# Petition — Frederick Contractors, Inc. v. Metropolitan Federal Savings & Loan Ass'n

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1977
- **Citation:** 434 U.S. 876

## Text

IN THE

Supreme Court of the Gnit States

SEPTEMBER TERM, 1976

No. 76-1668

FREDERICK CONTRACTORS, INC., e¢ al.,
Petitioners,

METROPOLITAN FEDERAL SAVINGS AND LOAN
ASSOCIATION OF BETHESDA, ez? ai.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE JUDGMENT OF THE COURT OF APPEALS
OF MARYLAND

MANUEL M. WEINBERG

CARVILLE M. DOWNES

DAVID M. GUGGENHEIM
Weinberg, Michel and Stern
10 West College Terrace
Frederick, Md. 21701

REX L. STURM
Brown and Sturm
260 East Jefferson Street
Rockville, Maryland 20850

Attorneys for Petitioners

Wasringron OC © CLE PUBLISHERS © LAW PRINTING CO « (70?) 3193 0675

(i)

TABLE OF CONTENTS

APPENDIX:

Extract of Petitioners’ Memorandum in the Circuit

Court for Montgomery County .................

Extract of Petitioners’ Brief in the Court of Appeals

Se neck dehasdeseSbetsebbedcésuen da

Cases.
Barry Properties, Inc. v. Fick Bros. Roofing Co.,

277 Md. 15, 353 A.2d 222 (1976) ...............

Brook Hollow Associates v. J. E. Greene, Inc., 389

Pes SEED concn cceudeoesecvcs

Coffin Brothers v. Bennett, 277 U.S. 29, 48 S. Ct.

SP OE HD no otbcedcceecccceeceses

Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32

EOE cceeccococccescsccescccesccces

Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S. Ct.

PEG MENGE coccccececeeccereccesss

(ii)

North Georgia Finishing, Inc. v. Di-Chem, Inc. 419
U.S. 601, 95 S. Ct. 719, 42 L.Ed.2d 751 2... ee eee eee ee 7

Residential Industrial Loan Company, Inc. v.
Manuel M. Weinberg, Trustee, et al. and
Frederick Contractors, Inc. v. Metropolitan
Federal Savings and Loan Association of
DT 66 cGeSUS SUSE E CSREES SEENEHOE GSS eUEeSEe CHOSE. l

Roundhouse Construction Corp. v. Telesco Masons
Supplies Company, Inc. (67 Conn. 371,

SE CUED ace nedeeedeesesescesccccanaceans 6

Snaidach v. Family Finance Corp., 395 U.S. 337, 89 S.
ee oe ie coat acbateeesdess eden 7

Spielman-F ond, Inc. v. Hanson's Inc., 379 F.Supp.997
(D. Ariz. 1973) per (curiam), aff'd 417 US. 901

DEE. suuunédad ceambeseaekubusestedd dbiseuces céceeeses 6
In Re Thomas A. Carey, Inc., 412 F. Supp. 667 (E.D.

ree re ce uudeebeseed 6
Statutes and Constitutional Provisions:
14th Amendment, Federal Constitution .... 2... 0.666 cee eee 2?
Md. Code (1974 and 1975 Cum. Supp.), Real Prop.

Be Cee GED choc cc be cdcccescccescccceccees 2

IN THE

Supreme Court of the United States

SEPTEMBER TERM, 1976

No.

FREDERICK CONTRACTORS, INC., ef al,
Petitioners,

METROPOLITAN FEDERAL SAVINGS AND LOAN
ASSOCIATION OF BETHESDA, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE JUDGMENT OF THE COURT OF APPEALS
OF MARYLAND

PRELIMINARY STATEMENT

Frederick Contractors, Inc. prays that the Writ of Certiorari
issue to review a judgment of the Court of Appeals of
Maryland, entered on February 24, 1977 in the case styled
Residential industrial Loan Company, Inc. v. Manuel M.
Weinberg, Trustee, et al. and Frederick Contractors, Inc. et al.
v. Metropolitan Federal Savings and Loan Association of
Bethesda No. 120, September Term, 1976.

OPINIONS

The original decision of the Court of Appeals of Maryland
decided on February 24, 1977 is included herein as Appendix
A. An extract of Petitioners’ memorandum in the Circuit
Court for Montgomery County, Maryland raising the Federal
issue is set forth herein as Appendix B. An excerpt from
Petitioners’ Brief in the Court of Appeals of Maryland raising
the Federal question is included herein as Appendix C.

JURISDICTION

The Jurisdiction of this Honorable Court to issue a Writ of
Certiorari is grounded on 28 U.S. Code §1254.

QUESTION PRESENTED

DID THE COURT OF APPEALS OF MARYLAND ERR
IN HOLDING THAT THE MARYLAND MECHANICS
LIEN LAW AS APPLIED TO THESE PARTIES
VIOLATED THE DUE PROCESS CLAUSE OF THE
FEDERAL CONSTITUTION.

STATUTES AND CONSTITUTIONAL PROVISIONS
INVOLVED:

Md. Code (1974 and 1975 Cum. Supp.), Real Prop. Art.,

§ §9-101 to -111.
14th Amendment, Federal Constitution.

STATEMENT OF THE CASE

On March 26, 1975, the Court of Appeals of Maryland
held that Frederick Contractors, Inc., had a mechanic's lien
but must wait for arbitration to foreclose its lien. Because
of a delay on the part of the landowner, Bel Pre Medical
Center, Inc., in paying the necessary fees to go to
arbitration, the panel was not to hear the case until
January 15 and 16, 1976. When the day for the arbitration
hearing approached, Bel Pre withdrew its request for
arbitration. Frederick Contractors, Inc., promptly
petitioned for a hearing to enforce its mechanic’s lien. A
hearing was held on February 26, 1976, and an Order
appointing Manuel M. Weinberg and Rex L. Sturm as
trustees to sell was entered on that date. On February 10,
1976, the Court of Appeals filed its opinion in Barry
Properties, Inc. vs. Fick Bros. Roofing Co., 277 Md. 15
(1976). This case held the Maryland mechanic's iien law
unconstitutional. The Trustees scheduled a foreclosure sale
for April 9, 1976. Upon the application of Metropolitan
Federal Savings and Loan Association and Residential
Industrial Loan Company, owners of Deeds of Trust on the
property, the sale was enjoined by the Circuit Court on
April 9, 1976. The trustees under the Deed of Trust
securing Metropolitan Federal Savings and Loan Association
scheduled a sale for June 14, 1976. That sale was enjoined
by the Referee in Bankruptcy for the Federal District
Court for Maryland.

On July 16, 1976, a hearing was held to determine the
priorities between the parties to this action. On August 20,
1976, an order was filed in the Circuit Court for
Montgomery County, Maryland ruling the order of
priorities with Metropolitan Federal first, Frederick Con-
tractors second, and Residential Loan Company third.

4

An appeal was taken by the Residential Industrial Loan
Company and Frederick Contractors, Inc. The Court of
Appeals of Maryland granted certiorari and upon hearing
held that th. mechanic's lien law of Maryland was void ab
initio and therefore the two Deeds of Trust took priority
because they were recorded prior to the Court decree for
foreclosure. Thus, the priority was held to be: First,
Metropolitan Federal; Second, Residential Industrial Loan
Company; and Third, Frederick Contractors, Inc.

STATEMENT OF THE FACTS

This case involves the order of priorities among two
owners of Deeds of Trust notes and a holder of a
mechanic's lien on property owned by a bankrupt
landowner, Bel Pre Medical Center, Inc. In 1971 Frederick
Contractors, Inc. agreed with the landowner, Bel Pre, to
construct an addition to a nursing home and began
construction shortly thereafter. On November 30, 1972 Bel
Pre executed a Deed of Trust covering the real property
involved securing 2 Note for $1,400,000.00 to Metropolitan
Federal Savings and Loan which Deed of Trust was
recorded in the Land Records on December 12, 1972. The
construction was completed in January 1973 at which
point approximately $148,000.00 was claimed by Frederick
Contractors, but was disputed by Bel Pre. Metropolitan and
Bel Pre were advised under the statutory procedure of the
intent to file a mechanic’s lien against the property and on
March 22, 1973 a mechanic’s lien was filed in the Land
Records. On April 30, 1973 a Bill of Complaint to
foreclose the lien was filed.

On April 18, 1973 some twelve (12) days earlier a Deed
of Trust securing a loan in the amount of $160,000.00
from Residential Industrial Loan Company, Inc. was

executed. On May 11, 1973 some eleven (11) days after
the filing of the Bill of Complaint, this Deed of Trust was
recorded in the Land Records.

From that time until March 26, 1975, the case traveled
through the Court system in Maryland and on March 26,
1975 the Court of Appeals stayed the foreclosure
proceeding “until arbitration [was] concluded or Be\ Pre’s
demand |was] withdrawn.”

The arbitration proceedings were eventually scheduled
for hearing on January 15 and 16, 1976, but when the day
for arbitration approached, Bel Pre’s demand was with-
drawn. Frederick Contractors promptly petitioned for a
hearing on its foreclosure proceeding and such a hearing
was held on February 26, 1976. Bel Pre at that hearing did
not dispute the amount nor the right to a mechanic’s lien
nor did it raise any defense of constitutionality. The Court
thus entered a “Decree for Enforcement of Mechanics Lien
and Appointment of Trustees for Foreclosure Sale.”

On February 10, 1976, the Barry Properties, Inc. vs. Fick
Bros. Roofing Co. decision was filed by the Court of
Appeals of Maryland holding that prior to a judicial hearing
a mechanic’s lien does not attach to real estate.

A foreclosure sale was scheduled by the trustees for
April 9, 1976 and the two Deeds of Trust Note holders
filed a Bill of Complaint to enjoin the sale and requested
that the mechanic's lien be declared junior to their liens.

Subsequently, Bel Pre went into bankruptcy and the
bankruptcy Judge permitted the Circuit Court of Maryland
to hear the question of priority of liens. Such a hearing was
held and the trial Judge entered an order declaring that
Metropolitan had a first lien, Frederick had a second and
Rilco had a third lien.

The Court of Appeals of Maryland upon hearing the case
held that the mechanic's lien law under which the case was
decided was unconstitutional in that it gave the mechanic's
lien holder priority before a judicial determination of the
validity of lien was held.

6

ARGUMENT

THE STATE COURT OF APPEALS ERRED IN
DECIDING THAT THE MECHANICS LIEN LAW
OF MARYLAND VIOLATED THE DUE PROCESS
CLAUSE OF THE FEDERAL CONSTITUTION.

This case presents the question of the validity of
Maryland’s Mechanics Lien law. The concept has previously
been before the Court in the case of Roundhouse
Construction Corp. y. Telesco Masons Supplies Company, Inc.
(67 Conn. 371, 362 A.2d 778 (1975), which was remanded by
the Court to consider whether the decision was based upon
Federal or State Constitutional grounds, 423 U.S. 809, 96 S.
Ct. 20, 46 L.Ed.2d 29. Upon remand the Connecticut Court
reconsidered and held that its decision was based upon both
State and Federal Constitutions, thus avoiding review of its
decision by this Court (cert. denied, 97 S. Ct. 246).

During the pendency of the Connecticut case, the Court of
Appeals of Maryland held sections of its mechanics lien law
unconstitutional and clearly based that result upon the
Federal Constitution. Barry Properties, Inc. v. Fick Bros.
Roofing Company, 277 Md. 15, 353 A.2d 222 (1976). The
Maryland Court then held that the particular landowner had
not been deprived of due process and upheld the lien, thus
avoiding the possible scrutiny of the Supreme Court. (A
maneuver labeled “wizardry” in the dissenting opinion.)

The Maryland case now stands alone in finding that
mechanics liens are invalid solely because they violate the due
process clause of the Federal Constitution. The Federal Courts
have uniformly found to the contrary. See Spielman-Fond,
Inc. v. Hanson's Inc., 379 F. Supp. 997 (D. Ariz. 1973) (per
curiam), aff'd 417 U.S. 901 (1974), In Re Thomas A. Carey,
Inc., 412 F. Supp. 667 (E.D. Va) (1976), even in
Connecticut, Brook Hoilow Associates vy. J. E. Greene, Inc.,
389 F. Supp. 1322 (Conn. 1975).

)

Mechanics liens fall within the decision in Coffin Brothers
v. Bennett, 277 U.S. 29, 48 S. Ct. 422, 722 Ed. 768 (1928)
in which it was noted that nothing is more common than a
lien dependent upon the result of a suit.

The Maryland Court struggled with the question of whether
the law deprived a debtor of a “significant property interest”
but a review of the cases considered by the Supreme Court
show that each involves a “possessory” interest and not a
notice to others that the property may be subject to a prior
claim. Sniadach v. Family Finance Corp. , 395 U.S. 337, 89 S.
Ct. 1820, 23 L.Ed.2d 349, Fuentes v. Shevin, 407 U.S. 67, 92
S. Ct. 1983, 32 L.Ed.2d 556, Mitchell v. W. T. Grant Co.,
416 US. 600, 94 S. Ct. 1895, 40 L.Ed.2d 406 and North
Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.
Ct. 719, 42 L.Ed.2d 751. Under a mechanics lien, only
foreclosure can deprive the owner of possession and under the
Statute that only can occur after notice and a full judicial
hearing.

Some of the considerations in Mitchell supra, (holding no
violation of due process) are applicable here. In that case the
Court dealt with conflicting interests in the same property. A
claim under a mechanics lien relates to additions to the land
which the lienholder claims to have made. Both parties claim
an interest in the subject matter of the lien. The lien statutes
were based upon unjust enrichment of a landowner where
ancient theory and time honored practice held that once
attached personal property legally became a part of the land.

The basic error of the Maryland Court in declaring the lien
unconstitutional was compounded with the following holding:

“Under this ruling, we believe, the statute continues to

effectuate the primary legislative intent, yet the owner is

not deprived of a significant property interest without
due process since the owner’s interest is not impinged
upon until after he is provided with notice and an
opportunity for a hearing. It follows that §9-107(b), to
the extent that it grants mechanics’ liens “priority over

any mortgage, judgment, lien or encumberance attaching
to the building or ground subsequent to the commence-
ment of the building” but prior to the time the lien is
established by a judicial determination, is also null and
void since to hold otherwise would permit contractors to
seize with their left hand what we have said they cannot

grasp with their right.” i

A startling new Constitutional concept has been conceived.
As a result we are dealing, not with possessory rights of the
individual property owner, but the security rights of large
corporate banking and financing institutions. The tug of war
between a lien holder and his interest in property which he
has placed upon the land is no longer between him and the
landowner. It is now between the creditor of the landowner
whose loan was made into the teeth of the lien perhaps the
day before the judicial hearing as to the value of the lien is
held. The deprivation in this case is visited upon the
lienholder. Surely such a result is not contemplated under any
of the decisions to date on denial of due process and
deprivation of property right.

The issue is ripe for a full airing and only this Court can
bring the Court of Appeals of Maryland ‘in line with the
Federal Courts and the prior decisions of the Court.

9

CONCLUSION

For the foregoing reasons, it is respectfully submitted that
the demands of public policy and justice require in this case
that a Writ of Certiorari should be granted and the judgment
in this case reversed.

Respectfully submitted,

MANUEL M. WEINBERG

CARVILLE M. DOWNES

DAVID M. GUGGENHEIM
Weinberg, Michel and Stern
10 West College Terrace
Frederick, Md. 21701

REX L. STURM
Brown and Sturm
260 East Jefferson Street
Rockville, Maryland 20850

Attorneys for Petitioners

la
APPENDIX A

IN THE COURT OF APPEALS OF MARYLAND
No. 120

September Term, 1976

RESIDENTIAL INDUSTRIAL LOAN
COMPANY, INC.

v.

MANUEL M. WEINBERG, TRUSTEE, et al.
** *
FREDERICK CONTRACTORS, INC., et al.

v.

METROPOLITAN FEDERAL SAVINGS AND
LOAN ASSOCIATION OF BETHESDA

Opinion by Digges, J.

Filed: February 24, 1977

This suit involves the ordering of priorities among three real
property lien creditors of the bankrupt Bel Pre Medical Center,
Inc., two of which are owners of deeds of trust notes, and the
other of which is a holder of a mechanics’ lien. Concluding
that under our ruling in Barry Properties v. Fick Bros., 277
Md. 15, 353 A.2d 222 (1976), the mechanics’ lien was not
established until after the recordation of the deeds of trust, it
follows that it is junior in priority to both of them.

Although we can only surmise from the facts of this case,
we have little doubt that Frederick Contractors, Inc., which
has been trying for the past four years to obtain payment for
work completed in 1973, must at this point wonder why it
has never gotten beyond the veritable Slough of Despond'
which has prevented it from achieving even a modicum of
success during all these years. Back in August of 1971,
Frederick entered into a contract with Bel Pre to construct an
addition to its nursing home in Silver Spring, Montgomery
County, and work was begun shortly thereafter. In the
autumn of 1972, before the addition was completed, Bel Pre
sought to obtain a permanent first trust loan from
Metropolitan Federal Savings and Loan Association of
Bethesda, and by letter dated November |, 1972, Metro-
politan committed itself to make that loan in the amount of

‘In John Bunyan’s The Pilgrim's Progress (1678), the first stumbling
block encountered on the pilgrimage to the Celestial City was the
Slough of Despond, “the descent whither the scum and filth that
attends conviction for sin doth continually run... .”

3a

$1,400,000. At the settlement on November 30, Bel Pre
executed a deed of trust covering the real property on which
the nursing home is located securing its note for the
$1,400,000 to Metropolitan; this deed of trust was duly
recorded on December 12, 1972. Although the facts are not
undisputed, it seems that at the time of this settlement, these
parties together with Frederick contemplated that $150,000
of the loan would be held in escrow to insure completion of
the addition and to secure the waiver of any mechanics’ liens
Frederick could claim for labor performed or materials
provided through November 29, 1972. Following completion
of the addition in January of 1973, Frederick demanded
payment of a little over $148,000 from the $150,000
Metropolitan was then holding, but was unable to collect the
money. Subsequently, an attorney for Frederick advised
Metropolitan of its intent to file a mechanics’ lien against the
property owned by Bel Pre, and on March 22, 1973,
Frederick recorded such an instrument. On April 30, 1973,
Frederick filed a bill of complaint to foreclose its claimed
lien.

Before the foreclosure proceedings could be terminated,
several things happened: Bel Pre obtained another loan
secured by a second deed of trust; pursuant to its contract
with Frederick, Bel Pre demanded arbitration of Frederick's
claim for payment; and Metropolitan disbursed to Bel Pre the
$150,000 it was holding. Specifically, the record discloses that
on April 18, 1973, a deed of trust securing a loan of
$160,000 from Residential Industrial Loan Company, Inc.
(RILCO) was executed, and this was recorded on May 11,
1973, subsequent to Frederick's bill of complaint to foreclose,
but prior to any judicial determination of the issue. The next
several years, however, found Frederick unable to establish its
claim because it was entangled in a dispute, initiated by Bel
Pre on May 22, 1973, over whether arbitration of Frederick’s
demand for payment was required before the mechanics’ lien

4a

could be foreclosed. The matter was not finally resolved until
this Court issued its opinion on March 26, 1975, staying the
foreclosure proceeding [“until arbitration [was] concluded or
Bel Pre’s demand [was] withdrawn.” Frederick Contr. v. Bel
Pre Med., 274 Md. 307, 316, 334 A.2d 526, 531 (1975).] In
the meantime, On May 23, 1974 to be exact, Bel Pre had
requested and obtained disbursement to it of the $150,000
Metropolitan was then holding.

Had the mechanics’ lien litigation been promptly termi-
nated following our decision in Frederick Contr. v. Bel Pre
Med., the parties probably would not be here today, but
unfortunately for Frederick, the chain reaction initiated by
Bel Pre’s demand for arbitration was to continue into 1976.
The proceedings were delayed, and although the hearing was
eventually scheduled for January 15 and 16, 1976, Bel Pre
withdrew its arbitration demand at the eleventh hour. Finally
free to pursue once again its mechanics’ lien foreclosure case,
Frederick promptly petitioned the Circuit Court for Mont-
gomery County for an early hearing, which it received on
February 26, 1976. On that day, the court entered a
(“Decree for Enforcement of Mechanics Lien and Appoint-
ment of Trustees for Foreclosure Sale.”] But it was already
too late — two weeks earlier this Court had decided Barry
Properties v. Fick Bros., 277 Md. 15, 353 A.2d 222 (1976),
where we held that, prior to the judicial establishment of a
mechanics’ lien, no such lien attaches to the real estate.
Learning that the foreclosure sale was scheduled for Aprii 9,
1976, Metropolitan and RILCO filed a bill of complaint three
days prior to the sale seeking to enjoin it, and requesting that
the court declare their liens “to be prior and senior to the
mechanics’ lien.” The court consolidated this action and the
original suit by Frederick against Bel Pre, and following a
trial, Judge Stanley B. Frosh entered an order declaring that
Metropolitan had a first lien, Frederick had a second lien, and
RILCO had a third lien. Both losers appealed, and RILCO

Sa

petitioned this Court as well for a writ of certiorari which we
issued before the Court of Special Appeals considered the
matter.

The question at the heart of this litigation is the
applicability of Barry Properties. In that case we ruled that
portions of the Maryland mechanics’ lien law then in force
and controlling here, Md. Code (1974 & 1975 Cum. Supp.),
Real Prop. Art., §§9-101 to -111, were unconstitutional
because they operated to deprive property owners of a
significant interest without due process of law.* Excising that
aspect “which purports to create a lien from the time work is
performed or materials furnished,” we held that there could
be no lien “until and unless the claimant prevails either in a
suit to enforce the claimed lien or in some other appropriate
proceeding. ...”" 277 Md. at 37, 353 A.2d at 235. We further
noted that until that time, the claimant possessed only a
chose in action, and that Section 9-107(b), to the extent it
granted mechanics’ liens priority over some encumbrances
recorded before the lien was established by a judicial
determination, was “null and void.” /d. Undoubtedly, the full
impact of Barry Properties applies in the present suit.
Although we did not explicitly state in that case that the
decision was to have retroactive operation, we indicated as
much by noting that “those portions of the statute we hold
unconstitutional are void ab initio.... 277 Md. at 38, 353
A.2d at 235. While we will not always reach such a
conclusion as to the effect of an unconstitutional statute, see
Perkins v. Eskridge, 278 Md. 619, 366 A.2d 21 (1976), it is
clear that we found no overriding concern dictating that we
give those mechanics’ liens recorded prior to February 10,
1976, the date of our decision in Barry Properties, any force

? Responding to the Barry Properties case, the General Assembly by
Chapter 349 of the Laws of 1976 extensively revised this State's
mechanics’ lien statute. See Md. Code (1974, 1976 Cum. Supp.), Real
Prop. Art., §§9-101, to -113.

6a -

unless and until a judicial determination takes place. See also
Scott & Wimbrow, Inc. v. Calwell, 31 Md. App. 1, 6, 354
A.2d 463, 466, cert. denied, 278 Md. (1976).

Contrary to Frederick’s contentions, we find nothing in the
present action which takes it outside the scope of Barry
Properties. \t is of no significance that here the dispute is
between a contractor holding a mechanivs’ lien and two other
lien creditors as opposed to the situation in Barry Properties
where the dispute was between a contractor and the property
owner. In either case, no mechanics’ lien attaches to the
property until the claimant has prevailed in an “appropriate
proceeding” to establish the lien’s existence. Moreover, in
spite of Frederick’s argument to the contrary, it is clear that
the Bel Pre case before this Court in 1975 was not a
proceeding which resulted in the creation of a mechanics’ lien.
The only issue we decided was whether Bel Pre’s demand for
arbitration precluded Frederick from establishing its me-
chanics’ lien until arbitration proceedings had been termi-
nated. Consequently, by no stretch of the imagination can the
“law of the case” or the res judicata doctrine catapult
Frederick to first place. Finally, we are also of the view that
the doctrine of lis pendens cannot aid Frederick here, since it
has been determined that as of the time of the recording of
the two deeds of trust, Frederick had no interest in the Bel
Pre property.

It is apparent from the foregoing that the order of the
priorities is as follows: Metropolitan first, RILCO second, and
Frederick third. This is so because Metropolitan recorded its
deed of trust on December 12, 1972, RILCO recorded its
instrument on May 11, 1973, and Frederick did not obtain a
mechanics’ lien until February 20. ‘976 Since we here decide

7a

only the priority issue, nothing in this opinion should be
construed as indicating our views as to the merits of any
other actions not pending or which may arise among the
parties to this suit.

ORDER OF THE CIRCUIT COURT FOR
MONTGOMERY COUNTY AFFIRMED IN
PART AND REVERSED IN PART AND

CASE REMANDED TO THAT COURT FOR

ENTRY OF AN ORDER AS HEREIN
STATED. COSTS TO BE PAID BY
MANUEL M. WEINBERG AND REX L.
STURM, TRUSTEES, AND FREDERICK
CONTRACTORS, INC

Ib

It should be understood that the facts in the Barry case did
not relate to priority of liens, vis a vis, a mortgage or deed of
trust; although a portion of the statute relating to priority
was declared unconstitutional. It is suggested that the portion
of the opinion of the Court of Appeals would not bear up
when weighed against the facts in this case. The Court should
apply the fests of constitutionality to the facts of this case
against the statutes involved.

The tests of constitutionality applied are notice and a prior
hearing. Metropolitan nor any other party has challenged the
validity of the lien nor has a serious challenge of its amount
been raised. Metropolitan had actual notice as outlined above
of the claim for approximately $150,000 to pay for the
construction work. All other parties had notice by iis
pendens, a doctrine which the Court of Appeals certainly has
not discarded (Marylard Rule BD1).

There is no question of the validity of the Mechanics Lien
of Frederick Contractors, only the issue of waiver which is
addressed above. The Court of Appeals should reexamine the
applicability of its constitutional tests to the facts as they
arise in this case and as they most often arise in other cases
before making a determination of constitutionality. The
Supreme Court cases relating to notice and prior hearing
(Sniadach v. Family Finance Corp., 395 U.S. 342; Fuentes v.
Shevin, 407 U.S. 371; Mitchell v. W. T. Grant Co., 416 US.
614). Each involve a possessory interest, not a mere financial
interest; and it is submitted that the Court of Appeals has
overreached the constitutional limitations in the dicta which
relates to the priority of a mechanics lien.

The only reason given for this remarkable decision is that
“to hold otherwise would permit contractors to seize with
their left hand what we have said they cannot grasp with their

2b

right.” Where this principle is set forth or implied by the
Constitution, we suggest needs further exploration by the
Court of Appeals.

We point out in note (13) of the opinion in the Barry case
the Court exercised the restraint which it should have with
respect to issues not before it.

THE CIRCUIT COURT FOR MONTGOMERY
COUNTY WAS IN ERROR IN NOT GIVING

PRIORITY TO THE CROSS-APPELLANT OVER
THE APPELLEE. .

Frederick Contractors because of the interpretation of the
lower court of the decision in the case of Barry Properties,
Inc. v. Fick Bros. Roofing Co..(decided February 10, 1976)
277 Md. 15, 353 A.2d 222, finds itself in a position that a
Court of Equity should abhore. This Court in Frederick
Contractors v. Bel Pre Medical Center, 274 Md. 307, 334
A.2d 526 (1975) decided that the Cross-Appellant was
entitled to its mechanic's lien. From that case's inception,
when Frederick had its lien and this Court agreed, in spite of
a provision for arbitration, that “an award in Frederick's favor
may be enforced or alternatively Frederick's claim may be
satisfied by the foreclosure of the lien,’ Frederick Contractors
was able to rely for protection on the Mechanic’s Lien law at
that time, enforced by a mandate by this Court. At no time
during this entire case was any defense raised to the merits of
the lien itself by anyone, Bel Pre, Metropolitan Federal nor
Residential Industrial Loan Co. and this Court knew from
argument and record about the existing Deeds of Trusts held
by Metropolitan Federal and Residential Industrial Loan Co.
Everyone knew that the lien was a valid one and could be
enforced if the arbitrators awarded money to Frederick
Contractors. Never did Bel Pre claim that the statute was
unconstitutional and in fact after the Frederick Contractors v.
Bel Pre Medical Center decision, Bel Pre chose not to arbitrate
nor present the alleged waiver of liens. If there had been a

.

2c

valid waiver, the case would never have gone further than the
original hearing in the Circuit Court for Montgomery County.
Metropolitan Federal was holding the money, and knew that
it was available to protect itself against Frederick Contractors’
mechanic’s lien.

Now, Frederick Contractors, armed with this mandate,
finds that this same Court in the Barry case has decided only
months later that the statute is unconstitutional and Frosh, J.
applied it retroactively to Frederick Contractors’ mechanic's
lien.
See 46 Am Jur 2d Judgments Sec. 19 which states:

“The fact that a Judgment in a civil action is based upon
an unconstitutional statute or ordinance does not render
it void or deprive it of its effect as a judgment.”
“The modern view is based on theory that the court
rendering the judgment has jurisdiction to determ'ne the
validity of the statute, that the parties derive their rights,
not from the unconstitutional statute, but from the
unreversed and unvacated judgment and that the finality
of the judgment is not affected by the unconstitu-
tionality of the statute.”

Sec. 2: “The definition of a judgment as a final

determination of the rights of the parties in an action

has been declared broad enough to include all final
judgments, whether they are for money or for some
other kind of relief.”

It is respectfully suggested that this Honorable Court take a
long, hard look at the effect of the Barry case on contractors
who acted in good faith upon a long standing legitimate
remedy only to find this remedy retroactively pulled out from
under them in mid-stream when the statute which affords the
remedy is declared unconstitutional. In 16 Am Jur 2d
Constitutional Law Section 178:

“It has been stated that an unconstitutional law should

not be applied to work a hardship or impose a liability

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on one who has acted in good faith and relied on the

validity of a statute before the courts have declared it

invalid.”

The case of Scott & Wimbrow, Inc. v. Calweil, 31 Md. App.
1, 354 A.ld 463 (decided June 3, 1976) went even further
than the Barry case and stated that a prior recorded
mechanic's lien would be a nullity ab initio. However, Gilbert
J. went one more step and said:

“It would, therefoi., appear that under Barry Properties,

appellant not having prevailed ‘in a suit to enforce the

claimed lien or in some other eppropriate proceeding’ the
alleged mechanic’s lien is of no force and effect.”

(emphasis supplied)

Your Cross-Appellant contends that the previous case
against Bel Pre supra was “some other appropriate proceed-
ing.” The matter of the right to a mechanic’s lien was
litigated and argued in the Circuit Court for Montgomery
County, the Court of Special Appeals and in this Court.
Cross-Appellant’s lien meets the constitutional tests of Barry
and should receive the benefits that were afforded it; namely,
priority over Metropolitan Federal and Residential Industrial
Loan Co. via a valid, enforceable lien. As is stated in 2 MLE
Appeals Section 543:

“The rule that the determination rendered on appeal is
the law of the case and binding on the lower court in
further or subsequent proceedings therein has been held
to apply even though such determination is erroneous
and not withstanding the Court of Appeals, subsequent
to its decision and while the case is still pending in the
lower court, adopts a position in cases similar to the
pending use which is inconsistent with the principals
enumerated by it in such case.” (emphasis supplied)

In the case at bar Frederick Contractors not only acted in
good faith and relied on the validity of a statute, but it also
had a mandate declaring the lien valid and enforceable, and it

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relied on the fact that Metropolitan Federal was holding the
funds. Even if this Court upholds the ruling in the Scott &
Wimbrow case supra as to the retroactive effect on the statute
by the Barry case supra, it is beyond all comprehension that,
as against your Cross-Appellant, the ruling would be
retroactive beyond the ruling in Frederick Contractors v. Bel
Pre, supra. See also Bay State Harness Horse Racing &
Breeding Association v. PPG Industries, Inc., 365 F. Supp.
1299 (Mass. 1973), and Gunter v. Merchants Warren National
Bank, 360 F. Supp. 1085 (S.D. Maine 1973), both of which
held that the finding of the unconstitutionality of prejudg-
ment real estate attachments was prospective only.

In Section 5(a) of an annotation in 10 ALR 3d 1371 it is
stated:

“It has often been recognized that retroactive operation
of an overruling decision is neither required nor
prohibited by constitutional provisions, and that whether
and to what extent a new rule adopted in an overruling
decision will be given retroactive effect ts thus not a
matter of constitutional compulsion, but a matter of
judicial policy, to be determined by the Court after
weighing the merits and demerits of the particular case,
by looking to the prior history of the rule in question,
its purpose and effect, and whether retroactive applica-
tion will further or retard its operation.” (emphasis
supplied)

It is respectfully suggested that the thrust of the Barry case
was to protect the owner — not the lender. Regarding
Metropolitan Federal, being the lender and not an owner, the
Barry case should not be applicable. This issue is the crux of
the case at bar! Who has priority between Frederick
Contractors, Metropolitan Federal and Residential Industrial
Loan Co.? As is argued elsewhere in this brief the
Cross-Appellant had a valid lien ahead of the others and
granted only a conditional Waiver of Liens to Metropolitan
Federal which was not adhered to by Metropolitan Federal
and its agents and they all knew it!

Sc

The position of the Cross-Appellant is that Sec. 9-107(b) is
constitutional and does not violate the 14th Amendment of
the U.S. Constitution nor Article 23 of the Maryland
Declaration of Rights. As this Court stated, Fick Bros. was

entitled to its lien because “The facts of this case show that
the Appellant knew of the Appellee’s claim to a lien
sometime well prior to the Appellee’s institution of this
enforcement action but chose not to challenge the lien’s
validity at that point; we conclude it thereby elected not to
assert any right it may have had to have its position
determined as of a time earlier than the hearing before Judge
Haile.” In footnote 12 of the Barry case it is stated:

“We do not here hold that the legislature could not
enact a mechanic’s lien law permitting general contrac-
tors and sub-contractors to obtain liens prior to owners
being given notice and an opportunity for a hearing if
the statute includes safeguards such as those discussed in
(cases cited). Rather, in this case, we only hold that
since the present law does not include such safeguards no
lien can exist under it until after owners are provided
with notice and a chance for a hearing.”

The Cross-Appellants respectfully suggest that there is no
difference between the case at bar and the position of Fick
Bros. The facts show that Bel Pre (and Metropolitan Federal)
knew of Frederick Contractors claim to a lien sometime well
prior to Frederick Contractors institution of the enforcement
action, and in fact, prior to settlement, (E. 3 & 40) but no
one chose to challenge the lien’s validity at that point (see
Frederick Contractors v. Bel Pre supra) and it has to be
concluded that there was an election by Bel Pre and
Metropolitan Federal not to assert any right they may have
had to have their position determined as of a time earlier than
the hearing before Judge Frosh on February 26, 1976.
Factually, all of the guarantees required by the U.S.
Constitution, the Maryland Declaration of Rights and the

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_ Barry case have been met as to Bel Pre and Metropolitan

Federal. The due process protections were there and the
Appellant and Appellee have been fully protected except
Frederick Contractors. If ever there was a case where Equity
should be done to protect a party which has done everything
equitably within its power to protect its interest and the
interests of others, this is the case. The testimony and
exhibits clearly show the intention of the parties, the escrow
of the $150,000.00 and the conditional waiver of liens. (E.
8-40) .

Quere: How can Metropolitan Federal, which admittedly
was holding the money for the completion of construction,
and obtained a conditional waiver of liens before it disbursed
funds to Bel Pre, now turn around and say “We are first in
priority.””?

The comparison of the Barry case with the facts in the case
at bar clearly show that to deny Frederick Contractors a lien
priority would fly into the face of the requirements
established by the Barry case. As with Fick Bros., Bel Pre, the
owner of the property through three stages of litigation had
every opportunity to attack the lien on the basis of the
waiver asserted by Frederick Contractors, which, it chose not
to do. The purpose of the Barry decision was to protect Barry
Properties in that case and Bel Pre in this case. Construction
was substantially completed in December, 1972, on March 22,
1973 Frederick Contractors recorded a Mechanic's Lien in the
Montgomery County Circuit Court and on April 30, 1973
filed a Bill of Complaint to foreclose the lien. On May 24,
1973 Bel Pre countered with a motion to strike the
mechanic’s lien, grounded on the contention that the contract
between Frederick Contractors and Bel Pre compelled
arbitration of disputes arising out of the contract which Bel
Pre had demanded. This issue as to the validity of the lien
raised by the owner came all the way up to this Court. This
Court in the Barry case ruled that the statute was

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unconstitutional because the law “permits an owner to be
deprived of a significant property interest without notice or a
prior hearing.” However, in turning to the problem of Fick
Bros. the court measured the position of Fick Bros. with
respect to the statute as it stands free of those provisions
(held unconstitutional).

“The facts of this case show that the Appellant knew of
the Appellee’s claim to a lien sometime well prior to the
Appellee’s institution of its enforcement action but chose
not to challenge the lien’s validity at that point;”’ Barry
Properties, supra at p. 235 & 236.

Fick was provided with notice and a hearing and the court
concluded that the Appellant (Barry) was afforded due
process prior to being deprived of its property.

The Cross-Appellant here can see absolutely no difference
between the position of Fick and its own position. The lien
was valid and enforceable as determined by this Court and
therefore was prior to Metropolitan Federal’s Deed of Trust.
The so called “Waiver of Liens” was conditional and since the
conditions were not met the waiver was void for lack of
consideration.

Since Metropolitan Federal was admittedly holding the
$150,000.00 for completion of construction there was no
violation of due process as far as the lender was concerned.
(E. -40) It was fully protected. So far as it was concerned the
funds belonged to Bel Pre or the contractor depending on the
outcome of any dispute they might have. (E.46)

To recapitulate briefly, the owner Bel Pre iiad all the due
process protections and is not now complaining as to the
validity of the lien. The complainors are the two lenders,
neither of which had any due process guarantees denied. If
this Court decides (as it should) that Frederick Contractors
stands on the same footing as Fick Bros., then the lien is a
valid one and the only issue is not the Barry case but a
question of fact as to who has the priority.

~ i ce

dc

The Cross-Appellant submits that the lower court com-
mitted error in its findings of fact and its interpretation of
the applicable law and the decision should be reversed, giving
the Cross-Appellant a first priority over the two lenders.

THE CROSS-APPELLANT HAS BEEN DENIED
DU&€ PROCESS OF LAW BY THE DECISION OF
THE MONTGOMERY COUNTY CIRCUIT COURT
PUTTING IT BEHIND THE APPELLEE IN

PRIORITY.

Realistically, the Barry case was a decision that had
regrettable import. The decision, if held to bar the
Cross-Appellant’s mechanic's lien, deprives the Cross-Appellant
of a property right without due process of law in violation of
the 14th Amendment to the Constitution of the United States
and Article 23 of the Declaration of Rights. In cases from
other jurisdictions and in Federal Courts the logic of the
Barry case is looked at with little favor. In fact these
decisions did not find that the property owner lost a
“significant property interest.” In Brook Hollow Associates ¥.
J. E. Greene, Inc., 389 F. Supp. 1322 (Conn. 1975) the court
cited with approval the ruling in Spielman-Fond, Inc. ¥.
Hansons, Inc., 379 F. Supp. 997 (Ariz. 1973) which said:

“It cannot be denied that the effect of such lien may
make it difficult to alienate the property. If the plaintiffs
can find a willing buyer, however, ther: is nothing in the
statutes or the liens which prohibits the consummation
of the transaction. Even though a willing buyer may be
more difficult to find, once he is found there is nothing
to prevent plaintiffs from msxing the sale to him. The
liens do nothing more Ut ‘yinge upon economic
interest of the property ows. - ae right to alienate has

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been harmed, but the difficulties which the lien creates

may be ameliorated through the use of bonding or title

insurance.”’ (emphasis supplied)

This Court in the Barry case supra while making a few
minor distinctions to the Spielman-Fond, Inc. case supra
acknowledged that the Arizona law did not provide for notice
of a prior hearing (just like the Maryland law) and stated
“... the Supreme Court may have thought that the Arizona
law contained enough safeguards to satisfy due process... .”
(emphasis supplied)

In a post Barry decision, In Re Thomas A. Carey, Inc., 412
F. Supp. 667 (E.D. Va. 1976) the Court cited Spielman-Fond,
Inc. and Brook-Hollow Asseciates supra with approval and
ruled that the Virginia mechanic's lien law (which is similar to
Maryland’s old Mechanic’s Lien law) did not violate the due
process clause of the 14th Amendment as there was no
deprivation of a “significant property interest.” The Court
“was mindful” of the Barry decision but considered “the
wiser course is to follow the decisions of the other District
Courts.” It is felt most important to point out that in this
decision the Court considered the decisions in Sniadach y.
Family Finance Corp., 395 U.S. at 337, 89 S. Ct. 1820, 23 L.
Ed.2d 349, Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983,
32 L Ed.2d 556, Mitchell v. W. T. Grant Co., 416 U.S. 600,
94 S. Ct. 1895, 40 L Ed.2d 406 and North Georgia Finishing,
Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S. Ct. 719, 42 L
Ed.2d 751.

For another post Barry decision holding a prejudgment
attachment procedure as applied to real estate does not
deprive a debtor of a “significant property interest,” see First
Recreation Corp. v. Amoroso, 26 Ariz. App. 477, 549 P.2d
257 (Ct. of Appeals, Ariz. 1976). See also Carl A. Morse, Inc.
v. Rentar Indus. Develop. Corp., 379 N.Y. $.2d 994 (1976).

In another state -— Georgia, the mechanic’s lien law
Statute is substantially similar to the old Maryland mechanic’s
lien law and the Supreme Court of Georgia in Tucker Door &

10c

Trim Corp. v. Fifteenth St. Co., 235 Ga. 727, 221 SE.2d 433
(1975) in its opinion stressed the importance of the
mechanic’s lien to contractors, and held that the filing of the
lien does not deprive the owner of a “significant property
interest” since it does not deprive the owner of possession
and it is not until the foreclosure of the lien, after full
judicial proceeding, that any judgment attaches against
property. The filing of the claim of a lien is similar to a lis
pendens notice. See also Matter of Northwest Homes of
Chehalis* Inc. v. Weyerhaeuser Co., 526 F.2d 505 (9th Cir.
1975), cert. denied, 3/29/76 in 96 S. Ct. 1501, and In Re
The Oronoka, 393 F. Supp. 1311 (Maine 1975).

In Connecticut, after the decision in Roundhouse Con-
struction Corp. v. Telesco Masons Supplies Co., 168 Conn.
371, 362 A.2d 778 (1975) the State Legislature enacted a
procedure for validating mechanic’s liens affected by the
decision. The lienors had a period of time in which to refile
their mechanic’s liens. This procedure, it is submitted, was a
recognition of the great hardships and unconstitutional denial
of due process placed upon a contractor. Maryland did not
proceed in this manner, but only enacted a Mechanic’s Lien
Law in accordance with the Barry decision, forgetting the
contractors and sub-contractors caught in the middle of
judicial process with no adequate relief.

It is most respectfully suggested that the Barry decision is
unconstitutional as to contractors such as the Cross-Appellant
who had filed their liens, and given notice thereof, but had
not obtained a Decree to Foreclose, particularly where the
present dispute is between lenders and a contractor.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1904%3A1. Public record. Not legal advice.