Nevada Supreme Court Clarifies Material Suppliers’ Mechanics Lien Rights

A recent case decided by the Nevada Supreme Court sheds some clarifying, and transformative, light on the mechanics lien rights of material suppliers.While mechanics liens generally provide protection to parties who furnish labor or material to construction projects, there are sometimes additional requirements for the provider of materials in order to gain that protection. Since the mechanics lien remedy is generally to protect parties who have “improved” real property, there are legitimate questions as to what constitutes acceptable an acceptable furnishing of labor and/or materials to qualify for lien protection. A party who performs labor on a construction project clearly performs some benefit to the property, but the improvement can be harder to quantify in the case of supplying materials to the project. Because of this, some states have required, either through statutory definition or court precedent, that in order for a material supplier to qualify for lien protection, the materials provided must actually be used and/or consumed into the project.

Nevada, at least until recently, fell into this camp. Special rules applied to material suppliers in Nevada such that the materials must have actually been consumed into the project, actually used in the construction of the project, or at lease specifically delivered to the project site (and not proved to not have been used), in order for mechanics lien rights to attach. In the case of Opaco Lumber & Realty Co. v. Phipps, 340 P.2d 95 (1959), the Nevada Supreme Court held that “a materialman only has a lien for materials proved either to have been delivered to the building site or to have gone into the structure.”

Background of the Recent Case

In the recent case, Simmons Self-Storage v. Rib Roof, Inc., the Nevada Supreme Court examined many aspects of the mechanics lien law, but only one of their determinations modified the lien law, rather than clarifying it. So, what was the situation at issue that gave rise to this case?

the court noted that the definition of 108.22144 could not be read into 108.222 without producing an absurd result

The mechanics liens at issue were filed by Rib Roof, Inc., a manufacturer and supplier of steel products. Rib Roof contracted with Southwest Steel who, in turn, contracted with the General Contractor Westar Construction to supply steel to 6 properties. Despite supplying the steel to the 6 projects, Rib Roof was only partially paid, and was owed approximately $1,000,000. Mechanics liens were perfected, and an enforcement action to foreclose on each of the 6 properties was initiated. Satisfactory surety bonds were posted for 4 of the 6 properties, and Rib Roof subsequently amended its complaint to dismiss the lien foreclosure actions against those properties, and replaced them with claims against the bonds. Among other findings, the district court determined that the mechanics liens Rib Room filed were valid because the steel was delivered to the job sites and the defendants failed to rebut the presumption that the steel was actually used in the project created by the delivery. As it turns out, whether the delivery was made to the job site or not, (a claim disputed in part by defendants), is inconsequential to the subsequent lien rights of the supplier.

Actual Use of the Materials Not Strictly Required

As noted above, Opaco Lumber held that “a materialman only has a lien for materials proved either to have been delivered to the building site or to have gone into the structure.” This was based on a fairly strict construction of the statutory language at issue. Even delivering the materials to the job site was not, by itself, necessarily sufficient to allow for a valid mechanics lien claim. Delivering the materials to the job site only provided a presumption in favor of the supplier that the materials were actually used in the project. This presumption could be overturned by actual evidence provided that showed the materials were not actually used.

In 2005, the phrase “used or to be used” [emphasis added] was added to the definition of ‘materials’.

The Nevada Supreme Court’s decision that such specific use or delivery to a particular place is not required is based on both an addition to the wording of the statute at issue, and some semantic arguments. NRS 108.222 states that a mechanics lien attaches to “the property and any improvements for which the work, materials, and equipment were furnished”. Further, NRS 108.22144 defines material as “appliances, equipment, machinery and substances affixed, used, consumed or incorporated in the improvement of property . . .”. Until this case, the definition in NRS 108.22144 had been read into 108.222, and indeed, that was the defendant’s argument in this case.

The court, however, disagreed. By determining that ‘furnish’ means “to supply, provide, or equip, for accomplishment of a particular purpose” the court noted that the definition of 108.22144 could not be read into 108.222 without producing an absurd result.

Specifically, reading NRS 108.22144 into NRS 108.222 is problematic because one cannot furnish “materials” for a property or improvement thereon that were already used for that property or improvement.

While this, specifically, might be a bit of linguistic gymnastics to reach the desired result, it does comply with the 2005 amendments to the lien law to a greater extent than the previous interpretation. In 2005, the phrase “used or to be used” [emphasis added] was added to the definition of ‘materials’. This clearly provides a bit more leeway in the determination of when the supplying of materials qualifies the supplier for mechanics lien protection.

Conclusion

The court, therefore, held that “under 108.222, a materialman has a lien upon a property and any improvements thereon for which he has supplied materials” without the need “to prove that the materials that he supplied were used or incorporated into the property or improvements; rather he must prove that they were supplied for use on or incorporation into the property or improvements thereon.” To the extent that Opaco Lumber is inconsistent with this holding, the Nevada Supreme Court determined that it had been superseded by the modifications to the lien law scheme.