THIS OPINION
HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT
IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.
THE
STATE OF SOUTH CAROLINA
In The Court of Appeals
E. Hathaway Construction,
Inc., Respondent,
v.
David Eli, a/k/a David Eliyahu,
Four Seasons, Rebecca Shirley, David L. Shirley and the Shirley Family
Limited Partnership, Defendants
Of Whom David Eli, a/k/a
David Eliyahu, Four Seasons is the, Appellant.
Appeal From Horry County
J. Stanton Cross, Jr., Master-In-Equity
Unpublished Opinion
No. 2004-UP-289
Heard April 7, 2004 Filed
May 4, 2004
AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED
John M Leiter, of Myrtle
Beach, for Appellant.
Norwood David DuRant, of
Surfside Beach, for Respondent.
PER
CURIAM: E. Hathaway Construction, Inc. brought this action against David
Eli, a/k/a David Eliyahu, Rebecca Shirley, David L. Shirley, and the Shirley
Family Limited Partnership to foreclose on a mechanics lien and for breach
of contract seeking to recover money owed for the construction of a building
on land Eli leased from the Shirleys. The Master-In-Equity awarded Hathaway
a judgment on its breach of contract claim, determined the total debt on the
mechanics lien, including a set-off in favor of Eli as a result of a leak,
and ordered the foreclosure of the lien. The master also awarded Hathaway attorneys
fees. We affirm in part, reverse in part, and remand.
FACTS
In March
of 2000, Hathaway and Eli entered into a verbal contract for the construction
of a building on land leased from the Shirleys. The building was to be used
by Eli for selling beach merchandise. The parties agreed Eli was to pay cost
plus fifteen percent.
The original
plan for the building called for the installation of a glass panel front to
the building. After construction began, Eli requested a change to the shape
of the front of the building by adding more glass and an angled front. Hathaway
used a Kawneer prefabricated system for the front of the building.
Eli made
a portion of the payments required under the verbal contract. However, he eventually
stopped making payments and Hathaway ceased work on the building. On August
31, 2000, Hathaway received a certificate of occupancy for the building, and
no further work was completed on the building.
Hathaway filed an Affidavit of Mechanics
Lien against the real property and the owners of the fee simple estate. The
notice of mechanics lien made no mention of the leasehold interest. On November
9, 2000, Hathaway filed the current action, seeking to foreclose on the mechanics
lien and also seeking damages for breach of contract. The Shirleys answered
and cross-claimed against Eli for indemnification. In his answer, Eli asserted
he was entitled to a setoff for the leaking glass front. He also counterclaimed
for damages suffered by the construction deficiencies.
The Master granted
Eli a $20,000 set-off for Eli to repair the roof that has a leak. He held
Hathaway was entitled to a judgment of $243,705.24 and ordered foreclosure of
the leasehold interest.
Eli filed a motion for reconsideration.
In it he alleged the court erred in concluding Hathaway had a valid mechanics
lien against the leasehold interest where the lien failed to mention the leasehold
and only mentioned the fee simple interest. Eli also alleged the court erred:
1) in enforcing the foreclosure against Elis wife because she was never made
a party to the action; 2) in awarding penalties and interest to Hathaway based
upon subcontractors not being paid; 3) in awarding prejudgment interest; 4)
in awarding attorneys fees under the contract; 5) in awarding one half of the
accountants fee; 6) in determining the amount of the setoff to which Eli was
entitled; and (7) in including certain sums in the total debt secured by the
mechanics lien.
The Master filed
an Amended Final Order in which he reaffirmed his previous order, but changed
some of the amounts. He held the total debt secured by the mechanics lien
was $201,752.69, which included $183,626.41 as the contract balance, prejudgment
interest, attorneys fees, court fees and the setoff in favor of Eli in the
amount of $20,000.00. The master also held Hathaway was entitled to a judgment
in the amount of $239,128.59, which included the above total debt plus half
of the accountants fee equaling $6,352.50 and penalties and interest charged
by subcontractors equaling $31,023.40. Although the attorneys fees are included
in the calculation of the mechanics lien, the order states the master awarded
the attorneys fees under the terms of the contract.
STANDARD OF REVIEW
The foreclosure of a mechanics lien
is an action at law. T.W. Morton Builders, Inc. v. von Buedingen, 316
S.C. 388, 397, 450 S.E.2d 87, 92 (Ct. App. 1994). An action for breach of contract
seeking money damages is also an action at law. Sterling Dev. Co. v. Collins,
309 S.C. 237, 240, 421 S.E.2d 402, 404 (1992). In an action at law, tried without
a jury, the masters findings of fact will not be disturbed on appeal unless
found to be without evidence which reasonably supports the Masters findings.
Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 86, 221 S.E.2d
773, 775 (1976).
LAW/ANALYSIS
I. Validity
of the Foreclosure
Eli argues the Master erred in foreclosing
on the leasehold interest pursuant to the mechanics lien because the mechanics
lien did not mention the leasehold interest. Additionally, he asserts the mechanics
lien only referenced the owners of the fee simple interest, the Shirleys, and
not the owners of the leasehold interest, which was foreclosed. We find Eli
failed to preserve this issue.
The mechanics lien statute requires
the lien to include a description of the property intended to be covered by
the lien sufficiently accurate for identification, with the name of the owner
of the property . . . S.C. Code Ann. § 29-5-90 (Supp. 2003). The lien in this
case did list the owner of the property, but failed to list the owner of the
leasehold interest. However, in the complaint, under the cause of action to
foreclose on mechanics lien, Hathaway noted the Shirleys had leased the property
to Eli and requested a judgment against the Defendants which include Eli.
Additionally, the complaint indicated that any deficiency judgment, if necessary,
should be against the Defendants including Eli. During an earlier arbitration
hearing, counsel for Hathaway stated that the action was under the mechanics
lien statute as a mechanics lien foreclosure of a leasehold interest. There
is no indication in the record that Eli objected to the statement. Finally,
at the beginning of trial, the court and counsel had discussions regarding the
fact Hathaway was proceeding to foreclose the leasehold interest. Eli made
no objection at that time. Later in the trial, Elis counsel stipulated that
the mechanics lien was filed timely and in compliance with the statute, and
the summons and complaint were filed timely and in compliance with the statute.
Again, Eli raised no objection to the court proceeding as a foreclosure against
the leasehold interest.
We find Eli should have raised the
objection to the form of the mechanics lien at the earliest opportunity and
not during a motion to alter or amend the judgment after the case had been tried.
See Patterson v. Reid, 318 S.C. 183, 185, 456 S.E.2d 436, 437
(Ct. App. 1995) (A party cannot for the first time raise an issue by way of
a Rule 59(e) motion which could have been raised at trial.). As such, we find
Eli waived his right to contest the form of the mechanics lien.
II. Foreclosure
on Dalya Eliyahus Leasehold Interest
Eli contends
the master erred in foreclosing the leasehold interest because Mrs. Eliyahu
was never made a party to the action. We disagree.
The purpose
of a notice of pendency of an action is to inform a purchaser or encumbrancer
that a particular piece of real property is subject to litigation. Pond
Place Partners, Inc. v. Poole, 351 S.C. 1, 16, 567 S.E.2d 881, 889 (Ct.
App. 2002). The lis pendens statute provides:
From the time of filing only,
the pendency of the action shall be constructive notice to a purchaser or
encumbrancer of the property affected thereby, and every person whose
conveyance or encumbrance is subsequently executed or subsequently recorded
shall be deemed a subsequent purchaser or encumbrancer and shall be bound
by all proceedings taken after the filing of such notice to the same extent
as if he were made a party to the action. For the purposes of this
section, an action shall be deemed to be pending from the time of filing
such notice.
S.C. Code
Ann. § 15-11-20 (1976) (emphasis added).
Thus,
when a notice of pendency is filed, a purchaser or encumbrancer is charged with
constructive notice of litigation if his conveyance or encumbrance is subsequently
executed or recorded. MI Co., Ltd. v. McLean, 325 S.C. 616, 626, 482
S.E.2d 597, 602 (Ct. App. 1997). A properly filed lis pendens binds subsequent
purchasers or encumbrancers to all proceedings evolving from the litigation.
South Carolina Natl Bank v. Cook, 291 S.C. 530, 532, 354 S.E.2d 562,
562 (1987).
The mechanics
lien in this case was filed on October 24, 2000. The lis pendens was filed
November 9, 2000. At the time, there was nothing filed with the Horry County
Register of Deeds to indicate that Mrs. Eliyahu was a party to the lease. Eli
and Mrs. Eliyahu subsequently filed a Memorandum of Lease with the RMC office
on December 29, 2000. As Mrs. Eliyahu failed to file the Memorandum of Lease
until after the filing of the lis pendens, she is bound by the proceedings taken
after the filing of such notice to the same extent as if she had been made a
party to the action. Accordingly, we find the master did not err in foreclosing
Mrs. Eliyahus leasehold interest in the property.
III. Setoff
Eli contends the master erred in
awarding only a $20,000.00 setoff against the amount Hathaway was entitled to
collect. He contends the master failed to make specific findings of fact to
support the amount. We agree and believe the issue should be remanded to the
master for a determination of the amount of the setoff and for specific findings
of fact in support of the amount.
In the Amended Final Order the master
awarded a $20,000.00 setoff in favor of Eli. The master stated:
The Court finds that the Defendant,
David Eli, answered and further counter claims and sets off for approximately
[$300,000.00] against the Plaintiff. This Court finds after considering
all of the evidence presented by David Eli, that most of the evidence is
not credible. However, the Court does find for the Defendant, David Eli,
and will allow the Defendant, David Eli, the set off in the amount of [$20,000.00]
to repair the roof that has a leak.
We agree that a setoff is appropriate
given the fact that even Hathaway acknowledges the construction is not complete
and a leak has occurred in the building. However, the Master made no finding
of fact stating how he reached a figure of $20,000.00 for the setoff. We are
unable to derive the basis for the figure from the record on appeal. As such,
we remand to the master for specific finding regarding the basis for the amount
of the setoff to which Eli is entitled. See Timothy C. Doughtie Adver.,
Inc. v. Nelsen Steel & Wire Co., Inc., 284 S.C. 27, 30, 324 S.E.2d 329,
331 (Ct. App. 1984) (case remanded where trial court failed to set forth specific
findings of fact and Court of Appeals was unable to determine whether the order
was controlled by an error of law).
IV. Accountants
Fee
Eli argues the master erred in requiring
him to pay one half of the accountants fee. We disagree.
The master found the parties entered
into an agreement that each party would pay for one half of the fee for Marshall
Wells, a CPA brought in to examine Hathaways records. During trial, Lynn Slocum,
an employee of Hathaway, testified she was involved in meetings in which Eli
requested that an independent CPA audit the account. She also stated that Eli
agreed to pay one half of the fee for the audit. Mr. Wells testified that Floyd
Hathaway, the owner of Hathaway, told him that his fee would be split between
Hathaway and Eli. Finally, Lisa Liebowitz, an employee of Eli, testified that
Eli and Floyd Hathaway had a meeting to discuss the account. She testified,
David called me, say[ing], Would you you know, are you willing to work with
someone we hire together, with [Hathaway] . . .
Based
upon our limited standard of review, we find there was evidence in the record
to support the masters finding that Eli agreed to hire Wells and to pay one
half of his fee for the audit of the account at Hathaway.
V. Subcontractors Penalties
and Interest
Eli contends the master erred in
awarding Hathaway the penalties and interest resulting from Hathaways failure
to pay subcontractors. We disagree and find the penalties and interest resulted
from Elis failure to pay according to the contract and are therefore a cost
incurred by Hathaway.
At trial, Slocum testified that Hathaway
incurred approximately $32,000.00 in fees, interest, penalties, and costs as
a result of Elis failure to pay when requested. The record includes many notices
of interest charges or late fees by Hathaways subcontractors.
The master determined the penalties
and interest were the direct result of the breach by Eli. As such, he awarded
$31,023.40 to Hathaway under the breach of contract claim. Damages recoverable
for breach of contract either must flow as a natural consequence of the breach
or must have been reasonably within the parties contemplation at the time of
the contract. Manning v. City of Columbia, 297 S.C. 451, 455, 377 S.E.2d
335, 337 (1989). We find there was testimony and evidence to support the masters
decision that the penalties and interest were the direct result of the breach
by Eli, and therefore, are recoverable under the breach of contract cause of
action.
VI. Attorneys Fees
Finally, Eli contends the master
erred in awarding Hathaway attorneys fees under the contract. He claims there
was no evidence the contract allowed for the collection of attorneys fees.
Hathaway contends it should be able to recover attorneys fees under the mechanics
lien statute and the award should be affirmed. We believe the issue should
be remanded for a determination by the master as to the amount of attorneys
fees due under the mechanics lien statute.
It is well established in South Carolina
that [a]ttorneys fees are not recoverable unless authorized by contract or
statute. Jackson v. Speed, 326 S.C. 289, 307, 486 S.E.2d 750, 759 (1997).
In this case, there is no evidence in the record indicating attorneys fees
were contemplated by the contract. Therefore, the master erred in awarding
attorneys fees to Hathaway under the contract.
The mechanics lien statute, however,
specifically authorizes the collection of attorneys fees by the prevailing
party. S.C. Code Ann. § 29-5-10(a) (Supp. 2003). While the master stated during
the hearing on Elis motion to alter or amend that he was awarding the fees
under the statute, his final order stated the fees were pursuant to the contract.
The master did not examine Hathaways right to attorneys fees under the statute,
and therefore, we remand for consideration of the amount of attorneys fees
to which Hathaway is entitled under section 29-5-10(a).
CONCLUSION
We find Eli waived
his right to complain of the form of the mechanics lien by not objecting at
the earliest possible opportunity. Additionally, we find Mrs. Eliyahu is bound
by the proceedings as the Memorandum of Lease was filed subsequent to the filing
of the lis pendens. We find the master correctly included in the judgment amount
one half of the fee for the accountant and the penalties and interest charged
by Hathaways shareholders. Accordingly, the decisions by the master on these
issues are affirmed. We find the master failed to make specific findings of
fact regarding the amount of the setoff to which Eli is entitled. Additionally,
the master erred in awarding the attorneys fees under the contract and not
under the mechanics lien statute. As such, these two issues are reversed and
remanded to the master for further consideration. Therefore, the order of the
master is
AFFIRMED
IN PART, REVERSED IN PART, AND REMANDED.
HUFF and STILWELL, JJ. and CURETON,
A.J., concur.