Opinion
Docket No. 27942.
Filed March 28, 2003.
Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Kathryn A. Sticklen, District Judge.
Order of the district court dismissing materialman's lien, reversed and case remanded.
Jones, Gledhill, Hess, Andrews, Fuhrman, Bradbury Eiden, PA, Boise, for appellant. Scott D. Hess argued.
Ling Robinson, Rupert, and Stoel Rives, LLP, Boise, for respondent. Erik F. Stidham argued.
Franklin Building Supply Co. appeals from a judgment of dismissal of its materialman's lien filed pursuant to I.C. § 45-501 and I.C. § 45-507 against certain property owned by Douglas and Pamela Sumpter. Franklin argues that the district court erred in determining that Franklin's lien was not timely filed and erred in excluding evidence of a credit application. We reverse and remand.
I. FACTS AND PROCEDURAL HISTORY
Douglas and Pamela Sumpter entered into a contract with Pond Construction, Inc. (Pond) for the construction of their home. Pond acted as the general contractor for the project and used Franklin Building Supply Co. (Franklin) as a materialman to supply materials for the home. Franklin supplied the materials through a continuous open account with Pond. Franklin maintained the continuous open account separately from Pond's other accounts with Franklin, and each account was segregated by the location of the construction project. Franklin submitted separate monthly bills to Pond for the materials supplied for the Sumpter home. Franklin performed the separate accounting to preserve Franklin's lien rights on the Sumpter property.
Pond began construction of the Sumpter home on approximately July 2, 1998. On November 25, the city building inspector issued a certificate of occupancy for the home, subject to the completion of the porch columns. The Sumpters moved into their home the last week of November. After they moved in, the Sumpters prepared several punch lists of items which still needed to be completed in the home. The Sumpters initially withheld final payment to Pond while Pond worked on the punch list items. The Sumpters signed a borrower's acceptance statement regarding the home on December 17, however, and sent it to Pond on December 29. The Sumpters made their final payment to Pond on January 11, 1999, although some punch list items still remained to be completed.
From July 2 to December 16, 1998, Franklin continuously supplied materials for the home's construction. Materials supplied included interior doors purchased on October 14, interior doorknobs purchased on November 17, and materials for the porch purchased on November 24. On December 2, Pond returned some items. On December 16, Pond purchased a sheet of cedar costing $19.52 to replace the trim at the base of the home's porch columns and a door handle for $18.89 to replace a non-locking doorknob in the master bathroom. Pond also purchased a hammer handle and two extension cords on the Sumpter account; these items, however, were not used in the Sumpter home. Franklin did not have knowledge of the punch lists, the issuance of the certificate of occupancy, or the other details of the completion of the house. Franklin did state that the invoices showed that Pond was performing finishing work starting in October 1998.
Pond failed to pay Franklin for materials used in the Sumpters' home and eventually filed for bankruptcy. Franklin wanted to wait as long as possible to file a lien on the Sumpter home because it did not want to compound Pond's financial problems. On March 16, 1999, the ninetieth day after the December 16, 1998, order from Pond, Franklin filed its claim of lien on the Sumpter property.
In its findings of fact and conclusions of law, the district court determined that Franklin's lien was not timely filed because Idaho case law requires that the time for filing a lien begins to run from the "substantial completion of the contract," that the Pond-Sumpter contract was the relevant contract, that the date of the substantial completion of the Pond-Sumpter contract was sometime at the end of November 1998, that the trigger date for the claim of lien filing by Franklin was at the end of November 1998 instead of December 16, 1998, and consequently, that the claim of lien was not filed within ninety days as required by I.C. § 45-507. Franklin appeals the trial court's dismissal of its claim of lien.
II. CLAIM OF LIEN WAS TIMELY FILED
Franklin argues that the district court erred in its interpretation of I.C. § 45-507 and applicable case law. Over questions of law, we exercise free review. Kawai Farms, Inc. v. Longstreet, 121 Idaho 610, 613, 826 P.2d 1322, 1325 (1992); Cole v. Kunzler, 115 Idaho 552, 555, 768 P.2d 815, 818 (Ct.App. 1989).
Idaho's mechanic's lien laws should be liberally construed in the favor of the person who performs labor upon or furnishes materials to be used in the construction of a building. See L W Supply Corp. v. Chartrand Family Trust, 136 Idaho 738, 742-43, 40 P.3d 96, 100-01 (2002). The purpose of the statute is to protect those who perform labor upon or furnish material used in the construction, alteration or repair of a building or structure. The statute permits a person to file a lien against an owner's property and commence in rem proceedings against it for payment of the lien amount. L W Supply Corp., 136 Idaho at 742-43, 40 P.3d at 100-01.
Idaho Code § 45-501 permits three broad categories of people involved in construction to file a mechanic's lien upon a property: those who perform labor, those who furnish materials (materialman), and those who render professional services. See I.C. § 45-501. A materialman is permitted to file a lien, even without a direct contractual relationship with the property owner, if the material is requested by an agent of the owner, such as the general contractor, as described in I.C. § 45-501. Pierson v. Sewell, 97 Idaho 38, 41-43, 539 P.2d 590, 593-595 (1975). Under I.C. § 45-501, the contractor's (builder's) agency is limited and
. . . . it extends only to the purchase of material reasonably necessary out of which to build the structure in accordance with the contract entered into between the owner and the builder.
Valley Lumber Mfg. Co. v. Nickerson, 13 Idaho 682, 691, 93 P. 24, 27. Thus, a materialman's lien will be valid only if the materials are delivered pursuant to the materialman's contract with the builder and the materials were actually used in the applicable structure. For a valid claim of lien, the person filing the lien must substantially comply with the requirements of the lien statutes. Pierson, 97 Idaho at 41, 539 P.2d at 593; Baker v. Boren, 129 Idaho 885, 895, 934 P.2d 951, 961 (Ct.App. 1997).
When Franklin filed its claim of lien, I.C. § 45-507 stated, in relevant part:
Any person claiming a lien pursuant to the provisions of this chapter must, within ninety (90) days after the completion of the labor or services or furnishing of materials, or the cessation of the labor, services or furnishing of materials for any cause, file for record . . . 1993 Sess. Laws, Ch. 378 § 1, p. 1386-87.
Franklin's claim of lien was filed in 1998. Accordingly, this opinion is based on the 1998 version of I.C. § 45-507. The legislature revised I.C. § 45-507 in 2001 and 2002. (2001 Sess. Laws, Ch. 152, § 5, p. 552; 2002 Sess. Laws, Ch. 307, § 1, p. 876.)
The trial court relied on several Idaho decisions interpreting the pre-1993 version of I.C. § 45-507 to mean that the trigger date for the time period in which to file a lien is the date of the substantial completion of the contract, and that items of a trivial character will not extend the time for claiming a lien. See Pierson, 97 Idaho at 42, 539 P.2d at 594; Mitchell v. Flandro, 95 Idaho 228, 231, 506 P.2d 455, 458 (1972), Gem State Lumber Co. v. Witty, 37 Idaho 489, 499, 217 P. 1027, 1030 (1923); Baker, 129 Idaho at 895, 934 P.2d at 961; Barlow's Inc. v. Bannock Cleaning Corp, 103 Idaho 310, 313, 647 P.2d 766, 769 (Ct.App. 1982).
The pre-1993 version of I.C. § 45-507 provided in pertinent part that:
Every original contractor, professional engineer or licensed surveyor claiming the benefit of this chapter must, within ninety (90) days, and every other person must, within sixty (60) days, after the completion of any building, improvement or structure, or after the completion of the alteration or repair thereof, or in case he cease to labor thereon before the completion thereof, then after he so ceases to labor or after he has ceased to labor thereon for any cause, or after he has ceased to furnish materials therefor . . . file for record. . . . (1895 Idaho Sess. Laws, Ch. 1, § 1, p. 48-49).
In 1971 either the phrase "or perform professional services" or the phrase "or to perform professional services" was inserted following the word "labor". 1971 Sess. Laws, Ch. 91, § 5, p. 196.
The Sumpters argue, and the district court agreed at trial, that Franklin's lien was not timely filed because Franklin based its lien filing on the last date it furnished materials as opposed to the date of the substantial completion of the contract between the Sumpters and Pond.
Of the cases relied on by the trial court, only Witty involved a materialman selling materials upon an open account. Witty in fact involved two separate lien claims, one by Gem State, the materialman, and the other by Vogt, the heating sub-contractor. Gem State last delivered materials that were used in the remodel project in January. The subsequent May delivery to the caretaker of the property of some materials for repair was not done pursuant to Gem State's contract to furnish materials for the remodel project and consequently did not extend or revive its expired lien. The Supreme Court then held that:
[W]here the time for filing a lien would otherwise have lapsed, and the lien claimant relies upon the delivery of additional material in order to revive or keep alive the time for filing his lien, it must not only be shown that the material was actually used in the building, but that it was reasonably necessary to complete the same according to the terms of the original contract. (Citation omitted.)
Witty, 37 Idaho at 498-499, 217 P. at 1029-1030. The "substantial completion of the contract" issue dealt with Vogt's sub-contract with the builder. The heating plant was substantially completed in December to such an extent that the tenants occupied the premises without complaint. Vogt did some finish work on the heating system in the following July that the court found "was not for the purpose of completing the plant as required by the contract, but for the purpose of reviving the lien and extending the time in which the same might be filed." Witty, 37 Idaho at 499-500, 217 P. at 1029. As to Vogt, the Supreme Court held that:
One who claims a lien under C. S. § 7339(I.C. § 45-501), for material or labor furnished in the construction, alteration, or repair of a building, after having substantially completed his contract, cannot thereafter unreasonably or purposely delay completing the same as to some comparatively unimportant matter, and thereby extend the time for claiming a lien to the later date.
Witty, 37 Idaho at 499-500, 217 P. at 1030. Vogt's lien was untimely.
In considering the issue of "substantial completion of the contract," it is important to draw a distinction between builders or lien claimants who furnish just labor or labor and materials (sub-contractor) and strict materialman such as Franklin. The distinction is due to the differences in their respective contracts. A builder or sub-contractor is generally on the job site and has a contract to complete the project or a specified portion of a project. A factual determination can be made when that contract has been substantially completed and the knowledge of the project's status is inherent in its performance. On the other hand, an open account materialman's contract is to furnish materials when requested. An open account is:
[S]imply an account with a balance which has not been ascertained. The account is kept open in anticipation of future transactions. Where an open account exists the parties are deemed to intend that individual items on the account will not be viewed separately but that the account will be considered as a connected series of transactions. (Citation omitted.)
Kugler v. Northwest Aviation, Inc., 108 Idaho 884, 887, 702 P.2d 922, 925 (Ct.App. 1985). Thus, the contract (continuous open account) is not substantially completed until the last item is delivered.
In Valley Lumber Man. Co. v. Driessel, 13 Idaho 662, 93 P. 765 (1907) the Supreme Court determined that:
Where materials are furnished for the same building or improvement in installments and at intervals and the parties intend them to be included in one account in settlement, the entire account will be treated as a continuous and connected transaction, and the lien limitation begins to run from the last item of the contract.
Id. at 670, 93 P. at 768 (citations omitted). Other Idaho cases which have analyzed a materialman's furnishing of materials on a continuous open account support that the date of filing is triggered by the date of the last item furnished, i.e., the completion of the furnishing of materials. Mine Etc. Co. v. Idaho Etc. Mines Co., 20 Idaho 300, 307, 118 P. 301, 303 (1911); Driessel, 13 Idaho at 670, 680-81, 93 P. at 768, 771-72 (1907). See also Gem State Lumber Co. v. School Dist. No. 8 in Caribou County, 44 Idaho 359, 362-63, 256 P. 949, 950 (1927).
The 1998 version of I.C. § 45-507 stated that the trigger date for filing is the completion of the furnishing of materials, or the cessation of the furnishing of materials. We consider the "cessation" of the furnishing of materials to be essentially the same standard as the "completion" of the furnishing of materials. In 2001, the legislature clarified I.C. § 45-507 by eliminating the "cessation" language. 2001 Sess. Laws, Ch. 152 § 5, p. 550.
Accordingly, we conclude that the trial court erred in determining that the lien trigger date was determined by the date of substantial completion of the Pond-Sumpter contract.
The trial court also found that the last two items furnished by Franklin, i.e., the locking door handle and the cedar trim were trivial items, that the doorknob was not actually needed and that the cedar trim was used by Pond to replace defective work. The trial court concluded that as the Pond-Sumpter contract had been substantially completed, the delivery of such items did not extend the time for Franklin to file its lien. As discussed above, the trial court erred in focusing upon the substantial completion of the Pond-Sumpter contract. In determining the lien trigger date for a materialman, the question is not whether the materials last delivered were trivial but, rather, were the last delivered materials used in the building, and were they reasonably necessary to complete the same according to the builder's contract with the owner and not for the purpose of extending the time for claiming a lien or reviving a lien that has expired. See Witty, 37 Idaho at 499-500, 217 P. at 1030; Boren, 129 Idaho at 896, 934 P.2d at 963.
In the instant case, the record reflects that Pond's replacement of the cedar trim and the locking door handle were done as part of his contract obligation under the Pond-Sumpter contract, that the items were actually installed in the Sumpter house, and that Franklin's delivery of the cedar and the locking doorknob was done pursuant to its open account with Pond and not for the purpose of extending the time for claiming a lien or reviving a lien that had expired. Accordingly, we conclude the trial court erred in determining that the last two items furnished by Franklin were trivial in nature and that Franklin's lien was untimely filed based on delivery of these items.
III. EXCLUSION OF CREDIT APPLICATION
Franklin argues that the district court erred by refusing to admit Pond's credit application into evidence. Franklin offered the credit application to show the interest calculated on the amount claimed in Franklin's lien. The district court denied admission of the credit application on the basis that it was irrelevant for calculating the interest accruing on the lien. Its rationale was that the interest Franklin could claim against Pond did not bind the Sumpters, as Franklin had no privity of contract with the Sumpters. Thus, the statutory rate of interest would apply.
We review questions of relevancy de novo. Lubcke v. Boise City/Ada County Hous. Auth., 124 Idaho 450, 466, 860 P.2d 653, 669 (1993). As discussed previously, I.C. § 45-507 creates a statutory remedy for a materialman to proceed in rem against an owner's property when not paid in full. A claim of lien under I.C. § 45-501 includes interest. See Acoustic Specialties, Inc. v. Wright, 103 Idaho 595, 599, 651 P.2d 529, 533 (1982); Guyman v. Anderson, 75 Idaho 294, 296, 271 P.2d 1020, 1021-22 (1954); Hendrix v. Gold Ridge Mines, Inc., 56 Idaho 326, 335-37, 54 P.2d 254, 257-58 (1936). The amount due to a materialman under the materialman's lien statutes is measured by the amount due to him under his contract. See Steltz v. The Armory Co., Ltd., 15 Idaho 551, 558, 99 P. 98, 101 (1908). Accordingly, if the contract at issue supplies an interest rate, it will apply to the claim of lien. See Guyman, 75 Idaho at 296, 271 P.2d at 1021-22; see I.C. § 28-22-104 (statutory interest rate applies when no express contract in writing fixes a different rate of interest).
Thus, Franklin was permitted to file a lien against the Sumpters' property for the amount it was owed under its contract with Pond. This amount includes interest at the contractual rate, if any, agreed upon between Pond and Franklin.
IV. ATTORNEY FEES
Franklin and the Sumpters both request an award of attorney fees on appeal. We initially note that the materialman lien provision regarding attorney fees, I.C. 45-513, does not allow the recovery of attorney fees on appeal. Fairfax v. Ramirez, 133 Idaho 72, 79, 982 P.2d 375, 382 (Ct.App. 1999). Thus, this Court is authorized to award reasonable attorney fees to the prevailing party on appeal only if the Court is left with the abiding belief that the appeal was brought, pursued or defended frivolously, unreasonably or without foundation. See I.C. § 12-121; IRCP 54(e)(1); Minich v. Gem State Dev., Inc., 99 Idaho 911, 918, 591 P.2d 1078, 1085 (1979). Due to the significant issues raised in this appeal regarding the interpretation of I.C. § 45-507 and case law, we do not believe this appeal was brought, pursued or defended frivolously, unreasonably or without foundation. We award Franklin costs under Idaho Appellate Rule 40, however, as Franklin is the prevailing party in this appeal.
V. CONCLUSION
We hold that the trigger date for filing a lien for a materialman furnishing materials on a continuous open account is the date of delivery of the last item of materials, provided those materials were not only used in the building, but were reasonably necessary to complete the same according to the builder's contract with the owner and not for the purpose of extending the time for claiming a lien or reviving a lien that has expired.
Franklin filed its lien within ninety days after the completion of furnishing materials pursuant to its continuous open account with Pond. Franklin furnished the materials pursuant to the terms of the continuous open account, and the materials were used in the Sumpter property. Accordingly, Franklin timely filed its lien. Franklin's claim of lien includes any contract rate of interest agreed upon between Franklin and Pond. Accordingly, we reverse and remand this case to the district court to determine the amount due to Franklin under its claim of lien, including interest and any other costs or fees provided by law. Franklin is entitled to recover its costs on appeal.
Chief Judge LANSING and Judge GUTIERREZ CONCUR.