Texas Construction Contracts: Pay-When-Paid or Pay-If-Paid?

 There is a big difference between so-called “pay-when-paid” clauses and “pay-if-paid” clauses.

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The Foreclosure Process in the Probate Context

This article was originally published in the Advocate The Advocate (Texas) - Symposium on Decedents and Ward - Fall, 2009. It is intended to provide an overview of the real property foreclosure process in the probate context. The substance of the article assumes basic familiarity with the foreclosure process under the Texas Property Code and basic familiarity with the estate administration processes under the Texas Probate Code.

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No Tort Liability of Project Architect for Economic Damages Suffered by Contractor or Subcontractor

LAN/STV v. Martin K. Eby Const. Co., Inc., 11-0810, 2014 WL 2789097 (Tex. June 20, 2014).
The Eby opinion involves three parties: (1) the general contractor, (2) the architect, and (3) the Dallas Area Rapid Transportation Authority (“DART”).
DART contracted with the architect, LAN/STV, to create the plans, drawings, and specifications for light rail project in downtown Dallas. Martin K. Eby Construction Company (“Eby”) won the bid from DART with a bid for $25 million to construct the project. Almost immediately, Eby noticed that 80% of LAN/STV’s plans had errors. The massive amount of errors in the plans caused significant delays in construction and increased expenses for Eby, roughly $14 million according to Eby’s calculations.
Eby first sued DART for breach of contract, but the case was dismissed because Eby had not followed the administrative procedure illustrated in its contract with DART prior to filing suit. Eventually, DART settled with Eby for $4.7 million. During the course of the administrative proceedings, Eby also filed suit against LAN/STV for negligence and negligent misrepresentation.
In its opinion, the Texas Supreme Court emphasizes the importance of addressing the potential for economic risks in contractual negotiations.
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An Overview of Collateral Estoppel in Adversary Proceedings

Collateral estoppel applies to adversary proceedings.

The doctrine of collateral estoppel or issue preclusion provides that “when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.” Dowling v. United States, 493 U.S. 342, 347 (1990) (citing Ashe v. Swenson, 397 U.S. 436 (1970)). This doctrine, precluding the relitigation of issues, is designed to promote judicial efficiency, protect parties from multiple lawsuits, and prevent inconsistent judgments. See Lytle v. Household Mfg. Inc., 494 U.S. 545, 553 (1990); Allen v. McCurry, 449 U.S. 90, 94 (1980); Montana v. United States, 440 U.S. 147, 153–54 (1979).

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Update: Arbitration Provision in Trust Enforceable

In Rachal v. Reitz, No. 11-0708, 2013 WL 1859249 (Tex. May 3, 2013), the Texas Supreme Court determined whether an arbitration provision contained in an inter vivos trust was enforceable against the trust beneficiaries. The trust contained a provision requiring all disputes regarding the trust and the trustee to proceed to arbitration. When a trust beneficiary sued the trustee alleging that the trustee violated the terms of the trust, the trustee moved to compel arbitration. The trial court denied the motion; the appellate court affirmed. The Supreme Court of Texas held the arbitration provision was enforceable against the beneficiary for two reasons.

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Introduced Bill Would Allow Substituted Service via Facebook

Last week, the Texas Legislature introduced H.B. No. 1989 which, if enacted, would allow substituted service through social media websites in certain circumstances. 

Under the proposed bill, if a court authorizes substituted service under the Texas Rules of Civil Procedure, the court may order service via an electronic communication sent to the defendant through a social media website. The court must find: 

  1. the defendant maintains a social media page on that website; 
  2. the profile on the social media page is the profile of the defendant; 
  3. the defendant regularly accesses the social media page account; and 
  4. the defendant could reasonably be expected to receive actual notice if the electronic communication was sent to the defendant's account. 

The bill has been referred to the Judiciary & Civil Jurisprudence committee for further action. 

The bill was introduced by Rep. Jeff Leach (profile) who represents District 67 (map). The entire text of H.B. 1989 can be found here.

Michael H. Bernick



Rule 11 Agreement Filed Over A Year After It Was Signed Is Enforceable

In Markarian v. Markarian, the Dallas Court of Appeals upheld a trial court’s ruling that a final divorce decree signed by the parties, and filed over a year after it was signed, was enforceable pursuant to Rule 11 of the Texas Rules of Civil Procedure. Rule 11 provides that agreements must be (1) in writing, (2) signed, and (3) filed with the papers as a part of the record to constitute an enforceable Rule 11 agreement. See Texas Rule of Civil Procedure 11. However, the rule does not state when the writing must be filed

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Supreme Court of Texas to Issue Decision on Spoliation of Evidence

The Surpreme Court of Texas heard argument in September 2012, in Brookshire Bros., Ltd. v. Aldridge, No. 12-08-00368-CV, 2010 WL 2982902 (Tex. App.—Tyler July 30, 2010, pet. granted) (mem. op.). The issues presented involve whether the trial court erred by admitting evidence of spoliation and including a spoliation instruction in the jury charge of a slip-and-fall case.


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Texas Supreme Court Enforces "Differing Site Conditions" Clause

 In El Paso Field Services, LP v. MasTec North America, Inc., No. 10-0648, 2012 WL 6634023 (Tex. Dec. 21, 2012), MasTec entered into a lump sum contract with El Paso to construct a $3.6 million butane pipeline for El Paso.  The contract contained a “differing site conditions” clause, which shifted the risk for unanticipated conditions to MasTec. MasTec also assumed “full and complete responsibility for any such conditions pertaining to the Work, the site of the Work or its surroundings” notwithstanding “any representations, statements or information made or furnished by [El Paso].” However, the contract also provided that El Paso would exercise due diligence in locating foreign crossings in the pipeline route on the worksite premises.

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Texas Supreme Court Holds Chiropractor Had a Duty to Disclose

In Felton v. Lovett, No. 11-0252, 2012 WL 5971207 (Tex. 2012), a patient, who suffered vertebral arterial dissection and stroke as a result of a neck manipulation, brought an action against a chiropractor, alleging that he failed to disclose risks associated with the neck manipulation procedure. 

The jury found in favor of the patient and awarded damages against the chiropractor.  The chiropractor appealed.

A reasonable health care provider must disclose the risks that would influence a reasonable patient in deciding whether to undergo treatment.  A health care provider may be liable for failing to disclose to a patient the risks inherent in proposed treatment. 

The issue in this case was whether the possibility that a patient would suffer a negative reaction to a procedure due to an undetectable physical condition was a risk that was inherent in the procedure.

The court of appeals concluded that because the patient’s injury would not have occurred but for his own physical condition—an unhealthy vertebral artery—the risk could not have been inherent in the chiropractor’s treatment.  The Texas Supreme Court held that the court of appeals ruling “ignores the evidence that the patient’s injury would not have occurred but for the chiropractor’s treatment, that chiropractic neck manipulation can result in vertebral artery dissection, and that dissection and stroke are known risks of chiropractic treatment that should be disclosed.”  As such, the Texas Supreme Court held that risk of vertebral artery dissection and stroke was inherent in neck manipulations, and, thus, the chiropractor had a duty to disclose the risk.


Strict Compliance Required for Default Judgment

In Bailey’s Furniture, Inc. v. Graham-Rutledge & Co., No. 05-11-00710-CV, the Fifth District Court of Appeals reaffirmed the long standing rule that strict compliance with Texas Rule of Civil Procedure 106(b) is necessary to establish proper service on a defaulting defendant.   

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Texas Supreme Court to Determine if Arbitration Clause in Trust is Enforceable




In Rachal v. Reitz, 347 S.W.3d 305 (Tex. App.--Dallas 2011, pet. filed), a beneficiary of a trust (the “Beneficiary”) sued the trustee (the “Trustee”), alleging failure to provide an accounting and breach of fiduciary duties.  The Trustee filed a motion to compel arbitration and to stay litigation, arguing that the Beneficiary must arbitrate his claims against the Trustee pursuant to a provision contained in the trust document.  The arbitration clause at issue stated:

Arbitration.  Despite anything herein to the contrary, I intend that as to any dispute of any kind involving this Trust or any of the parties or persons concerned herewith (e.g. beneficiaries, trustees), arbitration as provided herein shall be the sole and exclusive remedy....

The trial court denied the Trustee’s motion, and the Trustee appealed.

The existence of an arbitration agreement is based on Texas contract law. The sole evidence presented to support the Trustee’s motion—the trust document—expressed the settlor's intent that disputes involving the trust be resolved by arbitration.  The court of appeals held that the Trustee did not establish how the settlor's expression of intent satisfied all of the required elements of a contract or how this expression of the settlor's intent transformed the trust provision into an agreement to arbitrate between the Beneficiary and the Trustee. Accordingly, the court of appeals held that the arbitration provision in the trust document was not enforceable as an agreement to arbitrate.

The Texas Supreme Court agreed to review the appellate court's decision and is expected to issue a ruling in this case of first impression next year.


A Primer on Expedited Actions Under Texas Rule of Civil Procedure 169


In 2011, the Texas Legislature passed House Bill 274, which called upon the Supreme Court of Texas to promulgate procedural rules and amendments for expedited civil actions. The Supreme Court formed a task force to answer the legislature’s call, and the task force proposed several modifications to the Texas Rules of Civil Procedure. On November 13, 2012, the Supreme Court adopted the final proposed rules and amendments. This primer provides a review of major portions of the expedited action process.


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Top Ten Reasons to Plan Your Estate Now - Number Three

If you have a special needs child, do you have a plan in place that will allow your child to receive government assistance if something were to happen to you? Or would your child inherit assets that would disqualify him or her from receiving government assistance?

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Foreclosing on Residential Property under the Protecting Tenants at Foreclosure Act of 2009


In response to the housing collapse in 2009, the United States Congress enacted the Protecting Tenants at Foreclosure Act of 2009 (the “Act”) to protect tenants who live in residential properties that are being foreclosed from abruptly losing their homes. Lenders foreclosing on residential properties must comply with the obligations presented by the Act before filing a forcible detainer action against certain tenants residing in the properties. The Act was originally set to expire on December 31, 2012; however, the Dodd-Frank Wall Street Reform and Consumer Protection Act extended the Act to December 31, 2014. 

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