Claimants Need Not Record Complaints to Enforce Lien Dissolution Bonds Under
In a recent decision, the Supreme Judicial Court of Massachusetts (SJC) has held that a contractor seeking to enforce a lien dissolution bond under G.L. c. 254 § 14 need not record an attested to copy of its complaint with the Registry of Deeds. In City Electric Supply Co. v. Arch Insurance Co., the SJC vacated a decision of Norfolk Superior Court—refusing to apply the recording requirement of G.L. c. 254 § 5 to G.L. c. 254 § 14.
The plaintiff in City Electric supplied electrical materials for a project in Brookline to a subcontractor, and thereafter perfected a mechanic’s lien on the property by recording a notice of contract with the Registry of Deeds. The general contractor subsequently recorded a lien dissolution bond (also referred to as a target lien bond), which dissolves liens already attached to property.
However, when the supplier/lienholder filed a timely enforcement action against the subcontractor and bond surety, the surety moved for summary judgment—arguing that the lienholder had failed to comply with the strict requirements of Section 14 by failing to record an attested to copy of its complaint with the Registry of Deeds. After the Superior Court ruled in favor of the surety on grounds that the recording requirement of Section 5 applies to lien dissolution bonds, the plaintiff appealed to the SJC.
On appeal, the SJC vacated the decision because the plain language of Section 14 does not require that a claimant record an attested to copy of its complaint with the Registry of Deeds. In so holding, the Court compared the requirements of Section 14 to those of Section 12, which covers blanket lien bonds. Since Section 12 explicitly requires such a recording, the Court regarded its omission from Section 14 as purposeful.
The SJC also found that the legislative history of Section 14 further supports this strict interpretation. Specifically, in its 1973 drafting of Section 14, the legislature opted to delete a reference to Section 5, which would have required the recording of an attested to copy of the complaint with the Registry of Deeds.
The Court next addressed the surety’s argument that Section 14 requires the recording of the complaint because it provides that the recording of a lien dissolution bond does “not create any rights which the claimant would not have had, or impair any defense which the obligors would have had, in an action to enforce a lien.” In other words, the surety argued that this verbiage transferred the recording requirement of Section 5 into Section 14.The Court disagreed. Whereas Section 5 provides for the dissolution of a lien where a plaintiff fails to record its complaint, the Court reasoned that actions to enforce lien dissolution bonds address liens that have already been dissolved by the bond. Therefore, the Court found that the surety’s interpretation of Section 14 would render meaningless the language of Section 5 “or such lien shall be dissolved.”
Lastly, the Court reasoned that its interpretation of Section 14 serves the main purpose of the mechanic’s lien statute. Specifically, it found that the terms of the statute provide that once a bond is recorded under Section 14, the lien is dissolved, and any concern about the uncertainty of title arising from that lien is eliminated. Therefore, recording of a complaint to enforce a lien dissolution bond would not support the statute’s purpose of ensuring that a person searching the property’s land records can determine with certainty whether or not the title is encumbered by a mechanic’s lien.
However, in a footnote to its decision, the Court acknowledged the surety’s valid concern that many entities, including the general contractor and other subcontractors, may have an interest in knowing about a lien dissolution bond’s enforcement action. The surety asserted that since such entities are not named as parties to the action, they would not receive service, and therefore would not have knowledge of it. But the Court said resolution of this issue was for the Legislature (not the courts).
This well-reasoned decision from Massachusetts’ highest court provides clarity for contractors seeking to comply with the statute’s requirements in enforcing lien dissolution bonds. However, in light of the previously mentioned footnote to the decision, it will not come as a surprise if the Legislature amends the statute to include a notice or recording requirement in the near future.