Opinion ID: 1211307
Heading Depth: 1
Heading Rank: 4

Heading: durable's payments to marchini's materialmen

Text: As previously noted, shortly after service of the writ of garnishment, Durable requested and received invoices from Van's and Las Vegas Plywood which detailed sums Marchini Construction owed the materialmen. When these invoices were delivered, Durable paid the materialmen the amounts requested (approximately $248,140) before answering the garnishment interrogatories. The materialmen, who had billed more than they were owed, then paid the excess over to Marchini. The district court held that Durable was entitled to set off the amounts actually owed to the materialmen by Marchini. However, the district court held Durable liable to the Trustees for the excess amounts that were kicked back to Marchini. The Trustees now contend that the district court erred by failing to hold that the payments to the materialmen were improper in their entirety. According to the Trustees, Durable should not have been allowed to set off any amount paid to the materialmen after the Trustees served Durable with the writ of garnishment. In particular, the Trustees contend that because the materialmen failed to comply with NRS 108.2394, the materialmen did not have existing or valid lienable claims against Durable's property. [5] Therefore, the Trustees argue, the payments made by Durable to the materialmen over the writ of garnishment were improper. Durable counters that it had a statutory and a contractual right to offset the funds paid to the materialmen, and that the materialmen had priority under the mechanic's lien statutes. In its cross-appeal, Durable also contends that the district court erred in finding that Durable could not set off the amounts kicked back to Marchini. Finally, both Durable and the Trustees contend that the district court erred in determining the amounts of the kickbacks made to Marchini by the materialmen. We note initially that the district court concluded that Van's and Las Vegas Plywood substantially complied with the statutory requirements for the creation of mechanics liens on the construction projects. Although the Trustees argue that the district court erred in finding the materialmen had complied with the mechanics lien statutes, our review of the record indicates that the district court correctly determined that Van's and Las Vegas Plywood had substantially complied with the statutory requirements governing the creation of mechanics liens. See NRS 108.245 (formerly NRS 108.2394). Further, it is undisputed that Durable had actual notice of the potential lien claims. Such actual notice is dispositive of the issue now raised by the Trustees. As we noted in Las Vegas Plywood v. D & D Enterprises, 98 Nev. 378, 649 P.2d 1367 (1982), substantial compliance with the technical requirements of the lien statutes is sufficient to create a lien on the property where, as here, the owner of the property receives actual notice of the potential lien claim and is not prejudiced. Of greater significance is the fact that Durable had both a statutory and a contractual right to set off the monies due the materialmen. Garnishment invests a plaintiff-garnishor with the right to satisfy his claim against a defendant with the debts due from a third-person, the garnishee, to the defendant. Valley Bank of Nev. v. Dobson, 97 Nev. 276, 629 P.2d 229 (1981). As against the garnishee, the garnishor occupies the same position as the defendant, and is subject to any defenses available to the garnishee against the defendant. Id. at 278, 629 P.2d at 229. NRS 31.360 (emphasis added) provides a garnishee with a right of setoff as follows: Every garnishee shall be allowed to retain or deduct out of the property, effects or credits of the defendant in his hands all demands against the plaintiff and all demands against the defendant of which he could have availed himself if he had not been summoned as garnishee, whether the same are at the time due or not, and he shall be liable for the balance, only after all mutual demands between himself and plaintiff and defendant are adjusted, not including unliquidated damages for wrongs and injuries; but the verdict or finding as well as the record of the judgment shall show in all cases against which party, and the amount thereof, any counterclaim shall be allowed, if any shall be allowed. Pursuant to this statute, Durable had an absolute right to retain any monies which Durable was not required to pay to Marchini. Durable's subcontracts with Marchini expressly provided that Marchini was entitled to payment only after Durable had been furnished lien waivers from all materialmen. This contractual provision was intended to provide Durable the type of lien-free project demanded by modern commercial practice. Durable thus had the right to retain payment until lien waivers were provided, and Marchini was not entitled to payment until lien waivers were provided. Obviously, lien waivers could not be obtained until the materialmen were paid. It follows, therefore, that the Trustees had no right to any monies from Durable because no monies were due Marchini until after the materialmen were paid. Accordingly, the district court did not err in finding that Durable had a contractual right to pay the invoices submitted by the materialmen and to deduct the amounts paid the materialmen from the monies owed Marchini. See Eger Block & Redi-Mix Co. v. Wheeler, 207 So.2d 698 (Fla. Dist.Ct.App.1968). The district court did err, however, in determining that Durable was liable to the Trustees for the amounts paid to the materialmen in excess of the actual amounts owed by Marchini Construction. The materialmen provided invoices to Durable which Durable paid. There is no evidence in the record, nor did the district court find, that Durable had any knowledge or reason to know that the amounts billed by the materialmen were not actually owed to the materialmen. [6] Because Durable had an absolute right to pay the invoices of the materialmen, Durable cannot now be held liable for sums misappropriated by the materialmen. Accordingly, we reverse that portion of the district court's judgment finding Durable liable to the Trustees in the amount of the kickbacks ($44,170) made by the materialmen to Marchini. This disposition makes it unnecessary to decide the question of whether the district court erred in determining the amounts of the kickbacks.