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Defendant's Attorney:
William K. Luyties
Paul Judson Goldenberg
Description:
Houston, Texas – Civil Litigation lawyer represented Appellants with asserting negligence and gross negligence claims.
The Gurkas own property in an unincorporated part of Harris County. This
property lies within the 100-year floodplain as designated by the Federal Emergency
Management Agency (“FEMA”). The Base Flood Elevation for this area, as set by
FEMA, is 53 feet. Harris County regulations require the first floor of a residence in
a 100-year floodplain to be built 18 inches above the Base Flood Elevation, or at an
elevation of 54.50 feet.
In 2016, the Gurkas decided to build a new house. They reached out to Araceli
Jaimes, who owns and operates a construction and remodeling business called
AGVR Construction. The Gurkas and Jaimes negotiated two contracts for
construction of the new house. In the first contract, Jaimes, as the contractor, agreed
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to furnish “all floor plans and permits as they pertain to work to be performed” on
the Gurkas’ property, including a “plan and scale drawing showing the shape, size
dimensions, and construction and equipment specifications for home
improvements.” Jaimes had the discretion to “engage subcontractors to perform
work hereunder,” provided that she fully paid the subcontractors and “in all instances
remain[ed] responsible for the proper completion of this Contract.”
The second contract set out specifications for construction of a
“barndominium” style house and installation of a septic tank on the Gurkas’
property. Among other provisions, Jaimes agreed that the “ground elevation” would
be “raised as set forth in floor plans, ranging between 18 in. to 2 ft. for the
construction of a (60 ft. by 35 ft.) Barndominium (as required by local county).” She
also agreed to install “a foundational cement slab with its corresponding cement
beams (as approved by local county).” The parties further agreed, again, that Jaimes
could hire subcontractors to perform work under the contract—provided that Jaimes
fully paid the subcontractors and “in all instances remain[ed] responsible for the
proper completion of this Contract.” They also agreed that Jaimes “shall obtain all
permits necessary for the work to be performed.” Jaimes and the Gurkas were the
only signatories to these two contracts.
Jaimes entered into a subcontract agreement with Trevino, a licensed
professional engineer, and his engineering firm. In the “Scope of Work,” Trevino
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agreed to provide the following to Jaimes: “Site Plan, Architectural Plans, Electrical
Layout, Foundation Plans, Elevation Certificate, Harris County Floodplain Notes,
Septic System Design, [and] Permit Runs.” The parties agreed that Trevino would
not provide “[t]he following items and all other work not mentioned at the scope of
work”: “Harris County plan review and permit fees, Inspections during construction,
Boundary Survey, Plat or Re Plat, Soil Report, [and] Metal Building Pre Fab Plans.”
Trevino and Jaimes were the only signatories to this contract.
It is undisputed that Trevino provided the required architectural plans for the
house. It is also undisputed that his office applied for a residential building permit.
One of the documents that Trevino was required to complete and provide to the
Harris County Engineering Department to obtain the building permit was an
Elevation Certificate. In this document, Trevino certified, among other things, that
based on the construction plans and designs, the elevation of the first floor of the
house would be 54.50 feet, 18 inches above the Base Flood Elevation of 53.0 feet.
The Harris County Engineering Department approved the architectural plans
and issued a residential building permit to the Gurkas. The permit stated, “It is your
responsibility to call for all required inspections.” It also stated that a final inspection
would be required before the finished house would be “released” to obtain a
permanent electricity connection. Before the Gurkas could request a final inspection
by Harris County, they were required to submit three certificates completed by
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licensed professionals: an “Under Construction” Elevation Certificate; an As-Built
Certificate; and a “Final” Elevation Certificate. The “Under Construction” Elevation
Certificate is typically completed after the slab of the house is poured and before
framing of the house begins to ensure that construction is following the approved
plans and the house is being built to the proper elevation. It is undisputed that
Trevino did not inspect the house after the slab was poured, and he did not complete
an Elevation Certificate at that time.1
During construction, the Gurkas paid Jaimes the full contract price. Jaimes
constructed the slab, the frame, the roof, and the walls, but she did not finish the job.
The Gurkas then contracted with Jaimes’s brother, Victor, to complete construction.
When construction was finished, Trevino completed another Elevation Certificate in
March 2017. Trevino certified that the finished elevation of the first floor of the
house was 53.17 feet, which was approximately 13 inches below the elevation
required by FEMA and Harris County. As a result, Trevino was unable to issue an
As-Built Certificate certifying that the house complied with the approved
1 Trevino did not have any contact with the Gurkas during the planning or
construction of the house. He provided the architectural plans and the permits to
Jaimes. He also provided to Jaimes a copy of the Harris County Floodplain Notes,
which require, among other things, the completion of three Elevation Certificates:
“one at permitting, a second after the slab is poured or sub-floor is installed and
before the framing starts, and a third is required once construction is finished.”
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architectural plans. The house did not pass final inspection by Harris County, and
the Gurkas were unable to obtain a permanent electricity connection for the house.
The Gurkas obtained an estimate that the cost of raising the entire house to
meet the elevation requirement would be approximately $280,000. A second option
presented to them was to tear down the house and rebuild it at the correct elevation.
Although the Gurkas were able to live in the house by running an electrical line to
their pre-existing house on the property, they were unable to place the property on
the market or obtain flood insurance.
In August 2017, the house flooded during Hurricane Harvey. The Gurkas
spent approximately $41,000 on repairs to the house and on replacing personal
belongings.
The Gurkas filed suit against Araceli Jaimes d/b/a AGVR Construction &
Remodeling, Trevino, Trevino’s engineering firm, and Victor Jaimes.2 The Gurkas
sued Trevino and his firm for negligence and gross negligence, alleging that Trevino
“failed to act with ordinary care in overseeing the construction of the residence.”
Specifically, they alleged that an engineer acting with ordinary care “would have
ensured that AGVR constructed the home in compliance with the approved and
2 Neither Araceli nor Victor Jaimes joined Trevino’s motion for summary judgment
against the Gurkas. After the trial court granted Trevino’s motion, it severed the
Gurkas’ claims against Trevino into a separate cause number, making that summary
judgment final. Neither Araceli nor Victor Jaimes are parties to this appeal.
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permitted plans as well as timely inspect and certify the foundation prior to
continuing construction of the home.” The Gurkas sought damages, including the
reasonable cost of repairs to their house to cure the construction defect, the
reasonable cost of replacement or repair of damaged goods inside the residence,
“physical injury to [their] property requiring repairs to the residence and
remediation,” and exemplary damages.
Trevino and his firm moved for traditional summary judgment. They argued
that they were entitled to judgment as a matter of law on the Gurkas’ negligence and
gross negligence claims because the economic loss rule applied and barred recovery
on both claims. Trevino argued that he and the Gurkas were not in privity; instead,
his only contractual relationship was with Jaimes, and any duties he owed were owed
to her.
The Gurkas responded that the economic loss rule should not apply in this
situation. In part, the Gurkas argued that because Trevino—not Jaimes—applied for
the building permit, Trevino assumed an independent duty to complete a second
Elevation Certificate after the slab was poured, as required by Harris County
regulations, and ensure that the house was built at the correct elevation. They argued
that because this duty was imposed by law and not by contract, the economic loss
rule did not bar their claims against Trevino.
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The trial court granted Trevino’s motion for summary judgment and
dismissed the Gurkas’ claims against Trevino and his firm. The court then severed
the Gurkas’ claims against Trevino and his firm into a separate cause number. The
Gurkas moved for a new trial, again arguing that the economic loss rule did not bar
their claims against Trevino. The motion for new trial was overruled by operation of
law, and this appeal followed.
Summary Judgment
In their sole issue on appeal, the Gurkas argue that the trial court erred by
rendering summary judgment in favor of Trevino and his firm because the economic
loss rule does not apply to bar their claims for negligence and gross negligence.
A. Standard of Review
We review a trial court’s summary judgment ruling de novo. Odyssey 2020
Acad., Inc. v. Galveston Cent. Appraisal Dist., 624 S.W.3d 535, 540 (Tex. 2021).
To be entitled to traditional summary judgment, the moving party must demonstrate
that no genuine issue of material fact exists and the party is entitled to judgment as
a matter of law. JLB Builders, L.L.C. v. Hernandez, 622 S.W.3d 860, 864 (Tex.
2021); see TEX.R.CIV. P. 166a(c). If the moving party carries this burden, the burden
shifts to the nonmovant to raise a genuine issue of material fact precluding summary
judgment. Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018).
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Summary judgment is improper if the nonmovant brings forth more than a
scintilla of probative evidence to raise a fact issue. King Ranch, Inc. v. Chapman,
118 S.W.3d 742, 751 (Tex. 2003). The nonmovant presents more than a scintilla of
evidence when the evidence rises to a level that would enable reasonable and fairminded people to differ in their conclusions. Id. When reviewing a summary
judgment ruling, we take as true all evidence favorable to the nonmovant, and we
indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.
Hillis v. McCall, 602 S.W.3d 436, 440 (Tex. 2020) (quoting Valence Operating Co.
v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005)).
B. Economic Loss Rule
The “economic loss rule” is a collection of rules that govern the recovery of
economic losses in certain areas of the law. Sharyland Water Supply Corp. v. City
of Alton, 354 S.W.3d 407, 415 (Tex. 2011). Generally, the rule precludes recovery
in tort for economic losses resulting from a party’s failure to perform under a
contract when the harm consists only of the economic loss of a contractual
expectancy. Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 445 S.W.3d
716, 718 (Tex. 2014) (per curiam); James J. Flanagan Shipping Corp. v. Del Monte
Fresh Produce N.A., Inc., 403 S.W.3d 360, 365 (Tex. App.—Houston [1st Dist.]
2013, no pet.). Courts have defined “economic loss” as “damages for inadequate
value, costs of repair and replacement of the defective product, or consequent loss
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of profits—without any claim of personal injury or damage to other property.” Bass
v. City of Dallas, 34 S.W.3d 1, 9 (Tex. App.—Amarillo 2000, no pet.). If the injury
is due to a failure to fulfill a contractual obligation, the economic loss rule bars
recovery of economic losses in tort. Eagle Oil & Gas Co. v. Shale Expl., LLC, 549
S.W.3d 256, 268 (Tex. App.—Houston [1st Dist.] 2018, pet. dism’d). This rule does
not, however, bar all tort claims that arise out of a contractual setting. Chapman
Custom Homes, 445 S.W.3d at 718.
A party’s acts may breach duties in tort, duties in contract, or duties in both
simultaneously. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986).
A claim sounds in contract when the only injury is economic loss to the subject of
the contract itself. ½ Price Checks Cashed v. United Auto. Ins. Co., 344 S.W.3d 378,
387 (Tex. 2011). In the context of service contracts, “the subject matter of the
contract generally does not include other property that is not part of the contract.”
Flying J Inc. v. Meda, Inc., 373 S.W.3d 680, 686 (Tex. App.—San Antonio 2012,
no pet.).
A party states a tort claim when the duty allegedly breached is independent of
the contract and the harm suffered is not merely the economic loss of a contractual
benefit. Chapman Custom Homes, 445 S.W.3d at 718; Eagle Oil & Gas, 549 S.W.3d
at 268 (“Even if the matter in dispute is the subject of a contract, a party may elect a
recovery in tort if the duty breached stands independent from the contractual
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undertaking, and the alleged damages are not solely the result of a bargained-for
contractual benefit.”). The Texas Supreme Court has explained this distinction:
Tort obligations are in general obligations that are imposed by law—
apart from and independent of promises made and therefore apart from
the manifested intention of the parties—to avoid injury to others. If the
defendant’s conduct—such as negligently burning down a house—
would give rise to liability independent of the fact that a contract exists
between the parties, the plaintiff’s claim may also sound in tort.
Conversely, if the defendant’s conduct—such as failing to publish an
advertisement—would give rise to liability only because it breaches the
parties’ agreement, the plaintiff’s claim ordinarily sounds only in
contract.
Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991) (internal quotations
omitted).
“[T]he nature of the injury helps determine which duty or duties are breached
and, ultimately, which damages are appropriate.” Med. City Dallas, Ltd. v. Carlisle
Corp., 251 S.W.3d 55, 61 (Tex. 2008); Jim Walter Homes, 711 S.W.2d at 618. The
focus of the economic loss rule is “on determining whether the injury is to the subject
of the contract itself.” Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1,
12 (Tex. 2007); see also Mid-Continent Aircraft Corp. v. Curry Cnty. Spraying Serv.,
Inc., 572 S.W.2d 308, 312–13 (Tex. 1978) (stating, in products liability case, that
“[d]istinguished from personal injury and injury to other property, damage to the
product itself is essentially a loss to the purchaser of the benefit of the bargain with
the seller”). “In operation, the rule restricts contracting parties to contractual
remedies for those economic losses associated with the relationship, even when the
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breach might reasonably be viewed as a consequence of a contracting party’s
negligence.” Lamar Homes, 242 S.W.3d at 12–13.
Courts have applied the economic loss rule to negligence claims between
parties who were not in contractual privity. Sterling Chems., Inc. v. Texaco Inc., 259
S.W.3d 793, 799 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (citing
examples); see also Sharyland Water Supply Corp., 354 S.W.3d at 419 (noting that
court had previously held that economic loss rule can apply when no privity of
contract exists). However, the simple fact that the injury is to a subject of a contract
“does not mean that a contractual stranger is necessarily barred from suing a
contracting party for breach of an independent duty,” because otherwise “a party
could avoid tort liability to the world simply by entering into a contract with one
party.” Sharyland Water Supply Corp., 354 S.W.3d at 419; see Rio Grande City
Consol. Indep. Sch. Dist. v. Puentes, No. 13-19-00033-CV, 2020 WL 6878736, at
*4 (Tex. App.—Corpus Christi–Edinburg Nov. 24, 2020, pet. denied) (mem. op.)
(disagreeing with defendant’s trial-level contention that economic loss rule
necessarily bars tort claims between parties not in contractual privity); Barzoukas v.
Found. Design, Ltd., 363 S.W.3d 829, 838 (Tex. App.—Houston [14th Dist.] 2012,
pet. denied) (“Sharyland demonstrates that the mere presence of contracts in the
general vicinity of a construction dispute does not justify indiscriminate invocation
of the economic loss rule.”).
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Whether the economic loss rule bars a tort claim is a question of law. Eagle
Oil & Gas, 549 S.W.3d at 268. In determining whether the rule applies, we consider
the source of the defendant’s alleged duty and the damages sought by the plaintiff.
Id.; Levco Constr., Inc. v. Whole Foods Mkt. Rocky Mountain/Sw. L.P., 549 S.W.3d
618, 635 (Tex. App.—Houston [1st Dist.] 2017, no pet.).
C. Whether The Economic Loss Rule Applies to Bar The Gurkas’ Claims
Courts, including the Texas Supreme Court, have addressed the applicability
of the economic loss rule in the construction context in which general contractors
and subcontractors are involved and not all parties are in contractual privity with one
another. In LAN/STV v. Martin K. Eby Construction Co., an architect contracted with
the Dallas Area Rapid Transit Authority (“DART”) to prepare plans, drawings, and
specifications for a proposed light rail line. See 435 S.W.3d 234, 236 (Tex. 2014).
The architect agreed to be responsible for the quality and accuracy of the plans, and
it agreed to be liable to DART for all damages caused by negligent performance of
its services. Id. DART included the architect’s plans when it solicited bids for the
project, and Martin K. Eby Construction submitted the low bid on the project. Id.
Eby and the architect did not have a contract with each other, and the architect did
not owe Eby any contractual obligations. Id.
After the architect’s plans proved to be “full of errors,” many of the plans and
drawings had to be changed, construction slowed down, and Eby lost millions of
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dollars on the project. Id. Eventually, Eby sued the architect for negligent
misrepresentation and sought damages for the increased cost of performing under
the contract. Id. at 237. The architect argued that the jury verdict against it should be
overturned because the economic loss rule barred Eby’s negligent misrepresentation
claim. Id.
The Texas Supreme Court surveyed both the history of the economic loss rule
and caselaw concerning claims for negligent performance of services and negligent
misrepresentation. Id. at 238–45. Then, it turned to the application of the economic
loss rule in the context of construction projects. The court observed:
Construction projects operate by agreements among the participants.
Typically, those agreements are vertical: the owner contracts with an
architect and with a general contractor, the general contractor contracts
with subcontractors, a subcontractor may contract with a subsubcontractor, and so on. The architect does not contract with the
general contractor, and the subcontractors do not contract with the
architect, the owner, or each other.
We think it beyond argument that one participant on a construction
project cannot recover from another—setting aside the architect for the
moment—for economic loss caused by negligence. If the roofing
subcontractor could recover from the foundation subcontractor
damages for extra costs incurred or business lost due to the latter’s
negligent delay of construction, the risk of liability to everyone on the
project would be magnified and indeterminate . . . .
Id. at 246.
Quoting a tentative draft of the Restatement (Third) of Torts: Liability for
Economic Harm, the supreme court then stated:
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There is no liability in tort . . . when the owner of a construction project
sues a subcontractor for negligence resulting in economic loss; nor is
liability found when one subcontractor is sued by another because the
negligence of the first drives up the costs of the second. A
subcontractor’s negligence in either case is viewed just as a failure in
the performance of its obligations to its contractual partner, not as the
breach of a duty in tort to other subcontractors on the same job, or to
the owner of the project. This way of describing the subcontractor’s
role is not inevitable in all cases. General rules are favored in this area
of the law, however, because their clarity allows parties to do business
on a surer footing. In this setting, a rule of no liability is made especially
attractive by the number and intricacy of the contracts that define the
responsibilities of subcontractors on many construction projects. That
web of contracts would be disrupted by tort suits between
subcontractors or suits brought against them by a project’s owner.
Id. (emphasis added).
Ultimately, the Texas Supreme Court ruled that the economic loss rule barred
Eby’s claim against the architect. The court reasoned that DART was contractually
obligated to provide accurate plans and drawings to Eby, and when it did not do so,
Eby availed itself of the remedies in that contract and settled its claims against
DART. Id. at 249. DART could have sued the architect for breach of its contractual
obligation to provide accurate plans, but it did not do so. Id. Eby, however, had no
contract with the architect and was not a party to the architect’s contract with DART.
Id. The economic loss rule applied in that case “to preclude a general contractor from
recovering delay damages from the owner’s architect.” Id. at 250.
In a memorandum opinion, the Corpus Christi–Edinburg Court of Appeals
followed LAN/STV and concluded that the economic loss rule barred the property
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owner’s negligence claims against the engineer, a contractual stranger to the owner.
See Rio Grande City Consol. Indep. Sch. Dist., 2020 WL 6878736, at *7–8. In that
case, the school district desired to build a high school. The school district contracted
with an architect, who agreed to provide the necessary architectural and engineering
services. Id. at *1. The architect then entered into a subcontract with an engineering
firm. Id. The school district did not have a contractual relationship with the engineer.
After the school district discovered alleged construction and design defects, it
asserted a negligence claim against the engineer, but the trial court granted summary
judgment in favor of the engineer, ruling that the economic loss rule applied to bar
the claim. Id. at *1–2.
The Corpus Christi–Edinburg Court discussed LAN/STV in depth, observing
that the Texas Supreme Court applied the economic loss rule in that case, a “vertical
construction defect” case. Id. at *4–5. The court acknowledged that the school
district sued the engineer for its allegedly negligent acts or omissions in connection
with the engineer’s subcontract with the architect, and it then examined the
obligations under that contract. Id. at *5–6. After setting out the duties that the
subcontract required of the engineer, the court disagreed with the school district’s
contention that its damages “expand[ed] beyond those arising from the contractual
subject matter.” Id. at *6. Instead, the school district “complained of inadequacies in
the building that were the subject of” the subcontract, and “[n]one of the asserted
17
inadequacies amount to damages to property independent from the fixtures and
systems for which [the engineer] was contractually responsible.” Id. at *7. The court
therefore concluded that, because the source of the engineer’s duties was contractual
in nature and the nature of the injuries “sound in contract alone,” the economic loss
rule applied to bar the school district’s negligence claim against the engineer. Id. at
*7–8; see Trebuchet Siege Corp. v. Pavecon Com. Concrete, Ltd., No. 05-12-00945-
CV, 2014 WL 4071804, at *7 (Tex. App.—Dallas Aug. 19, 2014, no pet.) (mem.
op.) (concluding that economic loss rule barred owner’s negligence claim against
concrete flooring subcontractor because only duty allegedly breached was
subcontractor’s duty under its subcontract, and only losses claimed were costs to
repair allegedly defective flooring).
The Austin Court of Appeals has also considered the application of the
economic loss rule in a case similar to this one. See Thomson v. Espey Huston &
Assocs., Inc., 899 S.W.2d 415, 420–22 (Tex. App.—Austin 1995, no writ). In
Thomson, a property owner contracted with a company to construct an apartment
complex on the property. Id. at 417. The company then entered into a contract with
an engineering consulting firm for, among other things, the design of drainage
structures, storm water runoff facilities, and water and wastewater distribution and
collection systems. Id. Under a second contract between the engineering firm and a
joint venture involved with the project, the engineering firm agreed to perform
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periodic inspections of the construction site and report on the progress of the
construction. Id. During the two years following completion of the complex,
construction and design defects were discovered, including defects relating to
drainage and water runoff. Id. The property owner sued the engineering firm for
breach of both contracts and negligence in the firm’s completion of its contractual
duties. Id. at 417–18.
With respect to the negligence claim based on the inspection contract, the
Austin Court noted that the purpose of that contract was to provide assurances that
construction was going according to plan, but this measure allegedly failed and the
building ended up being defective. Id. at 421. The alleged injury was the failure to
receive the benefit of the bargain of the inspection contract, which will not give rise
to damages in tort. Id. Additionally, without the contract, the engineering firm had
no duty to inspect the construction site or report any problems. Id. The court held
that the economic loss rule barred a negligence cause of action based on the
engineering firm’s services under the inspection contract. Id. at 422.
With respect to the design contract, however, the Austin Court held that a
viable tort cause of action might exist. Id. at 421. The court noted that the property
owner alleged that the engineering firm’s alleged negligence in designing the
drainage system damaged other parts of the apartment complex, including various
problems with certain buildings in the complex and a problem with standing water
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that blocked a street. Id. at 421–22. This damage was “beyond the subject of the
contract itself,” which was the drainage system. Id. at 422. In determining that the
economic loss rule did not bar this claim, the court reasoned that if the property
owner had solely alleged that the drainage system was inadequate and required
repair, the owner would only have a contractual claim. Id. However, the owner
alleged that the inadequacies in the drainage system damaged other parts of the
property not covered by the contract with the engineering firm. Id. The engineering
firm had a contractual duty to perform specific services under the contract, but it also
had an independent duty not to negligently damage the owner’s property. Id. If
“incompetent engineering services have damaged [the] building,” then the
engineering firm “may be liable for that negligence in tort.” Id.
In this case, it is undisputed that the Gurkas contracted with Jaimes for
construction of a house. Jaimes contractually agreed to “furnish all floor plans and
permits as they pertain to work to be performed”; “obtain all permits necessary for
the work to be performed”; raise the ground elevation of the house “as set forth in
floor plans”; install a cement slab “as approved by local county”; and construct the
house as specified by Trevino’s floor plans and certain requests by the Gurkas. The
parties agreed that Jaimes had the discretion to hire subcontractors to perform work
under the two contracts, but Jaimes remained responsible for completion of the
contracts. Trevino was not a signatory to these contracts.
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It is further undisputed that Jaimes entered into a separate subcontract with
Trevino. The “Scope of Work” portion of this contract stated that Trevino would
provide the following items to Jaimes: Site Plan; Architectural Plans; Electrical
Layout; Foundation Plans; Elevation Certificate; Harris County Floodplain Notes;
Septic System Design; and Permit Runs. Trevino and Jaimes agreed that Trevino
would not provide “[t]he following items and all other work not mentioned in the
scope of work”: Harris County plan review and permit fees; Inspections during
construction; Boundary Survey; Plat or Re Plat; Soil Report; and Metal Building Pre
Fab Plans. The Gurkas were not signatories to this contract. There was, therefore, no
direct contractual relationship between the Gurkas and Trevino.
Additionally, it is undisputed that Trevino provided architectural plans for the
house to Jaimes, and the Gurkas have no complaint about the plans. Trevino
completed a pre-construction Elevation Certificate, which certified that the first floor
of the house, when constructed, would be at an elevation of 54.50 feet, meeting
FEMA and Harris County requirements. Trevino provided this certificate to the
Harris County Engineering Department and applied for the building permit. He listed
his own contact information as the “applicant” on the permit application, and neither
the application nor the permit mentioned Jaimes or her company. Harris County
approved the submitted plans and issued a building permit to the Gurkas.
21
It is also undisputed that Trevino did not inspect the property during
construction, and he did not complete an Elevation Certificate after the slab had been
poured. When construction was completed, he completed a Final Elevation
Certificate, which reflected that the first floor of the house was at an elevation of
53.17 feet. This elevation did not meet FEMA or Harris County requirements
because it was not at least 18 inches above the Base Flood Elevation for the zone in
which the property was located. Trevino, therefore, could not and did not complete
an As-Built Certificate. The Gurkas’ new house did not pass an inspection by Harris
County, and they were unable to obtain a permanent electricity connection to the
house. The house later flooded during Hurricane Harvey.
In their live pleading, the Gurkas alleged that by applying for and obtaining
the building permit for the house, Trevino “assum[ed] the obligation of making
certain that the general contractor built the residence as designed.” He also became
obligated to complete and submit to Harris County an Elevation Certificate
certifying that the foundation was at the proper elevation after construction of the
slab and before proceeding with construction of the house. They alleged that Trevino
failed to ensure that Jaimes followed the approved architectural plans for the house,
which undisputedly reflected the correct elevation, and failed to schedule an
inspection of the foundation after it had been poured.
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The Gurkas asserted a negligence claim against Trevino and his firm, alleging
that they failed to act with ordinary care in “overseeing the construction of the
residence.” An engineer acting with ordinary care would have ensured that Jaimes
constructed the home in compliance with the approved architectural plans and would
have timely inspected and certified the foundation prior to continuing construction
of the house. As damages, the Gurkas sought past and future economic damages “for
damage to their property which will require repairs and remediation”; “physical
injury to [their] property requiring repairs to the residence and remediation”; actual
damages, including depreciation in market value, engineering and expert fees,
construction costs, alternate living expenses, and past and future mental anguish; the
reasonable cost of repairs necessary to cure the defect; and the reasonable cost for
replacement or repair of their personal property that was inside the house when the
house flooded during Hurricane Harvey.
Citing language in the Harris County building permit application form, the
Gurkas argue that because Trevino applied for the building permit and listed his
company as the “applicant” and not the contractor, Jaimes, he became obligated to
ensure compliance with all provisions, conditions, and requirements of the building
permit, including the permit’s requirement that a second Elevation Certificate be
completed after pouring of the slab. The Gurkas argue that, as a result, Trevino had
23
a duty independent from the contract to complete the second Elevation Certificate
and ensure that Jaimes was building the house to the proper elevation.
It is undisputed that Trevino completed the building permit application, listed
the Gurkas as the property owners and his engineering firm as the applicant, and did
not mention Jaimes or AGVR Construction on the application.3 The application
directed “Home Builders” to enter completed inspections at a Harris County website.
The application also included the following statement:
All development and driveway construction must be completed in
accordance with the Regulations of Harris County, Texas for Flood
Plain Management . . . . This application is valid only for property
located in the Unincorporated Areas of Harris County, Texas. The
Applicant hereby acknowledges and agrees to be strictly bound to
Commissioners’ Court of Harris County in ensuring that all provisions,
conditions and requirements attached to the Issuance of the
development permit(s) under the Regulations of Harris County, Texas
for Flood Plain Management . . . will be faithfully and fully complied
with.
The permit applicant understands and agrees that the County Engineer
may make scheduled or unscheduled inspections of the property upon
the issuance of the permit. . . . If the permit applicant is a corporation,
partnership or other legal entity other than a natural person, then the
undersigned acting as the authorized representative of said entity will
be responsible for ensuring the entity’s compliance with all provisions,
conditions and requirements of the development and driveway permit.
3
In his deposition, Trevino testified that he completed the permit application in his
name and not Jaimes’s. He occasionally does so as a courtesy to his clients because
his office is close to the Harris County Engineering Department offices, and he is
familiar with the permitting procedures.
24
Harris County issued a “Class II” building permit to “Val & Terri Gurka,” and
the permit noted that Trevino’s firm was the permit applicant. The permit listed three
“pre-inspection documents” that were required to be submitted to Harris County
before an inspection could be requested: an “Under Construction” Elevation
Certificate, a “Final” Elevation Certificate, and an As-Built Certificate. Under
“Special Requirements,” the permit stated, “Upon foundation completion please
submit your required Elevation Certificate by your hired professional” to a Harris
County email address.
The Harris County Floodplain Management Regulations provide that “Class
‘II’ Permit holders” are required to submit to the County Engineer an Elevation
Certificate when the slab is poured to indicate that the minimum elevation has been
met, and “[t]he permittee will be responsible for determining whether inspections
have been made prior to proceeding with work.” The regulations include several
definitions, but they do not define “permit holders” or “permittees.” The Harris
County Floodplain Notes, which Trevino was required to place on his foundation
drawings prior to issuance of the permit, state a requirement that three Elevation
Certificates are to be submitted: “one at permitting, a second after the slab is poured
or sub-floor is installed and before the framing starts, and a third is required once
construction is finished.” The Floodplain Notes do not state that a specific person—
25
such as the property owner, the contractor, or the permit applicant—is to ensure that
the required Elevation Certificates are submitted.
We agree with Trevino that he did not, by applying for the building permit,
assume a duty independent of the contract to complete a second Elevation Certificate
during construction and ensure that Jaimes built the house to the proper elevation.
The Harris County Floodplain Management Regulations state that a “Class ‘II’
Permit holder” shall have an elevation inspection and certificate completed by a
professional after the slab is poured and that the “permittee” is responsible for
ensuring that the necessary inspections are made before proceeding with work. The
building permit was issued to the Gurkas, not to Trevino. And Jaimes, in her contract
with the Gurkas, agreed to obtain the necessary permits, agreed that all work would
be completed “in compliance with all building codes and other applicable laws,” and
agreed to “remain responsible for the proper completion of this Contract” even if she
engaged the assistance of subcontractors.
We conclude that Trevino’s duties with respect to construction of the Gurkas’
house derive from the contract that he had with Jaimes and not from an independent
duty to obtain a second Elevation Certificate and ensure that Jaimes properly
constructed the house.
4 The Gurkas’ house is the subject of the relevant contracts.
4 David Ballard, one of Gurkas’ experts, agreed that Jaimes, as the general contractor,
retained responsibility to ensure that construction was completed correctly.
26
Thus, to the extent the Gurkas seek damages to their house itself, such as the cost to
elevate their house to the proper level, these damages sound in contract, not in tort.
However, the Gurkas also argue that summary judgment based on the
economic loss rule is not permissible because they suffered damage to their personal
property that was inside their house when it flooded during Hurricane Harvey. They
therefore argue that they suffered damage to “other property,” making the economic
loss rule inapplicable. See Equistar Chems., L.P. v. Dresser-Rand Co., 240 S.W.3d
864, 867 (Tex. 2007) (stating that economic loss rule does not preclude tort recovery
if defective product causes physical harm to user or other property of user, in
addition to damage to product itself); Bass, 34 S.W.3d at 9 (noting that “economic
loss” has been defined as “damages for inadequate value, costs of repair and
replacement of the defective product, or consequent loss of profits—without any
claim of personal injury or damage to other property”) (emphasis added); see also
Chapman Custom Homes, 445 S.W.3d at 718 (stating that party states tort claim
when duty allegedly breached is independent of contract and harm that is suffered is
not merely economic loss of contractual benefit).
The damage to the Gurkas’ personal property that occurred when their house
flooded during Hurricane Harvey is damage to property that is not the subject of the
Gurkas’ contract with Jaimes or Jaimes’s contract with Trevino. See Thomson, 899
S.W.2d at 422 (reasoning that if property owner had alleged only damage to drainage
27
system—subject of relevant contract—owner would only have claim sounding in
contract, but because owner also alleged that improperly designed drainage system
damaged other parts of apartment complex, engineer might be liable in tort); see also
Murray v. Ford Motor Co., 97 S.W.3d 888, 893 (Tex. App.—Dallas 2003, no pet.)
(noting that while economic loss rule barred negligence claim for loss of truck due
to fire created by allegedly faulty wiring, rule did not bar tort claim for loss of “other
property” located inside truck that was also destroyed during fire). The Gurkas have
therefore alleged more than the economic loss of a contractual expectancy. See
Chapman Custom Homes, 445 S.W.3d at 718.
Thus, to the extent the Gurkas have alleged that Trevino’s negligent failure to
complete a second Elevation Certificate and ensure that Jaimes followed his
architectural plans and built the house to the proper elevation caused damage to their
personal property during Hurricane Harvey, we conclude that the Gurkas may have
a tort claim against Trevino for that loss. See Murray, 97 S.W.3d at 893; Thomson,
899 S.W.2d at 422. We therefore hold that Trevino and his firm did not establish, as
a matter of law, that the economic loss rule barred the entirety of the Gurkas’
negligence claim against them, and we hold that the trial court erred by granting
summary judgment on this portion of the Gurkas’ negligence claim.
We sustain the Gurkas’ sole issue in part.
Outcome: We reverse the trial court’s summary judgment with respect to the Gurkas’
claim that Trevino’s alleged negligence caused damage to their personal property,
and we remand that portion of the Gurkas’ claim for further proceedings. We affirm
the remainder of the trial court’s judgment.