City of San Antonio v. McKenzie Constr. Co
In City of San Antonio v. McKenzie Constr. Co., 136 Tex. 315, 150 S.W.2d 989, 996 (Tex. 1941), the Court held that "when parties to a building contract agree to submit questions which may arise thereunder to the decision of the engineer, his decision is final and conclusive; unless in making it he is guilty of fraud, misconduct, or such gross mistake as would imply bad faith or failure to exercise an honest judgment." McKenzie, 150 S.W.2d at 996.
Texas courts have applied this standard in other cases in which the contract designates an engineer on the building project to determine whether some aspect of performance suffices under a satisfaction clause.
State v. Martin Bros., 138 Tex. 505, 160 S.W.2d 58, 61 (Tex. 1942) (plaintiff must allege and prove that State highway engineer's decision was based on partiality, fraud, misconduct, or gross error);
Austin Bridge Co. v. Teague, 137 Tex. 119, 152 S.W.2d 1091, 1092 (Tex. 1941) (applying partiality, fraud, misconduct, or gross error standard of review to "State Highway Engineer's" decision under satisfaction clause);
State v. Clark, 695 S.W.2d 673, 675 (Tex. App.-Austin 1985, no writ) (court will set aside State highway engineer's decision only if plaintiff proves it was based on partiality, fraud, misconduct, or gross error);
Austin Bridge Co. v. State, 427 S.W.2d 925, 937 (Tex. Civ. App.-Austin 1968, writ ref'd n.r.e.) (absent pleadings and proof that State engineer's decision was based on partiality, fraud, misconduct, or gross error, engineer had exclusive and final authority to determine satisfaction of performance).