Posts Tagged ‘Collections’

How to Collect on a NSF Check in Oregon

On March 18, 2010        

Two weeks ago, we posted an article on How To Collect on a NSF Check in Washington.  Today, we address the same issue under the laws of Oregon.

In the construction business, NSF checks are a fact of life.   And sometimes, the NSF checks may cause big problems because they’re written in amounts that exceed $10,000, $50,000 or $100,000.

In Oregon, like in Washington, those who draft NSF checks have a specific window of time to make payment on the check amount, or be subjected to statutory penalties and their adversaries litigation costs.

I just published a Legal Guide on Avvo that gives step by step instructions to folks on how to collect against a NSF check.   Unlike many states, like Washington and Louisiana, that requires the use of particular forms and language, the Oregon statutes are very bland in their requirements.   To charge interest, penalties and legal expenses on a party who writes a hot check in Oregon, the recieving party need only send a written notice of the NSF check.   There’s no requirements as to the form of the notice, or how the notice should be sent.

Although, of course, we have our recommendations.

In sending the notice, you should send it through some service that allows your company to track its mailing and delivery.   In writing the notice, be certain that you identify the check in question, and indicate that if the check isn’t paid within 30 days, you’ll seek interest, penalties, attorneys fees and other costs allowed by the Oregon statutes.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.

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How To Collect A NSF Check in Washington State

On February 9, 2010        

NSF Checks are a fact of life for those in the construction business.   They are especially so when working in turbulent economic clients.

Getting paid with a NSF Check is actually not a terrible situation.  In fact, in certain scenarios it can help your position against the non-paying party.  While each side may have arguments about the quality of work or completeness of items before payment is made, once a check is written and it goes NSF, the old arguments disappear and you can focus on a very simple legal issue:  (i) a check was written to you; (ii) it wasn’t honored; (iii) the money is now due.

In addition to simplifying the issues, most states (including Washington) have very powerful laws that impose penalties against dishonored checks.   It is key to follow the relevant statutes and properly demand that the NSF Check be paid.   Take special notice of RCW §62A.3-520 and RCW §62A.3-522.

Step 1:  Give Notice of Dishonor

Upon receipt of a NSF check, you should deliver a “Notice of Dishonor of Check” to the drafter.   The preferred language is provided for by statute, as follows:

NOTICE OF DISHONOR OF CHECK

A check drawn by you and made payable by you to ….. in the amount of ….. has not been accepted for payment by ……, which is the drawee bank designated on your check. This check is dated ……, and it is numbered, No…….

You are CAUTIONED that unless you pay the amount of this check within fifteen days after the date this letter is postmarked, you may very well have to pay the following additional amounts: (1) Costs of collecting the amount of the check, including an attorney’s fee which will be set by the court; (2) Interest on the amount of the check which shall accrue at the rate of twelve percent per annum from the date of dishonor; and (3) Three hundred dollars or three times the face amount of the check, whichever is less, by award of the court.

You are also CAUTIONED that law enforcement agencies may be provided with a copy of this notice of dishonor and the check drawn by you for the possibility of proceeding with criminal charges if you do not pay the amount of this check within fifteen days after the date this letter is postmarked.

You are advised to make your payment to ….. at the following address:  ………

Step 2:   Execute Affidavit of Sending Notice

This is a lot easier than it sounds.   Simply add the following language to the end of your “Notice of Dishonor of Check,” fill in the blanks and sign it.    Make sure you keep a copy of the Notice being sent, along with a signed Affidavit of delivery.

While not required by the terms of the statute, it’s good practice to send this notice via Certified Mail so you can track its delivery.   Here is the affidavit of delivery language:

AFFIDAVIT OF SERVICE BY MAIL

I, ………., hereby certify that on the ….. day of ………., 20.., a copy of the foregoing Notice was served on ……… by mailing via the United States Postal Service, postage prepaid, at ………., Washington.

Dated:  ………………….
(Signature)

What NOT To Do

The first two steps are things you should do…this is a list of statutory things you should not do.  The Washington statutes specifically enumerate these actions, and state that if a party does any of these things, that party will not be entitled to penalties, interest & attorneys fees in collecting on the NSF check:

  • Do Not demand interest or collection costs in excess of the amounts provided for by statute;
  • Do Not demand interest or collection costs prior to the expiration of fifteen days after the mailing of notice of dishonor;
  • Do Not demand attorneys fees without having the fees set by the court, or prior to the expiration of fifteen days after the mailing of notice of dishonor.

Your Reward and The Next Step

If you follow Steps 1 and 2, and do not do the forbidden items within the “What NOT To Do” step, the statutes provide that you are entitled to the following if the check is not honored within 15 days of the notice:

  1. A reasonable handling fee for each instrument;
  2. Interest at the rate of 12% per annum from the date of dishonor
  3. Cost of collection not to exceed $40 or the face amount of the check, whichever is less
  4. Reasonable Attorneys Fees
  5. Penalty in the amount of $300, or three times the face amount of the check, whichever is less

If payment is not made as requested in the Notice of Dishonor, you can proceed with a civil action to enforce payment of the check, along with the penalties, interest and attorneys fees provided for by statute.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.

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Time for Prompt Payment Acts in Washington & Louisiana?

On February 10, 2009        

This weekend, I read a post on the South Carolina Construction Law Blog about Texas’ Prompt Payment Act.  It caused me to do a little online research on similar acts around the country, finding them in Alabama, Tennessee, Georgia, Wisconsin, New York, federally, and elsewhere.  

A "Construction News" pamphlet from Baker Donelson [pdf] in the Winter of 2004 has a good article about the statutes in AL, TN & GA, the theme of each act simply being this:  "Prompt Payment Acts Set Payment Guidelines for Construction Work."

It’s no secret that payment problems are rampant in the construction industry.  And unfortunately, the old statement that "possession is 90% of the law" has some truth to it. 

Large well-funded construction companies can hold progress payments at the end of a project for trivial reasons, and strong-arm its subcontractors into settling for less.  Prompt Payment Acts aim to equalize the playing field a bit, applying penalties against those who misapply funds or try to strong-arm subs and suppliers.

So, do they exist in Louisiana and Washington?   Mostly….no.  

Both Louisiana and Washington lack a pure "Prompt Payment Acts."  Those victim to the misapplication of funds must rely on jurisprudence or other possibly applicable statutes, discussed below. 

Misapplying Funds in Louisiana
Buried within the Private Works Act in Louisiana is La. R.S. 9:4814 (A), which provides as follows with regard to the misapplication of funds:

No contractor, subcontractor, or agent of a contractor or subcontractor, who has received money on account of a contract for the construction, erection, or repair of a building, structure, or other improvement, including contracts and mortgages for interim financing, shall knowingly fail to apply the money received as necessary to settle claims to sellers of movables or laborers due for the construction or under the contract. Any seller of movables or laborer whose claims have not been settled may file an action for the amount due, including reasonable attorney fees and court costs, and for civil penalties as provided in this Section.

This provision actually works as a "prompt payment" requirement, but as is evidence from its terms it only has limited applicability. 

First, the contractor must "knowingly" misapply the funds.  Second, the only parties qualified to recover the penalties of the provision are "sellers of movables" and "laborers." 

The Private Works Act in Louisiana specifically distinguishes between laborers and subcontractors, and so subcontractors who provide labor to the project would not likely qualify for the penalties under La. R.S. 9:4814 – although the matter has never been decided.

Unfortunately for everyone not mentioned by §9:4814, Louisiana doesn’t provide a remedy when funds are misapplied, and the parties must rely exclusively on the conditions of its contract.

Misapplying Funds in Washington
In 2006, the Washington Court of Appeals published an interesting reversal in Westview Investments, Ltd. v. U.S. Bank National Association [pdf of decision], addressing the issue of misapplying construction funds in Washington.

Since progress payments are not funds held in "trust" by statute in Washington, the court explained that they may be considered trusts if appointed as such by the parties – namely, through contract.

According to the Westview decision, progress payments made by a project owner to a general contractor constitute "trust funds" for the benefit of subcontractors, when the agreement between owner and contractor is based on AIA A201 (1997).    

Interfering with any "trust funds" would be a tortious conversion – and the Westfield court even goes so far as to rule that banks may be liable for misappropriating trust funds when it uses these funds to  pay down the borrower’s debt to the bank (see discussion here).

Time for A Prompt Payment Act?
Is it time for a Prompt Payment Act in these Washington and Louisiana?  

While many statutes and regulations have drawbacks, there doesn’t seem to be a downside to requiring contractors to pay its bills!

Litigation is costly and time-consuming – and it doesn’t seem fair that after a long, expensive battle with a better-funded opponent, subcontractors and suppliers must settle for the principal debt. 

There are ways to punish contractors in Louisiana and Washington when funds are misapplied, but it’s always dependant on circumstance.  A Prompt Payment Act would help equalize the playing field for subcontractors and suppliers who rely heavily on prompt payments.

Posted in:     Payment Requirements  /  Tags: , , , , , , , , , , ,   /   3 Comments

Legal Solutions for Contractors in Troubled Times Proactive & Reactive Tips – a 2 Part Series

On September 30, 2008        
The current financial crisis in America is hitting national organizations, banking intuitions and Wall Street – but it is not a recent phenomenon for those who earn a living in the construction industry.
 
While the 90s and early 2000s saw unprecedented growth in the construction sector, 2007 and 2008 has presented difficulties to the oversized industry as residential building plummeted and commercial construction exposed its vulnerabilities.

Most predictions on the economy and the construction industry are not as gloom and doom as the current press may indicate, but with the instant credit and cash crunch, its unanimous that these are challenging times for all businesses, large and small.

It’s prudent for those in the construction industry to make allowances for their company’s legal needs in these trouble times. This article series presents the contractor with some tips on how to be legally proactive and reactive in 2008 and 2009 without breaking the bank.

Over the next two weeks, Wolfe Law Group will publish the following two articles in this two part series:

Part One: An Apple A Day… Three Simple Proactive Steps Your Company Can Take To Weather the Economical Storm.

Part Two: Now What? Three Simple Principals To Mind When Your Involved with a costly dispute.

 
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