On August 22, 2014, the Texas Supreme Court decided Chapman Custom Homes v. Dallas Plumbing Company. In this case, a trustee contracted with Chapman, a homebuilder, to build a new home on property owned by the trust. Chapman hired Dallas Plumbing Company as a subcontractor to install the plumbing in the house. After the home was completed, there were plumbing leaks that allegedly caused flooding and damage to the house. The builder and trust sued Dallas Plumbing Company for damages, alleging breach of contract, breach of express warranty, and negligence.
The plumber denied liability and moved for summary judgment, which the trial court granted and the court of appeals affirmed. The court of appeals reasoned that Dallas Plumbing had no liability for breach of contract to the trustee-homeowner because its contract was with Chapman – not with the homeowner. The court further held that the plumbing company had no contract liability to Chapman, the homebuilder, because Chapman no longer owned the home. The court of appeals did not consider whether the plaintiffs had negligence claims against the plumber because the court did not believe that the claims had been raised in pleadings.
The Texas Supreme Court reversed holding that even though Dallas Plumbing could not be liable for breach of contract, it could be liable to the homeowner for negligence. The Court held that by agreeing to install the plumbing system in the home, the plumbing subcontractor assumed a duty not to flood or otherwise damage the home while performing its contract with the builder. And, the Court found that the plaintiffs had raised these claims in their pleadings.
The Court found that the negligence claim was not barred by the economic loss rule which generally prevents parties from bring tort claims to collect damages for losses that result from a party’s failure to perform a contract. The Court stated that the economic loss rule cannot be used by a party to a contract to avoid liability for breach of an independent duty of the contractual undertaking and “the harm suffered is not merely the economic loss of a contractual benefit.” The Court held that the plumber’s duty not to flood or otherwise damage the house is independent of its contractual obligations and the damages suffered by the homeowner “are beyond the economic loss of any anticipated benefit under the contract.”
This case affirms that a subcontractor whose negligence causes damages to a home cannot escape liability by claiming that it had no contract with the homeowner.
Chapman Custom Homes, Inc. v. Dallas Plumbing Co., No. 13-0776 (August 22, 2014).