Court of Appeals of Texas

Case no.: 14-25-00025-CV
Date filed: January 8, 2026

A Texas appeals court has ruled that a wrongfully terminated subcontractor, having failed to properly perfect a mechanic’s lien, could not recover for the value of its work from the project owner. The work had been subject to an express contract with the prime contractor.

CP2 Realty Holdings LLC awarded a contract to Jipeli Construction LLC to refurbish an office building in north Houston. Jipeli subcontracted the plumbing work to MJM Repair, LLC. When the plumbing work was almost complete, Jipeli replaced MJM with another plumber, leaving MJM unpaid for a portion of the work it had performed.

MJM asserted claims against the project owner for quantum meruit and foreclosure of a mechanic’s lien. A jury found that MJM had not breached the subcontract and was entitled to be paid by the project owner for $40,000 of plumbing improvements the owner had received.

The trial judge overrode the jury with a judgment notwithstanding the verdict, ruling that MJM had not complied with the requirements of the state mechanic’s lien statute. Additionally, MJM could not recover in quantum meruit because the work in question had been covered by an express contract. MJM appealed, arguing that its express contract had been with Jipeli Construction, not with CP2 Realty Holdings.

The Court of Appeals of Texas said it is well established that a party cannot recover in quantum meruit if there was an express contract covering the goods or services provided. “Quantum meruit is an equitable remedy based on an implied promise to pay for benefits received…. A party generally cannot recover under quantum meruit when there is a valid contract covering the services or materials furnished, as there was here. This rule applies not only when the plaintiff seeks to recover in quantum meruit from the party with whom it expressly contracted, but also where, as here, the plaintiff seeks to recover from a third party to the contract who benefited from its performance.”

The Texas Supreme Court has recognized an exception to the rule—recovery under quantum meruit is not barred if “1) a contractor under a construction contract (here, the Subcontractor) breaches the contract, and 2) the owner accepts and retains the benefits arising as a direct result of the contractor’s partial performance. A plaintiff who establishes this exception to the express-contract defense is allowed to recover the reasonable value of its services less any damages suffered by the defendant due to its breach.”

In this case, however, the jury found MJM had not breached its express contract with Jipeli Construction. Consequently, MJM could not recover in quantum meruit from CP2 Realty Holdings.

It is ironic that the subcontractor’s absence of breach barred its quantum meruit recovery from the project owner. But, the sub missed out on other, more viable payment remedies. The sub had a breach of contract claim against the prime contractor, although the contractor may have been insolvent. And, the subcontractor’s failure to perfect its mechanic’s lien rights against the owner’s property defeated its best remedy.

Subcontractors have particular challenges when it comes to perfecting their mechanic’s lien rights. In some states, they are required to give the project owner written notice before commencing work at the site or delivering materials. And, the period for filing a lien, commencing on the last date services were provided or materials furnished, is typically shorter than the filing period for constructors or suppliers with a direct contract with the owner.

Participants:
For MJM Repairs: Andrew Patrick Parma
For CP2 Realty Holdings: Peter C. Smart

Before: Judges Wise, Hart, and Boatman

Opinion by: Judge Boatman

Outcome: Judgment of trial court affirmed

Source: Please click here to read the complete opinion.