Opinion
NO. 2012-CA-000289-MR
02-14-2014
PBI BANK, INC. APPELLANT v. E-Z CONSTRUCTION COMPANY, INC. APPELLEE
BRIEFS FOR APPELLANT: Matthew F. Coogle Louisville, Kentucky BRIEF FOR APPELLEE: G. Bruce Stigger Louisville, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE OLU A. STEVENS, JUDGE
ACTION NO. 08-CI-007644
OPINION
AFFIRMING IN PART AND
REVERSING IN PART
BEFORE: DIXON, THOMPSON AND VANMETER, JUDGES. VANMETER, JUDGE: This appeal involves a bond executed by PBI Bank, Inc., pursuant to KRS 376.100, to allow for the release of a mechanics' and materialman's lien recorded on property known as Harrods Creek Overlook Condominiums, which is owned and being developed by Premier Land Company. The issues on appeal concern the amount of the judgment against PBI and whether the Jefferson Circuit Court properly awarded interest at the rate of 18% provided for in the underlying contract between Premier and E-Z Construction Company, Inc. We affirm the court's award of interest at a rate of 18%, but reverse the court's judgment in the amount of $166,170.65. The court is directed to enter a new judgment in the amount of $157,827.58, and award interest accordingly, accruing at a rate of 18%.
Kentucky Revised Statutes.
Premier and E-Z entered into a contract for certain site excavation work to be performed by E-Z at the Harrods Creek property. The contract provided that payments due were to be paid within twenty days of Premier's receipt of invoices sent by E-Z and amounts unpaid would bear interest from the payment due date at 1 1/2% per month, or 18% per year. PBI was not a party to the Premier contract but provided financing for the property.
After submitting invoices to Premier and not receiving payment, on May 22, 2008, E-Z filed a mechanics' and materialman's lien statement asserting a lien on the Harrods Creek property to secure the payment of $157,827.58. The lien statement referred to the Construction Contract between E-Z and Premier, and among other items stated "there is presently due and owing to E-Z . . . the sum of [$157,827.58], against which there are no just credits or set-offs[.]" The lien statement neither referred to interest nor stated a rate of interest. On June 27, 2008, PBI, as surety, executed a bond for $315,655.16, double the amount of E-Z's lien, to release the lien on the Harrods Creek property. The bond instrument provided that the bond "will satisfy any judgment that may be rendered in favor of the person or persons asserting the above referenced lien claim(s) by reason of said improvements or services being furnished to the above described property." In its final provision it stated:
The undersigned SURETY joins herein to offer its Bond to satisfy any judgment that may be rendered in favor of the person or persons filing the above-referenced lien(s) to the full amount of said Bond.
E-Z filed the present action alleging breach of contract by Premier and seeking foreclosure of its lien on the Harrods Creek property. PBI filed an answer to the complaint. Premier did not respond or appear in the action. Issues litigated concerned the timeliness of the lien and the amount of damages, including the interest owed on the billings. E-Z sought interest against PBI at 18% based on its contract with Premier. PBI contended that when it bonded off the $157,827.58 lien claim, it was responsible for the lien plus interest at 12% provided for in KRS 360.040.
At a bench trial, E-Z presented proof that it had sent unpaid invoices to Premier for $166,170.65. On January 25, 2011, a judgment and order was entered. The trial court found that the lien was timely filed and entered a default judgment against Premier for $301,292.22, which included $166,170.65 owed to E-Z and the contracted 18% interest rate accruing from the date the invoices became due. E-Z was awarded judgment against PBI, but the trial court reserved ruling on the amount of judgment pending the court's receipt of post-trial briefs.
After briefs were submitted regarding the amount recoverable by E-Z against PBI, the court entered an opinion and order on September 14, 2011, against PBI in the amount of the judgment against Premier, $301,292.22, to be satisfied by PBI's posted bond. The court subsequently denied PBI's motion to alter, amend, or vacate on January 13, 2012. At this point, further interest accrued on the judgment against PBI. Consequently, the trial court awarded E-Z a judgment against PBI in the amount of $315,655.16, the amount of the bond. PBI now appeals.
On appeal, PBI presents two issues: (1) whether the trial court properly permitted the judgment to include an additional $8,343.07, i.e., the difference between the $166,170.65 invoiced from E-Z to Premier and the $157,827.58 claimed in E-Z's lien; and (2) whether the trial court properly awarded interest at the contractual rate of 18% per annum on the principal amount of the Premier contract.
Mechanics' and materialman's liens and the release of those liens are provided for in statutory law. KRS 376.010 allows for a lien on any property on which labor is performed upon or materials furnished for certain improvements "to secure the amount thereof with interest as provided in KRS 360.040[.]" KRS 360.040, the post-judgment interest statute, provides for 12% interest on judgments unless "rendered for accruing interest on a written obligation, it shall bear interest in accordance with the instrument reporting such accruals, whether higher or lower than twelve percent (12%)."
KRS 376.100 addresses the release of a filed lien and states in its entirety:
The owner or claimant of property against which a lien has been asserted, or any contractor or other person contracting with the owner or claimant of such property for the furnishing of any improvements or services for which a lien is created by this chapter or any subcontractor or other person in privity with the contractor, may, at any time before a judgment is rendered enforcing the lien, execute before the county clerk in which the lien was filed a bond for double the amount of the lien claimed with good sureties to be approved by the clerk, conditioned upon the obligors satisfying any judgment that may be rendered in favor of the person asserting the lien. The bond shall be preserved by the clerk, and upon its execution the lien upon the property shall be discharged. The person asserting the lien may make the obligors in the bond parties to any action to enforce his claim, and any judgment recovered may be against all or any of the obligors on the bond."The purpose of the mechanics' lien statutes is to protect a mechanic or a materialman to the extent of the value of improvements which he makes on property, and the statutes will be liberally construed to attain that purpose." Jungbert v. Marret, 313 Ky. 338, 341, 231 S.W.2d 84, 85 (1950).
In Jungbert, the Court looked to the legislative intent in enacting KRS 376.100. Applying the general rules of statutory construction, it concluded:
In construing a statute, susceptible of more than one construction, the court will adopt that which will give effect to the legislative intent so as to preserve the object and purpose of the legislature in enacting the statute under consideration. It seems to us that, in enacting this particular statute, the legislature intended to provide a method only of freeing the property of the lien in order that the owner might make disposition of the property, and that the obligation of the bond should notId. (internal citations omitted) (emphasis added). In other words, "[s]ince the bond is a mere substitute for the lien property, the appellant can have no greater rights because of the bond than he would have had against the property." Id.
extend beyond the obligation of the lien for which it was substituted.
We agree with PBI that the principal amount of the lien is limited to $157,827.58, and that the trial court erred in including the additional $8,343.07 claimed by E-Z from Premier. To hold otherwise would violate one of the objects of the recording statutes: "to protect prospective purchasers and encumbrancers against the evils of secret grants and secret liens." Trio Realty Co. v. Queenan, 360 S.W.2d 747, 748-49 (Ky. 1962). At the time E-Z filed its lien, the principal amount of its lien should have been known to it, and E-Z could have easily filed a lien including the correct principal amount.
With respect to interest accruing on the principal amount, we understand PBI's argument to be that interest should only accrue from the date E-Z filed its lien, and only at the statutory rate for judgments as set forth in KRS 360.040, or 12%. As to the rate of interest, KRS 360.040 establishes an interest rate on judgments of 12%, but also states that "if rendered for accruing interest on a written obligation, it shall bear interest in accordance with the instrument reporting such accruals, whether higher or lower than twelve percent (12%)." In Union Trust, Inc. v. Brown, 757 S.W.2d 218 (Ky. App. 1988), this court recognized that KRS 360.040 means precisely what it says.
In this case, all contractual obligations were written: the contract between E-Z and Premier and the surety obligation undertaken by PBI. Specifically, PBI undertook the following obligation: "The undersigned SURETY joins herein to offer its Bond to satisfy any judgment that may be rendered in favor of the person or persons filing the above-referenced lien(s) to the full amount of said Bond." (Emphasis added.) The amount of the bond was $315,655.16, double the amount of the filed lien amount. By virtue of the underlying contract, the judgment properly bears interest at the rate of 18% per annum, not 12%. Despite PBI's argument to the contrary, the underlying contractual obligation between E-Z and Premier, on the one hand, cannot be disconnected from the lien claim and resultant judgment, on the other. The lien and the judgment flow from the contract which established the terms to be enforced. This court reached the correct result in Crace Constr. Co. v. Anthony Crane Rental, LP, No. 2006-CA-001724-MR, 2008 WL 4181978 (Ky. App., Sept. 12, 2008). Jungbert v. Marret, 313 Ky. 338, 231 S.W.2d 84 (1950), does not compel a different result.
While unpublished opinions are not binding precedent, we may consider such opinions. Kentucky Rules of Civil Procedure (CR) 76.28(4)(c).
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We have not overlooked E-Z's contention that by appealing the trial court's order granting a $315,655.16 judgment in E-Z's favor, PBI has waived the limits of the bond and interest should continue to accrue. However, we conclude the issue is not before this Court. In the absence of a cross-appeal, an appellee is only entitled to argue that the trial court reached the correct result for the reasons expressed in its judgment, or for any other reasons appropriately brought to the trial court's attention. Carrico v. City of Owensboro, 511 S.W.2d 677, 679 (Ky. 1974). From the amount awarded, the trial court apparently ruled that PBI's maximum liability was the amount of the bond and, therefore, it made no further award of post-judgment interest. That issue is to be determined by the trial court. Because E-Z did not file a cross-appeal, this court cannot decide the issue regarding whether the judgment, including interest, was properly limited to the amount of the bond.
Based on the foregoing, the Jefferson Circuit Court's order is affirmed in part, and reversed in part. The trial court is directed to enter a new judgment to reflect the amount of $157,827.58, at an interest rate of 18%.
DIXON, JUDGE, CONCURS.
THOMPSON, JUDGE, DISSENTS, WITHOUT SEPARATE OPINION. BRIEFS FOR APPELLANT: Matthew F. Coogle
Louisville, Kentucky
BRIEF FOR APPELLEE: G. Bruce Stigger
Louisville, Kentucky