James and Aileen Bryant v. Cadena Contracting, Inc.

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DIVISION I  CA07­376  DECEMBER 5, 2007  JAMES and AILEEN BRYANT  APPELLANTS  APPEAL  FROM  THE  LONOKE  COUNTY CIRCUIT COURT  [NO. CV­2005­270]  V. HON. PHILLIP T. WHITEAKER,  JUDGE  CADENA CONTRACTING, INC.  APPELLEE  REVERSED  Appellants James and Aileen Bryant appeal from the December 12, 2006 judgment  of the Lonoke County Circuit Court, which found that subcontractors are exempt from the  statutory notice requirement contained in Ark. Code Ann. § 18­44­115 (Supp. 2007), and  ordered a foreclosure on appellants’ property in the lien amount.  Appellants contend that  a subcontractor may not acquire a lien on residential property pursuant to the statute unless  the “IMPORTANT NOTICE TO OWNER” mandated by it has been served upon the owner  prior to the application of the labor or materials to the property.  We reverse the trial court’s  finding of a valid lien against appellants’ property.  Appellants filed a complaint in circuit court against appellee Cadena Contracting, Inc.,  and Craig Williams, d/b/a The Craig Williams Company, seeking to remove a cloud from the  title  to  their  property  located  at  101  Magnolia  Circle  and  described  as  Lot  9,  Block  19, Privett  Subdivision,  Lonoke,  Arkansas.  Appellants  bought  the  property  from  Williams,  whom  appellants  also  hired  as  general  contractor  to  build  their  house.    Appellee  counterclaimed and cross­claimed seeking a total of $10,645, which was the amount owed  it for the framing work that Williams had subcontracted with appellee to perform.  When  Williams failed to pay appellee, appellee made a demand for payment from Williams and  notified appellants by notice and invoice on January 7, 2005, that money was owed and that  appellee had a right to file a lien against the property if payment was not received.  Appellee  filed  a  lien  in  Lonoke  County  on  March  1,  2005,  asserting  that  it  furnished  labor  to  appellants, Williams, and The Craig Williams Company at the construction project, that a  total of $10,645 was due and owing, and that it had caused notice of the lien to be served.  At trial, appellants sought to remove the lien and argued that Ark. Code Ann. § 18­44­  115 requires that notice of the potential lien be given by the subcontractor to the property  owner  by  personal  delivery  or  by  certified  mail  before  the  work  is  done,  not  after  it  is  completed.  Appellee claimed that the statute did not require that notice be given before the  work is performed, only that the owner receive notice before the lien is obtained.  Further,  appellee argued that section 115 applies only to contractors, not subcontractors, thus making  section 115 inapplicable in this matter.  Appellee claimed that Ark. Code Ann. § 18­44­114  (Supp. 2007) is the statute applicable to subcontractors, and that it had complied with the  ten­day notice requirement therein contained.  The trial court found that the mechanic’s and materialmen’s lien statute differentiates  between classes of people within the construction industry and defines those terms under ­2­  CA07­376  Ark.  Code  Ann.  §  18­44­107  (Repl.  2003).  The  trial  court  found  that  appellee  was  a  subcontractor for purposes of the statute, and that, as such, had to comply with Ark. Code  Ann. § 18­44­114, which provides that a subcontractor must give ten­days notice before the  filing  of  the  lien.  The  trial  court  found  that  appellee  complied  with  this  requirement.  Further, the trial court found that Ark. Code Ann. § 18­44­115 only applies to contractors.  The trial court, therefore, granted the appellee’s motion for directed verdict and denied the  appellants’ request to remove the cloud from their title.  The appellants filed a timely motion  for  new  trial,  which  was  deemed  denied  when  the  trial  court  did  not  rule.    This  appeal  follows.  We review issues of statutory construction de novo because it is our responsibility to  determine what a statute means.  R. N. v. J. M., 347 Ark. 203, 61 S.W.3d 149 (2001).  While  we are not bound by the trial court’s ruling, we will accept the trial court’s interpretation of  a  statute  unless  it  is  shown  that  the  trial  court  erred.  Id.  The  purpose  of  statutory  interpretation is to give effect to the intent of the General Assembly.  Ford v. Keith, 338 Ark.  487, 996 S.W.2d 20 (1999).  We first seek the legislature’s intent by giving the words of the  statute their ordinary and usual meaning in common language.  Stephens v. Arkansas Sch.  for  the  Blind,  341  Ark.  939,  20  S.W.3d  397  (2000).  Where  the  meaning  is  clear  and  unambiguous, we do not resort to the rules of statutory interpretation.  Id.  Appellants  claim  that  the  lien  asserted  by  appellee  is  invalid  because  the  “IMPORTANT NOTICE TO OWNER,” as required and contained in Ark. Code Ann. §  18­44­115(c), was not delivered to them by either personal delivery or certified mail until ­3­  CA07­376  after the framing work had been done.  Arkansas Code Annotated section 18­44­115 states  in pertinent part as follows:  (a)(1) No lien may be acquired by virtue of this subchapter unless the owner or his  or her authorized agent has received, by personal delivery or by certified mail, a copy  of the notice set out in subsection (c) of this section.  . . .  (b)(1)(A)  It  shall  be  the  duty  of  the  contractor  to  give  the  owner  or  his  or  her  authorized agent the notice set out in subsection (c) of this section on behalf of all  potential  lien  claimants  under  his  or  her  contract  prior  to  the  supplying  of  any  materials or fixtures.  (B) Any potential lien claimant may also give notice.  (2) However, no lien may be claimed by any supplier of material or fixtures unless  the owner or agent has received at least one (1) copy of the notice, which need not  have been given by the particular lien claimant.  (c) The notice set forth in this subsection may be incorporated into the contract or  affixed  to  the  contract  and  shall  be  conspicuous,  worded  exactly  as  stated  in  all  capital letters, and shall read as follows:  “IMPORTANT NOTICE TO OWNER  I  UNDERSTAND  THAT  EACH  PERSON  SUPPLYING  MATERIAL  OR  FIXTURES IS ENTITLED TO A LIEN AGAINST PROPERTY IF NOT PAID IN  FULL  FOR  MATERIALS  USED  TO  IMPROVE  THE  PROPERTY  EVEN  THOUGH THE FULL CONTRACT PRICE MAY HAVE BEEN PAID TO THE  CONTRACTOR. I REALIZE THAT THIS LIEN CAN BE ENFORCED BY THE  SALE  OF  THE  PROPERTY  IF  NECESSARY.  I  AM  ALSO  AWARE  THAT  PAYMENT MAY BE WITHHELD TO THE CONTRACTOR IN THE AMOUNT  OF THE COST OF ANY MATERIALS OR LABOR NOT PAID FOR. I KNOW  THAT IT IS ADVISABLE TO, AND I MAY, REQUIRE THE CONTRACTOR TO  FURNISH TO ME A TRUE AND CORRECT FULL LIST OF ALL SUPPLIERS  UNDER THE CONTRACT, AND I MAY CHECK WITH THEM TO DETERMINE  IF ALL MATERIALS FURNISHED FOR THE PROPERTY HAVE BEEN PAID  FOR.  I  MAY  ALSO  REQUIRE  THE  CONTRACTOR  TO  PRESENT  LIEN  WAIVERS BY ALL SUPPLIERS, STATING THAT THEY HAVE BEEN PAID IN  FULL FOR SUPPLIES PROVIDED UNDER THE CONTRACT, BEFORE I PAY  THE CONTRACTOR IN FULL. IF A SUPPLIER HAS NOT BEEN PAID, I MAY  PAY THE SUPPLIER AND CONTRACTOR WITH A CHECK MADE PAYABLE  TO THEM JOINTLY. ­4­  CA07­376  SIGNED:  ______________________________________  ______________________________________  ADDRESS OF PROPERTY  DATE: ______________________  I  HEREBY  CERTIFY  THAT  THE  SIGNATURE  ABOVE  IS  THAT  OF  THE  OWNER OR AGENT OF THE OWNER OF THE PROPERTY AT THE ADDRESS  SET OUT ABOVE.  __________________________________________________________________  _____________  CONTRACTOR”  Appellants  argue  that  the  trial  court  relied  on  the  fact  that  “subcontractor,”  “contractor,” “material supplier,” and “person” are each defined by Ark. Code Ann. § 18­44­  107, which states as follows:  As used in this subchapter:  (1) “Contractor” means any person who contracts orally or in writing directly with a  person holding an interest in real estate, or such person’s agent, for the construction  of any improvement to or repair of real estate;  (2) “Material supplier” means any person who supplies materials, goods, fixtures, or  any other tangible item to the contractor or a subcontractor, or an individual having  direct contractual privity with such persons;  (3) “Person” includes an individual, a partnership, a corporation, a limited liability  organization, a trust, or any other business entity recognized by law; and  (4) “Subcontractor” means any person who supplies labor or services pursuant to a  contract with the contractor, or to a person in direct privity of contract with such  person.  The  trial  court  reasoned  that  this  differentiation  exempted  subcontractors  from  the  requirements under section 115.  However, appellants maintain that each category has the  same list of requirements to obtain a valid and enforceable labor or material lien. ­5­  CA07­376  Appellee asserts that mechanic’s liens are strictly construed.  See Books a Million,  Inc.  v.  Arkansas  Painting  &  Specialties  Co.,  340  Ark.  467,  10  S.W.3d  857  (2000).    He  contends that the General Assembly distinguished categories of potential lien claimants and  defined them in Ark. Code Ann. § 18­44­107.  The legislature then set forth section 114,  which applies to all “persons,” and which states in pertinent part as follows:  (a)  Every  person  who  may  wish  to  avail  himself  or  herself  of  the  benefit  of  the  provisions of this subchapter shall give ten (10) days’ notice before the filing of the  lien, as required in § 18­44­117(a), to the owner, owners, or agent, or either of them,  that he or she holds a claim against the building or improvement, setting forth the  amount and from whom it is due.  The  statute  clearly  requires  every  “person”  to  give  a  ten­day  notice  to  the  owner  before filing a lien. Appellee asserts that section 115 applies to every “contractor.”  Appellee  contends that the statute does not require that the owner must receive the “IMPORTANT  NOTICE TO OWNER” prior to the application of any “labor” to the property in order for  a subcontractor to acquire a lien.  Appellee contends that under section 115(b)(1)(A), the  contractor is duty bound to give the notice prior to the supply of materials or fixtures, but not  the supply of “labor” and “service,” which are not included in the statute.  Appellee argues  that “labor” and “service”  are included in the definition of subcontractor, and therefore,  section 115 does not apply to subcontractors.  Finally,  appellee  claims  that  under  appellants’  argument  of  prior  notice,  subcontractors who perform labor  or  services and who fail to receive payment from the  owner or the contractor for work performed are only able to file a lien if the same contractor  who failed to pay the subcontractor provided the “IMPORTANT NOTICE TO OWNERS” ­6­  CA07­376  to the owner prior to any labor being performed.  Appellee argues that this would place  subcontractors at the mercy of the contractors, allowing contractors to avoid liens filed by  subcontractors against the property for non­payment simply by failing to give the notice  before any work is provided.  However, appellee fails to recognize the statutory provision  for subcontractors to give the required notice to the owner.  See Ark. Code Ann. § 18­44­  115(b)(1)(B). This provision protects the subcontractor from the contractor who fails to give  notice.  The  distinction  between  contractors  and  subcontractors  in  the  statute  is  that  the  contractor has a legal duty to serve the notice before  the work is commenced, while the  subcontractor may serve the notice.  See Ark. Code Ann. § 18­44­115(b)(1)(A) and (B).  Appellants claim, and we agree, that this distinction allows the subcontractor to preserve his  right to file a lien in the event that the general contractor fails to fulfill his obligation under  the statute; i.e., to serve the notice.  If failure to serve the notice prior to work being done did  not impair the right of the subcontractor to acquire a lien against real property, then there  would be no explanation for the statutory provision that the subcontractor may serve the  notice himself, nor any reason for him to do so.  Appellants cite Urrey Ceramic Tile Co., Inc. v. Mosely, 304 Ark. 711, 805 S.W.2d  54  (1991),  where  the  Arkansas  Supreme  Court  held  that  the  exception  to  the  notice  requirement in the statute at issue there violated the Equal Protection clauses of the Fifth and  Fourteenth Amendments, and declined to enforce a lien claimed by Urrey Ceramic Tile, a  subcontractor,  when  no  “IMPORTANT  NOTICE  TO  OWNER”  had  been  filed  by  the  contractor  or  the  subcontractor.    The  court  stated,  “Generally,  under  §  18­44­115(a)­(d) ­7­  CA07­376  (1987), the principal contractor, prior to any materials being supplied, must give notice to  the property owners of any potential lien claimants under his contract before a lien can be  acquired against the owners’ property.”  Id. at 712, 805 S.W.2d at 55.  The court then noted  that any potential lien claimant may give notice so as to perfect his lien, citing § 18­44­  115(b).  Id.  Appellants also cite Books a Million, supra, where the Arkansas Supreme Court  held that strict compliance with § 18­44­115 (Supp. 1999) was required for a subcontractor  who had failed to send the notice within the time and in the manner specified by the statute  then in force.  In this commercial property case, the subcontractor failed to send the notice  within the seventy­five day period following completion of the work.  The court held that  because the notice requirements must be complied with strictly, the lien was not validly  created.  Appellants argue that the situation herein and in the cases cited above illustrate why  the  legislature  added  the  boldfaced  twelve­point  type  warnings  to  the  construction­lien  procedure.  The notice required by section 115 contains advance warnings, precautions, and  suggestions as to how to deal with the possibility that the general contractor may fail to pay  all the bills.  Appellants argue, and we agree, that after the work was done, the owner’s  financing was exhausted, and the contractor was in default, there was no benefit in appellee  notifying appellants that they could demand a list of all the suppliers of labor and material  and that they could make all their checks payable to the contractor and subcontractor jointly.  Therefore, we hold that the “IMPORTANT NOTICE TO OWNER” must be given by either  the contractor or subcontractor before the work is done in order for it to be of any practical ­8­  CA07­376  value.  Accordingly, we reverse the trial court’s finding of a valid lien against appellants’  property.  Reversed.  HEFFLEY, J., agrees.  BIRD, J., concurs.  BIRD, J., concurring. I agree with the court’s decision but am concerned with the  confusion caused by Ark. Code Ann. § 18­44­115 for the reasons set forth in my concurring  opinion in Bryant v. Jim Atkinson Tile, ___ Ark. App. ___, ___ S.W.3d ___ (Dec. 5, 2007). ­9­  CA07­376 

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