American Standard Homes Corp. v. Reinecke

• Decision Date: 08 January 1993
• Docket Number: 920254,Nos. 920242,s. 920242
• Court: Virginia Supreme Court
• Parties: AMERICAN STANDARD HOMES CORPORATION v. Ralph REINECKE, Trustee, et al. Ralph REINECKE, Trustee, et al. v. AMERICAN STANDARD HOMES CORPORATION. Record

Page 515

425 S.E.2d 515

245 Va. 113

AMERICAN STANDARD HOMES CORPORATION v. Ralph REINECKE, Trustee, et al.

Ralph REINECKE, Trustee, et al. v. AMERICAN STANDARD HOMES CORPORATION.

Record Nos. 920242, 920254.

Supreme Court of Virginia.

Jan. 8, 1993.

Ann T. Burks, Richmond (Charles F. Sievers, Manassas, Hunton & Williams, Richmond, Smith and Davenport, Manassas, on briefs), for appellant.

John S. Stump, McLean (Joseph W. Wright, III, McLean, David Hugh Boyd, Fairfax, McGuire, Woods, Battle & Boothe, McLean, on brief), for appellees.

Present: CARRICO, C.J., COMPTON, WHITING, LACY, HASSELL and KEENAN, JJ. and POFF, Senior Justice.

POFF, Senior Justice.

These two appeals challenge selected portions of a decree entered in a chancery cause consolidating 27 bills of complaint to enforce mechanic's liens. One suit was withdrawn below.

In six suits, the issue raised on appeal is whether the furnishing of replacement materials under a purchase order and invoice, more than 90 days after the last day of the month in which the materials required by a materialman's contract with an owner-developer were furnished, advances the materialman's right to perfect a mechanic's lien for the debt due under that contract. With respect to the other 20 suits, the parties agree that the memoranda of liens were timely filed.

In each of the 26 suits, the parties frame two additional questions, that is, (a) whether a materialman's right to a mechanic's lien includes interest on the unpaid cost of materials furnished at a rate fixed in its contract in excess of the legal rate, and (b) whether that right includes attorney's fees for collection of the debt as provided in the contract.

In 1983, American Standard Homes Corporation (American Standard), a manufacturer of prefabricated homes, entered into a basic contract to sell C.D.H. Corporation (CDH) a number of different model homes for erection on lots located in several subdivisions. The price of each model and that of any accessory or extra parts required to adapt a chosen model to a particular site or customer preference was set out in the general contract. For each new project, the parties entered into a "material order contract". This second contract designated the model and listed the "extras" required. In that contract, CDH agreed to pay interest on any debt delinquent for more than 30 days at an annual rate of 18% and "all expenses incurred in collecting same, including 25% attorney's fees." The material order contract also provided:

This is THE COMPLETE AGREEMENT BETWEEN THE PARTIES. There are no written or oral agreements or understandings directly or indirectly connected with this agreement that are not incorporated herein unless they are put in writing, signed by the parties and attached hereto.

In the summer of 1983, American Standard began delivery of the homes CDH ordered. Each was shipped in two separate packages of materials including the "extras" listed in the material order contract. The first, a "dry-in" package, contained structural units such as walls, roof components, and staircases. The second, a "trim" package, included cabinets, appliances, and similar items. American Standard billed CDH upon delivery of each package.

Shortly after the first of the year 1984, CDH discontinued operations, leaving 49 homes in different stages of completion. American Standard filed memoranda of mechanic's liens against 27 properties in January and February and, in April and May, suits to enforce those liens. The chancellor consolidated those suits and suits filed by other lien claimants and referred the cause to a commissioner in chancery.

The commissioner conducted hearings in 1985 and 1986 and, with the consent of the parties, considered the deposition of Irvin L. Davis, Jr., American Standard's credit manager, in lieu of his ore tenus testimony. That deposition and exhibits introduced in evidence show that, pursuant to "purchase orders" made by CDH and invoices issued by American Standard, certain materials were delivered to each of six projects more than 90 days after the materials and "extras" designated in the respective material order contracts had been delivered.

In the court below, the complainant contended that the 90-day time limitation for filing memoranda of mechanic's liens prescribed by Code § 43-4 did not begin to run until the last day of the month in which the additional materials were delivered. The respondents took the position that the time limitation began to run upon delivery of the materials designated in the material order contracts and, hence, that the filing of the memorandum of mechanic's lien in each of the six cases was untimely.

In a report filed in April 1991, the commissioner found:

There were instances in some of these cases wherein a written contract was fulfilled and thereafter, more than 90 days from the end of the month in which the final delivery under the contract was made, it was discovered that some of the items, after delivery, had been lost, damaged or stolen and these specific items were reordered. In such cases the defense has taken the position that the lien was lost on the original order.

However, your Commissioner takes the view that the fulfillment of the contract had no bearing on the time within which the lien could be preserved. [T]he furnishing of the replacement materials advanced the date on which materials were last delivered and thus the date on which the lien could be claimed was advanced and ... thus the original order could be claimed in the lien.

The commissioner also found that the several mechanic's liens to which American Standard was entitled included interest on the debt at the rate of 18% per annum, but no attorney's fees. In a final decree entered November 26, 1991, the chancellor overruled all exceptions filed by the parties, confirmed the commissioner's report, and held that all of American Standard's 26 liens were enforceable.

A group of 29 parties to the consolidated cases, including owners of lots affected by American Standard's mechanic's liens and trustees or beneficiaries of deeds of trust recorded on those lots (collectively, Reinecke), filed a petition for appeal challenging the ruling that American Standard's memoranda of mechanic's liens in six cases were timely filed and that all 26 liens included interest at 18% per annum. American Standard filed a petition for appeal challenging the ruling denying its claim for attorney's fees. We granted both petitions and consolidated the appeals, and we will consider these questions in sequence.

I. REVIVAL OF LIEN

The chancellor adopted and applied the commissioner's conclusions that the materials delivered under the purchase orders were materials last furnished within the intendment of the perfection statute and, hence, that the six liens were timely filed. While we accord a chancellor's findings of fact great weight, we are not bound by his applications of principles of law to those findings. "The rule of law with reference to the weight to be given to the findings of the commissioner, where the evidence taken before him is conflicting, can hardly have any application to this case where the conclusion is entirely one of law." Sterling v. Trust Co., 149 Va. 867, 876, 141 S.E. 856, 858 (1928); accord Morris v. United Virginia Bank, 237 Va. 331, 338, 377 S.E.2d 611, 614 (1989); Hill v. Hill, 227 Va. 569, 577, 318 S.E.2d 292, 296 (1984).

Insofar as relevant to the six cases in issue, Code § 43-4 (Repl.Vol.1990) as written when the commissioner filed his report provided:

A general contractor, or any other lien claimant ..., in order to perfect the lien given by § 43-3, shall file ... not later than ninety days from the last day of the month in which he last ... furnishes material ... a memorandum showing ... the amount and consideration of his claim, and the time or times when the same is or will be due and payable, verified by the oath of the claimant....

A lien created by Code § 43-3 is one in derogation of the common law. Once perfected in accordance with § 43-4, the lien can be enforced by suit brought as provided in §§ 43-17 and -22. In Virginia, provisions of the enforcement statutes are to be construed liberally while the requirements of the perfection statute are to be construed strictly.

[T]here exists a hopeless diversity of opinion as to whether mechanics' lien statutes should receive a liberal or strict construction. We believe the correct rule, deducible from the language and purposes of our statute and the decisions of this court with respect to it is, that there must be a substantial compliance with the requirement of that portion of the statute which relates to the creation of the lien; but that the provisions with respect to its enforcement should be liberally construed.

Francis, et als. v. Hotel Rueger, 125 Va. 106, 121, 99 S.E. 690, 694 (1919); accord Rosser v. Cole, 237 Va. 572, 576, 379 S.E.2d 323, 325 (1989); Mathews v. Meyers, 151 Va. 426, 430, 145 S.E. 352, 354 (1928); Clement v. Adams Bros.-Paynes Co., 113 Va. 547, 553, 75 S.E. 294, 296 (1912). "[U]nless [a mechanic's lien] is perfected within the proper time and in the proper manner, as outlined by the statute, it is lost." Wallace v. Brumback, 177 Va. 36, 40, 12 S.E.2d 801, 802 (1941); accord United Masonry, Inc. v. Riggs National Bank, 233 Va. 476, 480, 357 S.E.2d 509, 512 (1987); Furst-Kerber Cut Stone Co. v. Wells, 116 Va. 95, 99, 81 S.E. 22, 24 (1914); Trustees Franklin Street Church v. Davis, 85 Va. 193, 194-95, 7 S.E. 245, 246 (1888).

On brief, American Standard argues that the material order contracts "were open ended devices" and that, because "each contract contemplates both extras and multiple purchase orders", the materials acquired under purchase orders were, for purposes of the filing limitation prescribed by the perfection statute, materials last furnished under those contracts. ¹

We disagree. Each material order contract contained blank...