By Gregory A. Shimp, PSM

A title company orders a boundary survey which you deliver. After a few months of trying to collect on your invoice, you are informed that their land transaction did not close and the title company has no intention of paying your fee.  They suggest you pursue collection of your invoice through the buyer, who cancelled the transaction. 

An engineer orders a topographic survey which you deliver. After a few months of trying to collect your fee, you are informed that the engineer’s client backed out of the development project. The Engineer suggests you pursue collection of your fee with the former developer. The former developer says he didn’t order the topographic survey, and he isn’t going to pay for it.

A lawyer orders preparation of legal descriptions for land subdivision and easements.  After the lawyer's client changes his mind and refuses to pay him, he refuses to pay you.  The lawyer suggests you pursue payment through his former client.

Does any of this sound familiar? If not, you haven’t been in this business very long. There will always be clients who try to get out of paying once they realize a survey will no longer benefit them. In the situations described above, once all the finger pointing is done, who is ultimately responsible for paying your fee?

Until recently, I have worked under the assumption that the individual, or the corporation, which ordered the work and gave the authorization to proceed is ultimately responsible for payment. This, however, isn’t exactly correct.

A 1998 court case decided by the Court of Appeals of Ohio, Twelfth Appellate District shed some light on the laws which govern contracts made directly between a land surveyor and a principal party, verse contracts made indirectly between a land surveyor and an agent who merely represents a principal party. In this case, Gallagher v. Equity Land Title Agency, Inc. (1998 Ohio App. LEXIS 3349), the appellant court judge outlines the facts as follows:

• Gallagher owns a small land survey company;
• On December 8, 1995 and again on September 4, 1996, Equity Land Title Agency called Gallagher to request that he perform a survey;
• Gallagher also received faxes from Equity Land Title Agency entitled "Title and Survey Order Request." The faxes noted Equity Land Title Agency as the "Company Requesting" the survey, named the prospective buyers of the properties, their respective lending institutions, and the location of the property to be surveyed;
• Gallagher performed the survey work requested by Equity Land Title Agency. However the sale transactions for the surveyed properties were not completed;
• Equity Land Title Agency responded to Gallagher's demands for payment by sending Gallagher a letter informing him that he would not be paid for his surveying services because the sale of the properties never closed;
• Gallagher brought suit against Equity Land Title Agency seeking payment for services rendered;
• After a bench trial, the trial court issued a written opinion awarding Gallagher the full amount of his surveying services, $ 280 plus interest and court costs.

Sounds reasonable so far, however, Equity Land Title Agency’s attorneys raised the argument on appeal that Equity Land Title Agency was merely acting as an agent for the prospective home buyers and/or the lending institutions when Equity Land Title Agency requested that Gallagher perform the survey work. Equity Land Title Agency further argues that the evidence presented showed that Gallagher knew about the agency relationship and knew the identity of the principals. Therefore, Equity Land Title Agency asserts that it cannot be held liable for the services rendered by Gallagher.

Surprisingly enough, Equity Land Title Agency is correct on this point. The Appellant Court agrees that if Gallagher had been properly notified that Equity Land Title Agency was acting only as an agent representing the true principals involved, then Equity Land Title Agency would not be responsible for payment for the land surveying services which they ordered.  The judge's opinion is backed by a previous, and very similar case, which also involved Equity Land Title Agency and a land surveying company.

In this case, Boch & Clark, Inc. v. Equity Land Title Agency (Apr. 16, 1996, Montgomery C.P. No. 94-1827, unreported), the judge ruled that Equity Land Title Agency was not liable for the unpaid surveyor’s fees because the surveyor was aware that Equity Land Title Agency was only acting as an agent for the prospective purchasers and their lending institutions. According to the record, the surveyor’s (Boch & Clark) knowledge of Equity Land Title Agency's status as an agent was supported by the extensive working relationship between the parties, the business customs in Montgomery County, and language in the survey report which indicated that the surveyor had knowledge that Equity Land Title Agency was acting as an agent.

The judge in the Gallagher case, however, distinguished between the facts of the Boch & Clark and Gallagher cases by determining that Equity Land Title Agency did not supply sufficient evidence to support their claim that Gallagher knew, or should have known, that Equity Land Title Agency was merely an agent carrying out the wishes of the buyers, sellers, and/or lenders. Therefore, the judge upheld the lower court’s ruling and ordered Equity Land Title Agency to pay the surveyor’s fees.

To summarize the position of the court in this case:

• The individual or corporation requesting the survey, and giving the authorization to proceed, is typically responsible for payment.
• An exception to this rule is when the person who orders the survey establishes up-front that they are acting as an agent or intermediate for the person who is the true beneficiary of your work.
• To establish oneself as an agent, the person making the request for services must:
  • state his position as an agent,
  • state his relationship to the principal represented,
  • and state the identity of the principal.
• When the person ordering the work is a legitimate agent, and he/she has met the above 3 criteria, the principal he/she represents is ultimately responsible for payment.

What can we take from this? Cases like these set forth standards, which if we as land surveyors are familiar with, we can use to protect ourselves from clients who will refuse to pay when their deals go sour.

For example, don’t assume that the person ordering the work is also the person who will be paying the fees. Ask specifically who is responsible for paying the bill. If the person responsible for payment is someone other than the person who is ordering the work, it is good practice to only accept the authorization to proceed from the person who is responsible for payment. Contact the principals directly and inform them that survey work has been ordered on their behalf, and that they have been named as the person ultimately responsible for paying the invoice.

No system is 100% effective when it comes to getting paid, but a well-informed businessperson stands a better chance of receiving payment in full. Remember, when dealing with title companies, they are probably aware of court rulings similar to the Boch & Clark case.  Additionally, they are probably willing to assert their position as an "agent"  to avoid paying for surveys on potential transactions which did not transpire. As in the Boch & Clark case, any individual or corporation requesting that you include a note on your surveying stating their role as an "agent" should send up a red flag. By doing so, you limit your options when it comes to bill collection.  Understanding the law will give you an edge in dealing with these situations.

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