Henderson & Russell Associates, Inc. v. Warwick Shopping Center, Inc.

• Decision Date: 24 November 1976
• Docket Number: No. 751306,751306
• Citation: 217 Va. 486,229 S.E.2d 878
• Court: Virginia Supreme Court
• Parties: HENDERSON & RUSSELL ASSOCIATES, INC. v. WARWICK SHOPPING CENTER, INCORPORATED. Record

Page 878

229 S.E.2d 878

217 Va. 486

HENDERSON & RUSSELL ASSOCIATES, INC. v. WARWICK SHOPPING CENTER, INCORPORATED.

Record No. 751306.

Supreme Court of Virginia.

Nov. 24, 1976.

J. Davis Reed, III, Norfolk, for appellant.

Raymond H. Suttle, Newport News (Richard S. Gordon, Jones, Blechman, Woltz & Kelly, P.C., Newport News, on brief), for appellee.

Before I'ANSON, C.J., and CARRICO, HARRISON, COCHRAN, HARMAN, POFF and COMPTON, JJ.

COCHRAN, Justice.

Building & Design, Inc., the general contractor, entered into a contract in 1973 to complete a partially constructed theater building in the City of Newport News for the owner, Warwick Shopping Center, Incorporated (Warwick), for $105,700. After payments in the aggregate amount of $72,626.83 had been made to the general contractor by Warwick, the general contractor defaulted in February, 1974, when the project was approximately 25% Unfinished. Thereafter, a subcontractor, Henderson & Russell Associates, Inc. (Henderson), timely filed a memorandum of mechanic's lien for the balance due it by the general contractor, had copies of the memorandum served on the general contractor and on Warwick and instituted this chancery cause to enforce its lien against the property.

The facts were stipulated. The balance payable by the general contractor to Henderson for work completed on the building, after allowing credit for unfinished work and certain materials recovered from the job site pursuant to a separate law action in detinue, was the sum of $25,534.56, with interest from February 27, 1974. The balance payable by Warwick to the general contractor under the contract if the contract had been satisfactorily completed was $33,073.17. Warwick, which had neither completed the building nor contracted to have it completed at the time of trial some eighteen months after the general contractor defauled, had received from another contractor an estimate of $75,000 for the cost of completion.

On these facts the trial court ruled, without giving reasons for the ruling, that Henderson's lien was not inforceable. Henderson has appealed from the final decree entered on August 21, 1975, which dismissed its bill of complaint and awarded judgment to Warwick.

Under the provisions of Code § 43--7, ¹ the lien of a subcontractor is limited to the amount in which the owner is indebted to the general contractor, at or after the time the owner is given notice of the subcontractor's claim. Mills v. Moore's Super Stores, Inc., 217 Va. 276, 278--79, 227 S.E.2d 719, 722 (1976).

Henderson contends that Code § 43--16 ² is controlling, and that Warwick cannot avail itself of any setoff for cost of completion unless the building has been completed within a reasonable time. Warwick argues that the uncontradicted evidence that the cost of completion by another contractor would substantially exceed the balance payable under the contract if the general contractor had fully performed establishes that the owner, at or after the time of receiving written notice of the subcontractor's claim, was not indebted to the general contractor and, therefore, under Code § 43--7 was not liable to Henderson.

Both Henderson and Warwick rely principally on Knight v. Ferrante, 202 Va. 243, 117 S.E.2d 283 (1960). In that case the owners took possession of their newly constructed house but withheld the last payment of $6,400 to the general contractor because, they alleged, he had not completed the work and until he had done so they owed him nothing. Construing Code §§ 43--7 and 43--16, we held that the owners, who denied any liability to the subcontractors who were seeking to enforce mechanics' liens, had the burden of going forward with evidence to show what claims, if any, the owners had against the...