Matador Holdings, Inc. v. HoPo Realty Investments, L.L.C.
Docket: 1091700 and 1091790
Court: Supreme Court of Alabama; August 5, 2011; Alabama; State Supreme Court
Matador Holdings, Inc. and HoPo Realty Investments, L.L.C. have filed separate appeals regarding a Lee Circuit Court order related to commercial property owned by HoPo. Matador, which sells building materials, sued HoPo and its lessee, Stratford Plastic Components of Alabama, for payment for materials and services provided to Stratford at HoPo's property. The appeals focus on issues of a materialman’s lien and unjust enrichment, prompting their consolidation for a single opinion.
Stratford leased a commercial structure from HoPo on December 12, 2008, intending to convert it into a manufacturing facility. The lease specified that Stratford could only use the premises for manufacturing, storage, and distribution of plastic components, requiring HoPo's prior written consent for any alterations or improvements, which could not be unreasonably withheld. Conditions for consent included submitting plans by a licensed architect or engineer, using suitable contractors with local business licenses and insurance, and ensuring all work complied with regulations and was paid for in cash to avoid liens.
Alterations, other than trade fixtures, became HoPo's property, while Stratford retained ownership of trade fixtures, which could be removed upon vacating the premises. Stratford was responsible for all costs associated with removing trade fixtures and repairing any damage caused. The lease explicitly stated that Stratford could not create any liens or encumbrances on HoPo’s property and that HoPo would not be liable for any expenses related to work or materials provided to the leased premises.
Stratford is obligated to provide documents requested by HoPo to secure lien protection. All costs related to alterations, repairs, and materials are to be borne by Stratford, which is fully responsible for payments to contractors and suppliers. Should any mechanic's lien or payment order arise due to Stratford's actions, Stratford must resolve it within 15 days at its own expense, either by canceling the lien or providing a surety bond to protect HoPo from potential losses. The lease allows HoPo to enter the property for inspections or repairs. In September 2008, Stratford secured a line of credit with Matador, ordering materials for converting the leased property into a manufacturing facility, accumulating a total debt of $59,057.62. Stratford vacated the property before the lease ended without settling the debt to Matador. Howard Porter, a member of HoPo and its rental agent, confirmed the lease was 'as-is' and that Stratford did not request modifications. He noted that Stratford was consistently late on rent payments. Porter received a call from Matador's owner, Tracey Davis Allen, regarding Stratford’s unpaid materials, prompting him to notify Stratford of its lease obligations. Porter was unaware of Matador's involvement before the lease and stated that no notice of material supply was received from Matador. Although Stratford provided a basic layout for office partitions, no formal blueprints or approvals for work were submitted to HoPo.
Porter asserted that his only knowledge of Matador supplying materials to Stratford at the leased property stemmed from a phone call with Allen and a lien filed by Matador. He denied any agreement to pay for these materials, stating that payment issues were strictly between Allen and Stratford. Porter mentioned that he communicated to Allen or an independent contractor that Matador could retrieve its materials, provided it did not damage the building. He confirmed that the property had been shown to potential tenants post-Stratford's exit, but had not yet been leased, noting that some alterations were beneficial for certain tenants while detrimental for others. He indicated significant repairs would be necessary to prepare the property for a new tenant due to the condition of various utilities left after Stratford vacated.
Allen, the owner of Matador, testified that all materials ordered by Stratford were either delivered by Matador or shipped directly to the property. She recounted a conversation with Porter around the time of filing a lien in March 2009, during which he mentioned Stratford had not defaulted on rent. Allen informed Porter that she had legal representation and anticipated involving HoPo in the matter. Matador's invoices, totaling $47,915.24, covered materials supplied from November 2008 to March 2009.
Former Matador owner George Dyar testified about necessary upgrades to convert the building from a warehouse to a production facility, noting that improvements would benefit future tenants but not necessarily Stratford. He believed that Matador's piping could be removed without damaging the structure. Mike Carter, property manager for Porter Properties, discussed his attempts to lease the property after Stratford's departure, emphasizing that Matador had not communicated its supply of materials to HoPo.
HoPo became aware in March 2009 that Matador had supplied materials to Stratford when a materialman’s lien was filed. Following testimony and evidence presentation, the trial court ordered the following: Matador holds a secured lien under Ala.Code § 35-11-212 for goods and materials provided to Stratford, which can be removed from the Warehouse without damaging it or the property. HoPo must allow Matador access to remove these items for sale. Additionally, Matador's lien secures the unexpired lease term between HoPo and Stratford but may only be executed according to specified procedures. Any other claims by Matador, as recorded in a Verified Statement of Lien, are declared null and void regarding additional property interests. Matador's claim of unjust enrichment against HoPo was denied. Matador's post-judgment motion to amend the judgment was denied after 90 days under Rule 59.1. The appeals that followed will be reviewed under the ore tenus standard, which presumes the trial court's findings based on oral testimony are correct unless there is a clear error. This standard remains valid unless the law was improperly applied to the facts.
Matador contends that the trial court wrongly denied its unjust enrichment claim against HoPo. Under Alabama law, to succeed in an unjust enrichment claim, a plaintiff must demonstrate that the defendant knowingly accepted and retained a benefit provided by another, who reasonably expected compensation. Key precedents indicate that a recipient is unjustly enriched if retaining the benefit is unjust, particularly if the donor acted under a mistake or the recipient engaged in unconscionable conduct, such as fraud or coercion. The court found no evidence of Matador making a mistake or HoPo accepting responsibility for the materials provided. HoPo was unaware of Matador’s supply of materials until after project completion. Testimony revealed that while some improvements might benefit future tenants, others were specifically tailored for production tenants. HoPo's offer to allow Matador to remove the materials further complicates the claim. Given the conflicting evidence on whether HoPo knowingly retained the benefit, the trial court's judgment was supported and ultimately affirmed.
In a separate matter, HoPo challenged the enforcement of Matador's materialman’s lien, arguing it arose due to Stratford's alleged lease violations regarding property improvements. Matador countered that HoPo was informed of Stratford's plans to convert the building, as evidenced by a blueprint provided at the lease's inception.
Matador claims that HoPo had actual knowledge of property improvements since HoPo employees visited the premises multiple times to collect rent. Under Section 35-11-212, Ala.Code 1975, liens attach to leased lands when a building or improvement is erected under a valid contract with a lessee, provided the lease terms are not violated. The lien allows the holder to prevent lease forfeiture by paying rent or fulfilling other lessee obligations. Upon sale of the building, the purchaser can assume possession by paying rent or may remove the building within 60 days post-sale. If the lien holder has paid rent or fees due to the lessor, they are entitled to reimbursement from sale proceeds.
The evidence shows that HoPo was aware of necessary construction to accommodate Stratford’s needs, as Stratford provided a floor plan for intended modifications. However, Stratford did not comply with several lease requirements, including obtaining proper architectural stamps, providing contractor licenses and insurance, and ensuring payment for materials and construction to avoid liens. Due to these violations, Matador's lien against HoPo's property is deemed improper, leading to the conclusion that the trial court erred in upholding it.
The trial court's denial of Matador’s unjust-enrichment claim in case no. 1091700 is affirmed, but the enforcement of Matador's materialman’s lien in case no. 1091790 is reversed, declaring the lien void and remanding for the appropriate order.
The court affirmed one appeal and reversed another, remanding with directions. Consent judgments were previously established in favor of Matador against Stratford and HoPo against Stratford, amounting to $68,934.24 and $790,043.16 respectively, encompassing principal, attorney fees, compensatory damages, and interest. The lease in question, running from December 15, 2008, to December 31, 2013, included a 'Captions' section clarifying that the paragraph headings were for convenience and did not affect the interpretation of the lease's contents. Despite the placement of certain hold-harmless paragraphs under 'Maintenance and Repair of the Leased Premises,' this did not alter the court's review of their language.
Testimony revealed that Matador, which provided building materials for Stratford's conversion of the leased property, submitted unpaid invoices totaling $47,915.24. George Dyar, a former owner of Matador, confirmed that the upgrades made to the property would benefit future tenants beyond Stratford. Mike Carter, a property manager, noted that he was unaware of Matador supplying materials until March 2009, when a materialman’s lien was filed. Ultimately, the trial court ruled that Matador's judgment against the Stratford defendants is secured by a lien under Ala.Code 1975, § 35-11-212.
Matador holds a lien on goods and materials it provided to Stratford, which are incorporated into a Warehouse, but this lien is limited to items that can be removed without damaging the Warehouse or its property. Matador is permitted to enter the Warehouse, after notifying HoPo, to retrieve these items for sale according to legal procedures. Furthermore, a previously entered judgment in favor of Matador against the Stratford Defendants is also secured by a lien on the remaining term of the lease between HoPo and Stratford, executable only as specified under Alabama law. Aside from what is expressly stated in this judgment, Matador's lien as recorded in the Lee County Probate Office is null and void regarding any other property interests. Additionally, Matador's claim of unjust enrichment against HoPo has been denied. Matador's subsequent motion to amend this judgment was denied after 90 days under Rule 59.1, leading to the filing of appeals. The standard of review for these cases is the ore tenus standard, which presumes the trial court's factual findings are correct unless shown to be clearly erroneous. This standard applies to cases involving oral testimony and remains effective unless the law has been improperly applied to the facts. Matador contends that the trial court made an error in denying its unjust enrichment claim against HoPo.
HoPo contends that the elements required for an unjust-enrichment claim under Alabama law are not met. To succeed, a plaintiff must demonstrate that: 1) the defendant knowingly accepted and retained a benefit; 2) the benefit was provided by another; and 3) the provider had a reasonable expectation of compensation. The unjust enrichment is established if retaining the benefit is deemed unjust. Retention is considered unjust if the donor acted under a mistake of fact or misreliance, or if the recipient engaged in unconscionable conduct like fraud or coercion. Without such conditions, while enrichment may occur, it is not classified as unjust.
In this case, no evidence indicated that Matador mistakenly provided materials or that HoPo accepted responsibility for those materials to induce Matador's supply. HoPo was unaware of Matador's involvement until after the project was completed. Testimony suggested that some improvements were only beneficial to specific tenants. HoPo also allowed Matador to remove certain materials without damaging the property. Conflicting evidence existed regarding whether HoPo knowingly benefited or insisted on retaining that benefit. However, sufficient evidence supported the trial court's judgment, which was therefore affirmed.
Regarding the materialman’s lien, HoPo argued that the trial court incorrectly enforced Matador’s lien due to Stratford’s alleged violation of lease terms related to property alterations. Matador countered that the lease terms indicated HoPo was aware of Stratford’s conversion plans and had received a blueprint of the proposed construction. Additionally, HoPo had actual knowledge of the improvements as its employees visited the premises to collect rent. Alabama law, specifically Section 35-11-212, provides for liens against leased property.
When a building or improvement is made under a contract with a lessee, and it complies with the lease terms, a lien attaches to the property and the remaining lease term. The lienholder can prevent lease forfeiture by paying due rent or fulfilling lessee obligations. If the lien is enforced through property sale, the buyer may either take possession of the leased premises by paying rent or other obligations or remove the improvement within 60 days. Any pre-sale payments made by the lienholder to the lessor for the lessee’s obligations can be reimbursed from sale proceeds.
The lessor can discharge the lien before sale by paying the lienholder the secured amount, including costs. After sale, the lessor can prevent the removal of improvements by compensating the buyer for their value, upon which the improvements become the lessor’s property.
In this case, HoPo was aware that construction was needed for Stratford’s requirements, as evidenced by a submitted floor plan. However, Stratford failed to meet several lease conditions, including proper architectural approvals and payment methods. Consequently, Matador's lien against HoPo was deemed improper due to Stratford’s lease violations, leading to a reversal of the trial court's upholding of the lien. The court affirmed the denial of Matador's unjust enrichment claim against HoPo but reversed and remanded the ruling regarding the lien, declaring it void. Consent judgments against Stratford were previously settled, and the lease period was from December 15, 2008, to December 31, 2013. The lease agreement’s captions do not alter the interpretation of the hold-harmless clauses included in the maintenance section. Additionally, consent judgments were entered for substantial amounts against Stratford, which included principal, attorney fees, and damages. The court did not address whether Stratford had breached its lease regarding financial obligations to HoPo at the material supply time.
