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Recent Developments In Georgia Lien Law 02-96

By: James C. Busch

Recently, the Georgia Court of Appeals addressed a unique aspect of Georgia Lien Law in the case of Kelly v. Pierce Roofing Co., Inc., Case No. A95-A2351 (February 28, 1996).

In this case, the Kellys contracted with Associated Interiors for home improvements. Associated Interiors contracted with Pierce Roofing Co., Inc. for roof work. During the same month Pierce Roofing Co., Inc. finished its work, Associated Interiors abandoned its contract without completing its work and without paying Pierce Roofing Co., Inc. for labor or materials. Pierce Roofing Co., Inc. filed a claim of lien against the Kelly’s property.

Pierce Roofing Co., Inc. then obtained a default judgment against Associated Interiors. When Associated Interiors did not pay, Pierce Roofing Co., Inc. filed a complaint on lien for the amount of the default judgment. The Kellys filed a counterclaim suggesting that the roofing involved was defective. The trial court granted Pierce Roofing Co., Inc.’s Motion for Judgment on the pleadings. The Kelly’s appealed claiming numerous grounds for appeal.

The Georgia Court of Appeals reviewed the trial court and found for Pierce Roofing Co., Inc. In its ruling, the Georgia Court of Appeals held that Pierce Roofing Co., Inc. had established a prima facie case. In establishing its case, Pierce Roofing Co., Inc. filed affidavits and other evidence to which the Kellys presented no evidence in rebuttal instead relying on their Answer, which stated that they were without sufficient knowledge to form an opinion as to whether Pierce Roofing’s allegation that it completed its contract with Associated Interiors. The Kellys argued that they were not required to respond to the motion because Pierce Roofing Co., Inc. had failed to establish its prima facie case. They also claimed a default judgment by Pierce Roofing Co., Inc. against Associated Interiors did not establish prima evidence that Pierce Roofing substantially complied with their contract.

The Court of Appeals ruled that while a materialmen’s default judgment against a contractor is not binding on the owners, it does not follow that the judgment can not be used as prima facie evidence of substantial compliance with the contract. The default judgment operates as an admission by the contractor of the truth of the definite and certain allegations of the declaration. Thus, one of the allegations established is that Pierce Roofing Co., Inc. completed the work required by the contract. Therefore, the Court of Appeals ruled that Pierce Roofing Co., Inc.’s judgment against the contractor is prima facie evidence that Pierce Roofing Co., Inc. substantially complied with its contract. Therefore, the Kellys could not rest on the pleadings but were required to come forward and point to specific evidence giving rise to a triable issue. Because the Kellys failed to do so, Pierce Roofing Co., Inc. was entitled to summary judgment on its claim.

The Court of Appeals’ ruling in this case clarifies what was once a gray area of the law. This ruling also benefits materialmen who obtain default judgments against contractors and then decide to pursue the homeowner. What this case does is eliminates the unnecessary retrial of the original claim against the contractor. By accepting a default judgment as evidence of the claim, the Court of Appeals has sifted the burden to the homeowner to show the lien claimant is not entitled to judgment. While the homeowner can still raise valid issues to dispute the lien, these issues must be raised and supported by the evidence or the lien claimant will prevail.

For lien claimants, this case clearly indicates the benefit of proceeding quickly for judgment against the contractor so as to shift the burden of proof if the claimant decides to pursue the homeowner. Thus, if a lien claimant has the opportunity to obtain judgment against a contractor even if the contractor is insolvent or going to file bankruptcy, it is in the claimant’s best interest to quickly obtain the default judgment.

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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