NO. 87-512
I N THE SUPREME COURT O F THE S T A T E O F MONTANA
1988
DEAN DURAND, d / b / a DURAND CONSTRUCTION
C O . , FRANK K. MUTCH and MARY E . MUTCH,
d / b / a FLATHEAD E L E C T R I C S E R V I C E , AND
DUANE H . L I E N , d / b / a MAIN HARBOR PLTJMBING,
HEATING & PUMPS,
P l a i n t i f f s and A p p e l l a n t s ,
-vs-
JOHN DOWDALL a n d J . D . DUPUIS,
D e f e n d a n t s and R e s p o n d e n t s .
A P P E A L FROM: D i s t r i c t C o u r t of t h e T w e n t i e t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of L a k e ,
T h e H o n o r a b l e C . B. M c N e i l , Judge p r e s i d i n g .
COlTNSEL O F RECORD:
For A p p e l l a n t :
I n g r a h a m Law O f f i c e ; G r e g L. i n g r a h a m argued, R o n a n ,
Montana
For R e s p o n d e n t :
Boone, K a r l b e r g & Haddon; Sam E. H a d d o n argued,
Missoula, M o n t a n a
Submitted: A p r i l 26, 1988
Decided: June 1 6 , 1 9 8 8
Filed :
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiffs Durand, Mutch, and Lien appeal a judgment
entered in favor of defendants by the Twentieth Judicial
District Court, Lake County, sitting without a jury. We
affirm. The issues are:
1. Did the District Court err in concluding that plain-
tiffs had no valid mechanic's liens upon the defendants'
property?
2. Does merger of the leasehold and the fee permit
enforcement, against the fee, of a lien upon the leasehold?
3. Should plaintiffs be allowed to recover under the
theory of quantum meruit?
4. Was the claim of appellant Mutch, d/b/a Flathead
Electric, barred due to untimely filing of the lien?
Defendants John Dowdall and Joyce Dupuis, co-owners of a
parcel of property in Polson, Montana, entered into a "Prem-
ises Lease and Option to Purchase Real Estate" with Edward
Mills in July 1984. Prior to the time Mr. Dowdall and Ms.
Dupuis (Lessors) had purchased the property it had been used
to operate a service station. Pertinent provisions of the
agreement with Mr. Mills (Lessee) appear below:
5. USE OF PREMISES. The real property herein
described shall be leased for the purpose of oper-
ating a fast food business known as BURGER INNS of
AMERICA, Montana Division, and for no other
purpose.
6. IMPROVEMENTS AND FIXTURES. It is under-
stood that LESSEE intends to make substantial
improvements upon said real property in order to
make it suitable for the operation of his business.
It is further understood that at the expiration of
the lease, LESSORS shall be vested with all right,
title and interest to any and all improvements and
fixtures attached to the real property, in the
event LESSEE fails to exercise his option to
purchase. At the expiration of the term of the
lease, LESSEE shall have no further interest in the
real property or in any improvements or fixtures
located thereon.
7. MECHANIC'S LIENS. In any and all con-
tracts, written and oral, executed bv LESSEE for
any materials, or for any .constructiondonor repair
of any existing or future improvements located on
the real property, LESSEE shall include language to
the effect that he is solely responsible for the
cost of all labor and materials purchased by or for
him, and that the contractor, subcontractor,
materialman, or supplier waives any right to file a
mechanic's lien on the said real property and any
and all causes of action he may have against LES-
SORS as owners of the real property.
In August 1984 Lessee contracted with plaintiff Durand
for "extensive" demolition and remodeling of the service
station into a restaurant. Mr. Durand provided labor and
materials for the project for about two and one-half months,
but when it became clear that Lessee was not going to pay
him, Mr. Durand pulled off of the job. In December, Mr.
Durand filed a mechanic's lien against the property for
$23,030.87, the total value of labor and materials furnished
by Durand Construction Company.
Plaintiff Duane Lien has a plumbing and heating business
in the Polson area. Lessee contracted with Mr. Lien for
renovation and remodeling of the plumbing on the subject
property. Mr. Lien began in August and pulled off of the job
in October just as Mr. Durand had. In December Mr. Lien
filed a mechanic's lien against the property for $3,032.84,
the total value of labor and materials furnished by him.
Plaintiff Frank Mutch contracted with Lessee to provide
electrical work for the project, in August 1984. He alleges
he worked on the project up through January 16, 1985. He
filed a mechanic's lien against the property on March 5,
1985, for $8,941.16, the total value of labor and materials
furnished by him.
Plaintiffs then brought this action to recover on their
liens. The District Court concluded that the liens were
invalid and did not constitute liens or encumbrances against
Lessors' property. The court ruled that the mechanic's liens
filed by plaintiffs attached only to Lessee's interest in the
property which had been cancelled and terminated. The court
also made the following determinations:
[That] Plaintiffs have . . . failed to show
any consent by Defendants to the contracts between
Mills and Plaintiffs and failed to prove any rati-
fication thereof by Defendants.
That none of the contracts by Plaintiffs were
completed. Each Plaintiff pulled off the job
before work was completed because Mills did not pay
for work performed to that point. None of the
Plaintiffs ever billed either of the Defendants for
work done or materials provided, and all of the
Plaintiffs billed only Mills for their claims.
That the property in its present condition,
which is the same condition as existed when Plain-
tiffs discontinued work, is unusuable for any
commercial purpose. Electrical work is incomplete.
Interior finishing is incomplete. Fixtures and
equipment necessary to make the premises usable as
a restaurant or for any other commercial purpose
are not present and available.
That at the time the property was leased to
Mills it had a fair market value of $128,000.00.
In its present condition the property is not usable
for any commercial purpose and an expenditure of
approximately an additional $12,000.00 to
$30,000.00 would be required to make the property
usable for a commercial purpose. The property is
also not now suitable for any non-commercial use.
That the work undertaken by Plaintiffs to date
has not enhanced the value of the property.
Did the District Court err in concluding that plaintiffs
had no valid mechanic's liens upon the defendants' property?
The plaintiffs question the District Court's judgment in
several respects as it relates to this issue. Much of their
argument centers upon their theory that a contract for im-
provements arose by implication between Lessors and them-
selves. The trial court rejected that theory. We need not
address this argument as we determine the issue by answering
the following inquiry:
Did the court err in concluding that none of the plain-
tiffs substantially completed the work, and, by implication,
that they therefore had no right to assert liens upon the
property?
The plaintiffs accept the general rule in Montana stated
in Bauer v. Cook (1979), 182 Mont. 221, 224-25, 596 P.2d 200,
202, that a mechanic's lien arises only upon completion or
substantial completion of the contracted work. They rely
upon an exception recognized in Bauer, 596 P.2d at 203, which
arises when the laborer or materialman has been prevented
from completing the work by the breach of the owner or third
party. Plaintiffs argue that Lessee's failure to pay when
payment was requested constituted a breach by a third party
which prevented completion of the work. We conclude that
Intermountain Electric, Inc. v. Berndt (1974), 164 Mont. 67,
518 P.2d 1168, is controlling. That case was explained in
Bauer, 596 P.2d at 203:
However, in Berndt, involving substantially the
same question, we found nothing in the record to
suggest that the contractor's failure to make a
payment actually prevented the
subcontractor-lienholder from completing the work.
There was no evidence to indicate that the subcon-
tractor was entitled to demand any money from the
contractor at the time it submitted a bill, nor was
there any proof that prompt payment by the contrac-
tor and time were of the essence to completion of
the work. Finally, because the subcontractor did
not go to the homeowners and ask them for payment
of the bill or ask them if they wanted the work
completed, we concluded the subcontractor had
willfully and voluntarily abandoned the contract
before there had been substantial performance of
its terms.
In the present case, the record does not contain evi-
dence that Lessee's nonpayment prevented the plaintiffs from
completing the work they had contracted to do. Plaintiffs
presented no evidence that they were entitled to demand money
from Lessee at the time they submitted their demands, nor did
they present evidence that time and prompt payment by Lessee
were of the essence to completion of their work under the
contract. Further, they did not request payment by the
Lessors, and they did not ask if Lessors wanted the work
completed. In G r a m v. Insurance Unlimited (1963), 141 Mont.
456, 378 P.2d 662, we upheld a mechanic's lien on real prop-
erty. We concluded that the contract clearly provided for
prompt payment of installments by the homeowner to the con-
tractor and time was of the essence. G r a m , 378 P.2d at 664.
Plaintiffs failed to establish similar requirements in their
contracts with the Lessee. In addition, plaintiffs have
failed to establish that they relied upon the Lessors for
payment and that they granted to the Lessors the opportunity
to have the work completed.
If substantial evidence exists in the record to support
the district court's judgment, we will not disturb that
judgment. Berndt, 518 P.2d at 1171. In this case, the
interior ceiling was not installed; the interior walls were
not completed; painting was not completed; the wiring was not
completed; none of the necessary electrical fixtures were in
the building; the plumbing was not completed; and the walk-in
cooler did not have doors. The cost to complete the work
could be as much as $30,000. The property was not usable for
any commercial purpose. None of these facts have been con-
tested by the plaintiffs. We conclude that substantial
evidence exists to support the lower court's determination
that the plaintiffs had not substantially completed the work
they had contracted to perform.
Because plaintiffs had not substantially completed the
contracted work, their liens were prematurely filed. Western
Plumbing of Bozeman v. Garrison (1976), 171 Mont. 85, 88-89,
556 P.2d 520, 522. Therefore, we affirm the District Court's
holding that the plaintiffs have failed to establish valid
liens against the Lessors' property.
Does merger of the leasehold and the fee permit enforce-
ment, against the fee, of a lien upon the leasehold?
The plaintiffs assert that when the Lessee abandoned the
leasehold, the leasehold merged with the Lessors' fee inter-
est. They then urge that principles of equity would permit
enforcement of the liens against the Lessors' interest. This
argument, however, relies upon a valid lien. Without passing
upon the merit of plaintiffs' underlying theory, our holding
under Issue I renders consideration of this issue
unnecessary.
Should plaintiffs be allowed to recover under the theory
of quantum meruit?
The plaintiffs argued that the value of the property was
enhanced by their work. The District Court found that the
work had not enhanced the value of the property. Both plain-
tiff Durand and defendant Dowdall testified that the property
is not now useable for a service station, a restaurant, or
any other commercial use. The court determined that the
property also was not suitable for any non-commercial use.
The record contains substantial evidence to support these
findings; therefore, they will not be disturbed. With this
in mind, principles of equity do not weigh in favor of the
plaintiffs' claim for quantum meruit. We hold that plain-
tiffs may not recover expenditures for their work under
theory of quantum meruit.
IV
Was the claim of appellant Mutch, d/b/a/ Flathead Elec-
tric, barred due to untimely filing of the lien?
We need not consider this issue in light of our holding
as to Issue I.
Affirmed.
We Concur:
Mr. Justice R. C. McDonough concurs and dissents as follows:
I concur with the District Court's holding that Mutch,
d/b/a Flathead Electric, has no valid lien on defendants'
property.
However, Plaintiffs Durand and Lien have a valid
mechanic's lien against the defendants' property, as
defendants consented in advance to the improvements. ori in
Lumber Co. v. Person, et al. (1939), 110 Mont. 114, 99 P.2d
206. The lien statutes must be construed liberally in favor
of the lien claimants to promote the purposes and objectives
of such statutes. In Fausett v. Blanchard (1969), 154 Mont.
301, 463 P.2d 319, this Court stated as follows:
In support of this argument respondents cite
Morin Lumber Co. v. Person, supra, as holding that
there need not be a direct contract between the
lessor and the lienor but only that the owner must
consent in advance to the improvement either
expressly or impliedly, or subsequently ratify what
has been done. This is a worthy argument based on
a humane policy of protecting the laborer and
materialman and there is ample authority to support
it. This Court, in upholding a lien against
improvements, in Caird Engineering Works v.
Seven-Up Gold Mining Co., 111 Mont. 471, 479, 111
P.2d 267, 272, held:
This court is committed to the view that our
lien statutes should receive a liberal
construction to the end that the objects and
purposes of the statutes may be carried out. .
.
. The statute giving the right to a lien is
paramount to the conditions of the leases.
Nor do we find merit in appellant's contention
that the lien holders waived their lien rights due
to the provision in the lease absolving the
appellant property owner from all liens. Labor and
materialman's lien laws should be interpreted
liberally to protect the right of the lien.
Fausett, 463 P.2d at 322-23.
By the terms of the lease with Mills the defendants knew
that substantial improvements were to be made to the
property. Defendant Dowdall visited the site when the
demolition and remodeling were being done. Major structural
changes were made. Interior walls were torn down and the
building enlarged. Defendant Dowdall also sold the service
station hoist during this time and arranged for its removal
by the buyer, for the benefit of the remodeling project.
The majority opinion determines this case on the
following inquiry: Did the court err in concluding that none
of the plaintiffs substantially completed the work and by
implication that they therefore had no right to assert liens
upon the property?
In deciding this inquiry we look at the contracts
between the Lessee Mr. Mills and the plaintiffs Mr. Durand
and Mr. Lien. Each of these contracts were oral. Mr. Mills
would inform each of the contractors what was to be done,
orally and on an ad hoc basis. There were no plans and
specifications. The uncontroverted testimony of both Mr.
Durand and Mr. Lien stated that each went as far as he could
under the instructions given to them by Mr. Mills. A portion
of Mr. Durand's testimony under questioning by his attorney
is as follows:
9. Wasn't it a piecemeal project?
A. Yes, it was, definitely. If you want an
explanation of it, Ed Mills had planned a Burger
Inn that apparently -- they were built new around
the state or wherever the Burger Inns were at. The
first one I ever seen was this sign out here and he
had a plan of putting this thing together.
He pretty much would lay out what we were to
do when he came over. The basic structure, of
course, had to be turned into what I would call a
newer type of building where it had some insulation
in it. That could be done without really much
instruction from Ed Mills but as far as setting it
up for all the equipment and how he wanted windows
placed, the drive-up window and the doors and so on
and so forth, he pretty much told me what to do
when I would speak to the man.
Q. And when you came to the end of that
partidular parcel ~ - fthe project, you would wait
for Ed Mills for further instructions?
A. I believe all of us were waiting for
further instructions from Ed Mills.
Q. And at the time you pulled off the job,
had you completed that particular section?
A. I completed everything I could up to that
point.
Q. So you could continue no further on the
project?
A. Not without further instructions.
The testimony of Mr. Lien as he was questioned by his
attorney is as follows:
Q. Were you piecemealing the project as Dean
has testified to?
A. Pretty much, yes.
Q. When you walked off the job, as they have
stated, had you completed everything you possibly
could do at that time?
A. Everything on our part was 100 percent
finished because the fixtures, sinks -- whatever
type they wanted to put in -- facets, were to be
furnished by the Burger Inn from what we
understood, yes.
It was pointed out by Mr. Lien that a sewage sump pump could
have been installed because he had been instructed by Mr.
Mills to check the old one and it did not work. Mr. Lien
stated he did not do so because he was not instructed to do
so and because of the nonpayment for work already done.
Both Mr. Durand and Mr. Lien billed Mr. ills for
materials and services at the end of the first month of
construction, and their uncontroverted testimony is that
after Mr. Mills received Mr. Lien's bill he told Lien, "I'll
get it to you one of these days," meaning the payment. Also
after receiving Mr. Durand's first bill Mr. Mills stated to
Durand, "I'll get the money right away." Other assurances of
payment were made by Mr. Mills. The action by Mr. ills in
not providing the mechanics with further instructions to
complete the project and the breach of the agreements that he
would pay for the work billed, prevented the mechanics from
completing the work. Bauer v. Cook (1979), 182 Mont. 221,
596 P.2d 200. In Smith v. Guiness, 115 Mont. 362, 144 P.2d
186, this Court stated:
"One who prevents or makes impossible the
performance or happening of a condition precedent
upon which his liability by the terms of a contract
is made to depend cannot avail himself of its
non-performance. In other words, he who prevents a
thing from being done shall never be permitted to
avail himself of the non-performance which he
himself occasioned. 12 Am.Jur., sec. 329, p. 885.
The abandonment of an improvement before the
completion thereof, by the owner of the premises,
without fault on the part of the contractor, does
not abrogate the right of the contractor, laborers,
and material men to mechanics' liens for the value
of the work done and the material furnished. In
such case, the building or improvement is to be
deemed completed, so far as the rights of persons
to assert liens is concerned. 36 Am.Jur., sec. 35,
p. 38."
Bauer, 144 P.2d at 191.
On the basis of the uncontroverted testimony of Mr. Lien
and Mr. Durand, Mr. Mills did breach his contract by failing
to pay as promised. The contractors went as far as they
could without receiving further instructions which were not
given. Therefore, they were prevented from completing their
contract and were entitled on the basis of Smith v. Guiness
to file a mechanic's lien.
Retired Chief Justice Frank I. Haswell, sitting for
Chief Justice J.A. Turnaqe, and Justice William E. Hunt.
- -
concur in the foregoing.
,Retired Chief Justice
Justice