Loss of Lien - some defenses to a claim of lien
Mechanic’s lien claims for labor or materials furnished by lien claimants are defeated by failure to record a Notice of Lien claim within the prescribed period (that is, for lack of timeliness), filing a Notice of Lien with inadequate information or which is in some way defective, failure to commence an action to foreclose the lien within 180 days from the date of the Notice of Lien, and failure to file a lis pendens when commencing an action to foreclose a lien (failure to file a lis pendens only renders the lien ineffective against those who were not parties and who did not have actual knowledge of the commencement of the action).
A mechanic’s lien can also be lost under the following circumstances. If a subcontractor or supplier is performing work on or supplying materials to a contractor on a number of different projects, the subcontractor or supplier must demand of the contractor making payment a designation of the account and the items of account to which each payment is to apply. If the subcontractor or materialman fails to request a designation as required and a lien is claimed for the materials furnished or labor performed, it is a defense to the lien that a payment was made to the subcontractor or materialman and that when such payment was received by the subcontractor or materialman he did not demand a designation of the account and of the items of account to which such payment was to be applied. See Utah Code Ann. § 58-55-601 (Lexis 2005).
While such a result may seem harsh, the Utah Supreme Court has applied the statute in the only case decided under the provision. In the case of Western Ready Mix v. Rodriguez, 567 P.2d 1118 (Utah 1977), the Utah Supreme Court held that a supplier’s failure to request a designation of account as required by the statute cited above prevented that supplier from claiming a second payment from the owner under the mechanic’s lien statute.
Even though the Utah Supreme Court has to date strictly applied the request for designation statute, it has also held that the statute applies only in mechanic’s lien causes of action since the statute states that the failure to request a designation of account is a defense to a lien claim. See Geneva Pipe Company v. S & H Insurance Company, 714 P.2d 648 (Utah 1986). Thus the court has left other causes of action against the owner, such as failure to obtain a bond under Utah Code section 14-2-2, or quantum meruit, untainted by a failure to request a designation. See Utah Code Ann. § 14-2-2 (Lexis 2005).
In any mechanic’s lien case where a subcontractor or materialman has more than one project with a contractor, it is important for the subcontractor or materialman to be able to prove that he demanded designations of the account to which any payments received were to apply, that he credited the account in accordance with the designation and that there are amounts due and owing on the account which is the subject of the lien.
A mechanic’s lien can also be lost under the following circumstances. If a subcontractor or supplier is performing work on or supplying materials to a contractor on a number of different projects, the subcontractor or supplier must demand of the contractor making payment a designation of the account and the items of account to which each payment is to apply. If the subcontractor or materialman fails to request a designation as required and a lien is claimed for the materials furnished or labor performed, it is a defense to the lien that a payment was made to the subcontractor or materialman and that when such payment was received by the subcontractor or materialman he did not demand a designation of the account and of the items of account to which such payment was to be applied. See Utah Code Ann. § 58-55-601 (Lexis 2005).
While such a result may seem harsh, the Utah Supreme Court has applied the statute in the only case decided under the provision. In the case of Western Ready Mix v. Rodriguez, 567 P.2d 1118 (Utah 1977), the Utah Supreme Court held that a supplier’s failure to request a designation of account as required by the statute cited above prevented that supplier from claiming a second payment from the owner under the mechanic’s lien statute.
Even though the Utah Supreme Court has to date strictly applied the request for designation statute, it has also held that the statute applies only in mechanic’s lien causes of action since the statute states that the failure to request a designation of account is a defense to a lien claim. See Geneva Pipe Company v. S & H Insurance Company, 714 P.2d 648 (Utah 1986). Thus the court has left other causes of action against the owner, such as failure to obtain a bond under Utah Code section 14-2-2, or quantum meruit, untainted by a failure to request a designation. See Utah Code Ann. § 14-2-2 (Lexis 2005).
In any mechanic’s lien case where a subcontractor or materialman has more than one project with a contractor, it is important for the subcontractor or materialman to be able to prove that he demanded designations of the account to which any payments received were to apply, that he credited the account in accordance with the designation and that there are amounts due and owing on the account which is the subject of the lien.
posted by Randy B. Birch @ 1:41 PM
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