
    Botzum Brothers Co. v. Brandau et al.
    
      Mechanics’ liens — Subcontractors and materialmen estopped from asserting liens, when — Owner paid contractor presenting receipted statements from materialmen — Receipts from materialmen fraudulently secured by contractor.
    
    1. Although the Mechanic’s Lien Law was enacted for the benefit of subcontractors and materialmen, among others, it cannot be availed of for their protection in cases where their conduct is such as to estop them from taking advantage of its provisions.
    2. Where materialmen accept the check of the head contractor in payment of their claims, and deliver their receipted accounts to him, so that he can exhibit them to the owner and thus collect balance due from the owner, and such owner, relying on the receipted accounts of the materialmen, and acting in good faith and in the exercise of ordinary care, pays the head contractor the entire balance due, without the sworn statement and certificate required by Section 8312, General Code, the materialmen are estopped from securing and enforcing liens against the owner, even though the checks given by the head contractor are on a bank where he has no funds and he absconds without making payment.
    [1] Mechanics’ Liens, 40 C. J. §430; [2] Id., §431.
    (Decided May 28, 1925.)
    Appeal: Court of Appeals for Summit county.
    
      Messrs. May é May, for plaintiff and for defendant Fairlawn Coal & Supply Co.
    
      Mr. Carl M. Myers and Mr. George McCamment, for defendant Hudson Lumber Co.
    
      Mr. E. C. Housel, for defendant Henry G. Brandau.
   Richabds, J.

The plaintiff’s action was brought for the purpose of foreclosing a lien claimed to exist in its favor by reason of materials furnished to the principal contractor. Two of the defendants set up similar claims by way of cross-petition. The answer of the owner, Henry G-. Brandau, contains averments which it is claimed show that the plaintiff and the cross-petitioners are estopped from securing mechanics’ liens. On the trial in the court of common pleas, the issues were found in favor of the owner, the court adjudging that the plaintiff and the defendant lien claimants were estopped from asserting liens against the owner and that they had waived the same. Thereupon the case was appealed to this court.

The essential facts in this case are not in controversy. They show that the defendant Henry G. Brandau is the owner of the premises, located in the city of Akron, and that he contracted with one Frank Fay to construct a building thereon. Brandau made various payments as the construction of the building proceeded. It is conceded that the plaintiff and the other lien claimants were material-men and had taken all proper steps to secure liens upon the premises.

On November 10, 1923, Fay, the contractor, asked the owner for money on his contract, and the owner inquired if he had paid the materialmen. The contractor replied that he had not, but that he had the statements of their accounts and was immediately going to pay them. Later in the day Fay returned and presented to the owner the receipted bills of all the lien claimants. The fact that the bills were paid was stamped upon the bills by the respective lien claimants and signed by them, and relying upon these receipts, Brandau, the owner, paid to Fay, the principal contractor, the balance due on the building, being $1,840. The amount so paid was more than sufficient to pay the claims of those who are now seeking to assert liens as materialmen. The evidence leaves no room for doubt that the receipted bills were given by the several lien claimants to Fay in order that they might be exhibited by him to the owner and thus permit him to draw the balance remaining due from the owner.

A few days after this amount was paid by the owner to the contractor, it developed that Fay had made the payments to the several lien claimants by his own personal check, given on a bank in which he had no account. These checks were deposited by the payees in other banks, and the payees did not learn for three or four days that Fay had no account in the bank on which the checks were drawn. Within a few days after the checks were given, Fay absconded, and the checks have never been paid.

After Brandau learned that Fay had absconded, he called the Botzum Bros. Company on the telephone and informed them of the fact, and they stated to him that they had received their pay; and the same situation exists with reference to another of the lien claimants, the Fairlawn Supply Company. The other lien claimant, the Hudson Lumber Company, did not discover until November 14 that the check given it was unpaid.

Under these facts the owner contends that he was misled by the receipts given by the lien claim-

ants showing that their claims had been satisfied, that he made the payments relying on their receipts, and that having made such payments they were estopped from procuring and enforcing liens. On the other hand, the plaintiff and the other lien claimants insist that under the mechanic’s lien statute any payments made by the owner were unlawfully made unless the contractor had first furnished the written sworn statement and certificate required by that statute.

Numerous decisions under mechanics’ lien laws leave no room for doubt that one who furnishes labor or material for the purpose of erecting a building may waive the right to secure a lien therefor, or may estop himself from the right to obtain such lien. Decisions to that effect may be found in various states under various mechanics’ lien laws. ~We call attention only to a few reported decisions.

In the case of Cote Brilliant Pressed Brick Co. v. Sadring, 68 Mo. App., 15, the identical question was involved, and it was there held that a material-man who executes a receipt showing payment in full for. material furnished for a building is estopped from asserting that the receipted payment is untrue, if the owner, acting honestly and without negligence, pays the contractor upon the faith of the receipt. To the same effect is Moon v. Brown, 172 Mo. App., 516, 158 S. W., 79, where it was held that the giving by the materialman to the contractor of a receipt in full for materials would operate as an estoppel, if the owner, relying upon the receipt, paid the amount due. A similar holding was made in West v. Pinkston, 44 Utah, 123, 138 P., 1152, Ann. Cas., 1916D, 1065. In the case of Fairbairn v. Moody, 116 Mich., 61, 74 N. W., 386, 75 N. W., 469, a subcontractor was held estopped to assert a mechanic’s lien as to payments that had been made by the owner to the contractor in reliance upon the subcontractor’s expressed desire that such payment should be made. In all essential particulars involved in the question now under consideration the mechanics’ lien statute of Michigan is similar to our own.

The principle under which the law of estoppel applies in cases of this character is stated with clearness and precision in 18 Ruling Case Law, 962, Section 104. The mandatory character of the statute cannot avail those who voluntarily relinquish its benefits.

The owner and the lien claimants were all innocent parties. The wrongful and fraudulent conduct of Pay, the contractor, has resulted in damage. The active conduct of the lien claimants in furnishing the contractor with written receipts, showing that they had received their pay in full, enabled him to defraud the owner. Under such circumstances, they ought, in justice and equity, to be estopped from asserting their claims against the owner. The decisions cited only apply and accentuate familiar principles of the law of estoppel.

It is insisted, however, that by virtue of the Mechanic’s Lien Law of Ohio (Section 8312, General Code) the claimants are not estopped, and in order to determine the merits of this contention it will be necessary to give a somewhat critical examination to the statute. So far as pertinent to the case now under consideration, the statute provides that the original contractor shall, whenever he desires to draw any money from the owner, make ont and give to the owner a statement under oath, showing the name of every person furnishing material and giving the amount, if any, which is due or to become due to them, which statement shall be accompanied by a certificate signed by every person furnishing material. The statute then gives a form of the sworn statement and certificate to be furnished, and then provides that, “In lieu of such certificate, there may be furnished a written waiver of lien, a written release or receipt.” It is apparent from this language that the waiver of lien, release, or receipt may only be used in lieu of the certificate. The statute further provides:

“And any payments made by the owner, part owner, or lessee, before such statements are made or without retaining sufficient money, if that amount be due or it is to become due, to pay the subcontractor, laborers or materialmen, as shown by the said statements and certificates, shall be considered illegal and made in violation of the rights of the persons intended to be benefited by this act, and the rights of such subcontractors, laborers and materialmen to a lien, shall not be affected thereby.”

The statute authorizes the principal contractor to furnish a receipt from a subcontractor or materialman, which shall have the same effect as a written waiver of lien or a written release, and it is clear that one who has executed a written waiver of lien, or a written release, which has been acted on by the owner, and the money disbursed by bim .in the exercise of ordinary care in reliance thereon, would be precluded from securing a lien. Tbe provision quoted from tbe latter part of tbe section, rendering certain payments illegal, can have no application to a claimant wbo bas executed a written release or a receipt, after tbe owner, in reliance thereon, has disbursed tbe amount due. Certainly tbe mechanic’s lien statute was enacted for tbe benefit and protection, among others, of subcontractors and materialmen; but it cannot be so construed as to be for tbe protection of those wbo certify in writing that they bave been paid in full, where such certificate results in a payment of tbe amount by tbe owner to tbe principal contractor, tbe owner being free from negligence and acting in good faith.

Although tbe owner in tbe present instance bad made disbursements of some $1,790, prior to November 10, 1923, be yet retained in bis possession an amount more than sufficient to pay tbe amounts asserted to be due tbe three lien claimants, so that tbe payments made prior to November 10 could in no sense be prejudicial to them.

This court, for tbe reasons given, reaches tbe conclusion that tbe various lien claimants are estopped from asserting liens agaipst tbe property, and that an order should be entered cancelling their respective liens.

Decree accordingly.

Williams and Young, JJ., concur.

Judges of the Sixth Appellate District sitting in place of Judges Pardee, Punk and Washburn, of tbe Ninth Appellate District.  