Proposition P window, door work halts; legal battle looms

By MIKE ANTHONY

Executive Editor

Window and door replacement work being performed at four Mehlville School District buildings as part of the Proposition P districtwide building improvement program has been halted as a legal battle over the project looms in U.S. District Court in St. Louis.

Work at the four schools – Mehlville Senior High, Oakville Senior High, Trautwein Elementary and Wohlwend Elementary – came to a halt in December, according to Randy Charles, assistant superintendent for finance and the district’s chief financial officer.

The work at the four schools is being performed as part of a $3.7 million contract that was awarded to PrairieLand Construction Inc. in November 2001 by the Board of Ed-ucation. The contract also calls for future work to be performed at two middle schools – Oakville and Buerkle and five elementary schools – Blades, Beasley, Bierbaum, Forder and Point.

After work was halted, a snarl of lawsuits and counter suits ensued, including a bonding company suing the school district, the school district suing the bonding company, the school district suing the contractor, and the contractor suing the bonding company. In its suit against the bonding company, PrairieLand is seeking $5 million in punitive damages.

The McCarthy Construction Co. is serving as construction manager for the $72.4 million Proposition P districtwide building improvement program.

Jim Ulkus, McCarthy senior project manager, notified PrairieLand Construc-tion in a Dec. 27 letter that the company had defaulted on its contract with the Mehl-ville School District because PrairieLand had failed to complete the window and door replacement work at the four schools on time.

“Please be advised that McCarthy hereby notifies your firm pursuant to Article 9 of your trade contract on the above referenced project that your firm is in default because of failure to meet the contractual completion dates – which were extended to 12-21-02 – at Oakville High School, Trautwein Elementary School and Wohl-wend Elementary School, and Mehlville High School, which was Dec. 27, 2002,” Ulkus stated in his letter.

“… You are directed to cure the default(s) within 24 hours. Failure to do so may re-sult in the Mehlville School District in-voking the terms of the contract, including causing portions or all of the work to be performed for your account,” Ulkus’ letter continued. “PrairieLand will continue to incur liquidated damages obligations, per the contract, until the work at these facilities is complete.”

Under the terms of the contract between PrairieLand and the Mehlville School Dis-trict, liquidated damages total $1,000 per day for each day of delay. “Liquidated damages, if assessed, shall be on a per-campus basis,” the contract states.

Ulkus then wrote a Dec. 30 letter to the the Fireman’s Fund Insurance Company, which is affiliated with the National Surety Corp., the company from which PrairieLand purchased performance and payment bonds for the Mehlville project.

In that letter, Ulkus wrote, “PrairieLand Construction Co. is in default of their contract on the above referenced project and has failed to cure the defaults cited in my Dec. 27, 2002, letter to them … Fireman’s Fund Insurance Co. has been aware of PrairieLand’s failure to satisfactorily perform their contractual obligations. To date, the only direct response to your bond principal’s defaults that the Mehlville School District and McCarthy have seen was for you to have directed the owner (Mehlville) to cease further payments to PrairieLand without consent of surety. To date, you have no issued that consent of surety.

“Without prejudicing our rights under the contract and the bonds, the Mehlville School District and McCarthy demand that Fireman’s Fund, as the surety, take immediate action to cause the contract work to be performed to completion,” Ulkus wrote.

In January, National Surety filed suit against Mehlville School District in federal court, asking the court to “… order and declare that without a default termination of PrairieLand, National Surety has no obligation to cure or remedy the default of its principal PrairieLand under its bonded contract to Mehlville.”’

The suit states, “Following the Dec. 30, 2002, letter from James A. Ulkus, counsel for Mehlville told National Surety that de-spite PrairieLand’s being in default under its contract it would not terminate PrairieLand because doing so would cut off Mehlville’s entitlement to liquidated damages … With-out a default termination, National Surety cannot exercise any of the options available to it as surety under its bond.”

The Mehlville School District subsequently filed a counter suit against the National Surety Corp., contending that “despite being notified of PrairieLand’s defaults and being requested and demanded to perform its obligations under the performance bond, National Surety has breached its obligations under the performance bond by failing and refusing to perform its obligations thereunder.”

The school district contends that Prairie-Land’s default triggers National Surety’s obligations under the performance bond and asks the court to “enter judgment in its favor and against National Surety Corp. in an amount equal to Mehlville’s liquidated damages at the rate of $1,000 per campus, per day of delay, as well as Mehlville’s actual damages, attorneys’ fees and design professional costs incurred by Mehlville as a result of the default …”

Mehlville also has filed suit against PrairieLand, alleging breach of contract and seeking actual damages, liquidated damages and legal costs, including fees for attorneys and consultants.

In its suit against National Surety, Prairie-Land noted it entered into a $4,091,000 contract with the city of St. Louis in May 2001 and alleged the city breached that contract in July 2002, owing the contractor more than $300,000.

“Due to the city’s breach of contract by the city’s failure to pay the sum of $307,143.30 due to PrairieLand in July 2002, despite the demand for same, PrairieLand was unable to pay subcontractors and material suppliers who were owed money …,” the suit states.

PrairieLand requested National Surety “to demand payment by the city to a trust account or to consent to payments by the city by joint checks to PrairieLand and the subcontractors and material suppliers, which the surety refused.”

The suit also alleges that National Surety has interfered with PrairieLand’s contracts with the city and the Mehlville School District, inducing the city to declare its contract to be in default and inducing Mehl-ville to breach and terminate its contract.

PrairieLand’s suit alleges “tortious interference” and seeks from National Surety actual damages, attorneys’ fees and $5 million in punitive damages.

The cases have been consolidated into one action.

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