Justia Construction Law Opinion Summaries

This case was one of a number of cases which have, in the aftermath of the "Great Recession" that hit Riverside and San Bernadino counties particarly hard. This appeal stemmed from the construction of a Kohl’s department store in Beaumont. The developer of the store was Inland-LCG Beaumont, LLC, and the general contractor was 361 Group Construction Services, Inc. Somewhere in the process of construction, the money dried up and 361 refused to pay its subcontractors for work they had done. Those subcontractors included Cass Construction, TNT Grading Inc., Palomar Grading & Paving and R3 Contractors. These four subcontractors recorded mechanic’s liens and sued to foreclose those liens. With one exception they obtained judgments of foreclosure. The one exception was TNT, who, by the time of the trial to foreclose its mechanic’s lien, was a suspended corporation and thus unable to prosecute an action. The two owners of the property, Kohl’s and Wells Fargo, appealed the judgments obtained by the three successful subcontractors, Cass, R3 and Palomar Grading. The Court of Appeal took a "soup-to-nuts" approach in reviewing the multiple issues presented on appeal, and affirmed in all respects except to the degree that liens of Palomar Grading and Cass should include prejudgment interest. To that degree the Court reversed the judgment and remanded it with instructions to the trial court to recalculate the prejudgment interest at 7 percent. On balance, Cass and R3 were still the prevailing parties in this appeal: Of 10 issues raised, they prevailed, either singly or together, in 9. They recovered their costs on appeal from Kohl’s and Wells Fargo. For Palomar Grading, the only issue on which it has appeared in this appeal was the issue of the proper rate of prejudgment interest, and on that issue it lost. "However, it would be unfair to allow Kohl’s and Wells Fargo to recover all their appellate costs from Palomar Grading because they won on the lone prejudgment interest rate issue. Most of this appeal has concerned their unsuccessful challenges to the foreclosure judgments obtained by Cass and R3." View "Palomar Grading v. Wells Fargo" on Justia Law

Plaintiff filed suit against BHDR under the Fair Housing Act (FHA), 42 U.S.C. 3601 et seq., alleging that by failing to remedy certain flaws in the design and construction of the District Universal Boulevard Apartments (the District), BHDR discriminated against people with handicaps in violation of 42 U.S.C. 3604(f)(1)-(2). The court held that the FHA's design-and-construction guidelines do not provide a standard for determining whether discrimination under section 3604(f)(1) and (f)(2) exists outside of the design and construction contexts. Despite the fact that BHDR was not involved in the design or construction of the District, all of plaintiff's claims that BHDR violated subsections (f)(1) and (f)(2) were alleged through the lens of the design-and-construction guidelines in subsection (f)(3). The court held that an FHA plaintiff cannot establish the discrimination of a defendant who was uninvolved in the design or construction of a dwelling by reference to the guidelines at section 3604(f)(3)(C). Therefore, the district court did not err in granting summary judgment to BHDR. View "Harding v. Orlando Apartments, LLC, et al." on Justia Law

Defendants / cross-complainants Intervest-Mortgage Investment Company and Sterling Savings Bank (together Intervest) appealed a judgment in favor of plaintiff / cross-defendant Moorefield Construction, Inc. The parties' dispute stemmed from an uncompleted medical office building development in San Jacinto. Moorefield was the general contractor for the development, and Intervest was the construction lender. The developer, DBN Parkside, LLC, encountered financial difficulties toward the end of the project. As a result, DBN did not fully pay Moorefield for its construction services and defaulted on its construction loan from Intervest. Moorefield filed a mechanic's lien against the development property, and Intervest took title to the property in a trustee's sale under the construction loan. Moorefield's sought to foreclose on its mechanic's lien. Intervest's cross-complaint against Moorefield sought a declaration of the relative priority of the lien, equitable subrogation to a priority position over the lien, quiet title, and judicial foreclosure. After a bench trial, the court entered judgment in favor of Moorefield on the complaint and cross-complaint, declared Moorefield's mechanic's lien was superior in priority to Intervest's construction loan deed of trust, and ordered foreclosure and sale of the property to satisfy Moorefield's mechanic's lien. Intervest appealed, arguing: (1) the court erred in finding Moorefield's agreement to subordinate its mechanic's lien to the construction loan deed of trust was unenforceable; (2) the court should have applied the doctrine of equitable subrogation to give Intervest partial priority over Moorefield's mechanic's lien; (3) substantial evidence does not support the court's finding that Moorefield commenced work prior to the recording of Intervest's deed of trust; and (4) substantial evidence does not support the court's finding that Moorefield's mechanic's lien was timely filed following completion of construction. After review, the Court of Appeal concluded Moorefield's agreement to subordinate its mechanic's lien to the construction loan deed of trust was enforceable and therefore reversed the trial court's judgment. View "Moorefield Constr. v. Intervest-Mortgage" on Justia Law

Developer obtained a loan from Bank to construct a commercial and condominium project. Bank secured its loan with two deeds of trust, the first of which attached before construction began on the project. Developer failed to pay the general contractor (Contractor) several million dollars for the project, and after Developer had sold many of the units, Contractor recorded a mechanics’ lien against the project. Contractor then sought to foreclose on its lien against Developer, the unit owners, and their lenders. The Owners and Lenders contested the foreclosure, arguing that they were equitably subrogated to Bank’s first deed of trust and thus had priority over Contractor’s mechanics’ lien. The trial court concluded that Contractor’s lien had priority. The Supreme Court reversed, holding (1) Ariz. Rev. Stat. 33-992(A), which gives mechanics’ liens priority over liens recorded after construction begins on real property, does not preclude assignment by equitable subrogation of lien that attached before construction began on the project; and (2) when a single mortgage burdens multiple parcels, a third party may be entitled to equitable subrogation when that party has paid a pro rata amount of the obligation and obtained a full release of the parcel at issue from the mortgage. Remanded. View "Weitz Co., LLC v. Heth" on Justia Law

The Developer converted a vacant building into a residential condominium by gutting and refitting it. The Developer purchased Commercial Lines Policies covering bodily injury and property damage from Nautilus, covering periods from June 1998 through June 2000. The policies define occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” but do not define accident. The policies exclude damage to “that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations;” eliminate coverage for damage to “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it;” and contain an endorsement entitled “Exclusion—Products-Completed Operations Hazard.’ Construction was completed in 2000; the Developer transferred control to a board of owners. By May 2000, one homeowner was aware of water damage. In 2005, the Board hired a consulting firm, which found that the exterior brick walls were not fully waterproofed and concluded that the deterioration had likely developed over many years, even prior to the condominium conversion, but that the present water penetration was the result of inadequate restoration of the walls. The Board sued the Developer. Nautilus denied coverage and obtained a declaratory judgment. The Seventh Circuit affirmed, reviewing the policy and finding that the shoddy workmanship, of which the board complained, was not covered by the policies; that Nautilus did not unduly delay pursuing its declaratory suit; and that the alleged damage to residents’ personal property occurred after the portions of the building were excluded from coverage.View "Nautilus Ins. Co. v. Bd. of Dirs. of Regal Lofts Condo Ass'n" on Justia Law

Respondent supplied steel for projects on six properties. Respondent was not fully paid for the steel delivered to the properties, and consequently, Respondent perfected mechanics’ liens on the six properties. Respondent then filed a complaint for foreclosure against each property. Thereafter, surety bonds were posted and recorded for four properties. Respondent then amended its complaint to dismiss its lien foreclosure claims against those four properties, replacing them with claims against the sureties and principles on the surety bonds. The district court concluded that Respondent established liens on the six properties. The district court ordered the sale of all six properties without demonstrating that each surety bond was insufficient to pay the sum due on its respective property. The Supreme Court affirmed in part and reversed in part, holding (1) a materialman has a lien upon a property and any improvements thereon for which he supplied materials in the amount of the unpaid balance due for those materials; (2) in this case, Respondent established a materialman’s lien on each of the six properties for the unpaid balance due on the steel delivered; and (3) the district court erred by ordering the sale of all six properties. View "Simmons Self-Storage Partners v. Rib Roof, Inc." on Justia Law

The United States Bankruptcy Court for the District of Nevada certified three questions of law to the Supreme Court regarding the mechanic’s lien priority law, specifically, the visible-commencement-of-construction aspect of the law, which states that a mechanic’s lien takes priority over other encumbrances on a property that are recorded after construction of a work of improvement visibly commences. The Supreme Court answered (1) the Court’s holding in J.E. Dunn Northwest, Inc. v. Corus Construction Venture, LLC does not preclude a trier of fact from finding that grading property for a work of improvement constitutes visible commencement of construction; (2) the contract dates and permit issuance dates are irrelevant to the visible-commencement-of-construction test, even in this case where dirt material was placed on a future project site before building permits were issued and the general contractor was hired; and (3) the Court declined to answer the third certified question because it asked the Court to make findings of fact that should be left to the bankruptcy court. View "Byrd Underground, LLC v. Angaur, LLC" on Justia Law

In August, 2010, Appellants, Washington County residents Raymond and Donna Mantia, hired Appellee, West Virginia contractor Shafer Electric & Construction, to build a 34 foot by 24 foot, two-car garage addition onto their house. The proposals for the garage did not comply with several requirements of Section 517.7 of the Home Improvement Consumer Protection Act. Specifically, any home improvement contract, in order to be valid and enforceable against the owner of real property, had to be legible, in writing, and contain thirteen other specific requirements. Despite the detail in the specifications for the work to be completed, the contract here only complied with subsections (5), (7), and (8) of Section 517.7(a). Notwithstanding these deficiencies, work on the project began in October, 2010, when Appellants, who owned their own excavation business, began the foundation excavation. When Appellee commenced construction of the addition, it contended that problems surfaced because of Appellants' failure to complete the excavation work properly. During the subsequent months, Appellants eventually reexcavated the foundation area for the addition and, in the process (according to Appellee), changed the design of the addition several times. Negotiations into these design changes and other necessary alterations as a result of the excavation problems occurred, but ultimately failed when Appellants apparently refused to enter into a new contract with Appellee. Upon the breakdown of the negotiations, the parties mutually agreed that Appellee would invoice Appellants for the work completed, and that Appellee would discontinue efforts on the project. Appellants refused to pay the bill. Appellee responded by filing a mechanic's lien in the Washington County Court of Common Pleas. When Appellants still had failed to satisfy the outstanding balance, Appellee filed a civil action in the common pleas court, alleging both breach of contract and quantum meruit causes of action. The Supreme Court granted allowance of appeal in this matter to determine whether the Act barred a contractor from recovery under a theory of quantum meruit in the absence of a valid and enforceable home improvement contract as defined by the Act. The Superior Court held that the Act did not bar a cause of action sounding in quantum meruit and, for slightly different reasons, the Supreme Court affirmed. View "Shafer Electric & Construction v. Mantia" on Justia Law

The Cote Corporation filed a mechanic’s lien against real property owned by Kelley Earthworks, Inc. Cote subsequently brought a complaint to enforce the lien against Kelley. Kelley did not respond to the complaint or to Cote’s motion for summary judgment. The superior court entered Kelley’s default and then entered judgment for Cote, plus interest and attorney fees, and ordered that the property be sold to satisfy the judgment. Kelley appeared ten days after the judgment was entered on the docket and filed motions to set aside its default and for relief from the judgment. The court declined to set aside the default but did strike its order to sell the real property, instead awarding Cote a money judgment. The Supreme Court vacated the judgment, holding that the court erred in striking the provision of its order requiring a sale of the property. Remanded for entry of an order for the sale of at least a portion of Kelley’s land. View "The Cote Corp. v. Kelley Earthworks, Inc." on Justia Law

The Fillers planned to demolish an unused Chattanooga factory. They knew the site contained asbestos, a hazardous pollutant under the Clean Air Act. Environmental Protection Agency regulations require removal of all asbestos before any demolition. Asbestos materials must be wetted, lowered to the ground, not dropped, labeled, and disposed of at an authorized site. Fillers hired AA, a certified asbestos surveying company, which estimated that it would cost $214,650 to remove the material safely. Fillers hired Mathis to demolish the factory in exchange for salvageable materials. Mathis was required to use a certified asbestos contractor. Mathis applied for an EPA demolition permit, showing an estimated amount of asbestos far less than in the AA survey. The agency’s asbestos coordinator contacted Fillers to verify the amount of asbestos. Fillers did not send the survey, but provided a revised estimate, far less than the survey’s estimate. After the permit issued, the asbestos contractor removed “[m]aybe, like, 1/100th” of the asbestos listed in the AA survey. Temporary laborers were hired, not equipped with protective gear or trained to remove asbestos. Fillers supervised. The work dispersed dust throughout the neighborhood. An employee of a daycare facility testified that the children were unable to play outside. Eventually, the EPA sent out an emergency response coordinator and declared the site an imminent threat. Mathis and Fillers were convicted of conspiracy, 18 U.S.C. 371, and violations of the Clean Air Act, 42 U.S.C. 7413(c). Fillers was also convicted of making a false statement, 18 U.S.C. 1001(a)(2), and obstruction of justice, 18 U.S.C.1519. The district court sentenced Mathis to 18 months’ imprisonment and Fillers to 44 months. The Seventh Circuit affirmed.View "United States v. Mathis" on Justia Law