Guam High Court Effectively Eases Mechanics Lien Requirements
In common with every other U.S. jurisdiction, Guam has long had a so-called “mechanics lien” law that enables unpaid laborers, materials suppliers and other creditors to obtain a security interest in the project owner’s real property. However, Guam’s mechanics lien law has been the subject tremendous confusion and much litigation over the years. Often, the filing of a lien guaranteed little more than a seat in the courthouse.
Part of the problem has been that Guam’s mechanics lien law has been a moving target. The statute has been amended and retooled numerous times since the 1960s, and for quite a while litigants, and even the courts, had trouble ascertaining which version of the law applied to a given set of facts. Moreover, it used to be said in Guam legal circles that “there are fifty ways to perfect a mechanic’s lien; and 49 of them are wrong.” That is because the courts of Guam had strictly construed the statutory filing and notice requirements of the Mechanics Lien law. Any misstep in the process meant not only that the claim was invalidated but also that the court was deprived of jurisdiction to entertain the claim in the first place.
However, in two separate Guam Supreme Court decisions handed down in 2010, the Court clearly signaled a retreat from these former draconian principles of law. Specifically, the Court has now made it clear that “substantial compliance” (not strict compliance) with the mechanics lien law’s filing and notice requirements is generally sufficient.
That is significant because the statue is replete with detailed (and sometimes overlapping) filing deadlines and notice requirements that are difficult for lay persons (and sometimes even lawyers) to rigidly comply with in particular cases. For example, one provision of the law requires that a claim be filed within 150 days of cessation of labor on the project--a date which can be difficult to pin down, particularly on larger projects with multiple subcontractors on task. Under the standard promulgated by the Supreme Court, a court examining a lien claim must determine whether the claimant or property owner “complied to some extent with the statutory requirement and whether such compliance was sufficient to constitute substantial compliance” within the letter and spirit of the lien law.
This more lenient, if somewhat fungible, standard comes as welcome news to subcontractors and other would-be lien claimants, who formerly faced a zero-tolerance standard of scrutiny. The Guam Supreme Court also rejected the notion that any non-compliance with the lien statute automatically divested the court of jurisdiction. That is significant, because it means that any technical lack of compliance can be deemed waived if not timely raised as a defense by the opposing party.
Taken together, the Supreme Court’s recent rulings significantly lighten the load of a would-be mechanic’s lien claimant and lead to generally less harsh and more predictable results. As Guam prepares for a construction boom accompanying the military build-up, such considerations of stability and predictability will not be lost on contractors and suppliers considering whether to do business here.
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