Chapter 19 - § 19.7 • LIEN FORECLOSURE LAWSUIT
| Jurisdiction | Colorado |
§ 19.7.1-Time Requirements
An action to enforce a mechanics' lien must be brought within six months after the last work or labor is performed, or materials furnished, or after the completion of the building, structure, or improvement.193 The later of the three dates applies. Thus, a lien claimant must bring a foreclosure action within six months after the later of the following: (1) the last date that work was performed; (2) the last date that materials were furnished; or (3) the date that the building or improvement on the property was completed.194 "The burden is on the lien claimant to show that its claim was filed within the statutory period."195
Unlike the deadline for recording a lien, which is based solely on when the lien claimant last performed labor or furnished materials, the six-month deadline for filing the foreclosure action can be based on when the entire project was completed. So even if the lien claimant had not performed labor or furnished materials for the project within six months of bringing the foreclosure action, the lawsuit will still be timely if anyone had performed labor or furnished materials for the project within six months of when the lawsuit is filed.196
Trivial imperfections or omissions in the work will not result in the work being deemed incomplete for purposes of this deadline.197
Note that discontinuance of all labor, work, services, and furnishing of materials on a structure for a three-month period constitutes "abandonment." And once there has been abandonment, the building will be considered completed.198 Completion by abandonment occurs at the end of the three-month period, which then starts the six-month clock for filing the foreclosure lawsuit.199 Trivial work or trivial supplies of materials will not be counted to save a project from abandonment, and the "abandonment" doctrine is applicable to all potential lien claimants, laborers, contractors, and suppliers alike.200 Note that abandonment has no effect as to the time frames for serving and recording a mechanics' lien statement and the notice of intent to file a lien statement.
The lien claimant's attorney cannot wait until the last minute to begin preparation of the lawsuit. The attorney will need to obtain a "foreclosure certificate" or a "litigation guaranty certificate" from the title company (the name of the document varies from company to company). This certificate should contain copies of all of the recorded documents of all parties claiming an interest in the subject real estate. If the title company misses an entry, it is liable, so long as the title company is paid its premium.
Sometimes, if the amount is relatively small, the attorney may try to "save" the expense of the certificate by doing his or her own examination of the title records. The attorney may even obtain a signed "waiver" from the client for this money-saving tactic. It is not recommended, and if an attorney does skip this important step, he or she should make sure that there is sufficient malpractice insurance coverage. As far as obtaining this "waiver" from the client, a court would probably hold that either the client did not give "informed consent" or it is against public policy for the attorney to attempt this entire procedure.
In any event, the attorney will need to order supplemental update certificates from the title company during the pendency of the litigation. Further, should the trial judge enter a decree of foreclosure and a sheriff's sale, it is necessary to obtain a final update supplement before the sale. These supplements are necessary to monitor the possible recordings of other documents that would affect the title to the subject property.
The attorney will also need time to investigate the nature of the parties that need to be named in the lawsuit and, obviously, prepare the proper pleadings. If the attorney practices in an area far from the county where the real estate is situate, the attorney will need to allow time to mail the lis pendens to the clerk and recorder of the county where the real estate is located.
Furthermore, generally speaking, the lis pendens bears the docket number of the complaint in the district court. Since the attorney cannot know the docket number until the complaint is docketed in the district court, the attorney cannot even send in the lis pendens to the clerk and recorder until that docket number becomes available. The bottom line is that the attorney needs sufficient time to gather all of the necessary information and then to make sure that all the time constraints are complied with. If the attorney is dealing with a county far from his or her own, extra time must be allowed for the filings to be carried out in a timely manner.
§ 19.7.2-Lis Pendens
In addition to timely filing the foreclosure lawsuit, a notice stating that such action has been commenced - i.e., a lis pendens - must also be filed with the clerk and recorder's office where the property is located within the same six-month period.201 The lis pendens should include "the name of the court where such action is pending, the names of the parties to such action at the time of such recording, and a legal description of the real property."202
An example of a lis pendens is found in Exhibit 19G to this chapter.
Only one lis pendens per lawsuit is necessary.203 As such, other lien claimants named as defendants in a mechanics' lien foreclosure action do not need to file their own lis pendens with their cross-claims if one has already been recorded by the plaintiff.204 But beware that the original plaintiff may be asked to voluntarily release its lis pendens as part of a settlement with the owner. Also, some attorneys may not want to rely on the accuracy of another attorney's lis pendens. So an attorney representing a lien claimant named as defendant in a foreclosure action may want to consider whether recording a separate lis pendens is worthwhile.
If a mechanics' lien foreclosure is dismissed either by order or stipulation, then the appropriate way to deal with the cloud on title caused by the lis pendens is to request that the court clerk issue a certificate of dismissal and to record the same with the clerk and recorder's office.205 The lis pendens, after all, is merely a notice that a lawsuit affecting property is pending. So a certificate from the clerk indicating that the lawsuit has been dismissed should suffice for "releasing" the lis pendens. But some property owners and lenders want the added security of a court order expressly releasing the lis pendens. And it is not uncommon for parties to ask the court to issue an order specifically releasing the lis pendens once a mechanics' lien foreclosure action is resolved, and to record the order with the clerk and recorder's office.
§ 19.7.3-Venue, Where to File
Because they affect real property, mechanics' lien foreclosure actions should be filed in the district court of the county in which the real estate is located.206 In fact, Rule 98(a) uses the word "shall." The county courts do not have jurisdiction in matters affecting title to real estate.207 Therefore, a mechanics' lien foreclosure action must be filed in district court.
Venue is subservient to jurisdiction and cannot divest the court of jurisdiction.208 So it is conceivable that a foreclosure action could be filed in a county other than the county where the property is located. But if a motion to change venue is timely filed and the rules mandate a change of place of trial, then the trial court loses jurisdiction to proceed further, and may only order a transfer to the proper county.209 Additionally, the court is going to be asked to issue an order directing the foreclosure and sale of property. As such, it makes sense to file the mechanics' lien foreclosure action in the county where the property is located.
§ 19.7.4-Trial to the Court
Foreclosure actions are considered equitable actions. And "[t]here is no right to a jury trial in actions which historically were brought before courts of equity."210 As such, there is no right to a jury trial in a case where the thrust of the initial complaint is for the foreclosure of a mechanics' lien. This is true despite what counterclaims, cross-claims, or defenses may be raised, and despite the fact that the initial complaint may also include other claims. "It is the character of the complaint, rather than that of any counterclaims or defenses subsequently asserted, that fixes the nature of the suit and determines whether it should be tried in equity or at law."211
"[E]ven though a plaintiff seeks the recovery of money damages, it is not entitled to a jury trial if the essence of the action is equitable in nature."212 And courts in Colorado have held that cases where the complaint seeks to foreclose a lien are equitable in nature, and cannot be tried to a jury.
[I]f both legal and equitable claims are joined in a plaintiff's complaint, the trial court must determine whether the basic thrust of the action is legal or equitable in nature. . . .
Actions seeking judicial foreclosure of liens have traditionally been considered equitable proceedings. . . . Although such actions typically involve determinations of the existence and amount of indebtedness, and although any ensuing foreclosure decree typically includes a personal monetary award against the debtor founded in contract, the basic thrust of foreclosure proceedings has nevertheless been held to be equitable.213
To illustrate this point, consider the facts and multiple claims brought in Federal Lumber Co. v. Wheeler.214 There, the plaintiff (Federal Lumber) had not been paid for certain materials supplied for the construction of a home. So the plaintiff filed a complaint against the homeowners (the Wheelers), the general contractor (Alton), and the holder of a deed of trust in the property (Mesa Verde Savings and Loan).215 The plaintiff in Federal Lumber Co. "sought a personal judgment against...
To continue reading
Request your trial