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Georgia Lien Law Update 02-92

By: James C. Busch

On February 13, 1992 in the case of Palmer et al. vs. Duncan Wholesale, Inc., Case Number S91G0484 the Georgia Supreme Court reversed the decision of the Georgia Court of Appeals pertaining to certain aspects of the Georgia lien law. The issue decided was whether a party’s failure to file a notice of suit as required under the Official Code of Georgia Annotated (O.C.G.A.) 44-14-361.1(a)(4) was fatal to that party’s suit against the owners of the property.

In the Palmer case, Palmer contracted with a contractor for the construction of a home. Duncan Wholesale, Inc. (Duncan) supplied the contractor with some of the materials used in the construction of Palmers’ home. The contractor subsequently failed to pay Duncan for the materials purchased. Duncan then filed a lien against the Palmer property. Duncan filed suit against the contractor for the balance due. However, upon filing suit Duncan failed to file the notice of suit required to perfect their lien under O.C.G.A. 44-14-361.1. The contractor was served with the suit and shortly thereafter filed for bankruptcy protection. Duncan then filed an suit directly against Palmer seeking to enforce its lien directly against his/her property. Palmer sought to have the case dismissed since Duncan had failed to file a notice of suit. The trial court agreed and dismissed Duncans’ case. Duncan appealed and the Georgia Court of Appeals reversed indicating that the failure to file the notice of suit as required by O.C.G.A. 44-14-361.1 in an action against the contractor was not fatal to the Duncan’s present action against the property owner.

The Georgia Supreme Court reversed the Georgia Court of Appeals by holding that Duncan’s failure to file the notice of suit was fatal to the commencement their action against Palmer. In reversing the Georgia Court of Appeals, the Georgia Supreme Court held that in order to proceed against a property owner under the facts outlined above a lien must be perfected prior to proceeding against the property owner. In order to perfect their lien Duncan should have filed their lien within three months of the last date of work or service, filed suit against the contractor individually or jiontly with the property owner within one year of the last date of work or service and finally filed a notice of suit in the superior court of the county where the property and lien were filed within fourteen (14) days of the filing of suit. By failing to file a notice of suit Duncan lost their ability to perfect their lien and thereby collect from the property owner.

This case should serve as a reminder that Georgia lien laws are strictly construed and any omission will likely be fatal. The Georgia Supreme Court confirmed this interpretation in Palmer by holding that the contractor’s bankruptcy did not relieve Duncan from their statutory requirement of filing a notice of suit. If one is in the situation where a individual/corporation has filed to pay on their account the safest steps to take to protect one’s options for collection are: 1) file your lien within three months of the last date of service or work, 2) file suit within one year of the last date of work or service, and 3) file a notice of suit within fourteen days of filing suit. If you fail to compile with any of the latter three steps you will lose lien rights and options for collection.

Mr. Busch is an attorney specializing in commercial and construction litigation for Busch, Reed, Jones & Leeper, P.C. in Marietta, Georgia

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