Waco Scaffold & Shor. Co., Inc. v. 425 Eye St. Assoc.

• Decision Date: 08 April 1976
• Docket Number: No. 9228.,No. 9336.,No. 9229.,No. 9227.,9227.,9228.,9229.,9336.
• Citation: 355 A.2d 780
• Court: D.C. Court of Appeals
• Parties: WACO SCAFFOLD & SHORING CO., INC., Appellant, v. 425 EYE STREET ASSOCIATES, a Maryland Limited Partnership, Appellee (two cases). MARYLAND STEEL ERECTORS, INC., Appellant, v. 425 EYE STREET ASSOCIATES, a Maryland Limited Partnership, Appellee. ITT-GRINNELL CORPORATION, Appellant, v. 425 EYE STREET ASSOCIATES, a Maryland Limited Partnership, Appellee.

Page 780

355 A.2d 780

WACO SCAFFOLD & SHORING CO., INC., Appellant, v. 425 EYE STREET ASSOCIATES, a Maryland Limited Partnership, Appellee (two cases).

MARYLAND STEEL ERECTORS, INC., Appellant, v. 425 EYE STREET ASSOCIATES, a Maryland Limited Partnership, Appellee.

ITT-GRINNELL CORPORATION, Appellant, v. 425 EYE STREET ASSOCIATES, a Maryland Limited Partnership, Appellee.

No. 9227.

No. 9228.

No. 9229.

No. 9336.

District of Columbia Court of Appeals.

Argued December 2, 1975.

Decided April 8, 1976.

John Lindow, with whom Richard A. Mehler, Washington, D. C., was on the brief for Waco Scaffold & Shoring Co., Inc.

H. Michael Rankin, Oxon Hill, Md., with whom Raymond J. McDonough, Oxon Hill, Md., was on the brief for Maryland Steel Erectors, Inc.

Daniel V. S. McEvily, Washington, D. C., with whom John L. Hamilton and Nicholas D. Ward, Washington, D. C., were on the brief for ITT-Grinnell Corp.

Alvin Friedman for appellee 425 Eye Street Associates. Lawrence J. Ochs, Washington, D. C., also entered an appearance for appellee.

Before KELLY, KERN and YEAGLEY, Associate Judges.

KERN, Associate Judge:

Two issues are before us on this appeal: (1) the priority of mechanics' liens held by appellants Waco Scaffold & Shoring Co. [Waco], ITT-Grinnell [ITT] and Maryland Steel Erectors, Inc. [Maryland Steel] as against a construction lender's deed of trust securing a loan made to the predecessor of appellee 425 Eye Street Associates [Associates], and (2) the propriety of the trial court's judgment in favor of Associates on Waco's claim for damages in quantum meruit.¹

The property in issue is Lot 57, Square 516 in the District of Columbia, commonly known as 425 Eye Street N.W. The trial court's findings of fact made in response to appellee's motion to dismiss indicate that on October 8, 1971, a deed of trust was recorded as to this property to secure a promissory note for $9.4 million held by Girard Bank and Security National Bank the construction money lenders.² Appellants Maryland Steel, ITT and Waco, filed notices, of intent to hold a lien on the property³ on September 7, 1972, October 4, 1972, and March 15, 1973, respectively. The trial court found that sometime before these notices were filed, some $5,458,984 had been advanced by the construction money lenders to appellee or its predecessor in interest.

Appellants brought suit⁴ to enforce their liens in September 1973, arguing that mechanics' liens take priority over all other encumbrances except purchase-money mortgages or deeds of trust, and that mechanics' liens attach at the commencement of the work. See Deland v. Wagner, 62 App.D.C. 54, 64 F.2d 552 (1933); D.C. Code 1973, § 38-109. Appellant Maryland Steel alleged that it commenced work on the property in August 1971, before the deed of trust securing the construction money lender's loan was recorded, while appellants ITT and Waco claimed they commenced work in February 1972, after recordation of the deed of trust.⁵ The trial court found as a fact that each appellant had commenced work before filing its notice of lien.

The property in question was sold at a foreclosure sale on August 26, 1974, for $4,630,983, an amount less than the total amount advanced by the construction money lender. Appellee moved to dismiss on September 16, 1974, on the ground that the mechanics' liens which were the subject of the suit had been eliminated by the foreclosure sale at a price less than the total advances made prior to the commencement of work. This motion was granted on December 3, 1974, and appellants brought this appeal.

The issue before us, then, is the construction of D.C.Code 1973, § 38-109, which establishes the priorities accorded to various liens and encumbrances. Specifically, we must determine the relative priority of interests between a construction money lender who records its deed of trust to secure a construction loan after the commencement of work on the property by construction companies, and the construction company-mechanics' lienor who commences work prior to the construction lender's recordation but files a notice of intent to hold a lien after the lender has advanced money.⁶

The relevant statute, § 38-109, provides in part:

The [mechanics'] lien hereby given shall be preferred to all . . . deeds of trusts, liens, and incumbrances which attach upon the building or ground affected by said lien subsequently to the commencement of the work upon the building. . . . except that nothing herein shall affect the priority of a mortgage or deed of trust given to secure the purchase money for the land, if the same be recorded within ten days from the date of the acknowledgment thereof. When a mortgage or deed of trust of real estate securing advances thereafter to be made for the purpose of erecting buildings and improvements thereon is given. . . . the [mechanics'] lien hereinbefore authorized shall have priority to all advances made after the filing of said notices of lien, and the lien shall attach to the right, title, and interest of the owner in said building and land to the extent of all advances which shall have become due after the filing of such notice of such lien

. . . .

This statute was analyzed in our opinion in Guardian Federal Savings & Loan Association v. Suskind, D.C.App., 265 A.2d 295 (1970), a case that dealt with the priority of a purchase-money deed of trust within the context of a supplementary agreement. We stated there at 297:

In the absence of the subordination agreement, D.C.Code 1967, § 38-109 would establish the following priorities to the foreclosure sale proceeds: first, the purchase-money deed of trust; second the construction loan deed of trust to the extent of disbursements prior to the filing date of the mechanics' liens; third, the mechanics' liens; and finally, the balance of the construction loan. [Footnote omitted.]

We agree that this is the proper interpretation of the statute at issue here, for it comports with the plain meaning of the words used. This construction also supplies the simplest resolution to the problem of the two competing sets of priorities created in the statute by treating the second set of priorities as a modification of the priorities described generally in the first sentence. If Congress had intended that the second set of priorities take effect only if no construction work had commenced, it would have included this condition in the statute. Since it did not, we must construe the statute as a whole and reconcile the two provisions. See 2A Sutherland, Statutory Construction § 46.05 (4th ed. 1973). This is apparently the view taken by the trial court, and under the circumstances his dismissal of appellants' claims was correct.

The three appellants here all filed their notices of intent to hold a lien after the construction money lender had received and recorded a deed of trust securing its loan and had advanced significant sums, viz., $5,458,984, for the construction of the building. Consequently the claims of the construction money lenders up to the amount of the advances made before appellants filed notices took priority over appellants' mechanics' liens. The property in issue was purchased at the foreclosure sale by...