560 P.2d 902 | Mont. | 1977
No. 13411
IN THE SUPREME COURT OF THE STATE OF MONTANA GEORGE C. MILLER, d/b/a CENTRAL PLUMBING AND HEATING,
Plaintiff and Appellant, CHARLES W. MELANEY and MARY GLADYS MELANEY, husband and wife, and DEL HOSTETTER,
Defendants and Respondents. Appeal from: District Court of the Eighteenth Judicial District Honorable W. W. Lessley, Judge presiding. Counsel of Record : For Appellant: Bolinger and Wellcome, Bozeman, Montana Page Wellcome argued, Bozeman, Montana
For Respondents : Thomas I. Sabo, Bozeman, Montana Landoe, Gary and Planalp, Bozeman, Montana Robert Planalp argued, Bozeman, Montana
Submitted: January 10, 1977 Filed: ,,dK 377 M r . J u s r i c e Gene B . Daly d e l i v e r e d t h e Opinion of t h e Court. T h i s a p p e a l i n v o l v e s a s u b c o n t r a c t o r ' s a t t e m p t t o f o r e c l o s e a mechanic's l i e n a g a i n s t homeowners and a g e n e r a l c o n t r a c t o r . The d i s t r i c t c o u r t , G a l l a t i n County, d e c l i n e d t o f o r e c l o s e t h e mechanic's l i e n and r u l e d i n f a v o r of a l l d e f e n d a n t s . The sub- c o n t r a c t o r , George C. M i l l e r , d/b/a C e n t r a l Plumbing and H e a t i n g , a p p e a l s .
On June 3 , 1974, t h e g e n e r a l c o n t r a c t o r Del H o s t e t t e r e n t e r e d i n t o a c o n t r a c t w i t h homeowners C h a r l e s W. Melaney and Mary Gladys Melaney t o c o n s t r u c t an a d d i t i o n t o t h e i r home. The t o t a l c o n t r a c t p r i c e f o r t h e work was $22,600. The c o n t r a c t provided f o r compensation t o t h e c o n t r a c t o r i n p e r i o d i c payments, upon completion of s p e c i f i c segments of t h e work. The f i n a l payment was due upon completion of t h e a d d i t i o n and t h e c o n t r a c t o r ' s d e l i v e r y of l i e n w a i v e r s t o t h e homeowners.
M i l l e r a c c e p t e d a s u b c o n t r a c t t o i n s t a l l t h e h e a t i n g system p u r s u a n t t o t h e g e n e r a l c o n t r a c t o r ' s s p e c i f i c a t i o n s which i n c l u d e d t h e s i z e and l o c a t i o n o f d u c t work and f u r n a c e . The c o n t r a c t p r i c e was $925.00.
Homeowners t e n d e r e d a l l payments under t h e c o n t r a c t , when due, u n t i l t h e payment f o r $1,520 which was t o be p a i d a f t e r t h e i n s t a l l a t i o n of t h e h e a t i n g system. Homeowners r e f u s e d t o make t h i s payment because of a l l e g e d i n s u f f i c i e n c y of t h e h e a t i n g system. Following r e f u s a l of payment, t h e c o n t r a c t o r withdrew from t h e job and t h e s u b c o n t r a c t o r was denied admission t o t h e s i t e . The s u b c o n t r a c t o r h a s never r e c e i v e d payment f o r work p e r - formed on t h e a d d i t i o n .
Thereafter homeowners contacted an architect who re- designed the heating system by replacing a substantial portion of the existing duct work with a larger diameter duct and insulating the duct system. A supplemental furnace was installed in the garage to heat those portions of the house farthest from the furnace which was initially installed by the subcontractor. Home- owners paid $1,542.60 for these modifications to the heating system.
The subcontractor brought an action inpthe district court to foreclose his timely filed mechanic's lien. The district court denied the subcontractor foreclosure on the mechanic's lien and awarded homeowners a personal judgment against the subcontractor on their counterclaim for defective workmanship, holding the gross amount of damages incurred by homeowners exceeded the cost of the subcontractor's work by $757.08. The district court awarded home- owners attorney fees and costs incurred in defending the lien foreclosure action. The district court further held the general contractor was entitled to judgment in his favor, thus denying the subcontractor any recovery from the contractor.
These issues are presented for this Court's review: 1) Allowing homeowners to recover a personal judgment
against the subcontractor, lien claimant, by means of a counter- claim.
2) The judgment in favor of the general contractor thus allowing general contractor to avoid liability to the subcontractor. Issue 1. The subcontractor contends that a personal judgment can only be based upon the privity of a contractual re- lationship between the homeowner and the subcontractor. Since no contract was executed between homeowners and the subcontractor in the instant case, the subcontractor argues no privity of con- tract was established for purposes of rendering a personal judgment.
This Court fails to find merit in this contention. The correcc law is stated at 53 Am Jur 2d, Mechanics' Liens, $391: "In an action by a contractor or other claimant to enforce a mechanic's lien, the owner may avail him- self of all matters allowable by way of cross bill, cross complaint, recoupment, setoff, or counterclaim which arise out of the contract between the owner and the contractor, and which are available against the contractor or other claimant. He may maintain a cross bill, cross complaint, or counterclaim to recover damages sustained by the failure to perform the work according to the contract, or to recover damages connected with the construction, such as for defects or delay, damages for fraud, or damages from a materialman's inducing him to enter into a contract with a bankrupt contractor who did not complete his contract. * * *I' See: Monarch Lumber Co. v. Wallace, 132 Mont. 163, 314 The subcontractor cites the Montana case, Frank J. Trunk
& Son, Inc. v. DeHaan, 143 Mont. 442, 391 P.2d 353, and a California case, R. D. Reeder Lathing Co. v. Allen, 57 Cal.Rptr. 841, 425 P.2d 785, to support his position.
Trunk, like the instant case, concerned a subcontractor's attempt to foreclose a mechanic's H e n against homeowners who benefited from the subcontractor's work. The district court denied the subcontractor recovery under the mechanic's lien because of invalid filing of the lien. The subcontractor contended the district court should have entered personal judgments against the homeownersand the contractor notwithstanding the invalidity of
Court the lien. The district court found, and this/affirmed, that a personal judgment against the homeowners could not arise since such a judgment could only be grounded upon privity of contract between the subcontractor and the homeowners. Absent the sub- contractor's privity of contract with the homeowners, the only basis upon which a judgment against the homeowners could be pre- dicated, i.e., the lien, was lost by failure to perfect it.
The c r i t i c a l d i s t i n c t i o n between Trunk and t h e i n s t a n t case i s t h e a v a i l a b i l i t y of remedies. I n Trunk t h e subcontractor was denied a personal judgment a g a i n s t t h e homeownersbecause h i s remedy was t h e mechanic's l i e n which he f a i l e d t o p e r f e c t . Had t h e subcontractor perfected h i s l i e n , he would have been allowed t o recover even though no c o n t r a c t e x i s t e d between t h e l i e n claimant and t h e homeowner. The subcontractor need only e s t a b l i s h a con- t r a c t , express o r implied, between t h e homeowner and t h e prime c o n t r a c t o r . The r a t i o n a l e behind t h i s r u l e i s t h a t by v i r t u e of t h e c o n t r a c t between t h e prime c o n t r a c t o r and homeowner, an implied agency i s c r e a t e d between t h e two, giving t h e c o n t r a c t o r t h e a u t h o r i t y t o c o n t r a c t with subcontractors and materialmen f o r performance and supplying of m a t e r i a l s . G l a c i e r S t a t e E l e c t r i c Supply Company v. Hoyt, 152 Mont. 415, 451 P.2d 90.
S i m i l a r l y , t h e homeowner i s vested with c e r t a i n remedies when he f a c e s a l i e n f o r e c l o s u r e a c t i o n brought by a subcontractor, a s s p e c i f i c a l l y s e t out h e r e t o f o r e i n 53 Am J u r 2d, Mechanics' Liens, 6391, which includes t h e remedy of counterclaim here. The purpose of mechanic's l i e n l e g i s l a t i o n i s n o t t o s t r i p t h e homeowner of recourse f o r f r i v o l o u s l i e n foreclostsre a c t i o n s , but t o allow t h e l i e n claimant a remedy where no p r i v i t y of c o n t r a c t e x i s t s between t h e l i e n claimant and t h e property owner.
I n R.D. Reeder Lathing Co. v. Allen, 57 Cal.Rptr."altl, 425 P.2d 785, 788, t h e C a l i f o r n i a c o u r t s t a t e d : ""'While t h e e s s e n t i a l purpose of t h e mechanic's l i e n s t a t u t e s i s t o p r o t e c t those who have performed labor o r furnished m a t e r i a l towards t h e improvement of t h e property of another, * * * inherent i n t h i s concept i s a recogni- t i o n a l s o of t h e r i g h t s of t h e owner of t h e b e n e f i t e d property. I t has been s t a t e d t h a t t h e l i e n laws a r e f o r t h e p r o t e c t i o n of property owners a s w e l l a s l i e n claimants. * * * " " I
Reeder, Like Trunk, involved a s u b c o n t r a c t o r who sought t o f o r e c l o s e a mechanic's l i e n t o impress t h e improved p r o p e r t y . The lower c o u r t g r a n t e d t h e s u b c o n t r a c t o r ' s motion f o r summary judgment and decreed t h a t defendant was p e r s o n a l l y l i a b l e t o t h e s u b c o n t r a c t o r f o r t h e v a l u e of t h e l a b o r and m a t e r i a l s s u p p l i e d . The Supreme Court found t h e p r o v i s i o n of t h e lower c o u r t judgment which h e l d t h e defendant p e r s o n a l l y l i a b l e t o t h e p l a i n t i f f was erroneous. A s i n Trunk, t h e Supreme Court of C a l i f o r n i a . h e l d t h a t i n t h e absence of a c o n t r a c t between a l i e n claimant and t h e property owner, t h e r i g h t t o e n f o r c e a mechanic's l i e n a g a i n s t r e a l p r o p e r t y does n o t g i v e r i s e t o p e r s o n a l l i a b i l i t y of t h e owner.
The r u l e denying a l i e n claimant a p e r s o n a l judgment a g a i n s t a property owner i n a l i e n f o r e c l o s u r e a c t i o n , where p r i v i t y of c o n t r a c t i s a b s e n t , cannot be conversely a p p l i e d t o deny a p r o p e r t y owner a p e r s o n a l judgment a g a i n s t a l i e n c l a i m a n t f o r damages a t t r i b u t a b l e t o t h e l i e n c l a i m a n t and a r i s i n g o u t of t h e c o n t r a c t between t h e p r o p e r t y owner and t h e prime c o n t r a c t o r .
I s s u e 2. The c o n t e n t i o n t h e d i s t r i c t c o u r t e r r e d when -
it concluded t h e g e n e r a l c o n t r a c t o r owed nothing t o t h e subcon- t r a c t o r and was e n t i t l e d t o a judgment i s c o r r e c t .
The record of t h e proceedings i n t h e d i s t r i c t c o u r t d i s - c l o s e s t h e s u b c o n t r a c t o r c o n s t r u c t e d t h e h e a t i n g system i n com- p l i a n c e w i t h c e r t a i n s p e c i f i c a t i o n s provided by t h e g e n e r a l con- t r a c t o r , e . g . , the s i z e of t h e f u r n a c e , t h e l o c a t i o n of t h e f u r n a c e and t h e l o c a t i o n of a i r d u c t s . I n h e r e n t i n t h e d i s t r i c t c o u r t ' s award of damages t o t h e homeowners i s a d e t e r m i n a t i o n t h a t t h e h e a t i n g system, a s o r i g i n a l l y designed, was inadequate. L i a b i l i t y i n regard t o damages f o r d e f i c i e n c y i n d e s i g n a p p l i e d t o t h e c o n t r a c t o r , n o t t h e s u b c o n t r a c t o r .
The district court erred when it entered judgment for the general contractor and denied the subcontractor his right to indemnification. The district court must determine the con- tractor's liability for damages based upon the effect of the contractor's deficient design specifications which the subcontractor was compelled to use in performing under the contract.
The judgment of the district court is affirmed in part, reversed in part and remanded for modification not inconsistent with this opinion.
ustice We Concur: -