Jerome v. Winkler Construction Co.

JOHN J. BISHOP, Judge (retired), Specially Assigned. Scott Jerome, Barbara Chait, and Richard J. Musser, Va Musser Construction, Inc. appeal the action of the Circuit Court for Carroll County in granting a Final Order Establishing Mechanic’s Lien and denying certain post-judgment motions in favor of Winkler Construction Company, Inc., appellee. Appellants ask: I. Whether the trial court erred when it granted the Mechanic’s Lien; II. Whether the trial court erred when it refused to vacate the Final Order and to allow Appellants to file a Verified Answer; III.

Whether the trial court erred when it denied Appellants’ Motion to file a Mechanic’s Lien Release Bond. Because we reverse on the basis of our disposition of the first issue, we do not address the other issues. FACTS Jerome and Chait entered into a contract with Valley Homes for the construction of a dwelling on their property, described as Lot No. 52, Beaver Creek Estates subdivision, in Carroll County. Musser, a subcontractor of Valley Homes, had, in turn, entered into a sub-subcontract with Winkler to perform certain carpentry work in connection with the construction required under Musser’s sub contract.

Appellants contend that Winkler failed to complete the work it contracted to do and abandoned the job site. As a result of this alleged breach of the sub-subcontract, Musser claims he had to pay $7,240.00 for labor, materials and to other sub-subcontractors to complete the work that Winkler was required to do. On June 17, 1997, Winkler filed a Petition to Establish and • Enforce Mechanic’s Lien for work that it had performed under his sub-subcontract with Musser. Jerome and Chait were properly served.

They contacted Valley Homes, who advised them that a Mechanic’s Lien Release Bond had been ⁵⁴⁹ obtained and that they would be fully protected from Winkler’s claim. Accordingly, they did not file a response to the Petition. Musser filed a Verified Answer to the Petition to Establish Mechanic’s Lien and a Counter-Claim for damages caused by Winkler’s failure to perform. In the Verified Answer, Musser denied that any monies were due to Winkler and alleged that Winkler had failed to perform.

In his counter claim, Musser alleged that Winkler had failed to perform under his contract; and to his counter claim, Musser attached a copy of a certified letter, dated March 13, 1997, he sent to Winkler notifying him of the termination of the contract because of Winkler’s abandonment of the job site on March 3, 1997, and because of Winkler’s general non-compliance with the sub-subcontract. In a second letter dated April 21, 1997, and also appended to Musser’s Answer, Musser advised Winkler of the details of the alleged breach. In the letter, Musser claimed that he spent $13,000.00 to complete the job; he also showed a deduction of the $5,760.00 still due to Winkler under the subcontract, and enclosed an invoice, addressed to Winkler, in the net amount of $7,240.00, along with documentary support of the claim. A show cause hearing was held on August 14,1997.

Musser appeared and contested the claim; however, the trial court granted the Final Mechanic’s Lien because of the failure by Jerome and Chait to file an answer. The court explained: Well the Mechanic’s Lien Law is pretty darn strict and it ... provides once the plaintiff takes action on a mechanic’s lien that the owner has things that the owner has to do whether it’s a justifiable complaint or whether it is not a justifiable complaint, he has to answer under oath and it could be if that were the case, if he’d done what he had to do, then that matter could have been heard today, but you can’t just ignore pleadings and then come in and say, well, the real cause of action is between Winkler and the subcontractor (sic), it’s not between Winkler and the owners, ... that’s not the way it works. ⁵⁵⁰ You have an order, Mr. Hanly. [Winkler’s attorney] On August 22, 1997, the three appellants filed a Motion to Vacate and Reconsider and, in the alternative, a Petition to File a Mechanic’s Lien Release Bond, both of which were denied by the court without a hearing. A subsequent Motion to Revise the Denial of the Petition to File a Mechanic’s Lien Bond was also denied without a hearing. DISCUSSION Md.Code (1997 Supp.), § 9-102(d) of the Real Property Article (“R.P.”) provides: (d) However, a building or the land on which the building is erected may not be subjected to a lien under this subtitle if, prior to the establishment of a lien in accordance with this subtitle, legal title has been granted to a bona fide purchaser for value.

R.P. §§ 9 — 104(f)(l)(2) and (3) direct: (1) On receipt of notice given under this section, the owner may withhold, from sums due the contractor, the amount the owner ascertains to be due the subcontractor giving the notice. (2) If the subcontractor giving notice establishes a lien in accordance with this subtitle, the contractor shall receive only the difference between the amount due him and that due the subcontractor giving the notice. (3) Notwithstanding any other provision of this section to the contrary, the lien of the subcontractor against a single family dwelling being erected on the land of the owner for his own residence shall not exceed the amount by which the owner is indebted under the contract at the time the notice is given. In F. Scott Jay Co., Inc. v. Vargo, 112 Md.App. 354 , 685 A.2d 799 (1996), we interpreted these sections to require that the claimant “show that the owner is not a bona fide purchaser for value”.

Id. at 361 , 685 A.2d 799 . The owner is required to ⁵⁵¹ offer no evidence of his status unless there is evidence to the contrary offered by the claimant. Id. In Jay, we also interpreted the foregoing to mean that the amount of the lien is limited to the extent to which the owner is indebted to the contractor; and lack of indebtedness is not an affirmative defense required of the owner but a matter of proof by the claimant.

We wrote: It has long been recognized that it is the claimant’s burden to establish the validity of its lien. Continental Steel Corp. v. Sugarman, 266 Md. 541, 548 , 295 A.2d 493 (1972). Cf. RP § 14-203(d)(the Maryland Contract Lien Act, which was modeled after the Mechanics’ Liens Subtitle, expressly provides that the party seeking to establish the lien has the burden of proof).

By contrast, in order to allege a prima facie defense, an owner need only deny the validity of the lien and require the claimant to prove its validity. Id. Similarly, an owner need only allege that it is a bona fide purchaser for value in order to claim the benefit of the exemption provided in § 9-102(d). Talbott Lumber Co. v. Tymann, 48 Md.App. 647, 653 , 428 A.2d 1229 (1981).

It is the claimant’s burden to show that the owner is not a bona fide purchaser for value, and the owner need offer no evidence of his status except in response to evidence first offered by the claimant tending to show that he is not a bona fide purchaser for value. Id. at 653-54 , 428 A.2d 1229 . Against this backdrop, in 1982, the General Assembly added to the mechanic’s lien law a further hurdle, in the form of § 9-104(b) and (f), for cases involving single family dwellings for use as the owner’s own residence. Under those sections, the legislature provided that notice must be received by the owner prior to the time the owner makes full payment to the general contractor, § 9 — 104(b), and that the subcontractor is entitled to a lien only to the extent that the owner is indebted to the general contractor at the time ⁵⁵² of the receipt of notice. § 9 — 104(f)(3).

Given this history, we are confident that, had the legislature intended to make lack of indebtedness an affirmative defense, it would have done so by clear and explicit language. Id. at 361-62, 685 A.2d 799 . There is no entitlement to a lien unless there is strict compliance with the statute. Jay, 112 Md.App. at 360 , 685 A.2d 799 .

The failure to file a response does not cause a defective verified petition or the absence of supplemental proof of a required element to be in compliance by default. Westpointe Plaza II Ltd. Partnership v. Kalkreuth Roofing & Sheet Metal, Inc., 109 Md.App. 569, 579-80 , 675 A.2d 571 (1996). In Westpointe, we explained: A circuit court judge must follow a two-step process in awarding a mechanics’ lien. First, the circuit court judge has to determine whether there is a factual dispute.

Second, the judge has to determine whether the facts as resolved entitled the claimant to the lien as a matter of law. In the instant case, Kalkreuth and the circuit court judge confused the effect Westpointe’s failure to file an answer to the show cause order had on the two-step process. The circuit court believed, and Kalkreuth argues, that section 9-102(a) is a defense that has to be raised by an owner in its answer. Pursuant to this argument, if the “section 9-102(a) defense” is not pled in the answer then it is waived and the court can award the mechanics’ lien as a quasi-default remedy.

Under this approach, all property would be subject to attachment if the owner did not raise this defense. The “section 9-102(a) defense” argument, however, not only confuses the procedural steps involved in a mechanics’ lien proceeding, but it is inconsistent with section 9-102(a)’s legal requirements for the award of a mechanics’ lien. Id. at 578 , 675 A.2d 571 . The petition sub judice is not in compliance with the statute.

It does not contain any information with respect to whether the building is a single family dwelling. It also fails to allege the amount