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VIRGINIA, et al.



January 14, 2000

Record No. 990366 & Record No. 990426










Present: All the Justices

Carleton Penn, Judge Designate

These two appeals stem from a single suit to
enforce mechanics’ liens. Although such a lien is a creature of
statute, the lien must have its foundation in a contract, with
which the lien must correspond. Sergeant v. Denby, 87 Va.
206, 208, 12 S.E. 402, 402 (1890). Here, we must decide first
just what comprises the underlying contract of the parties. Then,
the dispositive issue will become whether the contract’s lien
waiver provisions control the rights of the lien claimant.

In 1989, Drewer Development Corporation (Drewer
or DDC) was a developer of multiple-lot residential projects in
Northern Virginia. J.S.C. Concrete Construction, Inc. (JSC), was
a concrete flatwork and walls contractor, which had worked for
Drewer for a number of years on different projects.

On January 10, 1991, JSC filed memoranda of
mechanic’s lien against 13 lots in two different residential
projects being developed by Drewer in Loudoun County. In a timely
filed suit to enforce the liens, JSC’s bill of complaint named
multiple defendants, including Drewer, which was the record owner
of the properties, and other mechanic’s lien claimants. The bill
also named as defendants First American Bank of Virginia and
Commonwealth Abstract Corporation, Trustee (collectively, the
Bank), the secured party and trustee, respectively, under
construction loan deeds of trust upon the properties.

The cause was referred to a commissioner in
chancery who held an evidentiary hearing in August 1995. At that
stage of the proceeding, the only parties active in the
litigation were JSC and the Bank; Drewer had ceased doing
business in 1991.

In a December 1996 report, the commissioner
recommended that portions of seven of the original 13 liens be
declared valid in the total amount of $39,124.81 out of the
$161,252.74 initially claimed. The commissioner also recommended
that prejudgment interest be assessed from December 30, 1990.

JSC and the Bank filed exceptions to the
commissioner’s report. Following argument of counsel, the
chancellor overruled the exceptions, but for two minor items not
at issue on appeal, and confirmed the report in a December 1998
final decree. We awarded the Bank and JSC separate appeals and
consolidated them.

The facts are undisputed. On March 16, 1989,
JSC entered into a "Contractor Base Agreement" with
Drewer. The three-page, 29-paragraph, mostly preprinted agreement
set forth the general conditions under which JSC would perform
work for Drewer. It provided that its purpose was "to fix
the obligations" of the parties with regard to the work.

It further provided that the work to be
performed would be "specifically described in Work Orders
issued but is generally as follows: To supply and install
materials and labor for footings (turn down slab) and insulation
slab (step from slab to garage) Stoop and Steps and Walls."

The Base Agreement also provided: "In
conjunction with this Agreement, DDC may issue Work Orders from
time to time covering the Work to be performed and time for
completion at each specific job location. Work Orders will
usually be issued prior to the start of required work." The
agreement stated that "the term Work Order shall include
forms designated ‘Extra Work Order’ and other similar
designations and containing information about commencing such
Work and the payment for such Work."

The agreement further provided that it was
"non-exclusive and that DDC is free to contract with any
other entity for the performance of the Work described in this
Agreement." Elaborating, the agreement stated that Drewer
was "not obligated to issue Work Orders" to JSC. Also,
the agreement provided that no payments would be due under it
until Drewer received "a Work Completion Certificate which
certifies that all Work to be performed under a particular Work
Order has been completed satisfactorily."

The remaining paragraphs of the Base Agreement
included provisions requiring JSC, for example, to become
familiar with plans and specifications, to cooperate with other
contractors, to obtain all required licenses and permits, to
indemnify Drewer for all claims arising from performance of the
work, to provide new materials, to keep the job site free of
waste and rubbish, and to obtain necessary insurance coverage.

Additionally, the agreement contained a
paragraph providing that JSC waived all rights to file mechanics’
liens against the property for any labor, services, or materials
furnished to Drewer.

During the time when JSC performed work for
Drewer a pattern of performance was established between the
parties. JSC would only begin work on a Drewer project when
Drewer issued preprinted work order forms labeled "Extra
Work Order." These forms would name the particular project,
identify the type of dwelling involved and its lot location, list
the concrete work to be performed and state the price to be paid
JSC. The date of the work order indicated the date that JSC was
authorized to begin construction.

Printed at the foot of the form was a paragraph
labeled "Work Completion Certificate." As we have said,
this was used to notify Drewer that the work had been completed
satisfactorily upon the date the form was signed on behalf of

According to the evidence, there were basically
three phases of the concrete work on each dwelling: (1) Footings
and foundation, (2) slabs, and (3) stoops and hearth. Drewer
would issue three separate Extra Work Order forms to JSC for the
three phases of the concrete work on each particular house and
lot. The three forms were always issued on the same date and each
form was for a different phase of the concrete work. No single
form listed all three phases of the concrete work.

Once the forms were received, JSC, or its
subcontractor, would proceed with the work, phase by phase, as
the house reached the stage of construction called for by each
work order. As the phase of the work described in each form was
completed, JSC would submit the dated Work Completion Certificate
to Drewer. Payment from Drewer for that phase of work would be
due JSC at the time each certificate was submitted.

A portion of the Work Completion Certificate
deals with the subject of mechanics’ liens. It purports to waive
any rights to file mechanics’ liens only "upon receipt of
payment from Drewer Development."

Keeping in mind that the initial issue we must
decide is just what comprised the contract between the parties,
we shall summarize the commissioner’s finding on that question,
which was confirmed by the chancellor. The commissioner stated
that, although the Contractor Base Agreement outlined the general
terms and conditions of the work that would be required by JSC,
"the agreement was non-exclusive with DDC reserving the
right to contract with any other party for the work described.
Only when DDC issued work orders to JSC and JSC accepted the
orders by supplying the materials and labor was a contractual
offer and acceptance established."

The commissioner determined that because the
work orders identified the details of the obligations between the
parties and verified the dates that the work was completed, upon
which dates the timely filing of the liens must be based,
"the liens correspond directly to the individual Work Orders
and not the Contractor’s Base Agreement." In other words,
the commissioner, and the chancellor, ruled that each Extra Work
Order for a lot was a separate, stand alone contract, thereby
taking the Contractor Base Agreement out of the equation.

In view of that ruling, it became unnecessary
for the commissioner and the chancellor to consider the lien
waiver provisions of the Base Agreement. Focusing only on the
lien waiver language of the Extra Work Orders, the commissioner
and the chancellor found that JSC "did not waive its right
to file its mechanic’s liens." They said "the lien
waiver stated in the Work Orders which stipulates ‘upon receipt
of payment,’ is considered to be a conditional lien waiver. As
JSC has not received payment for the work indicated in the liens,
the lien waiver is non-binding."

Having determined that each Extra Work Order
was a separate contract, and that the work orders for each lot
collectively did not constitute a single contract for each lot,
as JSC had argued, the commissioner found that the time for
filing a mechanic’s lien for much of JSC’s work had expired, and
reduced JSC’s claim as the result of the untimely filings.
Accordingly, the trial court reduced JSC’s total claim made at
the commissioner’s hearing of $80,549.51 by $41,424.70.

In its appeal, the Bank contends that the
Contractor Base Agreement and the Extra Work Orders for each lot
together form the contract between the parties and that the trial
court erred in ruling that each work order was a stand alone
contract. The Bank further contends that the lien-waiver language
in the work order conditioned upon receipt of payment should not
supersede the express waiver of mechanic’s lien rights contained
in the Base Agreement, and that the trial court erred in refusing
to hold that JSC had waived all its claims. Also, the Bank
contends the trial court erred in awarding prejudgment interest.

In its appeal, JSC contends all its liens were
timely filed and should be enforced because the trial court erred
in ruling that the individual work orders for each lot
constituted separate contracts. JSC argues that the work orders
for a particular lot "should be considered as a unitary and
continuing contract for that lot such that the time for filing a
mechanic’s lien does not begin to run until the last work is
performed on that lot." Thus, JSC asks this Court to reverse
that portion of the trial court’s decree which deducted
$41,424.70 from its total claim and to modify the decree to
include that sum in the total principal amount of the judgment in
its favor.

We agree with the Bank upon what comprises the
contract between the parties, and we also agree with the Bank
that JSC, according to the provisions of the Base Agreement,
waived its rights to file its mechanics’ liens.

Several settled principles are applicable in
this case of contract interpretation. In the present case, the
question of what comprised the parties’ contract and the
interpretation of that contract is a question of law. Thus, upon
review, we are not bound by the trial court’s opinion on those
issues. See Wilson v. Holyfield, 227 Va. 184,
187-88, 313 S.E.2d 396, 398 (1984). Additionally, "when
parties have entered into two documents relating to a business
transaction, the writings will be construed together to determine
the parties’ intent." Doswell Ltd. Partnership v.
Virginia Elec. and Power Co.
, 251 Va. 215, 222, 468 S.E.2d
84, 88 (1996).

First, we conclude that the trial court
incorrectly identified the underlying contract. In expressly
ruling that each work order for a house and lot was a stand alone
contract, and implicitly ruling that the Base Agreement was a
nullity, the court disregarded clear language in both the
agreement and the work orders that requires the documents to be
construed as one integrated contract.

For example, the Base Agreement provides that
its purpose "is to fix the obligations of" the parties.
The Base Agreement states that the term "Contract
Documents" shall mean the Agreement "together with any
Work Orders."

Moreover, the Base Agreement provides that the
term "Work" would "have the meaning specified in
Section 3." Section 3 identifies the three phases of the
concrete work to be performed by JSC that are to be
"specifically described in Work Orders issued."

The Extra Work Orders provide no new terms.
Indeed, the form states that JSC "is authorized and hereby
agrees to do the following work under the terms and conditions of
the Contractor Base Agreement."

Manifestly, the language of the documents
contemplates that both must be read together to set forth the
full understanding of the parties, and that neither one standing
alone constituted a complete contract. The work order specified
the work to be done under the terms and conditions established in
the Base Agreement. Upon Drewer’s offer extended by issuance of
the work order (which incorporated the Base Agreement) being
accepted by JSC’s consent to perform under the work order, a
binding contract between the parties was formed.

Because of the conclusion we reach on the
second issue, it is unnecessary to decide whether there were
three contracts on each house, one for each phase of the work, or
whether there was one contract on each house incorporating the
three work orders. Whether there are three contracts or one, the
lien-waiver language is present in all the contracts.

This brings us to the second issue, that is,
whether, in the contract, JSC waived its rights to file
mechanics’ liens.

The statute creating the right to a mechanic’s
lien specifically provides that any right to file or enforce such
a lien "may be waived in whole or in part at any time by any
person entitled to such lien." Code ? 43-3(C). Such a
waiver "must be express, or, if it is implied, it must be
established by clear and convincing evidence." McMerit
Constr. Co. v. Knightsbridge Dev. Co.
, 235 Va. 368, 374, 367
S.E.2d 512, 516 (1988).

Resolution of this issue requires
interpretation of the provisions in the Base Agreement and the
Extra Work Orders touching that subject. Paragraph 21 of the Base
Agreement provides:


The work order Work Completion Certificate

"Contractor [JSC] hereby reports
completion of work authorized above in compliance with the terms
and conditions of the Contractor Base Agreement and requests
payment of the consideration set forth above in the amount of
$_______. Contractor certifies that all labor and materials are
paid in full, that all withholding taxes, social security taxes
and applicable unemployment taxes for all employees of Contractor
have been paid, and upon receipt of payment from Drewer
Development, Contractor waives and releases all actions, claims,
and demands against Drewer Development and waives any mechanic’s,
materialmen’s or like liens and all rights to file any such liens
in the future against the real property on account of the work,
services, equipment and materials performed or furnished by

The language of the Base Agreement is express
and unambiguous; it is an unconditional waiver of the right to
file mechanics’ liens. Indeed, paragraph 24(e) provides that JSC
shall be in breach of the agreement if it "shall file a
claim or lien against the property where the Work has been

An apparent inconsistency is created, however,
by the Work Completion Certificate. If that language applies to
waiver of mechanic’s lien rights, it must be construed to mean
that lien waiver rights are waived only "upon receipt of
payment." But if the contractor has been paid in full, the
law gives it no lien. Payment "removes any right it may have
had to effect a lien." Walker & Laberge Co. v. First
Nat’l Bank of Boston
, 206 Va. 683, 692, 146 S.E.2d 239, 246
(1966). Therefore, an interpretation that makes the
enforceability of the work order’s lien waiver clause conditioned
upon payment should be avoided, as the Bank argues.

However, in construing contract documents as a
whole, "the court will not treat any word or clause as
meaningless if any reasonable interpretation consistent with the
other portions of the contract can be ascribed to it." Daugherty
v. Diment
, 238 Va. 520, 525, 385 S.E.2d 572, 574 (1989). In
other words, when two provisions of a contract appear to be
mutually conflicting, they should be reconciled if a reasonable
basis for reconciliation is afforded by the instrument’s
language. Hutchison v. King, 206 Va. 619, 624-25, 145
S.E.2d 216, 220 (1965).

When the contract is considered as a whole, and
the Work Completion Certificate is read as a part of the
contract, the contract clearly provides a binding waiver of
mechanic’s lien rights. The Base Agreement paragraph addresses
only waiver of liens. But, the Work Completion Certificate
addresses at least two subjects: The right to file liens, which
already has been waived when the work order becomes a part of the
contract, and other "actions, claims and demands."

In order to reconcile the provisions, we
interpret the condition precedent of payment to apply only to
waiver of "actions, claims, and demands," and not to
lien waiver. In other words, the clause in the Certificate should
be read in two parts: (1) "upon receipt of payment from
Drewer Development, Contractor waives and releases all actions,
claims, and demands against Drewer Development" and (2)
"waives any mechanic’s, materialmen’s or like liens and all
rights to file any such liens in the future." This second
portion merely reaffirms the waiver of lien rights that are so
clearly set forth in the Base Agreement.

Consequently, we hold that the trial court
erred in refusing to rule that JSC waived its rights to file
mechanic’s liens. Thus, it becomes unnecessary to address the
prejudgment interest question.

Therefore, the judgment of the court below will
be reversed and final judgment will be entered here in favor of
the Bank dismissing JSC’s bill of complaint.

Record No. 990366 — Reversed and final

Record No. 990426 — Reversed and final