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Somebody Transferred Materials I Delivered to Another Job – Can I Still File a Mechanics Lien?

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It’s no secret that compliance with preliminary notice deadlines can mean the difference between a valid lien and an unenforceable one, and therefore, can be the difference between getting paid or not. Usually, while there can be small questions related to the deadline calculation (i.e. is the date of furnishing the ship date or the delivery date, etc.) the noticing party at least knows that s/he is on the project and a notice is required.

I recently saw a situation, however, where materials were “delivered” to a project jobsite without the material supplier’s knowledge. In a situation like that, how are deadlines calculated, and how does the supplier remain protected?

Materials Misappropriated and Delivered to Different Site

In the above situation, a contractor took some construction materials from one jobsite to a second, entirely different jobsite where a completely unrelated project was underway (and he just happened to be working on both). Needless to say, the contractor was not authorized to do this.

This occurred without the supplier’s knowledge, who, at the time, thought the material was all where it was supposed to be. Later, when the contractor started buying product for the new job, the supplier found out that materials had been taken from the first to the second. This created a problem, since the supplier provided preliminary notice on the first project, and was going to provide timely preliminary notice on the second project too, but became aware that materials were actually delivered to the project well prior to what the supplier considered to be the first furnishing.

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Visit the Material Supplier section of zlien‘s website for more info on the challenges suppliers have getting paid.


Download Preliminary Notices Best Practices Guide


What’s Protected?

Because these were expensive materials, the supplier wanted to make sure that the materials they delivered to the first site as intended (but the contractor took to the second site) were protected. While lien law requirements are always open to interpretation by courts, in this situation it would appear that if timely notice was filed on both projects, all of the material would be protected.

This particular issue arose in Ohio, where the state’s lien laws support for the proposition that in this scenario, the materials are all covered (albeit the misappropriated materials may be covered by the first notice and secured by a lien on the first project).

In Ohio, “a mechanic’s lien for furnishing materials” arises under a specific list of circumstances. One of these circumstances is that the materials are:

“furnished with the intent, as evidenced by the contract of sale, the delivery order, delivery to the site by the claimant or at the claimant’s direction, or by other evidence, that the materials be used in the course of the improvement with which the lien arises.”

Additionally,

“the delivery of materials to the site of the improvement, whether or not by the claimant, creates a conclusive presumption that the materials were used in the course of the improvement or were incorporated into the improvement.”

This means that the delivery of the materials to the first site provides a conclusive presumption that the materials were used at that site. Accordingly, any potential lien for nonpayment related to these materials could likely be asserted against the first property.

However, there are some additional factors that make this less than completely cut and dried, like actual knowledge that the materials were not in fact used at the first jobsite. Additionally, if I was a property owner forced to pay twice for materials that weren’t even used on my project, I would be looking at all available remedies against any and all available parties.

While lien law requires strict compliance with the applicable rules and deadlines, its application must also be interpreted broadly for the protection of project participants. In cases like this, it is unlikely that the improper acts of other parties would function to cut-off lien rights for parties that have otherwise complied with the necessary requirements.


Lien and notice deadline chart for material suppliers - download


Summary
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Does a material supplier still have mechanics lien rights if a contractor took the materials from one jobsite to another without the supplier's knowledge?
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zlien
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Last Updated on Dec 03, 2018
Published on Sep 25, 2017

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Nate, along with being a husband, father, Eagle Scout, Teen Jeopardy! contestant, and musician, is the Chief Legal Officer and General Counsel at zlien, a vertical SaaS platform designed to help construction industry participants by promoting a collaborative construction payment process. Nate was recently recognized as one of the nation's Top General Counsels, and is working to get better at it every day. Nate is a licensed attorney in Louisiana and Texas, and a graduate of Stanford University (B.A.) and Tulane Law School (J.D.). He manages and oversees the Lien Genome and zlien's products, processes, and resources, directs the Construction Payment Blog, protects zlien's interests and intellectual property, and performs general counsel duties.

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