Bulletin: NM2016005

Date:
July 14, 2016
To:
All New Mexico Issuing Offices
RE:
UNDERWRITING - Mechanic’s Lien Update

Dear Associates:

The New Mexico Court of Appeals recently provided important guidance on what constitutes a valid claim of lien. In Sonida, LLC v. Spoverlook, LLC, 2016-NMCA-026 (Dec. 8, 2015), the New Mexico Court of Appeals reversed the lower court ruling and held that an unverified claim of lien was void ab initio, meaning it had no effect whatsoever.  

The court of appeals reiterated that under the New Mexico mechanic’s lien statute a claim of lien “must be verified by the oath of the [claimant] or of some other person.” (Emphasis added). The facts were undisputed that none of the plaintiff’s claims of lien included any language verifying upon oath the truth of the contents of the claims of lien. The court rejected the plaintiff’s arguments that (1) the word “must” was not obligatory; (2) that substantial compliance with the verification requirement should suffice under a liberal statutory interpretation standard; and (3) that the acknowledgement was the functional equivalent of a verification.[1]

The court’s decision is a reminder of the importance of complying with the specifics of a statute, and will provide an additional tool to confirm the validity of a recorded claim of lien.

Underwriting Guideline. If during your examination you find an unverified claim of lien where the two year period for enforcing the claim of lien has not yet elapsed, please contact your underwriter to determine whether the lien needs to be released as a condition of insuring the transaction or whether the lien does not pose a material risk in the circumstances. 

[1] The court’s opinion suggests that a jurat form of acknowledgement (i.e., “subscribed and sworn to”) would suffice as a verification.   

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
NM2015002 UNDERWRITING - Insuring Construction Loans in New Mexico; New Rules Effective August 1 and August 15, 2014
Underwriting Manual:
12.12 Mechanic's Liens
Exceptions Manual:
None
Forms:
None