Supreme Court Seal
South Carolina
JUDICIAL DEPARTMENT
Site Map | Feedback
2004-UP-289 - E. Hathaway Construction, Inc. v. Eli

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Unpublished Opinion No. 2004-UP-289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 mechanic’s 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 mechanic’s 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 attorney’s 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 Mechanic’s Lien against the real property and the “owners of the fee simple estate.”  The notice of mechanic’s 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 mechanic’s 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 Eli’s 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 attorney’s fees under the contract; 5) in awarding one half of the accountant’s 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 mechanic’s 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 mechanic’s lien was $201,752.69, which included $183,626.41 as the contract balance, prejudgment interest, attorney’s 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 accountant’s fee equaling $6,352.50 and penalties and interest charged by subcontractors equaling $31,023.40.  Although the attorney’s fees are included in the calculation of the mechanic’s lien, the order states the master awarded the attorney’s fees “under the terms of the contract.” 

STANDARD OF REVIEW

The foreclosure of a mechanic’s 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 master’s findings of fact will not be disturbed on appeal unless found to be without evidence which reasonably supports the Master’s 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 mechanic’s lien because the mechanic’s lien did not mention the leasehold interest.  Additionally, he asserts the mechanic’s 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 mechanic’s 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 mechanic’s 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 mechanic’s lien statute as a mechanic’s 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, Eli’s counsel stipulated that “the mechanic’s 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 mechanic’s 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 mechanic’s lien.

II.      Foreclosure on Dalya Eliyahu’s 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 Nat’l Bank v. Cook, 291 S.C. 530, 532, 354 S.E.2d 562, 562 (1987).

The mechanic’s 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. Eliyahu’s 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.    Accountant’s Fee

Eli argues the master erred in requiring him to pay one half of the accountant’s 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 Hathaway’s 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 master’s finding that Eli agreed to hire Wells and to pay one half of his fee for the audit of the account at Hathaway.

V.      Subcontractor’s Penalties and Interest

Eli contends the master erred in awarding Hathaway the penalties and interest resulting from Hathaway’s failure to pay subcontractors.  We disagree and find the penalties and interest resulted from Eli’s 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 Eli’s failure to pay when requested.  The record includes many notices of interest charges or late fees by Hathaway’s 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 master’s 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.    Attorney’s Fees

Finally, Eli contends the master erred in awarding Hathaway attorney’s fees under the contract.  He claims there was no evidence the contract allowed for the collection of attorney’s fees.  Hathaway contends it should be able to recover attorney’s fees under the mechanic’s 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 attorney’s fees due under the mechanic’s lien statute.

It is well established in South Carolina that “[a]ttorney’s 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 attorney’s fees were contemplated by the contract.  Therefore, the master erred in awarding attorney’s fees to Hathaway under the contract.

The mechanic’s lien statute, however, specifically authorizes the collection of attorney’s fees by the prevailing party.  S.C. Code Ann. § 29-5-10(a) (Supp. 2003).  While the master stated during the hearing on Eli’s 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 Hathaway’s right to attorney’s fees under the statute, and therefore, we remand for consideration of the amount of attorney’s 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 mechanic’s 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 Hathaway’s 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 attorney’s fees under the contract and not under the mechanic’s 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.