In re Kiser
| Decision Date | 02 December 2003 |
| Docket Number | Bankruptcy No. 7-03-00001-WSA-7.,Adversary No. 7-03-00076. |
| Citation | 344 B.R. 423 |
| Parties | Jackson Vaughan KISER, Laura Christine Kiser, Debtors. Jackson Vaughan Kiser, et ux., v. Russell County, Virginia, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Virginia |
John M. Lamie, Abingdon, VA, for Debtors.
The issue before the Court is whether a mechanics' lien can be properly perfected against real property held as tenants by the entirety when only one of the owners was listed on the Memorandum of Mechanics' Lien.
Jackson and Laura Kiser ("Kisers") acquired by separate deeds two lots, apparently adjoining, in Russell County as tenants by the entirety with rights of survivorship. The Risers proceeded to build a house situated on one or both of these lots and purchased material for such purpose from Builders' Supermarket. Builders' Supermarket, shown variously even in its own pleadings and documentation as Builders' Supermarket, Inc., Builder's Super Market, Inc., Builders' Super Market of Abingdon, Inc. and Builder's Super Market, Inc. of Abingdon, Va., extended credit to the Risers after both Mr. and Mrs. Kiser signed as personal guarantors of the account. Their credit application listed Mr. Kiser as the customer and in a separate section designated as "Principal Owners", Mr. Kiser's name was listed as "Vaughan" and "Laura" (Mrs. Kiser) as "spouse's name". It is not clear from the form whether a spouse who is also a co-owner should be also or instead listed as a co-owner. The building permit for the construction obtained from Russell County indicated that Mr. Kiser was the owner. By signing the permit application Mr. Kiser certified that the information contained therein was correct and complete to the best of his knowledge, that the proposed work was authorized by the owner of record, and that he had been authorized by the owner to obtain the permit as his authorized agent.
Builders' Supermarket last provided materials to the Risers on October 5, 2001. On January 22, 2002 Builders' Supermarket recorded a Memorandum of Mechanics' Lien, using the very general property description contained in the building permit, and listing only Mr. Kiser as the owner, but then sent a letter via certified mail addressed to both Mr. and Mrs. Kiser notifying them of the action taken. On June 11, 2002 Builders' Supermarket filed a Bill of Complaint to enforce its lien in the Circuit Court of Russell County. On January 2, 2003 the Risers filed a Chapter 13 petition in this Court and on May 22, 2003 they filed this adversary proceeding seeking to have Builders' Supermarket's lien declared invalid.
In addition to Builders' Supermarket's lien of $9,791.83, New Peoples Bank has a first deed of trust against the property in the amount of $59,100 and United Way of Southwest Virginia has a second deed of trust against the property in the amount of $5,238.95. Russell County also has a lien against the property for unpaid real estate taxes of $870.30. Furthermore, Jackson R. Kiser, the father of the male debtor has a judgment lien docketed against the property for $7,414.00 and Superior Financial Services has a judgment lien in the amount of $510.86. Thus, the total amount of the liens docketed against this property with an assessed value of $65,000 is $82,925.95. The Debtors have not taken any action to attempt to avoid the judgment liens pursuant to Bankruptcy Code § 522.
The Debtors filed a Motion for Summary Judgment alleging that the complaint to enforce the Mechanics' Lien inaccurately described the property to which Builders' Supermarket supplied materials and that the Memorandum of Lien had a fatal defect in that it only listed one of the owners, Mr. Kiser, when the property was held by both Mr. and Mrs. Kiser as tenants by the entirety. The Debtors do not allege, nor does the Court find any evidence, that the failure of Builders' Supermarket to list Mrs. Kiser on the Memorandum of Mechanics' Lien has resulted in any surprise or prejudice to the Debtors or any of their creditors. After a hearing on the motion, the Court denied summary judgment from the bench, for reasons stated on the record, on the ground that the property description in the Complaint was inaccurate. The Court also rejected, for reasons stated on the record, Builders' Supermarket's defenses that the property was not conveyed to the Kisers as tenants by the entirety and that such creditor in any event was entitled to a lien against the interest on Mr. Kiser in the entireties property. The Court took under advisement the issue of whether the listing of only Mr. Kiser on the Memorandum was a fatal defect rendering Builders' Supermarket's lien invalid.
This Court has jurisdiction of this proceeding by virtue of the provisions of 28 U.S.C. §§ 1334(a) and 157(a) and the delegation made to this Court by Order from the District Court on July 24, 1984. This is a "core proceeding" pursuant to 28 U.S.C. 157(b)(2)(K).
Pursuant to § 43-4 of the Code of Virginia, a contractor or other mechanic's lien claimant may file a memorandum of lien at any time after the materials have been furnished but not later than ninety days from the last day of the month in which materials were furnished. The memorandum must be filed with the clerk of the court in the county or city in which the property is located and it must "show the names of the owner of the property sought to be charged." However, the General Assembly has explicitly stated that substantial compliance with § 43-4 is all that is required for a valid mechanics' lien. Section 43-15 states that "[n]o inaccuracy in the memorandum filed ... shall invalidate the lien, if the property can be reasonably identified by the description given and the memorandum conforms substantially to the requirements of sections 43-5, 43-8, and 43-10, respectively, and is not willfully false." In the case of Clement v. Adams Bros.-Paynes Co., 113 Va. 547, 553, 75 S.E. 294, 296 (1912) the Supreme Court of Virginia ) considered an earlier version of what is now § 43-15 of the Code of 1950. The earlier statute, section 2478 of the Code of 1904, provided that "[n]o inaccuracy in the account filed or in the description of the property to be covered by the lien, shall invalidate the lien". This language was in conformity with section 2476 of such Code, which required that a mechanic's lien claimant must file in the proper clerk's office "an account showing the amount and character of the work done or materials furnished, the payments made, if any, and the balance due, verified by the oath of the claimant or its agent." The Court held that the statute by its terms only referred to inaccuracies in the account and the description of the property. Accordingly, other deficiencies in the filing did not qualify for the beneficial effects of the "substantial compliance" statute and a strict conformity with other statutory requirements of the memorandum was necessary for it to be valid. The remarkable strictness of the Court's approach is demonstrated by its holding in that case that the affidavit of the corporate claimant's president was inadequate because he was identified as its president rather than its agent. Over the eloquent dissent of Justice Buchanan, the Court held that no lien had been obtained. Thereafter, the General Assembly amended section 2476 to delete the requirement of attaching a statement of account to the memorandum, and section 2478 to provide that any inaccuracy in the memorandum (rather than of the "account") or the property description would not invalidate the memorandum if it conformed "substantially" with the applicable statutory requirements. Thus, the current substantial compliance provision is broader than its predecessor which was interpreted in the Clement case.
The Virginia Supreme Court has addressed the issue of substantial compliance with respect to mechanics' liens. In Blanton v. Owen, 203 Va. 73, 122 S.E.2d 650 (1961), the Virginia Supreme Court acknowledged that substantial compliance with § 43-4 was sufficient. In that case a husband and wife owned certain real property as tenants by the entirety on which they constructed a house. At the time the house was being built, the lot and house were under contract to be sold to a third party. One of the suppliers of materials recorded a mechanics' lien on the property and listed the husband and the third party purchaser as the owner on the Memorandum of Mechanics' Lien. In a suit to enforce the mechanics' lien, the defendants argued that the lien was invalid because the memorandum did not list the record owners. The Court rejected this argument holding that, at the very least, the third party purchaser had an equitable interest in said property on which a lien could be perfected. The inclusion of "other names mentioned are immaterial." Id. at 78, 122 S.E.2d at 653. The Court concluded that "[t]he memorandum for a mechanics' lien substantially complied with § 43-4, and is good on its face." Id. at 77-78, 122 S.E.2d at 653. By holding that the names of the husband and wife were mere surplusage, the Court expressly avoided the issue confronted in the present case, "we do not reach the question of whether a mechanics' lien is enforceable against property owned as tenants by the entireties ... under a lien against the interest of one of the tenants." Id.
Neither Blanton nor any decision of the Virginia Supreme Court since has determined whether listing only one co-owner of property held as tenants by the entirety meets the substantial compliance requirement of § 43-15. However, two Virginia Circuit Courts have been confronted with this issue and both have reached the same conclusion, that the listing of one of the owners does not satisfy the substantial compliance requirement of § 43-15. In ...
To continue reading
Request your trial