For liens, timing is everything — even if you’re right
Wednesday, June 15, 2016
As far too many unpaid construction industry participants have come to learn, filing a lien requires more than just being owed money — it also requires strict adherence to the administrative guidelines set forth by the laws of the particular state. And this is true for both liens filed against private property or bond claims for public projects.
Since these remedies are statutory in nature, failure to adhere to the notoriously strict and complicated requirements can destroy the chances of even the most meritorious claims.
For an example of how these complicated technical requirements can come back to bite the unwary, we can examine a Louisiana Fifth Circuit Court of Appeals case in which Apex Building Technologies recently learned this costly lesson.
Catco General Contractors hired Apex Building Technologies to provide electrical work for a new maintenance facility for Jefferson Parish in Jefferson, Louisiana. Hanover Insurance Company issued performance and payment bonds on behalf of Jefferson Parish for the project.
Following completion of its work, Apex filed a statement of claim and privilege for unpaid work in the amount of $39,186.19 in the Jefferson Parish mortgage records to preserve its claim. So far so good.
However, when the project was completed, Jefferson Parish filed an acceptance in the mortgage records on March 15, 2012. This filing initiated the one-year period within which Apex was required to initiate an action on its previously filed statement of claim and privilege.
On April 13, 2013, 13 months after the acceptance was filed, Apex filed suit against Catco and Hanover to recover the amount allegedly remaining unpaid.
Claiming that Apex did not timely file its petition, Hanover alleged that the missed deadline invalidated Apex's claim, and accordingly, that it should be dismissed. The district court agreed and dismissed Apex's claim against Hanover. Pursuant to the dismissal, the court ordered the cancellation of the recorded privilege filed by Apex in the parish records. Apex did not appeal this decision.
Not long before the district court issued the ruling regarding Hanover, Apex filed an amended petition naming Jefferson Parish as the defendant. The district court also dismissed Apex's claims against the parish, under similar reasoning to the dismissal of the claims against the GC. Apex sought appeal, which was granted.
On appeal, Apex asserted two claims. First, Apex argued that even if its claim had prescribed against Hanover, the court erred in ordering that Apex's claim of privilege in the parish record be terminated. Second, Apex claimed the parish was liable for breaching its statutory obligations under La. R.S. 38:2242(D) and La. R.S. 38:2243, and thus that the district court erred in granting Jefferson Parish summary judgment.
Apex's first claim, whether or not valid, was dismissed on a technicality. Apex failed to appeal the final judgment against Hanover that canceled its claim of privilege. The appellate court had no jurisdiction to consider this issue because it was not properly raised on appeal to that final decision.
While this was likely a losing argument in any event, it highlights both the complex nature of litigation involving this type of right, and a lack of foresight by the attorney.
Apex's second claim, alleging that Jefferson Parish was liable for breach, was more complicated to resolve. The Louisiana Public Works Act establishes the primary recourse for unpaid petitioners is on the surety bond. However, the Act does permit liability for the public authority that commissioned the work under certain circumstances.
Unfortunately for Apex, both of the scenarios contemplating liability for public authorities require the authority pay the contractor without making assurances that funds be left over for any claims outstanding by other parties to the project. Here, Jefferson Parish did not pay the contractor. Instead, Parish paid funds to Hanover, the surety.
The court went on to explain that even if Jefferson Parish had directly paid Catco, under the other remaining circumstances Apex would not be able to recover. Claims under La. R.S. 38:2242(D) require that a recorded privilege be present in order to recover against a public authority.
Since Apex's claim had prescribed against Hanover and Apex also failed to appeal the judgment removing its claim from the parish record, Apex's claim for an unpaid balance did not exist in the Jefferson Parish record.
When attempting to recover for unpaid work in the construction industry, following the strict statutory requirements is just as important as having meritorious claims. Here, despite an unpaid balance of nearly $40,000, Apex Building Technologies failed to recover because it did not meet statutory deadlines.
While Apex's appeals failed for technical legal reasons, the case could have gone quite differently had the original suit been initiated within the one-year required timeframe. With a little more attention to the requirements, Apex likely could have recovered what they were owed, and avoided additional years of litigation.
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