Mechanics' Liens and Public Improvement Bonds

Transcription

1 Mechanics' Liens and Public Improvement Bonds 10:15 a.m. - 11:00 a.m. Presented by: Robert Gainer Cutler Law Firm PC th St West Des Moines, Iowa Phone: Thursday, September 14, 2017

2 8/26/2017 IOWA MECHANIC S LIENS Robert C. Gainer Cutler Law Firm, P.C th Street West Des Moines, IA Phone: rgainer@cutlerfirm.com PREFACE The 2012 legislature enacted 84 G.A. ch 1104 (H.F. 675, a major revision of the mechanics lien law, effective January 1, The new law moves the filing of most pre foreclosure mechanics lien documentation from the clerk of the court to a new online state construction registry administered by the secretary of state. Today s Presentation tracks Iowa Code Chapter 572 (2016, and case authority todate. If using the referenced authority in the future, user is advised to consult the most recent Iowa Code and shepardize referenced cases. Fundamentals on Iowa Mechanic s Lien Law Iowa Code Section 572 Statutory framework. Mechanic s Lien Notice and Registry (Iowa Secretary or State MNLR : Concepts on Lien Commercial projects Residential Projects (single or two family dwellings occupied or used, or intended to be occupied or used primarily for residential purposes Definitions:

3 8/26/ : Persons Entitled to a (Mechanic s Lien (1 Every person who furnishes any material or labor for (2 Materials rented and/or used in the build out (3 BUT NOT owner builder (see for work performed prior to transfer of title : Collateral Security Should you take collateral security on any contract (think personal guarantees, separate security/encumbrance filings, you are not entitled to a mechanic s lien. See Builders Kitchen Supply v. Pautvein, 601 N.W.2d 72 (Iowa Practice: Cross collateralization risk/reward Completion of project and new security ( not affect right to lien property What Kind of Property Can be Encumbered by a Lien? Property of the Owner Leased Premises Public Property (remedies under Iowa Code 573, or Federally, under the Miller Act 40 U.S.C

4 8/26/2017 Filing Requirements Important Dates: 572.8: Perfection requirements: Lien filing required within ninety days of last furnishing Not punch list items; Transit: delivery or receipt? 572.9: Time to foreclose lien: Within two years and ninety days after the date of last furnishing (materials / labor & 11: Perfection after lapse of ninety days (Trappings Lien, and Extent Requires service of written Notice after filing on MNLR upon Owner in manner original notices required to be served Only to extent of balance due from Owner to GC or owner builder s buyer to owner builder; but, if bond in place, full extent of amount found due Where and How to File a Lien MNLR: Cover sheet information: Next Slide Lien itself: Iowa Docs, Form, SOS ( Requirements under 572 generally,

5 8/26/2017 Residential Construction special requirements : GC to provide Owner Notice A GC/Owner Builder Requirements: Post a Notice of Commencement of Work to the MNLR within ten days after the commencement of work. See A for what must be included B:Requirements of subcontractor on posting preliminary notice. See B for what must be included. Importantly, a subcontractor s failure to post a preliminary will preclude entitlement to a lien / remedy. Residential, Cont d Residential Projects: (single or two family dwellings occupied or used, or intended to be occupied or used primarily for residential purposes (Also includes condominium projects, but see Prime Contractors who are subcontracting for labor materials: Serve notice to owner, and Prime Contractors and Owner/Builders who are subcontracting for labor or materials: Post a Notice of Commencement on the State Construction Registry within 10 days from the commencement of the project. The administrator (Secretary of State will serve a copy of the Notice of Commencement upon the owner. Send a Notice of Commencement to the owner s address, and to the owner at the project address if the owner s address is different than the project address. Subcontractors (including those who contract directly with an owner builder: Post a preliminary notice on the State Construction Registry as soon as possible to trap funds, and serve a copy upon the owner. A lien, when later filed, may only include labor or materials provided after the preliminary notice is posted and served. If not posted by the prime contractor or owner builder, a subcontractor may post a Notice of Commencement, after which they may post their preliminary notice. Commercial Projects Requirements When furnishing Labor/Materials to a sub contractor, Claimant must: Notify General Contractor with a written Notice within 30 days from first furnishing materials or services. See (a for content of written Notice. Lien Claim be supported by certified statement that the General Contractor received notice required, supra (b No notice is required when contracting directly with the owner or prime contractor. 4

6 8/26/2017 Foreclosure of the Lien Suit must be filed in County of real property ( See Form. Within two years from the expiration of ninety days after the date on which the last of the material was furnished or last of labor performed ( , If Owner provides written demand for suit, Claimant must file suit within 30 days ( Court will establish priorities of Claimants, and other parties, subject to issues; Counter Claims and related claims must be added ( , Attorney Fees Prevailing party may be awarded reasonable attorney fees Challenge to incorrect residential posting may be awarded reasonable attorneys fees If bonded off pursuant to , persuasive authority in Dallas County stating prevailing party may be awarded reasonable attorney fees 5

7 8/26/2017 Prompt Payment Provisions for Subcontractors GC or Owner Builder needs to pay subs within 30 days of receipt of full payment from owner. If no due cause for failure to pay subs, requirements of subs to provide written Notice, and if certain requirements not met, subs entitled to exemplary damages of between 1 15% of amount owed. PUBLIC PROJECTS Iowa Code Section 573 Preliminary Notice to General Contractor detailing Amount, Kind, and Value within 30 days of first furnishing. See: , Accurate Controls, Inc. v. Cerro Gordo Cty. Bd. of Sup'rs, 627 F. Supp. 2d 976, 997 (N.D. Iowa Suit Deadlines: Needs to be filed not sooner than 30, nor later than 60, days after from completion and final acceptance of the project; or within 30 days from a demand to commence suit. The Miller Act: 40 U.S.C Questions?? Bob Gainer rgainer@cutlerfirm.com //

8 MECHANIC'S NOTICE AND LIEN REGISTRY Paul D. Pate Iowa Secretary of State 321 East 12th Street Des Moines, IA sos.iowa.gov POSTED MNLR # /11/2017 2:26:29 PM CLAIMANT POSTING THE MECHANIC'S LIEN Mechanic's Lien KONE, Inc. Name 4225 Naperville Road, Ste. 400 Mailing address Lisle City IL State Postal code Country CURRENT PROPERTY OWNER(S Siegeworks Lodging LLC Name th Street NE Mailing address Solon City IA State Postal code Country INFORMATION FOR PROPERTY TO BE CHARGED WITH MECHANIC'S LIEN Polk County 201 East Locust Street Street address or location of the property if the street address cannot be reasonably identified Des Moines City or nearest city if no street address Tax parcel identification number IA State Postal code The North 73.2 feet of Block G of Scott & Dean s Addition to East Fort Des Moines, an official plat, now included in and forming a part of the City of Des Moines, Polk County, Iowa. Being more particularly described as Parcel A on the plat of survey filed August 21, 2014 in Book 15297, Page 507 in the Office of the Polk County Recorder, Polk County, Iowa. Legal description MECHANIC'S LIEN INFORMATION 2/18/2016 Date materials were first furnished or labor was first performed 10/20/2016 Date materials were last furnished or labor was last performed $ 10, Amount owed to Claimant ADDITIONAL INFORMATION Hansen Company Inc. General Contractor / Owner Builder name 5665 Greendale Rd., Ste. A Mailing address Johnston City IA State Postal code Country Telephone ATTACHMENTS

9 Mechanic's Lien is appended to the Posted PDF Document. Statement of Account is appended to the Posted PDF Document. CERTIFICATION I certify under penalty of perjury and pursuant to the laws of the state of Iowa that the preceding is true and correct. Further, I agree to use an electronic signature in lieu of a handwritten signature, and the Secretary of State agrees to accept the electronic signature. Robert Gainer Electronic Signature POSTED BY Cutler Law Firm (Robert Gainer Posted by 4/11/2017 Date

10

11

12

13 IN THE IOWA DISTRICT COURT FOR COUNTY CONTRACTOR. vs. Plaintiff, LAND OWNER & GENERAL CONTRACTOR Case No. PETITION TO FORECLOSE MECHANIC S LIEN Defendants. COMES NOW Plaintiff,, and for its Petition to Foreclose Mechanic s Lien, avers as follows: 1. From and after January 5, 2001 Defendant, holds the title to the following described real estate in County, Iowa: A parcel of land located in the SE1/4 of Section 35.. feet to the point of beginning. Said parcel contains Acres, more or less, and is subject to all easements of record. 2. At all times material hereto, was the owner of the subject property. On or about December 16, 2013, Defendant ordered certain labor and/or materials from the Plaintiff to undertake work on the property described above and said Defendant agreed to pay therefore. 3. Pursuant to said agreement, beginning on or about March 1, 2014 and ending on or about May 2, 2014 Plaintiff furnished $255, in material and/or labor to improve said real estate. A true account of the labor and/or materials which Plaintiff furnished for said improvements and the fair and reasonable prices of each is attached hereto with the Mechanic s Lien filed in this case. A copy of said lien is attached hereto as Exhibit A.

14 4. On June 19, 2014 filed its mechanic s lien with the State of Iowa Secretary of State and paid costs of $50.00 in so doing. See Exhibit A. 5. Plaintiff was not, and is not, paid on the invoices provided in the filed Mechanic s Lien, and was precluded from continuing work on the project subsequent to May 2, Plaintiff has incurred attorney s fees in filing of the lien, and will continue to incur attorney s fees in the prosecution of this action. Plaintiff is entitled to tax all of its attorney s fees and cost pursuant to the terms of the contract and/or Iowa Code An Affidavit of Attorney Fees has been filed simultaneously with this Petition and incorporated herein by reference. WHEREFORE, Plaintiff prays judgment against the Defendants, in rem, for the sum of $255,897.36, for the costs of filing the mechanic s lien, and all attorney s fee, including interest at the legal rate from May 2, Plaintiff further prays that the lien of said mechanic s line and said judgment be established and confirmed as a first and paramount lien upon the real estate described in paragraph 1 hereof, senior and superior to the rights, title interests, liens, or claims of each and every defendant to this suit, and be foreclosed against all defendants, who be forever barred and estopped from having any right, title, or interest in said lands save only such statutory rights of redemption from the sheriff s sale as are given by law; that a special execution issue for the sale of the premises accordingly, and unless statutory redemption be made, a sheriff s deed issued to the purchasers or his assigns, conveying the absolute title thereto against all defendants and all persons claiming by, through, or under any of them; and that a writ of possession then issue forthwith to put such grantee in immediate possession of the entire premises and that plaintiff have such other and further relief as may be just and equitable in the premises.

15 Respectfully submitted, _/s/ Robert C. Gainer Robert C. Gainer AT CUTLER LAW FIRM, P.C th Street West Des Moines, Iowa Telephone: Facsimile: ATTORNEYS FOR PLAINTIFF Original filed. Copy to: DEFENDANTS CERTIFICATE OF SERVICE The undersigned certifies that the foregoing instrument was served upon all parties to the above cause to each of the attorneys of record or an unrepresented party herein at their respective addresses disclosed on this pleading this day of, U.S. Mail Facsimile Hand Delivery Signature

16 Case 4:14-cv REL-CFB Document 1 Filed 08/11/14 Page 1 of 6 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF IOWA In re: UNITED STATES OF AMERICA for the use of WESCO DISTRIBUTION, CASE NO. INC., Plaintiff, v. GREENLEAF CONSTRUCTION COMPANY, INC., INTERNATIONAL ELECTRIC, INC., LIBERTY MUTUAL INSURANCE COMPANY, and INTERNATIONAL FIDELITY INSURANCE COMPANY, Defendants. COMPLAINT Plaintiff UNITED STATES OF AMERICA for the use of WESCO DISTRIBUTION, INC. (hereafter, Plaintiff, by and through counsel, and for its Complaint against the Defendants states: JURISDICTION 1. This Court has subject matter jurisdiction pursuant to 28 U.S.C and the provisions of the Miller Act, 40 U.S.C The Court has pendent jurisdiction and supplemental jurisdiction over the state law claims alleged in this Complaint pursuant to 28 U.S.C VENUE 2. The contract at issue was to be performed and executed in Polk County, Iowa. Venue therefore lies in the United States District Court for the Southern District of Iowa pursuant to 40 U.S.C. 3133(b(3(B and 28 U.S.C. 1391(b(2.

17 Case 4:14-cv REL-CFB Document 1 Filed 08/11/14 Page 2 of 6 PARTIES 3. Plaintiff WESCO Distribution, Inc., is a Pennsylvania corporation, organized and existing under the laws of the state of Pennsylvania, with its principal place of business in Pittsburgh, Pennsylvania. 4. Defendant Greenleaf Construction Company, Inc. (hereafter, Greenleaf, is a Missouri corporation authorized to do business in Iowa that maintains its principal office at 1734 East 63 rd Street, Ste. 502, Kansas City, Missouri Defendant International Electric Company, Inc. (hereafter, IEC, is a Kansas corporation authorized to do business in Iowa that maintains its principal office at W 83 rd Street, Shawnee, Kansas Defendant Liberty Mutual Insurance Company (hereafter, Liberty Mutual, is a Massachusetts corporation that maintains its principal place of business at 175 Berkley Street, Boston, Massachusetts, Liberty Mutual is a licensed Iowa Insurance Company by the Iowa Insurance Division. 7. Defendant International Fidelity Insurance Company (hereafter, IFIC, is a New Jersey corporation that maintains its principal place of business at One Newark Center, 20 th Floor, Newark, New Jersey IFIC is a licensed Iowa Insurance Company by the Iowa Insurance Division. STATEMENT OF FACTS 8. On or before November 15, 2011, Defendant Greenleaf contracted with the U.S. Army Engineer District, Louisville, on the federal project known as the Army Reserve Center (ARC Organizational Maintenance Shop in Des Moines, Iowa (hereafter, ARC-Des Moines. The contract number for the ARC-Des Moines project was Contract No. W912QR-12-C-0014 (hereafter, Prime Contract. The Prime Contract required labor and materials for which Greenleaf required a sub-contractor, IEC, to perform. 9. On or about March 14, 2012, Greenleaf obtained a Miller Act payment bond from Defendant Liberty Mutual Insurance Company in the amount of $9,013,152.00, as required by the United States of America, Corps of Engineers (Louisville, KY. 10. In the Miller Act payment bond, Liberty Mutual agreed to be bound jointly and severally with Greenleaf to make payment to all persons having a direct contractual relationship with Greenleaf or to any sub-contractor of Greenleaf who furnished labor, material or both in the prosecution of the work provided for in the Prime Contract, in the event that Greenleaf Construction Company failed to make prompt payment to such persons. A copy of said Bond is attached to this Complaint, marked as Exhibit A and made a part hereof. 11. At some point on or before April 30, 2012, Greenleaf contracted with Defendant IEC., to furnish labor, materials, equipment, and other facilities required to complete the work contracted to be performed on the ARC-Des Moines project.

18 Case 4:14-cv REL-CFB Document 1 Filed 08/11/14 Page 3 of At all relevant times, IEC was a sub-contractor per written contract to Greenleaf on the ARC-Des Moines project. IEC was at all relevant times a direct party to contract with Greenleaf for the ARC-Des Moines project. 13. On April 30, 2012, IEC obtained a Sub-Contract Labor and Material Payment Bond from Defendant IFIC in the amount of $1,020,000.00, as required by the sub-contract IEC entered into with Greenleaf. 14. In the Sub-Contract Labor and Material Payment Bond, IFIC agreed to be bound jointly and severally with IEC to make payment to all claimants for all labor and material used or reasonably required for use in the performance of the sub-contract, in the event that IEC, failed to make prompt payment to such claimant. 15. At all relevant times during the course of the ARC-Des Moines project, WESCO was a direct sub-contractor of IEC, and IEC was contractually obligated to Plaintiff WESCO for service and materials necessary to prosecute and reasonably fulfill the obligations of IEC and Greenleaf for the ARC-Des Moines project under the Primary Contract. A copy of those agreements are attached to this Complaint, marked as Exhibits C-1 and C-2 and made a part hereof. 16. The agreement as between IEC and WESCO required payment to WESCO for materials and services provided net 30 days and that past due balances are subject to service charges at the rate of 1.5% per month. The contract further provides that IEC would be liable for all collection costs incurred by WESCO, including without limitation, attorneys and collection agencies fees and the related disbursements. 17. WESCO provided original Fixtures and Consignment Inventory to IEC/Army Corps at the ARC-Des Moines project location beginning in June 2013, and through and into November 22, 2013, all of which materials were furnished in the prosecution of the work provided for in the Prime Contract and specifications. 18. IEC, and Greenleaf, have failed to pay WESCO the $159, due under the sub-contract within 30 days of WESCO s final invoice, dated April 4, As of August 7, 2014, WESCO was owed $159,461.52, plus applicable interest, costs, attorneys fees, and damages, pursuant to the terms of the contract as between IEC and WESCO. A copy of the Aggregate Claim and invoices are attached to this Complaint, marked as Exhibit D and made a part hereof. 19. WESCO Distribution has submitted a claim for payment to both Liberty Mutual Insurance Company, and International Fidelity Insurance Company under each respective Payment Bond, but both sureties have failed to pay WESCO Distribution the amount due. 20. WESCO submitted a demand for payment to IFIC, received by IFIC on March 31, A copy of this correspondence is provided in Exhibit E and made a part hereof. In follow up correspondence with IFIC, at no point could IFIC substantiate denial of the entire claim made by WESCO. 21. IFIC requested information from IEC for reasons to deny payment of $94, that WESCO asserted was due and owing on June 3, On information and belief, IFIC did not

19 Case 4:14-cv REL-CFB Document 1 Filed 08/11/14 Page 4 of 6 receive any supporting information from IEC to preclude payment to WESCO. Despite repeat demands by WESCO, no payment was made by IFIC. 22. Demand was made upon IFIC for payment of $94, was made on July 24, IFIC provided no correspondence or any other information that could support a defense that at least $94, was properly owed to WESCO by IEC/IFIC. The refusal was wilful and persistent and without reasonable cause, as no information was provided by IFIC to support that the above referenced liquidate amount was in anyway fairly debatable as owing to WESCO. FIRST CLAIM (BREACH OF CONTRACT 23. WESCO repeats and re-alleges paragraphs 1-22 as though fully set forth in this claim. 24. WESCO had a direct contractual relationship with IEC for services and materials reasonably necessary for the prosecution of the work required under the Prime Contract. 25. WESCO has performed all of its obligations under its contract with IEC on the ARC-Des Moines project. 26. IEC has breached its agreement with WESCO in that it has failed and refused to pay WESCO in full for labor, services and materials furnished in the prosecution of the work reasonably required under the Prime Contract. 27. Plaintiff WESCO has suffered damages as a direct and proximate result of International Electric s breach of contract. SECOND CLAIM (QUANTUM MERUIT 28. WESCO repeats and re-alleges paragraphs 1-26 as though fully set forth in this claim. 29. WESCO provided valuable services and materials that were necessary for IEC and Greenleaf to perform and complete the obligation under the Prime Contract. 30. IEC and Greenleaf benefited from WESCO s services and materials, including but not limited to the fact that IEC and Greenleaf have received payment from the United States, and could not have fully performed and completed its obligations under the Prime Contract in the absences of the services and materials that WESCO provided. 31. Greenleaf and IEC have failed and refuse to pay WESCO for the services and materials referenced herein. 32. Plaintiff WESCO has suffered damages and both IEC and Greenleaf have been unjustly enriched as a result of IEC s failure to pay WESCO for the materials and services provided on the ARC-Des Moines project.

20 Case 4:14-cv REL-CFB Document 1 Filed 08/11/14 Page 5 of 6 THIRD CLAIM (MILLER ACT PAYMENT BOND 33. WESCO repeats and re-alleges paragraphs 1-31 as though fully set forth in this claim. 34. Liberty Mutual is obligated, pursuant to the Bond, to pay WESCO for the labor, materials and services it furnished in the prosecution of the work provided for in the Prime Contract, and for which IEC and Greenleaf have failed to make payment. 35. IFIC is obligated, pursuant to the Bond, to pay WESCO, for the labor, materials and services it furnished in the prosecution of the work provided for in the Prime Contract, and for which IEC and Greenleaf have failed to make payment. 36. Plaintiff WESCO is entitled to payment from Liberty Mutual pursuant to the Miller Act, 40 U.S.C Plaintiff WESCO is entitled to payment from IFIC pursuant to the Miller Act, 40 U.S.C FOURTH CLAIM (IOWA BAD FAITH DAMAGES as against IFIC ONLY 38. WESCO repeats and re-alleges paragraphs 1-37 as though fully set forth in this claim. 39. WESCO provided materials and services directly to IEC for the prosecution of the work required of IEC in fulfillment of its obligation to Greenleaf, pursuant to the Prime Contract. 40. WESCO submitted a proof of claim, received by IFIC, on March 31, IFIC could not reasonably contest, and provided no information as to why it was withholding, the sum of $94, that WESCO asserted due and owing. 42. By the time of the July 24, 2014, payment demand by WESCO, IFIC had no reasonable basis to deny payment. 43. Defendant IFIC has unreasonably delayed or denied payments owing WESCO under the Subcontract Labor and Material Payment Bond for which IFIC is bound as Surety on the ARC-Des Moines project. 44. WESCO has suffered damages as a direct and proximate result of IFIC s wilful refusal to advance benefits owed under the Subcontract Labor and Material Payment Bond. 45. Plaintiff WESCO is entitled to recovery of damages

21 Case 4:14-cv REL-CFB Document 1 Filed 08/11/14 Page 6 of 6 WHEREFORE, the Plaintiff requests this Court grant it: 1. Damages in the amount to be proven at trial; 2. Cost of suit incurred herein, inclusive of interest; 3. Reasonable attorneys fees; 4. Bad Faith damages as against IFIC; and 5. Such other and further relief as the Court may deem just and proper. Respectfully Submitted, _/s/ Robert C. Gainer Robert C. Gainer CUTLER LAW FIRM, P.C th Street West Des Moines, Iowa Phone: Facsimile: rgainer@cutlerfirm.com ATTORNEYS FOR WESCO DISTRIBUTION CERTIFICATE OF SERVICE I hereby certify that on August 11, 2014, I filed the foregoing with the Clerk of Court by using the ECF system, and I will send notification of such filing to the following by Carol Z. Smith (csmith@gh-ks.com Gilliland & Hayes, LLC 9225 Indian Creek Parkway, Suite 1070 Overland Park, KS Counsel for Defendant Liberty Mutual Insurance Company George Rettig (grettig@ific.com International Fidelity Insurance Company Assistant Vice President, Claims Counsel One Newark Center, 20th floor Newark, New Jersey Counsel for Defendant International Fidelity Insurance Company /s/ Robert C. Gainer