A & A Metal Bldgs. v. I-S, Inc.

• Decision Date: 06 December 1978
• Docket Number: INC,I-
• Citation: 274 N.W.2d 183
• Court: North Dakota Supreme Court
• Parties: A & A METAL BUILDINGS, a Domestic Corporation, Plaintiff and Appellee, v., d/b/a Underwood Redi-Mix, a Domestic Corporation, Defendant and Appellant. Civ. 9506.

Page 183

274 N.W.2d 183

A & A METAL BUILDINGS, a Domestic Corporation, Plaintiff and Appellee, v. I-S, INC., d/b/a Underwood Redi-Mix, a Domestic Corporation Defendant and Appellant.

Civ. 9506.

Supreme Court of North Dakota.

Dec. 6, 1978.

Thomas F. Kelsch, of Kelsch, Kelsch & Tudor, Bismarck, for plaintiff and appellee.

Peter S. Pantaleo, of Lundberg, Conmy, Nodland, Rosenberg, Lucas & Schulz, Bismarck, for defendant and appellant.

PAULSON, Justice.

The appellant, I-S, Inc., doing business as Underwood Redi-Mix (hereinafter I-S), appeals from the judgment of the Burleigh County District Court awarding five thousand six hundred sixty-six dollars and forty-one cents ($5,666.41) in damages and interest to A & A Metal Buildings (hereinafter A & A), after A & A paid I-S money owed by A & A's subcontractor, Jake's Concrete Company (hereinafter Jake's), in order to secure release of the Demand for Payment and Notice of Intention to File a Lien (hereinafter Demand and Notice), on the Underwood Fire Hall, which was being constructed by A & A. The district court determined that I-S had contracted directly with Jake's and that A & A was not liable for Jake's debts; that I-S had improperly filed a Demand and Notice on the Underwood Fire Hall property; and that the money paid by A & A to get I-S's Demand and Notice released and to enable A & A to receive payment from the Underwood Rural Fire Protection District (hereinafter Underwood Fire District) pursuant to its construction contract, was paid without consideration. Therefore, the court held that A & A was entitled to a judgment of.$4,872.66, the amount which A & A had paid I-S, plus interest from the date on which the cause of action arose. We affirm.

On December 30, 1975, the Underwood Fire District awarded the contract for the construction of the new fire hall in Underwood to A & A. Financing for the project was arranged through the Farmers' Home Administration (hereinafter FHA).

In early May of 1976, A & A began construction of the Underwood Fire Hall and subcontracted with Jake's to do the concrete work on the project. Jake's then contracted with I-S to have I-S supply the needed ready-mix concrete for the fire hall. I-S furnished Jake's with concrete and other materials between May 25 and June 7, 1976, when the concrete work was finished.

On June 10, Jake's issued a check to I-S for forty-four hundred forty-seven dollars and twelve cents ($4,447.12) in payment for concrete and other materials supplied to him for the fire hall project. In return, Jake's obtained a receipt and lien waiver from I-S. On June 11, A & A issued Jake's a check for fifteen hundred dollars ($1,500) in partial payment for Jake's concrete construction work. On June 14, the fire hall was inspected by the project's architect who informed A & A that the driveway had been constructed improperly and would have to be removed and reconstructed. A & A stopped payment on its $1,500 check to Jake's on the following day. Jake's then stopped payment on its $4,447.12 check to I-S on June 17.

I-S received notice of Jake's stop-payment order on June 17. Officers of I-S then contacted attorney William F. Lindell who suggested that I-S could file a mechanic's lien against the owner of the property.

Between June 18 and June 23, two telephone calls were made between A & A and I-S. During the first telephone call Claire Ihringer of I-S told Kenneth Scherr of A & A that Jake's had stopped payment on the check to I-S and requested that A & A pay Jake's concrete bill. Scherr responded that A & A had not contracted with I-S for any concrete and that it was not responsible for Jake's bills. According to Scherr, Ihringer then stated that I-S would file a mechanic's lien against the owner if the concrete bill was not paid. Ihringer testified at the trial that he could not recall whether or not he had mentioned that I-S might file a lien.

Following the phone call, Kenneth Scherr consulted A & A's attorney regarding lien laws. At trial, Scherr testified that during the second telephone call he informed Claire Ihringer that I-S could not legally obtain a lien and suggested that I-S check the lien laws. Ihringer could not recall whether or not Scherr informed him that I-S could not properly file a lien against the fire hall property.

On June 24, I-S served a Demand and Notice on A & A, Jake's, the Underwood Fire District, and the FHA. The Demand and Notice, which stated that a lien would be filed if Jake's' bill was not paid within fifteen days, was filed with the clerk of the McLean County District Court on June 28. On that date, A & A's attorney, Alfred C. Schultz, wrote I-S and demanded that suit be commenced within thirty days. Schultz also informed I-S that its Demand and Notice was not in compliance with § 35-27-02, N.D.C.C.

A & A was notified on the morning of July 7, 1976, that there would be a meeting that afternoon to close the loan on the fire hall. The meeting was attended by the architect of the project, a representative of the Underwood Fire District, two representatives of the FHA and Kenneth Scherr of A & A.

At the meeting, A & A was informed that the project had to be approved by the FHA that afternoon in order for the loan to be completed. The FHA, on the advice of its attorney, refused to close the loan until the Demand and Notice was removed. If the loan was not closed on that day, the loan money would have been returned to the FHA office in St. Louis and the Underwood Fire District would have had to reapply after the Demand and Notice was removed. Testimony at trial indicated that the reapplication process would take a minimum of thirty days.

A & A was under substantial pressure to pay I-S the money owed to it by Jake's in order to get the Demand and Notice released. If the loan failed to be closed, A & A would not have received twenty-five thousand dollars ($25,000) due under the construction contract for at least thirty days until reapplication could be made. A & A needed the money to meet its payroll and to obtain discounts on materials purchased for the project by paying its bills by the tenth of the month. A & A had contacted its attorney for advice but the attorney was out of town. Although A & A orally objected at the meeting that it was not responsible for Jake's bills and owed I-S nothing, A & A agreed to pay the money owed to I-S by Jake's in return for a release of the Demand and Notice so the FHA loan would be approved and A & A would be paid its $25,000 due under the contract.

A & A paid I-S four thousand eight hundred seventy-two dollars and sixty-six cents ($4,872.66) ¹ in full payment of the money due I-S under its contract with Jake's. I-S then released its Demand and Notice, the FHA loan was approved and A & A was paid $25,000. On July 13, 1976, A & A's attorney demanded in writing that I-S return the.$4,872.66 which had been paid by A & A. When I-S failed to comply with A & A's request, A & A brought an action against I-S on February 22, 1977. A & A sought a judgment for.$4,872.66 plus $5,000 in exemplary damages against I-S for illegally filing an improper Demand and Notice against the Underwood Fire Hall which forced A & A to pay Jake's debt for which it was not liable.

The case was tried without a jury before the Burleigh County District Court on March 31, 1978. The district court awarded A & A a judgment for.$4,872.66 plus interest from the date the cause of action arose. No exemplary damages were awarded.

The following issues are raised for appeal:

1. Did the trial court determine that I-S had committed the tort of abuse of process?

2. Did the trial court err in awarding a judgment for A & A in the amount it had paid I-S to release its Demand and Notice plus interest?

A & A, in its complaint, raised the pertinent allegations which are summarized as follows:

1. A & A obtained a contract to construct a new fire hall in Underwood;

2. A & A subcontracted to have Jake's perform the concrete work on the project;

3. I-S claimed that Jake's owed it.$4,872.66 for concrete and materials used on the project;

4. When Jake's failed to pay its debt to I-S, I-S filed a Demand and Notice against the fire hall property with the clerk of the McLean County District Court;

5. I-S was not entitled to file a Demand and Notice because it had not complied with § 35-27-02, N.D.C.C.;

6. I-S knew that it was not entitled to file a Demand and Notice against the fire hall;

7. A & A was not indebted to I-S at any time;

8. A & A was not responsible for the debts for Jake's, its subcontractor;

9. I-S, with malice, without probable cause and with intent to injure A & A, filed the Demand and Notice which it knew it was not entitled to for the sole purpose of forcing A & A to pay I-S for the debt owed by Jake's;

10. I-S knew that the FHA loan would not be closed and that A & A would not be paid under its construction contract until the Demand and Notice was released;

11. I-S knew that if the loan was not closed, A & A would lose the benefit and use of the contract money and would incur a loss by not being able to make timely payment for the materials it had purchased for the fire hall project;

12. The FHA did refuse to release the fire hall loan money for payment to A & A until the Demand and Notice was released; and

13. A & A was forced to pay I-S.$4,872.66 for Jake's debt in order to get the Demand and Notice released and get paid $25,000 under its contract.

A & A demanded judgment for relief against I-S in the following amounts:

1..$4,872.66 plus interest from July 9, 1976;

2. Exemplary damages for harassment, oppression and malice in the amount of $5,000; and

3. Costs, disbursements, attorney's fees and such other relief that the court may deem just and equitable.

A & A's complaint provided a detailed description of its claim showing that it was entitled to relief. Although A & A's complaint did not state a specific theory of grounds for relief, its counsel did raise the tort...