Justice 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:

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.

Written by Scott Wolfe Jr See original article at Acknowledgment Error Invalidates Rhode Island Mechanics Lien Originally posted on the LIEN

We frequently discuss bond claims on this blog, as this is the mechanics lien remedy available to contractors and suppliers on state and federal projects. When working on a project owned by or controlled by the government, those unpaid for services rendered are able to file a claim against a payment bond, as opposed to liening the property itself.

In the past, I’ve always focused on the laws governing these payment bond claims, as the federal government and each state government have such laws. However, there is another layer to these claims, and that’s the terms of the payment bond claim itself.  This post explains why these terms exist and when they matter.

Did You Realize Payment Bonds Have Contractual Terms?

Payment bonds always have legal terms. Many potential bond claimants overlook this because there is so much focus on the state or federal rules governing the bond claim, but nevertheless, they exist, and there are a handful of situations that can arise when your bond claim is compromised because of a failure to comply with the terms of the bond.

It’s important, therefore, to get a copy of the payment bond as soon as possible. We’ve written about how you can obtain a copy of the surety bond in the past.  It’s a very easy process: just ask for it.

Once you get a copy, it’s important to review it, and make note of your potential obligations under the bond in making a claim. These bonding companies are – at heart – insurance companies, and if you’ve ever dealt with an insurance company you know that getting a claim paid is sometimes more about complying with the policy’s technical provisions than having an actual worthwhile claim. This is true for payment bonds as well. Proceed with care.

When Payment Bond Terms and State or Federal Law Conflicts

Now, let’s get to the heart of this post. Let’s say you have made your claim in perfect compliance with state or federal laws (by sending any required notices and making any required claims, on time).  What happens if the terms of a payment bond conflict with the state or federal laws? Which prevails?

The overwhelming majority answer to this question is that the legal standards prevail.  Under the US Miller Act, and most state Little Miller Acts, any provisions within a payment bond that conflict with the legal requirements are rendered null and void.  As such, sticking to the state or federal legal requirements is a pretty safe practice.

Realize that this general rule does not negate the payment bond terms that do not conflict with federal or state law. Those terms remain valid, which loops you back to the start of this post and the lesson: get the bond and read it.

However, just like anything in the mechanics lien and payment bond world, there are always exceptions. Here are two example exceptions.

Kentucky

Most states require bond claims to be foreclosed upon within a certain time period – the statutory period.  If the statute in that state requires bond claim foreclosures within 1 or 2 years, any provision within a payment bond requiring foreclosure in a shorter time will be rendered null and void, as conflicting with state or federal law.

This is not the case in Kentucky, which bucks the trend in two ways.

First, it does not establish a specific time period to file a bond claim foreclosure action. Therefore, the general rule is that payment bond claimants have 15 years to file a lawsuit to enforce their bond claims, which is the general statutory limitations period.

Second, however, Kentucky does not prohibit a payment bond from restricting the time period to enforce a payment bond claim by the terms of the bond. Bond claimants, therefore, ought to be very cautious in Kentucky.  If the bond’s terms require a foreclosure in 6 months, 1 year, or some other period, the bond claimant must comply with that time period to enforce its claim.

Read the full text of the Kentucky Little Miller Act.

Rhode Island

Rhode Island has virtually the very same exception, only in reverse. In Rhode Island the payment bond terms cannot make the foreclosure period shorter, but it can make it longer. The statute in question is Rhode Island Statute § 37-12-5, which specifically provides a standard foreclosure period of 2 years and authorizes a payment bond to include terms that alters (in favor of the claimant) this statutory period:

No suit instituted under § 37-12-2 shall be commenced after the expiration of two (2) years, or under the maximum time limit as contained within any labor or material payment bond required under § 37-12-1, whichever period is longer, after the day on which the last of the labor was furnished or performed or material or equipment was furnished or supplied by any person claiming under the section.

A lot of other states may actually allow such foreclosure period extensions, but Rhode Island is one of the only states (that I know of) that specifically allows for this in their statute.

Read the full text of the Rhode Island Little Miller Act.

Written by Scott Wolfe Jr See original article at What If State Law Conflicts With Provisions Of The Construction Bond? Originally posted on the LIEN