Morgan Wightman Supply Co. v. Smith

• Decision Date: 24 January 1989
• Docket Number: No. 54192,54192
• Citation: 764 S.W.2d 485
• Parties: MORGAN WIGHTMAN SUPPLY CO., Plaintiff, v. Robert C. SMITH, d/b/a R.C. Smith Construction Company, Robert C. Smith, Elizabeth Joan Smith, Contractors Roofing & Supply Company, Inc., a Corporation, Defendants, Commerce-Warren County Bank, Defendant/Appellant, Kaplan Lumber Company, Inc., Defendant/Respondent.
• Court: Missouri Court of Appeals

Page 485

764 S.W.2d 485

MORGAN WIGHTMAN SUPPLY CO., Plaintiff, v. Robert C. SMITH, d/b/a R.C. Smith Construction Company Robert C. Smith, Elizabeth Joan Smith, Contractors Roofing & Supply Company, Inc., a Corporation, Defendants Commerce-Warren County Bank, Defendant/Appellant Kaplan Lumber Company, Inc., Defendant/Respondent.

No. 54192.

Missouri Court of Appeals,

Eastern District,

Division Four.

Jan. 24, 1989.

Darryl L. Hicks, Warrenton, for defendant-appellant.

Gerald Julian Bamberger, Kaplan Lumber Co., St. Charles, for defendant-respondent.

J. Ronald Lacey, Chesterfield, for plaintiff Morgan Wightman Supply Co.

Robert C. Smith & Elizabeth Joan Smith, Lake St. Louis, pro se.

Ervin D. Davis, St. Charles, for defendants Contractors Roofing & Supply, Inc.

SATZ, Judge.

This is an action to enforce a mechanic's lien. Defendant, Commerce-Warren County Bank (Commerce), appeals from the trial court's judgment granting intervenor, Kaplan Lumber Co. (Kaplan), a priority lien against the subject property. We reverse.

In 1985, defendants Robert and Elizabeth Smith (Owners), as tenants by the entirety, acquired title to a tract of unimproved property. The property was acquired to build two apartment buildings. The Owners applied to Commerce for construction financing. Commerce approved two loans totalling $162,000. The Owners jointly executed two promissory notes in the aggregate amount of $162,000 and also executed a deed of trust as security for the loans. Commerce recorded the deed of trust.

Commerce made periodic disbursements to Robert Smith, eventually exhausting the construction funds. Robert Smith used the proceeds to pay for materials, labor and for interest on the loans. Commerce never received any repayment of principal from the Owners.

During construction, Kaplan furnished building materials for the project, maintaining a running account for R.C. Smith Construction Co. but invoicing both "R.C. Construction" and "R.C. Smith." Robert Smith admits that he owes Kaplan $3,169.42 on the account.

The apartment buildings were completed on May 1, 1986. On May 13, 1986, Kaplan served the Owners with the notice of lien-filing required of subcontractors by § 429.100 RSMo 1986. ¹ Two weeks later, Kaplan filed its mechanic's lien with the Warren County Circuit Clerk.

In June, 1986, Morgan Wightman Supply Co. (Morgan Wightman), another supplier, filed the present action joining Robert Smith, Elizabeth Smith and Commerce as defendants and seeking a personal judgment against "Robert Smith", enforcement of a mechanic's lien against the "ground, building and improvements" in question and a declaration that its lien was prior to the lien of Commerce. Kaplan filed a motion to intervene as "a defendant" claiming to be "an indispensable party ... by virtue of its mechanic lien on the real estate." ² The trial court granted Kaplan's motion. Subsequently, Kaplan filed a cross-claim against Robert Smith d/b/a R.C. Smith Construction Co., Robert and Elizabeth Smith and Commerce, seeking a judgment against Robert Smith d/b/a R.C. Smith Construction Co., enforcement of its mechanic's lien and a determination of the rights and interests of the various lien claimants.

Prior to trial, Morgan Wightman settled its mechanic's claim against Commerce and proceeded only against the Owners. The Owners failed to respond, however, and the court entered a default judgment in favor of Morgan Wightman. The trial court then proceeded to hear Kaplan's cross-claim against Commerce and other defendants. ³

After a non-jury trial, the court issued Findings of Fact and Conclusions of Law. The court found that Robert Smith d/b/a R.C. Smith Construction Co. had a history of participation in the construction business and that Robert Smith proposed the present apartment buildings be constructed with the implicit consent and agreement of his wife, Elizabeth Smith. The court concluded that Robert Smith d/b/a R.C. Smith Construction Co. was the general contractor for the Owners, Kaplan was a subcontractor, and, as a subcontractor, Kaplan fully complied with the applicable statutory requirements for perfecting its lien. Based upon these findings and conclusions, among others, the court entered a money judgment in favor of Kaplan and against Robert Smith d/b/a R.C. Smith Construction Co., charged the property in question with a priority lien in favor of of Kaplan and ordered the money judgment satisfied, if necessary, by the enforcement of this lien.

On appeal, Commerce attacks the trial court's conclusion that Kaplan is a subcontractor of the Owners. Commerce contends Kaplan is an original contractor, and, as such, Commerce contends Kaplan failed to give the notice to the Owners required of original contractors by § 429.012. This failure, Commerce argues, precluded the "creation, existence or validity" of a lien in Kaplan's favor. § 429.012. We agree.

A person who furnishes work or labor for a building "under or by virtue of a contract with the owner ..., or his agent, ..., contractor or subcontractor" is entitled to a mechanic's lien, provided the person complies with certain enumerated statutory requirements, § 429.010, not the least of which is notice to the owner. §§ 429.012 and § 429.100. The notice required of an original contractor, however, differs from the notice required of subcontractors, materialmen and laborers. An original contractor is required to notify the owner he may be forced to pay twice but he may avoid double payment by obtaining waivers. Overberg Decorating Center v. Selbah Properties, 741 S.W.2d 879, 881 (Mo.App.1983); § 429.012. This requirement was enacted in 1974 "to protect owners who might inadvertently pay contractors without making sure that the contractors had paid subcontractors, laborers and materialmen." L.G. Chiodini, Inc. v. Summer Ridge Dev. Co., 751 S.W.2d 378, 379 (Mo. banc 1988). The specific language to be used in the notice is set out in the statute, § 429.012.1. ⁴ The original contractor must give this notice to the owner before the receipt of payment and no later than delivery of the first invoice. § 429.012.1. Moreover, the notice to the owner is "a condition precedent to the creation, existence or validity of any mechanic's lien in favor of the original contractor" § 429.012.2. A subcontractor, on the other hand, is only required to give the owner "ten days' notice before the filing of the lien...." § 429.100. An original contractor is exempt from this requirement. Id.

An original contractor is "[o]ne who makes a contract to perform labor or furnish materials with the then owner of the property...." Home Building Corp. v. Ventura Corp. 568 S.W.2d 769, 771 (Mo. banc 1978); Vasquez v. Village Center, Inc., 362 S.W.2d 588, 593 (Mo.1962). One who contracts with the original contractor to perform part of the labor or furnish part of the material is usually labeled a subcontractor. See e.g. Knapp Bros. Mfg. Co. v. Kansas City Stockyards Co., 168 Mo.App. 146, 152 S.W. 119, 122 (1912). ⁵ Thus, determination of a lien claimant's status as an original contractor is typically a simple matter. The court identifies the record owner at the time of the contract in question and decides whether the lien claimant contracted with the owner. See e.g. Home Building Corp. v. Ventura Corp., supra at 771. Application of this test to the present dispute, however, is complicated by two facts: The record owners during construction were Robert and Elizabeth Smith as tenants by the entirety and the material sold by Kaplan was invoiced to R.C. Smith Construction Co.

As a general rule, a wife's interest in real property held by her with her husband as a tenant by the entirety is not subject to a mechanic's lien absent her active participation in securing the improvements to the property. See, e.g. E.C. Robinson Lumber Co. v. Lowrey, 276 S.W.2d 636, 640 (Mo.App.1955) The character of the wife's participation is determined by the extent of her involvement in securing the construction loan, obtaining the labor and directing the actual construction. Id. at 640-643; see e.g., Magidson v. Stern, 235 Mo.App. 1039, 148 S.W.2d 144, 152 (1941). The wife may be almost totally divorced from this process, and her conduct, thus, can be characterized accurately as passive. See, e.g. R.J. Kurtz, Inc. v. Field, 223 Mo.App. 270, 14 S.W.2d 9, 11 (1929). In this situation, the wife cannot be personally indebted to the supplier nor can her interest be charged with a mechanic's lien, because she neither expressly or impliedly took part in or authorized the securing of the improvements to the property and her husband's conduct cannot be said to be hers. Id. On the other hand, the wife may be actively and directly involved in the whole process, not only in dealing directly with the lender but also dealing directly with the supplier or granting her husband complete authority to deal with the supplier on her behalf. In this situation, the wife not only can be charged personally with the debt to the supplier, her interest in the property can be charged with a mechanic's lien. See e.g. Bryant v. Bryant Construction Co., 425 S.W.2d 236, 242 (Mo.App.1968).

But the facts our courts normally confront cannot be so neatly pigeonholed. In these cases, the wife's conduct lies somewhere between the two extremes and, thus, cannot be characterized accurately as either totally passive, with no resulting liability, or active enough to appoint her husband as her agent with complete authority to bind her personally. Nonetheless, the supplier is still protected by our courts, but to a limited extent.

As previously noted, the supplier is entitled to a lien if he furnishes work or labor to the owner or his "agent" § 429.012. Through creative interpretation the "agent" referred to is not limited "to a person whose agency is sufficient in its scope to bind the owner personally for the labor or materials furnished". Ward v. Nolde, 259 Mo. 285, 168 S.W. 596, 599 (1...