Vineyard Props. of Utah LLC v. RLS Constr. LLC
| Decision Date | 30 December 2021 |
| Docket Number | 20200633-CA |
| Parties | VINEYARD PROPERTIES OF UTAH LLC, Appellant, v. RLS CONSTRUCTION LLC, Appellee. |
| Court | Utah Court of Appeals |
David M. Kono, Shane L. Keppner, Salt Lake City, and J. Jacob Gorringe, Attorneys for Appellant
David R. Nielson, Nathan D. Anderson, and Chase B. Ames, Salt Lake City, Attorneys for Appellee
Opinion
¶1 A commercial tenant hired a contractor to work on improvements to the leased property, but the tenant failed to pay for the work performed. The contractor filed a construction lien against the property, and the tenant's landlord—the record owner of the property—sued to remove the lien, asserting that it could attach only to the tenant's leasehold interest and not to the landlord's fee interest in the property. The district court entered judgment in favor of the contractor, concluding that, under Utah's current statutory scheme, the lien attached to the landlord's interest in the property. The landlord appeals, and we affirm.
¶2 Vineyard Properties of Utah LLC (Vineyard) is the record owner of a 63,000-square-foot commercial building (the Property). In 2017, Vineyard leased the Property to a tenant (Tenant); the lease term was for sixty-seven months, and Tenant negotiated for rent reductions over the first six months of the lease that were apparently designed to provide Tenant the financial flexibility to be able to pay for improvements to the Property that it believed were necessary to its business.
¶3 Soon after signing the lease, Tenant hired RLS Construction LLC (RLS) to make certain improvements to the Property. These improvements consisted mainly of electrical projects—wiring the Property for workstations, voice and data communication jacks, and electrical outlets for forklifts and conveyors—but also included installing flooring and cubicles, and trenching the concrete floor to run wiring for the electrical projects. Vineyard was aware of and authorized Tenant to carry out the work, although Vineyard did not hire RLS and did not contractually obligate itself to pay for the work. Thereafter, RLS commenced construction and filed the requisite preliminary notice with the Utah State Construction Registry, noting that it was working pursuant to a contract with Tenant.
¶4 Upon completion of its work on the Property, RLS invoiced Tenant for payment, but Tenant made only a partial payment, leaving an unpaid balance of $13,707.40. Tenant then abandoned the Property, even though many months still remained on the lease term. After realizing that the invoice would not be paid in full, RLS recorded a construction lien against the Property for the remaining balance. In the lien, RLS recited that it had been employed by Tenant and that it had provided "tenant improvements" to the Property. (Quotation simplified.)
¶5 Vineyard then sued RLS, asserting that RLS's lien could "only extend and attach to [Tenant's] interest in the Property." In its request for relief, Vineyard asked the district court to nullify the lien and issue a judicial declaration that it was "an unlawful and unauthorized encumbrance" on the Property. RLS responded by filing a counterclaim against Vineyard and a third-party complaint against Tenant, seeking (among other things) foreclosure of its lien against both Tenant and Vineyard. Tenant failed to respond, and default judgment was eventually entered against it and in favor of RLS. On their claims against each other, Vineyard and RLS filed motions for summary judgment, each contending that it was entitled to judgment as a matter of law.
¶6 In their competing motions, Vineyard and RLS presented conflicting interpretations of Utah's construction lien statutes. See generally Utah Code Ann. §§ 38-1a-101 to -805. RLS contended that its lien attached to Vineyard's interest in the Property because RLS had done work on the Property and Vineyard was the "owner" of the Property, as that term is now statutorily defined. See id. § 38-1a-102(26) (LexisNexis Supp. 2021). By contrast, Vineyard claimed that RLS's lien attached only to Tenant's leasehold interest in the Property because Vineyard had not contracted for the work.
¶7 After briefing and oral argument, the district court ruled in favor of RLS, concluding "that construction liens attach to the property at issue, absent any requirement to show that improvements requested by a tenant were installed at the direction of the landlord." The court determined that Vineyard was the only "owner" of the Property and that RLS's lien therefore attached to Vineyard's interest in the Property, and on that basis granted RLS's motion. Later, the court entered judgment against Vineyard and in favor of RLS in the amount of $13,707.40, plus interest, costs, and attorney fees.
¶8 Vineyard now appeals, and asks us to reverse the district court's grant of summary judgment to RLS. We review such orders for correctness, affording the district court's ruling no deference. See Shree Ganesh, LLC v. Weston Logan, Inc. , 2021 UT 21, ¶ 11, 491 P.3d 885.
¶9 Vineyard does not challenge the validity of RLS's construction lien; instead, it asserts that the district court incorrectly adjudged its scope. As Vineyard sees it, RLS's lien attaches only to Tenant's leasehold interest, and not to Vineyard's own fee interest in the Property. RLS takes a different view, and asserts that—regardless of whether its lien also attaches to Tenant's leasehold interest—its lien certainly attaches to Vineyard's fee interest. This issue matters, because construction liens against an owner's fee interest in real property tend to be more valuable than construction liens against a tenant's leasehold interest; indeed, a tenant possesses only a right to occupy the property in return for making specific lease payments and, unless the lease payments are well below market rate, there is often little value to be gained by foreclosing upon and selling a tenant's leasehold interest. See, e.g. , Martindale v. Adams , 777 P.2d 514, 516 n.2 (Utah Ct. App. 1989) ().
¶10 Had this issue arisen a decade ago, Vineyard would have had the more persuasive argument. But, as we discuss, amendments made to Utah's construction lien statutes in 2011 and 2012 changed the legal landscape and now foreclose Vineyard's position. Accordingly, the district court correctly determined that RLS's lien attached to Vineyard's fee interest in the Property.
¶11 We begin with a brief general discussion of Utah's construction lien statutes, before transitioning into an overview of how those statutes were interpreted, in the landlord-tenant context, prior to the 2011 and 2012 amendments. We then discuss those amendments in detail. Finally, we assess the parties’ competing interpretations of the statutory scheme, and conclude that RLS's interpretation of the current construction lien statutes is the one most in keeping with the statutes’ plain language.
¶12 One important purpose animating Utah's construction lien statutes is "to protect ... those who perform the labor and furnish the materials which enter into the construction of a building or other improvement," including "original contractors, subcontractors, and others who enhance the value of real property through improvements." Sill v. Hart , 2007 UT 45, ¶¶ 8, 12, 162 P.3d 1099 (quotation simplified). Construction lien statutes advance this purpose by preventing property owners "from taking the benefits of improvements placed on [their] property without paying for the labor and material that went into them." Frehner v. Morton , 18 Utah 2d 422, 424 P.2d 446, 447 (1967).
¶13 But as our supreme court recently pointed out, Utah's construction lien statutes do "more than just protect lien claimants in every conceivable situation." See Lane Myers Constr., LLC v. National City Bank , 2014 UT 58, ¶ 27, 342 P.3d 749. These statutes represent "an attempt by the legislature to balance competing policy considerations," id. (quotation simplified), such as "assuring clear notice for property owners and facilitating finality in a field—real estate transactions—where that policy is paramount," VCS, Inc. v. Utah Cmty. Bank , 2012 UT 89, ¶ 20, 293 P.3d 290. Indeed, at a conceptual level, construction lien statutes represent a legislative effort to "assign the risk of loss, and [an] attempt[ ] to balance the rights and duties of owners, subcontractors, and materialmen." See 53 Am. Jur. 2d Mechanics’ Liens § 11 (2021) (quotation simplified).
¶14 Historically, our supreme court issued firm instructions that Utah's construction lien statutes were to be "broadly construed" in favor of contractors. See, e.g. , Sill , 2007 UT 45, ¶ 8, 162 P.3d 1099 ; Interiors Contracting Inc. v. Navalco , 648 P.2d 1382, 1386 (Utah 1982). More recently, however, our supreme court has indicated that, because the area is governed by statute and therefore the enacted laws already reflect our legislature's effort to balance competing policy interests, a court's task in interpreting Utah's construction lien statutes is to "implement the particular balance of policies reflected in the terms of [the] statute[s]." See VCS , 2012 UT 89, ¶ 22, 293 P.3d 290. The answers to many questions about our construction lien statutes will be supplied simply by the statutes’ plain text, without the need to apply any interpretive gloss. Id. ¶ 23. Indeed, "[w]here the language of the statute is clear, that language controls and cannot be overridden by a presumed statutory purpose"; while a court's "understanding of purpose ... can be employed to inform and resolve ambiguities in the text[,] it cannot be used to establish an ambiguity that does...
To continue reading
Request your trial
-
Fischer v. Fischer
... ... Melissa Kay FISCHER, Appellee. No. 20200557-CA Court of Appeals of Utah. Filed December 30, 2021 Steve S. Christensen, Salt Lake City, and Clinton ... ...