Gerard C. Wallace Co. v. Simpson Land Co.

Singley, J., delivered the opinion of the Court. This is but another skirmish in the continuing battle between subcontractors, general contractors, and owners. While the relationship between them may perhaps be clouded, it is clear that sometime in May 1967, The Simpson Land Company (Simpson) as owner, and News Construction Co., Inc. (News) as contractor, commenced construction of a Holiday Inn Motel at Parole, Maryland. 1 In June 1967, John A. Simpson, president of Simpson and Leopold B. Boeckl, president of News seem to have persuaded Gerard C. Wallace, president of Gerard C. Wallace Co., Inc. (the Wallace Company) to undertake the performance of the plumbing subcontract on the ⁷⁰⁴ project on the condition that 80% of the subcontract price would be paid upon completion, the remaining 20 % to be evidenced by a six-months promissory note, which would be paid from rentals, a proposal made necessary by Simpson’s cash position. The Wallace Company would further agree to execute a release of lien when the 80% had been paid and a note for the remaining 20% delivered.

Except that there was no reference to the source of funds for payment of the note, all of this was ultimately incorporated in the subcontract between News and the Wallace Company. It is the last provision which is the crux of this controversy. The Wallace Company performed its subcontract, signed a release of lien; received payment of 80% of the contract price, and News’ note for $26,000.00, the remaining 20 % of the contract price. When no payments in reduction of the note were received within 90 days of the completion of the work, the Wallace Company gave timely notice of its intention to assert a lien, and later filed its claim. 2 When six months had passed without payment, the Wallace Company filed a bill in equity in the Circuit Court for Anne Arundel County for the sale of the property to satisfy its lien.

We were told at argument that News by this time had become insolvent. From an order dismissing the bill of complaint, the Wallace Company has appealed. The Wallace Company advances a many-faceted argument in support of its position that it should have prevailed. In essence, however, its contention is that an owner cannot rely on a release of lien given for the sole purpose of permitting the owner to withdraw the balance of a loan commitment from a construction lender, and further, that the release of lien was not supported by consideration.

Unfortunately for the Wallace Company, we agree with what must have been the chancellor’s conclusion: that ⁷⁰⁵ this contention simply finds no support in the facts. The subcontract between News and the Wallace Company dated 21 June 1967 provided that the Wallace Company would perform the plumbing, heating, air conditioning and ventilation work for a base price of $130,000.00, and then provided: “Twenty per-cent of this contract to be withheld for six (6) months after completion. After 80% of the contract is paid, release of liens are to be executed. “Contractor to sign a promissory note for the remaining 20% of the contract price for a period of six (6) months from date of completion. “Contract price to be $130,000.00. In the event subcontractor does not make 15% Overhead and profit, the contract price to be increased to a maximum of $132,000.00.” It is undisputed that the Wallace Company had received $105,890.34 from News by 22 March 1968, and accepted News’ note dated 7 June 1968, due six months from date, for $26,000.00 with interest at