Opinion
No. 90-E-50.
Decided July 1, 1991.
Jon Hapner, for applicant Highland Stone Division.
Carroll McKinney, for the administratrix.
Ronald Swonger, for Highland Enterprise Lumber Co.
Kevin Greer, for Edward and Cora Hamilton.
This cause is before the court on an application by Highland Stone Division, a creditor of the estate of Billy R. Gilbert, deceased. The estate is insolvent and the applicant creditor claims a priority over other unsecured creditors by virtue of a mechanic's lien filed against the real estate of Ed and Cora Hamilton for materials furnished. Highland Stone Division has been accorded an unsecured creditor classification by the fiduciary under R.C. 2117.25(I) and will share pro rata in any available assets unless it can obtain a secured claim classification.
A brief recital of the facts is as follows:
On October 2, 1989, the Hamiltons contracted with Billy R. Gilbert, d.b.a. B.R.G. Construction, for the construction of a house. Gilbert died on February 9, 1990 without completing the project, but was owed $4,000 for work performed. Gilbert owed Highland Stone Division $6,343.83 for material furnished to the site. Approximately three months after Gilbert's death, James Brown was engaged by the Hamiltons to complete the project. Brown completed the project with material provided by Highland Stone Division in May 1990 for which material Highland Stone Division was paid. Highland Stone Division filed a mechanic's lien on the Hamiltons' property on July 23, 1990, stating that it had furnished concrete and stone commencing October 13, 1989 pursuant to a contract with Gilbert, d.b.a. B.R.G. Construction, now deceased, and James Brown, the subsequent contractor.
Because of the mechanic's lien on the Hamiltons' property, Highland Stone Division claims the $4,000 the Hamiltons owe the estate should be paid to it instead of to the estate. There is no question that unless the mechanic's lien creates a priority, Highland Stone Division remains a general unsecured creditor. The validity of the mechanic's lien is being challenged by the fiduciary and other general unsecured creditors.
If the mechanics lien is valid, what are the legal consequences? The mechanic's lien is wholly a creature of statute. It is a lien that attaches to the land and buildings of the owner. It is only an additional right to resort to the real property of the owner to satisfy a debt. It is the property which provides the security for the debt. Gustafson v. Buckley (1953), 96 Ohio App. 115, 54 O.O. 212, 121 N.E.2d 280. It is not a lien on the $4,000 that the Hamiltons owe the estate of Gilbert. Materialmen who enhance a structure have the right to be paid out of the structure and the land upon which it stands rather than go uncompensated. Bullock v. Horn (1886), 44 Ohio St. 420, 7 N.E. 737.
If the owner fails to obtain a performance bond from the contractor, the question posed is which of two innocent parties should sustain the loss if the contractor fails to pay laborers or materialmen; the legislature, by enacting the lien statutes, has decided that the loss should fall on the owner because, among other things, it is the owner who puts the contractor in charge and holds him out as worthy of credit. Gimbert v. Heinsath (1896), 11 Ohio C.C. 339.
The analogy to a secured creditor of the estate is inapplicable to this case. A creditor who has a mortgage on real estate of the deceased is a secured creditor because his lien is on the land of the deceased. The lien created by the mechanic's lien is not on any property of the deceased, but on property of the owner. Nothing in the mechanic's lien statutes permits extension of the mechanic's lien to amounts owed the decedent's estate from the owner. It merely provides an additional remedy in the event the materialman does not receive complete satisfaction from the contractor. The procedure provided by statute is foreclosure of the mechanic's lien.
Although the preceding is dispositive of the issue before the court, the additional issue of the validity of the mechanic's lien in question has been raised. Limiting the following to the issue of priority of claims and recognizing that any court that has jurisdiction to consider the foreclosure of the mechanic's lien must make its own determination of the validity of such mechanic's lien, this court concludes that the mechanic's lien filed herein does not constitute a valid lien on the Hamiltons' property and thus lends no priority on the fund owed to the Gilbert estate by the Hamiltons.
The joint exhibits show that on February 1, 1990, Highland Stone Division by letter to B.R.G. Construction stated: "* * * We regret to inform you that your account with Highland Stone Division of Davon Inc. is now closed. * * *" Highland Stone Division's billing to B.R.G. Construction dated February 8, 1990 indicated that it was for "Transactions Processed Thru: 1/31/90." Gilbert died on February 9, 1990. Highland Stone Division continued to send billings to B.R.G. Construction monthly thereafter, but showed no additional materials being furnished. Only finance charges were being added to the bill. The last such billing was June 8, 1990.
The joint exhibits also reveal that on May 8, 1990 and continuing through May 24, 1990 Highland Stone Division delivered material to the construction site and charged the same under a new account to Jim Brown. These billings bear a new account number, 94951, while the B.R.G. Construction account number was 288140. On June 8, 1990, Highland Stone Division billed Jim Brown for "Transactions processed thru: 5/31/90" on account number 94951 and on the same date, billed B.R.G. Construction on account number 288140 for "Transactions processed thru: 5/31/90."
Obviously, Highland Stone Division recognized a new contractor and a new account. Highland Stone Division also recognized the Hamiltons' responsibility as owners of the property by letter of May 31, 1990 to the Hamiltons in which it stated that "* * * Charges * * * to this property during the fall of 1989 remain unpaid. This delinquent balance is $6,621.54. * * *"
In order for the material to be lienable, claimant has the burden to show an entire and continuing contract. Claimant has failed to do this. Tacking to prolong the statutory time for filing a mechanic's lien or to give a single lien for materials sold at different times under separate contracts, though for the same job, is not permitted. Otherwise, any uncompleted project could be completed months or years later by a different contractor and the statutory time limit of sixty days would have no meaning. Highland Stone Division by its own records did not treat the transaction as one running account, but two separate accounts.
Highland Stone Division's suggestion that since all the material it furnished was for the same job the time for filing a mechanic's lien runs from the time the last material is furnished was rejected in Settle Builders Supply Co. v. Frankel-Shore Partnership (1974), 42 Ohio Misc. 13, 71 O.O.2d 96, 326 N.E.2d 271. In Settle, supra, the principal contractor abandoned the job four months before a new contractor came on the scene. The materialman was well aware of this fact.
In the case before the court, Highland Stone Division knew that Gilbert died and that the contract was abandoned more than sixty days before it, Highland Stone Division, furnished more material under a new contract.
Where "* * * the contract has been abandoned by the principal contractor all contractual relations between the contractor and his subcontractors, laborers and materialmen are abrogated and liens for labor and materials furnished should be filed within sixty days after the last labor was performed or materials furnished prior to such abandonment. A contract entered into with the owner after the original contractor has abandoned his contract is a separate contract." Demann, Ohio Mechanic's Lien Law (2 Ed. 1953) 221-222, Section 9.11.
Authority cited by Highland Stone Division does not contradict the holding herein. The cases it cites deal with one general contract where delay in providing final material was justified or a small quantity of material was furnished at a later date, but was necessary for the completion of the project. In those cases, one contractor and one continuous contract dominated the facts, contrary to the case before this court.
In Daneman v. Union Lumber Coal Co. (App. 1926), 4 Ohio Law Abs. 663, cited by Highland Stone Division, the head contractor and the subcontractor lumber company had but one general contract. In the instant case, Billy Gilbert died February 9, 1990 and could not have had any connection with Jim Brown or the Hamiltons thereafter.
Sunbeam Heating Co. v. Dukes (C.P. 1928), 27 Ohio N.P. (N.S.) 103, indicates a single contractor, but a necessary later change in furnace piping which extended the time for filing the mechanic's lien.
These cases involve proceedings to foreclose mechanics' liens against the property owner. Such is not the case before the court. The filing of a valid or invalid mechanic's lien against the owner of the property creates no lien on assets due the estate of the deceased contractor, Billy Gilbert.
An unsecured creditor does not become secured against the estate of a deceased contractor by virtue of a mechanic's lien against a property owner.
The result is that the Hamiltons must pay the estate of Billy Gilbert $4,000. Highland Stone Division will share pro rata with other unsecured creditors. The remedy for any deficiency is against the owner of the property, enforceable by foreclosure of the mechanic's lien.
Judgment accordingly.