Lawyers sometimes discuss the way statutes and laws can be used in terms of shields and swords: how they can be used as defensive or offensive strategies. In the following case, we see that the right of contractors to place mechanic’s liens is strongly protected, even if the lien is improperly filed or, as in this case, multiple successive liens are filed as an apparent nuisance. Owners and developers in California can challenge the validity of the liens through a quiet title action, but they cannot attack the contractor with a claim of slander of title—owners have a shield, but no sword.
COOKING WITH GAS: RGC GASLAMP, LLC V. EHMCKE SHEET METAL CO., INC. (2020)
The Ehmcke Sheet Metal Co. performed sheet metal fabrication and installation work for a luxury hotel project in San Diego owned by RGC Gaslamp, LLC. Ehmcke, alleging that they were not paid for the work, recorded a mechanic’s lien against the property in September 2017. RGC sought a bond to release the lien from Liberty Mutual. (The bond does not eliminate the lien, but merely substitutes for the interest in the property.)
When RGC releases the first lien, things begin to heat up: Ehmcke files a second, identical lien in December, but then in April 2018, withdraws liens 1 and 2 only to record a third, identical lien. RGC again obtains a bond to release lien 3, only for Ehmcke to withdraw the third lien and file yet a fourth, identical lien in July 2018. RGC responded with a complaint for quiet title, slander of title, and declaratory and injunctive relief.
WHAT IS A MECHANIC’S LIEN?
A mechanic’s lien is a typical means of establishing collateral for contractor work should the work go unpaid. In addition to suing the property owner for breach of contract, California law allows contractors to place a lien on the property that gives them an interest in your property and creates a cloud on the title. Within 90 days, the contractor can then file suit to foreclose on the lien. The purpose of a mechanic’s lien is to give contractors leverage in settling debts; however, securing release bonds if the contractor refuses to withdraw the lien costs time and money, allowing contractors to create a possible nuisance for owners. In the case of RGC v. Ehmcke, Ehmcke recorded 4 different liens in various six-figure amounts, forcing RGC to seek multiple release bonds from Liberty Mutual.
SLAPPED DOWN
The “anti-SLAPP” (Strategic Lawsuits Against Public Participation) statute is meant to provide protection for the exercise of free speech and “petitions on matters of public concern.” So it may seem slightly odd to apply this statute to a mechanic’s lien. However, as the appellate court affirmed, recording a mechanic’s lien is a “protected activity,” since the anti-SLAPP statute includes as a protected activity “any written or oral statement or writing made before a legislative, executive, or judicial proceeding” (qtd. in Decision from Code Civ. Proc. § 425.16, subd. (e)(1)).
Moreover, the California court affirmed that such protection applied even if the lien was improper. Ehmcke stated that when they retained counsel and discovered that the lien was “untimely,” they released the fourth lien, but recording the erroneous lien was still protected under the anti-SLAPP statute. The California trial and appellate courts agreed with Ehmcke that a lien is still protected petitioning activity even if the lien is not lawful.
So now that Ehmcke had withdrawn the fourth lien, RGC’s claims for quiet title and relief were now taken off the table, and the remaining claim of slander of title lacked merit, since the mechanic’s lien was protected by anti-SLAPP privilege. Because only slander of title remained, Ehmcke prevailed and were awarded attorney’s fees and costs. In this case, RGC had no sword and lost their shield.
In theory, the mechanic’s lien served its purpose in this case, forcing RGC to reach a settlement for Ehmcke’s work, but it may seem unfair that a contractor is able to pile on liens as a harassment strategy. The game of issuing and then withdrawing liens worked in this case, even if the liens were made in good faith as the defendants claimed. For now, at least, it seems that contractors issuing multiple liens are protected from offensive strategies under California anti-SLAPP law.
