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Diaz Construction v. Industrial Development Board of Metropolitan Government of Nashville and Davidson County

Court of Appeals of Tennessee, Nashville

March 6, 2015

DIAZ CONSTRUCTION
v.
THE INDUSTRIAL DEVELOPMENT BOARD OF THE METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, ET AL.

Session January 20, 2015.

Appeal from the Chancery Court for Davidson County No. 131655II Carol L. McCoy, Chancellor.

Andy D. Bennett, J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Richard H. Dinkins, J., joined.

Russell E. Edwards, Hendersonville, Tennessee, for the appellant, Diaz Construction.

John T. Blankenship, Murfreesboro, Tennessee; James Timothy Crenshaw, Nashville, Tennessee; and Gregory L. Cashion, Nashville, Tennessee, for the appellees, The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County, Allegheny Solid Surface Technologies, LLC, and Brasfield & Gorrie, LLC.

OPINION

ANDY D. BENNETT, JUDGE.

This case involves the question of which entities a remote contractor is required to notify of nonpayment when the contractor intends to claim a mechanic's or materialman's lien pursuant to Title 66, Chapter 11 of the Tennessee Code.

Factual and Procedural Background

Diaz Construction ("Diaz") asserts in an amended complaint that in 2013 it was hired by Sunago Builders, Inc. ("Sunago") to work on improved real property known as theq Omni Nashville Hotel and Country Music Hall of Fame Expansion ("Omni Hotel"), located in Nashville. The owner of the Omni Hotel at that time was The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (the "IDB"). Brasfield & Gorrie ("B&G") was the general contractor for the project. According to Diaz's complaint, B&G hired Allegheny Solid Surface Technologies, LLC ("Allegheny") to be a subcontractor, and Allegheny hired Sunago. Sunago, in turn, hired Diaz to perform framing, flooring, roofing, and tile work. Diaz alleges it worked from on or around May 3, 2013, until about June 28, 2013. Diaz asserts it ceased working after June 28 because it was not being paid and was owed $72, 748.

Diaz initially filed a complaint against the IDB, B&G, Allegheny, and Sunago to enforce a mechanic's lien on the Omni Hotel. Diaz also claimed Sunago had misapplied its payments from Allegheny and was in violation of Tenn. Code Ann. § 66-11-138.[1] Then, after Allegheny obtained a Subcontract Payment Bond from Great American Insurance Company to release Diaz's lien from the Omni Hotel, Diaz filed a motion to amend its complaint, inter alia, to add Great American Insurance Company as a defendant.

Allegheny, the IDB, and B&G filed motions to dismiss Diaz's complaint and opposed Diaz's motion to amend on the ground that Diaz had not properly perfected its mechanic's lien. Allegheny, the IDB, and B&G argued that Diaz was required to serve a notice of nonpayment on B&G as well as the IDB, and because Diaz only served a notice of nonpayment on the IDB, Diaz did not have a properly perfected mechanic's lien.[2] Diaz agreed that it served a notice of nonpayment on the owner of the Omni Hotel, the IDB, and asserted that it served a notice of nonpayment on Sunago, the entity that hired Diaz. Diaz concedes that it did not serve a notice of nonpayment on B&G, the general contractor on the project, but contends it was not required to do so because it was not in contractual privity with B&G. According to Allegheny, the IDB, and B&G, however, Diaz was statutorily required to serve notice of nonpayment on B&G to have a properly perfected lien.

Tennessee Code Annotated section 66-11-145 identifies the entities Diaz was required to notify of nonpayment, and provides, in pertinent part, that:

Every remote contractor with respect to an improvement, except one-family, two-family, three-family and four-family residential units, shall serve, within ninety (90) days of the last day of each month within which work or labor was provided or materials, services, equipment, or machinery furnished and for which the remote contractor intends to claim a lien under this chapter, a notice of nonpayment for the work, labor, materials, services, machinery, or equipment to the owner and prime contractor in contractual privity with the remote contractor if its account is, in fact, unpaid.

Tenn. Code Ann. ยง 66-11-145(a) (emphasis added). If a remote contractor fails to provide the requisite notice of nonpayment, the remote contractor "shall have no right to claim a lien under this ...


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