Title: United Savings Assoc. v. Jim Carpenter Co.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present: All the Justices 
 
UNITED SAVINGS ASSOCIATION  
OF TEXAS, F.S.B., ET AL. 
 
 
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR. 
v.  Record No. 951470                 September 13, 1996 
 
JIM CARPENTER COMPANY 
 
 
FROM THE CIRCUIT COURT OF STAFFORD COUNTY  
 
James W. Haley, Jr., Judge 
 
TART LUMBER COMPANY, INC. 
 
v.   Record No. 952238 
 
DREWER DEVELOPMENT CORPORATION, ET AL. 
 
 
FROM THE CIRCUIT COURT OF LOUDOUN COUNTY  
 
Thomas D. Horne, Judge 
 
ADDINGTON-BEAMAN LUMBER COMPANY, INC. 
 
v.   Record No. 960615 
 
ROBERSON BUILDERS, INC., ET AL.  
 
 
FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE 
 
Russell I. Townsend, Jr., Judge 
 
 
In these appeals we consider the applicability of mechanic's 
liens to materials furnished for specific construction projects 
under pre-existing, non-binding credit agreements between 
contractors and materialmen.
1  In each instance, the contractor 
or its successor-in-interest asserts that the materials were 
furnished under "open accounts,"
2 thus each delivery of materials 
                     
     
1In addition to the original contractors and materialmen, 
each suit involved subsequent purchasers of the subject 
properties and their lenders.  For the purposes of this opinion, 
we will limit our discussion to the relevant transactions between 
the original parties, since these transactions formed the basis 
for the mechanic's liens at issue. 
     
2Parties on both sides of these disputes use the term "open 
account" to refer to the relationship between the materialmen and 
the contractors, though apparently subscribing to different 
constituted a separate contract.  The materialmen assert that the 
materials and deliveries are identifiable to specific projects 
under "running accounts,"
3 thus constituting a single continuing 
contract for each parcel.  For the reasons which follow, and 
under the specific facts of these cases, we agree with the 
materialmen. 
 
I.  
 
BACKGROUND 
 
 
A. United Savings Association of Texas v.  
 
Jim Carpenter Company
 
In 1983, Kenneth and Keith Ross (Ross Brothers), operating 
as joint proprietors, completed an application for credit with 
Jim Carpenter Company (Carpenter) in contemplation of purchasing 
building materials.  In the application Carpenter agreed to 
extend credit, and Ross Brothers guaranteed payment on any credit 
extended.  Ross Brothers subsequently incorporated, but otherwise 
continued to function as before. 
                                                                  
interpretations of that relationship.  The term "open account" 
can be applied generally to any unsecured line of credit.  
Black's Law Dictionary 1090 (6th ed. 1991).  For the purposes of 
this opinion, we will use the term "open account" to refer to a 
revolving line of credit based upon a credit application, but for 
which there is no obligation on either party to buy or sell 
materials for specific projects. 
     
3The term "running account," like "open account," has broad 
application to various forms of revolving credit.  Black's Law 
Dictionary 1333 (6th ed. 1991).  As used generally in our 
opinions, however, the term has a more limited meaning when 
applied to the relationship between materialmen and contractors 
where materials identifiable to specific projects are supplied 
under a continuing contract.  See, e.g., Southern Materials Co. 
v. Marks, 196 Va. 295, 297, 83 S.E.2d 353, 355 (1954).  
Accordingly, we have selected this term to distinguish the 
materialmen's assertions concerning their relationships with the 
contractors from the "open account" relationship described by the 
contractors. 
 
In 1989, Ross Brothers began construction of houses on two 
parcels in the Blake Farm subdivision of Stafford County.  Ross 
Brothers ordered materials from Carpenter using separate purchase 
order job sheets for each parcel.  Carpenter furnished the 
materials with invoices, assigning separate account numbers to 
each parcel, and submitted regular statements of the accounts to 
Ross Brothers.  Deliveries were made to each parcel beginning on 
February 12, 1990 and ending on July 26, 1990.  Ross Brothers 
paid for only one delivery.  The two completed homes were sold in 
June and July of 1990.   
 
On August 21, 1990, Carpenter filed memoranda of mechanic's 
liens on each parcel which it subsequently sought to enforce by 
amended chancery actions filed August 12, 1994.  The two chancery 
suits were consolidated and referred to a commissioner in 
chancery, who concluded the mechanic's liens were proper.  The 
defendants filed exceptions to the commissioner's report, 
including the contention that the liens, or portions thereof, 
would be barred by the 90 day limitation of Code § 43-4 if each 
delivery were viewed as a separate contract.  The chancellor 
sustained the commissioner's findings and awarded judgment to 
Carpenter.  We awarded an appeal to the defendants who are 
principally represented by United Savings Association of Texas, 
F.S.B., a mortgage lien holder on one of the properties. 
 
B. Tart Lumber Company, Inc. v. Drewer  
 
Development Corporation
 
Tart Lumber Company, Inc. (Tart) entered into a credit 
agreement with Drewer Development Corporation (Drewer) to furnish 
Drewer with materials for building projects.  Between August 8, 
1990 and November 27, 1990, Tart provided Drewer with building 
materials for a number of residential construction projects in 
Loudoun and Fairfax Counties on land owned by Drewer.   
 
For various aspects of each project, Drewer would submit a 
list of requirements or "takeoff."  Generally, each takeoff would 
list all the materials for a house or townhouse.  Tart would then 
furnish Drewer with a thirty-day firm offer on the materials it 
could supply.  Tart did not supply complete house packages, and 
the record does not establish how Drewer obtained those materials 
which Tart could not furnish.  When Drewer accepted Tart's offer, 
the materials were furnished along with an invoice referencing 
the specific project on which the materials were to be used.  On 
occasion, Drewer would submit "fill-in" requests for additional 
materials which Tart would supply.  Tart provided Drewer with 
regular statements combining charges under invoices for all 
materials furnished during a given time period.   
 
Beginning in the summer 1990, Drewer experienced financial 
difficulties and ceased payment on its account with Tart.  In 
response, on December 12, 1990, Tart filed memoranda of 
mechanic's liens on twelve properties, organizing in each 
memorandum all the invoices for a specific parcel.   
 
On June 27, 1991, Tart filed a bill of complaint to enforce 
the liens.  Although Drewer did not file an answer, the secured 
parties and trustees who financed the construction filed timely 
pleadings to contest the liens.  The cases were consolidated and 
referred to a commissioner in chancery.  The commissioner found 
that each delivery of materials was a separate contract, and, 
thus, he concluded that materials delivered more than ninety days 
before the memoranda were filed were not subject to mechanic's 
liens.  The chancellor upheld the commissioner's findings.  We 
awarded Tart an appeal. 
 
C. Addington-Beaman Lumber Company, Inc. v.  
 
Roberson Builders, Inc.
 
 
On August 16, 1990, Roberson Builders, Inc. (Roberson) 
completed an application for credit with Addington-Beaman Lumber 
Company, Inc. (Addington-Beaman).  Addington-Beaman furnished 
Roberson with building materials for the construction of houses 
on three parcels owned by Roberson in two subdivisions in the 
City of Chesapeake.  Each invoice referenced the original 
customer number assigned to Roberson's credit application, but 
was segregated by parcel. 
 
Although it does not appear from the record that Addington-
Beaman sent Roberson periodic statements, invoices for each 
parcel were separately totaled by Addington-Beaman's accounting 
staff and the statements were bundled together by parcel with the 
adding machine tape showing the total amount due for that parcel. 
 In one instance, an Addington-Beaman employee made a notation on 
one set of invoices that settlement of the contract for the sale 
of the home built on that parcel was expected shortly, at which 
time, presumptively, the invoices for the materials furnished for 
that project would be paid.  Roberson did not pay for any of 
these materials before or after it conveyed the properties to 
home buyers. 
 
For Lot 24, the deliveries were made from September 9, 1990 
to October 25, 1990.  For Lot 122, they were made from September 
6, 1990 to October 31, 1990.  For Lot 227, they were made from 
September 18, 1990 to November 13, 1990.  Addington-Beaman filed 
memoranda of mechanic's liens for Lot 24 and Lot 122 on January 
29, 1991 and on Lot 227 on February 28, 1991.   
 
After Addington-Beaman filed bills of complaint to enforce 
its mechanic's liens, all three matters were referred to a 
commissioner in chancery.  The commissioner found for Addington-
Beaman.  The chancellor reversed the commissioner's findings, 
ruling that each delivery was a separate contract required to 
meet the time requirements of Code § 43-4, even if filed under a 
combined lien.  Thus, the chancellor ruled that only those 
deliveries which fell within the statutory time requirement were 
subject to the liens and judgment was awarded only for the 
amounts on those invoices which fell within that time period.  We 
awarded Addington-Beaman an appeal. 
 
II.  
 
OPERATION OF MECHANIC'S LIENS UNDER CONTINUING  
 
CONTRACTS AND OPEN ACCOUNTS  
 
 
The central issue of each of these appeals is whether the 
materials were furnished by materialmen under specific continuing 
contracts or merely by marketplace suppliers under general open 
accounts.  See Staples v. Adams, Payne & Gleaves, Inc., 215 F. 
322, 327-28 (4th Cir. 1914).  We have previously stated the 
standard for operation of mechanic's liens under these differing 
forms of contract: 
 
 
"If the materials were furnished under a single 
contract, and were in fulfillment thereof, the items of 
the account would be continuous, and the material man 
would have ninety days from the date of the last item 
within which to file his account and perfect his 
lien. . . .  On the other hand, if the several items of 
the account, or a portion of them, are furnished under 
separate contracts, then the lien should have been 
filed ninety days from the date of the last item under 
each independent contract." 
 
First National Bank of Richmond v. William R. Trigg Co., 106 Va. 
327, 339-40, 56 S.E. 158, 161 (1907)(quoting Central Trust 
Company v. Chicago, K. & T Ry. Co., 54 F. 598, 599 (1893)).  
 
However, it appears that the specific issue of 
distinguishing between deliveries of construction materials under 
running accounts amounting to a single continuing contract and 
deliveries under open accounts amounting to separate contracts is 
a matter of first impression in Virginia, although not uncommon 
to the law of mechanic's liens generally.
4  See, e.g., 
Annotation, When contract, transaction, or account deemed 
"continuing" one as regards time for filing mechanics' lien, 97 
                     
     
4In Sergeant v. Derby, 87 Va. 206, 12 S.E. 402 (1890), we 
held that a single contract for a specific amount for 
construction materials for two separate houses provided a 
sufficient foundation for a mechanic's lien on both houses.  
There, we were not required to determine whether multiple 
deliveries of materials identified to a specific construction 
project constitute individual separate contracts.  Also, in 
Addington-Beaman Lumber Co. v. Lincoln Savings and Loan Assoc. 
241 Va. 436, 403 S.E.2d 688 (1991)(hereinafter referenced as 
Lincoln to avoid confusion with the present appeal involving 
Addington-Beaman), a case involving an open account for 
construction materials, we held that where there is a series of 
individual but related transactions identified to specific lots 
benefited by the materials, the materialman is required to 
apportion the costs of the materials in the memoranda of 
mechanic's liens to specific lots.  Neither of these cases 
addresses the specific issue of the present appeals by 
distinguishing a running account amounting to a single continuing 
contract from a general open account amounting to multiple 
contracts. 
A.L.R. 780 (1935).  We begin our analysis by reviewing the 
settled law of mechanic's liens in Virginia. 
 
Mechanic's liens are authorized by Code § 43-3(A), which 
provides: 
 
All persons performing labor or furnishing materials of 
the value of fifty dollars or more, for the 
construction, removal, repair or improvement of any 
building or structure permanently annexed to the 
freehold . . . shall have a lien, if perfected as 
hereinafter provided, upon such building or  
 
structure . . . . 
 
 
Code § 43-4 establishes the criteria for the filing of a 
memorandum to perfect the mechanic's lien: 
 
A . . . lien claimant . . . in order to perfect the 
lien given by § 43-3 . . . shall file a memorandum of 
lien at any time after the work is commenced or 
material furnished, but not later than ninety days from 
the last day of the month in which he last performs 
labor or furnishes material, and in no event later than 
ninety days from the time such building, structure, or 
railroad is completed, or the work thereon otherwise 
terminated. 
 
 
Mechanic's liens were created to provide the "security of a 
lien to those who, by their labor and materials, have enhanced 
the value of [a] 'building or structure' . . . ."  Lincoln, 241 
Va. at 439, 403 S.E.2d at 689.  Although a mechanic's lien "must 
have its foundation in a contract,"  Rosser v. Cole, 237 Va. 572, 
576, 379 S.E.2d 323, 325 (1989), the contract need not be in 
writing.  Pario v. Bethell, 75 Va. 825, 829 (1881). 
 
Nor is there any requirement that the contract at its 
inception state with specificity the nature of the work to be 
done and/or the materials to be furnished.  Rather, where the 
work or materials are furnished as part of a continuing contract 
related to a single property, a single contract adequate to 
underpin a mechanic's lien will be found to exist.  Thus, in 
Osborne v. Big Stone Gap Colliery Co., 96 Va. 58, 30 S.E. 446 
(1898), we stated that "[i]t is true that a number of items were 
furnished more than ninety days before the account was filed 
. . . but it was a running account, and, where nothing to the 
contrary appears, is to be considered as falling due at the date 
of its last item."  Id. at 66, 30 S.E. at 449 (emphasis added). 
 
Determining whether a particular claim is founded upon an 
account constituting a single continuing contract or upon 
separate and independent contracts is a question of fact, but one 
which turns upon a substantive, rather than technical, view of 
the situation.  See Chicago Lumber Company of Omaha v. Horner, 
317 N.W.2d 87, 90 (Neb. 1982).  In making this determination, the 
trier of fact should consider the factors surrounding the 
dealings of the parties including their agreement and its 
purpose, the object of the work done or the materials furnished, 
the time when the work was done or materials were furnished, and 
other circumstances which suggest the nature of the parties' 
intentions. 
 
Unlike the labor of a subcontractor, which can be readily 
identified with a specific project, the utilitarian nature of 
construction materials places upon the materialman a greater 
burden in establishing his right to a lien on a particular 
project.  Accordingly, applying the analysis used in Osborne and 
a non-technical view of the situation, where the course of 
dealing between the parties shows that each understood that the 
materials were being supplied for a particular project, rather 
than merely for general use by the contractor, and nothing in the 
record suggests that a mere open account was intended, a 
continuing contract will be found.  With these principles in 
mind, we turn now to the specific cases in these appeals. 
 
III. 
 
NATURE OF THE SPECIFIC ACCOUNTS 
 
 
In each of the present cases, the parties focus a great deal 
of attention on the initial applications for lines of credit.  
However, as is shown by each record, these documents are not, and 
do not purport to be, contracts.  The credit applications did not 
obligate either the contractor seeking credit or the materialman 
offering credit to purchase or furnish, respectively, any given 
materials at any given time.  In short, while these documents may 
be evidence of the intentions of the parties with respect to the 
subsequent contracts represented by the accounts in question, 
they do not represent the sole basis of the formation of those 
contracts. 
 
A. United Savings Association of Texas v. 
 
Jim Carpenter Company
 
 
In Carpenter, the contract is evidenced by the purchase 
orders, invoices, and account statements.  The materials 
furnished to each parcel were invoiced and billed under an 
account number unique for each parcel.  This method of record-
keeping clearly reflects an implied, if not express, unitary 
agreement of the parties for furnishing materials for specific 
construction projects under a continuing contract.  Considering 
the substance of this course of dealing, we believe that the 
separate orders and deliveries were part of an ongoing, unitary 
transaction.  Nothing in the record indicates that Ross Brothers 
sought competitive bids or otherwise sought the materials from 
other suppliers.  Accordingly, we hold that the chancellor 
correctly ruled that the materials were furnished under a single, 
unitary contract for each parcel. 
 
B. Tart Lumber Company, Inc. v. Drewer  
 
Development Corporation
 
 
In Tart, Drewer's takeoffs clearly constituted requests for 
bids, which, once accepted, created a contract for materials for 
that construction project covered by each takeoff.  Here, the 
materials furnished under each request were part of a single 
construction project, as is shown by the fact that each invoice 
referenced a specific parcel.  Moreover, Tart's salesman 
testified that in most cases the materials were delivered in bulk 
shipments to the individual parcels and that he regularly 
travelled to the job sites "because we were dealing in such large 
quantities, I wanted to make sure . . . the deliveries were 
dropped in the correct locations."   
 
The salesman testified that materials were supplied under 
"fill-in" orders only where "either the takeoff was incorrect or 
some of the material [had been] broken."  Moreover, when a fill-
in was requested, it does not appear that any competitive process 
was used.  Rather, Drewer simply contacted Tart and requested 
that the materials be supplied.  Tart then supplied the fill-in 
materials under an invoice referencing the specific parcel.
5  
                     
     
5In certain instances, Tart supplied material to Drewer 
without referencing specific parcels, and these materials were 
billed as part of the combined statements sent to Drewer.  
However, Tart excluded the charges for these materials when 
Thus, once Drewer accepted Tart's bid on a takeoff, the 
deliveries under that account, including those materials supplied 
as fill-ins, became part of a single, continuous contract related 
to a specific construction project. 
 
The fact that Tart combined invoices for multiple parcels in 
unitary billing statements does not preclude a finding that the 
materials were delivered to the individual parcels under separate 
continuing contracts.  Nothing in the record suggests that the 
combined statements were used for any purpose other than the 
convenience of the parties.  Moreover, when it filed its 
memoranda of mechanic's liens, Tart was able to segregate the 
charges for the materials furnished for each parcel, in a manner 
similar to a permissible apportioning of an account between 
related properties under a single contract.  See Lincoln, 241 Va. 
at 439-40, 403 S.E.2d at 689-90.  Accordingly, we hold that the 
chancellor erred in ruling that each delivery of materials 
constituted a separate contract. 
 
C. Addington-Beaman Lumber Company, Inc. v.  
 
Roberson Builders, Inc. 
 
 
Finally, in Addington-Beaman, the record shows that each 
order and each delivery of materials was segregated by parcel.  
The record further shows that Addington-Beaman anticipated 
satisfaction of the invoices for a given parcel in conjunction 
with the settlement on the sale of the home constructed on that 
parcel.  As with the other two cases, the substance of the 
relationship between the parties establishes that the materials 
                                                                  
filing its liens. 
were furnished under separate, but continuing contracts for each 
parcel.  We find nothing in the record to support the contrary 
conclusion that the parties viewed the relationship as a mere 
open account.  Accordingly, we hold that the chancellor erred in 
treating the individual deliveries of materials as separate 
contracts. 
 
IV. 
 
CONCLUSION 
 
In United Savings Association of Texas v. Jim Carpenter Co., 
the chancellor correctly found that the mechanic's liens were 
filed within ninety days from the last delivery of materials 
under continuing contracts for each parcel.  Accordingly, we will 
affirm that judgment. 
 
In both Tart Lumber Co. v. Drewer Development Corp. and 
Addington-Beaman Lumber Co. v. Roberson Builders, Inc., the trial 
courts erroneously found that the accounts did not constitute 
running accounts amounting to continuing contracts, and hence 
incorrectly ruled on the time limitation for the filing of liens. 
 Accordingly, we will reverse the judgment of the trial courts in 
those two cases, and remand the cases for a determination of the 
amount of the liens as filed under continuing contracts for each 
parcel.  
                       Record No. 951470 --Affirmed. 
 
Record No. 952238 --Reversed and remanded. 
 
Record No. 960615 --Reversed and remanded. 
 
JUSTICE COMPTON concurs in result.