627 A.2d 959 | Conn. Super. Ct. | 1992
The plaintiff, PDS Engineering Construction, Inc., (hereinafter PDS) moves for reconsideration of this court's decision, dated December 18, 1991, denying priority of PDS's lien over the mortgage of defendant, United Bank Trust Company (United Bank). The court based its holding on the ground that the Connecticut mechanic's lien law, General Statutes §
PDS challenges the court's conclusion, asserting that the pattern of statutes constituting the mechanic's lien law, §
At the hearing on the motion, this court granted the motion to reconsider, and set aside its judgment pending its decision after reconsideration. On reconsideration, the court reverses itself and finds the mechanic's lien law constitutional as applied to United Bank. *462
Section
This court, while hearing foreclosure cases for the last three years, has observed that in at least a third of such cases, the plaintiff is the assignee of the original mortgagee bank. This lends justification for the court's taking judicial notice of the commercial practice of banks assigning mortgages among themselves in a secondary market.
On the other hand, banks have ways of protecting themselves from mechanic's liens. The two most obvious ones are obtaining waivers from mechanic's lienors and obtaining title insurance. United Bank knew that PDS had done work on the subject property in issue before placing its mortgage and yet, unaccountably, failed to get a lien waiver from PDS. Also, United Bank did acquire title insurance and, in fact, the present case is being pursued on its behalf by a title insurance company. (In Spielman-Fond, Inc. v. Hanson's, inc.,
In the instant case, the certificate of mechanic's lien was filed by PDS on the land records on February 1, *463
1990. This foreclosure action was initiated by PDS on May 18, 1990, and United Bank was duly made a party. At that time United Bank had the right under §
On the other hand, PDS asserts that its interest in the mechanic's lien is substantial because the lien is the only way to secure payment for the services it rendered to improve the property.
In Roundhouse Construction Corporation v. Telesco Masons Supplies Co., supra, 381, the Supreme Court commented that a six month delay in the right to attack a mechanic's lien constituted "the bare minimum of due process protection consistent with the extent of the deprivation present."
Although the court in Roundhouse was speaking of the deprivation of property owners as opposed to that of mortgagees, in General Electric Supply Co. v. SNETCO,
Thus this court concludes that even when balancing the interests of United Bank and PDS, §§
Section
PDS contends that this statute gives United Bank, as principal on a bond, the right to as immediate a hearing as feasible to contest PDS's lien. United Bank asserts that this statute serves an entirely different purpose and cannot be applied to give United Bank the hearing required by the due process clause.
Section
United Bank contends that the language in §
No legislative history reveals the meaning of "invalid" as used in §
The major question raised by the application of §
The court approached this issue in General Electric Supply Co. v. SNETCO, supra, 591, when it stated: "The statutory requirement that any interested party other than the property owner must post a bond to obtain a hearing on a mechanic's lien raises serious doubts about the constitutionality of our statutory scheme."
The court then noted that courts in other jurisdictions are divided in their results, citing cases it claimed *466 came down on both sides of the issue. It observed, "[i]n light of the year that may elapse before a lienor must either foreclose or forfeit his lien, the defendants have made out a strong prima facie case that our statutes may operate to deprive a general contractor of a prompt hearing." Id., 592.
This observation of the Supreme Court in General Electric Supply Co., however, is dicta because the court determined that general contractor's claim that the property owner withheld funds from it as a result of a subcontractor's mechanic's lien, did not provide the proper grounds for testing the general contractor's constitutional challenge to the mechanic's lien law. Id., 594.
Of the cases cited by the Supreme Court in General Electric Supply Co., on the issue of the constitutionality of requiring a bond as a condition to the right to a hearing to contest an attachment, the clearest holding is Guzman v. Western State Bank of Devils Lake, North Dakota,
The federal appeals court in Guzman v. Western State Bank of Devils Lake, North Dakota, supra, 131, held this limitation on the right to a hearing to be one factor in declaring the North Dakota statute unconstitutional. That court stated: "The bond requirement places a considerable impediment on any debtor who seeks to contest the attachment of any item of substantial value, and to the extent that any debtor is unable to meet the bond requirement in order to obtain a discharge hearing, the goal of minimizing the impact on the debtor of a wrongful attachment has been undermined." Id.
In North Georgia Finishing, Inc. v. Di-Chim, Inc.,
Justice Powell, however, cited no authority for his comment, and careful research discloses no general rule that the requirement of a bond as a precondition to a hearing or to access to the courts is a denial of due process rights. Bond requirements are rampant in our law. Under General Statutes §
Due process, Justice Frankfurter reminded us in his concurring opinion in Joint Anti-Fascist Refugee Committee v. McGrath,
In Guzman v. Western State Bank of Devils Lake, North Dakota, supra, 132, the court considered the competing interests of the creditor and debtor and stated: "We believe that on the facts of this case the impact upon the Guzmans of losing their sole residence outweighs the possible detriment tot he property interest of the creditor in the mobile home. . . . In this case we have debtors faced with the catastrophe of losing their home in an ex parte procedure by which they are summarily evicted without any opportunity to be heard and to resist the grounds for eviction. Truly these debtors were driven to the wall by the seizure of the mobile home." (Emphasis added.)
In contrast to the facts of Guzman, while United Bank has an interest in the land measured by its mortgage, it is a non-possessory interest. The PDS mechanic's lien affects the priority of the bank's mortgage but it does not have impact of an eviction as in Guzman. Thus Guzman is clearly distinguishable from the present case. *469
Moreover, United Bank has not shown it would incur any undue hardship in putting up a bond. In fact, the bank is assumed to be familiar with the necessity for bonds in commercial transactions and could hardly claim a bond in present case would impose a burden. Since, when the due process clause is applied, account may be taken of the circumstances of the parties, this court concludes that requiring United Bank to file a bond as a condition to obtaining a hearing is not so onerous that it constitutes a denial of due process. Thus §
Section
United Bank argues that it could not invoke this statute to obtain a hearing to contest PDS' lien because the statute is intended to permit a party to demonstrate technical insufficiencies or jurisdictional failings that render the mechanic's lien wholly invalid, thereby entitling the party to damages for the lien not being released. The very few cases arising under the statute do involve such attacks upon a lien. In Weinburg v. Valente,
The wording of § 45-51 to the effect that a court "may adjudge the validity or invalidity of the lien" justifies the same interpretation as of similar language in §
In Roundhouse Construction Corporation v. Telesco Masons Supplies Co., supra, 375-376, our Supreme Court alluded to §
United Bank argues that the Connecticut mechanic's lien law does not satisfy due process standards as to it because the statute does not require that notice of *471
the filing of the mechanic's lien certificates be given to persons, other than the owner, affected by the lien. See General Statutes §
In the present case, while no evidence indicated United Bank was directly notified of the filing of PDS' mechanic's lien, there was ample evidence that PDS did sufficient visible work on the subject property before the recording of United Bank's mortgage so as to give United Bank constructive notice of the lien. The law is succinctly stated in Lenexa State Bank Trust Co. v. Dixon,
Moreover, the notice requirement is related to the right to a hearing at a meaningful time. In contrast to a property owner, whose prior mortgage may be accelerated, or whose credit rating may be adversely affected by the filing of an encumbrance on his property, the impact of the filing of the PDS mechanic's lien on United Bank is the more limited one of possibly affecting the assignment of its mortgage as a first lien on the property. When a title search reveals such a restriction on United Bank assigning its mortgage, that would be a meaningful time for United Bank to demand a prompt hearing under §
After Roundhouse the legislature amended the mechanic's lien law to require that the lienor serve a copy of its certificate of lien on the property owner. General Statutes §
In Connecticut v. Doehr, supra, 2113 n. 4, the court, after noting the preexisting interest a mechanic's lienor has in the property to which the services add value, said "a heightened plaintiff interest in certain circumstances can provide a ground for upholding procedures that are otherwise suspect."
In the present case, given that: (1) United Bank had constructive notice of PDS' lien; (2) the impact of the filing of the PDS lien certificate on United Bank was relatively small (even if not de minimus); (3) if the certificate prevented United Bank from assigning its mortgage, it could promptly obtain a hearing under §§
United Bank asserts that Doehr demands that PDS must prove at a hearing in probable cause that its mechanic's lien is meritorious before the PDS lien can *473 attach. While Doehr does require a predeprivation hearing when the plaintiff seeks an attachment of defendant's property to secure a possible judgment in a tort claim, no cases brought to the attention of this court have required a hearing on a mechanic's lien prior to it becoming effective. The observation of the Doehr court that the substantial interest of the mechanic's lienor in the property subject to the lien justifies less stringent due process requirements invites the inference that a hearing prior to filing is not constitutionally mandated.
On reconsideration, this court concludes that the Connecticut mechanic's lien law, particularly §§
When this court filed its earlier memorandum of decision, it failed to take into account that the parties had stated that they wanted to leave open the matter of the plaintiff's attorney's fees. At the motion for reconsideration, it reminded the court that it had been mistaken in fixing those fees. Since then the parties have agreed that PDS may be awarded counsel fees in the amount of $58,000.
Based on the foregoing, a judgment of strict foreclosure may enter in favor of PDS; its debt is fixed at $253,872, plus interest accruing from January 24, 1991 to date. PDS is awarded attorney's fees of $58,000 and an appraisal fee of $4800. The law day is set for June 1, 1992, for Double RS, the owner of the equity of redemption and subsequent days for subsequent encumbrances in inverse order of their priority. The order of priorities of encumbrances on the property is as