Case Title: Harrison & Bates Inc. v. Featherstone Assoc.

Citation: 

Docket Number: 961318

State: virginia

Court: Virginia Supreme Court

Date: 1997-04-18T00:00:00Z

Document:
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.