Southern Management Corp. v. Kevin Willes Construction Co.

⁵²⁸ CATHELL, J. This case raises numerous issues pertaining to the correct application of the modern law of mechanic’s liens in Maryland. The case arises out of a “Complaint to Establish and Enforce Mechanic’s Lien” (“Initial Complaint”), filed on April 20, 2000, by the Kevin Willes Construction Company (“Willes Construction”), respondent in the present appeal, as against Baltimore Condo 2-8, LLC (“Baltimore Condo”), one of two owners of separate real property interests in the building against which the lien was claimed, Southern Management Corporation (“SMC”), alleged property manager for Baltimore Condo in respect to the building, and James M. Jost and Company, Inc. (“Jost”), construction manager for the building renovation and under contract with SMC, collectively, the petitioners in the present proceeding. On May 15, 2001, more than a year after filing the Initial Complaint, a year during which service of process against the petitioners was not effectuated, and after receiving a “Notification of Contemplated Dismissal” from the Circuit Court for Baltimore City pursuant to Maryland Rule 2-507, 1 Willes Construction filed an “Amended Complaint to Establish and Enforce Mechanic’s Lien and Breach of Contract” (“Amended Complaint”). No additional defendants were named in the Amended Complaint.

The Amended Com ⁵²⁹ plaint added a breach of contract count. On August 6, 2001, Baltimore Condo, Jost and SMC filed a motion to dismiss Willes Construction’s Amended Complaint. During a hearing before the circuit court on August 15, 2001, petitioners’ motion to dismiss was denied. Immediately following the denial, the circuit court proceeded with a show-cause hearing, requiring the petitioners to “show cause” as to why a lien should not be established against the building in question.

On December 19, 2001, the circuit court entered a “Final Order Establishing Mechanic’s Lien and Directing Sale of Property” (“Final Order”). Petitioners thereafter appealed the decision of the circuit court to the Court of Special Appeals of Maryland. On August 15, 2003, in an unreported opinion, the intermediate appellate court modified the order of the circuit court, changing it from a “final order” to an “interlocutory order.” While this holding favored petitioners, other determinations were made by the intermediate appellate court in favor of Willes Construction. Petitioners then filed a Petition for Writ of Certiorari with this Court and Willes Construction filed a cross-petition.

On December 11, 2003, we granted both the petition and the cross-petition. Southern Management v. Willes Construction, 378 Md. 613 , 837 A.2d 925 (2003). The parties presented the following questions for our review: Petitioners ask: “I. Did the Court of Special Appeals commit reversible error by holding that where work is performed throughout an eight (8) unit condominium building, including the common areas, and is not allocated among the units or the common elements, the notice provisions prefatory to filing a mechanic’s lien against the entire condominium regime (Real Property Article § 9-104(d)) are satisfied by providing notice to either the property manager of the condominium entity of record or to one but not all of the unit owners holding title to individual units within the condominium? ⁵³⁰ “II. Did the Court of Special Appeals commit reversible error by sustaining the Circuit Court’s entry of a Final Order for Mechanic’s Lien without allocating the lien among the common elements and the condominium units of the condominium regime or in failing to identify which units were subject to having had work performed on them as required by the ‘Horizontal Property Act,’ Real Property Article Section 11-118 of the Maryland Code? “III.

Did the Court of Special Appeals commit reversible error in sustaining the Circuit Court’s denial of Petitioner’s Motion to Dismiss where there was substantial evidence that Respondent’s Complaint to Establish and Enforce a Mechanic’s Lien was filed more than 180 days from the day Respondent’s contract was terminated and all of its work benefitting the project ended? If no such error was committed by the Court of Special Appeals in determining the Circuit Court’s denial of this argument was not clearly erroneous, did the Court of Special Appeals commit reversible error by not requiring the issue of what was the time barred date for determining whether Respondent’s Complaint to establish a mechanic’s lien was filed within 180 days be remanded to the Circuit Court for a full evidential hearing? “IV. Did the Court of Special Appeals commit reversible error in overruling Respondent’s Motion to Dismiss and in entering a Mechanic’s Lien when the lien was not clearly established within one (1) year from the filing of the initial complaint as required by Real Property Article 9-109? 2 ⁵³¹ “V. Did the Court of Special Appeals commit reversible error by sustaining the Circuit Court’s entry of a Final Order of Mechanic’s Lien when for monetary consideration Respondent prepared, executed and delivered, in writing, a Release of Liens for all work and services performed and materials furnished, where Respondent specifically waived any right to make the claim it has asserted in the Circuit Court and where the Respondent waived its right to establish the mechanic’s lien?” Willes Construction asks: “Did the Court of Special Appeals commit reversible error in modifying the Final Order of Mechanic’s Lien to [an] Interlocutory Order and remanding the case to the Trial Court for further proceedings consistent with that opinion?” [Alteration added.] 3 We hold that a condominium regime lawfully existed at the building that is the subject of this case at the relevant times in question and, as such, notice was required to be given to all condominium unit owners under § 9-104 of the Real Property Article and all such owners had to be parties to the case before a mechanic’s lien could be established as against the entire building and that the circuit court further erred in entering an order establishing a mechanic’s lien where the lien was not allocated among the individual unit owners according to their percentage interests in the common elements as is required under § 11-118 of the Real Property Article. We need not decide the remaining issues. ⁵³² I. Facts A. Relevant pre-claim facts In August, 1999, Jost, construction manager for SMC, entered into an agreement with Willes Construction whereby Willes Construction was to provide demolition and abatement work for renovation of a building located at 118 N. Howard Street in Baltimore City (“Lexington Towers”).

The building consisted of eight condominium units with general and limited common areas. Seven of the units (in which apparently 178 residential units are now contained) were owned by an entity known as Baltimore Condo 2-8, LLC (“Baltimore Condo”), 4 with the remaining unit, which apparently comprised the first floor of the building, owned by an entity known as RA Baltimore Trust (“RA Trust”). 5 Ultimately, the mechanic’s lien action in the present case arose out of this contract. Work was done to both the individual units and to the general common elements. On September 30th, upon receiving a payment it had requested, Willes Construction executed a Partial Release of Liens (“Release”), which was signed by Willes Construction’s president, Kevin Willes.

The Release identified the property covered by the Release, stating that it was “real estate known and identified as 118 North Howard Street (Old Hecht Company Building), located at 118 North Howard Street, Baltimore, Maryland, and owned by Balto. Condo 2-8, LLC and RA Baltimore Trust.” It then stated, in pertinent part: “The UNDERSIGNED, for and in consideration of the sum One hundred fourteen thousand nine hundred three ($114,-903) ... does hereby waive and release any and all liens or claims or right of lien on the aforementioned property and ⁵³³ improvements thereon, and on monies or other consideration due or to become due on account of labor or services, materials, fixtures, or apparatus heretofore furnished.” On the morning of Monday, October 4, 1999, Willes Construction’s services as a subcontractor were terminated in accordance with the terms of the contract. The issue of whether that termination was proper is not before this Court in this case. Thereafter, Willes Construction drafted a “Notice to Owner or Owner’s Agent of Intention to Claim a Lien” for “[d]emolition work, removal of escalators, electrical wiring, plumbing, ironwork, mechanical systems, asbestos abatement in limited areas together with dumpsters and labor to perform the above work” for the period from August 1999 through October 25, 1999.

On November 23, 1999, this notice was served only upon SMC, Jost, and Baltimore Condo. 6 It was not served upon RA Trust, an owner of one of the condominium units comprising one floor of the Lexington Towers. On April 20, 2000, Willes Construction filed its Initial Complaint to establish and to enforce a lien, against the same entities — again not including RA Trust, asking that a lien be established against Lexington Towers in the amount of $267,842.37. More than a year later, after being notified that the case was going to be dismissed for lack of prosecution pursuant to Maryland Rule 2-507, Willes Construction, on May 12, 2001, filed an Amended Complaint, which merely added a count for breach of contract to the original allegations. At this point, more than a year after its original complaint, with requests for the issuance of summons attached, had been filed, and with no other activity indicated by the docket entries, no lien had been established.

Petitioners thereafter filed an answer to the ⁵³⁴ Amended Complaint and, on August 6, 2001, filed a motion to dismiss on several grounds, including that the Amended Complaint was defective in that it and the pre-filing notice did not properly notify the owners, and that the claim to establish and enforce a mechanic’s lien was made more than one year after the filing of the Initial Complaint on April 20, 2000. B. Circuit Court proceedings On August 15, 2001, a hearing on the motion to dismiss was held in the Circuit Court for Baltimore City. The circuit court denied petitioners’ motion, orally stating: “It’s the argument of the Defendant that the Court should dismiss the Amended Complaint to Establish and Enforce the Mechanic’s Lien based on the plain language of Section 9-109 of the Real Property Article of the Maryland Annotated Code. 7 It is the Defendant’s position that the plain language of the statute rules and maintains that in sentence one of that statute which provides the right to enforce any lien established under this subtitle expires at the end of one year from the day on which the petition to establish the lien was first filed. The Defendant maintains and the Court has reviewed it and agree that clearly this was filed, that is the Petition to Establish and Enforce Mechanic’s Lien on or about April 20, 2000.

The Defendant maintains that in as much as it is today August 15th, it is more than one year from the date of filing and, therefore, this Court must grant the Motion to Dismiss. The Plaintiff argues, however, that the sentence is really clarified and expanded by the remain ⁵³⁵ der of the portion of Section 9-109. That provides that, ‘During this time the claimant may file a petition in the lien proceedings to enforce the lien or execute on any bond given to obtain a release of the land and building from the lien.’ Clearly here the Plaintiff filed that Petition in the lien proceedings to enforce the lien. The critical part of the statute in this Court’s mind is the next sentence which states as follows: ‘If such petition is filed within the one-year period the right to a lien or the lien, or any bond given to obtain a release of lien, shall remain in full force and effect until the conclusion of the enforcement proceedings and thereafter only in accordance with the decree entered in the case.’ Accordingly, it’s based on that language that the Court denies the Defendant’s Motion to Dismiss the Amended Complaint at this time.

I will say that on its face the Defendant is right, if the Court were just to read the first sentence of Section 9-109 but because of the third sentence the Court does find clearly that the Petition was filed within the one-year period and therefore the right to a lien needs to remain in effect until the conclusion of the enforcement proceedings. Because specifically the Plaintiff filed not only the Petition but the right to enforce the lien the Court finds that that section controls, and for that reason the Court will deny the Motion to Dismiss the Amended Complaint.” [Footnote added.] After denying the motion to dismiss, the circuit court proceeded to the show-cause hearing portion of the proceedings. 8 Willes Construction claimed that it was owed money for change orders, that it had performed more work than claimed in its Application and Release, and that, notwithstanding its termination on October 4, 1999, it had continued to perform demolition and abatement work at the project site up until ⁵³⁶ October 25, 1999. Dwayne Massingale, a qualified expert on demolition, testified on behalf of Willes Construction and stated that, following a visit to the project site on October 13, 1999, he was of the opinion that Willes Construction had completed seventy percent (70%) of the work contained in the original contract. In response, petitioners presented evidence that tended to show the following: (1) Willes Construction was paid all sums due and owing through September 30, 1999, less minimal retainage; (2) Willes Construction prepared, executed and submitted both the Application and Release for all work done and materials provided through September 30, 1999; (3) Willes Construction was terminated one working day after submission of the Application and Release; (4) Willes Construction returned to the job site after termination for the purpose of gathering loose scrap metal and to clean up equipment and tie up other loose ends; and (5) as of October 4, 1999, Willes Construction had only completed thirty to thirty-five percent (30-35%) of the demolition work under the contract. 9 On August 30, 2001, the circuit court found that Willes Construction was entitled to the establishment of a mechanic’s lien and orally stated, in pertinent part: “[T]he Court has stated at its hearing and states now that the Court disagrees with [petitioners’] reading of the release ... and the Court does not find that there was, whatsoever, a knowing and voluntary release of all claims [in the Release].

It was simply a release for the work done by [Willes Construction], which is reflected in the amount of the consideration____[Willes Construction] presented through the testimony of ... its expert ... that approximately 70% of the entire contract that was agreed upon was completed. [Petitioners maintain] that between 30 and 35% of that work has, in fact, been completed. Clearly in the eyes of the ⁵³⁷ Court, a lien should be established and attached as a matter of law.... In connection with this case the Court finds that there is no genuine dispute as to any material fact and that a lien should attach as a matter of law.” [Alterations added.] Thereafter, on December 19, 2001, the circuit court issued a “Final Order,” which established a lien in the sum of $200,273.00 plus interest “against certain land and improvements thereon owned by the Defendant, Baltimore Condo 2-8 LLC,” stated to be the entirety of “Lexington Towers, 118 North Howard Street, Baltimore, Maryland ... a nine story brick and glass apartment building.” C. Court of Special Appeals’ decision The decision of the circuit court was challenged, for the most part unsuccessfully, by petitioners in the Court of Special Appeals. The questions presented to that court, of which there were six, read almost verbatim to the ones brought before us in the present case. 10 We shall address only those issues we view as determinative.

With respect to petitioners’ assertion that the circuit court erred in granting a “Final Order” in that the notice of the intention to file a mechanic’s lien and the complaint to establish the mechanic’s lien failed to name all owners of the property in question, the intermediate appellate court held that “[o]nce notice was sent to Southern Management, all remaining owners were put on notice.” In reaching that conclusion, the intermediate appellate court relied on § 9-104(d) of the Real Property Article, which provides that “[i]f there is more than one owner, the subcontractor may comply with this section by giving notice to any of the owners.” ⁵³⁸ On the issue of whether the circuit court erred in not allocating “the lien among the common elements and the condominium units ... as required by ... Real Property Section 11-118,” the Court of Special Appeals found that petitioners “failed to present evidence that a condominium regime was ever created in accordance with Section 11-102 of the Real Property Article.... ” Therefore, the circuit court “was not required to allocate amongst the owners the proportion of their liability to [Willes Construction]” (alteration added). When presented with the issue of whether the circuit court erred in entering a “Final Order” when the lien was not established* within one year from the filing of the initial complaint, as petitioners alleged was required under § 9-109 of the Real Property Article, the Court of Special Appeals held that, “because [Willes Construction’s] initial complaint was a complaint seeking to establish [and enforce] a mechanic’s lien, [Willes Construction] was entitled to obtain a lien until the circuit court issued a final ruling on the matter” (alterations added). Petitioners’ sole victory in the intermediate appellate court concerned the issue of whether there existed a genuine dispute of material fact in regard to the percentage of work completed by Willes Construction under the contract.

The court found that, “[b]ecause there was a dispute as to what percentage of work had actually been completed, at the relevant point, the [circuit court] should not have issued a final order of mechanic’s lien” (alteration added). Thereafter, the Court of Special Appeals modified the Final Order to an interlocutory order.

II

Standard of Review On appellate review, this Court may set aside the judgment of the trial court based on the factual findings of the trial court only when those findings are “clearly erroneous.” 11 Maryland Rule 8-131(c) provides: ⁵³⁹ “When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.” Our review on matters of law, however, is more expansive. The “clearly erroneous” portion of Md. Rule 8-131(c) does not apply to a trial court’s determinations of legal questions or conclusions of law based upon findings of fact. See Helinski v. Harford Memorial Hospital, Inc., 376 Md. 606, 614-15 , 831 A.2d 40, 45 (2003); Heat & Power Corp. v. Air Products & Chemicals, Inc., 320 Md. 584, 591 , 578 A.2d 1202, 1205 (1990); Davis v. Davis, 280 Md. 119, 124 , 372 A.2d 231, 233 , cert. denied, 434 U.S. 939 , 98 S.Ct. 430 , 54 L.Ed.2d 299 (1977).

Therefore, we shall apply the law as we discern it to be.

III

Discussion A. Notice of Mechanic’s Lien to Individual Condominium Unit Owners Petitioners first argue that the circuit court erred in granting a “Final Order” in that the Notice of Intention to File a Mechanic’s Lien was not given to all owners and the Complaint (both Initial and Amended) was not filed against all owners of the separate and distinct properties in question prior to the establishment of the lien. Petitioners base this argument on their claim that a condominium regime existed at Lexington Towers, a form of property ownership which involves the individual ownership of condominium units as well as percentage ownership of common elements of the condominium. Because there was some contention in the lower courts as to whether a condominium regime did in fact exist at the project site, this Court will need to ascertain whether the record reflects that a condominium regime was established ⁵⁴⁰ under Maryland law before we reach the issue of the propriety of Willes Construction’s notice. Md.Code (1974, 2003 Repl.Vol.), § 11-102 of the Real Property Article governs the method for establishing a condominium regime in Maryland.

The statute states, in pertinent part: “(a) By recording declaration, bylaws and plat; exception. — (1) The fee simple owner or lessee under a lease that exceeds 60 years of any property in the State may subject the property to a condominium regime by recording among the land records of the county where the property is located, a declaration, bylaws, and condominium plat that comply with the requirements specified in this title.” The record before us plainly establishes that a condominium regime was created at the project site by the recordation of a “Condominium Regime Declaration” on November 24, 1997. This Declaration includes all of the elements required by § 11-102 of the Real Property Article, i.e., bylaws and plat description, and was “recorded among the Land Records of Baltimore City in Liber P.M.B. No. 6861, page 221 et seq.” The “301 West Lexington Street Condominium,” as it is named in the Declaration, was established by Rite Aid of Maryland, Inc., a Maryland corporation. On December 18, 1997, a deed concerning Baltimore Condo’s purchase of several units within the condominium was filed in the land records and it stated the following: “THIS DEED Made this 25 day of November, 1997, by and between RITE AID OF MARYLAND, INC., a Maryland corporation ... and BALTIMORE CONDO 2-8 LLC, a Delaware Limited Liability Company.... WITNESSETH, that in consideration of the sum of [$50,-000.00] and other good and valuable consideration, the said party of the first part does grant, bargain, sell and convey unto the party of the second part in fee simple: ALL THOSE CERTAIN Units, being Units in 301 West Lexington Street Condominium as designated in a Declara ⁵⁴¹ tion of Condominium . .. and Situate in Baltimore City, State of Maryland, all as more fully described on Exhibit ‘A’ attached hereto and made a part hereof.

UNDER AND SUBJECT to matters of record, to the extent valid and enforceable and still applicable to the above described premises. TOGETHER with a proportionate undivided interest in the Common Elements as set forth in the Declaration and with all and singular the buildings and improvements, streets, alleys, passages, ways, waters, water-courses, rights, liberties, privileges, hereditaments and appurtenances whatsoever thereunto belonging, or in any wise appertaining, and the reversions and remainders, rents, issues and profits thereof; and all the estate, right, title, interest, property, claim and demand whatsoever, of it, the said party of the first part, in law, equity, or otherwise, of, in, and to the same. AND the said party of the first part covenants that it will warrant specially the property hereby conveyed, SUBJECT as aforesaid; and that it will execute such further assurances of said land as may be requisite. THE party of the first part certifies that this conveyance is not part of a transaction in which there is a sale, lease, exchange, or other transfer of all or substantially all of the property and assets of the Corporation.” The “LEGAL DESCRIPTION” of the property conveyed, also filed in the land records, was described thus: “All of that property situate in the City of Baltimore, State of Maryland being known and designated as condominium Units 200 thru 800 in 301 West Lexington Street Condominium ... established by Rite Aid of Maryland, Inc. under the provision of Title 11 of the Real Property Article, Annotated Code of Maryland, as amended, by Condominium Declaration dated November 25, 1997 and recorded among the Land Records of the City of Baltimore, Maryland in Liber P.M.B. No. 6861, page 221 et seq. and the By-Laws of the Condominium Regime recorded November 25, 1997 in Liber ⁵⁴² P.M.B. No. 6861 page 241, et seq. and by the Condominium Plat recorded on the aforesaid Land Records in condominium Plat Pocket Folder SEB No. 329. “Together with all the rights, privileges and appurtenances incident to said Unit as contained in the aforesaid condominium Declaration.” Likewise, on December 18, 1997, another deed and legal description pertaining to the “301 West Lexington Condominium” was filed in the Land Records of the City of Baltimore, these documents concerning RA Trust and the conveyance to it of “Unit 100” in the condominium regime in consideration of the sum of $3,450,000.

The “LEGAL DESCRIPTION” of RA Trust’s purchased property refers to: “All of that property situate in the City of Baltimore, State of Maryland being known and designated as condominium Unit 100 in 301 West Lexington Street Condominium ... established by Rite Aid of Maryland, Inc. under the provision of Title 11 of the Real Property Article, Annotated Code of Maryland, as amended, by Condominium Declaration dated November 25, 1997 and recorded among the Land Records of the City of Baltimore, Maryland in Liber P.M.B. No. 6861, page 221 et seq. and the By-Laws of the Condominium Regime recorded November 25, 1997 in Liber P.M.B. No. 6861 page 241, et seq. and by the Condominium Plat recorded on the aforesaid Land Records in condominium Plat Pocket Folder SEB No. 329. “Together with all the rights, privileges and appurtenances incident to said Unit as contained in the aforesaid condominium Declaration.” The Court of Special Appeals, in its unreported opinion, stated that “[t]he mere assertion that a condominium regime was created, without any evidence to support that assertion, is not enough to establish that a condominium regime was created.” We conclude, however, that evidence as to the creation of a condominium regime was before the court, as can plainly be seen in the aforementioned “Condominium Regime Declaration,” deeds and legal descriptions of the condominium ⁵⁴³ units conveyed to both Baltimore Condo and RA Trust, which are included in the record before us. These filed documents, in effect, legally created a condominium regime in which RA Trust was the unit owner of “Unit 100,” which is located on the first floor of the building made the subject of the present mechanic’s lien action, and Baltimore Condo became the unit owner of “Units 200 through 800,” which are located on the second through eighth floors of the building. Our determination, from the record before us, that a condominium regime did in fact exist at Lexington Towers at the time Willes Construction gave its notice and later filed its complaint to establish a mechanic’s lien necessarily brings this Court back to petitioners’ initial question: Whether notice of the intention to file a mechanic’s lien and a complaint must be given to all owners in a condominium regime prior to the establishment of a lien in the courts? For the reasons stated below, we hold that