Electric Supply Co. of Durham, Inc. v. Swain Elec. Co., Inc., No. 181PA90

• Decision Date: 02 May 1991
• Docket Number: No. 181PA90
• Citation: 403 S.E.2d 291,328 N.C. 651
• Court: North Carolina Supreme Court
• Parties: ELECTRIC SUPPLY CO. OF DURHAM, INC. v. SWAIN ELECTRICAL CO., INC., Davidson and Jones Construction Company, and Winstons Venture I, a North Carolina Partnership.

Page 291

403 S.E.2d 291

328 N.C. 651

ELECTRIC SUPPLY CO. OF DURHAM, INC. v. SWAIN ELECTRICAL CO., INC., Davidson and Jones Construction Company, and Winstons Venture I, a North Carolina Partnership.

No. 181PA90.

Supreme Court of North Carolina.

May 2, 1991.

On discretionary review of a decision of the Court of Appeals, 97 N.C.App. 479, 389 S.E.2d 128 (1990), reversing a judgment entered by Battle, J., in the Superior Court, Durham County, on 23 February 1989, declaring that the plaintiff had no claim against defendants by way of lien or subrogation and remanding the case to the trial division. Heard in the Supreme Court 12 December 1990.

Pulley, Watson, King & Hofler, P.A. by R. Hayes Hofler and Michael J. O'Foghludha, Durham, for plaintiff-appellee.

Manning, Fulton & Skinner by John I. Mabe, Jr., Raleigh, for defendant-appellants Davidson and Jones Const. Co. and Winstons Venture I.

Johnston, Taylor, Allison & Hord by James W. Allison and Greg C. Ahlum, Raleigh, for Carolinas AGC, Inc., amicus curiae.

Weinstein & Sturges, P.A. by L. Holmes Eleazer, Jr., and Fenton T. Erwin, Jr., Charlotte, for American Subcontractors Association, Inc., amicus curiae.

MEYER, Justice.

In 1986, defendant-appellant Winstons Venture I (hereinafter the "Owner") hired defendant-appellant Davidson and Jones Construction Company (hereinafter the "Contractor") to build a Comfort Inn motel in Durham. The Contractor in turn hired Swain Electrical Co., Inc. (hereinafter the "First-tier Subcontractor"), to install electrical systems in the project. The First-tier Subcontractor subcontracted with the plaintiff-appellee, Electric Supply Co. of Durham, Inc. (hereinafter the "Second-tier Subcontractor"), to supply electrical materials for incorporation into the construction project. See generally N.C.G.S. § 44A-17 (1989) (statutory definitions).

Beginning 9 December 1986 and continuing through 5 May 1987, the Second-tier Subcontractor supplied materials to the First-tier Subcontractor valued at $20,718.11, for which no payment was ever received. Meanwhile, due to the First-tier Subcontractor's failure to perform its obligations with the Contractor, disputes arose between the Contractor and the First-tier Subcontractor. On 18 May 1987, having not received payment for the materials supplied, the Second-tier Subcontractor filed and served on all defendants a notice of claim of lien and a claim of lien in the amount of $20,718.11. See N.C.G.S. §§ 44A-12, -19 (1989). At that same time, the First-tier Subcontractor abandoned the job. The First-tier Subcontractor was owed no money by the Contractor for work related to the Comfort Inn project. In fact, the Contractor has a claim against the First-tier Subcontractor (who at the time of trial was under the jurisdiction of the United States Bankruptcy Court) for breach of contract.

Finally, on 2 October 1987, the plaintiff Second-tier Subcontractor commenced enforcement of its claim of lien by filing suit as required by statute within 180 days of the Contractor's ¹ last furnishing of materials. See N.C.G.S. § 44A-13 (1989). Plaintiff filed this suit claiming any and all liens to which it is entitled under N.C.G.S. ch. 44A. On that same day, the Contractor posted a bond pursuant to N.C.G.S. § 44A-16(6), thereby canceling certain of plaintiff's liens.

The Contractor completed the project in late 1987 and sometime thereafter received a final payment from the Owner.

The trial court held that the plaintiff Second-tier Subcontractor's lien was limited to amounts owed by the Contractor to the First-tier Subcontractor at the time the plaintiff filed its lien, effectively denying plaintiff any relief. The Court of Appeals reversed, holding that N.C.G.S. § 44A-23 provides first-, second-, and third-tier subcontractors a right of subrogation to the lien of the contractor who dealt with the owner, regardless of any lien on funds. We agree.

The matter under review is the proper statutory interpretation of portions of article 2 of chapter 44A of the North Carolina General Statutes entitled "Statutory Liens on Real Property." The relevant statutory provisions at issue are N.C.G.S. §§ 44A-18 and -23.

N.C.G.S. § 44A-18 provides:

§ 44A-18. Grant of lien; subrogation; perfection.

....

(2) A second tier subcontractor who furnished labor or materials at the site of the improvement shall be entitled to a lien upon funds which are owed to the first tier subcontractor with whom the second tier subcontractor dealt and which arise out of the improvement on which the second tier subcontractor worked or furnished materials. A second tier subcontractor, to the extent of his lien provided in this subdivision, shall also be entitled to be subrogated to the lien of the first tier subcontractor with whom he dealt provided for in subdivision (1) and shall be entitled to perfect it by notice to the extent of his claim.

N.C.G.S. § 44A-18(2) (1989) (emphasis added). Since nothing was owed to the First-tier Subcontractor at or after the time that the Second-tier Subcontractor filed its lien claim, it is undisputed that, on the facts here, the Second-tier Subcontractor has no lien rights upon funds under N.C.G.S. § 44A-18.

N.C.G.S. § 44A-23 provides:

§ 44A-23. Contractor's lien; subrogation rights of subcontractor.

A first, second or third tier subcontractor, who gives notice as provided in this Article, may, to the extent of his claim, enforce the lien of the contractor created by Part 1 of Article 2 of this Chapter. The manner of such enforcement shall be as provided by G.S. 44A-7 through 44A-16. The lien is perfected as of the time set forth in G.S. 44A-10 upon filing of claim of lien pursuant to G.S. 44A-12. Upon the filing of the notice and claim of lien and the commencement of the action, no action of the contractor shall be effective to prejudice the rights of the subcontractor without his written consent.

N.C.G.S. § 44A-23 (1989) (emphasis added).

I.

The first issue that we must decide is whether the General Assembly, in adopting N.C.G.S. §§ 44A-17 to -23 in 1971, intended to carry forward in N.C.G.S. § 44A-23 the previously well-settled right of a subcontractor to a lien by subrogation to the lien rights of the contractor in the real property. ² Again, it is undisputed that N.C.G.S. §§ 44A-18 granted a new lien right to the subcontractor on certain funds and provided the subcontractor a right of subrogation to the rights of the contractor in specific circumstances. See N.C.G.S. § 44A-18(2), (3), (6) (1989). After examining the entire statutory scheme, we hold that the legislative intent was to continue the subcontractor's separate right in N.C.G.S. § 44A-23 to a lien by subrogation to the contractor's lien on the real property created by N.C.G.S. § 44A-8 (the contractor's lien).

In matters of statutory construction, our primary task is to ensure that the purpose of the legislature, the legislative intent, is accomplished. Hunt v. Reinsurance Facility, 302 N.C. 274, 288, 275 S.E.2d 399, 405 (1981). Legislative purpose is first ascertained from the plain words of the statute. See Burgess v. Your House of Raleigh, 326 N.C. 205, 209, 388 S.E.2d 134, 136 (1990). Moreover, we are guided by the structure of the statute and certain canons of statutory construction. See, e.g., Media, Inc. v. McDowell County, 304 N.C. 427, 430-31, 284 S.E.2d 457, 461 (1981) ("statutes dealing with the same subject matter must be construed in pari materia "); Builders, Inc. v. City of Winston-Salem, 302 N.C. 550, 556, 276 S.E.2d 443, 447 (1981) ("It is presumed that the legislature intended each portion to be given full effect and did not intend any provision to be mere surplusage"). Courts also ascertain legislative intent from the policy objectives behind a statute's passage "and the consequences which would follow from a construction one way or another." Campbell v. Church, 298 N.C. 476, 484, 259 S.E.2d 558, 564 (1979). "A construction which operates to defeat or impair the object of the statute must be avoided if that can reasonably be done without violence to the legislative language." State v. Hart, 287 N.C. 76, 80, 213 S.E.2d 291, 295 (1975). An analysis utilizing the plain language of the statute and the canons of construction must be done in a manner which harmonizes with the underlying reason and purpose of the statute. See In re Hardy, 294 N.C. 90, 96, 240 S.E.2d 367, 372 (1978).

When, after analyzing the text, structure, and policy of the statute, we are still in doubt as to legislative intent, we also examine the history of the legislation in question. See Cab Co. v. Charlotte, 234 N.C. 572, 576, 68 S.E.2d 433, 436 (1951). Changes made by the legislature to statutory structure and language are indicative of a change in legislative intent and therefore provide some weight in our analysis. Id. Amicus for Carolinas AGC, Inc., urges this Court to consider an attachment to the minutes of a House Committee on Judiciary III meeting held on 11 June 1985 as evidence of the legislature's intent in 1971. House Bill 1144, to which the minutes refer, is entitled "An Act to Clarify Filing Requirements for a Claim of Statutory Lien by a Subcontractor Dealing with One Other than the Owner of the Property." 1985 N.C.Sess. Laws ch. 702. A memorandum, written by the attorney who drafted the 1985 amendments to the statute contained in the bill, was attached to the minutes and may have been discussed in the meeting of the House Committee. The memorandum purports to describe the complete statutory scheme of N.C.G.S. §§ 44A-17 to -23 and suggests a legislative intent consistent with amicus' argument.

In determining legislative intent, this Court does not look to the record of the internal deliberations of committees of the legislature considering proposed legislation. Indeed, we have declared affidavits of members of the legislature who adopted statutes in question not to be competent evidence of the purpose and intended construction...