By: Alexander A. Miuccio Gregory J. Spaun Published: May 2018

Owner May be Liable for Sub's Work Despite Disclaimer

A mechanic’s lien is a powerful tool to ensure contractors get paid for their work. Mechanic’s liens can also be used to secure payment for work performed by a subcontractor where that owner consented to the performance of the work. The question of what constitutes an owner’s consent to the work is frequently litigated. In the recent case of Murnane Building Contractors, LLC v Cameron Hill Construction, LLC, an appellate court once again addressed this issue.

Background

Cameron Hill Construction entered into a contract with Syracuse University to construct a building on its campus. The contract also called for Cameron to lease the ground on which the building was located and, once construction was complete, lease back certain parts of the building to the University, as owner. In an attempt to stave off the filing of any mechanic’s liens, the University included a provision in the contract providing that “[n]othing in this [l]ease shall be construed as the consent or request of [the University], express or implied, by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any material for any improvement, alteration, or repair of the [p]remises, the [i]mprovements, or any part of either.”

Cameron entered into a subcontract with Murnane Building Contractors, LLC for the performance of certain work. During the project, construction was delayed. In order to keep work progressing, Cameron and the University entered into agreements which permitted specified construction work to go forward despite the delay. These agreements also required Cameron to obtain a mechanic’s lien waiver from Murnane. The document “waive[ed] and releas[ed] all liens or rights of lien now existing for work, labor, or materials furnished to 4/30/2014”. Ultimately, Murnane filed a mechanic’s lien to recover for unpaid work, and sued to foreclose that lien.

Decision

The University moved to dismiss Murnane’s lien foreclosure action, relying on both the provision of the contract disclaiming its consent to the work, as well as the lien waiver. The court granted the motion and dismissed the lawsuit. Murnane appealed. The appellate court reversed and reinstated the mechanic’s lien and revived the foreclosure action.

The appellate court quickly dispensed with the University’s lien waiver argument. It found that, by its terms, the lien waiver only applied to claims that arose before April 30, 2014, and Murnane’s complaint included claims to recover monies earned after that date. The appellate court also cited well established case law which holds that “[w]here a waiver form purports to acknowledge that no further payments are owed, but the parties’ conduct indicates otherwise, the instrument will not be construed as a release”. Here, Murnane submitted affidavits indicating that the parties’ actions demonstrated that the waiver should not be construed as a release of claims.

As to the disclaimer of consent in the contract, the court held that the agreement for Cameron to construct the building, for which the University would benefit, was sufficient evidence of consent. In addition, the University was aware that Murnane was performing the work. The University specifically agreed that Murnane “is an acceptable contractor”, and that Murnane was to provide payment and performance bonds. Relying on established case law, the court rejected the University’s disclaimer, holding that the University and Cameron “cannot by any arrangement among themselves cut off the rights of lienors”.

Comment

The courts’ interpretation of what constitutes an owner’s consent to an improvement is narrowly tailored and requires that the owner either be an affirmative factor in undertaking the work, or that the owner consents to the work with the expectation that it would reap the benefit of the work. Courts will not tolerate sly attempts to use boilerplate disclaimers where the owner’s consent may be inferred by conduct which demonstrates that the owner consented to the work performed on the project.

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