Mervin L. Blades & Son, Inc. v. Lighthouse Sound Marina and Country Club

Powers, J., delivered the opinion of the Court. Mechanics’ liens in Maryland were transformed into little more than debt claims when the Court of Appeals, following several due process rulings of the United States Supreme Court, decided Barry Properties v. Fick Bros., 277 Md. 15 , 353 A. 2d 222 , on 10 February 1976. The Court prefaced its discussion of the issue raised in that case with this explanation, at 19: “The basis of the present attack — that the imposition of a lien without notice and an opportunity for a prior hearing, as the Maryland statute authorizes, deprives the owner of his property without procedural due process — emanates from a quartet of recent Supreme Court decisions which address the question of whether certain statutory prejudgment creditor remedies are consonant wTith the due process clause of the Fourteenth Amendment. In the order they were decided, those cases are: Sniadach v. Family Finance Corp., 395 U. S. 337 , 89 S. Ct. 1820 , 23 L.Ed.2d 349 (1969) (garnishment of wages); Fuentes v. Shevin, 407 U. S. 67 , 92 S. Ct. 1983 , 32 L.Ed.2d 556 (1972) (replevin of personalty); Mitchell v. W. T. Grant Co., 416 U. S. 600 , 94 S. Ct. 1895 , 40 L.Ed.2d 406 (1974) (sequestration of personalty pursuant to ²⁶⁷ vendor’s lien); and North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U. S. 601 , 95 S. Ct. 719 , 42 L.Ed.2d 751 (1975) (garnishment of bank account).” After a thorough and exhaustive analysis of the constitutional principles expressed in the cited opinions of the Supreme Court, and of the Maryland statute, the Court said, at 33: “We conclude, therefore, that, because it allows prejudgment seizures without notice, a prior hearing or other sufficient safeguards, and cannot be justified under the extraordinary circumstances exception, Maryland’s mechanics’ lien law is incompatible with the due process clauses of Article 23 and the Fourteenth Amendment.” 1 The mechanics’ lien laws of Maryland, as they existed before the decision in Barry Properties , were found in Code, Real Property Article, Title 9, Subtitle 1, and were codified as §§ 9-101 to 9-111.

Procedural implementation of the statutory law was found in the BG Rules. Briefly summarized, the law, the numerous interpretive decisions, and the BG Rules, provided that a lien attached to a building and to the land covered by it, and as much immediately adjacent land of the same owner as may be necessary for the ordinary and useful purposes of the building, for work done and for materials furnished for or about the building. The lien' attached at the time the work was done or the materials were furnished, and had priority over any mortgage, judgment, lien, or encumbrance attaching to the building or ground subsequent to the commencement of the building. All valid mechanics’ liens on any building and ground shared equal priority. §§ 9-101, 9-102. ²⁶⁸ To preserve his lien, a claimant was required to file a claim or statement of his demand in the office of the clerk of the circuit court before the expiration of 180 days 2 after the work was finished or the materials furnished.

What the claim was required to set forth was specified in § 9-105 (c i. The final step, and the first judicial step, followed as prescribed in § 9-106. Unless within one year after the claim was filed, the claimant brought an equity suit to enforce it, the lien expired. If a suit to enforce the lien was timely filed, the lien remained until the case was concluded.

The owner of the property, or other person interested, could at any time file an equity suit to compel the claimant to prove the validity of the lien. A claimant’s suit to enforce his lien invoked the special statutory in rem jurisdiction of the equity court. Trial of such a suit could involve one or more of several issues, such as whether proper notice of intent to claim the lien was given, if required by § 9-103; whether the lien was preserved beyond its original life of 180 days by the timely filing of a claim; whether the claim as filed satisfied the requirements of § 9-105 (c); or whether the claimant is entitled to the full amount claimed. A finding of a valid lien in any amount normally resulted either in payment, so as to discharge the lien, or in a decree for sale of the property to satisfy the lien.

Rule BG73. It should be noted that the entire proceeding, from the creation of the lien to its discharge, was in rem, and even a final judgment after trial did not result in an in personam money judgment against any party. Indeed, § 9-109 explicitly preserved “the right of any person, to whom any debt is due for work done or material furnished, to maintain any personal action against the owner of the building or any other person liable for the debt.” Having held in Barry Properties that Maryland’s mechanics’ lien law violated due process, the Court of Appeals looked for severable salvage, to “preserv[e] enough ²⁶⁹ to have a law capable of fulfilling the principal legislative intent.” At 36-37. The Court said, at 37: “We think that this can be accomplished by excising 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 in a proceeding sufficient with respect to due process.

We therefore hold 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). What the claimant, be he a general contractor or subcontractor, possesses up to that point in time is a chose in action. Under this ruling, we believe, the statute continues to effectuate the primary legislative intent, yet the owner is not deprived of a significant property interest without due process since the owner’s interest is not impinged upon until after he is provided with notice and an opportunity for a hearing. It follows that § 9-107 (b), to the extent that it grants mechanics’ liens ‘priority over any mortgage, judgment, lien or encumbrance attaching to the building or ground subsequent to the commencement of the building’ but prior to the time the lien is established by a judicial determination, is also null and void since to hold otherwise would permit contractors to seize with their left hand what we have said they cannot grasp with their right.” It will be seen that the very valuable right which was preserved was the right of a creditor for labor or materials to proceed in rem against improved property even though he could show no privity of contract with the owner, nor personal liability of the owner to him.

It will be seen also that the lien concept in the law is otherwise virtually swept away. The claimant has no lien ²⁷⁰ until he has gone to court and has prevailed in what would be, in essence, a debt suit at law, without a jury. Even then he achieves no priority over any existing mortgage, judgment, lien, or other encumbrance. He may or may not share pro rata with holders of other mechanics’ liens, already established. 3 Any claimant who is able to show personal liability of the owner to him may well prefer to obtain an in personam money judgment in a suit at law.

The judgment would be an immediate lien against all real estate of the owner, and would afford other means of collection as well. A potential mechanics’ lien claimant who chooses to invoke the now curtailed benefits of the statute must still comply with the various procedural prerequisites, all within the specified time periods. Barry Properties, supra, at 37-38 . We have indulged in this extensive discussion of the mechanics’ lien law, both before and after the Court of Appeals in Barry Properties pointed out its substantial unconstitutionality, because of our deep concern for the predicament in which the appellant in this case finds itself.

Mervin L. Blades & Sons, Inc., the appellant, on 23 December 1975, filed in the Circuit Court for Worcester County, in equity, an initial pleading entitled “Bill To-Enforce Mechanics’ Lien”, naming as defendants Montego Bay Development Corporation, Wisterco Investments, Inc., and William R. Bloxom, all of whom it described as “owners or reputed owners, operating and commonly designated as Lighthouse Sound Marina and Country Club, now succeeded in interest by Lighthouse Sound Country Club, Inc.” The complaint also named the latter corporation as a party defendant. The ultimate disposition of the case in the Circuit Court for Worcester County was that the court, Daniel T. Prettyman, Judge, entered an order on 1 October 1976 sustaining an amended demurrer to the bill, without leave to ²⁷¹ amend. This constituted a final judgment, Maryland Rule 373 d., and from it Blades took this appeal. Blades sought in its complaint to enforce a mechanics’ lien claim in the amount if $672,809.56.

It alleged that pursuant to a contract with Montego, Wi stereo, and Bloxom, it had furnished materials and labor in connection with the construction of “a main core and tennis court building or buildings”, as described in the contract, which was attached to and incorporated into the complaint as Exhibit A. For a legal description of the real estate on which the building or buildings were erected, the complaint referred to a deed, a copy of which was a part of its mechanics’ lien claim. The complete lien claim, which the complaint alleged was filed in the office of the clerk of the circuit court on 23 December 1974, 4 was attached to and incorporated into the complaint as Exhibit B. The lien claim made no reference to a contract. The complaint went on to allege that Blades had fully performed its obligations under the contract; that it furnished materials and performed work within 180 days of filing its lien claim; that no payment had been made; and that the amount due it was $672,809.56, with interest. In response to the complaint filed by Blades, all defendants appeared by counsel and demurred, on the ground that the mechanics’ lien laws unconstitutionally violated due process.

While the demurrer was pending, the opinion in Barry Properties came down. All parties conceded that under that decision,