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YORK FEDERAL SAVINGS & LOAN ASSOCIATION v. HAZEL (59780)


YORK FEDERAL SAVINGS &
LOAN ASSOCIATION

v.

HAZEL


NOVEMBER 6, 1998
Record No. 980152

YORK FEDERAL SAVINGS & LOAN ASSOCIATION

v.

WILLIAM A. HAZEL, INC.

Michael A. McWeeny, Judge
Present: Carrico, C.J., Compton, Hassell, Keenan, Koontz, and
Kinser, JJ., and Whiting, Senior Justice

OPINION BY SENIOR JUSTICE HENRY H. WHITING
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY


In this mechanic’s lien enforcement suit, we
decide whether the holder of a mechanic’s lien that is
"bonded off" pursuant to Code Sect. 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 Sect. 43-70 (the
"bonding off" statute). Code Sect. 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 issue of York Federal’s alleged priority under the
provisions of Code Sect. 43-21.

As pertinent, Code Sect. 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
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 Sect. 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 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 Sects. 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 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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