Tag Archives: Construction Law Disputes

10 Step Checklist for Material Suppliers Filing a Mechanic’s Lien in Missouri

Material Suppliers often face collection issues due to contractors running up accounts and running out of funds on large projects. This can happen for any number of reasons including the contractor’s failure to properly bid the job, issues with cash flow, or complaints regarding the quality or condition of the materials supplied.

Regardless of the reason, suppliers find themselves in collection situations quite frequently, and in many cases, the only manner in which the supplier can collect is by filing a mechanic’s lien on the owner’s property.  In an effort to provide general guidance relating to Missouri mechanic’s liens, we have prepared a checklist that suppliers can reference which utilizes and references or is based upon Missouri’s lien statutes and case law.

It is always advised to seek the counsel of an attorney licensed in the state of Missouri who is familiar and knowledgeable regarding the lien laws.  A mechanic’s lien filing can be a meticulous and difficult process. You should proceed with caution and strongly consider using this checklist as a general reference rather than utilizing it to prepare your own lien.

Step 1. Determine whether the work or material furnished is considered lienable under Missouri Mechanic’s Lien Laws

Ordinarily, common sense will dictate whether work performed or materials supplied are lienable.  However, to make a few examples, Missouri case law describes the following items as those which may give rise to the assertion of a lien: lumber, paneling, sheet rock, tape, paint, paint brushes, sandpaper, saw blades.

Many of the foregoing items would give rise to an invoice that would not likely necessitate a lien due to their modest cost.  However, if a material supplier provides any appreciable amount of product or supplies, which are later incorporated into the subject property, there is a high probability that the supplier has a lienable claim. R.S. Mo. § 429.010

Step 2. Determine the Date that Indebtedness Accrued and Ensure Timely Filing of Lien

The date indebtedness accrued is typically treated as the last day the claimant provided labor or materials to the property that is the subject of the lien. R.S. Mo. § 429.080. “It shall be the duty of every original contractor, every journeyman and day laborer, including persons who use rented machinery or equipment in performing such work or labor, and every other person seeking to obtain the benefit of the provisions of sections 429.010 to 429.340, within six months after the indebtedness shall have accrued.” R.S. Mo. § 429.080.

Step 3. Obtain Legal Information Pertaining to the Subject Real Estate

Typically a title report or letter report is obtained from a local title company. This report is necessary for the preparation of the lien (it is not always necessary for the preparation of the notice but can be helpful in compiling the necessary information). Some of the important reasons to obtain the title report is to ascertain the identity of the owner of record and the exact legal description of the subject property.

Step 4. Determine the Classification of the Entity/Individual with Whom You Have Contracted

Construction projects can have numerous different trades and contractors.  It is important to establish your classification as a supplier or subcontractor or whatever you may be. If the claimant is a subcontractor or supplier (or any person on the project other than the original contractor), the claimant, in order to properly preserve its lien rights, is required to prepare a notice of intent to file a mechanic’s lien statement and serve it on the owner. Said notices are to be served within six months from the date indebtedness accrued less ten days pursuant to R.S. Mo. § 429.100. This notice is sometimes referred to in the industry as a Notice of Intent to File a Mechanic’s Lien.

For Suppliers of Rental Equipment, the claimant must comply with a number of rigid requirements set forth in R.S.Mo § 429.010, and said claimant should refer to the rental equipment supplier lien filing article, which references other statutes because the checklist set forth herein is not adequate to satisfy the rental equipment supplier lien claimant’s requirements. However, in an effort to give a rough overview, the following relates to liens involving rental of machinery/equipment:

  There shall be no lien involving the rental of machinery or equipment unless:

  • (1) The improvements are made on commercial property;
  • (2) The amount of the claim exceeds five thousand dollars; and
  • (3) The party claiming the lien provides written notice within fifteen business days of the commencement of the use of the rental machinery or equipment to the property owner that rental machinery or equipment is being used upon their property. Such notice shall identify the name of the entity that rented the machinery or equipment and the machinery or equipment being rented.

Step 5. Ensure the 10 day Notice of Intent to File a Mechanic’s Lien Contains the Required Elements

Notice of Intent to File a Mechanic’s Lien should contain the following information:

  1. The name of the person or persons to whom notice must be given
  2. The name of the claimant
  3. A description of the improvement (e.g., performed electrical work in the entirety of the two-story brick building)
  4. The location of the property, preferably the legal description that will be used in the lien statement
  5. The name of the person or persons with whom the claimant made the contract
  6. The amount of the claim
  7. The basis of the claim (i.e., whether for labor, for materials, or for labor and materials)
  8. A statement that, unless the account is paid before a specified date (which should be a date at least ten days after the date of service of the notice but in no event later than the date the lien statement must be filed), a lien statement will be filed
  9. The date of the notice
  10. The signature of the claimant–see Towner v. Remick, 19 Mo. App. 205 (W.D. 1885), and Schulenburg v. Bascom, 38 Mo. 188 (1866) (requiring the claimant’s name and signature); Miller v. Hoffman, 26 Mo. App. 199, 202 (E.D. 1887) (upheld a notice signed “Miller & Fathman, by Julian Laughlin, their attorney”)
  11. The return of service

 Step 6. Check the records of the clerk of the circuit court for other Lienholders or Individuals/Entities with Equitable Interests in the Property

It is well-advised to determine whether any other claimants maintain a lien or other equitable interest against the subject property. From a practical standpoint, many times the letter report or title report will identify those interested parties.  However, it is important to conduct your own investigation as your claim progresses to ensure that each interested party becomes a party to your enforcement lawsuit. If so, the claimant should be joined in that suit in order to properly adjudicate each interested party’s rights with respect to the lien. § 429.270

Step 7. Prepare and Timely file a Mechanic’s Lien Statement with the Clerk of the Circuit Court in the County where the Property is Located

Lien Statement should contain (§429.080):

  1. “[A] just and true account of the demand due . . . after all just credits have been given”
  2. “[A] true description of the property, or so near as to identify the same, upon which the lien is intended to apply”
  3. “[T]he name of the owner or contractor, or both, if known to the person filing the lien”
  4. Verification by the claimant or some credible person for the claimant

Step 8. Bring a Lawsuit to Foreclose on the Mechanic’s Lien within Six Months of Filing the Statement of Lien

The claimant must file a petition in the circuit or associate circuit division to foreclose the mechanic’s lien within six months from the date the lien statement was filed by the claimant. §429.170.

Step 9. Ensure that process is served as soon as possible to avoid vitiation of the lien due to failure to prosecute. §429.170

 Step 10. Take judgment on the Foreclosure of the Mechanic’s Lien Claim

After presenting the evidence and allowing the court or jury to review the merits of the case, you will request that the judge or jury render a judgment/verdict in your favor to take judgment in the case.

Conclusion

The foregoing steps merely provide to suppliers to provide some structure in pursuing claims for unpaid materials. However, the list is not exhaustive and lien filing process may include additional steps that are not covered herein. While this article may be helpful in many respects, it should not be used as a substitute for retaining competent counsel to assist with the preparation of a lien filing, including the notice provisions, as often that poses the greatest difficulty for clients. If you need assistance with filing your mechanic’s lien, please do not hesitate to contact our firm, and we can discuss your options and how to best proceed.

Can I Collect Attorney’s Fees in my Missouri Construction Dispute?

When I receive a phone call from a new potential client, the most common question that I get is:

“Can we collect attorney’s fees from the opposing party?”

The answer to this question is generally NO—unless, you have a contractual or statutory basis for collecting the same. In certain limited cases, the Courts may award fees on the basis of equity, but this exception is virtually non-existent from a practical standpoint.

Our law firm reviews and intakes a variety of different cases on an average day. Given our focus on construction litigation, we see cases involving issues arising on both residential and commercial construction projects, ranging from defective work claims to failure to pay claims to disputes arising from delay and timing issues to contractors or subcontractors disappearing with the money, among others.

Whether the potential client can recover attorney’s fees is incredibly important and can significantly change the leverage that the potential client has in the case because attorney’s fees can get very costly, depending on the case, and in some instances, the more complex cases can span a period of over several years, thus making the question of collecting attorney’s fees a critical piece of information.

We understand that it is also an important consideration for our potential clients to know their rights prior to getting involved in expensive construction litigation, and it is well-advised for all individuals to know their rights prior to undertaking an expensive construction project.

As noted above, the short answer is that Missouri does not allow for the recovery of attorney’s fees in construction disputes, except in a few select scenarios:

“Missouri follows the American rule which precludes recovery of attorney fees with these exceptions: (1) a statute or a contractual provision allows for their recovery; (2) the fees are incurred due to involvement in collateral litigation; or (3) equity demands it.” Marcomb v. Hartford Fire Ins. Co., 934 S.W.2d 17 (Mo. App. 1996).

Typically, parties to construction disputes are limited only to the first exception stated above: if a statute or contractual provision allows for the recovery of attorney’s fees. The collateral litigation exception involves a unique set of factual circumstances and, could conceivably be asserted if the stars align, but it is not commonly seen in construction litigation. The equitable exception is limited to very narrow circumstances, and Missouri courts are often reluctant to entertain utilizing such exception to allow recovery of fees because it would be such a drastic (or proactive) departure from the norm by the Court, which is not usually favored.

Accordingly, due to the fact that parties involved in construction litigation are typically limited to recovery of fees only if such recovery is provided for in the contract or pursuant to some applicable statute, this article will briefly discuss contracts and will go into a more in-depth discussion as to the governing statutory rights of parties involved in construction projects.

In order for a party to have a right to collect attorney’s fees based on a contract, there must be a provision in the contract specifically allowing for such recovery. Because construction contracts come in all shapes and sizes and can include innumerable provisions or language regarding the same, it is virtually impossible to cover every potential attorney’s fees provision that could exist in a contract.

One example includes a scenario where the contract allows for the recovery of fees “if the contractor retains counsel to collect on an outstanding balance that exists on the contract.” In this particular situation, the contractor can likely collect attorney’s fees if the contractor is successful in prosecuting a claim for collection of an outstanding balance. However, if the contractor is defending a claim in which the owner alleges defective work, then the contractor would not be able to recover attorney’s fees, even if the contractor is successful in defending the claim. As a sidebar, the contractor would be well-advised to have an experienced attorney craft a contractual provision that is broader and more encompassing to be able to collect attorney’s fees in the successful defense of a defective work claim.

The foregoing example poses a situation where the attorney’s fees provision is incredibly fact specific, and thus, it would be futile to try to cover the endless possibilities, speculating as to what the contractual language may be. However, there are some constants when analyzing recovery of attorney’s fees in construction disputes, and those arise from the applicable statutes.

Accordingly, the focus of this article is to explore various scenarios a contractor or owner may face where no applicable attorney’s fees provision is set forth in the contract governing the parties’ relationship. In an effort to do so, we will proceed with an analysis of a number of commonly seen scenarios involving construction projects.

We will start by looking at the statues (or Acts) that are the most applicable, when it comes to construction disputes, in an effort to provide preliminary information to the reader prior to undertaking the analysis.

1.     Missouri Prompt Payment Act (Public or Private)

As you may be able to gather from the name of the Act, the purpose of the Missouri Prompt Payment Act is to encourage prompt payment to those persons or entities providing work on a construction project.

The Missouri Public Prompt Payment Act is set forth under R.S.Mo. § 34.057 and requires payment to be made promptly and on a monthly basis, based on estimates provided by the contractor. R.S.Mo. § 34.057(1).

The Missouri Private Prompt Payment Act is set forth under R.S.Mo. § 431.180 and states: “[a]ll persons who enter into a contract for private design or construction work after August 28, 1995, shall make all scheduled payments pursuant to the terms of the contract.” R.S.Mo. § 431.180.1.

The Private Prompt Payment Act provides the remedy in the second paragraph, allowing for the recovery of actual damages, attorney’s fees, and 18% interest per annum on any outstanding balance:

“[a]ny person who has not been paid in accordance with subsection 1 of this section may bring an action in a court of competent jurisdiction against a person who has failed to pay.  The court may in addition to any other award for damages, award interest at the rate of up to one and one-half percent per month from the date payment was due pursuant to the terms of the contract, and reasonable attorney fees, to the prevailing party.” R.S.Mo. § 431.180.2.

There are certain limitations to the Missouri Private Prompt Payment Act, however, and we usually attempt to convey to clients the notion that the Private Prompt Payment Act only applies in the commercial context as opposed to those projects involving consumers. However, from a technical standpoint, that would be inaccurate, as the statute specifically states: “The provisions of this section shall not apply to contracts for private construction work for the building, improvement, repair or remodeling of owner-occupied residential property of four units or less.” R.S.Mo. § 431.180.3.

 

2.     Missouri Merchandising Practices Act

The Missouri Merchandising Practices Act (“MMPA”) is set of statutes which aims at protecting consumers. Typically, we describe the MMPA to clients as the equivalent of the Federal Consumer Protection Act but at a state level. The goal of the MMPA is to prevent businesses and larger entities from taking advantage of consumers through the use of deceptive, fraudulent, or other unfair business practices.

The operative statutes of the MMPA are set forth under R.S.Mo. § 407.020 and R.S.Mo. § 407.025. Specifically, R.S.Mo. § 407.020 states:

The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce…is declared to be an unlawful practice.

R.S.Mo. § 407.025.1 creates a private cause of action for consumers:

Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020, may bring a private civil action in either the circuit court of the county in which the seller or lessor resides or in which the transaction complained of took place, to recover actual damages.

The same statutory section also allows for recovery of punitive damages and attorney’s fees: “The court may, in its discretion, award punitive damages and may award to the prevailing party attorney’s fees, based on the amount of time reasonably expended, and may provide such equitable relief as it deems necessary or proper.” R.S.Mo. § 407.025.1.

The language in the statute gives the Court broad discretion in awarding attorney’s fees to the prevailing party. However, there is substantial case law discussing the purpose of the statute is to protect consumers, so it is incredibly difficult for an entity (or non-consumer) to obtain an award of attorney’s fees, even if the entity/non-consumer prevails.

Analysis of Common Construction Dispute Scenarios

Below consists of a discussion of various scenarios that are regularly observed in the construction context. While the analyses are not comprehensive, the purpose of this article is to examine whether legal authority exists to recover attorney’s fees in the examples provided. In all of the scenarios, the contract does not allow for the recovery of attorney’s fees, as we know from above, the contract would provide a basis for recovery. The idea behind excluding the right to recover fees in the hypothetical scenarios is to conduct an in-depth examination of the parties’ statutory rights to collect fees on construction projects.

Scenario 1: Contractor performs construction work on residential property and seeks payment of outstanding balance owed

Tommy owns a construction company, TM Construction, LLC (“TM Construction”). TM Construction provides interior construction services on both residential and commercial projects. On this specific project, TM Construction is working on Sarah Johnson’s personal residence to provide framing work, hanging drywall, and painting. TM Construction’s contract with Sarah requires her to make payment of half of the job up front and the remaining amount will be paid at the completion of the project. Payment is made at the beginning of the job as contemplated, and TM Construction completes the work on the project. TM Construction demands payment from Sarah, but she refuses to make payment. The contract does not include any provision for the recovery of attorney’s fees, can TM Construction collect attorney’s fees?

The short answer is no. The contract does not afford TM Construction rights to recover fees. Further, TM Construction does not have any statutory basis to do so because the Missouri Private Prompt Payment Act does not apply to owner-occupied residential property of four units or less. The Missouri Public Prompt Payment Act and the Missouri Merchandising Practices Act are wholly inapplicable to this situation.

Scenario 2: Contractor performs work on commercial building and seeks payment of outstanding balance owed

ABC Electrical, Inc. (“ABC Electrical”) is providing electrical rough-in work on a three-story office building owned by XYZ Developers, LLC (“XYZ Developers”). ABC Electrical performs the work and is paid according to the payment schedule set forth in the contract. The payment schedule is based on percentage of completion, which is supervised and monitored by an architect and the owner. The contract is silent as to collection of attorney’s fees.

Throughout the project, ABC Electrical is performing the work and the owner is making payment in accordance with the payment schedule set forth in the project. Once the Project is about 70% complete, the owner starts to withhold any further payment. ABC Electrical completes the job and the architect has no objection as to the work. ABC Electrical’s owner pleads with the owner of XYZ Developers, but XYZ Developers’ owner refuses to make the final payment.  Can ABC Electrical collect attorney’s fees?

The answer is that ABC Electrical has the right to collect attorney’s fees pursuant to the Missouri Private Prompt Payment Act. The party that prevails in the claim, ABC Electrical or XYZ Developers, will have the right to collect attorney’s fees. The award of attorney’s fees is at the discretion of the court, but typically the courts will award attorney’s fees if one of the parties is deemed to have prevailed.

Scenario 3: General Contractor hires Subcontractor who performs defective work on commercial project which General Contractor has to repair/replace

Exito Construction, Inc. (“Exito”) is a general contractor constructing a commercial building. S&S Exteriors, LLC (“S&S Exteriors”) is hired as a subcontractor to perform the masonry work on the building. The contract calls for monthly progress payments that correspond with the percentage of completion.  S&S Exteriors is more than halfway through with completion of the project when Exito notices and complains that the bricks are not being laid evenly and that the building is missing lintels that were specifically called for in the design and specifications. Exito withholds payment to S&S Exteriors until the issues with the masonry work are repaired. Exito has the right to withhold payment until the architect approves the work. S&S Exteriors refuses to make any repairs until payment is made.

After numerous exchanges of correspondence between counsel for the parties, Exito has no other option but to proceed with the hiring of another masonry subcontractor, J&J Masonry, Inc., to complete the work. J&J Masonry charges significantly more to complete the job than S&S Exteriors charged for the entire job. Exito wants to recover damages incurred for having to hire J&J Masonry to complete S&S Exteriors’ work. The contract is silent as to attorney’s fees.

Typically on large construction projects like that described above, the parties are sophisticated and usually have provisions in the contracts which would govern attorney’s fees. However, in this particular instance, there was no contractual provision accounting for recovery of fees. Can Exito recover attorney’s fees if it is successful in proving that S&S Exteriors was properly terminated from the project and that additional costs were incurred as a result of bringing J&J Masonry onto the project to complete the work?

The answer is generally no. Without a contractual provision, there is no legal authority from which to recover attorney’s fees, as the Missouri Private Prompt Payment Act does not govern this scenario because Exito is not bringing a claim that relates to payment.

However, the caveat is that S&S Exteriors would likely bring counterclaims in the lawsuit based on the Missouri Prompt Payment Act, and then the successful party would be entitled to collect attorney’s fees. This would be a situation where the opposing party opens the door to allowing for the recovery of attorney’s fees for Exito, if Exito is successful in its defense of the Prompt Payment Act claim and if the judge decides to award attorney’s fees.

Scenario 4: Contractor performs allegedly defective work on residential property and is defending homeowner’s claim of defective work

John Bruiser owns a remodeling company, Bruiser Construction, LLC. He typically remodels bathrooms, kitchens, and basements, and he’s been in business for 25 years. He meets a young couple, the Smiths, in their late 30s, early 40s, and Bruiser agrees to remodel their kitchen for a fixed price of $45,000.00, which includes the replacement of cabinets and flooring, as well as some painting, and minor drywall work. He also agreed to build the cabinets himself, which would be included in that price as well. There was no specific schedule, but he told the Smiths that he would have the project completed in no more than 3 months.

As construction progresses, the Smiths can tell that this project is going to take a lot longer than 3 months. The cabinets are not even fully constructed within the first 5 months, and the flooring is not lining up and is not level in certain areas. The contractor clearly did not know how to perform this job in a good and workmanlike manner. The project is going on 14 months, and the Smiths are irate. The contractor had bit off more than he could chew, and after the Smiths raised numerous complaints, Bruiser stopped answering their text messages or calls. He essentially disappeared.

Can the Smiths recovery attorney’s fees?

In this case, the question depends on whether the home on which Bruiser was performing work was the personal residence of the Smiths. If it was, then it also depends on whether the contract was merely negligent or committed some fraudulent, unscrupulous or unfair business practice. The simple failure to perform the work in a good and workmanlike manner is not sufficient. However, if there was something suspect going on with the contractor, there may be a statutory right to recover attorney’s fees pursuant to a claim based on violations of the MMPA.

Scenario 5: Contractor collects down payment for residential construction project and disappears with homeowner’s money

Randy Cognito (“Cognito”) is a fly by night contractor who performs roofing work. He is operating under the fictitious name (d/b/a) of Quality Roofing. Randy is a smooth talking salesman who convinces the homeowner to rebuild her deck for the “modest” fee of $42,000.00. The payment plan is to be structured into 3 installment payments of $14,000.00 each. The payments will be made (1) prior to Cognito commencing the work, (2) at the 50% completion point, and the last payment will be made (3) when the project is completed.

The homeowner wants to get the job moving because winter is quickly approaching, so she presses Cognito to start the work. Cognito explains to her that they cannot do anything until the first $14,000.00 payment is made in full. So, the homeowner writes a check and mails it to Cognito. Several weeks pass, and the homeowner does not hear anything from Cognito. Although, the check that she sent to him was cashed a few days after it was sent. The homeowner continues calling Cognito and never receives a response.

After numerous months pass without hearing from Cognito, the homeowner has a discussion with a neighbor who had the same thing happen to him. Cognito took his money and ran off with it.

Sadly, this situation happens all of the time. Can the homeowner collect attorney’s fees in this situation?

The answer is yes, but this article would neglect an important analysis if it did not briefly discuss throwing good money at bad. For every client who calls inquiring about this type of situation, our law firm discusses the possibility that we may never find the fraudulent contractor (Cognito) or that we might find him, but when we find him and take judgment, he has no money to collect on or is hiding assets.

These are all factors that the homeowner must take into consideration before proceeding against an unscrupulous or fraudulent contractor. However, after the homeowner has conducted an analysis and believes that it is in her best interests to proceed against the contractor, can she recover attorney’s fees?

The answer is: yes, there is a basis to seek recovery of attorney’s fees. The Missouri Merchandising Practices Act allows for the recovery of attorney’s fees when a contractor or company commits unlawful practices (i.e., deceptive, fraudulent, misrepresentations, false pretenses, omissions of material facts, etc.) against a consumer. In this case, Cognito duping the homeowner into paying $14,000.00 and then running off with her money would rise to the level of unlawful practices. This is a potential tool at the client’s disposal, but the client should also alert the Missouri Attorney General to prevent other unsuspecting victims from having to suffer through the same unfortunate and sad situation.

Scenario 6: Contractor begins residential construction project and changes pricing in middle of project

Sammy Samson (“Samson”) is a self-proclaimed general contractor. He pretty much does it all as far as interior repairs. He was hired by John Goodson to perform repairs and rehab work on a variety of different areas in the property, including drywalling, mudding, taping, and painting a bedroom; complete remodel of a kitchen; and replacement of shower enclosure in the bathroom. Samson prepared an estimate for Mr. Goodson, breaking down the project into 3 categories. Each scope of work had a fixed price for each portion. After Mr. Goodson reviewed the estimate, he liked the price and signed a contract with Samson, which reflected the fixed price amounts that Samson set forth in his estimate.

Samson began the project promptly and completed the drywalling, mudding, and taping portions of the work. However, shortly after beginning the painting, he submitted an additional invoice to Mr. Goodson, which was not included as part of the original estimate. He stated that the price of paint was rising due to tariffs and that Mr. Goodson owed him an additional $1,500.00, which must be paid before Samson will continue performing any additional work.

At this point, Mr. Goodson had already paid $5,000.00, and he feels like he’s being held hostage because he is stuck in the middle of the project and has to pay more amounts (that were not agreed to) in order to complete the work. Mr. Goodson does not feel like he’s being treated fairly, so he contacts the lawyer.

The first question Mr. Goodson asks after he tells his story is: “Can I collect attorney’s fees if we go after this guy?”
The answer is that there is a legal basis to support collection of attorney’s fees. The Missouri Merchandising Practices Act was designed to protect consumers from fraudulent billing practices like those which Samson was attempting to employ. The collection of attorney’s fees is at the discretion of the judge, but if Mr. Goodson can successfully prove his claim under the MMPA, then a judge is likely to award the same.

Conclusion

This article covers whether parties involved in construction litigation have the legal right to collect attorney’s fees.

Generally, the parties do not have a right to collect attorney’s fees on a construction project, unless there is a provision in the contract allowing the same or some statutory basis for collection of the same.

Missouri typically follows the American Rule:

“…which precludes recovery of attorney fees with these exceptions: (1) a statute or a contractual provision allows for their recovery; (2) the fees are incurred due to involvement in collateral litigation; or (3) equity demands it.” Marcomb v. Hartford Fire Ins. Co., 934 S.W.2d 17 (Mo. App. 1996).

Apart from a contractual basis, the two most common bases for collection of fees in a construction dispute are through the Missouri Prompt Payment Act and the Missouri Merchandising Practices Act.

There are two types of Prompt Payment Acts in Missouri (public and private). However, for purposes of this article, the Prompt Payment Act’s effect is essentially covered in the following excerpt from the applicable statute: “[a]ll persons who enter into a contract for private design or construction work after August 28, 1995, shall make all scheduled payments pursuant to the terms of the contract.” R.S.Mo. § 431.180.1.

The Missouri Merchandising Practices Act is governed primarily by the following two statutory sections:

The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce…is declared to be an unlawful practice. R.S.Mo. § 407.020

Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020, may bring a private civil action in either the circuit court of the county in which the seller or lessor resides or in which the transaction complained of took place, to recover actual damages. R.S.Mo. § 407.025.1

In an effort to apply the foregoing statutes/acts, we explored a variety of scenarios and provided an analysis as to whether attorney’s fees were recoverable in each situation. The scenarios were the following (see above for a full analysis of each):

Scenario 1: Contractor performs construction work on residential property and seeks payment of outstanding balance owed

Scenario 2: Contractor performs work on commercial building and seeks payment of outstanding balance owed

Scenario 3: General Contractor hires Subcontractor who performs defective work on commercial project which General Contractor has to repair/replace

Scenario 4: Contractor performs allegedly defective work on residential property and is defending homeowner’s claim of defective work

Scenario 5: Contractor collects down payment for residential construction project and disappears with homeowner’s money

Scenario 6: Contractor begins residential construction project and changes pricing in middle of project

Ultimately, there is no bullet proof strategy to ensure that your construction project will go smoothly 100% of the time. However, there are certain precautionary measures that may be taken to account for situations that commonly arise in the construction realm.

The construction contract that you sign should be fair and should account for situations that may pose a problem later down the road. Most importantly, the contract should include an attorney’s fees provision. That will often ensure that the parties to a construction dispute are more cautious about their actions, and, ultimately, it demands that they act with some level of accountability.

If you have any questions regarding your construction project, dispute or potential issue, or if you need a contract drafted or reviewed, please contact our law firm to assist you.

Daniel P. Gabris | Gabris Law, LLC

Construction Law Litigation

Are you involved in a dispute on a construction project? Do you need an attorney to assist you with the litigation process?

Our attorneys handle a wide array of construction disputes, and we can probably help you with your case. We have represented owners, general contractors, subcontractors, sureties, design professionals, and a variety of other participants on a construction project.

The litigation process can be quite complex. When combined with construction, it is easy to imagine how incredibly complex certain issues in construction litigation can be. Some disputes have many moving wheels, which poses a heavy task for the lawyers who have to wade through all of the facts and the law.

As part of their tasks, our lawyers participate in all phases of litigation from preventative measures such as contract negotiations and drafting to project execution and advising mid-project to post-project litigation such as collection work and bond claims.

It is imperative for limited liability companies and corporations involved in the construction industry to have a lawyer who specializes in construction litigation as Missouri courts require that construction companies, if they are incorporated, must be represented by a lawyer.

Why can an individual not represent an entity in court?
An individual, even a member or manager of the limited liability company (“LLC”) is not permitted to represent the LLC because it would constitute the unauthorized practice of law by a non-attorney.

Accordingly, construction companies that are incorporated, or held by an entity, must retain counsel in order to present a defense. If counsel is not retained, the construction company will have a default judgment taken against it and would then have to hire an attorney to file a motion to set aside the default judgment.

This is not an outcome that you want to face as a business owner because additional work means additional billing by the attorney. The most economical solution in dealing with a construction law dispute is to nip the problem in the bud by addressing it head on. That does not suggest that it should be addressed with a hard head.

Instead, the mantra should be an ounce of prevention is worth a pound of cure. Get your attorney involved from the beginning of the project, so you can avoid failing into the litigation sandpit.

3 Benefits the Missouri Prompt Payment Act Provides Contractors

Drill Bits

General Background on the Missouri Prompt Payment Act

Are you a contractor that has not been paid on a construction project?  Looking for an attorney to help you collect?  

You might be able to get your attorney’s fees paid for, and you might be able to reap the benefits of a number of other perks that accompany a Missouri Prompt Payment Act claim.  

The Missouri Prompt Payment Act is a group of statutes given the prompt payment title because of their ultimate purpose–these statutes were enacted to ensure that contractors on a construction project are expeditiously paid.  

The legislature noticed that contractors’ or owners’ failure to make payment on a construction project was becoming a significant problem, and there needed to be a remedy.  

Thus, the legislature incentivized payment by imposing various penalties.  

This article was written to discuss a few of those penalties as well as the benefits for contractors that make a Missouri Prompt Payment Act claim.  

1. Immediate Payment on the Project

As stated above, the goal of the Missouri Prompt Payment Act is to pressure the owner or general contractor into making payment as quickly as possible, so the contractor claimant receives the money to which s/he/it is entitled.  

The statute sets forth the time at which payment should be made.  The statute, R.S.Mo. section 431.180, the Missouri Private Prompt Payment Act, defers to the contract: “all persons who entered into a contract for private design or construction work after August 28, 1995, shall make all scheduled payments pursuant to the terms of the contract.”

In the event that those persons do not make payment, the statute provides a civil remedy that comes with other perks.

2. A Means to Pay for Your St. Louis Construction Law Attorney

Despite the incurrence of unwanted fees from hiring an attorney, you might be able to recover any monies paid out for attorney’s fees pursuant to Missouri statutes.

If you hire a St. Louis Construction Law Attorney, the statute provides a means to pay for him or her.  

The statute states the following: [t]he court may in addition to any other award for damages, award…reasonable attorney fees, to the prevailing party.” R.S.Mo. section 431.180.

Keep in mind that attorney’s fees are not guaranteed.  

The statute merely provides the potential to collect attorney’s Fees.  In any case, the potential to collect attorney’s fees creates leverage in the settlement of construction project disputes and that puts pressure on the owner or the non-paying contractor to immediately make payment.

If that entity or person fails to pay, they take the risk of potentially paying your attorney’s bill too.  

3. 18% Interest Rate for Unpaid Work under the Contract

The Missouri Prompt Payment Act Provides for an 18% interest rate. This is an incredible rate considering the ordinary statutory rate in Missouri is 9%.

From the time a claim becomes liquidated (an undisputed amount that is due and owing), interest begins to accrue.  This is a heavy burden for a non-paying owner or general contractor to foot if they wish to challenge the amounts because litigation could last for several years.  

If the court or jury finds against the non-paying owner or contractor, they could also be footing a heavy bill as a result of the additional interest. For this reason, you should consult a competent St. Louis Construction lawyer to help you determine your rights and decide whether payment should be forthcoming or whether a party has legitimate grounds to withhold payment.  

Conclusion

This article just told you about three benefits that a contractor can avail himself of through the Missouri Prompt Payment Act, when attempting to collect payment on a construction project.  

The three advantages a contractor has by using the Missouri Prompt Payment Act are the following:

  1. The statute calls for immediate payment in accordance with the contractual terms thereof.
  2. The statute provides for attorney’s fees to the prevailing party–remember this is discretionary.
  3. The statute also provides for 18% interest on amounts due and owing, which is twice the normal Missouri statutory interest rate.

For all of the above reasons, the Missouri Prompt Payment Act can be a very effective tool for contractors who are attempting to collect on a construction project.  

Because litigation can be a very complex process, contractors that need help collecting for work performed should contact a St. Louis construction law attorney for assistance.