law-McGregor-Act | construction law | governmental entities |
HOUSTON CASE LAW INVOLVING THE MCGREGOR ACT
Chapter 2253 of the Texas Government Code is commonly referred to as the“McGregor
Act.” See Tex. Gov’t Code Ann. §§ 2253.001–.079 (Vernon 2008 &Supp. 2009). The
McGregor Act requires general contractors to secure payment bonds on public works
projects because subcontractors cannot secure liens on public buildings and provides the
procedure for collecting on the bonds. Id.
McGregor Act and Substantial Compliance
United Fire contends that the notice Bortunco sent did not include a “sworn statement” as required by the
McGregor Act because the notice did not have a notary seal or signature. Therefore, United Fire contends
Bortunco failed to adhere to notice provisions in the McGregor Act and is not entitled to payment. Bortunco avers
it substantially complied with the McGregor Act because the document was only defective as a result of the notary’
s clerical error.
The legislature passed the McGregor Act to ensure payment to subcontractors because they may not place a lien
against a public building. Suretec Ins. Co. v. Myrex Ind., 232 S.W.3d 811, 813 (Tex. App.—Beaumont 2007, no
pet.); Ramex Constr. Co. v. Tamcon Serv. Inc., 29 S.W.3d 135, 139 (Tex. App.—Houston [14th Dist.] 2000, no
pet.). It was not intended to set up “technical tricks, traps, and stumbling blocks to the filing of legitimate notices of
claims,” but “to provide a simple and direct method of giving notice and perfecting claims.” Agree Corp. &
Seaboard Sur. Co. v. Solis, 932 S.W.2d 39, 52–53 (Tex. App.—Beaumont 1995), rev’d on other grounds, 951 S.
W.2d 384 (Tex. 1997). The notice requirements were also intended “to protect the prime contractor from incurring
double liability [and to relieve them of] liability for claims not asserted before retainage is paid in full.” Commercial
Union Ins. Co. v. Spaw-Glass Corp., 877 S.W.2d 538, 540 (Tex. App.—Austin 1994, writ denied).
The McGregor Act requires general contractors to secure a bond from a surety, allows a subcontractor to sue the
surety for unpaid balances for work and materials, and awards reasonable attorneys’ fees. Id.; see Tex. Gov’t
Code Ann. §§ 2253.021, 2253.073 (Vernon 2008). To recover under the act, a claimant or subcontractor must
provide notice to the general contractor and the surety in writing. Tex. Gov’t code § 2253.041. The McGregor Act
further provides that the notice must conform to the following requirements:
(b) The notice must be mailed on or before the 15th day of the third month after each month in which any of the
claimed labor was performed or any of the claimed material was delivered.
(c) The notice must be accompanied by a sworn statement of account that states in substance:
(1) the amount claimed is just and correct; and
(2) all just and lawful offsets, payments, and credit known to the affiant have been allowed.
(d) The statement of account shall include the amount of any retainage applicable to the account that has not
become due under the terms of the public work contract between the payment bond beneficiary and the prime
contractor or between the payment bond beneficiary and a subcontractor.
Tex. Gov’t Code Ann. § 2253.041(b)–(d) (Vernon 2008).
The McGregor Act is remedial in nature, and, therefore, “[t]he statute is to be given the most comprehensive and
liberal construction possible.” Ramex, 29 S.W.3d at 139; see also City of LaPorte v. Taylor, 836 S.W.2d 829, 832
(Tex. App.—Houston [1st Dist.] 1992, no writ). As a result, case law has established that adherence to notification
deadlines requires strict compliance, but substantial compliance is adequate for the other notice provisions. Cf.
Commercial Union Ins., 877 S.W.2d at 540 (holding that claimants could not recover when they failed to give any
notice); Suretec Ins. Co., 232 S.W.3d at 816 (failure to provide notice by 15th day of month not saved by
substantial compliance); Capitol Indem. Corp. v. Kirby Rest. Equip. & Chem. Supply Co., 170 S.W.3d 144, 147
(Tex. App.—San Antonio 2005, pet. denied) (holding “sworn certificate” that did not precisely comport with
statutory language sufficient); U.S. Fid. & Guar. Co. v. Parker Bros. & Co., 437 S.W.2d 880, 881–82 (Tex. Civ.
App.—Houston [1st Dist.] 1969, writ ref’d n.r.e.) (claimant substantially complied with notice provisions although
sworn statements were sent to general contractor and unsworn statements sent to surety). Substantial compliance
has been defined as “compliance with the ‘essential requirements of a statute’” and occurs when an actor’s
deviation does not seriously impede the legislative purpose of the statute. See Stratton v. Austin Indep. Sch. Dist.,
8 S.W.3d 26, 30 (Tex. App.—Austin 1999, no pet.).
United Fire & Casualty Company v. Boring & Tunneling Company of America
(Tex.App.- Houston [1st Dist.] Feb. 11, 2010)(Keyes) (construction bond, notice provisions of the McGregor Act
substantially complied with, sworn statement was defective in that notary signature and seal was missing, but issue
overruled as a technicality)
Here, although Bortunco’s sworn statement is missing the official certification by the notary to qualify as a affidavit, it is uncontested
that Bortunco’s agent swore to the statement before an “officer authorized to administer oaths” and signed the statement in the
notary’s presence. Likewise, the notice otherwise supplies the statutorily required statements and information and was delivered by
the required deadline. Bortunco’s notification was only deficient because of the nortary’s clerical error in failing to attach her
signature and seal before mailing the document.
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Evelyn Keyes
Before Justices Keyes, Hanks and Sharp
01-08-00487-CV United Fire & Casualty Company v. Boring & Tunneling Company of America d/b/a Bortunco
Appeal from 270th District Court of Harris County
Trial Court Judge: Hon. Brent Gamble
Because Bortunco’s sworn statement met the essential requirements of the statute in providing actual notice to
United Fire of Bortunco’s claims against the bond and adequately protected both Golf Services and United Fire
from undue liability, we hold that the document substantially complied with the McGregor Act’s notice provisions.
To hold otherwise would require that we set up “technical tricks, traps, and stumbling blocks to the filing of
legitimate notices of claims” rather than providing “a simple and direct method of giving notice and perfecting
claims” as the legislature intended. See Agree Corp., 932 S.W.2d at 52–53. Therefore, Bortunco met its burden of
proving that it was entitled to judgment as a matter of law and that there were no genuine issues of material fact.
See Tex. R. Civ. P. 166a(c); Cathey, 900 S.W.2d at 341.
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