Advanced Temporaries, Inc. v. Reliance Surety Co.

Court of Appeals of Texas,

Corpus Christi–Edinburg.

ADVANCE’D TEMPORARIES, INC., Appellant,

v.

RELIANCE SURETY COMPANY, Corpus Christi Crosswinds Apartments, Ltd., Cesar Gonzalez, Individually and d/b/a Gonzalez Construction, Appellees.

No. 13–01–821–CV.

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July 22, 2004.

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Rehearing and Rehearing En Banc

Overruled June 23, 2005.

Attorneys & Firms

*2 Roland L. Leon, Baker, Leon, Fancher & Matthys, Corpus Christi, for appellant.

Douglas D. Mclallen, Corpus Christi, for appellees.

Before Justices YÃNEZ, GARZA.

OPINION

Opinion by Justice CASTILLO.

This is a mechanic’s lien case. Advance’d Temporaries, Inc., a temporary employment agency, challenges the trial court’s legal conclusion that Advance’d has no standing to assert lien rights under chapter 53 of the Texas Property Code. The issue is one of first impression in Texas. We reverse and remand.

I. Background Facts

Advance’d filed suit against Reliance National Indemnity Company (“Reliance”),¹ Corpus Christi Crosswinds Apartments (“Crosswinds”), and Cesar Gonzalez, d/b/a Gonzalez Construction (“Gonzalez”), seeking $208,219.56 in damages arising out of contracts associated with an apartment construction project. Reliance filed a counterclaim seeking indemnity against Gonzales. L & T, J.V. (“Lamar”) intervened and brought causes of action against Gonzalez and Advance’d. Advance’d added causes of action against Lamar. Gonzalez brought cross-claims against Lamar.

In August of 1999, construction began on a building project known as the Corpus Christi Crosswinds Apartments. Lamar, Crosswind’s general contractor, entered into three subcontracts with Gonzalez: (1) a $450,000 contract for framing labor; (2) a $205,000 contract for drywall installation; and (3) a $30,150.75 contract for roofing labor. Crosswind’s general contract with Lamar required it to post a payment bond, with Reliance as surety, in the amount of $6,305,000, which was the total contract price. On November 10, 1999, Advance’d contracted with Gonzalez to provide temporary employees for Gonzalez’s use in performing its subcontract with Lamar on the Crosswinds project.

Accordingly, Advance’d recruited, hired, and provided to Gonzalez for the Crosswinds project general laborers, carpenter’s helpers, and carpenters. Between November 15, 1999 and February 11, 2000, Advance’d *3 qualified the workers by verifying legal documentation, driver’s licenses, social security cards, and federal employment forms. Advance’d hired the workers as its employees and carried their worker’s compensation, unemployment insurance, and general liability insurance. Advance’d invoiced Gonzalez weekly, paid all of the supplied employees, and made all proper payroll deductions. At times, more than one hundred Advance’d workers labored at Crosswinds under Gonzalez’s supervision.

The relationship between Lamar and Gonzalez deteriorated. Gonzalez’s work at Crosswinds abruptly ended on February 12, 2000.² On termination, Lamar paid Gonzalez for all outstanding work. Gonzalez paid Advance’d $63,210.67. A $208,219.56 outstanding balance remained unpaid.

Advance’d then asserted a claim against the payment bond but was unsuccessful in collecting on the bond. It filed suit for the outstanding balance. Following a bench trial, the court rendered judgment in full against Gonzalez in favor of Advance’d but denied Advance’d judgment against Crosswinds, Lamar, and Reliance. Following the bench trial, the trial court signed the final judgment on September 4, 2001. This appeal ensued.

In its second issue, Advance’d challenges the trial court’s conclusion of law that Advance’d “is not a person entitled to the benefits of the mechanic’s lien statutes.” Advance’d contends it is entitled to recover against the payment bond because, by virtue of its contract with Gonzalez, a subcontractor, it falls squarely within chapter 53 of the property code as a provider of labor in the direct prosecution of the work. Lamar and Reliance assert that the services provided by Advance’d, as a temporary employment agency, were payroll or administrative services and are not in the nature of “labor” or “work” as contemplated by the property code. Specifically, Lamar and Reliance argue, none of the services Advance’d provided was “labor for construction or repair.” Therefore, they conclude, Advance’d is not entitled to a lien or judgment against the payment bond.

II. ANALYSIS

A. Standard of Review

We review a trial court’s challenged conclusions of law as legal questions. Id.

B. Applicable Law

In Texas, the law recognizes two forms of mechanic’s liens: constitutional and statutory. The most common, applicable here, is found in chapter 53 of the Texas Property Code. Section 53.021 states:

(a) A person has a lien if:

*4 (1) the person labors, specially fabricates material, or furnishes labor or materials for construction or repair in this state of:

(A) a house, building or improvement;

(B) a levee or embankment to be erected for the reclamation of overflow land along a river or creek; or

(C) a railroad; and

(2) the person labors, specially fabricates the material, or furnishes the labor or materials under or by virtue of a contract with the owner or the owner’s agent, trustee, receiver, contractor, or subcontractor.

First Nat’l Bank v. Whirlpool Corp., 517 S.W.2d 262, 269 (Tex.1974)).

The usual building contract imposes the duty to pay for furnished labor and materials primarily on the contractor. Sherwin–Williams Paint Co., 217 S.W. at 373.

Chapter 53 defines “labor” is as “labor used in the direct prosecution of the work.” Page, 102 S.W.3d at 723 n. 3. Accordingly, we hold that chapter 53 of the property code affords protection to those who “furnish labor” as well as those who *5 actually labor on a construction project in Texas.

However, we conclude that not every arrangement will establish that a temporary employment agency “furnishes labor” as defined by chapter 53. For instance, a temporary employment agency may contract with a construction company to provide only administrative services for the contractor’s employees and not labor engaged in direct prosecution of the work. The California Court of Appeals has addressed just this issue. See Contractors Labor Pool, Inc. v. Westway Contractors, Inc., 53 Cal.App.4th 152, 61 Cal.Rptr.2d 715, 722–23 (1997). The plaintiff, a corporation in the business of furnishing skilled and unskilled temporary workers to construction contractors, sought recovery of damages for breach of contract and to assert lien rights on a payment bond. The court stated:

[T]he legal status of an employer of laborers furnished to a work of improvement is the crucial factor which distinguishes a person who “furnishes” such laborers to the project, and is thus entitled to lien rights, from a person who merely organizes the work force, performs administrative functions, advances wages, or does all three on behalf of another, and is consequently not entitled to lien rights.

Id.

This Court also addressed a similar question on an appeal from a summary judgment. See Id. at 161.

Here, Advance’d is a temporary employment agency, not in the construction business itself, that provides temporary construction workers under a contractual arrangement analogous to the agreement at issue in id.

We have reviewed relevant decisions in other jurisdictions to develop factors to consider in determining if Advance’d furnished labor in direct prosecution of work on the Crosswinds construction project. Those factors include: (1) the temporary employment agency’s involvement in selecting and screening the workers for hire; (2) the use by the agency of its own criteria for hiring the workers; (3) affirmative representations by the agency to the workers that it is their employer; (4) the nature of documentation exchanged between the workers *6 and the agency at the start of the working relationship; (5) the agency’s involvement in training, supervising, and disciplining the workers and otherwise retaining control over the workers or directing their behavior; (6) whether the agency rather than the contractor determined which workers could be terminated; and (7) whether the agency withheld workers rather than services on nonpayment by the contractor. See, e.g., Contractors Labor Pool multi-factor test to determine right of agency to which contractor outsourced its payroll and human resources responsibilities to assert lien rights on payment bond).

C. Application of the Law to the Facts

Here, the record shows that Advance’d recruited carpenters and general laborers to work for Gonzalez on the construction project. The record is not clear as to whether Advance’d used its own hiring criteria, if any, in making employment decisions. However, Advance’d did qualify the workers by verifying legal documentation, driver’s licenses, social security cards, and federal employment forms. The record is devoid of evidence of any screening, qualifying, or hiring decisions undertaken by Gonzalez. Further, Advance’d recruited and hired all workers as its own employees and provided all worker’s compensation, unemployment insurance, and general liability insurance. Finally, all workers hired by Advance’d to work for Gonzalez received paychecks from Advance’d, and Advance’d made all proper payroll deductions.³ On these facts, we conclude that the trial court did not reach a correct legal conclusion. See 53.021(3) (Vernon Supp.2004). We sustain Advance’d’s second issue.

III. CONCLUSION

Our disposition of the second issue compels reversal of the trial court’s judgment. Accordingly, we do not address the remaining issues raised by Advance’d.⁴ See TEX.R.APP. P. 47.1. Accordingly, we reverse the judgment of the trial court and remand for proceedings consistent with this opinion.