Idaho Land Law

A Blog Discussing Current Issues of Land Use, Real Estate, and Construction Law in the State of Idaho.

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What do you mean I cannot sue the subcontractor?

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@depositphotos-jazavac

Construction law cases… you have to love them.  Generally, we find a teaching moment or two in almost all the construction law decisions we review at the Idaho Land Law blog.  The Idaho Supreme Court’s decision in DeGroot v. Standley is no exception.  DeGroot is your standard general contractor, subcontractor, and supplier type construction defect case.  Parties pointing fingers at each other and the owner left with a little less than they bargained for when they started the project.   

In this case, Charles DeGroot and DeGroot Farms, LLC (collectively “DeGroot”) appealed the district court's grant of summary judgment in favor of Standley Trenching, Inc.  (“Standley”), concerning the construction and installation of a manure handling system at the DeGroot dairy. Beltman Construction, Inc. (“Beltman”) was the general contractor for the project and subcontracted with Standley for the installation of the manure handling equipment.

At some point after the construction of the DeGroot dairy, DeGroot began experiencing issues with the manure handling equipment and sued both Standley and Beltman. Beltman brought a third party complaint against Standley, Beltman stipulated to a judgment and assigned its 3rd party rights against Standley to DeGroot. The district court dismissed Beltman, granted Standley summary judgment on its counterclaim against DeGroot, granted Standley summary judgment on DeGroot’s claims, and granted Standley summary judgment on Beltman’s assigned third-party complaint.   

The case is an interesting read.  From our perspective, the most interesting portion of the case is the Supreme Court’s treatment of the whether or not DeGroot was a third-party beneficiary of the contract between the Beltman (the general contractor) and Standley (the subcontractor).  The Supreme Court held that DeGroot was not a third-party beneficiary to the subcontract between Beltman and Standley despite hearing evidence that Standley met with DeGroot prior to submitting its bid, listed DeGroot as the customer on its invoices, named the project “DeGroot”, and sent warranty information directly to DeGroot.

In reaching its decision, the Supreme Court looked at I.C. § 29-102 and stated that in order to establish a claim as a third-party beneficiary, “the contract itself must express an intent to benefit the third party.”   The Court went on to state, “Idaho case law is clear that the party claiming to be a third-party beneficiary must show that the contract expressly indicates that it was made for his or her direct benefit.”

What does this mean for owners and general contractors?

Given this holding, the logical question is should owners require general contractors to include third-party beneficiary language (in favor of the owner) in their contracts with subcontractors and suppliers?  Should general contractors require the same of subcontractors in the subcontractors' contracts with suppliers?  I think the answer to both these questions is yes. 

An owner will want to know that it can sue a subcontractor or supplier to a project under the theory that the owner is a third-party beneficiary to the general contractor’s contract.  From the general contractor’s perspective, it too will want the ability to sue a material supplier to a subcontractor, as a third-party beneficiary, should a material supplier fail to meet its contractual obligations to the subcontractor.  

Mechanic’s Liens in Idaho – How long before I lose my right to lien a project?

@depositphotos-Macor

@depositphotos-Macor

There are a few things you should know as a contractor, sub-contractor, or a material supplier doing work in Idaho. Probably the most important is that contractors are required to register in Idaho prior to doing work. Failure to register is a misdemeanor that may result in a fine but more importantly an unregistered contractor loses its rights to pursue legal remedies. I cover this topic in a blog post on Idaho’s Contractor Registration Act.  

The second most important topic is the deadline to file a mechanic’s lien. In Idaho, a mechanic’s lien must be filed within ninety (90) days after the completion of labor or services, or the furnishing of materials for project. This is a statutory deadline and failure to timely file results in a loss of your mechanic’s lien rights. Now that doesn’t mean you are without recourse, you could always sue for breach of contract but the ability to go after the underlying real property for payment… is waived. 

You must include the following in any Idaho mechanic’s lien claim:

(a) A statement of the claimant’s demand, after deducting all just credits and offsets;

(b) The name of the owner, or reputed owner, if known;

(c) The name of the person by whom he was employed or to whom he furnished the materials; and

(d) A description of the property to be charged with the lien, sufficient for identification.

In addition, a mechanic’s lien claim must also be verified by the oath of the claimant, his agent or attorney.  And a true and correct copy of the lien must be served on the owner of the property either by delivering a copy personally or by mailing a copy by certified mail to the owner at his last known address. The delivery or mailing of the lien claim must be made no later than five (5) business days following filing the lien.

As a practical tip, I prefer that the owner is served by a process server.  My reasoning for paying a little extra for personal service is that I can include the process server’s affidavit in the action (lawsuit) to enforce the mechanic’s lien.  Remember that you must file your mechanic’s lien lawsuit within six (6) months after the mechanic’s lien is filed.

Mechanic’s liens are an integral part of any contractor, sub-contractor, or material suppliers’ business payment strategy. As part of that business strategy, my suggestion is to calendar seventy (70) days after the last date labor or materials were supplied to a project and if payment is not received by that deadline, then begin preparing your mechanic’s lien. Calendaring these dates will ensure you do not miss the ninety (90) day deadline to file your mechanic’s lien and will also give your attorney time to help you with the process. 

Introducing Idaho Land Law blog’s Hall of Shame… “Florida Woman Bulldozes Neighbor’s Mobile Home”

We at the Idaho Land Law blog have started a special section called the “Hall of Shame.” This new section is dedicated to discussing the most outrageous land-use, real estate, and construction stories in the news.  Hopefully you will enjoy these updates as much as we do.

Our initially entry comes to us from St. Augustine, Florida where Ms. Ana Maria Moreta Folch is alleged to have hired a contractor to bulldoze her neighbor’s mobile home. Yes, you are reading this correctly. A number of news organizations from around the country have picked this up but I particularly like the reporting from the New York Daily News.

© Depositphotos.com - Zenpix.jpg

© Depositphotos.com - Zenpix.jpg

The story unfolds with Ms. Folch allegedly convincing a contractor to bulldoze her neighbor’s mobile home by showing him a key to the house. According to the news reports, the victim of the “bulldozing” returned to find her mobile home completely destroyed.  Ms. Folch was subsequently questioned, arrested, and charged with criminal mischief in the case. The damages are estimated at $26,000. 

Yes, this case is outrageous and entertaining but it also provides a couple of teaching moments for those in the land use arena:

First:  Never underestimate how people will react in a neighborhood dispute.  

This is an extreme case and worthy of the Hall of Shame but it is also illustrative of what can happen when neighbors begin behaving irrationally.  I recently was approached concerning a neighborhood dispute where an adjoining property owner was patrolling their property line with firearms and ATVs.  My initial reaction was to tell the individual that there might not be a legal solution to the matter and that they should consider moving.  The point is that some of these situations can become dangerous and that often there is not a legal solution for dealing with unhappy neighbors.  

Second:  Contractors should investigate ownership before beginning work. 

There are a number of reasons for contractors to make sure they are dealing with the owner.  Chiefly, you want to be paid for your work but also you want to make sure you will not be sued for performing work (or demolition) on someone else’s property.  A typical situation could involve performing work at the direction of a tenant instead of an owner.  The tenant may not have the authority to authorize the work and may not have the ability to pay for the work once it is completed.

We will continue to post new updates to the Hall of Shame.  If you have any stories you feel may be worthy, please let us know.  And remember… be careful who has your house key.

Why your Thanksgiving Meal is Really A Construction Project

It is that time of year and I am again thinking about how hard it must be to get everything right in the kitchen on Thanksgiving. Shopping for the food, cooking it, setting the table, dealing with relatives, and of course, cleaning up.  Kudos to anyone who has wrestled with this task. Our Country thanks you for your service-without you, we would be France.

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After some consideration of how much work goes into the Thanksgiving meal, I realized it is just like any other construction project. All the key players are on the site, but we know them by different names. Planning and understanding your workforce are the key components to a successful Thanksgiving feast.

Owner

In my family, the owner of the Thanksgiving meal project is my father. He wants to have the Thanksgiving meal “substantially completed” on or before noon. This will allow him plenty of time to watch football after the meal, take a nap, and eat a second meal sometime in the afternoon. In your family, the owner of the Thanksgiving meal project may be someone else but generally they all have the same criteria: DELIVER THE PROJECT ON TIME AND ON BUDGET!  I would suggest reading any contract entered into with the Owner as it is likely to contain liquidated damages provisions should you fail to timely deliver.

General Contractor

The general contractor of the Thanksgiving meal project is likely married to the owner. In my house there are never any bids accepted on the project and it is just assumed my mother will be awarded the contract. In her role as general contractor, she will order materials from local suppliers (Hy-Vee is where she does her trading) and she will engage subcontractors to complete various portions of the meal. 

Subcontractors

The subcontractors generally consist of my aunts or my sisters. Sometimes a subcontractor will be an unrelated guest but they are generally only awarded small contracts (i.e. bring a relish dish or a bottle of wine). I imagine that at one point my mother was a subcontractor for her mother on the annual Thanksgiving meal project but her responsibilities have grown over the years and she is now running her own project.

There is a list of approved subcontractors. This list is not necessarily written down but it is known within the “industry” about which subcontractors can be trusted to deliver. Because so much of the Thanksgiving meal relies on timing, it is imperative that only approved subcontractors be used on the project. A subcontractor that shows up late with the “green bean casserole” or “pumpkin pie” can ruin the entire project’s delivery and upset the owner. Not a good thing, even if there are no liquidated damages on the project.

Construction Manager

My mother also acts as the construction manager. She works at coordinating the different trades (see subcontractors above) to ensure that that the hot dishes have the appropriate oven space, that those subcontractors needing stove time have access, and that the desserts are staged in a guarded area away from my nieces (look for a separate blog post on construction site theft in the coming months).

Design Professionals

My family has been working off an old set of plans for the Thanksgiving meal feast. These plans were drawn up in 1621 by the Pilgrims at Plymouth and fortunately for us, the architects/engineers of those plans transferred all rights in those “instruments of service” to the people of the United States of America. Thanks architects and engineers!

Change Orders

No construction project would be complete without change orders and the Thanksgiving meal project is no different. I can tell you from personal experience that change orders will not be approved by either the Owner or the General Contractor in my household.

One year my brother and I decided that we would deep fry a turkey for the Thanksgiving meal project. We presented a “submittal” to the general contractor, with the requested change order but were summarily rejected. The reasoning was as follows: (1) we were not “approved” subcontractors and couldn’t be trusted to deliver on time; (2) even if we became “approved” subcontractors our insurance policy limits could not cover the inevitable turkey fryer fire (lack of bonding capacity); and (3) the “deep-fried” turkey did not match the plans and specs developed in 1621. Apparently, only an oven-baked turkey would satisfy the Owner. Unbelievable. If you have ever tasted a deep-fried turkey, you know this is an acceptable substitute for an oven-baked turkey.

Please enjoy your Thanksgiving meal feast and remember to thank all the owners, general contractors, and subcontractors in your life that make Thanksgiving such a special day. 


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