Opinion ID: 2517826
Heading Depth: 2
Heading Rank: 1

Heading: Lien Priority

Text: [¶ 10] Michael's claims the district court erred by concluding the date for its lien priority was the first day it performed actual construction work on the building site in October 2006. It argues that, under the relevant statutory provisions, its lien priority date should have related back to when the architectural firm started work on the project in the Spring of 2006, making its lien superior to ANB's mortgage recorded on July 3, 2006. [¶ 11] Wyo. Stat. Ann. § 29-1-305 (LexisNexis 2009) [1] set out the lien priority rules which apply in this case and stated in pertinent part: (a) Except as provided in this section the liens provided by this title shall be on an equal footing without reference to the date of the filing of the lien statement. (b) Any lien perfected as provided by this title attaches to the materials, machinery or supplies furnished and improvements made in preference to any subsequent lien, security interest or mortgage under any other provision of law which has been perfected upon real or personal property, including a leasehold interest, against which the lien is claimed. (c) Any lien, security interest or mortgage which has been perfected upon real or personal property or upon a leasehold interest prior to the commencement of any construction work or repair of the premises or property . . . shall have priority. (d) Where a sale is ordered by the court on foreclosure of any lien provided by this title and the proceeds from the sale are insufficient to discharge in full all of the liens, the proceeds shall be prorated among the several lien claimants according to the amounts of their respective claims. [¶ 12] In order to decide this case, we must interpret the statutory language by applying the following principles: [Our] paramount consideration is to determine the legislature's intent, which must be ascertained initially and primarily from the words used in the statute. We look first to the plain and ordinary meaning of the words to determine if the statute is ambiguous. A statute is clear and unambiguous if its wording is such that reasonable persons are able to agree on its meaning with consistency and predictability. Conversely, a statute is ambiguous if it is found to be vague or uncertain and subject to varying interpretations. Office of State Lands and Invs. v. Mule Shoe Ranch, Inc., 2011 WY 68, ¶ 13, 252 P.3d 951, 954-55 (Wyo.2011), quoting Dorr v. Smith, Keller & Assoc., 2010 WY 120, ¶ 11, 238 P.3d 549, 552 (Wyo.2010). See also, Vogel, ¶ 21, 267 P.3d at 1063. The determination of whether a statute is clear or ambiguous is a matter of law for the court. Office of State Lands, ¶ 13, 252 P.3d at 955. [¶ 13] In ascertaining the meaning of a statutory provision, all statutes relating to the same subject or having the same general purpose must be considered and construed in harmony. Mountain Cement Co. v. South of Laramie Water & Sewer Dist., 2011 WY 81, ¶ 13, 255 P.3d 881, 885 (Wyo.2011). When the language is clear, we give effect to the ordinary and obvious meaning of the words employed by the legislature. SLB v. JEO, 2006 WY 74, ¶ 8, 136 P.3d 797, 800 (Wyo.2006). [¶ 14] The district court relied upon § 29-1-305(c) in ruling that ANB's mortgage had priority over Michael's lien. That provision gave priority to [a]ny lien, security interest or mortgage which has been perfected upon real or personal property . . . prior to the commencement of any construction work or repair of the premises or property. Section 29-1-305(b) states the corollaryany construction lien properly perfected has preference over any subsequent lien, security interest or mortgage. Thus, the commencement of any construction work language set out in subsection (c) provides the line of demarcation for establishing the relative priorities of claimants and the meaning of that phrase is critical to our decision in this case. [¶ 15] Michael's maintains that, under § 29-1-305, any construction lien relates back to the commencement of the project, which includes preconstruction services such as architectural design work. Thatcher & Sons, Inc. v. Norwest Bank Casper, N.A., 750 P.2d 1324, 1327 (Wyo.1988) confirmed that the intent of § 29-1-305(b) was to relate all construction liens back to the commencement of the project. We held the lien of a subcontractor who began work on a project after a mortgage was recorded related back to the commencement of construction by the original contractor. Because construction was commenced prior to the recording of Norwest Bank's mortgage, the subcontractor's lien had priority. Id. Thatcher does not, however, directly answer the question of whether architectural services are included within the meaning of commencement of any construction work in § 29-1-305(c). [¶ 16] Applying our rules of statutory interpretation, we conclude the language of § 29-1-305(c) is clear. The ordinary and obvious meaning of construction is the process or act of constructing. Webster's Third New Int'l Dictionary 489 (2002). Construct is defined as to put together substances or parts, systematically, in order to make or build (a building, bridge, etc.); assemble[.] Id. Similarly, Black's Law Dictionary (6th Ed. 1990), defines construct as [t]o build; erect; put together; make ready for use. To adjust and join materials, or parts of, so as to form a permanent whole. To put together constituent parts of something in their proper place and order. Thus, the plain meaning of construction or construction work contemplates actual physical work on the building site. [¶ 17] Other jurisdictions have interpreted their lien priority statutes as requiring actual, visible construction work on the project site to trigger the priority date. In Walker v. Lytton Savings and Loan Assoc., 2 Cal.3d 152, 84 Cal.Rptr. 521, 465 P.2d 497 (1970), the California Supreme Court interpreted that state's lien priority statute, which stated that mechanics' liens were preferred to any . . . deed of trust . . . or other encumbrance. . . which may have attached subsequent to the time when the building, improvement. . . was commenced. Id. 84 Cal.Rptr. at 524 n. 4, 465 P.2d 497. The court ruled that architectural services did not trigger the lien priority statute, stating the general rule is that such a lien does not attach unless and until [c]onstruction has been undertaken by the doing of actual visible work on the land or the delivery of construction materials thereto. Id. 84 Cal. Rptr. at 524, 465 P.2d 497. [¶ 18] In Rupp v. Earl H. Cline & Sons, Inc., 230 Md. 573, 188 A.2d 146 (Md.Ct.App. 1963), the court was asked to determine the priorities of a deed of trust and a mechanics' lien to the proceeds of a foreclosure sale. The Maryland statute at issue stated that lienable work was given preference to a deed of trust which was recorded after commencement of the building. Id. at 148. The court stated that before there can be the commencement of a building which would give a mechanics' lien claimant a preference over a recorded mortgage there must be (i) a manifest commencement of some work or labor on the ground which everyone can readily see and recognize as the commencement of a building and (ii) the work done must have been begun with the intention and purpose then formed to continue the work until the completion of the building. If either of these elements is missing then there has been no `commencement of the building' within the meaning of § 15 of Art. 63. Id. at 149 (emphasis in original). [¶ 19] Other states, such as Nevada and Arkansas, have statutes which specifically define commencement of construction or similar language. In Arkansas, the lien priority statute stated that liens for labor performed or material or fixtures furnished shall date from the time that the construction or repair first commenced and had priority over all encumbrances that attached subsequent to commencement of construction. . . . May Constr. Co. v. Town Creek Constr. & Dev., LLC, ___ S.W.3d ___, 2011 WL 2477185 (Ark.2011). The statute specifically stated that [c]onstruction or repair commences when there is a visible manifestation of activity on real estate that would lead a reasonable person to believe that construction. . . has begun or will soon begin. . . . Id. Similarly, in Nevada, the lien priority statute stated that mechanics' liens had priority over any encumbrance which attached after the commencement of construction of a work of improvement. Commencement of construction was defined in Nevada statutes as the date on which: 1. Work performed; or 2. Materials or equipment furnished in connection with a work of improvement, is visible from a reasonable inspection of the site. J.E. Dunn Northwest, Inc. v. Corus Constr. Venture, LLC, 249 P.3d 501, 505 (Nev.2011). The Nevada Supreme Court noted that, while the statutory definition was not adopted until 2003, the court had recognized since 1977 that visible, on-site construction is required for mechanics' liens to take a priority position over a subsequently recorded deed of trust. Id. at 504, citing Aladdin Heating v. Trustees, Cent. States, 93 Nev. 257, 563 P.2d 82, 84 (1977). Thus, many cases interpret commencement of construction and similar language as requiring visible, on-site manifestations of construction activity to trigger the priority date for construction liens. Under those rulings, off-site preconstruction activities, like architectural services, are insufficient to qualify as commencement of construction. See also, Williams & Works, Inc. v. Springfield Corp., 408 Mich. 732, 293 N.W.2d 304, 306-07 (1980) (holding the Michigan lien priority statute did not include non-visible offsite engineering services as commencement of building or improvement for fixing mechanic's lien priority). [¶ 20] Michael's directs us to one case which reached the opposite conclusion Bankers Trust Co. v. El Paso Pre-Cast Co., 192 Colo. 468, 560 P.2d 457 (1977). The Colorado lien priority statute stated that all mechanics' liens shall relate back to the time of the commencement of work under the contract between the owner and the first contractor. The court stated that, since the lien priority statute referred to the first contractor and architects and engineers were contractors within the contemplation of the mechanics' lien laws, the lien priority dated from the commencement of the preconstruction work. The decision was based, in part, on the principle that mechanics' lien laws should be construed in favor of lien claimants. Id. at 461. [¶ 21] In this case, the district court concluded [t]he requirement of a visible, on-site commencement of construction work . . . is consonant with Wyoming principles, and we agree. The Wyoming legislature's use of the term construction work in § 29-1-305(c) rather than simply work to establish the date of priority is significant. The plain meaning of construction includes the concept of actual, visible on-site building or assembly activities. That distinguishes our statute from Colorado's, which referred only to commencement of work. Moreover, while Colorado has a policy that mechanics' liens should be construed in favor of lien claimants, we have consistently stated the opposite: Mechanics' liens were not recognized at and are in derogation of common law so there must be full compliance with legislative requirements. Arch Sellery, Inc. v. Simpson, Wyo.1959, 346 P.2d 1068. Statutory lien laws must be strictly construed and their scope cannot be extended. Cities Service Oil Company v. Pubco Petroleum Corporation, Wyo.1972, 497 P.2d 1368. American Buildings Co. v. Wheelers Stores, 585 P.2d 845, 847 (Wyo.1978). See also, Winter v. Pleasant, 2010 WY 4, ¶ 3, 222 P.3d 828, 832 (Wyo.2010). [¶ 22] Michael's argues that the legislature intended the commencement of architectural and other preconstruction services to establish the priority date for construction liens. It supports its position with several definitions set forth in Wyo. Stat. Ann. § 29-1-201 (LexisNexis 2011): (a) Except as otherwise provided, as used in this title: [2] (i) Contractor means: (A) A person employed by and contracting with an owner to improve an owner's property including: (I) An architect; (II) A professional engineer; and (III) A surveyor. . . . . (iii) Improve or improvement means: (A) Demolition, erection, alteration or repair of any property for its permanent benefit; (B) Any work performed or material furnished for the permanent change of any real property; and (C) Materials manufactured pursuant to contract. . . . . (vii) Work shall be as requested, authorized or ratified under contract. [¶ 23] Because, under § 29-1-201, architects are included within the definition of contractors, improvement includes any work performed . . . for the permanent change of any real property, and work means as ratified under a contract, Michael's argues that the legislature intended architectural services to be included in the definition of any construction work in § 29-1-305(c) for determining the date of lien priorities. Michael's insists that if the beginning of architectural services does not set the date for priority, then architects and other preconstruction service providers are effectively denied a lien, which is contrary to the intent of the lien statutes. [¶ 24] First, we note that the definitions stated in § 29-1-201 use the term work instead of construction work as used in § 29-1-305(c). As our earlier analysis of the language of § 29-1-305(c) makes clear, the legislature's choice to modify work with the term construction is important because it introduces the concepts of actual building and assembly activities into the statutory language. Thus, the definition of work without the modifier construction is of little use to our analysis. [¶ 25] Other jurisdictions have faced similar arguments that, because preconstruction service providers have the right to claim a lien, the date of their services should provide the date of priority. They have concluded there is a distinction between the designation of proper lien claimants and the determination of priority among lien claimants. See, e.g., Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Dev. Co., 784 P.2d 1217, 1221 (Utah Ct.App.1989); J.E. Dunn Northwest, 249 P.3d at 507-08. In Williams & Works, 293 N.W.2d at 310-11, the mechanic's lien claimant argued that, by expanding the scope of lienable work to include engineering services, the Michigan legislature intended the date of priority to relate back to the commencement of such offsite preconstruction services. The Michigan Supreme Court stated: [I]t [is] unreasonable to believe the Legislature intended to indirectly change § 9(3), containing the traditional and well-established rule requiring a visible, on-site commencement of construction in order to establish priority, by the simple expansion of the lienable services outlined in a different section[.] Id. at 311. [¶ 26] Likewise, we do not believe the Wyoming legislature meant to indirectly change the date of priority from the plain meaning of commencement of any construction work by including architects and other preconstruction service providers in the definition of lien claimants. Contrary to Michael's argument, architects, etc. are not left unprotected by our determination. They are still given a lien, with the date of priority simply being the date of actual construction activities. [¶ 27] Finally, Michael's argues that because ANB had actual notice that the architects were working on the project by signage placed on the property and an article in a local newspaper prior to the recording of the mortgage, its lien should have priority over the mortgage. We disagree. The legislature made a determination that the date of lien priority was the date of commencement of any construction work. We cannot disregard the legislature's choice and impose a different date based upon actual notice of offsite work being performed. See generally, Williams & Works, 293 N.W.2d at 314 (holding the fact that a mortgage holder had actual notice of preconstruction services did not affect the priority determination because the statute stated that a mortgage filed prior to the commencement of the building had priority). We affirm the district court's determination that ANB's mortgage was superior to Michael's construction lien.