Court Rules for and against Contractor and Subcontractor

in Columns/Law

BY JAMES R. KELLER

James R. Keller

Missouri’s Eastern District Court of Appeals decided for and against a contractor and its subcontractor. The opinion offers significant legal rulings on everyday construction issues including change orders for extra work, lien waivers and attorney fees.

The case is Parkway Construction Services, Inc. v. Blackline LLC, 2019 WL 1344401 (March 26, 2019).

The court placed the victory with the subcontractor, however, finding it to be the prevailing party. This finding allowed the subcontractor to recover attorney fees under its subcontract.

The fees exceeded by 11 times the amount awarded on the subcontractor’s claim. The Eastern District directed the trial court to reconsider these fees considering the overall dollar value of the recovery.

The project was the renovation of two apartment buildings at 2804-2820 South Compton Avenue in St. Louis, MO. Magnolia Halliday, LLC owned the property.

Magnolia hired Blackline as the general contractor. Blackline entered into a subcontract with Parkway to do the plumbing work for $96,000.

Blackline agreed to provide shower valves, faucets, tubs and sinks. Parkway’s scope of work included reworking existing drains lines, waste drains and vents (DWV). This improvement would allow for new fixtures.

The contract described Parkway’s objective was to provide a complete working plumbing system. But Parkway was unwilling to accept the risk of replacing all the DWV piping.

Thus, the parties stipulated that Parkway would be responsible for repairing or replacing up to a maximum of 50 percent of the DWV piping. This 50 percent threshold was not clearly defined.

The contract did expressly define extra work, however, as requiring prior written authorization from Blackline. Extra work is work not in the original contract scope.

The contract also contained an attorneys’ fee provision stating that the prevailing party was entitled to its reasonable attorneys’ fees, costs and expenses. The contract did not define “prevailing party.”

The project quickly fell behind schedule due to factors beyond Parkway’s control. Blackline continuously pressured Parkway to stay on schedule.

During the project Parkway emailed Blackline that it had reached the point of having repaired 50 percent of the stacks without any additional costs. It asked Blackline for direction going forward. Parkway stated it was a “tough job with a ton of additional costs we could not have foreseen.”

Blackline responded three days later. It disagreed that the 50 percent threshold had been reached.  Blackline contended that the entire job should be completed without exceeding the 50 percent allowance.

Parkway created two change order forms. One form related to the extra DWV work. The other form related to extra shower valve work.

Parkway submitted the shower valve change order form to Blackline before starting the work. Blackline approved in writing the extra work for $1,051.

Parkway submitted the DWV change order form only after completing the work. Parkway did not detail the precise hours spent on each task. It also did not receive in advance oral authorization to do the work.

When Blackline refused to grant the DWV change order request for extra work, Parkway stopped work.

Blackline then had to hire another plumbing contractor to complete the work.

As a partial attempt to resolve the DWV piping issue, Parkway executed a lien waiver in return for Blackline’s payment of $25,200. The waiver waived any claim for work through the date of the lien waiver.

Blackline also tendered to Parkway a check for $8,712.97. Blackline calculated this was the remaining amount due to Parkway after subtracting Blackline’s costs for hiring a second subcontractor to complete the job.

Parkway did not accept the check as payment, fearing this would preclude its claim for extra work.

At trial, Blackline admitted it owed Parkway $1,051 for the extra shower valve work and $8,712.97 under the contract as the remaining balance due. Parkway sought $79,449 relating to its extra work claim on the theory that Blackline benefitted from the work and if it did not pay it would be “unjustly enriched.”

Missouri case law supports recovery for work performed that was requested, but no formal contract was in place to cover the work. The claim is for quantum meruit or unjust enrichment.

The trial court found Blackline’s tender of $8,712.97 as final payment of the balance due to be a conditional settlement offer that Parkway did not accept. The court also noted Blackline’s behavior as “employing sharp practices to pressure Parkway to complete the project” and at the same time being “purposefully unresponsive to Parkway’s attempts at communication.”

Blackline prevailed on the DWV extra work claims. Blackline did not request the work as extra work.

The trial court also found that Parkway released its DWV claims by signing the lien waiver.

Parkway did recover on its contract balance and shower valve extra work claims. The work apparently was not subject to the lien waiver.

Finding Parkway to be the prevailing party, the trial court awarded attorney fees of $103,234.31.

Both parties appealed parts of the trial court’s rulings.

The appellant court decided that the lien waiver was enforceable and precluded Parkway from seeking any money for work it performed before the date on the lien waiver. The appellant court also decided that Parkway should have ceased work until it obtained written authorization pursuant to a change order to exceed the 50 percent threshold.

Despite these rulings, the appellant court found Parkway to be the prevailing party. The court noted there are many varied definitions and interpretations under Missouri case law as to who is the prevailing party.

In this case the court noted that Parkway’s evidence generally related to all its claims.  Thus, success on one was enough to be the prevailing party.

The Eastern District sent the matter back to the trial court to reexamine appropriate attorney fees and to make certain they were not excessively awarded given the success by the parties on various claims.

James R. Keller is counsel with Sandberg Phoenix & von Gontard, P.C., where he concentrates his practice on construction law, complex disputes, real estate and alternative dispute resolution. He also is an arbitrator and a mediator. Keller can be reached at (314) 446-4285, jkeller@sandbergphoenix.com.

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