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On October 29, 2014, the Fourth Appellate District of Ohio upheld a trial court’s decision in Hanson Aggregates Davon, LLC v. J & H Reinforcing and Structural Erectors, Inc. et al., 2014-Ohio-4832, placing the burden on a lien/payment bond claimant to prove that proper “written” service of its notice of furnishing was received in order to preserve its statutory lien and/or bond rights.

Under Ohio’s mechanic’s lien law, in order for a subtrade to preserve its lien or bond rights, the subtrade must serve a notice of furnishing upon the owner (or the owner’s designee) and, if the subtrade is not in direct privity of contract with the original contractor, it must also serve a notice of furnishing on the original contractor. Service must be accomplished by one of the following means:

  1. By the sheriff of the county in which the person or company resides;
  2. By certified or registered mail, overnight delivery service, hand delivery, or any other method which includes a written evidence of receipt; or
  3. By means provided for in Ohio Revised Code Section 1701.07.

In Hanson Aggregates v. J & H Reinforcing, the supplier, Hanson Aggregates, entered into a contract with subcontractor, Kenny Huston, to supply masonry block.  After Kenny Huston defaulted on the contract, Hanson asserted a statutory lien claim against the payment bond provided by original contractor, J&H Reinforcing and Structural Erectors, Inc. (“J&H”).  In response, J&H denied liability under the bond, averring that it did not receive a notice of furnishing from Hanson.  A lawsuit followed, at which time Hanson argued that “because it sent the notice of furnishing by certified mail, service was complete upon mailing and thus it was unnecessary to demonstrate J&H’s actual receipt of the notice of furnishing. * * * [In addition,] because the notice was not returned as undelivered, refused or unclaimed, [Hanson was] entitled to an inference that the notice of furnishing was received by J&H.”  The trial court and ultimately the Fourth Appellate District disagreed.

In a unanimous decision, the Fourth Appellate District upheld the trial court’s decision, finding that “proper service of a notice of furnishing is a prerequisite to being able to assert a statutory lien claim. * * * Although R.C. 1311.19(B) does state that service is complete upon mailing when a notice is sent via certified mail, R.C. 1311.19(A)(2) contemplates that written evidence of receipt will be able to be provided.”  Because Hanson could not provide written evidence of receipt of its notice of furnishing, Hanson’s bond claim was denied.

In light of the Hanson Aggregates v. J&H Reinforcing decision, lien claimants serving a notice of furnishing or a mechanic’s lien must recognize that if they choose to serve by either certified or registered mail, overnight delivery service, hand delivery, or other method, it is essential to obtain and retain  written evidence that the notice of furnishing or mechanic’s lien was received by the intended recipient.  Failure to do so will likely result in the waiver of lien and/or bond rights.

 

Construction

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