Home -> Law Blog Directory -> Construction Law Blogs -> The South Carolina Construction Law Blog

Construction Law

: The South Carolina Construction Law Blog

SC Court of Appeals: Recent Clarification on Who is a "Prevailing Party? Under a Mechanic's Lien Claim

By Ryan McCabe

   The South Carolina Court of Appeals recently decided a case that clarified who a "prevailing party" is under the mechanic?s lien statute. The Court held that if a party offers a successful defense against a mechanic?s lien based on the other party?s failure to comply with statutory time limits on enforcing the lien, then the former is the "prevailing party." Also, the Court held a party prevails when it successfully defends against a claim for a lien regardless of the outcomes of other causes of actions in the same suit. This clarification is important because a "prevailing party" on a mechanic?s lien claim in these situations not only defeats the lien but is also entitled to attorney fees expended to defeat the lien.

   In the case, Subcontractor hired EFCO, a window and framing system supplier, for a condominium project in Mount Pleasant, South Carolina. In February 2002, EFCO filed a mechanic?s lien against Subcontractor in the amount of $772,841.00. The Developer of the condominium project "bonded off" the lien by filing a bond with the Charleston County Clerk of Court. See S.C. Code Ann. § 29-5-10. However, EFCO failed to move for foreclosure and, instead, commenced a debt collection action on the lien in January 2003.

   In June 2003, EFCO filed a second mechanic?s lien in the amount of $793,428.48 after Subcontractor installed additional EFCO products. EFCO filed a debt collection action on the second lien and moved to foreclose it in August 2003.

   In response to this second lien, the Developer moved for summary judgment arguing the court should dissolve the first lien because EFCO failed to foreclose on the lien within the six month period required by statute. See S.C. Code Ann. § 29-5-120. The court agreed and granted the motion on the mechanic?s lien but allowed EFCO to proceed on several other causes of action. In addition, the court held that the Developer was the "prevailing party" and, therefore, entitled to attorney fees and cost incurred for defending against the mechanic?s lien. See S.C. Code Ann. § 29-5-10(a). EFCO appealed, arguing that the Developer was not a "prevailing party" and, even if the Developer was the "prevailing party", that the amount of the attorney fees was excessive.

   EFCO argued that the Developer won the summary judgment motion on a mere technicality and not on the merits and, therefore, was not the "prevailing party." The Court disagreed and held that the Developer successfully defeated the lien claim based on EFCO?s failure to comply with statutory time limits, which are, according to the court, similar to statutes of limitations. Dismissal based on a procedural rule like the statute of limitations is not prevailing based on a mere technicality but, rather, prevailing as a matter of law. The Developer could not, as a matter of law, be held liable to EFCO and, therefore, was the prevailing party.

   Additionally, EFCO asserted that since other causes of actions were still pending against the Developer, then the Court could not rule that the Developer was the prevailing party. Again, the Court disagreed and held that the mechanic?s lien statutes allow recovery of attorney fees when a party successfully defends against a claim for a lien regardless of the outcome of any remaining causes of action. The Court cited Cedar Creek?s holding that a prevailing party is entitled to attorney fees and costs incurred defending actions involving mechanic?s liens. See Cedar Creek v. Cantelou, 320 S.C. 483, 487 (Ct. App. 1995).

   Finally, the Court held that the trial court?s award of $10,434.00 in attorney fees was not excessive. The trial court properly considered the six factors a judge must consider before determining a reasonable attorney fee.

   The case citation is: EFCO Corp. v. Renaissance on Charleston Harbor, LLC, et. al., 370 S.C. 612, 635 S.E.2d 922 (2006).

   Lessons Learned:

For Owners, Builders, Developers, and General Contractors

• Always move for summary judgment against a mechanic?s lien when appropriate and ask for attorney fees and costs when the subcontractor or supplier fails to file the lien within 90 days or fails to enforce the lien within 6 months.
• Ask the court for attorney fees and costs when you successfully defeat a mechanic?s lien claim regardless of whether the other party has other causes of action against you.

For Subcontractors and Material Suppliers

• Be careful about missing statutory time deadlines, such as filing the mechanic?s lien within 90 days of finishing work or delivering materials or enforcing the lien within 6 months after filing. Failure to adhere to these deadlines will prevent you from enforcing the lien and will more than likely cause you to have to pay the other party?s attorney fees if they offer a successful defense against the lien.
• Do not just file a debt collection action on a mechanic?s lien. To satisfy the statutory requirements, you must file suit to foreclose on the lien within 6 months of filing the lien.
• Always send a demand for payment pursant to S.C. Code Ann. § 27-1-15 early in the collection process.  This will provide the possibility of attorney's fees even if a mechanic's lien is not filed.  If the subcontractor is not the prevailing party under the mechanic's lien statute, the subcontractor may still be the prevailing party under S.C. Code Ann. § 27-1-15 permitting attorney's fees or at least an offset against attorney's fees.  S.C. Code Ann. § 27-1-15 is risk free for a subcontractor, contractor, or material supplier.

   This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Full post as published by The South Carolina Construction Law Blog on June 29, 2007 (boomark / email).