PDS Engineering and Const., Inc. v. Double RS

• Decision Date: 08 April 1992
• Docket Number: No. 378684S,378684S
• Citation: 42 Conn.Supp. 460,627 A.2d 959
• Court: Connecticut Superior Court
• Parties: PDS ENGINEERING AND CONSTRUCTION, INC. v. DOUBLE RS et al. Judicial District of Hartford-New Britain at Hartford

Page 959

627 A.2d 959

42 Conn.Supp. 460

PDS ENGINEERING AND CONSTRUCTION, INC. v. DOUBLE RS et al.

No. 378684S.

Superior Court of Connecticut,

Judicial District of Hartford-New Britain

at Hartford.

April 8, 1992.

Halloran & Sage, Hartford, for the plaintiff.

Francis R. Sablone, Jr., Wethersfield, for the named defendant et al.

Pepe & Hazard and O'Connell, Flaherty, Attmore & Forsyth, Hartford, for defendant United Bank and Trust Co. (Fleet Bank).

Ericson, Scalise & Mangan, New Britain, for defendant Eastern Sewer Pipe Corp.

Constantine Constantine, Glastonbury, for defendant G and R Valley, Inc.

Roggi & Stuhlman, Wethersfield, for defendant Ronald Guimond.

No appearance for the defendants Salvatore Russo and Joseph D. Russo.

SATTER, Judge.

The plaintiff, PDS Engineering and Construction, Inc. (PDS), moves for reconsideration of this court's earlier decision, dated December 18, 1991, denying priority of PDS' lien over the mortgage of a defendant, United Bank and Trust Company (United Bank). The court had based its holding on the ground that the Connecticut mechanic's lien law, General Statutes § 49-33 et seq., does not afford United Bank the right to a hearing to contest PDS' lien at a meaningful time and in a meaningful manner. In so concluding, the court relied primarily on Roundhouse Construction Corporation v. Telesco Masons Supplies Co., 168 Conn. 371, 362 A.2d 778, vacated, 423 U.S. 809, 96 S.Ct. 20, 46 L.Ed.2d (1975), on remand, 170 Conn. 155, 365 A.2d 393, cert. denied, 429 U.S. 889, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976), and on Connecticut v. Doehr, 501 U.S. ----, 111 S.Ct. 2105, 115 L.Ed.2d 1 (1991).

PDS challenges the court's conclusion, asserting that the pattern of statutes constituting the state's mechanic's lien law, § 49-33 et seq., does create rights in United Bank to a hearing that meets constitutional muster, particularly when the interests of PDS as mechanic's lienor and United Bank as mortgagee are appropriately balanced. PDS points specifically to General Statutes §§ 49-39, 49-35a(c), 49-37 and 49-51.

At the hearing on the motion, this court granted the motion to reconsider, and set aside its judgment pending its decision after reconsideration. On reconsideration, the court reverses itself and finds the mechanic's lien law constitutional as applied to United Bank.

Section 49-39 provides that a foreclosure action on a mechanic's lien must be brought within one year of the recording of the lien and § 49-35a(c) provides that a party to the foreclosure action may move to have the lien discharged. PDS argues that the Doehr standards, discussed in this court's earlier memorandum of decision, imply that in determining compliance with due process, account should be taken of the private interest of the party affected by the lien compared with that of the party seeking the lien for its protection. When that comparison is made in the present case, PDS argues, the potential one year delay for United Bank to challenge PDS' lien, pursuant to § 49-35a(c), is not a denial of due process.

This court, while hearing foreclosure cases for the last three years, has observed that in at least one third of such cases, the plaintiff is the assignee of the original mortgagee bank. This lends justification for the court's taking judicial notice of the commercial practice of banks assigning mortgages among themselves in a secondary market.

On the other hand, banks have ways of protecting themselves from mechanic's liens. The two most obvious ones are obtaining waivers from mechanic's lienors and obtaining title insurance. United Bank knew that PDS had done work on the property in issue before placing its mortgage and yet, unaccountably, failed to get a lien waiver from PDS. Also, United Bank did acquire title insurance and, in fact, the present case is being pursued on its behalf by a title insurance company. (In Spielman-Fond, Inc. v. Hanson's, Inc., 379 F.Sup. 997, 999 (D.Ariz.), aff'd, 417 U.S. 901, 94 S.Ct. 2596, 41 L.Ed.2d 208 (1974), the court notes that title insurance may ameliorate the impact of a mechanic's lien.)

In the present case, the certificate of mechanic's lien was filed by PDS on the land records on February 1, 1990. This foreclosure action was initiated by PDS on May 18, 1990, and United Bank was duly made a party. At that time United Bank had the right under § 49-35a(c) to move that the lien be declared invalid as to it. United Bank did nothing until the present case came up for trial in January, 1991, at which time it resisted PDS' motion for determination of priorities. This delay by United Bank indicates that the filing of the mechanic's lien caused it little actual hardship.

On the other hand, PDS asserts that its interest in the mechanic's lien is substantial because the lien is the only way to secure payment for the services it rendered to improve the property.

In Roundhouse Construction Corporation v. Telesco Masons Supplies Co., supra, 168 Conn. at 381, 362 A.2d 778, the Supreme Court commented that a six month delay in the right to attack a mechanic's lien constituted "the bare minimum of due process protection consistent with the extent of the deprivation present."

Although the court in Roundhouse was speaking of the deprivation of property owners as opposed to that of mortgagees, in General Electric Supply Co. v. SNETCO, 185 Conn. 583, 592, 441 A.2d 581 (1981), the court indicated that "a strong prima facie case" was made that the one year time period within which a lienor must foreclose under § 49-39, so as to give a general contractor the right to challenge the lien under § 49-35a(c), operated to deprive the general contractor of a prompt hearing.

Thus, this court concludes that even when balancing the interests of United Bank and PDS, §§ 49-39 and 49-35a(c) do not satisfy due process hearing requirements.

Section 49-37 provides that whenever a mechanic's lien is placed on real property, the owner of that property "or any person interested in it," may apply to a Superior Court judge that the lien be dissolved upon the substitution of a bond with surety. Section 49-37(b)(1) provides that when a bond has been substituted for a lien, the principal or surety on the bond may apply to the Superior Court in order that "a hearing be held to determine whether the lien for which the bond was substituted should be declared invalid or reduced in amount." (Emphasis added.)

PDS contends that this statute gives United Bank, as principal on a bond, the right to as immediate a hearing as feasible to contest PDS' lien. United Bank asserts that this statute serves an entirely different purpose and cannot be applied to give United Bank the hearing required by the due process clause.

Section 49-37 is designed to facilitate the transfer of real property by creating a mechanism for removing a mechanic's lien from the land records and substituting it for a bond. Henry F. Raab Connecticut, Inc. v. J.W. Fisher Co., 183 Conn. 108, 116, 438 A.2d 834 (1981); Six Carpenters, Inc. v. Beach Carpenters Corporation, 172 Conn. 1, 6, 372 A.2d 123 (1976). That purpose, however, does not preclude filing the bond as a way to challenge the lien. In Henry F. Raab Connecticut, Inc. v. J.W. Fisher Co., supra, 183 Conn. at 116, 438 A.2d 834, a subcontractor filed a bond in order to contest the merits of the lien of another subcontractor so that it might satisfy its obligation under an agreement with the general contractor.

United Bank contends that the language in § 49-37 that the court "should determine whether the lien ... should be declared invalid" means that the court is restricted to finding the lien to be of no legal force and effect, and that it cannot decide the priority of liens. In support of this argument, United Bank points to § 49-34, which specifies requirements for making a mechanic's lien "valid." Those include: (1) lodging a mechanic's lien certificate with the town clerk where the property is located within ninety days after work ceases; (2) requiring that the certificate state certain particulars, and be subscribed and sworn to by the claimant; (3) requiring that the certificate be served on the landowners within thirty days after it is filed with the town clerk.

No legislative history reveals the meaning of "invalid" as used in § 49-37. On the theory that the mechanic's lien should be construed "so as to reasonably and fairly carry out its remedial intent"; Roundhouse Construction Corporation v. Telesco Masons Supplies Co., supra, 168 Conn. at 385, 362 A.2d 778; this court interprets "invalid" to mean either legally insufficient absolutely or specifically as to a particular party having an interest in the property. The purpose of § 49-37 is carried out when the lien can be attacked both to declare it entirely invalid or to declare it invalid only as to a party who is adversely affected by it. Consequently, United Bank had the power under § 49-37, if it filed a bond, to assert the priority of its mortgage over the PDS lien.

The major question raised by the application of § 49-37 to the present case is whether or not the requirement that United Bank file a bond as a precondition to a hearing is itself a denial of the due process right to a hearing.

The court approached this issue in General Electric Supply Co. v. SNETCO, supra, 185 Conn. at 591, 441 A.2d 581, when it stated: "The statutory requirement that any interested party other than the property owner must post a bond to obtain a hearing on a mechanic's lien raises serious doubts about the constitutionality of our statutory scheme."

The court then noted that courts in other jurisdictions are divided in their results, citing cases it claimed came down on both sides of the issue. It observed, "[i]n light of the year that may elapse before a lienor must either foreclose or forfeit his lien, the defendants have made out a strong prima facie case that our statutes may operate to deprive a general contractor of a prompt...