year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.

(b) For a claim arising from a residential construction project, suit must be brought to foreclose the lien within one year after the last day a claimant may file a lien affidavit under Section 53.052 or within one year after completion, termination, or abandonment of the work under the original contract under which the lien is claimed, whichever is later.

Added by Acts 1989, 71st Leg., ch. 1138, Sec. 23, eff. Sept. 1, 1989. Amended by Acts 1997, 75th Leg., ch. 526, Sec. 16, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 889, Sec. 4, eff. Sept. 1, 1999.

Sec. 53.159. OBLIGATION TO FURNISH INFORMATION. (a) An owner, on written request, shall furnish the following information within a reasonable time, but not later than the 10th day after the date the request is received, to any person furnishing labor or materials for the project: (1) a description of the real property being improved legally sufficient to identify it;

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(d) Not later than the 30th day after the date a written request is received from the owner, the contractor under whom a claim of lien or under whom a bond is made, or a surety on a bond on which a claim is made, a claimant for a lien or under a bond shall furnish to the requesting person a copy of any applicable written agreement, purchase order, or contract and any billing, statement, or payment request of the claimant reflecting the amount claimed and the work performed by the claimant for which the claim is made. If requested, the claimant shall provide the estimated amount due for each calendar month in which the claimant has performed labor or furnished materials.

(e) If a person from whom information is requested does not have a direct contractual relationship on the project with the person requesting the information, the person from whom information is requested, other than a claimant requested to furnish information under Subsection (d), may require payment of the actual costs, not to exceed $25, in furnishing the requested information. (f) A person, other than a claimant requested to furnish information under Subsection (d), who fails to furnish information as required by this section is liable to the requesting person for that person's reasonable and necessary costs incurred in procuring the requested information. (g) Expired.

Added by Acts 1989, 71st Leg., ch. 1138, Sec. 23, eff. Sept. 1, 1989. Amended by; Acts 2011, 82nd Leg., R.S., Ch. 499 (H.B. 1390), Sec. 7, eff. September 1, 2011.

Sec. 53.160. SUMMARY MOTION TO REMOVE INVALID OR UNENFORCEABLE LIEN. (a) In a suit brought to foreclose a lien or to declare a claim or lien invalid or unenforceable, a party objecting to the validity or enforceability of the claim or lien may file a motion to remove the claim or lien. The motion must be verified and state the legal and factual basis for objecting to the validity or enforceability of the claim or lien. The motion may be accompanied by supporting affidavits.

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(b) The grounds for objecting to the validity or enforceability of the claim or lien for purposes of the motion are limited to the following: (1) notice of claim was not furnished to the owner or original contractor as required by Section 53.056, 53.057, 53.058, 53.252, or 53.253; (2) an affidavit claiming a lien failed to comply with Section 53.054 or was not filed as required by Section 53.052; (3) notice of the filed affidavit was not furnished to the owner or original contractor as required by Section 53.055; (4) the deadlines for perfecting a lien claim for retainage under this chapter have expired and the owner complied with the requirements of Section 53.101 and paid the retainage and all other funds owed to the original contractor before: (A) the claimant perfected the lien claim; and (B) the owner received a notice of the claim as required by this chapter; (5) all funds subject to the notice of a claim to the owner and a notice regarding the retainage have been deposited in the registry of the court and the owner has no additional liability to the claimant; (6) when the lien affidavit was filed on homestead property: (A) no contract was executed or filed as required by Section 53.254; (B) the affidavit claiming a lien failed to contain the notice as required by Section 53.254; or (C) the notice of the claim failed to include the statement required by Section 53.254; and (7) the claimant executed a valid and enforceable waiver or release of the claim or lien claimed in the affidavit. (c) The claimant is not required to file a response. The claimant and any other party that has appeared in the proceeding must be notified by at least 21 days before the date of the hearing on the motion. A motion may not be heard before the 21st day after the date the claimant answers or appears in the proceeding. (d) At the hearing on the motion, the burden is on:

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(1) the claimant to prove that the notice of claim and affidavit of lien were furnished to the owner and original contractor as required by this chapter; and (2) the movant to establish that the lien should be removed for any other ground authorized by this section. (e) The court shall promptly determine a motion to remove a claim or lien under this section. If the court determines that the movant is not entitled to remove the lien, the court shall enter an order denying the motion. If the court determines that the movant is entitled to remove the lien, the court shall enter an order removing the lien claimed in the lien affidavit. A party to the proceeding^ may not file an interlocutory appeal from the court's order. (f) Any admissible evidence offered at the hearing may be admitted in the trial of the case. The court's order under Subsection (e) is not admissible as evidence in determining the validity and enforceability of the claim or lien.

Added by Acts 1997, 75th Leg., oh. 526, Sec. 17, eff. Sept. 1, 1997. Amended by: Acts 2011, 82nd Leg., R.S., Ch. 499 (H.B. 1390), Sec. 8, eff. September 1, 2011.

Sec. 53.161. BOND REQUIREMENTS AFTER ORDER TO REMOVE. (a) In the order removing a lien, the court shall set the amount of security that the claimant may provide in order to stay the removal of the claim or lien. The sum must be an amount that the court determines is a reasonable estimate of the costs and attorney's fees the movant is likely to incur in the proceeding to determine the validity or enforceability of the lien. The sum may not exceed the amount of the lien claim. (b) The court shall stay the order removing the lien if the claimant files a bond or a deposit in lieu of a bond in the amount set in the order with the clerk of the court not later than the 30th day after the date the order is entered by the court unless, for good cause, the court orders a later date for filing the bond or the deposit in lieu of a bond. If the court fails to set the amount of the security required, the amount required is the amount of the lien claim.

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