Nance v. Resolution Trust Corp.
803 S.W.2d 323 | Texas Court of Appeals, 4th District (San Antonio) | 1990
What This Case Means for Subcontractors
A general partner sued his lender (Alamo Savings) for refusing to fund a construction loan. The jury found the lender breached the contract and awarded $993,000 in damages. However, the court threw out the verdict, ruling that the lender had a clear contractual right to withhold 10% retainage and that the damages claim lacked sufficient proof of actual losses. The lender won its counterclaim for the unpaid loan balance.
Key Takeaways
- •Retainage clauses in loan agreements are enforceable—lenders can legally withhold funds if the contract explicitly allows it. Review your loan documents carefully before work begins.
- •Claiming lost profits as damages requires solid proof of what you actually would have earned. Vague or speculative damage estimates will be rejected by courts.
- •If your lender withholds funds under a contract clause, you cannot automatically claim breach. You must prove the lender acted outside its contractual rights or violated good faith obligations.
Section 4.02 of the loan agreement clearly gave Alamo the right to withhold 10% retainage.
Frequently Asked Question
Can a lender legally withhold 10% of my construction loan funds as retainage?
Yes, if your loan agreement explicitly gives the lender that right. Courts will enforce retainage clauses as written. However, the lender must still act in good faith and cannot use retainage as a pretext to breach other obligations. Always review retainage terms before signing.
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