NH Construction Law
  • Home
  • Blog
  • Links

#21:  Lower Tier Mechanic's Liens: The Westinghouse Wrinkle

11/29/2014

0 Comments

 
Several months ago I blogged about the Notice of Intent to Lien required of a subcontractor, whose mechanic’s lien will be capped by the amount that the owner owes (or will owe) the general contractor on the date the notice of intent is received by the owner.  The precise language of the statute, RSA 447:6, is “Such notice may be given after the labor is performed or the material is furnished, and said lien shall be valid to the extent of the amount then due or that may thereafter become due to the contractor, agent or subcontractor of the owner.”

What if you are a third-tier sub or supplier?  By whose unpaid contract balance is your lien capped on the date of receipt of your Notice of Intent?  Is your cap (1) the amount due or to become due from the owner to the GC, or (2) the amount due or to become due to the party with whom you contracted?

While one can read the statute to suggest that (2) is the answer, (1) makes more sense as a policy matter.  After all, the point of the Notice of Intent is to protect owners from having to pay twice for the same work, once to the GC and a second time to a lienor who performed the work but whom he didn’t know about when he wrote his check to the GC.  On this logic, once the owner has fully paid the GC for all work without notice of any lien claims from unpaid lower tiers, his property should be lien-free.

But consider the case of Westinghouse Electric Supply Co. v. Electromech, Inc., 119 N.H. 833 (1979).  Westinghouse sold electrical supplies on credit to an electrical subcontractor, Electromech, who worked for two separate GCs on two separate projects.  When Electromech went bankrupt before paying for the materials, Westinghouse gave notice of intent to lien the two projects.  In each case the owners had not yet fully paid their GCs on the day the notices arrived, withholding sums more than sufficient to cover what Westinghouse was owed.  However, the GCs each had backcharges against Electromech such that Electromech wasn’t owed as much as it, in turn, owed Westinghouse.  The Court limited Westinghouse’s lien, saying: “We hold that a correct interpretation of RSA 447:6 limits the lien of the materialman to amounts due or that may thereafter become due to the subcontractor with whom the materialman contracted. Accordingly, Westinghouse can only recover the amount the owner owes the subcontractor, Electromech.”  Id. at 837.

(This may have been loose language.  An owner has no contract with the GC’s subs, so without some equitable remedy -- or perhaps an interpretation of RSA 447:8 -- “the amount the owner owes the subcontractor” is always zero.  Indeed, the Court in Westinghouse rejected the plaintiff’s argument that “once the owner's indebtedness to the principal contractor is established, the materialman's claim to the proceeds in the owner's hands becomes direct and completely independent of the rights of the contractor or other subcontractors.”  Id. at 836.)  

The Court’s decision that “RSA 447:6 limits the lien of the materialman to amounts due or that may thereafter become due to the subcontractor with whom the materialman contracted" leaves an important question unanswered: is the lien also limited by what the owner owes the GC?  If not, an owner who has fully paid for the project prior to getting a Notice of Intent can still suffer a lien from a third tier sub or supplier whenever the second tier who owes him money is itself owed money by the GC.  Perhaps both (1) and (2) are caps!  That would be consistent with Westinghouse’s purpose “to protect the owner from unknown liability to the subcontractor or materialman and from liability for payments in excess of the amounts owed to the general contractor.”  But the Court never had to reach this two-cap issue, since there was still money owed from owner to GC.  Until our Supreme Court gets a case that presents the question squarely, it is safest to assume that lower tier subs and suppliers who delay sending a Notice of Intent to Lien will have two hurdles to clear.


0 Comments



Leave a Reply.

    Author

    Frank Spinella

    Archives

    May 2025
    April 2025
    March 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    April 2024
    March 2024
    February 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    January 2019
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014

    Categories

    All

    RSS Feed

Proudly powered by Weebly