Opinion ID: 1373256
Heading Depth: 1
Heading Rank: 1

Heading: Pacific Concrete's False Representation or Concealment of a Material Fact

Text: Pacific Concrete never telephoned or in any other way notified the defendants of the risk posed by Aquarius' financial precariousness. The question becomes whether on the facts of this case Pacific Concrete had a duty to speak, as required for estoppel by Broida v. Hayashi, supra, 51 Haw. at 499, 464 P.2d 285, and by Peabody v. Damon, supra, 16 Haw. at 452-456. If there was such a duty, it was breached and the first element of estoppel was established. No cases directly hold that a materialman has a duty to warn a property owner that the owner is dealing with a financially imperiled general contractor. Generally, an owner is assumed capable of exercising prudence in selecting and dealing with a general contractor. In fact, the great majority of the homeowning public is ignorant of the existence of the mechanics' lien law and thus is not alert to the risk involved if the general contractor fails to pay the subcontractor or materialman. When estoppel is found, courts generally find it arising from representations made directly to the property owner from the materialman or other lienor. [2] California does recognize that silence may support estoppel in a mechanics' lien situation, Reeder Lathing Co. v. Allen, supra note 1; Baxter Corp. v. Home Owners and Lenders, supra note 1, and California and Arkansas recognize that the credit practices of a lienor may support an estoppel. Reeder Lathing, supra ; Degen v. Acme Brick, supra note 1. But see Midland Bldg. Industries v. Oldenkamp, 122 Ind. App. 347, 103 N.E.2d 451 (1952); Wheatley Industries v. Owens-Corning Fiberglas Co., 470 P.2d 986 (Okl. 1970). Plaintiff argues that Wheatley Industries v. Owens-Corning Fiberglas Co., supra , compels affirmance of the judgment below. However, that case is distinguishable on the grounds that the relevant Oklahoma statute practically forecloses the applicability of estoppel by declaring in relevant part, The risk of all payments made to the original contractor shall be upon such owner until the expiration of the ninety (90) days herein specified. 42 Okl.Stat. 1961, § 143. The Hawaii mechanics' and materialman's lien statute has no such provision. More importantly, in both Wheatley and in this case the heart of the matter is the lien claimant's credit policy toward its immediate customer, but Wheatley does not elaborate on the exact nature and extent of the problem. In Wheatley the defendant asserting estoppel pointed to a 60-day delinquency in the relevant account with the materialman, a delinquency which lengthened to six months after the material was delivered to the job site, and a bad check. The opinion does not reveal the sizes of the delinquency and the volume of business on the account, and a small delinquency on a large account of a large firm with long established good credit differs from a large delinquency on a small account of a small, new company with little credit history. It is more appropriate to approach each case individually, especially given that estoppel calls for the balancing of specific equities. In this case, Pacific Concrete had two early warnings about possible payment problems by Aquarius. Pacific Concrete also knew of Aquarius' default on its September payment and starting in February knew of complete defaults on bills starting in November, defaults which were to extend to the December 1971 and January 1972 billings. Furthermore, by early March, 1972, at the latest, Pacific Concrete was aware of the State tax lien against Aquarius. Pacific Concrete's concern with the situation is clear from its action in putting Aquarius on a C.O.D. basis. Yet while acting to protect its own interests by C.O.D. transactions, Pacific Concrete did nothing to warn homeowners of Aquarius' delinquency and thus did nothing to insure payment on the delinquent accounts for November and December, 1971 and January, 1972, beyond relying on the mechanics' lien statute. These events warning Pacific Concrete of the danger posed by Aquarius all occurred before the Wetzels finished paying for their pool in late March. This situation is more egregious than the Wheatley case, and under the facts in this case the materialman, Pacific Concrete, had a duty to warn the Wetzels, owners of the property in which the material was used. We believe that it is the better policy to impose such a duty. The plight of the homeowner is well recognized. Nock, The Forgotten Man of Mechanics' Lien Laws  The Homeowner, 16 Hastings L.J. 198 (Nov. 1964); Comment, Mechanics' Liens  Potential Pitfall for the Homeowner, 62 Ky.L.J. 278 (1973-74); Mechanics' Lien Liability: A Pandora's Box for Unwary Owners, 3 Willamette L.J. 93 (1964-65). At the very best, the homeowning public should be alerted to the risks of liens when it contracts for construction, and if materialmen tighten credit practices and drive out the more financially unsound contractors, the benefit to the homeowner from greater protection outweighs the harm of decreased business opportunity. Because materialmen are generally business concerns with the ability to judge credit and to take care of their own interests, and because they are in the best position to avert the type of problem raised in this case, it is appropriate for them to bear the duty to warn.