Lien Transfer with No Surety

Action against lien transfer bond must be brought within one year of transfer – if lien is transferred during pendency of lien foreclosure action.

Prior to 2005, Florida Statute, Section 713.24 provided that if a lawsuit to enforce a transferred lien was not commenced within one year of recording the lien, the clerk was required to return the security. However, Courts refused to apply the one-year time limitation to bar a claim against the surety where the lien was transferred to security during the pendency of a suit to foreclose a lien. The Courts reasoned that to hold otherwise would permit property owners to defend the suit until one year passed, and then transfer the lien to bond, and in so doing, prevent any liability against the owner or the surety. Consequently, in 2005, the Florida legislature amended Florida Statute, Section 713.24(4) by adding the following sentence:

“If a proceeding to enforce a lien is commenced in a court of competent jurisdiction within the time specified in s. 713.22 and, during such proceeding, the lien is transferred pursuant to this section or s. 713.13(1)(e), an action commenced within 1 year after the transfer . . . in the same county or circuit court to recover against the security shall be deemed to have been brought as of the date of filing the action to enforce the lien, and the court shall have jurisdiction over the action.”

The amended Florida Statute, Section 713.24(4) was recently applied and interpreted in the case of The Cool Guys, LLC v. Jomar Properties, LLC, 2012 WL 716084 (Fla. 4th DCA 2012). In The Cool Guys, LLC, the Contractor recorded a construction lien against the real property in February 2007. In March 2007, litigation commenced over the matter and the Contractor filed a counterclaim to foreclose its lien. In December 2007, during the pendency of the litigation, the Owner of the real property posted a transfer bond, transferring the Contractor’s lien to a surety bond. The Contractor received notice of the transfer of the lien to security. Despite receiving such notice, the Contractor did not bring a claim on the transfer bond until two years after the lien was transferred. Consequently, the Owner and the surety moved for summary judgment asserting that the Contractor’s claim on the transfer bond was time-barred given the one-year limitations period in Florida Statute, Section 713.24(4).

The trial court, relying on the added sentence in Florida Statute, Section 713.24(4) found that the Contractor’s claim brought on the transfer bond was untimely as the lien had been transferred to security during the pendency of the lien foreclosure suit, and no attempt was made to state a claim on the bond until two years after such transfer. The Contractor appealed the trial court’s judgment in favor of the Owner and surety on the grounds that the sentence added to section 713.24(4) applies only where the lienor seeks to file an entirely separate action against the surety. The appellate court disagreed with the Contractor and affirmed the judgment in favor of the Owner and Surety.

The appellate court reasoned that there is no ambiguity in Florida Statute, Section 713.24(4). When the words of a statute are plain and unambiguous and convey a definite meaning, courts have no occasion to resort to rules of construction. Courts must read the statute as written, and their inquiry ends there. Thus, the Court held that it is clear from the language in the statute that if a lien foreclosure suit is pending, and the lien is subsequently transferred to security during the pendency of that litigation, a claim to recover against the transferred security must be brought within one year of the transfer.

This case demonstrates the clear meaning of Florida Statute, Section 713.24(4) – if a lien foreclosure suit is pending, and the lien is subsequently transferred to security during the pendency of the litigation, the lienor must amend its complaint to file an action against the lien transfer bond within one year of the lien being transferred.

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