Friday, May 20, 2011

Loosening up on liens

Historically, lien requirements have been dealt with very strictly by the courts.  This may be relaxing a bit.  The Court of Appeals recently sided with a lien claimant on the adequacy of a claim of lien’s property description. In 3400 Partners v. Chavez, a painting subcontractor sued to foreclose a lien on a condominium project. The trial court granted summary judgment in favor of the subcontractor, and the owner appealed, arguing that the lien was defective because the legal description referred to in the lien listed one of many condominium units, rather than the property as a whole. The Court of Appeals affirmed and found the lien to be valid.

The subcontractor’s lien properly identified the street address for the property, 3400 Malone Drive, Chamblee, Georgia 30341, and stated that the lien “is claimed, separately and severally, as to all buildings and improvements thereon, and the said land.” The owner’s argument focused on Exhibit A to the lien, which included a legal description of the property, “all that tract and parcel of land lying in and being land lot 299, 18th District, Chamblee section, Dekalb County” but went on to say “and being unit 311, 3400 Malone Condominiums.” Thus, Exhibit A to the lien contained language arguably limiting the lien to Unit 311. Clearly, the lien and Exhibit A contained conflicting language as to the scope of the lien.

In rejecting the owner’s argument, the Court of Appeals acknowledged that the creation of liens under the mechanic’s lien statute is in derogation of the common law, and that “strict compliance with the requirements of the statute is required.” The Court balanced this rule with recent case law that passed on the adequacy of a property description. In a 2008 case, the Court ruled that “it is only when a description [of property] is manifestly too meager, imperfect, or uncertain to serve as adequate means of identification that the court can adjudge the description insufficient as a matter of law.” Deljoo v. Suntrust Mtg., 284 Ga. 438,440, 668 S.E. 2d 245 (2008). The Court noted that the Court of Appeals had enforced liens with descriptions containing surplusage, omissions, or even errors.

In this case, the Court found that the limitation to Unit 311 contradicted all of the other evidence in the case. The Court noted that the lien contained the correct street address for the property, and the description incorporated plat book drawings of the entire condominium project. Interestingly, the Court also relied on extrinsic evidence. First, the owner, 3400 Partners, had sent a letter to Chavez concerning its work at 3400 Malone Drive without any limitation to a particular unit. Second, Chavez claimed a lien for $186,000, and the market value of the individual units was less than $200,000.

In short, the Court overlooked the discrepancy in the lien, and noted that “there was no evidence that the parties were confused” about the extent of the property interest subject to the lien. The Court focused on the correct address and statement that the lien covered all buildings, and found that any confusion or discrepancy was resolved by extrinsic evidence. Chavez will certainly be cited in years to come by attorneys defending liens that may have some defect, with the argument that the court should look at extrinsic evidence to uphold the lien.

No comments:

Post a Comment