K&L Gates Construction Law Blog : Construction and Engineering Lawyers & Attorneys : K&L Gates Law Firm : Financing, Development, Dispute Resolution, Government Contracting

Baugh v. Gale Lim Holdings, Inc., 2009 WL 33149 (D. Idaho Jan 5, 2009)

In this case, Gale Lim Construction contracted with the State of Idaho to repair portions of the Tin Cup Highway.  Lim contacted Silver Star Communications before excavating, as required, and Silver Star then sent its employee, John Baugh, to the jobsite to mark its fiber optic cable.  Baugh was injured and brought a tort action against Lim.

Lim filed a motion for summary judgment claiming that worker's compensation law made it a "statutory employer" of Baugh and therefore immune from tort claims.  Baugh defended the motion by arguing that immunity was not applicable in this case where there was no contract between Lim and Silver Star.  Holding that a question of fact remained as to the existence of a contract, the court denied the motion.

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Excell Constr., Inc., v. Idaho Dep’t of Commerce and Labor, 145 Idaho 783, 186 P.3d 639 (2008)

This appeal arises out of an Idaho Industrial Commission finding that certain sheetrock workers hired by Excell Construction were employees rather than independent contractors.  At issue was whether Excell would be required to pay $6,353 in unemployment insurance taxes and penalties.  On appeal, the Idaho Supreme Court held the workers were independent contractors and reversed the Commission’s finding.

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BMC West Corp.  v. Horkley, 144 Idaho 890, 174 P.3d 399 (2007)

BMC West provided materials to contractor Davies for work on Horkley's commercial structure.  All sales were on an open account.  Davies did not fully pay BMC, so BMC filed liens “on the land on which the buildings were located, and on the buildings themselves.”  BMC then sued Horkley for payment and to foreclose the liens.  Horkley asserted the “open account defense,” which applies when a materialman “relies exclusively on the general credit of the purchaser, and does not look to the land, structure or building as additional security for the materials sold on credit.”  To avoid the defense and make the lien valid, the materials “must be furnished with special reference to their use in a particular building.”

Because BMC had tracked the materials sold to Davis for use on Horkley's building, it was not relying on Davies' general credit alone.  Since BMC was able to track the materials used to a specific project, the court granted summary judgment in favor of BMC.  The Idaho Supreme Court affirmed, including an award of attorney fees.
 

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Boise Tower Assocs. LLC v. Wash. Capital Joint Master Trust, 2007 WL 1035158 (D. Idaho Apr. 2, 2007)

In this case, the federal court sitting in Boise applied Washington law in delivering a win for a lender who refused to lend to the plaintiff developer.  The lender agreed to provide financing, but only if four conditions precedent were met, including an agreement to use union labor.  The developer agreed, but later took steps to have his contractor use non-union labor.  The lender refused to loan, prompting a lawsuit by the developer.  The court held that the lender was entitled to refuse because the developer had not demonstrated that it was willing and able to perform the conditions precedent.  A party, here the developer, that claims to have been damaged by a repudiation must show that it was ready, willing and able to perform its obligations under the contract before the repudiation, and that it would have rendered the agreed performance if the defendant had not repudiated.  The developer could not do so here, so the court excused the lender from making the loan.

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Fuhriman v. Idaho Dept. of Transp., 143 Idaho 800, 153 P.3d 480 (2007)

Idaho law provides that workers' compensation benefits are the exclusive remedy for workplace injuries.  Idaho Code §72-223, however, contains an exception to that "exclusive remedy."  The exception allows a finding of liability against a third party, even where the injured employee has received worker's compensation benefits, if the third party is legally liable for damages.  This exception to the exclusive remedy rule does not apply, however, to employers described in §72-216, which includes third party that has expressly or impliedly hired or contracted the services of another, including contractors and subcontractors, and the third party is liable to pay workers’ compensation benefits if the direct employer, the contractor or subcontractor, does not.

In a February 2007 opinion, the Idaho Supreme Court held that the Idaho Department of Transportation was not subject to the exception (that is, it was protected by the exclusive remedy rule).  The State was using workers employed by a contractor.  Those workers were killed on the job.  Their families received workers' compensation benefits and sued the State.  The Court rejected the claims, however, because the State would have been liable for the worker's compensation benefits if the contractor/employer failed to pay those benefits.  The exception therefore did not apply.

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Craig Johnson Constr., L.L.C. v. Floyd Town Architects, P.A., 142 Idaho 797, 134 P.3d 648 (2006)

Town entered into a contract with Dean to prepare plans for condominiums in Ketchum.  Once Dean received the plans, Dean contracted with Johnson to build the condominiums according to Town’s plans.  The condominiums were built in two phases.  In Phase one Johnson deviated from the plans, but did not do so in building phase two.  The first winter the condominiums were completed, ice dams formed on the roofs of individual units in both phases of construction.  All three parties then brought actions against each other for breach of contract, negligence and indemnification. 

At trial, the jury found Johnson to be 90 percent at fault and Town only 10 percent at fault.  The court held that “a public or private contractor following plans and specifications prepared by another party is not liable in negligence where defects in the plans and specifications cause injuries, so long as the contractor should not have reasonably known about the defects.”  The court affirmed the jury’s verdict since there was sufficient evidence in the record to show that Johnson was negligent and failed to follow Town’s plans. 

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Boise Jr. Coll. Dist. v. Mattefs Constr. Co., 92 Idaho 757, 450 P.2d 604 (1969)

Mattefs Construction submitted a bid for the construction of a building for Boise Junior College.  The bid contained a clerical error that omitted one item that constituted 14 percent of the bid.  The court held a contractor is entitled to the equitable relief of rescission if he can establish the following conditions:  “(1) the mistake is material; (2) enforcement of a contract pursuant to the terms on an erroneous bid would be unconscionable; (3) the mistake did not result from violation of a positive legal duty or culpable negligence; (4) the party to whom the bid is submitted will not be prejudiced except by loss of his bargain; and (5) prompt notice of the error is given.”  The court concluded that the clerical error in submitting a bid, which was 14 percent of the total bid, was substantial and material and did not result from culpable negligence.  The court further found that Boise Junior College would not suffer a substantial hardship since Mattefs informed them of the error before they had attempted to accept the offer.  The court did note that not all mistakes entitle a bidder to withdraw his bid, but distinguished this case on the basis that this was a clerical error and not an error in judgment, such as underestimating cost or labor.  Since the court found Mattefs satisfied all five factors, equity required the bid to be withdrawn without forfeiting the bid bond. 

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Puget Sound Nat’l Bank v. C. B. Lauch Constr. Co., 73 Idaho 68, 245 P.2d 800 (1952)

Saxon Painting entered into a contract with Lauch Construction to do all of the painting for a government housing project.  The contract required Saxon to apply two coats of a certain type of paint, which was provided by Lauch.  Saxon followed the specifications in the contract and completed the painting in a timely manner without any objections to the work from Lauch.  Saxon alleged that he was still owed $19,958 from the contract and three months after completing the work, a lawsuit was commenced.

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Steltz v. Armory, 15 Idaho 551, 99 P. 98 (1908)

Steltz contracted with Armory for the construction of a building in the city of Genesee.  The building was erected and Armory moved in and continued to use it for six weeks, until a windstorm blew down the front of the building.  Armory then refused to pay Steltz arguing that the building was not constructed in a workmanlike manner and Steltz filed this action to recover payment due under the contract.  During trial, evidence was presented that showed the front wall blew down because it had not been properly tied into the rest of the building.  The court held that the defect of not tying the front wall into the building was not an obvious or patent defect, but was a latent defect.  The Court reasoned that if the defect were obvious or patent, then Armory would have accepted the defect by taking possession without conditionally doing so.  The court affirmed the lower court’s decision to offset the cost to repair the defect from the amount still owed under the contract.

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