Opinion
C.A. No. 06L-03-031-RFS.
Submitted: May 1, 2008.
Decided: August 28, 2008.
Richard E. Franta, Esquire, Wilmington, Delaware, Attorney for Plaintiff.
Dennis L. Schrader, Esquire, Wilson, Halbrook Bayard, Georgetown, Delaware, Attorney for Defendants Littleton.
MEMORANDUM OPINION
This is a mechanic's lien and contract action brought by Construction Resource Management, Inc. (hereafter "Plaintiff" or "CRM") against homeowners, named Joshua and Julia Littleton (hereafter collectively "Littleton") and a general contractor, Pulse Construction Company (hereafter "Pulse"). Pulse has dissolved, and a default judgment has been entered against it. Pulse's president, Gerald Mott (hereafter "Mott") was sued on a personal guaranty but he has filed bankruptcy, and this claim is severed from this case.
Following trial, the parties submitted memoranda, and the Court has reviewed them. After consideration, the following findings of fact and conclusions of law are made.
Findings of Fact
1. On August 16, 2005, Pulse and Littleton entered into a construction contract for a project named Littleton Residence, Lot #15, Crest Drive, Malihorn Crest, Seaford, Delaware, 19973.
2. The contract had a price of $323,038 with a draw schedule, calling for payments of $51,000 at lot clearing excavation and footings complete, $51,000 at foundation complete, $90,000 at framing and sheathing complete, $58,740 at framing inspection, rough in complete, $35,298 at insulation drywall complete, and $37,000 at certificate of occupancy.
3. Littleton obtained construction financing from Wilmington Trust Company (hereafter "WTC").
4. On or about September 15, 2005, Pulse entered a contract with CRM.
5. Under the contract, CRM provided skilled workers to Pulse for use in its construction work. Upon Pulse's order, CRM sent workers to job sites. Pulse was obligated to supervise and manage them. Pulse and CRM agreed upon a wage rate which was multiplied by 1.75 to cover expenses for CRM including withholding taxes and the like. CRM paid the workers.
6. Littleton was not mentioned in the contract nor was any specific construction project.
7. Between December 8, 2005 and January 19, 2006, Pulse ordered CRM to provide skilled workers to Littleton's Seaford property.
8. CRM provided five (5)skilled masons who also could perform carpentry work. The lead mason was Robert Lake (hereafter "Lake") although Pulse had managerial responsibility.
9. Between December 8, 2005 and January 19, 2006, the five (5) masons supplied by Pulse worked on the foundation. Pulse's manager was named Mark Knodler (hereafter "Knodler")
10. Knodler and Lake confirmed the time spent by the masons which CRM used to bill Pulse. CRM would receive the information on or before Wednesday of each week, pay the workers on T hursday, and bill Pulse on Friday. Payment was due 30 days thereafter.
11. In effect, CRM had a five week period before payments were received from Pulse. For security, CRM had adequate financial resources and had M ott's guaranty. Also, CRM also determined that Pulse was creditworthy based upon Dunn and Bradstreet Reports and other background work done before its contract with Pulse. Also, if unpaid, CRM intended to rely on the mechanic's lien law by liening property where labor was performed.
12. Pulse paid CRM's first two invoices for the workers used at Littleton's home. CRM and Pulse agreed that Lake would confirm the time worked when Knodler was not available.
13. On January 19, 2006, Knodler for Pulse, ordered Lake and the other CRM workers to leave Littleton's property. At that time, no complaints were made about poor performance or defective workmanship.
14. Thereafter, in the last two weeks of January, CRM attempted to contact Pulse but Pulse was evasive and failed to provide a reason for its decision.
15. Pulse breached its contract with CRM by failing to pay invoices due CRM. At the Littleton job, CRM is due $37,693.77 for six weeks work from December 8, 2005 — January 19, 2006. CRM is due $47,565.77 from Pulse for workers supplied at all sites, including the Littleton Residence.
16. The failure of Pulse to pay CRM was not justified by a belated claim made by Pulse of defective workmanship. Lake's trial testimony was credible and persuasive, and the masonry work was satisfactory.
17. On March 27, 2006, CRM filed suit. On March 30, 2006, the Littleton Residence was posted with a copy of the Summons, and the Statement of Claim for Mechanic's Lien.
18. On March 30, 2006, Joshua Littleton saw the posting. Littleton knew CRM had not been paid. However, Littleton relied upon Pulse's assurances that Pulse would take care of CRM. Before the posting, Littleton paid two draw payments on October 26, 2005 and January 11, 2006 totaling $102,000. From the second payment, Pulse and Littleton agreed that $19,600 would be paid to Littleton for windows and other items supplied by Littleton. Under the draw schedule, the foundation work was to be complete by the second draw, and Pulse had the funds to satisfy CRM's claim but did not pay CRM for the masonry work.
19. Relying upon Pulse's assurance, Littleton continued to pay Pulse under the draw schedule from the WTC construction loan. After the posting, Pulse was paid $184,038 — $90,000 on April 5, 2006, $58,740 on July 12, 2006 and $35,298 on August 4, 2006. Because of Pulse's failure to adequately perform its contract, Littleton terminated Pulse in November of 2006. Money due under the last draw, $37,000 at the certificate of occupancy, was used by Littleton for work at the residence.
20. Pulse breached its contract with Littleton and over $32,000 is required to satisfactorily complete the residence.
21. Littleton made full payment to Pulse.
Conclusions of Law
Littleton argues that CRM should not be able to assert a mechanic's lien because it only had a labor staffing agreement with Pulse. However, after reviewing the applicable mechanics' liens statutes, the purposes behind the statutes, and the applicable case law, I conclude that CRM is able to seek a mechanics' lien.
The statute establishing who is entitled to obtain liens is 25 Del. C. § 2702. Therein, it is provided:
(a) It shall be lawful for any person having performed or furnished labor or material, or both, to an amount exceeding $25 in or for the erection, alteration or repair of any structure, in pursuance of any contract, express or implied, with the owners of such structure or with the agent of such owner or with any contractor who has contracted for the erection, alteration or repair of the same and for the furnishing of the whole or any part of the materials therefor, including any person who has performed or furnished labor or material, or both, for or at such structure under a contract with or order from any subcontractor to obtain a lien upon such structure and upon the ground upon which the same may be situated or erected.
(b) Liens may also be obtained in connection with: labor performed and materials furnished in plumbing, gas fitting, paper hanging, paving, placing iron works and machinery of every kind in mills and factories, bridge building, the erection, construction and filling in of wharves, piers and docks and all improvements to land by drainage, dredging, filling in, irrigating and erecting banks and the services rendered and labor performed and materials furnished by architects.
25 Del. C. § 2702(emphasis added).
In 1 Del. C. § 302, it is provided:
In the construction of this Code and of all other statutes of this State, unless the context requires a different meaning: . . .
(16) "Person" and "whoever" respectively include corporations, companies, associations, firms, partnerships, societies and joint-stock companies, as well as individuals.
These two statutes support the conclusion that a company, such as CRM, which furnishes labor for the erection of a structure may obtain a mechanics' lien.
Moreover, the right to a mechanics' lien is not limited to a "contractor". The label "contractor" is a defined term which is important to determining when an entity must file its claim pursuant to 25 Del. C. § 2711. A "contractor" directly contracts with the owner or reputed owner of the structure. A contractor refers "to such persons only who contract to do the whole or any part of the work in the construction of any building or structure, and also to furnish the materials required for such contract." Mulrine v. Washington Lodge, No. 5, I.O.O. F., 11 Del. 350, 353-54 (Del.Super. 1881). To emphasize, a contractor is one who provides labor and materials, even if the materials provided are de minimis . Breeding v. Melson, 143 A. 23, 25 (Del. 19 27). "Con tractors" must file their claims pursuant to 25 Del. C. § 2711(a)(1). All other persons must file their claims pursuant to 25 Del. C. § 2711(b). CRM is a not a "contractor", and the timing of its claim is not in dispute.
In 25 Del. C. § 2711, it is provided in pertinent part as follows:
(a) (1) A contractor who:
a. Has made h is contract directly with the owner or reputed owner of any structure; and
b. Has furnished both labor and material in and for such structure, or has provided construction management services in connection with the furnishing of such labor and material, in order to avail himself of the benefits of this subchapter, shall file his statement of claim within 180 days after the completion of such structure. . . .
(b) All other persons embraced within this chapter and entitled to avail themselves of the liens here in provided shall file a statement of the irrespective claims within 120 days from the date from the completion of the labor performed or from the last delivery of materials furnished by them respectively.
The mechanics' lien statutes are to be strictly construed because they are in derogation of the common law; however, they are "not to be construed in such a fashion as to produce an unreasonable or unwarranted construction." Kershaw Excavating Company, Inc. v. City Systems, Inc., 1989 Del. Super. LEXIS 408 at *3 (Del.Super. Oct. 6, 1989), rev'd on other grounds, 581 A.2d 1111 (Del. 1990).
As explained in Girdler Corp. v. Delaware Compressed Gas Company:
The right to a lien rests upon the theory that the land has been increased in value by the labor or materials bestowed upon the building or structure erected thereupon. The theory, of course, supposes that the labor or materials have gone into and have become an integral part of the realty.Girdler Corp., 182 A. 480, 482 (Del.Super. 1936).
The labor can be superintending and "[n]o distinction is made between skilled and unskilled labor, or between mere manual labor and the labor of one who supervises and directs." Breeding v. Melson, 143 A. at 24. In Breeding, the plaintiff sought to recover for his labor, the labor of others, materials, and his superintending. The Court ruled he could recover for such, concluding that the statute allowed for recovery by all persons "who perform labor in the construction or reparation of a building, irrespective of the grade of their employment, or the particular kind of service." Id.
In this case, CRM is a "person" which has furnished labor to an amount exceeding $25 for the erection of a structure in pursuance of a contract, express or implied, with a contractor who has contracted for the erection of the same and for the furnishing of the whole or any part of the materials therefore. While its agreement with Pulse did not reference the Littleton job, this circumstance is not substantially different from a supplier's open account with a builder. If the material is used, homeowners are subject to a mechanic's lien. See Willam M. Young Co. v. Bacon, 1991 WL 89817 (Del.Super. May 1, 1991). Also, once Pulse submitted its orders, labor was supplied on the credit of the Littleton property. Indeed, proof that labor was performed is " prima facie evidence that the same was performed or furnished or provided for and on the credit of such structure." 25 Del.C. § 2717.
Thus, CRM is an entity which may seek to recover under the mechanics' lien statutes.
In addition, Littleton contends that the mechanic's lien complaint should be dismissed, alleging the bill of particulars is deficient. The purpose of a bill of particulars is to inform the defendants of the basis for a claim. Caposse v. Levine, 2008 WL 484442 (Del.Super. Feb. 20, 2008). As cited in Kershaw, while the mechanic's lien statute is strictly construed, it does not require an unreasonable or unwarranted construction.
Under 25 Del.C. § 2712(b)(4), a bill of particulars must demonstrate "the kind and amount of labor done." Here, the bill consists of two pages that specifically describes the work and amount due for the five masons who worked at Littleton's property from December 8, 2005 to January 19, 2006. The nature of the work and the amounts claimed due from Littleton are detailed. CRM's contract with Pulse and the unpaid invoices are incorporated. The basis of the claim is fully explained.
Because CRM provided workers elsewhere, Littleton claims the specific identities of the masons who worked at their property must be listed in the bill. This would be an unwarranted and unreasonable interpretation of section 2712(b)(4). If the identity of a person is desired, the discovery process exists to provide that information. The identities of all the tradesmen were provided in Exhibit D to the Statement of Claim, and the names of workers at Littleton's property were mentioned in the depositions and trial.
Also, Littleton objects that the affidavit accompanying the complaint is inadequate. The argument attacked the averment that work was supplied on credit of the structure because the CRM-Pulse agreement was signed in advance of actual work. At all times, CRM intended to rely upon mechanic's lien protection if the workers were not paid by Pulse or under Mott's personal guaranty. When Pulse submitted an order, masons were supplied. A crew of five masons actually performed work for Littleton's home. Without undue repetition, that performance is prima facie evidence to show the work was done on the credit of the structure under 25 Del.C. § 2717.
In the answer, Littleton sought relief under 25 Del.C. § 2707. Under this provision, mechanic's liens cannot be filed where homeowners make full and final payment to contractors in good faith. Littleton's property was posted on March 30, 2006. Notwithstanding, Littleton paid Pulse $184,038.00 thereafter.
The concept of good faith was discussed in the Bacon case this way: "[T]he `good faith' required under § 2707 . . . is to be determined by the Court from all of the relevant circumstances." Bacon, 1991 WL 89817, at *2 (quoting Bedford v. Sussex Electrical Const. Co., 382 A.2d 246 (Del.Super. 1978)). If circumstances were such that the owner knew or should have known that one who provided labor or materials for the project had not been paid, then payments to the contractor thereafter are not made in good faith. Id. Stated another way, payments are not made in good faith if the owner had reason to believe that paying the general contractor directly would lessen the likelihood of the subcontractors and suppliers being paid. Grier Lumber Company, Inc. v. Tryon, 337 A.2d 323 (Del.Super. 1975).
Given the posting, Littleton knew CRM had not been paid for work and the subsequent payments were not made in good faith. This defense cannot trump a mechanic's lien filed by CRM.
Moreover, CRM argues that it should have an in personam judgment against Littleton. While Littleton loses protection against a mechanic's lien, the continued payments to Pulse does not ipso facto make them liable to CRM on an in personam basis.
Liability of this nature can only be established on restitutionary principles which are absent in this case.
Under the Restatement of Restitution:
"A person who has been unjustly enriched at the expense of another is required to make restitution to the other." Restatement of Restitution § 1 (1988).
This principle is qualified, however, by the following rule:
"A person who has conferred a benefit upon another as the performance of a contract with a third person is not entitled to restitution from the other merely because of the failure of performance by the third person." (emphasis added).Id. § 110; Chrysler Corp. v. Airtemp Corp., 426 A.2d 845, 855 (Del.Super. 1980)
Here, Pulse would be the third person, and its failure of performance to CRM would not permit recovery against Littleton. This remains true where an owner has made full payment to a general contractor. See William M. Young Co. v. Bacon, supra at 14, 17; Cohen v. Delmar Drive-In Theater, 84 A.2d 597, 598 (Del.Super. 1951). In that event, the benefit was purchased, and, therefore, its receipt is just. See J.O.B. Construction Company v. Jennings Churella Services, Inc., 2001 WL 985106 (Del.Super. August 9, 2001).
Here, Littleton reasonably expected Pulse to satisfy CRM and was mislead. Pulse should have paid CRM from the payments which it received. Because of problems with Pulse, Littleton has paid more money than was due under their home contract. Littleton's retention of the benefit of CRM's services is not unjust under these circumstances.
Considering the foregoing, IT IS HEREBY ORDERED that:
1) On Count 1, a mechanic's lien judgment in rem is entered against Littleton's property referenced in paragraph 1 in the amount of $37,693.77 together with pre-judgment and post-judgment interest from January 19, 2006, at the legal rate together with costs.
2) On Counts III and IV, for money due CRM from the Littleton job and elsewhere, an in personam judgment is entered against Pulse in the amount of $47,585.77 together with prejudgment interest from January 19, 2006, and post-judgment interest at the legal rate plus costs. CRM is also entitled to reasonable attorneys fees under the Pulse agreement, and the Court will award them based upon an affidavit from counsel.
3) On Littleton's cross claim, judgment is entered in personam against Pulse in the amount of $37,693.77 together with prejudgment and post-judgment interest from January 19, 2006 at the legal rate together with costs.