Request By:
Mr. Michael Trabue
Attorney
Chicago Title Insurance Company
Suite 1400 Louisville Trust Building
One Riverfront Plaza
Louisville, Kentucky 40202
Opinion
Opinion By: ROBERT F. STEPHENS, ATTORNEY GENERAL; Elizabeth E. Blackford, Assistant Attorney General
In your letter of May 1 you requested the opinion of this office as to whether a creditor, bonafide or other purchaser, who has no actual notice of a pending suit to enforce a mechanic's lien may disregard a mechanic's lien which has been filed longer than one year where no lis pendens affecting the subject property appears of record within one year of the date of filing the lien.
Provisions for the creation and preservation of mechanic's liens are found in KRS 376.010 et seq. In order to preserve a lien KRS 376.080 requires that a statement containing certain particulars be filed in the office of the county clerk within six months of the time the labor or materials were furnished. Under KRS 376.090(1) the lienholder is given one year from the date of filing the lien under KRS 376.080 to bring an action to enforce the lien. Filing the lien in compliance with KRS 376.080 serves to preserve the lien for the duration of the statute of limitations. It also serves to give statutory notice of the existence of the lien. Any creditor or purchaser taking the affected property during that time takes subject to the lien.
The problem raised by your question arises when an action to enforce the lien has been filed. According to the provisions of KRS 376.090(2) the lien has priority over the interests of creditors and purchasers from the time such action is filed. The statute reads as follows:
"Any lien provided for in KRS 376.010 shall, if the lienholder complies with the requirements of KRS 376.080 and subsection (1) of this section . . . be valid and effectual against any creditor of, or bonafide or other purchaser from, the owner of the property."
The seemingly absolute priority afforded mechanic's liens under KRS 376.090(2) becomes questionable in light of KRS 382.440 which reads as follows:
"No action . . . in which . . . any lien . . . is in any manner affected or involved, nor any order or judgment therein . . . shall in any manner affect the right, title or interest of any subsequent purchaser, leasee, or encumbrancer of such real property, or interest for value and without notice thereof, except from the time there is filed, in the office of the county clerk . . . a memorandum stating:
(a) The number of the action, if it is numbered, and the style of such action or proceeding and the court in which it is commenced, or is pending.
(b) The name of the person whose right, title, interest is, or claim to, real property is involved or affected; and
(c) A description of the real property in the county thereby affected."
The language of KRS 382.440 is broad and commanding. No action in which any lien is involved shall affect the right of subsequent creditors, bonafide or other purchasers except from the time the requisite memorandum is filed. The purpose of this statute is to protect those who would be lis pendens purchasers by requiring notice to be filed of the pendency of an action to enforce the lien. Perkins v. Ogilvie, 140 Ky. 412, 131 S.W. 200 (1910). Therefore, it is clear that the mechanic's lien falls within the literal language and intended purview of KRS 382.440. The lienholder must file a lis pendens notice at the commencement of an action to enforce the lien in order to protect his lien against subsequent creditors and purchasers.
The problem is clear. KRS 3/6.090(2) and 382.440 contain conflicting provisions with reference to what the lienholder must do to subject the interests of creditors and purchasers of the affected property to the lien. Under KRS 376.090(2) creditors and purchasers take subject to the lien when the lien is filed and an action to enforce the lien is brought. Under KRS 382.440 filing an action to enforce the lien will not affect the interests of creditors or purchasers who have no actual notice of the action unless lis pendens notice is filed with the county clerk. The question is, what impact will the failure to file lis pendens notice have on the priority afforded by KRS 376.090(2).
When construing conflicting statutes, the statute enacted later in time shall prevail as the latest expression of the legislative will. State Property and Building Commission v. Hays, Ky., 346 S.W.2d 3. KRS 382.440 was enacted after KRS 376.090(2). Therefore, the provisions and requirements of KRS 382.440 shall control those of KRS 376.090(2) where the two are in conflict.
Prior to the enactment of KRS 382.440, filing a mechanic's lien or commencing an action to enforce the lien operated as constructive notice such that subsequent creditors and purchasers took subject to the lien. Foushee, &c. v. Grigsby & Robinson, &c. , 75 K.R. 75 (12 Bush); Annot., 10 ALR 306. KRS 382.440 has abrogated the doctrine of constructive notice. Since the enactment of that statute, filing a petition to enforce the lien does not create lis pendens notice and commencing an action to enforce the lien no longer acts as constructive notice. Tapp's Admr v. Bailey, 152 Ky. 369, 153 S.W. 472 (1913); Donacher v. Tafferty, 147 Ky. 337, 144 S.W. 13 (1912); Louisville Asphault Co. v. Cobb, 310 Ky. 126, 220 S.W.2d 110 (1949). Under KRS 382.440, liens are superior to and protected against subsequent creditors and purchasers only when statutory notice has been given or when creditors or purchasers have actual notice of the pendency of an action to enforce the lien. Perkins v. Ogilvie, supra, Donacher v. Tafferty, supra; Louisville Asphault Co. v. Cobb, supra. Therefore, absent actual notice, subsequent creditors and purchasers will not take subject to the lien if no lis penden notice is filed when an action to enforce the lien is commenced.
Finally, it is the opinion of this office that a filed mechanic's lien is not the type of fact which would raise a duty of inquiry under the rationale of Dick v. Jasper, 195 Ky. 539, 242 S.W. 834 (1922) where the one year statute of limitations has passed and no lis pendens has appeared of record.
Dick v. Jasper stands for the proposition that the lis pendens statute is not intended to confine inquiry solely to the record. A purchaser or creditor's interest will be subject to claims revealed by reasonable inquiry if there were facts known to the purchaser at the time of the purchase which would have put a reasonably prudent man on inquiry.
Despite the broad language used by the court in Dick , the fact situation in which that rationale was employed was unusual. In the Dick case there were only three record owners of title and yet eight people signed the deed in the capacity of grantors. The discrepancy in the number of people who held record title and the number who joined in the next conveyance was so highly suspicious as to place the grantee under a duty of inquiry to find out what had happened that was not shown in the record title.
Inasmuch as mechanic's liens are often paid off before the need to enforce the lien arises, it would not be an unusual or suspect situation for the record to reflect that a mechanic's lien was filed but no lis pendens notice signifying the commencement of an action to enforce the lien was filed within the next year. This is not the type of fact which is so suspicious of itself that it would cause a reasonably prudent man to inquire further. Therefore, it is the opinion of this office that no duty of inquiry rests upon one who finds a filed mechanic's lien to determine whether an action to enforce the lien was filed within the next year where no lis pendens notice appeared of record during that year.
For these reasons it is the opinion of this office that a creditor, bonafide or other purchaser, who has no actual notice of a pending suit to enforce a mechanic's lien may disregard a mechanic's lien which has been filed longer than one year where no lis pendens affecting the subject property appears of record during the one year period of limitations.