How Not To Recover on a Mechanics Lien
We've said it before, and we'll say it again: Mechanic Lien statutes (in all states) are hyper-technical. Litigators familiar with the lien statutes must tread carefully when making lien claims...and those unfamiliar with the statutes must be more careful.
A 2007 Washington Appeals decision underscores this point. In DBM Consulting Engineers, Inc. v. United States Fidelity and Guaranty Company, a contractor won its suit against a defendant but was still unable to recover on the lien's bond. Why? Because the contractor "failed to obtain judgment upon the lien, only obtaining a judgment on the breach of contract claim."
The background to this suit is that a contractor filed suit against a client for its failure to pay a debt, and the client subsequently recorded a lien bond to free up the property for sale. The contractor then won it's lawsuit against the client...but when it moved to recover against the bond, its claim was denied.
The appeals court provided this pithy conclusion:
A lien bond does not eliminate a lien entirely. A lien bond releases the property from the lien, but the lien is then secured by the bond. While the applicable foreclosure process depends on whether the lien is secured by property (which can then be sold) or by a bond, in either situation, the lien must be foreclosed upon before the lienholder is entitled to recover on the lien. So in order to be entitled to payment on the bond, DBM needed to foreclose its lien. Because DBM did not obtain a judgment foreclosing its lien, Travelers is not obligated to pay on the lien bond.
A fellow construction firm in the Pacific Northwest, Carney Law, discusses the DBM decision on its website saying that the Court's holding "is yet another application of the familiar canon that the mechanics' lien statute is strictly construed to determine whether the lien attaches." It is also another application of the canon that the statues are hyper-technical, with a slew of traps for the unwary.
While this example is from Washington, the same general principals hold true in Louisiana and elsewhere: wade through mechanics lien statutes carefully.
