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HARRISON & BATES, INC. v. FEATHERSTONE ASSOCIATES LIMITED (59885)


HARRISON & BATES,
INC.
v.
FEATHERSTONE ASSOCIATES LIMITED
PARTNERSHIP, ET AL.


April 18, 1997
Record No. 961318

HARRISON & BATES, INC.
v.
FEATHERSTONE ASSOCIATES LIMITED
PARTNERSHIP, ET AL.

Present: All the Justices
Herbert C. Gill, Judge
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY


In this appeal, we consider whether the Commercial Real Estate
Broker’s Lien Act, Code ” 55-526 and 55-527 (the Broker’s
Lien Act), permits a commercial real estate broker to record and
enforce a lien against rents on property after the property has
been transferred to a subsequent purchaser.

BACKGROUND
The parties stipulated the facts in the trial court. We
summarize the chronology of events and commercial transactions
that form the framework of the parties’ differing assertions on
appeal. In 1988, Featherstone Associates (Featherstone/Virginia),
a Virginia general partnership, owned Featherstone Professional
Center (the property), a commercial office complex in
Chesterfield County. To obtain tenants for the property,
Featherstone/Virginia entered into a written commission agreement
with Bowers, Nelms & Fonville, Inc. (Bowers), a licensed
commercial real estate broker. Under this agreement Bowers’
brokerage fee was to be 4% of the rents paid over the term,
including any renewal period, of leases procured by Bowers.

Harrison & Bates, Inc. (Harrison), a licensed commercial
real estate broker, is the assignee of the agreement between
Bowers and Featherstone/Virginia. Principal Commercial Advisors,
Inc. (Principal), a subsidiary of the Principal Financial Group,
is the successor of the original mortgage lender to
Featherstone/Virginia on the property. Featherstone Associates
Limited Partnership (Featherstone/New Mexico) is a New Mexico
limited partnership and is unrelated to Featherstone/Virginia.

April 16, 1987 Featherstone/Virginia executes first Deed of
Trust, Assignment of Leases and Security Agreement on the
property in favor of Signet Bank.

June 1, 1988 Featherstone/Virginia and Bowers execute commission
agreement.

October 11, 1988 Featherstone/Virginia executes second Deed of
Trust and Assignment of Rents and Leases on the property in favor
of Signet Bank.

May 4, 1989 Bowers procures lease on a portion of the property
with John Tyler Community College; Featherstone/Virginia begins
paying commissions to Bowers on rents received under this lease.

August 4, 1989 Bowers procures lease on a portion of the property
with Dr. Jonas B. Speigel; Featherstone/Virginia begins paying
commissions to Bowers on rents received under this lease.

June 28, 1993 Signet Bank transfers interest in first and second
Deeds of Trust and Assignments of Rents and Leases on the
property to Principal.

January 14, 1994 Featherstone/Virginia agrees to transfer
ownership of the property to Principal in lieu of foreclosure;
deed placed in escrow with Signet Bank; Signet Bank continues
paying commissions to Harrison as Bowers’ successor-in-interest.

May 2, 1994 Deed released from escrow and recorded; last
commission payment is made to Harrison by agent of Principal.

July 22, 1994 Principal informs Harrison that it will not
continue commission payments.

January 24, 1995 Harrison files memorandum of commercial real
estate broker’s lien.

May 5, 1995 Principal deeds ownership of the property to
Featherstone/New Mexico; Featherstone/New Mexico executes Deed of
Trust and Assignment of Rents in favor of Principal.

June 12, 1995 Harrison requests unsuccessfully that tenants pay
rent directly to Harrison under the lien.

July 31, 1995 Harrison files bill of complaint to enforce lien,
naming as respondents Featherstone/New Mexico, Principal, the
trustees under Featherstone/New Mexico’s Deed of Trust in favor
of Principal, and the two tenants.

In a letter opinion subsequently incorporated by reference in the
final decree, the trial court initially determined that the
language of the Broker’s Lien Act is ambiguous with regard to
when a broker’s lien is created, and is, therefore, subject to
judicial construction. The trial court then determined that the
purpose of the Broker’s Lien Act was to provide commercial real
estate brokers with a lien to secure contractual obligations of
the property owner without having to bargain for that right. The
trial court further reasoned, with reference to the Virginia
Recording Act, Code ‘ 55?95, that recording requirements
within the Broker’s Lien Act were intended to provide purchasers
and encumbrancers with notice of the existence of the lien. On
that basis, the trial court concluded that "perfection of a
lien subsequent to the transfer of property would be contrary to
the clear legislative purpose behind" the Broker’s Lien Act.
Accordingly, the trial court found that the present lien is not
enforceable. We awarded Harrison this appeal.
DISCUSSION

We first consider Harrison’s assertion that the Broker’s Lien
Act is not ambiguous and, thus, should be applied according to
the plain meaning and intent of its language. It is well
established that "[t]he province of [statutory] construction
lies wholly within the domain of ambiguity." Winston v.
City of Richmond
, 196 Va. 403, 408, 83 S.E.2d 728, 731
(1954). When a statute is plain and unambiguous, a court may look
only to the words of the statute to determine its meaning. Brown
v. Lukhard
, 229 Va. 316, 321, 330 S.E.2d 84, 87 (1985).

The Broker’s Lien Act consists of two code sections, the first
of which defines the terms "commercial real estate" and
"principal broker." Code ‘ 55?526. The
dispositive portions of the Broker’s Lien Act are contained in
Code ‘ 55?527, which has two subparts. At the time Harrison
filed its lien, Code ‘ 55?527 read, in pertinent part:

A. Any principal broker who . . . has provided
licensed services that result in the procuring of a tenant of
commercial real estate upon the terms provided for in a written
agreement signed by the owner thereof . . . shall have
a lien, in the amount of the compensation agreed upon by and
between the principal broker and the owner, upon rent paid by the
tenant of the commercial real estate, or by the successors or
assigns of such tenant. . . .

B. The lien provided by this chapter shall not attach or be
perfected until a memorandum of such lien
signed under oath
by the broker and meeting the requirements of this subsection has
been recorded
in the clerk’s office of the circuit court of
the county or city where the commercial real estate is located.
The memorandum of lien shall state the name of the claimant, the
name of the owner of the commercial real estate, a description of
the commercial real estate, the name and address of the person
against whom the broker’s claim for compensation is made, the
name and address of the tenant paying the rent against which the
lien is being claimed, the amount for which the lien is being
claimed, and the real estate license number of the principal
broker claiming the lien. The lien provided by this chapter and
the right to rents secured by such lien shall be subordinate to
all liens, deeds of trust, mortgages or assignments of the
leases, rents or profits recorded prior to the time the
memorandum of lien is recorded.(Emphasis added.)

Nothing in the language of this statute is inherently
difficult to comprehend, of doubtful import, or lacking in
clarity and definiteness. Accordingly, it is not necessary to
look beyond the plain language of the statute to ascertain its
underlying legislative intent. See Brown, 229 Va.
at 321, 330 S.E.2d at 87.

While we agree with Harrison that the trial court erred in
ruling that Code ‘ 55?527 was ambiguous and required
judicial construction, reversal of the judgment is not required.
"We do not hesitate, in a proper case, where the correct
conclusion has been reached but the wrong reason given, to
sustain the result and assign the right ground." Robbins
v. Grimes
, 211 Va. 97, 100, 175 S.E.2d 246, 248 (1970); see
also First Security Federal Savings Bank, Inc. v.
McQuilken
, 253 Va. 110, 114, 480 S.E.2d 485, 488 (1997); RF&P
Railroad v. Metro. Wash. Airports Auth.
251 Va. 201, 214, 468
S.E.2d 90, 98 (1996). As we shall demonstrate, this is such a
case.

Relying on the plain language of the statute, Harrison asserts
that an inchoate lien arises under ‘ 55-527(A) upon the
broker rendering service under an agreement with the property
owner, and this lien can be perfected at any time thereafter by
complying with the recording requirements of ‘ 55-527(B).
Harrison misinterprets the nature of the lien provided by the
statute.

In general terms, an inchoate lien is one which attaches to
property by operation of a statute or entry of a judgment, but
which cannot be enforced until it becomes a consummate lien by
the appropriate statutory or judicial process. When an inchoate
lien becomes consummate, the priority of its enforcement relates
back to the date the lien was created. See Black’s Law
Dictionary
762 (6th ed. 1990).

For example, Virginia’s Mechanics’ Lien Act provides for the
creation of a lien on property, Code ‘ 43?3, which can then
be perfected by filing a memorandum within 90 days of the last
day of the month in which work was performed on, or material
provided to, the property. Code ‘ 43-4. In Hadrup v. Sale,
201 Va. 421, 425, 111 S.E.2d 405, 407 (1959), we held that these
statutes, "when fairly construed, [mean] that an inchoate
lien attaches when the work is done and materials furnished which
may be perfected within the specified time."

In Hadrup, however, we distinguished liens which come
into existence only upon their being timely recorded, under a
particular statutory scheme, from inchoate liens created by
statute and merely subject to perfection by recording:

Under statutes which provide that the claimant shall, upon
giving or filing notice, have a lien upon the property, a sale of
it in good faith before the notice of lien is given or filed
prevents the acquisition of any lien. On the other hand, under
statutes which recognize the right to a lien from the date of the
contract or the time of the commencement of the building or other
improvement, or from the beginning of the performance of the
labor or the furnishing of material for which the lien is
claimed, a lien which has thus attached is not affected by a
change of ownership . . . .

Id. at 423-24, 111 S.E.2d at 407.

The lien available to commercial real estate brokers under the
Broker’s Lien Act falls into the former category. Unlike an
inchoate lien, the lien provided for by the Broker’s Lien Act
"shall not attach or be perfected until
. . . recorded." In other words, Harrison’s
assertion that ‘ 55?527(A) results in the attachment of an
inchoate lien, thereafter subject to perfection by recording
under the provisions of ‘ 55-527(B), is expressly
contradicted by the plain language of the statute. Accordingly,
we hold that the lien available to a commercial real estate
broker pursuant to the Broker’s Lien Act comes into existence, if
at all, only when the required recording occurs.

Harrison further asserts that the requirement of
‘ 55?527(B) that the memorandum of lien state both
"the name of the owner of the commercial real estate
. . . [and] the name and address of the person against
whom the broker’s claim for compensation is made" manifests
a legislative intent to permit a lien on the rents to be
perfected after transfer of the property and enforced against the
new owner. We disagree.

The Broker’s Lien Act was created in derogation of the common
law. See S.L. Nusbaum & Co. v. Atlantic Virginia
Realty Corp.
, 206 Va. 673, 146 S.E.2d 205 (1966); Hoffman
v. First National Bank of Boston
, 205 Va. 232, 135 S.E.2d 818
(1964). Accordingly, any right it provides not previously
available at common law must be found in an express statement
within the language of the Act. See Hyman v. Glover,
232 Va. 140, 143, 348 S.E.2d 269, 271 (1986); C. & O.
Railway v. Kinzer
, 206 Va. 175, 181, 142 S.E.2d 514, 518
(1965). The language relied upon by Harrison is not so broad as
to encompass the extraordinary right of a broker to obtain
priority over a subsequent purchaser of the property. Rather,
this language merely recognizes that there may be circumstances
under which the party with the right to collect rents, and, thus
against whom the lien may be enforced, may not be the party who
owns the property at the time the lien is recorded.

Finally, we find no merit to Harrison’s contention that its
asserted lien attached to the rents in question because both
Principal and Featherstone/New Mexico had actual or constructive
knowledge of Harrison’s claim prior to their acquisition of the
property. The two cases relied upon by Harrison, Ely v.
Johnson
, 114 Va. 31, 75 S.E. 748 (1912)(purchaser on notice
as to possession and use of land by another) and Hunton v.
Wood
, 101 Va. 54, 43 S.E. 186 (1903)(improperly recorded deed
of trust), each dealt with subsequent purchasers of land with
prior notice of an existing, but unrecorded, interest in the
property acquired. However, at the time Principal acquired the
property, Harrison did not have an existing, but unrecorded,
interest in the property. Rather, its interest constituted a
potential lien upon the rents which could come into existence
only upon the recording of a memorandum of that lien prior to a
transfer of the property. Prior to that, Harrison had nothing
more than a contract obligation enforceable against
Featherstone/Virginia. Consequently, because the memorandum of
lien was not recorded until after the transfer of the property,
Harrison did not acquire a lien that attached to the subsequent
purchaser’s interest in the property.

In summary, when Featherstone/Virginia, the party with which
Harrison was in privity on the commission contract, transferred
its interest in the rents along with its other property rights to
Principal, Harrison lost any power it had to seek enforcement of
the contract obligation by lien since Featherstone/Virginia no
longer possessed the property right potentially subject to such a
lien. Thus, Harrison’s subsequent recording of the memorandum of
lien was ineffective against Principal, and any notice which that
memorandum provided to Featherstone/New Mexico was equally
ineffective.

For these reasons, we will affirm the judgment of the trial
court.

Affirmed.

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