Contractors’ Rights on a Remediation Project

The phone rings at 5am.

It’s a call from the insurance adjuster.

One of their insured clients’ home flooded.

Your company is tasked with performing the remediation work after the flood. As part of the work, you had to remove personal property for the homeowner.

You also agreed to store the personal property for the homeowner, and you’re billing the homeowner an agreed upon amount for said storage.

After you have completed all of the work, the homeowner refuses to pay your company for the work and will not pay for the transportation of the personal property to storage, or for the storage of the goods. The owner refuses to pay anything, claiming that the work was defective.

What are your rights?

This article was written by a St. Louis Construction Lawyer and is designed to provide general guidance for Missouri contractors with respect to rights against a homeowner when personal property is transported and stored in conjunction with a remediation project.  

However, the information in this article should never be used as a substitute for advice from a competent construction lawyer, as the facts of each case will be determinative of the contractors’ rights.

Below is a discussion on contractors’ rights against homeowners in the event of nonpayment as it pertains to (1) the work performed, (2) the transportation costs of the personal property, and for (3) the costs of storage for the property.

1. Lien Rights for Transporting Consumer’s Personal Property

The Uniform Commercial Code provides that a warehouseman has a lien on goods that are in his possession for charges for storage, transportation, insurance, and/or labor.  R.S.Mo. § 400.7-209 (2015).

The lien on the personal property does not include a lien on the personal property for the amounts incurred by the homeowner for the remediation services—meaning that the lien only applies to the amount owing for the storage, transportation, and labor (to transport and store the personal property).

“If storage charges are due, a bailee…can assert a warehouseman’s lien under § 400.7-209, RSMo 1978. He may retain the goods or sell them.

If an action is brought against the bailee, he can assert his enforcement of its lien as a defense to his non-delivery. See § 400.7-403(1)(c).” Church v. Richfer Corp., 618 S.W.2d 29 (Mo., 1981). This means that the contractor has the right to hold the personal property as collateral for payment for the transport and storage of the goods.

2. Right to Hold the Owner’s Property for Non-Payment

Generally, you have the right to hold the owner’s property until the debt is satisfied (lien is paid off). After the lien is paid off, who has the responsibility of transporting the property back to the owner? This is likely a subject of negotiation between the parties.  The contractor can often accomplish such a task much easier that the owner as the contractor was the party that moved the property in the first place. If the contractor is responsible for returning the property, however, in most instances, Missouri law may permit them to roll that expense into the warehouseman’s lien on the property. The statute allows the lien for general transportation and storage. Additionally, the insurance company will likely cover, most if not all, of the bill. The contractor can’t rack up exorbitant expenses during the transportation, however, they have to be reasonable. If it’s a large amount of property, the expenses may rise proportionately.

3. Right to Sell the Consumer’s Personal Property

Yes, if you provide the proper notice and strictly comply with the foreclosure procedure enumerated in the Missouri statutes, you can liquidate (foreclose on) the homeowner’s personal property to satisfy the amounts due to you.

As a rule of thumb, a sale of more goods than is apparently necessary to insure satisfaction of the amount owed is not commercially reasonable, except in rare cases.

4. Right to Waive Negligence During the Storage and/or Transport of the Homeowner’s Property

A warehouseman can potentially be held liable for damages to the goods if that damage is the result of the contractor’s failure to exercise the care of an ordinarily prudent person would exercise under like circumstances.

The property owner and the warehouseman have what’s called a bailment relationship.

The bailment, by virtue of the relationship between the owner and the contractor, creates a duty to exercise ordinary care when handling and storing the property.

Can the Contractor Include a Provision in the Contract to Absolve Himself from Liability?

Yes. The Uniform Commercial Code, which was adopted by Missouri, allows the warehouseman to limit the liability exposure to the bailor or, in essence, to waive claims of negligence:

“Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage, and setting forth a specific liability per article or item, or value per unit of weight, beyond which the warehouseman shall not be liable…” R.S.Mo. § 400.7-204

5. Right to Terminate Homeowner’s Storage Lease

A warehouseman may on notifying the person on whose account the goods are held and any other person known to claim an interest in the goods require payment of any charges and removal of the goods from the warehouse at the termination of the period of storage fixed by the document, or, if no period is fixed, within a stated period not less than thirty days after the notification. If the goods are not removed before the date specified in the notification, the warehouseman may sell them in accordance with the provisions of the section on enforcement of a warehouseman’s lien (section 400.7-210). Section 400.7-206.1

Is a Missouri Contractor who stores a Homeowner’s Property governed by the Missouri Warehouse Statute and Self-Storage Facilities Statute?

Chapter 415 of the Missouri Revised Statutes sets forth the persons, entities, and subject matter that govern self-storage facilities.

Most notably, Chapter 415 designates the term “operator” as the owner, operator, lessor or sublessor of a self-service storage facility.

R.S.Mo. Section 415.405, which is the definitions section of Chapter 415, lays out two relevant definitions: (1) Operator and (2) Self-service Storage Facility.

• Operator is “the owner, operator, lessor or sublessor of a self-service storage facility, or an agent or any other person authorized to manage the facility; except that, the term “operator” does not include a warehouseman, unless the operator issues a warehouse receipt, bill of lading, or other document of title for the personal property stored.

• Self-Service Storage Facility – “any real property used for renting or leasing individual storage spaces in which the occupants themselves customarily store and remove their own personal property on a self-service basis”

According to the definitions section, operator under the self-storage statutes specifically excludes a “warehouseman.”

Therefore, the Self-Service Storage Facility statutes do not govern contractors who transport and store personal property in conjunction with a remediation project.

What is the Procedure for Foreclosing on a Warehouseman’s Lien in Missouri?

Except as provided in subsection (2), a warehouseman’s lien may be enforced:

• by public or private sale of the goods in bloc or in parcels,
• at any time or place and on any terms which are commercially reasonable,
• after notifying all persons known to claim an interest in the goods.

R.S.Mo. Section 400.7-210. (1)

What does the Lien Sale Notice Have to Include?

• the amount due,
• the nature of the proposed sale, and
• the time and place of any public sale.

*All sales must be carried out in a commercially reasonable manner.

How is Commercially Reasonable Manner Defined?

R.S.MO. 400.9-627 sets forth the elements to categorize a sale as conducted “in a commercially reasonable manner,” as follows, if the disposition is made:

(1) In the usual manner on any recognized market;

(2) At the price current in any recognized market at the time of the disposition; or

(3) Otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.

Other methods of carrying out a collection, enforcement, disposition, or acceptance will be commercially reasonable if approved:

(1) In a judicial proceeding;

(2) By a bona fide creditors’ committee;

(3) By a representative of creditors; or

(4) By an assignee for the benefit of creditors.

* The fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.

Enforcement of a Warehouseman’s Lien on Goods Other than Merchant Stored Goods

A warehouseman’s lien on goods other than goods stored by a merchant in the course of his business  may be enforced only as follows:

(a) All persons known to claim an interest in the goods must be notified;

(b) The notification must be delivered in person or sent by registered or certified letter to the last known address of any person to be notified;

(c) The notification must include an itemized statement of the claim, a description of the goods subject to the lien, a demand for payment within a specified time not less than ten days after receipt of the notification, and a conspicuous statement that unless the claim is paid within that time the goods will be advertised for sale and sold by auction at a specified time and place

(d) The sale must conform to the terms of the notification.

(e) The sale must be held at the nearest suitable place to that where the goods are held or stored.

(f) After the expiration of the time given in the notification, an advertisement of the sale must be published once a week for two weeks consecutively in a newspaper of general circulation where the sale is to be held.

The advertisement must include a description of the goods, the name of the person on whose account they are being held, and the time and place of the sale. The sale must take place at least fifteen days after the first publication.

Conclusion

Each case is fact specific.

However, the above describes the general laws that govern a frequent situation in the construction remediation industry.

It is commonplace for contractors performing remediation work to transport and store an owner’s property.

As you can see above there are very specific statutes regarding the Missouri laws that apply to the storage of an owner’s property.

The above discussion includes a few questions that contractors often ask their attorney and the law pertaining to such questions.

Please note that this article is only a general discussion and should not be applied to your case unless and until you consult an experienced construction lawyer to evaluate your specific factual circumstances.

If you are in a similar situation, you should contact an experienced construction law attorney to advise you as there may be statutory nuances that affect your rights.

The above is merely general information regarding statutes and case law in Missouri, which pertain to contractors’ rights on a construction project.

A lawyer should always evaluate the facts of your case to determine whether these rights are applicable.