Heldenfels Bros., Inc. v. City of Corpus Christi

Decision Date03 June 1992
Docket NumberNo. D-0816,D-0816
CourtTexas Supreme Court

GONZALEZ, Justice.

This case involves the issue of whether a municipality owed a duty to a subcontractor of requiring the general contractor to provide a "proper" bond on work performed for the municipality. The trial court rendered judgment for the subcontractor, but the court of appeals reversed and rendered. 802 S.W.2d 35. We affirm. The City of Corpus Christi employed La-Man Constructors, Inc., to build a recreation center on the City's park land. The general contract provided for payment to La-Man of $267,748. La-Man agreed to provide the standard performance and payment bonds as required by former TEX.REV.CIV.STAT. art. 5160. 1 La-Man prepared documents which facially appeared to meet the statutory requirements and the City accepted these bonds.

La-Man hired Heldenfels Brothers, Inc., as a subcontractor, to furnish concrete T-beams to support the roof covering the recreation center. Heldenfels constructed the T-beams and delivered them to the project site.

During the course of construction, the City made monthly payments to La-Man for the work completed, less a 10% retainage which would be paid upon completion. The City authorized a payment of $29,250 (less $3,250 retainage) to La-Man for the T-beams supplied by Heldenfels. La-Man contracted to pay Heldenfels $26,000 for its work.

A city inspector noticed cracks in the T-beams provided by Heldenfels. The City subsequently retained $20,000 from La-Man's periodic payment to protect itself against the possibility of defective T-beams. Several reports were prepared by experts regarding the alleged defects in the T-beams. These reports exonerated Heldenfels. Thereafter, La-Man abandoned the project and subsequently filed for bankruptcy, leaving the subcontractors unpaid. Following La-Man's abandonment of the project, the City discovered that the bonds were fraudulent. A new general contractor was hired to complete the project.

Heldenfels filed suit against the City for payment. Following a bench trial, the trial court found for Heldenfels under several theories of recovery including unjust enrichment, quantum meruit, and negligence. The negligence recovery was based upon the acts committed by the City in fulfilling its duty to obtain valid bonds as required by former article 5160. 2 The trial court rendered a $23,250 judgment for Heldenfels plus attorney fees and interest. The court of appeals reversed the trial court's judgment and held that Heldenfels should take nothing. The court of appeals concluded that there was no evidence to support recovery under unjust enrichment or quantum meruit. It also held that former article 5160 did not impose liability on a city in the event that accepted bonds were invalid. 802 S.W.2d at 41. 3

The trial court held that Heldenfels was entitled to recover under the quantum meruit doctrine. Quantum meruit is an equitable theory of recovery which is based on an implied agreement to pay for benefits received. Vortt Exploration Co., Inc. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex.1990). To recover under the doctrine of quantum meruit, a plaintiff must establish that: 1) valuable services and/or materials were furnished, 2) to the party sought to be charged, 3) which were accepted by the party sought to be charged, and 4) under such circumstances as reasonably notified the recipient that the plaintiff, in performing, expected to be paid by the recipient. Id.

The court of appeals denied recovery under this doctrine because it held that there was no evidence which established that Heldenfels, in rendering services to the City, reasonably notified the City that it expected to be paid by the City. 802 S.W.2d at 39.

The correct standard for review of a no evidence point is that the reviewing court must consider only the evidence and inferences from evidence which supports the trial court's findings, and disregard all evidence and inferences to the contrary. Responsive Terminal Sys., Inc. v. Boy Scouts of Am., 774 S.W.2d 666, 668 (Tex.1989).

Heldenfels never actually informed the City that it expected to be paid by it prior to La-Man's abandonment of the project. Heldenfels relied, however, upon the testimony of two witnesses to show that the City knew, before Heldenfels provided the T-beams, that Heldenfels would look to the City for payment.

Kurt Schriefer, an employee of Heldenfels, testified that the City accepted, used, and enjoyed the T-beams "under such circumstances as Heldenfels ... reasonably notified the City that they expected the City to pay for the work." However, Schriefer never revealed those circumstances. In addition, H.C. Heldenfels testified that it is normal to approach the owner for payment when neither the contractor nor the bonding company make payment, and that he would be "greatly surprised" if the City was not aware of Heldenfels' expectations before it began work on the project. "When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence." Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983). We agree with the court of appeals that this testimony provides no evidence that the City had notice that Heldenfels anticipated payment from the City before Heldenfels delivered the T-beams. 4

The trial court also held that Heldenfels was entitled to recovery under the theory of unjust enrichment. A party may recover under the unjust enrichment theory when one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage. See Pope v. Garrett, 147 Tex. 18, 211 S.W.2d 559, 560, 562 (1948); Austin v. Duval, 735 S.W.2d 647, 649 (Tex.App.--Austin 1987, writ denied). We agree with the court of appeals that Heldenfels is not entitled to recovery under the theory of unjust enrichment.

The trial court awarded recovery to Heldenfels based upon the City's retention of funds under the general contract. Because the retention was due to the alleged defects in the T-beams, Heldenfels claimed a right to trace the retained funds to its own entitlement to payment from La-Man for the T-beams. Unjust enrichment is not a proper remedy merely because it "might appear expedient or generally fair that some recompense be afforded for an unfortunate loss" to the claimant, or because the benefits to the person sought to be charged amount to a windfall. 5 Id.

Finally, the trial court held that the City was liable to Heldenfels because it negligently performed its duty pursuant to former article 5160. Former article 5160 A provided:

Any ... corporation ... entering into a formal contract in excess of $25,000 with any ... municipality of this State ... shall be required before commencing such work to execute to the [municipality] the statutory bonds.... Each such bond shall be executed by a corporate surety ... duly authorized to do business in this State.... [T]he bonds shall be payable to the [municipality] and shall be approved by it as to form.

(emphasis added).

The purpose of acquiring the bond is to protect subcontractors. See City of Ingleside v. Stewart, 554 S.W.2d 939, 945 (Tex.Civ.App.--Corpus Christi 1977, writ ref'd n.r.e.). However, this purpose does not support the imposition of liability in the absence of an explicit statutory provision. Former article 5160 imposed a statutory duty upon a municipality to ensure that the general contractor posted a sufficient bond; it did not impose any liability for a breach of that duty. Therefore, we agree with the court of appeals' holding that no tort action arises from a city's failure to secure a valid payment bond from the general contractor under former article 5160.

Because we hold that Heldenfels is not entitled to recovery from the City, we need not address the attorney's fee issue or Heldenfels' request for additional damages. The judgment of the court of appeals is affirmed.

Dissenting opinion by GAMMAGE, J., joined by MAUZY and DOGGETT, JJ.

GAMMAGE, Justice, dissenting.

The court has reached beyond the narrow issue on which application for writ of error was granted--whether the court of appeals erred in reversing the trial court's judgment in favor of Heldenfels on its negligence claim. 1 Today's opinion extinguishes other equitable doctrines an unsuspecting 2 subcontractor might reasonably rely on when attempting to recover payment for materials and services rendered. At 40 n. 2. Because I cannot accept the inequity the court imposes today, I respectfully dissent.


The court's first blow to Heldenfels' equitable right of recovery is delivered against the doctrine of quantum meruit. Although I do not quarrel with its general statement of the law under this theory, the court fails to properly conduct a no evidence review.

The majority opinion reviews the testimony of two of Heldenfels' witnesses, Kurt Schriefer and H.C. Heldenfels, and concludes their testimony provides no evidence to support the trial court's finding that Heldenfels anticipated payment from the City before delivering the T-beams. At 41. I disagree. The record reveals some evidence that Heldenfels relied on the City for payment. Consistent with this expectation there is evidence the City, when it temporarily assumed the duties of the general contractor, would have relied on Heldenfels for any needed repair or modification to the T-beams. See Garza v. Alviar, ...

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