The contractor amended its construction lien, which was then transferred to a bond and contested by the property owner after the start of litigation. When the contractor failed to add the bond’s surety to the lawsuit within 60 days, the property owner sought summary judgment and obtained an order finding the lien was extinguished based on the operation of two sections of Florida’s Construction Lien law.
Jon M. Hall Company, LLC v. Canoe Creek Investments, LLC, arises from payment dispute between a contractor and property owner. After the property owner refused to make final payment, the contractor recorded an approximately $825,000 lien against the property. A month later the owner transferred this original lien to a transfer bond, and then days after that, recorded a notice of contest of lien.
Shortly after that, the contractor recorded an amended claim of lien, increasing the total amount of the lien to approximately $1.8 million. A couple of weeks later, the contractor filed a lawsuit against the property owner, and others, seeking, among other things, to foreclose the amended claim of lien. The lawsuit did not name the surety for the original transfer bond as a party to the lawsuit.
Two weeks later, the property owner transferred the amended lien to a transfer bond using the same surety that issued the bond on the original lien. At the same time, the property owner recorded a notice of contest of the amended claim of lien.
Five months later, the property owner moved for summary judgment on the claim to foreclose the amended construction lien, arguing that transferring the amended lien to a bond and then filing a notice of contest of lien had left the contractor with only 60 days to amend its lawsuit to add the surety to the lawsuit. Because the contractor failed to do that, the property owner further argued that the lien was extinguished as a matter of law.
Two months later the contract sought to amend the lawsuit to add the surety as a party with regard to the lien foreclosure count. A few months later, the court granted the property owner’s motion for summary judgment, effectively extinguishing the contractor’s lien claim. The contractor appealed the ruling.
On appeal, the contractor argued that the trial court misapplied sections 713.22 and 713.24, Florida Statutes, arguing that because the lien was originally transferred to a bond before litigation commenced, there was no time limit on when it could bring its claims against the surety as long as the original lawsuit was timely filed. The property owner argued in response that the operative lien for the purposes of litigation was the amended lien, which was transferred to a bond and noticed for contest during the litigation.
In giving its ruling, Florida’s Second District Court of Appeal first noted that the time periods in Florida’s Construction Lien Law are intended to be definite and to provide certainty of deadlines that can be relied on not only by the parties to the lien but also lenders, buyers, and others who rely on time periods set forth in the lien law. The court then turned its attention to sections 713.22 and 713.24 Florida Statutes.
Section 713.22, Florida Statutes, sets forth the general one year deadline to bring an action to enforce a lien, but also provides that a property owner can shorten the time within which an action to enforce any claim of lien or claim against a bond can be commenced by recorded a notice of contest of lien. If, after the recording of a notice of contest of lien, a lienor fails to institute a suit to enforce the relevant lien within 60 days, the lien is extinguished automatically.
Section 713.24, Florida Statutes, governs transfers of liens to security, and indicates that any lien can be transferred from real property to other security through several means, including obtaining a bond from a surety and filing a copy of the bond with the clerk. The statute continues to state that actions to enforce a transferred lien must be commenced within the time specified in 713.22, Florida Statutes, as follows:
If a proceeding to enforce a lien is commenced in a court of competent jurisdiction within the time specified in s. 713.22 and, during such proceeding, the lien is transferred pursuant to this section[,] . . . an action commenced within 1 year after the transfer, unless otherwise shortened by operation of law, in the same county or circuit court to recover against the security shall be deemed to have been brought as of the date of filing the action to enforce the lien, and the court shall have jurisdiction over the action.
In construing these two statutes together, the appellate court concluded that":
Thus, under the plain statutory language, where a lien is transferred to a bond during litigation, and the owner records a notice of contest, the lienor has “60 days” “within which to commence an action to enforce any claim of lien or claim against a bond,” or else the “lien . . . shall be extinguished automatically.”
The cited to its own prior decision and one from the Fourth District Court of Appeal supporting this conclusion.
The court then turned back to the underlying facts of the present case, noting that while that original lien was recorded, transferred, and contested all before litigation commenced, the amended lien was only recorded before litigation, and was transferred and contested after the start of litigation. Thus, the contractor only had 60 days to bring an action against the surety on the bond. Once it failed to do so, the lien was extinguished as a matter of law.
The court rejected the argument advanced by the contractor that the original claim of lien was the only one that mattered for the purposes of transfer, noting that this could result in the type of prejudice prohibited by section 713.08(4)(b), Florida Statutes, as follows:
[The contractor’s] argument -- that the transfer of the Amended Claim of Lien was irrelevant because the “only” claim of lien had already been transferred -- would violate this provision by eviscerating [the property owner’s] statutory rights both to release its property from the Amended Claim of Lien and to shorten the time for [the contractor] to claim against the bond. [The contractor] cannot have it both ways: if amending its claim of lien allowed [it] to encumber [the property owner’s] property and seek more money in foreclosure, then [the property owner] was likewise allowed to take “advantage of these special statutory lien rights by posting a transfer bond thereby transferring the lien on the real property to a surety bond and removing the cloud on [the] property's title.”
The appellate court concluded that the trial court had properly entered summary judgment on the construction lien claim
The key takeaway for contractors from this decision should be to pay careful attention to the documents they receive relating to their liens and to pay careful attention to what they do to relevant deadlines. Transfers, notices of contest, and even the start of litigation can all affect the timing of when actions need to be taken, when they are barred, and who the critical parties to the action should be. Contractors should consult with an attorney to ensure they do not miss critical deadlines that can possibly waive their lien claims.