Opinion
Decided May 3, 1932.
A sub-contractor has no lien under P. L., c. 217, s. 15, where at the time of his notice nothing is due or thereafter becomes due from the owner to the contractor. Where by certain contracts and instruments executed between the owner, the builder and a third party, the latter with the consent of the owner agreed to make advances to the builder in consideration of the assignment of his claim against the owner, such advances if authorized by the owner to be made on his account in advance of completion of the work and if made before notice to the owner of the sub-contractor's claim of lien are not subject thereto.
ASSUMPSIT, to establish and enforce a sub-contractor's lien according to the provisions of Public Laws, chapter 217, sections 11 to 22. Trial by the court and verdict for the defendants Barry et al. From the findings of the court the following facts appear.
On January 27, 1928, the defendants, Barry and Hallisey, entered into a contract with the defendant Smith for the erection of a theatre by Smith on land of Barry and Hallisey in Nashua, according to certain plans and specifications. By the terms of this contract Smith was to complete the building on or before August 1, 1928, and Barry and Hallisey were to pay him, on completion of the work free and clear of all liens and claims, the sum of $57,000. On the same date the defendant Smith, by a separate contract, agreed with Barry and Hallisey "to assume the financing of said project," for which service he was to receive a bonus of $8400. Also on the same date the defendants Barry and Hallisey executed a note for $70,000, payable three years from date to the defendant Smith, and secured by a mortgage on the real estate where the theatre was to be erected. In a separate memorandum executed at the same time by the defendant Smith, the consideration for this note was stated to be "$57,000, for the erected theatre and entrance specified," $8,400 for the bonus and $4,600 to be used in the equipment of the theatre. On the same date the defendants, Smith and Goodman, entered into a contract by the terms of which Goodman agreed to advance to Smith the sum of $46,250 toward the construction of said theatre, in monthly installments upon architect's certificates as the work progressed, for which services he was to receive the sum of $3,750, covering "services, inspection fee and charges." In order to secure the payment of these advances and charges, the defendant Smith, on the same date, executed a note for $50,000 payable one year from date to the defendant Goodman, and as collateral security for the same, assigned to him the $70,000 note and mortgage of Barry and Hallisey. This agreement was known to Barry and Hallisey, and they agreed in writing not to do any act to impair its performance or change its terms without the written approval of said Goodman. The defendant Goodman also had knowledge of all the agreements between the defendants Smith, and Barry and Hallisey.
The plaintiff Bennett was a sub-contractor under the defendant Smith, and furnished materials and labor which he claims were of the value of $6,838.79. The plaintiff started work on or about May 20 and finished on or about August 15, 1928. Upon October 2, 1928, he gave to all the defendants notice in writing that he would claim a lien upon the theatre property for the amount of his bill.
The defendant, Smith, Inc., was unable to complete its contract with Barry and Hallisey, and abandoned work on the theatre about the middle of August. At this time the defendant Goodman had paid to Smith, Inc., the sum of $26,033.38 and had incurred obligations properly chargeable to Smith amounting to $5,166, making a total of $31,199.38 advanced by Goodman to Smith.
Upon the abandonment of the contract by Smith, Barry and Hallisey completed the theatre under new and less expensive specifications, which would have entitled them to a reduction of the contract price to $52,758.84. In order to complete the building in this way, they paid out the sum of $24,680.50, which added to the $31,199.38 advanced by Goodman made the total cost of the theatre $55,879.88. Barry and Hallisey also sustained a loss of $8,750 by reason of delay in completing the building.
The court found "upon careful consideration of the matters involved from all angles" that the plaintiff had acquired no lien upon the property of Barry and Hallisey.
Transferred by Scammon, J., upon the plaintiff's exceptions to the refusal of the court to make certain rulings of law, among which was the following: "(6). That Bennett has a lien on the Tremont Theatre property in the amount of his claim, $6,838.79." The plaintiff also excepted "to the ruling of the court that the sum of $31,199.38, representing advances by Goodman to the Smith company and obligations incurred, were proper charges to Smith by Barry and Hallisey."
Other facts appear in the opinion.
Hamblett Hamblett (Mr. Robert B. Hamblett orally), for the plaintiff.
William H. Barry and Demond, Woodworth, Sulloway Rogers (Mr. Jonathan Piper orally), for the defendants Barry and Hallisey,
Wyman, Starr, Booth Wadleigh (Mr. Wadleigh orally), for the defendant Goodman.
The statutory provisions covering these proceedings appear in chapter 217 of the Public Laws and are as follows:
"12. Buildings, c. If any person shall, by himself or others, perform labor or furnish materials to the amount of fifteen dollars or more for erecting or repairing a house or other building . . . by virtue of a contract with the owner thereof, he shall have a lien on any materials so furnished and on said structure, and on any right of the owner to the lot of land on which it stands."
"15. Sub-contractors. If a person shall by himself or others perform labor or furnish materials to the amount of fifteen dollars or more, for any of the purposes specified in the three preceding sections, by virtue of a contract with an agent, contractor or sub-contractor of the owner, he shall have the same lien as provided in said sections; provided, that he gives notice in writing to the owner or to the person having charge of the property that he shall claim such lien before performing the labor or furnishing the material for which it is claimed."
"16. Notice. Such notice may be given after the labor is performed or the material is furnished, and said lien shall be valid to the extent of the amount then due or that may thereafter become due the contractor, agent or sub-contractor of the owner."
Despite careful attention to the plaintiff's brief and oral argument, we still find difficulty in apprehending clearly the legal theory upon which he hopes to succeed. It is plain, however, that the plaintiff regards as vitally important to his case the provision in the contract between Smith, Inc. and Barry and Hallisey that payment of the contract price shall be made "on the completion of said theatre and entrance free and clear of all liens and claims of every nature and description"; and the further provision in their supplementary agreement that a part of the consideration for the $70,000 note of Barry and Hallisey was $57,000 for the erected theatre and entrance specified. The contention seems to be that by reason of these provisions Barry and Hallisey were not required to pay Smith, Inc. anything until the completed theatre was delivered to them; that they should, for this reason, be treated as if nothing had been paid to Smith when the plaintiff's notice was served upon them and that the "payments from Goodman to Smith were immaterial." Upon this theory Barry and Hallisey are to be held indebted to Smith, Inc. for the amount of materials and labor furnished by it up to the time the contract was abandoned by Smith, and against this amount plaintiff's lien is to be established.
If the major premise of this argument were sound, the plaintiff's case would be utterly destroyed. If this were indeed a case in which "the parties have agreed that nothing should be paid the plaintiff [Smith, Inc.] in case of failure to perform his contract" (Smith v. Newcastle, 48 N.H. 70, 72-73), Smith, Inc. having broken its contract, could recover nothing from Barry and Hallisey even upon a quantum meruit, for, as pointed out in the brief for Barry and Hallisey, Smith "never has been able to deliver a completed building free of liens and encumbrances, and never can, and if the plaintiff's interpretation of the contract is correct he never has been in a position to and never can be in a position to recover anything . . . On this theory nothing was due on October 2, 1928, or thereafter, and the plaintiff has no lien."
Clearly, however, the agreements of the parties are not to be interpreted in this way. It is conceded on all sides that all the agreements executed upon January 7, 1928, are to be construed together as evidencing a single contract (Hill v. Huntress, 43 N.H. 480) and thus construed, it is plain that Barry and Hallisey, despite the terms of their contract with Smith, Inc. authorized payments to it by Goodman, on their account, in advance of completion to the extent of $50,000.
In pursuance of this authority, the court finds, in effect, that Smith, Inc. was paid by Goodman the sum of $31,199.38 up to the time when the contract was abandoned. To this extent the indebtedness of Barry and Hallisey to Smith was paid. Whether this sum accurately represented the value of the labor and materials furnished up to that date is immaterial, for at the same time, by breaking its contract with Barry and Hallisey, Smith, Inc. became liable to them for the additional cost of completing the building, and the court has found that this additional cost amounted to $3,120 more than the balance of the adjusted contract price. It, therefore, seems clear that since the date when the plaintiff's notice was served upon the defendants, there has been no time when there was anything due Smith, Inc. on account of the construction work done on the building in question. On the contrary, it appears that Smith, Inc. was not only fully paid but overpaid. by a substantial amount, and since our law is designed to furnish "protection to the owner against having to pay more than is due under his contract with the contractor" (Boulia-Gorrell Lumber Co. v. Company, 84 N.H. 174, 176) the lien claimed by the plaintiff must be disallowed.
Apparently in support of his exception to the finding and ruling of the court that the sum of $31,199.38 representing advances from Goodman to Smith, Inc. were properly chargeable to Smith by Barry and Hallisey, the plaintiff argues that they might successfully have resisted the payment of a portion of this amount to Goodman because some of his advances to Smith, Inc. were made after he knew that it would probably be unable to complete its contract, and after Goodman had notice that Barry and Hallisey were entitled to rescind the contract with Smith, Inc. on account of fraud. So far as this argument involves questions of law, no error in the rulings of the trial court have been pointed out. So far as it involves questions of fact, the findings of the trial court are supported by the evidence and are conclusive here.
We think that the foregoing considerations are decisive of this case and we, therefore, find it unnecessary to pass upon the many other questions suggested in the plaintiff's brief with reference to the legal effect of the written instruments here involved and the precise legal relationships of the parties resulting therefrom.
Exceptions overruled.
All concurred.