Construction Law

Kenneth A. Slavens, Esquire

Under Missouri’s Mechanic’s Lien Law, contractors who contracted with the agent of the record owner of the subdivision property were considered original contractors under the facts of these circumstances, and, therefore, no notice was required under § 429.100.  River City Drywall, et al. v. Raleigh Properties, Inc., et al., No. 94990 and 94991 (Mo. App. E.D., May 17, 2011), Mooney, J.

A drywall contractor and a flooring contractor sought liens against property in a subdivision.  The property making up the future subdivision was transferred by a general warranty deed to Raleigh Properties, Inc. (Properties).  Properties conveyed the land by quit-claim deed to Raleigh Development, L.L.C. (Development).  Properties subsequently filed a subdivision plat for the subdivision which identified Properties as the owner despite the quick claim deed which had transferred the land to Development.

Properties and Development were owned and controlled by the same person.  This person was the president and sole shareholder and the sole member and sole employee respectively of the two entities.  When this person made management and business decisions regarding the subdivision, he admitted that he made no distinction between Development and Properties.  He admitted that he did not exercise due diligence in maintaining a separation between the two.  The roles of the companies were confused and interchanged.

Properties had contracted with the drywall contractor and with the flooring contractor for work in the subdivision.  Neither contractor served Development, the record owner of the property, with the notice required by § 429.100 of its intent to file a lien.  Both filed suit to enforce their respective liens.  However, the trial court held that he contractors were subcontractors which required notice.  Because the contractors had failed to meet the notice requirement, they could not meet their burden of proof, so they were not entitled to a lien.

Held:  Reversed. 
The court of appeals noted that it was mindful that the mechanic’s lien law of Missouri is remedial in nature.  The law has an equitable purpose and the aim is to accomplish substantial justice.

When a lien claimant fails to comply with the applicable notice provisions, the claimant is not entitled to a mechanic’s lien on the property.  An original contractor is required to provide to the person with whom the contract was made, or the owner if there is no contract, a notice comprised of prescribed language at one of the four times enumerated in the statute prior to receiving payment.  A subcontractor is required to serve the property owner with notice of its claim against the property ten days before filing its lien.

In light of principles applicable to mechanic’s liens and the “particular circumstances of this case,” the court held that the claimants here contracted with the agent of the owner.  The court held that a party who contracts with the owner’s agent is considered an original contractor.  Thus, as original contractors, the ten day notice prior to filing the lien is not required.

The statute of limitations is not tolled on a homeowner’s claim related to the cracking of a basement floor slab because of the failure to identify the specific cause of the cracking when a reasonably prudent person could have discovered the cause much sooner and, further, though damages continued over time, there was only one wrong and not multiple continuing wrongs so as to toll the statute.  Ball v. Friese Construction, Co., No. 95984 (Mo. App. E.D., September 20, 2011), Sullivan, J.

A homeowner filed suit on May 28, 2010 against the homebuilder alleging a breach of the implied warranty of habitability, fraud and violations of the Missouri Merchandising Practices Act relative to problem with the house.  The trial court sustained the home builder’s motion for summary judgment finding that the statute of limitations (§ 561.100, RSMo) had run on the homeowner’s claim because the homeowner’s damages were capable of ascertainment well before 2005.

The homeowner closed on the sale of his home in March of 2001.  In December of 2001 the homeowner complained of cracks in the basement floor.  An engineering firm was hired and the home builder reported shortly thereafter that there were two possible causes of the cracking in the floor.  In September of 2002, the home owner provided a copy of an engineering report from another engineering firm to the home builder which offered different opinions as to the cause of the floor cracking.

In December 2005, the homeowner sent a letter to the home builder detailing problems with the home including the cracking floor slab.  This was followed by another letter in April of 2006.

In December of 2009, a new and different engineering firm provided a report to the homeowner setting out its opinion of the case of problems with the floor slab and some movement of interior columns.  This engineering firm opined that cause of the cracking floor slab was due to the home builder’s failure to properly remove or to properly compact the plastic soil.

As a result, the homeowner argued that the damages were not capable of ascertainment until the 2009 engineering report because that was when the “actual” cause of the cracking was identified.  The homeowner also argued that there were multiple items of damage suffered and, as a result, the statute is tolled until the last item of damages is suffered.

Held: Affirmed.
The statute of limitations begins to run when the evidence is such that circumstances would place a reasonably prudent person on notice of a potentially actionable injury.  Damages are ascertained when the fact of damage appears and not when the extent or amount of damages is determined.  Here, the homeowner could have discovered the cause of the damages earlier but chose not to take the necessary steps to do so.  The homeowner had reason to believe the basement floor was heaving in 2002.

As to the homeowner’s claim that the damages were continuing and on-going so as to toll the statute, the court held that there was only one wrong which resulted in continuing damages and not multiple wrongs. 

Danne W. Webb, Esquire

A payment bond surety is held liable for interest and prevailing party attorneys’ fees awarded to a subcontractor against a bonded general contractor after a settlement was reached between the subcontractor and the general contractor. Brooke Drywall of Columbia, Inc. v. Building Construction Enterprises, Inc., et al., No. 73355 (Mo. App. W.D., November 8, 2011), Mitchell, P.J.

Subcontractor Brooke Drywall of Columbia, Inc. (“Brooke”) entered into a settlement agreement with general contractor Building Construction Enterprises, Inc., (“BCE”) on a public project in Missouri.  BCE was the principal on a payment bond issued by Hartford Fire Insurance Company (“Hartford”).  A dispute arose over payment to Brooke.  After lengthy litigation, and during a jury trial, Brooke and BCE settled for the principal amount of Brooke’s claim, reserving the issue of interest and attorneys’ fees for determination by the trial court.  The subcontract between Brooke and BCE contained a prevailing party attorneys’ fee provision. 

The trial court found that Brooke was entitled to both interest and attorneys’ fees, and that both BCE and Hartford were liable.  Hartford disputed liability on the basis that its payment bond did not cover BCE’s liability to Brooke for interest and attorneys’ fees.

Held:  Affirmed.  The Western District determined that Brooke was entitled to recover interest under the subcontract, and that by prevailing on that issue, Brooke was also the prevailing party for purposes of attorneys’ fees.  The Western District further found that through the language of the payment bond, the surety had guaranteed all payments due for breach of BCE’s obligations, which included attorneys’ fees.