§ 16.2 For Whom Is a Lien Created

LibraryConstruction Law in Oregon (OSBar) (2019 Ed.)
§ 16.2 FOR WHOM IS A LIEN CREATED

§ 16.2-1 Statutory Provision

The individuals and entities for whom construction-lien claims are created are set forth in ORS 87.010. If a lien is created for a person who is not enumerated in ORS 87.010, that lien cannot be subsequently perfected and foreclosed. See ORS 87.035(1); ORS 87.060.

§ 16.2-2 Persons Whose Efforts Are Used in the Construction of an Improvement

One requirement to create a lien is that the person's efforts be used in the "construction of any improvement." ORS 87.010(1). The word construction means "creating or making an improvement or performing an alteration, partial construction or repair in and upon an improvement." ORS 87.005(2). The term improvement means "a building, wharf, bridge, ditch, flume, reservoir, well, tunnel, fence, street, sidewalk, machinery, aqueduct or other structure or superstructure." ORS 87.005(5).

Given the flexibility of the terms structures and superstructures, the Oregon courts have applied the doctrine of noscitur a sociis—literally, "it is known by its associates"—under which the meaning of a flexible word is determined from the words that accompany it in the statute, thus giving the words structures and superstructures wide-ranging meanings. See McCormack v. Bertschinger, 115 Or 250, 255, 237 P 363 (1925). Included in the courts' definition of structures and superstructures, and therefore included within the meaning of improvement, are the following:

• poles connected by wires to form electrical transmission lines (Forbes v. Willamette Falls Elec. Co., 19 Or 61, 62, 23 P 670 (1890))
• portable sawmills (McFeron v. Doyens, 59 Or 366, 369, 116 P 1063 (1911))
• railroads (George v. Oregon, C. & E. Ry. Co., 118 Or 502, 506, 247 P 780 (1926))
• mining mills and tramways (Watson v. Noonday Min. Co., 37 Or 287, 295, 60 P 994 (1900))
• driveways, garages, and retaining walls (McCormack, 115 Or at 255)
• log dumps (Abajian v. Hill, 42 Or App 695, 700, 601 P2d 837 (1979))
• condominiums (ORS 87.015(2))
• repair of well pump by removal, overhaul, and reinstallation (Austin v. Carver, 85 Or App 529, 532-33, 737 P2d 639 (1987))

Although a church is considered a building within the statutory meaning of improvement and is subject to a lien (Harrisburg Lumber Co. v. Washburn, 29 Or 150, 160-61, 44 P 390 (1896)), a publicly owned structure is not subject to a lien (First Nat'l Bank of Idaho v. Malheur Cnty., 30 Or 420, 423-24, 45 P 781 (1896)). Thus, a construction lien cannot be created on any municipal, county, state, or federal construction project, because the word private is an implied adjective precedent to the statutory delineations of ORS 87.005(5). Yet, if the public body creates an interest in its property, such as a right-of-way or a leasehold, then that property is subject to a construction-lien claim. See Robertson, Hay & Wallace v. Kunkle, 69 Or App 99, 106, 686 P2d 399 (1984) (a lien for labor and materials used in the construction of facilities on land leased by the defendant from the Port of Portland).

A question that is being asked with increasing frequency is whether a construction lien can be claimed against a casino or other project constructed on Native American Indian lands. Generally, a construction lien cannot be claimed against tribal lands that the United States holds in trust. See United States v. Chinburg, 224 F2d 177, 180 (10th Cir), cert den, 350 US 897 (1955). A tribe may, however, with the Secretary of the Interior's approval, consent to the application of state construction-lien laws to a leasehold interest created in tribal lands. If so, the Secretary's trust responsibilities are fulfilled and a construction lien may be claimed. See Red Mountain Mach. Co. v. Grace Inv. Co., 29 F3d 1408, 1411-12 (9th Cir), cert den, 513 US 1044 (1994) (allowing enforcement of an Arizona mechanic's lien by foreclosure against a non-Indian lessee of Indian lands).

An Indian tribe is able to waive its sovereign immunity, whether in general or for a specific project. See C&L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 US 411, 414-15, 121 S Ct 1589, 149 L Ed 2d 623 (2001) (immunity was waived when the tribe entered into an American Institute of Architects form contract that incorporated rules of the American Arbitration Association). For further discussion of construction contracts with Indian tribes, see § 4.5.

§ 16.2-3 Persons Whose Efforts Are Used in the Preparation of Land

A lien is created under ORS 87.010(2) when a person's efforts are used in the preparation of a lot or parcel of land. By statute, the term preparation includes "excavating, surveying, landscaping, demolishing or detaching existing structures, or leveling, filling in or otherwise making land ready for construction." ORS 87.005(9).

In Abajian v. Hill, 42 Or App 695, 699, 601 P2d 837 (1979), the court found that providing and hauling away drop boxes constituted an act of preparation within the meaning of ORS 87.005(9). In so doing, the court stressed that the isolated functions of providing and hauling away drop boxes "must be analyzed as one part of the larger function in the development to which it contributes." Abajian, 42 Or App at 698. Thus, providing and hauling away drop boxes was an act of preparing the land for construction. Abajian, 42 Or App at 699.

§ 16.2-4 At the Instance of Owner of Improvement or Construction Agent

A contract must exist between the lien claimant and the owner of the improvement or the owner's agent or construction agent. See ORS 87.010(1) (allowing a lien for labor, materials, or equipment furnished "at the instance of the owner of the improvement" or the owner's construction agent); ORS 87.005(3) (defining construction agent); ORS 87.005(4) (defining contractor); ORS 87.010 (entitlement to construction liens).

§ 16.2-4(a) Owner versus Agent versus Construction Agent

It is important to understand how each of the relationships mentioned in § 16.2-4 affects a claimant's potential construction-lien rights. The first step in this understanding is to review the definitions of the terms owner, agent, and construction agent.

Under ORS 87.005(8), the term owner is defined as follows:

(a) A person that is or claims to be the owner in fee or a lesser estate of the land on which preparation or construction is performed; or
(b) A person that entered into a contract to purchase an interest in the land or improvement sought to be charged with a lien created under ORS 87.010; or
(c) A person that has a valid lease on land or an improvement and that possesses an interest in the land or improvement by reason of the lease.

The term construction agent is defined in ORS 87.005(3) as "a contractor, architect, builder or other person having charge of construction or preparation."

The term agent is not defined in ORS chapter 87. Thus, it is likely that a court might look to common-law definitions of this term. C.f. Vaughn v. First Transit, Inc., 346 Or 128, 135, 206 P3d 181, 186 (2009) (abrogated by statute) (analyzing the undefined term agent as used in the Oregon Tort Claims Act in light of common-law agency theory). Oregon courts have held that an agent "is one who has authority to act for another in contractual dealings with third persons." Barnes v. E. & W. Lumber Co., 205 Or 553, 574, 287 P2d 929 (1955). Agency is also defined as a "fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Jones v. Herr, 39 Or App 937, 940, 594 P2d 410, rev den, 287 or 1 (1979) (quoting Restatement (Second) of Agency § 1 (1958)). In other words, the finding that a person is an agent is based on a factual determination specific to each situation.

Different lien rights for different relationships are specified in ORS chapter 87. Lien rights for those providing labor, materials, or equipment on an improvement "at the instance of the owner of the improvement or the construction agent of the owner" are set forth in ORS 87.010(1). Lien rights for those engaged in or renting equipment for the preparation of an improvement at the request of the owner are set forth in ORS 87.010(2). Lien rights for design professionals who prepare plans intended for use in an improvement "at the request of the owner or an agent of the owner" are set forth in ORS 87.010(5).

Generally, a construction lien is also created when a person has a contract with the owner's construction agent. A construction agent includes "a contractor, architect, builder or other person having charge of construction or preparation." ORS 87.005(3).

The construction-lien statutes do not define the terms architect or builder. But see ORS 671.010(1) (architect defined). The term contractor is defined as

a person that contracts on predetermined terms to be responsible for performing all or part of a job of preparation or construction in accordance with established specifications or plans, retaining control of the means, method and manner of accomplishing the desired result, and that provides:
(a) Labor at the site; or
(b) Materials, supplies and labor at the site.

ORS 87.005(4).

Therefore, a person who agrees to fabricate structures for use in an improvement without providing materials, supplies, or labor at the site cannot be a contractor. Steel Products Co. of Oregon, Inc. v. Portland Gen. Elec. Co., 47 Or App 597, 602-03, 615 P2d 344 (1980), aff'd, 291 Or 41, 628 P2d 1180 (1981). However, such a person can be an "other person having charge of construction or preparation" (ORS 87.005(3)), and such contracts with that person may be at the instance of the owner's construction agent as required by ORS 87.010. Steel Products Co. of Oregon, Inc., 47 Or App at 602-04.

The court in Steel Products Co. considered two factors in its analysis of whether the plaintiff steel fabricator was a construction agent:

(1) Was the fabrication performed "with...

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