01/01/2019

Construction Contract Suit Victory

In the late fall of 2018, Shareholders Gerry Fagan and Brandon Hoskins obtained an important and substantial trial victory for their clients Jones Construction Inc. and its President, Jerry Jones. An LLC called SMSH sued them for breach of a construction contract, negligent property damage and interference with business relations, among other claims. A longtime Billings developer named Aaron Sparboe is the principal behind SMSH. SMSH’s claims arose from a construction contract between it and Jones Construction to build Sparboe an expensive luxury home on property owned by SMSH. The contract contained a “Guaranteed Maximum Price” of about $4.4 million dollars and necessitated written change orders to deviate from the GMP. The house eventually cost over $8 million. After disputes arose when SMSH became substantially overdue on invoiced payments to JCI, SMSH eventually terminated JCI and filed suit. SMSH sought all amounts it paid out on the home, including to a subsequent contractor to complete the home, over the original GMP since there were no change orders issued. SMSH also sued Jerry Jones individually for allegedly interfering with its and Sparboe’s banking relationship. At trial, SMSH sought over $6 million from JCI and Jones, including over $3.5 million on the construction claim. JCI counterclaimed to enforce a construction lien in the amount of $262,000. After a five day bench trial, JCI and Jones won a complete victory on a written order from District Court Judge Gregory Todd. Judge Todd dismissed all of SMSH’s claims and ruled that JCI has an enforceable construction lien in the full amount claimed by JCI. Pursuant to a Montana Supreme Court decision entitled Lewistown Miller Co. v. Martin, 2011 MT 325, Fagan and Hoskins successfully convinced the Court that SMSH had waived the contractual provisions, including the GMP, through Sparboe’s affirmative conduct and involvement. JCI kept Sparboe well informed of cost increases as bids and estimates came in from subcontractors and suppliers after the contract was signed, and Sparboe participated in and approved the hiring of subcontractors and suppliers even when the estimated costs had increased. Fagan and Hoskins proved at trial that Sparboe’s conduct and approvals constituted waiver of the GMP. They also proved there was interference with a business relationship, as well as the validity and amount of JCI’s construction lien.

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