Higby v. Hooper

• Decision Date: 28 August 1950
• Docket Number: No. 8944,8944
• Citation: 221 P.2d 1043,124 Mont. 331
• Parties: HIGBY et ux. v. HOOPER et al.
• Court: Montana Supreme Court

Page 1043

221 P.2d 1043

124 Mont. 331

HIGBY et ux. v. HOOPER et al.

No. 8944.

Supreme Court of Montana.

Aug. 28, 1950.

Paul T. Keller, Helena, for appellant.

Floyd O. Small, Helena, for defendant, cross-complainant and respondent Hooper.

David R. Smith, Helena, for cross-defendant and respondent, Home Building & Loan Ass'n.

ADAIR, Chief Justice.

Don Higby served three years in the military forces of the United States during World War II.

In May 1945, Higby, then aged 28, was honorably discharged from the Army and returned to Helena, Montana, where he obtained employment in the office of an insurance company.

At the times here involved the nation was confronted with an acute housing shortage. Houses for rent or sale were scarce and materials for construction purposes were unobtainable except by persons to whom the law granted a preference and priority over other users.

Higby and his wife Lorraine were of limited means. Their savings amounted to but $500, yet both were exceedingly desirous of acquiring a small home to be occupied by themselves and children and they set about planning for the financing and construction of such a dwelling.

As an honorably discharged veteran of World War II, Higby was entitled to the loan benefits, priorities and privileges of the Servicemen's Readjustment Act of June 22, 1944, as amended, commonly known as the 'G. I. Bill,' 38 U.S.C.A. Sec. 693 et seq.

In December 1945, the veteran and his wife discussed their finances and plans with Fred D. Hooper, a general building contractor of more than twenty-four years experience in the contracting business. The two had been well and personally acquainted for fifteen years or more. Hooper's son and the veteran had been boyhood friends and companions, having grown up, played, hunted and fished together, and the Higbys had implicit confidence in Hooper's integrity and ability as a builder.

From a rough sketch made by the veteran and his wife, Mr. Hooper drafted and submitted to the Higbys blueprint plans and written specifications for the contruction of the proposed dwelling. The Higbys approved the plans and specifications and in January 1946, entered into a verbal agreement with Mr. Hooper for the construction of the dwelling to be built in accordance therewith.

To finance the proposed construction the Higbys were to supplement the $500 which they then had in the bank with an additional sum of $2,000 which they had arranged to borrow from Mrs. Higby's father and the balance was to be raised through a 'G. I. loan' which would enable them to obtain the advantages of a long-time amortized loan at a low interest rate (4%) and also the preference, priorities on construction materials and other privileges available to an honorably discharged veteran under the 'G. I. Bill of Rights,' supra.

The veteran first applied to the Union Bank and Trust Company of Helena, for a G. I. loan but his application was turned down. Thereupon the veteran was directed by Mr. Hooper to apply to the Home Building and Loan Association of Helena of which Mr. Hooper is a stockholder, and this the veteran did, such association being an authorized lending agency incorporated under the laws of the state of Montana and subject to examination and supervision by the state.

The proposed dwelling was to be constructed on lots numbered 11 and 12 in block 4 of the Lockey addition to the city of Helena, to which lots the Higbys had acquired title in fee simple.

The builder declined to commence construction until the money to be borrowed from Mrs. Higby's father was made available.

April 8, 1946, the Higbys received the $2,000 from the above source.

April 19, 1946, the plans and specifications and the lots on which the dwelling was to be constructed were inspected by an appraiser designated by the Veterans' Administration and appraisal report (VA form 4-1803) filed with the Veterans' Administration at Fort Harrison, Montana, appraising the lots at $400 and the dwelling and improvements to be constructed thereon at $9,100. Paragraph 17 of the appraisal report reads: '17. Comments: See copy of specifications attached for detail of materials and general construction features.'

April 24, 1946, the builder commenced excavating on the lots for the foundation and basement being the first work done under the contract. The excavation was completed within a few days and immediately following the Home Building and Loan Association, with whom the application for a G. I. loan was then pending and undetermined, through its managing officer John W. Schroeder, advised both the borrowers Higby and the builder Hooper that it would be impossible to make the loan without a letter or statement in writing from Hooper embodying the oral agreement between the parties for the contruction of the dwelling.

Mr. Higby testified that Mr. Schroeder informed him that he 'should have a reiteration of that contract, of that oral agreement.'

On May 13, 1946, in compliance with the request of both the lender and the borrowers for a writing setting forth the contract, Mr. Hooper, the builder, signed and delivered to the Home Building and Loan Company a letter prepared for him by Attorney David R. Smith, reading:

'Paul W. Smith

David R. Smith

J. Miller Smith

Attorneys At Law

Suite 5

Penwell Block

Helena, Montana

May 13, 1946

'Mr. Donald Higbe

Helena, Montana

'Dear Mr. Higbe:

'Whereas I am about to build a house for you on lots owned by you in the City of Helena, Montana, in accordance with the plans and specifications submitted to me therefor, and agreed upon, I am hereby certifying in writing that the complete cost of the same in accordance with said plans and specifications will not exceed the sum of $8,300.00.

'Very respectfully yours,

/s/ Fred D. Hooper

'DRS:aw'

Neither of the Higbys was present when the above letter was written or signed nor was either present when it was delivered to the building and loan association.

May 18, 1946, the Higbys paid the builder Hooper $1,000 on the contract out of the money they had received from Mrs. Higby's father and on July 6, 1946, they paid the builder the further sum of $1,000, thereby exhausting the money that had been borrowed from the wife's father.

The Home Building and Loan Association made an amortized twenty-year, 4% loan in the principal sum of $5,800 to the Higbys secured by a real estate mortgage on the aforementioned city lots and improvements including the dwelling to be contructed thereon and reported such loan to the Veterans' Administration at Fort Harrison, Montana, with application for a government guaranty thereon, the report being accompanied by (1) the original of Don Higby's honorable discharge from military service; (2) the original letter of May 13, 1946, from Fred D. Hooper, the building contractor, to Higby and (3) the appraisal report (VA Form 4-1803) dated April 19, 1946, made by the designated appraiser.

July 11, 1946, the mortgage to the Home Building and Loan Company was recorded in the office of the county clerk and recorder of Lewis and Clark county, Montana, and in August 1946, the Higbys commenced making the monthly installment payments called for by such mortgage.

The construction work moved very slowly. As the work progressed the Home Building and Loan Company disbursed and paid direct to the builder Hooper out of the loan and on the contract, various sums amounting in the aggregate to $5,000.00. In addition the Higbys with the consent and approval of the builder had expended further sums totaling $221.18 for scarce materials requiring priorities which they purchased and for which they were entitled to credit by the builder.

Winter came with the dwelling still unfinished. The Higbys were threatened with eviction from the house in which they were living and they found it increasingly difficult to make the monthly installment payments on their loan and also to pay rent, so on January 3, 1947, they moved into the unfinished home.

Five days later Mr. Hooper informed the Higbys that the construction costs of the dwelling 'had run over about $2000' and asked them to make application to the Home Building and Loan Company to increase their loan by such amount. This the Higbys declined to do, advising the builder that they were standing on their contract which they had entered into in good faith.

Mr. Hooper, the general building contractor, failed to pay three subcontractors employed by him who had furnished work and materials on the house and on or about February 27, 1947, mechanic's liens were filed against the property as follows: Carl W. Carlson for plumbing materials and labor furnished between June 20, 1946, and February 21, 1947, $1,312.72; Carl Peterson for cement and cement finishing labor furnished between December 6 and 9, 1946, $236.90; S. A. Douglas for plastering material and work furnished between November 14, 1946, and February 22, 1947, $361.60, such three liens totaling $1,911.22.

Also on February 27, 1947, the builder Fred D. Hooper filed a mechanic's lien sworn to before David R. Smith, as notary, claiming an unpaid balance owing Hooper for materials and labor furnished by him on the house between April 24, 1946, and February 6, 1947, in the further sum of $1,489.44.

The total claimed in the four mechanic's liens is $3,400.66. Exclusive of interest, costs and attorney's fees, such amount, added to the $7,221.18 already paid to Hooper would run the cost of the unpainted and unfinished dwelling to $10,621.84, being $2,321.84 in excess of the maximum cost certified by Hooper in his letter to Higby of May 13, 1946.

The mechanic's liens became and were superior to the prior mortgage given the Home Building and Loan Association. R.C.M. 1947, section 45-506, provides: 'The liens attach to the buildings, structures, or improvements for which they were furnished or the work was done in preference to any prior lien, encumbrance, or mortgage upon the land upon which said buildings, structures,...