VCS, Inc. v. La Salle Dev., LLC

• Citation: 723 Utah Adv. Rep. 93,293 P.3d 290
• Decision Date: 11 December 2012
• Docket Number: No. 20110062.,20110062.
• Parties: VCS, INC., a Utah corporation, Plaintiff and Appellant, v. La Salle Development, LLC, a limited liability company; America West Bank, a Utah limited liability company; UTAH COMMUNITY BANK, a Utah corporation; and Does 1–10, Defendants and Appellee.
• Court: Supreme Court of Utah

293 P.3d 290

723 Utah Adv. Rep. 93

VCS, INC., a Utah corporation, Plaintiff and Appellant,

v.La Salle Development, LLC, a limited liability company; America West Bank, a Utah limited liability company; UTAH COMMUNITY BANK, a Utah corporation; and Does 1–10, Defendants and Appellee.

No. 20110062.

Supreme Court of Utah.

Dec. 11, 2012.

David B. Stevenson, Ogden, for appellant.

Ronald G. Russell and Mathew J. Ball, Salt Lake City, for appellee.

Justice LEE, opinion of the Court:

¶ 1 VCS, Inc. claims it acquired a valid mechanic's lien on an Ogden subdivision by performing work as a general contractor. Utah Community Bank (UCB) claims an interest in the same Ogden subdivision, an interest it acquired by extending a construction loan—secured by a deed of trust—to the subdivision's owner.

¶ 2 This case involves a dispute over the validity of VCS's mechanic's lien as against UCB. VCS brought suit against UCB to vindicate VCS's allegedly superior interest in the subdivision property. UCB responded by asserting that VCS's mechanic's lien was not valid as against UCB's interest in the property because VCS had failed to record a timely lis pendens, as required under our mechanic's lien statutes. VCS claimed that its lien was valid as against UCB despite VCS's failure to record a timely lis pendens. VCS further claimed that even if its lien was invalid, it was entitled to equitable relief under the doctrine of unjust enrichment because UCB had acquired ownership of a number of the subdivision lots pursuant to a trustee's sale on its deed of trust.

¶ 3 VCS and UCB filed cross-motions for summary judgment. The district court denied VCS's motion and granted UCB's, concluding that (a) VCS's mechanic's lien was void and unenforceable as against UCB because VCS had failed to record a timely lis pendens, (b) VCS was not entitled to unjust enrichment relief, and (c) UCB was entitled to recover attorney fees. VCS appealed.

¶ 4 We affirm. VCS's failure to record a timely lis pendens rendered its mechanic's lien void and unenforceable as against UCB. And because VCS failed to appropriately exhaust its legal remedies, VCS is not entitled to equitable relief under the doctrine of unjust enrichment. Consequently, we also affirm the district court's award of attorney fees to UCB under Utah Code section 38–1–18 and likewise conclude that UCB is entitled to its reasonable attorney fees incurred on appeal (in an amount to be determined on remand).

I

¶ 5 Appellant VCS, Inc. was hired by La Salle Development, LLC in 2006 as the general contractor for the Northpark Meadows residential subdivision in Ogden, Utah. Although VCS and La Salle did not enter into a formal agreement until February 22, 2007, VCS began working on Northpark Meadows during the first week of November 2006.

¶ 6 Appellee Utah Community Bank (UCB) acquired its initial interest in Northpark Meadows soon thereafter when it extended a construction loan to La Salle, secured by a deed of trust. The deed of trust was dated January 9, 2007 and recorded January 12, 2007.

¶ 7 After VCS began working on Northpark Meadows, VCS took several steps designed to perfect its mechanic's lien. First, VCS filed a Notice of Commencement with the State Construction Registry on April 17, 2007. Later, after VCS was terminated by La Salle in September 2007,¹ VCS also recorded a Notice of Mechanic's Lien on January 29, 2008.

¶ 8 VCS attempted to inform La Salle (but not UCB) that it had recorded this Notice of Mechanic's Lien. VCS also brought suit against La Salle (but not UCB), on March 12, 2008, but it did not record a lis pendens until April 24, 2009. This was 452 days after it first recorded its notice of mechanic's lien. VCS obtained a default judgment against La Salle on June 6, 2008. VCS filed a notice of judgment lien with the county recorder on September 24, 2008. VCS informed UCB of this judgment lien in a letter written on October 16, 2008, a letter in which VCS asked UCB to stipulate that VCS's lien had priority over any claimed UCB interest in Northpark Meadows.²

¶ 9 On January 26, 2009, La Salle filed a motion to set aside the default judgment that had been entered against it.³ Thereafter, on April 21, 2009, VCS amended its complaint to add claims against UCB (including claims for mechanic's lien foreclosure, declaratory judgment [relating to lien priority], and unjust enrichment).⁴ Just a few days after VCS amended its complaint, on April 27, 2009, the district court set aside VCS's default judgment against La Salle, concluding that service on La Salle's registered against had been deficient. Then, in December 2009, UCB became the owner of a number of Northpark Meadows lots pursuant to a trustee's sale on its deed of trust.

¶ 10 VCS moved for summary judgment against UCB in April 2010, alleging that VCS had a mechanic's lien that was valid against UCB—such that the trustee's sale in favor of UCB should be set aside. Alternatively, VCS asserted that it was entitled to compensation because it had unjustly enriched UCB.⁵ UCB filed a cross-motion for summary judgment, seeking a determination that VCS's mechanic's lien was void and unenforceable as against UCB, a determination that VCS's unjust enrichment claim was barred by its failure to exhaust its legal remedies, and an award of attorney fees under Utah Code section 38–1–18 (2010). The district court denied VCS's motion for summary judgment and granted UCB's cross-motion. VCS appealed.

II

¶ 11 VCS asserts four grounds for challenging the district court's decision granting summary judgment for UCB: (1) VCS was not required by the mechanic's lien statute to record a lis pendens within 180 days of the Notice of Mechanic's Lien because UCB was eventually made a party to VCS's lien foreclosure suit; (2) VCS's suit against La Salle satisfied any statutory requirement for VCS to make UCB a party to the lien foreclosure action within 180 days; (3) VCS satisfied the substantial compliance provision of the statute; and (4) VCS is entitled to equitable relief under the doctrine of unjust enrichment.⁶

¶ 12 We find no merit in any of these grounds. We accordingly affirm, under the de novo standard of review for summary judgment. See L.C. Canyon Partners, L.L.C. v. Salt Lake Cnty., 2011 UT 63, ¶ 8, 266 P.3d 797.

A

¶ 13 VCS's first argument rests on its proposed construction of Utah Code section 38–1–11(3)(a) (2010).⁷ This section provides, in relevant part:

Within the time period provided for filing [a foreclosure action set forth] in Subsection (2) [i.e. within 180 days after the day on which the lien claimant files its Notice of Mechanic's Lien] the lien claimant shall file for record with the county recorder of each county in which the lien is recorded a notice of the pendency of the [foreclosure] action, in the manner provided in actions affecting the title or right to possession of real property, or the lien shall be void, except as to persons who have been made parties to the action and persons having actual knowledge of the commencement of the action.

Utah Code § 38–1–11(3)(a).

¶ 14 VCS characterizes this provision as consisting of a general rule and two exceptions. The general rule is that a lis pendens must be recorded within the 180–day window afforded for filing a mechanic's lien foreclosure action (i.e., within 180 days of the filing of the Notice of Mechanic's Lien). The exceptions apply where a person either (a) is made a party to the foreclosure action, or (b) has actual knowledge of the commencement of that action. VCS's position rests on the notion that the 180–day time period applies to the general rule and not to the exceptions. Because UCB was eventually made a party to this action (though not within the 180–day period), VCS insists that it escapes the implications of the general timing rule under the first statutory exception.

¶ 15 We do not read the statute as VCS does. Section 11(3) does prescribe exceptions to a general rule. But those exceptions are not unattached to or outside the timeframe established by the general rule. Rather, the exceptions are subject to the 180–day time period. To be invoked, the conditions set forth in the exception must be satisfied within 180 days of the filing of the Notice of Mechanic's Lien.

¶ 16 The statutory text does not explicitly make the exceptions subject to the 180–day time period. Read in isolation, the conditions implicating the statutory exceptions could be read without reference to the 180–day timeframe. We reject that reading, however, for a number of reasons.

¶ 17 First, the text of the exception provisos does make express reference to some timeframe: They are implicated with respect to persons “who have been made parties to the action” and to persons “ having actual knowledge” of the action. Id. (emphasis added). That formulation necessarily requires an answer to a timing question that is not expressly answered in the text—which is when a person must have been made a party and when a person must have actual knowledge. And given that the statute clearly implicates some timeframe, the most natural reading of the exceptions is that they incorporate the only timeframe set forth in the statute—which is the 180–day timeframe for both filing the foreclosure action and recording the lis pendens.

¶ 18 Second, VCS's contrary view—that the timeframe for joinder of a party to the action or for knowledge of commencement of the action is unlimited—would effectively nullify the 180–day requirement set forth in the general rule. If we endorsed VCS's construction, a lien holder who failed to record a lis pendens within 180 days could routinely excuse its noncompliance by adding a party to a foreclosure action later on, or by simply informing such a person about the commencement of the suit. Such a result would allow the exceptions to swallow the 180–day requirement, and that outcome runs afoul of the settled canon of preserving independent meaning for all statutory provisions. S...