Pete Wall Plumbing (PWP) sought to enforce its materialmen's lien against property developed by Sandra Anderson Builders (SAB), in conjuction with Carolina Bank and the Greensboro Housing Authority.
Due to the multiparty nature of a development, SAB was both an owner of the properties under Chapter 44A, Article 2, Part 1, by virtue of the Subleases, see N.C. Gen. Stat. § 44A-7 (“An ‘owner’ is a person who has an interest in the real property improved and for whom an improvement is made and who ordered the improvement to be made.”); and also a contractor under Part 2, based upon the language in the Subleases requiring it to make improvements upon the properties. See N.C. Gen. Stat. § 44A-17 (“‘Contractor’ means a person who contracts with an owner to improve real property.”).
PWP's filings attempted to ensure that it would receive the protections of both Parts 1 and 2, by using forms that combined the forms found in such parts. The Court of Appeals held that a "claimant utilizing either a claim of lien or a notice of claim of lien on funds is not required to use the model statutory form and “deviation from the statutory form is permissible so long as all of the information set out in the statutory form is contained” within the filing." Contract Steel Sales, Inc. v. Freedom Const. Co., 321 N.C. 215, 222, 362 S.E.2d 547, 551 (1987). The primary difference between the two is that a claim of lien “need only identify the owner, the claimant, and the party with which the claimant contracted[,]” while a notice of claim of lien “must identify all the parties in the ‘contractual chain’ between the claimant and the owner.” Universal Mechanical v. Hunt, 114 N.C. App. 484, 488, 442 S.E.2d 130, 132 (1994). Reviewing the filings by PWP, the Court of Appeals found that the amalgamation of forms contained all required information and were sufficient to allow a title searcher to determine potential claimants against the properties.
The subsequent private owners of the properties, however, contended that they had received title to the properties from SAB prior to the filings by PWP. As to the claim of lien, it is only valid “to the extent of the interest of the owner.” N.C. Gen. Stat. § 44A-9 (2009). Since PWP did not commence enforcement until after SAB had sold the properties, the claim of lien was terminated.
Regarding the Notices of Claim of Lien on Funds, such does not attach to any funds until the notice is received by an obligor. Carolina Bank had been an obligor, but the properties were transferred to the private owners free of its Deeds of Trust, terminating its status as an obligor. That Carolina Bank subsequently received notice of claim of lien on funds, was not sufficient to subject Carolina Bank to liability. (PWP had obtained a judgment against SAB, so regardless of whether it should have a valid lien on funds paid by SAB was harmless error, since PWP could not have obtained a larger judgment.)
Two lots, however, had not been sold to private owners and were instead foreclosed on by Carolina Bank. As to the claim of lien, since Carolina Bank recorded deeds of trust on these lots before PWP provided labor and/or materials to them, Carolina Bank’s deeds of trust were senior to PWP's claims of lien and the foreclosure extinguished them. As to the Notices of Claim of Lien on Funds, such attach to any funds recieved, and not the real property, so the foreclosure had no effect on these filings.
In a concurrence, Judge Steelman agrees with the holding but questions whether the current statutory scheme meets the requirements of Article X, Section 3 of the North Carolina Constitution to "provide by
proper legislation for giving to mechanics and laborers an adequate lien on the subject-matter of their labor."
Pete Wall Plumbing v. Sandra Anderson Builders.PDF
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