Title: York Federal Savings & Loan Assoc. v. Hazel

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Carrico, C.J., Compton, Hassell, Keenan, Koontz, and 
Kinser, JJ., and Whiting, Senior Justice 
 
YORK FEDERAL SAVINGS & LOAN ASSOCIATION 
 
 
 
OPINION BY 
v.  Record No. 980152 
SENIOR JUSTICE HENRY H. WHITING 
 
 
 
NOVEMBER 6, 1998 
WILLIAM A. HAZEL, INC. 
 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Michael A. McWeeny, Judge 
In this mechanic's lien enforcement suit, we decide whether 
the holder of a mechanic's lien that is "bonded off" pursuant to 
Code § 43-70 must still establish the priority of the lien. 
 
William A. Hazel, Inc. (Hazel) furnished labor and 
materials in performing site development work for a townhouse 
project on real estate in Fairfax County owned by Detty/Anderson 
Hotel Limited Partnership (the owner).  The real estate was 
encumbered by a recorded deed of trust securing payment of the 
owner's obligation to York Federal Savings & Loan Association 
(York Federal). 
Subsequent to the owner's failure to pay Hazel, it recorded 
a memorandum of mechanic's lien and filed this suit to enforce 
its lien against the property.  Two of the defendants in the 
suit, York Federal and Marilyn C. Cunningham, P.C., (the 
substitute trustee under the deed of trust) petitioned the court 
to release Hazel's lien against the real estate upon their 
posting a bond under the provisions of Code § 43-70 (the 
 
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"bonding off" statute).  Code § 43-70 provides in pertinent 
part: 
In any suit brought [to enforce a mechanic's 
lien], the owner of the building and premises to which 
the lien, or liens, sought to be enforced shall have 
attached, the general contractor for such building or 
other parties in interest may . . . apply to the court 
in which such suit shall be pending . . . for 
permission to . . . file a bond . . . conditioned for 
the payment of such judgment adjudicating the lien or 
liens to be valid and determining the amount for which 
the same would have been enforceable against the real 
estate as may be rendered by the court upon the 
hearing of the case on its merits . . . . 
 
The parties stipulated: (1) that the owner owed Hazel 
$56,226.25 under its enforceable mechanic's lien; (2) that 
Hazel's Bill of Complaint "satisfied all of the requirements of 
the Virginia mechanic's lien statutes;" (3) that York Federal 
had filed a bond pursuant to the bonding off statute, obtained a 
release of the property from the mechanic's lien claim, and 
later had the substitute trustee sell the property under the 
deed of trust; and (4) that although York Federal "concedes the 
validity and amount of Hazel's memorandum of mechanic's lien, it 
contends that Hazel's recovery is precluded by the priority of 
York'[s]" lien. 
Hazel moved for summary judgment.  Hazel contended that 
there was no material issue of fact to be decided since York 
Federal had stipulated as to the "validity, amount and 
enforceability" of Hazel's mechanic's lien, thus removing the 
 
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issue of York Federal's alleged priority under the provisions of 
Code § 43-21.   
As pertinent, Code § 43-21 provides:  
In the enforcement of [mechanic's] liens . . . 
any lien or encumbrance created on the land before the 
work was commenced or materials furnished shall be 
preferred in the distribution of the proceeds of sale 
only to the extent of the value of the land estimated, 
exclusive of the buildings or structures, at the time 
of sale, and the residue of the proceeds of sale shall 
be applied to the satisfaction of the liens provided 
for in the previous sections of this chapter. Provided 
that liens filed for performing labor or furnishing 
materials for the repair or improvement of any 
building 
or 
structure 
shall 
be 
subject 
to 
any 
encumbrance 
against 
such 
land 
and 
building 
or 
structure of record prior to the commencement of the 
improvements or repairs or the furnishing of materials 
or supplies therefor. 
 
York Federal opposed entry of summary judgment on the 
ground that Hazel was still obligated to prove the value of the 
real estate without Hazel's improvements in order for the court 
to apportion the relative priorities of York Federal and Hazel 
to the bond.  After considering the stipulations and the 
argument of counsel, the court sustained Hazel's motion for 
summary judgment.  York Federal appeals. 
York Federal contends that its stipulation did not resolve 
the issue of the relative priorities of the liens of the 
parties.  Hazel responds that the issue has been resolved 
because of the stipulations and the fact that "the bond had 
replaced the real property as security and the trustee had sold 
 
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the real property."  Hazel concludes that "[t]o recover from the 
bond, [Hazel] must only show that his lien is enforceable, not 
that his lien would have been collectable against the real 
property had the property been sold." 
In George W. Kane, Inc. v. NuScope, Inc.  243 Va. 503, 509, 
416 S.E.2d 701, 704 (1992), we said that "with respect to a bond 
enforcement suit, the party-plaintiff has the burden of proving 
the same elements of his claim that he would have had to prove 
in a suit to enforce the [mechanic's] lien released by that 
bond."  Hazel contends that the stipulation of the "validity, 
amount, and enforceability of the lien" establishes "the same 
elements of his claim" referred to in Kane. 
However, York Federal did not stipulate that Hazel could 
have collected its claim from the real estate if the bond had 
not been posted but only that Hazel's lien was "enforceable 
under the memorandum of mechanic's lien."  (Emphasis added.)  
Indeed, the stipulation states that "[w]hile York Federal 
concedes the validity and amount of Hazel's memorandum of 
mechanic's lien, it contends that Hazel's recovery is precluded 
by the priority of York Federal's lien." 
Additionally, payment of the bond posted is expressly 
conditioned on the provisions of Code § 43-70.  Further, the 
bonding off order uses substantially the same language found in 
the bonding off statute in conditioning payment of the bond upon 
 
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the court's adjudication of "the amount for which the liens or 
any one lien would have been enforceable against the real 
estate."  Accordingly, we do not think that the stipulation 
removed any burden of proof as to this issue which Hazel may 
have had under Code §§ 43-21 and 43-70.  
Hazel construes the bonding off statute as "simply 
ensur[ing] that amounts enforceable against the bond are 
allowable under the mechanic's lien statute."  According to 
Hazel, "[t]he General Assembly could not have intended that the 
language requires proof of priority in this case because no 
competing interests exist once the mechanic's lien was released 
under [the bonding off statute]."  However, under Hazel's 
construction, few prior lienors would be willing to bond off the 
real estate if, by doing so, the lienor would be relieved of the 
necessity of proving the priority of his lien. 
Because the language of the bonding off statute is clear 
and unambiguous, it will be applied as written.  Robbs v. 
Commonwealth, 252 Va. 433, 436, 478 S.E.2d 699, 700 (1996); 
Brown v. Lukhard, 229 Va. 316, 321, 330 S.E.2d 84, 87 (1985).  
In our opinion, the bonding off statute merely releases the real 
estate from the mechanic's lien claim by requiring that payment 
of the bond be “conditioned for the payment of such judgment 
adjudicating the lien or liens to be valid and determining the 
amount for which the same would have been enforceable against 
 
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the real estate.”  This provision substitutes the bond for the 
real estate. 
Hence, we conclude that the court erred in deciding that no 
issue remained as to the priority Hazel would have had in the 
bonded off real estate and consequently in entering summary 
judgment.  Accordingly, the judgment will be reversed and the 
case remanded for further proceedings consistent with this 
opinion. 
Reversed and remanded. 
 
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