Walt Robbins, Inc. v. Damon Corp.

Decision Date05 September 1986
Docket NumberNo. 830658,830658
Citation348 S.E.2d 223,232 Va. 43
CourtVirginia Supreme Court

H. Bradley Evans, Jr., David G. Fiske (John P. Corrado, Thomas & Fiske, P.C., Alexandria, on briefs), for appellants.

Craig B. Dunbar, Arlington, John R. Prosser (Gregory J. Miner, Washington, D.C., Nikolas E. Parthemos, Leesburg, Rhodes, Dunbar & Lomax, Chartered, P.C., Arlington, Hall, Monahan, Engle, Mahan & Mitchell, Leesburg, on briefs), for appellees.

Present: All the Justices.

POFF, Justice.

Springbelt Associates Limited Partnership (Springbelt), the owner of a tract of unimproved land in Springfield, planned to construct a Government Printing Office Warehouse. Springbelt executed a deed of trust conveying the land to Jeffrey Wagner and Frank Thompson, trustees, securing payment of a loan from Madison National Bank in the sum of $4,500,000. Walt Robbins, Incorporated (Robbins), employed as general contractor, entered into a subcontract with Damon Corporation (Damon) for the erection of structural steel and certain other work. Damon engaged Lynn Fabricators, Inc. (Lynn), to supply the steel.

The progress of construction was delayed by inclement weather, poor site access, change orders, and other factors, and a dispute over payments arose. Charging that Robbins was in default under the terms of the subcontract, Damon abandoned the project on February 8, 1980. At that point, Damon had furnished approximately 97% of the labor and materials required by the subcontract.

Damon and Lynn (which had received no payment for the steel furnished Damon) filed memoranda of mechanics' liens against Springbelt's property and, later, bills of complaint to enforce the liens. Lynn's bill named Springbelt, Robbins, and Damon as defendants, sought a personal judgment for materials supplied, and asked the court to enforce its lien by a sale of the property. Damon's bill named Springbelt and Robbins as defendants, alleged that it was entitled to $99,526.02 for labor and materials furnished, prayed for enforcement of its lien, and demanded a personal judgment against the defendants. Springbelt and Robbins filed a cross-bill against Damon, seeking $100,000 in damages on account of additional expenses allegedly incurred by reason of Damon's failure to complete the project.

In February 1981, the chancellor referred Damon's suit to a commissioner in chancery. The decree directed the commissioner to determine whether Damon's lien was valid; whether Damon had perfected its lien in accordance with statutory provisions, and if so, the amount of the lien as perfected; whether Damon was entitled to a personal judgment against Robbins if the lien was not properly perfected; whether Springbelt and Robbins had a valid claim against Damon; and whether the property subject to the lien should be sold to satisfy the lien. In a later order, the chancellor consolidated the two suits for consideration by the commissioner.

In his report, the commissioner concluded that, although Damon's and Lynn's claims were valid, neither had perfected its lien in accordance with the mechanic's liens statutes, Code § 43-1, et seq., and, thus, that the liens were unenforceable. The commissioner premised his conclusion on the fact that neither Damon nor Lynn had named the trustees or the beneficiary of the antecedent deed of trust as parties to their suits. Additionally, the commissioner found that Damon's bill was unenforceable because it did not include a verified, itemized statement of account as required by Code § 43-22.

Next, the commissioner concluded that Damon should recover no damages from Springbelt, but should recover the full amount of its claim from Robbins. Damon's claim included $56,306.56 alleged to be due under the terms of its contract and $43,220.46 for delay damages and the cost of "extras". The commissioner found that Lynn was entitled to a personal judgment against Damon in the amount of $34,545.92. Finally, the commissioner recommended that the cross-bill filed by Springbelt and Robbins be dismissed.

All parties filed exceptions to the commissioner's report. The chancellor adopted some of the commissioner's findings and rejected others. In a final decree entered January 28, 1983, the chancellor ruled that the two mechanics' liens were enforceable; that Damon was not entitled to recover a personal judgment against Springbelt or Robbins; that Lynn was entitled to a personal judgment against Damon but not against Springbelt or Robbins; that Springbelt's and Robbins' cross-bill against Damon be dismissed; and that Springbelt's property be sold to satisfy the mechanics' liens.

Appellants Springbelt and Robbins have assigned several errors and Damon has assigned cross-error. 1 However, the parties have joined issue on two of the chancellor's rulings which we consider dispositive of this appeal. The questions presented are: (1) whether the mechanics' liens are unenforceable because Damon and Lynn failed to make the trustees and the beneficiary of the antecedent deed of trust parties to their suits to enforce; and (2) whether Damon is entitled to a personal judgment against Robbins.

Springbelt and Robbins contend that the chancellor erred in rejecting the commissioner's conclusion that the trustees and the beneficiary of the antecedent deed of trust on the land were necessary parties to the suits to enforce the mechanics' liens. Damon and Lynn argue that, although both are proper parties, neither is a necessary party. 2

It is true, as Damon and Lynn say, that Code § 43-22, which authorizes enforcement of a mechanic's lien by a suit in equity, does not expressly require that the trustee and beneficiary under an antecedent deed of trust be made parties to that suit. 3 But, in our view, the issue is controlled by principles of due process of law.

"It is fundamental, of course, that no person may be deprived of his property without due process of law. 'One of the essentials of due process is notice. This is especially true in proceedings of a judicial nature affecting the property rights of citizens.' " Finkel Products v. Bell, 205 Va. 927, 931, 140 S.E.2d 695, 698 (1965) (citation omitted). The lien of a deed of trust recorded before land is improved is a first lien on the land and a lien on the improvements subordinate to a mechanic's lien; the mechanic's lien is a first lien on the improvements and a subordinate lien on so much of the land as is necessary for the use and enjoyment of the improvements. Federal Land Bank v. Clinchfield Co., 171 Va. 118, 123, 198 S.E. 437, 439 (1938) (construing statutory ancestors of Code §§ 43-3, -21). Because the proceeds of a judicial sale under a decree enforcing a mechanic's lien may prove to be insufficient to pay both lien creditors in full, the beneficiary of an antecedent deed of trust has a property right which entitles him to notice and an opportunity to challenge the perfection of the mechanic's lien or to invoke the forfeiture provisions of Code § 43-23.1.

Here, sale has been ordered and the beneficiary has been denied such an opportunity. Guided by principles of due process, we hold that the beneficiary of the antecedent deed of trust was a necessary party to the suits to enforce the mechanics' liens. 4

We now consider whether the trustees, who hold bare legal title to the land to be sold, were necessary parties. Damon and Lynn insist that our decision in Loyola Fed. Savings v. Herndon, 218 Va. 803, 241 S.E.2d 752 (1978), controls that question. There, we construed Code § 43-4 which provides that, in order to perfect a mechanic's lien, the claimant must file a memorandum "showing the names of the owner of the property sought to be charged". We held that a trustee under a deed of trust is not an "owner" within the meaning of that statute, and, hence, that the failure of the claimant in that case to name the trustee in the memorandum he filed did not...

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