Construction Law Update: Iowa Court of Appeals Affirms Vacation Of Mechanic's Lien Rule
Recently, the Iowa Court of Appeals affirmed a lower court decision which held the Iowa Secretary of State’s Office exceeded its authority when the Secretary of State created Rule 721-45.4(1) concerning notice of mechanic’s liens. Standard Water v. Jones, No. 15-0458 (Iowa Ct. App. August 31, 2016). On December 8, 2016, the Iowa Supreme Court denied further review of the Court of Appeal’s decision. In short, the Iowa Court of Appeals decision was left undisturbed.
Iowa Code chapter 572 was amended in 2012 and the substantive amendments went into effect on January 1, 2013. Mechanics Liens—Perfection—Notice, 1105 H.F. 675, 84 Gen. Assemb., 2d Reg. Sess. (Apr. 27, 2012). The Iowa Secretary of State’s Office adopted several administrative rules regarding administration of the Mechanic’s Notice and Lien Registry (“MNLR”).
The particular rule at issue provided:
A general contractor for residential construction shall post a notice of commencement of work to the MNLR within ten days of commencement of work, or the general contractor is not entitled to a lien or remedies provided in Iowa Code chapter 572.
The argument was presented that that rule was based upon the plain language of Iowa Code chapter 572. Specifically, Iowa Code section 572.13A states:
A general contractor or owner-builder who has contracted or will contract with a subcontractor to provide labor or furnish material to the property shall post a notice of commencement of work to the mechanic’s notice and lien registry internet site no later than ten days after the commencement of work on the property.
The Court of Appeals concluded the statute was ambiguous as to whether a general contractor with no subcontractors must post a Notice of Commencement to the “MNLR.” Slip op. at 5.
The Court of Appeals found that the last antecedent rule was not dispositive of the question and turned to other aids to statutory construction. Id.
The Court of Appeals then examined the purpose of the statute. Id. at 5. The Court of Appeals concluded that the statute as a whole supported the conclusion that only a general contractor who hires subcontractors must post a notice to the MNLR. Id. at 5-7.
Next, deference to the Secretary of State’s rules was not warranted because, in the Iowa Court of Appeal’s view, interpretive power had not been given to the Iowa Secretary of State’s Office. Id. at 8. Instead, the Secretary was only given authority to administer the MNLR. Id.
Thus, the interpretation of the statute which provided that general contractors on residential property who do not hire subcontractors need not post a notice to the MNLR “does the most service to the stated intent of the law.” Id. at 8-9.
Nonetheless, the Court of Appeals vacated an attorney fee award that exceeded 800 percent of the underlying judgment. Id. at 11. Consequently, the Court of Appeals remanded the case to the district court for further “fact-finding” to determine an appropriate attorney fee award. Id. at 11.