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.