Litigation
The defendant was sued by several subcontractors and the general contractor for construction lien foreclosure and breach of contract.

The defendant had entered into a design-build contract for $3,385,200. The general contractor had claimed that the defendant owed them an additional $1,360,015 for extras which had been performed without any written change orders or knowledge on behalf of the defendant. The defendant claimed that the extra work was governed by the terms of the contract and, therefore, owed no additional monies. An additional $815,908 had already been paid on the contract. Subsequently, construction liens totaling $2,132,881.17 were filed against the defendant’s property.

The defendant files a cross-claim against the general contractor for breach of contract for defective work and for extras which were already covered under the contract. The defendant further alleged the general contractor violated the Michigan Builder’s Trust Fund Act, MCL 570.151, et seq., for failing to pay off its subcontractors while ensuring it was paid 68 percent of the monies it was owed. On this basis, the defendant files motions for: 1) security of costs; 2) compelling the posting of a discharge bond by the general contractor; and 3) the appointment of a receiver to review the general contractor’s financial records as to how the monies were distributed. The trial judge granted all these motions and the general contractor was ordered to post a $500,000 security bond and a $1.5 million discharge bond on the construction liens.

While the Court of Appeals overturned the orders appointing the receiver and compelling the posting of a discharge bond, the trial judge appointed the receiver as a special master over all discovery and settlement proceedings. The special master conducted a discovery with each party and requested extensive documentation and memoranda which supported each party’s position. Special master R. John Umlauf Jr., CPA, also performed a comprehensive accounting/audit which was used by all parties to resolve ambiguities in factual issues.

Further, the special master, through the application of forensic accounting procedures, was able to contain each litigant’s interpretation of the facts. At the conclusion of this fact finding, the special master required certain parties to provide an analysis of facts and law. These actions resulted in a settlement of the case with all lien claimants being compromised and each complainant recovering approximately .28 on the dollar.

Case Details
September 4, 2000
14 Mich. L.W. 1680

Breach of Contract
Construction

Injuries Alleged: $1,360,015 for additional work; $2,132,881.17 in construction liens.

Name of Case: Lakeside Building Projects, Inc., v. PressWay, Inc., et al.

Court/Case Number: Macomb County Circuit Court, #99-2044-CH

Name of Judge: Michael D. Schwartz

Jury Demanded: Yes

Amount of Settlement: $600,000 amongst seven lien claimants and their subcontractors

Date: June 1, 2000

Attorney for the Plaintiff: Withheld

Attorney for the Defendant: John M. Beeding, Jr. and David G. Marowske

Name/City of Most Helpful Experts: R. John Umlauf, Jr., CPA, Utica- Appointed as special master by trial judge

Highest Offer: $2.1 million demanded by general contractor