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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