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Groesbeck v. Linden

321 N.J. Super. 349, 729 A.2d 47 (App. Div. 1999)

CONTRACTORS; LIENS—A contractor may forego using the Construction Lien Law and seek ordinary breach of contract remedies.

A home improvement contractor was engaged to do work on residential real property. The written agreement required payments for the work to be made in stages. A time came when the homeowner failed and refused to make the installment payment then due. Under the Construction Lien Law, a contractor who supplies work, services or material to the owner of real property can obtain a lien if a lien claim is filed not later than 90 days following the last furnishing of work, services, or material. The contractor served and filed a “Notice of Unpaid Balance and Right to File Lien.” Simultaneously with the filing, the contractor served the homeowner with a demand for arbitration which the Law requires when residential construction is involved. Following arbitration, an award was granted in the contractor’s favor allowing it to file a lien claim but requiring the contractor to post a bond, a letter of credit or funds in an amount representing 110% of the approximate fair and reasonable value of set offs claimed by the homeowner. The contractor was unable to post the security within the required 10-day period. As the consequence, the lien claim abated and was discharged of record. Then, the contractor filed a complaint against the homeowner, in the courts, seeking a monetary judgment for its open account. The homeowner contended that the contractor, having elected to pursue a lien claim subject to the law, was precluded from bringing suit on the basic construction contract. The lower court agreed, concluding that the contractor had elected its remedy to seek a lien under the law, was bound thereby, and forfeited its common law remedy to sue on the open book account. The Appellate Division disagreed and reversed.

The Court considered the language of the Construction Lien Law in the context of the entire legislative scheme. The current law replaced the long-standing Mechanics’ Lien Law, eliminating the requirement that a contractor planning to supply labor and materials must pre-file a mechanics’ notice of intention before a lien could attach to the property involved. Significantly, the Law, which creates the right to apply for a lien, provides that “[n]othing in this act shall be construed to limit the right of any claimant from pursuing any other remedy by law.” To the Court, other language in the Law also makes it clear that the lien claim procedure provided by the Law was not “designed or intended to be the exclusive remedy of an unpaid contractor.” In its view, a contractor does not lose its traditional common law contract remedy for unpaid services by initial resort to a lien pursuant to the terms of the Law. “It is not mandatory [for] an unpaid contractor who initially seeks a lien to follow through, fulfill and satisfactorily complete the lien claim procedure provided by the Act. Since the Act is not intended to be the exclusive remedy for an unpaid contractor, a contractor may forgo the legal effect and certainty represented by a lien and pursue other available remedies.” In sum, the Court held that “where a contractor’s lien claim is forfeited or aborted short of the commencement of an action in the Superior Court to establish and enforce the lien claim ... this contractor, . , may resort to any other remedy provided by law.”


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