§ 16.8 Special Circumstances

LibraryConstruction Law in Oregon (OSBar) (2019 Ed.)
§ 16.8 SPECIAL CIRCUMSTANCES

§ 16.8-1 Waiver of Lien

The right to perfect a construction lien is a statutory privilege that may be waived. Boise-Payette Lumber Co. v. Dominican Sisters of Ontario, 102 Or 314, 319, 202 P 554 (1921). Yet, because the Oregon courts closely scrutinize what constitutes the waiver of a lien, a supplier does not waive a lien right by agreeing to arbitrate a dispute (Harris v. Dyer, 50 Or App 223, 228, 623 P2d 662, modified, 292 Or 233, 637 P2d 918 (1981)), or by taking a promissory note as collateral security for the supplier's claim (see Johnson v. Paulson, 83 Or 238, 248-49, 163 P 435 (1917); see also Alza Corp. v. Lehman Dev. Corp., 162 Or App 128, 133-34, 986 P2d 59 (1999) (summary judgment was precluded because of the factual dispute regarding whether the parties intended the note to be accord and satisfaction for the plaintiff's debt or mere security for the debt)).

If a note is taken in payment of the supplier's claim, it constitutes a credit or offset that must be deducted from the supplier's claim. See Johnson, 83 Or 248-49; ORS 87.035(3)(a). However, if a mortgage or trust deed is received on the property as security, the right to a lien is waived. Trullinger v. Kofoed, 7 Or 228, 232 (1879) ("the rule seems to be well settled that where a mechanic takes a mortgage, either on the same property to which the lien attaches or on other property, he thereby waives his lien"); Charles K. Spaulding Logging Co. v. Ryckman, 139 Or 230, 239-42, 6 P2d 25 (1931) (when the claimant agreed to accept a mortgage to secure his debt, but filed a lien claim instead before the mortgage was executed, he waived the lien); Evergreen Pac., Inc. v. Cedar Brook Way, LLC, 251 Or App 194, 203-06, 284 P3d 509 (2012) (as a matter of law, by taking a trust deed, a lien claimant forfeits the right to assert a construction lien).

A clause in an agreement between the original contractor and the owner stipulating that no liens will be filed against the improvement does not waive a subcontractor's lien rights. Myers v. Joseph A. Strowbridge Estate Co., 82 Or 29, 40-41, 160 P 135 (1916). To effectively waive the subcontractor's rights, the subcontractor must expressly assent to such a provision. The subcontractor's mere knowledge of the provision's existence is insufficient. Myers, 82 Or at 40.

QUERY: Does a flow-down clause in a subcontract bind the subcontractor to an anticipatory lien-waiver clause found only in the prime contract? Without some more specific form of assent, a court may find that the
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