A Second Bite of The Apple Revisited
The Right to Record a Second Mechanics Lien
A recent appellate court decision has overruled an earlier court appellate decision that limited a contractor=s ability to re-record a mechanics lien after the contractor failed to initiate a timely legal action. The recent decision significantly changes a contractors legal right to re-record a lien if the time to record a lien has not expired
California law requires that a lawsuit be filed to foreclose on a mechanic=s lien within 90 days (Civil Code section 3144) after recording it. If a timely lawsuit is not filed, the property owner can file a motion, under Civil Code section 3154, to have the court remove the lien. Two earlier appellate court case have considered what lien claim rights exist if the time to foreclose on the lien has expired and the owner has filed a petition seeking a court decree removing the lien. Prior to the holding in this case it was accepted that: (a) a lien claimant could record a second lien if the first lien was voluntarily removed and the time for recording a second lien had not expired, but (b) a second lien could not be recorded if a court decree released the first lien.
In the case of Koudmani v. Ogle Enterprises, Inc.(1996) 47 Cal App 4th 1650 a subcontractor filed a lien 87 days after the owner recorded a notice of completion. Fifteen days later, the subcontractor filed a second mechanic=s lien. Two days after that, the owner=s attorney sent a letter to the subcontractor, demanding that the original lien be released because the contractor had failed to file a foreclosure action on the first lien within 90 days of recording it. The subcontractor released the first lien, and then filed a timely foreclosure action on the second one. At that point, the owner filed a petition to release the lien, pursuant to Civil Code section 3154, which allows an owner to move the court to release a lien when a foreclosure action has not been filed within 90 days of the recording of the lien. The trial court ruled against the subcontractor, and released the property from the second lien. The appellate court reversed the trial court=s decision and allowed the subcontractor to foreclose on his second lien. Civil Code section 3154 provides owners with a simple remedy to remove mechanic=s liens when lien claimants fail to file timely actions to foreclose on them. However, if a claimant voluntarily releases a lien before the owner files a motion, this does not, on its face, bar the claimant from filing a second timely lien.
The Koudmani Court criticized the holding in Maris Management Corp. v. Assured Drywall & Textures (1984) 152 Cal. App. 3rd 268. The Maris Court held that once the owner received a court decree releasing the property from mechanic lien, pursuant to a Civil Code section 3154 petition, the contractor could not record a second lien although the time for recording the lien had not expired. Since the holding in Maris, attorneys have advised dilatory lien claimants to release the lien before the petition was filed. However, the Solit court has now overruled the decision in Maris.
The Solit Court agreed with the Koudmani Court=s criticism of the holding in Maris. The Solit Court concluded that inchoate constitutional right that a contractor has to file a lien is not extinguished by a court decree under the statutory authority of Civil Code section 3154. In essence, the Civil Code section 3154 only allows for the release of the actual recorded lien not the constitutional right to a lien. The Maris decision has long been considered a inconsistent with the other cases concerning a contractor=s inchoate constitutional right to record a mechanic lien. The Court=s decision to overrule the Maris holding, is thus, appropriate and long overdue.
Since it is relatively common for lien claimants to wait too long before seeking legal advice, this decision will give some lien claimants a second chance to perfect their lien claims. It is also common for a contractor to record more than one lien to correct errors in the lien or to add the value of additional labor and materials.
If a contractor has failed to file a timely foreclosure lawsuit, a contractor should determine if he or she can record a second mechanic=s lien in a timely manner (e.g., 30, 60, or 90 days after the project is substantially completed). If so, the first lien should be released the first lien and a new one recorded. However, the lien release should clearly indicate that the original claim remains unsatisfied. Conversely, if the lien has been satisfied the lien release should expressly state that the underlying obligation has been fully satisfied. If the lien release is not clear as to what is being released, the owner may then argue that the contractor has released all its rights to record a new lien.
This article, 8 1999, was written by William C. Last, Jr. of Last, Harrelson & Faoro. Mr. Last is an attorney who has been specializing in Construction Law for over eighteen years. Mr. Last also holds a California A&B contractors license. If you have any questions Mr. Last can be contacted at 415‑764‑1990. This bulletin is published periodically to provide general information about current legal issues. If you have a specific legal question or need legal advice, you should contact an attorney.