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Synchronized Constr. Servs., Inc. v. Prav Lodging, LLC

Supreme Court of Virginia

October 31, 2014

SYNCHRONIZED CONSTRUCTION SERVICES, INC.
v.
PRAV LODGING, LLC, ET AL

Page 62

FROM THE CIRCUIT COURT OF ORANGE COUNTY. Daniel R. Bouton, Judge.

Andrew N. Felice (James H. Higginbotham, II; Rees Broome, on brief), for appellant.

W. Alexander Burnett (Paul S. Bliley, Jr.; Joseph E. Blackburn, III; Williams Mullen, on brief), for appellees Virginia Community Bank and Paul S. Bliley, Jr., Trustee.

Sean D. Gregg, for appellee Prav Lodging, LLC.

Present: Kinser, C.J., Lemons, Goodwyn, Millette, Mims, and Powell, JJ., and Koontz, S.J.

OPINION

Page 63

[288 Va. 360] LEROY F. MILLETTE, JR. JUSTICE

In this appeal we consider whether a general contractor, who has no pecuniary interest in the bond posted to release the real estate subject to a subcontractor's mechanic's lien, is a necessary party to a subcontractor's mechanic's lien enforcement action.

[288 Va. 361] I. Facts and Proceedings

In 2008, Prav Lodging, L.L.C. (" Prav" ) acquired a parcel of real estate in Orange County, Virginia to build a hotel facility. Secured by a credit line deed of trust, Virginia Community Bank (" VCB" ) financed the construction of the hotel facility. Prav entered into a contract with Paris Development Group, LLC (" Paris" ) to act as construction manager for the project. As construction manager, Paris had the authority to enter into subcontracts with subcontractors to facilitate the project. Paris entered into several such subcontracts, including a subcontract with Synchronized Construction Services, Inc. (" Synchronized" ).

The owner-construction manager contract between Prav and Paris was a cost-plus agreement, whereby Prav would pay Paris the cost of the work plus a $192,000 fixed fee. Prav's payments were scheduled to be made on a monthly basis upon Paris' submission of an invoice to Prav.

The construction manager-subcontractor subcontract between Paris and Synchronized was a fee agreement, whereby Paris would pay Synchronized a $398,000 fee subject to additions and deductions as the project progressed. Paris' payments were scheduled to be made on a monthly basis upon Synchronized's submission of a pay application to Paris.

By February 3, 2010, the construction project was " substantially complete," with the remaining work to be " obtainable in a matter of a few days." On March 11, 2010, Synchronized recorded a mechanic's lien for unpaid work on the construction project in the amount of $208,250.80 with the Orange County Clerk's Office. On September 9, 2010, Synchronized filed a complaint to enforce its mechanic's lien in the Circuit Court of Orange County, naming Prav, Paris, VCB, and numerous other subcontractors as defendants. In its complaint, Synchronized asserted a claim to enforce its mechanic's lien as well as a claim that Paris breached its contract with Synchronized by failing to

Page 64

make all payments due to Synchronized under their subcontract.

Paris did not enter an appearance in the case. Indeed, it could not do so because it no longer existed. According to the public records of its state of incorporation, Paris was dissolved on March 12, 2010 -- the day after Synchronized had recorded its mechanic's lien.

Prav and VCB filed an application to post a bond in the amount of $237,906.80 in accordance with Code § 43-70. The circuit court granted that application, thereby releasing the real estate which had been subject to Synchronized's mechanic's lien.

[288 Va. 362] Prav filed a motion to dismiss the entire complaint on the basis that Synchronized failed to timely serve numerous defendants. In response, the circuit court held that Synchronized " failed to exercise due diligence" to serve Paris within one year of the date of the filing of the complaint, and therefore dismissed Synchronized's breach of contract claim against Paris. However, the court declined to dismiss Synchronized's mechanic's lien claim.

Later, VCB filed a motion to dismiss the mechanic's lien claim on the basis that Synchronized failed to timely serve Paris, who, as the construction manager, was a necessary party to the mechanic's lien enforcement action. In response, the circuit court held that Paris was in fact a necessary party, and that Synchronized's failure to timely serve Paris required dismissing Synchronized's mechanic's lien claim with prejudice. The court entered an order to that effect and denied Synchronized's motion for reconsideration.

Synchronized timely filed a petition for appeal with this Court. We granted the following assignments of error:

1. The [c]ircuit [c]ourt erred in dismissing Synchronized's mechanic's lien enforcement action where Paris, the construction manager, did not have a recognized possessory or expectancy interest in the lien enforcement action which could be defeated or diminished as the result [of that] suit and therefore was not a necessary party to the action. While Paris may have had a contractual claim against the owner of the [p]roject arising out of its [c]ontract, the facts below reveal that Paris never satisfied the express conditions precedent[] found in its [c]ontract in order to preserve and maintain such claims. Hence, even if Paris had contractual claims, those claims would not be sufficient to mandate a finding that Paris was a necessary party to the lien enforcement action brought by Synchronized.
2. The [c]ircuit [c]ourt applied an incorrect standard in analyzing whether Paris was a necessary party to the lien enforcement action and thus erred in dismissing Synchronized['s] mechanic's lien enforcement action where the presence of . . . Paris[, the general contractor,] was not required under Virginia law.
3. The [c]ircuit [c]ourt erred in that Virginia Code § 43-22 does not explicitly require a [general contractor] to be included as a party to a mechanic's lien enforcement action or at all times be [a] viable party in a mechanic's lien enforcement action where the [288 Va. 363] facts below showed that Synchronized had the ability to present proof at trial of the balance due under the Prav Lodging-Paris [c]ontract at all relevant times included at the time Synchronized's mechanic's lien was recorded.

II. Discussion

A. Standard of Review

Whether a party is a necessary party to a particular claim is a question of law that we review de novo. Glasser & Glasser, PLC v. Jack Bays, Inc.,285 ...


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