Court Opinion

ID: 1060128
Source: CourtListenerOpinion
Date Created: 2013-10-09 18:42:21.36107+00
Date Added: 2024-06-11T12:05:15.467044
License: Public Domain

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
                               1
contractors and materialmen.       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
      1
      In 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.
      2
      Parties 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.
     3
      The 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
                                            4
to the law of mechanic's liens generally.       See, e.g.,

Annotation, When contract, transaction, or account deemed

"continuing" one as regards time for filing mechanics' lien, 97

     4
      In 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
     5
      In 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.