The Supreme Judicial Court (SJC) in Massachusetts has held in the City Electric case that a party seeking to enforce a target lien bond, otherwise known as a lien dissolution bond, need not record a copy of a complaint in the registry of deeds as a condition precedent to enforcing the bond.1 While this case permits practitioners to forgo a step in the lien process when pursuing recovery under a bond, for the reasons described below, it is not likely to have an immediate impact on the procedure that practitioners follow.
Enforcement of Mechanic’s Lien
The mechanic’s lien statute set forth in Massachusetts General Laws (G.L.), Chapter 254, governs the creation, perfection and dissolution of a mechanic’s lien.2 The primary purpose of the mechanic’s lien statute is to provide a means for contractors, subcontractors, laborers and suppliers to secure the value of their services and goods that improve an owner’s real estate.3 The mechanic’s lien statute is also designed to ensure that a person searching the land records can determine with certainty whether title to a particular parcel of land is encumbered.4
Because mechanic’s liens were created by statute with the purpose of protecting these competing interests, they are enforced only by strict compliance with the statute and consistent with the goals the statute was created to protect.5 Even a seasoned attorney can run afoul when seeking to enforce a lien, particularly when it comes to the timing and notice requirements set forth in sections 1, 2, 4, 5 and 8, which set strict timelines and rules for recording and transmitting to other parties the notice of contract, statement of account and civil action complaint.6
Lien Dissolution Bond
Section 14 of the mechanic’s lien statute allows a party to execute and record a bond to dissolve a lien so that anyone possessing an interest in that land may keep the title free from liens and prevent the sale of the land to satisfy a lien.7 Section 14 dictates how a perfected lien may be dissolved by the posting of a bond, and what a subcontractor must do to maintain his security.8 General Laws c. 254, § 14, as amended through St. 2002, c. 400, § 2 (§ 14), provides, in relevant part:
Any person in interest may dissolve a lien under this chapter by recording ... a bond ... 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 claimant may enforce the bond by a civil action commenced within ninety days after the later of the filing of [the G.L. c. 254, § 8, statement of account] ... or receipt of notice of recording of the bond....”
‘City Electric’ Case
In the City Electric case, the claimant, CES, was a subcontractor that supplied electrical materials for a construction project in Brookline. A payment dispute arose and CES filed a notice of contract pursuant to G.L. c. 254 § 4, after which the property owner obtained a target bond pursuant to G.L. c. 254 § 14. CES then timely filed suit against the general contractor and its surety to enforce the bond. The surety subsequently sought summary judgment dismissing the lawsuit on the basis that CES did not record a copy of its complaint as required under G.L. c. 254 § 5, which pertains to the procedure to enforce a lien.
The Superior Court judge granted the motion for summary judgment, but the SJC has overruled the lower court. While the lower court opined that G.L. c. 254 § 14 must be read in conjunction with the requirements in § 5, the SJC held that the two sections provide distinct theories of recovery. “After a target lien bond is recorded pursuant to the terms and procedural requirements of G.L. c. 254, § 14,9 a claimant becomes newly able to ‘recover on [its] claim for … labor and materials’ by enforcing the target lien bond itself, as distinct from the then-dissolved mechanic’s lien.”
In so holding, the SJC relied in part on its interpretation of the plain language of the statute. G.L. c. 254 § 5 provides for dissolution of a lien as a consequence of a plaintiff’s failure to record a complaint to enforce the lien. However, in an action under a § 14 target bond, the underlying lien already has been dissolved. Consequently, if the court enforced the requirements of § 5 in the context of § 14, it would render the phrase “or such liens shall be dissolved” from § 5 as meaningless, which the court must avoid.
The SJC’s holding also relied on its review of legislative history. The legislature previously considered language for § 14 that referred to § 5, but then purposely chose not to include the § 5 reference in the current version. “Where the legislature has deleted language, apparently purposefully, the current version of the statute cannot be interpreted to include the rejected requirement.” Consequently, the court cannot apply the requirements from § 5 within § 14.
Future Impact
While the holding in City Electric draws a distinction between the procedural requirements for pursuing a lien claim versus a bond claim, it is likely that practitioners in Massachusetts who have been following the procedures set forth in § 5, even where the lien has been dissolved with a bond under § 14, will continue to do so until additional cases test the veracity and scope of the reasoning in City Electric. Hesitancy to forgo the strict requirements of § 5 is likely due to the precedent for Massachusetts courts to reject c. 254 claims due to even minor procedural infractions.
Moreover, the SJC decision in City Electric confirms that despite the distinction between the bond claim and the lien claim, the bond claim under § 14 is inextricably linked to the underlying lien claim. Consequently, it is likely that sureties will continue to rely on a claimant’s procedural deficiencies in perfecting the lien to try to defend against the bond claim. Prudent plaintiffs’ counsel will likely incur the nominal cost to follow the § 5 recording procedures to avoid having to litigate the sureties’ defenses, even if those defenses are rendered meritless by the decision in City Electric.
Kristen R. Ragosta is an associate attorney at Kenney & Sams PC in Boston and a member of the MBA’s Development & Construction Law Practice Group Steering Committee.
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1 City Electric Supply Company v. Arch Insurance Co., (Norfolk) March 2019.
2 NES Rentals v. Maine Drilling & Blasting Inc., 465 Mass. 856, 861, 992 N.E.2d 291, 295 (2013), citing National Lumber Co. v. United Cas. & Sur. Ins. Co., 440 Mass. 723, 726, 802 N.E.2d 82 (2004) (National Lumber II), citing Ng Bros. Constr. v. Cranney, 436 Mass. 638, 644, 766 N.E.2d 864 (2002), and sets forth the procedures for execution and enforcement of a lien dissolution bond. National Lumber II, supra at 726, 802 N.E.2d 82.
3 M.G.L.A. c. 254, § 1, NES Rentals v. Maine Drilling & Blasting Inc., 465 Mass. 856, 992 N.E.2d 291 (2013).
4 Id.
5 Nat’l Lumber Co. v. United Cas. & Sur. Ins. Co., 440 Mass. 723, 802 N.E.2d 82 (2004).
6 M.G.L.A. c. 254, §§ 1,2, 4, 5 and 8.
7 M.G.L.A. c. 254, § 14.
8 Id.
9 Contrast this with the requirements under § 12 that expressly require that a complaint be recorded with regard to a blanket lien bond.