H.B. 96

1

WRONGFUL LIEN AMENDMENTS
2 1997 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: John E. Swallow
5 AN ACT RELATING TO LIENS; PROVIDING DEFINITIONS; PROHIBITING RECORDING
6 OR FILING A WRONGFUL LIEN OR OTHER WRONGFUL NOTICE DOCUMENT ON
7 THE PROPERTY OF ANOTHER WHICH ADVERSELY AFFECTS THE PROPERTY
8 TITLE; PERMITTING THE COUNTY RECORDER TO REJECT A LIEN; PROVIDING
9 EXCEPTIONS; CLARIFYING THE STATUTORY IMPACT ON CIVIL PROCEDURE
10 RULES; AND PROVIDING CRIMINAL AND CIVIL PENALTIES.
11 This act affects sections of Utah Code Annotated 1953 as follows:
12 AMENDS:
13 38-1-25, Utah Code Annotated 1953
14 ENACTS:
15 38-9-5, Utah Code Annotated 1953
16 38-9-6, Utah Code Annotated 1953
17 38-9-7, Utah Code Annotated 1953
18 REPEALS AND REENACTS:
19 38-9-1, as enacted by Chapter 182, Laws of Utah 1985
20 38-9-2, as enacted by Chapter 182, Laws of Utah 1985
21 38-9-3, as enacted by Chapter 182, Laws of Utah 1985
22 38-9-4, as enacted by Chapter 182, Laws of Utah 1985
23 Be it enacted by the Legislature of the state of Utah:
24 Section 1. Section 38-1-25 is amended to read:
25 38-1-25. Abuse of lien right -- Penalty.
26 Any person entitled to record or file a lien under Section 38-1-3 is guilty of a class B
27 misdemeanor who [knowingly] intentionally causes [to be filed for record] a claim of lien against

1 any property, which contains a greater demand than the sum due [him,] to be recorded or filed:
2 (1) with the intent to cloud the title[, or];
3 (2) to exact from the owner or person liable by means of [such] the excessive claim of lien
4 more than is due [him,]; or
5 (3) to procure any unjustified advantage or benefit [whatever, is guilty of a misdemeanor].
6 Section 2. Section 38-9-1 is repealed and reenacted to read:
7 38-9-1. Definitions.
8 As used in this chapter:
9 (1) "Interest holder" means a person who holds or possesses a present, lawful property
10 interest in certain real property, including an owner, title holder, mortgagee, trustee, or beneficial
11 owner.
12 (2) "Lien claimant" means a person S CLAIMING AN INTEREST IN REAL PROPERTY s who
12a offers a document for recording or filing with any
13 county recorder in the state asserting a lien or other claim of interest in certain real property.
14 (3) "Owner" means a person who has a vested ownership interest in certain real property.
15 (4) "Record interest holder" means a person who holds or possesses a present, lawful
16 property interest in certain real property, including an owner, titleholder, mortgagee, trustee, or
17 beneficial owner, and whose name and interest in that real property appears in the county
18 recorder's records for the county in which the property is located.
19 (5) "Record owner" means an owner whose name and ownership interest in certain real
20 property is recorded or filed in the county recorder's records for the county in which the property
21 is located.
22 (6) "Wrongful lien" means any document that h [claims] h PURPORTS TO CREATE h
22a a lien h [, ] OR h encumbrance h [, or any other
23 interest ] ON AN OWNER'S INTEREST h in certain real property and at the time it is recorded or filed
23a is not:
24 (a) expressly authorized by this chapter or another state or federal statute;
25 (b) authorized by or contained in an order or judgment of a court of competent jurisdiction
26 in the state; or
27 (c) signed by or authorized pursuant to a document signed by h [an ] THE h owner of the
27a real
28 property.
29 Section 3. Section 38-9-2 is repealed and reenacted to read:
30 38-9-2. Scope.
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Amend on 3_goldenrod March 5, 1997 31 (1) The provisions of this chapter apply to any recording or filing or any rejected recording

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1 or filing of a lien pursuant to this chapter on or after May 5, 1997.
2 (2) The provisions of this chapter shall not prevent a person from filing a lis pendens in
3 accordance with Section 78-40-2 or seeking any other relief permitted by law.
3a h (3) THIS CHAPTER DOES NOT APPLY TO A PERSON ENTITLED TO A LIEN UNDER SECTION
3b 38-1-3 WHO FILES A LIEN PURSUANT TO TITLE 38, CHAPTER 1. h
4 Section 4. Section 38-9-3 is repealed and reenacted to read:
5 38-9-3. County recorder may reject wrongful lien.
6 (1) A county recorder may reject recording of a lien if the county recorder determines the
7 lien is a wrongful lien as defined in Section 38-9-1. If the county recorder rejects the document,
8 the county recorder shall S IMMEDIATELY s return the original document S [, and] TOGETHER WITH s
8a a notice that the document was rejected
9 pursuant to this section S , s to the person attempting to record or file the document or to the address
10 provided on the document.
11 (2) A county recorder who h , WITHIN THE SCOPE OF THE COUNTY RECORDER'S
11a EMPLOYMENT , h rejects h OR ACCEPTS h a document for recording or filing in good faith under
12 this section may not be liable for damages except as otherwise provided by law.
13 (3) If a rejected document is later found to be recordable pursuant to a court order, it shall
14 have no retroactive recording priority.
15 (4) Nothing in this chapter shall preclude any person from pursuing any remedy pursuant
16 to Utah Rules of Civil Procedure, Rule 65A, Injunctions.
17 Section 5. Section 38-9-4 is repealed and reenacted to read:
18 38-9-4. Civil liability of person filing wrongful lien.
19 (1) S [A person] A LIEN CLAIMANT s who records or files or causes a wrongful lien as
19a defined in Section 38-9-1
20 to be recorded or filed in the office of the county recorder against real property is liable to a record
21 interest holder for any actual damages proximately caused by the wrongful lien.
22 (2) If the person in violation of Subsection (1) h [intentionally ] h refuses to release or
22a correct
23 the wrongful lien within 20 days from the date of written request from a record interest holder of
24 the real property S DELIVERED PERSONALLY OR MAILED TO THE LAST KNOWN ADDRESS OF THE
24a LIEN CLAIMANT s , the person is liable to that record interest holder for $1,000 or for treble actual
25 damages, whichever is greater, and for reasonable attorney fees and costs.
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Amend on 3_goldenrod March 5, 1997 26 (3) A person is liable to the record owner of real property for $3,000 or for treble actual

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27 damages, whichever is greater, and for reasonable attorney fees and costs, who records or files or
28 causes to be recorded or filed a wrongful lien as defined in Section 38-9-1 in the office of the
29 county recorder against the real property, knowing or having reason to know that the document:
30 (a) is a wrongful lien;
31 (b) is groundless; or























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1 (c) contains a material misstatement or false claim.
2 Section 6. Section 38-9-5 is enacted to read:
3 38-9-5. Criminal liability for filing a wrongful lien -- Penalties.
4 (1) A person who intentionally records or files or causes to be recorded or filed a wrongful
5 lien with a county recorder is guilty of a class B misdemeanor. Under this Subsection (1), it is an
6 affirmative defense to this offense that the person recorded or filed a release of the claim or lien
7 within 20 days from the date of written request from a record interest holder that the wrongful lien
8 be released. The accused person shall prove this affirmative defense by a preponderance of the
9 evidence.
10 (2) A person who intentionally records or files or causes to be recorded or filed a wrongful
11 lien with the county recorder is guilty of a third degree felony if, at the time of recording or filing,
12 the person knowingly had no present, lawful property interest in the real property and no
13 reasonable basis to believe he had a present, lawful property interest in the real property.
14 h [(3) This section does not apply to a person entitled to a lien under Section 38-1-3 who files
15 a lien pursuant to Title 38, Chapter 1.
16 (4) ] (3) h Nothing in this section shall bar a prosecution for any act in violation of Section
17 76-8-414.
18 Section 7. Section 38-9-6 is enacted to read:
19 38-9-6. Petition to file lien -- Notice to record interest holders -- Summary relief --
20 Contested petition.
21 (1) A lien claimant whose document is rejected pursuant to Section 38-9-3 may petition
22 the district court in the county in which the document was rejected for an expedited determination
23 that the lien may be recorded or filed.
24 (2) (a) The petition shall be filed with the district court within ten days of the date notice
25 is received of the rejection and shall state with specificity the grounds why the document should
26 lawfully be recorded or filed.
27 (b) The petition shall be supported by a sworn affidavit of the lien claimant.
28 (c) If the court finds the petition is insufficient, it may dismiss the petition without a
29 hearing.
30 (d) If the court grants a hearing, the petitioner shall serve a copy of the petition, notice of
31 hearing, and a copy of the court's order granting an expedited hearing on all record interest holders
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1 of the property sufficiently in advance of the hearing to enable any record interest holder to attend
2 the hearing and service shall be accomplished by certified or registered mail.
3 (e) Any record interest holder of the property has the right to attend and contest the
4 petition.
5 (3) Following a hearing on the matter, if the court finds that the document may lawfully
6 be recorded, it shall issue an order directing the county recorder to accept the document for
7 recording. If the petition is contested, the court may award costs and reasonable attorney's fees
8 to the prevailing party.
9 (4) A summary proceeding under this section is only to determine whether or not a
10 contested document, on its face, shall be recorded by the county recorder. The proceeding may
11 not determine the truth of the content of the document nor the property or legal rights of the parties
12 beyond the necessary determination of whether or not the document shall be recorded. The court's
13 grant or denial of the petition under this section may not restrict any other legal remedies of any
14 party, including any right to injunctive relief pursuant to Rules of Civil Procedure, Rule 65A,
15 Injunctions.
16 (5) If the petition contains a claim for damages, the damage proceedings may not be
17 expedited under this section.
18 Section 8. Section 38-9-7 is enacted to read:
19 38-9-7. Petition to nullify lien -- Notice to lien claimant -- Summary relief -- Finding
20 of wrongful lien -- Wrongful lien is void.
21 (1) Any record interest holder of real property against which a wrongful lien as defined
22 in Section 38-9-1 has been recorded may petition the district court in the county in which the
23 document was recorded for summary relief to nullify the lien.
24 (2) The petition shall state with specificity the claim that the lien is a wrongful lien and
25 shall be supported by a sworn affidavit of the record interest holder.
26 (3) (a) If the court finds the petition insufficient, it may dismiss the petition without a
27 hearing.
28 (b) If the court finds the petition is sufficient, the court shall schedule a hearing within ten
29 days to determine whether the document is a wrongful lien.
30 (c) The record interest holder shall serve a copy of the petition on the lien claimant and
31 a notice of the hearing pursuant to Rules of Civil Procedure, Rule 4, Process.

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1 (d) The lien claimant is entitled to attend and contest the petition.
2 (4) A summary proceeding under this section is only to determine whether or not a
3 document is a wrongful lien. The proceeding shall not determine any other property or legal rights
4 of the parties nor restrict other legal remedies of any party.
5 (5) (a) Following a hearing on the matter, if the court determines that the document is a
6 wrongful lien, the court shall issue an order declaring the wrongful lien void ab initio, releasing
7 the property from the lien, and awarding costs and reasonable attorney's fees to the petitioner.
8 (b) (i) The record interest holder may record a certified copy of the order with the county
9 recorder.
10 (ii) The order shall contain a legal description of the real property.
11 (c) If the court determines that the claim of lien is valid, the court shall dismiss the petition
12 and may award costs and reasonable attorney's fees to the lien claimant. S THE DISMISSAL ORDER
12a SHALL CONTAIN A LEGAL DESCRIPTION OF THE REAL PROPERTY. THE PREVAILING LIEN
12b CLAIMANT MAY RECORD A CERTIFIED COPY OF THE DISMISSAL ORDER. s
13 (6) If the district court determines that the lien is a wrongful lien as defined in Section
14 38-9-1, the wrongful lien is void ab initio and provides no notice of claim or interest.
15 (7) If the petition contains a claim for damages, the damage proceedings may not be
16 expedited under this section.




Legislative Review Note
as of 1-23-97 11:45 AM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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Amend on 3_goldenrod March 5, 1997