Better Roads Digital Magazine
Issue link: https://read.dmtmag.com/i/376195
Better Roads September 2014 23 InCourt by Brian Morrow, P.E., Esq. Attorney Brian Morrow is a partner in Newmeyer & Dillion LLP and a licensed civil engineer specializing in construction law, including road and heavy construction. brian.morrow@ndlf.com I n a recent case involving mechanic's liens – Byrd Underground LLC v. Angaur LLC, Aug. 7, 2014 – the Nevada Supreme Court held that grading and site work can establish the commencement of con- struction, and hence, the priority of a mechanic's lien. Mechanic's liens are creatures of statute in all 50 states. They are designed to assist in ensuring payment for work or materials provided for construction or improvements on land. Mechanic's liens are typically given a higher priority than most other real property security interests. The priority of competing security interests is important because it determines which claims will have the first right to funds from a foreclosure sale. The priority of a mechanic's lien is determined either by the time the lien attaches to the title or by the point in time to which it "relates back." With some exceptions, the lien attaches or relates back prior to the time that any notice appears in the public records. In many states, such as Nevada, mechanic's liens relate back to when the first visible con- struction commences on the property. In Byrd Underground, Angaur, LLC, and Balaji Properties Investment, LLC (collectively, the owners) jointly pur- chased a parcel of unimproved land in Las Vegas. In spring and summer 2006, two different parties placed, and allegedly spread, between 200 and 300 truckloads of dirt/material on the property. Both parties were perform- ing work on unrelated construction projects on neigh- boring parcels and roadways. The degree to which the subject property was covered and subsequently spread or graded is not clear. Meanwhile, the owners obtained bids from general contractors to construct a strip mall on the property. Atlas Construction Ltd. was selected as the general contractor. On Nov. 2, 2006, Byrd dug four to six holes on the prop- erty with a backhoe to determine how much dirt/mate- rial had been brought onto the subject property in order to submit a bid to Atlas. On Nov. 8, 2006, the owners contracted with Atlas. On Nov. 28, 2006, a title company conducted a site inspection of the property and concluded the land was vacant and that there was no evidence of a recent work of improvement. Thereafter, the owners borrowed funds from PFF Bank & Trust for the purpose of constructing a strip mall on the property. On Nov. 29, 2006, a deed of trust for the construction loan was recorded with the Clark County Recorder. Byrd had not performed any work on the subject property prior to Nov. 29, 2006, other than digging the test holes and submitting a bid. Subsequently, a dust control permit and building per- mit were issued for the subject property. During con- struction, Atlas used and incorporated at least a portion of the dirt/materials into the project. In 2007, Atlas and Byrd executed three written subcontracts for wet utilities, dry utilities, and grading. Byrd and another subcontrac- tor, Wells Cargo, Inc., provided services for the project but were not paid. As a result, Byrd and Wells Cargo (collectively, lien claimants) commenced mechanic's lien actions in state court and obtained judgments against Angaur, Balaji, and Atlas. After the construction project was completed, the Construction and the Mechanic's Lien Here's why a grading contractor prevails on a Nevada mechanic's lien claim.