GIL RUEHL MECHANICAL, INC. v. HARTFORD FIRE INSURANCE COMPANY
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RENDERED:
DECEMBER 17, 2004; 2:00 p.m.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-001250-MR
GIL RUEHL MECHANICAL, INC.
APPELLANT
APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE LEONARD L. KOPOWSKI, JUDGE
ACTION NO. 03-CI-00344
v.
HARTFORD FIRE INSURANCE COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JOHNSON, TAYLOR, AND VANMETER, JUDGES.
TAYLOR, JUDGE:
Gil Ruehl Mechanical, Inc. (Gil) brings this
appeal from a June 10, 2003, Order of the Campbell Circuit
Court, dismissing its complaint to recover against the surety of
a mechanic’s lien release bond.
We affirm.
In 2001, Gil was a plumbing subcontractor involved in
the construction of Joe’s Crab Shack (Joe’s) in Bellevue,
Kentucky.
Gil alleged the general contractor, AGB Capital
Properties, Inc., failed to pay it for services performed in the
construction of Joe’s.
March 11, 2002.
As a result, Gil filed two “liens” on
Landry’s Seafood House-Bellevue, Inc., the
operator of Joe’s, secured a mechanic’s lien release bond from
Hartford Fire Insurance Company (Hartford).
The bond
specifically provided that it was executed pursuant to Kentucky
Revised Statutes (KRS) 376.100.
On March 12, 2003, Gil filed an action against, inter
alios, Hartford asserting a claim for “Foreclosure on Bond in
Lieu of Mechanic’s Liens.”
Hartford filed a motion to dismiss
under Ky. R. Civ. P. (CR) 12 based upon expiration of the
statute of limitations.
Hartford argued the applicable statute
of limitations for an action against a surety on a mechanic’s
lien release bond was found in KRS 376.090.1
Hartford pointed
out that KRS 376.090 provides the limitation period for an
action to enforce a mechanic’s lien.
Thus, Hartford argued that
KRS 376.090 is also the limitation period for an action against
a surety upon a mechanic’s lien release bond.
1
Under KRS
Kentucky Revised Statutes (KRS) 376.090 reads, in part, as follows:
(1) Any lien provided for in KRS 376.010 shall be
deemed dissolved unless an action is brought to
enforce the lien within twelve (12) months from the
day of filing the statement in the clerk's office, as
required by KRS 376.080. . . .
(2) 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, and does
so within the time therein fixed, be valid and
effectual against any creditor of, or bona fide or
other purchaser from, the owner of the property.
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376.090, an action to enforce a mechanic’s lien must be filed
within twelve months of filing the lien.
Hartford pointed out
that the liens were filed March 11, 2002, and the action was
filed March 12, 2003, one day outside the limitation period.
Thus, Hartford claimed that KRS 376.090 barred Gil’s action upon
the release bond.
Gil countered that KRS 413.220 represented the proper
statute of limitation.2
Under KRS 413.220, an action against a
surety upon a bond must be brought within seven years of filing
the bond.
As the mechanic’s liens were discharged upon filing
the bond, Gil argued that KRS 413.220 was the applicable statute
of limitations and that its action was timely filed.
The circuit court agreed with Hartford that KRS
376.090 was the proper statute of limitations and that Gil’s
action to enforce the mechanic’s lien release bond was untimely
filed.
2
By order entered June 10, 2003, the circuit court
KRS 413.220 reads as follows:
(1) A surety shall be discharged from all liability
under any judgment or decree, after the lapse of
seven (7) years without the issue of execution and
prosecution in good faith for collection.
(2) A surety in any bond given in the course of any
judicial proceeding shall be discharged from all
liability on it unless suit is brought on it within
seven (7) years after the cause of action accrues.
(3) A surety in any obligation or contract, other
than those provided for in KRS 413.230, shall be
discharged from all liability on it unless suit is
brought on it within seven (7) years after the cause
of action accrues.
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dismissed Gil’s action to enforce its claim against Hartford as
surety on the release bond.
This appeal follows.
Upon review of a motion to dismiss under CR 12, all
factual allegations contained in the complaint must be admitted
as true and there must exist no set of facts upon which recovery
could be had.
undisputed.
The facts relevant to this appeal are materially
We are called upon to decide a single legal issue –
whether KRS 413.220 or KRS 376.090 is the proper statute of
limitations for an action to recover against the surety upon a
mechanic’s lien release bond.
For the reasons hereafter stated,
we hold that KRS 376.090 provides the proper limitation period
for an action to recover against the surety of a mechanic’s lien
release bond.
To determine the applicable statute of limitations for
an action to enforce a mechanic’s lien release bond, our
analysis must begin with the only case in this Commonwealth
interpreting our release bond statute, KRS 376.100.3
3
In Jungbert
KRS 376.100 provides:
“The owner or claimant of property against which a
lien has been asserted, or any other person
contracting with the owner or claimant of such
property for the furnishing of any improvements or
services for which a lien is created by this chapter,
may, at any time before a judgment is rendered
enforcing the lien, execute before the county clerk
in which the lien was filed a bond for double the
amount of the lien claimed with good sureties to be
approved by the clerk, conditioned upon the obligors
satisfying any judgment that may be rendered in favor
of the person asserting the lien. The bond shall be
preserved by the clerk, and upon its execution the
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v. Marret, 313 Ky. 338, 231 S.W.2d 84 (1950), the Court was
faced with the question of whether an invalid mechanic’s lien
operated to extinguish liability upon a mechanic’s lien release
bond.
The Court answered in the affirmative by interpreting KRS
376.100 as creating a bond that is a “mere substitute for the
lien property.”
Id. at 85.
The Court explained that in
enacting KRS 376.100, the General Assembly’s intent was:
[T]o provide a method only of freeing the
property of the lien in order that the owner
might make disposition of the property, and
that the obligation of the bond should not
extend beyond the obligation of the lien for
which it was substituted.
Jungbert, 231 S.W.2d at 85.
In accordance with this intent, the
Court concluded that “[t]he prerequisite for the effectiveness
of the bond is the existence of a valid lien on the property.”
Id.
In essence, the Court adopted a view that the release
bond merely transfers the mechanic’s lien from the real property
to the bond.
See Gerald B. Treacy, Comment, The Release Bond
Statutes: Achieving Balance in the Mechanics’ Lien Laws, 28 UCLA
L. Rev. 95 (1980).
Under such view, the statutory mandates
necessary to establish a valid mechanic’s lien must be satisfied
lien upon the property shall be discharged. The
person asserting the lien may make the obligors in
the bond parties to any action to enforce his claim,
and any judgment recovered may be against all or any
of the obligors on the bond.”
-5-
in order to recover against the surety upon the release bond.
53 Am. Jur. 2d Mechanics’ Liens § 314 (1996).
KRS 376.090 codifies the statute of limitations
applicable to an action to enforce a mechanic’s lien.
While
most statutes of limitations are procedural in nature, an
exception is recognized:
[W]here a statute gives a right of action,
or creates a liability, which did not exist
at common law, and makes limitation of time
an essential element of the cause of action,
in which case the running of the limitation
period will not only bar the remedy, but
also the right conferred . . . .
54 C.J.S. Limitations of Actions § 11 (1987)(footnotes omitted).
In such circumstances, the statute of limitations is regarded as
a substantive restriction upon a statutorily created right.
It is well known that a mechanic’s lien is a creature
of statutory law and did not exist at common law.
Additionally,
KRS 376.090, the mechanic’s lien statute of limitations,
specifically provides that the lien “shall be deemed dissolved
unless an action is brought to enforce the lien within twelve
(12) months from the day of filing the statement . . . .”
(Emphasis added).
Thus, under its plain terms, KRS 376.090 does
not merely preclude a claim upon the mechanic’s lien; rather, it
dissolves the lien.
It has been observed that “[a] statute that
invalidates the mechanic’s lien, rather than simply precluding a
claim on it, is not a traditional statute of limitations, but a
-6-
substantive restriction on the lien . . . .”
Mechanics’ Liens § 354 (1996).
53 Am. Jur. 2d
As KRS 376.090 dissolves the
mechanic’s lien, its limitation period should be regarded as a
substantive rather than a procedural restriction.
Accordingly, we hold the twelve-month limitation
period set out in KRS 376.090 extinguishes not only the right to
enforce the mechanic’s lien but extinguishes the lien itself.
Simply stated, we view KRS 376.090 as representing a substantive
restriction upon and an essential element of a valid mechanic’s
lien.
In accordance with Jungbert, 231 S.W.2d 84, the
statutory mandates necessary to establish a valid mechanic’s
lien must be satisfied in order to recover upon the release
bond.
As artfully stated therein, “[t]he prerequisite for the
effectiveness of the bond is the existence of a valid lien on
the property.”
Id. at 85.
As KRS 376.090 represents a
substantive restriction upon a mechanic’s lien, we now recognize
that its limitation period must be complied with in order to
recover upon a mechanic’s lien release bond.
As such, KRS
376.090 is the proper statute of limitations in an action to
recover against the surety of a mechanic’s lien release bond
under KRS 376.100.4
4
Gil effectively asks this Court to interpret KRS 376.100 in such a manner
so as to extend the obligation of the bond beyond the obligation of the lien
for which it was substituted. This argument was specifically rejected in
-7-
As Gil’s action to recover against Hartford was filed
one day after the limitation period of KRS 376.090 expired, we
conclude the circuit court properly dismissed Gil’s action to
recover upon the mechanic’s lien release bond.
For the foregoing reasons, the Order of the Campbell
Circuit Court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Steven C. Coffaro
E. Todd Wilkowski
Keating, Muething & Klekamp,
P.L.L.
Cincinnati, Ohio
Michael A. Duncan
Molly E. McEvoy
ZIEGLER & SCHNEIDER, P.S.C.
Covington, Kentucky
Jungbert v. Marret, 313 Ky. 338, 231 S.W.2d 84 (1950). In other words, Gil
seeks to extend the statute to “insure” the validity of the lien which the
legislature did not intend. Id. at 85. Notwithstanding Gil’s argument for a
liberal construction of the statute, we are not at liberty to rewrite the
statute contrary to legislative intent.
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