Acknowledgment Error Invalidates Rhode Island Mechanics Lien

Acknowledgment Error Invalidates Rhode Island Mechanics LienJustice Flaherty of the Rhode Island Supreme Court begins the court’s opinion in GSM Industrial Inc. v. Grinnell Fire Protection Systems Company, Inc., et al, with “This case requires us to don our miner’s helmets and once again descend into the subterranean labyrinth that is the Rhode Island mechanic’s lien statute.” That’s a perfect introduction to this opinion, as the court addresses the validity of a mechanics lien with a review of the tiny details that must be followed by lien claimants in the state.

The issue in the Rhode Island’s GSM case is whether a particular notarial acknowledgment in a notice of intention to enforce a mechanics lien met the state’s statutory requirement that the statement be “under oath.”

Rhode Island Tosses Mechanics Lien for Improper Acknowledgment

Rhode Island General Laws 1956 § 32-28-4(b) provides that mechanics lien claims (a “notice of intention”) must be “executed under oath.”  The Supreme Court in GSM was charged with determining what exactly this means.

The mechanics lien in question met all of the other mechanics lien requirements in the state. It was signed by the corporation’s president in their homestate of Pennsylvania, where it was notarized.  The notary clause stated:

The foregoing instrument was acknowledged before me this 13th day of September 2010 by James K. Towers, III of GSM Industrial, Inc., a Pennsylvania corporation, on behalf of the corporation. Mr Towers is personally known to me or has produced valid state issued identification.

The property owner (Grinnell) argued that the lien contained an acknowledgement and not an oath. GSM argued the notice was signed under oath, and even submitted an affidavit to the court wherein Mr. Towers swore – under oath – that he signed the Rhode Island mechanics lien under oath when it was notarized.

The Rhode Island Supreme Court agreed the property owners holding that that mechanics lien was invalid and properly dismissed because it was not signed “under oath.”  This is a disappointing ruling because the Supreme Court seems to really be parsing words, which defeats the purpose of the statutory protection provided by the mechanics lien. Consider this fumbling around with words:

The plaintiff’s citation to Black’s Law Dictionary is unavailing. Although it is true that the term “acknowledge” is defined as “[t]o recognize (something) as being factual or valid” or “[t]o confirm as genuine,” that same venerable tome provides a much more specific definition for that same word with respect to notaries or other public officers. Black’s Law Dictionary 25 (9th ed. 2009). It defines “an acknowledgement” as “[a] formal declaration made in the presence of an authorized officer, such as a notary public, by someone who signs a document and confirms that the signature is authentic.”

How Notarial Acknowledgements Fit Into Mechanics Lien Claims Across the United States

Notarial  acknowledgements are a big deal for mechanics lien statements across the United States.

Every state requires that a mechanics lien statement be signed. In some states, the signature on the lien is an after-thought, but in other states, the signature is a very big deal and requires specific acknowledgments and swearing to. Whether a mechanics lien does or does not need notarization differs from state to state and situation to situation.

When a state does require notarization, getting it right is serious business as illustrated by this recent Rhode Island decision.

A similar situation arose in the Washington Williams v. Athletic’s Field case, although an opposite result occurred. In that case, the parties were arguing over whether an acknowledgement was compliant with the wording of the statute. The Washington Supreme Court eventually ruled in favor of the lien claimant, acknowledging that liens must be afforded liberal construction under the law and that the acknowledgment was good enough.

While the Williams case is related to the same issue as this GSM case, an identical situation actually arose in Connecticut in 2009 in the Kesco LLC v. 201 Salem Tpk, LLC case, where the court invalidated a mechanics lien because the “notarizations amounted to an acknowledgment, not an oath.”

It’s important to understand that state’s construe mechanics lien statutes differently, and they give a different amount of weight to the acknowledgement. Be very careful when filing a mechanics lien, and make sure you especially get the notarization and acknowledgement right.

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Scott Wolfe Jr

About Scott Wolfe Jr

Scott Wolfe Jr. is the CEO of zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of The Lien and Credit Journal, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via Twitter, LinkedIn and Google+.

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