A Story about a Lien Dissolution Bond and Its Trusty Suit-To-Enforce Action
A “lien dissolution bond,” which can be filed to remove mechanic’s liens from a property, is one of many names or phrases given to bonds of this type. Some other names or phrases you may recognize include: bonded off lien, discharge bond, bonding around/over lien, lien prevention bond, transfer bond, and a new one to me, a target lien bond. (Much to my dismay, “target lien bond” has nothing to do with shopping at the infamous Target.)
While today’s post has little to do with my shopping obsessions, it does focus on what happened in one Massachusetts case when the lien claimant took steps to foreclose on the lien dissolution bond.
Massachusetts Statute Allows for Liens to be Dissolved by Filing a Bond
We’ll get the technical aspect out of the way first. Section 14 of G.L. c. 254 (i.e. Massachusetts mechanic’s lien statute) provides that a lien dissolution bond can be filed with the Registry of Deeds to remove a mechanic’s lien filed against a property.
“Any person in interest may dissolve a lien under this chapter by recording or causing to be recorded in the registry of deeds in the county or district where the land lies, a bond of a surety company authorized to do business in Massachusetts and in a penal sum equal to the amount of the lien sought to be dissolved conditioned for the payment of any sum which the claimant may recover on his claim for labor or labor and materials. Upon the recording of the bond, the lien shall be dissolved…”
Section 14 also explains that a notice of the recorded bond and copy of the bond should be provided to the lien claimant whose lien has been dissolved. And, statute states “The claimant may enforce the bond by a civil action commenced within ninety days after the later of the filing of the statement required by section 8 or receipt of notice of recording of the bond, but such bond shall not create any rights which the claimant would not have had, or impair any defense which the obligors would have had, in an action to enforce a lien.”
Section 14 is referring to the deadlines laid out under section 8 for mechanic’s liens. Here are the mechanic’s lien deadlines from The National Lien Digest –
- File a Statement of Account no later than the earliest of:
- 90 days from the recording of a Notice of Substantial Completion,
- 120 days from the recording of a Notice of Termination, or
- 120 days from the last furnishing of materials or services by the prime contractor or the subcontractor.
- File suit to enforce the lien within 90 days from filing the Statement of Account.
In other words, a claimant can proceed with suit to enforce the lien dissolution bond within the same deadlines as they would for a mechanic’s lien: 90 days from the date the lien was filed.
Yikes, That’s A Lot of Technical. What about the Case?
I know – the downside to some of these cases is the crazy technicalities that need to be explained prior to getting to the good stuff. So, on to the good stuff!
The question before the court was “if a claimant proceeds with suit against the bond, are they required to record an attested copy of their complaint?” Because the mechanic’s lien statute states an “attested copy” of the suit action must be recorded with the Registry of Deeds.
The short answer? Nope.
According to an article by Kevin Mortimer and Samuel Tony Starr, the surety is the party that contested the court’s decision.
“…when the supplier/lienholder filed a timely enforcement action against the subcontractor and bond surety, the surety moved for summary judgment—arguing that the lienholder had failed to comply with the strict requirements of Section 14 by failing to record an attested to copy of its complaint with the Registry of Deeds.”
And the lower court sided with the surety. But, what good is a case that isn’t appealed?
Upon appeal, the Supreme Judicial Court overturned the earlier decision, because the language within statute does not state there is a requirement for recordation of an attested copy. In fact, the court compared the lack of language in section 14 to the inclusion of language in section 12.
Essentially: if the statute wanted an attested copy to be recorded, it would have said so.
But wait, there’s more. The surety argued that an attested copy should be recorded to notify other parties of the suit, even if they are non-parties to the action.
“…the Court acknowledged the surety’s valid concern that many entities, including the general contractor and other subcontractors, may have an interest in knowing about a lien dissolution bond’s enforcement action. The surety asserted that since such entities are not named as parties to the action, they would not receive service, and therefore would not have knowledge of it.”
Perhaps We Will See New Legislation?
Well, it’s certainly possible. When the court acknowledged the surety’s concern about notifying interested parties of the suit action, it made a footnote comment that may be fortuitous “Any resolution of this issue, however, is for the Legislature.” So, it’s possible that new legislation may develop from this case.
You can read the court opinion here: City Electric Supply Co. v. Arch Insurance Co.
Did you catch our top 10 list of lien waiver questions? Read this post for answers to questions like “Which waiver is preferred?” and “Does a lien waiver waive my right to cause of action for lost profits or disputed change orders?” NCS Top 10 List: Lien Waiver Questions
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