Missouri Appellate Courts Decide Many Recent Construction Cases

By James R. Keller

This article originally appeared as "Survey of Recent Missouri Construction Cases," 13 MISSOURI LAWYERS WEEKLY 842, August 16, 1999.

Missouri's appellate courts have decided a wide variety of cases since late 1998 involving the construction industry. This article briefly discusses by topic some of these cases, including one from the Supreme Court of Missouri on the statute of limitations. This case,Business Men's Assurance Company of America v. Graham, 984 S.W.2d 501 (1999), may portend in future cases far beyond construction a greater judicial acceptance toward "extending" by application the statutory time within which a lawsuit can be filed.

"Construction" means...

Before we get started, we need to define construction. That was the central question in Hadel v. Board of Education of School District of Springfield, 990 S.W.2d 107 (1999). The Springfield school board had decided to use its own employees to do roof work, including removal and replacement on part of one of its buildings.

Members of a local union affiliated with the United Union of Local Roofers, Waterproofers and Allied Workers of America brought a class action. They asked the court to enjoin the school district and to declare that the board of education had to advertise this work for public bidding, per Section 177.086, R.S.Mo. (1996). This section requires that if a school district authorizes "the construction of facilities" that may exceed $12,500 (as of August 29, 1996), there must be public bidding on the work.

The parties stipulated that the work would not exceed 20 percent of the total roof area but would exceed $12,500. They differed, however, on whether this was construction, as the union members asserted, or repair or maintenance, as the school board argued. Deciding for the school board, the Southern District relied partly on Black's Law Dictionary, and largely on Missouri's Prevailing Wage Act, Section 290.210(1) R.S.Mo. (1994), which defines "construction" as major repair, and defines "maintenance work" as repair but not replacement of existing facilities. The court found the work to be repairs, not construction. Thus, the Prevailing Wage Act helped the school district to prevail, and according to this case, not all repairs, no matter the cost, necessarily are construction.

Missouri's Prevailing Wage Act

Four roofers faired better under Missouri's Prevailing Wage Act in Board v. Eurostyle, Inc., 1999 WL 460924 (Mo.App. S.D.). Working for a subcontractor, they sued the general contractor and its surety on a performance bond for double their unpaid wages plus attorney fees for work on a public works construction project for the State of Missouri. The Missouri Department of Labor and Industrial Relations determines, pursuant to Section 290.250, R.S.Mo., the prevailing wage rates for the locality where the public work is performed. Payment to workers of a lower rate is a violation to which both the general contractor and its surety can be penalized. The court held that this Act protects an employee of a subcontractor, such that the general and the surety were responsible for double the difference in wages plus reasonable attorney fees.

In Hth Companies, Inc. v. Missouri Labor and Industrial Relations Commission, 1999 WL 385819 (Mo.App. W.D.), the Western District affirmed an order of the Missouri Labor and Industrial Relations Commission setting the prevailing wage for Audrain and Boone counties. Section 290.250 R.S.Mo. provides that the Commission determines once each year the prevailing hourly rate of wages paid to each occupational title of work in each Missouri county. The court decided, among other points, that if there is no evidence of wage rates paid in a county for an occupational title-in this case asbestos workers-then applicable collective bargaining agreements can apply to establish the rates.

A violation of the Prevailing Wage Act can subject the contractor to a lawsuit by the Division of Labor Standards, Department of Labor and Industrial Relations, as well as by employees. In Division of Labor Standards v. Walton Construction Management Co., Inc., 984 S.W.2d 152 (1998), the Department sued a general contractor and a subcontractor for penalties under the Prevailing Wage Act for work on a new junior high school in Lee's Summit, Missouri. The work was public work; thus, the Prevailing Wage Act applied.

The appellate court upheld dismissal of the case by deciding that the defendants were not "moneyed corporations" as outlined in Section 516.420, R.S.Mo. Thus, a two-year statute of limitations, rather than a six-year, applied. Section 516.420 first appeared in the 1865 General Statutes of Missouri. Apparently, it was not until this case, however, 133 years later, that a Missouri court had to decide this definition in this context. The court, noting that the term "moneyed corporation" came for a New York statute, looked to New York to decide the outcome. Relying on a 1851 case from New York's highest court, and a 1904 case from the United States Supreme Court, which construed "moneyed corporation" in the context of New York's statute, the Western District in Missouri held that a moneyed corporation is one having banking powers. This definition did not apply to contractor Walton Construction.

Lowest Bidder

The lowest bidder does not always obtain the construction contract. Section 88.700 R.S.Mo. governs the letting of construction contracts for fourth class cities. It requires the public authority to award the contract to the "lowest and best bidder." The court in Kat Excavation, Inc. v. City of Benton, 1999 WL 311704 (Mo.App. W.D.), construed this provision to deny a claim of the lowest bidder for declaratory judgment and injunctive relief on a bid for street improvements. The court decided that lowest does not necessarily mean best. In deciding who is the "best", a public authority has wide discretion. It may consider the "honesty and integrity of the bidder necessary to a faithful performance on the contract; the bidder's skill and business judgment; the bidder's experience and facilities for carrying out the contract; previous conduct of the bidder under other contracts; and the quality of the bidder's work." Since the City of Benton had experienced previous problems with contractors not completing projects on time, this criteria, the court concluded, is quite important and supported an award to the second lowest bidder, who had a track record of timely performance.

Personal Injury

Unfortunately, personal injury remains a factor in construction projects. For an injured employee of an independent contractor to recover against the owner of the property where the accident occurred, the employee must show that the owner controlled the job site and the contractor's activities. Applying this law, the Eastern District overturned a jury verdict of almost $2,200,000 (reduced 25 percent for comparative fault) for an employee who fell off his ladder while working on asbestos removal. Coonrod v. Archer-Daniels-Midland Co., 984 S.W.2d 529 (1998).

In another case, an employee of a subcontractor fell 40 feet while working at Chrysler's Fenton, Missouri plant. Smart v. Chrysler Corp., 991 S.W.2d 737 (1999). He sued Chrysler in negligence for personal injuries sustained during the erection of steel structures. The Eastern District held that Chrysler did not adequately control the construction site to have a duty to maintain a safe work place for this plaintiff. The evidence showed that Chrysler relinquished possession of the plant to the contractor, visited the site only to ensure compliance with the contract specifications and never dictated details of the operation. Given these facts, the trial court properly granted summary judgment for Chrysler, the Eastern District decided.

On the same day, May 18, 1999, the Western District affirmed the trial court's entry of judgment after a jury verdict finding defendants zero percent at fault. Wilson v. River Market Venture, 1999 WL 308639 (Mo.App. W.D.). An employee of a painting subcontractor sued the general contractor and the owner of the premises in negligence for personal injuries from his fall into a manhole. He claimed the manhole to be a dangerous condition under owner's control, but the jury found otherwise.

The Western District also decided that expert testimony was not necessary for an injured worker to establish a cause of action against a lessor that furnished a construction crane. Parra v. Building Erection Services,982 S.W.2d 278 (1998). Plaintiff was injured when an unsecured cable tail whipped around and hit him in the head. Expert testimony was not needed to establish whether the unsecured cable was dangerous; this decision could rest with the experience and knowledge of the jurors. In so holding, the Western District reversed the trial court's grant of defendant's motion for directed verdict at the close plaintiff's case, and remanded the case for another trial.

Mechanics' Liens

Perhaps no area of law in Missouri is more underestimated by the inexperienced and more feared by the knowledgeable than Missouri's Mechanics' Lien Act, Chapter 429, R.S.Mo. Deceptively simple at first blush, the Act continues to confound those who seek its protection.

The Act's most recent victim is the plaintiff in Webcon Group, Inc. v. S.M. Properties, L.P., 1999 WL 455364 (Mo.App. E.D). The Eastern District upheld the trial court's dismissal of a mechanics' lien cause of action because plaintiff failed to include the owner, as required in Section 429.170 R.S.Mo., as a party to the lawsuit within six months after filing its lien. The public records showed who was the owner and thus plaintiff could have timely included this party, the court decided. This decision reinforces the importance of doing a title search before pursuing a mechanics' lien, and the importance of including all necessary parties in the lawsuit within six months of filing the lien.

Another recent casualty was the plaintiff in Schott Electrical Distributors, Inc. v. Mac Electric, Inc., 1999 WL 504586 (Mo.App. E.D.). Plaintiff filed a mechanics' lien on a movie theatre built in Cape Girardeau for owner Druco, Inc. Plaintiff, a sub-subcontractor of the general contractor, claimed the subcontractor owed plaintiff $60,696.48. (Cautious claimants know-when possible-to display debts under the Act to the penny. By contrast, even the Internal Revenue Service allows tax returns to be rounded to the nearest dollar.)

As a sub-subcontractor, plaintiff prepared its notice of intent to file a lien, and personally served the owner, Druco. Plaintiff attached to its notice the various invoices showing its work on and materials for the project. Thereafter, plaintiff did not attach these invoices to the lien it filed and served on all interested parties.

The owner and these other party defendants moved to dismiss the lawsuit, for failure to state a cause of action. They claimed that without these invoices, which the Act does not expressly require, the lien was not a "just and true account" of the money owed as required by Section 429.080 R.S.Mo. The trial court granted the motion and the Eastern District affirmed. The appellate court decided that since only the owner received these invoices with the notice of intent to file a lien, and none of the invoices was attached to the lien, the lien did not comply with the Act and the trial court properly dismissed all defendants

Statute of Limitations

Missouri has a five-year statute of limitations for breach of contract. Section 516.120, R.S.Mo. A lawsuit must be brought within five years of when damage is "sustained and capable of ascertainment." Id. In Business Men's Assurance Co. of America v. Graham, 984 S.W.2d 501 (1999), the Missouri Supreme Court applied this law to allow a lawsuit in 1986 against architects and engineers for their design of a building completed 23 years earlier in 1963.

After completion in 1963, the owner performed various repairs in the 1960s and the 1970s to the marble exterior panels due to chipping problems and replaced one of the panels. In 1985, several panels began to fall from the building. Thus, the Supreme Court of Missouri concluded the owner timely sued in 1986 for design problems. The court stated that the earlier problems "were not of such nature to alert [the owners] to negligent design and installation damages." Id. at 508. The court noted that the phrase "capable of ascertainment" has never been given a precise definition. Id. at 507.

This decision left in place a judgment after a jury verdict of $5,287,991 against the architects and the engineers. The court found the defendants to be professionally liable 36 years after completion of the construction project.

Mr. Keller is a partner at Herzog, Crebs and McGhee, LLP in St. Louis, practicing civil litigation with an emphasis on business disputes and construction law. He also is a panelist with the American Arbitration Association.