The South Carolina Supreme Court recently held that the 90 day period in which to record a mechanic’s lien began to run upon the delivery of a box of ceiling tiles even though the mechanic's lien rights had previously "expired."

Subcontractor entered into a contract with Contractor to provide labor and supply materials for interior walls and ceilings in a commercial renovation project.  The contract amount was $493,156.  Subcontractor provided labor and materials for the renovation of the church on a regular basis from mid- 1999 until December 2000.  Upon completion of additional work and change orders, the total amount due was $713,364.  Contractor and Owner did not dispute the original contract amount or the various amounts for additional work, but Subcontractor was only paid $536,363 of the amount owed—leaving a balance due of $177,001.  Contractor and Owner did assert a counterclaim for offsets for delays.

In early 2001, upon the request of the Contractor’s supervisor, Subcontractor delivered one box of ceiling tiles to replace tiles at the renovation site which had been damaged.  A project foreman for the Contractor signed a form accepting delivery of the ceiling tiles.  Approximately one month later, Subcontractor filed a notice and certificate of mechanic’s lien. Contractor and Owner alleged the mechanic’s lien was not timely recorded within 90 days as required by S.C. Code Ann. § 29-5-10 et al. 

A bench trial was held and the court found that the mechanic’s lien was indeed timely recorded as required by statute.  The Subcontractor was awarded $152,001, the total amount due reduced by $25,000 for delays attributable to Subcontractor.  However, the court refused to award pre-judgment interest to the Subcontractor on the grounds that the amount owed was disputed.

Owner and Contractor appealed asserting that the mechanic’s lien was not timely recorded and the Subcontractor cross-appealed asserting that it was entitled to prejudgment interest.

 
The South Carolina Supreme Court considered the following issues:

              1) whether the mechanic’s lien was  timely recorded?

              2) whether the Subcontractor was -entitled to prejudgment interest?

 
Owner and Contractor argued that Subcontractor did not timely serve and record its mechanic’s lien within the 90 day deadline because the delivery of the ceiling tiles was a “unilateral, unsolicited delivery” and therefore did not restore the expired right to file a mechanic’s lien.  Owner and Contractor asserted that the delivery was merely that of “surplus materials” not required by the contract and that the delivery was also “merely provided as a gratuity or an act of friendly accommodation.”  The Owner and Contractor also argued that Subcontractor’s delivery of one box of ceiling tile was nothing more than “a contrived effort to revive lien rights.”         

The Subcontractor argued that it furnished additional supplies in good faith and at the request of the Contractor.  Subcontractor provided testimony that it routinely included the cost of replacing some damaged ceiling tiles in its estimates. 

The Supreme Court upheld the trial court on its holding that Subcontractor’s delivery of one box of ceiling tile was not done for the purpose of extending the time for serving a mechanic’s lien, but was done in good faith and for the purpose of fully completing the contract. The Supreme Court also held that the 90 day period to record the mechanic’s lien began to run upon delivery of the box of ceiling tiles in 2001.

The Supreme Court reversed the trial court on its denial of prejudgment interest holding that the Subcontractor was entitled to prejudgment interest since the amount owed was capable of being reduced to certainty upon demand for payment.

The case citation is: Butler Contracting, Inc. v. Court Street, LLC, 369 SC 121, 631 SE2d 252 (S.C. 2006).

Lessons learned:

• For Owners, General Contractors, and Residential Builders:

• Be careful about asking a subcontractor or material supplier to perform additional work or to provide additional material, including punch list work when substantial time has run towards the 90 days, or after the 90 day time period has run.  Although you may still be liable for the work, you are in a much better position defending on a breach of contract claim than a mechanic’s lien claim which may permit the lien claimant to foreclose.

• For Subcontractors and Material Suppliers:

• Do not be too quick to refuse to perform punch list work or to provide additional materials.  Under most circumstances this does little to compel the Owner, General Contractor, or Residential Builder to make payment.  However, it may under many circumstances permit additional time or restart the time to file the mechanic’s lien.  Keep in mind that more time is not always appropriate – i.e., if the property is going to be sold or a loan is to be closed, then the quicker a mechanic’s lien is filed the better.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.