P&N Invs. v. Frontier Mall Assocs., 2017 Wyo. LEXIS 62 (Wyo. 2017)

This payment dispute arose over conditional language in a lease agreement between a mall and a restaurant operator.  P&N Investments (“P&N”) leased space from Frontier Mall Associates, LP (“Mall”) to operate a restaurant.  The lease contained a “finish allowance” under which Mall agreed to cover some of P&N’s costs to renovate the space, up to $150,180.

The finish allowance was conditioned on the following provision:

[P&N] shall have furnished evidence satisfactory to Mall from its general contractor and any subcontractors that any and all liens that have been, or may be, filed have been satisfied of record or waived and an affidavit that all work has been paid for.

P&N hired CCI as its general contractor, and CCI in turn hired subcontractors, to renovate the space.  P&N paid CCI in full once CCI and its subcontractors completed the work.  The amount paid was $308,930.  CCI, however, failed to pay its subcontractors in full.  The unpaid amount was approximately $90,000.  Mall refused to pay P&N the finish allowance despite the fact that P&N paid CCI in full and submitted an affidavit stating that no liens were, or could be, filed because of time limitations for liens had expired.

City of Dardenne Prairie v. Adams Concrete & Masonry, LLC, No. ED104982, 2017 Mo. App. LEXIS 533 (Mo. Ct. App. May 30, 2017)

This case arises out of a construction project in which the City of Dardenne Prairie (the “City”) purchased bricks for its construction of two buildings—a new city hall and a parks maintenance building—from Adams Concrete & Masonry, LLC (“ACM”).  In October 2008, the City enacted two ordinances authorizing the construction of the new city hall, but did not enact any ordinances authorizing the construction of the parks maintenance building.  Such authorization—and approval—by the City’s Board of Aldermen (“Board”) is required by law for public projects in Missouri.  Nevertheless, the City executed an agreement with ACM for the purchase of bricks and provision of masonry work for both projects.  In November 2009, the City paid ACM in full for all of the bricks.  But in December 2010, the City decided not to construct its parks maintenance building and thus, the bricks for it were never delivered.

In 2014, the City contacted ACM regarding the location of the undelivered bricks.  Upon learning that ACM’s fabricator had already resold the bricks, the City sued ACM for breach of contract to recover the cost of the undelivered bricks, averring that ACM had breached its purchase agreement by failing to deliver the materials.  ACM counterclaimed for breach of contract, claiming that the City was in breach by cancelling the construction of the parks maintenance building, thereby preventing ACM from completing its masonry work.  The City raised an affirmative defense, asserting that its agreement with ACM had not been approved by the City’s Board as required and thus was not enforceable.  ACM seized on the City’s assertion and moved for judgment on the pleadings arguing that, through this affirmative defense, the City admitted that its Board had not approved the agreement, and thus, the agreement was void and the City, too, was barred from recovering for breach of a contract that never existed.  The trial court sustained ACM’s motion and dismissed the claim and counterclaim.

Iliescu v. Steppan, No. 68346, 2017 Nev. LEXIS 38, (Nevada Supreme Court, May 25, 2017)

Appellants Iliescu entered into a Land Purchase Agreement to sell four unimproved parcels in downtown Reno, Nevada to Consolidated Pacific Development (“CPD”) for development of a high-rise, mixed-use project to be known as Wingfield Towers, which agreement was subsequently assigned to BSC Investments, LLC (“BSC”).  BSC subsequently hired Mark Steppan (“Steppan”), to provide design services for the Wingfield Towers.  Financing was never obtained for the project and the escrow never closed on the sale of appellants’ property.  In addition, since BSC did not pay Steppan for his services, Steppan recorded a mechanic’s lien against appellants’ property.  However, Steppan did not provide appellants with a pre-lien notice.

In this case, the Nevada Supreme Court was asked to determine whether the actual notice exception for pre-lien notices should be extended to offsite work and services performed by an architect for a prospective buyer of the property.  NRS 108.245(1) requires a mechanic’s lien claimant, other than one who performs only labor, to deliver a written notice to the owner of the property of the right to lien after they first perform work on or provide material to a project.  However, substantial compliance with this requirements is met if the property owner: (1) has actual notice of the construction on the property and (2) knows the lien claimant’s identity.

City of Phoenix v. Glenayre Elecs., Inc., 2017 Ariz. LEXIS 121 (Ariz. May 10, 2017)

Between 1960 and 2000, Carlos Tarazon (“Tarazon”) performed work installing and repairing water piping for various contractors and developers in the City of Phoenix, Arizona (the “City”).  In 2013, after developing mesothelioma from exposure to asbestos while working on these projects, Tarazon filed a personal injury suit against numerous defendants, including the City and the various contractors and developers for whom he had worked.

The City filed a third-party complaint against the contractors and developers, alleging that they had agreed to defend and indemnify the City against negligence claims relating to these projects.  With respect to the contractors, their various contracts with the City each expressly required the contractor to indemnify the City from all suits arising from their work.

Wood Elec., Inc. v. Ohio Facilities Constr. Comm’n, 10th Dist. Franklin No. 16AP-643, 2017-Ohio-2743, 2017 Ohio App. Lexis 1745 (May 9, 2017)

The Ohio Facilities Construction Commission (“OFCC”), together with a school district, an architect, and a construction manager, issued an invitation for bids to build a school. Three prime contractors were chosen: a general contractor, a mechanical contractor, and an electrical contractor, Wood Electric (“Wood”).

The general contractor failed to meet the contractual milestones for either temporary enclosure or full building enclosure, significantly delaying Wood’s work. Wood notified the OFCC of the likely impact on its work soon after the general contractor failed to meet the first milestone, and requested an extension of its own deadlines. The OFCC denied Wood’s request. Wood then requested an extension of time in which to prepare, substantiate, and certify a formal claim, which the OFCC also denied.  Wood hastened to submit a timely claim, projecting an impact of $207,467.57, and reserving its right to supplement the claim when the full impact on its work became known.

When OFCC denied Wood’s claim, Wood sued OFCC in the Court of Claims.  At trial, OFCC acknowledged that Wood had a proper claim, but disputed the $254,027 amount, which included $35,006 for home office overhead.  Wood’s expert testified that he had calculated the home office overhead using the “HOOP” formula adopted by the Ohio Department of Transportation.  The trial court ultimately entered judgment in favor of Wood for the full amount of its claim.

Balfour Beatty Infrastructure, Inc. v. Mayor and City Council of Baltimore, 2017 U.S. App. Lexis 7252 (4th Cir., April 25, 2017)

The United States Court of Appeals for the Fourth Circuit recently addressed whether the City of Baltimore (the “City”) had abandoned a contractually required administrative dispute resolution process and relieved Balfour Beatty Infrastructure, Inc. (the “Contractor”) of any obligation to use the administrative dispute resolution process before seeking judicial review of the Contractor’s claims.

The City and the Contractor entered into two contracts (the “Contracts”) whereby the Contractor agreed to build certain parts of a wastewater treatment plant servicing the Chesapeake Bay. The Contracts stipulated that time was of the essence and permitted the City to assess liquidated damages if the Contractor failed to meet the specified completion date.  The Contracts also incorporated by reference the administrative dispute resolution process set forth in the City’s “Department of Public Works Specifications – Materials, Highways, Bridges, Utilities and Incidental Structures 2006,” known as the “Green Book,” which requires contractors engaged by the City in connection with public works projects to seek administrative review by the City’s Department of Public Works of any dispute related to their contracts before suing in court.

Allied World Specialty Ins. Co. v. Abat Lerew Constr., 2017 U.S. Dist. LEXIS 61794 (D. Neb. Apr. 24, 2017)

 Abat Lerew Construction (“ALC”) entered into multiple construction projects which required it to obtain surety bonds guaranteeing its performance. ALC obtained the bonds from Allied World Specialty Insurance Company (“Allied”) and also entered into an indemnity agreement with Allied.  In that agreement ALC agreed to indemnify and hold Allied harmless from and against all liability and to deposit with Allied collateral in an amount determined by Allied to be sufficient to cover liability for any claims under the bonds.

During ALC’s performance of the bonded contracts, Allied received claims on the bonds in excess of $300,000. Invoking the terms of its indemnity agreement with ALC, Allied demanded that ALC post collateral security in the amount of $400,000 to cover liability for the claims.  ALC refused and Allied commenced an action seeking equitable relief requiring ALC to deposit the demanded collateral security.  Upon commencement of the litigation, Allied asked the court to issue a preliminary injunction requiring ALC to post the $400,000 security and restraining ALC from transferring assets.

Alkemade v. Quanta Indem. Co., 2017 U.S. App. LEXIS 6896 (9th Cir. Apr. 20, 2017)

 In 1994, Adrianus and Rachelle Alkemade (the “Alkemades”) bought a house from Meltebeke Built Paradise Homes (“Meltebeke”). The home was built on expanding soils, causing significant structural damage.  Meltebeke repaired the existing damage and hired an engineering firm to install a helical pier foundation, which would have prevented any further damage to the home.  However, the helical pier foundation was also installed negligently, afflicting the home with the same type of structural damage as before.

Alkemades sued Meltebeke for negligent supervision of the helical piers installation. Meltebeke entered a settlement agreement with Alkemades in which Meltebeke assigned to Alkemades the right to sue its insurers, Quanta and GFIC, who refused to defend Meltebeke on grounds that its knowledge of the damage caused by the original, defective construction prevented coverage under a known damages provision in Meltebeke’s policies (the “Policies”).  Alkemades subsequently sued the issuers for breach of contract in the U.S. District Court for the District of Oregon for their failure to defend and indemnify Meltebeke.  The insurers moved for summary judgment.

The Policies excluded coverage for damage known by the insured, in whole or in part, that occurred before the policy period began. If such damage was known to the insured, then any “any continuation, change or resumption” of that damage was also deemed known, and excluded.

Nova Contr., Inc. v. City of Olympia, No. 48644-0-II, 2017 Wash. App. LEXIS 913 (Ct. App. Apr. 18, 2017)

This case arose out of a public project in which the City of Olympia (“City”) hired Nova Contracting, Inc. (“Nova”) to replace a culvert. A prior City project on which Nova completed work ended with Nova receiving extra compensation due to the City’s design errors and, as a result, a grudge held by some City staff against Nova.  The present contract required Nova to send submittals describing its plans for bypass pumping and excavation to the City’s engineer for approval before it could begin work.  The City’s decision regarding submittals was final and Nova bore the risk and cost of delay due to any non-approval.
The City issued its Notice to Proceed on August 11, 2014, but Nova could not begin construction due to the City’s rejection of its submittals. Nearly one month later, the City declared Nova to be in default because it failed to provide satisfactory submittals and failed to mobilize to the site.  Coincidentally, that same day, Nova had mobilized to the site; the City, however, later ordered Nova to cease work because it had commenced operations before obtaining the requisite approval.  Nova protested the City’s declaration of default, but the City terminated the contract on September 24.

Nova filed suit against the City for breach of contract, claiming that its handling of the submittals imposed requirements that were not part of the project’s specifications, thereby delaying Nova’s performance to a point where the project could not be timely completed. In support thereof, Nova’s witnesses declared that the City had appeared to be reviewing the submittals with the goal of rejecting them as a sort of “gotcha” review employed to prevent Nova’s performance.  The City moved for summary judgment, and the trial court granted its motion.  Nova appealed, arguing that there existed genuine issues of fact as to why the project was not completed and that the City had breached its duty of good faith by preventing Nova from attaining its justified contractual expectations.  The City argued that the duty of good faith did not apply because it had unconditional authority to accept or reject Nova’s submittals.

Melchert v. Pro Elec. Contrs., 2017 Wis. Lexis 169 (April 7, 2017)

The Wisconsin Department of Transportation (“DOT”) contracted with Payne & Dolan (“P&D”) as General Contractor on a road improvement project. P&D in turn contracted with Pro Electric Contractors (“Pro Electric”) to install concrete bases for new traffic signal poles.  DOT provided Pro Electric with detailed plans and specifications for the project (“Project Plan”) that specified the location of the concrete bases and the excavation equipment to be used.  Pro Electric was required to comply with the Project Plan and could only make deviations if approved by DOT’s engineer.

While excavating one of the specified locations, Pro Electric unknowingly severed a sewer line, causing sewage backup and flooding on adjoining private property. Pro Electric then backfilled the excavation site without inspecting the sewer line for damage.  The private property owners (“Owners”) brought a negligence action against Pro Electric.  The trial court granted summary judgment in favor of Pro Electric, ruling that it was immune from liability because it was merely implementing DOT’s design decisions.  The court of appeals affirmed, and Owners appealed to the Supreme Court of Wisconsin.