Sonida, LLC v. Spoverlook, LLC

Decision Date08 December 2015
Docket NumberNo. 32,661.,32,661.
Parties SONIDA, LLC, Plaintiff–Appellee, v. SPOVERLOOK, LLC, Defendant–Appellant.
CourtCourt of Appeals of New Mexico

Sommer, Karnes & Associates, LLP, Karl H. Sommer, James R. Hawley, Santa Fe, NM, for Appellee.

Keleher & McLeod, P.A., W. Spencer Reid, Thomas C. Bird, Justin B. Breen, Albuquerque, NM, for Appellant.

OPINION

KENNEDY

, Judge.

{1} Defendant Spoverlook, LLC, (SPO) appeals an award of attorney fees to Plaintiff Sonida, LLC (Sonida), whom the district court found to be the prevailing party in a "dispute arising out of or relating to a lien action" under NMSA 1978, Section 48–2–14 (2007)

. The award of attorney fees was made following a jury trial that awarded money to both parties following a dispute over construction of a house. SPO asserts that Sonida's lien was invalid, that the district court's denial of its motion for summary judgment based on the invalidity of Sonida's lien was erroneous, and that an invalid lien cannot support the award of fees.

{2} The contents of mechanics' and materialmen's liens are prescribed by statute, NMSA 1978, §§ 48–2–1

to –17 (1880, as amended through 2015), and require specifically that any claim "must be verified by the oath of [the claimant] or of some other person." Section 48–2–6. We face two questions in this case: can Sonida prevail on a claim to foreclose an unverified materialmen's lien, and was the district court's award of attorney fees based on work performed in conjunction with "contract and lien claims" sufficiently justified as a "dispute arising out of or relating to a lien action" to permit the award? Section 48–2–14.

{3} We hold that even in light of decades of liberal construction and permitting substantial compliance in drafting lien claims, Sonida's unverified lien was void ab initio. To the extent that no valid lien existed, nothing supported an award of attorney fees predicated on a claim "arising out of or related to a lien[.]" Section 48–2–14

. Since the district court's sole justification for the award was Section 48–2–14, we conclude that the award of attorney fees to Sonida was erroneous, and we reverse the district court, remanding for entry of an amended judgment.

BACKGROUND

{4} The parties do not dispute the facts underlying this appeal. Real estate developer SPO contracted with New Mexico Dream Home, LLC (NMDH) to construct a house in Sandoval County for a television show. SPO in turn subcontracted with home-builder Sonida to build the home, agreeing to pay Sonida approximately one million dollars for the job. Before construction began, SPO and Sonida did not have a written agreement between them, although subsequent arrangements were reached, and Sonida began construction of the home. As construction went forward, NMDH issued three payments of approximately $250,000 each to SPO. SPO forwarded two payments to Sonida. A dispute arose when SPO did not forward a third payment to Sonida.

{5} Sonida filed a claim of lien against the home to protect its interests, and then amended it twice; all of which were recorded in the Sandoval County Clerk's office. All three lien documents were signed by a Sonida representative and acknowledged before Sonida's attorney, who notarized them. However, none of Sonida's lien documents included any language verifying upon oath the truth of its contents.

{6} Sonida then brought suit in the district court against SPO and NMDH for the money it maintained it was owed. In Count 4 of Sonida's complaint, Sonida sought foreclosure of its lien. SPO's answer denied that Sonida was entitled to file a claim of lien, foreclose on the lien that it had filed, or collect attorney fees for litigating its foreclosure. SPO thereafter filed a motion for summary judgment asserting that the lien claim was invalid and unenforceable because it was not verified pursuant to Home Plumbing & Contracting Co. v. Pruitt, 1962–NMSC–075, 70 N.M. 182, 372 P.2d 378

. In its response to SPO's motion, Sonida argued that SPO had waived its ‘void for lack of verification’ argument because SPO had not raised it as an affirmative defense in the its answer. The district court denied SPO's motion without explanation, and the case proceeded to trial.

{7} Following a jury trial in which both parties received awards, Sonida moved for an award of attorney fees claiming it was the prevailing party in a lien action under Section 48–2–14

. The parties submitted proposed findings of fact and conclusions of law, including SPO's renewed assertion that Sonida was not the prevailing party in a lien action. The district court entered its final judgment granting Sonida's request for attorney fees. In separate findings and conclusions, the district court found that "Sonida prevailed on its lien claim against ... Defendant SPO" and concluded that "[a] prevailing party in a dispute arising out of or relating to a lien action is entitled to recover from the other party the reasonable attorney fees, costs and expenses incurred by the prevailing party." Section 48–2–14. SPO now appeals the district court award to Sonida of $136,375.75 in attorney fees.

DISCUSSION
Standard of Review

{8} Ordinarily, we review an award of attorney fees for an abuse of discretion. Rio Grande Sun v. Jemez Mountains Pub. Sch. Dist., 2012–NMCA–091, ¶ 10, 287 P.3d 318

. "Section 48–2–14 empowers the court to award reasonable attorney fees in the district and supreme courts in actions to enforce mechanics' and materialmen's liens." Lenz v. Chalamidas, 1991–NMSC–099, ¶ 2, 113 N.M. 17, 821 P.2d 355 (emphasis omitted). However, our determination of whether an unverified lien satisfies the requirements of Section 48–2–6 involves the interpretation of a statute that we review de novo. State ex. rel. Madrid v. UU Bar Ranch Ltd. P'ship, 2005–NMCA–079, ¶ 11, 137 N.M. 719, 114 P.3d 399. With regard to SPO's motion for summary judgment, where there are no genuine issues of material fact, and the movant may be entitled to judgment as a matter of law, our review is also de novo. Self v. United Parcel Serv., Inc., 1998–NMSC–046, ¶ 6, 126 N.M. 396, 970 P.2d 582.I. Sonida Did Not File Valid Claims of Lien

{9} We begin by addressing SPO's argument that the district court erred by failing to reject as a matter of law Sonida's unverified claim of lien. In order to analyze this issue, we must discuss the requirements for a claim of lien to be valid.

{10} Section 48–2–61

generally sets out two requirements for the contents of a valid lien: a statement of the nature of the claim against the property owner, and a verification by oath. The purpose of the former is to "give notice [to all interested parties] of the extent and nature of the lienor's claim." Garrett Bldg. Ctrs., Inc. v. Hale, 1981–NMSC–009, ¶ 10, 95 N.M. 450, 623 P.2d 570 (internal quotation marks and citation omitted). Since they are not in dispute in this case, we are not concerned with the sufficiency of Sonida's statement of the debt and terms of the claim.

{11} As to the verification requirement, we first observe that the use of the word "must" in the statute requiring verification by oath conveys the Legislature's setting a mandatory precondition to the lien's validity. The Uniform Statute and Rule Construction Act compels us to regard the word "must" as expressing "a duty, obligation, requirement or condition precedent." NMSA 1978, § 12–2A–4(A) (1997)

; see also, State v. Lujan, 1977–NMSC–010, ¶ 4, 90 N.M. 103, 560 P.2d 167 (holding that the word "must" in the statute indicates "that the provisions of a statute are mandatory and not discretionary").

{12} It is undisputed that the claims of lien filed in this case were not verified. Sonida attempts to address this "technical defect" by arguing that the claim as filed satisfied the purposes of the statute, which should be "liberally construed," and by implication, permits "substantial compliance" by the claimant. New Mexico is a state that affords liberal construction to the drafting of lien notices, and permits substantial compliance with Section 48–2–6

. Chavez v. Sedillo, 1955–NMSC–039, ¶ 17, 59 N.M. 357, 284 P.2d 1026. To a point. "[T]he reason which underlies the [liberal construction rule] is that the claim of lien must not only contain a statement of the terms, time given and conditions of the contract, but such statement must be true." Id. (emphasis omitted). However, no New Mexico case has yet made the verification requirement superfluous. For reasons that follow, we conclude that even in a common law atmosphere with plenty of slack for drafting liens, there are requirements that are immutable, particularly a verification upon oath of the underlying claim that must be set out in the lien notice. Sonida misapprehends the latitude our courts have provided claims of lien as affording sanction to their total lack of compliance with the verification requirement of the statute.

A. Verification Requires a Formal Assertion of the Truth of the Lien's Contents

{13} By definition, "verification" is "confirmation of correctness, truth, or authenticity by affidavit, oath, or deposition." Black's Law Dictionary, 1732 (1968 4th ed.). Our courts' construction of what it means for a lien to "be verified by the oath of [the claimant] or of some other person" is of long standing. Section 48–2–6

. "In the early days of our history, [our Supreme Court] was disposed to hold that the mechanics lien law was in derogation of the common law and should be strictly construed[.]" Home Plumbing,

1962–NMSC–075, ¶¶ 6–7, 70 N.M. 182, 372 P.2d 378 (internal quotation marks and citation omitted). This construction applied to the verification requirement. Finane v. Las Vegas Hotel & Improvement Co., 1885–NMSC–023, ¶ 13, 3 N.M. 411, 5 P. 725 ("[Verification] is a substantial and necessary requirement, and must be complied with in order to make the claim of lien effectual. The statute makes it obligatory by the use of the word ‘must,’ and we think it was error for the court below to have admitted the [unverified] paper...

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    ...that will bar a plaintiff's recovery once a right to recover is established." Sonida, LLC v. Spoverlook, LLC, 2016-NMCA-026, ¶ 25, 367 P.3d 854 (alterations, internal quotation marks, and citation omitted). Under Rule 1-008(C) NMRA, a party is required to set forth any affirmative defenses ......
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