OSCN Found Document:H2K TECHNOLOGIES v. WSP USA
NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.
¶1 This cause concerns an action to foreclose a materialman's lien filed on property located in Garvin County, Oklahoma. Wynnewood Refining Co., LLC (Wynnewood or owner) is the owner of an oil refinery located in Garvin County, Oklahoma (Property). On or about March 2, 2004, the owner, what is now Wynnewood, entered into an Environmental Services Agreement with the original contractor, what is now WSP USA, Inc. (WSP or original contractor), to provide labor and materials to improve the Property.1 Thereafter, on or about August 28, 2018, WSP entered into a subcontract with Techsas, Inc., (Techsas or subcontractor) to provide labor and materials to improve the property (Techsas Contract). The Techsas Contract contained a waiver clause whereby Techsas waived all liens and claims, statutory or otherwise, resulting from the labor done and materials furnished on the project. The waiver clause also required Techsas to insert a similar waiver clause into any subcontracts it engages in. The parties agree that sometime in 2019, Techsas entered into a subcontract (H2K Contract) with the plaintiff/appellant, H2K Technologies, Inc., (H2K or materialman) to provide materials and labor to improve the property.
¶2 WSP received a total of three invoices from Techsas for the work it performed on the project and claims to have paid the first and second invoices on January 7, 2019 and February 11, 2019, respectively. Techsas filed for bankruptcy protection on February 13, 2019, two days after the second invoice was paid. Thereafter, H2K sent an invoice to Techsas dated February 14, 2019, in the amount of $116,280.00. In addition, H2K sent an invoice to WSP Environment & Energy (WSP E&E) on March 5, 2019, in the amount of $4,500.00.2 Each invoice contained a provision for charging a monthly interest rate of 1.5% on past due invoices. When Techsas failed to pay H2K, the materialman served a preliminary lien notice on Wynnewood, Techsas and WSP which indicated the estimated price of the provided labor, services, equipment or materials was $120,780.00. On May 6, 2019, H2K filed a lien statement in the office of the Garvin County Clerk. The statement claims a lien in the amount of $120,780.00 plus interest after March 6, 2019, at a monthly rate of 1.5%, plus attorney fees and filing costs. On September 20, 2019, H2K filed its petition to foreclose the lien.
¶3 On January 3, 2020, the defendants, WSP, as principal, and Fidelity and Deposit Company of Maryland, as surety, submitted a bond in the amount of $150,975.00 to discharge the lien pursuant to 42 O.S. Supp. 2019, § 147.1. WSP and Fidelity were substituted as defendants and H2K dismissed Wynnewood as a defendant in this action which resulted in an in rem action against the bond. After H2K objected to the bond amount, an additional $14,535.00 was placed into a trust account.
¶4 Both plaintiff and defendants filed competing motions for summary judgment. On February 26, 2021, the trial court ruled in favor of the defendants' motion and denied the plaintiff's motion. First, it ruled that although the Techsas Contract was governed by New York law, which prohibits waiver clauses, contract provisions that subject a construction contract to the laws of another state are against public policy in Oklahoma pursuant to 15 O.S. 2011, § 821(B)(1). Next, the trial court ruled H2K is charged with constructive notice of the subcontract between Techsas and WSP and because Techsas had waived its rights to all liens and claims, H2K could not "obtain any greater rights" than the subcontractor Techsas. It held, H2K did not have a legal right to impress a lien on the Property and H2K's May 6, 2019 lien statement did not constitute a valid or proper lien. The trial court exonerated and discharged the bond and directed the surety to return all sums to WSP. The court also released the amounts held in the trust account to WSP. Enforcement of the order was stayed by the court for ten days.
¶5 H2K filed its petition in error on March 19, 2021. It asserted it had a valid lien for labor and materials and Techsas could not waive H2K's statutory right to a lien without H2K's knowledge and consent. H2K further asserted 15 O.S. 2011, § 821(B)(1) provides it is against public policy of this state for a construction contract to have "[a] provision, covenant, clause or understanding in, collateral to or affecting a construction contract that disallows or alters the rights of any contractor or subcontractor to receive and enforce any and all rights under this act."3 On March 22, 2021, this Court retained the matter on its own motion.
STANDARD OF REVIEW
¶6 Although a trial court in making a decision on whether summary judgment is appropriate considers factual matters, the ultimate decision turns on purely legal determinations, i.e., whether one party is entitled to judgment as a matter of law because there are no material disputed factual questions. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. Therefore, as the decision involves purely legal determinations, the appellate standard of review of a trial court's grant of summary judgment is de novo. Id.
ANALYSIS
¶7 The trial court held, as a matter of law, H2K had no right to file a lien. Therefore, the court determined the many objections to the alleged uncontroverted facts in the parties' motions for summary judgment were not material to the resolution of the issues presented.4 H2K does not assert on appeal that the trial court erred in granting summary judgment because there were disputed genuine issues of material fact. However, because today we reverse the order granting summary judgment, we remand the matter to the trial court wherein the parties will have an opportunity to conduct discovery and pursue a trial if necessary. We retained this appeal to only decide the limited issues of law presented, i.e., 1) what effect, if any, does a waiver of lien clause in a subcontractor's contract with the original contractor have upon a materialman who was not a party to that contract; and 2) do the provisions of 15 O.S. 2011, § 821(B)(2) prohibit such clauses from being placed in a construction contract.
1. The waiver of lien clause in the subcontractor's contract with the original contractor does not automatically flow down to the materialman, thereby waiving such materialman's statutory entitlement to file a mechanics' and materialmen's lien.
¶8 Section 143 of title 42 of the Oklahoma Statutes governs liens filed by a subcontractor as well as liens filed by those employed as an artisan or day laborer by a subcontractor and those who furnish material or equipment to such subcontractor.5 The purpose of the lien statute is to protect subcontractors who provide labor and services, secure payment of claims, and give notice to owners of the intent to file a lien in a definite amount. Biantrav Contractor, LLC, v. Condren, 2020 OK 73, ¶4, 489 P.3d 522, 523. Liens for material and labor are entirely of statutory creation. Holloman v. Britton, 1959 OK 187, ¶11, 346 P.2d 941, 944. Statutory liens, such as mechanics' and materialmen's liens, stand in derogation of the common law and therefore must be strictly confined to the ambit of the enactment giving it birth. Riffe Petroleum Co. v. Great Nat. Corp., Inc., 1980 OK 112, ¶5, 614 P.2d 576, 579. The terms prescribed by statute cannot be ignored; they are the measure of the right and of the remedy. Id.
¶9 Section 143 provides both the entitlement to file a lien as well as limitations on that entitlement. It provides in pertinent part (emphasis added):
Any person who shall furnish any such material or lease or rent equipment used on said land or perform such labor as a subcontractor, or as an artisan or day laborer in the employ of the contractor, may obtain a lien upon such land, or improvements, or both, from the same time, in the same manner, and to the same extent as the original contractor, for the amount due for such material, equipment and labor, as well as any applicable profit and overhead costs due to the person; and any artisan or day laborer in the employ of, and any person furnishing material or equipment used on said land to, such subcontractor may obtain a lien upon such land, or improvements, or both, for the same time, in the same manner, and to the same extent as the subcontractor, for the amount due for such material, equipment used on said land and labor, as well as any applicable profit and overhead costs due to the person . . . . Provided further, that the owner of any land affected by such lien shall not thereby become liable to any claimant for any greater amount than he contracted to pay the original contractor.
In the present case, Techsas, a subcontractor of the original contractor, WSP, subcontracted with H2K to provide materials and labor to be used on the land of the owner, Wynnewood. Thereafter, H2K filed a lien pursuant to § 143 when Techsas failed to pay. The defendants assert H2K cannot file a lien. Its argument appears to be as follows: 1) pursuant to § 143, H2K can only have a lien to the "same extent" as Techsas and Techsas waived its lien in its subcontract with WSP, therefore, H2K cannot have any greater right to file a lien than Techsas; 2) it has long been established in Oklahoma that a subcontractor is charged with notice of the "original contract" and therefore, H2K had constructive notice of the lien waiver clause in the Techsas Contract (a subcontract); and 3) the lien waiver provision flows down to H2K and it is bound by it.
¶10 In support of their argument, the defendants cite Treece v. Carpenter, 1923 OK 569, ¶7, 222 P. 230, and assert that a subcontractor only has a lien "in the same manner, and to the same extent as the original contractor." The cited paragraph, however, provides:
[M]aterialmen and subcontractors shall have a lien, to the same extent as the original contractor, for the amount due him for such material and labor furnished. The contractor has a lien to the extent of the contract price, and therefore, under this statute, all of the persons, together, furnishing labor and material, would have a lien to the extent of the contract price. (emphasis added).6
First, the defendants misconstrue the term "extent" in § 143. They interpret "extent" to mean the right or ability to file a lien. However, we have long defined "extent" to mean the obligation of the owner to pay the original contractor under the original contract. This interpretation is consistent with the limitations placed on a lien in § 143, i.e., "the owner of any land affected by such lien shall not thereby become liable to any claimant for any greater amount than he contracted to pay the original contractor." In Consolidated Cut Stone Co. v. Seidenbach, 1937 OK 701, 75 P.2d 442, we examined the "extent" language in a previous version of § 143. We held that a "lien is granted the subcontractor 'to the same extent' it is granted the contractor. The proviso limiting the liability of the owner to subcontractors to the amount he contracted to pay the contractor is but another way of saying that the liens of the subcontractor and the contractor are 'to the same extent' and subject to the same limitations." Id. ¶24, 75 P.2d at 449. The owner's obligation to pay under the original contract "is the primary and controlling question." Id. ¶27, 75 P.2d at 449. We determined "[i]n every case there must be liability to the original contractor." Id. In some cases and based upon the terms of the original contract, we acknowledged an owner may be obligated to "no extent" upon a breach of the contract or failure to perform. Id. Section 143 also provides:
[A]ny artisan or day laborer in the employ of, and any person furnishing material or equipment used on said land to, such subcontractor may obtain a lien upon such land, or improvements, or both, for the same time, in the same manner, and to the same extent as the subcontractor, for the amount due for such material, equipment used on said land and labor, as well as any applicable profit and overhead costs due to the person . . . .
Likewise, such materialman would have a lien to the same extent as the subcontractor, which, as discussed above, is to the same extent as the original contractor, and is limited by the amounts due him or her under § 143 and shall not exceed the owner's obligation to the original contractor under the original contract.
¶11 Without any evidence that H2K actually agreed to limit its entitlement to file a lien, the "extent" of its lien is limited by § 143 and cannot exceed Wynnewood's obligation under the original contract, i.e., no "greater amount than [Wynnewood] contracted to pay the original contractor [WSP]." The extent of that obligation is pursuant to the original contract. The cases cited by the defendants only serve to reiterate this point and provide no support for the argument that a subcontract, rather than the original contract, controls the extent of the owner's obligation.
¶12 Next, the defendants assert "Oklahoma's courts have long held the rights of a subcontractor are controlled by the original contract and that the subcontractor is charged with notice of the terms of said contract." In support of this argument, they cite Hudson Huston Lumber Co., v. Parks, 1923 OK 313, ¶26, 215 P. 1072, 1075, wherein we quoted the following from William Mack, LL.D., Vol. 27 Cyclopedia of Law and Practice 93 (1907):
As a general rule the right of subcontractors, materialmen, and workmen to a lien is controlled by the terms of the original contract. They are chargeable with notice of the terms of such contract.7
The defendants rely on this quote to establish H2K had constructive notice of the Techsas Contract and therefore it was bound by it. However, the "chargeable with notice" language relates to the original contract. Again, this is because the original contract is what controls the obligation of the owner. The Techsas Contract is a subcontract between the original contractor and the subcontractor; it is not the original contract, nor does it appear that H2K was a party to its formation or execution. In addition, even if H2K's knowledge of the waiver of lien clause was relevant to the disposition of this matter, the clause required Techsas to place a similar lien waiver in any subcontracts it might make. Neither party claims the H2K Contract had such a provision. We do not find that under the authority presented H2K, as a matter of law, was charged with notice of the Techsas Contract and bound by its waiver of lien clause.
¶13 Lastly, the defendants assert the waiver of lien clause flows down from the Techsas Contract and is binding upon H2K. This argument is based upon two federal district court opinions that are neither precedential nor persuasive. In United Tunneling Enterprises, Inc., v. Havens Const. Co., 35 F. SupP.2d 789, 792 (D. Kan. 1998), a prime contract provided for liquidated damages to be paid upon a delay in the contractor's performance. The contractor entered into a subcontract. This subcontract contained a "pass through, flow-down or conduit provision" which provided the subcontractor agreed to be bound by the terms of the prime contract to the extent those terms applied to the work of the subcontractor. Id. at 794. The court determined such flow down provisions mean "'the same rights and duties should flow equally from the owner down through the general contractor to the subcontractor, as well as flowing from the subcontractor up through the general contractor to the owner.'" Id. at 795 (quoting Industrial Indemnity Co., v. Wick Construction Co., 680 P.3d 1100, 1103 (Alaska 1984)). The other case relied upon is Plum Creek Wastewater Auth. v. Aqua-Aerobic Systems, Inc., 597 F. SupP.2d 1228 (D. Colo. 2009). Therein, the court upheld the flow down provisions in the prime contract as well as in the purchase order which was agreed to by the supplier. The purchase order stated the "[s]upplier agrees to abide by all applicable terms and conditions of the General Contract between the Owner and the Prime Contractor, and warrants that the material covered by this agreement conforms to the requirements thereof." Id. at 1231-32. These cases are distinguishable from the present matter. In both cases the affected subcontractor or supplier agreed to be bound by the terms of the prime contract through a flow down provision. Here, there is no evidence that H2K ever agreed to a flow down provision that would bind it to the terms of the Techsas Contract.
¶14 The defendants have failed to provide any authority supporting its argument that H2K is bound by the terms of a subcontract to which it was not a party. In determining any limitation on a mechanics' and materialmen's lien, the primary and controlling document is the original contract and no authority has been presented to support that a subcontract is given the same status. Further, this Court has been opposed to the idea that parties to a contract could waive the statutory rights of third persons who were not parties to such contract. See Thacher v. Int'l Supply Co., 1936 OK 136, ¶ 7, 54 P.2d 376, 378-79 (in discussing a "non-lien" provision in a contract between an owner and well drillers we determined, "we know of no rule of law permitting parties to so contract with each other as to do away with the statutory rights of third persons not parties to the contract."); Metro. Water Co. v. Hild, 1966 OK 96, 415 P.2d 970, 977 (Berry, J., specially concurring) ("The right to claim a lien is a privilege granted by statute and the party to whom such right is extended unquestionably may waive the privilege.").
¶15 The essence of the subcontractor mechanics' and materialmen's lien statute has changed little since its enactment.8 The language that a subcontractor, etc., may obtain a lien "from the same time, in the same manner, and to the same extent as the original contractor" and the language limiting the liability of the owner have been in the statute since its inception. Although the statute has been interpreted to allow a subcontractor to file a lien against the owner's property even though the owner may have no knowledge of the subcontractor,9 there is no indication it allows a party to waive the lien rights of third persons who are not a party to a contract that attempts to waive such rights. The statute allows a lien "for the amount due for such material, equipment used on said land and labor, as well as any applicable profit and overhead costs due to the person" but also provides the owner "shall not become liable to any claimant for any greater amount than he or she contracted to pay the original contractor." We hold, a party may waive their own statutory right to file a lien, otherwise, such right is limited by the provisions of § 143. There being no evidence that H2K ever waived its right to file a lien, it therefore was not prohibited from filing its lien solely based upon the fact that Techsas had waived its right in its subcontract with the original contractor.
2. The provisions of 15 O.S. 2011, § 821(B)(2) are not applicable to mechanics' and materialmen's liens and therefore do not make all lien waivers invalid as a matter of public policy in Oklahoma.
¶16 H2K asserted in its surreply that a lien waiver clause is invalid pursuant to 15 O.S. 2011, § 821(B)(2). In its petition in error H2K states the trial court erred by ignoring 15 O.S. 2011, § 821(B)(1), but quotes language from § 821(B)(2). Section 821(B) provides:
B. The following are against this state's public policy and are void and unenforceable:
1. A provision, covenant, clause or understanding in, collateral to or affecting a construction contract that makes the contract subject to the laws of another state or that requires any litigation, arbitration or other dispute resolution proceeding arising from the contract to be conducted in another state; and
2. A provision, covenant, clause or understanding in, collateral to or affecting a construction contract that disallows or alters the rights of any contractor or subcontractor to receive and enforce any and all rights under this act.
The language in (B)(1) is applicable to H2K's earlier argument that the Techsas Contract, which was to be governed by New York law, would be against public policy. The trial court did not ignore H2K's arguments on that point and agreed that the governing law provision was void and against public policy and held this action would therefore be governed by Oklahoma law. However, the trial court did not overtly rule upon what affect, if any, subsection (B)(2) would have on the outcome of this case.
¶17 Subsection (B)(2) provides, it is against public policy for a provision in a construction contract to disallow or alter the rights of any contractor or subcontractor to receive and enforce any rights under this act. The act it is referring to is a two section act composed of sections 820 and 821 of title 15 of the Oklahoma Statutes.10 Unlike the provisions of subsection (B)(1), subsection (B)(2) only relates to enforcing rights under this act. The purpose of the act is to provide deadlines on progress payments to contractors and subcontractors, to allow suspension of work upon non-payment, and to make provisions for resumption of work upon certain conditions being met.11 Subsection (B)(2) would prohibit a contract from restricting enforcement of these provisions. We do not find that subsection (B)(2) is clearly meant to apply to mechanics' and materialmen's liens which are found in title 42 of the Oklahoma Statutes. The act covers a specific subject, and if the intent of the Legislature was to make it applicable to such liens it should be made manifest in language of plain and unambiguous meaning, not left to conjecture, or implication, especially in matters declaring a public policy. Therefore, we cannot agree with H2K's assertion that its provisions also apply to mechanics' and materialmen's liens which are not part of this act.
CONCLUSION
¶18 We hold that under the limited issues of law presented to this Court, H2K, without further evidence, was not bound by the waiver of lien clause in the Techsas Contract. We also hold that the provisions of 15 O.S. 2011, § 821(B)(2) are not applicable to mechanics' and materialmen's liens. We reverse the trial court's order granting summary judgment and remand for further proceedings consistent with this opinion.
APPEAL PREVIOUSLY RETAINED;
TRIAL COURT REVERSED AND REMANDED FOR FURTHER
PROCEEDINGS
¶19 Darby, C.J., Kane, V.C.J., Kauger, Winchester, Edmondson, Combs, Gurich, and Kuehn, JJ., concur.
¶20 Rowe, J., concurs in part, dissents in part.