Iowa Court of Appeals Affirms Dismissal of Subcontractor’s Attempt to Foreclose Mechanic's Lien on Public Property

04.24.2026

“A drywall subcontractor tried to foreclose a mechanic's lien against the general contractor and the owner of a construction project. But that was impossible because the drywalling was for a public project. This appeal arises from the subcontractor's efforts to amend its petition and proceed instead under Iowa Code chapter 573, which governs public construction projects.” Payne Drywall, LLC v. Bi-State Contracting, Inc., 2025 WL 1704454, (Iowa Ct. App. June 18, 2025).

Eastern Iowa Community College launched a construction project for a career and technical education building on its Muscatine campus in 2021. After letting bids under Iowa Code Chapter 26, the college awarded the building project to Bi-State Contracting, Inc., as the general contractor. Then Bi-State subcontracted with Payne Drywall, LLC, to coordinate and provide labor, equipment, and materials to provide a complete package to hang and finish all drywall needed for the project. But payment disagreements arose, and Payne asserted that it completed its work on the project in September 2022, but was still owed $53,280 of the $102,425 billed for its materials and labor. In November 2022, Payne filed a mechanic's lien against the College's public property, and two months later, it petitioned to foreclose its mechanic's lien under Iowa Code Chapter 572.

About a year after the lawsuit was filed, Bi-State moved for summary judgment, contending that the mechanic's lien filed under Iowa Code chapter 572 was void, a nullity, and unenforceable because mechanic's liens do not attach to public property. In support of the motion, Bi-State included the College's Notice of Completion and Final Acceptance of the project—dated November 17, 2023. In response, Payne asked for leave to amend its Petition, which the district court allowed. Payne's amended Petition asserted a public project claim under Iowa Code Chapter 573 and a count of common law fraud, alleging Bi-State did not timely disclose the November 17, 2023 Notice of Completion and Final Acceptance and related correspondence.

Bi-State moved to dismiss the amended Petition and argued that the Chapter 573 claim was untimely and barred by the statute of limitations, and that the fraud claim was not a viable claim. Payne contended that the Chapter 573 claim related back to its original mechanic’s lien Petition—filed in January 2023, so that the Chapter 573 claim was timely. The district court rejected Payne Drywall’s arguments and dismissed all claims. Payne Drywall appealed.

The Iowa Court of Appeals first discussed Chapter 573’s dual filing requirements. The first step is the process for subcontractors to file claims with the bid-letting authority, which, under Iowa Code Sections 573.7(1) and 573.10(1), requires subcontractors to file such claims with the authorized officer “[a]ny time before the expiration of thirty days immediately following the completion and final acceptance of the improvement.” The second step is to enforce that claim in court, which, under Iowa Code Section 573.16(1), requires the subcontractor to file suit “at any time after the expiration of thirty days, and not later than sixty days, following the completion and final acceptance of said improvement.”

The Court of Appeals rejected Payne’s argument that its filing of the mechanic’s lien (with the Iowa Secretary of State’s office as required by Iowa Code Chapter 572) satisfied the claim filing requirement under Iowa Code Sections 573.7(1) and 573.10(1). It explained that “Payne filed its lien with the Mechanic's Notice and Lien Registry maintained by the Secretary of State, not with ‘the officer, board, or commission authorized by law to let contracts for such improvement’ as required by section 573.7(1). So even though Payne filed the mechanic's lien before the expiration of thirty days immediately following the final acceptance of the improvement under section 573.10(1), it was not a claim ‘filed with said officer’ as that section requires.”

The Court also rejected Payne’s relation-back argument. It first explained that the relation-back rule (found in Iowa Rule of Civil Procedure 1.402(5)) “has no role in amending documents that are not court pleadings”; mechanic’s liens and Chapter 573 claims are not pleadings so the relation-back rule is inapplicable to them. Also, the Court concluded that the relation-back rule would not apply anyway because “Payne never filed a proper claim under sections 573.7 and 573.10(1), its section 573.16 action in the amended petition did not arise ‘out of the conduct, transaction, or occurrence’ set forth in the original pleading. Instead, the proposed amendment ‘substantially change[d] the issues in the case,’ [so] [t]he district court properly determined that the relation-back doctrine did not absolve Payne's failure to meet its statutory obligation to file a claim under section 573.10.”

Finally, the Court rejected Payne’s fraud claim and its request for application of equitable principles to save its claims. The Court explained, “Nothing prevented Payne from meeting the deadlines in that chapter. The subcontractor simply made a legal mistake in proceeding under chapter 572 instead. Equitable estoppel does not prevent dismissal.”

The lesson from this case is that private and public construction projects have substantively different mechanisms for subcontractors to obtain payment for their work. Private projects (governed by Iowa Code Chapter 572) allow subcontractors a mechanic’s lien remedy against the private property itself. Public projects do not because Iowa law does not allow a party to file a mechanic’s lien against public property, foreclose on that public property, and then sell it to recoup payments owed. Instead, public projects utilize a retainage and payment bond mechanism under Iowa Code Chapter 573. Subcontractors confusing these two separate payment mechanisms can find themselves in the same situation as Payne Drywall: dismissal of their case.