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D.D.B. Interior Contracting, Inc. v. Trends Urban Renewal Association

May 12, 2003

D.D.B. INTERIOR CONTRACTING INC., PLAINTIFF-APPELLANT,
v.
TRENDS URBAN RENEWAL ASSOCIATION, LTD., ITURC HOLDING CORP., LYNMARK CONSTRUCTION & MANAGEMENT CO., INC. AND THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY, DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

This appeal considers whether by executing a power of attorney the sole owner and president of a corporation may confer on another the authority to sign, acknowledge, and verify a lien claim as a duly authorized officer, pursuant to the Construction Lien Law, N.J.S.A. 2A:44A-1 to -38 (CLL).

D.D.B. Interior Contracting, Inc. (DDB) entered into a series of written contracts with one of the defendants to renovate a building at the Port Authority Technical Center in Jersey City. According to the sole owner and president of DDB, the defendant requested additional work that was not included in the written contracts. DDB completed the work and submitted its bills for the contract amount and for the additional work. Defendant contested the amount billed for the additional work. In response, the owner and president of DDB sought to obtain a lien against the defendants. DDB's counsel informed the owner and president that other corporate clients had executed powers of attorney granting him the authority to sign and prosecute lien claims on their behalf and that in one case a court had reviewed that practice and found it satisfied the lien claim signatory requirement. Relying on that information, the owner and president of DDB executed a power of attorney and appointed the counsel as DDB's "true and lawful attorney-in-fact ... to act for it and in its name with respect to the preparation, filing, recording, releasing and satisfying of liens[s]." DDB's counsel then signed and filed a construction lien claim against defendants.

DDB filed a complaint against defendants to enforce its lien. Defendants moved for summary judgment, requesting dismissal of the complaint and forfeiture of the construction lien. Defendants asserted that the lien claim was invalid because DDB overstated the lien amount, filed the lien more than ninety days after completion of the work, and failed to have the lien claim form signed by a duly authorized officer. DDB filed a cross-motion for summary judgment. The trial court granted defendants' motion for summary judgment, discharging and forfeiting the lien claim on the basis that a corporate officer was not a signatory to the lien pursuant to N.J.S.A. 2A:44A-6. The trial court dismissed the complaint without prejudice and directed DDB and the contracting defendant to resolve their underlying contract dispute pursuant to the arbitration clause in their contracts.

In an unpublished opinion, the Appellate Division affirmed the trial court's decision, reasoning that the power of attorney cannot cancel out DDB's failure to comply with the specific requirements of the statute. The panel also declined to apply the doctrine of substantial compliance.

HELD: Based on the unique facts of this case and the Legislature's failure to define the term "duly authorized officer" in the Construction Lien Law, the Court concludes that the execution of a power of attorney by DDB's owner and president intending to confer on DDB's counsel the authority to sign and prosecute a construction lien claim on DDB's behalf complied with the signatory requirements of N.J.S.A. 2A:44A-6.

1. N.J.S.A. 2A:44A-3 provides that "[a]ny contractor, subcontractor or supplier who provides work, services, material or equipment pursuant to a contract, shall be entitled to a lien for the value of the work or services performed, or materials or equipment furnished in accordance with the contract and based upon the contract price...." The CLL simplifies the lien-filing process, making it easier to place construction liens on property. (Pp. 4- 5.)

2. Section 6 of the CLL provides in part that a lien claim "shall be signed, acknowledged and verified by oath of the claimant or, in the case of a partnership or corporation, a partner or duly authorized officer thereof, and filed with the county clerk not later than 90 days following the date the last work, service, material or equipment was provided for which payment is claimed." N.J.S.A. 2A:44A-6. A lien does not attach or become enforceable "unless the lien claim is filed in the form, manner and within the time provided by [N.J.S.A. 2A:44A-6] and [N.J.S.A. 2A:44A-8] of [the] act ...." The CLL does not define the term "duly authorized officer." (Pp. 5-6.)

2. A power of attorney is an instrument in writing whereby one person, as principal, appoints another as his or her agent and confers authority to perform certain specified acts or kinds of acts on behalf of the principal. DDB's owner and president executed a power of attorney appointing DDB's counsel as its attorney-in-fact to act for it and in its name with respect to the preparation, filing, recording, releasing and satisfying of liens. Based on the counsel's representations, DDB's owner and president reasonably believed that he was vesting the counsel with his authority as a duly authorized officer to sign and file a lien claim on behalf of DDB. (Pp. 6-7).

3. Because the Legislature has not addressed whether a power of attorney may vest an individual with the authority of a duly authorized officer and because DDB's owner and president reasonably relied on counsel's representations that the power of attorney was effective under the Construction Lien Law, the Court finds DDB's lien claim valid. (Pp. 7)

4. Finding the lien at issue valid does not contravene the purpose of the corporate signatory requirement of N.J.S.A. 2A:44A-6. That requirement protects a corporation and its shareholders by restricting to a select few individuals the authority to expose the corporation to potential liability under N.J.S.A. 2A:44A-14 and -15. Here, the owner and president of DDB is the only party who stands to be harmed by an improvident extension of corporate liability. Moreover, the record indicates that the counsel's role as signatory on the lien claim form does not prejudice defendants. The CLL ensures that interested parties have adequate notice of the existence of lien claims on certain real property. The counsel's execution of the lien claim did not compromise that goal. Further, defendants did not rely to their detriment on a misapprehension that the counsel was a corporate officer of DDB. (Pp. 7-8).

5. In view of the Legislature's failure to define the term "duly authorized officer" and the unique facts of this appeal, the lower courts erred in discharging DDB's lien. Nonetheless, the Court recognizes that harm to a corporation or its shareholders or prejudice to interested parties may result when an individual who signs a lien claim form on behalf of a corporation is not an officer of that corporation. Accordingly, in the future when a corporation intends to appoint an attorney to sign, acknowledge and verify a lien claim, that corporation must comply with its certificate of incorporation and bylaws to ensure that the attorney executing those duties is a corporate officer. Execution of a power of attorney will be deemed inadequate to vest an attorney-in-fact with the authority of a duly authorized officer pursuant to N.J.S.A. 2A:44A-6. (Pp. 8-9).

6. The Court expresses no opinion regarding the merits of defendants' claim that the lien is defective because it calls for an amount that exceeds the contract price or because DDB filed the lien more than ninety days after the completion of the work. The matter is remanded to the trial court to determine whether arbitration or the trial court is the appropriate forum for the disposition of those issues. (Pp. 9-10).

The judgment of the Appellate Division affirming the trial court's order for summary judgment in favor of defendants is REVERSED and the matter is REMANDED to the Law Division for ...


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