Walker & Laberge Co. v. First Nat. Bank of Boston

• Decision Date: 17 January 1966
• Citation: 146 S.E.2d 239,206 Va. 683
• Court: Virginia Supreme Court
• Parties: WALKER & LABERGE COMPANY, Incorporated, v. FIRST NATIONAL BANK OF BOSTON.

Page 239

146 S.E.2d 239

206 Va. 683

WALKER & LABERGE COMPANY, Incorporated, v. FIRST NATIONAL BANK OF BOSTON.

Supreme Court of Appeals of Virginia.

Jan. 17, 1966.

Louis B. Fine, Norfolk (Melvin J. Radin, Virginia Beach, Fine, Fine, Legum, Schwan & Fine, Norfolk, on brief), for appellant.

John L. Walker, Jr., Roanoke (Frank W. Rogers, Woods, Rogers, Muse & Walker, Roanoke, Lyne, Woodworth & Evarts, Boston, Mass., on brief), for appellee.

Before EGGLESTON, C. J., and SPRATLEY, BUCHANAN, SNEAD, I'ANSON, CARRICO and GORDON, JJ.

SPRATLEY, Justice.

The First National Bank of Boston, on January 22, 1962, instituted this proceeding against Towers Shopping Center, Incorporated, of Roanoke, Virginia, Times-World Corporation, as lessor of Towers, the trustees under three deeds of trust securing payment of loans from the bank to Towers, and all contractors and subcontractors who had recorded memoranda of mechanic's liens against the leasehold estate of Towers. The bill of complaint alleged that in accordance with the terms of a loan agreement, dated July 27, 1961, the bank had agreed to advance monies to Towers for the construction of its shopping center; that to secure the advances Towers executed in July and August, 1961, three deeds of trust on its leasehold estate; that as of December 31, 1961, it had advanced $3,199,154.38 under the deeds of trust; that the deeds provided, in the event of default by Towers in the performance of covenants therein contained, certain optional remedies to the bank; and that among the options was the right of the bank to discharge, and treat as a part of the debt secured to it, any lien on the property which might be superior to the liens evidenced by the above mentioned deeds of trust.

The bill alleged that Towers was in default in the performance of its covenants, in permitting the filing of mechanic's liens against its leasehold property, and in failing to provide funds for completion of the shopping center.

The bank prayed that the court convene all creditors of Towers; ascertain the amounts of priorities and liens against the property; appoint the trustees in the first deed of trust as receivers of the leasehold estate; and permit it to foreclose its deeds of trust, if it should appear that Towers could not be relieved of its financial difficulties within a reasonable time.

The court appointed receivers, as requested, and also a special commissioner to ascertain and report to the court the assets and liabilities of Towers and the liens against its property. Subsequently, the bank filed two supplemental bills, each of which presented a specific issue of the binding effect of mechanic's lien waivers executed by Towers' contractors, for a consideration furnished by the bank. Supplemental Bill No. 1 named as defendants only parties already before the court. Supplemental Bill No. 2 brought in as defendants several other persons and firms, including Walker & Laberge Company, Incorporated, who had not been made parties in prior proceedings.

Supplemental Bill No. 2 alleged that Walker & Laberge Company, Incorporated, hereinafter referred to as defendant, had furnished labor and material for the construction of the shopping center; that the bank had, prior to October 31, 1961, paid defendant $35,000.00 on its account [amended by decree of August 31, 1962, to show $40,000.00]; on October 31, 1961, an additional $20,000.00 [amended by the above decree to show $15,000.00]; that, as consideration for these payments by the bank, and as an inducement to the bank to make further loans to Towers on completion of its building, defendant, on October 31, 1961, had executed and delivered a waiver and release of any right it had, or might have in the future, to file or claim a mechanic's lien against the property involved, or any interest therein; and that the waiver reads as follows:

'MECHANIC'S LIEN WAIVER

'TOWERS SHOPPING CENTER, INCORPORATED (hereinafter sometimes referred to as 'Towers') has now about completed a shopping center on property at the southwest corner of Colonial Avenue and Brandon Road in the City of Roanoke, Virginia, leased by it from TIMES-WORLD CORPORATION by lease dated May 16, 1960 and recorded in Deed Book 1075, page 240 in the clerk's office of the Hustings Court for the City of Roanoke, Virginia, and by an amendatory lease dated January 23, 1961 and recorded in Deed Book 1089, page 443. The undersigned has furnished, or will furnish, or both, labor or material, or both, for said project. In consideration of $1.00 cash in hand paid to the undersigned by The First National Bank of Boston, receipt whereof is hereby asknowledged, and as an inducement to said bank to make further loans to Towers in addition to advances already made, the undersigned hereby waives and releases any right that the undersigned now has or may in the future have to file or claim a mechanic's lien against said property or any interest therein on account of labor or material heretofore or hereafter furnished to Towers or to any other party in connection with or incidental to the construction and equipment of said shopping center.

'Dated this 31 day of October, 1961.

'Walker & Laberge Co., Inc.

'By Henry Walker.'

The bill further alleged that notwithstanding the execution and delivery of the waiver, defendant, on January 1, 1962, recorded a memorandum of mechanic's lien for $28,136.50; and that the said amount was correct, but was entitled to be allowed only as an unsecured claim against Towers.

On July 24, 1962, defendant answered, saying that 'The one dollar ($1.00) cash [mentioned in the waiver] was not only not paid as recited, but also the item of $20,000.00 mentioned therein was paid on or about September 21, 1961;' that there was 'never any unconditional waiver' of its right to a mechanic's lien; 'never any valid consideration' therefor; and 'all of the parties knew it was a mere matter of facilitating the situation without any release.' It added that: 'The conduct of the bank in obtaining said alleged waiver constituted fraud.' It prayed that the answer 'be treated as a cross-bill, praying for affirmative relief,' and that 'any issue of fact be determined by a jury.'

On August 31, 1962, defendant filed an amended answer, in which it stated 'that all of the payments made on the job are as follows: August 4, 1961-$20,000.00, September 22, 1961-$20,000.00, and November 1, 1961-$15,000.00, making a total of $55,000.00. Said dates are the dates the credits were posted by Walker & Laberge Company, Incorporated.'

The bank moved to strike the answer and amended answer on the grounds: (1) that the facts set out therein did not, in law, constitute a defense; (2) that while there was a general allegation of lack of consideration for the waiver, there was no denial of the payment of $15,000.00 on October 31, 1961, though posted on defendant's books the following day; and (3) no specific facts to support the allegation of fraud.

The court, on September 5, 1963, sustained the motion to strike the answers, with leave to the defendants to file, within fifteen days thereafter, such additional pleading as it deemed proper.

On September 18, 1963, defendant filed a second amended answer, in which it repeated its former averments and denials; and, for the first time, averred that the execution of the waiver 'was conditional upon Walker & Laberge Company, Inc., receiving the entire payment of the said mechanic's lien, interest and cost;' and that it was 'understood' that the waiver 'would be held in escrow until full payment had been made' to the defendant.

The bank moved to strike the second amended answer on the ground that its averments did not, at law, constitute a good defense to its bill. It pointed out that the alleged verbal agreement was inconsistent with the execution and delivery of the waiver, since payment of defendant's claim in full would 'eliminate' any right to a lien, and there would be nothing on which the waiver could operate.

On June 23, 1964, the court sustained the motion to strike for reasons set forth in a written opinion, filed in the cause. The court there said:

'It must be assumed by the Court that some purpose was intended to be accomplished by the execution and delivery of the waiver agreement, and if the contention of the defendant prevails no purpose was accomplished and it deprives the agreement of any operative effect. This result the Court does not conceive to be what the parties intended. The purported condition is such that makes it impossible for the agreement to be operative at any time and have any purpose from its inception, and therefore, if permitted to be shown would nullify the terms of the instrument itself. It is common knowledge that such waiver agreements are in common use in the financing of construction operations and their effect and purpose are well known, and in the absence of fraud or misrepresentation are usually legally enforcible to accomplish that purpose.'

Subsequently, on July 9, 1964, defendant filed an additional pleading, in which it adopted its prior answers, and denied every allegation of the bill of complaint, which did not admit that the delivery of the waiver was conditional, and 'in expectation' by the defendant of the payment of the balance due. It further averred that, under the circumstances, 'the partial payment' made did not constitute a complete release of 'all mechanic's liens in excess of the amount which had been actually paid' to defendant. Defendant again prayed that all issues of fact be determined by a jury 'as a matter of right and as a plea in equity.'

Again, the defendant moved to strike this latest pleading, in that it set up no defense that had not been theretofore determined adversely to defendant.

On July 21, 1964, the court sustained the motion, ordered that Supplemental Bill No. 2 be taken as confessed as to the defendant, holding that defendant had waived its right to file a mechanic's lien;...