Tuesday, November 12, 2013

Lien Law Online eLert for 11/4/2013 - Kentucky

21. Two relevant cases:

PBI Bank, Inc. v. Schnabel Found. Co., No. 2011-CA-001135-MR (Ky. App. Jan. 25, 2013) – equitable tolling applied to allow untimely lien statement to relate back to a prior lien statement that the county clerk had wrongly refused to file.  **Case is “to be published” but hasn’t been yet**

Schnabel Foundation Company (“Schnabel”) provided labor and materials on the Harrods Creek Overlook Condominiums project in Prospect, Kentucky (the “Project”).  The Project was owned by Premier Land Company (“Premier”).  Premier obtained a mortgage on the property from PBI Bank, Inc. (“PBI”). 

Schnabel’s last day of work was August 27, 2007.  On February 22, 2008, Schnabel’s counsel mailed a lien statement to the Jefferson County Clerk for recordation.  The clerk refused to file the statement because Schnabel’s counsel had not signed as the preparer of the statement. 

When Premier defaulted on its mortgage, PBI moved for foreclosure on May 20, 2008 and named Schnabel as a defendant.  Nine days later, on May 29, 2008, Schnabel recorded its Mechanic’s Lien (which included a signature by the preparer). 

Schnabel and PBI moved for summary judgment on the enforceability of the lien.  The court first examined whether the February 22, 2008 lien statement was improperly rejected by the Jefferson County Clerk.  KRS 382.335(1) requires that lien statements must include “the name and address of the individual who prepared the instrument” and must be signed by the individual who prepared them.  The appellate court determined that Schnabel’s attorney had signed the lien statement and had included a “‘prepared by statement’ listing [the attorney’s] name and address” but had not signed separately as the preparer.  “KRS 382.335(1) does not require that the preparer of the statement sign the instrument in a specific form or location.  It only requires that the person who prepared the instrument execute his signature by ‘affixing a facsimile of his on the instrument.”  Id. at slip op. 4.  Therefore, because Schnabel had signed the first lien statement, the court determined that it had been improperly rejected by the County Clerk. 

The court then examined whether equitable tolling would allow the untimely second lien statement to relate back to the improperly rejected first lien statement (the second lien statement was untimely because it was filed more than six months after Schnabel’s last day of work, in violation of KRS 376.080).  As Schnabel “could not force the county clerk to perform official duties and file the [first lien statement],” the Court of Appeals affirmed the application of equitable tolling and thereby the lower court’s judgment in favor of Schnabel.  Id. at slip op. 5. 

Dreamers, LLC v. Don’s Lumber & Hardware, Inc., No. 2009-CA-000978-MR (Ky. App. Jan. 11, 2013) – examination of notice requirement **Opinion is not to be published**

The Dreamers, LLC (“Dreamers”) purchased materials from Don’s Lumber & Hardware, Inc. (“DLH”) on credit and incorporated those materials into the construction of a new house in Radcliff, Kentucky.  Dreamers sold the completed house to Appellant Glenda Hoffman. 

When DLH was not paid for its materials, it filed a Mechanic’s Lien against the house and later sued to foreclose the lien.  The case was before the Court of Appeals on several grounds, including the Appellants’ claim that summary judgment was improper because DLH had failed to comply with the notice provisions of KRS 376.010(3) and (4).  The Court of Appeals found no merit in this argument, explaining that the record showed that DLH had given notice to Hoffman within sixty days of last performing work on the property.  Therefore DLH had complied with the requirements of KRS 376.010(3) and (4). 

S2. Statutory discussion of Kentucky Fairness in Construction Contracting Act applicable to mechanics liens

A.J. Manion (Contributing Author)
Manion Stigger LLP

Lien Law Online eLert for 11/4/2013 - Mississippi

November 4, 2013 
"On October 10, 2013, the United States Court of Appeals for the Fifth Circuit in Noatex Corp. v. King Constr. of Houston, LLC, 2013 U.S. App. LEXIS 20656 (5th Cir., Oct. 10, 2013) held that Mississippi’s Stop Payment Notice statute, Miss. Code Ann. §85-7-181, is an unconstitutional violation of procedural due process. Accordingly, since only those who have a direct contractual relationship with the owner, his agent, or his representative are afforded the protection of a lien, subcontractors and suppliers to general contractors currently do not have any type of lien or payment protection rights." 
David Mockbee, Contributing Author
Mockbee Hall & Drake, P.A.