Mechanics liens are powerful instruments to induce payment on construction projects. There are many reasons this is so, but perhaps the most attention grabbing (at least for the owner of the improved property) is that the property may be sold to satisfy the debt. This provides a serious incentive for the property owner to make sure the parties on the project are paid, and this incentive appears even bigger when the amount in controversy is small in comparison to the value of the property. A property owner in Maine recently discovered this the hard way; and found out the the Maine Supreme Judicial Court doesn’t pull any punches in interpreting that state’s mechanics lien statute.
The Cote Corp. v. Kelley Earthworks, Inc.
In The Cote Corp. v. Kelley Earthworks, Inc., the Maine Supreme Judicial Court reviewed the decision of the lower court modifying its previous order forcing the sale of a property to satisfy a mechanics lien to a money judgment for the same amount. The general facts of the case are as follows.
the property was ostensibly worth more than $1,000,000, but the award to Cote was for only $29,990The Cote Corp. (“Cote”) was hired by Kelley Earthworks, Inc. (“Kelley”) to construct an asphalt plant on land owned by Kelley. Cote was not fully paid for the construction, and in June 2012 filed a mechanics lien against the property. In August, within the time set forth by statute, Cote filed an action to enforce their lien. Kelley failed to respond to the action, and the court entered a default against Kelley in November of 2012. The following January, Cote moved the court for summary judgment requesting the property be sold to satisfy the mechanics lien amount of $29,990, plus attorneys’ fees and costs. Kelley again failed to respond, and the court granted the motion as unopposed. 10 days after the judgment was entered, Kelley finally responded for the first time, and requested that the judgment be set aside. Among many other arguments, Kelley noted that the property was ostensibly worth more than $1,000,000, but the award to Cote was for only $29,990, plus attorneys’ fees and costs, a tiny portion of the property’s total worth. The court neglected to do so, but did modify the judgment to set aside the sale of the property and award a money judgment in its place. The cross-appeal to the Supreme Judicial Court followed, with Cote again requesting a sale of the property and Kelley requesting relief from the summary judgment order.
The Supreme Court vacated the judgment, and determined that the lower court erred in striking the order to sell the property.
How Did That Happen?
In reaching this decision, the Maine Supreme Court analyzed the mechanics lien statute to determine the necessity of selling the property to satisfy the debt after a successful enforcement action. In doing so, the court specifically looked at two particular statutory sections, 10 M.R.S. § 3259 and 10 M.R.S. § 3265. After scrutiny of these provisions, the court concluded that “the mechanic’s lien statutes require a sale of Kelley’s property in order to satisfy Cote’s lien, but they do not necessarily require a sale of the entire parcel”.
So, what do these statutory sections actually say?
10 M.R.S. § 3259 reads as follows, in pertinent part:
If it is determined that the parties or any of them . . . have a lien upon said building and land . . . the court may decree that said property . . . shall be sold, and shall prescribe the place, time, terms, manner and conditions of such sale. . . . If justice requires, the court may provide in the order of sale that the owner shall have a right to redeem the property from such sale within a time fixed in the order of sale. If the court shall determine that the whole of the land on which the lien exists is not necessary therefor, it shall describe in the order of sale a suitable lot therefor; and only so much shall be sold.
The court read this as specifically requiring the sale of the property, but is this correct? While it seems clear the court is correct in its conclusion that the language of the statute does not specifically contemplate a money judgment as an alternative to selling the property, but it’s not as clear that it mandates that sale. The language above specifically notes that “the court may decree . . .” (emphasis added) a sale of the property. This seems to indicate that some alternative judgment may be possible. The Supreme Court’s interpretation of the statute, however, is aided by the language of the second statutory provision examined, 10 M.R.S. § 3265, which states:
[w]hen a judgment is rendered in any action authorized by chapters 601 to 631 against any . . . building or appurtenances, . . . and the land on which it stands . . . said property shall be taken and sold on execution in the same manner that rights of redeeming mortgaged real estate may be taken and sold.
This, then, provides the direct statement on which the court relied. When a judgment is rendered pursuant to an action to enforce a mechanics lien, the property “shall be taken and sold” (emphasis added). This is a pretty clear requirement and mandate to the court.
What Does This Mean For Maine Mechanics Lien Claimants/Defendants?
The takeaway for mechanics lien claimants and/or defendants is simple: if a judgment is entered pursuant to a mechanics lien, the property (or a satisfactory section/parcel thereof) will be sold to satisfy that judgment. For lien claimants this provides strong leverage. For lien defendants, this provides a strong incentive to take care of the lien prior to this step.