A contractor is thrown off a job midstream for alleged shoddy work and/or slow performance. He sues the owner for his unpaid contract balance. His contract provides for interest and attorneys’ fees if payment is not timely made, so he adds both to his complaint. The owner then counterclaims for the cost of correcting items of poor workmanship and for the cost of completing the unfinished work (which the owner claims will exceed the unpaid contract balance), and perhaps for delay damages as well.
Suppose the contractor applied for and got a mechanic’s lien attachment on an ex parte basis in the full amount of his claims (unpaid balance, interest and anticipated attorneys’ fees). If the owner then files an objection to the lien and asks for a hearing, what will be grounds for the judge to reduce or eliminate the lien?
The starting point is the basic mechanic’s lien rule in RSA 447:2 that anyone who furnishes labor or materials to improve another’s property “shall have a lien on any material so furnished and on said structure, and on any right of the owner to the lot of land on which it stands.” The word “shall” here means what it says. The lien is a matter of right so long as it is timely and properly perfected. Timeliness is governed by RSA 447:9, providing that the lien “shall continue for 120 days after the services are performed, or the materials, supplies or other things are furnished.” Perfection is governed by RSA 447:10, providing that a mechanic’s lien is secured “by attachment of the property upon which it exists at any time while the lien continues.”
Because an attachment is a court order, it is tempting to assume that all of the provisions of New Hampshire’s pre-judgment attachment statute, RSA 511-A, will apply to that effort -- including RSA 511-A:3, which requires “the plaintiff to show that there is a reasonable likelihood that the plaintiff will recover judgment including interest and costs on any amount equal to or greater than than the amount of the attachment.” This statute focuses on the ultimate judgment, where counterclaims will matter; any judgment will necessarily be reduced by a successful counterclaim. But a number of Superior Court decisions, including Consolidated Elec. Distrib., Inc. v. SES Concord Co., No. 89-C-571/579 (Merrimack County Superior Ct., Nov. 21, 1989), and West Side Dev. Group, LLC v. D’Amour, No. 04-C-018, (Carroll County Superior Ct., March 24, 2004), have held that the provisions of RSA 511-A:3 do not apply to mechanic’s lien attachments, thus relieving the contractor of the burden of proving a reasonable likelihood of getting a judgment at least equal to the lien amount. Our federal court has followed suit. H.E. Contracting v. Franklin Pierce College, 360 F.Supp.2d 289 (D.N.H. 2005).
Freed of the burden of showing a likelihood that he will recover a judgment “equal to or greater than than the amount of the attachment,” the contractor will be allowed to lien for the amount of his claim regardless of whether the owner may have a setoff against that amount at trial. The amount of the lien will be the unpaid contract sum, i.e., the contractually agreed value of the labor and materials furnished. The owner may be able to argue that defective goods and deficient work must be taken into account in valuing the contractor’s performance, but not all courts will lend an ear to that argument at the attachment hearing, preferring to leave that claim for trial and not gut the lien at the pretrial stage.
Note that the inapplicability of RSA 511-A:3 cuts both ways; a mechanic’s lien attachment will not include “interest and costs” (which for this purpose will include attorneys’ fees). If those amounts were included in the lien amount ex parte, subtracting them may be the owner’s lone victory at the attachment hearing.
Suppose the contractor applied for and got a mechanic’s lien attachment on an ex parte basis in the full amount of his claims (unpaid balance, interest and anticipated attorneys’ fees). If the owner then files an objection to the lien and asks for a hearing, what will be grounds for the judge to reduce or eliminate the lien?
The starting point is the basic mechanic’s lien rule in RSA 447:2 that anyone who furnishes labor or materials to improve another’s property “shall have a lien on any material so furnished and on said structure, and on any right of the owner to the lot of land on which it stands.” The word “shall” here means what it says. The lien is a matter of right so long as it is timely and properly perfected. Timeliness is governed by RSA 447:9, providing that the lien “shall continue for 120 days after the services are performed, or the materials, supplies or other things are furnished.” Perfection is governed by RSA 447:10, providing that a mechanic’s lien is secured “by attachment of the property upon which it exists at any time while the lien continues.”
Because an attachment is a court order, it is tempting to assume that all of the provisions of New Hampshire’s pre-judgment attachment statute, RSA 511-A, will apply to that effort -- including RSA 511-A:3, which requires “the plaintiff to show that there is a reasonable likelihood that the plaintiff will recover judgment including interest and costs on any amount equal to or greater than than the amount of the attachment.” This statute focuses on the ultimate judgment, where counterclaims will matter; any judgment will necessarily be reduced by a successful counterclaim. But a number of Superior Court decisions, including Consolidated Elec. Distrib., Inc. v. SES Concord Co., No. 89-C-571/579 (Merrimack County Superior Ct., Nov. 21, 1989), and West Side Dev. Group, LLC v. D’Amour, No. 04-C-018, (Carroll County Superior Ct., March 24, 2004), have held that the provisions of RSA 511-A:3 do not apply to mechanic’s lien attachments, thus relieving the contractor of the burden of proving a reasonable likelihood of getting a judgment at least equal to the lien amount. Our federal court has followed suit. H.E. Contracting v. Franklin Pierce College, 360 F.Supp.2d 289 (D.N.H. 2005).
Freed of the burden of showing a likelihood that he will recover a judgment “equal to or greater than than the amount of the attachment,” the contractor will be allowed to lien for the amount of his claim regardless of whether the owner may have a setoff against that amount at trial. The amount of the lien will be the unpaid contract sum, i.e., the contractually agreed value of the labor and materials furnished. The owner may be able to argue that defective goods and deficient work must be taken into account in valuing the contractor’s performance, but not all courts will lend an ear to that argument at the attachment hearing, preferring to leave that claim for trial and not gut the lien at the pretrial stage.
Note that the inapplicability of RSA 511-A:3 cuts both ways; a mechanic’s lien attachment will not include “interest and costs” (which for this purpose will include attorneys’ fees). If those amounts were included in the lien amount ex parte, subtracting them may be the owner’s lone victory at the attachment hearing.
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