Collections: Timeliness of Mechanic's Lien

The Supreme Court of Virginia reviewed several interesting issues regarding mechanic's liens in the case of American Standard Homes Corp. v. Reinecke, 425 S.E.2d 515, 245 Va. 113 (1993).

In American Standard some of the replacement materials for the prefabricated homes were delivered to each of the six projects more than 90 days after the materials and "extras" designated in the respective material order contracts had been delivered, the time limitation for filing memoranda of mechanic's liens, specified in Virginia Code §43-4. The Court ruled that time began to run upon delivery of the material designated in the material order contracts and not from delivery of the replacement materials. The Court, in making its ruling, determined that the materials delivered under the purchase orders were not materials last furnished within the intendment of the perfection statute, thus, the six liens were not timely filed.

The seller of the prefab homes had argued that the material order contracts were "open-ended devices" and that, because "each contract contemplated both extras and multiple purchase orders," the materials acquired under purchase orders were, for purposes of the filing limitation prescribed by the perfection statute, materials last furnished under those contracts. The Court disagreed though, finding that each material order contract contained blank spaces beneath the word "Extras" in which the buyer listed the materials to be added to those designated in the "dry-in" and "trim" packages. Unlike the "Extras" listed in the material order contracts and included in the invoices issued when the two material packages were delivered, the "Extras" to be shipped C.O.D. under particularized purchase orders were articles which were "replacement materials" for those materials that after delivery, had been lost, damaged or stolen and were reordered. Neither the basic contract nor the material order contract required the buyer to purchase such "extras" from the seller; the buyer was free to contract with other materialmen for materials needed to replace those delivered earlier by the seller. In its purchase orders, the buyer offered to buy replacement parts from the seller. The seller accepted that offer by delivering the materials.

The Court found that this was a contract, one separate and apart from the material order contract. The latter expressly provided that it was "THE COMPLETE AGREEMENT BETWEEN THE PARTIES." When the seller delivered the materials designated as extras listed in the contract, it delivered all it had contracted to deliver. What it delivered under the contract were the materials last furnished within the intendment of the 90-day statutory limit for filing memorandum of mechanic's lien. The Court found that the record showed with respect to each of the six liens at issue that the limitation period had expired before the seller filed its memoranda. Accordingly, the liens were unenforceable.

The lesson of American Standard - enforcement of creditor’s rights in construction law matters is a very complex and requires experienced counsel.