A Troubling Superior Court Decision May Limit The Right Of Subcontractors And Suppliers To File Mechanic’s Liens

By: Paul R. Fitzgerald, Esq.

A mechanic’s lien is perhaps the most effective remedy available to subcontractors and suppliers who have not been paid for their work on private construction projects.  In fact, lien rights are so important that they have been established and enhanced by statutes in Connecticut for almost 200 years.  However, a Connecticut Superior Court decision recently interpreted Connecticut’s lien laws in a way that may prevent subcontractors and suppliers from securing their claims with mechanic’s liens.  The decision, Wegrzyniak v. Hanley Construction, LLC, 2017 WL 5706192 (Conn.Super. Oct. 30, 2017), stands for the proposition that a subcontractor cannot file a mechanic’s lien if the general contractor has already filed a lien that includes amounts due to the sub.  This article discusses the Wegrzyniak decision and what it means for subcontractors and suppliers who wish to file mechanic’s liens in Connecticut.   

Wegrzyniak: A common fact pattern, but an uncommon decision.

The facts underlying Wegrzyniak are straightforward and typical of many troubled construction projects. Several subcontractors filed mechanic’s liens in order to secure payment for amounts due from the general contractor.  The general contractor also filed its own lien, which included amounts due to the subs. The property owners moved to discharge the subs’ liens, noting that the property was now encumbered by liens totaling far more than the amount which the owners agreed to pay the general contractor.  

The court found in favor of the owners and discharged the subcontractors’ liens, concluding that Connecticut’s lien laws prohibit subs from “piling on” and “tying up equity in vast multiples of the dollar amounts that may actually be owed under a contract by filing liens to cover amounts already covered by the general contractor’s lien.”  The court was unconcerned that the subs’ claims would no longer be secured by the subs’ own liens, finding that the subs would still be protected by the general contractor’s lien.

As far as we are aware, the Wegrzyniak decision is entirely new law in Connecticut.  Never before has a Connecticut court discharged a subcontractor’s lien on the basis that the lien is duplicative of a general contractor’s lien.  We believe the court misinterpreted a number of Connecticut statutes, with potentially serious ramifications for subcontractors and suppliers.

Connecticut General Statutes §§ 49-33 and 49-36 and the doctrine of “subrogation.”

In support of its novel decision, the court in Wegrzyniak relied on two Connecticut statutes: Conn. Gen. Stat. §§ 49-33 and 49-36.  Both statutes state that a subcontractor may not file a lien for his work “to a greater extent in the whole than the amount which the owner has agreed to pay to any person through whom the subcontractor claims….”

Per §§ 49-33 and 49-36, a subcontractor is “subrogated” to the rights of the general contractor through whom he claims, such that a sub only can enforce a mechanic’s lien to the extent that there is an unpaid contract debt owed to the general contractor by the owner.  Thus, a sub’s right to enforce its lien hinges on whether the general contractor could recover from the property owner because the subrogation doctrine only allows a sub to recover to the extent that a general contractor could recover.

While both statutes do prohibit the filing of a lien in an amount greater than the contract price which the owner agreed to pay the general contractor, it is important to note that this limitation applies only to an individual lien, not the total of all liens.  Moreover, nothing in either statute prohibits the filing of more than one lien per project.  To the contrary, it is very common for numerous subcontractors to file liens on projects where payment is a problem.  In such cases, the total amount of the liens often greatly exceeds the amount which the owner agreed to pay the general contractor.  When this happens, §49-36 sets forth a procedure by which the “lienable fund”- that is, the amount still owed by the owner to the general contractor– shall be apportioned among the claimants having liens.  This procedure ensures that an owner will never be required to pay more than the amount he or she agreed to pay the general contractor, but it does not deprive subcontractors of the right to file liens in the first place.

Why the Wegrzyniak decision is a problem for subcontractors and suppliers.

The Wegrzyniak decision wrongfully assumes that subcontractors will be adequately protected by the general contractor’s lien.  To understand why this conclusion is problematic for subcontractors and suppliers, consider the following potential scenarios:

  • The general contractor unilaterally decides to settle its claim against the owner and release its lien, leaving subcontractors (who have no liens) with the choice to either settle with the general contractor for less than the full amount of their claims (assuming the subs are even offered anything at all), or litigate with the general contractor without the benefit of a lien to secure their claims.
  • The general contractor is successful at trial and is either paid directly by the owner or with funds from the sale of the liened property.  Thereafter, the general contractor uses the funds to pay other creditors, not the subcontractors who performed work on the property. Because the subs could not file their own liens, their claims are totally unsecured.
  • After the subcontractors’ liens are discharged based on Wegrzyniak decision, and after the subs’ lien rights have expired, it becomes apparent that the general contractor’s mechanic’s lien is defective and is itself subject to discharge.  Now none of the parties who performed work on the project are protected by a lien.
  • One subcontractor may have lien rights that are superior to a second subcontractor.  Since both subs were precluded from filing liens because the general contractor filed its own lien, the first sub cannot assert its priority over the second sub.

All of these scenarios share a common theme: subcontractors and suppliers are now at the mercy of the general contractor to adequately protect their interests by filing a valid mechanic’s lien and properly foreclosing the lien.  

Conclusion  

The Wegrzyniak decision raises troubling questions for subcontractors and suppliers in Connecticut.  Notwithstanding the decision, we believe it is vitally important for subs to continue to file liens to protect their interests on private construction projects in the State.  If you have any questions about Wegrzyniak or mechanic’s liens generally, please call MKRB at 860-522-1243.

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