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Georgia Appellate Court Finds Question Of Material Fact Regarding Whether A Materialmen’s Lien Attaches Based Upon Entity Name In Subcontract

In Optum Construction Group, LLC et al. v. City Electric Supply Company, 2020 WL 5792581 (Ga. App. 2020), appellee City Electric Supply Company (“City Electric”) furnished materials to Palmetto Power Services, LLC (“Palmetto Services”), an entity that represented itself as a subcontractor for a hotel construction project on which appellant Optum Construction Group, LLC (“Optum”) was the general contractor. After Palmetto Services failed to pay City Electric for the materials, City Electric sued Palmetto Services and filed a materialman’s lien on the hotel and real estate (“the Property”) on which it was constructed. Optum and its surety, Fidelity and Deposit Company of Maryland (“Fidelity”), discharged the lien by filing a bond.

City Electric settled with Palmetto Services, then filed suit against Optum and Fidelity to recover on the lien. City Electric claimed that, pursuant to a contract, it supplied materials to Palmetto Services for improvements to the Property and was not paid for the materials. The trial court granted City Electric’s motion for summary judgment and denied Optum and Fidelity’s motions. Optum and Fidelity appealed, arguing that City Electric did not satisfy the lien requirements set out in OCGA § 44-14-361.

Pursuant to OCGA § 44-14-361 et seq., a materialman who furnishes supplies and materials for building, repairing, or improving property may file a lien. OCGA § 44-14-361(b) provides that a lien “may attach to the real estate of the owner for which the labor, services, or materials are furnished if they are furnished at the instance of the owner, contractor, or some other person acting for the owner or contractor[.]” However, “[a]bsent proof of a contractual relationship, either directly or through a chain of contracts, between the owner of the property and the person to whom the materials are furnished, a lien created under OCGA § 44-14-361 et seq. will not attach.”

Optum claimed that City Electric did not qualify as a lien claimant because it was not in direct privity of contract with Optum. Optum’s electrical subcontract was with “Palmetto Power Services Palmetto Power Unlimited, [I]nc” (“Palmetto Unlimited”). But, the pay applications received and paid by Optum were from “Palmetto Power Services.”

The appellate court held that there was a genuine issue of material fact as to whether Optum had a contractual relationship with City Electric through a chain of contracts with Palmetto Services. While the subcontract listed “Palmetto Power Services Palmetto Power Unlimited [I]nc.” as the subcontractor, not Palmetto Power Services, LLC, Optum conceded that “Palmetto Power Unlimited was ultimately organized as an LLC instead of a corporation.”

This case demonstrates the importance of accuracy in identifying parties to a contract. Here, the contract is not clear as to the identity of the subcontractor, and the record contains conflicting evidence regarding whether City Electric was in a link of contracts to reach Optum.