Stephenson v. Ketchikan Spruce Mills, Inc. , 412 P.2d 496 ( 1966 )

DIMOND, Justice.

Appellee sold building materials to a corporation, Evergreen, Inc. Evergreen used the materials to prefabricate portions of a house, and then sold the materials as a “house package” to a contractor who constructed a house for appellant, State Manor, Inc., on lot 4 of the State Manor Subdivision.

Appellee was not paid for the materials it sold. It gave notice of a claim of a ma-terialmen’s lien on lot 4, and subsequently brought this action to foreclose the lien. A judgment of foreclosure of the lien was entered, and appellants brought this appeal. The principal question for our decision is whether appellee’s lien had been discharged by payment of the debt for which the lien was claimed.

Evergreen had several accounts with ap-pellee. The sum of $3,239.71, referred to as the State Manor account, was owed for materials purchased by Evergreen which found their way into the house constructed on lot 4 of the State Manor Subdivision. Appellee’s claim of lien on lot 4 was recorded on March 5, 1962. On June 27, 1962 William Campbell, the business manager of Evergreen, paid appellee the sum of $11,-244.44. At Campbell’s request appellee applied $3,239.71 of this amount in full payment of the State Manor account. On July 6, 1962 Campbell notified appellee that the directors of Evergreen had not approved payment of the State Manor account. He requested appellee to void the June 27 credit and apply the $3,239.71 to the open book accounts of Evergreen, which appellee did.

Evergreen had the right, with the manifested assent of appellee, to change application of the $3,239.71 payment from the State Manor account to Evergreen’s open book accounts with appellee,¹ provided that the rights of third parties would not be jeopardized or injuriously affected.² No such third party rights are involved here. The money used by Evergreen to pay ap-pellee did not come from the corporate appellant, State Manor, Inc., nor from the individual appellants, Stephenson, Foster and Diggins, but rather from other of Evergreen’s accounts receivable having nothing to do with the State Manor Subdivision. There is no showing that after Evergreen’s payment was applied'to the State Manor account that the appellants did anything in reliance on such payments so that it would be unjust to permit Evergreen and appellee to agree to the reapplication of the payment to other accounts. Since the reapplication of such payment was made by the mutual consent of Evergreen and appellee, and appellants’ rights were not jeopardized or injuriously affected, neither the State Manor debt nor the lien on lot 4 was discharged by Evergreen’s initial direction to apply its payment to the State Manor account.

We agree with the principles of law, referred to by Justice Rabinowitz in his dissenting opinion, which pertain to the discharge of a secured obligation and of a surety by the initial allocation of a payment of a debt, notwithstanding a subsequent reallocation of such payment. We simply believe that such legal principles should not be applied in this situation where to do so would give the State Manor Corporation a windfall to which it is not entitled. It would be unjust, we believe, to relieve that corporation of its lien obligation to pay the State Manor account where the corporation was the ultimate user and owner of the materials represented by such account and had paid nothing for such materials.

Nor was the State Manor debt discharged by an accord and satisfaction, as appellants claim. An accord is a contract between a creditor and a debtor for the settlement of the creditor’s claim by some performance other than that which is due.³ No such contract existed between appellee and appellants, or between appellee and Evergreen. The performance that was due was payment of the State Manor account. It was not agreed that there would be any substituted performance for such payment.

Appellants contend that the appellee’s lien was invalid because the claim of lien was not verified in accordance with AS 34.35.070 (c) (5) which requires that a lien claim “be verified by the oath of the claimant or another person having knowledge of the facts.”

Appellee’s lien claim was executed as follows : .

KETCHIKAN SPRUCE MILLS, INC.

By: /S/ Lyle E. Anderson

LYLE E. ANDERSON, Manager

Immediately below Anderson’s signature was the following:

UNITED STATES i OF AMERICA l ss: STATE OF ALASKAJ

LYLE E. ANDERSON, being first duly sworn, upon oath deposes and says:

That he is the Manager of KETCHI-KAN SPRUCE MILLS, INC. and makes this verification for and on behalf of said corporation; that KETCHIKAN SPRUCE MILLS, INC. is the claimant named in the foregoing claim of lien; that he has read the same and knows the contents thereof, and that the same is true of his own knowledge.

SUBSCRIBED and SWORN to before me this 5th day of March, 1962.

/S/ Veryl B. Lekander Notary Public in and for Alaska

My Commission expires: 9/28/64

It is the lack of Anderson’s signature on the line following the form of oath that appellants contend invalidates the lien.

AS 34.35.500 provides that the intent of' the lien statutes “is remedial and * * * [should] be liberally construed.”⁴ Substantial compliance with the verification requirement is sufficient.⁵ There is substantial compliance here. The form of oath followed by the words “subscribed and sworn to before me * * * ”, and the notary public’s signature, amounts in substance to a certificate by the notary that the claim of lien was verified by the oath of Anderson. The claim of lien ⅛ not ineffective by reason of any insufficiency in the requirement for verification.

In order to perfect its lien, appellee was required by statute to file its claim of lien within 90 days after it ceased to furnish materials for the building on lot 4 of the State Manor Subdivision.⁶ Appellants contend that the claim of lien was not filed until after the 90 day period had expired and, therefore, that the lien was lost.

The lien claim was filed of record on March 5, 1962. The trial court found that appellee had furnished materials for the building on lot 4 as late as December 6, 1961, which was within 90 days of the date the lien claim was filed. We cannot say that such a finding is clearly erroneous, which we would have to do in order to set the finding aside.⁷ The evidence supports the court’s finding. Materials furnished on December 6 consisted of some hand rail brackets costing $1.50 and aluminum storm doors and weather stripped thresholds costing $39.35. The fact that the cost of those items is small in comparison with the over-all cost of the building does not defeat appellee’s lien where it appears, as it does here, that the furnishing of the materials on December 6 was done in good faith and in the normal course of business, and not for the purpose of extending the time to file a claim of lien.⁸

Appellants’ final point is that the court erred in holding the appellants, Stephenson, Foster and Diggins, individually liable for payment of the State Manor account. Those individual appellants and the corporate appellant, State Manor, Inc., pursuant to statute, had posted lot 4 with the notice of non-responsibility for liens.⁹ Appellee refused to furnish materials for the house to be constructed on lot 4 unless the appellants agreed to waive their notice of non-responsibility. The appellants and appellee then executed plaintiff’s exhibit 2, a document entitled “Waiver of Notice of Non-lien Liability”. In addition to waiving their rights under law pursuant to the notice of non-responsibility for liens, the appellants in this instrument agreed that they would pay for the building materials to be purchased from appellee, and in the event of non-payment, agreed that appellee would have the right to file a lien on lot 4. This instrument was signed on behalf of State Manor, Inc., and also individually by the .appellants, Stephenson, Foster and Diggins. On the basis of this document, the court concluded that the individual appellants, in addition to State Manor, Inc., were liable for the payment of the State Manor account.

The testimony of appellee’s manager, Lyle Anderson, indicated that plaintiff’s exhibit 2 did not reflect the actual intent of the parties, the intent of appellee having been not to hold the individual appellants personally responsible for the debt. When appellants’ counsel attempted to go into the •question of intent during the examination of the appellant, Diggins, the court sustained an objection by appellee’s counsel to such testimony on the ground that plaintiff’s exhibit 2 spoke for itself, and that since the document was unambiguous, parole evidence as to the understanding of the parties was inadmissible.

We believe the court was mistaken. The testimony of Anderson raised a question as to whether plaintiff’s exhibit 2, in providing for the individual responsibility of the appellants, Stephenson, Foster and Diggins, varied from the actual understanding of the parties but was nevertheless signed by appellee and appellant in ignorance of the variance. In such a situation the court ought to have allowed the admission of parole evidence to show mutual mistake, if it existed, and what the real intent of the parties was.¹⁰ If after having heard such evidence, the court should find the proof clear and convincing¹¹ that there was a variance between the true agreement and its written expression, the court should reform the writing to express the actual intention of the parties.¹²

To the extent that the judgment below imposes personal liability on the appellants, Stephenson, Foster and Diggins, it is set aside and the case remanded for further proceedings consistent with the views expressed in this opinion. In all other respects the judgment is affirmed.

1 . Restatement, Contracts § 392 (1932).

2 . Hart, Schaffner & Marx v. Vaugh, 17 Cal.App.2d 516, 62 P.2d 377, 378 (Dist.Ct.App.1936); Johnston v. Groom, 99 Cal. App. 462, 278 P. 935, 936 (Dist.Ct.App.1929); Pinney v. French, 67 Kan. 473, 73 P. 94 (1903); See Annot., 57 A.L.R. 2d 855, 865 (1958), supplementing 21 A.L.R. 704, 712 (1922).

3 . Restatement, Contracts § 417, comment a (1932).

4 . Clay v. Sandal, 369 P.2d 890, 896 (Alaska 1962).

5 . Lyons v. Howard, 16 N.M. 327, 117 Pac. 842 (1911); Ainslie v. Kohn, 16 Or. 363, 19 P. 97, 103 (1888).

AS 34.35.020, relating to the foreclosure of liens, provides in part as follows:

(a) No mistake in formality or lack of statement in the lien notice or the pleadings is ground for dismissal or unnecessary delay in an action to foreclose a lien.

(b) Substantial compliance with the law relating to the contents of the lien notice is considered sufficient, if the notice satisfactorily shows the name of the claimant, the amount of his demand, the time of his employment, the property sought to be charged with the lien sufficient for identification and the name of the owner or reputed owner of the property.

6 . AS 34.35.070(b).

7 . Civ.R. 52(a) provides in part that “[f] hidings of fact shall not be set aside unless clearly erroneous ⅜ *

Gilbert v. Sexton, 401 P.2d 300, 301-302 (Alaska 1965); Herning v. Wigger, 398 P.2d 1002, 1005 (Alaska 1965); Williams v. DeLay, 395 P.2d 839, 845 (Alaska 1964); First Nat’l Bank of Fairbanks v. Dual, 392 P.2d 463, 465 (Alaska 1964); Isaacs v. Hickey, 391 P.2d 449, 451 (Alaska 1964); George v. Willman, 379 P.2d 103, 106 (Alaska 1962); Nordin v. Zimmer, 373 P.2d 738, 741-42 (Alaska 1962); Rogge v. Weaver, 368 P.2d 810, 813 (Alaska 1962).

8 . Walsh-Anderson Co. v. Keller, 139 Mont. 210, 362 P.2d 533, 537 (1961); Christenson v. Behrens, 231 Or. 458, 372 P.2d 494, 498-499 (1962); Kirk v. Rohan, 29 Wash.2d 432, 187 P.2d 607, 609 (1947); Flint v. Bronson, 197 Wash. 686, 86 P.2d 218, 220 (1939).

9 . AS 34.35.065.

10 . Michael Rose Prod., Inc. v. Loew’s Inc., 141 F.Supp. 257, 261 (S.D.N.Y.1950); Murray v. Gadsden, 91 U.S.App.D.C. 38, 197 E.2d 194, 202, 33 A.L.R.2d 554 (1952); 9 Wigmore, Evidence § 2417 (3d ed. 1940).

11 . In Durkee v. Busk, 355 P.2d 588, 593 (Alaska 1960) we held that only clear and convincing evidence that a mistake has been made will justify a decree of reformation of a written agreement.

12 . Authorities cited note 10 supra.