DIRT Development for Friday, March 13, 2009
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

MECHANIC'S LIENS; AMOUNT OF LIEN;  "DOWNTIME" CHARGES: Charges for equipment during "downtime" (periods during which the equipment sits idle on the construction site due to nonpayment by the general contractor) are not lienable labor costs under Missouri's mechanic's lien statutes.

Missouri Land Development Specialties, LLC v. Concord Excavating Company, L.L.C., 269 S.W.3d 489 (Mo. Ct. App. 2008).

Subdivision developer Woods Mill Development Company ("Woods Mill") retained Concord Excavating Company ("Concord") as the general contractor for the project. Concord retained Missouri Land Development Specialties ("MLDS"), an excavating and blasting company, in August of 2004 to provide construction services related to the project. When MLDS was not paid by Concord, it shut down work but left its equipment on site for some period of time. In January of 2005, MLDS filed a mechanic's lien claim in the amount of $628,595.43, one month after serving Woods Mill with a notice of intent to lien. On the lien claim, MLDS stated it was filing the attached account "for work and labor done and material furnished" by MLDS under contract with Concord, "upon, to and for the buildings and improvements" at the subdivision. Over a month later, MLDS filed its petition to enforce its lien claim, naming Woods Mill, Concord, and FirstService Bank ("FirstService"), a lender for the project, as defendan

ts. The petition included several causes of action, including a mechanic's lien claim.

At trial, MLDS presented testimony and several invoices explaining the charges constituting the amount of its claim. On one invoice of particular interest to the parties, the subtotal due was $62,288.65, such amount being comprised of charges for several listed invoice items. Included within these items was one dozer, two thirty-ton trucks, one excavator, and one high lift, all of which sat idle on the jobsite with no operators. The charges for those particular pieces of equipment totaled $50,538.65 and were comprised primarily of rent owed to MLDS. The trial court found that the charges claimed by MLDS were all reasonable, except for the $50,538.65, which constituted "the total of charges for the above-described pieces of equipment during 'downtime'-the period during which the equipment sat idle and shut down because of nonpayment by the general contractor." FirstService, which held an interest inferior to MLDS, asserted several weak arguments on appeal, and MLDS appealed as to t

he $50,538.65.

The Missouri Court of Appeals addressed, as a matter of first impression, whether "downtime" charges are lienable under Missouri law as labor costs. To complicate matters, the Missouri statute applicable to the creation of mechanic's liens was amended subsequent to the date the lien accrued, and MLDS argued that the amended statute should apply retroactively to the issue. The court did not address this argument in detail since it concluded that even if the amended statute is applied, MLDS's argument fails.

The amended statute provided that:

"Any person who shall do or perform any work or labor upon, rent any machinery or equipment, or furnish any material, … for any building, erection or improvements upon land, or for repairing, grading, excavating, or filling of the same, … under or by virtue of any contract with the owner ... thereof, or his … contractor … upon complying with the [applicable statutory provisions], shall have for his … work or labor done, machinery or equipment rented or materials …furnished, … a lien upon such building, erection or improvements, and upon the land belonging to such owner … on which the same are situated, … to secure the payment of such work or labor done, machinery or equipment rented, or materials … furnished …. For claims involving the rental of machinery or equipment, the lien shall be for the reasonable rental value of the machinery or equipment during the period of actual use and any periods of nonuse taken into account in the rental contract, while the equipment is on the prop

erty in question."

Applying this language, the court held that while the statute could reasonably be read to apply to both lessors and lessees of machinery and equipment, the statutory language did not apply to "downtime" charges of lessees. In so holding, the court relied on (1) the principle announced in Bush Construction Machinery, Inc. v. Kansas City Factory Outlets, L.L.C., 81 S.W.3d 121 (Mo.App. W.D.2002). (holding that a supplier of rental equipment could not obtain a mechanic's lien for the nonpayment of equipment rental fees and calling upon the legislature to consider whether a lien for lessors of machinery is desirable), and (2) the latter portion of the statute (providing that a lien shall be "for the reasonable rental value of the machinery or equipment during the period of actual use and any periods of nonuse taken into account in the rental contract") in which the language clearly refers to liens being allowed only for periods of nonuse taken into account in the rental contract, rathe

r than the contract at issue between MLDS and Concord.

In addition, the court also held that "downtime charges" do not fall within the meaning of the term "labor," distinguishing the facts in this case from those in which equipment or "downtime" charges have been held to be lienable as labor costs. Specifically, the court focused on the fact that the costs incurred for equipment during the period of downtime in this case (i.e., rent) were incurred when no laborers were present, which is unlike the typical situation where (1) a lien award has included costs of equipment, (2) the propriety of the charges has not been at issue, and (3) the equipment charges have been necessary or ancillary to the laborer's performance of his work. In this case, the court could not say "that the costs incurred for equipment during a period of downtime were a part of the labor cost that ultimately produced the improvements to the property," and therefore, the charges were not lienable.

Comment 1: It’s hard to argue with the court’s literal interpretation of the statute, but was this really what the statute means?  If we assume that the contractual understandings of the contractor and owner (or contractor and subcontractor) was that downtime would be recoverable when it was required by delays in the project, which should the person paying rent for the equipment during that downtime be compensated through the lien process?  Maybe another amendment is needed.  But who has the lobbying strength to support it?

Comment 2: The editor acknowledges that this case may not meet the hypothetical standard he proposes.  Why exactly did the equipment stand unused for the period of time that it did?  At the request of the contractor?  When MLDS shut down, it could have withdrawn its equipment.  If it didn’t just for its own convenience, or to build up the damages, then the downtime probably shouldn’t be compensable at all, much less as a lien.. 

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