INTERSTATE CONTRACTING CORPORATION, Appellee, v. CITY OF DALLAS, Texas, Appellant

INTERSTATE CONTRACTING CORPORATION, Appellee, v. CITY OF DALLAS, Texas, Appellant

Texas recognizes pass-through claims in construction contracts; the contractor must remain liable to the subcontractor for the damages claimed (liability may be conditional or contingent), and the owner bears the burden to prove as an affirmative defense that the pass-through arrangement negates that liability; the Court did not resolve sovereign immunity issues.

Citation
135 S.W.3d 605; 47 Tex. Sup. Ct. J. 434; 25 A.L.R. 6th 729; 2004 Tex. LEXIS 354; 2004 WL 835705
Parties
Appellee (contractor): Interstate Contracting Corporation; Appellant (owner): City of Dallas, Texas
Court
Texas Supreme Court
Jurisdiction
United States
Judgment Date
16 April 2004
Case Number
03-0152
Procedural Posture
Certified Questions From the United States Court of Appeals for the Fifth Circuit / Supreme Court of Texas Opinion Answering Certified Questions
Outcome
Certified questions answered: (1) Yes, Texas recognizes pass-through claims; (2) Contractor must remain liable to subcontractor for subcontractor's damages and owner bears burden to prove contractor non-liability; sovereign immunity not addressed.
Legal Topics
Pass Through Claims, Privity of Contract, Liquidation Agreements, Severin Doctrine, Burden of Proof, Standing
Source Language
English
Contract Law Construction Law Civil Procedure Municipal Law Pass Through Claims Privity of Contract Liquidation Agreements Severin Doctrine +2 more

Case Brief

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Parties

Interstate Contracting Corporation

Appellee (contractor)

City of Dallas, Texas

Appellant (owner)

Procedural Posture

Certified Questions From the United States Court of Appeals for the Fifth Circuit / Supreme Court of Texas Opinion Answering Certified Questions

Legal Issues

  1. 1 Whether Texas recognizes pass-through claims by contractors on behalf of subcontractors absent privity between subcontractor and owner
  2. 2 What requirements must be satisfied to assert such pass-through claims and who bears the burden of proof
  3. 3 Relation of privity and standing to pass-through claims and limits of the doctrine (e.g., construction context)

Ratio Decidendi

Texas recognizes pass-through claims in construction contracts; the contractor must remain liable to the subcontractor for the damages claimed (liability may be conditional or contingent), and the owner bears the burden to prove as an affirmative defense that the pass-through arrangement negates that liability; the Court did not resolve sovereign immunity issues.

Court Disposition

Certified questions answered: (1) Yes, Texas recognizes pass-through claims; (2) Contractor must remain liable to subcontractor for subcontractor's damages and owner bears burden to prove contractor non-liability; sovereign immunity not addressed.

Orders

  • Answer to certified question 1: Texas recognizes pass-through claims in construction contracts.
  • Answer to certified question 2: Contractor must remain liable to subcontractor for the pass-through claim; owner bears burden to prove an affirmative defense negating contractor liability.