Case Title: McGLUMPHY v. JETERO CONST. CO., INC.

Citation: 1978 OK 154, 593 P.2d 76

Docket Number: 

State: oklahoma

Court: Oklahoma Supreme Court

Date: 1978-12-05T00:00:00Z

Document:
McGLUMPHY v. JETERO CONST. CO., INC.  McGLUMPHY v. JETERO CONST. CO., INC. 1978 OK 154 593 P.2d 76 Decided: 12/05/1978 Supreme Court of Oklahoma D. McGLUMPHY, D/B/A MAC'S ELECTRIC SUPPLY, APPELLEE, v. JETERO CONSTRUCTION CO., INC., A TEXAS CORPORATION, AND TRAVELERS INDEMNITY COMPANY, A CORPORATION, APPELLANTS, v. MARVIN LASATER, D/B/A LASATER ELECTRIC COMPANY, APPELLEE. Appeal from the District Court of Tulsa County; William W. Means, Trial Judge. ¶0 Materialman seeks payment for materials furnished subcontractor on construction projects through enforcement of lien, and other, rights, against certain entities, including the general contractor. By counterclaim, and by making subcontractor a third party defendant, general contractor seeks to impress particular funds paid by sub-contractor to materialman with a trust to pay for unpaid materials furnished. General contractor asks for indemnity from any materialman's recovery against it and to recover additional expenses in completing the sub-contract; all as against the sub-contractor. That sub-contractor cross-petitions against the general contractor for monies owed for unpaid, but performed, construction work. On trial to the court, judgment was entered allowing recovery to materialman as sought in the petition, including attorney fees, denying any relief against the materialman, and allowing judgments, with offsetting credit, sought by the general contractor and the sub-contractor as against each other. Judgment allowed general contractor and bondsman to be indemnified by sub-contractor for judgment rendered against them in favor of materialman. Original defendants, including the general contractor, appeals. AFFIRMED IN PART; REVERSED IN PART; AND REMANDED. Sanders, McElroy & Carpenter, Tulsa, for appellee, D. McClumphy, d/b/a Mac's Electric Supply. Boyd & Parks by John W. Moody, Tulsa, for appellants. Hall, Estill, Hardwick, Gable, Collingsworth & Nelson by Frank M. Hagedorn, Tulsa, for appellee, Marvin Lasater, d/b/a Lasater Elec. Co. LAVENDER, Vice Chief Justice: [593 P.2d 79] ¶1 Jetero Construction Co., Inc. (Jetero) was the general contractor on two separate construction projects owned by different entities. One, a motel, was located in Tulsa, Oklahoma. The other, an apartment complex, was located in Ft. Smith, Arkansas. Jetero's electrical sub-contractor on both projects was Marvin Lasater, d/b/a Lasater Electric Company (Lasater). D. McGlumphy, d/b/a Mac's Electric Supply (Mac's) was an electrical material supplier for Lasater. There were other construction projects where this same relationship existed between these entities of general contractor, electrical sub-contractor, and supplier. ¶2 Mac's claimed money was owed him for materials furnished for the Tulsa, Ft. Smith, and other projects, and subsequently filed materialman's lien against the Tulsa and Ft. Smith projects in the proper counties where the projects were located. Jetero claims it cancelled its sub-contracts on these two projects with Lasater for failure to keep the projects free of lien claims, and claims additional expense in securing other completion of the electrical subcontracts. Lasater claims monies owed to him for completed electrical work on the projects. ¶3 To relieve the two real estate developments from the recorded liens, Mac's entered into a written agreement with Jetero and Travelers Indemnity Company (Travelers). That agreement bound Jetero and Travelers to pay Mac's claims, or parts thereof, ultimately determined by adjudication to be a lien, with Mac's releasing its recorded liens. Suit by any of the parties to the agreement could be brought in the District Court of Tulsa County as to both projects. Other than litigating both claims in the same forum, there was no waiver of any objections, defenses, claims, rights, causes of action or remedies with Oklahoma law applicable to the Oklahoma and Arkansas law applicable to the Arkansas lien. ¶4 Mac's brings an action against Jetero and Travelers containing a cause of action for each of the two projects. He pleads the agreement and asks judgment for payment of materials furnished and attorney fees. Jetero denies and pleads certain defenses. By counterclaim and by making Lasater a third party defendant, Jetero seeks to impress particular funds paid by Lasater to Mac's with a trust to pay lienable items on the project generating that particular payment. Jetero also seeks Lasater to indemnify it from any recovery of Mac's against Jetero, and money judgment against Lasater for additional expenses required to complete Lasater's electrical sub-contract on the two projects. Lasater cross-petitions against Jetero for money judgment against Jetero on alleged performed, but unpaid, electrical work on the two projects. ¶5 Trial was to the court. Judgment entered for Mac's as sought in the petition, including attorney fees and denying any relief against that materialman, with Jetero and Travelers recovering a judgment in indemnity against Lasater for the amounts Jetero and Travelers were required to pay Mac's. Jetero recovered judgment against Lasater for cost of completing the electrical sub-contracts. Lasater recovered judgment against Jetero for unpaid work performed on the sub-contracts. Both Jetero and Lasater were denied attorney fees as against each other. Jetero and Travelers appeal. ¶6 Though Mac's original action is correctly based on the written agreement between that materialman, the general contractor and Travelers, we do not agree with Mac's contention his action was on a "judicial bond." The written agreement was an agreed-to mechanism whereby the real estate developments would be free of filed liens. Judicial energy was conserved by allowing litigation to proceed under the agreement in one forum with Oklahoma law applicable to the Oklahoma lien and Arkansas law applicable to the Arkansas lien. There were no waiver of objections, defenses, claims, rights, causes of action, or remedies under the laws of either state. Plead lien rights must be considered in this appeal. [593 P.2d 80] ¶7 As to Mac's recovery, Jetero's and Traveler's principal arguments are (1) material was sold on an open account and without a contract as to particular projects so as not to create a lien on individual projects; (2) lien trust fund statutes require payment on lienable items on the project generating the payment funds; and (3) failed to perfect the materialman's lien under Arkansas law on the Arkansas project through proper notice. As to Lasater's recovery, Jetero and Travelers contend there should be no recovery, for Lasater breached the sub-contract by failure to keep the projects free of lien claims. ¶8 Mac's contends (1) as a materialman, performing part of the sub-contract, he is entitled to a lien on the projects; (2) payments to him from the sub-contractor could be applied as agreed to the oldest purchase owed and not to the material sold to the project generating the payment; and (3) substantial compliance with the Arkansas law to perfect that lien. ¶9 Lasater adopts the same positions as Jetero and Travelers except as to Lasater's recovery; there contending, breach does not bar recovery for unpaid, but performed work. ¶10 For a materialman to be entitled to a lien under 42 O.S. 1971 § 143 there need not be a direct contractual relation with the owner or the original contract, but it is essential that such materialman have knowledge of such a contract and furnish his materials in compliance with the original contract with the degree the materialman is removed from the original contractor being immaterial. Rogers v. Crane Co., 180 Okl. 139, 68 P.2d 520 (1937). In Rogers, supra, contention was made that notations or job numbers on invoices bore no legal significance and that fixtures were purchased by the sub-contractor in the course of ordinary trade with those purchases divorced from the improvement contract involving installation. This position was rejected. See also Dolese Bros. Co. v. Andrecopulas, 113 Okl. 18, 237 P. 844 (1925), Case 2. ¶11 In present case, general contractor argues the sale of electrical supplies to the electrical sub-contractor was in the ordinary course of trade with no connection to any particular contract to install or to any particular construction project. And, the material sale was without any contract and under an "open account" of the sub-contractor with the materialman. ¶12 The form of the indebtedness is not the vital element relative to a materialman lien. Open account, in legal as well as in ordinary language, means an indebtedness subject to future adjustment, and which may be reduced or modified by proof. ¶13 Mac's did have knowledge of the contracts with part of the material supplied being specially manufactured and delivered to each of the two separate projects. There [593 P.2d 81] was an effort, although not very efficient, to identify by project numbers the material picked up by the sub-contractor from the supplier. There was no direct evidence material was charged one project but used on another job. Though the form of indebtedness may have been considered as an open account, there is no evidence of the materials purchased from Mac's going into Lasater's general inventory for use on jobs other than those involved here. We find there was an implied contract ¶14 By letter written by Mac's and agreed to by Lasater, the record shows an agreement between the two for any payment of Lasater to Mac's would be applied to the oldest purchase. Jetero says Lasater paid sufficient monies to Mac's to pay for the material supplied to the two projects if the monies were applied to the project generating the funds instead of the oldest outstanding item. Mac's required Lasater to pay by cashier checks, said to be caused by Lasater's checks often being returned for insufficient funds. ¶15 We agree generally with the authorities cited by Mac's that undesignated payments may be applied to debts owed to the same creditor at the discretion of that creditor. ¶16 With Bohn v. Divine, Okl.App., 544 P.2d 916 (1975), this jurisdiction has adopted a liberal construction of §§ 152, 153 as remedial legislation rather than penal, and that they were for the protection of the lienholders as well as the owner. "On their face the statutes, in creating a `trust' of construction funds, appear to be protective in nature - protective of the rights of all to whom an obligation is owed for the fund's proper disbursement. For this reason, we construe the statutes liberally as though they are remedial statutes." (Emphasis added), Bohn, supra. This similar understanding of these sections is expressed in Swan Air Conditioning Co. v. Crest Const. Corp., Okl.App., 568 P.2d 1330 , 1335 (1977). There, the opinion said: [593 P.2d 82] "The construction trust statutes not only protect the lienholder, but also prevent the injustice of a double payment by an owner, trustee, contractor or subcontractor when placed in a situation comparable to that of appellant here." We make application of the construction trust statutes to present case and determine there was owed to Jetero, the contractor, an obligation for construction funds paid to Lasater to be properly disbursed in payment of valid lienable claims on construction projects generating the payment fund. ¶17 It is noted Lasater made some payment by cashier check, as requested by Mac's, with application made to the oldest purchase as they had agreed. This suggests the problem of following trust funds to their source and is discussed in