Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

Silver Lining? Economic Downturn Spurs Construction Disputes

Rob-Pitkin-214x3001For this week’s Guest Post Friday here at Musings, we welcome back Rob Pitkin. Rob (@KCconstrlawyer) is an attorney with the Construction Law Group of Horn Aylward & Bandy, LLC in Kansas City, where he handles Construction disputes and other types of sophisticated business litigation. Originally from Iowa, he graduated from Wheaton College in Illinois and Wake Forest University School of Law in North Carolina. Rob is listed in Best Lawyers in America in Construction Law and serves as an Arbitrator on construction cases for the American Arbitration Association. He has been practicing law for 25 years now and focusing on construction law for more than 15 years.

The economic downturn in 2008 spawned many construction disputes, some of which have given us some new law governing these types of cases. Here in the Kansas City area we are no exception.

The seminal case involved a partially completed office tower, parking garage, and hotel that ended up in bankruptcy, sold to a third party and then torn down and built for a new end user. The original project was called “West Edge” (it was to be located on the “west edge” of the famous Country Club Plaza area of Kansas City). As it turned out, the Polsinelli law firm and the Hotel Sorella ended up occupying the site.

When the original developer ended up in bankruptcy court, it was up to the bankruptcy judge to apply the mechanic’s lien laws of Missouri to the numerous claims filed against the property. The resulting opinion is a primer on Missouri mechanic’s lien law. In re Trilogy Development Co., 468 B.R. 854 (Bankr. W.D. Mo. 2011). Pitkin Construction

Another case involved the relative priority of mechanic’s liens in Missouri vis-à-vis a purchase money deed of trust. Missouri is a “recording” state for purposes of mortgages and deeds of trust, and applies the “first spade” rule to priority of mechanic’s liens. Significantly, the Missouri Supreme Court upheld the priority of the mechanic’s liens based on work that commenced before the purchase deed of trust at issue was recorded, even though the deed of trust had been issued before construction work began on the project. Bob DeGeorge Assoc., Inc. v. Hawthorn Bank, 377 S.W.3d 592 (Mo. 2012).

A third case involved the common scenario where a defendant wants to include third-party claims against potential indemnitors. Since at least 1980, Missouri had required such a defendant to first of all admit its own liability to the plaintiff before asserting such third-party claims. However, the Missouri Supreme Court declared that a defendant/third-party plaintiff can deny liability to the plaintiff, but also assert a third party claim against others who would be liable to the defendant if it is adjudge liable to the plaintiff. Travelers Property Cas. Co. of Am. v. Manitowoc Co., 389 S.W.3d 174 (Mo. 2013).

Currently, the Missouri Supreme Court has two construction cases set back-to-back on its docket on September 3, 2014. The first case involves whether mechanic’s lien claimants – like mortgage holders – are entitled to constitutional notice of an intervening tax foreclosure sale. In the Matter of Foreclosure Liens for Delinquent Taxes by Action in Rem, No. SC93982 The second case involves whether innocent unpaid subcontractors are entitled to file mechanic’s liens and/or assert direct claims against a public entity that failed to require the necessary statutory public works bond. Brentwood Glass Co. v. Pal’s Glass Serv., No. SC94038. Both cases will have a huge impact on the current status Missouri construction law.

As always, Rob and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.

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2 Responses to Silver Lining? Economic Downturn Spurs Construction Disputes

  1. What a terrific post, and you are correct that the added litigation has given courts the opportunity to interpret and apply some aspects of lien and bond law which may have been overlooked before. In fact, I’d like to share a recent Georgia case where a Georgia subcontractor attempted to use promissory estoppel as a means to get a foreclosing bank to pay for its grading and paving services.

    I hope that you’ll let us know about the two pending cases in Missouri. Here’s the link to our blog on the recent Georgia case:

  2. Thanks for checking in Mark. Here’s hoping that the litigation helps in the long run by giving courts the ability to clarify a few things.

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