DD 2/25/10 When a subcontractor hires and pays subcontractors, is that "work" performed on the project by the first subcontractor?

Daily Development for Thursday, February 25, 2010
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
dirt@umkc.edu

MECHANICS' LIENS; ENFORCEABILITY: A state statute requiring that a mechanics' lien claimants "do or perform any work or labor upon land" shall be interpreted such that a claimant who hires and pays subcontractors will be viewed as having "performed work on the property" by furnishing labor through such subcontractors, and therefore such claimants may place a lien on property for work performed by subcontractors.

Midwest Floor Company v. Miceli Development Company, et al., ___ S.W.3d ___, 2008 Westlaw 4124595 (Mo. Ct. App. 2009).

Preckels  purchased a home from builder Miceli in 2006. As part of the construction project, Miceli hired Kelpe Contracting) to stabilize a slope on the property. Kelpe performed this work at various times. After invoices for such work remained unpaid, Kelpe filed a mechanics lien for $127,776.50 against the property, followed by a claim for breach of contract and enforcement of mechanics lien against Kelpe and the Preckels. The trial court granted Kelpe's motion, and the Preckels appealed.

On appeal to the Missouri Court of Appeals, the Preckels argued that Kelpe's statement of mechanics' liens required by statute failed to set forth a just and true account of the work performed. Specifically, the Preckels argued that each subcontractor must file a timely mechanics' lien and then assign its rights to the contractor, even in cases where the subcontractors are paid by the contractor. In the subject case, because the subcontractors were paid, they did not file mechanics liens or assign them to Kelpe. Therefore, the Preckels concluded that Kelpe wrongfully included non-lienable items, which resulted in its failure to file a just and true account of the lien.

In its analysis of this issue, the court recognized that this was an issue of first impression in Missouri, and noted that the Preckels cited no case law to support their position. Instead, they based their argument on a Missouri statute which provides that "'[a]ny person who shall do or perform any work or labor upon land' may have a lien upon the land." According to the Preckels, this language "expressly limits the class of people who can claim a mechanics' lien to those who actually 'engage in affirmative acts to improve the property by performing work,'" and that "Kelpe cannot include the cost of the subcontractors' labor in the mechanics' lien because it did not actually perform the work of the subcontractors."

Missouri courts construe mechanics' lien statutes "as favorably to the materialman as its terms permit." The statutory construction proposed by the Preckels in this case "would deny contractors security for the labor and materials they furnish in improving the property, and it would defeat the purpose of the statute." Instead, the court held that the proper construction is that Kelpe "performed work on the property by furnishing labor through subcontractors," and that any other construction of the statute would deny contractors security for such labor. Accordingly, the court rejected the Preckels' argument and held that "lien claimants may include the work performed by subcontractors in their mechanics' lien."

Comment: 1 As this is an issue of first impression in Missouri, which has a long established mechanic’s lien law, the editor suspects that it may come up later elsewhere, and therefore, although an interpretation of local law, it is useful for the national audience. 

Comment 2: On the substantive point, so long as the statutory language supports this interpretation, it appears to be a correct one.  From the owner’s standpoint, what difference does it make whether the subcontractor used employees or another level of subcontractors?  The only question might be whether these “second tiers” subcontractors have been fully paid.  Otherwise, the owner might get double thunked. 



MECHANICS' LIENS; ENFORCEABILITY: A state statute requiring that a mechanics' lien claimants "do or perform any work or labor upon land" shall be interpreted such that a claimant who hires and pays subcontractors will be viewed as having "performed work on the property" by furnishing labor through such subcontractors, and therefore such claimants may place a lien on property for work performed by subcontractors.

Midwest Floor Company v. Miceli Development Company, et al., ___ S.W.3d ___, 2008 Westlaw 4124595 (Mo. Ct. App. 2009).

Preckels  purchased a home from builder Miceli in 2006. As part of the construction project, Miceli hired Kelpe Contracting) to stabilize a slope on the property. Kelpe performed this work at various times. After invoices for such work remained unpaid, Kelpe filed a mechanics lien for $127,776.50 against the property, followed by a claim for breach of contract and enforcement of mechanics lien against Kelpe and the Preckels. The trial court granted Kelpe's motion, and the Preckels appealed.

On appeal to the Missouri Court of Appeals, the Preckels argued that Kelpe's statement of mechanics' liens required by statute failed to set forth a just and true account of the work performed. Specifically, the Preckels argued that each subcontractor must file a timely mechanics' lien and then assign its rights to the contractor, even in cases where the subcontractors are paid by the contractor. In the subject case, because the subcontractors were paid, they did not file mechanics liens or assign them to Kelpe. Therefore, the Preckels concluded that Kelpe wrongfully included non-lienable items, which resulted in its failure to file a just and true account of the lien.

In its analysis of this issue, the court recognized that this was an issue of first impression in Missouri, and noted that the Preckels cited no case law to support their position. Instead, they based their argument on a Missouri statute which provides that "'[a]ny person who shall do or perform any work or labor upon land' may have a lien upon the land." According to the Preckels, this language "expressly limits the class of people who can claim a mechanics' lien to those who actually 'engage in affirmative acts to improve the property by performing work,'" and that "Kelpe cannot include the cost of the subcontractors' labor in the mechanics' lien because it did not actually perform the work of the subcontractors."
Missouri courts construe mechanics' lien statutes "as favorably to the materialman as its terms permit." The statutory construction proposed by the Preckels in this case "would deny contractors security for the labor and materials they furnish in improving the property, and it would defeat the purpose of the statute." Instead, the court held that the proper construction is that Kelpe "performed work on the property by furnishing labor through subcontractors," and that any other construction of the statute would deny contractors security for such labor. Accordingly, the court rejected the Preckels' argument and held that "lien claimants may include the work performed by subcontractors in their mechanics' lien."

Comment: 1 As this is an issue of first impression in Missouri, which has a long established mechanic’s lien law, the editor suspects that it may come up later elsewhere, and therefore, although an interpretation of local law, it is useful for the national audience. 

Comment 2: On the substantive point, so long as the statutory language supports this interpretation, it appears to be a correct one.  From the owner’s standpoint, what difference does it make whether the subcontractor used employees or another level of subcontractors?  The only question might be whether these “second tiers” subcontractors have been fully paid.  Otherwise, the owner might get double thunked. 

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