Delmastro & Eells v. Taco Bell Corp (10/12/2011)

December 2, 2011

Arizona Court of Appeals Division Two Holds That, for a Mechanic’s Lien to be Valid, the Description Contained in the Twenty-Day Notice Required by A.R.S. § 33-992.01(C) Must be Sufficient to Allow a Stranger to the Transaction to Identify Both What the Lien Claimant Has Provided and to Which Specific Property Any Future Lien Will Attach.

Venture Development Group (“VDG”) owned two blocks of platted property, specifically, Blocks 1 and 3, included in the Riverside Crossing III commercial complex at 2190 W. River Road, in Tucson.  In January 2008, Delmastro & Eells (“Delmastro”) entered into a contract with VDG to build the Tutor Time Child Care Center, located on Block 1 on the complex, and to make other improvements.  Taco Bell acquired title to Block 3 from VDG several months later, recording its deed on June 18, 2008.  Pursuant to A.R.S. § 33-992.01, Delmastro sent VDG three preliminary twenty-day notices, asserting that Delmastro had provided “materials and/or labor” for a building, structure, or improvement located at “2190 W. River Road” in “Tucson, Pima County, Arizona,” that was “legally described as . . . Tutor Time Child Care.”  Taco Bell was neither named in, nor served with, any preliminary notice.  Pursuant to A.R.S. § 33-993, Delmastro subsequently filed a notice and claim of lien in January 2009 against property that included Block 3.  The lien did not name Taco Bell as the owner of the parcel, and Taco Bell did not receive any notice of the lien until Delmastro filed an amended complaint seeking to foreclose against Block 3 in May 2009.  During the ensuing litigation, Taco Bell filed a motion for summary judgment arguing that the lien against Block 3 was invalid for various reasons.  Taco Bell also sought damages and attorney fees for the wrongful recording of a lien and lis pendens under A.R.S. § 33-420(A).  The trial court granted the motion and entered judgment.  Delmastro timely appealed.

On appeal, the Court of Appeals affirmed the trial court’s judgment, concluding that Delmastro’s lien was invalid and that Delmastro was liable for the wrongful recording of the lien under A.R.S. § 33-420(A) because Delmastro had reason to know its lien against Taco Bell’s property was invalid.  Under Arizona law, “every person who furnishes labor, professional services, materials, machinery, fixtures or tools for which a [lien] may be claimed” must first serve the owner with a written preliminary twenty-day notice.  A.R.S. § 33-992.01(B).  Pursuant to subsection (C), a lien claimant’s preliminary notice must include both “[a] general description of the labor, professional services, materials, machinery, fixtures or tools furnished or to be furnished and an estimate of the total price thereof,” as well as “[a] legal description, subdivision plat, street address, location with respect to commonly known roads or other landmarks in the area or any other description of the jobsite sufficient for identification.”  A.R.S. § 33-992.01(C)(1), (4).  According to the Court of Appeals, the descriptions required by A.R.S. § 33-992.01(C) must be sufficient to allow a stranger to the transaction to identify both what the lien claimant has provided and to which specific property any future lien will attached.  In this case, the Court of Appeals determined that Delmastro’s preliminary notices were plainly insufficient because they did not describe any work being performed on Block 3 so as to alert a notice recipient that a lien might attach thereto. 

The court also rejected Delmastro’s argument that it should not be liable for damages for wrongful recording because it did not know the lien was objectively invalid under existing law at the time of recording.  Section 33–420(A) affords relief for recording a lien “knowing or having reason to know that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid.”  In general, however, the law presumes that everyone knows the law, meaning that the objective invalidity of a lien necessarily leads to the conclusion that the claimant had reason to know the lien was invalid.   Delmastro knew or should have known it its duties under the express language of § 33-99.01(C) and therefore had reason to know its lien against Taco Bell’s property was invalid. 

Judge Eckerstrom authored the opinion; Judges Howard and Brammer concurred.