PLUMBING, INC. V. ARMSTRONG, 1987-NMSC-068,
106 N.M. 155, 740 P.2d 705 C & D (S. Ct.
1987)
C & D Plumbing, Inc., a New Mexico
corporation, and Texas
Street Lumber Company, a New Mexico corporation,
Plaintiffs-Appellants,
vs.
R. G. Armstrong, Leona C. Armstrong, his wife, et al.,
Defendants; Robert G. Armstrong and Leona C.
Armstrong, his wife, Third party
Plaintiffs-Appellees, v. C & D Plumbing,
Inc., et al., Third Party Defendants
SUPREME COURT OF NEW MEXICO
1987-NMSC-068, 106 N.M. 155, 740 P.2d 705
Appeal from the District Court of Eddy
County, Harvey W. Fort, District Judge
W. T. Martin, Jr., Carlsbad, New Mexico,
for Appellant C & D Plumbing.
Rosenberg, Murphy & Meyer, Robert N.
Meyer, Carlsbad, New Mexico, for Appellant Texas Street Lumber.
Dow & Williams, Lesley Williams,
Carlsbad, New Mexico, for Appellees.
{1} Third-party
plaintiffs-appellees Robert G. Armstrong and Leona C. Armstrong (Owners) were
granted summary judgment by the trial court in their defense of an action
brought by third-party defendants-appellants C & D Plumbing, Inc., and
Texas Street Lumber Company (Lien Claimants) to foreclose materialmen's liens
against the Owners' property. The Lien Claimants appeal, and we reverse the
trial court's judgment.
{2} The undisputed facts are
as follows. The Owners entered into a contract with Scott Bibby (Bibby), a
general contractor, whereby Bibby agreed to build the Owners' home in Carlsbad.
The contract price for the construction was $78,513.00, and the Owners agreed
to pay Bibby in "partial draws * * * as work is completed." Beginning
with a check dated April 26, 1985, the Owners paid Bibby $68,000 on the contract,
the last payment reflected in a check for
{*156}
$15,000 dated December 3, 1985, bearing the words, "To be applied to
total price of [Owners' residence], balance $10,513.00."
{3} The Lien Claimants
provided building materials to the Owners through Bibby costing a total of
$15,117.05. At some point in November 1985, the Owners asked one of the Lien
Claimants for a lien release, but were informed by the Lien Claimant that it
could not sign such a release until it had been paid what was owed to it for materials
already provided to the project. On January 10, 1986, Bibby abandoned the
project, and on January 16, 1986 he executed an unverified "Receipt and
Release," stating in pertinent parts: "[T]he contractor * * * does
hereby acknowledge receipt from * * * owners * * * of the payment of all
amounts due and owing for any construction, improvements, landscaping, or other
work done under the terms of said construction contract * * * in the total sum
of $68,000 and which sum is the total paid by the [Owners] for partial draws
and that the work is completed for which the said [contractor] has received
payment."
{4} On January 31, 1986 Bibby
filed a petition for voluntary bankruptcy under Chapter 7 of the United States
Bankruptcy Code. One Lien Claimant had recorded its lien on January 22, 1986,
and the other on January 30, 1986.
{5} The controlling statute
for this appeal is NMSA 1978, Section
48-2-10.1 (Cum. Supp.1985), and the
controlling case is
Aztec Wood Interiors, Inc. v. Andrade Homes, Inc.,
104 N.M. 45,
716 P.2d 236 (1986). The parties argue for differing
interpretations of the applicable law. The Owners argue that they are protected
from claims of lien by virtue of the language in Section 48-2-10.1 which reads,
"Payment by the owner * * * to any person entitled to * * * payment of all
amounts due and owing for any construction * * * the performance of which could
give rise to a lien pursuant to Section 48-2-2 * * * shall discharge all such
liens unless prior to such payment any person who is entitled to such lien has
filed for record his lien pursuant to Section 48-2-6 * * *." The Owners
contend that the words "all amounts due and owing" apply to the
partial payments they made to the contractor, and point to the receipt and
release as evidence of payment of "all amounts." The Lien Claimants,
on the other hand, argue that the words "all amounts due and owing"
mean full and final payment of the original contract price, and that since such
payment has admittedly not been made, the Owners can find no relief in Section
48-2-10.1.
{6} We agree with the Lien
Claimants as to this issue. In
Aztec Wood Interiors, Inc. v. Andrade Homes,
Inc., where we likewise construed Section 48-2-10.1, we held "Since
Aztec filed its lien after the Alcones made the
final payment on the
property, Subsection (A) discharges the Alcones from the lien * * *." 104
N.M. at 46, 716 P.2d at 237. (Emphasis added.) We have thus construed the words
"all amounts due and owing" in the statute to mean final payment, not
partial payment as here. The Owners' reliance on their contractor's receipt and
release, worded judiciously to conform with Subsection (A) of the statute, does
not provide the remedy for which the Owners argue.
{7} However, even if the
receipt and release did entitle the Owners to prevail on their claim that
partial payment equals "all amounts due and owing," there is a
further obstacle which the Owners cannot surmount -- namely, our interpretation
of Section 48-2-10.1 so as to apply to
innocent owners only.
Aztec Wood
Interiors, Inc., 104 N.M. at 47, 716 P.2d at 238. By innocent we meant
owners who had no notice, actual or constructive, of intervening claims by
unpaid materialmen. Whereas the contractor in
Aztec Wood Interiors gave
his owners an affidavit stating that there were no outstanding liens on the
property, here it is undisputed that the Owners knew of at least one
outstanding claim before they made the last payment to the contractor. The
Owners argue in their brief on appeal that "whether or not the Owners knew
of a possible lien is of no consequence," citing
Aztec as authority
for
{*157} such proposition, but the
Owners' reliance on that case is misplaced.
{8} Accordingly, we reverse
the judgment of the trial court, and remand the case to the trial court with
instructions to enter judgment in favor of the Lien Claimants.
WE CONCUR: MARY C. WALTERS and RICHARD E. RANSOM, Justices