Conrad American v. Cooperative Grain & Product Co. of Ringsted, Iowa
| Decision Date | 22 July 1992 |
| Docket Number | No. 90-1762,90-1762 |
| Citation | 488 N.W.2d 450 |
| Parties | CONRAD AMERICAN, Appellee, v. COOPERATIVE GRAIN & PRODUCT COMPANY OF RINGSTED, IOWA, Appellant. |
| Court | Iowa Supreme Court |
Joseph L. Fitzgibbons, Harold W. White, and David A. Lester of Fitzgibbons Bros., Estherville, for appellant.
Maynard M. Mohn of Mitchell and Mohn, Estherville, for appellee.
Considered by McGIVERIN, C.J., and CARTER, LAVORATO, NEUMAN, and SNELL, JJ.
Plaintiff Conrad American, a subcontractor, supplied building materials to Commercial Millwright Service Corporation, a contractor. The latter used the materials in the construction of a grain storage tank on property owned by defendant Cooperative Grain and Product Company of Ringsted, Iowa (Ringsted Coop). After Conrad American surmised that it was not going to be paid for the materials it supplied, it filed a mechanic's lien on Ringsted Coop's real estate, and eventually instituted the present action to foreclose the lien.
The district court ultimately granted Conrad American's summary judgment motion, and Ringsted Coop appealed. Our court of appeals reversed the district court's judgment. We, now, vacate the court of appeals decision and affirm the judgment of the district court.
I. Background facts and proceedings. In early 1989, defendant Ringsted Coop, a commercial grain elevator, contracted with Commercial Millwright Service Corporation (Millwright) to construct a grain storage tank and conveyance facility at Ringsted Coop's Halfa, Iowa, facility. The majority of the building materials needed to construct the tank were to be supplied by plaintiff Conrad American (Conrad). On previous occasions, Conrad had supplied Millwright with the materials Millwright needed to construct other grain storage tanks.
Unknown by Ringsted Coop, Millwright had a history of financial instability. In order to accommodate this instability, Conrad and Millwright established a course of dealing whereby Conrad, upon delivery of building materials, would accept post-dated checks from Millwright and agree not to present the checks for payment until Millwright obtained funds sufficient to cover them. Ringsted Coop was unaware of this practice.
On August 23, 1989, Conrad delivered to the Halfa facility the materials Millwright needed to construct Ringsted Coop's grain storage tank. Upon delivery, Conrad accepted a check from Millwright in the amount of approximately $38,000. The check was post-dated September 1, 1989, and attached to it were instructions to hold it for ten days "as with past transactions." Upon delivery of the materials, Ringsted Coop wired $60,000 to Millwright as part payment for the grain storage tank. Conrad and Ringsted Coop never had any direct dealings with each other, and there is no evidence that Ringsted Coop had a lien waiver from Conrad when Ringsted Coop made that payment to Millwright. See Iowa Code § 572.13(1)(a) (1989).
Roughly a week later, on August 31, Millwright told Conrad that it did not have sufficient funds to cover the $38,000 check and requested Conrad to continue to hold the check. Conrad agreed. After holding the check for another month, Conrad received a letter from Millwright informing Conrad that the $38,000 check could not be honored and that Millwright was going to take bankruptcy. Conrad never presented the check for payment, and on October 2, filed a mechanic's lien with the district court clerk on Ringsted Coop's Halfa property for the amount owed to Conrad by Millwright. See Iowa Code § 572.8.
Conrad thereafter instituted this equity action against Ringsted Coop to foreclose its mechanic's lien. Ringsted Coop answered and alleged affirmative defenses, contending that Conrad had a duty to warn Ringsted Coop of Millwright's financial condition and that Conrad was equitably estopped from enforcing its lien. Conrad moved for summary judgment. See Iowa R.Civ.P. 237(c). After the district court sustained Conrad's motion and entered judgment for Conrad, Ringsted Coop appealed.
We transferred the case to the court of appeals. See Iowa R.App.P. 401. That court reversed the district court, holding that a genuine issue of fact existed as to whether Conrad had a duty to warn Ringsted Coop of Millwright's financial instability and Conrad's practice of accepting Millwright's post-dated checks. The court also concluded that a fact issue existed concerning whether Conrad was equitably estopped from enforcing its mechanic's lien.
We granted Conrad's application for further review. See Iowa R.App.P. 402. On this appeal, we review the pleadings, depositions, and affidavits in the summary judgment record to determine whether there is any genuine issue of material fact for trial and whether Conrad is entitled to judgment as a matter of law. See Iowa R.Civ.P. 237(c).
II. Whether Conrad had a duty to warn. Defendant Ringsted Coop contends that plaintiff Conrad had a duty to warn Ringsted Coop of Millwright's financial instability so that Ringsted Coop could have taken steps to ensure proper payment to Conrad. Ringsted Coop argues that Conrad's failure to warn Ringsted Coop equitably estops Conrad from enforcing its mechanic's lien. We disagree.
Our mechanic's lien statutes, Iowa Code chapter 572, clearly place the burden upon property owners such as Ringsted Coop to ensure that subcontractors and materialmen have been paid if the property owner pays a general contractor within the time allowed for the filing of mechanic's liens. 1 Iowa Code section 572.13(1) provides as follows:
An owner of a building, land, or improvement upon which a mechanic's lien of a subcontractor may be filed, is not required to pay the original contractor for compensation for work done or material furnished for the building, land, or improvement until the expiration of ninety days from the completion of the building or improvement unless the original contractor furnishes to the owner one of the following:
a. Receipts and waivers of claims for mechanics' liens, signed by all persons who furnished material or performed labor for the building, land, or improvement.
b. A good and sufficient bond to be approved by the owner, conditioned that the owner shall be held harmless from any loss which the owner may sustain by reason of the filing of mechanics' liens by subcontractors.
Furthermore, Iowa Code section 572.14(1) provides, in relevant part, that
[P]ayment to the original contractor by the owner of any part or all of the contract price of the building or improvement before the lapse of the ninety days allowed by law for the filing of a mechanic's lien by a subcontractor, does not relieve the owner from liability to the subcontractor for the full value of any material furnished or labor performed upon the building, land, or improvement if the subcontractor files a lien within the time provided by law for its filing.
(Emphasis supplied.)
We have consistently maintained that if, as here, a mechanic's lien is filed within the ninety day period, "the owner might settle with the chief contractor before the expiration of such time only at his peril; and this without regard to whether he had knowledge of the existence of the subcontractor." See Des Moines Furnace & Stove Repair Co. v. Lemon, 244 Iowa 316, 321, 56 N.W.2d 923, 926 (1953); see also Moffitt Building Mat. Co. v. U.S. Lumber and Supply, 255 Iowa 765, 769, 124 N.W.2d 134, 137 (1963). See generally Note Owner's Liability to Subcontractors Under the Iowa Mechanic's Lien Law, 47 Iowa L.Rev. 144, 147-48 (1961).
More specifically, a property owner "must take notice that there may be subcontractors, and he may not pay the contractor within the period prescribed without taking the risk that subcontractors' liens may be filed which will entail liability upon him." Lemon, 244 Iowa at 323, ...
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