Development Northwest, Inc. v. Zhiryada ( 2023 )

No. 642 December 6, 2023 427
This is a nonprecedential memorandum opinion
pursuant to ORAP 10.30 and may not be cited
except as provided in ORAP 10.30(1).
IN THE COURT OF APPEALS OF THE
STATE OF OREGON
DEVELOPMENT NORTHWEST, INC.,
an Oregon corporation,
dba Wolcott Plumbing,
Plaintiff-Appellant,
v.
Valeriy ZHIRYADA,
an individual;
Valentina Zhiryada, an individual;
and NORTHWEST FREIGHT, LLC,
a Washington limited liability company,
Defendants-Respondents,
and
VALLEY PACIFIC CONSTRUCTION, INC.,
an Oregon corporation;
and KEITH MINTER, INC.,
an Oregon corporation,
dba Jade Smith Paving,
Defendants.
Multnomah County Circuit Court
19CV13524; A176707
Christopher J. Marshall, Judge.
Argued and submitted September 6, 2023.
Thomas M. Christ argued the cause and filed the briefs
for appellant. Also on the briefs was Sussman Shank LLP.
Geoffrey B. Silverman argued the cause and filed the
brief for respondents. Also on the brief was The Law Office
of Geoffrey B. Silverman, LLC.
Before Shorr, Presiding Judge, and Mooney, Judge, and
Pagán, Judge.
428 Development Northwest, Inc. v. Zhiryada
SHORR, P. J.
Reversed and remanded as to plaintiff’s lien foreclosure
claim; otherwise affirmed.
Nonprecedential Memo Op: 329 Or App 427 (2023) 429
SHORR, P. J.
Following a bench trial, plaintiff appeals from a
judgment dismissing its claim for construction lien foreclo-
sure. In a single assignment of error, plaintiff asserts that
the trial court erred in dismissing plaintiff’s lien foreclosure
claim because, according to plaintiff, the construction work
invoices that plaintiff presented to defendant were due and
payable and defendant failed to tender adequate payment
such that defendant could avoid the enforcement of plain-
tiff’s construction lien. We agree and conclude that the trial
court erred in holding that defendant’s proffered check was
an unconditional and adequate payment to plaintiff. Rather,
defendant’s check was improperly conditioned on plaintiff’s
potential release of a construction lien for plaintiff’s work
on defendant’s property for which plaintiff had not yet been
paid. As a result, we reverse and remand for further pro-
ceedings on the construction lien claim.1
The dispute arose out of plumbing subcontract
work plaintiff provided to defendant on a major commercial
construction project. Defendant contracted with a primary
contractor, E&M Constructors, which subsequently subcon-
tracted with plaintiff. The contract between defendant and
E&M Constructors provided for defendant to pay subcon-
tractors directly.
Following the completion of its work, plaintiff sent
two invoices to defendant: one for “finishing work” in the
amount of $13,050; and one for “Change Order 6 work” for
the plumbing work on a truck washing installation, in the
amount of $39,530. Both invoices were sent on December 19,
2018, and had a due date of January 10, 2019. On February
12, 2019, defendant sent plaintiff a check for $13,050, along
with a lien waiver form that stated:
“The undersigned acknowledges receipt of a progress
payment in the amount of $13,050.00 and in consideration
of such payment, does hereby release any rights to collection,
mechanics lien, stop notice, or bond right that the undersigned
1
Plaintiff also brought breach of contract and quantum meruit claims, which
were tried to a jury. The jury found in plaintiff’s favor on the breach of contract
claim. The merits of that claim have not been challenged on appeal. We therefore
affirm those portions of the judgment resulting from the jury’s verdict.
430 Development Northwest, Inc. v. Zhiryada
has on the above-referenced job, not just claims paid by this
check, to the following extent. This release covers a progress
payment for labor, service, equipment, or materials fur-
nished to Northwest Freight project through __________[2]
only and does not cover any retentions retained before or
after the release date; extras furnished before the release
date for which payment has not been received; extras or
items furnished after the release date. Rights based upon
work performed or items furnished under a written change
order which has been fully executed by the parties prior to
the release date are covered by this release unless specifi-
cally reserved by the claimant in this release.
“* * * * *
“NOTICE: THIS DOCUMENT WAIVES RIGHTS
UNCONDITIONALLY AND STATES THAT YOU HAVE
BEEN PAID FOR GIVING UP THESE RIGHTS. THIS
DOCUMENT IS ENFORCEABLE AGAINST YOU IF
YOU SIGN IT, EVEN IF YOU HAVE NOT BEEN PAID.
IF YOU HAVE NOT BEEN PAID, USE A CONDITIONAL
RELEASE FORM.”
(Uppercase in original; emphases added.).
Plaintiff declined to sign the form because it did not
specifically reserve rights for plaintiff to be paid for work
associated with the Change Order 6 invoice. Plaintiff con-
tacted its attorney, and obtained an alternative waiver form,
which acknowledged the $13,050 payment on the finishing
work invoice and released plaintiff’s lien on the property for
that work and up to that amount, but reserved all rights,
including lien rights, on the unpaid Change Order 6 invoice.
Plaintiff’s attorney emailed the alternative waiver to defen-
dant owner Valentina Zhiryada, stating:
“Last week [plaintiff] received a check for $13,050.00
and a form of unconditional waiver, copies of which are
attached. [Plaintiff] construes your tender of the $13,050.00
payment as being conditioned on [plaintiff] signing and
returning the unconditional waiver. [Plaintiff] is unwilling
to sign the unconditional waiver, because it is not condi-
tioned on the check clearing and also includes language
that may result in [plaintiff] waiving or adversely affecting
2
The blank was not filled in. In previous versions of the form accompanying
prior payments, a date was hand-written into the blank.
Nonprecedential Memo Op: 329 Or App 427 (2023) 431
its lien rights for other amounts owed to [plaintiff] on this
project.
“Also attached [is] a ‘Waiver of Right to Lien - Unsigned
(2-16-19)’, which [plaintiff] is willing to sign and return
to you when it deposits the $13,050.00 check. However,
we need your written confirmation (your reply e-mail is
sufficient) that * * * this lien waiver is acceptable to you.
* * * If I do not receive your confirming e-mail by close of
business on 2/20/19, [plaintiff] will conclude the waiver of
right to lien is not acceptable to you, and in that event the
$13,050.00 check will be mailed back to you.”
Zhiryada replied that she understood the parties to still
be in negotiations about the Change Order 6 invoice, and
otherwise responded to the email as follows: “I need You to
sign a Waiver that I sent You together with my Check #1307
for $13,050.00 and email it back to Me, please.” Plaintiff did
not cash the check. Instead, it returned the check to defen-
dant, recorded its lien with the county, and filed this action
to foreclose the lien.
The lien foreclosure claim was tried to the court. The
trial court concluded that defendant’s $13,050 check was “an
unconditional tender” and that “[t]he payment for the fin-
ishing work was not conditional on the execution of the lien
waiver[.]” Because the check was “good tender” that plain-
tiff rejected, the trial court concluded that the tender cut
off consequences of nonpayment, and plaintiff was therefore
not entitled to foreclose on the lien for the $13,050 invoice.
The court further determined that, under the terms of the
subcontract, completion of a lien waiver for the $13,050 pay-
ment was a condition precedent for payment of the follow-
ing invoice for the Change Order 6 work, and that, because
plaintiff had not accepted payment and executed such a lien
waiver, the Change Order 6 invoice was not presently due
and was therefore not subject to foreclosure. The trial court
thus entered judgment in favor of defendant.3
3
The trial court later entered a supplemental judgment awarding plain-
tiff attorney fees based on plaintiff prevailing before the jury on its breach of
contract claim. Defendant has appealed that supplemental judgment, which is
before us in a separate appeal that we affirm today in Development Northwest,
Inc. v. Zhiryada (A178102), 329 Or App 439 (2023) (nonprecedential memoran-
dum opinion).
432 Development Northwest, Inc. v. Zhiryada
The issues as presented by the parties on appeal are
whether defendant tendered adequate unconditional pay-
ment for the finishing work invoice and whether the Change
Order 6 invoice was due and payable. We review the trial
court’s legal conclusions for legal error and its factual find-
ings to determine whether those findings are supported by
any evidence in the record. Vukanovich v. Kine, 268 Or App
623, 633, 342 P3d 1075, adh’d to as modified on recons, 271
Or App 133, 349 P3d 567 (2015).
We agree with plaintiff that the trial court erred
in concluding that defendant’s $13,050 check was uncon-
ditional. Under lien foreclosure law, a property owner may
demand that a contractor waive all lien rights “as to mate-
rials or supplies for which payment has been made.” ORS
87.025(5). Under that law, a property owner may not demand
a lien waiver from a contractor who has not been paid for
that work unless the “language of the waiver [brings] home
to the supplier what he is releasing.” Portland Elec. & Plum.
v. Simpson, 59 Or App 486, 490, 651 P2d 172 (1982), adh’d to
on recons, 61 Or App 266, 656 P2d 394, rev den, 294 Or 682(1983). Otherwise, the “person making payment is entitled
to a waiver of a lien only as to materials or supplies already
paid for.” Id.Defendant was, thus, permitted to demand a
broader release, but plaintiff was not obligated to, and in
fact did not, agree to that broader language. Oregon sub-
scribes to the objective theory of contracts, which provides
that the existence and terms of a contract are determined by
objective evidence of the parties’ communications and acts.
Rhoades v. Beck, 260 Or App 569, 572, 320 P3d 593 (2014).
We conclude that the parties’ objective actions demonstrate
that defendant’s offer of the $13,050 check was conditioned
on plaintiff signing defendant’s broadly stated lien waiver
form, and that plaintiff declined to agree to that broad lien
waiver language. The check and the waiver form were sent
together. The form stated: “The undersigned acknowledges
receipt of a progress payment in the amount of $13,050.00
and in consideration of such payment, does hereby release
any rights * * * not just claims paid by this check to the fol-
lowing extent.” (Emphases added.) The remainder of the
Nonprecedential Memo Op: 329 Or App 427 (2023) 433
form includes a blank that does not identify or limit the
date through which the release covers and does not other-
wise identify which work the payment covers. The form thus
indicated that the payment, while being made in exchange
for the work completed, was also being offered in exchange
for plaintiff’s unconditional waiver of all lien rights. Even to
the extent that defendant’s form could be ambiguous as to
the extent of the release, which defendant does not argue,
plaintiff’s attorney then proposed a more limited release to
clarify that plaintiff would release a lien for the finishing
work reflected in the finishing work invoice, in the amount
of $13,050. Plaintiff’s counsel then explicitly stated in his
email to defendant that plaintiff construed the check “as
being conditioned on [plaintiff] signing and returning the
unconditional waiver.” Defendant did nothing to dispel that
assumption, and indeed responded that plaintiff needed
to sign the broad waiver that was sent with the check.
Defendant did not address plaintiff’s proffered alternative
and more limited waiver.
We conclude that the only reasonable objective
interpretation of those acts, none of which are factually
disputed, is that the check was not an unconditional pay-
ment, but was instead conditioned on plaintiff signing the
broadly worded lien waiver form sent by defendant. Plaintiff
was not obligated to accept the broad waiver under ORS
87.025, and it did not do so. Defendant takes the position on
appeal that plaintiff could have cashed the check outright
without signing any waiver, or could have amended the
waiver by indicating it was reserving its rights with respect
to the Change Order 6 work; however, those options were
not communicated to plaintiff at the time the dispute arose,
and defendant’s actions and statements viewed objectively
demonstrate otherwise. The trial court therefore erred in
concluding that the check was unconditional and was there-
fore adequate tender that plaintiff rejected.4
4
The trial court’s additional conclusion that payment was not due on the
Change Order 6 invoice was premised on its erroneous conclusion regarding the
conditional nature of the $13,050 check. We therefore do not need to address
the parties’ further dispute about plaintiff’s obligation to provide lien waivers
as a condition precedent for future payments, because defendant did not tender
unconditional payment for the finishing work invoice.
434 Development Northwest, Inc. v. Zhiryada
Because defendant failed to tender adequate pay-
ment for either invoice, both of which were due and payable,
the trial court erred in dismissing plaintiff’s lien foreclosure
claim.5
Reversed and remanded as to plaintiff’s lien fore-
closure claim; otherwise affirmed.
5
As the trial court noted, there was no controversy regarding the timeliness
of the filing of the liens and the service of related notices. On remand, the trial
court will need to make fact findings regarding the precise amount of the lien
foreclosure.