Extraordinary Collection Procedures Part I

• Publication year: 1993
• Pages: 13
• Citation: Vol. 6 No. 6 Pg. 13

Extraordinary Collection Procedures Part I Vol. 6 No. 6 Pg. 13 Utah Bar Journal July, 1993

June, 1993.

Bryan W. Cannon, J.

Editor's Note: The following article is Part I of a two part series. Part II will be published in a future issue of the Utah Bar Journal.

The topic of collections commonly brings to mind thoughts of garnishments, executions and foreclosures. Few involved in collections have not been involved in efforts to discover assets through issuance of subpoenas and attendance at hearings with the debtors (Motion and Order in Supplemental Proceedings, Order to Show Cause and Bench Warrants). However, there are other areas that a collection attorney must become familiar with that may not be in the ordinary course of her practice. This article examines some of the extraordinary collection topics encountered by collection attorneys. Actually, these extraordinary collection procedures may become ordinary in the practice of some lawyers. This article is not intended to be exhaustive on the subjects listed, but is an overview. Stan Fitts of Beesley, Fair-clough, Cannon & Fitts assisted in the preparation of the construction law portion of this article.

THIRD PARTY COLLECTIONS IN CONSTRUCTION INDUSTRY

Utah Mechanics Lien Law

The Utah Mechanics' Lien statute is found at Utah Code Annotated §38-1-1, et seq. The Mechanics' Lien statute does not apply to any public building, structure or improvement. §38-1-3 contains the provisions which specify those entitled to a lien and what property may be attached.

The purpose of the Mechanics' Lien Statute is to prevent the owner of land from benefiting from improvements on his property without paying for the labor and material provided by contractors and subcontractors. Bailey v. Call, 767 P.2d 138 (Utah Ct. App., cert denied, 773, P.2d 45 (Utah 1989)).

A lien can be asserted against property occupied by a lessee of the owner. Whether or not the lien attaches to the owner's interest or the lessee's leasehold interest depends upon the circumstances of the case. See Interiors Contracting, Inc. v. Navako, 648 P.2d 1382 (Utah 1982).

For the services or work performed to give rise to lien rights under §38-1-1 et seq. depends on whether or not the work constitutes an "improvement". See E.G. Rotta v. Hawk, 756 P.2d 713 (Utah Ct. App. 1988) (holding that the clearing of brush and removal of dirt from land involved in the work project for purpose of providing fill on another project was not an improvement under the section because the work did not benefit the project).

Under §38-1-5, a mechanics' lien relates back and is effective as of the time of commencement to do work or furnish materials on the property for the structure or improvement. A mechanic's lien relates back to the first work performed by any lien claimant. Therefore, if a project is commenced and the first work is on January 1, 1992, a lien claimant furnishing work in July 1992 and filing a lien in July 1992, obtains a lien which relates back to January 1, 1992. A mechanic's lien has priority over any lien, mortgage or other encumbrance which arises subsequent to the time when the building improvement or structure was commenced, work began or first material was furnished on the ground. §38-1-5 also provides that the lien has priority over any other unrecorded lien or encumbrance when the lien holder had no notice of the encumbrance at the time work was commenced on the project. While preliminary off site architectural work is a lienable service, it does not constitute commencement of work on the property for priority purposes under §38-1-5. Ketchum, Konkel, Barrett, Nichel & Austin, Inc. v. Heritage Mt. Dev. Co., 784 P.2d 1217 (Utah Ct. App. 1989), cert, denied, 795 P.2d 1138 (Utah 1990)). (Holding that surveying, staking and soil testing do not constitute visible on site improvements for priority under this section).

For priority of a mechanics' lien to arise under §38-1-1 et seq. the work must have a continuity of purpose such that a reasonable observer of the site would be put on notice that the work was under way. Nu-trend Elec, Inc. v. Deseret Fed. Sav. & Loan Assoc, 786 P.2d 1369 (Utah Ct. Appl. 1990).

One of the most important...