First American Bank v. J.S.C. Concrete Construction, Inc.

Present: All the Justices

FIRST AMERICAN BANK
OF VIRGINIA, ET AL.

v. Record No. 990366

J.S.C. CONCRETE CONSTRUCTION,
INC.
OPINION BY JUSTICE A. CHRISTIAN COMPTON
January 14, 2000
J.S.C. CONCRETE CONSTRUCTION,
INC.

v. Record No. 990426

FIRST AMERICAN BANK
OF VIRGINIA, ET AL.

FROM THE CIRCUIT COURT OF LOUDOUN COUNTY
Carleton Penn, Judge Designate

These two appeals stem from a single suit to enforce

mechanics' liens. Although such a lien is a creature of

statute, the lien must have its foundation in a contract, with

which the lien must correspond. Sergeant v. Denby, 87 Va. 206,

208, 12 S.E. 402, 402 (1890). Here, we must decide first just

what comprises the underlying contract of the parties. Then,

the dispositive issue will become whether the contract's lien

waiver provisions control the rights of the lien claimant.

In 1989, Drewer Development Corporation (Drewer or DDC) was

a developer of multiple-lot residential projects in Northern

Virginia. J.S.C. Concrete Construction, Inc. (JSC), was a
concrete flatwork and walls contractor, which had worked for

Drewer for a number of years on different projects.

On January 10, 1991, JSC filed memoranda of mechanic's lien

against 13 lots in two different residential projects being

developed by Drewer in Loudoun County. In a timely filed suit

to enforce the liens, JSC's bill of complaint named multiple

defendants, including Drewer, which was the record owner of the

properties, and other mechanic's lien claimants. The bill also

named as defendants First American Bank of Virginia and

Commonwealth Abstract Corporation, Trustee (collectively, the

Bank), the secured party and trustee, respectively, under

construction loan deeds of trust upon the properties.

The cause was referred to a commissioner in chancery who

held an evidentiary hearing in August 1995. At that stage of

the proceeding, the only parties active in the litigation were

JSC and the Bank; Drewer had ceased doing business in 1991.

In a December 1996 report, the commissioner recommended

that portions of seven of the original 13 liens be declared

valid in the total amount of $39,124.81 out of the $161,252.74

initially claimed. The commissioner also recommended that

prejudgment interest be assessed from December 30, 1990.

JSC and the Bank filed exceptions to the commissioner's

report. Following argument of counsel, the chancellor overruled

the exceptions, but for two minor items not at issue on appeal,

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and confirmed the report in a December 1998 final decree. We

awarded the Bank and JSC separate appeals and consolidated them.

The facts are undisputed. On March 16, 1989, JSC entered

into a "Contractor Base Agreement" with Drewer. The three-page,

29-paragraph, mostly preprinted agreement set forth the general

conditions under which JSC would perform work for Drewer. It

provided that its purpose was "to fix the obligations" of the

parties with regard to the work.

It further provided that the work to be performed would be

"specifically described in Work Orders issued but is generally

as follows: To supply and install materials and labor for

footings (turn down slab) and insulation slab (step from slab to

garage) Stoop and Steps and Walls."

The Base Agreement also provided: "In conjunction with

this Agreement, DDC may issue Work Orders from time to time

covering the Work to be performed and time for completion at

each specific job location. Work Orders will usually be issued

prior to the start of required work." The agreement stated that

"the term Work Order shall include forms designated 'Extra Work

Order' and other similar designations and containing information

about commencing such Work and the payment for such Work."

The agreement further provided that it was "non-exclusive

and that DDC is free to contract with any other entity for the

performance of the Work described in this Agreement."

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Elaborating, the agreement stated that Drewer was "not obligated

to issue Work Orders" to JSC. Also, the agreement provided that

no payments would be due under it until Drewer received "a Work

Completion Certificate which certifies that all Work to be

performed under a particular Work Order has been completed

satisfactorily."

The remaining paragraphs of the Base Agreement included

provisions requiring JSC, for example, to become familiar with

plans and specifications, to cooperate with other contractors,

to obtain all required licenses and permits, to indemnify Drewer

for all claims arising from performance of the work, to provide

new materials, to keep the job site free of waste and rubbish,

and to obtain necessary insurance coverage.

Additionally, the agreement contained a paragraph providing

that JSC waived all rights to file mechanics' liens against the

property for any labor, services, or materials furnished to

Drewer.

During the time when JSC performed work for Drewer a

pattern of performance was established between the parties. JSC

would only begin work on a Drewer project when Drewer issued

preprinted work order forms labeled "Extra Work Order." These

forms would name the particular project, identify the type of

dwelling involved and its lot location, list the concrete work

to be performed and state the price to be paid JSC. The date of

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the work order indicated the date that JSC was authorized to

begin construction.

Printed at the foot of the form was a paragraph labeled

"Work Completion Certificate." As we have said, this was used

to notify Drewer that the work had been completed satisfactorily

upon the date the form was signed on behalf of JSC.

According to the evidence, there were basically three

phases of the concrete work on each dwelling: (1) Footings and

foundation, (2) slabs, and (3) stoops and hearth. Drewer would

issue three separate Extra Work Order forms to JSC for the three

phases of the concrete work on each particular house and lot.

The three forms were always issued on the same date and each

form was for a different phase of the concrete work. No single

form listed all three phases of the concrete work.

Once the forms were received, JSC, or its subcontractor,

would proceed with the work, phase by phase, as the house

reached the stage of construction called for by each work order.

As the phase of the work described in each form was completed,

JSC would submit the dated Work Completion Certificate to

Drewer. Payment from Drewer for that phase of work would be due

JSC at the time each certificate was submitted.

A portion of the Work Completion Certificate deals with the

subject of mechanics' liens. It purports to waive any rights to

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file mechanics' liens only "upon receipt of payment from Drewer

Development."

Keeping in mind that the initial issue we must decide is

just what comprised the contract between the parties, we shall

summarize the commissioner's finding on that question, which was

confirmed by the chancellor. The commissioner stated that,

although the Contractor Base Agreement outlined the general

terms and conditions of the work that would be required by JSC,

"the agreement was non-exclusive with DDC reserving the right to

contract with any other party for the work described. Only when

DDC issued work orders to JSC and JSC accepted the orders by

supplying the materials and labor was a contractual offer and

acceptance established."

The commissioner determined that because the work orders

identified the details of the obligations between the parties

and verified the dates that the work was completed, upon which

dates the timely filing of the liens must be based, "the liens

correspond directly to the individual Work Orders and not the

Contractor's Base Agreement." In other words, the commissioner,

and the chancellor, ruled that each Extra Work Order for a lot

was a separate, stand alone contract, thereby taking the

Contractor Base Agreement out of the equation.

In view of that ruling, it became unnecessary for the

commissioner and the chancellor to consider the lien waiver

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provisions of the Base Agreement. Focusing only on the lien

waiver language of the Extra Work Orders, the commissioner and

the chancellor found that JSC "did not waive its right to file

its mechanic's liens." They said "the lien waiver stated in the

Work Orders which stipulates 'upon receipt of payment,' is

considered to be a conditional lien waiver. As JSC has not

received payment for the work indicated in the liens, the lien

waiver is non-binding."

Having determined that each Extra Work Order was a separate

contract, and that the work orders for each lot collectively did

not constitute a single contract for each lot, as JSC had

argued, the commissioner found that the time for filing a

mechanic's lien for much of JSC's work had expired, and reduced

JSC's claim as the result of the untimely filings. Accordingly,

the trial court reduced JSC's total claim made at the

commissioner's hearing of $80,549.51 by $41,424.70.

In its appeal, the Bank contends that the Contractor Base

Agreement and the Extra Work Orders for each lot together form

the contract between the parties and that the trial court erred

in ruling that each work order was a stand alone contract. The

Bank further contends that the lien-waiver language in the work

order conditioned upon receipt of payment should not supersede

the express waiver of mechanic's lien rights contained in the

Base Agreement, and that the trial court erred in refusing to

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hold that JSC had waived all its claims. Also, the Bank

contends the trial court erred in awarding prejudgment interest.

In its appeal, JSC contends all its liens were timely filed

and should be enforced because the trial court erred in ruling

that the individual work orders for each lot constituted

separate contracts. JSC argues that the work orders for a

particular lot "should be considered as a unitary and continuing

contract for that lot such that the time for filing a mechanic's

lien does not begin to run until the last work is performed on

that lot." Thus, JSC asks this Court to reverse that portion of

the trial court's decree which deducted $41,424.70 from its

total claim and to modify the decree to include that sum in the

total principal amount of the judgment in its favor.

We agree with the Bank upon what comprises the contract

between the parties, and we also agree with the Bank that JSC,

according to the provisions of the Base Agreement, waived its

rights to file its mechanics' liens.

Several settled principles are applicable in this case of

contract interpretation. In the present case, the question of

what comprised the parties' contract and the interpretation of

that contract is a question of law. Thus, upon review, we are

not bound by the trial court's opinion on those issues. See

Wilson v. Holyfield, 227 Va. 184, 187-88, 313 S.E.2d 396, 398

(1984). Additionally, "when parties have entered into two

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documents relating to a business transaction, the writings will

be construed together to determine the parties' intent."

Doswell Ltd. Partnership v. Virginia Elec. and Power Co., 251

Va. 215, 222, 468 S.E.2d 84, 88 (1996).

First, we conclude that the trial court incorrectly

identified the underlying contract. In expressly ruling that

each work order for a house and lot was a stand alone contract,

and implicitly ruling that the Base Agreement was a nullity, the

court disregarded clear language in both the agreement and the

work orders that requires the documents to be construed as one

integrated contract.

For example, the Base Agreement provides that its purpose

"is to fix the obligations of" the parties. The Base Agreement

states that the term "Contract Documents" shall mean the

Agreement "together with any Work Orders."

Moreover, the Base Agreement provides that the term "Work"

would "have the meaning specified in Section 3." Section 3

identifies the three phases of the concrete work to be performed

by JSC that are to be "specifically described in Work Orders

issued."

The Extra Work Orders provide no new terms. Indeed, the

form states that JSC "is authorized and hereby agrees to do the

following work under the terms and conditions of the Contractor

Base Agreement."

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 Manifestly, the language of the documents contemplates that

both must be read together to set forth the full understanding

of the parties, and that neither one standing alone constituted

a complete contract. The work order specified the work to be

done under the terms and conditions established in the Base

Agreement. Upon Drewer's offer extended by issuance of the

work order (which incorporated the Base Agreement) being

accepted by JSC's consent to perform under the work order, a

binding contract between the parties was formed.

Because of the conclusion we reach on the second issue, it

is unnecessary to decide whether there were three contracts on

each house, one for each phase of the work, or whether there was

one contract on each house incorporating the three work orders.

Whether there are three contracts or one, the lien-waiver

language is present in all the contracts.

This brings us to the second issue, that is, whether, in

the contract, JSC waived its rights to file mechanics' liens.

The statute creating the right to a mechanic's lien

specifically provides that any right to file or enforce such a

lien "may be waived in whole or in part at any time by any

person entitled to such lien." Code § 43-3(C). Such a waiver

"must be express, or, if it is implied, it must be established

by clear and convincing evidence." McMerit Constr. Co. v.

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Knightsbridge Dev. Co., 235 Va. 368, 374, 367 S.E.2d 512, 516

(1988).

Resolution of this issue requires interpretation of the

provisions in the Base Agreement and the Extra Work Orders

touching that subject. Paragraph 21 of the Base Agreement

provides:

"TO THE EXTENT NOT PROHIBITED BY LAW, CONTRACTOR [JSC]
HEREBY WAIVES AND RELINQUISHES ANY AND ALL STATUTORY
OR CONTRACTUAL RIGHTS THAT HE MAY HAVE TO OBTAIN STOP
NOTICES OR LIENS, MECHANICS OR OTHERWISE, AGAINST THE
PROPERTY OR IMPROVEMENTS THAT ARE THE SUBJECT OF THE
WORK, AND AGREES NOT TO FILE ANY SUCH NOTICE OR LIEN
AGAINST SUCH PROPERTY OR IMPROVEMENTS FOR ANY LABOR,
SERVICES, OR MATERIALS FURNISHED TO DDC."

The work order Work Completion Certificate provides:

"Contractor [JSC] hereby reports completion of
work authorized above in compliance with the terms and
conditions of the Contractor Base Agreement and
requests payment of the consideration set forth above
in the amount of $_______. Contractor certifies that
all labor and materials are paid in full, that all
withholding taxes, social security taxes and
applicable unemployment taxes for all employees of
Contractor have been paid, and upon receipt of payment
from Drewer Development, Contractor waives and
releases all actions, claims, and demands against
Drewer Development and waives any mechanic's,
materialmen's or like liens and all rights to file any
such liens in the future against the real property on
account of the work, services, equipment and materials
performed or furnished by Contractor."

The language of the Base Agreement is express and

unambiguous; it is an unconditional waiver of the right to file

mechanics' liens. Indeed, paragraph 24(e) provides that JSC

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shall be in breach of the agreement if it "shall file a claim or

lien against the property where the Work has been performed."

An apparent inconsistency is created, however, by the Work

Completion Certificate. If that language applies to waiver of

mechanic's lien rights, it must be construed to mean that lien

waiver rights are waived only "upon receipt of payment." But if

the contractor has been paid in full, the law gives it no lien.

Payment "removes any right it may have had to effect a lien."

Walker & Laberge Co. v. First Nat'l Bank of Boston, 206 Va. 683,

692, 146 S.E.2d 239, 246 (1966). Therefore, an interpretation

that makes the enforceability of the work order's lien waiver

clause conditioned upon payment should be avoided, as the Bank

argues.

However, in construing contract documents as a whole, "the

court will not treat any word or clause as meaningless if any

reasonable interpretation consistent with the other portions of

the contract can be ascribed to it." Daugherty v. Diment, 238

Va. 520, 525, 385 S.E.2d 572, 574 (1989). In other words, when

two provisions of a contract appear to be mutually conflicting,

they should be reconciled if a reasonable basis for

reconciliation is afforded by the instrument's language.

Hutchison v. King, 206 Va. 619, 624-25, 145 S.E.2d 216, 220

(1965).

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 When the contract is considered as a whole, and the Work

Completion Certificate is read as a part of the contract, the

contract clearly provides a binding waiver of mechanic's lien

rights. The Base Agreement paragraph addresses only waiver of

liens. But, the Work Completion Certificate addresses at least

two subjects: The right to file liens, which already has been

waived when the work order becomes a part of the contract, and

other "actions, claims and demands."

In order to reconcile the provisions, we interpret the

condition precedent of payment to apply only to waiver of

"actions, claims, and demands," and not to lien waiver. In

other words, the clause in the Certificate should be read in two

parts: (1) "upon receipt of payment from Drewer Development,

Contractor waives and releases all actions, claims, and demands

against Drewer Development" and (2) "waives any mechanic's,

materialmen's or like liens and all rights to file any such

liens in the future." This second portion merely reaffirms the

waiver of lien rights that are so clearly set forth in the Base

Agreement.

Consequently, we hold that the trial court erred in

refusing to rule that JSC waived its rights to file mechanic's

liens. Thus, it becomes unnecessary to address the prejudgment

interest question.

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 Therefore, the judgment of the court below will be reversed

and final judgment will be entered here in favor of the Bank

dismissing JSC's bill of complaint.

Record No. 990366 — Reversed and final judgment.
Record No. 990426 — Reversed and final judgment.

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