Massey v. Duke Builders, Inc.

310 Ga. 153

849 S.E.2d 186

MASSEY et al.

v.DUKE BUILDERS, INC.

S20G0018

Supreme Court of Georgia.

Decided: September 28, 2020

Reconsideration Denied October 19, 2020

Matthew Parks Benson, Gerald Davidson, Jr., Brian Tanner Easley, Mahaffey Pickens Tucker, LLP, 1550 North Brown Road, Suite 125, Lawrenceville, Georgia 30043, Michael Brian Terry, Jane D. Vincent, Bondurant, Mixson & Elmore, LLP, 1201 West Peachtree Street, N.W., Suite 3900, Atlanta, Georgia 30309-3417, Attorneys for the Appellant.

Anthony O. L. Powell, Wesley Charles Ross, John James Crowley, Powell & Edwards, 10 Lumpkin Street, PO Box 1390, Lawrenceville, Georgia 30046, Robert Sparks Highsmith, Jr., Holland & Knight LLP, One Atlantic Center, Suite 2000, 1201 West Peachtree Street, Atlanta, Georgia 30309-3453, James Cullen Evans, Holland & Knight, LLP, 1180 W. Peachtree Street, NE, Ste 1800, Atlanta, Georgia 30309, Attorneys for the Appellee.

Nahmias, Presiding Justice.

In this dispute between property owners and the contractor they hired to build a house, we granted the property owners’ petition for certiorari to consider two questions: (1) whether anticipated profits can be included in a materialmen's lien and (2) if so, whether the improper inclusion of such profits renders the entire lien void. As explained below, because the Court of Appeals correctly held that anticipated profits may not be included in a lien and that their inclusion does not invalidate the entire lien, see Duke Builders, Inc. v. Massey , 351 Ga. App. 535, 537-539, 831 S.E.2d 172 (2019), we affirm.

1. In June 2013, John and Stephanie Massey's home was destroyed by a fire. They hired Duke Builders, Inc. as the contractor to build a new house. The Masseys pre-approved and then paid Duke Builders for completed work on a project-by-project basis. The payments for these projects included the actual cost of the work and materials as well as a contractor's fee for Duke Builders, which varied from project to project. After a series of disagreements between the parties, Duke Builders stopped work on the Masseys’ property by April 2015, and the Masseys hired a new contractor. In May 2015, Duke Builders filed a materialmen's lien in the amount of $197,107.13 against the Masseys’ property. This amount included $145,694.20 for work that had been completed but not paid for (including Duke Builders’ profits on those completed projects) and $51,412.93 as the profit Duke Builders anticipated based on its estimated cost to finish the house.

In November 2015, the Masseys filed a lawsuit against Duke Builders for, among other things, breach of contract. Duke Builders filed an answer and counterclaims, including one for breach of contract. In December 2016, the Masseys filed a motion for partial summary judgment on several claims as well as the lien, arguing that the lien should not include Duke Builders’ anticipated profits. In April 2017, the trial court summarily denied the Masseys’ motion without specifically addressing the lien issue. In March 2018, the Masseys filed a renewed motion for summary judgment raising only the lien issue, and this time the trial court granted the motion. The court ruled that the lien amount was illegal because it included Duke Builders’ anticipated profits and that the entire lien was therefore void; the court ordered that the lien be marked as cancelled.

Duke Builders appealed the cancellation of its lien.¹ The Court of Appeals affirmed the trial court's holding that anticipated profits could not be included in the lien, but reversed the trial court's holding that the entire lien was void. See Duke Builders , 351 Ga. App. at 537-539, 831 S.E.2d 172. The Court of Appeals was correct on both issues.²

2. On the first question – whether a materialmen's lien can include anticipated but not yet earned profits – the Court of Appeals looked to the plain text of OCGA §§ 44-14-361 and 44-14-361.1 (e) to conclude that the lien cannot include anticipated profits. See Duke Builders , 351 Ga. App. at 537, 831 S.E.2d 172. Subsection (a) (2) of OCGA § 44-14-361 authorizes contractors to file "a special lien on the real estate ... or other property for which they furnish labor, services, or materials." Subsection (b) says that the lien "may attach to the real estate of the owner for which the labor, services, or materials are furnished if they are furnished at the instance of the owner, contractor, or some other person acting for the owner or contractor." Subsection (c) says that this lien "shall include the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order subject to subsection (e) of Code Section 44-14-361.1."

Under subsection (c), which was added to OCGA § 44-14-361 in 2013, the lien claimant can file a lien "based on the contracted price of the work, which includes overhead costs and profit, rather than just on the value of the materials and labor that directly improved the property." Stock Bldg. Supply, Inc. v. Platte River Ins. Co. , 336 Ga. App. 113, 118-119, 783 S.E.2d 708 (2016). Duke Builders argues that subsection (c)’s reference to the contract means that a lien claimant can include even unearned profits that were anticipated based on the contract. That statutory provision, however, restricts the lien to the "amount due and owing " under the contract. Thus, the lien is limited to amounts actually due to the claimant based on the work completed at the time the lien is filed, not amounts that the claimant was expecting to receive for future work under the contract. OCGA § 44-14-361.1 (e) also mentions the contract price but again limits the lien to the contract price of work already done by referring to the work in the past tense: "In no event shall the aggregate amount of liens set up by Code Section 44-14-361 exceed the contract price of the improvements made or services performed. " (Emphasis added.)

The Court of Appeals was correct to hold that a materialmen's lien may not include anticipated profits, and we affirm that holding.³

3. On the second question – the effect of the inclusion of nonlienable amounts in a materialmen's lien – the Court of Appeals held that the trial court erred by ruling that the entire lien was void, reversed that portion of the trial court's summary judgment order, and remanded the case for a determination of the lienable amount. See Duke Builders , 351 Ga. App. at 538-539, 831 S.E.2d 172. The Court of Appeals did not err.

(a) In support of its holding, the Court of Appeals looked to the precedents established in Pace v. Shields-Geise Lumber Co. , 147 Ga. 36, 92 S.E. 755 (1917), and Sears Roebuck & Co. v. Superior Rigging & Erecting Co. , 120 Ga. App. 412, 170 S.E.2d 721 (1969). In Pace , which dealt with a materialmen's lien, this Court held: "If one's claim exceed his right, the excess of the claim is void, but not the whole claim. A valid part may be included in that which is not sound as a whole, and the valid part may be legally asserted, while the invalid part fails." 147 Ga. at 37, 92 S.E. 755. See also Hillburn v. O'Barr , 19 Ga. 591, 593 (1856) (addressing a carpenter's lien and holding: "[W]hat law is there that says, if a man's claim exceed his right, not the excess of the claim merely, but the whole of the claim, is void. The reverse is, in general, true. And no authority is cited to show this case an exception to the general rule.").

The Masseys argue that Pace and Hillburn do not apply here because they dealt with situations where the lien overage at issue related to how much of the property the lien could encumber, rather than the amount of the lien. See Pace , 147 Ga. at 37, 92 S.E. 755 (explaining that the lien could attach only to the one-fourth interest in the property belonging to the person who defaulted on the contract); Hillburn , 19 Ga. at 593 (explaining that the lien could attach only to the interest of one of the four property owners). The holding in those cases, however, applies just as readily to cases where the lien amount is too high because improper amounts were included. We see no reason to view this factual distinction as a legal one.

Indeed, the Court of Appeals cited Pace in Sears Roebuck , which dealt with a materialmen's lien that included nonlienable amounts. See 120 Ga. App. at 415, 170 S.E.2d 721. The property owner there, like the Masseys here, argued that the inclusion of those improper amounts defeated the whole lien, but the court responded:

We have found no cases so holding. The nonlienable items were easily separable from the lienable items in this case. We agree with the lower court, as expressed in its order: "(T)he whole claim should not fall because part is bad."

Id. The Court of Appeals has followed Sears Roebuck in at least two other cases dealing with materialmen's liens that included improper amounts. See Summit-Top Dev., Inc. v. Williamson Constr., Inc. , 203 Ga. App. 460, 461-462, 416 S.E.2d 889 (1992) (holding that the claimant's initial inclusion of nonlienable amounts in the lien did not invalidate the entire lien); Taverrite v. Lowe's of Franklin , 166 Ga. App. 346, 348, 304 S.E.2d 78 (1983) (physical precedent only) ("The inclusion of nonlienable items, easily separable from lienable items, does not defeat the entire lien.").⁴

Thus, the Court of Appeals’ holding in this case is supported by precedent from this Court and the Court of Appeals, and the Masseys have not convinced us that we should repudiate that line of authority.⁵ We therefore affirm the Court of Appeals’ holding on this issue.

(b) At the end of its discussion about the continued validity of the lien, the Court of Appeals indicated that the trial court should direct that the lien be amended, saying: "Here, because the lost profits amount was easily determined, the trial court erred by invalidating the entire lien, instead of directing that the lien be amended to exclude the non-lienable amounts." Duke Builders, 351 Ga. App. at 538-539, 831...