A. Impartiality of Arbitrators
1. Burlington Northern Railroad v. Tuco, Inc., 960 S.W.2d 629 (Tex. 1997).
In this case, the Texas Supreme Court held that a neutral arbitrator's failure to disclose his acceptance of a substantial referral to his law firm from the law firm of a non-neutral co-arbitrator established "evident partiality," and therefore the arbitration award was set aside. While the Court stressed in its opinion that it was not finding bias on the part of the neutral arbitrator, it held that a reasonable person could conclude that the referral of a case might affect his impartiality, which triggers a disclosure requirement. According to the Court, a neutral arbitrator exhibits "evident partiality" if the arbitrator fails to disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator's partiality.
B. Waiver of Arbitration Provisions
1. Weekley Homes, Inc. v. Jennings, 936 S.W.2d 16 (Tex. App.--San Antonio 1996, writ denied).
The parties' construction contract provided for arbitration in accordance with the American Arbitration Association's construction industry rules, but required that mediation between the parties take place first. When one party filed an arbitration demand without first attempting to mediate the dispute, the court held that the party had waived its right to arbitrate. The decision was based upon the particular contractual provision involved. Thus, it appears that in Texas parties must be very careful to follow the dispute resolution procedures in their contracts to avoid waiving their arbitration rights. Note that the 1997 Edition of the AIA-A201 General Conditions of the Contract for Construction requires mediation prior to arbitration. Thus, according to this case, skipping the mediation process could amount to a total waiver of the arbitration provision in the contract.
2. Pepe Int'l Development Co. v. Pub Brewing Co., 915 S.W.2d 925 (Tex. App.--Houston [1st Dist.] 1996, no writ).
In this case, the court held that waiver of an arbitration provision only occurs when the party seeking arbitration has substantially involved the judicial process to the detriment of the opposing party. Thus, the court found no waiver when the party had answered the lawsuit and filed a counterclaim. This analysis follows the Texas Supreme Court's ruling in E.Z. Pawn Corp. v. Honorable Fernando Manicas, 934 S.W.2d 87 (Tex. 1996), which held that an arbitration agreement had not been waived when it was found and invoked ten (10) months after answering the lawsuit in state court.
C. Applicability of an Arbitration Provision
1. Hardin Construction Group v. Strictly Painting, Inc., 945 S.W.2d 309 (Tex. App.--San Antonio 1997, no writ).
Hardin Construction was the general contractor for the construction of a hotel, and it accepted a bid for a painting subcontract from Strictly Painting. Hardin submitted a standard form contract for Strictly to sign which included an arbitration clause and a requirement for the posting of a performance bond. Strictly did not execute the subcontract form, though it began work on the project. Strictly objected to the performance bond provision, but never specifically objected to the arbitration clause. The parties were never able to resolve the conflict over the bond, but Strickely completed its work on the project, and then sued Hardin for withheld payments. Hardin attempted to compel arbitration pursuant to the subcontract. On appeal, the court held that Strictly was required to arbitrate its disputes even though it never signed the subcontract because Strictly, by fully performing the work under the subcontract, had agreed to every term in the subcontract with the exception of the bond requirement, to which it had specifically objected. Therefore, Strictly was bound by the arbitration clause.
2. Hou-Scape, Inc. v. Lloyd, 945 S.W.2d 202 (Tex. App.--Houston [1st Dist.] 1997, no writ).
In this case, the trial court found that the parties' contractual disputes were covered by an arbitration clause in their contract, but the tort claims should be heard in state court. On appeal, the Court relied on the broad language of the arbitration clause which required arbitration of all disputes "arising out of, or relating to the Contract Documents or the breach thereof." The court held that the claims regarding violations of the DTPA, libel, slander, tortious interference, negligence, gross negligence, and fraud all arose out of or related to the Contract Documents, and therefore all the claims were arbitrable.
A. Tips v. Hartland Developers, Inc., 961 S.W.2d 618 (Tex. App.--San Antonio 1998, no writ).
The San Antonio Court of Appeals ruled that compliance with local building codes is implied in all building and construction contracts. Compliance with building codes is a presumption which may be rebutted only by evidence that the parties intended otherwise. In this case, the structure was built under a design-build contract, so the contractor both designed and built the structure. It is not clear whether this case means that a contractor whose obligation is to build according to the plans and specifications drawn by the architect also has a duty to build in compliance with the local building codes. Additionally, it is unclear whether this case imposes a duty on architects to design in compliance with local building codes, although that appears to be a reasonable interpretation.
A. Formosa Plastics Co. v. Presidio Engineers, 960 S.W.2d 41 (Tex. 1998).
While the Supreme Court typically avoids allowing tort actions and damages in contract cases, in this case the Supreme Court held that tort damages (and, therefore, punitive damages) are allowed for fraudulent inducement claims even if the claims wholly arise out of a contract between the parties. To establish fraudulent inducement, however, the plaintiff must show a material misrepresentation, which was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, and which was relied upon to the injury of the plaintiff. The court held that the promise of future performance of a contract constitutes an actionable misrepresentation if the promise was made with no intention of performing at the time it was made; however, mere failure to perform a contract is not evidence of fraud.
B. Buxani v. Nussbaum, 940 S.W.2d 350 (Tex. App.--San Antonio 1997, no writ).
The Buxanies agreed in writing with Nussbaum for Nussbaum to remodel and expand their jewelry store. The contract contained a clause which required any alterations or deviations involving extra costs to be in writing. During the remodeling, the Buxanies orally requested work from Nussbaum which was not included in the written contract. Nussbaum performed the additional work and invoiced the Buxanies. When the Buxanies refused to pay for the additional work, Nussbaum stopped work, and each party sued the other for breach of contract. At trial, the court found that the Buxanies breached an oral agreement for the additional work, and that the Buxanies breached the written contract by not paying, thus excusing Nussbaum's further performance.
On appeal, the Buxanies argued that there was no mutual assent to the oral agreement. The Court of Appeals recognized that mutual assent can be found from a party's acts and conduct. The Buxanies requested the work, Nussbaum told them that an additional charge would be made, and the Buxanies agreed to pay for the extra work. Further, the Buxanies allowed the items to be installed with objection until it became time to pay. Thus, the court held that there was mutual assent to the oral agreement. Additionally, the Court of Appeals found that, because the work requested by the Buxanies was above and beyond what was required by the written contract, the extra work was not part of the written contract, and therefore the agreement to perform the extra work was not required to be in the form of written change orders.
C. Trevino and Gonzalez Co. v. R.F. Muller Co., 949 S.W.2d 39 (Tex. App.--San Antonio 1997, no writ).
This case involved a suit by a landowner against a contractor and the City of Laredo for damage to property caused by the contractor while installing a sewer pursuant to a construction permit that required the contractor to restore the site to its original condition. Plaintiff claimed that it was a third-party beneficiary of the permit, and that the permit was a contract between the contractor and the City. The court held that the granting of a building permit is a governmental function, and that it does not constitute a contract. The court called the building permit a revokable license authorizing construction. Because it is not a contract, the court continued, a building permit cannot be the basis of third-party beneficiary liability. Thus, the Court of Appeals affirmed the trial court's judgment in favor of the contractor and the City.
D. Hartman v. Urban, 946 S.W.2d 546 (Tex. App.--Corpus Christi 1997, no writ).
Padre Island Investment Corporation ("PIIC") hired Urban to prepare a plat of a subdivision. Urban completed the subdivision plat in February of 1972, but revised the plat in January of 1975 to correct an error made in the original plat. The revised plat was delivered to PIIC, but was never filed of record. In 1993, a home builder bought the lot for the purpose of building a home on it. He relied on the description of the lot as set forth in the Urban's original plat filed in the property records. The home builder later found that the designed home would not fit on the lot because of the error made by Urban in the original subdivision plat.
The home builder sued Urban for violations of the DTPA and negligence. On appeal, the court held that Urban was hired by the owner of the property to lay out the lots so that the subdivision could be created. Under these facts, Urban and the home builder were not in privity of contract. Therefore, the court held that Urban did not owe the builder a duty of care in the preparation of the original plat of the subdivision, nor did Urban owe the builder a duty to provide it with a record of any errors that the plat contained.
A. Green Int'l., Inc. v. Solis, 951 S.W.2d 384 (Tex. 1997).
Green International, Inc. ("Green") was the general contractor on three (3) prison projects for the State. Green subcontracted with Frank Solis for steel erection and a portion of the concrete work on the project. Solis completed the work on one of the projects, but abandoned the other two before the work was complete. Green sued Solis, and Solis counterclaimed against Green. The jury found that Green had caused delays to Solis through several different actions, and therefore Green had breached the contracts with Solis. On appeal, Green argued that Solis was barred from recovering damages resulting from Green's delays because the subcontract contained a "no-damages-for-delay" clause. Solis argued that the no damages for delay clause in the contract was unenforceable because it was not conspicuous and was ambiguous, and therefore was not in conformity with the standards set forth in Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505 (Tex. 1993) (holding that releases and indemnity agreements for one's own negligence must be clear as to their meaning and conspicuously typed in a font larger than the surrounding text and in bold print). However, the Court held that a "no-damages-for-delay" clause is not required to adhere to the standards set forth in Dresser, therefore the no damages for delay clause did apply, and Solis was not entitled to recover damages from Green caused by Green's delays.
B. Arthur Andersen and Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 1997).
In this case, the Texas Supreme Court ruled that in order to recover attorneys' fees under the Deceptive Trade Practices Act ("DTPA"), a plaintiff must prove that the amount of fees were both reasonably incurred and necessary to the prosecution of the case at bar, and must ask the jury to award the fees in a specific dollar amount rather than as a percentage of the judgment.
C. Chilton Ins. Co. v. Pate & Pate Enterprises, 930 S.W.2d 877 (Tex. App.--San Antonio 1996, writ denied).
The San Antonio Court of Appeals refused to allow the use of the Eichleay formula for computation of home/office overhead during delay on impacted performance periods. The court held that a contractor must prove that it incurred additional overhead costs "directly resulting from construction delays" caused by the owner. The court continued that "the additional expenses must be over and above normally incurred fixed expenses," and that the contractor is required to "demonstrate that it would have obtained other jobs to absorb the extra overhead but for the delay by [the owner]." After reviewing the evidence presented at trial, the Court of Appeals found that there was not sufficient evidence to show that the contractor had incurred overhead expenses beyond those costs that would have accrued whether the project was delayed or not, and therefore the evidence was insufficient to trigger the use of the Eichleay formula.
D. Altmayer v. Johnson, 79 F.3d 1129 (Fed. Cir. 1996).
In federal contracts the Eichleay formula can be applied if the facts demonstrate that (1)the owner caused compensable delays, disruption, or suspension; (2)the contractor remained on stand-by due to uncertain duration of the delaying events; and (3)the contractor was unable to reasonably take on additional work during the delay period.
E. Satellite Elec. Co. v. Dalton, 105 F.3d 1418 (Fed. Cir. 1997).
In this case, the contractor was denied home office overhead during an owner-caused suspension because the owner proved that the contractor had the ability to take on other work during the delay. The owner showed that the contractor bid and furnished bid bonds on 42 jobs during a 228 day suspension of work. The Board of Contract Appeals denied the contractor's recovery of home office overhead, and the contractor appealed, arguing that it did not actually get any of the projects for which it bid. On appeal, the Federal Circuit held that the owner was only required to prove that the contractor had the "organizational ability to perform replacement work" as opposed to actually obtaining it. Thus, the contractor was not allowed to recover its extended home office overhead damages.
F. Stewart Title Guar. Co. v. Aiello, 941 S.W.2d 68 (Tex. 1997).
The Texas Supreme Court reaffirmed the rule that exemplary (punitive) damages and mental anguish damages cannot be recovered for breach of contract suits.
G. The City of Tyler v. Likes, 41 Tex.Sup.Ct.J. 174, 1997 W.L. 760284 (Tex. 1997).
This case involved a homeowner's suit against the City for negligently constructing and maintaining drainage culverts, which resulted in flood damage to her home. The plaintiff sued the City, asking in part for mental anguish damages based on negligent property damage caused by the City. The Supreme Court held that mental anguish damages based solely on negligent property damage are not recoverable by a plaintiff as a matter of law.
INSURANCE
A. Highlands Ins. Co. v. Kelley-Coppedge, Inc., 950 S.W.2d 415 (Tex. App.--Ft. Worth 1997, no writ).
While Kelley-Coppedge, Inc. ("KCI") was laying a pipeline for a gas company, a KCI employee operating a ditcher struck a crude oil pipeline, causing it to release approximately 1600 barrels of crude oil. KCI notified Highlands Ins. Co. ("Highlands"), its commercial general liability insurance carrier. The oil spill damaged the property on which KCI was laying the pipeline. When KCI filed a claim on the policy, Highlands refused to pay for the cleanup. KCI sued Highlands, and the trial court granted summary judgment in favor of KCI and awarded it damages under the policy.
Highlands appealed, claiming the pollution exclusion precluded coverage. The policy excluded coverage for property damage arising out of the disbursal of a pollutant ". . . at or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured . . .." The court held that one can occupy a site without owning or holding an interest in the premises as long as he or she has the right to occupy portions of the property as are necessary to perform the obligations he or she has assumed. Therefore, the court concluded that KCI "occupied" the property, and coverage was excluded. The court reversed and rendered judgment in favor of Highlands.
B. Certain Underwriters v. C.A. Turner Construction Co., Inc., 112 F.3d 184 (5th Cir. 1997).
In this case, the court held that an insurance policy's pollution exclusion precluded coverage for job site injuries which were caused by the release of phenol gas while welders were welding a pipe. The court held that the release of the gas, though it was not widespread and did not cause environmental harm, fit under the policy's definition of "pollution," and thus the injuries were excluded from coverage. The court noted that "pollution" commonly is defined as contamination of the air by the discharge of harmful substances, and thus damage resulting from the release of phenol gas is excluded from coverage.
C. Maryland Ins. Co. v. Head Industrial Coatings & Services, Inc., 938 S.W.2d 27 (Tex. 1996).
In this case, the Supreme Court held that an insurance company owes no duty of good faith and fair dealing to investigate and defend a claim by a third party against its insured.
D. Rocor Int'l, Inc. v. National Union Fire Ins. Co., 1998 W.L. 9505 (Tex. App.--San Antonio 1998, n.w.h.).
In this case, a lawsuit was filed against an insurance company's insured. Despite the fact that the insured's liability was clear, the insurance company delayed settling the lawsuit, causing the insured to incur substantial attorneys' fees and expenses in preparing for trial. The insurance company, National, which eventually settled the case, was actually the excess carrier. The court held that, while the excess carrier had no duty to defend the insured, once it assumed the duty to settle the claims, it had the duty to do so in a reasonable manner, including reasonable promptness. Thus, the insured recovered the attorneys' fees and expenses it had incurred in preparation for trial.
E. Data Specialties, Inc. v. Transcontinental Ins. Co., 125 F.3d 909 (5th Cir. 1997).
An electrical contractor was hired to reconstruct the electrical system of a manufacturing facility. During testing of the electrical switchboard, a short circuit resulted in an explosion which damaged the switchboard and other property in the facility. The cause of the explosion was found to be a defective circuit breaker. The electrical contractor completed its job by hiring out a third party to repair and rebuild the damaged parts at the facility.
The electrical contractor sought reimbursement under its standard commercial general liability ("CGL") policy for the additional expenses it incurred because of the explosion. The insurance company denied coverage for the claim, and the electrical contractor sued the insurance company for breach of contract.
On appeal, the court noted that the electrical contractor was seeking to recover its own out-of-pocket expenses incurred in completing the work under its contract, and that no party had claimed that the contractor was at fault for the damages incurred by the explosion. The court held that the CGL policy language provided coverage only for those damages for which the insured was legally obligated to pay as a damages caused by the insured's torts, and not by the insured's breaches of contract. Thus, the court concluded that the insurance company was not obligated to reimburse the contractor.
A. Clayton Williams, Jr., Inc. v. Oliveo, 952 S.W.2d 523 (Tex. 1997).
In this case, the Supreme Court held that a general contractor in control of the premises on which it is working and/or its subcontractors are working can be liable for two types of negligence in failing to keep the premises safe: that arising from an activity on the premises and that arising from a premises defect. The Court continued that there are two types of premises defects which will form the basis of actions by a subcontractor's employee against a general contractor for personal injury. The first category involves existing defects on the premises or those that are created through activity unrelated to the activity of the injured employee or his employer. In such a situation, the general contractor has a duty to inspect the premises and warn the independent contractor's employees of dangerous conditions of which the general contractor knows or should know. The second category of premises defects are those created by the actions of the independent contractor. Generally, when the independent contractor creates dangerous conditions, the general contractor has no duty to warn the independent contractor's employees of such danger. However, when the general contractor retains control over part of the work of the independent contractor or when the general contractor actually exercises such control, the general contractor does have a duty to warn the independent contractor's employees of a dangerous condition arising out of the independent contractor's work.
B. Jacobs-Kathey Co. v. Cochran, 947 S.W.2d 288 (Tex. App.--Waco 1997, writ denied).
Jacobs-Kathey Co. ("Jacobs") serviced some air conditioners at a school in the Waco Independent School District. Jacobs allegedly failed to remove some air conditioning belts from a school roof after it had completed the job. Eight months later, Cochran, a roofing inspector employed by the Waco Independent School District, tripped over an air conditioning belt, fell over the side of the school, and sustained permanent injuries. Cochran sued Jacobs for negligence, and a jury awarded Cochran $325,000.00. On appeal, the court concluded that even though Jacobs had a company policy to remove debris left by others, that policy is insufficient to change the rule that a bystander has no duty to make safe a dangerous condition created by a third party. Cochran also asserted that Jacobs, because it was a highly technical and specialized air conditioner repair company, owed a duty under common law principles to remedy dangerous conditions created by third persons. The court concluded, however, that there is no such common law duty. The court did find that Jacobs had a duty to remove its own air conditioning belts from the premises. The court then concluded that there was sufficient evidence to support a finding by the jury of negligence against Jacobs, such finding necessarily based on the conclusion that the belt over which Cochran tripped had been left eight months earlier by Jacobs' employees.
C. Campbell v. Adventist Health System/Sunbelt, Inc., AHS Services, Inc., et al., 946 S.W.2d 617 (Tex. App.--Ft. Worth 1997, no writ).
After an employee of a subcontractor suffered injuries while working on the construction of a steel canopy at a medical office building, the employee sued the general contractor on the project. The employee of the subcontractor asserted that the general contractor had a contractual right to control the method and manner of work by personnel on the job site, and therefore, owed the employee a duty to exercise reasonable care in supervising the activities of subcontractors and preventing them and their employees from engaging in unsafe conduct.
The subcontract between the subcontractor and the general contractor provided that the general contractor had the right to control the activities of the subcontractor. However, the court considered the fact that the employee was an experienced iron worker. Most of his work at the project was done while he was on portable scaffolding similar to that from which he fell. He understood how to brace the scaffold and prevent unsteadiness, and he inspected the scaffold's wheels, brakes, and bracing each time he climbed the scaffold. The employee verified that at any time he thought it necessary to dismantle, move, and reassemble parts of the scaffold in order to perform his welding or other iron work on the canopy, the decision was his alone to make and he did the task without direction from anyone, because it was an integral part of his job.
On appeal, the Fort Worth Court of Appeals stated that the general rule is that one who entrusts work to an independent contractor, but who retains the control of any part of the work is subject to liability for physical harm to others which is caused by its failure to exercise its control with reasonable care. However, in order for this rule to apply, the employer must have retained at least some degree of control over the manner in which the work was done. It is not enough that the employer has merely a general right to order the work stopped or resumed, to inspect its progress or to receive reports, to make suggestions or recommendations which need not necessarily be followed, or to prescribe alterations and deviations. There must be such a retention of supervision that the contractor is not entirely free to do the work his own way. Pursuant to these rules, the court held that the subcontract provisions did not establish that the general contractor had a duty to exercise reasonable care to supervise its subcontractors and to prevent them and their employees from engaging in unsafe conduct.
D. Richard v. Cornerstone Constructors, Inc., 921 S.W.2d 465 (Tex. App.--Houston [1st Dist.] 1996, writ denied).
In this case, the Houston First Court of Appeals held that a general contractor is not liable for negligence per se (negligence based solely on the fact that an ordinance or regulation was violated) based upon OSHA duties to all employees, including employees of subcontractors, at construction sites. Thus, the common law duties owed by a general contractor are not expanded by OSHA regulations.
A. Bruce v. Jim Walter Homes, Inc., 943 S.W.2d 121 (Tex. App.--San Antonio 1997, writ denied).
The San Antonio Court of Appeals held that the RCLA prevails over all conflicting law on construction defects, including the DTPA. The court held, however, that a fraud cause of action is not in conflict with the RCLA, and thus is not preempted. The court reasoned that: "while the misrepresentation alleged in an action for fraud may be in regard to construction or a construction defect, the wrong sought to be redressed is not the subject of the misrepresentation but the act of the misrepresentation itself." Based on this case, it appears that the plaintiff would be able to circumvent the RCLA, and thus the damage limitations provided by the RCLA, by artfully pleading a cause of action as fraud.
B. In re Kimble Hill Homes of Texas, Inc., 1998 WL 223459 (Tex. App.--Houston [14th Dist.] 1998, n.w.h.). This case has not been released to the permanent law reports and may still be withdrawn.
In many respects this case directly conflicts with Bruce v. Jim Walters Homes, Inc. (discussed above). Several hundred homeowners in the Houston area who had purchased homes from Kimball Hill filed suit against Kimball Hill and HL&P alleging misrepresentations regarding the quality, craftsmanship, and energy efficiency of their homes. The homeowners asserted causes of action for conspiracy, common law fraud, statutory fraud in a real estate transaction, breach of contract, and breach of warranty. The Fourteenth Houston Court of Appeals held that the RCLA does apply to the homeowners' causes of action. The court held that the homeowners' pleading made clear that the underlying nature of their claim was for construction defects. While the homeowners alleged that Kimball Hill made multiple misrepresentations to them, the court reasoned that without the alleged construction defects in the homes, the homeowners would have nothing to complain about, and thus no claim against Kimball Hill. The court stated that "a claim that exists by virtue of alleged construction defects clearly falls within the RCLA." Further, the court said "the underlying nature of the claim controls and a plaintiff cannot by artful pleading recast a claim in order to avoid the adverse effect of a statute." Thus, it appears that the Houston Fourteenth Court of Appeals, in cases where a plaintiff alleges fraud regarding construction defects in a home, will hold that the RCLA does control the claim, and thus the damages limitation offered by the RCLA will control. Perhaps the Supreme Court will soon resolve the conflict between the Bruce case and the Kimball Hill Homes case.
C. O'Donnell v. Roger Bullivant of Texas, Inc., 940 S.W.2d 411 (Tex. App.--Ft. Worth 1997, writ denied).
In this case, a homeowner's demand letter pursuant to the RCLA provided a period for the contractor to respond which was longer than the statutory 45-day limit provided in the RCLA. When the contractor responded after the 45-day statutory limit, but before the time limit set forth in the homeowner's demand letter, the court held that the response by the contractor was timely, as the parties were allowed to agree to extend the time limit. However, the court held that the contractor's response was not a reasonable offer to repair the defects under the RCLA, and therefore the contractor would not receive the protection of the "damage cap" in the RCLA. The "damage cap" in the RCLA provides that the damages assessed against the contractor may not exceed the plaintiff's purchase price of the home.
A. Federal Sign v. Texas Southern University, 951 S.W.2d 401 (Tex. 1997).
The Texas Supreme Court held in this case that a state's sovereign immunity exists in two parts: immunity from suit and immunity from liability. The Court held that when the State contracts with a private party, the State waives its immunity from liability (i.e., from having to pay damages to the party for breach of contract). However, the State retains its immunity from suit (i.e., while the State may be liable to pay the private party damages for breach of contract, the party cannot actually sue the State to recover those damages). The Court continued that the State may waive its immunity from suit in two ways: it may enact a statute waiving immunity from suit for that particular governmental entity with whom the private party has contracted, or the private party may petition the Legislature for permission to sue that particular governmental entity in that particular case.
Unfortunately, as the dissent pointed out in the opinion, only 6% of the requests by private parties seeking Legislative consent to sue the State of Texas were granted in the eight years prior to 1996. Thus, the Supreme Court's ruling in this case effectively perpetuates the old rule that "the king (state) can do no wrong." Private parties must be very careful before entering into a contract with any State entity, including school districts, public universities and colleges, municipal utility districts, municipalities, counties, and all other state entities. A party may be barred from suing that State entity for breach of contract if a statute does not exist which specifically waives that State entity's immunity from suit. Thus, a private party needs to do some research before entering into a contract to perform any work for a division of the Texas government.
A. Jackson v. Coldspring Terrace Property Owners Assoc., 939 S.W.2d 762 (Tex. App.--Houston [14th Dist.] 1997, writ denied).
In 1969, Sam Gardener, a franchisee of Blue Haven Pools, built a pool on property which was subsequently purchased by Coldspring Terrace Property Owners Association ("Coldspring"). Blue Haven Pools was subsequently purchased by KDI Corporation ("KDI"). Fourteen (14) years later, in 1984, Jackson dove into the swimming pool and was rendered a quadriplegic. He sued a number of defendants alleging that the pool was negligently designed and did not have sufficient depth markings. The trial court granted summary judgment in favor of KDI and Gardener based upon the Statute of Repose.
On appeal, the court stated that the Statute of Repose (Section 16.009 of the Civil Practice and Remedies Code) provides that a suit against a person who constructs or repairs an improvement to real property cannot be brought later than ten (10) years after the improvement is constructed or repaired. The court then held that Gardener clearly fell within the Statute of Repose's protection because he was the individual who constructed the pool on the property. Regarding Blue Haven and KDI, the court continued that Blue Haven, and thus KDI's liability, if any, would arise from the franchise holding itself out as the manufacturer of the pool. Because Gardener was the actual manufacturer of the pool, the court concluded that any defenses available to Gardener were available to KDI and Blue Haven. Thus, the court held that Jackson's claims against Gardener, KDI, and Blue Haven were all barred by the Statute of Repose.
B. Reames v. Hawthorne-Seving, Inc., 949 S.W.2d 758 (Tex. App.--Dallas 1997, writ denied).
In this case, the court discussed which parties are protected by the Statute of Repose, and held, as previous decisions have held, that the Statute of Repose is only available to those parties who affix or annex personal property to real property. Those who only manufacture or sell an item are not protected unless they also install the item on the property. However, the court continued that a general contractor is protected even if the item was installed totally by a subcontractor.
C. Gordon v. Western Steel Co., 950 S.W.2d 743 (Tex. App.--Corpus Christi 1997, writ denied).
This important Statute of Repose case held that the Statute runs separately for each subcontractor who completes its work on the project. In this case, the subcontractors each completed their work more than ten (10) years before they were sued. However, the entire project, and thus the general contractor's work, was not substantially complete until a date within ten (10) years of the date that the contractor was sued. The court held that the Statute of Repose begins to run for a subcontractor on the date each subcontractor completes its portion of the work. Thus, the suits against each subcontractor were barred by the Statute of Repose. The court recognized that, in some fact scenarios, a general contractor may be exposed to liability because the entire project was completed within ten years of the suit being filed against the general contractor, while various subcontractors on the same project may be protected by the Statute of Repose, thus limiting the contractor's ability to cross-claim against certain subcontractors for construction defects on the project.
A. Universal Surety of America v. Central Electric Enterprises & Co., 956 S.W.2d 627 (Tex. App.--San Antonio 1997, no writ).
In this case, the San Antonio Court of Appeals held that a subcontractor who sought the proceeds of a payment bond paid for by a general contractor and issued by a surety was not a "consumer" under the DTPA. The subcontractor did not seek goods or services from the surety. Thus, because the subcontractor was not a "consumer" of anything from the surety, the consumer was prohibited from bringing a DTPA claim against the surety.