Connecticut Courts Treat Two Mechanic’s Lien Deadlines Differently

The Connecticut courts have often been schizophrenic in their interpretation of Connecticut mechanic’s lien law.  On one hand, the courts refer to mechanic’s liens as a right created by statute and, therefore, must be strictly interpreted.  On the other, the courts refer to mechanic’s liens as remedial in nature and, therefore, should be liberally construed.  Based upon some recent decisions, it appears that that deadline to record and serve the mechanic’s lien is being strictly interpreted but the deadline to foreclose the lien is being liberally construed.

For a mechanic’s lien to be valid, it must be recorded within 90 days of the last day worked.  The mechanic’s lien, however, will expire if not foreclosed within one year of its recording.  Recently, the courts examined whether: 1.) the 30 day time limit for service was included within the 90 days for recording; and 2.) if the 30 days a marshal has to serve papers extended the one year deadline to foreclose.  Based upon the language of the statutes, the decisions came out the exact opposite as you might expect.

Conn. Gen. Stat. §49-34 states that the lien must be recorded within 90 days after the last date worked and served upon the owner within 30 days of recorded the certificate.

Pending Legislation Concerning Mechanic’s Liens

Right now, the Connecticut Legislature is considering Proposed Bill No. 5682 (the “Proposed Act”), which states as its purpose “[t]o establish a process for the holder of a mechanic’s lien to establish priority for the lien effective upon the filing of a ‘Notice of Commencement of Work’ with the town clerk for recording with deeds of land.”  The text of the Proposed Act states, however, that the lienor must be an architect and that the lienor’s priority is established upon the date of filing.  Such language raises many questions.

The “priority” of a mechanic’s lien pertains to where the mechanic’s lien stands in line with regard to the other claims against a property such as mortgages and other interest should the property go into foreclosure.  Presently, the priority of a mechanic’s lien relates back to the first date that the lienor, i.e. the person filing the mechanic’s lien, worked on the project.  There is some logic in creating a separate statute for design professionals because – unlike an excavation contractor – no one can see when a design professional starts work but, if that were the reason for the change, why does the Proposed Act only pertain to architects and not engineers as well. 

Another Step Closer to Understanding Pay-When-Paid Clauses

No provision in a standard construction contract has been more debated than the requirement for the general contractor to pay its subcontractors after its receipt of payment from the owner.  In situations where the owner does not pay the general contractor, the general contractor typically argues that it has no obligation to pay the subcontractor even if the reason for the owner’s nonpayment had nothing to do with the subcontractor.  Conversely, the subcontractor argues that – when the reason for the owner’s nonpayment is not the subcontractor’s fault – the general contractor must pay the monies the subcontractor is due.  Generally, the courts have said that contract language which states that the subcontractor shall not be paid until after the general contractor’s receipt of payment from the owner merely sets forth the time for payment and does not transfer the risk of the owner’s insolvency from the general contractor to the subcontractor.  “Normally and legally, the insolvency of the owner will not defeat the claim of the subcontractor against the general contractor.”  Sil/Carr Corp. v. Bartlett, 2012 Conn. Super. LEXIS 1665 (Conn. Super. Ct. June 26, 2012).  It is, however, possible for the contractor to transfer the risk of the owner’s nonpayment to the subcontractor. 

Subcontractors Only Have Very Limited Rights Against Public Owners

On private construction projects, subcontractors and/or suppliers that furnish labor, material, or services but are not paid by the project’s general contractor have a variety of claims that they may assert against a private owner.  For example, such subcontractors and/or suppliers may assert claims for unjust enrichment or file a mechanic’s lien.  No such rights exist, however, where the project owner is the State of Connecticut or one of its cities or towns.

As an alternative to the typical claims a subcontractor or supplier has against a private owner, Conn. Gen. Stat. § 49-41 requires general contractors that enter contracts for public projects over a certain dollar amount to post surety bonds that guarantee payment to their subcontractors and suppliers.  The exact language of Conn. Gen. Stat. § 49-41 states that “[e]ach contract . . . [for] any public building or public work of the state or a municipality shall include a provision that the person to perform the contract shall furnish . . . a bond . . . for the protection of persons supplying labor or materials . . .”  By the plain language of the statute, the onus is put on the general contractor to supply the bond;

A Contractor That Acts as His Own Expert Witness May Inadvertently Waive Attorney Client Privilege

The general rule is that a party does not have to disclose communications with its attorney seeking legal advice.  A recent Superior Court decision, Noble v. the City of Norwalk, 2012 Conn. Super. LEXIS 2017, however, has found an exception to the attorney client privilege that contractors need to be aware about.

During a trial, witnesses are not allowed to give their opinion unless they are qualified as an “expert.”  Under the legal definition, an “expert” is anyone that has knowledge through education, training or experience that would be helpful to the jury given the subject matter of the lawsuit.  Based upon the foregoing definition, almost anyone can qualify as an expert if the right case came along.  For example, my 13-year-old daughter has been taking ballet lessons since she was 3.  If ballet ever became relevant to a key issue in a lawsuit, my daughter would qualify as an expert on that subject.

In construction litigation, there are always questions that are not clearly fact or opinion.  For example, the amount of time that the forms have to remain in place after a concrete pour is a subject upon which there is disagreement and often depends upon the structure that was poured and the conditions under which the concrete was placed. 

The Contract and Not Common Sense Determines the Proper Parties to an Arbitration

Many construction contracts require the parties to resolve their disputes through alternate dispute resolution procedures such as mediation and arbitration.  Arbitration is intended to be a cost effective alternative to litigation.  The issue of whether arbitration works as well as intended will be the subject of a future post on this Blog but the topic of discussion here is the question of determining the proper parties to any given arbitration.  The answer is counterintuitive.

When it comes to arbitration, there are several well settled rules.  For example, courts favor arbitration, arbitration is a creature of contract, and no party will be forced to arbitrate when it has not agreed to do so.  In light of the foregoing, you might believe that a party, who is named in a demand for arbitration, files an answer to the demand, and participates in the arbitration hearing, has agreed to arbitrate and should be held liable for any arbitrator’s award that enters against it.  If you did believe that, however, you’d be wrong.

In CDIFUND, LLC v. Lenkowski, disputes arising out of home construction contracts were arbitrated.  CDIFUND, LLC v. Lenkowski, 2011 Conn. Super.

The Standard Procedure for Obtaining Lien Waivers May Be Ineffective

A recent Superior Court decision should cause general contractors and owners to reevaluate their procedures for obtaining lien waivers.  Typically, signed lien waivers are submitted after the work is performed but before payment is received.  On a basic level, the procedure makes sense because the owner does not want to issue payment to its general contractor unless it is sure that it’s protected from potential mechanic’s liens.  While the general contractor and its subcontractors may argue that they should not have to provide lien waivers until they receive payment, they are generally protected if the owner does not actually issue the payment described in the lien waiver because standard lien waiver language makes it clear that the waiver is not effective unless the payment described therein is actually received.

In Milone & MacBroom, Inc. v. Winchester Estates, 2011 Conn. Super. LEXIS 2688, the Superior Court considered whether a lien waiver is valid when:

1. The lien waiver is issued after the work is performed:
2. The lien waiver is executed before payment is received; and
3. The payment described in the lien waiver is received three weeks after the lien waiver was signed.

Court Rules That the Government Contractor Defense is Not Applicable to Road Reconstruction Projects

As articulated by the United States Supreme Court, the government contractor defense provides that “[l]iability for design defects in military equipment cannot be imposed, pursuant to state law, when (1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.”  Boyle v. United Techs. Corp., 487 U.S. 500, 512 (U.S. 1988).  The Connecticut Supreme Court recognized the government contractor defense in Miller v. United Technologies Corp., 233 Conn. 732 (Conn. 1995).  Nonetheless, a Connecticut Superior Court has just refused to apply the government contractor defense to a claim arising out of a road reconstruction project.

In Fox v. Town of Stratford, 2012 Conn. Super. LEXIS 1443 (Conn. Super. Ct. June 1, 2012), the plaintiff alleged that his property was damaged by flooding caused by a road reconstruction project.  The contractor asserted that, under the authority of Miller and Boyle, it cannot be held liable for plaintiff’s alleged damages because it strictly complied with the government’s plans and specifications. 

Subcontractors Only Have Very Limited Rights Against Public Owners

On private construction projects, subcontractors and/or suppliers that furnish labor, material, or services but are not paid by the project’s general contractor have a variety of claims that they may assert against a private owner.  For example, such subcontractors and/or suppliers may assert claims for unjust enrichment or file a mechanic’s lien.  No such rights exist, however, where the project owner is the State of Connecticut or one of its cities or towns.

As an alternative to the typical claims a subcontractor or supplier has against a private owner, Conn. Gen. Stat. § 49-41 requires general contractors that enter contracts for public projects over a certain dollar amount to post surety bonds that guarantee payment to their subcontractors and suppliers.  The exact language of Conn. Gen. Stat. § 49-41 states that “[e]ach contract . . . [for] any public building or public work of the state or a municipality shall include a provision that the person to perform the contract shall furnish . . . a bond . . . for the protection of persons supplying labor or materials . . .”  By the plain language of the statute, the onus is put on the general contractor to supply the bond;