Hayek v. Western Steel Co.

• Decision Date: 15 March 1972
• Docket Number: No. B--2882,B--2882
• Citation: 478 S.W.2d 786
• Parties: E. W. HAYEK et al., Petitioners, v. WESTERN STEEL COMPANY et al., Respondents.
• Court: Texas Supreme Court

Page 786

478 S.W.2d 786

E. W. HAYEK et al., Petitioners, v. WESTERN STEEL COMPANY et al., Respondents.

No. B--2882.

Supreme Court of Texas.

March 15, 1972.

Rehearing Denied May 3, 1972.

Milton W. Walton, Corpus Christi, for petitioners.

Head & Kendrick, Michael Kendrick, Jr., Sorrell, Anderson, Sorrell & Atwill, William R. Anderson, Jr., Corpus Christi, for respondents.

DANIEL, Justice.

This appeal involves the construction of the Mechanics' and Materialmen's Lien Act, ¹ particularly Articles 5452 and 5469. The Act, among other things, provides statutory liens for those who labor or furnish materials for the construction or repair of any house, building or improvement. Respondents, as plaintiffs below, sued the Petitioner owners for the unpaid balance on steel and concrete furnished to Petitioners' foundation contractor, claiming that Petitioners are liable therefor under Article 5469. It is unquestioned that under Article 5469 an owner who makes a general contract covering the entire construction of a house or other building must, for the protection of laborers and materialmen, retain in his hands for 30 days after the work is completed ten per cent (10%) of the contract price or value of the house or other building. ² If the owner fails to retain such fund, then all complying claimants 'shall share ratably among themselves, with preference to artisans and mechanics . . ., liens at least to the extent of the aforesaid fund of ten per-cent (10%) which should have been retained as against the house, building . . . or improvement and all of its properties . . .'

The question here is whether the Petitioner owners, who acted as their own builders through numerous separate original contracts, none of which were covered by surety bonds authorized by Article 5472d, had the same obligation under Article 5469 to retain or become liable for an amount equal to ten per cent (10%) of the value of their completed houses. This question was answered in the affirmative by the 156th District Court, San Patricio County, and judgment was rendered for the materialmen, who are Respondents here. Except for modification of the trial court's judgment as to interest, the Court of Civil Appeals affirmed. 469 S.W.2d 206. We affirm the judgment of the Court of Civil Appeals.

This case actually involves twelve separate causes of action which were tried together with the consent of the parties. Each of the Petitioners owned one or more tracts of land in various subdivisions located in San Patricio County upon which he constructed a house or apartment units. None of Petitioners entered into a general contract for the construction of his improvements at a fixed contract price, but each acted as his own builder for the particular house or other building on his own land. At a total cost of $500,346.97, Petitioners built eleven houses and one unit of apartment houses on their respective lots, with the 'total cost and the reasonable value of the work' to complete each of the structures being separately itemized and stipulated. The cost and value of the eleven completed houses totaled $183,437.02 for an average of approximately $16,676.00 per house. The apartment house unit, owned and built by Petitioner Charles McEntire, was stipulated to have a total cost and value of $316,909.95.

Charles McEntire, who had the largest financial interest of any of the owner-builders, was an experienced builder and developer in the area. He testified that he had built about 150 houses since 1953. Although operating under five separate ownerships of land and improvements, Petitioners apparently cooperated in some of their efforts, including the timing of construction. Foundation work on the structures began in November of 1968; the last of the house was completed in July of 1969; and the apartment house unit was completed in September of 1969. All had been sold before the trial on September 17, 1970. ³

Each of the owner-builders contracted under separate agreements with Glenn McEntire, brother of Petitioner Charles McEntire, for the construction of a concrete foundation for a building with respect to each separately owned tract of land. They required no surety bonds for payment of liens as authorized by Article 5472d. Glenn McEntire purchased steel and concrete materials for the foundations from Respondents, Western Steel Company and Gulf Concrete Company, respectively, but failed to pay them in full for such materials. From the stipulations, and other evidence, it appears that total contract price agreed upon with Glenn McEntire was $49,581.00; that the total of Respondents' unpaid claims for materials furnished Glenn McEntire amounted to $20,002.87; that each foundation was completed less than 30 days after delivery of the materials; that each owner-builder paid Glenn McEntire in full before learning that he had not paid Respondents; and that both the notices of unpaid claims and the lien affidavits were given and filed by Respondents more than 30 days after the foundations were completed but prior to the completion of the respective buildings and less than 90 days after the respective indebtedness accrued.

It was further stipulated that the Petitioner owner-builders did not retain any funds during construction or for thirty days after the completion of construction of their respective buildings. They do not deny that Article 5469 and its ten per cent retainage fund applies to them as owner-builders, but they insist that it does not require them to hold or become liable for the same amount (10% Of the total cost or value of each house) as if they had entered general 'turn-key' contracts for the entire construction of their respective houses. They contend that if liable to Respondents for any amount, it it limited to ten per cent of their respective contract prices with Glenn McEntire for the foundation work, which would total $4,958.10 to be applied ratably on the unpaid claims of Respondents for $20,002.87. Under Respondents' interpretation of Article 5469, the Petitioners are liable on each building up to ten per cent of the cost or value thereof (a total of $50,034.69), which would enable each of their respective claims to be fully satisfied.

The relevant portions of Articles 5452 and 5469, as amended in 1961, are as follows:

'Art. 5452. (5621) (3294) Lien prescribed.

'1. Any person or firm, lumber dealer or corporation, artisan, laborer, mechanic or sub-contractor Who may labor, specially fabricate material, Or furnish labor or material: (a) For the construction or repair of any house, building or improvement whatever; (b) for the construction or repair of levees or embankments to be erected for the reclamation of overflow lands along any river or creek; (c) or for the construction or repair of any railroad: within this state under or by virtue of a contract with the owner, owners, or his or their agent, trustee, receiver, contractor, contractors, or with any subcontractor; upon complying with the provisions of this Chapter Shall have a lien on such house, building, fixtures, improvements, . . . and shall have a lien on the lot or lots of land necessarily connected therewith, . . . to secure payment: (a) For the labor done or material furnished or both for such construction or repair; . . .

'2. For the purposes of this Act, the following definitions shall apply:

'd. The work shall be construed as any construction or repair referred to in paragraph 1 of this Article.

'e. An original contractor is defined as one contracting with an owner, directly or through his agent; and an original contract is defined as an agreement to which an owner is a party, either directly or by implication of law. There may be one or more original contractors.' (Emphasis supplied.)

'Art. 5469. (5638) Lien claimants fund with reference to mechanics

'Whenever work is done whereby a lien or liens may be claimed under Article 5452 hereof, It shall be the duty of the owner, his agent, trustee, or receiver To retain in his hands during the progress of such work and for thirty (30) days after the work is completed, to secure the payment of artisans and mechanics who perform labor or service, and To secure the payment of any other claimants furnishing material, or material and labor, or specially fabricated material for any contractor, subcontractor, agent, or receiver in the performance of such work Ten per cent (10%) of the contract price to the owner, his agent, trustee, or receiver Of such work, or ten per cent (10%) of the value of same, measured by the proportion that the work done bears to the work to be done, using the contract price or, if none, the reasonable value of the completed work as a basis of computing value. All persons who shall send notices in the time and manner required by this Act and shall file affidavits claiming a lien not later than thirty (30) days After the work is completed shall have a lien upon the Fund so retained by the owner, his agent, trustee, or receiver; with preference to artisans and mechanics, who shall share ratably therein to the extent of their claims; With any remaining balance to be shared ratably among all other participating claimants. If the owner, his agent, trustee, or receiver refuses or fails to comply with the provisions of this Article, then All claimants complying with the provisions of this Act shall share ratably among themselves, with preference to artisans and mechanics as above specified, Liens at least to the extent of the aforesaid fund of ten per cent (10%) which should have been retained, As against the house, building, structure, fixture, or improvement and all of its properties, and on the lot or lots of land necessarily connected therewith, to secure payment of such liens.' (Emphasis supplied.)

The following cases hold that an owner who does not comply with Article 5469 is liable to the extent of the 10% Retainage to those protected by such Article, and that they are entitled to a lien on the land and...