Construction Law

Editor:
Kenneth A. Slavens, Esquire

Award of attorney's fee under the Private Prompt Pay Act (PPPA) upheld where requested in prayer for relief with requisite specificity. Lucas Stucco & EIFS Design, LLC v. Landau, No.90771 (Mo. banc S.C., October 26, 2010), Russell, J.

The contractor's suit sought recovery of the contract balance of $4,900.00 in a suit against the owner of project. At trial, the contractor asked the court to award attorney's fees pursuant to the Private Prompt Pay Act. The trial court awarded $10,567.04 in fees.

The owner appealed and argued that the petition made no mention of PPPA and did not set forth any basis for the recovery of attorney's fees.

The Supreme Court held that there are only two requirements for pleading a violation of the PPPA: (1) the parties entered into a private construction contract, and (2) one or more payments were not made pursuant to the contract. The Court found that both elements were pleaded in the contractor's petition. The prayers for relief associated with each count requested a judgment for the contract balance with interest and attorney's fees.

The PPPA does not require specific reference to the statute in the pleading the Court decided. A court may award any relief the PPPA provides, including attorney's fees, as long as the party has pleaded the necessary elements of the act and has requested that relief in the prayer.

Held:
In a suit by a contractor to recover an unpaid contract balance on a construction contract, the Supreme Court held that the award of attorney's fees under the Private Prompt Pay Act (PPPA), if requested in the prayer, is appropriate as long as the pleading sets out the necessary elements and that specific reference in the pleading to the PPPA is not necessary.

River City Drywall, Inc. and Ambassador Floor Company, Inc., lien claimants in this consolidated appeal, sought to enforce liens relative to a subdivision development. River City Drywall sought to enforce a lien on one lot and Ambassador Floor sought to lien two lots. Because the two entities were essentially one and the same, 10 day notice to sub-contractors required by mechanics lien statute held not required. River City Drywall, Inc., et al. v. Raleigh Properties, Inc., et al., Nos. 94990 and 94991 (Mo. App. E.D., May 17, 2011), Mooney, J.

The subdivision was Hillington Estates. The subdivision had its beginnings in 2004. In August 2004, the tract of land which would become the subdivision was transferred by general warranty deed to Raleigh Properties, Inc. (Properties). Properties transferred the land by quit claim deed in December 2004 to Raleigh Development (Development). In January of 2005, Properties recorded a subdivision plat. The plat identified Properties as the owner despite the fact that Properties had transferred its ownership interests to Development months earlier.

Both Properties and Development were owned by one person, Richard Raleigh. Mr. Raleigh testified that Development was set up to hold the ownership of the real estate. Properties were set up for the marketing, selling and contracting associated with the subdivision. Mr. Raleigh testified that Development was a holding company for Properties.

In addition, Mr. Raleigh admitted that due diligence was not exercised in maintaining separation, between the two companies. The roles of the two were confused and interchanged. Mr. Raleigh admitted that, in practice, Properties acted as and was treated as the owner with respect to the construction activities at the subdivision. Properties entered into the sales contracts for the homes in the subdivision even though Development held the titles. There were no formal contracts between Properties and Development covering the transfer of titles of the subdivision's lots.

The trial court found that the lien claimants were subcontractors and not original contractors because the respective contracts were between the claimants and Properties and Development was the owner. The trial court refused to enforce the liens because neither lien claimant had given the required 10 Day Notice under Section 429.100, RSMo which is required of subcontractor lien claimants.

The appellate court reversed. The court of appeals noted that the mechanic's lien statute affords the right to a mechanic's lien to any party that contracts with the owner or the owner's agent. Under the mechanic's lien statute the term "agent" is interpreted much more broadly and the required proof is less stringent to show agency than in other settings.

The court of appeals said:

As used in our mechanic's lien law, an "agent" may be "a person with such limited authority as to be unable to bind his principal personally for the work, but who at the same time, by an exercise of the limited authority given, will transmit to the persons furnishing the materials a right to a lien upon the owner's premises." (citations omitted.)

The purpose of the 10 day notice required of subcontractors is solely to benefit the owner of the property and to afford the property owner notice of an outstanding claim of a subcontractor so payment may be withheld from the direct contractor to avoid double payment. In this dispute, the lien claimants contracted with an agent as defined under the mechanic's lien statute. The "agent" and the "owner" were substantially the same. The court noted that Properties and Development had the same person as the owner, sole employee and sole decision maker. The court concluded that the 10 day notice to the owner would serve no purpose because, in effect, the owner would know all the same things the agent would know under this scenario.

Held:
In an action by two contractors to enforce mechanic's liens, in response to the question of whether the claimants were original contractors or subcontractors, the court concluded that under these factual circumstances where one company owned the real estate and another had contracted with the lien claimants, but the two entities were essentially one and the same, the lien claimants should be treated as original contractors and, therefore, were not required to give the 10 day notice.

The Missouri Bar Courts Bulletin, 11-Jul