Opinion ID: 1614056
Heading Depth: 1
Heading Rank: 2

Heading: Interpretation of the Written Lien Waiver.

Text: The fighting issue in the present appeal is whether the trial court correctly found and concluded that the written waiver of mechanic's lien executed by the defendant contractor and dated June 23, 1980, which recited payment of $385,400 was only intended to waive defendant's right to claim a lien for that portion of the contract for which he had in fact been paid. In resolving this issue, we consider the following facts. The plaintiff bank stipulated prior to trial that (1) the total amount which the owners of the property were obligated to pay the defendant contractor under the agreed arrangement for construction of a restaurant facility on their property was $456,251.33; (2) the total of payments made by the owners in discharge of such indebtedness was $401,576.90, leaving a balance owed of $54,674.43; (3) the defendant contractor performed the services and furnished the material under such agreed arrangement between August 29, 1979, and September 10, 1980; and (4) the mortgage on which the bank's claim is based was executed by the owners on January 17, 1980. In addition to these stipulated facts, it appears without dispute that on September 11, 1980, the defendant contractor filed and perfected a mechanic's lien on the real estate of the owners Martha Smith and Robert Smith on which the restaurant was constructed. The amount of the lien which was thus filed was $60,662. It also appears without dispute that the bank received no waiver of lien or subordination agreement from the defendant contractor prior to late October or early November of 1980 at which time work on the contract had been completed and the lien had been filed and perfected. The document executed by the contractor at this time was back-dated to June 23, 1980, and acknowledged receipt of $385,400 from the owners and recited: I/we do hereby waive and release any and all my/our right or claim of rights, to file and establish a mechanic's lien against [the subject premises]. This document was secured from the contractor at the request of the owners and apparently delivered by them to the bank. The defendant contractor testified at the trial that this written instrument was dated June 23, 1980, and the consideration of $385,400 was recited so as to evidence the amount of the contract payments he had received on the contract as of that date from the construction loan made by the bank. He further testified that the document was only intended to waive any claim to a mechanic's lien to the extent of such payment. This testimony is corroborated to some extent by the testimony of defendant Martha Smith, one of the owners. Testimony from a representative of the bank indicated that mechanic's lien waivers were required for disbursement of the progress payments of the construction loan funds for the contract price of $385,400 and that none of the mortgage proceeds were paid toward any of the contract extras. In interpreting the meaning of written instruments we seek to give effect to the intention of the parties in conformity with a reasonable application of the circumstances under which the instrument was executed. Miller v. Geerlings, 256 Iowa 569, 576-77, 128 N.W.2d 207, 213 (1964); Darnall v. Day, 240 Iowa 665, 670-71, 37 N.W.2d 277, 280 (1949). Upon our de novo review of the transaction at issue, we agree with the trial court's finding that the so-called waiver of mechanic's lien was intended, as between the defendant contractor and the owners, as a waiver of the contractor's right to assert a lien for work which had been paid for from the construction loan proceeds. Because the commencement of work by the contractor under agreement with the owners clearly antedates the bank's mortgage, the rights of the plaintiff bank can rise no higher than those of the owners. Iowa Code § 572.18 (1981). We find support for our conclusion in the fact that when the waiver form was executed the contractor had already perfected a lien for the extra work which had been performed in addition to that covered by the contract price of $385,400, for which the bank's construction funds were available. The written waiver makes no reference to release of that lien and no formal release thereof has ever been obtained by the owners or the bank. No reason has been made to appear why the contractor would release the security of his perfected lien for sums concededly owing and unpaid which, in the absence of such release, was clearly prior to the mortgage of the bank.