Norwest Mortgage, Inc. v. Salinas
999 S.W.2d 846 | Texas Court of Appeals, 13th District | 1999
What This Case Means for Subcontractors
The Salinases sued their mortgage lender Norwest for mishandling a construction loan. Norwest failed to obtain lien waivers from subcontractors before releasing loan funds and didn't properly supervise the construction process. The court found Norwest liable under Texas's consumer protection law and awarded damages. This matters to subcontractors because it shows lenders can be held responsible when they don't follow proper procedures to protect your lien rights.
Key Takeaways
- •Always provide lien waivers to the lender before they disburse funds—lenders have a duty to collect them, and if they don't, they may be liable for your unpaid claims
- •Lenders must supervise construction loans properly, including verifying that subcontractors are paid before releasing the next draw—poor oversight can expose them to liability
- •Document everything: if a lender fails to obtain waivers or disburses funds without proper oversight, you may have a claim against them in addition to your claim against the contractor
Norwest failed to properly supervise construction and obtain lien waivers prior to disbursement.
Frequently Asked Question
Can I sue the lender if they don't collect lien waivers before paying the contractor?
Yes, under Texas law. Lenders have a duty to properly supervise construction loans and obtain lien waivers before disbursing funds. If they fail to do this and you don't get paid, you may have a claim against the lender for consumer protection violations and negligence. Always insist that lien waivers are submitted to the lender before each draw.
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