Mobile Components, Inc. v. Layon

1980 OK 173, 623 P.2d 591

• Court: Supreme Court of Oklahoma
• Decided: November 25, 1980
• Docket: 51141
• Status: Published

Opinions

SIMMS, Justice:

This appeal concerns two lien foreclosure actions consolidated by the trial court. In 1973, Lewis Avenue Investment Company, as landowner, contracted to have a total of 975 apartment units constructed on two tracts of land, one in Tulsa and one in Broken Arrow. The carpeting for the units on both tracts was sub-contracted to Century Interiors, Inc. On July 17,1974, Century filed a materialmen’s lien statement in the amount of $17,115.37. The lien statement incorrectly described the Tulsa property for which the carpeting was furnished, but correctly described the property in Broken Arrow.

Appellant, as the assignee of these lien claims, sued below for foreclosure. Appel-lee Planned Residential Community Construction Company (PRCCC) bought the Broken Arrow property in January, 1975, with notice of the lien claim. Appellee Outrigger bought the Tulsa property in September, 1974, at which time, because of the incorrect description on the statement, it had no notice of the lien claim. Appellant, after the commencement of this action, was allowed to amend the lien statement to correctly describe the Tulsa property-

Appellees’ motion for summary judgment was sustained at the pretrial conference. The trial judge ruled that the Oklahoma Mechanics’ and Materialmen’s Lien laws, 42 O.S.1971, §§ 141, et seq., were unconstitutional as a deprivation of property without due process of law. The constitutionality of these statutes is the only issue on appeal.¹

We do not now determine if the trial court erred by allowing the description amendment to the lien statement, or by allowing one lien statement to suffice for two noncontiguous tracts of land.

42 O.S.1971, §§ 141, et seq., provide the statutory scheme through which a mechanic or materialman may claim a lien on real estate. A general contractor must file a lien statement within four months after the date upon which the last labor is performed, or materials last furnished, in the office of the clerk of the county where the land is located. The statement need only provide: the amount claimed and the items thereof as nearly as practicable; the names of the owner(s), the contractor, and the claimant; and a legal description of the property, all verified by affidavit. 42 O.S.1971, § 142.

The relevant provisions for subcontractors are the same, except that the lien statement must be filed within ninety days from the date of the last work performed or material furnished, and notice of the claim must be served to the owner. 42 O.S.1971, § 143.² The lien statement constitutes constructive notice of the claim to all purchasers subsequent to the date of the furnishing of the first material or performance of the first labor. 42 O.S.1971, § 141.

The claimant has one year to commence suit to enforce the lien. 42 O.S.1971, § 172. If no action is commenced within one year, the lien is canceled by limitation of law. 42 O.S.1971, § 177.³

The landowner may bring an action to discharge the lien at any time. 42 O.S.1971, § 177. He can also discharge the lien by posting a cash bond in a suitable amount. 42 O.S.1971, § 147. He has no other remedy. There is no provision that the claimant must post bond to indemnify the landowner for costs he might incur in clearing title to his property.

Appellant makes no claim that the liens it asserts were not the result of state action, but only that no significant property interest is deprived by the mere filing of the lien statement.

Appellees’ constitutional attack on the Oklahoma lien statutes is based primarily on four recent decisions by the United States Supreme Court concerning the requirements of due process where a state statute gives a creditor prejudgment relief.

In Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), a Wisconsin statute allowing a creditor to freeze the wages of an alleged debtor was held to be unconstitutional. The Court ruled that before the debtor could be deprived, even temporarily, of his wages, due process of law required that he be given notice and an opportunity to be heard.

Three years later, in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 349 (1972), the Court invalidated prejudgment replevin statutes of Florida and Pennsylvania, which allowed property to be seized by an ex parte application of one claiming a right in the property. The Court held that due process required that, except in unusual circumstances, the debtor must be given notice and an opportunity to be heard before he can be deprived, even temporarily, of any significant property interest.

In Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), a Louisiana statute allowing sequestration of property sold under an installment sale was upheld. The Court distinguished Fuentes, by saying that in this case the seizure was necessary to protect the rights of the seller in the collateral, as he had a valid vendor’s lien. The statute did not provide for notice and a hearing, but did have other procedural safeguards that the Court found to be a sufficient accommodation of the respective interests involved. The statute required: an affidavit of facts; review by a judge; a bond to be posted by the creditor; and a prompt post seizure hearing.

Most recently in North Georgia Finishing Inc. v. Di-Chem, Inc., 419 U.S. 601, 96 S.Ct. 719, 42 L.Ed.2d 751 (1975), the Court overturned a Georgia statute allowing the freezing of a commercial bank account. The statute required an affidavit to be filed with the court clerk, and a bond posted for twice the amount claimed. The Court held this statute unconstitutional because it provided for no prior notice and opportunity to be heard, nor any judicial participation in the proceeding before garnishing the account.

These cases enunciate the current due process standards required for prejudgment garnishment and replevin statutes. In the absence of extraordinary circumstances, certain procedural safeguards must be followed before a person is deprived of a significant property interest. Generally, he must be given notice of the creditor’s claim, and an opportunity to be heard before his property may be seized. However, if the interests of the creditor cannot be protected by allowing such prior notice and hearing, then there must be other procedural safeguards to sufficiently protect the property rights of the alleged debtor. These standards are meant to be flexible, to constitutionally accommodate the rights of all parties involved.

These requirements attach only when there has been a deprivation of a significant property interest. Appellees claim that a clear title is such a property interest. A lien, they argue, (1) clouds the title, and (2) restricts the alienation of the land, or at least reduces the market value; (3) the filing of the lien statement constitutes a taking; and (4) the provisions of the Oklahoma Mechanics’ and Materialmen’s lien statutes do not have the sufficient procedural safeguards required by the above cases, and are therefore unconstitutional.

The mere filing of the lien statement does not entitle the claimant to a lien on the land. 42 O.S.1971, § 141 provides that only a person who has in fact done work or furnished material on the property is entitled to a lien.⁴ This presupposes a judicial determination. We said in Hartford Accident and Indemnity v. Orr, Okl., 321 P.2d 373, 376-377, (1958):

“The filing of a lien claim is not ordinarily deemed the equivalent of the fact of the indebtedness which it concerns. As was said in Beebe v. Redward, 35 Wash. 615, 77 P. 1052, 1055: ‘It is at most only a tentative charge against the property it purports to bind, and is liable to be defeated * * * by showing that the indebtedness, or some considerable part thereof, is not owing.’ ”

The lien claimant gets nothing before judgment. The only prejudgment charge against the property is the notice of the lien claim. This notice serves the important functions of protecting the workman’s claim from subsequent assignment of the property by the landowner, and of informing potential buyers of a possible economic charge running with the land. Real property law in this country is founded upon principles of notice. To hold that the notice alone can constitute a taking of a significant property interest would severely restrict its entire purpose. The Supreme Court of Colorado, in rejecting a very similar constitutional attack to their lien statutes observed, in Bankers Trust Co. v. El Paso Pre-Cast Co., et aL, Colo. 560 P.2d 457, 462-463, (1977):

“To require the full panoply of due process protections before filing a lien statement would impair the notice function of the lien statements. In the interval between the time of the work, the furnishing of materials or services giving rise to lien claim and the hearing on the lien, prospective purchasers would have no notice of the potential lien. The very ‘deprivation’ complained of by [appellant], the difficulty in alienating property against which a lien has been filed, indicated the effectiveness and importance of the notice function of lien statements.”

The issue of the constitutionality of lien statutes relative to federal due process requirements has been considered by many other jurisdictions in the past few years. While some hold that the filing of the lien statement constitutes a significant taking of a property interest,⁵ we cannot do so. We are more persuaded by the rationale adopted by the majority of jurisdictions which have considered the issue, that the filing of the lien statement is a de minimis taking to which due process protection does not attach.⁶ The landowner is not deprived of substantial use and enjoyment of the property. The statement merely gives notice to all that a claim may be enforced against the land. Without suit being filed, the claim itself expires by limitation of law. 42 O.S.1971, § 177. In this regard, it is much the same as the lis pendens notice required when a suit is commenced concerning title to land. Appellees contend that the statute allows lien claimants to “extort” their claim from the landowner who wants to discharge the lien. We do not think that this danger is so apparent. If so, common sense would require a pre-filing hearing on the merits of a claim, not only for lien suits, but for any civil action, resulting in an unbearable administrative burden on the courts. On balance, the notice function, as well as administrative necessity, outweighs the minimal interference to property resulting from mere filing of the claim. We agree with the view expressed by the Missouri Supreme Court in Home Building Corp. v. The Ventura Corp., et al., Mo., 568 S.W.2d 769 (1978), where the court noted that the existence of the lien may have an economic effect and said:

“. .. but that does not deprive the owner of a significant property interest. The possession and use of the property is retained and the owner may sell, lease or encumber. The situation is comparable to several others wherein a pending suit has some economic impact on an owner but does not deprive it of a significant property interest ... It is comparable to the filing of a lis pendens notice. Such suits are instituted and maintained without the requirement of a hearing before filing to test the validity of the asserted claim.” (At 774).

The United States Supreme Court has spoken only indirectly on the constitutionality of mechanics’ lien statutes by its summary affirmance of Spielman-Fond, Inc. v. Hanson’s, Inc., 379 F.Supp. 997 (D.Ariz.1973), aff’d. 417 U.S. 901, 94 S.Ct. 2596, 41 L.Ed.2d 208 (1974). In this case, the Arizona lien statutes were upheld by the district court. While we realize the Supreme Court’s summary affirmance does not necessarily show approval of the reasoning used by the District Court⁷, we agree with the rationale expressed therein where it was said:

“Here, a lien is filed against the property and clouds title. It cannot be denied that the effect of such lien may make it difficult to alienate the property. If the plaintiffs can find a willing buyer, however, there is nothing in the statutes or the liens which prohibits the consummation of the transaction. Even though a willing buyer may be more difficult to find, once he is found there is nothing to prevent plaintiffs from making the sale to him.” (379 F.Supp. at 999).

Appellees claim that this is an “unrealistic” appraisal of the effect the lien filing has on the property. We need only note that in the case at bar, Lewis Avenue Investment Company, the original landowner in this case, was in fact able to sell the Broken Arrow property to appellee PRCCC notwithstanding the existence of the very lien statement complained of here.

Appellees cite two state cases where the states’ mechanics’ lien laws were held unconstitutional on due process grounds, and urge us to adopt the rationale expressed therein. Roundhouse Construction Corp. v. Telesco Masons Supplies, Conn., 362 A.2d 778, 168 Conn. 371, vacated and remanded 423 U.S. 809, 96 S.Ct. 20, 46 L.Ed.2d 29 (1975), reaff’d on both state and federal grounds, Conn., 365 A.2d 393, 170 Conn. 155, cert. denied, 429 U.S. 889, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976). Barry Properties Inc. v. Fick Bros. Roofing Co., Md., 353 A.2d 222, 277 Md. 15 (1976). We do not find these cases persuasive. In Barry, the court found the lien statutes unconstitutional because the lien attached to the property as soon as the work was performed or the materials supplied. It then upheld the validity of the lien claimed in that case by “excising” the offending portion and construing the statute to mean that the lien claimant really had only a possibility of a lien before judicial determination. Therefore, the court reasoned, the lien statement did not legally divest the landowner of any interest in his property prior to such judicial determination, which, of course, afforded adequate due process. We do not see how this result is consistent with the court’s holding that the lien deprives the landowner of a significant property interest. We agree with the dissenting opinion at page 237 (dissenting only to result) that:

“Appellant was either deprived of due process or he was not, and if he was, the deprivation cannot be rectified by acknowledging it on the one hand and ignoring it on the other. If it is the view of the majority that appellant suffered no denial of due process, that holding is dispositive of the case and this Court has no business in purporting to hold the lien facially unconstitutional.”

In the Roundhouse case, we note that the United States Supreme Court denied certio-rari because the judgment rested on adequate state ground, at 429 U.S. 889, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976). We think it is reasonable to conclude, as the court did in South Central District, etc. v. Bruce-Rogers Co., Ark., 599 S.W.2d 702 (1980), see footnote 2, that the United States Supreme Court considered its summary affirmance in Spielman-Fond, Inc. v. Hanson’s, Inc., supra, to be applicable, or the state ground would have been immaterial.

Moreover, we agree with the opinion expressed by the court in Home Building Corp. v. Ventura Corp., et al., supra, at 775, about these two cases that:

“They impose a very strict limitation on the reasonable efforts of a state to protect those who supply labor and materials to make improvements to real estate. Such results, in our judgment, are not dictated by the decisions in Sniadach, Fuentes, Mitchell, and North Georgia.”

We hold that the filing of a lien statement under our mechanics’ and material-men’s lien statutes is only a de minimis interference with the use and enjoyment of the property involved.⁸ As such, it does not amount to a taking of a significant property interest to which the requirements of either state or federal due process attach. Therefore, the summary judgment granted appellees holding those statutes unconstitutional is REVERSED.

REVERSED AND REMANDED.

LAVENDER, C. J., IRWIN, V. C. J., and WILLIAMS, BARNES, DOOLIN, HAR-GRAVE and OPALA, JJ., concur. HODGES, J., dissents.

1 . This action concerns only 42 O.S.1971, §§ 141, et seq., the later amendments to those statutes, 42 O.S.Supp.1979, §§ 141, et seq., are not in question here.

2 . The Legislature amended the statute in 1977 to provide for notice of the claim to the landowner from the contractor as well as the subcontractor. 42 O.S.Supp. § 143.1.

3 . Under our Title Examination Standards, 16 O.S.1971, Ch. 1, App., St. 14.1, unreleased liens may be disregarded where foreclosure has not been filed within the statutory time, and the Clerk requested to release same pursuant to 42 O.S. § 177.

4 . Under our slander of title action, 16 O.S.1971 § 79 the landowner may recover costs, attorney fees and damages suffered for a slanderous notice of claim. 42 O.S.Supp.1980 § 142.4 makes it a felony for any original contractor to falsify a lien statement to any owner of a dwelling.

5 . Jurisdictions declaring their mechanics’ lien statutes unconstitutional on the grounds that they are violative of due process include: Roundhouse Construction Corp. v. Telesco Masons Supplies Co., Inc., 362 A.2d 778, 168 Conn. 371, vacated 423 U.S. 809, 96 S.Ct. 20, 46 L.Ed.2d 29, on remand 365 A.2d 393, 170 Conn. 155, cert. den. 429 U.S. 889, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976) (Conn.1974); Barry Properties, Inc. v. Fick Bros. Roofing Co., 353 A.2d 222, 277 Md. 15 (Md.1976). Jurisdictions upholding the constitutionality of their mechanics’ lien statutes on the grounds that they contain procedural safeguards sufficient to satisfy due process include: Connolly Development, Inc. v. Superior Court of Merced County, 17 Cal.3d 803, 132 Cal.Rptr. 477, 553 P.2d 637, appeal dismissed, 429 U.S. 1056, 97 S.Ct. 778, 50 L.Ed.2d 773 (Cal.1976); Ruocco v. Banker, 380 F.Supp. 432 (Fla.1974).

6 . Jurisdictions upholding the constitutionality of their mechanics’ lien statutes on the grounds that the filing of a mechanics’ lien does not constitute the taking of a significant property interest include: Spielman-Fond v. Hanson’s Inc., 379 F.Supp. 997, affirmed 417 U.S. 901, 94 S.Ct. 2596, 41 L.Ed.2d 208 (Ariz.1973); Nelson-American Developers, Ltd. v. Enco Engineering Corp., 337 So.2d 729 (Ala.1976); Banker's Trust Co. v. El Paso Pre-Cast Co., 560 P.2d 457 (Colo.1977); Tucker Door & Trim Corp. v. 15th St. Co., 221 S.E.2d 443, 235 Ga. 727 (Ga.1975); Keith Young & Sons Const. Co. v. Victor Senior Citizens Housing, Inc., 262 N.W.2d 554 (Iowa 1978); Carl A. Morse, Inc. v. Rentar Industries Development Corp., 56 A.D.2d30, 391 N.Y.S.2d 425 (N.Y.1975); B & P Development Co. v. Walker, 420 F.Supp. 704 (Penn.1976); Cook v. Carlson, 364 F.Supp. 24 (S.Dak.1973); In re Thomas A. Cary, Inc., 412 F.Supp. 667 (Va.1976); Home Bldg. Corp. v. The Ventura Corp. and Housing Authority of the City of Nevada, Missouri, 568 S.W.2d 799 (Mo. 1978); Silverman v. Gossett, 553 S.W.2d 581 (Tenn.1977); So. Cent. Dist. Pentecostal Church of God of America, Inc. v. Bruce-Rogers Co., Ark., 599 S.W.2d 702 (1980).

7 . The United States Supreme Court summarily affirmed Spielman-Fond without opinion. The precedential significance of a summary affirmance by the United States Supreme Court was discussed by Justice Burger in Fusari v. Steinberg, 419 U.S. 379, 95 S.Ct. 533, 541, 42 L.Ed.2d 521 (1975), when he wrote: “When [the Supreme Court] summarily affirm[s] without opinion the judgment of a three-judge district court [the Court] affirm[s] the judgment but not necessarily the reasoning by which it was reached. An unexplicated summary affirmance settles the issues for the parties, and is not to be read as a renunciation by this Court of doctrines previously announced in our opinions after full argument. Indeed, upon fuller consideration of an issue under plenary review, the Court has not hesitated to discard a rule which a line of summary affirmances may appear to have established.”

8 . The legislature, since the filing of this action, has become more sensitive to the kinds of issues raised by appellants, evidenced by its recent enactments of protective provisions for the landowner. 42 O.S.Supp.1979 § 143.1 now requires notice be given the landowner by any lien claimant (see fn. 2). 42 O.S.Supp.1980 §§ 142.1, 142.2 require an original contractor to furnish the owner of property occupied as a dwelling a notice, before the commencement of any work or furnishing of any material, to be signed by the owner, informing the owner of certain rights and liabilities to which he is subject under the lien laws. Failure to give such notice, dated and signed by the landowner, renders the lien unenforceable.