[Cite as A & J Plumbing, Inc. v. Huntington Natl. Bank, 2014-Ohio-5707.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
A & J PLUMBING, INC., : OPINION
Plaintiff-Appellant, : CASE NO. 2014-L-023 - vs - :
HUNTINGTON NATIONAL BANK, et al., :
Defendants-Appellees. :
Civil Appeal from the Lake County Court of Common Pleas, Case No. 12 CV 001183.
Judgment: Affirmed.
Frederick L. Zuch, 7343 Chillicothe Road, Mentor, OH 44060 (For Plaintiff-Appellant).
Kirk W. Roessler and Douglas M. Eppler, Ziegler Metzger LLP, 925 Euclid Avenue, Suite 2020, Cleveland, OH 44115-1441 (For Defendant-Appellees).
THOMAS R. WRIGHT, J.
{¶1} This accelerated-calendar appeal stems from a final judgment of the Lake
County Court of Common Pleas, granting summary judgment in favor of appellee, the
North American Specialty Insurance Company, on two claims for enforcement of surety
bonds. Appellant, A & J Plumbing, Inc., challenges the trial court’s legal determination
that it was not entitled to recover under the surety bonds because the two underlying
mechanic’s liens are invalid. For the following reasons, the court’s ruling is affirmed.
{¶2} The relevant facts of this case are not in dispute. Wilshire Homes, Inc. is
engaged in the business of residential home construction. In 2006, it purchased two parcels of property in Lake County for the purpose of building a single-family residence
on each. The first parcel was on Cambden Crossing Way in Concord, Ohio, while the
second property was on Jennings Drive in Leroy, Ohio.
{¶3} To finance the construction of both homes, Wilshire Homes obtained two
commercial loans from Huntington National Bank. In each transaction, Wilshire Homes
executed an open-end mortgage in favor of Huntington National Bank on each parcel.
Each mortgage was duly recorded.
{¶4} In each of the two projects, Wilshire Homes hired appellant to install the
plumbing. When work on both projects was finished in early 2009, appellant submitted
its final bill in accordance with the underlying contracts. Since Wilshire Homes could
not sell either of the homes, appellant was never paid for the plumbing work.
{¶5} In June 2009, appellant submitted affidavits with the clerk of courts for the
purpose of obtaining mechanic’s liens on each of the parcels. Although both liens were
duly recorded, appellant did not take steps necessary to perfect the liens. As a result,
copies of the affidavits were never served upon Wilshire Homes, and copies were
never posted on either of the subject parcels.
{¶6} No further action was taken in regard to the mechanic’s liens over the next
thirty months. In 2011, appellant and Huntington National Bank were named as parties
in a tax foreclosure action on the “Cambden Crossing” property. While this action was
pending, Wilshire Homes and its realtor found a potential buyer for that parcel. In order
to facilitate the sale, the realtor attempted to negotiate a final settlement of all pending
liens on the “Cambden Crossing” property, including the liens held by appellant and
Huntington National Bank. Ultimately, no settlement was reached because appellant
would not agree to certain terms sought by Huntington National Bank. Therefore, the
2 proposed sale of the property was never finalized, and a final order of foreclosure was
issued in the “tax” action.
{¶7} In February 2012, Huntington National Bank filed with the common pleas
court two applications for approval of bonds to discharge the mechanic’s liens on each
of the properties. Attached to each application was a surety bond issued by appellee
for the total amount owed under the respective lien. Each bond provided that payment
under the bond was conditioned upon a subsequent adjudication that appellant has a
valid claim against the subject property. Upon due consideration, the common pleas
court approved both applications, ordering that the liens be discharged and that the
bonds be substituted as the security for the underlying debts.
{¶8} In compliance with the requirements of the bonds, appellant initiated a civil
action against appellee, Huntington National Bank, Wilshire Homes, and three other
defendants. Under the first four claims of its complaint, appellant sought recovery from
Wilshire Homes for the total amount owed for the plumbing work. These claims were
based upon theories of breach of contract, amounts on account, and quantum meruit.
Appellant’s fifth claim sounded in tortuous interference with a contractual relationship,
and was predicated upon the events surrounding the attempted settlement negotiations
concerning the liens on the “Cambden Crossing” property. Under its sixth and seventh
claims, appellant sought recovery on the bonds issued by appellee.
{¶9} The majority of the underlying proceedings pertained solely to appellant’s
“tortuous interference” claim. As to the two “bond” claims, the discovery process was
short. As part of its responses to Huntington National Bank’s requests for admissions,
appellant made the following admissions: (1) after filing its affidavits for the mechanic’s
liens on both properties, it did not serve copies of the affidavits upon Wilshire Homes;
3 and (2) it also did not post copies of the affidavits upon either of the subject properties.
These admissions were verified by appellant’s vice president.
{¶10} Based solely upon the admissions, appellee moved for summary judgment
on the two “bond” claims. Citing R.C. 1311.07, appellee first argued that the failure to
serve or post the affidavits rendered the two mechanic’s liens invalid. Appellee further
argued that, in the absence of valid liens, appellant was not entitled to recovery under
the bonds for any amount owed by Wilshire Homes.
{¶11} In responding to the summary judgment motion, appellant did not contest
the fact that the mechanic’s liens were invalid as a result of the failure to comply with
R.C. 1311.07. Nevertheless, appellant contended that it could still seek recovery under
the bonds because the invalidity of the liens would have no effect upon the merits of its
claims against Wilshire Homes. In support, appellant emphasized that the wording of
the bonds referred to the existence of a valid “claim” against the properties, not a valid
“lien.”
{¶12} After appellee submitted a reply brief on the matter, the trial court issued
its order granting summary judgment against appellant on both “bond” claims. Citing
R.C. 1311.11(C), the trial court noted that, once a surety bond is approved, it is merely
intended to act as a substitute for the mechanic’s lien. Based upon this, the court held
that appellant must be able to establish the validity of its liens on the two parcels before
it could recover under the bonds. Thus, since appellant’s liens were invalid due to the
lack of service or posting of the affidavits, appellant could not prove a set of facts under
which it would be entitled to the funds covered by the bonds.
{¶13} Immediately following the issuance of the foregoing order, the trial court
entered a final judgment in favor of appellant on its four claims against Wilshire Homes.
4 The entry of the latter decision had the effect of disposing of all remaining claims in the
action, thereby making the summary judgment determination a final appealable order.
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[Cite as A & J Plumbing, Inc. v. Huntington Natl. Bank, 2014-Ohio-5707.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
A & J PLUMBING, INC., : OPINION
Plaintiff-Appellant, : CASE NO. 2014-L-023 - vs - :
HUNTINGTON NATIONAL BANK, et al., :
Defendants-Appellees. :
Civil Appeal from the Lake County Court of Common Pleas, Case No. 12 CV 001183.
Judgment: Affirmed.
Frederick L. Zuch, 7343 Chillicothe Road, Mentor, OH 44060 (For Plaintiff-Appellant).
Kirk W. Roessler and Douglas M. Eppler, Ziegler Metzger LLP, 925 Euclid Avenue, Suite 2020, Cleveland, OH 44115-1441 (For Defendant-Appellees).
THOMAS R. WRIGHT, J.
{¶1} This accelerated-calendar appeal stems from a final judgment of the Lake
County Court of Common Pleas, granting summary judgment in favor of appellee, the
North American Specialty Insurance Company, on two claims for enforcement of surety
bonds. Appellant, A & J Plumbing, Inc., challenges the trial court’s legal determination
that it was not entitled to recover under the surety bonds because the two underlying
mechanic’s liens are invalid. For the following reasons, the court’s ruling is affirmed.
{¶2} The relevant facts of this case are not in dispute. Wilshire Homes, Inc. is
engaged in the business of residential home construction. In 2006, it purchased two parcels of property in Lake County for the purpose of building a single-family residence
on each. The first parcel was on Cambden Crossing Way in Concord, Ohio, while the
second property was on Jennings Drive in Leroy, Ohio.
{¶3} To finance the construction of both homes, Wilshire Homes obtained two
commercial loans from Huntington National Bank. In each transaction, Wilshire Homes
executed an open-end mortgage in favor of Huntington National Bank on each parcel.
Each mortgage was duly recorded.
{¶4} In each of the two projects, Wilshire Homes hired appellant to install the
plumbing. When work on both projects was finished in early 2009, appellant submitted
its final bill in accordance with the underlying contracts. Since Wilshire Homes could
not sell either of the homes, appellant was never paid for the plumbing work.
{¶5} In June 2009, appellant submitted affidavits with the clerk of courts for the
purpose of obtaining mechanic’s liens on each of the parcels. Although both liens were
duly recorded, appellant did not take steps necessary to perfect the liens. As a result,
copies of the affidavits were never served upon Wilshire Homes, and copies were
never posted on either of the subject parcels.
{¶6} No further action was taken in regard to the mechanic’s liens over the next
thirty months. In 2011, appellant and Huntington National Bank were named as parties
in a tax foreclosure action on the “Cambden Crossing” property. While this action was
pending, Wilshire Homes and its realtor found a potential buyer for that parcel. In order
to facilitate the sale, the realtor attempted to negotiate a final settlement of all pending
liens on the “Cambden Crossing” property, including the liens held by appellant and
Huntington National Bank. Ultimately, no settlement was reached because appellant
would not agree to certain terms sought by Huntington National Bank. Therefore, the
2 proposed sale of the property was never finalized, and a final order of foreclosure was
issued in the “tax” action.
{¶7} In February 2012, Huntington National Bank filed with the common pleas
court two applications for approval of bonds to discharge the mechanic’s liens on each
of the properties. Attached to each application was a surety bond issued by appellee
for the total amount owed under the respective lien. Each bond provided that payment
under the bond was conditioned upon a subsequent adjudication that appellant has a
valid claim against the subject property. Upon due consideration, the common pleas
court approved both applications, ordering that the liens be discharged and that the
bonds be substituted as the security for the underlying debts.
{¶8} In compliance with the requirements of the bonds, appellant initiated a civil
action against appellee, Huntington National Bank, Wilshire Homes, and three other
defendants. Under the first four claims of its complaint, appellant sought recovery from
Wilshire Homes for the total amount owed for the plumbing work. These claims were
based upon theories of breach of contract, amounts on account, and quantum meruit.
Appellant’s fifth claim sounded in tortuous interference with a contractual relationship,
and was predicated upon the events surrounding the attempted settlement negotiations
concerning the liens on the “Cambden Crossing” property. Under its sixth and seventh
claims, appellant sought recovery on the bonds issued by appellee.
{¶9} The majority of the underlying proceedings pertained solely to appellant’s
“tortuous interference” claim. As to the two “bond” claims, the discovery process was
short. As part of its responses to Huntington National Bank’s requests for admissions,
appellant made the following admissions: (1) after filing its affidavits for the mechanic’s
liens on both properties, it did not serve copies of the affidavits upon Wilshire Homes;
3 and (2) it also did not post copies of the affidavits upon either of the subject properties.
These admissions were verified by appellant’s vice president.
{¶10} Based solely upon the admissions, appellee moved for summary judgment
on the two “bond” claims. Citing R.C. 1311.07, appellee first argued that the failure to
serve or post the affidavits rendered the two mechanic’s liens invalid. Appellee further
argued that, in the absence of valid liens, appellant was not entitled to recovery under
the bonds for any amount owed by Wilshire Homes.
{¶11} In responding to the summary judgment motion, appellant did not contest
the fact that the mechanic’s liens were invalid as a result of the failure to comply with
R.C. 1311.07. Nevertheless, appellant contended that it could still seek recovery under
the bonds because the invalidity of the liens would have no effect upon the merits of its
claims against Wilshire Homes. In support, appellant emphasized that the wording of
the bonds referred to the existence of a valid “claim” against the properties, not a valid
“lien.”
{¶12} After appellee submitted a reply brief on the matter, the trial court issued
its order granting summary judgment against appellant on both “bond” claims. Citing
R.C. 1311.11(C), the trial court noted that, once a surety bond is approved, it is merely
intended to act as a substitute for the mechanic’s lien. Based upon this, the court held
that appellant must be able to establish the validity of its liens on the two parcels before
it could recover under the bonds. Thus, since appellant’s liens were invalid due to the
lack of service or posting of the affidavits, appellant could not prove a set of facts under
which it would be entitled to the funds covered by the bonds.
{¶13} Immediately following the issuance of the foregoing order, the trial court
entered a final judgment in favor of appellant on its four claims against Wilshire Homes.
4 The entry of the latter decision had the effect of disposing of all remaining claims in the
action, thereby making the summary judgment determination a final appealable order.
In only appealing the trial court’s ruling on its two “bond” claims, appellant asserts one
assignment of error for review:
{¶14} “The trial court committed prejudicial error by concluding as a matter of
law, pursuant to R.C. 1311.11, that a claim against real property cannot exist without a
valid original lien.”
{¶15} Under this assignment, appellant does not contest the fact that, by failing
to either serve its affidavits for the mechanic’s liens upon Wilshire Homes or post them
at the respective properties, it did not follow the necessary procedure in R.C. 1311.07
for obtaining such a lien. Consequently, neither of the underlying liens was ever valid
and enforceable. Despite this, appellant still argues it was entitled to go forward on its
“bond” claims because the invalidity of the liens had no effect upon its right to enforce
its judgment against Wilshire Homes under the bonds. Specifically, appellant contends
that it has the right to recover under the bonds so long as it can prove that it has never
been paid for the plumbing work rendered on the two properties.
{¶16} R.C. 1311.11 delineates the procedure an owner or mortgagee of property
can follow to have a mechanic’s lien removed from its record of title. Subsections (A)
and (B) generally provides the means by which the owner or mortgagee can force the
lienholder to immediately bring a civil action to resolve the underlying dispute between
the parties. Under subsection (A), the owner or mortgagee can serve notice upon the
lienholder that he is required to “commence suit on the lien” within sixty days. If proper
service of the notice is achieved and an affidavit verifying such service is filed with the
county recorder, subsection (B) provides: “If the lienholder fails to commence suit upon
5 the lien within sixty days after completion of service upon him of the notice to
commence suit, or if the suit is commenced but dismissed with prejudice before
adjudication, the lien is void and the property wholly discharged from the lien.”
{¶17} R.C. 1311.11(C) states a separate procedure under which a mechanic’s
lien can be declared void even before the lienholder has been compelled to commence
the action on the underlying dispute. Specifically, subsection (C) allows for the lien to
be replaced by a bond, cash deposit, or other reasonable security. In order for this to
occur, the owner or mortgagee of the property must file with the common pleas court
an application for approval of the new security. After holding a hearing on the matter,
the common pleas court must decide whether the new security is “sufficient” to protect
the lienholder’s interest to the same extent as the lien. As to the effect of a judgment of
approval, R.C. 1311.11(C)(3) provides: “As of the date of the entry of approval, the
security of the bond, cash deposit, * * * or other reasonable security shall be
substituted for the security of the lien, and the lien is void and the property wholly
discharged from the lien.”
{¶18} Focusing upon the word “void” in the foregoing provision, appellant argues
that, since the mechanic’s lien no longer exists, any problem with the enforceability of
the lien has no effect upon the lienholder’s right to recover under the bond. However,
this argument fails to account for the fact that the provision also states that the bond or
other new security is meant to act as a mere substitute for the lien. To this extent, any
obligation stemming from the bond will always be based upon the prior existence of the
lien.
{¶19} Given the nature of its provisions, the purpose of R.C. 1311.11(C) is to
give a landowner or mortgagee the ability to clear the title to the subject real estate.
6 See In re Mechanics’ Lien of Whitta, 7 Ohio App.3d 153, 156 (3d Dist.1982). Clearly,
in order for this purpose to be served, the lien on the real estate must be void once the
bond has been approved. Moreover, since the bond is viewed as a substitute for the
lien, it follows that the surety on the bond steps into the “shoes” of the owner or
mortgagee of the property. Thus, in the context of an action based upon a mechanic’s
lien, the surety on the bond is entitled to invoke all “mechanic’s lien” defenses available
to the landowner. Midwest Curtainwalls, Inc. v. Pinnacle 701, LLC, 8th Dist. Cuyahoga
No. 92269, 2009-Ohio-3740, ¶59. Thus, if the mechanic’s lien would not have been
enforceable as invalid, the surety cannot be held responsible to pay on the bond.
Construction One, Inc. v. Shore Thing, Inc., 8th Dist. Cuyahoga No. 81135, 2003-Ohio-
1339, ¶25.
{¶20} As part of its interpretation of R.C. 1311.11, appellant maintains that, by
moving the common pleas court to approve the two bonds in lieu of the liens, appellee
essentially waived its right to challenge the validity of the liens. In support of this point,
appellee cites R.C. 1311.11(A). However, subsection (A) only has provisions relating
to the service of the notice to the lienholder to commence a lawsuit; it does not have
any provision regarding the effect of substituting a bond for the lien. Furthermore, our
review of the other statutes in R.C. Chapter 1311 does not reveal any provision stating
that a challenge to a mechanic’s lien must be raised in a particular type of proceeding
or within a particular time limit. Finally, appellant has not cited any case law to support
its contention that a landowner or mortgagee waives all challenges to the validity of the
lien by invoking the procedure under R.C. 1311.11(C).
{¶21} In support of its basic argument, appellant further notes that, pursuant to
R.C. 1311.11(B)(3), if a lien becomes void as a result of the lienholder’s failure to bring
7 the required lawsuit within sixty days, “the claim upon which the lien was founded is not
prejudiced * * *.” This provision simply restates the general principle that the merits of
the underlying “debt” dispute will not be affected by any flaw in the security; i.e., if the
lienholder is successful in the separate proceeding on the debt, it simply means that
the judgment debt will be unsecured. To this extent, the cited provision is irrelevant to
the proper interpretation of R.C. 1311.11(C).
{¶22} As a separate argument, appellant submits that its right to recover under
the two surety bonds should be controlled solely by the wording of those documents.
Appellant emphasizes that the bonds do not employ the term “lien” in describing when
appellee will be liable to pay, but instead only uses the word “claim.” Appellant argues
that the term “claim” could only mean the claim it has against Wilshire Homes, and that
the only condition it must satisfy to collect under the bonds is to show that it has
prevailed in its action against Wilshire Homes.
{¶23} The first paragraph of each bond states that Huntington National Bank and
appellee agree to pay appellee the amount of the bond upon the condition that “if
[appellant] shall commence suit upon the Bond and * * * the court shall adjudge and
decree that that said claim is a valid claim and [Huntington] shall pay the sum for which
[appellant] is adjudged and decreed by the Court to have had as a valid claim against
the property, * * *.” In light of the quoted language, the word “claim” is not intended to
refer to appellant’s claim against Wilshire Homes, but instead refers to a separate claim
to enforce the bond itself. In the beginning, the passage refers to the commencement
of a lawsuit “upon the Bond.” At the end, the passage refers to a “valid claim against
the property.”
{¶24} Accordingly, appellant’s interpretation of the quoted language is incorrect;
8 payment is conditioned upon a court’s adjudication that a valid claim has been brought
against the bond. In this case, appellant cannot bring a valid claim under either bond
because the underlying mechanic’s liens are invalid.
{¶25} Based on the foregoing, the sole assignment lacks merit. The judgment of
the Lake County Court of Common Pleas is affirmed.
DIANE V. GRENDELL, J., concurs,
COLLEEN MARY O’TOOLE, J., concurs with a Concurring Opinion.
____________________
{¶26} I concur with the well-reasoned opinion of the majority. I write separately
simply to emphasize that the failure of appellant’s action against the bonds, due to its
failure to perfect its liens on the subject properties, does not in any way affect the
validity of its underlying contractual claims against Wiltshire Homes. Jaric, Inc. v.
Chakroff, 63 Ohio App.3d 506, 511-512 (10th Dist.1989). It appears the trial court
granted appellant default judgment against Wiltshire on these claims, which may be
made a lien against Wiltshire. See, e.g., R.C. 2329.02.