Facts: Chris Sweeney Construction, Inc. (“CSCI”) provided a quote to Kevin Walsh to perform various remodeling work on his home.  Walsh agreed to the price, and CSCI performed the work—but it did not execute a written contract.  When a dispute arose over the work, CSCI recorded a mechanic’s lien on the property for $4,150 in unpaid work.

HICA generally requires a home improvement contractor to provide a consumer with a written home improvement contract containing certain provisions.  At the bench trial, CSCI only pursued claims on its mechanic’s lien and unjust enrichment, knowing that it would not be able to prevail on its breach of contract claim because of its failure to comply with HICA. Walsh filed a counterclaim based on CSCI’s violation of HICA.

The trial court held that CSCI was entitled to the unpaid amount plus its attorney’s fees (under Indiana mechanic’s lien act). Walsh appealed and argued that because HICA prevented a breach of contract claim, CSC should also be precluded from recovering on a theory of unjust enrichment or under the mechanic’s lien.

Decision: The Indiana Court of Appeals affirmed the trial court’s decision. In the absence of a contract, a party may recover under a theory of unjust enrichment—an equitable doctrine that permits recovery when the circumstances are such that justice requires recovery as though there has been a promise.  A mechanic’s lien is equitable in nature and is based upon a theory of unjust enrichment. The Appellate Court found that it would be unjust for Walsh to retain the benefit of CSCI’s services despite CSCI’s non-compliance with HICA.

Walsh also lost on his counterclaim for violating HICA.  HICA provides that a supplier’s failure to give the consumer a written contract is a deceptive act. However, to establish entitlement to those remedies, the homeowner must show that the deceptive act was either uncured, meaning that notice was given and the deceptive act was not cured, or incurable, meaning that the supplier acted with intent to defraud or mislead the consumer. Walsh offered no evidence that he notified CSCI of its deceptive act or offered it the opportunity to cure the deceptive act.  The Court also found that CSCI’s deceptive act was not willful or intentional and that it was not part of a scheme, artifice, or device intended to defraud or mislead Walsh.

The Walsh case is “unpublished,” which means that it cannot be regarded as precedent for other cases; but it likely illuminates the Court’s approach to a contractor’s non-compliance with HICA if there is no evidence of intent to defraud or mislead.  Nevertheless, home improvement contractors should ensure that their contracts comply with Indiana law.

By:  Roy Rodabaugh

Our construction litigation team consists of Roy, Mike Cavosie, and Theresa Ringle.

Facts: Dave’s Excavating (“Contractor”) contracted to perform work on a sanitation project for New Castle (“City”). Liberty Mutual (“Surety”) posted the statutorily-required payment and performance bonds. During work on the project, Contractor submitted a differing site conditions claim and stopped work: The contract stipulated that “Contractor shall not further disturb such condition or perform any Work in connection therewith . . . until receipt of written order to do so.”

The contract also contained a clause obligating Contractor to continue performance during a dispute:

4.03.A.  Contractor shall carry on the Work and adhere to the progress schedule during all disputes or disagreements with Owner.  No Work shall be delayed or postponed pending resolution of any disputes or disagreements except as permitted by [the contract] or as Owner and Contractor may otherwise agree in writing.

Relying on that clause, City directed Contractor to resume  its work.  When Contractor refused, City terminated it, made a demand upon Surety under Contractor’s performance bond, and hired a replacement contractor.

The trial court awarded City $900,000 in damages and attorneys’ fees, and Contractor and Surety appealed.  The Court of Appeals affirmed the award.

First, the Court of Appeals agreed that Contractor had breached the contract.  It noted:  ”In sum, [Contractor's] refusal to return to work when directed to do so constituted a breach of 4.03.A of the construction contract.”

Second, the Court of Appeals rejected Surety’s argument that City had “usurped [Surety's] right to mitigate its damages” by hiring a replacement contractor.  Because of statutory requirements for installing utilities after an annexation, City had declared the project an emergency and notified Surety of its intent to promptly hire a replacement contractor.  Surety’s letter acknowledging City’s bond claim instructed City of its obligation to mitigate its damages–standard language in a surety’s acknowledgment.  The Court sanctioned City’s hiring of a replacement contractor for that reason:  ”By hiring a replacement contractor, [City] worked to mitigate its damages–as instructed in [Surety's letter]–and in fact hired a contractor that worked faster than [Contractor] had and completed the Project ahead of schedule.”

Facts: Shook Construction served as general contractor for renovations to Ball State’s football stadium. It subcontracted with Boyer Corp. to perform a variety of tasks on the Project. After the Project’s completion, Boyer sought additional compensation.

After a bench trial, the trial court judge held, among other things, that many of Boyer Corp.’s requests were untimely. Boyer appealed that finding and argued that Shook had waived its right to enforce the 21-day change order time limit because that provision wase not routinely followed over the course of the project.

Decision: The Indiana Court of Appeals affirmed the trial court decision. Boyer admitted that it had submitted its request for additional compensation after the deadline but argued that the trial court erred in failing to find that Shook, by its conduct, waived its ability to enforce the 21-day limit. The appellate court disagreed:

We need not engage in a thorough examination into whether the court erred in not concluding that Shook waived its right to assert the Change Order Provision and the Claim Notice Provision, and in concluding that Boyer’s claims for additional compensation were therefore untimely, because Boyer agreed in the Subcontract that no action by Shook (or Ball State) shall constitute a waiver of a right. Specifically, Section 13.4.2 of the prime contract (the “No Waiver Provision”) states:

No action or failure to act by [Ball State], Architect or [Shook] shall constitute a waiver of a right or duty afforded them under the Contract, nor shall such action or failure to act constitute approval of or acquiescence in a breach thereunder, except as may be specifically agreed in writing.

Thus, Shook did not waive the right to enforce the 21-day limit.

Although the Boyer decision is “unpublished”–and thus cannot regarded as precedent for other cases–it follows the holding in a published 2010 decision, Weigand Constr. Co., Inc. v. Stephens Fabrication, Inc.  In that case, which involved identical no-waiver language, the Indiana Court of Appeals held:  “even if the record showed undisputed facts that would support a waiver argument—which it does not,” the no waiver provisions “would prevent us from finding that Weigand waived its right to enforce the Claim Provision.”

Facts: The Tippecanoe County Public Library solicited bids for the Stein Building Project. JR Kelly Company, Inc. claimed the local preference and submitted a bid of $686,000. Non-local contractor Mattcon submitted a bid of $630,000. JR Kelly Company filed a lawsuit in the Tippecanoe County Circuit Court challenging the subsequent award to Mattcon.

Indiana Code section 36-1-12-22 grants a preference–in the form of a percentage deduction to a bid–to local Indiana businesses. That statute then states:

(d) Notwithstanding provisions of this chapter that require the award of a contract to the lowest responsive bidder or the lowest responsive and responsible quoter, but subject to subection (e), a contract shall be awarded to the lowest responsive and responsible local Indiana business that claims the preference provided by this section.

(e) Notwithstanding subsection (d), a contract shall be awarded to the lowest responsive and responsible bidder or quoter, regardless of the preference provided in this section, if the lowest responsive and responsible bidder or quoter is a local Indiana business.

JR Kelly Company argued that the “shall” language in subsection (d) required the Library to award the project to it.

Decision:  The Court disagreed.  After analyzing the language of the statute, it held:

While it appears unclear in the statute how the price preference scale is to be applied, it does seem relatively clear that some sort of price preference scale is to be applied and an absolute preference was not the intention.

Moreover, the Court argued that interpreting the statute to require an absolute preference for a local Indiana businesses could produce an absurd result clearly not intended by the Indiana Legislature:

All a company has to do, under Plaintiff’s interpretation of an absolute preference, is to submit a bid, and claim preference, and then hope they are the only local Indiana business submitting a bid.  If they are the only bidder that can be found to have a local preference then their bid “shall” be accepted.  The implications of this could be great.  It could become general practice, encouraged by this law, for local Indiana businesses to submit high bids for local projects, and hope they are the lowest of the high bids.

The Court confirmed the award to Mattcon.

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