Total Restoration, Inc. v. Merritt

2014 UT App 258_________________________________________________________
THE UTAH COURT OF APPEALS
TOTAL RESTORATION, INC.,
Plaintiff and Appellee,
v.
VERNON MERRITT AND SANDRA MERRITT,
Defendants and Appellants.
Opinion
No. 20120785-CA
Filed October 30, 2014
Third District Court, Silver Summit Department
The Honorable Keith A. Kelly
No. 090500905
Vernon Merritt and Sandra Merritt, Appellants
Pro Se
Dana T. Farmer, Attorney for Appellee
JUDGE MICHELE M. CHRISTIANSEN authored this Opinion, in
which JUDGES GREGORY K. ORME and JOHN A. PEARCE concurred.
CHRISTIANSEN, Judge:
¶1 Vernon and Sandra Merritt appeal from the trial court’s
determination that a mechanics’ lien that Total Restoration, Inc.
recorded against the Merritts’ home was valid and enforceable.
Total Restoration recorded the lien after a dispute arose over
payment for flood-remediation work that Total Restoration had
performed on the home. The Merritts argue that the work Total
Restoration performed was not lienable work under the mechanics’
lien statute and that the district court erred in ruling that the lien
was enforceable, awarding attorney fees to Total Restoration, and
dismissing the Merritts’ counterclaims.
Total Restoration, Inc. v. Merritt
¶2 Because we conclude that the work Total Restoration
performed was not lienable, we reverse the trial court’s
determination that the lien was valid and reverse the award of
attorney fees to Total Restoration under the mechanics’ lien statute.
We also reverse the trial court’s dismissal of the Merritts’
counterclaims to the extent that dismissal was based on the
erroneous determination that the lien was valid, and we remand to
the trial court for consideration of those claims.
BACKGROUND
¶3 In late 2008, the Merritts’ home was damaged by flooding
after a fire-sprinkler pipe and sprinkler head froze and cracked.
The Merritts’ property manager hired Total Restoration to repair
the fire-sprinkler system and perform flood-remediation work on
the home. Total Restoration removed water-damaged baseboards,
carpet pad, drywall, and insulation from the home, dried the
premises, cleaned the carpets, and applied an anti-microbial agent
to prevent mold growth. Total Restoration also hired a
subcontractor to repair the fire-sprinkler system and return it to
service.
¶4 The Merritts did not pay Total Restoration for its work.
Total Restoration recorded a mechanics’ lien against the Merritts’
home and then filed suit against the Merritts for breach of contract,
unjust enrichment, and foreclosure of its mechanics’ lien. The
Merritts counterclaimed for breach of contract, breach of the
covenant of good faith and fair dealing, abuse of lien right, and
wrongful lien.
¶5 The trial court held a bench trial and received evidence on
the contractual relationship between the parties, the extent of the
damage to the Merritts’ home, and the nature and value of Total
Restoration’s work. After trial, the court found the Merritts liable
for unjust enrichment and awarded damages to Total Restoration.
The court also found that the work performed by Total Restoration
amounted to “extensive repairs” that were lienable under the
mechanics’ lien statute. Accordingly, it ruled that Total
20120785-CA 2 2014 UT App 258Total Restoration, Inc. v. Merritt
Restoration’s lien was valid and awarded Total Restoration
attorney fees as the successful party in an action to enforce a
mechanics’ lien.
¶6 The trial court dismissed the Merritts’ counterclaims for
abuse of lien right and wrongful lien based upon its determination
that the lien was valid. The trial court also dismissed the Merritts’
counterclaim for breach of the covenant of good faith and fair
dealing to the extent it was based on the recording of the lien. The
court then found that Total Restoration had not violated any
contractual terms or breached the covenant of good faith and fair
dealing in performing its work or in billing the Merritts. The
Merritts appeal the trial court’s determination that Total
Restoration’s lien was valid, the award of attorney fees, and the
dismissal of their counterclaims that were premised on their claim
that the lien was invalid.
ISSUES AND STANDARDS OF REVIEW
¶7 The Merritts first challenge the trial court’s conclusion that
the work performed by Total Restoration is lienable under Utah’s
mechanics’ lien statute and that the lien was therefore valid. We
review the trial court’s interpretation of the mechanics’ lien statute
for correctness. All Clean, Inc. v. Timberline Props., 2011 UT App 370,
¶ 5, 264 P.3d 244.
¶8 The Merritts next argue that the trial court erred in
awarding attorney fees to Total Restoration under the mechanics’
lien statute. We review for correctness a trial court’s determination
that a party is entitled to recover attorney fees. Hartwig v. Johnsen,
2008 UT 40, ¶ 6, 190 P.3d 1242.
¶9 Last, the Merritts argue that the trial court erred in
dismissing their lien-related counterclaims. Where claims are
dismissed after a bench trial for failure to establish a prima facie
case, we review the trial court’s dismissal of the claims for
correctness. Sorenson v. Kennecott-Utah Copper Corp., 873 P.2d 1141,
1144 (Utah Ct. App. 1994).
20120785-CA 3 2014 UT App 258Total Restoration, Inc. v. Merritt
ANALYSIS
I. The Work Performed by Total Restoration Is Not Lienable
Under the Mechanics’ Lien Statute.
¶10 The Merritts argue that the repair and flood-remediation
work Total Restoration performed is not lienable under the
mechanics’ lien statute, because it does not constitute an
improvement to the property. We agree. Utah’s mechanics’ lien
statute provides, in relevant part,
Contractors, subcontractors, and all persons
performing any services or furnishing or renting any
materials or equipment used in the construction,
alteration, or improvement of any building or
structure or improvement to any premises in any
manner . . . shall have a lien upon the property upon
or concerning which they have rendered service,
performed labor, or furnished or rented materials or
equipment . . . .
Utah Code Ann. § 38-1-3 (LexisNexis 2005). “[T]he word
‘improvement’ in the mechanics’ lien context does not refer simply
to any work that makes the premises better.” All Clean, Inc. v.
Timberline Props., 2011 UT App 370, ¶ 14, 264 P.3d 244. “Rather,
‘improvement’ is a legal term that has been construed to connote
physical affixation and enduring change to premises in a manner
that adds value.” Id. Thus, “physical affixation and enduring
change are the primary characteristics of lienable work.” Id. ¶ 18.
And “mitigation work that merely involves cleanup or remediation
to return the property to its precasualty condition and that does not
implicate any physical affixation to or alteration of the structure of
the building or the premises” is not lienable under the statute. Id.
¶ 15.
¶11 In All Clean, Inc. v. Timberline Properties, this court
determined that flood-remediation work similar to that performed
by Total Restoration was not lienable. See 2011 UT App 370, ¶ 19,
264 P.3d 244. There, a broken pipe flooded several offices in
20120785-CA 4 2014 UT App 258Total Restoration, Inc. v. Merritt
Timberline’s building. Id. ¶ 2. Timberline hired All Clean to
perform flood-remediation work. Id. “The scope of the work
included extracting the water, padding the furniture to prevent
additional damage, drying the premises, cleaning and deodorizing
the carpets, and applying a microbial agent to prevent mold.” Id.
After a dispute arose over payment for the work, All Clean
recorded a mechanics’ lien against the building and then filed a
complaint seeking to foreclose the mechanics’ lien, among other
claims. Id. ¶¶ 3–4. The district court rejected All Clean’s mechanics’
lien claim, concluding that All Clean’s work was not lienable under
the statute. Id. ¶ 4. We affirmed, holding that “mitigation work that
merely involves cleanup or remediation to return the property to
its precasualty condition and that does not implicate any physical
affixation to or alteration of the structure of the building or the
premises cannot be” lienable under the mechanics’ lien statute. Id.
¶ 15. Because All Clean’s work “restored the building to its prior
condition only by removing water and otherwise cleaning up from
flooding” and “did not involve any affixation to the premises or
structural change to the building,” that work did not fall within the
scope of the mechanics’ lien statute. Id. ¶¶ 17–19.
¶12 This court has also considered whether the repair of frozen
water pipes constitutes lienable work. In Daniels v. Deseret Federal
Savings & Loan Ass’n, we determined that a contractor’s inspection
and repair of frozen water pipes did not extend the period for
recording a mechanics’ lien. 771 P.2d 1100, 1102 (Utah Ct. App.
1989). Approximately four months after completing construction
on a condominium project, Daniels, the general contractor, was
called to inspect and repair several frozen water pipes in the
condominiums. Id. at 1101. Daniels inspected the pipes and hired
subcontractors to perform repairs. Id. Shortly thereafter, Daniels
recorded a notice of lien against the project and attempted to
foreclose it. Id. The district court granted summary judgment
against Daniels, concluding that the inspection and repair of the
water pipes constituted “mere[] repairs” that could not extend the
time to record a mechanics’ lien. Id. at 1102. We affirmed, agreeing
with the district court that the inspection and repair of the pipes
did not extend the time period for recording a mechanics’ lien,
20120785-CA 5 2014 UT App 258Total Restoration, Inc. v. Merritt
because “the inspection and repairs undertaken by Daniels . . . were
not services used in the construction, alteration, or improvement of
the building, nor did the services add directly to the value of the
property.” Id.¶13 The work Total Restoration performed here amounts to no
more than flood-remediation and minor repairs that are not
lienable under the mechanics’ lien statute. Total Restoration
removed a substantial amount of water-damaged material from the
home, hired a subcontractor to repair the fire-sprinkler system, and
dried and cleaned the premises after the flood. None of the work
Total Restoration performed involved “physical affixation” or
“alteration of the structure” of the Merritts’ home that would
constitute a lienable “improvement.” All Clean, 2011 UT App 370,
¶¶ 14–15. Rather, the removal of water-damaged debris and the
drying and cleaning of the premises is “mitigation work that
merely involves cleanup or remediation to return the property to
its precasualty condition.” Id. ¶¶ 15, 18. And the “mere[] repair” of
the fire-sprinkler system is likewise nonlienable. Daniels, 771 P.2d
at 1102.
¶14 In ruling for Total Restoration, the trial court relied on a
footnote in All Clean where this court observed that we had
previously deemed lienable “extensive” repairs to a flooded
building. All Clean, 2011 UT App 370, ¶ 15 n.4 (citing Advanced
Restoration, LLC v. Priskos, 2005 UT App 505, ¶¶ 3, 30–31, 126 P.3d
786). The trial court here concluded that Total Restoration had
performed “extensive repairs to damaged walls, floors, carpet, and
ceiling caused by the flooding,” and that Total Restoration’s work
was therefore lienable under All Clean and Advanced Restoration.
However, the question of whether the work at issue was lienable
under the mechanics’ lien statute was not before this court in
Advanced Restoration, as we expressly noted in All Clean, 2011 UT
App 370, ¶ 15 n.4. Rather, in Advanced Restoration we analyzed
whether “[a tenant] acted as [the landlord’s] implied agent in
contracting with Advanced [Restoration] for repair work.” 2005 UT
App 505, ¶ 16. And “there is no discussion [in Advanced Restoration]
of whether the work was lienable under the statute.” All Clean, 2011
UT App 370, ¶ 15 n.4. Because Advanced Restoration did not address
20120785-CA 6 2014 UT App 258Total Restoration, Inc. v. Merritt
the question of lienability, it is of little precedential value on this
issue and the trial court’s reliance on this footnote in All Clean was
likely misplaced.
¶15 Nevertheless, we conclude that Total Restoration would not
be entitled to a mechanics’ lien for the work it performed even
under an “extensive repairs” analysis, and we therefore need not
further consider the vitality of such an approach. The trial court’s
findings and the record on appeal demonstrate that, while the
flooding may have caused extensive damage to the Merritts’ home,
Total Restoration did not perform extensive repairs to the home. As
discussed above, Total Restoration’s work consisted principally of
removing water-damaged material from the home, rather than
repairing the flood damage by, for example, replacing damaged
baseboards, drywall, or insulation with new material. The only
repair work attributable to Total Restoration is the repair of the
fire-sprinkler system, which itself is nonlienable. See Daniels, 771
P.2d at 1102. Thus, we cannot agree with the trial court’s
determination that Total Restoration performed “extensive repairs”
or that Total Restoration’s work was otherwise lienable under the
mechanics’ lien statute. We therefore reverse the trial court’s
determination that Total Restoration’s lien against the Merritts’
home is valid and enforceable.
II. The Trial Court Erred in Awarding Total Restoration Its
Attorney Fees.
¶16 The Merritts next challenge the trial court’s award of
attorney fees to Total Restoration. Generally, the prevailing party
in an action brought to enforce a mechanics’ lien is entitled to an
award of reasonable attorney fees. Utah Code Ann. § 38-1-18(LexisNexis 2005). Because we conclude that Total Restoration’s
lien was invalid, it has not prevailed in its action to enforce that lien
and is not entitled to an award of attorney fees. We therefore
reverse the trial court’s award of attorney fees to Total Restoration.1
1. The Merritts have requested an award of fees as the successful
party on appeal. However, because pro se litigants do not incur
(continued...)
20120785-CA 7 2014 UT App 258Total Restoration, Inc. v. Merritt
III. The Trial Court Erred in Dismissing the Merritts’ Lien-
Related Counterclaims.
¶17 Last, the Merritts challenge the trial court’s dismissal of their
counterclaims for wrongful lien, abuse of lien right, and breach of
the covenant of good faith and fair dealing. The trial court
dismissed these claims based on its determination that the
mechanics’ lien recorded by Total Restoration was valid without
making factual findings as to the specific elements of the lien-
related counterclaims. We therefore view the trial court’s dismissal
of these claims as a determination that, in the face of the court’s
ruling that Total Restoration’s lien was valid, the Merritts could not
establish a prima facie case for wrongful lien, abuse of lien right, or
breach of the covenant of good faith and fair dealing based on the
recordation of the lien. Because we reverse the trial court’s
determination that the lien was valid, we also reverse its dismissal
of the Merritts’ wrongful-lien, abuse-of lien-right, and good-faith-
and-fair-dealing counterclaims to the extent they are based on Total
Restoration’s recordation of the mechanics’ lien. We remand to the
trial court to consider these claims in light of our decision.2
¶18 Because the issue is likely to arise on remand, we also
address Total Restoration’s argument that because mechanics’ liens
are authorized by statute, “mechanics’ liens, without exception, are
never wrongful liens.” We agree that, because they are expressly
authorized by statute, mechanics’ liens generally do not fall within
the scope of Utah’s Wrongful Lien Act. See Hutter v. Dig-It, Inc.,
2009 UT 69, ¶ 52, 219 P.3d 918. However, as this court recently
explained in Bay Harbor Farm, LC v. Sumsion, a lien claimant may
1. (...continued)
attorney fees, they may not recover such fees for successful
litigation. Smith v. Batchelor, 832 P.2d 467, 473–74 (Utah 1992).
Because the Merritts have pursued this appeal pro se, we must
deny their request for an award of attorney fees.
2. The Merritts did not challenge the trial court’s dismissal of their
other counterclaims, and we express no opinion as to the
correctness of the trial court’s disposition of those counterclaims.
20120785-CA 8 2014 UT App 258Total Restoration, Inc. v. Merritt
not “escape the reach of the Wrongful Lien Act simply by alleging
that his or her lien is ‘expressly authorized by statute.’” 2014 UT
App 133, ¶ 12, 329 P.3d 46 (quoting Hutter, 2009 UT 69, ¶ 52).
Rather, the trial court should “consider whether a lien claimant has
a good-faith basis for claiming a statutory lien.” Id. If the claimant
has “no plausible basis” for recording a statutory lien, “a court may
declare the lien wrongful under the Wrongful Lien Act even if it
purports to be one falling into the category of statutorily
authorized liens.” Id.CONCLUSION
¶19 The trial court erred in concluding that the work performed
by Total Restoration was lienable under the mechanics’ lien statute.
Because we reverse the trial court’s determination that Total
Restoration’s lien was valid and enforceable, we also reverse the
award of attorney fees to Total Restoration under the mechanics’
lien statute and the dismissal of the Merritts’ lien-related
counterclaims.3
3. On appeal, the Merritts have challenged neither the trial court’s
ruling in favor of Total Restoration on the Merritts’ liability nor its
award of damages to Total Restoration. Our conclusion that Total
Restoration’s work was not lienable has no effect on the trial court’s
determinations of liability or damages, and we express no opinion
on those issues.
20120785-CA 9 2014 UT App 258