SW Legal studies in Business

Failure of Settlement Agreement Means Original Lien on Property May Be Enforced
Description

A building contractor and the property owner had a dispute that resulted in a mechanicís lien being filed. The parties entered into a settlement agreement but the property owner failed to pay what was owed. At that point, the appeals court held, the original mechanicís lien would be enforced.

Topic Real and Personal Property
Key Words

Mechanicís Lien; Enforcement

C A S E   S U M M A R Y
Facts

Ellis contracted with Reynolds Properties to build a coffee shop. The work was completed in early 2007. A dispute arose between the parties and Reynolds withheld payment of $209,310. Ellis then filed a mechanicís lien on the property, which was owned 50-50 by Reynolds and Inspiration, LLC. Ellis acted to perfect the lien by filing a complaint against Reynolds and Inspiration. Following mediation, the parties entered into a settlement agreement under which Reynolds was to pay Ellis $112,500 in three installments. Reynolds made a payment of $12,500 but failed to pay the remaining $100,000. Ellis never withdrew the lien, and the suit that had been filed had not been dismissed. Ellis then sought enforcement of the settlement agreement and the trial court ordered Reynolds to pay $100,000. Ellis was unable to collect on the judgment and sought enforcement of the original lien. Ellis asked the trial court to foreclose on the property. The trial court refused; Ellis appealed.

Decision

Reversed. Enforcement of the lien was a remedy that Ellis was entitled to. Since he could not collect on a judgment against Reynolds to enforce the settlement agreement, he may now move to enforce the lien. The lien was never cancelled, so its enforcement is an appropriate remedy. The settlement agreement called for the lien to be cancelled, but that was contingent on the $112,500 being paid.

Citation Ellis-Walker Builders v. Don Reynolds Properties, ---S.E.2d--- (2010 WL 2650915, Ct. App., N.C., 2010)

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