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 N.C. App. LEXIS 132 (1990), modified, 330 N.C. 487 , 411 S.E.2d 916, 1992 N.C. LEXIS 11 (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, 1983 N.C. App. LEXIS 2437 , rev'd, 309 N.C. 182 , 305 S.E.2d 722, 1983 N.C. LEXIS 1319 (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, 1994 N.C. App. LEXIS 542 , cert. denied, 338 N.C. 518 , 452 S.E.2d 813, 1994 N.C. LEXIS 756 (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., 387 B.R. 677, 2008 Bankr. LEXIS 854 (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, 2009 U.S. Dist. LEXIS 115526 (M.D.N.C. 2009).

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, 1975 U.S. Dist. LEXIS 14388 (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, 1975 U.S. Dist. LEXIS 14388 (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, 1975 U.S. Dist. LEXIS 14388 (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., 2010 Bankr. LEXIS 1776 (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 N.C. App. LEXIS 113 (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, 2010 Bankr. LEXIS 477 (Bankr. E.D.N.C. Feb. 16, 2010), dismissed in part, 2010 Bankr. LEXIS 583 (Bankr. E.D.N.C. Feb. 23, 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 N.C. App. LEXIS 3427 (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 N.C. App. LEXIS 415 (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 N.C. App. LEXIS 1426 (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 N.C. App. LEXIS 1078 , writ denied, 327 N.C. 638 , 398 S.E.2d 871, 1990 N.C. LEXIS 1005 (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 N.C. App. LEXIS 1078 , writ denied, 327 N.C. 638 , 398 S.E.2d 871, 1990 N.C. LEXIS 1005 (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 N.C. App. LEXIS 1085 (1994).

Where petitioner sought authorization to sell a motor vehicle under a lien, the trial court acted properly by authorizing the sale of a truck under N.C. Gen. Stat. § 44A-2(d) because competent evidence supported its finding that a contract existed between petitioner and the owner for the towing and storage of the truck. The claimed lien amount did not exceed legal limits, because the truck was stored by petitioner for one year at the rate of $40 per day plus a $150 towing fee; the trial court’s findings with respect to the duration and amount of the lien were supported by competent evidence. Bottoms Towing & Recovery, LLC v. Circle of Seven, LLC, 2022-NCCOA-342, 2022 N.C. App. LEXIS 363 (May 17, 2022).

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 N.C. LEXIS 1014 (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, 1981 N.C. App. LEXIS 2190 , cert. denied, 302 N.C. 629 , 280 S.E.2d 441, 1981 N.C. LEXIS 1244 (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, 2008 U.S. Dist. LEXIS 92321 (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 N.C. App. LEXIS 384 (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, 2012 Bankr. LEXIS 3802 (Bankr. M.D.N.C. Aug. 17, 2012).

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, 1975 U.S. Dist. LEXIS 14388 (M.D.N.C. 1975).

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, 1975 U.S. Dist. LEXIS 14388 (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, 1975 U.S. Dist. LEXIS 14388 (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 N.C. App. LEXIS 3427 (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 N.C. App. LEXIS 1426 (2003).

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, 2010 Bankr. LEXIS 477 (Bankr. E.D.N.C. Feb. 16, 2010), dismissed in part, 2010 Bankr. LEXIS 583 (Bankr. E.D.N.C. Feb. 23, 2010).

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 N.C. App. LEXIS 3427 (1984).

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 N.C. App. LEXIS 1085 (1994).

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 N.C. LEXIS 1014 (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, 2001 U.S. Dist. LEXIS 23827 (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 N.C. LEXIS 1879 (1986).

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, 1975 U.S. Dist. LEXIS 14388 (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, 1975 U.S. Dist. LEXIS 14388 (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, 1975 U.S. Dist. LEXIS 14388 (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 N.C. App. LEXIS 531 (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, 1975 U.S. Dist. LEXIS 14388 (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 N.C. App. LEXIS 1085 (1994).

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 N.C. App. LEXIS 3427 (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, 1993 U.S. Dist. LEXIS 19034 (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 N.C. App. LEXIS 940 (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 N.C. App. LEXIS 384 (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 N.C. App. LEXIS 940 (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 N.C. App. LEXIS 113 (1996).

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. Op. Att'y Gen. 111 (1979).

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 N.C. App. LEXIS 3427 (1984).

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, 1981 N.C. App. LEXIS 2190 , cert. denied, 302 N.C. 629 , 280 S.E.2d 441, 1981 N.C. LEXIS 1244 (1981).

CASE NOTES

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 N.C. App. LEXIS 1426 (2003).

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 N.C. App. LEXIS 762 (1999).

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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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, 1976 N.C. App. LEXIS 2538 , cert. denied, 290 N.C. 552 , 226 S.E.2d 514, 1976 N.C. LEXIS 1105 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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, 2013 N.C. App. LEXIS 126 , 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 N.C. App. LEXIS 102 (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 N.C. App. LEXIS 1143 (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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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 N.C. App. LEXIS 723 (2012).

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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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 N.C. LEXIS 11 (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 N.C. LEXIS 11 (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 N.C. App. LEXIS 723 (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., 438 B.R. 95, 2010 Bankr. LEXIS 3658 (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, 2012 Bankr. LEXIS 2368 (Bankr. E.D.N.C. May 25, 2012), aff'd, 584 Fed. Appx. 136, 2014 U.S. App. LEXIS 19118 (4th Cir. 2014).

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, 1976 N.C. App. LEXIS 2538 , cert. denied, 290 N.C. 552 , 226 S.E.2d 514, 1976 N.C. LEXIS 1105 (1976).

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 U.S. App. LEXIS 1451 (4th Cir.), cert. denied, 562 U.S. 832, 131 S. Ct. 121, 178 L. Ed. 2d 32, 2010 U.S. LEXIS 6346 (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 N.C. App. LEXIS 2928 (1980); Caldwell's Well Drilling, Inc. v. Moore, 79 N.C. App. 730, 340 S.E.2d 518, 1986 N.C. App. LEXIS 2124 (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 N.C. App. LEXIS 2928 (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 N.C. App. LEXIS 1623 (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, 1977 N.C. App. LEXIS 2031 , rev'd, 293 N.C. 688 , 239 S.E.2d 566, 1977 N.C. LEXIS 1016 (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 N.C. App. LEXIS 2928 (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 N.C. LEXIS 11 (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 N.C. App. LEXIS 449 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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 N.C. App. LEXIS 1268 (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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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 N.C. App. LEXIS 1863 (1972); Caldwell's Well Drilling, Inc. v. Moore, 79 N.C. App. 730, 340 S.E.2d 518, 1986 N.C. App. LEXIS 2124 (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 N.C. App. LEXIS 1863 (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, 1986 N.C. App. LEXIS 1965 (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 N.C. App. LEXIS 2124 (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 N.C. App. LEXIS 2677 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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, 2013 N.C. App. LEXIS 126 , 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, 1986 N.C. App. LEXIS 1965 (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 N.C. App. LEXIS 1231 (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 N.C. App. LEXIS 723 (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 N.C. LEXIS 1295 (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 N.C. LEXIS 1295 (1978).

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 N.C. App. LEXIS 102 (1993).

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, 1994 N.C. App. LEXIS 204 (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 N.C. App. LEXIS 723 (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 N.C. App. LEXIS 2119 (1978); Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, 1986 N.C. App. LEXIS 2421 (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 N.C. App. LEXIS 1143 (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 B.R. 441, 1989 U.S. Dist. LEXIS 16797 (E.D.N.C. 1989), aff'd, 907 F.2d 1139 (4th Cir. 1990), aff'd, 907 F.2d 1139, 1990 U.S. App. LEXIS 9867 (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 N.C. App. LEXIS 1930 (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 N.C. App. LEXIS 3077 (1980), aff'd, 302 N.C. 599 , 276 S.E.2d 375, 1981 N.C. LEXIS 1068 (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 N.C. LEXIS 1295 (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 N.C. App. LEXIS 3043 (1984), modified, aff'd, 313 N.C. 442 , 329 S.E.2d 322, 1985 N.C. LEXIS 1545 (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 N.C. App. LEXIS 3043 (1984), modified, aff'd, 313 N.C. 442 , 329 S.E.2d 322, 1985 N.C. LEXIS 1545 (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 N.C. LEXIS 1545 (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 B.R. 441, 1989 U.S. Dist. LEXIS 16797 (E.D.N.C. 1989), aff'd, 907 F.2d 1139 (4th Cir. 1990), aff'd, 907 F.2d 1139, 1990 U.S. App. LEXIS 9867 (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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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 N.C. App. LEXIS 2677 (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., 2009 Bankr. LEXIS 2157 (Bankr. E.D.N.C. July 30, 2009), abrogated in part, In re Constr. Supervision Servs., 2012 Bankr. LEXIS 1069 (Bankr. E.D.N.C. Mar. 14, 2012).

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 N.C. App. LEXIS 1623 (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 N.C. App. LEXIS 1623 (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 N.C. App. LEXIS 1468 (2011).

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 N.C. App. LEXIS 723 (2012).

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 N.C. App. LEXIS 1889 (2011).

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, 2012 Bankr. LEXIS 2368 (Bankr. E.D.N.C. May 25, 2012), aff'd, 584 Fed. Appx. 136, 2014 U.S. App. LEXIS 19118 (4th Cir. 2014).

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 N.C. LEXIS 1295 (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 N.C. LEXIS 1295 (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, 1994 N.C. App. LEXIS 204 (1994).

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 N.C. App. LEXIS 2119 (1978); Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, 1986 N.C. App. LEXIS 2421 (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, 2011 Bankr. LEXIS 4601 (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 N.C. App. LEXIS 1018 (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 U.S. App. LEXIS 1451 (4th Cir.), cert. denied, 562 U.S. 832, 131 S. Ct. 121, 178 L. Ed. 2d 32, 2010 U.S. LEXIS 6346 (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 N.C. LEXIS 1295 (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 N.C. App. LEXIS 1987 (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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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, 1985 N.C. App. LEXIS 3076 (1985), limited, John Conner Constr., Inc. v. Grandfather Holding Co., 223 N.C. App. 37, 732 S.E.2d 367, 2012 N.C. App. LEXIS 1143 (2012).

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 N.C. App. LEXIS 1889 (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, 2009 Bankr. LEXIS 3896 (Bankr. E.D.N.C. Nov. 24, 2009).

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 N.C. App. LEXIS 1468 (2011).

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 N.C. LEXIS 983 (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 N.C. LEXIS 983 (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 N.C. App. LEXIS 1599 (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 N.C. App. LEXIS 1231 (2011).

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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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.

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.

CASE NOTES

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, 2009 Bankr. LEXIS 3896 (Bankr. E.D.N.C. Nov. 24, 2009).

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 N.C. App. LEXIS 2429 (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 N.C. App. LEXIS 1120 (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 N.C. App. LEXIS 1014 (1993).

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, 1994 N.C. App. LEXIS 204 (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 N.C. App. LEXIS 723 (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 N.C. App. LEXIS 2119 (1978); Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, 1986 N.C. App. LEXIS 2421 (1986).

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 N.C. App. LEXIS 1680 (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 N.C. App. LEXIS 2666 (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 N.C. App. LEXIS 388 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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 N.C. App. LEXIS 1889 (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 N.C. App. LEXIS 723 (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 N.C. LEXIS 983 (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 354 (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 B.R. 441, 1989 U.S. Dist. LEXIS 16797 (E.D.N.C. 1989), aff'd, 907 F.2d 1139 (4th Cir. 1990), aff'd, 907 F.2d 1139, 1990 U.S. App. LEXIS 9867 (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 N.C. App. LEXIS 2429 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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 N.C. App. LEXIS 388 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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, 2013 N.C. App. LEXIS 126 , 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 N.C. App. LEXIS 2429 (1974).

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 N.C. App. LEXIS 1143 (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).

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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

CASE NOTES

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 N.C. App. LEXIS 723 (2012).

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 Builders, Inc., 309 N.C. 182 , 305 S.E.2d 722, 1983 N.C. LEXIS 1319 (1983).

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 N.C. App. LEXIS 3043 (1984), modified, aff'd, 313 N.C. 442 , 329 S.E.2d 322, 1985 N.C. LEXIS 1545 (1985).

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 N.C. App. LEXIS 3043 (1984), modified, aff'd, 313 N.C. 442 , 329 S.E.2d 322, 1985 N.C. LEXIS 1545 (1985).

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 N.C. App. LEXIS 2928 (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 N.C. App. LEXIS 1623 (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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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 Builders, Inc., 309 N.C. 182 , 305 S.E.2d 722, 1983 N.C. LEXIS 1319 (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., 394 B.R. 372, 2008 Bankr. LEXIS 2866 (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 Builders, Inc., 309 N.C. 182 , 305 S.E.2d 722, 1983 N.C. LEXIS 1319 (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., 394 B.R. 372, 2008 Bankr. LEXIS 2866 (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, 2009 Bankr. LEXIS 3896 (Bankr. E.D.N.C. Nov. 24, 2009).

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, 2009 Bankr. LEXIS 3896 (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 N.C. App. LEXIS 2624 (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 N.C. App. LEXIS 870 (1988), cert. denied, 324 N.C. 335 , 378 S.E.2d 793, 1989 N.C. LEXIS 240 (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 N.C. App. LEXIS 1089 (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, 1986 N.C. App. LEXIS 1965 (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 N.C. App. LEXIS 444 (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 N.C. LEXIS 1295 (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 N.C. App. LEXIS 1987 (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 N.C. LEXIS 1016 (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 N.C. LEXIS 1016 (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 N.C. App. LEXIS 2928 (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, 1977 N.C. App. LEXIS 2031 , rev'd, 293 N.C. 688 , 239 S.E.2d 566, 1977 N.C. LEXIS 1016 (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 N.C. LEXIS 1016 (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 N.C. LEXIS 1016 (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 N.C. LEXIS 1016 (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 N.C. App. LEXIS 1680 (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 N.C. App. LEXIS 3458 (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 N.C. App. LEXIS 1680 (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 N.C. LEXIS 983 (1975).

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 N.C. App. LEXIS 2119 (1978); Queensboro Steel Corp. v. East Coast Mach. & Iron Works, Inc., 82 N.C. App. 182, 346 S.E.2d 248, 1986 N.C. App. LEXIS 2421 (1986).

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 N.C. App. LEXIS 26 (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, 1994 N.C. App. LEXIS 204 (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, 1986 N.C. App. LEXIS 1965 (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 N.C. App. LEXIS 723 (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 N.C. App. LEXIS 255 (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 N.C. App. LEXIS 1623 (2011).

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 N.C. App. LEXIS 1804 (1977), cert. denied, 294 N.C. 441 , 241 S.E.2d 843, 1978 N.C. LEXIS 1264 (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 N.C. LEXIS 61 (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 N.C. LEXIS 61 (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 N.C. App. LEXIS 1804 (1977), cert. denied, 294 N.C. 441 , 241 S.E.2d 843, 1978 N.C. LEXIS 1264 (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 N.C. LEXIS 17 (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 N.C. App. LEXIS 485 (1991), aff'd, 330 N.C. 755 , 412 S.E.2d 43, 1992 N.C. LEXIS 61 (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 N.C. App. LEXIS 485 (1991), aff'd, 330 N.C. 755 , 412 S.E.2d 43, 1992 N.C. LEXIS 61 (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 N.C. LEXIS 61 (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 N.C. LEXIS 61 (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 N.C. App. LEXIS 1804 (1977), cert. denied, 294 N.C. 441 , 241 S.E.2d 843, 1978 N.C. LEXIS 1264 (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 N.C. App. LEXIS 1889 (2011).

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., 394 B.R. 372, 2008 Bankr. LEXIS 2866 (Bankr. M.D.N.C. 2008).

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., 393 B.R. 372, 2008 Bankr. LEXIS 2867 (Bankr. M.D.N.C. 2008).

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 N.C. App. LEXIS 1143 (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).

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

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).

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 N.C. App. LEXIS 102 (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 N.C. LEXIS 6 (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 N.C. App. LEXIS 102 (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 N.C. App. LEXIS 102 (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, 1987 N.C. App. LEXIS 2525 , aff'd, 321 N.C. 215 , 362 S.E.2d 547, 1987 N.C. LEXIS 2564 (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 N.C. LEXIS 2564 (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 N.C. App. LEXIS 102 (1993).

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 N.C. App. LEXIS 102 (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 N.C. App. LEXIS 102 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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, 2009 Bankr. LEXIS 2170 (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., 753 F.3d 124, 2014 U.S. App. LEXIS 9532 (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 N.C. App. LEXIS 1930 (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 N.C. App. LEXIS 2120 (2007).

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 N.C. App. LEXIS 1930 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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 B.R. 299, 1996 U.S. Dist. LEXIS 6563 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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 N.C. App. LEXIS 3245 (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 N.C. App. LEXIS 3245 (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 N.C. App. LEXIS 1930 (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 N.C. App. LEXIS 3245 (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, 1982 N.C. App. LEXIS 2486 , cert. denied, 306 N.C. 382 , 294 S.E.2d 206, 1982 N.C. LEXIS 1611 (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, 1987 N.C. App. LEXIS 2525 , aff'd, 321 N.C. 215 , 362 S.E.2d 547, 1987 N.C. LEXIS 2564 (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, 1986 N.C. App. LEXIS 2421 (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 N.C. LEXIS 2564 (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 N.C. LEXIS 336 (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 N.C. App. LEXIS 808 (1990).

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, 1986 N.C. App. LEXIS 2421 (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., 2009 N.C. App. LEXIS 1402 (N.C. Ct. App. 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 N.C. App. LEXIS 1889 (2011).

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, 1987 N.C. App. LEXIS 2525 , aff'd, 321 N.C. 215 , 362 S.E.2d 547, 1987 N.C. LEXIS 2564 (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 N.C. App. LEXIS 1014 (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 N.C. LEXIS 2564 (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., 2009 N.C. App. LEXIS 1402 (N.C. Ct. App. 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, 1987 N.C. App. LEXIS 2525 , aff'd, 321 N.C. 215 , 362 S.E.2d 547, 1987 N.C. LEXIS 2564 (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 N.C. LEXIS 6 (2006).

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 N.C. App. LEXIS 1889 (2011).

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 N.C. App. LEXIS 388 (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 N.C. App. LEXIS 388 (1994).

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 N.C. App. LEXIS 3245 (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 N.C. App. LEXIS 3245 (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 N.C. App. LEXIS 1930 (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 N.C. App. LEXIS 1567 (2002).

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 N.C. LEXIS 6 (2006).

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., 2009 N.C. App. LEXIS 1402 (N.C. Ct. App. 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, 1982 N.C. App. LEXIS 2486 , cert. denied, 306 N.C. 382 , 294 S.E.2d 206, 1982 N.C. LEXIS 1611 (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 N.C. LEXIS 2564 (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 N.C. App. LEXIS 1889 (2011).

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 B.R. 299, 1996 U.S. Dist. LEXIS 6563 (E.D.N.C. 1996).

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 N.C. LEXIS 336 (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., 2012 Bankr. LEXIS 1771 (Bankr. E.D.N.C. Apr. 20, 2012).

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 N.C. App. LEXIS 1930 (2003).

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 N.C. App. LEXIS 3245 (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 N.C. App. LEXIS 1930 (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 N.C. LEXIS 336 (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 N.C. App. LEXIS 3245 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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 N.C. LEXIS 335 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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, 1990 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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 N.C. App. LEXIS 1930 (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 N.C. LEXIS 336 (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 N.C. App. LEXIS 167 (1990), aff'd, 328 N.C. 651 , 403 S.E.2d 291, 1991 N.C. LEXIS 336 (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, 1982 N.C. App. LEXIS 2486 , cert. denied, 306 N.C. 382 , 294 S.E.2d 206, 1982 N.C. LEXIS 1611 (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 N.C. App. LEXIS 1930 (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, 1993 N.C. App. LEXIS 918 (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 N.C. App. LEXIS 2120 (2007).

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., 2009 N.C. App. LEXIS 1402 (N.C. Ct. App. Sept. 1, 2009).

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 N.C. App. LEXIS 1231 (2011).

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

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.

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 N.C. App. LEXIS 88 (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 N.C. App. LEXIS 88 (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 N.C. App. LEXIS 805 (2005).

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 N.C. LEXIS 16 (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, 2006 N.C. App. LEXIS 1897 (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, 1987 U.S. Dist. LEXIS 12282 (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 N.C. App. LEXIS 2432 (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, 1987 U.S. Dist. LEXIS 12282 (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 N.C. App. LEXIS 2836 (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 N.C. App. LEXIS 2836 (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, 2006 N.C. App. LEXIS 1897 (2006).

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. Op. Att'y Gen. 25 (1988).

CASE NOTES

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, 1987 U.S. Dist. LEXIS 12282 (W.D.N.C. 1987).

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 N.C. App. LEXIS 805 (2005).

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, 1987 U.S. Dist. LEXIS 12282 (W.D.N.C. 1987).

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 N.C. App. LEXIS 805 (2005).

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 N.C. App. LEXIS 2565 (1987), rev'd, 321 N.C. 435 , 364 S.E.2d 380, 1988 N.C. LEXIS 16 (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 N.C. App. LEXIS 2565 (1987), rev'd, 321 N.C. 435 , 364 S.E.2d 380, 1988 N.C. LEXIS 16 (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 N.C. App. LEXIS 731 (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 N.C. App. LEXIS 731 (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 N.C. App. LEXIS 1300 (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, 1994 N.C. App. LEXIS 854 (1994), aff'd, 340 N.C. 257 , 456 S.E.2d 308, 1995 N.C. LEXIS 234 (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 N.C. App. LEXIS 731 (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 N.C. App. LEXIS 2565 (1987), rev'd, 321 N.C. 435 , 364 S.E.2d 380, 1988 N.C. LEXIS 16 (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 N.C. App. LEXIS 392 (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 N.C. LEXIS 16 (1988).

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 N.C. LEXIS 16 (1988).

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, 1987 U.S. Dist. LEXIS 12282 (W.D.N.C. 1987).

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, 2006 N.C. App. LEXIS 1897 (2006).

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 N.C. App. LEXIS 650 (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 N.C. App. LEXIS 341 (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 N.C. App. LEXIS 341 (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 N.C. App. LEXIS 174 (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 N.C. App. LEXIS 1366 (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 N.C. App. LEXIS 1366 (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 N.C. App. LEXIS 272 (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 N.C. App. LEXIS 341 (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 N.C. App. LEXIS 1623 (2011).

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).

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.