Section Review

Mechanic's liens after the National Lumber and Golden decisions

Thomas I. Elkind is a partner in the Boston office of Epstein Becker & Green, P.C., a national law firm. His practice concentrates on commercial litigation. Elkind represented the subsequent purchaser of the property at issue in the National Lumber case.

Introduction

The Supreme Judicial Court recently issued two decisions in cases that settled issues of first impression under the mechanic's lien statute, General Laws chapter 254, section 1, et seq.1 These decisions demonstrate not only how the court has interpreted the mechanic's lien statute, but also how the court is dealing with issues of statutory construction generally.

In National Lumber II,2 the SJC ruled that a mechanic's lien does not include interest or attorneys' fees, even if the original owner had agreed to such provisions in the contract on which the mechanic's lien is based.

In Golden, the SJC ruled that enforcement of a mechanic's lien could be commenced by a counterclaim, as long as the counterclaim is filed and recorded within the time required by the statute.

The National Lumber cases

The Massachusetts mechanic's lien statute, General Laws chapter 254, provides security for general contractors, subcontractors, suppliers and laborers who furnish labor and/or material "in the erection, alteration, repair or removal of a building or structure." The statute was last significantly amended in 1996. Although the National Lumber cases construed the statute as it existed prior to the 1996 amendments, those 1996 amendments did not affect the issues that were the subject of the National Lumber cases.

Chapter 254, section 4, provided that a supplier may file a notice of contract in the registry of deeds for the county or district where the land lies. The statute provided: "Upon filing a notice . . . the subcontractor shall have a lien to secure the payment of all labor and material which he is to furnish or has furnished, upon the building or structure, and upon the interest of the owner . . . in the lot of land on which said building or structure is situated."

Section 8 of chapter 254 required the person who had filed a notice of contract to file in the same registry of deeds "a statement . . . giving a just and true account of the amount due him" within 30 days after the date on which the principal contract is to be performed.

If the notice of contract and the statement of claim were recorded as required, the subcontractor could then commence an action to enforce the lien under section 11 of chapter 254 "within sixty days after the filing of the statement required by section eight."

Section 14 of chapter 254 provided that: "Any person in interest may dissolve the lien by recording . . . a bond of a surety company . . . in a penal sum equal to the amount of the lien sought to be dissolved conditioned for the payment of any sum which the claimant may recover on his claim for labor or labor and materials."

The National Lumber cases arose out of a contract dated Sept. 21, 1995, between plaintiff National Lumber Company and LeFrancois Construction Corp. Pursuant to the contract, National Lumber agreed to furnish certain lumber and building materials to LeFrancois. LeFrancois used the materials to build a house on land in Northboro, Mass., which it then owned.

On Oct. 30, 1995, in accordance with General Laws chapter 254, section 4, National Lumber recorded a notice of contract with the Worcester County Registry of Deeds. According to the notice of contract, the contract was to be completed by Dec. 1, 1995. On Dec. 14, 1995, LeFrancois sold the property to Dean and Stephanie Schwartz. Four days after this conveyance, on Dec. 18, 1995, in accordance with General Laws chapter 254, section 8, National Lumber recorded with the registry a sworn statement of claim. The statement declared that LeFrancois owed National Lumber $26,103.98 for the materials that had been provided in connection with the erection of a structure on the property. By recording the statement, National Lumber perfected its mechanic's lien on the property to secure the amount owed to it by LeFrancois for the materials.

On or about Feb. 5, 1996, after LeFrancois had conveyed the property to Schwartz, National Lumber commenced this action by filing a complaint against LeFrancois for breach of contract and to enforce the lien. National Lumber then discovered that LeFrancois had no assets, and, almost seven months later, National Lumber filed an amended complaint, which added Schwartz as a defendant.

The first National Lumber decision

Schwartz contended that because he had acquired title to the property prior to the filing of the complaint, yet was not named as a defendant in the action to enforce the lien within the time required by chapter 254, section 11, the lien had been dissolved. The Supreme Judicial Court disagreed. Although the court acknowledged that the statute was silent on this issue, it concluded that because a primary purpose of chapter 254 is "to provide security to contractors . . . for the value of their services and goods provided for improving the owner's real estate," citing Hamill-McCormick Assocs. v. New England Tel. & Tel. Co., 399 Mass. 541, 542-543 (1987), and because chapter 254 sets out in careful detail the steps required to create, maintain and enforce a mechanic's lien, the legislature did not intend to require a lienholder to perform subsequent title searches to avoid the dissolution of its lien in the event of a conveyance of the real estate. The court determined that because chapter 254 required that an attested copy of any complaint brought under section 11 be recorded, a title search by any prospective purchaser after the complaint was recorded would have enabled the prospective purchaser to determine whether National Lumber had sought to enforce its lien.

Schwartz also argued that the failure to name Schwartz in the original complaint could not be cured by the relation back provision of Mass. R. Civ. P. 15(c) because chapter 254, section 11 is a statute of repose, which bars any future action once the statutory deadline has passed. The court rejected this argument based on its finding that chapter 254 did not require National Lumber to name any subsequent purchasers in the original complaint. Having found that chapter 254 did not require National Lumber to name the record owner of the property as a defendant within the time required for commencement of an action by section 11, the court was not troubled by the well-established maxim that a mechanic's lien is enforceable only "by strict compliance with the statutory specifications." See East Coast Steel Erectors, Inc. v. Ciolfi, 417 Mass. 602, 605 (1994).

The second National Lumber decision

After Schwartz received the SJC decision, Schwartz attempted to pay National Lumber the sum of $26,104, which was the amount set forth in the statement recorded by National Lumber. National Lumber rejected this tender, maintaining that National Lumber was entitled to 18 percent annual interest and reasonable attorneys' fees pursuant to its contract with LeFrancois. In response, Schwartz obtained a dissolve lien bond in the penal sum of $26,104 from United Casualty & Surety Insurance Company. Schwartz recorded the bond in the registry, dissolving the lien in accordance with the provisions of chapter 254, section 14.

National Lumber then filed a new action against United to either strike the bond as insufficient or to increase the penal sum of the bond to include interest and attorneys' fees. The case against United was consolidated with the case against Schwartz, and these consolidated cases again found their way to the Supreme Judicial Court.

The court ruled that the lien was limited to the amount claimed for labor and materials, rejecting National Lumber's argument that it could require the subsequent purchaser of the property to pay amounts that LeFrancois had agreed to pay to National Lumber in the contract.

The court found that the plain wording of chapter 254 limited a mechanic's lien created pursuant to section 4 to the amount due for labor and materials only. The court noted that nowhere in the detailed statutory framework was there a reference to interest or attorneys' fees. The court also noted that contractual interest and attorneys' fees cannot be part of the "amount due" at the time the statement is filed because they have not yet been determined.

The court also seemed persuaded by the fact that chapter 254, section 14 allows an interested person to dissolve a lien by obtaining a surety bond in the amount due for labor and materials, and recording it. The court noted that allowing a lienholder to record a claim for one amount in the statement and then to later assert a higher amount because of contractual terms "would subvert the statute's purpose to protect those with an interest in the property." The court also noted that the design of chapter 254 is to ensure that a person searching the registry could determine with certainty the amount due pursuant to a lien.

The court refused to add statutory interest to the amount of the lien because the action to enforce the lien was an action in rem. The statutes allowing interest to be added to a judgment apply only when an action is "based on contractual obligations" or is one "in which damages are awarded." General Laws chapter 231, sections 6C, 6H. The court concluded that the action to enforce the lien did not fit in either of these categories.

The Golden decision

In Golden, General Builders, a supplier of building materials, had properly recorded a notice of contract and statement of lien as required by General Laws chapter 254, sections 4 and 8. Here, however, the property owner, Golden, filed a complaint seeking to discharge the lien three days before the lien would have otherwise expired. (A lien holder now has 90 days after recording the statement of the amount owed to bring an action to enforce the lien. General Laws chapter 254, section 11.) General Builders filed its answer and counterclaim 31 days after the complaint was filed. In its counterclaim, General Builders sought to enforce its mechanic's lien. Golden claimed that the lien had already expired and could not be revived, while General Builders, apparently relying on National Lumber I, claimed that its counterclaim should relate back to the date the complaint was filed. The court, liberally citing from National Lumber I, first determined that the lien could be enforced by a counterclaim, but, in contrast to National Lumber I, determined that the counterclaim did not relate back to the date of the filing of the complaint.

The court's reasoning in Golden

In holding that the lien could be enforced by a counterclaim, the court noted that nothing in the mechanic's lien statute suggests that enforcement of a lien will not be governed by ordinary procedural rules. The court stated: "Absent some incompatibility between a specific procedural rule and the provisions of the statute, we will apply and enforce both." The court cited to its application of the relation back provisions of Mass. R. Civ. P. 15(c) in National Lumber I to support this ruling, and noted that Rule 13(b) allows a party to "state as a counterclaim any claim against an opposing party." The court concluded that allowing enforcement of a lien by a counterclaim would not undermine any aspect of the mechanic's lien statute, again citing National Lumber I, because an attested copy of the counterclaim would need to be recorded in the registry within 30 days of its filing with the court (General Laws chapter 254, section 5), and would contain all the information required to be included in a complaint to enforce a lien.

However, the court came to a different conclusion when confronting the relation back issue in Golden. The court concluded that applying the relation back doctrine to salvage an untimely filed counterclaim would be contrary to the mechanic's lien statute and would seriously undermine its operation. Stating that the statute "must be strictly construed against the party asserting the lien," the court held that once the 90-day period had run from the recording of the statement of the amount owed, the lien was dissolved, and it could not be resurrected by a counterclaim filed thereafter. To hold otherwise would wreak havoc with the provision of "an accurate system for recording and identifying encumbrances secured under the mechanic's lien statute," again citing National Lumber I. Thus, the court required that any counterclaim used to enforce a mechanic's lien be filed with the court and recorded with the registry within the time required by the mechanic's lien statute, General Laws chapter 254, sections 5 and 11.

Conclusion

In all three of these decisions, the SJC took pains not to read into the mechanic's lien statute anything that was not supplied by the legislature. In National Lumber I this led to a ruling favorable to the lienholder, while in National Lumber II the result was favorable to the subsequent owner. In Golden, the result favored the original owner. The court's primary concern seemed to be to ensure that the recording system could be relied upon to provide complete and accurate information to persons interested in the title to a property.

These decisions should be instructive in predicting not only how the court will deal with future issues arising under the mechanic's lien statute, but also how it will address issues of statutory construction generally. The court seems to be saying loud and clear that it will not attempt to determine what the legislature may have intended unless that intent is clearly expressed in the statute, and that the sanctity of the recording system is of paramount importance in mechanic's lien cases.

End notes

1. Nat'l Lumber Co. v. United Casualty and Surety Ins. Co., Inc., 440 Mass. 723 (2004) ("National Lumber II"); and Golden v. General Builders Supply LLC, 441 Mass. 652 (2004).[back]

2. A prior decision regarding the same lien is National Lumber Company v. LeFrancois Construction Corporation, 430 Mass. 663 (2000) ("National Lumber I").[back]

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