After damage repairs from a November 29, 2018 fire resulted in a $1.96 million contract for Zetina Construction Solutions, LLC, property owner Shore to Shore Properties, LLC has sued for breach of contract — alleging that Zetina has failed to complete its work amid an imbalance in payment.
Following the fire at Norman, Oklahoma’s “Commons on Oak Tree” apartment complex, Shore to Shore hired Zetina Construction to repair the damages — requiring them to provide all necessary labor and materials and manage the project’s subcontractors and suppliers.
At the time of the March 5, 2021, lawsuit filing, Shore to Shore claimed that it had paid Zetina Construction $1,738,514.56, coming to 89% of the total contract’s value.
However, Shore to Shore alleged that Zetina Construction had only completed approximately 60% of the work designated by the contract — noting that “the cost to complete the scope of work that remains to be performed under the Contract far exceeds the remaining balance of the Contract price.”
On top of this, Shore to Shore further accused Zetina Construction of failing to properly manage the project, claiming that Zetina didn’t properly pay a number of their subcontractors and suppliers.
The lawsuit asserts that Shore to Shore is owed damages totaling $721,986.54 — plus attorney’s fees, costs, and interest.
Lawsuit also alleges possible violations of Oklahoma Construction Trust Fund Statutes
Shore to Shore also claims that Zetina Construction has violated Oklahoma construction law in its dealings with the project’s subcontractors.
At the time of the lawsuit’s filing, six subcontractors or suppliers had filed mechanics liens coming to a total of $288,176.58 against Shore to Shore’s property as a result of non-payment on the part of Zetina Construction. The project’s largest individual lien, filed by MCK Construction, LLC, is for $129,250.
Mechanics liens are a crucial part of ensuring payment on construction projects. Generally, anyone who provides labor or materials to a project can file a mechanics lien over non-payment. However, Shore to Shore’s lawsuit disputes that the filed mechanics liens are its responsibility.
The lawsuit points out Oklahoma statutes which say that “funds paid to a contractor…shall not be used for any other purpose until all lienable claims…have been paid” — mentioning alongside this that these liens have come despite Shore to Shore paying Zetina Construction an amount much larger than the work already done on the property.
Though Zetina Construction received its payment, it was required by Oklahoma law to hold it as “trust funds for the payment of all lienable claims.”
Shore to Shore stated that Zetina Construction is liable for the full amount of the six liens, requesting that Zetina Construction owner and manager Jorge R. Rodriguez be required to pay Shore to Shore the full total — plus the amount of any liens filed at a later date — so that it can settle the dispute over its property.
As Levelset lawyer Alex Benarroche states, “penalties for diversion or misappropriation of these payments can be severe,” and “the construction trust fund imposes personal liability on the trustee who misused the payments.”
This personal liability could lead to significant out-of-pocket expenses, or even criminal penalties, as a result of any mishandling of funds.
Fire damage can often be connected to contractor risk and non-payment
Non-payment regarding fire damage or construction fires has resulted in a number of high-profile legal actions in the last few years.
A December 21, 2019, fire at a Taylor, Texas Durcon industrial plant resulted in contractors hired for repairs filing mechanics liens totalling $8.9 million. Shortly following this, five contractors were forced to file mechanics liens coming to $1.7 million against Meridia Construction Management, LLC after a January 12, 2020, arson caused the partial destruction of two apartment complexes in Bound Brook, New Jersey.
An August 4, 2020, fire destroyed an under-construction hotel in St. Paul, Minnesota, leading to 10 mechanics liens totalling $4.44 million.
Though the dispute with Shore to Shore’s property occurred over fire damage repairs, fire damage to in-progress construction sites themselves commonly lead to significant issues. A February 2020 study from the National Fire Protection Association noted that from 2013 to 2017 fire departments dealt with an estimated average of 3,840 fires in structures under construction and 2,580 fires in structures undergoing renovations per year — resulting in a yearly cumulative average of $408 million in damages.