GSNC

ARTICLE 1. Possessory Liens on Personal Property.

Sec.

§ 44A-1. Definitions.

As used in this Article:

"Legal possessor" means
1. Any person entrusted with possession of personal property by an owner thereof, or
2. Any person in possession of personal property and entitled thereto by operation of law.
"Lienor" means any person entitled to a lien under this Article.
"Motor Vehicle" has the meaning provided in G.S. 20-4.01.
"Owner" means
1. Any person having legal title to the property, or
2. A lessee of the person having legal title, or
3. A debtor entrusted with possession of the property by a secured party, or
4. A secured party entitled to possession, or
5. Any person entrusted with possession of the property by his employer or principal who is an owner under any of the above.
"Secured party" means a person holding a security interest.
"Security interest" means any interest in personal property which interest is subject to the provisions of Article 9 of the Uniform Commercial Code, or any other interest intended to create security in real or personal property.
"Vessel" has the meaning provided in G.S. 75A-2.

History

(1967, c. 1029, s. 1; 1991, c. 731, s. 1.)

Legal Periodicals. - For article concerning liens on personal property not governed by the Uniform Commercial Code, see 44 N.C.L. Rev. 322 (1966).

CASE NOTES

This Chapter did not purport to abrogate long established principles under which equitable liens have been enforced by our courts in a variety of situations. Embree Constr. Group, Inc. v. Rafcor, Inc., 97 N.C. App. 418, 388 S.E.2d 604 (1990), modified on other grounds, 330 N.C. 487, 411 S.E.2d 916 (1992).

Priority of Liens. - For priority purposes, liens duly perfected under this Chapter relate back to the time of first furnishing labor or materials. As between a statutory lien and the lien created by a deed of trust, the general rule is that the lien which is first in time has priority. RDC, Inc. v. Brookleigh Bldrs., Inc., 60 N.C. App. 375, 299 S.E.2d 448, rev'd on other grounds, 309 N.C. 182, 305 S.E.2d 722 (1983).

Defendant properly met the requirements of this chapter, and judgment signed by trial judge properly referred to the site upon which defendant wanted a lien declared and related the lien back to the date when labor and materials were first furnished at the site; therefore, defendant's lien had priority over the deed of trust held by plaintiff. Metropolitan Life Ins. Co. v. Rowell, 115 N.C. App. 152, 444 S.E.2d 231, cert. denied, 338 N.C. 518, 452 S.E.2d 813 (1994).

Debtor's motion for summary judgment on the adversary proceeding of the Chapter 44A claimants to recover on liens for unpaid labor and materials was denied because the motion relied on G.S. 25-9-334, which was not applicable to priority questions involving nonpossessory statutory liens under Chapter 44A. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 387 B.R. 677 (Bankr. M.D.N.C. 2008).

Preservation for Review. - In a case in which a bankruptcy court awarded a debtor damages and attorney's fees for conversion by a creditor and the creditor argued on appeal that even if the layaway plan became an installment sales contract, he nevertheless obtained a possessory lien on the sewing/embroidery machine for repairs pursuant to G.S. 44A-1 et seq., which, he contended, authorized his retention of the machine until the debtor paid for repairs, he had not raised that argument in the bankruptcy court, and the district court could not consider the argument because there was no showing of exceptional circumstances. Hancock v. Renshaw, 421 B.R. 738 (M.D.N.C. 2009).

Applied in MSR Enters., Inc. v. GMC, 27 N.C. App. 94, 218 S.E.2d 234 (1975); Drummond v. Cordell, 72 N.C. App. 262, 324 S.E.2d 301 (1985); Peace River Elec. Coop. v. Ward Transformer Co., 116 N.C. App. 493, 449 S.E.2d 202 (1994); Monteau v. Reis Trucking & Constr., Inc., 147 N.C. App. 121, 553 S.E.2d 709 (2001); Bowles Auto., Inc. v. N.C. DMV, 203 N.C. App. 19, 690 S.E.2d 728 (2010), review denied, 364 N.C. 324, 700 S.E.2d 746, 2010 N.C. LEXIS 590 (2010).

Cited in Floyd S. Pike Elec. Contractor v. Goodwill Missionary Baptist Church, 25 N.C. App. 563, 214 S.E.2d 276 (1975); Paccar Fin. Corp. v. Harnett Transf., Inc., 51 N.C. App. 1, 275 S.E.2d 243 (1981); State v. Davy, 100 N.C. App. 551, 397 S.E.2d 634 (1990); Vaseleniuck Engine Dev., LLC v. Sabertooth Motorcycles, LLC, 219 N.C. App. 540, 727 S.E.2d 308 (2012).

§ 44A-2. Persons entitled to lien on personal property.

Any person who tows, alters, repairs, stores, services, treats, or improves personal property other than a motor vehicle or an aircraft in the ordinary course of his business pursuant to an express or implied contract with an owner or legal possessor of the personal property has a lien upon the property. The amount of the lien shall be the lesser of
1. The reasonable charges for the services and materials; or
2. The contract price; or
3. One hundred dollars ($100.00) if the lienor has dealt with a legal possessor who is not an owner.
Any person engaged in the business of operating a hotel, motel, or boardinghouse has a lien upon all baggage, vehicles and other personal property brought upon his premises by a guest or boarder who is an owner thereof to the extent of reasonable charges for the room, accommodations and other items or services furnished at the request of the guest or boarder. This lien shall not have priority over any security interest in the property which is perfected at the time the guest or boarder brings the property to said hotel, motel or boardinghouse.
Any person engaged in the business of boarding animals has a lien on the animals boarded for reasonable charges for such boarding which are contracted for with an owner or legal possessor of the animal. This lien shall have priority over perfected and unperfected security interests.
Any person who repairs, services, tows, or stores motor vehicles in the ordinary course of the person's business pursuant to an express or implied contract with an owner or legal possessor of the motor vehicle, except for a motor vehicle seized pursuant to G.S. 20-28.3, has a lien upon the motor vehicle for reasonable charges for such repairs, servicing, towing, storing, or for the rental of one or more substitute vehicles provided during the repair, servicing, or storage. This lien shall have priority over perfected and unperfected security interests. Payment for towing and storing a motor vehicle seized pursuant to G.S. 20-28.3 shall be as provided for in G.S. 20-28.2 through G.S. 20-28.5.
Any lessor of nonresidential demised premises has a lien on all furniture, furnishings, trade fixtures, equipment and other personal property to which the tenant has legal title and which remains on the demised premises if (i) the tenant has vacated the premises for 21 or more days after the paid rental period has expired, and (ii) the lessor has a lawful claim for damages against the tenant. If the tenant has vacated the premises for 21 or more days after the expiration of the paid rental period, or if the lessor has received a judgment for possession of the premises which is executable and the tenant has vacated the premises, then all property remaining on the premises may be removed and placed in storage. If the total value of all property remaining on the premises is less than one hundred dollars ($100.00), then it shall be deemed abandoned five days after the tenant has vacated the premises, and the lessor may remove it and may donate it to any charitable institution or organization. Provided, the lessor shall not have a lien if there is an agreement between the lessor or his agent and the tenant that the lessor shall not have a lien. This lien shall be for the amount of any rents which were due the lessor at the time the tenant vacated the premises and for the time, up to 60 days, from the vacating of the premises to the date of sale; and for any sums necessary to repair damages to the premises caused by the tenant, normal wear and tear excepted; and for reasonable costs and expenses of sale. The lien created by this subsection shall be enforced by sale at public sale pursuant to the provisions of G.S. 44A-4(e). This lien shall not have priority over any security interest in the property which is perfected at the time the lessor acquires this lien.
This Article shall not apply to liens created by storage of personal property at a self-service storage facility.
Any lessor of a space for a manufactured home as defined in G.S. 143-143.9(6) has a lien on all furniture, furnishings, and other personal property including the manufactured home titled in the name of the tenant if (i) the manufactured home remains on the demised premises 21 days after the lessor is placed in lawful possession by writ of possession and (ii) the lessor has a lawful claim for damages against the tenant. If the lessor has received a judgment for possession of the premises which has been executed, then all property remaining on the premises may be removed and placed in storage. Prior to the expiration of the 21-day period, the landlord shall release possession of the personal property and manufactured home to the tenant during regular business hours or at a time mutually agreed upon. This lien shall be for the amount of any rents which were due the lessor at the time the tenant vacated the premises and for the time, up to 60 days, from the vacating of the premises to the date of sale; and for any sums necessary to repair damages to the premises caused by the tenant, normal wear and tear excepted; and for reasonable costs and expenses of the sale. The lien created by this subsection shall be enforced by public sale under G.S. 44A-4(e). The landlord may begin the advertisement for sale process immediately upon execution of the writ of possession by the sheriff, but may not conduct the sale until the lien has attached. This lien shall not have any priority over any security interest in the property that is perfected at the time the lessor acquires this lien. The lessor shall not have a lien under this subsection if there is an agreement between the lessor or the lessor's agent and the tenant that the lessor shall not have a lien.
Any person who improves any textile goods in the ordinary course of his business pursuant to an express or implied contract with the owner or legal possessor of such goods shall have a lien upon all goods of such owner or possessor in his possession for improvement. The amount of such lien shall be for the entire unpaid contracted charges owed such person for improvement of said goods including any amount owed for improvement of goods, the possession of which may have been relinquished, and such lien shall have priority over perfected and unperfected security interests. "Goods" as used herein includes any textile goods, yarns or products of natural or man-made fibers or combination thereof. "Improve" as used herein shall be construed to include processing, fabricating or treating by throwing, spinning, knitting, dyeing, finishing, fabricating or otherwise.
Any person who fabricates, casts, or otherwise makes a mold or who uses a mold to manufacture, assemble, or otherwise make a product pursuant to an express or implied contract with the owner of such mold shall have a lien upon the mold. For a lien to arise under this subsection, there must exist written evidence that the parties understood that a lien could be applied against the mold, with the evidence being in the form either of a written contract or a separate written statement provided by the potential holder of the lien under this subsection to the owner of the mold prior to the fabrication or use of the mold. The written contract or separate written statement must describe generally the amount of the potential lien as set forth in this subsection. The amount of the lien under this subsection shall equal the total of (i) any unpaid contracted charges due from the owner of the mold for making the mold, plus (ii) any unpaid contracted charges for all products made with the mold. The lien under this subsection shall not have priority over any security interest in the mold which is perfected at the time the person acquires this lien. As used in this subsection, the word "mold" shall include a mold, die, form, or pattern.
Any landlord of nonresidential property, including any storage or self-storage space, in which potentially confidential materials, as that term is defined in G.S. 42-14.4(a), remain after the landlord has obtained possession of the property must provide notice to the North Carolina State Bar and comply with the provisions of G.S. 42-14.4, if the landlord has actual knowledge that the former tenant is an attorney. Potentially confidential materials shall not be the subject of a lien under the provisions of this Article.

This lien shall have priority over perfected and unperfected security interests.

History

(1967, c. 1029, s. 1; 1971, cc. 261, 403; c. 544, s. 1; c. 1197; 1973, c. 1298, s. 1; 1975, c. 461; 1981, c. 566, s. 2; c. 682, s. 9; 1981 (Reg. Sess., 1982), c. 1275, s. 2; 1995, c. 460, s. 9; c. 480, s. 1; 1995 (Reg. Sess., 1996), c. 744, s. 1; 1998-182, s. 14; 1999-278, s. 5; 2006-222, s. 1.2; 2012-76, s. 2.)

Effect of Amendments. - Session Laws 2006-222, s. 1.2, effective October 1, 2006, and applicable to labor, skills, or materials furnished on an aircraft, or storage provided for an aircraft, on or after that date, inserted "or an aircraft" in the first sentence of the introductory language of subsection (a).

Session Laws 2012-76, s. 2, effective October 1, 2012, added subsection (h).

Legal Periodicals. - For note on garagemen's liens and duress of goods, see 54 N.C.L. Rev. 1106 (1976).

For comment on landlords' eviction remedies in the light of Spinks v. Taylor, 303 N.C. 256, 278 S.E.2d 501 (1981), and the 1981 Act to clarify landlord eviction remedies in residential tenancies, see 60 N.C.L. Rev. 885 (1982).

For survey of 1981 commercial law, see 60 N.C.L. Rev. 1238 (1982).

For article discussing unfair methods of competition, deceptive trade practices, and unfair trade practices, see 5 Campbell L. Rev. 119 (1982).

For article discussing self help residential eviction by landlords in light of the Landlord Eviction Remedies Act, see 13 N.C. Cent. L.J. 195 (1982).

For comment on the Landlord Eviction Remedies Act in light of Spinks v. Taylor, 303 N.C. 256, 278 S.E.2d 501 (1981), see 18 Wake Forest L. Rev. 25 (1982).

CASE NOTES

Provisions for Retention of Motor Vehicle Are Not Unconstitutional. - The provisions of the possessory lien statute which provide for the retention of the motor vehicle by any person who repairs, services, tows or stores such vehicle in his business, without prior notice or hearing, do not violate the due process clause of U.S. Const., Amend. XIV. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

This section and G.S. 44A-3 are codifications of the common-law principle that a garageman has a possessory interest in a vehicle left in his care by the owner or legal possessor and in which he has invested labor and materials. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

The lienor's possessor interest represents a balancing of the interests between ownership rights and the right of a craftsman to have security for payment for his service. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

Boarding Lien. - Parties who provided services under production agreements with a Chapter 11 debtor that was in business of finishing genetically specific pigs did not have valid "boarding liens" within the meaning of G.S. 44A-2(c) because the parties that were claiming liens were not engaged in business of boarding within the meaning of the statute, and because, in any event, any such liens were expressly waived in the agreement between the parties. Newkirk Farms, Inc. v. First Nat'l Bank, N.A. (In re Coastal Plains Pork, LLC), - Bankr. - (Bankr. E.D.N.C. May 21, 2010).

Warehouseman's Lien. - Any rights a warehouseman had to plaintiff's personal property stored in his warehouse were to be analyzed as a warehouseman's lien under chapter 25 rather than as a possessory lien under chapter 44A. Smithers v. Tru-Pak Moving Sys., 121 N.C. App. 542, 468 S.E.2d 410 (1996).

Continued Storage of Property Sustained Lien, But Did Not Amount to Violation of Automatic Stay. - Default judgment was not entered against a towing company because a debtor's complaint alleging violation of the automatic stay, 11 U.S.C.S. § 362(a)(5), lacked merit, as the company's continued storage of the vehicle sustained its state law lien, G.S. 44A-2(d) and G.S. 44A-3, but did not amount to enforcement of the lien or a willful violation of the automatic stay. Green v. Univ. Auto Care (In re Green), - Bankr. - (Bankr. E.D.N.C. Feb. 16, 2010).

Owner of garage and wrecker service with whom sheriff contracted to store certain cars levied on pursuant to court order was a legal possessor, and under subsection (d) of this section had a lien on the cars from the time he began towing them away; his lien was enforceable in the principal action under the explicit language of G.S. 1A-1, Rule 24, and G.S. 1-440.43 by intervention. Case v. Miller, 68 N.C. App. 729, 315 S.E.2d 737 (1984).

Owner of storage or towing company was entitled to recovery under this section because the company had an implied contract with the sheriff. Green Tree Fin. Servicing v. Young, 133 N.C. App. 339, 515 S.E.2d 223 (1999).

Mechanic's Lien Survived Credit Union's Repossession of a Car - While a mechanic who performed a diagnostic analysis of an automobile had a valid lien against the credit union that financed the purchase of the automobile and repossessed the automobile from the mechanic's premises late at night without the mechanic's knowledge or consent, the trial court erred in awarding the mechanic actual and treble damages, as the mechanic's proper remedy was to be awarded possession of the automobile. Old Salem Foreign Car Serv., Inc. v. Webb, 159 N.C. App. 93, 582 S.E.2d 673 (2003).

Court of Appeals would decline to create a judicial exception to this Article and hold that when property is seized by a law enforcement agency who thereafter directs the local storage facility to store and retain said property at their direction, the lawful owner is entitled to immediate possession of said property and the law enforcement agency is thereafter held accountable for all storage liens. State v. Davy, 100 N.C. App. 551, 397 S.E.2d 634 (1990).

A law enforcement agency is not accountable for storage liens attaching, pursuant to this section, to property seized by the agency and stored, at the agency's direction, by a local storage facility. To hold otherwise would be to create a judicial exception to this Article. State v. Davy, 100 N.C. App. 551, 397 S.E.2d 634 (1990).

Amount of Lien Established. - Under the plain language of G.S. 44A-4, where the lien amount was designated as $100.00 in plaintiff's complaint and that allegation was not challenged in the statutorily specified manner, the amount of the lien was conclusively established as being $100.00. Thus, regardless of any labels attached to the various parties herein, the clerk of court did not err in ordering defendant to relinquish possession of transformer upon plaintiff's tender of $100.00. Peace River Elec. Coop. v. Ward Transformer Co., 116 N.C. App. 493, 449 S.E.2d 202 (1994), cert. denied, 339 N.C. 739, 454 S.E.2d 655 (1995).

Lien Not Extinguished Where Check Bounced. - Where, before an automobile was delivered to owner, defendant had a lien on the vehicle for the entire amount due to it for repairs and services pursuant to subsection (d) of this section, and in order to obtain the vehicle the owner gave defendant a check for the balance due, which was returned uncashed because of insufficient funds, defendant's lien was not extinguished and the property was subject to redelivery to defendant through the remedy of claim and delivery. Adder v. Holman & Moody, Inc., 288 N.C. 484, 219 S.E.2d 190 (1975).

Where purchaser of personal property subject to a valid, enforceable, perfected security interest buys in the collateral at a foreclosure sale conducted pursuant to this Chapter to satisfy an account for repairs which the purchaser has failed to pay, for a purchase price which essentially represents payment of the account, the purchaser does not thereby extinguish the security interest; rather, the security property or collateral remains subject to the security interest, and if the indebtedness for payment of which the collateral was pledged remains in default, the right to possession continues to be with the holder of the security interest. Paccar Fin. Corp. v. Harnett Transf., Inc., 51 N.C. App. 1, 275 S.E.2d 243, cert. denied, 302 N.C. 629, 280 S.E.2d 441 (1981).

Where No Contract With Amounts Owed. - Plaintiff had not shown that it had a lien on certain bottle cap molds because, among other reasons, it had not shown that it had a contract with the purchaser upon which there were amounts owed, as required by G.S. 44A-2(g). Weener Plastics, Inc. v. HNH Packaging, LLC, 590 F. Supp. 2d 760 (E.D.N.C. 2008).

Summary Judgment on Conversion and Trespass to Chattels Claims Improper. - Partial summary judgment on conversion and trespass to chattels claims was error because, as it was uncontroverted that plaintiff had altered the condition of the engines in its possession and had not been paid in full, plaintiff was entitled to an G.S. 44A-2(a) possessory lien on the engines. Vaseleniuck Engine Dev., LLC v. Sabertooth Motorcycles, LLC, 219 N.C. App. 540, 727 S.E.2d 308 (2012).

Lessor's Lien Not Established. - Claim was not nondischargeable under 11 U.S.C.S. § 523(a)(2) and (a)(6) where a creditor/lessor failed to prove that it had a statutory lien on items removed from leased premises under G.S. 44A-2(e), as there was no evidence that the lessee had vacated the premises for at least 21 days on the day that the lessor changed the locks. Even if it did have a valid lien, the evidence showed that the items removed were the personal property of the debtor (who personally guaranteed the lease and who was the lessee's principal officer) and of the lessee's employees, not of the lessee. Walton Holding of NC, LLC v. Young (In re Young), - Bankr. - (Bankr. M.D.N.C. Aug. 17, 2012).

Applied in Marlen C. Robb & Son Boatyard & Marina, Inc. v. Vessel Bristol, 893 F. Supp. 526 (E.D.N.C. 1994); Bowles Auto., Inc. v. N.C. DMV, 203 N.C. App. 19, 690 S.E.2d 728 (2010), review denied, 364 N.C. 324, 700 S.E.2d 746, 2010 N.C. LEXIS 590 (2010).

Cited in Griffin v. Holmes, 843 F. Supp. 81 (E.D.N.C. 1993); In re Aerospace Technologies, Inc., 199 Bankr. 331 (Bankr. M.D.N.C. 1996); North Carolina Farm Bureau Mut. Ins. Co. v. Weaver, 134 N.C. App. 359, 517 S.E.2d 381 (1999); Triad Int'l Maint. Corp. v. Guernsey Air Leasing, Ltd., 178 F. Supp. 2d 547 (M.D.N.C. 2001).

§ 44A-3. When lien arises and terminates.

Liens conferred under this Article arise only when the lienor acquires possession of the property and terminate and become unenforceable when the lienor voluntarily relinquishes the possession of the property upon which a lien might be claimed, or when an owner, his agent, a legal possessor or any other person having a security or other interest in the property tenders prior to sale the amount secured by the lien plus reasonable storage, boarding and other expenses incurred by the lienor. The reacquisition of possession of property voluntarily relinquished shall not reinstate the lien. Liens conferred under this Article do not terminate when the lienor involuntarily relinquishes the possession of the property.

History

(1967, c. 1029, s. 1; 1991, c. 344, s. 3; c. 731, s. 2.)

Legal Periodicals. - For note on garagemen's liens and duress of goods, see 54 N.C.L. Rev. 1106 (1976).

CASE NOTES

This section and G.S. 44A-2 are codifications of the common-law principle that a garageman has a possessory interest in a vehicle left in his care by the owner or legal possessor and in which he has invested labor and materials. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

The lienor's possessory interest represents a balancing of the interests between ownership rights and the right of a craftsman to have security for payment for his service. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

Relinquishment Terminates Lien Only When It Is Voluntary. - While it is true that possessory liens generally terminate when the lienor relinquishes possession, that rule only applies when possession is surrendered voluntarily. Case v. Miller, 68 N.C. App. 729, 315 S.E.2d 737 (1984).

While a mechanic who performed a diagnostic analysis of an automobile had a valid lien against the credit union that financed the purchase of the automobile and repossessed the automobile from the mechanic's premises late at night without the mechanic's knowledge or consent, the trial court erred in awarding the mechanic actual and treble damages, as the mechanic's proper remedy was to be awarded possession of the automobile. Old Salem Foreign Car Serv., Inc. v. Webb, 159 N.C. App. 93, 582 S.E.2d 673 (2003).

Where possession of vehicles was surrendered in obedience to a court order directing their sale, obedience to the court order did not work a forfeiture of the rights of the lienholder. Case v. Miller, 68 N.C. App. 729, 315 S.E.2d 737 (1984).

Where owner obtained delivery of his property by giving the lienholder a worthless check, the property was not voluntarily relinquished by the lienholder. Adder v. Holman & Moody, Inc., 288 N.C. 484, 219 S.E.2d 190 (1975).

Because an aircraft maintenance facility never acquired possession of the complete set of an aircraft's maintenance records, it never acquired a mechanic's lien on those items; when the maintenance facility returned the aircraft's engines to the owner, its interest in the engines terminated and it no longer held an enforceable interest in the engines. Triad Int'l Maint. Corp. v. Guernsey Air Leasing, Ltd., 178 F. Supp. 2d 547 (M.D.N.C. 2001).

Amendment of Complaint Held Timely. - When plaintiff filed motion to amend his complaint to add a cause of action to enforce a materialman's or laborer's lien on December 8, 1983, and the last day he had furnished material or labor to defendants' property was June 15, 1983, his motion was filed within the 180-day period set forth in subsection (a) of this section, the date of the filing of the motion, rather than the date the court rules on it, being the crucial date in measuring the period of limitations. Plaintiff 's amendment was therefore not barred by the statute of limitations, and whether it would "relate back" to the filing of the original complaint was immaterial. Mauney v. Morris, 316 N.C. 67, 340 S.E.2d 397 (1986).

Cited in Paccar Fin. Corp. v. Harnett Transf., Inc., 51 N.C. App. 1, 275 S.E.2d 243 (1981); Griffin v. Holmes, 843 F. Supp. 81 (E.D.N.C. 1993); North Carolina Farm Bureau Mut. Ins. Co. v. Weaver, 134 N.C. App. 359, 517 S.E.2d 381 (1999).

§ 44A-4. Enforcement of lien by sale.

Enforcement by Sale. - If the charges for which the lien is claimed under this Article remain unpaid or unsatisfied for 30 days or, in the case of towing and storage charges on a motor vehicle, 10 days following the maturity of the obligation to pay any such charges, the lienor may enforce the lien by public or private sale as provided in this section. The lienor may bring an action on the debt in any court of competent jurisdiction at any time following maturity of the obligation. Failure of the lienor to bring such action within a 180-day period following the commencement of storage shall constitute a waiver of any right to collect storage charges which accrue after such period. Provided that when property is placed in storage pursuant to an express contract of storage, the lien shall continue and the lienor may bring an action to collect storage charges and enforce his lien at any time within 120 days following default on the obligation to pay storage charges.
Notice and Hearings. -
1. If the property upon which the lien is claimed is a motor vehicle that is required to be registered, the lienor following the expiration of the relevant time period provided by subsection (a) shall give notice to the Division of Motor Vehicles that a lien is asserted and sale is proposed and shall remit to the Division a fee of thirteen dollars ($13.00). The Division of Motor Vehicles shall issue notice by certified mail, return receipt requested, to the person having legal title to the property, if reasonably ascertainable, to the person with whom the lienor dealt if different, and to each secured party and other person claiming an interest in the property who is actually known to the Division or who can be reasonably ascertained. The notice shall state that a lien has been asserted against specific property and shall identify the lienor, the date that the lien arose, the general nature of the services performed and materials used or sold for which the lien is asserted, the amount of the lien, and that the lienor intends to sell the property in satisfaction of the lien. The notice shall inform the recipient that the recipient has the right to a judicial hearing at which time a determination will be made as to the validity of the lien prior to a sale taking place. The notice shall further state that the recipient has a period of 10 days from the date of receipt in which to notify the Division by certified mail, return receipt requested, that a hearing is desired and that if the recipient wishes to contest the sale of his property pursuant to such lien, the recipient should notify the Division that a hearing is desired. The notice shall state the required information in simplified terms and shall contain a form whereby the recipient may notify the Division that a hearing is desired by the return of such form to the Division. The Division shall notify the lienor whether such notice is timely received by the Division. In lieu of the notice by the lienor to the Division and the notices issued by the Division described above, the lienor may issue notice on a form approved by the Division pursuant to the notice requirements above. If notice is issued by the lienor, the recipient shall return the form requesting a hearing to the lienor, and not the Division, within 10 days from the date the recipient receives the notice if a judicial hearing is requested. If the certified mail notice has been returned as undeliverable and the notice of a right to a judicial hearing has been given to the owner of the motor vehicle in accordance with G.S. 20-28.4, no further notice is required. Failure of the recipient to notify the Division or lienor, as specified in the notice, within 10 days of the receipt of such notice that a hearing is desired shall be deemed a waiver of the right to a hearing prior to the sale of the property against which the lien is asserted, and the lienor may proceed to enforce the lien by public or private sale as provided in this section and the Division shall transfer title to the property pursuant to such sale. If the Division or lienor, as specified in the notice, is notified within the 10-day period provided above that a hearing is desired prior to sale, the lien may be enforced by sale as provided in this section and the Division will transfer title only pursuant to the order of a court of competent jurisdiction.
2. If the property upon which the lien is claimed is other than a motor vehicle required to be registered, the lienor following the expiration of the 30-day period provided by subsection (a) shall issue notice to the person having legal title to the property, if reasonably ascertainable, and to the person with whom the lienor dealt if different by certified mail, return receipt requested. Such notice shall state that a lien has been asserted against specific property and shall identify the lienor, the date that the lien arose, the general nature of the services performed and materials used or sold for which the lien is asserted, the amount of the lien, and that the lienor intends to sell the property in satisfaction of the lien. The notice shall inform the recipient that the recipient has the right to a judicial hearing at which time a determination will be made as to the validity of the lien prior to a sale taking place. The notice shall further state that the recipient has a period of 10 days from the date of receipt in which to notify the lienor by certified mail, return receipt requested, that a hearing is desired and that if the recipient wishes to contest the sale of his property pursuant to such lien, the recipient should notify the lienor that a hearing is desired. The notice shall state the required information in simplified terms and shall contain a form whereby the recipient may notify the lienor that a hearing is desired by the return of such form to the lienor. Failure of the recipient to notify the lienor within 10 days of the receipt of such notice that a hearing is desired shall be deemed a waiver of the right to a hearing prior to sale of the property against which the lien is asserted and the lienor may proceed to enforce the lien by public or private sale as provided in this section. If the lienor is notified within the 10-day period provided above that a hearing is desired prior to sale, the lien may be enforced by sale as provided in this section only pursuant to the order of a court of competent jurisdiction.
Private Sale. - Sale by private sale may be made in any manner that is commercially reasonable. If the property upon which the lien is claimed is a motor vehicle, the sale may not be made until notice is given to the Commissioner of Motor Vehicles pursuant to G.S. 20-114(c). Not less than 30 days prior to the date of the proposed private sale, the lienor shall cause notice to be mailed, as provided in subsection (f) hereof, to the person having legal title to the property, if reasonably ascertainable, to the person with whom the lienor dealt if different, and to each secured party or other person claiming an interest in the property who is actually known to the lienor or can be reasonably ascertained. Notices provided pursuant to subsection (b) hereof shall be sufficient for these purposes if such notices contain the information required by subsection (f) hereof. The lienor shall not purchase, directly or indirectly, the property at private sale and such a sale to the lienor shall be voidable.
Request for Public Sale. - If an owner, the person with whom the lienor dealt, any secured party, or other person claiming an interest in the property notifies the lienor prior to the date upon or after which the sale by private sale is proposed to be made, that public sale is requested, sale by private sale shall not be made. After request for public sale is received, notice of public sale must be given as if no notice of sale by private sale had been given.
Public Sale. -
1. Not less than 20 days prior to sale by public sale the lienor:
  1. Shall notify the Commissioner of Motor Vehicles as provided in G.S. 20-114(c) if the property upon which the lien is claimed is a motor vehicle; and
  2. Shall advertise the sale by posting a copy of the notice of sale at the courthouse door in the county where the sale is to be held;
2. A public sale must be held on a day other than Sunday and between the hours of 10:00 A.M. and 4:00 P.M.:
  1. In any county where any part of the contract giving rise to the lien was performed, or
  2. In the county where the obligation secured by the lien was contracted for.
3. A lienor may purchase at public sale.
Notice of Sale. - The notice of sale shall include:
1. The name and address of the lienor;
2. The name of the person having legal title to the property if such person can be reasonably ascertained and the name of the person with whom the lienor dealt;
3. A description of the property;
4. The amount due for which the lien is claimed;
5. The place of the sale;
6. If a private sale the date upon or after which the sale is proposed to be made, or if a public sale the date and hour when the sale is to be held.
Damages for Noncompliance. - If the lienor fails to comply substantially with any of the provisions of this section, the lienor shall be liable to the person having legal title to the property or any other party injured by such noncompliance in the sum of one hundred dollars ($100.00), together with a reasonable attorney's fee as awarded by the court. Damages provided by this section shall be in addition to actual damages to which any party is otherwise entitled.

The owner or person with whom the lienor dealt may at any time following the maturity of the obligation bring an action in any court of competent jurisdiction as by law provided. If in any such action the owner or other party requests immediate possession of the property and pays the amount of the lien asserted into the clerk of the court in which such action is pending, the clerk shall issue an order to the lienor to relinquish possession of the property to the owner or other party. The request for immediate possession may be made in the complaint, which shall also set forth the amount of the asserted lien and the portion thereof which is not in dispute, if any. If within three days after service of the summons and complaint, as the number of days is computed in G.S. 1A-1, Rule 6, the lienor does not file a contrary statement of the amount of the lien at the time of the filing of the complaint, the amount set forth in the complaint shall be deemed to be the amount of the asserted lien. The clerk may at any time disburse to the lienor that portion of the cash bond, which the plaintiff says in his complaint is not in dispute, upon application of the lienor. The magistrate or judge shall direct appropriate disbursement of the disputed or undisbursed portion of the bond in the judgment of the court. In the event an action by the owner pursuant to this section is heard in district or superior court, the substantially prevailing party in such court may be awarded a reasonable attorney's fee in the discretion of the judge.

If the certified mail notice has been returned as undeliverable, or if the name of the person having legal title to the vehicle cannot reasonably be ascertained and the fair market value of the vehicle is less than eight hundred dollars ($800.00), the lienor may institute a special proceeding in the county where the vehicle is being held, for authorization to sell that vehicle. Market value shall be determined by the schedule of values adopted by the Commissioner under G.S. 105-187.3.

In such a proceeding a lienor may not include more than ten vehicles, but the proceeds of the sale of each shall be subject only to valid claims against that vehicle, and any excess proceeds of the sale shall be paid immediately to the Treasurer for disposition pursuant to Chapter 116B of the General Statutes.

The application to the clerk in such a special proceeding shall contain the notice of sale information set out in subsection (f) hereof. If the application is in proper form the clerk shall enter an order authorizing the sale on a date not less than 14 days therefrom, and the lienor shall cause the application and order to be sent immediately by first-class mail pursuant to G.S. 1A-1, Rule 5, to each person to whom notice was mailed pursuant to this subsection. Following the authorized sale the lienor shall file with the clerk a report in the form of an affidavit, stating that the lienor has complied with the public or private sale provisions of G.S. 44A-4, the name, address, and bid of the high bidder or person buying at a private sale, and a statement of the disposition of the sale proceeds. The clerk then shall enter an order directing the Division to transfer title accordingly.

If prior to the sale the owner or legal possessor contests the sale or lien in a writing filed with the clerk, the proceeding shall be handled in accordance with G.S. 1-301.2.

a1. Shall cause notice to be mailed to the person having legal title to the property if reasonably ascertainable, to the person with whom the lienor dealt if different, and to each secured party or other person claiming an interest in the property who is actually known to the lienor or can be reasonably ascertained, provided that notices provided pursuant to subsection (b) hereof shall be sufficient for these purposes if such notices contain the information required by subsection (f) hereof; and

and shall publish notice of sale once a week for two consecutive weeks in a newspaper of general circulation in the same county, the date of the last publication being not less than five days prior to the sale. The notice of sale need not be published if the vehicle has a market value of less than three thousand five hundred dollars ($3,500), as determined by the schedule of values adopted by the Commissioner under G.S. 105-187.3.

History

(1967, c. 1029, s. 1; 1975, c. 438, s. 1; c. 716, s. 5; 1977, c. 74, s. 4; c. 793, s. 1; 1981, c. 690, s. 26; 1983, c. 44, ss. 1, 2; 1985, c. 655, ss. 4, 5; 1989, c. 770, s. 10; 1991, c. 344, s. 1; c. 731, s. 3; 1995 (Reg. Sess., 1996), c. 635, ss. 2-4; 1998-182, s. 15; 1999-216, s. 10; 1999-460, s. 7; 2004-128, s. 5; 2012-175, s. 12(a); 2015-241, s. 29.30(r); 2019-243, s. 17(a).)

Editor's Note. - Session Laws 2019-243, s. 17(b), made the amendment of subdivision (b)(1) by Session Laws 2019-243, s. 17(a), effective December 1, 2019, and applicable to applications filed on or after that date.

Effect of Amendments. - Session Laws 2012-175, s. 12(a), effective July 12, 2012, deleted "registered or" preceding "certified mail" throughout subsection (b).

Session Laws 2015-241, s. 29.30(r), effective January 1, 2016, substituted "thirteen dollars ($13.00)" for "ten dollars ($10.00)" in the first sentence of subdivision (b)(1). For applicability, see editor's note.

Session Laws 2019-243, s. 17(a), substituted "may not include more than ten vehicles" for "may include more than one vehicle" in the third paragraph of subdivision (b)(1). For effective date and applicability, see editor's note.

Legal Periodicals. - For note on garagemen's liens and duress of goods, see 54 N.C.L. Rev. 1106 (1976).

CASE NOTES

Former Provisions as to Sale Unconstitutional. - The sale provision of this section as it stood before the 1975 amendment permitted the sale of motor vehicles by a lienor without affording the owner an opportunity for notice and a hearing to judicially determine the validity of the underlying debt, and in this respect the statute violated the due process clause of U.S. Const., Amend. XIV. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

"State Action" Involved. - The State is actively involved in the creation and enforcement of the lien on motor vehicles and such must be held to constitute "state action" as that term is used in 42 U.S.C. § 1983. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

Under North Carolina law, the sale could not be accomplished without the affirmative acts of the Department (now Division) of Motor Vehicles in transferring the indicia of ownership. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

Lienor Must Comply with Section when Mail Notice Undeliverable. - Subdivision (b)(1) of this section did not allow a lienor of an abandoned motor vehicle to dispose of it without complying with the requirements of this section as they pertain to other types of personal property when the registered or certified mail notice had been returned as undeliverable. Ernie's Tire Sales & Serv. v. Riggs, 106 N.C. App. 460, 417 S.E.2d 75 (1992).

Lienor May Not Sell Vehicle Without Prior Judicial Determination or Owner's Waiver. - The lienor may still retain his possessory lien on the motor vehicle if the owner or legal possessor fails to pay his charges, but the lienor may not, without a prior judicial determination or the owner's waiver, sell the motor vehicle to satisfy his claim. Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

Amount Designated in Complaint Established Amount of Lien. - Under the plain language of this section, where the lien amount was designated as $100.00 in plaintiff's complaint and that allegation was not challenged in the statutorily specified manner, the amount of the lien was conclusively established as being $100.00. Thus, regardless of any labels attached to the various parties herein, the clerk of court did not err in ordering defendant to relinquish possession of transformer upon plaintiff's tender of $100.00. Peace River Elec. Coop. v. Ward Transformer Co., 116 N.C. App. 493, 449 S.E.2d 202 (1994), cert. denied, 339 N.C. 739, 454 S.E.2d 655 (1995).

Time for Collection by Lienholder. - In view of the proviso of subsection (a) of this section, which states that when property is placed in storage pursuant to an express contract of storage, the lien shall continue and the lienor may bring an action to collect storage charges and enforce his lien at any time within 120 days following default on the obligation to pay storage charges, and in view of the fact that storage was under an express contract with the sheriff, subject to the control of court, lienholder's right to collect did not end 180 days after storage began, but 120 days after the default, if any, occurred. Case v. Miller, 68 N.C. App. 729, 315 S.E.2d 737 (1984).

Applicability of Bond Provision. - The bond provision is located only in the second paragraph of subsection (a), the paragraph governing lien actions filed by the owner of property subject to a lien; accordingly, the bond provision applies only to lien actions filed by the owner of property subject to a lien, not to lien actions filed by the lienor. Griffin v. Holmes, 843 F. Supp. 81 (E.D.N.C. 1993).

G.S. 44A-4(b)(2) provides that the lienor has to issue notice to the person having legal title to property and specifies what the notice should contain; where defendant failed to comply substantially with the provisions of that subdivision, defendant was liable for statutory and actual damages. Rowell v. N.C. Equip. Co., 146 N.C. App. 431, 552 S.E.2d 274 (2001).

Summary Judgment Improper. - Summary judgment for defendant on its claim that plaintiff violated G.S. 44A-4 was error because, although the evidence raised an inference that plaintiff failed to comply with G.S. 44A-4, this was a factual issue to have been determined only by the jury. Vaseleniuck Engine Dev., LLC v. Sabertooth Motorcycles, LLC, 219 N.C. App. 540, 727 S.E.2d 308 (2012).

Calculation of Damages. - Determination of actual damages, if any, was reserved for the jury, and the measure of actual damages was the difference between the fair market value of the property at the time of the sale and the amount for which the property was actually sold. Rowell v. N.C. Equip. Co., 146 N.C. App. 431, 552 S.E.2d 274 (2001).

Attorney Fees. - Where defendant neither prevailed nor defended under the theory that he had a chapter 44A lien, but it was a warehouseman's lien under chapter 25, the trial court erred by awarding attorney fees under this section. Smithers v. Tru-Pak Moving Sys., 121 N.C. App. 542, 468 S.E.2d 410 (1996).

Applied in Drummond v. Cordell, 72 N.C. App. 262, 324 S.E.2d 301 (1985); Drummond v. Cordell, 73 N.C. App. 438, 326 S.E.2d 292 (1985); AT & T Family Fed. Credit Union v. Beaty Wrecker Serv., Inc., 108 N.C. App. 611, 425 S.E.2d 427 (1993); Rowell v. N.C. Equip. Co., 146 N.C. App. 431, 552 S.E.2d 274 (2001); Triad Int'l Maint. Corp. v. Guernsey Air Leasing, Ltd., 178 F. Supp. 2d 547 (M.D.N.C. 2001); Bowles Auto., Inc. v. N.C. DMV, 203 N.C. App. 19, 690 S.E.2d 728 (2010), review denied, 364 N.C. 324, 700 S.E.2d 746, 2010 N.C. LEXIS 590 (2010).

Cited in Old Salem Foreign Car Serv., Inc. v. Webb, 159 N.C. App. 93, 582 S.E.2d 673 (2003).

Opinions of Attorney General

Enforcement of Lien by Warehouseman. - Warehouseman with liens pursuant to both Article 1 of Chapter 44A and Article 7 of the U.C.C. may enforce lien under G.S. 25-7-210 without allowing the owner a judicial hearing under G.S. 44A-4. See opinion of Attorney General to Resa L. Harris, Legal Officer, Office of the Clerk of Superior Court, Mecklenburg County, 48 N.C.A.G. 111 (1979).

§ 44A-5. Proceeds of sale.

The proceeds of the sale shall be applied as follows:

Payment of reasonable expenses incurred in connection with the sale. Expenses of sale include but are not limited to reasonable storage and boarding expenses after giving notice of sale.
Payment of the obligation secured by the lien.
Any surplus shall be paid to the person entitled thereto; but when such person cannot be found, the surplus shall be paid to the clerk of superior court of the county in which the sale took place, to be held by the clerk for the person entitled thereto.

History

(1967, c. 1029, s. 1; 1971, c. 544, s. 2.)

CASE NOTES

Effect of Sale. - The sale of property encumbered by a statutory lien does not extinguish the lien; instead, its obligations are collectable from the proceeds of sale. Case v. Miller, 68 N.C. App. 729, 315 S.E.2d 737 (1984).

Cited in Drummond v. Cordell, 73 N.C. App. 438, 326 S.E.2d 292 (1985).

§ 44A-6. Title of purchaser.

A purchaser for value at a properly conducted sale, and a purchaser for value without constructive notice of a defect in the sale, whether or not the purchaser is the lienor or an agent of the lienor, acquires title to the property free of any interests over which the lienor was entitled to priority.

History

(1967, c. 1029, s. 1; 1995, c. 480, s. 2.)

Legal Periodicals. - For survey of 1981 commercial law, see 60 N.C.L. Rev. 1238 (1982).

CASE NOTES

Where purchaser of personal property subject to a valid, enforceable, perfected security interest buys in the collateral at a foreclosure sale conducted pursuant to this chapter to satisfy an account for repairs which the purchaser has failed to pay for a purchase price which essentially represents payment of the account, the purchaser does not thereby extinguish the security interest; rather, the security property or collateral remains subject to the security interest, and if the indebtedness for payment of which the collateral was pledged remains in default, the right to possession continues to be with the holder of the security interest. Paccar Fin. Corp. v. Harnett Transf., Inc., 51 N.C. App. 1, 275 S.E.2d 243, cert. denied, 302 N.C. 629, 280 S.E.2d 441 (1981).

Applied in Caesar v. Kiser, 387 F. Supp. 645 (M.D.N.C. 1975).

§ 44A-6.1. Action to regain possession of a motor vehicle or vessel.

When the lienor involuntarily relinquishes possession of the property and the property upon which the lien is claimed is a motor vehicle or vessel, the lienor may institute an action to regain possession of the motor vehicle or vessel in small claims court any time following the lienor's involuntary loss of possession and following maturity of the obligation to pay charges. The lienor shall serve a copy of the summons and the complaint pursuant to G.S. 1A-1, Rule 4, on each secured party claiming an interest in the vehicle or vessel. For purposes of this section, involuntary relinquishment of possession includes only those situations where the owner or other party takes possession of the motor vehicle or vessel without the lienor's permission or without judicial process. If in the court action the owner or other party retains possession of the motor vehicle or vessel, the owner or other party shall pay the amount of the lien asserted as bond into the clerk of the court in which the action is pending.
1. Direct appropriate disbursement of the disputed or undisbursed portion of the bond; and
2. Direct appropriate possession of the motor vehicle or vessel if, in the judgment of the court, the plaintiff has a valid right to a lien.
Either party to an action pursuant to subsection (a) of this section may appeal to district court for a trial de novo.

If within three days after service of the summons and complaint, as the number of days is computed in G.S. 1A-1, Rule 6, neither the defendant nor a secured party claiming an interest in the vehicle or vessel files a contrary statement of the amount of the lien at the time of the filing of the complaint, the amount set forth in the complaint shall be deemed to be the amount of the asserted lien. The clerk may at any time disburse to the lienor that portion of the cash bond which is not in dispute, upon application of the lienor. The magistrate shall:

History

(1991, c. 344, s. 2; c. 731, s. 4.)

CASE NOTES

Failure to Use Legal Remedies May Preclude Insurance Coverage. - The actions of defendant, who had available legal remedies under subsection (a) of this section but attempted to repossess car by means not authorized by law, were not "necessary or incidental" to "garage operations" and insurance contract did not provide coverage for conduct complained of in wrongful death action. North Carolina Farm Bureau Mut. Ins. Co. v. Weaver, 134 N.C. App. 359, 517 S.E.2d 381 (1999).

ARTICLE 2. Statutory Liens on Real Property.

Part 1. Liens of Mechanics, Laborers, and Materialmen Dealing with Owner.

Sec.

Part 2. Liens of Mechanics, Laborers, and Materialmen Dealing with One Other Than Owner.

Part 3. Criminal Sanctions for Furnishing a False Statement in Connection with Improvement to Real Property.

Part 4. Commercial Real Estate Broker Lien Act.

PART 1. LIENS OF MECHANICS, LABORERS, AND MATERIALMEN DEALING WITH OWNER.

§ 44A-7. Definitions.

Unless the context otherwise requires, the following definitions apply in this Article:

Contractor. - A person who contracts with an owner to improve real property.
First tier subcontractor. - A person who contracts with a contractor to improve real property.
Improve. - To build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and private roadways, or to furnish materials, including trees and shrubbery, for any of such purposes, or to perform any labor upon such improvements, and shall also mean and include any design or other professional or skilled services furnished by architects, engineers, land surveyors and landscape architects registered under Chapter 83A, 89A or 89C of the General Statutes, and rental of equipment directly utilized on the real property in making the improvement.
Improvement. - All or any part of any building, structure, erection, alteration, demolition, excavation, clearing, grading, filling, or landscaping, including trees and shrubbery, driveways, and private roadways, on real property.
Inspection department. - Any city or county building inspection department authorized by Chapter 160A or Chapter 153A of the General Statutes.
Lien agent. - A title insurance company or title insurance agency designated by an owner pursuant to G.S. 44A-11.1.
Obligor. - An owner, contractor, or subcontractor in any tier who owes money to another as a result of the other's partial or total performance of a contract to improve real property.
Owner. - 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. "Owner" includes successors in interest of the owner and agents of the owner acting within their authority.
Potential lien claimant. - Any person entitled to claim a lien for improvements to real property under this Article who is subject to G.S. 44A-11.1.
Real property. - The real estate that is improved, including lands, leaseholds, tenements and hereditaments, and improvements placed thereon.
Second tier subcontractor. - A person who contracts with a first tier subcontractor to improve real property.
Third tier subcontractor. - A person who contracts with a second tier subcontractor to improve real property.

History

(1969, c. 1112, s. 1; 1975, c. 715, s. 1; 1985, c. 689, s. 13; 1995 (Reg. Sess., 1996), c. 607, s. 1; 2012-158, s. 1; 2012-175, s. 1.)

Effect of Amendments. - Session Laws 2005-229, s. 1, effective October 1, 2005, and applicable to claims of lien on real property filed and notices of claims of lien upon funds served on or after that date, made a minor stylistic change in the part heading.

Session Laws 2012-158, s. 1, effective April 1, 2013, added subdivisions (4a), (4b), and (6a). For applicability, see editor's note.

Session Laws 2012-175, s. 1, effective January 1, 2013, added subdivisions (1), (2), (5), (8) and (9) and redesignated the remaining subdivisions accordingly; substituted "requires, the following definitions apply in this Article" for "requires in this Article" at the end of the introductory paragraph; and made stylistic and punctuation changes throughout the list of definitions. For applicability, see editor's note.

Legal Periodicals. - For survey of 1977 law on civil procedure, see 56 N.C.L. Rev. 874 (1978).

For comment on materialmen's liens in North Carolina, see 61 N.C.L. Rev. 926 (1983).

For article, "North Carolina Construction Law Survey II," see 22 Wake Forest L. Rev. 481 (1987).

For note, "Mechanics' Liens - Judicial Legislation at Work: Changes in the Mechanics' Lien Law of North Carolina after Electric Supply Co. v. Swain Electrical Co.," see 27 Wake Forest L. Rev. 1033 (1992).

CASE NOTES

Act Is Remedial in Nature. - The materialman's lien act, Chapter 44A, Article 2, Part 1, is remedial in nature and should be construed to advance the legislative intent in enacting it. Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

The 1975 amendment created a new right to a lien in those who perform or furnish professional design or surveying services. Wilbur Smith & Assocs. v. South Mt. Properties, Inc., 29 N.C. App. 447, 224 S.E.2d 692, cert. denied, 290 N.C. 552, 226 S.E.2d 514 (1976).

"Improvements." - Where contractors who performed labor or furnished materials for improvements at Chapter 11 debtor's facility asserted statutory liens against certain machinery and equipment at the facility, the contractors were not entitled to liens because the machinery and equipment, which were intended to remain personal property and could, despite their size and weight, be removed, did not constitute improvements on real property within the meaning of G.S. 44A-7(2) and did not constitute improvements on real property for purposes of G.S. 44A-8. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Plaintiff's work preparing a report for a developer went toward making an improvement to the land as required by G.S. 44A-8 as the work constituted an improvement under G.S. 44A-7, and defendants' claim that the work was done under a separate contract was rejected. Ramey Kemp & Assocs. v. Richmond Hills Residential Partners, LLC, 225 N.C. App. 397, 737 S.E.2d 420, aff'd, 367 N.C. 118, 748 S.E.2d 143, 2013 N.C. LEXIS 1020 (2013).

Providing rental equipment does not constitute furnishing material, as the common meaning of the word material is simply "the basic matter (as metal, wood, plastic, fiber) from which the whole or the greater part of something physical (as a machine, tool, building, fabric) is made." Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993).

"Owner." - Contractors' mechanics' lien complaint alleging a bank took the subject property at a foreclosure sale subject to the lien was properly dismissed because the contractors had no right to file a lien, as (1) no G.S. 44A-12 claim of lien or G.S. 44A-17 et seq. notice of claim of lien was alleged, and (2) the contractors had no lien against the bank's predecessor, as the predecessor had no interest in the property when the contractors first furnished materials, so the contractors did not contract with the G.S. 44A-8 "owner" of the property. John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367 (2012), cert. denied, 366 N.C. 419, 734 S.E.2d 860, 2012 N.C. LEXIS 1013 (2012), aff'd, 366 N.C. 547, 742 S.E.2d 802, 2013 N.C. LEXIS 492 (2013).

As to whether vendee who orders commencement of work before acquiring legal title is an owner within the meaning of this section, see Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

Binding Findings of Fact. - For purposes of G.S. 44A-8 and G.S. 44A-7, the trial court found that a company entered into the contract as defendant's agent, which ratified and accepted the contract by performing functions of owner under the contract; these conclusions were not challenged and thus were binding findings of fact that the agent's role was to provide representation services for defendant, and only defendant was authorized to do business in the state, and defendant paid all invoices submitted. Young & McQueen Grading Co. v. Mar-Comm & Assocs., 221 N.C. App. 178, 728 S.E.2d 1 (2012).

Cited in Meads v. Davis, 22 N.C. App. 479, 206 S.E.2d 868 (1974); Bryan v. Projects, Inc., 29 N.C. App. 453, 224 S.E.2d 689 (1976); Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978); Con Co., Inc. v. Wilson Acres Apts., Ltd., 56 N.C. App. 661, 289 S.E.2d 633 (1982); W.H. Dail Plumbing, Inc. v. Roger Baker & Assocs., 78 N.C. App. 664, 338 S.E.2d 135 (1986); Brown v. Middleton, 86 N.C. App. 63, 356 S.E.2d 386 (1987); K & K Dev. Corp. v. Columbia Banking Fed. Sav. & Loan Ass'n, 96 N.C. App. 474, 386 S.E.2d 226 (1989); Blalock Elec. Co. v. Grassy Creek Dev. Corp., 99 N.C. App. 440, 393 S.E.2d 354 (1990); McNeary's Arborists, Inc. v. Carley Capital Group, 103 N.C. App. 650, 406 S.E.2d 644 (1991); Carolina Bldg. Servs.' Windows & Doors, Inc. v. Boardwalk, LLC, 362 N.C. 262, 658 S.E.2d 924 (2008); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

§ 44A-8. Mechanics', laborers', and materialmen's lien; persons entitled to claim of lien on real property.

Any person who performs or furnishes labor or professional design or surveying services or furnishes materials or furnishes rental equipment pursuant to a contract, either express or implied, with the owner of real property for the making of an improvement thereon shall, upon complying with the provisions of this Article, have a right to file a claim of lien on real property on the real property to secure payment of all debts owing for labor done or professional design or surveying services or material furnished or equipment rented pursuant to the contract.

History

(1969, c. 1112, s. 1; 1975, c. 715, s. 2; 1995 (Reg. Sess., 1996), c. 607, s. 2; 2005-229, s. 1.)

Legal Periodicals. - For article, "Mechanics' Liens for the Improvement of Real Property: Recent Developments in Perfection, Enforcement and Priority," see 12 Wake Forest L. Rev. 283 (1976).

For survey of 1978 property law, see 57 N.C.L. Rev. 1103 (1979).

For comment, "Offer to Purchase and Contract: Buyer Beware," see 8 Campbell L. Rev. 473 (1986).

For note, "Judicial Activism Constructs Lenders' Nightmare - Embree Construction Group, Inc. v. Rafcor, Inc. and United Carolina Bank," see 15 Campbell L. Rev. 77 (1992).

For article, "North Carolina's Real Estate Recording Laws: The Ghost of 1885," see 28 N.C. Cent. L.J. 199 (2006).

CASE NOTES

Purpose. - The purpose of the materialman's lien statute is to protect the interest of the supplier in the materials it supplies; the materialman, rather than the mortgagee, should have the benefit of materials that go into the property and give it value. To implement this purpose, courts should construe the statute so as to further the legislature's intent. They should construe a remedial statute to advance the remedy intended. Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

The purpose of this lien statute is to protect the interest of the contractor, laborer or materialman. Embree Constr. Group, Inc. v. Rafcor, Inc., 330 N.C. 487, 411 S.E.2d 916 (1992).

The lien created by this section secures the right of the claimant to amounts earned whether or not the funds are due or the claimant's job is complete. Embree Constr. Group, Inc. v. Rafcor, Inc., 330 N.C. 487, 411 S.E.2d 916 (1992).

To enforce a lien under Article 2 of N.C. Gen. Stat. ch. 44A, the lienor must have performed work pursuant to a contract, either express or implied, with the owner of real property, under G.S. 44A-8, and read in pari materia, the G.S. 44A-13(b) phrase "principal amount shown to be due" refers to the principal amount due under the contract giving rise to the lien enforcement proceedings pursuant to N.C. Gen. Stat. ch. 44A, Article 2, that is, the contract between the lienor and the owner of real property; if the judgment is awarding the lienor the principal amount due under his contract with the property owner, the interest included in that "principal amount" would be the interest due under the contract with the property owner, and clearly, then, the requirement of an agreement on interest between the parties refers to the agreement between the lienor and the owner of the property. Young & McQueen Grading Co. v. Mar-Comm & Assocs., 221 N.C. App. 178, 728 S.E.2d 1 (2012).

Relationship to 11 U.S.C. § 522(f)(1). - In a Chapter 7 bankruptcy case in which two debtors filed an 11 U.S.C.S. § 522(f)(1) motion to avoid a judgment lien, arguing that the judgment was a judicial lien, the judgment lien was a mechanics' lien created pursuant to North Carolina law. As a mechanics' lien, it was a statutory lien that could not be avoided under § 522(f)(1) since that section expressly provided relief only for judicial liens. Helms v. Belfor USA Group, Inc. (In re Helms), 438 B.R. 95 (Bankr. W.D.N.C. 2010).

Relationship to 11 U.S.C. § 547(b). - Chapter 7 trustee established the prima facie elements of his preference claim under 11 U.S.C.S. § 547(b) as to payments by debtor of labor and materials to a supplier in connection with the debtor's construction of homes because there was no solid basis on which to conclude that the supplier's assertion of its unexercised right to file a claim of lien under G.S. 44A-8 should, in the context of § 547(b)(5), be viewed as tantamount to the supplier having done so. Sparkman v. Am. Residential Servs., LLC (In re Anderson Homes, Inc.), - Bankr. - (Bankr. E.D.N.C. May 25, 2012).

Mechanic's Lien Statutes Grant Supplier of Labor or Material Only the Right to File Mechanic's Lien, Not a Security Interest. - In rejecting appellant creditor's defense to the avoidance of preferential transfers made to a debtor, the court rejected the argument that it held a security interest in the owners' properties at the time of the transfers because North Carolina's mechanic's lien statutes immediately granted a security interest to a supplier who furnished labor or material to improve the property. The mechanic's lien statutes granted a supplier of labor or material only the right to file a mechanic's lien under G.S. 44A-8, which appellant did not do, and only upon the filing of a claim for a mechanic's lien was the owner's property encumbered under G.S. 44A-10; because appellant had not filed such a claim when the transfers were made, no interest was transferred to it, and it had no such interest to release. United Rentals, Inc. v. Angell, 592 F.3d 525 (2010), cert. denied, 131 S. Ct. 121, 2010 U.S. LEXIS 6346, 178 L. Ed. 2d 32 (U.S. 2010).

The lien created by this section is incident to and security for a debt. There can be no lien in the absence of an underlying debt. Lowe's of Fayetteville, Inc. v. Quigley, 46 N.C. App. 770, 266 S.E.2d 378 (1980); Caldwell's Well Drilling, Inc. v. Moore, 79 N.C. App. 730, 340 S.E.2d 518 (1986).

A laborers' and materialmen's lien arises out of the relationship of debtor and creditor, and it is for the debt that the lien is created by statute. Lowe's of Fayetteville, Inc. v. Quigley, 46 N.C. App. 770, 266 S.E.2d 378 (1980).

Enforceable Contract Has to Exist to Establish Valid Claim of Lien. - Trial court erred in granting a builder a lien on owners' real property on the theory of quantum meruit because to establish a valid claim of lien under G.S. 44A-8, an enforceable contract had to exist between the parties; a contract implied-in-law is nothing more than a term of art used to express an equitable remedy used by the court to prevent unjust enrichment, and as quantum meruit is not a theory based upon an actual agreement, it may not establish the contractual relationship necessary to form the basis for filing a claim of lien pursuant to G.S. 44A-8. Waters Edge Builders, LLC v. Longa, 214 N.C. App. 350, 715 S.E.2d 193 (2011).

There must be a contract, express or implied, to create a laborer's or materialman's lien. The holder of the lien has a "security" that open or general creditors do not have and that is based on contract. Ridge Community Investors, Inc. v. Berry, 32 N.C. App. 642, 234 S.E.2d 6, rev'd on other grounds, 293 N.C. 688, 239 S.E.2d 566 (1977).

Without a contract the lien does not exist. Lowe's of Fayetteville, Inc. v. Quigley, 46 N.C. App. 770, 266 S.E.2d 378 (1980).

Absent express or implied contract, the statutory lien is unavailable. Embree Constr. Group, Inc. v. Rafcor, Inc., 330 N.C. 487, 411 S.E.2d 916 (1992).

Defendant was not a materialman for purposes of the statute of repose, G.S. 1-50(5)(b)(9), because plaintiff and defendant had no contract, and defendant's only intent was that of a manufacturer, to place its product into the stream of commerce, without ever intending its product be particularly delivered to plaintiff. Forsyth Mem. Hosp. v. Armstrong World Indus., Inc., 122 N.C. App. 413, 470 S.E.2d 826 (1996).

Open Account Can Qualify as Contract. - Where contractors who performed labor or furnished materials for improvements at Chapter 11 debtor's facility on an open account basis asserted statutory liens against certain machinery and equipment at the facility, the contractual arrangement embodied within the open accounts fell within the requirement that there be a contract, either express or implied, and could serve as a basis for claiming a lien under G.S. 44A-8. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Third Party Contract Not Implied. - This article does not provide an exception to the principle that where there is a contract between persons for the furnishing of services or goods to a third person, the latter is not liable on an implied contract simply because he has received such services or goods. Suffolk Lumber Co. v. White, 12 N.C. App. 27, 182 S.E.2d 215 (1971).

As to whether vendee who orders commencement of work before acquiring legal title is an owner within the meaning of G.S. 44A-7, see Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

Plaintiff Must Prove Performance Pursuant to Contract with Defendant. - Plaintiff has the burden of showing, not only that it performed labor or furnished materials for the making of an improvement on defendants' property, but also that the labor was performed or the materials were furnished pursuant to a contract, either express or implied, with defendants. Wilson Elec. Co. v. Robinson, 15 N.C. App. 201, 189 S.E.2d 758 (1972); Caldwell's Well Drilling, Inc. v. Moore, 79 N.C. App. 730, 340 S.E.2d 518 (1986).

Absence of Contract Justified Dismissal. - Where much of the evidence offered by plaintiff and all of the evidence offered by defendants tended to show that plaintiff's contract was with the general contractor employed to build the house, and not with defendants, the trial court acted properly in accepting the verdict of the jury and entering judgment dismissing the plaintiff's claim. Wilson Elec. Co. v. Robinson, 15 N.C. App. 201, 189 S.E.2d 758 (1972).

"Debts Owing." - Where plumbing company had contracted with owner of office condominium complex for a total, after change orders, of $43,178.61, and prior to defaulting, owner had paid $30,000.00 toward this total, the "debt owing" to which a lien under this section could attach totalled $13,718.61. W.H. Dail Plumbing, Inc. v. Roger Baker & Assocs., 78 N.C. App. 664, 338 S.E.2d 135, cert. denied, 316 N.C. 731, 345 S.E.2d 398 (1986).

Lien Could Not Be Imposed Absent Underlying Debt. - Where plaintiff sought a personal judgment against owners based on its contract to drill a well and sought to have such personal judgment declared to be a specific lien on the property allegedly conveyed by owners to purchasers, but there was no allegation in the complaint that the purchasers were indebted to plaintiff in any amount, and subsequently plaintiff abandoned its claim for a personal judgment based on the contract by taking a voluntary dismissal of its claim against the owners, when the trial judge granted the purchasers' motion to dismiss under G.S. 1A-1, Rule 12(b) there was no debt or judgment to be secured by a lien on the property in question, and since the court necessarily considered matters outside the pleadings, i.e., the voluntary dismissal of plaintiff 's claim for personal judgment against the owners, the order under G.S. 1A-1, Rule 12(b) was converted to a summary judgment for the purchasers with respect to the dismissal of plaintiff 's claim to have a lien imposed on the property. Caldwell's Well Drilling, Inc. v. Moore, 79 N.C. App. 730, 340 S.E.2d 518 (1986).

Improvement of Property Not Required. - There is no requirement in this section that the lienholder's work actually improve the property. Design Assocs. v. Powers, 86 N.C. App. 216, 356 S.E.2d 819 (1987).

No Improvement on Real Property. - Where contractors who performed labor or furnished materials for improvements at Chapter 11 debtor's facility asserted statutory liens against certain machinery and equipment at the facility, the contractors were not entitled to liens because the machinery and equipment, which were intended to remain personal property and could, despite their size and weight, be removed, did not constitute improvements on real property within the meaning of G.S. 44A-7(2) and did not constitute improvements on real property for purposes of G.S. 44A-8. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Improvement Found. - Plaintiff's work preparing a report for a developer went toward making an improvement to the land as required by G.S. 44A-8 as the work constituted an improvement under G.S. 44A-7, and defendants' claim that the work was done under a separate contract was rejected. Ramey Kemp & Assocs. v. Richmond Hills Residential Partners, LLC, 225 N.C. App. 397, 737 S.E.2d 420, aff'd, 367 N.C. 118, 748 S.E.2d 143, 2013 N.C. LEXIS 1020 (2013).

No Lien for Lost Profits. - A lien under this section attaches only for debts owing for labor done or professional design or surveying services or material furnished. Nothing is said about lost profits. W.H. Dail Plumbing, Inc. v. Roger Baker & Assocs., 78 N.C. App. 664, 338 S.E.2d 135, cert. denied, 316 N.C. 731, 345 S.E.2d 398 (1986).

No Contractual Relationship Established. - Because there was no contractual relationship between a contractor and a county, the contractor could not enforce a lien on real property conveyed to the county; the contractor executed a waiver of its materialmen's lien rights within a development and sought to enforce a lien on the property for work performed after the lien waiver was signed and after the property was conveyed to the county, but the contractor did not allege a contractual relationship between it and county, and absent such a relationship, it could not enforce a lien on county real property. Gaines & Co. v. Wendell Falls Residential, LLC, 212 N.C. App. 606, 714 S.E.2d 179 (2011).

Issues Tried With Implied Consent. - Because no objections were raised to evidence concerning agency between defendant and a company, that issue was tried with the implied consent of the parties and the pleadings were deemed to be amended; thus, the challenge to the conclusions regarding agency failed, and enforcement of the lien did not violate the requirement under G.S. 44A-8 that a lienor had to contract with the owner because plaintiff entered into the contract with defendant's agent, and plaintiff was entitled to enforce its lien. Young & McQueen Grading Co. v. Mar-Comm & Assocs., 221 N.C. App. 178, 728 S.E.2d 1 (2012).

Meaning of "Labor". - The partial clearing and staking of the building lines on a construction was "labor" under this section as it read prior to the 1975 amendment. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

The term "labor" in this section as it read prior to the 1975 amendment was not restricted to unskilled work of an inferior and toilsome nature. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

First Furnishing. - The judgment in defendant's favor properly ordered a sale of the property to enforce defendant's statutory lien, and the lien related back to the date of the first furnishing listed in the claim of lien and judgment even though the court failed to include the beginning date of the work. Metropolitan Life Ins. Co. v. Rowell, 113 N.C. App. 779, 440 S.E.2d 283, rev'd on other grounds, 115 N.C. App. 152, 444 S.E.2d 231 (1994), cert. denied, 338 N.C. 518, 452 S.E.2d 813 (1994).

Plaintiff was seeking payment for work done pursuant to a contract and its amendment, and thus the proper date was the first furnishing of work under this contract and not another contract. Young & McQueen Grading Co. v. Mar-Comm & Assocs., 221 N.C. App. 178, 728 S.E.2d 1 (2012).

Delivery of Materials to Site. - The lien claimant is not required to personally make delivery of materials to the site of the improvement, so long as the materialman furnished the goods with the intent that they would later be placed on the site and they were so placed. The lien, when properly perfected, will relate to and take effect from the first furnishing of materials on the site. Raleigh Paint & Wallpaper Co. v. Peacock & Assocs., 38 N.C. App. 144, 247 S.E.2d 728 (1978), cert. denied, 296 N.C. 415, 251 S.E.2d 470 (1979); Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, cert. denied, 318 N.C. 508, 349 S.E.2d 865 (1986).

Contractors' mechanics' lien complaint alleging a bank took the subject property at a foreclosure sale subject to the lien was properly dismissed because the contractors had no right to file a lien, as (1) no G.S. 44A-12 claim of lien or G.S. 44A-17 et seq. notice of claim of lien was alleged, and (2) the contractors had no lien against the bank's predecessor, as the predecessor had no interest in the property when the contractors first furnished materials, so the contractors did not contract with the G.S. 44A-8 "owner" of the property. John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367 (2012), cert. denied, 366 N.C. 419, 734 S.E.2d 860, 2012 N.C. LEXIS 1013 (2012), aff'd, 366 N.C. 547, 742 S.E.2d 802, 2013 N.C. LEXIS 492 (2013).

Compliance with Requisite Elements Created Valid Lien. - Contractor complied with all the required elements under North Carolina law in order to establish a valid lien under this chapter where it was undisputed that contractor performed pursuant to a contract, that it proved the first date it furnished materials at the construction project and its contract was with the owner of the property since contractor's contract was with person who became legal owner of the property by a valid deed. Southeastern Sav. & Loan Ass'n v. Rentenbach Constructors, Inc., 114 Bankr. 441 (E.D.N.C. 1989), aff'd per curiam, 907 F.2d 1139 (4th Cir. 1990).

Lien of First Tier Subcontractor Recognized. - G.S. 44A-23 grants to a first tier subcontractor a lien upon real property based upon a right of subrogation to the direct lien of the general contractor on the improved real property as provided in G.S. 44A-8. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

Plaintiff subcontractor could not establish a lien for labor and materials as a prime contractor when its own notice of claim of lien and judicial findings to which plaintiff consented established it as a subcontractor. Outer Banks Contractors v. Forbes, 47 N.C. App. 371, 267 S.E.2d 63 (1980), aff'd, 302 N.C. 599, 276 S.E.2d 375 (1981).

Lien Is Inchoate Until Perfected. - The lien provided for by this section is inchoate until perfected by compliance with G.S. 44A-11 and G.S. 44A-12, and is lost if the steps required for its perfection are not taken in the manner and within the time prescribed by law. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978), decided under this section as it read prior to the 1975 amendment.

Enforcement of Lien and Arbitration Are Mutually Exclusive. - The right to file and enforce a lien claim and the right to resolve a dispute through arbitration are mutually exclusive rights. Adams v. Nelsen, 67 N.C. App. 284, 312 S.E.2d 896 (1984), modified on other grounds, 313 N.C. 442, 329 S.E.2d 322 (1985).

Plaintiff, by contractually agreeing to arbitration, did not thereby waive his right to file a lien claim and to institute court action to enforce such lien, and he was entitled to enforce any award in his favor through a judgment enforcing his lien claim. Adams v. Nelsen, 67 N.C. App. 284, 312 S.E.2d 896 (1984), modified on other grounds, 313 N.C. 442, 329 S.E.2d 322 (1985).

Agreement to Arbitrate Did Not Bar Plaintiff from Statutory Remedy. - Claim of lien, included within complaint of plaintiff, a registered professional engineer, for breach of contract, and filed pursuant to this section, constituted a statutory remedy that was not extinguished merely because plaintiff had entered into a contract providing for arbitration; plaintiff was not foreclosed from pursuing his statutory remedy by agreeing to arbitrate. Adams v. Nelson, 313 N.C. 442, 329 S.E.2d 322 (1985).

Materialman's Lien Superior to Faulty Deed of Trust. - Where deed of trust which was recorded did not convey debtor's predecessor's interest in that property, but instead purported to convey an interest which debtor did not have, and the deed was indexed with debtor as grantor and thus was recorded outside of its chain of title which had the same effect on notice as no registration, fact that such deed was signed general partner of actual owner had no effect, hence materialmen's lien was superior to deed of trust. Southeastern Sav. & Loan Ass'n v. Rentenbach Constructors, Inc., 114 Bankr. 441 (E.D.N.C. 1989), aff'd per curiam, 907 F.2d 1139 (4th Cir. 1990).

Priority over Purchase Money Deed of Trust. - Where plaintiff had a contract with the owner of the property within the meaning and intent of those terms as used in this section, materials furnished pursuant to that contract gave rise to a statutory materialman's lien which takes precedence over a purchase money deed of trust when there is an intervening construction loan deed of trust. Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

Professional design services furnished by an architectural firm pursuant to a contract entitled the plaintiff firm to a lien to secure payment for those services. Design Assocs. v. Powers, 86 N.C. App. 216, 356 S.E.2d 819 (1987).

Lien Asserted in Violation of the Automatic Stay. Where subcontractors of the debtor sought to impose statutory liens under G.S. 44A, et seq., but their interests in the funds were only perfected, and only arose postpetition, the liens were void for violating the automatic stay under 11 U.S.C.S. § 362(a)(4). In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009).

Award of Attorneys' Fees Held Error. - Trial court erred in granting a builder attorney's fees pursuant to G.S. 44A-35 because the trial court awarded the builder attorney fees as the prevailing party, but the builder could not prevail within the meaning of G.S. 44A-35 because the court of appeals concluded that trial court erred in granting the builder a lien on owners' real property on the theory of quantum meruit; to establish a valid claim of lien under G.S. 44A-8, an enforceable contract has to exist between the parties. Waters Edge Builders, LLC v. Longa, 214 N.C. App. 350, 715 S.E.2d 193 (2011).

Evidence Supported Value Assessed for Materials And Services Rendered. - Given the evidence and the inexact nature of ascertaining a definite cost for the type of service a builder provided, the value as assessed by the trial court, for the materials and services rendered by the builder and accepted by the owners, was reasonable and supported by competent evidence. Waters Edge Builders, LLC v. Longa, 214 N.C. App. 350, 715 S.E.2d 193 (2011).

Lien Waiver Merely Released Costs to Date and Did Not Change Date of Creation of Lien. - Contractor's lien under G.S. 44A-8 had priority over a lender's later-filed deed of trust despite the contractor's execution of partial lien waivers, because the language of the lien waivers merely released the labor and materials costs for which the contractor had been reimbursed as of the date of the waivers. The partial lien waivers functioned as an acknowledgement of payment for labor and materials expended through a certain date and that the contractor had no further lien rights in the furnishing of labor and materials reimbursed by those payments. Wachovia Bank Nat'l Ass'n v. Superior Constr. Corp., 213 N.C. App. 341, 718 S.E.2d 160 (2011), review denied, 365 N.C. 367, 719 S.E.2d 41, 2011 N.C. LEXIS 1009 (2011).

Applied in Mauney v. Morris, 73 N.C. App. 589, 327 S.E.2d 248 (1985); Lynch v. Price Homes, Inc., 156 N.C. App. 83, 575 S.E.2d 543 (2003); Signature Dev., LLC v. Sandler Commer. at Union, L.L.C., 207 N.C. App. 576, 701 S.E.2d 300 (2010), review dismissed, as moot, 710 S.E.2d 28, 2011 N.C. LEXIS 448 (N.C. 2011); Lawyers Title Ins. Corp. v. Zogreo, 208 N.C. App. 88, 702 S.E.2d 222 (2010), review denied 365 N.C. 213,710 S.E.2d 37, 2011 N.C. LEXIS 504 (N.C. 2011).

Cited in Pegram-West, Inc. v. Hiatt Homes, Inc., 12 N.C. App. 519, 184 S.E.2d 65 (1971); Bryan v. Projects, Inc., 29 N.C. App. 453, 224 S.E.2d 689 (1976); Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418 (1987); Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 291 (1991); Dalton Moran Shook, Inc. v. Pitt Dev. Co., 113 N.C. App. 707, 440 S.E.2d 585 (1994); Forsyth Mem. Hosp. v. Armstrong World Indus., Inc., 336 N.C. 438, 444 S.E.2d 423 (1994); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011); Lake Colony Constr., Inc. v. Boyd, 212 N.C. App. 300, 711 S.E.2d 742 (2011); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

§ 44A-9. Extent of claim of lien on real property.

A claim of lien on real property authorized under this Article shall extend to the improvement and to the lot or tract on which the improvement is situated, to the extent of the interest of the owner. When the lot or tract on which a building is erected is not surrounded at the time of making the contract with the owner by an enclosure separating it from adjoining land of the same owner, the lot or tract to which any claim of lien on real property extends shall be the area that is reasonably necessary for the convenient use and occupation of the building, but in no case shall the area include a building, structure, or improvement not normally used or occupied or intended to be used or occupied with the building with respect to which the claim of lien on real property is claimed.

History

(1969, c. 1112, s. 1; 2005-229, s. 1.)

CASE NOTES

Notices of Claims and Liens Properly Discharged. - Materialman's notices of claims and liens were properly discharged as the materialman did not begin enforcement proceedings until after a sublessee's interest in the properties had been extinguished by the conveyance of the properties to the private owners. Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

Cited in Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

§ 44A-10. Effective date of claim of lien on real property.

A claim of lien on real property granted by this Article shall relate to and take effect from the time of the first furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property.

History

(1969, c. 1112, s. 1; 2005-229, s. 1.)

Legal Periodicals. - For survey of 1978 property law, see 57 N.C.L. Rev. 1103 (1979).

For article, "Future Advances and Title Insurance Coverage," see 15 Wake Forest L. Rev. 329 (1979).

CASE NOTES

Relationship to 11 U.S.C. § 547(b). - Chapter 7 trustee established the prima facie elements of his preference claim under 11 U.S.C.S. § 547(b) as to payments by debtor of labor and materials to a supplier in connection with the debtor's construction of homes because there was no solid basis on which to conclude that the supplier's assertion of its unexercised right to file a claim of lien under G.S. 44A-8 should, in the context of § 547(b)(5), be viewed as tantamount to the supplier having done so; Chapter 44A gives only the right to file a mechanic's lien. Sparkman v. Am. Residential Servs., LLC (In re Anderson Homes, Inc.), - Bankr. - (Bankr. E.D.N.C. May 25, 2012).

This section implies that there be a visible commencement of the improvement. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

Partial clearing of a site and staking of outlines of the building, as the "first furnishing of labor," constitute a "visible commencement of an improvement" sufficient to put a prudent man on notice that a possible improvement is underway and that the property might be subject to a lien under G.S. 44A-8. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

Delivery of Materials to Site. - The lien claimant is not required to personally make delivery of materials to the site of the improvement so long as the materialman furnished the goods with the intent that they would later be placed on the site and they were so placed. The lien, when properly perfected, will relate to and take effect from the first furnishing of materials on the site. Raleigh Paint & Wallpaper Co. v. Peacock & Assocs., 38 N.C. App. 144, 247 S.E.2d 728 (1978), cert. denied, 296 N.C. 415, 251 S.E.2d 470 (1979); Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, cert. denied, 318 N.C. 508, 349 S.E.2d 865 (1986).

Creditor's materialmen's lien was perfected as of the date of the first furnishing of labor or materials at the site of a debtor's home pursuant to G.S. 44A-10 and was not avoidable pursuant to 11 U.S.C.S. § 522(f). B&W Remodeling, Inc. v. Cofield (In re Cofield), - Bankr. - (Bankr. E.D.N.C. Sept. 15, 2011).

Mechanic's Lien for Work Done to Bring Property into Compliance with Restrictive Covenants. - Where it was undisputed that plaintiff first furnished labor or materials at lot for the purpose of bringing the property into compliance with the terms of applicable protective covenants on June 8, 1987, over a year after defendant's deed of trust on the property was recorded, plaintiff did not have priority over defendant and defendant was entitled to judgment as a matter of law. K & K Dev. Corp. v. Columbia Banking Fed. Sav. & Loan Ass'n, 96 N.C. App. 474, 386 S.E.2d 226 (1989).

Encumbrance Created Only Upon Filing of Claim. - In rejecting appellant creditor's defense to the avoidance of preferential transfers made to a debtor, the court rejected the argument that it held a security interest in the owners' properties at the time of the transfers because North Carolina's mechanic's lien statutes immediately granted a security interest to a supplier who furnished labor or material to improve the property. The mechanic's lien statutes granted a supplier of labor or material only the right to file a mechanic's lien under G.S. 44A-8, which appellant did not do, and only upon the filing of a claim for a mechanic's lien was the owner's property encumbered under G.S. 44A-10; because appellant had not filed such a claim when the transfers were made, no interest was transferred to it, and it had no such interest to release. United Rentals, Inc. v. Angell, 592 F.3d 525 (2010), cert. denied, 131 S. Ct. 121, 2010 U.S. LEXIS 6346, 178 L. Ed. 2d 32 (U.S. 2010).

Priority of Contractor's Lien. - By virtue of this section, a contractor's lien for all labor and materials furnished pursuant to a contract is deemed prior to any liens or encumbrances attaching to the property subsequent to the date of the contractor's first furnishing of labor or materials to the construction site. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

A materialman's lien on a leasehold which is properly enforced so as to relate back prior to a deed of trust on the leasehold would, upon foreclosure, entitle the materialman to priority in that portion of the proceeds representing the value of the leasehold. Miller v. Lemon Tree Inn of Roanoke Rapids, Inc., 32 N.C. App. 524, 233 S.E.2d 69 (1977).

Priority of Purchase Money Deed of Trust Under Doctrine of Instantaneous Seisin. - A materialman's lien relates back and takes effect from the time of the first furnishing of materials at the site of the improvement by the person claiming the lien. While the statutory language does not indicate the precise moment of attachment, it does indicate an order of priority between competing lien claimants. That priority can be defeated by the application of the doctrine of instantaneous seisin. Such doctrine provides that when a deed and a purchase money deed of trust are executed, delivered, and recorded as part of the same transaction, the deed of trust attaches at the instant the vendee acquires title and constitutes a lien superior to all others. It would thus subordinate a previously existing materialman's lien. Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

Policy supporting the doctrine of instantaneous seisin is that a vendor who parts with property and supplies the purchase price does so on the basis of having a first priority security interest in the property. The vendor who advances purchase money relies on the assurance that he or she will be able to foreclose on the land if the purchase price is not repaid. It is thus equitable and just that the vendor have a first priority security interest and be protected from the possibility of losing both the land and the money in the transaction. Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

No Priority Where Holder Gives Construction Lender Priority over Own Interest. - Since the vendor and the construction lender have the resources and the bargaining power to require the vendee to obtain lien waivers from material suppliers or to obtain title insurance, the court can perceive no reason to extend the doctrine of instantaneous seisin to protect, at the expense of the materialman, the holder of a purchase money security interest who, by consenting to give a construction lender's security an intervening priority over his or her own, has indicated an intent not to be so protected. Carolina Bldrs. Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E.2d 626, cert. denied, 313 N.C. 597, 330 S.E.2d 606 (1985).

Foreclosure Extinguished Liens. - Foreclosure on and recordation of a bank's deeds of trust on two properties extinguished a materialman's claims of liens on the properties as the foreclosures occurred before the materialman supplied labor and/or materials for use on the properties. Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

Lien Waivers Not Effective as Against Another Creditor in Bankruptcy Proceeding. - Lien waivers executed by a general contractor, who made a prima facie showing that his lien had priority under G.S. 44A-10, 44A-12(b), and 44A-13(a), did not give a bank priority because the general contractor expressly did not waive lien rights for work that had not been paid and for retainage, and the retainage for which the lien rights were not waived accrued before the bank began its lending relationship with the debtor. Thus, the general contractor's lien rights, which related back to the first furnishing of materials under G.S. 44A-10, had priority over the bank pursuant to G.S. 47-20. Lee F. Cowper, Inc. v. Watermark Marina of Wilmington, LLC (In re Watermark Marina of Wilmington, LLC), - Bankr. - (Bankr. E.D.N.C. Nov. 24, 2009).

A claim of lien is not fatally defective because of an obvious scrivener's error in stating the date of first furnishing it. Canady v. Creech, 288 N.C. 354, 218 S.E.2d 383 (1975).

Where a claim of lien for labor and materials in connection with the construction of a dwelling on certain property was filed on October 8, 1973, within 120 days from the last day the materials and supplies were furnished, but the claim of lien erroneously recited that the labor and materials were first furnished on December 4, 1973, and where on August 20, 1973, the property was conveyed, the erroneous statement in the claim of lien as to the date of first furnishing did not preclude enforcement of the lien against the purchasers, since they had constructive notice of the facts upon which the claim of lien was based and could not take advantage of a scrivener's error in the claim relative to these facts and upon which they did not rely to defeat the lien, which, because of these facts, related back to a time that predated their purchase. Canady v. Creech, 288 N.C. 354, 218 S.E.2d 383 (1975).

Filing of Action Did Not Relate Back to Filing Claim of Lien. - G.S. 44A-10 caused a subcontractor's claim of lien to relate back to the first date materials were provided, but had nothing to do with the effective date of the action to enforce the claim; a lien was not an action, and thus for purposes of a motion to consolidate, the filing of the action did not relate back to the date of the filing of the claim of lien. Barrier Geotechnical Contrs., Inc. v. Radford Quarries of Boone, Inc., 184 N.C. App. 741, 646 S.E.2d 840 (2007).

No Contractual Relationship Established. - Because there was no contractual relationship between a contractor and a county, the contractor could not enforce a lien on real property conveyed to the county; the contractor executed a waiver of its materialmen's lien rights within a development and sought to enforce a lien on the property for work performed after the lien waiver was signed and after the property was conveyed to the county, but the contractor did not allege a contractual relationship between it and the county, and absent such a relationship, it could not enforce a lien on county real property. Gaines & Co. v. Wendell Falls Residential, LLC, 212 N.C. App. 606, 714 S.E.2d 179 (2011).

Applied in Dalton Moran Shook, Inc. v. Pitt Dev. Co., 113 N.C. App. 707, 440 S.E.2d 585 (1994).

Cited in Wachovia Bank & Trust Co. v. Harris, 455 F.2d 841 (4th Cir. 1972); Wachovia Bank & Trust Co. v. Harris, 409 U.S. 844, 93 S. Ct. 47, 34 L. Ed. 2d 84 (1972); Universal Mechanical, Inc. v. Hunt, 114 N.C. App. 484, 442 S.E.2d 130 (1994); Schafer v. Carolina Kitchen & Bath, Inc. (In re Orndorff Constr., Inc.), 394 B.R. 372 (Bankr. M.D.N.C. 2008); In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009); Lawyers Title Ins. Corp. v. Zogreo, 208 N.C. App. 88, 702 S.E.2d 222 (2010), review denied 365 N.C. 213,710 S.E.2d 37, 2011 N.C. LEXIS 504 (N.C. 2011); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

§ 44A-11. Perfecting claim of lien on real property.

Perfection. - A claim of lien on real property granted by this Article shall be perfected as of the time provided in G.S. 44A-10 upon the occurrence of all of the following:
1. Service of a copy of the claim of lien on real property upon the record owner of the real property claimed to be subject to the claim of lien and, if the claim of lien on real property is being asserted pursuant to G.S. 44A-23, also upon the contractor through which subrogation is being asserted.
2. Filing of the claim of lien on real property under G.S. 44A-12.
Method of Service. - Service of the claim of lien on real property pursuant to subsection (a) of this section shall not require proof of actual receipt by the listed recipient and shall be complete upon the occurrence of any of the following:
1. Personal delivery of a copy of the claim of lien on real property upon the recipient.
2. Deposit of a copy of the claim of lien on real property in a postpaid, properly addressed wrapper in either of the following:
  1. A post office or official depository under the exclusive care and custody of the United States Postal Service.
  2. An authorized depository under the exclusive care and custody of a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2).
Service Address. - For purposes of this section, a wrapper addressed to a party required to be served under subdivision (1) of subsection (a) of this section shall be conclusively deemed properly addressed if it uses any of the following addresses:
1. The address for the party to be served listed on the permit issued for the improvement.
2. The address for the party to be served listed with the tax rolls for any county in North Carolina.
3. The address of the registered agent for the party to be served listed with the North Carolina Secretary of State's office.

History

(1969, c. 1112, s. 1; 2005-229, s. 1; 2012-175, s. 2.)

Effect of Amendments. - Session Laws 2012-175, s. 2, effective January 1, 2013, rewrote the section. For applicability, see editor's note.

Legal Periodicals. - For article, "Mechanics' Liens for the Improvement of Real Property: Recent Developments in Perfection, Enforcement and Priority," see 12 Wake Forest L. Rev. 283 (1976).

CASE NOTES

Waiver of Lien Rights. - Where a Chapter 11 debtor executed a note in favor of a contractor, who supplied the debtor with materials, in order to cover past due amounts owed on an open account, the supplier waived pursuant to G.S. 44A-12(b) its statutory lien rights under G.S. 44A-11, as to materials delivered prior to the execution of the note, because the maturity date of the note, i.e., the date on which the last payment on the note was due, was outside of the 120-day claim of lien perfection period. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Applied in Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

Cited in Schafer v. Carolina Kitchen & Bath, Inc. (In re Orndorff Constr., Inc.), 394 B.R. 372 (Bankr. M.D.N.C. 2008); Ivester v. Miller, 398 B.R. 408 (M.D.N.C. 2008); Lawyers Title Ins. Corp. v. Zogreo, 208 N.C. App. 88, 702 S.E.2d 222 (2010), review denied 365 N.C. 213,710 S.E.2d 37, 2011 N.C. LEXIS 504 (N.C. 2011).

§ 44A-11.1. Lien agent; designation and duties.

With regard to any improvements to real property to which this Article is applicable for which the costs of the undertaking are thirty thousand dollars ($30,000) or more, either at the time that the original building permit is issued or, in cases in which no building permit is required, at the time the contract for the improvements is entered into with the owner, the owner shall designate a lien agent no later than the time the owner first contracts with any person to improve the real property. Provided, however, that the owner is not required to designate a lien agent for improvements to an existing single-family residential dwelling unit as defined in G.S. 87-15.5(7) that is occupied by the owner as a residence, or for the addition of an accessory building or accessory structure as defined in the North Carolina Uniform Residential Building Code, the use of which is incidental to that residence. The owner shall deliver written notice of designation to its designated lien agent by any method authorized in G.S. 44A-11.2(f), and shall include in its notice the street address, tax map lot and block number, reference to recorded instrument, or any other description that reasonably identifies the real property for the improvements to which the lien agent has been designated, and the owner's contact information. Designation of a lien agent pursuant to this section does not make the lien agent an agent of the owner for purposes of receiving a Claim of Lien on Real Property, a Notice of Claim of Lien upon Funds, a Notice of Subcontract, or for any purpose other than the receipt of notices to the lien agent required under G.S. 44A-11.2.
Where the improvements to a real property leasehold are limited to the purchase, transportation, and setup of a manufactured home, as defined in G.S. 143-143.9(6), for which there is a current certificate of title, the purchase price of the manufactured home shall be excluded in determining whether the costs of the undertaking are thirty thousand dollars ($30,000) or more.
The lien agent shall be chosen from among the list of registered lien agents maintained by the Department of Insurance pursuant to G.S. 58-26-45.
Upon receipt of written notification of designation by an owner pursuant to subsection (a) of this section, the lien agent shall have the duties as set forth in G.S. 58-26-45(b).
In the event that the lien agent resigns, is no longer licensed to serve as a lien agent, revokes its consent to serve as lien agent or is removed by the owner, or otherwise becomes unable or unwilling to serve before the completion of all improvements to the real property, the owner shall within three business days of notice of such event do all of the following:
1. Designate a successor lien agent and provide written notice of designation to the successor lien agent pursuant to subsection (a) of this section.
2. Provide the contact information for the successor lien agent to the inspection department that issued any required building permit and to any persons who requested information from the owner relating to the predecessor lien agent.
3. Display the contact information for the successor lien agent on the building permit or attachment thereto posted on the improved property or, if no building permit was required, on a sign complying with G.S. 44A-11.2(e).
Until such time as the owner has fully complied with subsection (d) of this section, notice transmitted to the predecessor lien agent shall be deemed effective notice, notwithstanding the fact that the lien agent may have resigned or otherwise become unable or unwilling to serve.
Any attorney who, in connection with a transaction involving improved real property subject to this section for which the attorney is serving as the closing attorney, contacts the lien agent in writing and requests copies of the notices to lien agent, renewals of notices to lien agent, and cancellations of notices to lien agent received by the lien agent relating to the real property not more than five business days prior to the date of recordation of a deed or deed of trust on the real property, shall be deemed to have fulfilled the attorney's professional obligation as closing attorney to check such notices to lien agent, renewals of notices to lien agent, and cancellations of notices to lien agent and shall have no further duty to request that the lien agent provide information pertaining to notices or cancellations received subsequently by the lien agent.

History

(2012-158, s. 2; 2013-16, s. 1; 2013-117, s. 1; 2014-115, s. 35(a); 2016-59, s. 7; 2017-168, s. 1.)

Editor's Note. - Session Laws 2013-16, s. 1, updated certain references in this section to subsections in G.S. 44A-11.2. These references have been further conformed to match the revised numbering in G.S. 44A-11.2 at the direction of the Revisor of Statutes.

Effect of Amendments. - Session Laws 2013-16, s. 1, in subsection (a), substituted "are thirty thousand dollars ($30,000) or more, either at the time that the original building permit is issued or, in cases in which no building permit is required, at the time the contract for the improvements is entered into with the owner," for "at the time that the original building permit is issued is thirty thousand dollars $30,000 or more" in the first sentence, added "and owner's contact information" in the third sentence, and added "a Claim of Lien on Real Property" in the last sentence; added "dies, resigns, is no longer licensed to serve as a lien agent" in subsection (d); and added "in writing" preceding "and requests copies" in subsection (f). For applicability and effective date, see editor's note.

Session Laws 2013-117, s. 1, in the second sentence of subsection (a), substituted "occupied" for "used" and added "or for the addition of an accessory building or accessory structure as defined in the North Carolina Uniform Residential Building Code, the use of which is incidental to that residence"; and deleted "dies" following "the lien agent" in subsection (d). For effective date and applicability, see editor's note.

Session Laws 2014-115, s. 35(a), effective August 11, 2014, inserted "a Notice of Subcontract," in the last sentence of (a).

Session Laws 2016-59, s. 7, effective July 1, 2017, added subsection (a1).

Session Laws 2017-168, s. 1, effective October 1, 2018, in subsection (f) inserted "to lien agent, renewals of notices to lien agent, and cancellations of notices to lien agent" following "copies of the notices", inserted "renewals of notices to lien agent, and cancellations of notices to lien agent" following "such notices to lien agent", made a related punctuation change, and inserted "or cancellations" near the end.

§ 44A-11.2. Identification of lien agent; notice to lien agent; effect of notice.

As used in this section, the term "contact information" means the name, physical and mailing address, telephone number, facsimile number, and electronic mail address of the lien agent designated by the owner pursuant to G.S. 44A-11.1.
Within seven days of receiving a written request by a potential lien claimant by any delivery method specified in subsection (f) of this section, the owner shall provide a notice to the potential lien claimant containing the contact information for the lien agent, by the same delivery method used by the potential lien claimant in making the request.
A potential lien claimant making a request pursuant to subsection (b) of this section who did not receive the lien agent contact information pursuant to subsection (c) of this section, and who has not furnished labor, materials, rental equipment, or professional design or surveying services at the site of the improvements, or who last furnished labor, materials, rental equipment, or professional design or surveying services at the site of the improvements prior to the posting of the contact information for the lien agent pursuant to subsection (d) or (e) of this section, has no obligation to give notice to the lien agent under this section until the potential lien claimant has received the contact information from the owner.
A contractor or subcontractor for improvements to real property subject to G.S. 44A-11.1 shall, within three business days of contracting with a lower-tier subcontractor who is not required to furnish labor, materials, rental equipment, or professional design or surveying services at the site of the improvements, provide the lower-tier subcontractor with a written notice containing the contact information for the lien agent designated by the owner. This notice shall be given pursuant to subsection (f) of this section or may be given by including the lien agent contact information in a written subcontract entered into by, or a written purchase order issued to, the lower-tier subcontractor entitled to the notice required by this subsection. Any contractor or subcontractor who has previously received notice of the lien agent contact information, whether from the building permit, the inspections office, a notice from the owner, contractor, or subcontractor, or by any other means, and who fails to provide the lien agent contact information to the lower-tier subcontractor in the time required under this subsection, is liable to the lower-tier subcontractor for any actual damages incurred by the lower-tier subcontractor as a result of the failure to give notice.
For any improvement to real property subject to G.S. 44A-11.1, any building permit issued pursuant to G.S. 160A-417(d) or G.S. 153A-357(e) shall be conspicuously and continuously posted on the property for which the permit is issued until the completion of all construction.
For any improvement to real property subject to G.S. 44A-11.1, a sign disclosing the contact information for the lien agent shall be conspicuously and continuously posted on the property until the completion of all construction if the contact information for the lien agent is not contained in a building permit or attachment thereto posted on the property.
In complying with any requirement for written notice pursuant to this section, the notice shall be addressed to the person required to be provided with the notice and shall be delivered by any of the following methods:
1. Certified mail, return receipt requested.
2. Signature confirmation as provided by the United States Postal Service.
3. Physical delivery and obtaining a delivery receipt from the lien agent.
4. Facsimile with a facsimile confirmation.
5. Depositing with a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2).
6. Electronic mail, with delivery receipt.
7. Utilizing an Internet Web site approved for such use by the designated lien agent to transmit to the designated lien agent, with delivery receipt, all information required to notify the lien agent of its designation pursuant to G.S. 44A-11.1 or to provide a notice to the designated lien agent pursuant to this section.
For purposes of this subsection, "custom contractor" means a contractor duly licensed as a general contractor pursuant to Article 1 of Chapter 87 of the General Statutes who has contracted with an owner who is not an affiliate, relative, or insider of the contractor to build a single-family residence on the owner's property to be occupied by the owner as a residence. A custom contractor shall be deemed to have met the requirement of notice under subsections (l) and (m) of this section on the date of the lien agent's receipt of notice of its designation as lien agent delivered to it by the custom contractor in accordance with this section if, at the time of the lien agent's receipt of the notice, all of the following conditions are met:
1. The owner has not previously designated a lien agent for the improvements to which the notice of designation of lien agent relates.
2. The custom contractor is authorized to designate the lien agent on behalf of the owner under the written contract between the owner and custom contractor.
3. In addition to the information required to be included pursuant to G.S. 44A-11.1(a), the notice of designation of lien agent contains the following information:
  1. The custom contractor's name, mailing address, telephone number, fax number (if available), and electronic mailing address (if available).
  2. The name of the owner with whom the custom contractor has contracted to improve the real property identified in the notice.
When a lien agent is not identified in a contract for improvements to real property subject to G.S. 44A-11.1 entered into between an owner and a design professional, the design professional shall be deemed to have met the requirement of notice under subsections (l) and (m) of this section on the date of the lien agent's receipt of the owner's designation of the lien agent. The owner shall provide written notice to the lien agent containing the information pertaining to the design professional required in a notice to lien agent pursuant to subdivisions (1) through (3) of subsection (i) of this section, by any method of delivery authorized in subsection (f) of this section. The lien agent shall include the design professional's name and address in its response to any persons requesting information relating to persons who have given notice to the lien agent pursuant to this section. For purposes of this subsection, the term "design professional" means any architects, engineers, land surveyors, and landscape architects registered under Chapter 83A, 89A, or 89C of the General Statutes.
The form of the notice to be given under this section shall be legible, shall include the following information unless designated as "if available," and shall be substantially as follows:
1. Potential lien claimant's name, mailing address, telephone number, fax number (if available), and electronic mailing address (if available): (2) Name of the party with whom the potential lien claimant has contracted to improve the real property described below: (3) A description of the real property sufficient to identify the real property, such as the name of the project, if applicable, the physical address as shown on the building permit or notice received from the owner: (4) I give notice of my right subsequently to pursue a claim of lien for improvements to the real property described in this notice. Dated: ________________________ ______________________________ Potential Lien Claimant
The service of the Notice to Lien Agent does not satisfy the service or filing requirements applicable to a Notice of Subcontract under Part 2 of Article 2 of this Chapter, a Notice of Claim of Lien upon Funds under Part 2 of Article 2 of this Chapter, or a Claim of Lien on Real Property under Part 1 or Part 2 of Article 2 of this Chapter. A Notice to Lien Agent shall not be combined with or make reference to a Notice of Subcontract or Notice of Claim of Lien upon Funds as described in this subsection.
The notice to lien agent shall not be filed with the clerk of superior court. An inaccuracy in the description of the improved real property provided in the notice does not bar a person from claiming a lien under this Article or otherwise perfecting or enforcing a claim of lien as provided in this Article, if the improved real property can otherwise reasonably be identified from the information contained in the notice.
Except as otherwise provided in this section, for any improvement to real property subject to G.S. 44A-11.1, a potential lien claimant may perfect a claim of lien on real property only if at least one of the following conditions is met:
1. The lien agent identified in accordance with this section has received a Notice to Lien Agent from the potential lien claimant no later than 15 days after the first furnishing of labor or materials by the potential lien claimant.
2. Any of the following conditions is met:
  1. The lien agent identified in accordance with this section has received a Notice to Lien Agent from the potential lien claimant prior to the date of recordation of a conveyance of the property interest in the real property to a bona fide purchaser for value protected under G.S. 47-18 who is not an affiliate, relative, or insider of the owner.
  2. The potential lien claimant has perfected its claim of lien on real property pursuant to G.S. 44A-11 prior to the recordation of a conveyance of the property interest in the real property to a bona fide purchaser for value protected under G.S. 47-18 who is not an affiliate, relative, or insider of the owner.
Except as otherwise provided in this section, for any improvement to real property subject to G.S. 44A-11.1, the claim of lien on real property of a potential lien claimant that is not perfected pursuant to G.S. 44A-11 prior to the recordation of any mortgage or deed of trust for the benefit of one who is not an affiliate, relative, or insider of the owner is subordinate to the previously recorded mortgage or deed of trust unless at least one of the following conditions is met:
1. The lien agent identified in accordance with this section has received a Notice to Lien Agent from the potential lien claimant no later than 15 days after the first furnishing of labor or materials by the potential lien claimant.
2. The lien agent identified in accordance with this section has received a Notice to Lien Agent from the potential lien claimant prior to the date of recordation of the mortgage or deed of trust.
For any improvement to real property subject to G.S. 44A-11.1, a potential lien claimant is not required to comply with this section if the lien agent contact information is neither contained in the building permit or attachment thereto or sign posted on the improved property pursuant to subsection (d) or (e) of this section at the time when the potential lien claimant was furnishing labor, materials, rental equipment, or professional design or surveying services at the site of the improvements, nor timely provided by the owner in response to a written request by the potential lien claimant made pursuant to subsection (b) of this section. The lien rights of a potential lien claimant who is given erroneous information by the owner regarding the identity of the lien agent are not extinguished under subsection (l) of this section nor subordinated under subsection (m) of this section.
Except as provided in subsections (l) and (m) of this section, nothing contained in this section affects a claim of lien upon funds pursuant to G.S. 44A-18.
A potential lien claimant may provide the notice to lien agent required under this section regardless of whether the improvements for which the potential lien claimant is responsible are contracted, started, in process, or completed at the time of submitting the notice.
For any improvement to real property subject to G.S. 44A-11.1, a potential lien claimant may cancel a Notice to Lien Agent by utilizing the Internet Web site approved for such use by the designated lien agent. For any improvement to real property subject to G.S. 44A-11.1 comprising one- or two-family dwellings, a potential lien claimant shall cancel a Notice to Lien Agent by utilizing the Internet Web site approved for such use by the designated lien agent within a reasonable time after the potential lien claimant has confirmed its receipt of final payment for the improvement to which the Notice to Lien Agent relates.
A Notice to Lien Agent not otherwise cancelled or renewed pursuant to this section expires and is discharged five years from its date of delivery to the lien agent.
A Notice to Lien Agent may be renewed prior to its cancellation or automatic expiration for one five-year period by utilizing the Internet Web site approved for such use by the designated lien agent. Such renewal shall extend the date of expiration by five years.
If a Notice to Lien Agent is timely renewed prior to cancellation or expiration pursuant to this section, the renewal shall maintain and relate back to the original delivery date of the Notice to Lien Agent.
Any protections provided to a potential lien claimant under this section as the result of its delivery of a Notice to Lien Agent shall terminate upon the cancellation or automatic expiration of that Notice to Lien Agent pursuant to this section and shall not thereafter be revived or renewed by subsequent delivery of a Notice to Lien Agent by that potential lien claimant.
Cancellation or expiration of a Notice to Lien Agent pursuant to this section has no effect upon the validity of a previously filed claim of lien or upon the priority of lien rights.

As used in this subsection, "delivery receipt" includes an electronic or facsimile confirmation. A return receipt or other receipt showing delivery of the notice to the addressee or written evidence that the notice was delivered by the postal service or other carrier to but not accepted by the addressee is prima facie evidence of receipt.

After receiving a notice of its designation from a custom contractor pursuant to this subsection, the designated lien agent shall include the custom contractor's name and contact information in responding to any request for information pursuant to G.S. 58-26-45(b)(7).

NOTICE TO LIEN AGENT

As used in this subdivision, the terms "affiliate," "relative," and "insider" have the meanings as set forth in G.S. 39-23.1.

History

(2012-158, s. 2; 2013-16, s. 2; 2013-117, s. 2; 2014-115, s. 35(b); 2017-168, s. 2; 2018-142, s. 8(a).)

Editor's Note. - Subsections (h) through (p) were enacted as subsections (g1) through (o) by Session Laws 2012-158, s. 2. The subsections were relettered at the direction of the Revisor of Statutes.

Subsections (b1) through (p) were enacted or redesignated as subsections (c) through (q) by Session Laws 2013-16, s. 2. The subsections were relettered at the direction of the Revisor of Statutes.

Session Laws 2018-142, s. 8(b), provides "The amendments to G.S. 44A-11.2(v) in subsection (a) of this section become effective October 1, 2018. The remainder of this section is effective when it becomes law."

Effect of Amendments. - Session Laws 2013-16, s. 2, rewrote the section. For effective date and applicability, see editor's note.

Session Laws 2013-117, s. 2, added "materials, rental equipment, or professional design or surveying services" in the first sentence of present subsection (c); in present subdivision (f)(7), added "or" following "G.S. 44A-11.1" and deleted "or to deliver a copy of a notice of claim of lien upon funds to the designated lien agent pursuant to G.S. 44A-23(a1)(3) or G.S. 44A-23(b)(5)c" at the end; and rewrote present subsection (g). For effective date and applicability, see editor's note.

Session Laws 2014-115, s. 35(b), effective August 11, 2014, inserted "shall be legible, shall include the following information unless designated as 'if available,' and" in the introductory paragraph of subsection (i); and in subsection (j), in the first sentence, inserted "a Notice of Subcontract under Part 2 of Article 2 of this Chapter," made a minor punctuation change, and added the second sentence.

Session Laws 2017-168, s. 2, effective October 1, 2018, added subsections (q) through (v).

Session Laws 2018-142, s. 8(a), effective December 15, 2018, substituted "means" for "shall mean" in subsections (a) and (h); substituted "is" for "shall be" in subsections (c), (f), and (m); substituted "shall" for "will" in subsections (g) and (h); in subsection (b1), substituted "has" for "shall have" preceding "no obligation"; in subsection (f), substituted "the" for "such" following "evidence that"; in subsection (k), substituted "does" for "shall" following "in the notice"; in subdivision (l)(2), deleted "shall" preceding "have the meanings"; in subsection (n), substituted "is not" for "shall not be" preceding "required to comply", and substituted "are not" for "will not be" following "lien agent"; in subsection (o), substituted "affects" for "shall affect" preceding "a claim of lien"; and in subsection (v), substituted "effect" for "affect [effect]" preceding "upon the validity." For effective date see editor's note.

§ 44A-12. Filing claim of lien on real property.

Place of Filing. - All claims of lien on real property must be filed in the office of the clerk of superior court in each county where the real property subject to the claim of lien on real property is located. The clerk of superior court shall note the claim of lien on real property on the judgment docket and index the same under the name of the record owner of the real property at the time the claim of lien on real property is filed. An additional copy of the claim of lien on real property may also be filed with any receiver, referee in bankruptcy or assignee for benefit of creditors who obtains legal authority over the real property.
Time of Filing. - Claims of lien on real property may be filed at any time after the maturity of the obligation secured thereby but not later than 120 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien.
Contents of Claim of Lien on Real Property to Be Filed. - All claims of lien on real property must be filed using a form substantially as follows:
1. Name and address of the person claiming the claim of lien on real property:
2. Name and address of the record owner of the real property claimed to be subject to the claim of lien on real property at the time the claim of lien on real property is filed and, if the claim of lien on real property is being asserted pursuant to G.S. 44A-23, the name of the contractor through which subrogation is being asserted:
3. Description of the real property upon which the claim of lien on real property is claimed: (Street address, tax lot and block number, reference to recorded instrument, or any other description of real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.)
4. Name and address of the person with whom the claimant contracted for the furnishing of labor or materials:
5. Date upon which labor or materials were first furnished upon said property by the claimant:
6. Date upon which labor or materials were last furnished upon said property by the claimant:
7. General description of the labor performed or materials furnished and the amount claimed therefor:
No Amendment of Claim of Lien on Real Property. - A claim of lien on real property may not be amended. A claim of lien on real property may be cancelled by a claimant or the claimant's authorized agent or attorney and a new claim of lien on real property substituted therefor within the time herein provided for original filing.
Notice of Assignment of Claim of Lien on Real Property. - When a claim of lien on real property has been filed, it may be assigned of record by the lien claimant in a writing filed with the clerk of superior court who shall note the assignment in the margin of the judgment docket containing the claim of lien on real property. Thereafter the assignee becomes the lien claimant of record.
Waiver of Right to File, Serve, or Claim Liens as Consideration for Contract Against Public Policy. - An agreement to waive the right to file a claim of lien on real property granted under this Part, or an agreement to waive the right to serve a notice of claim of lien upon funds granted under Part 2 of this Article, which agreement is in anticipation of and in consideration for the awarding of any contract, either expressed or implied, for the making of an improvement upon real property under this Article is against public policy and is unenforceable. This section does not prohibit subordination or release of a lien granted under this Part or Part 2 of this Article.

CLAIM OF LIEN ON REAL PROPERTY

I hereby certify that I have served the parties listed in (2) above in accordance with the requirements of G.S. 44A-11.

_____________________________________________________________________

Lien Claimant

Filed this ________ day of ________, ________

_____________________________________________________________________

Clerk of Superior Court

A general description of the labor performed or materials furnished is sufficient. It is not necessary for lien claimant to file an itemized list of materials or a detailed statement of labor performed.

History

(1969, c. 1112, s. 1; 1977, c. 369; 1983, c. 888; 1999-456, s. 59; 2005-229, s. 1; 2012-175, s. 3.)

Cross References. - As to filing a false lien or encumbrance, see G.S. 14-118.6.

Effect of Amendments. - Session Laws 2012-175, s. 3, effective January 1, 2013, in the form in subsection (c), added "and, if the claim of lien on real property is being asserted pursuant to G.S. 44A-23, the name of the contractor through which subrogation is being asserted" at the end of item (2) and added the last paragraph. For applicability, see editor's note.

Legal Periodicals. - For article, "Transferring North Carolina Real Estate Part I: How the Present System Functions," see 49 N.C.L. Rev. 418 (1971).

For comment, "Offer to Purchase and Contract: Buyer Beware," see 8 Campbell L. Rev. 473 (1986).

For article, "North Carolina's Real Estate Recording Laws: The Ghost of 1885," see 28 N.C. Cent. L.J. 199 (2006).

CASE NOTES

A lien is lost if the steps required to perfect it are not taken in the same manner and within the time prescribed by law. Strickland v. General Bldg. & Masonry Contractors, 22 N.C. App. 729, 207 S.E.2d 399 (1974).

Plaintiff was not entitled to enforce by means of its second lien an obligation which was asserted but not enforced in its first lien where plaintiff's second claim of lien contained incorrect statements concerning the date of first furnishings, and the alleged amount owed; thus the claim was defective. Plaintiff also failed to cancel this second lien and substitute a new claim of lien containing the correct information within the prescribed time. Gaston Grading & Landscaping v. Young, 116 N.C. App. 719, 449 S.E.2d 475 (1994).

Filing Is Required. - Although a second tier subcontractor must notice its claim of lien using a format substantially similar to that provided in G.S. 44A-19, perfection of this lien is not achieved merely upon proper notice; the claim of lien must also be filed pursuant to this section before it is considered perfected. Cameron & Barkley Co. v. American Ins. Co., 112 N.C. App. 36, 434 S.E.2d 632 (1993).

Date in Claim of Lien Is Binding. - Barring an obvious error, easily discernible to the title examiner, the plaintiff is bound by the date stated in his claim of lien. Beach & Adams Bldrs., Inv. v. Northwestern Bank, 28 N.C. App. 80, 220 S.E.2d 414 (1975).

The plaintiff was not entitled to amend or change the date of last furnishing stated in his claim of lien, where such date, on its face, was not an obvious typographical error, and as the claim of lien was filed more than 120 days after the last date of furnishing, it was void and subject to cancellation. Brown v. Middleton, 86 N.C. App. 63, 356 S.E.2d 386 (1987).

Contents. - A claim of lien need only identify the owner, the claimant, and the party with which the claimant contracted. Thus, while plaintiff's claim of lien met the requirements of this section, the claim of lien did not meet the requirements of G.S. 44A-19, because the claim of lien did not name defendant or assert rights available to plaintiff via a notice of claim of lien. Universal Mechanical, Inc. v. Hunt, 114 N.C. App. 484, 442 S.E.2d 130 (1994).

Description contained in a claim of lien filed by a supplier of labor and materials for installation of a paper machine and additional work substantially complied with G.S. 44A-12(c)(6) because, although the description referred only to installation of a paper machine, the reference was sufficient to put parties on notice regarding the project that included the installation of a paper machine and to provide notice as to the other work provided by the supplier in the course of that project. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Description contained in a claim of lien filed by a supplier of stainless steel piping, tubing and fittings, valves, controls and process equipment substantially complied with G.S. 44A-12(c)(6) because, although the supplier erroneously described that the materials were to be used in the plumbing/sewer/water system of the customer's plant, the description was not misleading and was sufficient to put an interested party on notice regarding the materials supplied which were part of a piping system located within the plant. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Materialman's filings were sufficient to protect its rights under both parts of Article 2 of Chapter 44A of the General Statutes, as they contained all of the information required by G.S. 44A-12 and G.S.44A-19, and enough information to allow a title searcher to ascertain which entities were potential claimants and how each was connected to the real estate. Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

Because plaintiff contracted with defendant's agent, the agent's contracting with plaintiff was the act of defendant, and thus the claim of lien properly listed defendant. Young & McQueen Grading Co. v. Mar-Comm & Assocs., 221 N.C. App. 178, 728 S.E.2d 1 (2012).

A claim of lien is not fatally defective because of an obvious scrivener's error in stating the date of first furnishing it. Canady v. Creech, 288 N.C. 354, 218 S.E.2d 383 (1975).

Provision of contract between debtor and contractor in which the contractor warrants that title to all work, materials and equipment is free and clear of all liens, claims, security interest or encumbrances if construed as a complete waiver of statutory lien rights, was invalid and unenforceable under North Carolina law. Southeastern Sav. & Loan Ass'n v. Rentenbach Constructors, Inc., 114 Bankr. 441 (E.D.N.C. 1989), aff'd per curiam, 907 F.2d 1139 (4th Cir. 1990).

Claim of Materialman, etc., Need Not State Date of Last Furnishing. - Although this section clearly requires that a lien be filed within 120 days after the last furnishing of labor or materials, there is no requirement that a mechanic, laborer, or materialman state in his claim of lien the date of the last furnishing. Strickland v. General Bldg. & Masonry Contractors, 22 N.C. App. 729, 207 S.E.2d 399 (1974).

Last Day of Work. - Supplier of materials to a Chapter 11 debtor on open account did not file a timely notice of claim of lien because the notice was filed outside the 120 days allowed by G.S. 44A-12; the removal of trailers containing the debtor's supplies was insufficient to constitute last work for purposes of G.S. 44A-12 because the removal was not required under any aspect of the contractual arrangement between the debtor and the supplier, and the removal was not done in good faith. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Notice of Claim of Lien. - A claim of lien may not serve as a notice of claim of lien because a notice of claim of lien must identify all the parties in the "contractual chain" between the claimant and the owner. Universal Mechanical, Inc. v. Hunt, 114 N.C. App. 484, 442 S.E.2d 130 (1994).

Timely Notice of Claim of Lien. - Suppliers of materials to a Chapter 11 debtor on open account timely filed notices of claim of lien because the notices were filed within the 120 days allowed by G.S. 44A-12. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Plaintiff's claim of lien was filed well within the 120-day period under G.S. 44A-12(b) where: (1) plaintiff worked for a developer under a contract dated 10 August 2005 until 24 February 2010; (2) plaintiff's work often spanned months or even years in a given development, sometimes with long gaps between service; (3) the services were provided under a single seamless contract; (4) the last work performed by plaintiff was made based on a specific request on behalf of the developer; and (5) defendants' claim that the work was performed under a separate contract was not supported. Ramey Kemp & Assocs. v. Richmond Hills Residential Partners, LLC, 225 N.C. App. 397, 737 S.E.2d 420, aff'd, 367 N.C. 118, 748 S.E.2d 143, 2013 N.C. LEXIS 1020 (2013).

Lien Held Void. - Where plaintiff, in claim of lien, stated that materials were last furnished upon the property on March 28, 1973, which date was more than 120 days prior to July 27, 1973, when the claim was filed, the lien itself was void. Strickland v. General Bldg. & Masonry Contractors, 22 N.C. App. 729, 207 S.E.2d 399 (1974).

Applied in Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978); Wolfe v. Hewes, 41 N.C. App. 88, 254 S.E.2d 204 (1979); RDC, Inc. v. Brookleigh Bldrs., Inc., 309 N.C. 182, 305 S.E.2d 722 (1983); Mauney v. Morris, 73 N.C. App. 589, 327 S.E.2d 248 (1985); Lynch v. Price Homes, Inc., 156 N.C. App. 83, 575 S.E.2d 543 (2003).

Cited in J.F. Wilkerson Contracting Co. v. Rowland, 29 N.C. App. 722, 225 S.E.2d 840 (1976); Ridge Community Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977); Ridge Community Investors, Inc. v. Berry, 32 N.C. App. 642, 234 S.E.2d 6 (1977); Miller v. Lemon Tree Inn of Roanoke Rapids, Inc., 32 N.C. App. 524, 233 S.E.2d 69 (1977); RDC, Inc. v. Brookleigh Bldrs., Inc., 60 N.C. App. 375, 299 S.E.2d 448 (1983); Trustees of Garden of Prayer Baptist Church v. Geraldco Bldrs., Inc., 78 N.C. App. 108, 336 S.E.2d 694 (1985); Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418 (1987); Mill-Power Supply Co. v. CVM Assocs., 85 N.C. App. 455, 355 S.E.2d 245 (1987); Blalock Elec. Co. v. Grassy Creek Dev. Corp., 99 N.C. App. 440, 393 S.E.2d 354 (1990); Dalton Moran Shook, Inc. v. Pitt Dev. Co., 113 N.C. App. 707, 440 S.E.2d 585 (1994); Metropolitan Life Ins. Co. v. Rowell, 115 N.C. App. 152, 444 S.E.2d 231, cert. denied, 338 N.C. 518, 452 S.E.2d 813 (1994); Stewart Enters. v. MRM Constr. Co., 116 N.C. App. 604, 449 S.E.2d 20 (1994); Vance Constr. Co. v. Duane White Land Corp., 120 N.C. App. 401, 462 S.E.2d 814 (1995); Johnson Neurological Clinic, Inc. v. Kirkman, 121 N.C. App. 326, 465 S.E.2d 32 (1996); Paving Equip. of Carolinas, Inc. v. Waters, 122 N.C. App. 502, 470 S.E.2d 546 (1996); Park East Sales, LLC v. Clark-Langley, Inc., 186 N.C. App. 198, 651 S.E.2d 235 (2007), review denied, 362 N.C. 360, 661 S.E.2d 736 (2008), review dismissed, as moot, 362 N.C. 360, 661 S.E.2d 737 (2008); Schafer v. Carolina Kitchen & Bath, Inc. (In re Orndorff Constr., Inc.), 394 B.R. 372 (Bankr. M.D.N.C. 2008); Voller Realty & Constr., Ltd. v. D.V. Holdings, Inc., - N.C. App. - , - S.E.2d - (Sept. 1, 2009); Ellis-Walker Builders, Inc. v. Don Reynolds Props., LLC, 205 N.C. App. 306, 695 S.E.2d 832 (2010); Lawyers Title Ins. Corp. v. Zogreo, 208 N.C. App. 88, 702 S.E.2d 222 (2010), review denied 365 N.C. 213,710 S.E.2d 37, 2011 N.C. LEXIS 504 (N.C. 2011); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

§ 44A-12.1. No docketing of lien unless authorized by statute.

The clerk of superior court shall not index, docket, or record a claim of lien on real property or other document purporting to claim or assert a lien on real property in such a way as to affect the title to any real property unless the document:
1. Is offered for filing under this Article or another statute that provides for indexing and docketing of claims of lien on real property; and
2. Appears on its face to contain all of the information required by the statute under which it is offered for filing.
The clerk may accept, for filing only, any document that does not meet the criteria established for indexing, docketing, or recording under subsection (a) of this section. If the clerk does accept this document, the clerk shall inform the person offering the document that it will not be indexed, docketed, or recorded in any way as to affect the title to any real property.
Any person who causes or attempts to cause a claim of lien on real property or other document to be filed, knowing that the filing is not authorized by statute, or with the intent that the filing is made for an improper purpose such as to hinder, harass, or otherwise wrongfully interfere with any person, shall be guilty of a Class I felony.
A claim of lien on real property, a claim of lien on real property with a notice of claim of lien upon funds attached thereto, or other document purporting to claim or assert a lien on real property that is filed by an attorney licensed in the State of North Carolina and that otherwise complies with subsection (a) of this section shall not be rejected by the clerk of superior court for indexing, docketing, recording, or filing.

History

(2001-495, s. 1; 2005-229, s. 1; 2012-150, s. 6.1.)

Effect of Amendments. - Session Laws 2012-150, s. 6.1, substituted "Class I felony" for "Class 1 misdemeanor" at the end of subsection (c). For applicability, see editor's note.

§ 44A-13. Action to enforce claim of lien on real property.

Where and When Action Commenced. - An action to enforce a claim of lien on real property may be commenced in any county where venue is otherwise proper. No such action may be commenced later than 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property. If the title to the real property against which the claim of lien on real property is asserted is by law vested in a receiver or is subject to the control of the bankruptcy court, the claim of lien on real property shall be enforced in accordance with the orders of the court having jurisdiction over said real property. The filing of a proof of claim with a receiver or in bankruptcy and the filing of a notice of lis pendens in each county where the real property subject to the claim of lien on real property is located within the time required by this section satisfies the requirement for the commencement of a civil action.
Judgment. - A judgment enforcing a lien under this Article may be entered for the principal amount shown to be due, not exceeding the principal amount stated in the claim of lien enforced thereby. The judgment shall direct a sale of the real property subject to the lien thereby enforced.
Notice of Action. - In order for the sale under G.S. 44A-14(a) to pass all title and interest of the owner to the purchaser good against all claims or interests recorded, filed or arising after the first furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property, a notice of lis pendens shall be filed in each county in which the real property subject to the claim of lien on real property is located except the county in which the action is commenced. The notice of lis pendens shall be filed within the time provided in subsection (a) of this section for the commencement of the action by the lien claimant. If neither an action nor a notice of lis pendens is filed in accordance with this section, the judgment entered in the action enforcing the claim of lien on real property shall not direct a sale of the real property subject to the claim of lien on real property enforced thereby nor be entitled to any priority under the provisions of G.S. 44A-14(a), but shall be entitled only to those priorities accorded by law to money judgments.
Former Owner Not a Necessary Party to Action. - In an action brought under this section, a former owner of the improved property at the time the lien arose, who holds no ownership interest in the property at the time the action is commenced and against whom the plaintiff seeks no relief, is not a necessary party to the action.
Subsequent Purchaser and Lender Not Necessary or Proper Parties to Action Filed After Claim of Lien Is Discharged. - If a claim of lien on real property filed under this Article is discharged pursuant to G.S. 44A-16(a)(5) or G.S. 44A-16(a)(6) prior to the filing of an action to enforce the claim of lien under this section, then neither a subsequent purchaser of the real property upon which the lien is claimed nor the subsequent purchaser's lender shall be a necessary or proper party to the action. However, nothing herein precludes the lien claimant from asserting any claims against any party that are separate and distinct from enforcement of the lien.
Subsequent Purchaser and Lender No Longer Necessary or Proper Parties Upon Discharge of Claim of Lien After Action Is Filed. - If an action to enforce a lien under this section is commenced before the claim of lien is discharged pursuant to G.S. 44A-16(a)(5) or G.S. 44A-16(a)(6), a subsequent purchaser of the real property upon which the lien is claimed and the subsequent purchaser's lender shall cease to be a necessary or proper party to the action, and any claim for lien enforcement asserted against the subsequent purchaser of the real property upon which the lien is claimed or the subsequent purchaser's lender shall be dismissed upon motion of any party upon a showing that the claim of lien was discharged pursuant to G.S. 44A-16. However, nothing herein precludes the lien claimant from continuing to pursue any claims against any party that are separate and distinct from enforcement of the lien.
Bonds Prohibited From Requiring Subsequent Purchaser or Lender to Remain Parties to Action After Discharge of Claim of Lien. - The fact that a subsequent purchaser of the real property upon which the lien is claimed or the subsequent purchaser's lender is not a party to an action to enforce a claim of lien on real property subsequent to discharge of that claim of lien by the contractor under G.S. 44A-16 shall not invalidate the claim of lien under this Chapter, nor shall it invalidate any bond filed under G.S. 44A-16 to discharge the claim of lien. Further, a bond filed under G.S. 44A-16(a)(6) shall not require that a subsequent purchaser of the real property upon which the lien is claimed or the subsequent purchaser's lender remain a party to an action to enforce a claim of lien after the claim of lien has been discharged pursuant to G.S. 44A-16.
Definition of "Subsequent Purchaser." -. For purposes of this section, a "subsequent purchaser" means a party whose record interest is protected under G.S. 47-18, including any beneficiary of a deed of trust or mortgagee of that party, the priority of whose interest is protected under the provisions of G.S. 47-20, and who was not the owner of the real property at the time of the improvements giving rise to the lien claim as defined in G.S. 44A-7(6).

History

(1969, c. 1112, s. 1; 1977, c. 883; 2005-229, s. 1; 2012-175, s. 4.)

Effect of Amendments. - Session Laws 2012-175, s. 4, effective July 12, 2012, added subsections (d) through (h).

Legal Periodicals. - For article, "Mechanics' Liens for the Improvement of Real Property: Recent Developments in Perfection, Enforcement and Priority," see 12 Wake Forest L. Rev. 283 (1976).

For survey of 1977 law on civil procedure, see 56 N.C.L. Rev. 874 (1978).

For note, "Judicial Activism Constructs Lenders' Nightmare - Embree Construction Group, Inc. v. Rafcor, Inc. and United Carolina Bank," see 15 Campbell L. Rev. 77 (1992).

CASE NOTES

Specific Statute Controls General Section Establishing One Form of Action. - A particular statute controls a general one with reference to the same subject matter. Subsection (a) of this section specifically directs that a lien against property vested in a trustee in bankruptcy "shall be enforced" in accordance with the orders of the bankruptcy court; this provision controls over G.S. 1A-1, Rule 2, which is a general rule establishing one form of action. Therefore, an action under G.S. 1A-1, Rule 2 was not required to enforce lien. RDC, Inc. v. Brookleigh Bldrs., Inc., 309 N.C. 182, 305 S.E.2d 722 (1983).

Plaintiff, by contractually agreeing to arbitration, did not thereby waive his right to file a lien claim and institute court action to enforce such lien, and he was entitled to enforce any award in his favor through a judgment enforcing his lien claim. Adams v. Nelsen, 67 N.C. App. 284, 312 S.E.2d 896 (1984).

The lienor under G.S. 44A-8 may proceed to enforce his lien and simultaneously bring an action to recover a personal judgment for the amount due. Lowe's of Fayetteville, Inc. v. Quigley, 46 N.C. App. 770, 266 S.E.2d 378 (1980).

Enforceable Contract has to Exist to Establish Valid Claim of Lien. - Trial court erred in granting a builder a lien on an owners' real property on the theory of quantum meruit because to establish a valid claim of lien under G.S. 44A-8, an enforceable contract had to exist between the parties; a contract implied-in-law is nothing more than a term of art used to express an equitable remedy used by the court to prevent unjust enrichment, and as quantum meruit is not a theory based upon an actual agreement, it may not establish the contractual relationship necessary to form the basis for filing a claim of lien pursuant to G.S. 44A-8. Waters Edge Builders, LLC v. Longa, 214 N.C. App. 350, 715 S.E.2d 193 (2011).

Filing of Notice of Lis Pendens. - Suppliers of materials to a Chapter 11 debtor failed to comply with G.S. 44A-13(a) and therefore had their liens discharged pursuant to G.S. 44A-16(3) (now G.S. 44A-16(a)(3)) because they failed to file a notice of lis pendens in the county where the debtor's property was located; the fact that the debtor's real property was sold before the time for filing a notice of lis pendens expired did not obviate the need for filing a notice of lis pendens. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Filing of Lien Claim in Bankruptcy Proceedings Commences Action for Enforcement. - The filing by statutory lienor of a proof of claim in bankruptcy proceedings of the owner of the real property constituted the commencement of an action for the enforcement of its lien within the meaning of subsection (a) of this section. RDC, Inc. v. Brookleigh Bldrs., Inc., 309 N.C. 182, 305 S.E.2d 722 (1983).

Bankruptcy. - Materialman's lien on property owned by a Chapter 7 debtor lapsed because the lien holder did not give the debtor the notice required by 11 U.S.C.S. § 362(b)(3) and 11 U.S.C.S. § 546(b)(2) within 180 days after the holder last performed work or delivered materials to the property, as required by G.S. 44A-13(a). Schafer v. Carolina Kitchen & Bath, Inc. (In re Orndorff Constr., Inc.), 394 B.R. 372 (Bankr. M.D.N.C. 2008).

Bankruptcy Proceeding Does Not Toll 180-Day Period. - The 180-day period is not a statute of limitations, but an element of the cause of action; it is not tolled by a bankruptcy proceeding. RDC, Inc. v. Brookleigh Bldrs., Inc., 309 N.C. 182, 305 S.E.2d 722 (1983).

11 U.S.C.S. § 108(c) did not toll the 180-day time period for filing an action to enforce a materialmen's lien because the 180-day period provided by G.S. 44A-13(a) was not a statute of limitations, but rather an element of the cause of action. Schafer v. Carolina Kitchen & Bath, Inc. (In re Orndorff Constr., Inc.), 394 B.R. 372 (Bankr. M.D.N.C. 2008).

Lien Rights Not Enforceable in Bankruptcy Proceeding. - Although a landscape company's claim of lien filed against a debtor arose out of work furnished prior to a general contractor's start date, once the landscape company made the strategic decision to execute on its state court default judgment against the debtor rather than pursue its lien position, then under G.S. 44A-13, its lien rights could no longer be enforced. Lee F. Cowper, Inc. v. Watermark Marina of Wilmington, LLC (In re Watermark Marina of Wilmington, LLC), - Bankr. - (Bankr. E.D.N.C. Nov. 24, 2009).

Time Limitation Inapplicable Where Lien Cancelled. - Subsection (a) of this section, which only limits the time for suing to enforce a lien on real property, had no application where there was no lien on real estate that contractor could sue to enforce, as the lien that he might have sued to enforce had been cancelled and discharged both by the terms of agreement between himself and owner and the provisions of G.S. 44A-16(5) (now G.S. 44A-16(a)(5)). In re Woodie, 85 N.C. App. 533, 355 S.E.2d 163 (1987).

Amended Claim Requires Notice. - Amending a claim for a monetary award, to include a claim under this section to enforce a lien against nonparties without allowing any type of notice, does not fall within the reasonable interpretation of G.S. 1A-1, Rule 15(c). Lawyers Title Ins. Corp. v. Langdon, 91 N.C. App. 382, 371 S.E.2d 727 (1988), cert. denied, 324 N.C. 335, 378 S.E.2d 793 (1989).

Plaintiff's amended complaint did not relate back to the date of the original complaint, because the plaintiff failed to establish that the added parties received notice or should have known of the action against them within the limitation period. Stewart Enters. v. MRM Constr. Co., 116 N.C. App. 604, 449 S.E.2d 20 (1994).

The amount of the lien is limited by subsection (b) of this section to the amount stated in the claim. W.H. Dail Plumbing, Inc. v. Roger Baker & Assocs., 78 N.C. App. 664, 338 S.E.2d 135, cert. denied, 316 N.C. 731, 345 S.E.2d 398 (1986).

A judgment enforcing a lien under subsection (b) cannot exceed the amount determined to be due from the defendant to the plaintiff; thus, portion of judgment ordering attorney's fees awarded by jury to be enforced as a part of the lien was a nullity. Paving Equip. of Carolinas, Inc. v. Waters, 122 N.C. App. 502, 470 S.E.2d 546 (1996).

Contest of Amount of Lien. - Subsection (b) of this section contemplates that a defendant has the right to contest the amount of plaintiff's lien during enforcement proceedings, and not prior thereto. Frank H. Conner Co. v. Spanish Inns Charlotte, Ltd., 294 N.C. 661, 242 S.E.2d 785 (1978).

Contents of Judgment Enforcing Lien. - To enforce a materialman's lien the judgment must state the effective date of the lien and contain a general description of the property subject to the lien, so that one reading the docketed judgment will have notice that it was more than a money judgment. Miller v. Lemon Tree Inn of Roanoke Rapids, Inc., 32 N.C. App. 524, 233 S.E.2d 69 (1977).

The effect of subsection (c) is to give protection to purchasers and examiners of titles no matter where the action to enforce the lien is instituted. Ridge Community Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977).

Liens established pursuant to this Chapter are not "contractual security" within the meaning of G.S. 1A-1, Rule 55(b)(1), and a clerk or assistant clerk of court is without jurisdiction to make orders consummating foreclosure of liens established pursuant to this Chapter. Ridge Community Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977).

Dismissal of a suit on account of plaintiff's inability to establish an alleged lien was improper where the complaint, in addition to averring the lien and praying for its foreclosure, stated a good cause of action for labor performed or materials supplied. Lowe's of Fayetteville, Inc. v. Quigley, 46 N.C. App. 770, 266 S.E.2d 378 (1980).

An action to enforce a lien need not be filed in the county where the land is situated. Ridge Community Investors, Inc. v. Berry, 32 N.C. App. 642, 234 S.E.2d 6, rev'd on other grounds, 293 N.C. 688, 239 S.E.2d 566 (1977).

Better Practice Is to File Where Claim of Lien Is Filed. - It is the better practice to file the action to enforce a lien in the county in which the claim of lien is filed. Ridge Community Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977).

Language in Subsection (a) Is Not a Jurisdictional Requirement. - The language contained in subsection (a) stating that the action to enforce a lien "may be instituted in any county in which the lien is filed" is not a jurisdictional requirement. Ridge Community Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977).

The 1977 amendment adding subsection (c) is a strong indication that it was not the intent of the legislature to enact a jurisdictional requisite when it used language in subsection (a) to the effect that such action "may be instituted in any county in which the lien is filed." Ridge Community Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977).

Date in Claim of Lien Is Binding. - Barring an obvious error, easily discernible to the title examiner, the plaintiff is bound by the date stated in his claim of lien. Beach & Adams Bldrs., Inc. v. Northwestern Bank, 28 N.C. App. 80, 220 S.E.2d 414 (1975).

Lien Not Barred by Failure of Court to Include Beginning and Ending Dates of Work in Judgment. - Where a plaintiff pursued his recovery by filing both a claim of lien and action, and had at all times maintained its request for a lien in its complaint and appeal, the judgment relating back and incorporating the complaint and claim of lien included all the information required, except the effective date of the lien, then plaintiff should not have been barred from the benefits of a remedy by the trial court's failure to include in its judgment the beginning and ending dates of the work. Jennings Glass Co. v. Brummer, 88 N.C. App. 44, 362 S.E.2d 578 (1987).

While the date of last furnishing is not statutorily required, it cannot be deemed mere "surplusage" when supplied, even voluntarily. To do so would do injury to the purpose of the lien statute, in that title examiners would, barring an obvious error, reasonably rely on the date actually furnished. Beach & Adams Bldrs., Inc. v. Northwestern Bank, 28 N.C. App. 80, 220 S.E.2d 414 (1975).

Claim of lien is not fatally defective because of an obvious scrivener's error in stating the date of first furnishing it. Canady v. Creech, 288 N.C. 354, 218 S.E.2d 383 (1975).

Lien Claimant Not Entitled to Foreclosure Sale Surplus Where He Failed to Timely Commence An Enforcement Action. - Although the subsequent buyer of the property at a foreclosure sale had perfected his lien, he was not entitled to any of the surplus funds from the foreclosure sale where he had failed to timely commence an action to enforce his lien. Lynch v. Price Homes, Inc., 156 N.C. App. 83, 575 S.E.2d 543 (2003).

The judgment in defendant's favor properly ordered a sale of the property to enforce defendant's statutory lien, and the lien related back to the date of the first furnishing listed in the claim of lien and judgment even though the court failed to include the beginning date of the work. Metropolitan Life Ins. Co. v. Rowell, 113 N.C. App. 779, 440 S.E.2d 283, rev'd on other grounds, 115 N.C. App. 152, 444 S.E.2d 231 (1994), cert. denied, 338 N.C. 518, 452 S.E.2d 813 (1994).

Prejudgment Interest. - Prejudgment interest is not authorized when only enforcing a statutory lien, absent a contract between the parties. W.H. Dail Plumbing, Inc. v. Roger Baker & Assocs., 78 N.C. App. 664, 338 S.E.2d 135, cert. denied, 316 N.C. 731, 345 S.E.2d 398 (1986).

Recovery of Interest Under Contract. - Contract in this case permitted plaintiff to recover interest on past-due payments, and under the case law, plaintiff could recover accrued interest. Young & McQueen Grading Co. v. Mar-Comm & Assocs., 221 N.C. App. 178, 728 S.E.2d 1 (2012).

Action to Recover Money Damages and to Enforce Lien. - Action to enforce a materialmen's lien did not need to be filed in the county where the liened property was located; because the primary purpose of a contractor's suit was recovery of money damages, but also requested enforcement of a lien, venue was proper in the county where the contractor had its principal place of business, even though the liened property was located in a different county. Wellons Constr., Inc. v. Landsouth Props., LLC, 168 N.C. App. 403, 607 S.E.2d 695 (2005).

Evidence Supported Value Assessed for Materials and Services Rendered. - Given the evidence and the inexact nature of ascertaining a definite cost for the type of service a builder provided, the value as assessed by the trial court, for the materials and services rendered by the builder and accepted by the owners, was reasonable and supported by competent evidence. Waters Edge Builders, LLC v. Longa, 214 N.C. App. 350, 715 S.E.2d 193 (2011).

Applied in H & B Co. v. Hammond, 17 N.C. App. 534, 195 S.E.2d 58 (1973); Embree Constr. Group, Inc. v. Rafcor, Inc., 330 N.C. 487, 411 S.E.2d 916 (1992).

Cited in T.A. Loving Co. v. Latham, 15 N.C. App. 441, 190 S.E.2d 248 (1972); Miller v. Lemon Tree Inn of Wilmington, Inc., 39 N.C. App. 133, 249 S.E.2d 836 (1978); Mill-Power Supply Co. v. CVM Assocs., 85 N.C. App. 455, 355 S.E.2d 245 (1987); Blalock Elec. Co. v. Grassy Creek Dev. Corp., 99 N.C. App. 440, 393 S.E.2d 354 (1990); Dalton Moran Shook, Inc. v. Pitt Dev. Co., 113 N.C. App. 707, 440 S.E.2d 585 (1994); Metropolitan Life Ins. Co. v. Rowell, 115 N.C. App. 152, 444 S.E.2d 231 (1994); Piedmont Rebar, Inc. v. Sun Constr., Inc., 150 N.C. App. 573, 564 S.E.2d 281 (2002); In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009); Ellis-Walker Builders, Inc. v. Don Reynolds Props., LLC, 205 N.C. App. 306, 695 S.E.2d 832 (2010); Lawyers Title Ins. Corp. v. Zogreo, 208 N.C. App. 88, 702 S.E.2d 222 (2010), review denied 365 N.C. 213,710 S.E.2d 37, 2011 N.C. LEXIS 504 (N.C. 2011); Lake Colony Constr., Inc. v. Boyd, 212 N.C. App. 300, 711 S.E.2d 742 (2011); ACC Constr. v. SunTrust Mortg., Inc., 239 N.C. App. 252, 769 S.E.2d 200 (2015).

§ 44A-14. Sale of property in satisfaction of judgment enforcing claim of lien on real property or upon order prior to judgment; distribution of proceeds.

Execution Sale; Effect of Sale. - Except as provided in subsection (b) of this section, sales under this Article and distribution of proceeds thereof shall be made in accordance with the execution sale provisions set out in G.S. 1-339.41 through 1-339.76. The sale of real property to satisfy a claim of lien on real property granted by this Article shall pass all title and interest of the owner to the purchaser, good against all claims or interests recorded, filed or arising after the first furnishing of labor or materials at the site of the improvement by the person claiming a lien.
Sale of Property upon Order Prior to Judgment. - A resident judge of superior court in the district in which the action to enforce the claim of lien on real property is pending, a judge regularly holding the superior courts of the said district, any judge holding a session of superior court, either civil or criminal, in the said district, a special judge of superior court residing in the said district, or the chief judge of the district court in which the action to enforce the claim of lien on real property is pending, may, upon notice to all interested parties and after a hearing thereupon and upon a finding that a sale prior to judgment is necessary to prevent substantial waste, destruction, depreciation or other damage to said real property prior to the final determination of said action, order any real property against which a claim of lien on real property under this Article is asserted, sold in any manner determined by said judge to be commercially reasonable. The rights of all parties shall be transferred to the proceeds of the sale. Application for such order and further proceedings thereon may be heard in or out of session.

History

(1969, c. 1112, s. 1; 2005-229, s. 1.)

§ 44A-15. Attachment available to lien claimant.

In addition to other grounds for attachment, in all cases where the owner removes or attempts or threatens to remove an improvement from real property subject to a claim of lien on real property under this Article, without the written permission of the lien claimant or with the intent to deprive the lien claimant of his or her claim of lien on real property, the remedy of attachment of the property subject to the claim of lien on real property shall be available to the lien claimant or any other person.

History

(1969, c. 1112, s. 1; 2005-229, s. 1.)

§ 44A-16. Discharge of record claim of lien on real property.

Any claim of lien on real property filed under this Article may be discharged by any of the following methods:
1. The lien claimant of record, the claimant's agent or attorney, in the presence of the clerk of superior court may acknowledge the satisfaction of the claim of lien on real property indebtedness, whereupon the clerk of superior court shall forthwith make upon the record of such claim of lien on real property an entry of such acknowledgment of satisfaction, which shall be signed by the lien claimant of record, the claimant's agent or attorney, and witnessed by the clerk of superior court.
2. The owner may exhibit an instrument of satisfaction signed and acknowledged by the lien claimant of record which instrument states that the claim of lien on real property indebtedness has been paid or satisfied, whereupon the clerk of superior court shall cancel the claim of lien on real property by entry of satisfaction on the record of such claim of lien on real property.
3. By failure to enforce the claim of lien on real property within the time prescribed in this Article.
4. By filing in the office of the clerk of superior court the original or certified copy of a judgment or decree of a court of competent jurisdiction showing that the action by the claimant to enforce the claim of lien on real property has been dismissed or finally determined adversely to the claimant.
5. Whenever a sum equal to the amount of the claim or claims of lien on real property claimed is deposited with the clerk of court, to be applied to the payment finally determined to be due, whereupon the clerk of superior court shall cancel the claim or claims of lien on real property or claims of lien on real property of record.
6. Whenever a corporate surety bond, in a sum equal to one and one-fourth times the amount of the claim or claims of lien on real property claimed and conditioned upon the payment of the amount finally determined to be due in satisfaction of said claim or claims of lien on real property, is deposited with the clerk of court, whereupon the clerk of superior court shall cancel the claim or claims of lien on real property of record.
The clerk may release funds held or a corporate surety bond upon receipt of one of the following:
1. Written agreement of the parties.
2. A final judgment of a court of competent jurisdiction.
3. A consent order.
For improvements performed in conjunction with a development contract under G.S. 143-128.1C, a claim of lien on real property or a claim of lien on funds served on a private developer may also be discharged by the private developer and the surety on a payment bond issued under G.S. 143-128.1C(g)(1) in accordance with this subsection. The claim of lien may be discharged by the private developer and surety jointly filing with the clerk of superior court of the county where the project is located a copy of the payment bond together with an affidavit executed by the surety stating that, as of the date of the filing of the payment bond with the clerk of superior court, the amount of the penal sum of the payment bond minus any amounts paid in good faith to other claimants on the project and minus the amount of all other claims of lien on real property filed against the property improved by the project exceeds the amount claimed by the lien claim being discharged by at least one hundred twenty-five percent (125%). Notwithstanding any other contractual provision or law, where a claimant's lien claim has been discharged under this subsection, the claimant shall have no less than one year from the date of being served with the payment bond and affidavit to file suit on the payment bond.

History

(1969, c. 1112, s. 1; 1971, c. 766; 2005-229, s. 1; 2011-411, s. 3; 2013-401, s. 6.)

Editor's Note. - The preamble to Session Laws 2013-401, provides: "Whereas, the legislature recognizes that there is a public need for the design, construction, improvement, renovation, and expansion of high-performing public buildings within the State of North Carolina; and "Whereas, the public need may not be, in limited situations, wholly satisfied by existing procurement methods in which public buildings are designed, constructed, improved, renovated, or expanded; and

"Whereas, many local governmental entities request special legislative authorization to enter into public-private partnerships and use design-build contracting every legislative session; and

"Whereas, in some instances, more efficient delivery of quality design and construction can be realized when a governmental entity is authorized to utilize an integrated approach for the design and construction of a project under one contract with a single point of responsibility; and

"Whereas, the design-build integrated approach to project delivery, based upon qualifications and experience, in some instances, can yield improved collaboration among design professionals, builders, and owners throughout the entire process and deliver a quality and cost-efficient building; and

"Whereas, certain governmental entities within the State lack the financial resources required to undertake capital building construction projects that are necessary to satisfy critical public needs; and

"Whereas, partnerships with private developers may offer an effective financial mechanism for governmental entities to secure public buildings to satisfy critical public needs that cannot otherwise be met; and

"Whereas, the legislature recognizes that the general public must have confidence in governmental entities' processes for construction contracting; and

"Whereas, the legislature realizes that open competition delivers the best value for taxpayers and public owners; and

"Whereas, the legislature seeks to create transparent, fair, and equitable contracting procedures for the use of public funds in government construction contracting; and

"Whereas, the legislation proposed in this act is not intended to affect the existing statutes, regulations, or practices relevant to projects administered by the North Carolina Department of Transportation nor licensing requirements of designers or contractors; Now, therefore,"

Session Laws 2013-401, s. 9, provides: "This act becomes effective 30 days after it becomes law [the act became law on August 23, 2013] and applies to projects bid on or after that date and public private development contracts entered into on or after that date, and does not supersede any prior enacted local act of the General Assembly enacted on or before July 1, 2013.

Effect of Amendments. - Session Laws 2011-411, s. 3, effective September 15, 2011, added subsection (a) designation and added subsection (b).

Session Laws 2013-401, s. 6, added subsection (c). For effective date and applicability, see editor's note.

CASE NOTES

Subdivision (a)(6) is more for the benefit of the landowner than the lien-creditor. Gelder & Assocs. v. St. Paul Fire & Marine Ins. Co., 34 N.C. App. 731, 239 S.E.2d 604 (1977), cert. denied, 294 N.C. 441, 241 S.E.2d 843 (1978).

The primary purpose of subdivision (a)(6) of this section is to protect the landowner, not the lien claimant, who is already protected by virtue of the lien on the property. George v. Hartford Accident & Indem. Co., 330 N.C. 755, 412 S.E.2d 43 (1992).

The primary purpose of subdivision (a)(6) of this section is to provide the landowner a convenient way to unburden his property while the lien claimant's claim is litigated. George v. Hartford Accident & Indem. Co., 330 N.C. 755, 412 S.E.2d 43 (1992).

The lien-creditor has no choice under subdivision (a)(6) as to whether the lien will be cancelled. Gelder & Assocs. v. St. Paul Fire & Marine Ins. Co., 34 N.C. App. 731, 239 S.E.2d 604 (1977), cert. denied, 294 N.C. 441, 241 S.E.2d 843 (1978).

Lien Not Cancelled by Voluntary Dismissal. - In light of the requirement of subdivision (a)(4) of this section that a judgment must be filed to discharge a lien, a lien may not be cancelled by taking a voluntary dismissal without prejudice. Newberry Metal Masters Fabricators, Inc. v. Mitek Indus., Inc., 333 N.C. 250, 424 S.E.2d 383 (1993).

Three Year Limitations Period Applied to Action to Recover on Surety Bond. - Subsection (1) of G.S. 1-52, which provides for a three year statute of limitations, applied to subcontractor's action to recover on contractor's surety bond. George v. Hartford Accident & Indem. Co., 102 N.C. App. 761, 404 S.E.2d 1 (1991), modified on other grounds, 330 N.C. 755, 412 S.E.2d 43 (1992).

Defendant's Liability on Bond Did Not Accrue Until Amount Established. - Where a bond obligated defendant to "pay the full amount of the Lien Claim as established in any appropriate court proceeding," under the clear wording of the bond, the defendant's liability did not accrue until the amount was "established in any appropriate court proceeding." The amount was established in the award of the arbitrator in May, 1988 and became a final judgment August, 1988. Thus plaintiff's claim filed in February 1989 was timely. George v. Hartford Accident & Indem. Co., 102 N.C. App. 761, 404 S.E.2d 1 (1991), modified on other grounds, 330 N.C. 755, 412 S.E.2d 43 (1992).

When Limitations Period Begins to Run in Favor of Corporate Surety. - The statute of limitations begins to run in favor of a corporate surety which has filed a bond discharging a lien under subdivision (a)(6) of this section when final judgment is entered in favor of the lien claimant. George v. Hartford Accident & Indem. Co., 330 N.C. 755, 412 S.E.2d 43 (1992).

A corporate surety bond acts as a substitute for the land; the lien claimant's right to make demand upon the bond accrues at the same time that he would have been able to enforce the lien against the land: at final judgment in his favor. George v. Hartford Accident & Indem. Co., 330 N.C. 755, 412 S.E.2d 43 (1992).

Landowner Free to Sell, Mortgage, etc., Land After Action Under Subdivisions (a)(5) or (a)(6). - Under subdivision (a)(6) of this section the landowner can post a bond and free his land from the weight of the lien while the parties litigate over the amount, if any, that may finally be determined to be due. He can accomplish the same result by depositing cash with the clerk under subdivision (a)(5). He is then free to sell, mortgage or otherwise encumber the land free of the lien. Gelder & Assocs. v. St. Paul Fire & Marine Ins. Co., 34 N.C. App. 731, 239 S.E.2d 604 (1977), cert. denied, 294 N.C. 441, 241 S.E.2d 843 (1978).

Foreclosure Extinguished Liens. - Materialman's notices of claims and liens were properly discharged as the materialman did not begin enforcement proceedings until after a sublessee's interest in the properties had been extinguished by the conveyance of the properties to the private owners. Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

Failure to Comply With G.S. 44A-13(a). - Suppliers of materials to a Chapter 11 debtor failed to comply with G.S. 44A-13(a) and therefore had their liens discharged pursuant to G.S. 44A-16(3) (now G.S. 44A-16(a)(3)) because they failed to file a notice of lis pendens in the county where the debtor's property was located; the fact that the debtor's real property was sold before the time for filing a notice of lis pendens expired did not obviate the need for filing a notice of lis pendens. All Points Capital Corp. v. Laurel Hill Paper Co. (In re Laurel Hill Paper Co.), 393 B.R. 372 (Bankr. M.D.N.C. 2008), appeal dismissed, 2009 U.S. Dist. LEXIS 6875 (M.D.N.C. 2009).

Applied in Beach & Adams Bldrs., Inc. v. Northwestern Bank, 28 N.C. App. 80, 220 S.E.2d 414 (1975); Miller v. Lemon Tree Inn of Roanoke Rapids, Inc., 32 N.C. App. 524, 233 S.E.2d 69 (1977); In re Woodie, 85 N.C. App. 533, 355 S.E.2d 163 (1987).

Cited in In re Woodie, 85 N.C. App. 533, 355 S.E.2d 163 (1987); Miller v. Ensley, 88 N.C. App. 686, 365 S.E.2d 11 (1988); Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128 (1990); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

PART 2. LIENS OF MECHANICS, LABORERS, AND MATERIALMEN DEALING WITH ONE OTHER THAN OWNER.

§ 44A-17: Repealed by Session Laws 2012-175, s. 5, effective January 1, 2013.

History

(1971, c. 880, s. 1; repealed by 2012-175, s. 5, effective January 1, 2013.)

Editor's Note. - Former G.S. 44A-17 pertained to the defining of liens of mechanics, laborers, and materialmen dealing with one other than owner.

Legal Periodicals. - For survey of North Carolina construction law, see 21 Wake Forest L. Rev. 633 (1986).

§ 44A-18. Grant of lien upon funds; subrogation; perfection.

A first tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the contractor with whom the first tier subcontractor dealt and that arise out of the improvement on which the first tier subcontractor worked or furnished materials.
A second tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the first tier subcontractor with whom the second tier subcontractor dealt and that arise out of the improvement on which the second tier subcontractor worked or furnished materials. A second tier subcontractor, to the extent of the second tier subcontractor's lien provided in this subdivision, shall also be subrogated to the lien upon funds of the first tier subcontractor with whom the second tier contractor dealt provided for in subdivision (1) of this section and shall perfect it by service of the notice of claim of lien upon funds to the extent of the claim.
A third tier subcontractor who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the second tier subcontractor with whom the third tier subcontractor dealt and that arise out of the improvement on which the third tier subcontractor worked or furnished materials. A third tier subcontractor, to the extent of the third tier subcontractor's lien upon funds provided in this subdivision, shall also be subrogated to the lien upon funds of the second tier subcontractor with whom the third tier contractor dealt and to the lien upon funds of the first tier subcontractor with whom the second tier subcontractor dealt to the extent that the second tier subcontractor is subrogated thereto, and in either case shall perfect it by service of the notice of claim of lien upon funds to the extent of the claim.
Subcontractors more remote than the third tier who furnished labor, materials, or rental equipment at the site of the improvement shall have a lien upon funds that are owed to the person with whom they dealt and that arise out of the improvement on which they furnished labor, materials, or rental equipment, but such remote tier subcontractor shall not be entitled to subrogation to the rights of other persons.
The liens upon funds granted under this section shall secure amounts earned by the lien claimant as a result of having furnished labor, materials, or rental equipment at the site of the improvement under the contract to improve real property, including interest at the legal rate provided in G.S. 24-5, whether or not such amounts are due and whether or not performance or delivery is complete. In the event insufficient funds are retained to satisfy all lien claimants, subcontractor lien claimants may recover the interest due under this subdivision on a pro rata basis, but in no event shall interest due under this subdivision increase the liability of the obligor under G.S. 44A-20.
A lien upon funds granted under this section arises, attaches, and is effective immediately upon the first furnishing of labor, materials, or rental equipment at the site of the improvement by a subcontractor. Any lien upon funds granted under this section is perfected upon the giving of notice of claim of lien upon funds in writing to the obligor as provided in G.S. 44A-19.
Until a lien claimant gives notice of a claim of lien upon funds in writing to the obligor as provided in G.S. 44A-19, any owner, contractor, or subcontractor against whose interest the lien upon funds is claimed may make, receive, use, or collect payments thereon and may use such proceeds in the ordinary course of its business.

History

(1971, c. 880, s. 1; 1985, c. 702, s. 3; 1995 (Reg. Sess., 1996), c. 607, s. 3; 2005-229, s. 1; 2012-175, s. 6.)

Effect of Amendments. - Session Laws 2012-175, s. 6, effective January 1, 2013, deleted the introductory paragraph; redesignated former subdivisions (1) through (6) as present subsections (a) through (f); substituted "shall have a lien" for "shall be entitled to a lien" in subsections (a) and (d) and in the first sentence of subsections (b) and (c); in the last sentence in subsection (b), substituted "subrogated to the lien upon funds" for "entitled to be subrogated to the lien" and substituted "perfect it by service of the notice" for "be entitled to perfect it by notice"; in the last sentence of subsection (c), deleted "be entitled to" following "subdivision, shall also" near the middle, and substituted "subcontractor is subrogated thereto, and in either case shall perfect it by service of the notice of claim" for "subcontractor is entitled to be subrogated thereto, and in either case shall be entitled to perfect the same by notice of claim" near the end; rewrote subsection (f); and added subsection (g). For applicability, see editor's note.

Legal Periodicals. - For article, "Mechanics' Liens for the Improvement of Real Property: Recent Developments in Perfection, Enforcement and Priority," see 12 Wake Forest L. Rev. 283 (1976).

For survey of 1977 contract law, see 56 N.C.L. Rev. 926 (1978).

For survey on subcontractors' statutory lien rights, see 70 N.C.L. Rev. 1996 (1992).

CASE NOTES

Editor's Note. - Many of the cases annotated below were decided prior to the 1992 amendment to G.S. 44A-23, which, inter alia, added subsection (b) of that section.

The primary purpose of a lien statute is to protect laborers and materialmen who expend their labor and materials upon the buildings of others. Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993).

Adequate Lien for Subcontractors and Suppliers of Materials and Labor. - Appellate court erred in reversing the trial court's grant of summary judgment to the product supplier that found the product supplier was entitled to judgment in the amount specified in its notice of lien sent to the manufacturer; the state constitution and statutory law provided that a materialman was entitled to an adequate lien on the subject matter of the materials supplied, the product supplier sent a notice of lien for a certain amount to the manufacturer after the product supplier became aware that the contractor with whom the manufacturer had contracted was having financial difficulties, and the manufacturer nevertheless paid the contractor, instead of the product supplier, shortly before the contractor went bankrupt. O & M Indus. v. Smith Eng'g Co., 360 N.C. 263, 624 S.E.2d 345 (2006).

Liberal Construction. - The lien statute is remedial in nature and, therefore, should be liberally construed to advance the legislature's intent. No statute, however, should be construed so liberally as to give it a meaning never intended by the legislature. Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993).

Meaning of "Labor". - Because it is not explicitly defined in this Article, "labor" must be given its common and ordinary meaning. Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993).

Materials are furnished within the meaning of this section if, pursuant to a subcontract, a subcontractor delivers materials to the site of improvement to real property. Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418, aff'd, 321 N.C. 215, 362 S.E.2d 547 (1987).

Materials are furnished within the meaning of subdivision (1) of this section when, pursuant to a subcontract, materials are delivered to the site of improvement, and there is no need that they be incorporated into the improvement itself. Contract Steel Sales, Inc. v. Freedom Constr. Co., 321 N.C. 215, 362 S.E.2d 547 (1987).

The rental of equipment is not within the scope of "labor or materials" in this Article. Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993).

The general lease of a crane was not lienable pursuant to this Article. Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993).

Under this section, a subcontractor's direct lien rights are limited to the amount owing to the entity above him in the construction chain. Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

Bankruptcy. - An interest in property of the estate against which a lien is asserted must be present pre-petition; the Bankruptcy Code stepped in and froze rights where they stood at the time the bankruptcy was initiated, before the subcontractor lien claimants accrued any property interests under North Carolina law. In re Shearin Family Invs., LLC, - Bankr. - (Bankr. E.D.N.C. Apr. 17, 2009).

Subcontractors had an interest in property when the debtor contractor filed its bankruptcy petition, because the subcontractors' entitlement to a lien arose upon delivery of the materials and equipment, and the parties agreed that all other conditions for an exception under 11 U.S.C.S. § 362(b)(3) were satisfied. Branch Banking & Trust Co. v. Constr. Supervision Servs. (In re Constr. Supervision Servs.), 753 F.3d 124 (4th Cir. 2014).

Summary Judgment Proper - Trial court properly granted the owners' summary judgment motion as to a subcontractor's claim for a lien on funds under G.S. 44A-18(1), as the contractor's claim against the owners had been arbitrated, and after the contractor's claim was set-off against the owners' claim, the contractor was indebted to the owners. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

Summary Judgment Improper. - Genuine issue of material fact existed on whether an unpaid contract balance remained between a contractor and a subcontractor thereby precluding summary judgment on a claim of lien made by the supplier, a second-tier subcontractor, on the subcontractor's funds under G.S. 44A-18. Park East Sales, LLC v. Clark-Langley, Inc., 186 N.C. App. 198, 651 S.E.2d 235 (2007), review denied, 362 N.C. 360, 661 S.E.2d 736 (2008), review dismissed, as moot, 362 N.C. 360, 661 S.E.2d 737 (2008).

Lien on Funds Does Not Arise by Subrogation - Subcontractor's lien on funds does not arise by subrogation; rather, under G.S. 44A-18(1), a lien in favor of the subcontractor can attach only to funds owed by an owner to a contractor. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

If nothing is owing to the first tier subcontractor, the second tier subcontractor has no right to enforce his lien under the plain language of this section. Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

Notice to Be Filed Following Receipt of Payment. - Subcontractor who receives payments from a contractor within 90 days of the contractor's filing for bankruptcy does not perfect his lien by the mere receipt and possession of the payments; he must still file the statutory notice in order to become a secured creditor and protect his receipt of payments from avoidance by the bankruptcy trustee. Precision Walls, Inc. v. Crampton, 196 Bankr. 299 (E.D.N.C. 1996).

Tiered Subcontractor May Enforce Lien of General Contractor Under G.S. 44A-23. - G.S. 44A-23 expressly preserves the rights of a first, second or third tier subcontractor to enforce the lien of the general contractor. This construction is supported by the inclusion of the language that upon filing of the notice and claim of lien "no action of the contractor shall be effective to prejudice the rights of the subcontractor without his written consent." This language, not found in this section, indicates that the legislature intended for the subcontractor to be secured by a mechanic's lien to the full extent of his claim. Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

While it is true that G.S. 44A-23 expressly limits the tiered subcontractor's lien only "to the extent of his claim," this language does not mean "to the extent of his claim as permitted by this section." Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

What Is First Tier Subcontractor's Lien upon Funds. - The first tier subcontractor's lien upon funds contemplated by subdivision (1) of this section is a lien upon funds which are owed and not upon funds which might have been owed had the contract been completed. Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

Lien Under Subdivision (1) Necessary for Lien Under G.S. 44A-20(d). - The existence of a lien upon the realty granted by G.S. 44A-20(d) is dependent upon the existence of a valid lien upon funds pursuant to subdivision (1) of this section. Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

Subcontractor's Lien Recognized - Appellate court has long recognized that a lien in favor of a subcontractor may arise either directly under G.S. 44A-18 and G.S. 44A-20 or by subrogation under G.S. 44A-23. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

A lien upon realty may arise directly in favor of a first tier subcontractor under subdivision (1) of this section and G.S. 44A-20, and the right to such a lien, unlike the right to a lien under G.S. 44A-23, may arise without regard to whether the general contractor has waived its own lien rights. Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

Subcontractor's Right Not Affected by Prime Contractor's Waiver. - Prime contractor's waiver of the right to establish a lien does not affect subcontractor's right to perfect a lien as a subcontractor under this section. Con Co., Inc. v. Wilson Acres Apts., Ltd., 56 N.C. App. 661, 289 S.E.2d 633, cert. denied, 306 N.C. 382, 294 S.E.2d 206 (1982).

Subcontractor's Right Not Affected by Amounts Due or Completion of Performance. - Where the plaintiff subcontractor, pursuant to a subcontract with the general contractor, furnished materials to the site of improvement to the real property improved, pursuant to this section, the plaintiff was entitled to a lien upon funds owed by the owner to the general contractor, regardless of whether or not the amounts were due and whether or not performance or delivery was complete. Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418, aff'd, 321 N.C. 215, 362 S.E.2d 547 (1987).

Subcontractor Need Not Deliver Materials Personally. - This section, which grants a lien to subcontractors "who furnished labor or materials at the site of the improvement," does not require that the subcontractor claiming the lien personally deliver the materials to the building site. Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, cert. denied, 318 N.C. 508, 349 S.E.2d 865 (1986).

Physical Presence of Materials When Notice Is Given Not Required. - Just as actual incorporation into the improvement is not a statutory prerequisite, neither does the statute require that the materials be physically present on the site at the time notice of lien is given. Contract Steel Sales, Inc. v. Freedom Constr. Co., 321 N.C. 215, 362 S.E.2d 547 (1987).

Second-Tier Subcontractor Had No Lien Rights Upon Funds. - Since nothing was owed to the first-tier subcontractor at or after the time that the second-tier subcontractor filed its lien claim, it was undisputed that the second-tier subcontractor had no lien rights upon funds under this section. Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 291 (1991).

Plaintiff's Subrogation Claim Barred. - Plaintiff had an adequate legal remedy in the form of a statutory lien against defendants pursuant to this section, but did not exercise it in a timely manner. Failure to timely assert the remedy is not a circumstance that renders the statutory remedy "inadequate," because to do so would allow a party to circumvent equitable principles. Therefore, the existence of a legal remedy acts as a legal bar to plaintiff's subrogation claim, and the trial court properly granted summary judgment for defendants. Jones Cooling & Heating, Inc. v. Booth, 99 N.C. App. 757, 394 S.E.2d 292 (1990), cert. denied, 328 N.C. 732, 404 S.E.2d 869 (1991).

If a third tier subcontractor delivers materials to a second tier subcontractor with the intent that the materials ultimately be delivered at the site, and the materials are actually delivered at the site, the third tier subcontractor has a lien on the funds owed to the second tier subcontractor for those materials. Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, cert. denied, 318 N.C. 508, 349 S.E.2d 865 (1986).

Receipt of Notice. - Subcontractor's claim of lien was properly filed because although there was a minor procedural defect in the filing of the claim of lien, an owner and general contractor were not prejudiced in any way merely because the notice of claim of lien was not filed as an attachment to the claim of lien since the owner was put on notice of the claim of lien and understood how the lien arose; the subcontractor failed to state why it was entitled to a lien on real property pursuant to G.S. 44A-20(d), but in the answer of the owner and contractor, it was admitted that the subcontractor made repeated demands for payment on numerous occasions, which were denied based upon the subcontractor's alleged failure to complete all of the work and to complete the work in a workmanlike manner. Voller Realty & Constr., Ltd. v. D.V. Holdings, Inc., - N.C. App. - , - S.E.2d - (Sept. 1, 2009).

Although a foreclosure on two lots did not effect a materialman's filings of liens on funds, the error was harmless as the materialman had consented to a judgment against a sublessee. Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

Applied in Interior Distribs., Inc. v. Promac, Inc., 27 N.C. App. 418, 219 S.E.2d 281 (1975); Lewis-Brady Bldrs. Supply, Inc. v. Bedros, 32 N.C. App. 209, 231 S.E.2d 199 (1977); Martin Architectural Prods. v. Meridian Constr. Co., 155 N.C. App. 176, 574 S.E.2d 189 (2002); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

Cited in Olney Paint Co. v. Zalewski, 29 N.C. App. 149, 223 S.E.2d 573 (1976); Trustees of Garden of Prayer Baptist Church v. Geraldco Bldrs., Inc., 78 N.C. App. 108, 336 S.E.2d 694 (1985); Concrete Supply Co. v. Ramseur Baptist Church, 95 N.C. App. 658, 383 S.E.2d 222 (1989); Cameron & Barkley Co. v. American Ins. Co., 112 N.C. App. 36, 434 S.E.2d 632 (1993); Precision Walls, Inc. v. Crampton, 196 Bankr. 299 (E.D.N.C. 1996); James River Equip., Inc v. Tharpe's Excavating, Inc., 179 N.C. App. 336, 634 S.E.2d 548 (2006); Carolina Bldg. Servs.' Windows & Doors, Inc. v. Boardwalk, LLC, 362 N.C. 262, 658 S.E.2d 924 (2008); Ivester v. Miller, 398 B.R. 408 (M.D.N.C. 2008); In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009).

§ 44A-19. Notice of claim of lien upon funds.

Notice of a claim of lien upon funds shall set forth all of the following information:
1. The name and address of the person claiming the lien upon funds.
2. A general description of the real property improved.
3. The name and address of the person with whom the lien claimant contracted to improve real property.
4. The name and address of each person against or through whom subrogation rights are claimed.
5. A general description of the contract and the person against whose interest the lien upon funds is claimed.
6. The amount of the lien upon funds claimed by the lien claimant under the contract.
All notices of claims of liens upon funds by first, second, or third tier subcontractors must be given using a form substantially as follows:
Notices of claims of lien upon funds under this section shall be served upon the obligor by personal delivery or in any manner authorized by Rule 4 of the North Carolina Rules of Civil Procedure. A copy of the notice of claim of lien upon funds shall be attached to any claim of lien on real property filed pursuant to G.S. 44A-20(d).
Notices of claims of lien upon funds shall not be filed with the clerk of superior court and shall not be indexed, docketed, or recorded in any way as to affect title to any real property, except a notice of a claim of lien upon funds may be filed with the clerk of superior court under either of the following circumstances:
1. When the notice of claim of lien upon funds is attached to a claim of lien on real property filed pursuant to G.S. 44A-20(d).
2. When the notice of claim of lien upon funds or a copy thereof is filed by the obligor for the purpose of discharging the claim of lien upon funds in accordance with G.S. 44A-20(e).
Filing a notice of claim of lien upon funds pursuant to subsection (e) of this section is not a violation of G.S. 44A-12.1.

NOTICE OF CLAIM OF LIEN UPON FUNDS BY FIRST, SECOND, OR THIRD TIER SUBCONTRACTOR

To:

1. __________________________, owner of property involved.

(Name and address)

2. __________________________, contractor.

(Name and address)

3. __________________________, first tier subcontractor against or through

(Name and address) whom subrogation is claimed, if any.

4. __________________________, second tier subcontractor against or through

(Name and address) whom subrogation is claimed, if any.
General description of real property on which labor performed or material furnished:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
General description of undersigned lien claimant's contract including the names of the parties thereto:
______________________________________________________________________________
______________________________________________________________________________
The amount of lien upon funds claimed pursuant to the above described
$ ___________
The undersigned lien claimant gives this notice of claim of lien upon funds pursuant to North Carolina law and claims all rights of subrogation to which he is entitled under Part 2 of Article 2 of Chapter 44A of the General Statutes of North Carolina.
Dated __________
__________________, Lien Claimant
______________________________________________________________________
(Address)

(c) All notices of claims of liens upon funds by subcontractors more remote than the third tier must be given using a form substantially as follows:

NOTICE OF CLAIM OF LIEN UPON FUNDS BY SUBCONTRACTOR MORE REMOTE THAN THE THIRD TIER

To:

______________________________, person holding funds against which lien
(Name and Address)
upon funds is claimed.
General description of real property on which labor performed or material furnished:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
General description of undersigned lien claimant's contract including the names of the parties thereto:
______________________________________________________________________________
______________________________________________________________________________
The amount of lien upon funds claimed pursuant to the above described
contract: $ ______________________________________________________
The undersigned lien claimant gives this notice of claim of lien upon funds pursuant to North Carolina law and claims all rights to which he or she is entitled under Part 2 of Article 2 of Chapter 44A of the General Statutes of North Carolina.
Dated: __________
__________________, Lien Claimant
______________________________________________________________________

(Address)

History

(1971, c. 880, s. 1; 1985, c. 702, s. 1; 2005-229, s. 1; 2012-175, s. 7; 2013-16, s. 3.)

Editor's Note. - The North Carolina Rules of Civil Procedure, referred to in subsection (d), are codified in G.S. 1A-1.

Effect of Amendments. - Session Laws 2012-175, s. 7, effective January 1, 2013, deleted "general" preceding "contractor" in item 2 in the form in subsection (b); substituted "real property on which" for "real property where" in the form in subsections (b) and (c); and deleted "or G.S. 44A-23" at the end of subsection (d) and at the end of subdivision (e)(1). For applicability, see editor's note.

Session Laws 2013-16, s. 3, added "or a copy thereof" in subdivision (e)(2). For effective date and applicability, see editor's note.

CASE NOTES

Purpose of Notice. - The notice of claim of lien filed by the subcontractor is for the purpose of giving the owner obligor notice; the notice is not intended to protect innocent third parties and does not affect the title to the real property being improved. Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418, aff'd, 321 N.C. 215, 362 S.E.2d 547 (1987).

Filing Is Also Required. - Although a second tier subcontractor must notice its claim of lien using a format substantially similar to that provided in this section, perfection of this lien is not achieved merely upon proper notice; the claim of lien must also be filed pursuant to G.S. 44A-12 before it is considered perfected. Cameron & Barkley Co. v. American Ins. Co., 112 N.C. App. 36, 434 S.E.2d 632 (1993).

Deviation from the statutory form is permissible so long as all of the information set out in the statutory form is contained in the notice. Contract Steel Sales, Inc. v. Freedom Constr. Co., 321 N.C. 215, 362 S.E.2d 547 (1987).

Notice of Claim of Lien and Claim of Lien Properly Served and Filed. - Trial court's conclusion that a subcontractor's notice of claim of lien was properly made to the record owner was not erroneous because the admissions in the pleadings of an owner and a general contractor showed that the notice and the claim of lien were properly served and filed; in the original answer and answer to the subcontractor's amended complaint, it was admitted that the owner was served by certified mail to its registered agent a copy of the notice of claim of lien and claim of lien, and although there was a minor procedural defect in the filing of the claim of lien, the owner and contractor were not prejudiced in any way merely because the notice of claim of lien was not filed as an attachment to the claim of lien since the owner was put on notice of the claim of lien and understood how the lien arose. Voller Realty & Constr., Ltd. v. D.V. Holdings, Inc., - N.C. App. - , - S.E.2d - (Sept. 1, 2009).

Sufficient Compliance. - The subcontractor's letter to the property owner was held, as a matter of law, to substantially comply with the notice requirements set forth in this section. Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418, aff'd, 321 N.C. 215, 362 S.E.2d 547 (1987).

Appellate court erred in reversing the trial court's grant of summary judgment to the product supplier that found the product supplier was entitled to judgment in the amount specified in its notice of lien sent to the manufacturer; the state constitution and statutory law provided that a materialman was entitled to an adequate lien on the subject matter of the materials supplied, the product supplier sent a notice of lien for a certain amount to the manufacturer after the product supplier became aware that the contractor with whom the manufacturer had contracted was having financial difficulties, the manufacturer nevertheless paid the contractor, instead of the product supplier, shortly before the contractor went bankrupt, and the manufacturer's receipt of notice obligated it to pay the product supplier's claimed lien amount. O & M Indus. v. Smith Eng'g Co., 360 N.C. 263, 624 S.E.2d 345 (2006).

Claim of Lien Insufficient. - A claim of lien may not serve as a notice of claim of lien because a notice of claim of lien must identify all the parties in the "contractual chain" between the claimant and the owner. Universal Mechanical, Inc. v. Hunt, 114 N.C. App. 484, 442 S.E.2d 130 (1994).

A claim of lien need only identify the owner, the claimant, and the party with which the claimant contracted. Thus, while plaintiff's claim of lien met the requirements of G.S. 44A-12, the claim of lien did not meet the requirements of this section, because the claim of lien did not name defendant or assert rights available to plaintiff via a notice of claim of lien. Universal Mechanical, Inc. v. Hunt, 114 N.C. App. 484, 442 S.E.2d 130 (1994).

Cited in Outer Banks Contractors v. Forbes, 47 N.C. App. 371, 267 S.E.2d 63 (1980); Carolina Bldg. Servs.' Windows & Doors, Inc. v. Boardwalk, LLC, 362 N.C. 262, 658 S.E.2d 924 (2008); In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

§ 44A-20. Duties and liability of obligor.

Upon receipt of the notice of claim of lien upon funds provided for in this Article, the obligor shall be under a duty to retain any funds subject to the lien or liens upon funds under this Article up to the total amount of such liens upon funds as to which notices of claims of lien upon funds have been received.
If, after the receipt of the notice of claim of lien upon funds to the obligor, the obligor makes further payments to a contractor or subcontractor against whose interest the lien or liens upon funds are claimed, the lien upon funds shall continue upon the funds in the hands of the contractor or subcontractor who received the payment, and in addition the obligor shall be personally liable to the person or persons entitled to liens upon funds up to the amount of such wrongful payments, not exceeding the total claims with respect to which the notice of claim of lien upon funds was received prior to payment.
If an obligor makes a payment after receipt of notice of claim of lien on funds and incurs personal liability under subsection (b) of this section, the obligor shall be entitled to reimbursement and indemnification from the party receiving such payment.
If the obligor is an owner of the property being improved, the lien claimant shall be entitled to a claim of lien upon real property upon the interest of the obligor in the real property to the extent of the owner's personal liability under subsection (b) of this section, which claim of lien on real property shall be enforced only in the manner set forth in G.S. 44A-7 through G.S. 44A-16 and which claim of lien on real property shall be entitled to the same priorities and subject to the same filing requirements and periods of limitation applicable to the contractor. The claim of lien on real property is perfected as of the time set forth in G.S. 44A-10 upon satisfaction of those requirements set forth in G.S. 44A-11. A lien waiver signed by the contractor prior to a subcontractor's perfecting its claim of lien on real property in accordance with G.S. 44A-11 waives the subcontractor's right to enforce the contractor's claim of lien on real property, but does not affect the subcontractor's right to a claim of lien on funds or the subcontractor's right to a claim of lien on real property allowed under this subsection. The claim of lien on real property as provided under this subsection shall be in the form set out in G.S. 44A-12(c) and shall contain, in addition, a copy of the notice of claim of lien upon funds given pursuant to G.S. 44A-19 as an exhibit together with proof of service thereof by affidavit, and shall state the grounds the lien claimant has to believe that the obligor is personally liable for the debt under subsection (b) of this section.
A notice of claim of lien upon funds under G.S. 44A-19 may be filed by the obligor with the clerk of superior court in each county where the real property upon which the filed notice of claim of lien upon funds is located for the purpose of discharging the notice of claim of lien upon funds by any of the methods described in G.S. 44A-16.
A bond deposited under this section to discharge a filed notice of claim of lien upon funds shall be effective to discharge any claim of lien on real property filed by the same lien claimant pursuant to subsection (d) of this section or G.S. 44A-23 and shall further be effective to discharge any notices of claims of lien upon funds served by lower tier subcontractors or any claims of lien on real property filed by lower tier subcontractors pursuant to subsection (d) of this section or G.S. 44A-23 claiming through or against the contractor or higher tier subcontractors up to the amount of the bond.

History

(1971, c. 880, s. 1; 1985, c. 702, s. 2; 2005-229, s. 1; 2012-175, s. 8; 2013-16, s. 4.)

Effect of Amendments. - Session Laws 2012-175, s. 8, effective January 1, 2013, in subsection (d), added the third sentence, and inserted "as provided under this subsection" near the beginning of the fourth sentence. For applicability, see editor's note.

Session Laws 2013-16, s. 4, in subsection (d), substituted "satisfaction of those requirements set forth in G.S. 44A-11" for "the filing of the claim of lien on real property pursuant to G.S. 44A-12" in the second sentence, and in the third sentence, substituted "a subcontractor's perfecting its claim of lien on real property in accordance with G.S. 44A-11" for "the commencement of an action to enforce a perfected claim of lien on real property granted under G.A. 44A-23." For effective date and applicability, see editor's note.

CASE NOTES

Lien Under G.S. 44A-18(1) Necessary for Lien Under Subsection (d). - The existence of a lien upon the realty granted by subsection (d) of this section is dependent upon the existence of a valid lien upon funds pursuant to G.S. 44A-18(1). Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

A lien upon realty may arise directly in favor of a first tier subcontractor under G.S. 44A-18(1) and this section, and the right to such a lien, unlike the right to a lien under G.S. 44A-23, may arise without regard to whether the general contractor has waived its own lien rights. Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

Appellate court has long recognized that a lien in favor of a subcontractor may arise either directly under G.S. 44A-18 and G.S. 44A-20 or by subrogation under G.S. 44A-23. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

Receipt of Notice - Credit union was to retain at least the amount claimed by a subcontractor upon receipt of notice of the subcontractor's lien when it still owed an amount exceeding that under the construction contract, and it could not set off its attorney's fees from the amount owed. Martin Architectural Prods. v. Meridian Constr. Co., 155 N.C. App. 176, 574 S.E.2d 189 (2002).

Subcontractor's claim of lien was properly filed because although there was a minor procedural defect in the filing of the claim of lien, an owner and general contractor were not prejudiced in any way merely because the notice of claim of lien was not filed as an attachment to the claim of lien since the owner was put on notice of the claim of lien and understood how the lien arose; the subcontractor failed to state why it was entitled to a lien on real property pursuant to G.S. 44A-20(d), but in the answer of the owner and contractor, it was admitted that the subcontractor made repeated demands for payment on numerous occasions, which were denied based upon the subcontractor's alleged failure to complete all of the work and to complete the work in a workmanlike manner. Voller Realty & Constr., Ltd. v. D.V. Holdings, Inc., - N.C. App. - , - S.E.2d - (Sept. 1, 2009).

Effect of Filing Claim Before Service of Notice. - The fact that a lien claim is filed under this section before notice is actually served does not make a difference. Con Co., Inc. v. Wilson Acres Apts., Ltd., 56 N.C. App. 661, 289 S.E.2d 633, cert. denied, 306 N.C. 382, 294 S.E.2d 206 (1982).

Once entitlement to a lien has been established, statutory requirements concerning perfection must be liberally construed in favor of the lien claimant. Contract Steel Sales, Inc. v. Freedom Constr. Co., 321 N.C. 215, 362 S.E.2d 547 (1987).

Harmless Error. - Assuming that a materialman possessed a valid lien on funds paid to a sublessee, so that the discharge of a lien on the funds was in error, the error was harmless as the materialman could not have received a larger judgment if it had been permitted to pursue a lien on funds against the sublessee than it had already received under a consent judgment. Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 215 N.C. App. 220, 721 S.E.2d 663 (2011).

Applied in Interior Distribs., Inc. v. Promac, Inc., 27 N.C. App. 418, 219 S.E.2d 281 (1975); Lewis-Brady Bldrs. Supply, Inc. v. Bedros, 32 N.C. App. 209, 231 S.E.2d 199 (1977).

Cited in Trustees of Garden of Prayer Baptist Church v. Geraldco Bldrs., Inc., 78 N.C. App. 108, 336 S.E.2d 694 (1985); Contract Steel Sales, Inc. v. Freedom Constr. Co., 84 N.C. App. 460, 353 S.E.2d 418 (1987); Carolina Bldg. Servs.' Windows & Doors, Inc. v. Boardwalk, LLC, 362 N.C. 262, 658 S.E.2d 924 (2008); Pete Wall Plumbing Co. v. Sandra Anderson Builders, Inc., 210 N.C. App. 338, 708 S.E.2d 157 (2011).

§ 44A-21. Pro rata payments.

Where the obligor is a contractor or subcontractor and the funds in the hands of the obligor and the obligor's personal liability, if any, under G.S. 44A-20 are less than the amount of valid liens upon funds that have been received by the obligor under this Article, the parties entitled to liens upon funds shall share the funds on a pro rata basis.
Where the obligor is an owner and the funds in the hands of the obligor and the obligor's personal liability, if any, under G.S. 44A-20 are less than the sum of the amount of valid claims of liens upon funds that have been received by the obligor under this Article and the amount of the valid claims of liens on real property upon the owner's property filed by the subcontractors with the clerk of superior court under G.S. 44A-23, the parties entitled to liens upon funds and the parties entitled to subrogation claims of liens on real property upon the owner's property shall share the funds on a pro rata basis.

History

(1971, c. 880, s. 1; 1998-217, s. 4(d); 2005-229, s. 1.)

§ 44A-22. Priority of liens upon funds.

Liens upon funds perfected under this Article have priority over all other interests or claims theretofore or thereafter created or suffered in the funds by the person against whose interest the lien upon funds is asserted, including, but not limited to, liens arising from garnishment, attachment, levy, judgment, assignments, security interests, and any other type of transfer, whether voluntary or involuntary. Any person who receives payment from an obligor in bad faith with knowledge of a lien upon funds shall take such payment subject to the lien upon funds.

History

(1971, c. 880, s. 1; 2005-229, s. 1.)

Legal Periodicals. - For article, "Mechanics' Liens for the Improvement of Real Property: Recent Developments in Perfection, Enforcement and Priority," see 12 Wake Forest L. Rev. 283 (1976).

CASE NOTES

Notice Must Be Filed. - Subcontractor who receives payments from a contractor within 90 days of the contractor's filing for bankruptcy does not perfect his lien by the mere receipt and possession of the payments; he must still file the statutory notice, in order to become a secured creditor and protect his receipt of payments from avoidance by the bankruptcy trustee. Precision Walls, Inc. v. Crampton, 196 Bankr. 299 (E.D.N.C. 1996).

Applied in Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248 (1986).

Cited in Trustees of Garden of Prayer Baptist Church v. Geraldco Bldrs., Inc., 78 N.C. App. 108, 336 S.E.2d 694 (1985); In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009).

§ 44A-23. Contractor's claim of lien on real property; perfection of subrogation rights of subcontractor.

First tier subcontractor. - A first tier subcontractor may, to the extent of its claim, enforce the claim of lien on real property of the contractor created by Part 1 of this Article. The manner of such enforcement shall be as provided by G.S. 44A-7 through 44A-16. The claim of lien on real property is perfected as of the time set forth in G.S. 44A-10 upon satisfaction of those requirements set forth in G.S. 44A-11.
No action of the contractor shall be effective to prejudice the rights of a first tier subcontractor without its written consent once the first tier subcontractor has perfected its claim of lien on real property in accordance with G.S. 44A-11.
Second or third tier subcontractor. -
1. A second or third tier subcontractor may, to the extent of his claim, enforce the claim of lien on real property of the contractor created by Part 1 of Article 2 of the Chapter except when:
  1. The owner or contractor, within 30 days following the date the permit is issued for the improvement of the real property involved or within 30 days following the date the contractor is awarded the contract for the improvement of the real property involved, whichever is later, posts on the property in a visible location adjacent to the posted permit, if a permit is required, and files in the office of the clerk of superior court in each county wherein the real property to be improved is located, a completed and signed notice of contract form and the second or third tier subcontractor fails to serve upon the contractor a completed and signed notice of subcontract form by the same means of service as described in G.S. 44A-19(d); or
  2. After the posting and filing of a signed notice of contract and the service upon the contractor of a signed notice of subcontract, the contractor serves upon the second or third tier subcontractor, within five days following each subsequent payment, by the same means of service as described in G.S. 44A-19(d), the written notice of payment setting forth the date of payment and the period for which payment is made as requested in the notice of subcontract form set forth herein.
2. The form of the notice of contract to be so utilized under this section shall be substantially as follows and the fee for filing the same with the clerk of superior court shall be the same as charged for filing a claim of lien on real property:
A lien waiver signed by the contractor before the occurrence of all of the actions specified in subsection (a1) and subdivision (5) of subsection (b) of this section waives the subcontractor's right to enforce the contractor's claim of lien on real property, but does not affect the subcontractor's right to a claim of lien on funds or the subcontractor's right to a claim of lien on real property allowed under G.S. 44A-20(d).
When completing the claim of lien on real property form to perfect the contractor's claim of lien on real property, a first, second, or third tier subcontractor may use as the date upon which labor or materials were first or last furnished on the real property either any date on or after the date of the first furnishing of labor or materials on the real property, or any date on or before the date of the last furnishing of labor or materials on the real property by the subcontractor making the claim, or any date on or after the date of the first furnishing of labor or materials on the real property, or any date on or before the date of the last furnishing of labor or materials on the real property by the contractor through which the claim of lien on real property is being asserted.

"NOTICE OF CONTRACT

"(1) Name and address of the Contractor: "(2) Name and address of the owner of the real property at the time this Notice of Contract is recorded: "(3) General description of the real property to be improved (street address, tax map lot and block number, reference to recorded instrument, or any other description that reasonably identifies the real property): "(4) Name and address of the person, firm or corporation filing this Notice of Contract: "Dated: __________________ _______________________________________________________________________ "Contractor "Filed this the ________ day of ______________, ________. ________________________ Clerk of Superior Court" (3) The form of the notice of subcontract to be so utilized under this section shall be substantially as follows:

"NOTICE OF SUBCONTRACT

"(1) Name and address of the subcontractor: "(2) General description of the real property on which the labor was performed or the material was furnished (street address, tax map lot and block number, reference to recorded instrument, or any description that reasonably identifies the real property): "(3) "(i) General description of the subcontractor's contract, including the names of the parties thereto: "(ii) General description of the labor and material performed and furnished thereunder: "(4) Request is hereby made by the undersigned subcontractor that he be notified in writing by the contractor of, and within five days following, each subsequent payment by the contractor to the first tier subcontractor for labor performed or material furnished at the improved real property within the above descriptions of such in paragraph (2) and subparagraph (3)(ii), respectively, the date payment was made and the period for which payment is made. "Dated: ______________________________ _______________________________________________________________________ Subcontractor"

(4) The manner of such enforcement shall be as provided by G.S. 44A-7 through G.S. 44A-16. The lien is perfected as of the time set forth in G.S. 44A-10 upon the filing of a claim of lien on real property pursuant to G.S. 44A-12.

(5) No action of the contractor shall be effective to prejudice the rights of the second or third tier subcontractor without its written consent once the second or third tier subcontractor has perfected its claim of lien on real property in accordance with G.S. 44A-11.

History

(1971, c. 880, s. 1; 1985, c. 702, s. 4; 1991 (Reg. Sess., 1992), c. 1010, s. 1; 1993, c. 553, s. 13; 1997-456, s. 27; 1999-456, s. 59; 2005-229, s. 1; 2012-158, s. 6.1; 2012-175, s. 9; 2012-194, s. 65(a), (b); 2013-16, s. 5.)

Effect of Amendments. - Session Laws 2012-158, s. 6.1, as amended by Session Laws 2012-194, s. 65.3(a), effective April 1, 2013, added the subsection (a1) and subdivision (b)(5) designations and added subdivisions (a1)(1) through (3) and (b)(5)a. to c.; deleted "Upon the filing of the claim of lien on real property, with the notice of claim of lien upon funds attached, and the commencement of the action, no" from the end of subsection (a) and subdivision (b)(4); in the introductory paragraph of subsection (a)(1) and subdivision (b)(5), added "No" at the beginning and added "upon the occurrence of all of the following" to the end; and made punctuation and stylistic changes. For applicability, see editor's note.

Session Laws 2012-175, s. 9, effective January 1, 2013, rewrote subsection (a); in subsection (b), inserted "tier" in the subsection heading, substituted "subcontractor may" for "subcontractor, who gives notice of claim of lien upon funds as provided in this Article, may" in the introductory paragraph of subdivision (1), and substituted "The owner or contractor, within 30 days following the date the permit is issued for the improvement of the real property involved or within 30 days following the date the contractor is awarded the contract for the improvement of the real property involved, whichever is later, posts on the property in a visible location adjacent to the posted permit, if a permit is required" for "The contractor, within 30 days following the date the building permit is issued for the improvement of the real property involved, posts on the property in a visible location adjacent to the posted building permit" at the beginning of subdivision (1)a.; in the NOTICE OF SUBCONTRACT form, substituted "on which the labor" for "where the labor" in item (2) and substituted "real property" for "real property, with the notice of claim of lien upon funds attached" in the last sentence of item (4); and added subsection (c). For applicability, see editor's note.

Session Laws 2012-194, s. 65.3(b), effective April 1, 2013, substituted "before the occurrence of all of the actions specified in subsection (a1) and subdivision (5) of subsection (b) of this section" for "prior to the commencement of an action to enforce a perfected claim of lien on real property granted under this section" in subsection (c). For applicability, see editor's note.

Session Laws 2013-16, s. 5, in subsection (a), substituted "satisfaction of those requirements set forth in G.S. 44A-11" for "filing of the claim of lien on real property pursuant to G.S. 44A-12" at the end of third sentence, and deleted the former last sentence; rewrote subsection (a1); rewrote subdivision (b)(5); and added subsection (d). For effective date and applicability, see editor's note.

Legal Periodicals. - For survey on subcontractors' statutory lien rights, see 70 N.C.L. Rev. 1996 (1992).

CASE NOTES

Editor's Note. - Some of the cases annotated below were decided prior to the 1992 amendment, which, inter alia, added subsection (b).

The legislative intent was to continue the subcontractor's separate right in this section to a lien by subrogation to the contractor's lien on real property created by G.S. 44A-8 (the contractor's lien). Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 291 (1991).

Exception to Automatic Stay Under 11 U.S.C.S. § 362(b)(3). - Creditor was not entitled to a Fed. R. Bankr. P. 8005 stay pending appeal of an order finding that the lien rights of a contractor against a Chapter 11 debtor's real property under G.S. 44A-23 were permitted exceptions to the automatic stay under 11 U.S.C.S. § 362(b)(3). The creditor did not show that it would succeed on the merits, that it would be irreparably harmed absent the stay, or that the public interest would be served by a stay. In re Constr. Supervision Servs., - Bankr. - (Bankr. E.D.N.C. Apr. 20, 2012).

Subcontractor is entitled to a lien under this section only by way of subrogation; his lien rights are dependent upon the lien rights of the general contractor. Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

Because a subcontractor is entitled to a lien under G.S. 44A-23 only by way of subrogation, a subcontractor's lien rights are dependent upon the lien rights of the general contractor; where the general contractor does not have any lien rights against the owner, the first-tier subcontractor, likewise, has no rights. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

Right of Subrogation Where Owner Has Paid Contractor for Specific Labor or Materials. - Even if the owner has specifically paid the contractor for the labor or materials supplied by the specific unpaid subcontractor who is claiming the lien, that subcontractor retains a right of subrogation, to the extent of his claim, to whatever lien rights the contractor otherwise has in the project. Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 291 (1991).

Barring of Subcontractor's Rights by General Contractor. - No action of the contractor will be effective to prejudice the rights of the subcontractor without his written consent upon the filing of the notice and claim of lien and the commencement of the action; prior to that time, however, the general contractor is free to waive its lien rights and to effectively bar the subcontractor's rights by way of subrogation. Mace v. Bryant Constr. Corp., 48 N.C. App. 297, 269 S.E.2d 191 (1980).

Prior payment to intermediary first tier subcontractors does not bar claims of second tier subcontractors. Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

Default Judgment Against General Contractor Does Not Extinguish Subcontractor's Lien. - Default judgment against a general contractor cannot be used to form the basis for extinguishing a subcontractor's lien on property under G.S. 44A-23. Carolina Bldg. Servs.' Windows & Doors, Inc. v. Boardwalk, LLC, 362 N.C. 262, 658 S.E.2d 924 (2008).

As Tiered Subcontractor May Enforce Lien of General Contractor Under This Section. - This section expressly preserves the rights of a first, second or third tier subcontractor to enforce the lien of the general contractor. This construction is supported by the inclusion of the language that upon filing of the notice and claim of lien "no action of the contractor shall be effective to prejudice the rights of the subcontractor without his written consent." This language, not found in G.S. 44A-18, indicates that the legislature intended for the subcontractor to be secured by a mechanic's lien to the full extent of his claim. Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

A second tier subcontractor has a right to a mechanic's lien against the owner's property when the first tier subcontractor has been fully paid but the owner still owes money to the general contractor. Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128, aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

G.S. 44A-23 grants to a first tier subcontractor a lien upon real property based upon a right of subrogation to the direct lien of the general contractor on the improved real property as provided in G.S. 44A-8. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

Subcontractor May Assert Whatever Lien Contractor Has Against Owner. - Subcontractor may assert whatever lien that the contractor who dealt with the owner has against the owner's real property relating to the project. Electric Supply Co. v. Swain Elec. Co., 328 N.C. 651, 403 S.E.2d 291 (1991).

Tiered Subcontractor Not Limited to Extent of Claim Under G.S. 44A-18. - While it is true that this section expressly limits the tiered subcontractor's lien only "to the extent of his claim," this language does not mean "to the extent of his claim as permitted by G.S. 44A-18." Electric Supply Co. v. Swain Elec. Co., 97 N.C. App. 479, 389 S.E.2d 128 (1990), aff'd, 328 N.C. 651, 403 S.E.2d 291 (1991).

Subcontractor Bound by Defenses Against Contractor. - If a subcontractor attempts to perfect a lien by subrogation, he is bound by any defenses available against the contractor. Con Co., Inc. v. Wilson Acres Apts., Ltd., 56 N.C. App. 661, 289 S.E.2d 633, cert. denied, 306 N.C. 382, 294 S.E.2d 206 (1982).

Trial court properly granted the owners' summary judgment motion as to a subcontractor's claim for enforcement of lien under G.S. 44A-23, as the subcontractor's claim was by way of subrogation; the contractor's claim against the owners had been arbitrated, and after the contractor's claim was set-off against the owners' claim, the contractor was indebted to the owners for corrected and uncompleted work. Watson Elec. Constr. Co. v. Summit Cos., LLC, 160 N.C. App. 647, 587 S.E.2d 87 (2003).

Plaintiffs' liens on real property were limited by the amount remaining due on the contract; they were not permitted to assert liens on improved property for the full amount of their claims where that amount greatly exceeded the amount due on the contract. Vulcan Materials Co. v. Fowler Contracting Corp., 111 N.C. App. 919, 433 S.E.2d 462, appeal dismissed, 335 N.C. 565, 439 S.E.2d 163 (1993).

Genuine Issue as to Whether Unpaid Contract Balance Remained - Summary judgment could not be sustained based on a claim of lien on property because a genuine issue of material fact existed on whether an unpaid contract balance remained between the subcontractor and the supplier, a second-tier subcontractor. Park East Sales, LLC v. Clark-Langley, Inc., 186 N.C. App. 198, 651 S.E.2d 235 (2007), review denied, 362 N.C. 360, 661 S.E.2d 736 (2008), review dismissed, as moot, 362 N.C. 360, 661 S.E.2d 737 (2008).

No Contractual Relationship Established. - Because there was no contractual relationship between a contractor and a county, the contractor could not enforce a lien on real property conveyed to the county; the contractor executed a waiver of its materialmen's lien rights within a development and sought to enforce a lien on the property for work performed after the lien waiver was signed and after the property was conveyed to the county, but the contractor did not allege a contractual relationship between it and the county, and absent such a relationship, it could not enforce a lien on county real property. Gaines & Co. v. Wendell Falls Residential, LLC, 212 N.C. App. 606, 714 S.E.2d 179 (2011).

Cited in Universal Mechanical, Inc. v. Hunt, 114 N.C. App. 484, 442 S.E.2d 130 (1994); In re Harrelson Utils., Inc., - Bankr. - (Bankr. E.D.N.C. July 30, 2009).

PART 3. CRIMINAL SANCTIONS FOR FURNISHING A FALSE STATEMENT IN CONNECTION WITH IMPROVEMENT TO REAL PROPERTY.

§ 44A-24. False statement a misdemeanor and grounds for disciplinary action against a licensed contractor or qualifying party.

If any contractor or other person receiving payment from an obligor for an improvement to real property or from a purchaser for a conveyance of real property with improvements subject to this Article or to Article 3 of this Chapter shall knowingly furnish to such obligor, purchaser, or to a lender who obtains a security interest in said real property, or to a title insurance company insuring title to such real property, a false written statement of the sums due or claimed to be due for labor or material furnished at the site of improvements to such real property, then such contractor, subcontractor or other person shall be guilty of a Class 1 misdemeanor. Upon conviction and in the event the court shall grant any defendant a suspended sentence, the court may in its discretion include as a condition of such suspension a provision that the defendant shall reimburse the party who suffered loss on such conditions as the court shall determine are proper.

The elements of the offense herein stated are the furnishing of the false written statement with knowledge that it is false and the subsequent or simultaneous receipt of payment from an obligor or purchaser by the person signing the document, a person directing another to sign the document, or any person or entity for whom the document was signed. In any criminal prosecution hereunder it shall not be necessary for the State to prove that the obligor, purchaser, lender or title insurance company relied upon the false statement or that any person was injured thereby.

In addition to the criminal sanctions created by this section, conduct constituting the offense herein stated and causing actual harm to any person by any licensed contractor or qualifying party, as that term is used in Chapter 87 of the General Statutes, shall constitute deceit and misconduct subject to disciplinary action under Chapter 87 of the General Statutes, including revocation, suspension, or restriction of a license or the ability to act as a qualifying party for a license.

History

(1971, c. 880, s. 1.1; 1973, c. 991; 1993, c. 539, s. 406; 1994, Ex. Sess., c. 24, s. 14(c); 2012-175, s. 10.)

Effect of Amendments. - Session Laws 2012-175, s. 10, effective January 1, 2013, added "and grounds for disciplinary action against a licensed contractor or qualifying party" to the end of the section heading; inserted "subject to this Article or to Article 3 of this Chapter" in the first sentence in the first paragraph; substituted "purchaser by the person signing the document, a person directing another to sign the document, or any person or entity for whom the document was signed. In any criminal" for "purchaser, and in any" in the first sentence in the second paragraph; and added the last paragraph. For applicability, see editor's note.

PART 4. COMMERCIAL REAL ESTATE BROKER LIEN ACT.

§ 44A-24.1. Short title.

This Part shall be known and may be cited as the "Commercial Real Estate Broker Lien Act."

History

(2011-165, s. 1.)

Editor's Note. - Session Laws 2011-165, s. 3, made this part effective October 1, 2011, and applicable to written agreements signed by the owner of commercial real estate or the owner's duly authorized agent on or after that date.

§ 44A-24.2. Definitions.

The following definitions apply in this Part:

Broker. - A real estate broker licensed pursuant to Chapter 93A of the General Statutes.
Broker services. - Services for which a license issued by the North Carolina Real Estate Commission is required pursuant to Chapter 93A of the General Statutes.
Commercial real estate. - Any real property or interest therein, whether freehold or nonfreehold, which at the time the property or interest is made the subject of an agreement for broker services:
1. Is lawfully used primarily for sales, office, research, institutional, agricultural, forestry, warehouse, manufacturing, industrial, or mining purposes or for multifamily residential purposes involving five or more dwelling units;
2. May lawfully be used for any of the purposes listed in sub-subdivision (3)a. of this section by a zoning ordinance adopted pursuant to the provisions of Article 18 of Chapter 153A or Article 19 of Chapter 160A of the General Statutes or which is the subject of an official application or petition to amend the applicable zoning ordinance to permit any of the uses listed in sub-subdivision (3)a. of this section which is under consideration by the government agency with authority to approve the amendment; or
3. Is in good faith intended to be immediately used for any of the purposes listed in sub-subdivision (3)a. of this section by the parties to any contract, lease, option, or offer to make any contract, lease, or option.
Commission. - Any compensation which is due a broker for performance of broker services.
Lien claimant. - A broker claiming a lien pursuant to this Part.
Owner. - The owner of record of any interest in commercial real estate.

History

(2011-165, s. 1; 2012-194, s. 15; 2017-211, s. 17.)

Effect of Amendments. - Session Laws 2012-194, s. 15, effective July 17, 2012, substituted "sub-subdivision (3)a." for "subdivision (3)" twice in sub-subdivision (3)b. and once in sub-subdivision (3)c.

Session Laws 2017-211, s. 17, effective October 5, 2017, inserted "agricultural, forestry" in subdivision (3)a

§ 44A-24.3. Commercial real estate lien.

A broker shall have a lien upon commercial real estate in the amount that the broker is due under a written agreement for broker services signed by the owner or signed by the owner's duly authorized agent, if:
1. The broker has performed under the provisions of the agreement;
2. The written agreement for broker services clearly sets forth the broker's duties to the owner; and
3. The written agreement for broker services sets forth the conditions upon which the compensation shall be earned and the amount of such compensation.
The lien under this section shall be available only to the broker named in the instrument signed by the owner or the owner's duly authorized agent. A lien under this section shall be available only against the commercial real estate which is the subject of the written agreement for broker services.
When payment of commission to a broker is due in installments, a portion of which is due only after the conveyance or transfer of the commercial real estate, any notice of lien for those payments due after the transfer or conveyance may be recorded at any time subsequent to the transfer or conveyance of the commercial real estate and within 90 days of the date on which the payment is due. The notice of lien shall be effective as a lien against the owner's interest in the commercial real estate only to the extent funds are owed to the owner by the transferee, but the lien shall be effective as a lien against the transferee's interest in the commercial real estate. A single claim for lien filed prior to transfer or conveyance of the commercial real estate claiming all commissions due in installments shall also be valid and enforceable as it pertains to payments due after the transfer or conveyance; provided, however, that as payments or partial payments of commission are received, the broker shall provide partial releases for those payments, thereby reducing the amount due the broker under the broker's lien.

History

(2011-165, s. 1.)

§ 44A-24.4. When lien attaches to commercial real estate.

A lien authorized by this Part attaches to the commercial real estate only when the lien claimant files a timely notice of the lien conforming to the requirements of G.S. 44A-24.5 and this section in the office of the clerk of superior court. A notice of lien is timely if it is filed after the claimant's performance under the written agreement for broker services and before the conveyance or transfer of the commercial real estate which is the subject of the lien, except that in the case of a lease or transfer of a nonfreehold interest, the notice of a lien shall be filed no later than 90 days following the tenant's possession of the commercial real estate or no later than 60 days following any date or dates set out in the written agreement for broker services for subsequent payment or payments. When a notice of a lien is filed more than 30 days preceding the date for settlement or possession set out in an offer to purchase, sales contract, or lease, which establishes the broker's claim of performance, the lien shall be available only upon grounds of the owner's breach of the written agreement for broker services.

History

(2011-165, s. 1.)

§ 44A-24.5. Lien notice; content.

A lien notice under this Part shall be signed by the lien claimant and shall contain an attestation by the lien claimant that the information contained in the notice is true and accurate to the best of the lien claimant's knowledge and belief.
The lien notice shall include all of the following information:
1. The name of the lien claimant.
2. The name of the owner.
3. A description of the commercial real estate upon which the lien is being claimed.
4. The amount for which the lien is claimed and whether the amount is due in installments.
5. The claimant's grounds for the lien, including a reference to the written agreement for broker services that is the basis for the lien.

History

(2011-165, s. 1.)

§ 44A-24.6. When lien claim release or satisfaction to be filed.

If a claim for a lien has been filed with the clerk of superior court and a condition occurs that would preclude the lien claimant from receiving compensation under the terms of the written agreement for broker services on which the lien is based, the lien claimant shall file and serve the owner of record a written release or satisfaction of the lien promptly, and in no event more than 30 days after the demand.

History

(2011-165, s. 1.)

§ 44A-24.7. Lien claimant to mail copy of notice of lien to owner by certified mail.

Any lien claimant who files a lien on commercial real estate pursuant to the provisions of this Part shall mail a copy of the notice of the lien to the owner of the commercial real estate by certified mail, return receipt requested, or shall serve a copy of the notice of the lien in accordance with any of the provisions for service of process set forth in G.S. 1A-1, Rule 4. The lien claimant shall file proof of service with the clerk of the superior court. The lien is void if the lien claimant does not file and serve the lien as provided in this Part.

History

(2011-165, s. 1.)

§ 44A-24.8. Enforcing lien.

A lien claimant may bring suit to enforce a lien which attaches pursuant to the provisions of this Part in any court of competent jurisdiction in the county where the commercial real estate is located. The lien claimant shall commence proceedings within 18 months after filing the lien, and failure to commence proceedings within the 18 months shall extinguish the lien. If a claim is based upon an option to purchase the commercial real estate, the lien claimant shall commence proceedings within one year of the option to purchase being exercised. A claim for the same lien extinguished pursuant to this section and G.S. 44A-24.10 may not be asserted in any subsequent proceeding. A lender shall not be made a party to any suit to enforce a lien under this Part unless the lender has willfully caused the nonpayment of the commission giving rise to the lien.

History

(2011-165, s. 1.)

§ 44A-24.9. Complaint; content; parties' foreclosure action; procedure.

A complaint filed pursuant to the provisions of this section and G.S. 44A-24.8 shall contain all of the following:
1. A statement of the terms of the written agreement for broker services on which the lien is based or a copy of the written contract or agreement.
2. The date when the written agreement for broker services was made.
3. A description of the services performed.
4. The amount due and unpaid.
5. A description of the property that is subject to the lien.
6. Any other facts necessary for a full understanding of the rights of the parties.
The plaintiff shall file the action against all parties that have an interest of record in the commercial real estate; provided that a lender shall not be made a party to any suit to enforce a lien under this Part unless the lender has willfully caused the nonpayment of the commission giving rise to the lien: a foreclosure action for a lien claimed pursuant to this Part shall be brought pursuant to the provisions of this Article.
Valid prior recorded liens or mortgages shall have priority over a lien under this Part.

History

(2011-165, s. 1.)

§ 44A-24.10. Lien extinguished for lien claimant failing to file suit or answer in pending suit within 30 days after service on owner.

If a lien claimant fails to file a suit to enforce the lien or fails to file an answer in a pending suit to enforce a lien within 30 days after a properly served written demand of the owner, lienee, or other authorized agent, the lien shall be extinguished. Service of the demand shall be by certified mail, return receipt requested, or by personal service. The claimant shall file proof of properly served written demand with the clerk of the superior court. The provisions of this section shall not extend to any other deadline provided by law for the filing of any pleadings or for the foreclosure of any lien governed by this Part.

History

(2011-165, s. 1; 2012-175, s. 12(b).)

Effect of Amendments. - Session Laws 2012-175, s. 12(b), effective July 12, 2012, deleted "registered or" preceding "certified mail" in the second sentence.

§ 44A-24.11. Satisfaction or release of lien.

If a claim for a lien has been filed pursuant to the provisions of this Part with the clerk of superior court and the claim has been paid in full, or if the lien claimant fails to institute a suit to enforce the lien within the time as provided by law, the lien claimant shall acknowledge satisfaction or release of the lien in writing upon written demand of the owner promptly, and in no event more than 30 days after the demand.

History

(2011-165, s. 1.)

§ 44A-24.12. Cost of proceeding to be paid by nonprevailing party.

The costs of any proceeding brought to enforce a lien filed pursuant to this Part, including reasonable attorneys' fees and prejudgment interest due to the prevailing party, shall be paid by the nonprevailing party or parties. If more than one party is responsible for costs, fees, and prejudgment interest, the costs, fees, and prejudgment interest shall be equitably apportioned by the court among the responsible parties.

History

(2011-165, s. 1.)

§ 44A-24.13. Discharge of lien.

Unless an alternative procedure is available and is acceptable to the transferee in a real estate transaction, any claim of lien on commercial real estate filed under this Article may be discharged by any of the following methods:
1. The lien claimant of record, the claimant's agent, or attorney, in the presence of the clerk of superior court, may acknowledge the satisfaction of the claim of lien on the commercial real estate indebtedness, whereupon the clerk of superior court shall enter on the record of the claim of lien on the commercial real estate the acknowledgment of satisfaction, which shall be signed by the lien claimant of record, the claimant's agent, or attorney, and witnessed by the clerk of superior court.
2. The owner may exhibit an instrument of satisfaction signed and acknowledged by the lien claimant of record, which instrument states that the claim of lien on the commercial real estate indebtedness has been paid or satisfied, whereupon the clerk of superior court shall cancel the claim of lien on the commercial real estate by entry of satisfaction on the record of the claim of lien on the commercial real estate.
3. By failure to enforce the claim of lien on the commercial real estate within the time prescribed in this Article.
4. By filing in the office of the clerk of superior court the original or certified copy of a judgment or decree of a court of competent jurisdiction showing that the action by the claimant to enforce the claim of lien on the commercial real estate has been dismissed or finally determined adversely to the claimant.
5. Whenever funds in an amount equal to one hundred twenty-five percent (125%) of the amount of the claim of lien on the commercial real estate is deposited with the clerk of superior court to be applied to the payment finally determined to be due, whereupon the clerk of superior court shall cancel the claim of lien on the commercial real estate.
6. Whenever a corporate surety bond, in an amount equal to one hundred twenty-five percent (125%) of the amount of the claim of lien on the commercial real estate and conditioned upon the payment of the amount finally determined to be due in satisfaction of the claim of lien on the commercial real estate is deposited with the clerk of superior court, whereupon the clerk of superior court shall cancel the claim of lien on the commercial real estate.
7. By failure to file documentation if required pursuant to G.S. 44A-24.6 or G.S. 44A-24.10.
If funds in an amount equal to one hundred twenty-five percent (125%) of the amount that is sufficient to release the claim of lien have been deposited with the clerk of superior court, or a bond in an equal amount has been secured, the lien claimant shall release the claim for the lien on the commercial real estate, and the lien claimant shall have a lien on the funds deposited with the clerk of superior court.

History

(2011-165, s. 1.)

§ 44A-24.14. Priority of lien under this Part.

Any claim of lien on real property or claim of lien on funds allowed under Part 1 or Part 2 of this Article shall be deemed superior in all respects to any lien asserted under this Part, regardless of the effective date of the competing liens and shall survive notwithstanding any judgment awarding a lien under this Part. No lien claimant filing a lien pursuant to this Part shall be entitled to participate in any pro rata distributions to claimants proceeding under G.S. 44A-21.

History

(2011-165, s. 1.)

ARTICLE 3. Model Payment and Performance Bond.

Sec.

§ 44A-25. Definitions.

Unless the context otherwise requires in this Article:

"Claimant" includes any individual, firm, partnership, association or corporation entitled to maintain an action on a bond described in this Article and shall include the "contracting body" in a suit to enforce the performance bond.
"Construction contract" means any contract for the construction, reconstruction, alteration or repair of any public building or other public work or public improvement, including highways.
"Contracting body" means any department, agency, or political subdivision of the State of North Carolina which has authority to enter into construction contracts.
"Contractor" means any person who has entered into a construction contract with a contracting body.
"Labor or materials" shall include all materials furnished or labor performed in the prosecution of the work called for by the construction contract regardless of whether or not the labor or materials enter into or become a component part of the public improvement, and further shall include gas, power, light, heat, oil, gasoline, telephone services and rental of equipment or the reasonable value of the use of equipment directly utilized in the performance of the work called for in the construction contract.
"Subcontractor" means any person who has contracted to furnish labor or materials to, or who has performed labor for, a contractor or another subcontractor in connection with a construction contract.

History

(1973, c. 1194, s. 1.)

Local Modification. - (As to Article 3) Onslow: 2013-37, s. 1(e); (As to Article 3) City of Charlotte: 1987, c. 329, s. 2; (As to Article 3) city of Durham: 1987, c. 789; 1991, c. 107; (As to Article 3) city of Mount Airy: 2003-281, s. 1; (As to Article 3) town of Manteo: 1985 (Reg. Sess., 1986), c. 808.

Legal Periodicals. - For note, "Mechanics' Liens - Judicial Legislation at Work: Changes in the Mechanics' Lien Law of North Carolina after Electric Supply Co. v. Swain Electrical Co.," see 27 Wake Forest L. Rev. 1033 (1992).

CASE NOTES

Right of Materialman Who Furnishes Material to Subcontractor to Recover. - Neither actual delivery of material to a prime contract job site nor incorporation of the material into the work affects a materialman's right to recover under the contractor's payment bond; in order for a materialman who furnishes a subcontractor with materials for use on a public project to recover against a prime contractor's payment bond pursuant to this Article, it is only necessary that the materialman has sold and delivered the materials to the subcontractor in good faith and under the reasonable belief that these materials were for ultimate use under the prime contract. Syro Steel Co. v. Hubbell Hwy. Signs, Inc., 108 N.C. App. 529, 424 S.E.2d 208 (1993).

Where there was evidence that a materialman delivered material to a subcontractor in good faith and under the reasonable belief that the material was intended for use on the construction project, and where the subcontractor failed to present any evidence indicating that the materialman should have had reasonable grounds to believe that materials shipped to the subcontractor's warehouse were not intended for the project site, the trial court did not err in granting summary judgment in favor of the materialman against the contractor's payment bond for the materials shipped to the project site and to the warehouse. Syro Steel Co. v. Hubbell Hwy. Signs, Inc., 108 N.C. App. 529, 424 S.E.2d 208 (1993).

Assignee of Subcontractor Was Also a Subcontractor. - Assignee of a subcontractor that installed a fire protection system on a port project that the prime contractor contracted with the subcontractor to install was a second-tier subcontractor and thus a subcontractor under G.S. 44A-25(6); therefore, a supplier that sold supplies for the project to the assignee could bring a performance bond claim when the assignee did not pay for the supplies. HSI N.C. LLC v. Diversified Fire Prot. of Wilmington, Inc., 169 N.C. App. 767, 611 S.E.2d 224 (2005).

Applied in Interstate Equip. Co. v. Smith, 292 N.C. 592, 234 S.E.2d 599 (1977); Noland Co. v. Poovey, 58 N.C. App. 800, 295 S.E.2d 238 (1982); Southeastern Steel Erectors, Inc. v. Inco, Inc., 108 N.C. App. 429, 424 S.E.2d 433 (1993); McClure Estimating Co. v. H.G. Reynolds Co., 136 N.C. App. 176, 523 S.E.2d 144 (1999).

Cited in Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987); Gemini Drilling & Found., LLC v. Nat'l Fire Ins. Co., 192 N.C. App. 376, 665 S.E.2d 505 (2008).

§ 44A-26. Bonds required.

When the total amount of construction contracts awarded for any one project exceeds three hundred thousand dollars ($300,000), a performance and payment bond as set forth in (1) and (2) is required by the contracting body from any contractor or construction manager at risk with a contract more than fifty thousand dollars ($50,000); provided that, for State departments, State agencies, and The University of North Carolina and its constituent institutions, a performance and payment bond is required in accordance with this subsection if the total amount of construction contracts awarded for any one project exceeds five hundred thousand dollars ($500,000). In the discretion of the contracting body, a performance and payment bond may be required on any construction contract as follows:
1. A performance bond in the amount of one hundred percent (100%) of the construction contract amount, conditioned upon the faithful performance of the contract in accordance with the plans, specifications and conditions of the contract. Such bond shall be solely for the protection of the contracting body that is constructing the project.
2. A payment bond in the amount of one hundred percent (100%) of the construction contract amount, conditioned upon the prompt payment for all labor or materials for which a contractor or subcontractor is liable. The payment bond shall be solely for the protection of the persons furnishing materials or performing labor for which a contractor, subcontractor, or construction manager at risk is liable.
The performance bond and the payment bond shall be executed by one or more surety companies legally authorized to do business in the State of North Carolina and shall become effective upon the awarding of the construction contract.

History

(1973, c. 1194, s. 1; 1983, c. 818; 1987 (Reg. Sess., 1988), c. 1108, s. 10; 1995, c. 367, s. 3; 2001-496, s. 7; 2010-148, s. 1.)

Local Modification. - Guilford: 1987 (Reg. Sess., 1988), c. 1010, s. 1; city of Greensboro: 1987 (Reg. Sess., 1988), c. 1010, s. 1; city of Winston-Salem: 1987 (Reg. Sess., 1988), c. 949; town of Carrboro: 1995, c. 339, s. 5.

Cross References. - As to waiver of bonding requirements for Small Business Enterprises bids, see G.S. 136-28.10.

As to department reporting provisions on projects let without a performance or payment bond, see G.S. 143-129(i).

Editor's Note. - Session Laws 2005-276, s. 28.10, as amended by Session Laws 2006-67, s. 1, provides: "(a) The Department of Transportation may implement up to two performance-based contracts for routine maintenance and operations, exclusive of resurfacing. Selection of firms to perform this work shall be made using a best-value procurement process.

"Prior to any advertisement for a proposed project, the Department shall report to the Joint Legislative Transportation Oversight Committee on the contractor selection criteria to be used."

"(b) For contracts authorized under this section, notwithstanding G.S. 44A-26(a)(1) and (a)(2), the Department of Transportation may require the bonds issued pursuant to Article 3 of Chapter 44A of the General Statutes for public construction to be provided on a periodic basis and in the amount to cover that specific period rather than for the entire project duration."

Effect of Amendments. - Session Laws 2010-148, s. 1, effective October 1, 2010, and applicable to construction contracts awarded on or after that date, added the proviso at the end of the first sentence in the introductory paragraph of subsection (a).

CASE NOTES

Article Presumed Written into Payment Bond. - In all cases of public construction for which a payment bond is required under this section, the provisions of this Article are conclusively presumed to have been written into the payment bond. Pyco Supply Co. v. American Centennial Ins. Co., 321 N.C. 435, 364 S.E.2d 380 (1988).

Requirement for Benefit of Laborers and Subcontractors. - Statutory bond requirement in G.S. 44A-26(a)(2) are clearly and explicitly for the benefit of laborers and subcontractors. James River Equip., Inc v. Tharpe's Excavating, Inc., 179 N.C. App. 336, 634 S.E.2d 548, review denied, appeal dismissed, 361 N.C. 167, 639 S.E.2d 651 (2006).

The subcontractor is bound by the subcontract language when dealing with the surety. Otherwise, the relationship between the surety and the principal is fundamentally altered. Mason C. Day Excavating, Inc. v. Crowder Constr. Co., 676 F. Supp. 670 (W.D.N.C. 1987).

Sureties' Liability to Subcontractor. - Trial court erred in determining that a breach of a subcontract was outside the terms of a payment bond executed by a general contractor on a construction project for the State of North Carolina because the payment bond stated it applied to "all persons supplying labor and materials in prosecution of the project" and that language coupled with G.S. 44A-26(a)(2) was sufficient to hold two insurers liable to a subcontractor as sureties on the payment bond. Southern Seeding Serv. v. W.C. English, Inc., 217 N.C. App. 300, 719 S.E.2d 211 (2011).

Agreement for Delayed Payment. - This Article does not explicitly provide that an agreement for delayed payment after termination of the subcontract is void. Mason C. Day Excavating, Inc. v. Crowder Constr. Co., 676 F. Supp. 670 (W.D.N.C. 1987).

Proof That Materials Were Used on Project. - If the supplier in good faith furnished the material for the construction of the project, it is entitled to recover for the materials so furnished. It is not required to prove that the materials were actually used on the project. Noland Co. v. Poovey, 58 N.C. App. 800, 295 S.E.2d 238 (1982).

Submission of Surety's Liability to Jury. - Where there is evidence from which a jury could conclude that the supplier delivered some materials to the job site which it did not in good faith believe were intended for the project, the issue as to the surety's liability on the bond should be submitted to the jury. Noland Co. v. Poovey, 58 N.C. App. 800, 295 S.E.2d 238 (1982).

Bond Must Be Provided for Life of Project. - General contractor could be held liable to the supplier for failure to provide a payment bond for the life of the project because the bond requirements of G.S. 44A-26, extended throughout life of project. James River Equip., Inc v. Tharpe's Excavating, Inc., 179 N.C. App. 336, 634 S.E.2d 548, review denied, appeal dismissed, 361 N.C. 167, 639 S.E.2d 651 (2006).

Applied in HSI N.C. LLC v. Diversified Fire Prot. of Wilmington, Inc., 169 N.C. App. 767, 611 S.E.2d 224 (2005).

Cited in Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987); James River Equip., Inc. v. Mecklenburg Utils., Inc., 179 N.C. App. 414, 634 S.E.2d 557 (2006); S. Seeding Serv. v. W.C. English, 224 N.C. App. 90, 735 S.E.2d 829 (2012).

Opinions of Attorney General

Withholding of Prime Contractor's Funds Unnecessary. - Even in view of the required statutory contract payment bond, the provisions of Article 32 of the general contract conditions of state construction contracts (which provides for the withholding of the prime contractor's funds upon notice of a claim by the subcontractor against the prime contractor) are not necessary; since the subcontractor is adequately protected by the contract payment bond required by Article 3 of Chapter 44A, there is no legal requirement for withholding such funds. See opinion of Attorney General to Mr. James S. Lofton, Secretary, N.C. Department of Transportation, 58 N.C.A.G. 25 (1988).

§ 44A-27. Actions on payment bonds; service of notice.

Subject to the provision of subsection (b) hereof, any claimant who has performed labor or furnished materials in the prosecution of the work required by any contract for which a payment bond has been given pursuant to the provisions of this Article, and who has not been paid in full therefor before the expiration of 90 days after the day on which the claimant performed the last such labor or furnished the last such materials for which he claims payment, may bring an action on such payment bond in his own name, to recover any amount due him for such labor or materials and may prosecute such action to final judgment and have execution on the judgment.
Any claimant who has a direct contractual relationship with any subcontractor but has no contractual relationship, express or implied, with the contractor may bring an action on the payment bond only if he has given written notice of claim on payment bond to the contractor within 120 days from the date on which the claimant performed the last of the labor or furnished the last of the materials for which he claims payment, stating with substantial accuracy the amount claimed and the name of the person for whom the work was performed or to whom the material was furnished. The contractor shall, in response to a written request served by any claimant in accordance with the provisions of subsection (c) of this section, send a copy of the payment bond required by this Article to the claimant making the request within seven calendar days after receipt of such request. Subject to the exception set forth in subsection (e) of this section, unless the contractor has failed to satisfy its obligation to timely furnish a copy of the payment bond to a claimant upon proper request by the claimant, the claim of such a claimant shall not include labor or materials provided more than 75 days prior to the claimant's service, in accordance with subsections (c) and (d) of this section, of its written notice of public subcontract to the contractor.
The notices required by and any requests for copy of payment bond referenced by subsection (b) of this section, shall be served by certified mail, or by signature confirmation as provided by the United States Postal Service, postage prepaid, in an envelope addressed to such contractor at any place where his office is regularly maintained for the transaction of business or to such agent identified in the contractor's project statement referenced in subdivision (1) of subsection (f) of this section or served in any manner provided by law for the service of summons.
The form of the notice of public subcontract to be served pursuant to subsection (b) of this section shall be substantially as follows:
1. Name and address of the subcontractor giving notice of public subcontract: (2) General description of the real property on which the labor was or is to be performed or the material was or is to be furnished (street address, tax map lot and block number, reference to recorded instrument, or any description that reasonably identifies the real property): (3) General description of the subcontractor's contract, including the names and addresses of the parties thereto: (4) General description of the labor and material performed and furnished thereunder: Dated: __________________ __________________________________________________________________ Subcontractor"
Notwithstanding subsections (b), (c), and (d) of this section, the obligation to provide a notice of public subcontract shall not apply to claims of twenty thousand dollars ($20,000) or less and, for any claim exceeding twenty thousand dollars ($20,000), shall apply only to that portion of the claim in excess of twenty thousand dollars ($20,000).
In connection with any construction contract for which a bond is required by G.S. 44A-26(a), all of the following shall apply:
1. The contractor shall provide to each subcontractor that it engages to perform labor or furnish materials in the performance of the construction contract a contractor's project statement containing all of the following information:
  1. The name of the project.
  2. The physical address of the project.
  3. The name of the contracting body.
  4. The name of the contractor.
  5. The name, phone number, and mailing address of an agent authorized by the contractor to accept service of the requests for payment bond, the notice of public subcontract, and the notice of claim on payment bond referenced in subsection (b) of this section.
  6. The name and address of the principal place of business of the surety issuing the payment bond required by G.S. 44A-26(a) for the construction contract.
2. Each subcontractor shall provide each subcontractor that it engages to perform labor or furnish materials in the performance of the construction contract a copy of the contractor's project statement.
3. No agreement entered into between a contractor and a subcontractor or between a subcontractor and its subcontractor shall be enforceable against the lower tier party until the contractor's project statement has been provided to the lower tier party.

"NOTICE OF PUBLIC SUBCONTRACT

History

(1973, c. 1194, s. 1; 1987, c. 569; 2001-177, s. 1; 2001-487, s. 100; 2012-175, s. 11; 2013-16, s. 6.)

Effect of Amendments. - Session Laws 2012-175, s. 11, effective January 1, 2013, in subsection (b), inserted "of claim on payment bond" near the middle of the first sentence and added the second and third sentences; rewrote subsection (c); and added subsections (d) through (f). For applicability, see editor's note.

Session Laws 2013-16, s. 6, rewrote the second sentence in (b), which formerly read "The contractor shall furnish a copy of the payment bond required by this Article within seven calendar days in response to a written request served by any claimant in accordance with the provisions of subsection (c) of this section." For effective date and applicability, see editor's note.

CASE NOTES

Subcontractor's Assignee Was a Subcontractor. - Supplier was entitled to summary judgment and an award of damages because the supplier gave a timely written notice of a performance bond claim when a subcontractor's assignee, and therefore a subcontractor as defined by G.S. 44A-25(6), failed to pay for supplies purchased from the supplier for a port project. HSI N.C. LLC v. Diversified Fire Prot. of Wilmington, Inc., 169 N.C. App. 767, 611 S.E.2d 224 (2005).

Failure to Mitigate. - Supplier was not estopped from its performance bond claim for failure to mitigate by giving an earlier notification as the notice given by the supplier was timely given under the statute. HSI N.C. LLC v. Diversified Fire Prot. of Wilmington, Inc., 169 N.C. App. 767, 611 S.E.2d 224 (2005).

Applied in Monteau v. Reis Trucking & Constr., Inc., 147 N.C. App. 121, 553 S.E.2d 709 (2001).

Cited in Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987); Symons Corp. v. Insurance Co. of N. Am., 94 N.C. App. 541, 380 S.E.2d 550 (1989).

§ 44A-28. Actions on payment bonds; venue and limitations.

Every action on a payment bond as provided in G.S. 44A-27 shall be brought in a court of appropriate jurisdiction in a county where the construction contract or any part thereof is to be or has been performed.
No action on a payment bond shall be commenced after the expiration of the longer period of one year from the day on which the last of the labor was performed or material was furnished by the claimant, or one year from the day on which final settlement was made with the contractor.

History

(1973, c. 1194, s. 1.)

Legal Periodicals. - For survey of North Carolina construction law, see 21 Wake Forest L. Rev. 633 (1986).

CASE NOTES

Purpose of employing "final settlement" as yardstick is that it provides definite time, fixed by public record and readily ascertainable, after which subcontractors must bring suit. Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987), rev'd on other grounds, 321 N.C. 435, 364 S.E.2d 380 (1988).

For discussion of meaning of "final settlements," see Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987), rev'd on other grounds, 321 N.C. 435, 364 S.E.2d 380 (1988).

Appellate court does not find that a final completion requirement needs to be implied into G.S. 44A-28(b) since the doctrine of substantial completion adequately addresses concerns that there could be a final ascertainment of the amount due immediately on the execution of a contract; certainly a project must be substantially complete before a governmental agency is capable of administratively fixing the amount it is bound to pay, however, the North Carolina legislature does not expressly require the contract to be 100-percent completed before the government may determine the final settlement, and the appellate court does not import this language into North Carolina law. Cencomp, Inc. v. Webcon, Inc., 157 N.C. App. 501, 579 S.E.2d 482 (2003).

It is true that the government's retainage of funds casts doubt on whether its payment was intended to be a genuinely "final payment" for purposes of determining a final settlement under G.S. 44A-28(b); however, final payment and final settlement are not synonymous, and while retainage directly affects final payment, it does not have a similar impact on final settlement. A governmental entity may administratively fix the amount it is bound to pay, and then retain a portion of that payment to ensure not only that the contractor completes the entire project, including the punch-list, but also that no liens are outstanding. Cencomp, Inc. v. Webcon, Inc., 157 N.C. App. 501, 579 S.E.2d 482 (2003).

Construction Contract is Prime Contract. - A complaint which was filed in the county where some portion of a subcontract was performed should have been removed for improper venue to the county where the prime contract was performed because the statutory definitions, the plain language, context and federal case law support an interpretation that "the construction contract" addressed in this section is the prime contract and only the prime contract. McClure Estimating Co. v. H.G. Reynolds Co., 136 N.C. App. 176, 523 S.E.2d 144 (1999).

When Limitation Period Commences to Run. - Subsection (b) is a statute of repose; therefore the limitation period contained therein runs from the longer period of one year from the last day on which labor was performed or material was furnished, or one year from the date of final settlement with the contractor. Tipton & Young Constr. Co. v. Blue Ridge Structure Co., 116 N.C. App. 115, 446 S.E.2d 603, aff'd, 340 N.C. 257, 456 S.E.2d 308 (1995).

Subcontractors' suit against the contractor's insurer was time-barred under G.S. 44A-28(b) where: (1) the contractor had sent a final bill on the project to the City; (2) the project engineer had advised the City that the work was substantially complete and that final payment (less a retainage) should be made, with the retainage balance to be paid after the City was satisfied that the project was 100-percent complete; (3) the City wrote the contractor a check for the final amount less the retainer more than one year before the suit was filed; (4) the City's Finance Director was confident that the final sum had been determined even though a retainage had been kept; and (5) the City's engineering technician testified that contractors submitted a final bill and that the retainage was usually paid one to three months later. Cencomp, Inc. v. Webcon, Inc., 157 N.C. App. 501, 579 S.E.2d 482 (2003).

Contractual Reduction of Statutory Limitation Time Disregarded. - Where the contractual provisions of a bond sought to shorten the limitation period to the minimum allowed under subsection (b), but the statute provides for the longer period, the contractual limits set out in the bond would be disregarded to the extent they would reduce the limitation period allowed under subsection (b). Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987), rev'd on other grounds, 321 N.C. 435, 364 S.E.2d 380 (1988).

Parties cannot contract to shorten the one-year limitations period for payment bonds required by the public bond statute. However, in contrast to the provisions governing payment bonds, the public bond statute does not specify a limitations period for performance bonds. Town of Pineville v. Atkinson/Dyer/Watson Architects, 114 N.C. App. 497, 442 S.E.2d 73 (1994).

Amended Complaint Related Back to Filing of Original Complaint. - Where supplier attached contract two to its original complaint, where supplier amended the complaint to state a claim which included contract four, and where the original complaint and amended complaint, viewed together, evidenced the intention of the supplier to collect all outstanding sums owed by general contractor to supplier for material supplied in connection with any bonded contract on which surety for general contractor was liable, allegations in original complaint were sufficient to put surety on notice of all of supplier's claims, and the amended complaint related back to the original complaint; Court of Appeals erred in holding that since one year limitation in subsection (b) was a substantive element of the claim that had gone unsatisfied, the amended complaint could not relate back to date of the filing of the original complaint. Pyco Supply Co. v. American Centennial Ins. Co., 321 N.C. 435, 364 S.E.2d 380 (1988).

Applied in Mid-South Constr. Co. v. Wilson, 71 N.C. App. 445, 322 S.E.2d 418 (1984).

Cited in Pyco Supply Co. v. American Centennial Ins. Co., 321 N.C. 435, 364 S.E.2d 380 (1988).

§ 44A-29. Limitation of liability of a surety.

No surety shall be liable under a payment bond for a total amount greater than the face amount of the payment bond. A judgment against any surety may be reduced or set aside upon motion by the surety and a showing that the total amount of claims paid and judgments previously rendered under such payment bond, together with the amount of the judgment to be reduced or set aside, exceeds the face amount of the bond.

History

(1973, c. 1194, s. 1.)

§ 44A-30. Variance of liability; contents of bond.

No act of or agreement between a contracting body, a contractor or a surety shall reduce the period of time for giving notice under G.S. 44A-27(b) or commencing action under G.S. 44A-28(b) or otherwise reduce or limit the liability of the contractor or surety as prescribed in this Article.
Every bond given by a contractor to a contracting body pursuant to this Article shall be conclusively presumed to have been given in accordance herewith, whether or not such bond be so drawn as to conform to this Article. This Article shall be conclusively presumed to have been written into every bond given pursuant thereto.

History

(1973, c. 1194, s. 1.)

CASE NOTES

Article Presumed Written into Payment Bond. - In all cases of public construction for which a payment bond is required under G.S. 44A-26, the provisions of this Article are conclusively presumed to have been written into the payment bond. Pyco Supply Co. v. American Centennial Ins. Co., 321 N.C. 435, 364 S.E.2d 380 (1988).

Cited in Noland Co. v. Poovey, 58 N.C. App. 800, 295 S.E.2d 238 (1982); Pyco Supply Co. v. American Centennial Ins. Co., 85 N.C. App. 114, 354 S.E.2d 360 (1987).

§ 44A-31. Certified copy of bond and contract.

Any person entitled to bring an action or any defendant in an action on a payment bond shall have a right to require the contracting body to certify and furnish a copy of the payment bond and of the construction contract covered by the bond. It shall be the duty of such contracting body to give any such person a certified copy of the payment bond and the construction contract upon not less than 10 days' notice and request. The contracting body may require a reasonable payment for the actual cost of furnishing the certified copy.
A copy of any payment bond and of the construction contract covered by the bond certified by the contracting body shall constitute prima facie evidence of the contents, execution and delivery of such bond and construction contract.

History

(1973, c. 1194, s. 1.)

§ 44A-32. Designation of official; violation a misdemeanor.

Each contracting body shall designate an official thereof to require the bonds described by this Article. If the official so designated shall fail to require said bond, he shall be guilty of a Class 1 misdemeanor.

History

(1973, c. 1194, s. 1; 1993, c. 539, s. 407; 1994, Ex. Sess., c. 24, s. 14(c).)

CASE NOTES

No Civil Remedy Available Against Board of Education. - Claims for failure to maintain a performance bond against the Board of Education were properly dismissed because the supplier had no civil remedy against the Board for such a violation. James River Equip., Inc v. Tharpe's Excavating, Inc., 179 N.C. App. 336, 634 S.E.2d 548, review denied, appeal dismissed, 361 N.C. 167, 639 S.E.2d 651 (2006).

§ 44A-33. Form.

A performance bond form containing the following provisions shall comply with this Article: the date the bond is executed; the name of the principal; the name of the surety; the name of the contracting body; the amount of the bond; the contract number; and the following conditions:
A payment bond form containing the following provisions shall comply with this Article: the date the bond is executed; the name of the principal; the name of the surety; the name of the contracting body; the contract number; and the following conditions:

"KNOW ALL MEN BY THESE PRESENTS, That we, the PRINCIPAL AND SURETY above named, are held and firmly bound unto the above named Contracting Body, hereinafter called the Contracting Body, in the penal sum of the amount stated above for the payment of which sum well and truly to be made, we bind ourselves, our heirs, executors, administrators, and successors, jointly and severally, firmly by these presents.

"THE CONDITION OF THIS OBLIGATION IS SUCH, that whereas the Principal entered into a certain contract with the Contracting Body, numbered as shown above and hereto attached:

"NOW THEREFORE, if the Principal shall well and truly perform and fulfill all the undertakings, covenants, terms, conditions, and agreements of said contract during the original term of said contract and any extensions thereof that may be granted by the Contracting Body, with or without notice to the Surety, and during the life of any guaranty required under the contract, and shall also well and truly perform and fulfill all the undertakings, covenants, terms, conditions, and agreements of any and all duly authorized modifications of said contract that may hereafter be made, notice of which modifications to the Surety being hereby waived, then, this obligation to be void; otherwise to remain in full force and virtue.

"IN WITNESS WHEREOF, the above-bounden parties have executed this instrument under their several seals on the date indicated above, the name and corporate seal of each corporate party being hereto affixed and these presents duly signed by its undersigned representative, pursuant to authority of its governing body."

Appropriate places for execution by the surety and principal shall be provided.

"KNOW ALL MEN BY THESE PRESENTS, That we, the PRINCIPAL and SURETY above named, are held and firmly bound unto the above named Contracting Body, hereinafter called the Contracting Body, in the penal sum of the amount stated above, for the payment of which sum well and truly to be made, we bind ourselves, our heirs, executors, administrators, and successors, jointly and severally, firmly by these presents.

"THE CONDITION OF THIS OBLIGATION IS SUCH, that whereas the Principal entered into a certain contract with the Contracting Body, numbered as shown above and hereto attached;

"NOW THEREFORE, if the Principal shall promptly make payment to all persons supplying labor and material in the prosecution of the work provided for in said contract, and any and all duly authorized modifications of said contract that may hereafter be made, notice of which modifications to the Surety being hereby waived, then this obligation to be void; otherwise to remain in full force and virtue.

Appropriate places for execution by the surety and principal shall be provided.

History

(1973, c. 1194, s. 1.)

§ 44A-34. Construction of Article.

The addition of this Article shall not be construed as making the provisions of Articles 1 and 2 of Chapter 44A of the General Statutes apply to public bodies or public buildings.

History

(1973, c. 1194, s. 3.)

§ 44A-35. Attorneys' fees.

In any suit brought or defended under the provisions of Article 2 or Article 3 of this Chapter, the presiding judge may allow a reasonable attorneys' fee to the attorney representing the prevailing party. This attorneys' fee is to be taxed as part of the court costs and be payable by the losing party upon a finding that there was an unreasonable refusal by the losing party to fully resolve the matter which constituted the basis of the suit or the basis of the defense. For purposes of this section, "prevailing party" is a party plaintiff or third party plaintiff who obtains a judgment of at least fifty percent (50%) of the monetary amount sought in a claim or is a party defendant or third party defendant against whom a claim is asserted which results in a judgment of less than fifty percent (50%) of the amount sought in the claim defended. Notwithstanding the foregoing, in the event an offer of judgment is served in accordance with G.S. 1A-1, Rule 68, a "prevailing party" is an offeree who obtains judgment in an amount more favorable than the last offer or is an offeror against whom judgment is rendered in an amount less favorable than the last offer.

History

(1991 (Reg. Sess., 1992), c. 1010, s. 3; 1993 (Reg. Sess., 1994), c. 763, s. 1.)

CASE NOTES

Discretion of Trial Judge. - Where the trial judge found as a fact that there was no unreasonable refusal to resolve the dispute, his determination not to award attorney fees was not an abuse of discretion. Barrett Kays & Assocs. v. Colonial Bldg. Co., 129 N.C. App. 525, 500 S.E.2d 108 (1998).

Construction. - G.S. 44A-35 is remedial in nature and must be liberally construed. Martin & Loftis Clearing & Grading, Inc. v. Saieed Constr. Sys. Corp., 168 N.C. App. 542, 608 S.E.2d 124 (2005).

Prevailing Party. - G.S. 44A-35 provides a specific definition of what constitutes a prevailing party when an offer of judgment is made by stating that there is no prevailing party when such an offer is made and accepted. Martin & Loftis Clearing & Grading, Inc. v. Saieed Constr. Sys. Corp., 168 N.C. App. 542, 608 S.E.2d 124 (2005).

Unjustifiable Refusal. - In a contractor's suit against homeowners for payment, a trial court did not abuse the court's discretion by awarding attorney fees without first finding an unjustifiable refusal to resolve the matter out of court because (1) the court found the homeowners' unreasonable refusal to resolve the basis of the suit, and (2) the court's findings showed the award was the product of a reasoned decision. Brown's Builders Supply, Inc. v. Johnson, 240 N.C. App. 8, 769 S.E.2d 653 (2015).

Award Proper. - Grassing subcontractor was properly awarded attorney's fees under G.S. 44A-35 as an erosion subcontractor's claims that the payment bond obligations were not triggered since there was not a default, and that the erosion subcontractor was not a party to the payment bond were misplaced because the trial court found that the grassing subcontractor was the prevailing party in the breach of contract suit and that the erosion subcontractor unreasonably refused to resolve the matter. S. Seeding Serv. v. W.C. English, 224 N.C. App. 90, 735 S.E.2d 829 (2012).

Grassing subcontractor was properly awarded attorney's fees under G.S. 44A-35 because: (1) the grassing subcontractor was not appropriately paid for work it performed for an erosion subcontractor; (2) the grassing subcontractor took the matter to trial; (3) the sureties and the erosion subcontractor lost at trial; (4) the erosion subcontractor was found to have unreasonably refused to settle because of actions taken or not taken prior to judgment; and (5) the erosion subcontractor's claim that it was not obligated to pay the equitable adjustment funds until the trial court entered the judgment and thus did not unreasonably refuse to settle was rejected. S. Seeding Serv. v. W.C. English, 224 N.C. App. 90, 735 S.E.2d 829 (2012).

When, in a builder's suit against a homeowner to enforce a lien, the homeowner was granted summary judgment, the builder showed no abuse of discretion in granting the homeowner attorneys' fees because (1) the builder submitted no transcripts, (2) the trial court made requisite findings based on the parties' stated actions at mediation, when the homeowner rejected the builder's settlement demand, affidavits and argument, and (3) the homeowner prevailed. R & L Constr. of Mt. Airy, LLC v. Diaz, 240 N.C. App. 194, 770 S.E.2d 698 (2015).

Award of Attorneys' Fees Held Error. - In a breach of contract suit wherein plaintiff subcontractor accepted an offer of judgment made by defendant general contractor, the suit was settled and the trial court erred by granting an award of attorneys' fees to the subcontractor; when an offer of judgment is involved, no prevailing or losing party exists and an award of attorneys' fees is precluded under G.S. 44A-35. Martin & Loftis Clearing & Grading, Inc. v. Saieed Constr. Sys. Corp., 168 N.C. App. 542, 608 S.E.2d 124 (2005).

Trial court erred in granting a builder attorney's fees pursuant to G.S. 44A-35 because the trial court awarded the builder attorney fees as the prevailing party, but the builder could not prevail within the meaning of G.S. 44A-35 because the court of appeals concluded that trial court erred in granting the builder a lien on owners' real property on the theory of quantum meruit; to establish a valid claim of lien under G.S. 44A-8, an enforceable contract has to exist between the parties. Waters Edge Builders, LLC v. Longa, 214 N.C. App. 350, 715 S.E.2d 193 (2011).

Cited in Members Interior Constr., Inc. v. Leader Constr. Co., 124 N.C. App. 121, 476 S.E.2d 399 (1996); HSI N.C. LLC v. Diversified Fire Prot. of Wilmington, Inc., 169 N.C. App. 767, 611 S.E.2d 224 (2005).

§§ 44A-36 through 44A-39: Reserved for future codification purposes.

ARTICLE 4. Self-Service Storage Facilities.

Sec.

§ 44A-40. Definitions.

As used in this Article, unless the context clearly requires otherwise:

"E-mail" or "electronic mail" means an electronic message or an executable program or computer file that contains an image of a message that is transmitted between two or more computers or electronic terminals. The term includes electronic messages that are transmitted within or between computer networks.
"Independent bidder" means a person who is not related to the lienor, within the meaning of G.S. 25-9-102(62), in the case of a lienor who is an individual, or G.S. 25-9-102(63), in the case of a lienor that is an organization.
"Last known address" means that mailing address or e-mail address provided by the occupant in the latest rental agreement or the address provided by the occupant in a subsequent written notice of a change of address.
"Lienor" means any person entitled to a lien under this Article.
"Occupant" means a person, his sublessee, successor, or assign, entitled to the use of the storage space at a self-service storage facility under a rental agreement, to the exclusion of others.
"Owner" means the owner, operator, lessor, or sublessor of a self-service storage facility, his agent, or any other person authorized by him to manage the facility or to receive rent from an occupant under a rental agreement.
"Personal property" means movable property not affixed to land and includes, but is not limited to, goods, merchandise, household items, and watercraft.
"Rental agreement" means any agreement or lease, written or oral, that establishes or modifies the terms, conditions, rules or any other provisions concerning the use and occupancy of a self-service storage facility.
"Self-service storage facility" means any real property designed and used for the purpose of renting or leasing individual storage space to occupants who are to have access to such for the purpose of storing and removing personal property. No occupant shall use a self-service storage facility for residential purposes. A self-service storage facility is not subject to the provisions of Article 7 of General Statutes Chapter 25. Provided, however, if an owner issues any warehouse receipt, bill of lading, or other document of title for the personal property stored, the owner and the occupant are subject to the provisions of Article 7 of General Statutes Chapter 25 and the provisions of this Article do not apply.
"Verified electronic mail" means electronic mail that is transmitted to an e-mail address that the sender has verified by any reasonable means as being a working electronic mail address.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1; 2013-239, s. 1.)

Editor's Note. - Subdivision (1) was redesignated as subdivision (1b) and subdivisions (8) through (10), as enacted by Session Laws 2013-239, have been redesignated as subdivisions (1), (1a), and (8), respectively, at the direction of the Revisor of Statutes to maintain alphabetical order.

Effect of Amendments. - Session Laws 2013-239, s. 1, effective October 1, 2013, in subdivision (1b), substituted "that mailing address or e-mail address" for "that address"; substituted "household items, and watercraft" for "and household items" in subdivision (5); and added present subdivisions (1), (1a) and (8).

§ 44A-41. Self-service storage facility owner entitled to lien.

The owner of a self-service storage facility has a lien upon all personal property stored at the facility for rent, expenses necessary for the preservation of the personal property, and expenses reasonably incurred in the sale or other disposition of the personal property pursuant to this Article. This lien shall not have priority over any security interest which is perfected at the time the occupant stores the property at the self-service storage facility. For purposes of this Article, to identify an existing security interest in stored property, the owner shall conduct an online search for Uniform Commercial Code financing statements filed with the Office of the Secretary of State in the name of the occupant.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1; 2009-201, s. 1.)

Effect of Amendments. - Session Laws 2009-201, s. 1, effective October 1, 2009, added the last sentence.

§ 44A-42. When self-service storage facility lien arises and terminates.

The lien conferred under this Article arises only when the owner acquires possession of the property stored in the self-service storage facility; and it shall terminate when the owner relinquishes possession of the property upon which the lien might be claimed, or when the occupant or any other person having a security or other interest in the property tenders prior to sale the amount of the rent, plus the expenses incurred by the owner for the preservation of the property. The reacquisition of possession of the property stored in the self-service storage facility, which was relinquished, shall not reinstate the lien.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1.)

§ 44A-43. Enforcement of self-service storage facility lien.

If the rent and other charges for which the lien is claimed under this Article remain unpaid or unsatisfied for 15 days following the maturity of the obligation to pay rent, the owner may enforce the lien by a public sale or other disposition of the property as provided in this section. The owner may bring an action to collect rent and other charges in any court of competent jurisdiction at any time following the maturity of the obligation to pay the rent.
Notice and Hearing:
1. If the property upon which the lien is claimed is a motor vehicle, the lienor, following the expiration of the 15-day period provided by subsection (a), shall give notice to the Division of Motor Vehicles that a lien is asserted and that a sale is proposed. The lienor shall remit to the Division a fee of two dollars ($2.00); and shall also furnish the Division with the last known address of the occupant. The Division of Motor Vehicles shall issue notice by certified mail, return receipt requested to the person having legal title to the vehicle, if reasonably ascertainable, and to the occupant, if different, at his last known address. The notice shall:
  1. State: (i) that a lien is being asserted against the specific vehicle by the lienor or owner of the self-service storage facility, (ii) that the lien is being asserted for rental charges at the self-service storage facility, (iii) the amount of the lien, and (iv) that the lienor intends to sell or otherwise dispose of the vehicle in satisfaction of the lien;
  2. Inform the person having legal title and the occupant of their right to a judicial hearing at which a determination will be made as to the validity of the lien prior to a sale taking place; and
  3. State that the legal title holder and the occupant have a period of 10 days from the date of receipt of the notice in which to notify the Division of Motor Vehicles by certified mail, return receipt requested, that a hearing is desired to contest the sale of the vehicle pursuant to the lien.
2. If the property upon which the lien is claimed is a motor vehicle, watercraft, or trailer, and rent and other charges related to the property remain unpaid or unsatisfied for 60 days following the maturity of the obligation to pay rent, the lienor may have the property towed. If a motor vehicle is towed as authorized in this subdivision, the lienor shall not be liable for the motor vehicle or any damages to the motor vehicle once the tower takes possession of the property.
3. If the property upon which the lien is claimed is other than a motor vehicle, watercraft, or trailer, the lienor following the expiration of the 15-day period provided by subsection (a) shall issue notice to the person having a security or other interest in the property, if reasonably ascertainable, and to the occupant, if different, at his last known address. Notice given pursuant to this subdivision shall be presumed delivered when it is properly addressed, first-class postage prepaid, and deposited with the United States Postal Service, or when it is sent by verified electronic mail to the occupant's last known address, if the occupant has made an election in the rental agreement to receive notice by electronic mail.
  1. State: (i) that a lien is being asserted against the specific property by the lienor, (ii) that the lien is being asserted for rental charges at the self-service storage facility, (iii) the amount of the lien, and (iv) that the lienor intends to sell or otherwise dispose of the property in satisfaction of the lien;
  2. Provide a brief and general description of the personal property subject to the lien. The description shall be reasonably adequate to permit the person notified to identify it, except that any container including, but not limited to, a trunk, valise, or box that is locked, fastened, sealed, or tied in a manner which deters immediate access to its contents may be described as such without describing its contents;
  3. Inform the person with a security or other interest in the property and occupant, if different, of their right to a judicial hearing at which a determination will be made as to the validity of the lien prior to a sale taking place;
  4. State that the person with a security or other interest in the property or the occupant, if different, has a period of 10 days from the date of the mailing of the notice to notify the lienor by registered, or certified mail, return receipt requested, that a hearing is desired, and that if the legal title holder or occupant wishes to contest the sale of his property pursuant to the lien he should notify the lienor that a hearing is desired.
Public Sale. -
1. Not less than 20 days prior to sale by public sale the lienor:
  1. Shall cause notice to be delivered by certified mail to the person having a security interest in the property if reasonably ascertainable, and to the occupant at the occupant's last known address by certified mail or by verified electronic mail if the occupant has made an election in the rental agreement to receive notice by electronic mail. Notice given by certified mail pursuant to this subdivision shall be presumed delivered when it is properly addressed, first-class postage prepaid, and deposited with the United States Postal Service. Notice given by verified electronic mail pursuant to this subdivision shall be presumed delivered when it is transmitted.
  2. Repealed by Session Laws 2009-201, s. 1, effective October 1, 2009.
2. Not less than five days prior to sale by public sale, the lienor shall publish notice of sale either (i) in a newspaper of general circulation in the county where the sale is to be held or (ii) in any other commercially reasonable manner. The manner of advertisement shall be deemed commercially reasonable if at least three independent bidders attend the sale at the time and place advertised and the sale is otherwise consistent with the definition set out in G.S. 25-9-627.
3. Repealed by Session Laws 2013-239, s. 2, effective October 1, 2013.
4. The sale shall be conducted in a commercially reasonable manner, as defined in G.S. 25-9-627, including offering property to an audience of bidders through an online, publicly accessible auction Web site. If the sale is a live auction conducted at the facility, the nearest suitable place where the property is held or stored, or in the county where the obligation secured by the lien was contracted for, the sale must be held on a day other than Sunday and between the hours of 9:00 A.M. and 4:00 P.M. A lienor may purchase at public sale.
5. Repealed by Session Laws 2013-239, s. 2, effective October 1, 2013.
Repealed by Session Laws 2013-239, s. 2, effective October 1, 2013.

The occupant or any other person having a security or other interest in the property stored in the self-service storage facility may bring an action to request the immediate possession of the property, at any time following the assertion of the lien by the owner. Before such possession is granted, the occupant or the person with a security or other interest in the property shall pay the amount of the lien asserted to the clerk of court in which the action is pending, or post a bond for double the amount. The clerk shall then issue an order to the owner to relinquish possession of the property to the occupant or other party.

The person with legal title or the occupant must, within 10 days of receipt of the notice from the Division of Motor Vehicles, notify the Division of his desire to contest the sale of the vehicle pursuant to the lien, and that the Division should so notify lienor.

Failure of the person with legal title or the occupant to notify the Division that a hearing is desired shall be deemed a waiver of the right to a hearing prior to sale of the vehicle against which the lien is asserted. Upon such failure, the Division shall so notify the lienor; the lienor may proceed to enforce the lien by a public sale as provided by this section; and the Division shall transfer title to the property pursuant to such sale.

If the Division is notified within the 10-day period provided in this section that a hearing is desired prior to the sale, the lien may be enforced by a public sale as provided in this section and the Division will transfer title only pursuant to the order of a court of competent jurisdiction.

The notice shall:

The person with a security or other interest in the property or the occupant must, within 10 days from the date of the mailing of the notice from the lienor, notify the lienor of his desire for a hearing, and state whether or not he wishes to contest the sale of the property pursuant to the lien.

Failure of the person with a security or other interest in the property, or the occupant to notify the lienor that a hearing is desired shall be deemed a waiver of the right to a hearing prior to the sale of the property against which the lien is asserted. Upon such failure the lienor may proceed to enforce the lien by a public sale as provided by this section. Upon the expiration of the 10-day notice, the occupant's tenancy shall be terminated, and the lienor may move the occupant's property to another place of safekeeping.

If the lienor is notified, within the 10-day period as provided by this section, that a hearing is desired prior to the sale, the lien may be enforced by a public sale as provided in this section only pursuant to the order of a court of competent jurisdiction.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1; 2006-264, s. 38.5; 2009-201, s. 1; 2012-175, s. 12(c); 2013-239, s. 2.)

Effect of Amendments. - Session Laws 2006-264, s. 38.5, effective August 27, 2006, substituted "9:00 A.M." for "10:00 A.M." in the introductory language of subdivision (c)(2).

Session Laws 2009-201, s. 1, effective October 1, 2009, added subdivision (b)(1a); in subdivision (b)(2), in the first paragraph, deleted "by registered or certified mail, return receipt requested" from the end of the first sentence, and added the second sentence, in subdivision (b)(2)d., substituted "the mailing" for "receipt," in the third paragraph, substituted "from the date of the mailing" for "of receipt," and in the fifth paragraph, added the last sentence; rewrote subdivision (c)(1); and added subdivision (c)(1a).

Session Laws 2012-175, s. 12(c), effective July 12, 2012, deleted "registered or" preceding "certified mail" in subdivisions (b)(1), (b)(1)c., and (c)(1)a.

Session Laws 2013-239, s. 2, effective October 1, 2013, added "watercraft, or trailer" in subdivisions (b)(1a) and (b)(2); added "or when it is sent by verified electronic mail to the occupant's last known address, if the occupant has made an election in the rental agreement to receive notice by electronic mail" in subdivision (b)(2); in sub-subdivision (c)(1)a., added "by certified mail or by verified electronic mail if the occupant has made an election in the rental agreement to receive notice by electronic mail," "by certified mail," and the last sentence; rewrote subdivision (c)(1a); added subdivision (c)(2a); deleted subdivisions (c)(2), (c)(3) and subsection (d); and made minor punctuation changes in subsections (b) and (c). For applicability, see editor's note.

§ 44A-44. Right of redemption; good faith purchaser's right; disposition of proceeds; lienor's liability.

Before the sale authorized by G.S. 44A-43, or other disposition of the property, the occupant may pay the amount necessary to satisfy the lien plus the reasonable expenses incurred by the owner for the preservation of the property and thereby redeem the property. Upon receipt of such payment, the owner shall return the personal property to the occupant; and thereafter shall have no further claim against such personal property on account of the lien which was asserted. The partial payment of rent or other charges shall not satisfy the lien or stop or delay the owner's right to sell the occupant's property unless the owner agrees to satisfaction or a stop or delay in a writing signed by the owner.
A purchaser in good faith, and without knowledge of any defect in the sale of the personal property sold to satisfy a lien provided for in this Article takes the property free of any rights of persons against whom the lien was valid.
Proceeds of a sale under this section shall be applied as follows:
1. Payment of reasonable expenses incurred in connection with the sale;
2. Payment of the obligation secured by any security interest that was perfected at the time the occupant stored the property at the self-service storage facility;
3. Payment of the obligation secured by the self-service storage facility lien;
4. Any balance shall be paid to the occupant or other person lawfully entitled thereto; but if such person cannot be found, the balance shall be paid to the clerk of superior court of the county in which the sale took place, to be held by the clerk for the person entitled thereto.
If the lienor fails to comply substantially with any of the provisions of this section, he shall be liable to the occupant or any other party injured by such noncompliance in the sum of one hundred dollars ($100.00), together with reasonable attorney's fees as awarded by the court. Damages provided by this section shall be in addition to actual damages to which any party is otherwise entitled.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1; 2009-201, s. 1.)

Effect of Amendments. - Session Laws 2009-201, s. 1, effective October 1, 2009, added the last sentence in subsection (a).

§ 44A-44.1. Possession vested in occupant.

Unless the rental agreement specifically provides otherwise, the exclusive care, custody, and control of all personal property stored in a storage space at a self-service storage facility shall remain vested in the occupant until the property is sold as provided in this Article or otherwise disposed of. The owner of a self-service storage facility is a commercial landlord who rents space. Unless the rental agreement specifically provides otherwise, while the personal property remains on the owner's premises, the owner is liable for damage caused by the intentional acts or negligence of the owner or the owner's employees.

History

(2009-201, s. 1.)

§ 44A-45. Article is supplemental to lien created by contract.

Nothing in this Article shall be construed as in any manner impairing or affecting the right of parties to create liens by contract or agreement.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1.)

§ 44A-46. Application.

All rental agreements entered into before September 1, 1982, and not extended or renewed after that date, and the rights and duties and interests flowing from them, shall remain valid, and may be enforced or terminated in accordance with their terms or as permitted by any other law of this State.

History

(1981 (Reg. Sess., 1982), c. 1275, s. 1.)

§§ 44A-47 through 44A-49: Reserved for future codification purposes.

ARTICLE 5. Aircraft Labor and Storage Liens.

Sec.

§ 44A-50. Definitions.

As used in this Article, the following terms mean:

Aircraft. - As the term is defined in G.S. 63-1(3), or any engine, part, component, or accessory, whether affixed to or separate from the aircraft.
Lienor. - A person entitled to a lien under this Article.
Owner. - As the term is defined in G.S. 44A-1(3) for an aircraft, or any person authorized by an owner, as defined in G.S. 44A-1(3), to perform, contract, or arrange for the provision of labor, skill, materials, or storage with respect to any aircraft.
Person. - Any individual, corporation, association, partnership, whether limited or general, limited liability company, or other entity.

History

(2006-222, s. 1.1.)

Editor's Note. - Session Laws 2006-222, s. 1.3, made this Article effective October 1, 2006, and applicable to labor, skills, or materials furnished on an aircraft, or storage provided for an aircraft, on or after that date.

§ 44A-55. Persons entitled to a lien on an aircraft.

Any person who has expended labor, skill, or materials on an aircraft or has furnished storage for an aircraft at the request of its owner has a perfected lien on the aircraft beginning on the date the expenditure of labor, skill, or materials or the storage commenced, for the contract price for the expenditure of labor, skill, or materials or for the storage, or, in the absence of a contract price, for the reasonable worth of the expenditure of labor, skill, or materials, or of the storage. The lien under this section survives even if the possession of the aircraft is surrendered by the lienor.

History

(2006-222, s. 1.1.)

§ 44A-60. Notice of lien on an aircraft.

The lien under G.S. 44A-55 expires 120 days after the date the lienor voluntarily surrenders possession of the aircraft, unless the lienor, prior to the expiration of the 120-day period, files a notice of lien in the office of the clerk of court of the county in which the labor, skill, or materials were expended on the aircraft, or the storage was furnished for the aircraft.
The notice of lien shall state all of the following:
1. The name of the lienor.
2. The name of the registered owner of the aircraft, if known.
3. The name of the person with whom the lienor entered into a contract for labor, skill, or materials on the aircraft, or storage of the aircraft.
4. A description of the aircraft sufficient for identification.
5. The amount for which the lien is claimed.
6. The dates upon which the expenditure of labor, skill, materials, or storage was commenced and completed, or, if not completed, the date through which the claimed amount is calculated.
The notice of lien shall be sworn to or affirmed, and subscribed by the lienor, or by someone on the lienor's behalf having personal knowledge of the facts.
The notice of lien shall be in substantially the following form:

"NOTICE OF LIEN ON AIRCRAFT

[Lienor] Lienor, v. [Owner] Owner Notice is hereby given that [Lienor](name) claims a lien upon ______________________________ [aircraft](describe the aircraft) for labor, skill, or materials expended on, and for storage furnished for, this aircraft; that the name of the registered owner or reputed owner, if the aircraft is not registered or the registered owner is not known, is [Owner](name), that the labor, skill, or materials were expended on the aircraft commencing the ________ day of ______________, and storage was furnished on the aircraft commencing the ________ day of ______________, and the labor, skill, materials, and storage furnished by the lienor [was completed] [is ongoing] on the ________ day of ______________; that 120 days have not elapsed since the aircraft was released by the lienor; that the amount the lienor demands for the labor, skill, materials, and storage furnished, as of the date hereof is $______________ (amount); that no part thereof has been paid except $______________ (amount); and that there is now due and remaining unpaid, after deducting all credits and offsets, the sum of $______________ (amount), in which amount [Lienor](name) claims a lien upon the aircraft. (Signed) ________________________ (Lienor) Address of Lienor ________________________________________ State of North Carolina County of ________________________ Sworn to (or affirmed) and subscribed before me this day by [name of principal]. Date:________________________________________ [Official Signature of Notary] ________________________________________ [Notary's printed or typed name], Notary Public ________________________________________ My Commission Expires:[Date] [Official Seal]"

History

(2006-222, s. 1.1.)

§ 44A-65. Notice of lien filed by the clerk of court.

Upon presentation of a notice of lien pursuant to this Article, the clerk of court shall file the notice of lien and shall index the notice of lien in a record maintained by the clerk for that purpose.

History

(2006-222, s. 1.1.)

§ 44A-70. Priority of a lien on an aircraft.

The lien under this Article shall have priority over perfected and unperfected security interests.

History

(2006-222, s. 1.1.)

§ 44A-75. Termination of a lien on an aircraft.

Termination by Payment of Amount Owed. - Any lien under this Article shall be terminated upon receipt by the lienor of the full amount owed for the labor, skill, or materials on the aircraft, and for storage of the aircraft, which amount shall not be limited to any amount shown on the notice of lien filed under G.S. 44A-60, if a notice of lien has been filed by the lienor. Upon receipt of the amount owed, the lienor or the lienor's agent shall release the aircraft to the owner, if the aircraft is in the possession of the lienor, and shall, within 20 days following a request in writing by the aircraft owner, file with the clerk of court a notice of satisfaction of lien, if a notice of lien has been filed by the lienor. A notice of satisfaction of lien shall state that the amount owed for the lienor's expenditure of labor, skill, or materials on the aircraft, and for the storage of the aircraft, has been paid and the lien against the aircraft has been terminated. The notice of satisfaction of lien shall be sworn to or affirmed, and subscribed by the lienor or by someone on the lienor's behalf having personal knowledge of the facts. Upon the filing of a notice of satisfaction of lien, the clerk of court shall make an entry of acknowledgment of satisfaction in the index.
Termination by Deposit of Surety Bond. - Any lien under this Article shall be terminated by the clerk of court whenever a surety bond in a sum equal to one and one-fourth times the amount of the lien claimed against the aircraft and conditioned upon the payment of the amount finally determined to be due in satisfaction of the lien is deposited with the clerk of court. When a deposit that satisfies this subsection is made, the lienor or the lienor's agent shall release the aircraft to the owner, if the aircraft is in the possession of the lienor.

History

(2006-222, s. 1.1; 2013-17, s. 1.)

Effect of Amendments. - Session Laws 2013-17, s. 1, redesignated the formerly undesignated paragraph as present subsection (a); added "Termination by Payment of Amount Owed" in the subsection (a) heading; and added subsection (b). For effective date and applicability, see editor's note.

§ 44A-80. Fees.

The clerk of court shall collect fees for filing, copying, and certifying any document under this Article as set forth in G.S. 7A-308.

History

(2006-222, s. 1.1.)

§ 44A-85. Enforcement of lien by sale.

A lien filed under this Article may be enforced in accordance with G.S. 44A-4, and the proceeds of sale shall be applied as set forth in G.S. 44A-5, except that the three-day time period set forth in G.S. 44A-4(a) for the lienor to file a contrary statement of the amount of the lien at the time of the filing of a complaint by the owner shall be extended to 30 days. An owner may seek immediate possession of an aircraft in accordance with G.S. 44A-4.

History

(2006-222, s. 1.1.)

§ 44A-90. Title of purchaser.

A purchaser for value at a properly conducted sale under this Article, and a purchaser for value without constructive notice of a defect in the sale, whether or not the purchaser is the lienor or an agent of the lienor, acquires title to the property free of any interests over which the lienor was entitled to priority.
Upon the completion of a sale conducted under this Article, the lienor or a person acting on behalf of the lienor, who conducted the sale shall furnish to the purchaser for value a bill of sale for the aircraft signed by the person who conducted the sale that includes a statement that the sale was conducted in accordance with this Article.

History

(2006-222, s. 1.1.)