Justia Construction Law Opinion Summaries

A general contractor was hired to oversee the construction of a hotel in Vermont and subcontracted with a firm to install metal siding panels manufactured by a third party. The subcontractor relied on installation instructions available on the manufacturer’s website, which did not specify the use of a splice plate to connect the panels. The panels were installed without splice plates, and after construction, the panels began to detach from the building, causing some to fall and damage nearby property. The contractor later discovered that the manufacturer had created an instruction sheet in 2006 recommending splice plates, but this information was not publicly available at the time of installation.The contractor initially sued the installer for breach of contract, warranty, and negligence in the Vermont Superior Court, Chittenden Unit, Civil Division. The complaint was later amended to add a product liability claim against the manufacturer. After further discovery, the contractor sought to amend the complaint a third time to add new claims against the manufacturer, arguing that new evidence justified the amendment. The trial court denied this motion, citing undue delay and prejudice to the manufacturer, and granted summary judgment to the manufacturer on the product liability claim and on a crossclaim for implied indemnity brought by the installer, finding both barred by the economic-loss rule.On appeal, the Vermont Supreme Court affirmed the trial court’s decisions. The Court held that the trial court did not abuse its discretion in denying the third motion to amend due to undue delay and prejudice. It also held that the economic-loss rule barred the contractor’s product liability claim, as neither the “other-property” nor “special-relationship” exceptions applied. Finally, the Court found the contractor lacked standing to appeal the summary judgment on the installer’s implied indemnity claim. View "PeakCM, LLC v. Mountainview Metal Systems, LLC" on Justia Law

A primary contractor entered into a subcontract with a heating and cooling company to install HVAC systems in an apartment complex. The subcontract included an arbitration clause allowing the contractor, at its sole option, to require arbitration of disputes. Over several years, the relationship between the parties deteriorated, leading the heating and cooling company to file suit for breach of contract and related claims. The contractor failed to respond timely to an amended complaint due to a breakdown in communication with its registered agent, resulting in a default being entered against it. After being properly served, the contractor and the heating and cooling company stipulated to set aside the default, and the contractor then filed an answer and counterclaims. Only after several months did the contractor move to stay proceedings and compel arbitration under the subcontract.The Eighteenth Judicial District Court, Gallatin County, denied the contractor’s motion to compel arbitration. The court found that the contractor had acted inconsistently with its right to arbitrate by failing to assert the arbitration right when reentering the litigation and by not including the arbitration defense in its initial answer. The court also determined that the delay prejudiced the heating and cooling company, which had incurred additional costs and surrendered its default judgment without knowing the contractor would later seek arbitration.The Supreme Court of the State of Montana reviewed the case and affirmed the District Court’s decision. The Supreme Court held that the contractor had waived its right to compel arbitration by acting inconsistently with that right and by causing prejudice to the opposing party. The court found no error in the District Court’s application of the waiver standard and declined to address arguments regarding federal arbitration law, as the waiver was established under Montana law. View "Monarch v. Petra" on Justia Law

A construction worker employed by a subcontractor was injured when a scaffold collapsed at a Manhattan worksite. The worker sued the property owner and general contractor in New York Supreme Court, alleging negligence and violations of state labor laws. The owner’s insurer, Liberty Insurance Corporation, sought a declaration in federal court that the subcontractor’s insurer, Hudson Excess Insurance Company, was obligated to defend and indemnify the owner as an additional insured under the subcontractor’s commercial general liability policy. The subcontract between the general contractor and the subcontractor required the latter to provide insurance coverage for the owner and general contractor.In the New York Supreme Court, summary judgment was granted to the injured worker on some claims, while other claims remained pending. The court denied summary judgment to the owner on its contractual indemnification claim against the subcontractor, finding factual questions about the scope of the subcontractor’s work. Later, after the federal district court’s decision, the state court dismissed all third-party claims against the subcontractor, finding the indemnity provision in the subcontract invalid due to lack of a meeting of the minds.The United States Court of Appeals for the Second Circuit reviewed the case. It affirmed the district court’s finding, after a bench trial on stipulated facts, that the subcontractor’s actions proximately caused the worker’s injuries and that Hudson owed a duty to indemnify the owner under the policy. The Second Circuit held that the later state court decision did not alter this result. However, the Second Circuit reversed the district court’s award of attorney’s fees to Liberty, holding that Hudson was entitled to a statutory safe harbor under New York Insurance Law, and thus was not required to pay Liberty’s attorney’s fees for the federal action. View "Liberty Insurance Corp. v. Hudson Excess Insurance Co." on Justia Law

A dispute arose between a surety bond company, Granite Re, Inc. (Granite), and a creditor bank, United Prairie Bank (UPB), over entitlement to funds held by a receiver in a receivership action. Granite issued payment bonds to Molnau Trucking LLC (Molnau) for public works projects, but Molnau defaulted on both the projects and loans from UPB. The issue was whether Granite or UPB had priority to the bonded contract funds held by the receiver. Granite argued for priority under equitable subrogation, having paid laborers and suppliers, while UPB claimed priority under the UCC, having perfected its security interests in Molnau’s accounts receivable before Granite issued the bonds.The district court granted summary judgment in favor of UPB, recognizing Granite’s equitable subrogation rights but ruling that UPB’s perfected security interest had priority. The court of appeals affirmed, applying a “mistake of fact” standard from mortgage context case law, which Granite did not meet.The Minnesota Supreme Court reviewed the case and held that the “mistake of fact” standard does not apply to performing construction sureties. The court concluded that Granite, as a surety, has the right to equitable subrogation without needing to show a mistake of fact. The court further held that a surety’s right to equitable subrogation is not a security interest subject to the UCC’s first-in-time priority rule. Instead, a performing surety has priority over a secured creditor regarding bonded contract funds.The Minnesota Supreme Court reversed the court of appeals’ decision and remanded the case to the district court for entry of judgment in favor of Granite, allowing Granite to request redistribution of the bonded contract funds. View "In re Receivership of United Prairie Bank v. Molnau Trucking LLC" on Justia Law

Bighorn Construction, LLC (Bighorn) and JED Spectrum, Inc. (JED) filed mechanic’s liens against property owned by Keith Stoakes, seeking to foreclose on the liens. Stoakes denied the validity of the liens and counterclaimed for slander of title against both companies, and for breach of contract, promissory estoppel, and fraud against JED. After a bench trial, the circuit court denied Bighorn’s and JED’s claims for lien foreclosure and ruled in favor of Stoakes on his slander of title claims, awarding him $252,225.27 in damages and $33,394.20 in attorney fees. The court denied relief on the remaining claims.The circuit court found that Bighorn had no reasonable grounds to file the lien after receiving a check for full payment, and that JED’s lien was untimely and insufficiently itemized. The court also found that Stoakes reasonably relied on JED’s promise of a shared well system, awarding him damages for promissory estoppel. However, the court later reversed its decision on the promissory estoppel claim and reduced the attorney fee award accordingly.The Supreme Court of South Dakota reviewed the case. It reversed the circuit court’s ruling on the slander of title claims, finding insufficient evidence to prove that Jerry, acting on behalf of Bighorn and JED, knew or recklessly disregarded the falsity of the liens. The court affirmed the denial of Stoakes’s promissory estoppel claim, concluding that Stoakes did not suffer substantial economic detriment. The court also affirmed the attorney fee award of $33,394.20 to Stoakes, as it was within the court’s discretion under SDCL 44-9-42. View "Jed Spectrum, Inc. v. Stoakes" on Justia Law

Kratzer Construction entered into a subcontract with Hardy Construction Co. to perform work on a building addition for Ekalaka Public Schools. Kratzer completed the work and submitted pay applications, including one for $92,856.45, which Hardy partially disputed due to unapproved change orders. Hardy offered to pay $81,153 upon Kratzer signing a release, but Kratzer refused, demanding the full amount plus interest. Hardy later offered the same amount without requiring a release, but Kratzer still declined, insisting on interest.The Sixteenth Judicial District Court granted summary judgment to Kratzer, ruling that Hardy owed $81,153 plus 18% interest from January 6, 2022, and attorney fees, as Kratzer was deemed the prevailing party. Hardy appealed, arguing that Kratzer failed to meet a condition precedent in the subcontract requiring submission of releases from his subcontractors before final payment.The Supreme Court of Montana reviewed the case and concluded that the subcontract's provisions were clear and unambiguous. The court determined that Kratzer's failure to submit the required releases constituted a breach of the subcontract, and Hardy was entitled to withhold payment. The court found that Hardy's offers to settle did not constitute a waiver of the condition precedent or a novation of the contract.The Supreme Court reversed the District Court's summary judgment in favor of Kratzer, including the awards for interest and attorney fees. The court remanded the case for entry of judgment in favor of Hardy, requiring Hardy to pay Kratzer $81,153 for services rendered under the subcontract, less reasonable attorney fees and costs incurred by Hardy. View "Kratzer Construction v. Hardy Construction" on Justia Law

A charter city in California entered into an agreement with a private developer to revitalize a nearly vacant mall into a multipurpose development. The city contributed approximately $51.36 million in local funds for public improvements, while the developer invested $143 million of its own funds and obtained additional loans. The developer selected the contractors and paid workers less than the prevailing wage, relying on a city ordinance exempting the project from the Prevailing Wage Law (PWL).The Department of Industrial Relations (DIR) determined that the project was subject to the PWL, as it involved public funds. The developer challenged this determination, but the Superior Court of Riverside County affirmed the DIR's decision, concluding that the project was not a municipal affair exempt from the PWL.The Court of Appeal, Fourth Appellate District, reviewed the case and affirmed the lower court's judgment. The court held that the project was not a municipal affair under the home rule provision of the California Constitution. The court distinguished this case from others where charter cities directly managed and funded public works projects. Here, the developer controlled the construction, selected contractors, and bore the majority of the financial burden. The court concluded that the primary purpose of the project was to benefit the developer, not the city, and thus, the PWL applied. The judgment was affirmed, and the DIR was awarded costs on appeal. View "Palm Springs Promenade, LLC v. Dept. of Industrial Relations" on Justia Law

A contractor hired a subcontractor to work on a remote bridge construction project. The scope of the work changed, and neither party kept detailed records of the changes and associated costs. Years after the project was completed, the subcontractor sued for damages, claiming unpaid work. The superior court found that the subcontract did not govern the extra work, awarded some damages to the subcontractor, and precluded some claims due to discovery violations. The court also found the contractor to be the prevailing party and awarded attorney’s fees. Both parties appealed.The superior court denied summary judgment motions from both parties, finding factual disputes. It precluded the subcontractor from pursuing certain damages claims due to insufficient documentation but allowed evidence for contingent findings. After a bench trial, the court awarded the subcontractor $191,443.42, later reduced to $146,693.42 upon reconsideration. The court found the contractor to be the prevailing party under Rule 68 and awarded attorney’s fees.The Supreme Court of Alaska reviewed the case. It concluded that the superior court abused its discretion by precluding the subcontractor’s claims for snowmachine use and labor without considering less severe sanctions. The court affirmed the superior court’s findings on other damages but reversed the awards for Morris Johnson’s labor and boat use, remanding for recalculation. The prevailing party determination and attorney’s fee award were vacated and remanded for reconsideration. The court otherwise affirmed the superior court’s judgment. View "Johnson v. Albin Carlson & Co." on Justia Law

Tom Smith Masonry (Smith Masonry) and WIPI Group USA, Inc. (WIPI) entered into a contract for Smith Masonry to construct a fence on WIPI’s property. After completing most of the work, Smith Masonry requested final payment, which WIPI withheld due to a dispute over the installation of a gate operator. Smith Masonry filed a mechanic’s lien and subsequently a lawsuit to foreclose on the lien, seeking the unpaid balance. WIPI counterclaimed for breach of contract and other issues, seeking damages for alleged faulty workmanship.The Circuit Court of the Second Judicial Circuit, Lincoln County, South Dakota, denied relief to both parties, finding that Smith Masonry’s work was defective and that WIPI’s damages were not established with exactitude. Smith Masonry appealed, and the South Dakota Supreme Court reversed and remanded, directing the lower court to enter a judgment of foreclosure in favor of Smith Masonry for the full amount of the lien and to reconsider Smith Masonry’s request for attorney fees.On remand, the circuit court entered a judgment in favor of Smith Masonry on the lien but denied the request for attorney fees. Smith Masonry appealed again. The South Dakota Supreme Court found that the circuit court violated the law of the case doctrine by revisiting issues already settled in the first appeal and by speculating on what might have occurred had the trial resumed. The Supreme Court also held that the circuit court abused its discretion by denying attorney fees based on irrelevant factors and an overly narrow interpretation of the statute governing attorney fees in mechanic’s lien cases.The South Dakota Supreme Court reversed the circuit court’s denial of attorney fees and remanded for a determination of an appropriate award of attorney fees consistent with its opinion. The court also awarded Smith Masonry $30,000 for appellate attorney fees. View "Smith Masonry v. Wipi Group Inc." on Justia Law

EdgeRock Development, LLC developed a planned unit development in Westfield, Indiana, comprising retail and residential projects. EdgeRock contracted with C.H. Garmong & Son, Inc. and Fox Contractors Corp. to develop the lots. When EdgeRock fell behind on payments, Garmong and Fox recorded construction liens on all five lots, including those sold to ZPS Westfield, LLC and a nonparty. The contractors sued EdgeRock for breach of contract and sought to foreclose the liens.The Hamilton Superior Court awarded the contractors most of the relief they sought, including foreclosure of the construction liens. The Indiana Court of Appeals reversed the foreclosure, concluding the liens were overstated as they were not limited to debts for improvements directly benefiting the properties to which the liens attached.The Indiana Supreme Court reviewed the case to address the validity and scope of the construction liens and the priority between the construction liens and First Bank Richmond’s mortgage lien. The court held that a construction lien secures only the debt for improvements directly benefiting the property to which the lien attaches. Therefore, the contractors can foreclose the liens on each property to recover only those amounts. The court also concluded that First Bank’s mortgage lien is senior to the construction liens for the amount loaned to satisfy Garmong’s prior construction lien but junior for the remaining amounts.The court affirmed the trial court’s judgment in part, reversed in part, and remanded for the trial court to amend the judgment consistent with its opinion. The court also noted that its holdings do not disturb the in personam judgments against EdgeRock on Garmong’s and Fox’s breach-of-contract claims. View "Edgerock Development, LLC v. C.H. Garmong & Son Inc" on Justia Law