When determining the amount of security and protection afforded by a mechanics lien, the priority of that lien compared to other encumbrances on the property is of clear importance. Accordingly, lien priority is topic of much discussion on the blog, and an area in which clear information can be exceedingly helpful.
Since large problems with construction projects can result in not enough money to go around to all claimants, the relative priority of those parties’ claims can be the difference between getting paid and going home empty-handed. Luckily for mechanics lien claimants, there are specific statutory and case-law rules that can put mechanics liens in a relatively strong position. These “relation-back” doctrines are important to fulfilling the mechanics lien’s purpose of providing security by ensuring that an additional encumbrance arising after some work was performed on the project doesn’t usurp the mechanics lien’s place on the priority ladder.
Missouri and the “First Spade” Rule
mechanics liens shall be preferred to all other encumbrances . . . subsequent to the commencement of such buildings or improvements.
For a glimpse of this rule in action, one can review Grau Contracting, Inc. v. Captiva Lake Investments, LLC, in which Captiva Lake Investments, LLC. (“Captiva”) appealed the trial court’s finding that Grau Contracting, Inc.’s mechanics liens were prior and superior to deed of trust recorded subsequently to the commencement of work. Captiva’s argument, given the generally clear priority of mechanics liens in similar situations, was that section 443.055, which deals with future advance deeds of trust, is an exception to the first spade rule. Captiva also insisted that no prior case has addressed whether §443.055 actually trumps the first spade rule.
While the nitty-gritty of the Court’s legal analysis is potentially interesting but ultimately unnecessary to discuss, the Court ultimately came to a decision by looking to the strongly expressed statutory policy of protecting the rights of mechanics’ lienors. In other words, mechanics lien statutes will likely prevail in the face of statutory conflict. Given the equally well-established judicial attitude in favor of this policy, the Court found it unlikely that this will be reversed. Therefore, the Court rejected Captiva’s claim and upheld the ruling of the lower court.
This case is a powerful example of the general preference of mechanics lien priority, and Missouri’s specific judicial attitude toward protecting mechanics’ lienors and their rights in particular. Even though prior cases have not addressed a potential exception to the first spade rule, the Court was confident that the mechanics’ lien statute would prevail in this statutory conflict.