Sundance Mechanical & Utility Corp. v. Atlas, 18077

• Decision Date: 02 April 1990
• Docket Number: No. 18077,18077
• Citation: 109 N.M. 683,1990 NMSC 31,789 P.2d 1250
• Parties: SUNDANCE MECHANICAL & UTILITY CORPORATION, a New Mexico corporation, Plaintiff, v. Marvin F. ATLAS, and Carole J. Atlas, husband and wife, et al., Defendants-Appellants, v. Eric MENTER, d/b/a Creative Carpentry, Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 1250

789 P.2d 1250 109 N.M. 683 SUNDANCE MECHANICAL & UTILITY CORPORATION, a New Mexico
corporation, Plaintiff,
v.
Marvin F. ATLAS, and Carole J. Atlas, husband and wife, et
al., Defendants-Appellants,
v.
Eric MENTER, d/b/a Creative Carpentry, Defendant-Appellee. No. 18077. Supreme Court of New Mexico. April 2, 1990.

Page 1251

[109 NM 684] Threet & King, Martin E. Threet, Robert G. Kavanagh, Albuquerque, for defendants-appellants.

Toulouse & Associates, P.A., Charlotte M. Toulouse, Phillip Baca, Albuquerque, for defendant-appellee.

OPINION

MONTGOMERY, Justice.

This little case raises large issues concerning the jurisdiction of our courts, the relationship between jurisdiction and a complaint's failure to state a claim upon which relief can be granted, and the power of a district court to enter a default judgment when the complaint fails to state a cause of action. The principal specific question for decision is whether the trial court could properly reinstate a default judgment against a homeowner in a subcontractor's suit to foreclose on his mechanic's lien when his complaint (actually, his crossclaim) failed to allege that he held a valid contractor's license. We hold that the trial court could do so, and we therefore affirm.

I.

The subcontractor is Eric Menter, d/b/a Creative Carpentry, the crossclaimant and appellee in this appeal. The homeowners are appellants Marvin and Carole Atlas. They contracted in 1986 with Robert J. Eden, d/b/a R.J. Eden Construction Co. (the general contractor), for the construction of a single-family residence in Albuquerque. Menter held a subcontract to install wood trim and door frames. Toward the end of construction of the house a dispute arose, and on November 24, 1986, the subcontractor filed a claim of lien against the homeowners' property.

Some time before the subcontractor filed his lien, the homeowners completed payments to the general contractor in an amount which was later determined, in an arbitration proceeding between the homeowners and the general contractor, to have exceeded the contract price.

After completion of the project, this litigation began. It was commenced on March 19, 1987, by the filing of a complaint by another lien claimant, Sundance Mechanical & Utility Corp. (not a party to this appeal), to foreclose on that party's own mechanic's lien. The homeowners, the general contractor, the subcontractor in this case (Menter), and various other lien claimants were all joined as defendants. The subcontractor here, Menter, duly answered

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[109 NM 685] the complaint and filed a crossclaim against the homeowners, seeking judgment of $1,628 plus interest, costs and attorney's fees as compensatory damages, $10,000 as punitive damages, and foreclosure on his mechanic's lien.

Although they did file an answer to the original plaintiff's complaint, the homeowners did not answer the crossclaim filed by the subcontractor. The situation seems to have been confused by various events and proceedings: The homeowners' attorney withdrew from the action; the homeowners appeared pro se (through Mr. Atlas, who is a retired New York state judge); and the arbitration proceeding was commenced and litigated. On March 1, 1988, the subcontractor filed a notice of intent to apply for a default judgment, serving the homeowners by mail. The homeowners did not respond to this notice, and the court entered a default judgment against them for $2,227.66 (representing the amount of the subcontractor's claim plus interest and attorney's fees) on March 11, 1988. Shortly after that, the homeowners, still acting pro se, filed a motion to set aside the default judgment. A hearing was held on April 4, 1988, at which the homeowners were represented by new counsel. The court granted the motion to set aside the default and entered an order on April 19, 1988, providing: "Defendants are directed to immediate [sic] and forthwith to [sic] file their answer herein."

A period of four months then elapsed, during which the homeowners failed to file an answer. On August 26, 1988, the subcontractor filed a motion for reinstatement of the default judgment. Finally, on September 1, 1988, fifteen and one-half months after filing of the subcontractor's crossclaim, the homeowners filed their answer. They denied various allegations in the crossclaim, denied personal liability to the subcontractor, asserted that the subcontractor's lien had been discharged by full payment to the general contractor, and raised the defense that the subcontractor's crossclaim had failed to allege that he was a duly licensed contractor. The subcontractor moved to strike the answer, and on October 6, 1988, the court granted the motion and entered its order reinstating the default judgment.

On appeal from this order the homeowners challenge the jurisdiction of the court to enter the order and otherwise assail the propriety of that order. Their jurisdictional challenge consists of two arguments. First, they maintain that when they made their final payment to the general contractor in an amount later determined to have exceeded the contract price, the subcontractor's lien was discharged by operation of NMSA 1978, Section 48-2-10.1(A) (Repl.Pamp.1987) (repealed 1989 N.M. Laws, ch. 301, Sec. 13), and that the trial court therefore lacked jurisdiction to entertain the subcontractor's claim for foreclosure of his mechanic's lien and to award a default judgment on that claim. The second basis for the homeowners' jurisdictional argument is that the crossclaim failed to state a claim upon which relief could be granted, in that it did not allege that the crossclaimant held a contractor's license, and that this failure to state a claim deprived the trial court of jurisdiction.

As additional grounds for attacking the trial court's order the homeowners contend that a personal judgment against them was improper, inasmuch as they had no direct contractual relationship with the subcontractor, and that the trial court abused its discretion in reinstating the default judgment and refusing to permit their belated answer to be filed.

We consider these various arguments in the order in which they are asserted.

II.

The homeowners' first jurisdictional argument may be disposed of without much difficulty. It is, again, that their final payment to the general contractor of an amount in excess of the contract price, at a time when they had no notice of any

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[109 NM 686] mechanics' or materialmen's liens, operated to discharge the subcontractor's lien, so that his subsequent filing of a claim of lien was a "nullity" with respect to the homeowners' property. Therefore, the homeowners argue, when the subcontractor sought to foreclose upon his claimed mechanic's lien by filing a crossclaim against the homeowners, the court had no jurisdiction to entertain this claim because the lien upon which it was founded had been discharged.

As support for their argument the homeowners cite Sundance Mechanical & Util. Corp. v. Armijo, 106 N.M. 249, 741 P.2d 1370 (1987), and Aztec Wood Interiors, Inc. v. Andrade Homes, Inc., 104 N.M. 45, 716 P.2d 236 (1986). In those cases we construed Section 48-2-10.1 ¹ as discharging a mechanic's or materialman's lien claimed upon a residence containing not more than four dwelling units when a claim of lien has not been filed prior to the owner's final payment to the general contractor and the owner has received no notice of the potential lien claim by the lien claimant. Nothing in the statute, however, relates to the jurisdiction of a court when suit is brought to enforce a claimed lien. ² Nor do the homeowners cite any other authority for their rather unusual theory that the district court's jurisdiction is affected by this statute dealing with the circumstances under which a lien claim is treated as paid. Of course, when...