{"id":1497,"date":"2013-04-10T06:27:20","date_gmt":"2013-04-10T12:27:20","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=1497"},"modified":"2013-04-02T16:28:28","modified_gmt":"2013-04-02T22:28:28","slug":"virginias-mechanics-lien-and-the-supreme-courts-latest-ruling","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/","title":{"rendered":"Virginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling"},"content":{"rendered":"

Robert K. Cox – March 25, 2013<\/span><\/p>\n

Commentators like to discuss the possibility of a uniform, national mechanic\u2019s lien law; some in favor, some not.\u00a0 Until there is a uniform mechanic\u2019s lien law, and in our opinion there is no current groundswell for one, those of you in the construction industry must know the unique aspects of the mechanic\u2019s lien law applying where you own, develop or work on a construction project.<\/span><\/p>\n


In a 2012 Construction Alert, we pointed out the then new changes to North Carolina\u2019s mechanic\u2019s lien law.\u00a0 Now, in this Construction Alert we bring to your attention the February 28, 2013 decision from the Virginia Supreme Court on the unique requirements of the Virginia mechanic\u2019s lien law.\u00a0 In\u00a0<\/span>Glasser & Glasser, PLC v. Jack Bays, Inc., et al<\/em>., the Virginia Supreme Court addressed in one decision many of the hurdles under Virginia\u2019s mechanic\u2019s lien law, including such issues as: (1) did the lien claimant join all the necessary parties in the lien enforcement lawsuit; (2) did the lien claimant meet the 90\u2011day rule for recording its lien; (3) does the lien amount include sums outside the 150\u2011day count-back rule; (4) does the mechanic\u2019s lien have priority over deeds of trust recorded on the property; and (5) does the lienor have a duty to mitigate its damages?<\/span>

While the Court\u2019s decision was dependent on the specific facts of the case, the Court\u2019s application of Virginia\u2019s mechanic\u2019s lien law to the facts is instructive.\u00a0 Here is our take on the ruling.<\/span>

History of the Case<\/span><\/strong>

The project at the center of the case was the construction of a new church in Woodbridge, Virginia.\u00a0 Before completion, the project owner exhausted the construction financing.\u00a0 The general contractor and subcontractors, nonetheless, continued working for several months without payment based on the owner\u2019s statements that new financing was being sought.\u00a0 When new financing did not happen, the general contractor ceased work and notified its subcontractors that further work by them would be at their risk.<\/span>

Certain of the subcontractors continued working for several more weeks thereafter, primarily demobilizing and making safe the project site.\u00a0 The general contractor stayed on site some six weeks, claiming it was demobilizing, but, as the Court noted, the general contractor also increased its percentage of completion from 92% to 94% during that time.<\/span>

Eventually, the general contractor and 12 subcontractors recorded mechanic\u2019s liens against the project property, and thereafter filed separate lawsuits to enforce their respective liens.\u00a0 In a consolidated proceeding, a Commissioner in Chancery upheld the validity of the liens and ordered the property sold.\u00a0 The Circuit Court of Prince William County upheld the Commissioner\u2019s findings and ordered the property sold at public auction, with the sale proceeds to satisfy the mechanic\u2019s liens in order of priority.\u00a0 Lenders with secured mortgage liens on the property to be sold appealed to the Virginia Supreme Court.\u00a0 The Supreme Court upheld the Circuit Court decision except for the order to sell the property, which the Court reversed and remanded for further findings.<\/span>

Necessary Parties<\/strong><\/span>

One of the first issues for the Supreme Court was whether the lienors had named all necessary parties in the lawsuits to enforce the mechanic\u2019s liens.\u00a0 By statute, suits to enforce mechanic\u2019s liens must name all \u201cnecessary\u201d parties, and the failure to do so requires dismissal of the lawsuit.<\/span>

In this case, in their lawsuits to enforce the liens, the lienors had named the trustees and trust beneficiaries under the deed of trust encumbering the property.\u00a0 The deed of trust, however, also incorporated a Trust Indenture for the benefit of certain bondholders and named a Trustee for the Trust Indenture.\u00a0 The lienors named the Trustee for the Trust Indenture in their lawsuits, but did not name the bondholders of the Trust Indenture.\u00a0 The lenders contended the bondholders should have been named as necessary parties in the lawsuits and that the lienors\u2019 failure to name the bondholders was fatal to the lien lawsuits.\u00a0 The Court did not agree with the lenders, reasoning that in naming the deed of trust beneficiaries and the Trustee for the Trust Indenture, the lienors had met the purpose of naming necessary parties having a substantial interest in being given the opportunity to challenge the lien.<\/span>

The 90-Day Rule<\/strong><\/span>

The Virginia mechanic\u2019s lien statute requires a lien to be recorded not later than 90 days from the end of the last month in which the lienor performs labor or furnishes material, and in no event later than 90 days from the time the building, structure or railroad is completed or the work \u201cotherwise terminated\u201d.\u00a0 Here, it was undisputed that the general contractor ceased work on September 28, 2007, and recorded its lien on December 28, 2007.\u00a0 The lenders argued that work \u201cotherwise terminated\u201d on September 28, 2007, thus the 90 day filing period expired on December 27, 2007, one day before the general contractor actually filed its mechanic\u2019s lien.\u00a0 The general contractor argued that it had 90 days from the last day of September to file its mechanic\u2019s lien, and therefore had timely filed on December 28, 2007.<\/span>

The Supreme Court held that the general contractor timely filed its lien, holding that \u201cotherwise terminated\u201d under the mechanic\u2019s lien statute means all work terminated, not just the work of the general contractor.\u00a0 Because the subcontractors continued to work after the general contractor ceased its work, the work was not \u201cotherwise terminated,\u201d and the 90\u2011day filing period began\u00a0 from the end of\u00a0 September and not September 28.<\/span>

The 150-Day Count-Back Rule<\/strong><\/span>

Under the Virginia mechanic\u2019s lien law, a lien claimant cannot include in the memorandum of lien sums due for labor or materials furnished more than 150 days prior to the last day labor or material was furnished to the job preceding the filing of the lien memorandum.\u00a0 Retainage is not subject to this exclusionary rule and can be included in the memorandum of lien even if outside the 150 day count-back period.\u00a0 This rule is often a basis of challenge because non-compliance, with few exceptions, will invalidate the lien.<\/span>

In this case, the lenders first argued that the 150 day count-back rule did not apply separately to each lien claimant, but rather was a unitary date range for all lien claimants.\u00a0 Citing the express terms of the mechanic\u2019s lien statute, the Court rejected the lenders\u2019 argument, and noted the 150 day count-back rule is calculated for each lien claimant based on that particular claimant\u2019s timing of furnishing labor or materials.<\/span>

A second issue was whether the general contractor, in particular, included sums in its lien for labor or materials furnished outside the 150 day count-back period.\u00a0 The Commissioner in Chancery concluded the general contractor had not furnished labor or materials after it announced it was ceasing work in late September, therefore the general contractor\u2019s lien amount could include sums for labor or materials furnished in the prior 150 days.\u00a0 While the facts recited in the ruling could lead to a contrary conclusion, on appeal from the Circuit Court\u2019s approval of the Commissioner\u2019s findings, the Supreme Court will affirm the Circuit Court\u2019s decree unless it is \u201cplainly wrong or without evidence to support it.\u201d\u00a0 Here the Court concluded in favor of the general contractor.<\/span>

Lien Priority<\/strong><\/span>

The Supreme Court affirmed that, under the terms of the Virginia mechanic\u2019s lien statute, the subcontractors\u2019 mechanic\u2019s liens had priority over the general contractor\u2019s mechanic\u2019s lien, and those mechanic\u2019s liens had priority over the lenders\u2019 deeds of trust on the property.<\/span>

Mitigation of Damages<\/strong><\/span>

The lenders also argued that the general contractor had a duty to mitigate its damages following the last owner payment, and while the owner sought new financing.\u00a0 Without taking a position on whether a duty of mitigation exists for a lienor under the mechanic\u2019s lien statute, the Court upheld the Commissioner\u2019s and Circuit Court\u2019s finding that the general contractor did mitigate its damages.<\/span>

Conclusion<\/strong><\/span>

The ruling in this case, as noted at the outset, was fact driven.\u00a0 It is the Court\u2019s application of the Virginia mechanic\u2019s lien law to those facts that makes this decision a good one to know.<\/span><\/p>\n

Virginia\u2019s mechanic\u2019s lien and the Supreme Court\u2019s latest ruling – Lexology<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Robert K. Cox – March 25, 2013 Commentators like to discuss the possibility of a uniform, national mechanic\u2019s lien law; some in favor, some not.\u00a0 Until there is a uniform mechanic\u2019s lien law, and in our opinion there is no current groundswell for one, those of you in the construction industry must know the unique… Continue reading Virginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[8],"tags":[12,184],"class_list":["post-1497","post","type-post","status-publish","format-standard","hentry","category-mechanics-lien-rights","tag-construction","tag-mechanics-lien-law","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nVirginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling - Advise & Consult, Inc.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Virginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Robert K. Cox – March 25, 2013 Commentators like to discuss the possibility of a uniform, national mechanic\u2019s lien law; some in favor, some not.\u00a0 Until there is a uniform mechanic\u2019s lien law, and in our opinion there is no current groundswell for one, those of you in the construction industry must know the unique… Continue reading Virginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise & Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2013-04-10T12:27:20+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"7 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Virginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling\",\"datePublished\":\"2013-04-10T12:27:20+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/\"},\"wordCount\":1377,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"construction\",\"Mechanics Lien Law\"],\"articleSection\":[\"Mechanics Lien Rights\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/virginias-mechanics-lien-and-the-supreme-courts-latest-ruling\/\",\"name\":\"Virginia\u2019s Mechanic\u2019s Lien and the Supreme Court\u2019s Latest Ruling - 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