York Federal Savings & Loan Ass'n v. William A. Hazel, Inc.

Present: Carrico, C.J., Compton, Hassell, Keenan, Koontz, and
Kinser, JJ., and Whiting, Senior Justice

YORK FEDERAL SAVINGS & LOAN ASSOCIATION
OPINION BY
v. Record No. 980152 SENIOR JUSTICE HENRY H. WHITING
NOVEMBER 6, 1998
WILLIAM A. HAZEL, INC.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Michael A. McWeeny, Judge

In this mechanic's lien enforcement suit, we decide whether

the holder of a mechanic's lien that is "bonded off" pursuant to

Code § 43-70 must still establish the priority of the lien.

William A. Hazel, Inc. (Hazel) furnished labor and

materials in performing site development work for a townhouse

project on real estate in Fairfax County owned by Detty/Anderson

Hotel Limited Partnership (the owner). The real estate was

encumbered by a recorded deed of trust securing payment of the

owner's obligation to York Federal Savings & Loan Association

(York Federal).

Subsequent to the owner's failure to pay Hazel, it recorded

a memorandum of mechanic's lien and filed this suit to enforce

its lien against the property. Two of the defendants in the

suit, York Federal and Marilyn C. Cunningham, P.C., (the

substitute trustee under the deed of trust) petitioned the court

to release Hazel's lien against the real estate upon their

posting a bond under the provisions of Code § 43-70 (the

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"bonding off" statute). Code § 43-70 provides in pertinent

part:

In any suit brought [to enforce a mechanic's
lien], the owner of the building and premises to which
the lien, or liens, sought to be enforced shall have
attached, the general contractor for such building or
other parties in interest may . . . apply to the court
in which such suit shall be pending . . . for
permission to . . . file a bond . . . conditioned for
the payment of such judgment adjudicating the lien or
liens to be valid and determining the amount for which
the same would have been enforceable against the real
estate as may be rendered by the court upon the
hearing of the case on its merits . . . .

The parties stipulated: (1) that the owner owed Hazel

$56,226.25 under its enforceable mechanic's lien; (2) that

Hazel's Bill of Complaint "satisfied all of the requirements of

the Virginia mechanic's lien statutes;" (3) that York Federal

had filed a bond pursuant to the bonding off statute, obtained a

release of the property from the mechanic's lien claim, and

later had the substitute trustee sell the property under the

deed of trust; and (4) that although York Federal "concedes the

validity and amount of Hazel's memorandum of mechanic's lien, it

contends that Hazel's recovery is precluded by the priority of

York'[s]" lien.

Hazel moved for summary judgment. Hazel contended that

there was no material issue of fact to be decided since York

Federal had stipulated as to the "validity, amount and

enforceability" of Hazel's mechanic's lien, thus removing the

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issue of York Federal's alleged priority under the provisions of

Code § 43-21.

As pertinent, Code § 43-21 provides:

In the enforcement of [mechanic's] liens . . .
any lien or encumbrance created on the land before the
work was commenced or materials furnished shall be
preferred in the distribution of the proceeds of sale
only to the extent of the value of the land estimated,
exclusive of the buildings or structures, at the time
of sale, and the residue of the proceeds of sale shall
be applied to the satisfaction of the liens provided
for in the previous sections of this chapter. Provided
that liens filed for performing labor or furnishing
materials for the repair or improvement of any
building or structure shall be subject to any
encumbrance against such land and building or
structure of record prior to the commencement of the
improvements or repairs or the furnishing of materials
or supplies therefor.

York Federal opposed entry of summary judgment on the

ground that Hazel was still obligated to prove the value of the

real estate without Hazel's improvements in order for the court

to apportion the relative priorities of York Federal and Hazel

to the bond. After considering the stipulations and the

argument of counsel, the court sustained Hazel's motion for

summary judgment. York Federal appeals.

York Federal contends that its stipulation did not resolve

the issue of the relative priorities of the liens of the

parties. Hazel responds that the issue has been resolved

because of the stipulations and the fact that "the bond had

replaced the real property as security and the trustee had sold

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the real property." Hazel concludes that "[t]o recover from the

bond, [Hazel] must only show that his lien is enforceable, not

that his lien would have been collectable against the real

property had the property been sold."

In George W. Kane, Inc. v. NuScope, Inc. 243 Va. 503, 509,

416 S.E.2d 701, 704 (1992), we said that "with respect to a bond

enforcement suit, the party-plaintiff has the burden of proving

the same elements of his claim that he would have had to prove

in a suit to enforce the [mechanic's] lien released by that

bond." Hazel contends that the stipulation of the "validity,

amount, and enforceability of the lien" establishes "the same

elements of his claim" referred to in Kane.

However, York Federal did not stipulate that Hazel could

have collected its claim from the real estate if the bond had

not been posted but only that Hazel's lien was "enforceable

under the memorandum of mechanic's lien." (Emphasis added.)

Indeed, the stipulation states that "[w]hile York Federal

concedes the validity and amount of Hazel's memorandum of

mechanic's lien, it contends that Hazel's recovery is precluded

by the priority of York Federal's lien."

Additionally, payment of the bond posted is expressly

conditioned on the provisions of Code § 43-70. Further, the

bonding off order uses substantially the same language found in

the bonding off statute in conditioning payment of the bond upon

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the court's adjudication of "the amount for which the liens or

any one lien would have been enforceable against the real

estate." Accordingly, we do not think that the stipulation

removed any burden of proof as to this issue which Hazel may

have had under Code §§ 43-21 and 43-70.

Hazel construes the bonding off statute as "simply

ensur[ing] that amounts enforceable against the bond are

allowable under the mechanic's lien statute." According to

Hazel, "[t]he General Assembly could not have intended that the

language requires proof of priority in this case because no

competing interests exist once the mechanic's lien was released

under [the bonding off statute]." However, under Hazel's

construction, few prior lienors would be willing to bond off the

real estate if, by doing so, the lienor would be relieved of the

necessity of proving the priority of his lien.

Because the language of the bonding off statute is clear

and unambiguous, it will be applied as written. Robbs v.

Commonwealth, 252 Va. 433, 436, 478 S.E.2d 699, 700 (1996);

Brown v. Lukhard, 229 Va. 316, 321, 330 S.E.2d 84, 87 (1985).

In our opinion, the bonding off statute merely releases the real

estate from the mechanic's lien claim by requiring that payment

of the bond be “conditioned for the payment of such judgment

adjudicating the lien or liens to be valid and determining the

amount for which the same would have been enforceable against

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the real estate.” This provision substitutes the bond for the

real estate.

Hence, we conclude that the court erred in deciding that no

issue remained as to the priority Hazel would have had in the

bonded off real estate and consequently in entering summary

judgment. Accordingly, the judgment will be reversed and the

case remanded for further proceedings consistent with this

opinion.

Reversed and remanded.

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