Judd Fire Protection, Inc. v. Davidson

KENNEY, Judge. This appeal arises from a decision of the Circuit Court for Baltimore County granting a mechanic’s lien that had been opposed by appellant, Judd Fire Protection, Inc.' (“Judd”). Judd raises three issues on appeal, which we have reworded as follows: 1. Did the trial court err in finding that individual employees of a sub-subcontractor had standing to bring an ⁶⁵⁷ action against a subcontractor under Maryland’s Mechanics’ Lien statute when the sub-subcontractor furnished the subcontractor with a Mechanics’ Lien release? 2.

Did the trial court err when it failed to use the contract price as the measure of damages? 3. Did the trial court err by failing to offset judgments in favor of those Appellees who previously were awarded restitution by the District Court in criminal proceedings against their employer, Steven Ramsey, the owner of SDR Fire Protection? For the reasons set forth below, we answer the first question in the negative and the second in the affirmative. We do not reach the third question.

FACTUAL BACKGROUND The property involved in this case is an apartment building owned by Woodlawn Limited Partnership (“Woodlawn”) and known as “Parkview at Woodlawn.” Woodlawn had entered into a general contract with Whiting-Turner, Inc. (“Whiting-Turner”) for construction of the building. Whiting-Turner subsequently subcontracted with Judd to install the automatic fire sprinkler systems (the “sprinkler system”). Judd began installation of the sprinkler system in September of 1998. In October of 1998, Whiting-Turner accelerated the timetable for completion of the project.

In order to meet the accelerated schedule, Judd was obliged to enter into a series of subcontracts with SDR Fire Protection (“SDR”), a business owned by Steven Ramsey. Appellees in this case were SDR employees. Judd and SDR entered into four subcontracts, one for each floor on the west side of the building. SDR was responsible for installing a total of 749 sprinkler heads and pipes, and it was also responsible for testing the system after installation.

The total contract price was $13,987 and covered labor only. Ramsey testified that the contract price “was done on a by the head basis.” Judd testified that the contract price was based on $17 per sprinkler head. ⁶⁵⁸ SDR first sent people to the site on or about November 21, 1998. SDR and its employees entered into a collective bargaining agreement on or about December 4,1998. SDR had completed about 85% of its work on the first floor, the attic, and the second floor when its employees walked off the job because their paychecks were being returned for insufficient funds.

The date of the work stoppage was disputed. 1 In addition to failing to pay its employees, SDR did not have the proper insurance coverage required by its contracts with Judd. As a result of SDR’s labor problems, Judd entered into an agreement whereby it paid SDR for work completed, less insurance payments made by Judd, and SDR signed a Lien Release. Judd paid SDR a total of $7,243.69, 2 which it calculated by multiplying $17 by the number of sprinkler heads actually installed. The Lien Release included a provision that materialmen would not be entitled to assert any liens against either the property or Judd.

SDR did not obtain lien releases from any of the employees who had been working on the site. Ramsey eventually was convicted of check fraud and was incarcerated at the time of the proceedings before the circuit court on the mechanic’s lien claim. In addition, some of the employees who had worked on the project had filed civil suits against Ramsey and obtained judgments, which were not satisfied. Consequently, on February 9, 1999, ten of SDR’s former employees filed a Petition to Establish Mechanics’ Lien against the Parkview at Woodlawn property.

The plaintiffs in the action were: Larry Davidson, William Gilliam, Mike Green, John Hodge, Dennis Johnson, Melvin Morrison, Gary Nokes, Steve Randall, David Shirley, and Anthony S. Wood (the “plaintiffs”). They requested a lien in the amount of $37,910.52. ⁶⁵⁹ Judd intervened in the case and filed an answer on April 20, 1999, on behalf of both Woodlawn and Whiting-Turner. That same day, Judd filed a motion to compel arbitration, 3 which the circuit court granted. The plaintiffs, unhappy with being ordered to arbitrate, filed a motion to alter or amend judgment on July 16,1999, which the court granted. 4 A hearing was held on April 17, 2000, and, at its conclusion, the court entered judgment in favor of Judd against Larry Davidson, Melvin Morrison, Gary Nokes, and David Shirley, all of whom failed to appear at the hearing.

Counsel then submitted closing arguments by memoranda, and the parties returned to court on June 1, 2000. Following a hearing, the court entered judgment against Judd and in favor of the remaining six plaintiffs. The court found that the plaintiffs were “entitled to recover the reasonable value of the services rendered in each instance by each employee considered separately.” The court then ordered Judd to pay damages as follows: (1) to Michael Green the sum of $3,973.93; (2) to John Hodge the sum of $3,973.93; (3) to Steven Randall the sum of $2,299.79; (4) to William Gilliam the sum of $3,870.36; (5) to Dennis Johnson the sum of $1,984.80; and (5) to Anthony Woods the sum of $2,669.47. The court also assigned to Judd any judgments and orders of restitution obtained by any of the six plaintiffs against Ramsey as a result of prior criminal or civil proceedings.

This appeal followed. DISCUSSION Standard of Review When an action has been tried without a jury, we review the case on both the law and the evidence, but we will not reverse a case on the evidence in the absence of clear ⁶⁶⁰ error. Md. Rule 8—131(c); Narayen v. Bailey, 130 Md.App. 458, 461 , 747 A.2d 195 (2000). Our review on matters of law, however, is more expansive.

Narayen, 130 Md.App. at 461 , 747 A.2d 195 . I. Standing Judd first argues that appellees lacked standing to maintain an action under Maryland’s Mechanics’ Liens statute, Md. Code (1974, 1996 Repl.Vol., 1999 Supp.), § 9-101 et seq. of the Real Property Article (“RP”). A mechanics’ lien is a statutorily created in rem remedy. As an in rem proceeding against property, an action to establish and enforce a mechanics’ lien is “effective against the owner [of the property], for [the benefit of] subcontractors who perform their contractual obligations but are not paid.” The mechanics’ lien law allows “a creditor for labor or materials to proceed in rem against improved property even though he could show no privity of contract with the owner, nor personal liability of the owner to him.” Without the mechanics’ lien remedy, such a creditor would have no recourse against the property or the ultimate owner of the property, even though the owner would enjoy the improvements to the property made possible by the creditor’s work and materials.

Instead, the creditor’s remedy would be limited to obtaining a judgment against the person with whom he contracted, who would likely have no interest in the property and might be without assets. Mechanics’ liens are creatures of statute. As such, to be entitled to a mechanics’ lien against property in Maryland, one must satisfy the substantive and procedural criteria set forth in the Act. Section 9-102(a) of the Act provides that: [e]very building erected ... is subject to establishment of a lien in accordance with this subtitle for the payment of all debts ... contracted for work done for or about the building and for materials furnished for or about the building.... ⁶⁶¹ Wolf Org. v. Oles, 119 Md.App. 357, 366-67 , 705 A.2d 40 (1998) (citations omitted).

In ruling that appellees had standing, the trial court relied on two cases, Diener v. Cubbage, 259 Md. 555 , 270 A.2d 471 (1970), and Nat’l Elec. Indus. Fund v. Bethlehem Steel Corp., 296 Md. 541 , 463 A.2d 858 (1983). It found that both of those cases, which appear to be the only Maryland cases dealing with this subject, stand for the proposition that, by virtue of their employment, appellees were subcontractors under the statutory definition of a subcontractor.

Judd argues that Maryland courts, including the Diener and Bethlehem Steel courts, have not directly addressed the issue of whether at-will employees have standing to bring a suit for a mechanic’s lien. Although appellees appeared to have been at-will employees, 5 we do not believe that this aspect of their employment status is ultimately relevant to our discussion. In Diener , the subcontractor, Suburban Carpentry Corporation, sub-subcontracted with two individuals, Lewis and David Cubbage to do carpentry work on a townhouse project. Diener, 259 Md. at 557 , 270 A.2d 471 .

In the case at bar, the subcontractor, Judd, contracted with a corporate sub-subcontractor that was then left to its own devices as to how to fulfill its end of the bargain. ⁶⁶² In Bethlehem Steel, Mid-States, a subcontractor, had entered into a collective bargaining agreement with its employees. As Judge Rodowsky pointed out, in a collective bargaining situation, “[t]here are individual contracts of hire between Mid-States and electrical workers it employed.” Bethlehem Steel, 296 Md. at 546 , 463 A.2d 858 . He went on to say: Although the collective bargaining agreement is not a contract for work at Bethlehem, employees of Mid-States were directed, as part of their individual contracts, to perform their work for Mid-States at Bethlehem. Accordingly, each electrical worker employed by Mid-States at Bethlehem was a subcontractor as defined in the Act, because each had a contract with someone, other than the owner, for doing work for or about the “building.” Bethlehem Steel, 296 Md. at 547-48 , 463 A.2d 858 .

Despite appellees’ status as employees of SDR, they were also subcontractors under the statute who could file for a mechanic’s lien. A subcontractor is defined as “a person who has a contract with anyone except the owner or his agent.” RP § 9-101(g). A contract is a prerequisite to establishing a lien. Kaufman v. Miller, 75 Md.App. 545, 548 , 542 A.2d 391 (1988). “ ‘Contract’ means an agreement of any kind or nature, express or implied, for doing work or furnishing material, or both, for or about a building.” RP § 9-101(c).

In the instant case, although appellees entered into a collective bargaining agreement with SDR, they did not do so until December 4, 1998, after they commenced work in performance of the Judd-SDR contracts. The collective bargaining agreement has no relevance to the issue of their standing as subcontractors under the statute because it was not an agreement to work at the Parkview at Woodlawn site. The agreement to do work at that site arose from their individual employment with SDR. See Bethlehem Steel, 296 Md. at 547-48 , 463 A.2d 858 (“Accordingly, each electrical worker employed by Mid-States at Bethlehem was a subcontractor as defined in the Act, because each had a contract with someone, ⁶⁶³ other than the owner, for doing work for or about the ‘building.’”).

Although appellees may have been employees of a subcontractor, there were individual agreements, whether by writing, or by word of mouth, or implied by conduct, between appellees and SDR. See Bethlehem Steel, 296 Md. at 546-48 , 463 A.2d 858 . Pursuant to these agreements, appellees agreed to furnish labor in the construction of a building, and SDR, who was not the owner or the owner’s agent, agreed to pay them to do so. When SDR failed to do so, it became liable to its employees because the employees had rendered services.

We hold that appellees had standing as subcontractors pursuant to the statute. This case is complicated by the fact that Judd paid SDR for the work that had been completed, and SDR executed a release of mechanic’s lien purporting to release Judd and the project from both its claims and the claims of its employees: NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, in payment of invoices or applications dated through 123198, the undersigned does hereby waive and release any and all liens or claims of right of lien on the aforementioned property and improvements now or hereafter assertable thereon for and on account of labor, materials, services and equipment furnished for said Project through 123198 (the “Release Date”). Further, the undersigned hereby waives and releases any and all claims, demands, liens, or right(s) or action, whether legal or equitable, against the above Project, said Subcontractor, Judd Fire Protection, Inc., any payment bonds or sureties, and the Project Owner, for and on account of all labor, materials, services and/or equipment furnished by or through the undersigned for said Project through the Release Date. IN CONSIDERATION of the payment sought hereby, the undersigned respectfully warrants that all material, labor, services and/or equipment used by the undersigned or ⁶⁶⁴ its sub-subcontractors, suppliers or materialmen for the Project through the Release Date hereof have been paid for in full, including taxes of every description, and that none of such sub-subcontractors, suppliers or materialmen is or will be entitled to claim or assert any claim or lien against the aforementioned Project including the property and improvement thereof, said subcontractor, Judd Fire Protection, Inc., any payment bonds or sureties of the Project Owner.

FURTHER, the undersigned shall hold harmless, protect and indemnify Judd Fire Protection, Inc., said Subcontractor and the Project against any claim, demand, lien or right of action, whether legal or equitable, that has accrued or may accrue as