Title: First American Bank v. J.S.C. Concrete Constr.

State: virginia

Issuer: Virginia Supreme Court

Document:

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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