2 Ton Plumbing, L.L.C. v. Thorgaard

• Decision Date: 30 January 2015
• Docket Number: No. 20120390.,20120390.
• Citation: 779 Utah Adv. Rep. 6
• Parties: 2 TON PLUMBING, L.L.C., Appellee/Cross–Appellant, v. Gregory THORGAARD; Kendra Thorgaard; Washington Federal, Inc., dba Washington Federal Savings, et al., Appellants/Cross–Appellees.
• Court: Utah Supreme Court

779 Utah Adv. Rep. 6

2 TON PLUMBING, L.L.C., Appellee/Cross–Appellant,

v.Gregory THORGAARD; Kendra Thorgaard; Washington Federal, Inc., dba Washington Federal Savings, et al., Appellants/Cross–Appellees.

No. 20120390.

Supreme Court of Utah.

Jan. 30, 2015.

Reversed and remanded.

[345 P.3d 677]

David R. Nielson, Tracy A. Wilder, Salt Lake City, for appellee.

Ronald G. Russell, Royce B. Covington, Jeffery A. Balls, Salt Lake City, for appellants.

Associate Chief Justice NEHRING authored the opinion of the Court, in which Chief Justice DURRANT, Justice PARRISH, Justice LEE, and Judge KELLY joined.Associate Chief Justice NEHRING, opinion of the Court:

INTRODUCTION

¶ 1 This case involves interpretation of various provisions of the 2009 Mechanics' Liens statute. Specifically, we are asked to consider (1) whether attorney fees and other costs may be included in the value of a mechanics' lien, (2) when a notice of release of lien and substitution of alternate security is timely filed, and (3) whether the attorney fees award was reasonable.

¶ 12 On January 28, 2011, the Thorgaards moved to dismiss two counts of 2 Ton's third amended complaint-the lien foreclosure claim, and the claim that the lien release and substitution of alternate security was invalid. The Thorgaards contended that their lien release was valid because they properly submitted a cash deposit in the amount of 200 percent of 2 Ton's original lien claim and thus fully complied with the pertinent section of the Mechanics' Liens statute, Utah Code section 38–1–28. They argued that a mechanics' lien claim is limited to the “value of the services rendered, labor performed, or materials or equipment furnished or rented” and attorney fees and costs are not included in this amount. The Thorgaards also argued that the amended notice of lien was invalid and “unenforceable” because it was untimely filed and “moreover ... [could] not be used to trigger a requirement for more security than what is required under

[345 P.3d 679]

section 38–1–28.” After briefing and oral argument on the matter, the district court denied the Thorgaards' motion to dismiss. The Thorgaards appeal in part from that denial.

¶ 13 Ten days after the hearing on the motion to dismiss, on June 13, 2011, 2 Ton recorded a second amended notice of mechanics' lien against Lot 30 in the amount of $38,714.98. The second amended notice of lien alleged, again, that $7,147.41 of this amount was for improvements to the property while the remaining sum consisted of lien fees, interest, late fees, costs, and attorney fees.

¶ 14 As the litigation continued, the Thorgaards and Developers continued to dispute the validity of the lien on the basis that 2 Ton had been overpaid for its work. Ultimately, on December 5, 2011, the Thorgaards stipulated to a finding of fact that the value of the services rendered, labor performed, or materials or equipment furnished or rented by 2 Ton that had not been paid on Lot 30 was $7,147.41.

¶ 15 Following the Thorgaards' stipulation, 2 Ton submitted affidavit testimony and exhibits to support its claim for attorney fees. 2 Ton alleged that it had incurred $37,019.53 in attorney fees and $1,543.56 in costs prosecuting its lien against Lot 30. The Thorgaards contested 2 Ton's claim for attorney fees on the basis that the amount was unreasonable, that attorney fees should be allocated to those defendants who caused 2 Ton to incur the majority of those fees, and that attorney fees should be awarded on a per capita basis against all fourteen lots in the development.

¶ 16 On March 19, 2012, the district court entered a ruling and order on the award of attorney fees, and on April 16, 2012, it entered a judgment against Lot 30 in the amount of $57,972.42. The judgment included $7,147.41 in principal, $1,287.50 in costs, $110 for a lien filing fee, $4,569.81 in interest, and $44,857.70 in attorney fees. The Thorgaards also appeal from this judgment.

ISSUES AND STANDARDS OF REVIEW

¶ 17 The Thorgaards and Washington Federal raise three issues on appeal. First, they contend that the district court erred by ruling that attorney fees and costs are properly included in a mechanics' lien and therefore erroneously found their notice of release of lien and substitution of alternate security was invalid. A district court's interpretation of relevant statutory provisions is reviewed for correctness, giving “no deference to the district court's decision.” ²

¶ 18 Second, the Thorgaards argue that the district court erroneously held that 2 Ton's amended notices of lien were timely filed. Because we hold that the amended notices of lien were invalid, we do not address this issue.

¶ 19 Finally, the Thorgaards challenge the district court's award of $44,957.70 in attorney fees. A district court's calculation of attorney fees will not be overturned absent a showing that the district court abused its discretion.³

¶ 20 2 Ton raises one issue on cross-appeal. It argues that the district court erred by allowing Washington Federal to record its notice of release of lien and substitution of alternate security more than ninety days after the original owner of Lot 30 was served with a summons and complaint in the lien foreclosure action. We review questions of statutory interpretation for correctness, granting no deference to the district court's decision.⁴

ANALYSIS

¶ 21 “Mechanics' liens are statutory creatures unknown to the common law.” ⁵ The Utah Mechanics' Liens statute is to be “liberally construed” to effect its purpose,

[345 P.3d 680]

which is “to provide protection to those who enhance the value of a property by supplying labor or materials.” ⁶ Of course, “[w]hile it is true that our statutes are to be liberally construed to give effect to their purpose and to promote justice,” we note that “it is equally true that they should not be distorted beyond the intent of the legislature.” ⁷ Most statutes, including this one, are the result of a legislative balancing of “competing policy considerations.” ⁸ Accordingly, we begin our analysis with the plain language of the statute. In so doing, we read the plain language of the Mechanics' Lien Act “as a whole and interpret its provisions in harmony with other provisions in the same statute.” ⁹ This is because a statute “is passed as a whole” and “[c]onsequently, each part or section should be construed in connection with every other part or section so as to produce a harmonious whole.” ¹⁰ However, “where the statute fails, courts cannot create rights, and should not do so by unnatural and forced construction.” ¹¹ “[A] lien created solely by statute depends on the terms of the statute....” ¹² Because a mechanics' lien is a “statutory creature,” we begin with a review of the relevant statutory provisions of the Mechanics' Liens statute.

¶ 22 In 2012, the “Mechanics' Liens” section of the Utah Code was renumbered, amended, and partially repealed. The current statutory provisions now appear under the chapter name “Preconstruction and Construction liens,” and can be found in the Utah Code at section 38–1a–101 through section 38–1a–804. Of particular note, two sections central to this case, Utah Code sections 38–1–16 and 38–1–17 (2009), were repealed by the Utah Legislature in 2012. This case involves the 2009 version of the Utah Code. Because “we apply the law as it exists at the time of the event regulated by the law in question,” ¹³ we will refer to the 2009 version of the Mechanics' Liens statutes throughout.

¶ 23 Under section 38–1–3 of the Utah Code, a subcontractor “shall have a lien upon the property upon or concerning which they have rendered service, performed labor, or furnished or rented materials or equipment for the value of the service rendered, labor performed, or materials or equipment furnished or rented.” ¹⁴ A lien “attach[es] as of the date of the commencement of the first work on the improvement or structure involved,” ¹⁵ but in order to perfect the lien, a lien claimant must follow the procedures dictated by the statute.¹⁶

¶ 24 Section 38–1–7 of the Utah Code provides that a lien claimant “shall file” a “written notice to hold and claim a lien.” ¹⁷ Subsection 38–1–7(2)(a) specifies further that a lien claimant's notice of lien “shall” set forth, among other things, the “amount of the lien claim.” ¹⁸ The lien claimant must file the completed notice of lien with the county recorder no later than “180 days after the day on which occurs final completion of the original contract.” ¹⁹ And, “[w]ithin 30 days after filing the notice of lien, the lien claimant shall deliver or mail ... a copy of the notice of lien

[345 P.3d 681]

to (i) the reputed owner of the real property; or (ii) the record owner of the real property.” ²⁰

¶ 25 After filing the notice of lien, section 38–1–11 requires that the lien claimant record a lis pendens with the county recorder and “file an action to enforce the lien,” both within 180 days from the day on which the lien notice was filed.²¹ If that action is successful, “[t]he court shall cause the property to be sold in satisfaction of the liens and costs.” ²² “Costs” include “the costs of preparing and recording the notice of claim of lien and such reasonable attorneys' fee as may be incurred in preparing and recording said notice of claim of lien.” ²³ In terms of attorney fees, the statute specifically provides that the “successful party” in an action to enforce a mechanics' lien “shall be entitled to recover a reasonable attorneys' fee, to be fixed by the court, which shall be taxed as costs in the action.” ²⁴ The Act further provides that the court has the power to apportion costs between a contractor and an owner, “but in all cases each subcontractor exhibiting a lien shall have his costs awarded to him,” including reasonable attorneys' fees.²⁵

¶ 26 Utah Code section 38–1–28 sets forth procedures by which a party disputing a lien's validity may release the lien and clear the subject...