Landover Associates Ltd. Partnership v. Fabricated Steel Products, Inc.

Lowe, J., delivered the opinion of the Court. Because we are accustomed to a judicial procedure requiring proof of a claim by procuring a judgment prerequisite to obtention of a lien, the pre-Barry 1 statutory “mechanics’ lien” takes on an Alice in Wonderland quality. 2 Notwithstanding there was a similar possessory lien at common law, the concept of lien-first, judgment-after, does not comport with our traditional sense of systemic justice, but it was, until Barry Properties v. Fick Bros., 277 Md. 15 , ⁶⁷⁵ the law of Maryland for 185 years. Under Md. Code, Real Prop. Art., § 9-101 through § 9-113, the lien was created and attached to the property as soon as work was performed upon the property or materials supplied to it.

The law presupposed a contract, but its absence could have been raised as a defense. The lien’s initial life was 180 days but it could be extended for an additional year by properly recording it with the clerk of court. The property owner had the right to bring proceedings to compel proof of validity of the lien, and if he did not do so the claimant was required to commence proceedings to enforce it within that year, or lose it. Appellee, Fabricated Steel Products, Inc. (Fabricated), recorded its lien against appellant Landover Associates Limited Partnership (Landover) on March 12, 1975.

The general contractor of Landover, Burroughs and Preston, Inc. (Burroughs), who had engaged Fabricated as a subcontractor, petitioned the Circuit Court for Prince George’s County on March 26, 1975 to release the lien and offered to substitute the cash amount of the claim underlying the lien. Fabricated, with some qualifications, consented to the release. The consent agreement concluded: “The substitution in no way releases or relinquishes the claim of Fabricated Steel Products, Inc. and reserves its claim and each [and] every facet thereof as though the land were still the subject of the proceedings.” An order permitting the substitution was granted. This order was subsequently supplanted by an order permitting substitution of a bond for the cash.

A bill of complaint to enforce the mechanics’ lien was filed on April 7,1975 against Landover. There was some confusion in the case as to which of two cases the bond applied, because the petition to release the lien received one number and the subsequent petition to enforce the lien received another. The issue was settled by an order granting Fabricated’s motion to consolidate and to amend “so as accurately to reflect the status of the case as it now exists.” The amended bill of complaint included the ⁶⁷⁶ bonding company, Maryland Casualty Company, as well as Burroughs, as defendants. On December 16, 1975 Landover demurred to the bill of complaint on the grounds “That the Maryland’s Mechanics’ Lien Statute is unconstitutional...” and that “the burden of instituting judicial inquiry as to the bona fides of the claim and/or its validity, rests upon the defendants [sic ?].” The court overruled the demurrer and permitted Landover time to answer.

Following the answer, a full hearing was held on the bill to enforce, which resulted in a decree that found “a valid Mechanics’ Lien ... to exist in favor of the Plaintiff as against the Defendants”. Six issues are raised on appeal by appellants Landover, Burroughs and Maryland Casualty. I “Does the unconstitutional nature of the previous Mechanics’ Lien Statute with respect to procedural due process of law bar the Plaintiffs/Appellee’s suit to enforce a mechanics’ lien?” The short answer is “no”. The reasons are not so succinct.

Appellants rely most heavily on a footnote in Barry supra, to distinguish the instant case from the result in Barry. Meeting the question of the constitutionality of the Mechanics’ Lien law in that case, the Court’s holding was that: “... under the current statute there can be no existing lien on property until and unless the claimant prevails either in a suit to enforce the claimed lien or in some other appropriate proceeding providing notice and a hearing (i.e., a declaratory judgment action).” 277 Md. at 37 . ⁶⁷⁷ But the Court decided the remainder of the statute could stand since the defective portions were severable: “We think that this can be accomplished by exercising that portion of the statute which purports to create a lien from the time work is performed or materials furnished to the time a lien is established by judicial determination ... .” Id. at 37 . The holding transformed the lien from an absolute security which attached against a given property as the debt was incurred, to a “claimed” security right against that property subject to proof, as any other claim. In short, placing the lien before the judgment was “stuff and nonsense”. 3 If one has a claim it must be proved before a lien attaches. 4 Appellants are misled by the application of Barry’s facts to its holding.

The result of that case was to allow the lien to attach because the claimant had prevailed in the suit to ⁶⁷⁸ enforce the claimed lien. This suit satisfied the due process prerequisite of a hearing. The Court pointed out that the property owner “knew of the [claimant's claim to a lien sometime well prior to the [claimant’s institution” of the enforcement action but failed to challenge “the lien’s validity at that point”. The Court then concluded that the property owner “elected not to assert any right it may have had to have its position determined as of a time earlier than the hearing . ...” Id. at 38 .

The Court therefore concluded that before the final determination by the chancellor at the conclusion of the enforcement hearing, the property owner had been provided with notice and a hearing. As indicated, appellants’ reliance rests primarily upon a footnote in the course of the Court’s discussion in Barry, wherein it attempted to distinguish the Barry facts from the Supreme Court cases: “14. In this regard we mention that in neither North Georgia Finishing [, Inc. v. Di-Chem. Inc., 419 U. S. 601 ], Mitchell, Fuentes nor Sniadach, [all supra, n. 3] in contradistinction to this case, was there an adjudication on the merits of the creditor’s claim.

Rather, in each of those cases the property owner sought, by way of an injunction, declaratory judgment, motion to dismiss, motion to dissolve or some other similar procedure, to defeat the particular prejudgment creditor remedy at a point prior to an adjudication on the merits, with the appeal being taken from the denial of the requested action and without there being a determination of the underlying claim.” Id. at 38. Landover contends that its demurrer on constitutional grounds was an “other similar procedure” placing it in a position to defeat the creditor at a point prior to an adjudication on the merits. The demurrer was overruled by Judge Ernest A. Loveless, Jr., although he did not hear the case on its merits. Implicit in his holding was the theme that the demurrer was not an attack on a then-existing lien so much as it sought to ⁶⁷⁹ eliminate the claim to the lien which was subject to adjudication upon the hearing to enforce.

After pointing out the care taken by the Court of Appeals to preserve as much as possible of the Mechanics’ Lien law, he explained that: “Footnote 14 would have been applicable had the land owner sought to remove a recorded lien on the Land records, considered as a cloud on the title, as to the property on which it was claimed prior to a judicial determination, or some other similar remedy. Under the majority opinion this case and the action on the land would certainly appear to fall under the ‘suit to enforce the claimed lien or in some other appropriate proceeding’ supra.” We agree with Judge Loveless. The Court of Appeals by example indicated that it would preserve the rights of a claimant to the extent that he had provided the due process prerequisites to the owner, and would not let the form of the action destroy its substance if fundamental fairness was maintained. We further note, as indicated by Mitchell v. W. T. Grant Co., supra, “due process” is not offended because there was no deprivation of property prior to a hearing.

Landover did not raise the constitutional issue until eight months after the enforcement action commenced, and then directed its attack, not upon the question of the then-existence of the lien, but rather at the whole proceeding, contending that it was invalid on the theory that the entire statute was unconstitutional. The effect of Judge Loveless’ opinion was that which we regard as the effect of Barry, i.e., that prior to a hearing “no such lien attaches to the real estate”. Residential Industrial Loan Company, Inc. v. Manual M. Weinberg, Trustee et al., 279 Md. 483 (1977). Thus Barry had the effect of transforming the “Bill of Complaint to