Hiding Won't Make a Lien Disappear

When a lien is filed, owners get scared. That’s what makes a lien such an effective tool! In order to avoid the property encumbrance, owners should understand exactly who is working on their project and make sure everyone is paid. Perhaps the best way to do this is to request preliminary notices and to require conditional waivers when payments are made. By the time a lien is filed, it’s typically too late and owners have fewer options. Hiding isn’t one of those. As Amor Real Estate Investment (“Amor”) recently learned, hiding won’t make a lien disappear.

The Case

The fact pattern here will start a little later than most since this is about the (lack of) response to the lien. AWC, Inc. (“AWC”) filed suit to foreclose a mechanics lien against Amor. When AWC attempted to serve Amor, things got silly. A lawsuit can apparently make an owner disappear, but that won’t make a lien disappear.

The first attempt to serve Amor resulted in the nanny coming to the door. The nanny stated that she knew the person listed as Amor’s registered agent and that she thought they might own the home. The next attempt had a similar result. This time, a male resident opened the door. He confirmed that the house belonged to Amor’s agent, but claimed the agent neither lived there nor regularly went to that location. The third attempt at service resulted in no answer at the door.

Fortunately for AWC, the phrase “See no evil, hear no evil, speak no evil,” does not apply to mechanics liens. (For the record, I wanted to include those monkey emojis in this post.)

After service failed, the next step was to file for substitute service. With proof of due diligence in attempting to serve Amor, AWC filed for substitute service through the secretary of state. The state accepted the citation for service on Amor through the secretary of state on March 3, 2015. Because Amor could not be reached for service, this allowed AWC to serve the secretary of state in Amor’s place. This does not purport to serve the property owner from another angle. The secretary of state actually stood in the place of Amor for the purposes of service. The secretary of state forwarded the certificate of service to Amor by certified mail. No return receipt was received by the state.

With no response, default judgment was entered in favor of AWC. Notice of the judgement was sent to the very address that had now received three attempts at service and another attempt to notify Amor of the suit. Magically, this caught the attention of Amor who filed for appeal two months later. Amor claimed that because the secretary of state did not receive a response to the citation sent through certified mail, the default judgment should not stand. But the citation sent from the secretary of state was not an attempt at service. Service had already been completed on the secretary of state in place of Amor. Because service was rendered, there was no error on which to overturn the trial court’s decision. AWC’s lien was foreclosed.

Conclusion

Liens can be scary, but that’s the point. Without this tool, contractors, subs, and suppliers would be disadvantaged in payment disputes. Most disagreements can be nipped in the bud with clear communication at the start of the project. Here, it appears the project was probably devoid of communication from start to finish. Property owners should know that hiding won’t make a lien disappear. Rather than avoiding problems when they arise, the best course of action is to establish transparency from the beginning.

Subscribe to zlien's Construction Payment Blog

Summary
Hiding Won't Make a Lien Disappear
Article Name
Hiding Won't Make a Lien Disappear
Description
A Texas company learns, after 3 failed attempts to serve, that hiding won't make a lien disappear.
Author
Publisher Name
zlien
Publisher Logo