Virginia Lawyers Weekly

In this ongoing dispute between a developer and a contractor in this $92 million condominium project in Arlington, an Alexandria U.S. District Court rejects the contractor’s claim that it had a right to file two mechanic’s liens after the parties entered into an agreement in which the contractor waived its right to file additional mechanic’s liens in exchange for the developer’s promise to escrow funds to cover the remaining damage claims.

Plaintiff Comstock Potomac Yard LC, a developer, entered into a $92 million contract with Centex Construction LLC for construction of a multi-use condominium project in Arlington. Defendant Balfour Beatty later acquired the rights to the contract.

Disputes arose between Comstock and Balfour. Also, in December 2007, a Balfour subcontractor named Atlas Comfort Systems USA filed two mechanic’s liens for approximately $1.4 million against the project. The parties entered into an agreement in January 2008 in an attempt to resolve some of their differences.

The issue presented here is whether Balfour Beatty was barred by the parties’ agreement from filing the two mechanic’s liens – a $330,510 lien for retainage on adjusted contract amounts not subject to prior liens and a $221,566 lien for extended delay costs on adjusted contract amounts not subject to prior liens – on the project. If any of the following three statements are accurate, Balfour was not barred from filing the liens when it did: 1) the agreement is not supported by valid consideration; 2) the lien waiver provisions are subject to a conditional precedent that had not yet triggered at the time the liens were filed; or 3) Comstock breached the agreement before Balfour filed its liens. None of these statements have support. Therefore, Balfour was bound by the lien waiver provisions in the agreement and barred by the agreement from filing the two mechanic’s liens against the project.

There was valid, bargained-for consideration for the agreement. Comstock promised to pay Balfour $1,712,500 to settle some of the disputed claims between the parties, even though Comstock believed that other disputed claims not resolved by the agreement gave it the right to recover over $8 million in liquidated damages from Balfour. Comstock also promised it would negotiate in good faith on the unresolved disputed claims; that it had $1.3 million available in a contingency fund on Jan. 30 2008, when the agreement was signed; and that it would establish a segregated escrow account of $1.3 million prior to resolution of the remaining disputed claims or completion of sales at the project. In exchange for these promises, Balfour agreed to waive its right to file mechanic’s liens.

Although Balfour ardently sought to condition its lien waiver on some type of performance by Comstock, Comstock rejected all of Balfour’s attempts to qualify the lien waiver provision. The evidence at the hearing and the plain and unambiguous language of the contract itself both support the conclusion that the lien waiver provisions in the agreement are unconditional.

Finally, Comstock did not breach the agreement before Balfour filed the liens by refinancing another loan, by not having $1.3 million available to pay for the remaining disputed claims on Jan. 30, 2008, or by not putting $1.3 million into an escrow account.

In sum, the court finds the agreement is supported by consideration, that the lien waiver provisions in the agreement are unconditional and that Comstock did not breach the agreement before Balfour filed the liens. The court holds the two mechanic’s liens are invalid because they were barred by the lien waiver provisions.

Judgment for the developer.

Comstock Potomac Yard LC v. Balfour Beatty Construction LLC (O’Grady, J.) No. 1:08cv894, April 20, 2009; USDC at Alexandria, Va. VLW 009-3-217, 19 pp.

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