Texas Public Works Bond Claim Case

A recent case, brings good news for material suppliers and subcontractors. The Texas Supreme Court ruled in favor of an unpaid supplier regarding statutory and common law claims, even though the unpaid material supplier missed their bond claim deadlines. In Dealers Electrical Supply Co. v. Scoggins Construction Co. Inc., 2009 WL 1901638, Slip op No. 08-0272 (Tex. July 3, 2009), an electrical subcontractor on a bonded public-works project walked off the job and left his parts supplier, Dealers, unpaid. The supplier missed the McGregor Act deadline to pursue a claim on the bond, but filed suit against the prime or general contractor for violation of the Texas Construction Trust Fund Act and breach of a separate Joint Check Agreement.

At trial, it was held that the prime contractor's president violated the Trust Fund Act by failing to pay the supplier, and had guaranteed the payment of the supplier’s materials under a Joint Check Agreement, and was therefore liable. The court of appeals reversed incorrectly ruling that that the McGregor Act was the supplier’s exclusive remedy. The Texas Supreme Court disagreed, holding that the McGregor Act is the unpaid laborer and materialman's exclusive remedy against the payment bond but does not otherwise limit their other statutory and common-law claims. Dealers Electrical Supply Co. v. Scoggins Construction Co. Inc., 2009 WL 1901638, Slip op No. 08-0272 (Tex. July 3, 2009).