Opinion
01-21-00039-CV
08-23-2022
VAL GURKA AND TERRI GURKA, Appellants v. JORGE L. TREVINO AND J. L. TREVINO & ASSOCIATES, PLLC,Appellees
On Appeal from the 215th District Court Harris County, Texas Trial Court Case No. 2017-67622-A
Panel consists of Chief Justice Radack and Justices Countiss and Farris.
MEMORANDUM OPINION
April L. Farris Justice
In this property-damage case, Val and Terri Gurka sued the engineer involved with construction of their home, Jorge L. Trevino and J.L. Trevino & Associates, PLLC (collectively, "Trevino"), after the Gurkas' house was not built to the elevation required by Harris County regulations. The house subsequently flooded during Hurricane Harvey. In addition to suing the home builder for several claims, the Gurkas asserted negligence and gross negligence claims against Trevino. The trial court granted summary judgment in favor of Trevino based on the economic loss rule and dismissed the Gurkas' claims.
In their sole issue on appeal, the Gurkas contend that the trial court erred in granting summary judgment because the economic loss rule does not apply in this case and does not bar their negligence and gross negligence claims against Trevino. We affirm in part and reverse and remand in part.
Background
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 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 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 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.
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."
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 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. 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 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.
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.
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.
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).
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 fair-minded 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 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 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 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.").
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 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 sub-subcontractor, 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:
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 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 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 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 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.
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.
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.
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 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. The application directed "Home Builders" to enter completed inspections at a Harris County website. The application also included the following statement:
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.
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.
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- 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. The Gurkas' house is the subject of the relevant contracts. 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.
David Ballard, one of Gurkas' experts, agreed that Jaimes, as the general contractor, retained responsibility to ensure that construction was completed correctly.
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 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.
Conclusion
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.