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Court of Appeals Invalidates Lien under Dormancy Clause

On October 27, 2016, the Georgia Court of Appeals determined whether the Dormancy Statute, which bars the enforcement of judgments after seven years, applied to a lienholder’s action to foreclose its lien.

A property owner (“Owner”), contracted with a contractor Contractor (“Contractor”) to build a home in January 2006.  Contractor purchased building materials from a supplier (“Supplier”).  In September 2006, Contractor failed to pay for the materials, and Supplier filed a lien on Owner’s property in November 2006.  Supplier filed a claim of lien and instituted a lien action against Contractor.  In March 2007, a default judgment was entered in favor of Supplier for the lien amount.

It was not until November 2014 that Supplier sued Owner, seeking a declaration of a special lien in the amount of $14,655.65.  The trial court granted Supplier’s motion for summary judgment and awarded Supplier a special lien in the amount of $14,655.65 plus $8,305 in accrued interest.  Owner appealed, arguing that the lien was rendered unenforceable by the Dormancy Statute.

The Court began with its analysis of the lien statute, which it summarized as follows:

OCGA § 44-14-361.1(a) sets out the provisions for perfecting a [materialman’s] lien.  These provisions require a materialman who has substantially complied with the contract for materials to (a) file a claim of lien in the county where the property is located with [90 days] of furnishing the materials; (b) [properly] send a copy of the lien claim to the property owner; (c) commence an action against the contractor to recover the amount of the claim within [365 days from the date of filing the lien]; and (d) file a notice of the action with the superior court clerk of the county where the lien was filed so that the clerk can enter information about the lawsuit in county records.

In obtaining the default judgment in March 2007, the Court maintained that Supplier made good on its lien against Owner’s property under the lien statute.  However, the Court noted that Supplier failed to take any further action to enforce its lien and the judgment became unenforceable under O.C.G.A. § 9-12-60(a), the Dormancy Statute.  The statute provides that “a judgment shall become dormant and shall not be enforced when seven years shall elapse after the rendition of the judgment before execution is issued thereon and is entered on the general execution docket.”

In this case, the Court explained that once the lien was made good by compliance with the lien statute, the judgment obtained would become dormant after seven years pursuant to the Dormancy Statute.  Supplier obtained its judgment against Contractor before it could initiate a lien foreclosure action against the property.  Yet no action was taken by Supplier thereafter and the judgment became dormant.  As such, the lien was no longer valid and foreclosure was not an option.  The Court did, however, make an important distinction that the Dormancy Statute would not affect liens that arise out of contract, but only those that arise from a judgment.

This case highlights the importance that lienholders diligently enforce their liens against the property.  Even if a judgment is obtained, if seven years pass without adequate effort to foreclose the lien, lienholders can be stripped of their rights and the line can be invalidated under the Dormancy Clause.

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