How the Virginia Mechanics lien applies condominium common area and the requirement to provide the proper name and the issue of apportionment
Circuit Court Alexandria, VA.
Re: USA Contractors, Inc. v. The Manors at Stonegate, a Condominium Unit Owners Association Docket No. CL12002459
Dear Counsel,
This matter comes before the Court on Defendant’s demurrer to the Complaint. After reviewing the pleadings, applicable law, and argument held on September 26,2012, the Court requested supplemental briefing and took the matter under advisement. Counsel timely provided
the Court with well-researched supplemental briefs that aided the Court in consideration of this matter. In reaching its decision on the demurrer, the Court has considered the pleadings, the arguments made at the hearing, the supplemental briefs, and the governing law.
USA Contractors Inc. (Plaintiff) filed a Complaint alleging that it contracted for and performed “improvements, repairs, and maintenance .. . for the common area for all units” of the
Manors at Stonegate (Defendant), but the Defendant did not pay in full. Accordingly, the Complaint asserts three counts: (I) enforcement of a mechanic’s lien against the property in the amount of $192,540.63 plus interest, (11) breach of contract seeking $253,265.00 in damages,
plus interest, and (111) unjust enriciment seeking $253,265.00 in damage, plus interest.
The Defendant timely filed a Demurrer to the Complaint. The Demurrer asks this Court to dismiss Count I, the mechanic’s lien, on two grounds. First, Defendant claims that the mechanic’s lien fails to name the proper owners as required by Code 43-4. Second, Defendant
claims that the mechanic’s lien fails to apportion the claim as required by Code 43-3.
Defendant also demurred to Count II stating that the Complaint failed to attach the contract and to Count III claiming that Plaintiff may not sue for unjust enrichment while simultaneously claiming that an express contract exists.
Mechanic’s Liens
Mechanic’s liens are creatures of statute in Virginia and courts must strictly construe such liens since they operate in derogation of common law. See e.g. Britt Constr., Inc. v. Magazzine Clean, LLC, 271 Va. 58, 63 (2006). “Substantial compliance with the statute is essential or the lien will be lost.” Belle View Condos. v. Drytech, Inc., 65 Va. Cir. 169, 171 (Fairfax Va. Cir. Ct. 2004) (citing Wallace v. Brumback, 177 Va. 36 (1941)). “It is therefore incumbent upon the party asserting a lien under the statute to show that he has complied with every essential requirement of the statute; and unless such compliance is shown, his claim must be rejected.” Id. A curing statute exists, however, to relieve contractors of the draconian consequences of failing to fully comply with the technical elements. This statute, 43-15, entitled “Inaccuracies in memorandum or description not affecting lien” states that:
No inaccuracy ill the memorandum filed, or in the description of the property to be covered by the lien, shall invalidate the lien, if the property can be reasonably identified by the description given and the memorandum conforms substantially to the requirements of 43-5,43-8 and 43-10, respectively, and is not wilfully false.
Va. Code 43-15. The enforcement statutes, however, must be liberally construed. See American Stnd. Homes Corp. v. Reinecke, 245 Va. 1 13, 119 (1 993).
Virginia Code 43-4 states that to perfect a lien a claimant must file a memorandum of lien at any time after the work is commenced or material fwnished in the clerk’s office where the property is located. This required memorandum:
shall show the names of the owner of the property sought to be charged, and of the claimant of the lien, the amount and consideration of his claim, and the time or times when the same is or will be due and payable, verified by the oath of the claimant, or his agent, including a statement declaring his intention to claim the benefit of the lien, and giving a brief description of the property on which he claims a lien.
See Va. Code 43-4 (emphasis added). This memorandum is key to the perfection of the lien and, hence, the General Assembly provided a sample memorandum in Code 43-5 which states: “The memorandum and affidavit required by 43-4 shall be sufficient if substantially in form and effect as follows.” See Va. Code 43-5 (emphasis added). In Blanton v. Owen,the Supreme Court held that a memorandum which stated the property was owned by one of two people or by a “person unknown” was a sufficient statement of ownership since one of the persons named was the equitable owner. See 203 Va. 73 (1961).
The concept of a condominium is “a unique type of land-holding which exists primarily under the authority of special statutes.” United Masonry, Inc. v. Jefferson Mews, Inc., 21 8 Va.
360,363 (1977). In Virginia this method of owning real estate is governed by the Condominium Act, Code $5 55-79.39 et seq. (1974). The Mechanic’s lien statutes incorporated this relatively new property regime and Code tj 43-3 explains that:
A. If the building or structure being constructed, removed or repaired is part of a condominium as defined in 55-79.41 or under the Horizontal Property Act ( 55-79.1 through 55-79.38), any person providing labor or furnishing material to one or more units or limited common elements within the condominium pursuant to a single contract may perfect a single lien encumbering the one or more units which are the subject of the contract or to which those limited common elements pertain, and for which payment has not been made. All persons providing labor or furnishing materials for the common elements pertaining to all the units may perfect a single lien encumbering all such condominium units.
Whenever a lien has been or may be perfected encumbering two or more units, the proportionate amount of the indebtedness attributable to each unit shall be the ratio that the percentage liability for common expenses appertaining to that unit computed pursuant to subsection D of 55-79.83 bears to the total percentage liabilities for all units which are encumbered by the lien. The lien claimant shall release from a perfected lien an encumbered unit upon request of the unit owner as provided in subsection B of 55-79.46 upon receipt of payment equal to that portion of the indebtedness evidenced by the lien attributable to such unit determined as herein provided. . . .
B. Any person providing labor or materials for site development improvements or for streets, stormwater facilities, sanitary sewers or water lines for the purpose of providing access or service to the individual lots in a development or condominium units as defined in 55-79.41 or under the Horizontal Property Act (55-79.1 through 55-79.3 8) shall have a lien on each individual lot in the development for the fractional part of the total value of the work contracted for … however, no such lien shall be valid as to any lot or condominium unit unless the person providing such work shall, prior to the sale of such lot or condominium unit, file with the clerk of the circuit court of the jurisdiction in which such land lies a document setting forth a full disclosure of the nature of the lien which may be claimed, the total value of the work contracted for by the claimant in the subdivision and the portion thereof allocated to each lot as required herein, and a description of the development or condominium, and shall, thereafter, comply with all other applicable provisions of this chapter. ….
Nothing contained herein shall be construed to prevent the filing of a mechanics’
lien under the provisions of subsection A, or require the lien claimant to elect
under which subsection the lien may be enforced.
See Va. Code 43-3 (emphasis added). Subsection A authorizes a contractor to perfect a single lien and states that after a lien is filed one may look to the Condominium Act to determine how to release the lien. Subsection B requires that certain types of contractors must file a document apportioning their lien with the clerk of the circuit court in order for the lien to be valid. This language is conspicuously absent from Subsection A.
The method of apportionment under Code 43-3(A) references a subsection of the Condominium Act which states:
D. The amount of all common expenses not specially assessed pursuant to subsection A, B, or C hereof shall be assessed against the condominium units in
proportion to the number of votes in the unit owners’association appertaining to
each such unit, or, if such votes were allocated as provided in subsection B of55-79.77, those common expense assessments shall be either in proportion tothose votes or in proportion to the units’ respective undivided interests in the common elements, whichever basis the condominium instruments specify. Such assessments shall be made by the unit owners’ association annually, or more often if the condominium instruments so provide.
See Va. Code 55-79.83 (emphasis added). The Condominium Act grants the unit owner’s association the “irrevocable power as attorney-in-fact on behalf of all the unit owners and their successors in title with respect to the common elements, including without limitation the right .. settle any claims or actions related to the common elements.” See Va. Code 55-79.80. The “release of lien” section of the Act specifically references an owner’s associations ability to mortgage “on any portion of the condominium within which no units are located.” See Code 55-79.46 (“nor shall any provision of this subsection be construed to prohibit the unit owners’ association from mortgaging or causing a deed of trust to be placed on any portion of the condominium within which no units are located, so long as any time limit specified pursuant to 55-79.74 has expired, and so long as the bylaws authorize the same.”).
The Virginia Supreme Court has addressed a case similar to the one at bar, United Masonry, Inc. v. Jefferson Mews, Inc., 21 8 Va. 360 (1977). United Masonry addressed a blanket lien on a Condominium Complex for work done on the common elements and 132 units. At the time the lien was filed only 132 units had been built, though 264 units were planned and legally part of the Condo Association. The Condo Association challenged the lien because it overburdened certain units and failed to apportion the amount due under two separate contracts. The Court stated that: “We are dealing here with two different . ..So, more precisely, the issue is whether the blanket mechanic’s lien is invalid for failure to apportion the value of the work performed between the individual condominium units and the common elements.” Id. at 372.
The Condo Association represented to the Court that “if in this case work had been done under a single contract which added value to only 132 units and a memorandum had been recorded which claimed a joint lien on only those 132 units, the lien would have been valid.” Id. at 374. The Court in United Masonry sustained the Association’s demurrer to the liens because the complaint “flatly and clearly alleges that .there were two separate contracts” and the contractor sought to encumber 240 units for work done to 132 units.
Defendant contends that the lien should fail because it “fails to name each individual owner of a unit within the condominium. The Association owns no real property on which the Lien may attach” as required by Code 43-4. See Demurrer at ¶ 7. Defendant further argues that the failure to apportion the lien by the method delineated in Code $ 43-3 is also fatal to the lien.
In the supplemental memorandum submitted to the Court, Defendant raised several issues not specifically stated in the demurrer, including the issue of notice to the individual unit owners, failure to join the unit owners as necessary parties, and that Plaintiff actually did work to individual units. As a demurrer must state specifically the grounds upon which is relies, this Court will not address those arguments at this time. Furthermore, the factual allegations made in the Demurrer or the supplemental brief, such as the contention that Plaintiff worked on individual units, must be ignored on demurrer.
Plaintiff emphasizes that it only performed work on the common elements and only filed a lien against the complex as a whole. Plaintiff points to Code 43-3(A) arguing that if a contractor does work on the common elements he “shall have a single lien” encumbering all the units. Plaintiff further argues that the statute does not contemplate that a contractor who did work on only the common elements must conduct title searches for each individual unit owner in order to have his lien. Plaintiff points to many parts of the Condominium Act where the owner’s association is granted powers of attorney-in-fact and powers over the common elements. If the statute required that all unit owners be named, Plaintiff argues, then it would be a practical nightmare not intended by the statutes. Plaintiff postulates that filing a lien for work done on a condo would require hundreds of title searches, many of which would later be invalidated if a transfer had occurred in the interim or a unit was owned by tenants in common, etc. This result would eviscerate the remedy of mechanic’s liens as applied to Condo complexes. Regardless, Plaintiff asserts, the statute explaining how mechanic’s liens may be filed on condo complexes do not mention the term “unit owners” once. Regarding apportionment, Plaintiff interprets the statutes to describe apportionment of the lien as necessary for the release but not as a requirement for the filing of the lien memorandum. Additionally, Plaintiff cites the example of a memorandum in Code 43-5 which does not mention apportionment. Requiring apportionment, Plaintiff contends, would add a requirement riot in the plain language of the statutes.
-Conclusion
As this matter comes before the Court: on demurrer, the Court is bound by the facts and reasonable inferences in the Complaint. This Court must strictly construe the mechanic’s lien statutes because they are in derogation of the common law. The plethora of cases invalidating blanket or joint liens did so because the lien over-burdened the property or improperly burdened the property for work not performed. In this case, Plaintiff has alleged one contract with the Defendant, the unit owner’s association, for work done only to the common elements of six different buildings. The lien does not over-burden the property or burden property not improved.
Mechanic’s lien statutes require that the memorandum name the owner sought to be charged. See Code 43-4. The Court finds persuasive that the mechanic’s liens statutes fail to mention “unit owners” when addressing condominiums. Additionally, the Condominium Act contemplates an owner’s association’s ability to lien common elements without a parallel requirement that it name the owners. In most prior cases the contractor sought to lien a certain number of units for work done to those units, but here Plaintiff filed a blanket lien against the entire complex. The Court finds that Plaintiffs memorandum of the lien placed the world on notice of the lien. See e.g. Kiser v. Russell County (In re Kiser), supra. Further, the memorandum substantially conlplies with the statutes. See Code 43-15. This Court finds that the remedy of a mechanic’s lien should not be vitiated because the unique land-holding concept of condominium presents impediments to filing a single lien and “both the policy considerations and equitable considerations favor the materialmen.” In re Thomas A. Cary, Inc., 412 F. Supp. 667 (E.D. Va. 1976).
This Court finds that the plain language of Code 5 43-3(A) permits a contractor to file a blanket lien against a condominium complex and explains how the amount encumbering each unit shall be calculated with reference to the Condominium Act. That section does not require that the contractor apportion the amounts in the memorandum. In fact, the General Assembly included language in Code 43-3(B) requiring that the contractor file with the clerk a document apportioning amounts due, but chose not to include such language in 43-3(A). Furthermore, Code 43-5 entitled “Sufficiency of memorandum and affidavit required by 43-4” provides a form for a mechanic’s lien with all the necessary blanks but there is no mention of “apportionment.” The Court holds that a strict construction of the mechanic’s lien statutes reveals that the requirement that a contractor file a document apportioning his lien applies only to 43-3(B), because the General Assembly could have included the same language in 43-3(A) but chose not to do so. See Eberhardt v. Fairfax County Emps. Ret. Sys. Bd. of Trs., 283 Va. 190, 195 (2012) (“Where the same term is used in different places within a statutory scheme, we apply the same meaning unless the legislature clearly intended a different one.”); Appalachian Power Co. v. State Corp. Comm’n, 284 Va. 695,706 (2012) (“Rules of statutory construction prohibit adding language to or deleting language from a statute.”) (citing to BBF, Inc. v. Alstom Power, Inc., 274 Va. 326, 33 1 (2007)). The Fairfax County Circuit Court in Belle View held that the apportionment section is not self-executing, therefore the contractor should have apportioned the amounts to each individual unit when he filed the memorandum of the lien. This Court holds that the language of the statute conveys that apportionment is self-executing as explains how it “shall” be calculated, but does not place the onus on the contractor.
The Court overrules the demurrer as to the mechanic’s lien claim.
Breach of Contract
“The elements of a breach of contract action are (1) a legally enforceable obligation of a defendant to a plaintiff; (2) .the defendant’s violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.” Sunrise Continuing Care, LLC v. Wright, 277 Va. 148 (2009) (citations omitted).
Defendant demurs to the breach of contract because the Plaintiff did not attach a copy of the contract to the Complaint. On July 11,201 2, the parties came before Judge Kloch sitting for this Court and argued Defendant’s motion craving oyer. This Court denied Defendant’s motion by Order and now Defendant seeks to dismiss the breach of contract claim for lack of production of the contract.
The Complaint stated that the parties had a “continuing contract,” alleged the relevant terms, stated that Plaintiff had performed the work to the common elements, Defendant paid some amounts due, that Defendant later declared that it would cease paying, that Defendant did cease payments, and that Plaintiff was injured thereby. The Complaint did not attach the contract and the Complaint is silent as to whether the contract was oral or written. The Court finds that, for the purposes of demurrer, Plaintiff has pled sufficient facts to maintain a cause of action for breach of contract, therefore the demurrer to this count is overruled.
Unjust Enrichment
Quantum meruit recovery.. . is based upon an implied contract to pay the reasonable value of services rendered. This cause of action has been available in Virginia for many years. In Rea v. Trotter.. . (1 875), this Court referred to it as ‘an undeniable principle of law.’ There, we said, ‘Where service is performed by one, at the instance and request of another, and . . . nothing is said between the parties as to compensation for such service, the law implies a contract, that the party who performs the service shall be paid a reasonable compensation therefor.’ The remedy available to the plaintiff is an award of damages amounting to the reasonable value of the work performed, less the compensation actually received for that work.
For a court to award a quantum meruit recovery, the court must conclude that there is no enforceable express contract between the parties covering the same subject matter. In such a case, the court will imply a contract between the parties to prevent inequity; when such an express contract exists, however, there is no need to imply one because the parties have already negotiated an agreement.
Mongold v. Woods, 278 Va. 196,203 (2009) (internal citations omitted).
Defendant argues that the Court should dismiss Count I11 for unjust enrichment because Plaintiff pled the existence of an express contract. Virginia Supreme Court Rule 1:4, however, states that a party “may plead alternative facts and theories of recovery against alternative parties, provided that such claims, defenses, or demands for relief so joined arise out of the same transaction or occurrence. … A party may also state as many separate claims or defenses as he has regardless of consistency.. .” The Court finds that Plaintiff may plead in the alternative, though he may not recover under both breach of contract and unjust enrichment. If, during the course of litigation, this Court finds that there was not an express contract, then Plaintiff may rely on this claim for unjust enrichment. The demurrer to this Count is overruled.
Sincerely,
Nolan B. Dawkins