Hayek v. Western Steel Co

In Hayek v. Western Steel Co., 478 S.W.2d 786, 792, 15 Tex. Sup. Ct. J. 232 (Tex. 1972), the Court interpreted this language to mean that the owner must retain ten percent of the project's cost regardless of how many individual construction contracts were awarded. Therefore, we held that a subcontractor who had supplied steel and concrete to the foundation contractor could bring a retainage claim not just for ten percent of the value of the foundation contract, but rather for ten percent of the entire cost of building the home. Id. The Court's decision in Hayek focused on protecting lien claimants who might need to share in the retainage fund, based on the Legislature's "broad extension of protection and sharing in this fund to a new class of persons (materialmen)." Hayek, 478 S.W.2d at 793. However, the Legislature determined that Hayek placed too great a burden on owners and original contractors by creating "an unreasonable retainage requirement on owners who enter into original contracts." Act of May 16, 1973, 63rd Leg., ch. 96, 3, 1973 Tex. Gen. Laws 215 (repealed 1983) (current version at TEX. PROP. CODE 53.001). In response, the Legislature amended the statute at its next regular session. The bill analysis stated that the "original intent of the legislation was for the 10% retainage requirement to apply to each individual contract, not the total cost of the job" and that the bill's purpose was to "carry out the intent of the original legislation which created the 10% retainage requirement by limiting the 10% to each individual contract . . . ." HOUSE COMM. ON JUDICIARY, BILL ANALYSIS, Tex. H.B. 1059, 63rd Leg., R.S. (1973). The new language added references to "an original contract" in the definitions of "work" and "contract price." "Work" was defined as "any construction or repair . . . which is performed pursuant to an original contract," and "contract price" was defined as "the cost to the owner for any construction or repair . . . which is performed pursuant to an original contract." Act of May 16, 1973, 63rd Leg., ch. 96, 2(d), 1973 Tex. Gen. Laws 214 (repealed 1983) (current version at TEX. PROP. CODE 53.001).