Daily Development for Monday, May 19, 2002
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

CONSTITUTIONAL LAW; DUE PROCESS; MECHANIC'S LIENS:
Rhode Island trial court finds state mechanics' lien law unconstitutional -
no hearing prior to attachment of lien.

Sells/Greene Building Company, LLC. v.  Rossi, CA No. PB 02-1019
(Providence Cty. Sup. Ct., Rhode Island, 5/16/03)

In a decision that many have been suspecting would come sooner or later,
a trial court has found the Rhode Island mechanic's lien law
unconstitutional because it deprives landowners of a significant interest in
their property without opportunity for a prior due process hearing, in
violation of Sniadach, Fuentes, and the various "due process revolution"
cases of the 1970's, as more specifically articulated in the more recent
decisions in Connecticut v. Doehr, 111 S.Ct. 2105 (1991) (striking down
Connecticut's pre-judgment attachment process for real property) and
Reardon v. U.S., 9047 F.2d 1509 (1st. Cir. 1991) (then existing CERCLA
provision interpreted to prevent pre-attachment challenge of CERCLA
clean-up liens is uconstittutional).

The Rhode Island statute is not that much different from statutes in many
states.  Landowners receive notice from potential lien claimants that they
are about to supply materials or conduct work on the property.  Later, if a
lien is in fact filed, landowners get notice of the filing of the lien and the
accompanying lis pendens.  But the lien takes priority at least as of the time
of filing (the editor could not make out from the case whether Rhode Island
provides, as many other states do for "super priority" such as a "first
shovel" rule.)  This attachment thus will bind any other person seeking to
establish an interest in the property after the filing; but until the hearing on
the lien, the owner of the property can get the lien released only by the
posting of a bond.  (Many states don't even permit lien release with a bond.)

After the Doehr decision, really the only open issues that appeared to be left
open were whether there were any differences between the impact on the
property owner of the pre-judgment attachment struck down in Doehr and
the Rhode Island mechanic's lien (there don't appear to be) and whether, on
balance, there is an adequate degree of due process protection in this
procedure taking into account all the relevant public interests in having a
mechanic's lien process, which clearly is far narrower in its reach than a
general pre-judgment attachment.

One post-Doehr case, in Indiana, had held that impact of that state's
mechanic's lien statute did not amount to an unconstitutional deprivation
of property.  Haimbaugh Landscaping, Inc. v. Jegen, 653 N.E. 2d 95 (Ind
App. 1995).  In a word, the Rhode Island trial court concludes that
Haimbagh is wrong, but it also makes a feint at distinguishing the case
anyway.

The court refused to conclude that the "bonding off" right or the right to
bring an independent judicial action to expunge the lien were adequate
protections for the landowner, because in both cases the landowner was
saddled with the lien prior to obtaining such relief.  The editor, in his report
on Doehr in the ABA Quarterly Report in 1991, noted that the case
involved multitudinous individual opinions, and there was not a five judge
agreement on the question of whether a "bonding off" process would
resolve the perceived infirmities in that case.

Comment 1: This case almost certainly will be appealed.  The judge invited
various amicus opinions and had a brief from the Rhode Island Attorney
General's office supporting the statute.  We'll likely get an appellate court
"read" on the issues.

Comment 2:   As noted, the fundamental question is the balance of admitted
adverse impact on the landowner of having a lien imposed and the benefit
to the public and the other parties in the mechanic's lien process.
Remember that the fundamental practical purpose of the statute is to give
mechanics' a stronger bargaining position in a process that often involves
the collapse of a construction project and lots of loss to be spread around.

Although, if we compare the mechanic's lien only to the pre-judgment
attachment process struck down in Doehr, it does appear that there are
parallels.  But that's only one end of the spectrum.  We also should look at
the fact that we have, imbedded from an early point in the common law, the
concept of   lis pendens.  When an action is filed concerning property, the
action immediately attaches to the property (modernly, when the land
records so reflect).  The land is "tied up," it's true, but this is necessary to
preserve the claimed interest from being cut off by transfer to a BFP.  Land,
after all, is a unique asset for both the owner and the claimant.   The editor
thinks it unlikely that the Supreme Court will strike down the traditional lis
pendens remedy as violative of Due Process.

So where does the mechanic's lien fit on the spectrum?  It certainly is a
claim closely related to property.  The notion is that the work of
construction has enhanced the value of the property, and the lien should
insure that the party who has so enhanced the value should have a claim to
secure the payment.  In many states, the lien amount is stated to be the
amount of improvement, rather than the charges imposed, although as a
practical matter there's rarely a difference.

On the other hand, unlike the typical lis pendens, the primary focus of the
mechanic's lien is as a money collection device.  It's function is to twist the
owner's beak so that the owner will pay off the mechanic, even when the
owner (in many states) has already paid the general contractor for the work.

We also have to look at the burden on the state.  If we permit pre-
attachment hearings in every case, there will be cost associated with this
that the state must bear.  And the cost will not only be financial - we'll pay
the cost in deferment of other legal process that society might find desirable.

Tough call.  The editor comes out in favor of the lien process, and therefore
concludes that the case is wrong, and that the judge guessed wrong about
where the higher courts will come out.

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