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Case Summaries
REAL ESTATE CASES
The
doctrine of adverse possession is disfavored and its
elements stringent.
Crown Credit Co. Ltd. v.
Bushman (3rd Dist. 2007), 170 Ohio App.3d 807,
2007-Ohio-1230. In Bushman, Crown Credit Co.,
Ltd. brought an action against its neighbors for
declaratory judgment as to ownership of a disputed
border area, and Bushman filed a counterclaim to quiet
title based on adverse possession. The Auglaize County
Court of Common Pleas granted Bushman’s motion for
summary judgment, and Crown appealed. The Appellate
Court reversed and remanded the trial court decision.
The Appellate Court held that to
acquire title by adverse possession an adverse
possession claimant must demonstrate, by clear and
convincing evidence, exclusive possession and open,
notorious, continuous, and adverse use of the disputed
property for a period of 21 years. Here, Crown
conducted a survey in 2004, which was accompanied by an
intent to exercise dominion over the border area such
that it was sufficient to disrupt the 21-year period
required for Bushman to acquire the area by adverse
possession. Crown entered the land by conducting the
survey of the property, including the border area, in
preparation for purchasing the property in 2004, posted
flags demarcating the border area, and properly filed
the survey with the Engineer’s office, giving notice to
the world that it intended to possess and control the
entire property. This defeated Bushman’s “exclusive”
possession.
Although Bushman’s maintenance of
the disputed border area was “open” for purposes of
adverse possession, the actual, notorious and adverse
elements necessary to establish ownership require more
than merely conducting activities on the disputed
property where others can observe. To be notorious for
adverse possession purposes, a use must be known to some
who might reasonably be expected to communicate their
knowledge to the owner if he maintained a reasonable
degree of supervision over his premises; in other words,
the use of the property must be so patent that the true
owner of the property could not be deceived as to the
property’s use. The Appellate Court went on to conclude
that Bushman’s use of the disputed border was not
actual, notorious, or adverse.
CONSTRUCTION CASES
Failure to
follow contractual notice provisions precludes owner
from backcharging contractor for alleged
construction defects.
Certek, Inc. v. The Ohio
State University (Ct. of Cl. May 2, 2007),
2007-Ohio-2750. OSU entered into a contract with
Certek to manufacture and install a laboratory module.
OSU approved the plans, and Certek completed its work in
December 2004. OSU first raised problems with the lab
module in a letter dated April 29, 2005. The contractor
argued that the modifications identified by OSU in this
letter were not part of the original approved design but
were actually improvements. Certek further argued that
it had no chance to modify the work as the notice came
after others had already made modifications. OSU, eager
to open the lab, hired other contractors who were
already on site to complete the modifications and
attempted to backcharge Certek for its costs.
The Referee determined that OSU
failed to provide timely notice under the contract,
thereby denying Certek a reasonable time to cure any
defects. As in Dugan & Meyers, the court
strictly enforced the notice provision – only this time
against the owner.
_____________________________
Unreasonably late finish prevents builder from
collecting full contract amount.
Morton Buildings, Inc. v.
Correct Custom Drywall, Inc. (Franklin App. June
7, 2007), 2007-Ohio-2788. This case arose from
construction of a 36,000-square-foot garage with a
contract amount of $126,438. Although the owner wanted
it built within 90 days, the signed contract did not
contain a completion date but did state that July 1,
2002 would be the “approximate delivery date” for the
building materials. Also, a third proposal, dated the
same day as the contract, provided that construction
would begin in late July and end in late August.
The owner testified that he signed
the original contract because the contractor guaranteed
that it would complete the garage by September 1, 2002.
The contractor denied that he ever guaranteed a
particular completion date.
As expected, the contractor
encountered delays in completion, some of which were
caused by plan approval and inspections. In April 2003,
the owner learned that construction was not likely to
finish before April 15, 2003. The owner terminated the
contract, having paid only $50,571 – approximately 40%
of the original contract amount.
Morton sued for breach of contract
and unjust enrichment, and the owner filed a
counterclaim for breach of contract. Following a bench
trial, the court rendered a verdict against Morton on
its claims, and against CCD on its counterclaim. Morton
appealed.
The Court of Appeals held that
although the contract failed to specify a completion
date, the law implies that performance must take place
within a reasonable time. If performance took an
unreasonable time, then a material breach of contract
had occurred. Thus, if one party to a contract
unreasonably delays its performance, the other party is
excused from its contractual obligations.
Here, it was clear that the parties
had intended a three-month construction period, and the
actual construction stretched over a year. Although
some delays were caused by the city, the Court found the
contractor more responsible. As a result of Morton’s
unreasonable delay, the owner was excused from its
payment obligation.
Further, the Court rejected
Morton’s argument that the owner’s instruction to go
forward with construction following the initial
three-month period was a waiver of the owner’s right to
terminate the contract for unreasonable delay. Because
there was no definite date on which the job was to be
finished, the owner could continue to demand that the
contractor finish the job without waiving any right to
timely performance. Finally, the Court rejected
Morton’s unjust enrichment claim, holding that Morton
failed to prove that the owner lured it into building a
garage that it did not intend to pay for.
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A
corporation’s imputed knowledge of a safety violation is
sufficient to charge it with a “serious” violation of
OSHA Safety Standards.
Kokosing Construction
Company, Inc. v. Occupational Safety and Hazard Review
Commission (May 25, 2007), 2007 U.S. App. LEXIS
12835. The case arose from an accident during the
construction of an underground sewer line in
Cincinnati. The project required deep excavations,
which in turn required the use of de-watering pumps. In
order to provide power for the de-watering pumps,
Kokosing used construction-grade electrical cords
connected to portable generators.
The workers on the site also used
wire chokers to move equipment on the site. A wire
choker is a device that uses a multi-strand wire to form
a loop on each end.
Just prior to the incident, a
Kokosing foreman discovered two electrical cords and two
water-discharge hoses lying on top of a choker. The
foreman asked another employee to assist him in pulling
the choker out from under the cords and hoses. When
they attempted to pull the choker out, a wire protruding
from the midsection of the choker pierced one of the
electrical cords. Two employees suffered electrical
shocks.
OSHA conducted an investigation and
issued a citation for a serious violation. The
administrative law judge who heard the case determined
that the citation was properly issued. After the
Occupational Safety and Hazard Review Commission upheld
the decision, Kokosing appealed to the Sixth Circuit.
Kokosing argued that it had no
knowledge of the violation and that the knowledge of its
foreman was, at best, constructive knowledge. According
to Kokosing, the Commission should not have imputed the
foreman’s knowledge of the violation to the company.
The court stepped through two different earlier cases to
reach an answer.
In Carlisle Equip. Co. v. United
States Sec’y of Labor, 24 F.3d 790 (6th
Cir. 1994), the court found that as long as the
government can prove that knowledge of a risk could have
been obtained “with the exercise of reasonable
diligence,” a supervisor is considered to have
constructive knowledge. In an earlier case, Donovan
v. Capital City Excavating, 712 F.3d 1008 (6th
Cir. 1983), the court found that the actual or
constructive knowledge of the employer’s foreman or
supervisor can be imputed to the employer.
Putting these two case together,
the Court found that if the foreman could have found a
hazard through reasonable diligence, that constructive
knowledge would be imputed to Kokosing. Determining
reasonable diligence requires the Court to look at
several factors, “including an employer’s obligation to
inspect the work area, to anticipate hazards to which
employees might be exposed, and to take measures to
prevent the occurrence.”
In this case, the foreman knew of
the possibility of a hazardous situation. He admitted
that he knew the choker was old but still did not check
it for abrasions before he moved it. He testified that
he had been taught to protect electrical cords from
sharp metal. The Court found that the Commission drew
the logical conclusion that the foreman knew an old
choker could have abrasions that could pierce the
electrical cord, thereby presenting a hazard.
The Court determined that the
foreman’s constructive knowledge could be imputed to
Kokosing. Such knowledge was sufficient to uphold a
serious violation and a fine of $1,875. This case
serves to remind employers that what a foreman may not
know but should can hurt both the employees and,
ultimately, the company.
Managing
Construction Site Condition Risks
By:
Michael Copley
Benjamin Franklin said simply “time
is money.” When a contractor encounters a differing site
condition, costs can skyrocket while production slows or
even comes to a standstill. Proper site planning and
carefully drafted contract clauses may determine which
party bears the risk.
For an owner or developer, the foundation for successful
development and construction begins with an adequate and
accurate “site investigation.” It then ends with solid
documentation in the contract of the “baseline” expected
to be encountered by the contractor.
Which Party Bears The Risk To
Assure The Accuracy Of The Site Investigation?
The owner and contractor both have duties with regard to
accuracy of the site investigation. Most contract
documents will incorporate the owner’s site
investigation. They usually place a burden on
contractors to inspect the land to ensure they are
familiar with the scope of work.
Results Of Investigations
Should Be Incorporated from “Differing” Site Condition
Claims.
The owner’s obligation is to be accurate in the
information it provides to the contractor. In a recent
case against Miami University, an asbestos removal
contractor alleged to have encountered a differing site
condition when it discovered ceiling tiles mounted
directly to clay tile requiring more work than it had
bid. After a trial on the merits, the focus of the court
was on the pre-bid site inspection and the documents
that the owner made available for the bidders’s
inspection. The court held that the contractor had
adequate opportunity to inspect the site and should have
discovered the condition encountered. The court held:
Moreover, the court is persuaded by the testimony of
[Miami] that the historical drawings were mentioned and
made available pre-bid and that the “as-built” drawings
not only showed the presence of a tile substrate but
also noted with the designation “su.” where the
suspended ceiling systems were located. The court also
finds credible and gives weight to the testimony of
[Miami], who stated that it was not unusual for a
building from this era to have clay tile in place.
The court could have held that merely “mentioning” the
historical drawings was not sufficient to place the
contractor on notice of their existence. Therefore, as a
practical matter, the lesson learned from the Miami
University case is to document all items provided to the
contractors for the purpose of site investigation. The
simplest means of doing so is to list within the
contract documents the data, such as the historical
drawings, and the location where it can be inspected.
Subsurface Differing Site
Conditions Cannot Be “Inspected.”
Even though a contractor has a duty to conduct a
reasonable site inspection, it does not place a duty to
conduct a subsurface investigation independent of that
conducted by the owner. In a case against the Ohio
Department of Admin. Services., the contractor did not
perform any site investigation before submitting a bid
to construct a new prison. While excavating footers 35
feet below grade, the contractor encountered large
rocks, coal and shale that made trench footings
impossible. Rather than using open trenches for pouring
footings, the contractor was forced to build forms.
Although the State had provided soil borings and
drawings to the bidders, it relied upon a disclaimer
that declared the soil borings to be for “information
purposes” only. The court noted that the disclaimer in a
government contract is not enforceable in Ohio and that
the contractor can rely upon the Owner’s underground
investigation as being accurate when preparing its bid.
The Owner Should Not Withhold
Vital Subsurface Condition Data.
Another lesson to be learned from the Miami University
case is that Ohio will apparently recognize a cause of
action known as “superior knowledge” if the facts are
supportive. In order to establish a breach by
nondisclosure of superior knowledge, a contractor must
establish (1) the owner possesses knowledge of vital
facts regarding a solicitation or contract, (2) the
contractor neither knows nor should have known of the
facts, by contract specification or otherwise, (3) the
owner knew or should have known of the contractor’s
ignorance of the facts, and (4) the owner failed to
disclose the facts to the contractor. Once a party
demonstrates the nondisclosure of superior knowledge,
the party must still show reliance and injury by the
failure to disclose.
A mere estimate of costs prepared by the Owner’s
consultant, without details of the actual job site
conditions, is not likely to be considered “vital”
information. The Ohio Tenth District Court of Appeals in
a case against the City of Columbus held that an
engineer’s estimate for the dewatering costs to be
approximately one percent of the costs was not an
“affirmative representation about the conditions that
will be encountered on site.”
In a very close case in the Second District Court of
Appeals case against the City of Troy, the court held
that the contractor was responsible for ground water
conditions encountered on site when the owner conducted
no soils testing. It was discovered that the owner had
been advised by a local engineering firm that shallow
ground water was to be expected. The court said that
without expert testimony, it could not hold that the
advice was vital to a contractor.
The holding in the City of Troy case is unusual and
should not be relied upon by owners to forego its own
subsurface investigation. Typically, without an owner’s
baseline, each bidding contractor will be expected to
include a significant contingency in their bid to
address unknown subsurface conditions. This tends to
needlessly drive costs upward. If a bidder conducts its
own soils test, it will certainly expect to pass its
costs with mark-up through to the owner. It will further
insist upon incorporating the results of its
investigation into the contract. Finally, the successful
bidder can always argue that the conditions are
materially different from those ordinarily encountered.
Therefore, rather than take risky positions, such as
that taken by the City of Troy, it’s best to develop a
baseline to serve as a fair starting point for all
concerned.
Ohio recognizes the two types of differing site
conditions noted in that clause as Type I and Type II
differing site conditions. Type I differing site
conditions involve conditions that are materially
different from the conditions noted in the contract
documents. Some examples of Type I differing site
conditions include the presence of subsurface perched
water, boulders, water table levels, soils type (whether
too hard or too soft) and even old building foundations.
Type II differing site conditions differ materially from
what is expected in that geographic region. For example,
a contractor in Alaska encountered a Volkswagen Bus that
had broken down on the tundra in the winter and sank
when it thawed in the spring. The contract documents did
not warn against such a find. The contractor submitted a
claim for the cost of its removal and the court held
that it was not unusual to find cars and equipment
sunken in the tundra and it was a condition that the
contractor should have included as acontingency in its
bid.
Notice Is
Serious Business In Ohio
If a contractor disturbs the site and fails to comply
with the notice requirements of the differing site
condition clause, the Ohio courts will typically throw
out the differing site
condition claim, regardless of the cost to the
contractor or the lack of prejudice to the owner. In the
case involving the construction of the Columbus
Convention Center, a contractor encountered nearly $1
million dollars in additional hauling costs compared to
its original scope of work of $200 thousand. The Ohio
Supreme Court held that even though the Owner had
knowledge of the additional work and “even acquiesced”
in it, the Owner could duck liability if the contractor
did not have a signed change order from the Owner before
proceeding with the work.
Conclusion
With careful planning, a solid site investigation team,
and reasonable contract clauses owners can hedge their
bets against subsurface conditions.
 Mike Copley
is a Shareholder and a member of the
Real Estate & Construction and
Litigation Practice Groups. He can be reached at
mcopley@bdblaw.com
or 614.227.4264. He
concentrates his practice in the areas of land
development, construction and business litigation.
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Eric J. Neuman,
Litigation
and
Real Estate & Construction Law
Practice Groups,
Associate
Mr. Neuman has extensive experience in complex
litigation, with an emphasis on construction law.
He successfully represents residential real estate
purchasers and developers of condominiums and single
family homes in regard to claims for the recovery of
preconstruction deposits, including claims pursuant to
the Federal Interstate Land Sales Full Disclosure Act,
15 U.S.C. § 1701 et seq. He also prosecutes and
defends complex, multi-party commercial matters on
behalf of global, national, and regional entities.
Mr. Neuman has wide-ranging experience resolving claims
through all forms of alternative dispute resolution
including arbitration and mediation.
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KUDOS__________________________________________
In October, Michael
F. Copley
(Columbus) served as a judge for the Ohio Valley
Associated Builders and Contractors Annual Project
Awards.
Christopher M. Ernst
(Cleveland)
was a contributing author to an article in
Concrete Contractor (October 2007). The article was
entitled, “Is Your Lawyer Good or Bad for Business.” It
can be found online at
http://www.forconstructionpros.com/publication/printer.jsp?id=8819.
Eric
J. Neuman
(Boca Raton)
was quoted in the October 25, 2007 edition of Miami
Today. The article was entitled, "Buyers Seek
Ways to Void Condo Contracts." Also, Mr. Neuman
and
H. Michael Muñiz
(Boca Raton)
published an article entitled, "ILSA Complicates Real
Estate Contracts" in the October edition of the Florida
Real Estate Journal. Mr. Neuman was also mentioned
in the Florida Bar News and the Palm Beach Post
for his involvement in the
Anti-Defamation League's Glass Leadership Institute.
Scott J. Topolski
(Boca Raton)
is featured in the current issue of BASF News,
the magazine of the Builders' Association of South Florida.
BDB was the presenting sponsor of BASF's recent High Rise
Council Forum.
The
following
real estate & construction
attorneys have received top ratings in their specialties and
are listed in the 2008 edition of Best Lawyers in America®:
Edward V. Buehrle
(Akron)
Real Estate Law
James L. Fisher
(Akron)
Real Estate Law (10 year + honoree)
Nicholas T. George
(Akron)
Corporate Law, Construction Law
Robert A. Hager
(Cleveland)
Construction Law
Donald B. Leach, Jr.
(Columbus)
Construction Law, Real Estate Law
William B. Leahy
(Cleveland)
Alternative Dispute Resolution, Construction Law
Richard J. Lolli
(Canton)
Construction Law
Craig S. Marshall
(Akron)
Corporate Law,
Mergers & Acquisitions Law
John P. Slagter (Cleveland)
Real Estate Law
David W. Woodburn
(Akron)
Real Estate Law, Trusts and Estates
The
following Florida attorneys were listed as Top Lawyers in
the 2008 Edition of South Florida Legal Guide, a
publication of CEO Publishing Group, Inc.:
Rana M. Gorzeck
(Boca Raton)
Real Estate & Construction
Michael D. Mopsick
(Boca Raton)
Litigation,
Real Estate & Construction
Scott J. Topolski
(Boca Raton)
Litigation,
Labor & Employment
SPEAKING OUT __________________________________
Presentations recently given…
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KeyBank |
Save the date for these upcoming presentations…
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Date |
Title |
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Sponsored By: |
December 5
Columbus, Ohio
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Development of Business and Industrial Parks in
Ohio |
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Lorman Education Services Click
here
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January 31, 2008
Columbus,
Ohio
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Half Moon Seminars |
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