H2K Techs., Inc. v. WSP USA, Inc.

• Decision Date: 16 November 2021
• Docket Number: Case No. 119,422
• Citation: 503 P.3d 1177
• Parties: H2K TECHNOLOGIES, INC., Plaintiff/Appellant, v. WSP USA, INC. and Fidelity and Deposit Company of Maryland, Defendants/Appellees.
• Court: Oklahoma Supreme Court

503 P.3d 1177

H2K TECHNOLOGIES, INC., Plaintiff/Appellant,

v.WSP USA, INC. and Fidelity and Deposit Company of Maryland, Defendants/Appellees.

Case No. 119,422

Supreme Court of Oklahoma.

FILED NOVEMBER 16, 2021

Brett Agee, Garvin Agee Carlton, P.C., Pauls Valley OK, for plaintiff/appellant

John T. Richer, D. Kenyon Williams, and Christopher J. Gnaedig, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, OK, for defendants/appellees

COMBS, J.:

¶1 This cause concerns an action to foreclose a materialman's lien filed on property located in Garvin County, Oklahoma. Wynnewood Refining Co., LLC (Wynnewood or owner) is the owner of an oil refinery located in Garvin County, Oklahoma (Property). On or about March 2, 2004, the owner, what is now Wynnewood, entered into an Environmental Services Agreement with the original contractor, what is now WSP USA, Inc. (WSP or original contractor), to provide labor and materials to improve the Property.¹ Thereafter, on or about August 28, 2018, WSP entered into a subcontract with Techsas, Inc., (Techsas or subcontractor) to provide labor and materials to improve the property (Techsas Contract). The Techsas Contract contained a waiver clause whereby Techsas waived all liens and claims, statutory or otherwise, resulting from the labor done and materials furnished on the project. The waiver clause also required Techsas to insert a similar waiver clause into any subcontracts it engages in. The parties agree that sometime in 2019, Techsas entered into a subcontract (H2K Contract) with the plaintiff/appellant, H2K Technologies, Inc., (H2K or materialman) to provide materials and labor to improve the property.

¶2 WSP received a total of three invoices from Techsas for the work it performed on the project and claims to have paid the first and second invoices on January 7, 2019 and February 11, 2019, respectively. Techsas filed for bankruptcy protection on February 13, 2019, two days after the second invoice was paid. Thereafter, H2K sent an invoice to Techsas dated February 14, 2019, in the amount of $116,280.00. In addition, H2K sent an invoice to WSP Environment & Energy (WSP E&E) on March 5, 2019, in the amount of $4,500.00.² Each invoice contained a provision for charging a monthly interest rate of 1.5% on past due invoices. When Techsas failed to pay H2K, the materialman served a preliminary lien notice on Wynnewood, Techsas and WSP which indicated the estimated price of the provided labor, services, equipment or materials was $120,780.00. On May 6, 2019, H2K filed a lien statement in the office of the Garvin County Clerk. The statement claims a lien in the amount of $120,780.00 plus interest after March 6, 2019, at a monthly rate of 1.5%, plus attorney fees and filing costs. On September 20, 2019, H2K filed its petition to foreclose the lien.

¶3 On January 3, 2020, the defendants, WSP, as principal, and Fidelity and Deposit Company of Maryland, as surety, submitted a bond in the amount of $150,975.00 to discharge the lien pursuant to 42 O.S. Supp. 2019, § 147.1. WSP and Fidelity were substituted as defendants and H2K dismissed Wynnewood as a defendant in this action which resulted in an in rem action against the bond. After H2K objected to the bond amount, an additional $14,535.00 was placed into a trust account.

¶4 Both plaintiff and defendants filed competing motions for summary judgment. On February 26, 2021, the trial court ruled in favor of the defendants' motion and denied the plaintiff's motion. First, it ruled that although the Techsas Contract was governed by New York law, which prohibits waiver clauses, contract provisions that subject a construction contract to the laws of another state are against public policy in Oklahoma pursuant to 15 O.S. 2011, § 821(B)(1). Next, the trial court ruled H2K is charged with constructive notice of the subcontract between Techsas and WSP and because Techsas had waived its rights to all liens and claims, H2K could not "obtain any greater rights" than the subcontractor Techsas. It held, H2K did not have a legal right to impress a lien on the Property and H2K's May 6, 2019 lien statement did not constitute a valid or proper lien. The trial court exonerated and discharged the bond and directed the surety to return all sums to WSP. The court also released the amounts held in the trust account to WSP. Enforcement of the order was stayed by the court for ten days.

¶5 H2K filed its petition in error on March 19, 2021. It asserted it had a valid lien for labor and materials and Techsas could not waive H2K's statutory right to a lien without H2K's knowledge and consent. H2K further asserted 15 O.S. 2011, § 821(B)(1) provides it is against public policy of this state for a construction contract to have "[a] provision, covenant, clause or understanding in, collateral to or affecting a construction contract that disallows or alters the rights of any contractor or subcontractor to receive and enforce any and all rights under this act."³ On March 22, 2021, this Court retained the matter on its own motion.

STANDARD OF REVIEW

¶6 Although a trial court in making a decision on whether summary judgment is appropriate considers factual matters, the ultimate decision turns on purely legal determinations, i.e., whether one party is entitled to judgment as a matter of law because there are no material disputed factual questions. Carmichael v. Beller , 1996 OK 48, ¶2, 914 P.2d 1051, 1053. Therefore, as the decision involves purely legal determinations, the appellate standard of review of a trial court's grant of summary judgment is de novo. Id.

ANALYSIS

¶7 The trial court held, as a matter of law, H2K had no right to file a lien. Therefore, the court determined the many objections to the alleged uncontroverted facts in the parties' motions for summary judgment were not material to the resolution of the issues presented.⁴ H2K does not assert on appeal that the trial court erred in granting summary judgment because there were disputed genuine issues of material fact. However, because today we reverse the order granting summary judgment, we remand the matter to the trial court wherein the parties will have an opportunity to conduct discovery and pursue a trial if necessary. We retained this appeal to only decide the limited issues of law presented, i.e., 1) what effect, if any, does a waiver of lien clause in a subcontractor's contract with the original contractor have upon a materialman who was not a party to that contract; and 2) do the provisions of 15 O.S. 2011, § 821(B)(2) prohibit such clauses from being placed in a construction contract.

1. The waiver of lien clause in the subcontractor's contract with the original contractor does not automatically flow down to the materialman, thereby waiving such materialman's statutory entitlement to file a mechanics' and materialmen's lien.

¶8 Section 143 of title 42 of the Oklahoma Statutes governs liens filed by a subcontractor as well as liens filed by those employed as an artisan or day laborer by a subcontractor and those who furnish material or equipment to such subcontractor.⁵ The purpose of the lien statute is to protect subcontractors who provide labor and services, secure payment of claims, and give notice to owners of the intent to file a lien in a definite amount. Biantrav Contractor, LLC, v. Condren, 2020 OK 73, ¶4, 489 P.3d 522, 523. Liens for material and labor are entirely of statutory creation. Holloman v. Britton, 1959 OK 187, ¶11, 346 P.2d 941, 944. Statutory liens, such as mechanics' and materialmen's liens, stand in derogation of the common law and therefore must be strictly confined to the ambit of the enactment giving it birth. Riffe Petroleum Co. v. Great Nat. Corp., Inc., 1980 OK 112, ¶5, 614 P.2d 576, 579. The terms prescribed by statute cannot be ignored; they are the measure of the right and of the remedy. Id.

¶9 Section 143 provides both the entitlement to file a lien as well as limitations on that entitlement. It provides in pertinent part (emphasis added):

Any person who shall furnish any such material or lease or rent equipment used on said land or perform such labor as a subcontractor , or as an artisan or day laborer in the employ of the contractor, may obtain a lien upon such land, or improvements, or both, from the same time, in the same manner, and to the same extent as the original contractor , for the amount due for such material, equipment and labor, as well as any applicable profit and overhead costs due to the person; and any artisan or day laborer in the employ of, and any person furnishing material or equipment used on said land to, such subcontractor may obtain a lien upon such land, or improvements, or both, for the same time, in the same manner, and to the same extent as the subcontractor , for the amount due for such material, equipment used on said land and labor, as well as any applicable profit and overhead costs due to the person .... Provided further, that the owner of any land affected by such lien shall not thereby become liable to any claimant for any greater amount than he contracted to pay the original contractor .

In the present case, Techsas, a subcontractor of the original contractor, WSP, subcontracted with H2K to provide materials and labor to be used on the land of the owner, Wynnewood. Thereafter, H2K filed a lien pursuant to § 143 when Techsas failed to pay. The defendants assert H2K cannot file a lien. Its argument appears to be as follows: 1) pursuant to § 143, H2K can only have a lien to the "same extent" as Techsas and Techsas waived its lien in its subcontract with WSP, therefore, H2K cannot have any greater right to file a lien than Techsas; 2) it has long been established in Oklahoma that a subcontractor is charged with notice of the "original contract" and therefore, H2K had constructive notice of the lien waiver clause in the Techsas Contract (a subcontract); and 3) the lien waiver provision flows down to H2K and it is bound by it.

¶10 In support...