What if you miss your Bond Claim Deadline?
Earlier this year the Texas Supreme court ruled in favor of a supply company and the ruling has very good implications for subcontractors and suppliers. Here is an excerpt of the opinion:
Chapter 2253 of the Texas Government Code, historically called the McGregor Act, requires a prime contractor on a public-work contract to execute a payment bond to protect laborers and materialmen who work on or supply materials for the project. See Tex. Gov't Code § 2253.021(a), (2). In this case, an electrical subcontractor on a bonded public-work project walked off the job, leaving his supplier of electrical parts unpaid. The supplier missed the McGregor Act deadline to pursue a claim on the bond, and filed this suit against the prime contractor for violation of the Texas Construction Trust Fund Act, Tex. Prop. Code §§ 162.001(a), 162.031(a)
With this ruling it helps any supplier or subcontractor in a situation where they were not paid and missed the bond claim deadline outlined in the McGregor Act. Quiet often, the General Contractor received construction funds from the owner of the project to pay the supplier or subcontractor for the work or product but diverted it for another purpose. This is where the Texas Trust Fund Statute comes into place. The great thing about this statute is that you are able to sue owners of corporations personally for violation of the Statute. Specifically, owners of the General Contractor's company can be sued by the supplier or subcontractor for the outstanding balances owed to them. In a declining economy where construction companies are filing bankruptcy in record numbers, the Texas Trust Fund Statute provides a method of securing payment without having to stand in line with the other creditors in bankruptcy court. In the past, the law was vague as to whether or not suppliers or subcontractors would have this remedy if they failed to follow the bond claim process or was untimely in their pursuit of a bond claim. This case is definitely a win for the construction industry and helps clarify the situation and provides an extra remedy for the suppliers and subcontractors.
About the Author
Occupation: Attorney
Kelly Davis owns a law firm located in Lewisville, Denton County, Texas which is centrally located to the DFW metroplex, including Dallas, Tarrant and Collin Counties. She has been licensed to practice law since 1999, having graduated with her Juris Doctorate degree from St. Mary’s University School of Law. Kelly opened her own business, Kelly M. Davis & Associates, LLC, in 2002. Since then, she has practiced in all areas of civil litigation including business, construction, and commercial litigation. Additionally, her firm handles transactional work such as contracts, corporate entity formation, probate, wills, estate planning and trust.
Over the past five years, Kelly’s firm has primarily concentrated on representing construction related companies – home builders, suppliers, vendors and subcontractors of every trade. With law firms on every corner, most people wonder what makes our law firm different than most in the area. Primarily, it is Kelly’s family background in the building industry. Kelly spent many of hours as a little girl on construction job sites so she is familiar with most of the challenges faced by people in the industry. Also, KMDA’s wide variety of clients in the construction industry provides a readymade expert base for all their clients.
KMDA’s firm philosophy was originally derived from a conversation Kelly had with her dad when she was in law school. Her dad once told her that all attorneys, whether or not they represented the builder or not, automatically thought that the builder was guilty. Isn’t it interesting that this country is built on “innocence until proven guilty”… unless you are a builder? KMDA really wants builders who come to her firm for representation to know that KMDA truly fights for the builder and truly understands some of the specific issues that builders face every day.
In the past few years, KMDA’s practice has greatly expanded to include all types of vendors and subcontractors. While we have always filed a great deal of Mechanic’s liens, unfortunately the economy is in such a state that we file close to 100 liens and lien notices per month. What this means to our client is that we have been able to automate the lien process and have made it much more economical for our clients. For our vendors and subcontractors, KMDA has had great success in collecting their past due accounts and greatly decreasing their receivables.
Surely everyone would agree that if you have a heart problem you go to a cardiologist not just your local clinic doctor. Kelly thinks that construction related issues are the same. If you are going to hire legal counsel, why not hire someone whose practice mainly consists of issues you face every day? If you go to an attorney that does not primarily practice construction litigation, you are more than likely paying for that attorney’s learning curve because a portion of your bill will go towards that attorney learning construction law. Also, along those lines, most attorneys only handle cases in a few counties. KMDA travels where our builders are and where they build and we are used to handling cases all over the State of Texas.
