What Constitutes a "Duly Authorized Officer?" - The New Jersey Appellate Division Strictly Construes the Signatory Requirement of Section 6 New Jersey's Construction Lien Law

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Construction Group Newsletter

January 3, 2011

In Aloia Construction Co., Inc. v. BFW/Howell Associates, LLC, et al., 2010 N.J. Super. Unpub. LEXIS 173 (App. Div. Jan. 29, 2010), Defendant TechnoSteel Manufacturing, LLC (“TechnoSteel”) supplied structural steel and drawings to M.J. Fisher Steel Co., LLC (“M.J. Fisher”) to be used in the construction of a shopping center known as Howell Commons. Although TechnoSteel determined that M.J. Fisher was not creditworthy, it agreed to enter into the contract with M.J. Fisher based upon a letter from Benderson Development Company (“Benderson”), the property’s labor, equipment and materials contractor, to M.J. Fisher that required M.J. Fisher to “provide assurances that TechnoSteel has been paid in full for its portion of the work prior to the release of the final contract payment” by Benderson. At the conclusion of its work on the project, TechnoSteel was owed $103,026.50, for which it filed a construction lien. The lien was signed by TechnoSteel’s attorney, as a “duly authorized officer” of the corporation.

Benderson sought discovery on the issue of whether TechnoSteel’s attorney was, in fact, a “duly authorized officer,” but the discovery was not provided. Benderson then moved for summary judgment seeking dismissal of TechnoSteel’s lien and contract claims, which the trial court granted based upon its finding that TechnoSteel’s attorney was not a “duly authorized officer” pursuant to section 6 of New Jersey’s Construction Lien Law, N.J.S.A. § 2A:44A-6, and that M.J. Fisher’s alleged agreement to provide Benderson with an assurance that TechnoSteel had been paid in full did not require Benderson to confirm that payment had been made, nor did it create an obligation on Benderson’s part to ensure that TechnoSteel was paid in full.

The Appellate Division affirmed the discharge of TechnoSteel’s construction lien for the reasons set forth by the trial court, and rejected TechnoSteel’s argument — raised for the first time on appeal — that it had “substantially complied” with the requirements of the Construction Lien Law. The Appellate Division emphasized that the statutory provisions creating construction liens must be strictly construed and enforced. The court further explicitly held that “[i]t is insufficient for an attorney to sign a lien claim on behalf of a client when simply acting as the client’s attorney … N.J.S.A. 2A:44A-6 requires that in order for a lien claim to attach, it must be ‘signed, acknowledged and verified’ by a duly authorized officer.” In reaching its decision, the court placed significant emphasis on TechnoSteel’s failure to provide evidence in discovery that the attorney who had signed the construction lien was a duly authorized officer, despite discovery requests that called for the production of such information.

Notwithstanding the court’s observation that TechnoSteel’s “lien appears to satisfy the technical requirements for filing a construction lien insofar as it was signed, acknowledged and verified by oath of a person identified on the document as a duly authorized corporate officer of the defendant and was filed within the requisite time period” it nonetheless rejected TechnoSteel’s argument that technical compliance constituted substantial compliance sufficient to prevent discharge of the lien. In rejecting TechnoSteel’s substantial compliance arguments, the Aloia court construed the New Jersey Supreme Court’s opinion in D.D.B Interior Contracting, Inc. v. Trends Urban Renewal Assoc., Ltd., 176 N.J. 170 (2003) to hold not that substantial compliance of the signatory requirement in N.J.S.A. § 2A:44A-6 might be sufficient in certain circumstances, but to the contrary; i.e., after the date of the D.D.B. decision, substantial compliance would no longer be an availing argument for lien holders. In D.D.B. the construction lien had been signed by an attorney pursuant to a power of attorney purporting to authorize him to do so. The Aloia court made clear that such powers of attorney would no longer be considered effective by New Jersey courts in the wake of the D.D.B. decision. The D.D.B. court “made clear that ‘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.’ … The import of this statement was that going forward, a corporation could no longer satisfy the lien statute’s signature requirements merely by substantially complying.”

The Aloia decision provides important lessons for subcontractors faced with the need to file construction liens in New Jersey. When filing a construction lien, it is critically important to comply with the letter of the law including all procedural requirements of N.J.S.A. § 2A:44A. Companies in the habit of having an attorney — either in-house counsel or retained counsel — execute construction liens on their behalf must ensure that such attorney is a duly authorized officer of the company, and be prepared to prove that status in the event the validity of the lien is later challenged in subsequent litigation or arbitration. Reliance on a power of attorney in lieu of formal appointment as a corporate officer will be insufficient to satisfy this requirement.