Harrison & Bates, Inc. v. Featherstone Associates Ltd. Partnership

Present: All the Justices

HARRISON & BATES, INC.
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
v. Record No. 961318 APRIL 18, 1997

FEATHERSTONE ASSOCIATES LIMITED
PARTNERSHIP, ET AL.

FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY
Herbert C. Gill, Judge

In this appeal, we consider whether the Commercial Real

Estate Broker's Lien Act, Code §§ 55-526 and 55-527 (the Broker's

Lien Act), permits a commercial real estate broker to record and

enforce a lien against rents on property after the property has

been transferred to a subsequent purchaser.
BACKGROUND

The parties stipulated the facts in the trial court. We

summarize the chronology of events and commercial transactions

that form the framework of the parties' differing assertions on

appeal. In 1988, Featherstone Associates

(Featherstone/Virginia), a Virginia general partnership, owned

Featherstone Professional Center (the property), a commercial

office complex in Chesterfield County. To obtain tenants for the

property, Featherstone/Virginia entered into a written commission

agreement with Bowers, Nelms & Fonville, Inc. (Bowers), a

licensed commercial real estate broker. Under this agreement

Bowers' brokerage fee was to be 4% of the rents paid over the

term, including any renewal period, of leases procured by Bowers.

Harrison & Bates, Inc. (Harrison), a licensed commercial

real estate broker, is the assignee of the agreement between

Bowers and Featherstone/Virginia. Principal Commercial Advisors,
Inc. (Principal), a subsidiary of the Principal Financial Group,

is the successor of the original mortgage lender to

Featherstone/Virginia on the property. Featherstone Associates

Limited Partnership (Featherstone/New Mexico) is a New Mexico

limited partnership and is unrelated to Featherstone/Virginia.

April 16, 1987 Featherstone/Virginia executes first Deed of
Trust, Assignment of Leases and Security
Agreement on the property in favor of Signet
Bank.
June 1, 1988 Featherstone/Virginia and Bowers execute
commission agreement.

October 11, 1988 Featherstone/Virginia executes second Deed of
Trust and Assignment of Rents and Leases on
the property in favor of Signet Bank.

May 4, 1989 Bowers procures lease on a portion of the
property with John Tyler Community College;
Featherstone/Virginia begins paying
commissions to Bowers on rents received under
this lease.

August 4, 1989 Bowers procures lease on a portion of the
property with Dr. Jonas B. Speigel;
Featherstone/Virginia begins paying
commissions to Bowers on rents received under
this lease.

June 28, 1993 Signet Bank transfers interest in first and
second Deeds of Trust and Assignments of
Rents and Leases on the property to
Principal.

January 14, 1994 Featherstone/Virginia agrees to transfer
ownership of the property to Principal in
lieu of foreclosure; deed placed in escrow
with Signet Bank; Signet Bank continues
paying commissions to Harrison as Bowers'
successor-in-interest.

May 2, 1994 Deed released from escrow and recorded; last
commission payment is made to Harrison by
agent of Principal.

July 22, 1994 Principal informs Harrison that it will not
continue commission payments.
January 24, 1995 Harrison files memorandum of commercial real
estate broker's lien.

May 5, 1995 Principal deeds ownership of the property to
Featherstone/New Mexico; Featherstone/New
Mexico executes Deed of Trust and Assignment
of Rents in favor of Principal.

June 12, 1995 Harrison requests unsuccessfully that tenants
pay rent directly to Harrison under the lien.

July 31, 1995 Harrison files bill of complaint to enforce
lien, naming as respondents Featherstone/New
Mexico, Principal, the trustees under
Featherstone/New Mexico's Deed of Trust in
favor of Principal, and the two tenants.

In a letter opinion subsequently incorporated by reference

in the final decree, the trial court initially determined that

the language of the Broker's Lien Act is ambiguous with regard to

when a broker's lien is created, and is, therefore, subject to

judicial construction. The trial court then determined that the

purpose of the Broker's Lien Act was to provide commercial real

estate brokers with a lien to secure contractual obligations of

the property owner without having to bargain for that right. The

trial court further reasoned, with reference to the Virginia

Recording Act, Code § 55-95, that recording requirements within

the Broker's Lien Act were intended to provide purchasers and

encumbrancers with notice of the existence of the lien. On that

basis, the trial court concluded that "perfection of a lien

subsequent to the transfer of property would be contrary to the

clear legislative purpose behind" the Broker's Lien Act.

Accordingly, the trial court found that the present lien is not

enforceable. We awarded Harrison this appeal.
DISCUSSION
 We first consider Harrison's assertion that the Broker's

Lien Act is not ambiguous and, thus, should be applied according

to the plain meaning and intent of its language. It is well

established that "[t]he province of [statutory] construction lies

wholly within the domain of ambiguity." Winston v. City of

Richmond, 196 Va. 403, 408, 83 S.E.2d 728, 731 (1954). When a

statute is plain and unambiguous, a court may look only to the

words of the statute to determine its meaning. Brown v. Lukhard,

229 Va. 316, 321, 330 S.E.2d 84, 87 (1985).
The Broker's Lien Act consists of two code sections, the

first of which defines the terms "commercial real estate" and

"principal broker." Code § 55-526. The dispositive portions of

the Broker's Lien Act are contained in Code § 55-527, which has

two subparts. At the time Harrison filed its lien, Code § 55-527

read, in pertinent part:
A. Any principal broker who . . . has provided
licensed services that result in the procuring of a
tenant of commercial real estate upon the terms
provided for in a written agreement signed by the owner
thereof . . . shall have a lien, in the amount of the
compensation agreed upon by and between the principal
broker and the owner, upon rent paid by the tenant of
the commercial real estate, or by the successors or
assigns of such tenant. . . .

B. The lien provided by this chapter shall not
attach or be perfected until a memorandum of such lien
signed under oath by the broker and meeting the
requirements of this subsection has been recorded in
the clerk's office of the circuit court of the county
or city where the commercial real estate is located.
The memorandum of lien shall state the name of the
claimant, the name of the owner of the commercial real
estate, a description of the commercial real estate,
the name and address of the person against whom the
broker's claim for compensation is made, the name and
address of the tenant paying the rent against which the
lien is being claimed, the amount for which the lien is
being claimed, and the real estate license number of
 the principal broker claiming the lien. The lien
provided by this chapter and the right to rents secured
by such lien shall be subordinate to all liens, deeds
of trust, mortgages or assignments of the leases, rents
or profits recorded prior to the time the memorandum of
lien is recorded.

(Emphasis added.)

Nothing in the language of this statute is inherently

difficult to comprehend, of doubtful import, or lacking in

clarity and definiteness. Accordingly, it is not necessary to

look beyond the plain language of the statute to ascertain its

underlying legislative intent. See Brown, 229 Va. at 321, 330

S.E.2d at 87.

While we agree with Harrison that the trial court erred in

ruling that Code § 55-527 was ambiguous and required judicial

construction, reversal of the judgment is not required. "We do

not hesitate, in a proper case, where the correct conclusion has

been reached but the wrong reason given, to sustain the result

and assign the right ground." Robbins v. Grimes, 211 Va. 97,

100, 175 S.E.2d 246, 248 (1970); see also First Security Federal
Savings Bank, Inc. v. McQuilken, 253 Va. 110, 114, 480 S.E.2d

485, 488 (1997); RF&P Railroad v. Metro. Wash. Airports Auth. 251

Va. 201, 214, 468 S.E.2d 90, 98 (1996). As we shall demonstrate,

this is such a case.

Relying on the plain language of the statute, Harrison

asserts that an inchoate lien arises under § 55-527(A) upon the

broker rendering service under an agreement with the property

owner, and this lien can be perfected at any time thereafter by

complying with the recording requirements of § 55-527(B).
Harrison misinterprets the nature of the lien provided by the

statute.

In general terms, an inchoate lien is one which attaches to

property by operation of a statute or entry of a judgment, but

which cannot be enforced until it becomes a consummate lien by

the appropriate statutory or judicial process. When an inchoate

lien becomes consummate, the priority of its enforcement relates

back to the date the lien was created. See Black's Law
Dictionary 762 (6th ed. 1990).

For example, Virginia's Mechanics' Lien Act provides for the

creation of a lien on property, Code § 43-3, which can then be

perfected by filing a memorandum within 90 days of the last day

of the month in which work was performed on, or material provided

to, the property. Code § 43-4. In Hadrup v. Sale, 201 Va. 421,

425, 111 S.E.2d 405, 407 (1959), we held that these statutes,

"when fairly construed, [mean] that an inchoate lien attaches

when the work is done and materials furnished which may be

perfected within the specified time."

In Hadrup, however, we distinguished liens which come into
existence only upon their being timely recorded, under a

particular statutory scheme, from inchoate liens created by

statute and merely subject to perfection by recording:
Under statutes which provide that the claimant shall,
upon giving or filing notice, have a lien upon the
property, a sale of it in good faith before the notice
of lien is given or filed prevents the acquisition of
any lien. On the other hand, under statutes which
recognize the right to a lien from the date of the
contract or the time of the commencement of the
building or other improvement, or from the beginning of
the performance of the labor or the furnishing of
material for which the lien is claimed, a lien which
 has thus attached is not affected by a change of
ownership . . . .

Id. at 423-24, 111 S.E.2d at 407.

The lien available to commercial real estate brokers under

the Broker's Lien Act falls into the former category. Unlike an

inchoate lien, the lien provided for by the Broker's Lien Act

"shall not attach or be perfected until . . . recorded." In

other words, Harrison's assertion that § 55-527(A) results in the

attachment of an inchoate lien, thereafter subject to perfection

by recording under the provisions of § 55-527(B), is expressly

contradicted by the plain language of the statute. Accordingly,

we hold that the lien available to a commercial real estate

broker pursuant to the Broker's Lien Act comes into existence, if

at all, only when the required recording occurs.
Harrison further asserts that the requirement of § 55-527(B)

that the memorandum of lien state both "the name of the owner of

the commercial real estate . . . [and] the name and address of

the person against whom the broker's claim for compensation is

made" manifests a legislative intent to permit a lien on the

rents to be perfected after transfer of the property and enforced

against the new owner. We disagree.

The Broker's Lien Act was created in derogation of the

common law. See S.L. Nusbaum & Co. v. Atlantic Virginia Realty

Corp., 206 Va. 673, 146 S.E.2d 205 (1966); Hoffman v. First
National Bank of Boston, 205 Va. 232, 135 S.E.2d 818 (1964).

Accordingly, any right it provides not previously available at

common law must be found in an express statement within the
language of the Act. See Hyman v. Glover, 232 Va. 140, 143, 348

S.E.2d 269, 271 (1986); C. & O. Railway v. Kinzer, 206 Va. 175,

181, 142 S.E.2d 514, 518 (1965). The language relied upon by

Harrison is not so broad as to encompass the extraordinary right

of a broker to obtain priority over a subsequent purchaser of the

property. Rather, this language merely recognizes that there may

be circumstances under which the party with the right to collect

rents, and, thus against whom the lien may be enforced, may not

be the party who owns the property at the time the lien is

recorded.
Finally, we find no merit to Harrison's contention that its

asserted lien attached to the rents in question because both

Principal and Featherstone/New Mexico had actual or constructive

knowledge of Harrison's claim prior to their acquisition of the

property. The two cases relied upon by Harrison, Ely v. Johnson,

114 Va. 31, 75 S.E. 748 (1912)(purchaser on notice as to

possession and use of land by another) and Hunton v. Wood, 101

Va. 54, 43 S.E. 186 (1903)(improperly recorded deed of trust),

each dealt with subsequent purchasers of land with prior notice

of an existing, but unrecorded, interest in the property

acquired. However, at the time Principal acquired the property,

Harrison did not have an existing, but unrecorded, interest in

the property. Rather, its interest constituted a potential lien

upon the rents which could come into existence only upon the

recording of a memorandum of that lien prior to a transfer of the

property. Prior to that, Harrison had nothing more than a

contract obligation enforceable against Featherstone/Virginia.
Consequently, because the memorandum of lien was not recorded

until after the transfer of the property, Harrison did not

acquire a lien that attached to the subsequent purchaser's

interest in the property.

In summary, when Featherstone/Virginia, the party with which

Harrison was in privity on the commission contract, transferred

its interest in the rents along with its other property rights to

Principal, Harrison lost any power it had to seek enforcement of

the contract obligation by lien since Featherstone/Virginia no

longer possessed the property right potentially subject to such a

lien. Thus, Harrison's subsequent recording of the memorandum of

lien was ineffective against Principal, and any notice which that

memorandum provided to Featherstone/New Mexico was equally

ineffective.
For these reasons, we will affirm the judgment of the trial

court.

Affirmed.