Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Development Co.

• Decision Date: 01 December 1989
• Docket Number: No. 890284-CA,890284-CA
• Citation: 784 P.2d 1217
• Court: Utah Court of Appeals
• Parties: KETCHUM, KONKEL, BARRETT, NICKEL & AUSTIN, d/b/a KKBNA Incorporated, a Utah corporation; Kent W. Walker and Michael V. Lee, a Utah partnership, d/b/a The Architectural Partnership; Sheldon L. Pollack Corporation, a California corporation; and Norbert W. Pieper, A.I.A., Inc., a California corporation, Plaintiffs and Appellants, v. HERITAGE MOUNTAIN DEVELOPMENT COMPANY, a Utah corporation, et al., Defendants and Respondents.

Page 1217

784 P.2d 1217

KETCHUM, KONKEL, BARRETT, NICKEL & AUSTIN, d/b/a KKBNA

Incorporated, a Utah corporation; Kent W. Walker and

Michael V. Lee, a Utah partnership, d/b/a The Architectural

Partnership; Sheldon L. Pollack Corporation, a California

corporation; and Norbert W. Pieper, A.I.A., Inc., a California corporation, Plaintiffs and Appellants,

v.

HERITAGE MOUNTAIN DEVELOPMENT COMPANY, a Utah corporation,

et al., Defendants and Respondents.

No. 890284-CA.

Court of Appeals of Utah.

Dec. 1, 1989.

David M. Wahlquist (argued), James J. Cassity, Merrill F. Nelson, Kirton, McConkie & Bushnell, Salt Lake City, Attorneys at Law for Pollack & Pieper.

Richard C. Cahoon, Marsden, Orton & Cahoon, Salt Lake City, for Nordic Constructors.

David R. Olsen (argued), Carl F. Huefner, Michael W. Homer, Suitter, Axland, Armstrong & Hanson, Salt Lake City, for respondent, Guar. S & L.

Richard L. Hill, Jeffrey R. Hill, Olsen, Hintze, Nielson & Hill, Provo, for respondent, Heritage Mtn.

Before BENCH, BILLINGS and GREENWOOD, JJ.

BILLINGS, Judge:

Appellants Sheldon L. Pollack Corp., Norbert W. Pieper, A.I.A., Inc. ("appellants"), among other lien holders, filed actions to foreclose their mechanics' liens recorded against property being developed as a ski resort in Utah County. The construction lender, Guaranty Savings and Loan Association ("Guaranty"), moved for partial summary judgment claiming its trust deed had priority over all mechanics' liens on the property. The lien holders opposed the motion and filed cross-motions for partial summary judgment on the priority issue. The trial court ruled in favor of Guaranty, and certified its order as final under Utah Rules of Civil Procedure 54(b). Appellants appeal the trial court's order on priority.

We set forth the relevant, undisputed facts before the trial court when it granted summary judgment in this mechanics' liens priority dispute. In October 1972, Wilderness Associates, the predecessor in interest of Heritage Mountain Development Co. ("Heritage"), began the planning and development of a ski resort. The master plan for the ski resort contemplated the common development of three contiguous parcels of property in Utah County: 110 acres owned in fee simple ("Fee Property"); 41 acres leased from the State of Utah ("Leased Property"); and 4500 acres of federal land under a special use permit ("Permit Property").

Between September 1978 and the summer of 1982, Heritage remodeled a barn for a headquarters, and installed sewer and water lines, built parking lots, and made other improvements on the Leased Property. During the same period of time, Heritage cut construction access roads, flagged ski trails and excavated, and performed soil tests on all three parcels. From early 1981 to the summer of 1982, appellants performed architectural, engineering, surveying, consulting, and planning services for the entire ski development.

On November 17, 1982, a mortgage lender obtained a Judgment and Decree of Foreclosure on the Fee Property. Heritage repurchased the Fee Property on June 29, 1983.

Beginning in April of 1983, an engineering firm surveyed and staked the boundaries of the property. In June 1983, Heritage obtained a predevelopment loan from Guaranty. To secure the loan, Heritage executed a trust deed on the property. Guaranty recorded the trust deed on September 15, 1983. At the time of this loan, Guaranty knew that appellants had performed extensive design work on the project. Between June and September of 1983, appellants and others resumed design work on the project.

The long-term financing for the ski development fell through and no additional on-site construction took place. Heritage abandoned the project by the summer of 1984 and left appellants and other contractors unpaid. The lien holders, including appellants, sued to foreclose their mechanics' liens and Guaranty opposed the suits by asserting its trust deed had priority over all mechanics' liens.

The district court held that "commencement of work," for the purpose of establishing priority under Utah Code Ann. § 38-1-5 (1988), requires "visible, on-site" improvements, and thus appellants' mechanics' liens did not attach prior to the

recording of Guaranty's trust deed. In addition, the court held the November 1982 foreclosure judgment on the Fee Property barred relation back of appellants' liens to on-site work performed on the property prior to the date of the foreclosure. The court also concluded that no on-site work occurred between the November 1982 foreclosure and the recording of Guaranty's trust deed on September 15, 1983, to which the liens could relate back. Appellants challenge each of the trial court's conclusions claiming the court should have held their mechanics' liens had priority over Guaranty's trust deed.

I. EFFECT OF OFF-SITE ARCHITECTURAL WORK ON MECHANICS' LIENS PRIORITY

Appellants claim that, under Utah Code Ann. §§ 38-1-5 and -10 (1988), their post-foreclosure, pre-trust deed, off-site design work on the project gives their mechanics' liens priority over Guaranty's trust deed. We disagree.

Under Utah law, architects' services are lienable. Utah Code Ann. § 38-1-3 (1981) expressly provides for liens for architectural services:

[L]icensed architects and engineers and artisans who have furnished designs, plats, plans, maps, specifications, drawings, estimates of cost, surveys or superintendence, or who have rendered other like professional service, or bestowed labor, shall have a lien upon the property upon or concerning which they have rendered service, performed labor, or furnished or rented materials....

Guaranty does not challenge the validity of the appellants' liens, but claims its trust deed has priority over all valid mechanics' liens under the statutory scheme. Priority of mechanics' liens, including architectural liens, is governed by Utah Code Ann. § 38-1-5 (1988), which provides:

The liens herein provided for shall relate back to, and take effect as of, the time of the commencement to do work or furnish materials on the ground for the structure or improvement, and shall have priority over any lien, mortgage or other encumbrance which may have attached subsequently to the time when the building, improvement or structure was commenced, work begun, or first material furnished on the ground....

Lien statutes are construed broadly in order to achieve their protective purpose. AAA Fencing Co. v. Raintree Dev. & Energy Co., 714 P.2d 289, 291 (Utah 1986); Interiors Contracting, Inc. v. Navalco, 648 P.2d 1382, 1386 (Utah 1982). Further, the phrase "commencement to do work" is construed in favor of the lien claimant. Calder Bros. Co. v. Anderson, 652 P.2d 922, 924 (Utah 1982) (citing Bankers Trust Co. v. El Paso Pre-Cast Co., 192 Colo. 468, 560 P.2d 457 (1977)); see also Tripp v. Vaughn, 747 P.2d 1051, 1055 (Utah Ct.App.1987).

The precise statutory construction issue presented is the meaning of the language "commencement to do work or furnish materials on the ground for the structure or improvement" in section 38-1-5. The district court construed this section to require the commencement of visible, on-site improvements without regard to whether a subsequent lender had actual notice of prior off-site lienable work such as appellants'.

The construction of a statute is a question of law and thus we review the trial court's conclusion under a correction of error standard. See, e.g., Berube v. Fashion Centre, Ltd., 771 P.2d 1033, 1038 (Utah 1989) ("rulings of a trial court regarding statutory construction are not entitled to particular deference."); Forbes v. St. Mark's Hosp., 754 P.2d 933, 934 (Utah 1988) (no deference need be given to trial court's statutory interpretation).

Appellants claim the district court misconstrued the statute because it did not restrict the modifying phrase "on the ground" to furnishing materials and instead applied it to the earlier disjunctive phrase "commencement to do work." Appellants argue that section 38-1-5 contemplates alternative times of lien attachment for priority purposes either at the commencement to do work (with no on-site This issue has never been squarely dealt with by Utah courts. However, Utah case law discussing priority under section 38-1-5 has emphasized visible work performed on the property or the presence of materials, giving notice that work has commenced on the property. In Calder Bros. Co. v. Anderson, 652 P.2d 922 (Utah 1982), the court rejected the lien claimant's claim of priority because "[a]t no point up to and including the time [the lender's] mortgage was recorded, was it evident from the inspection of the premises that an improvement had been commenced." Id. at 924. The court stated that "visible evidence of work performed provides notice to any interested party that work has commenced." Id. at 924 n. 1.

requirement) or at the furnishing of materials on the ground. Thus, they assert their architects' liens attached for priority purposes at the time they commenced architectural design work.

In First of Denver Mortgage Investors v. C.N. Zundel & Assocs., 600 P.2d 521, 526 (Utah 1979), the court allowed a mechanic to attach a lien to a 44-acre subdivision for its services of putting in water and sewer lines and storm drains. The court, in addressing the visibility of work issue, distinguished this on-site pipeline installation from the architectural and survey work at issue in the case of Aladdin Heating Corp. v. Trustees, 93 Nev. 257, 563 P.2d 82, 84 (1977). In Aladdin, the Nevada Supreme Court required visible signs of construction to inform prospective lenders who inspected the premises that liens had attached and, thus, refused to relate mechanics' liens back to architectural, survey and soil testing work.

In Western Mortgage Loan Corp. v. Cottonwood Constr. Co., 18 Utah 2d 409, 424 P.2d 437 (1967), the court again stressed the requirement that there be evidence on the ground that work has commenced. The...