Fabricators Take Note: You Can Be a Secured Creditor with an Artisan’s Lien

N.J.S.A. 2A-44:32 to 34 codifies enforcement of the common law artisan’s lien, also called a workman’s lien or artificer’s lien, upon personal property for the price of labor and material furnished in its repair or construction. Contrast this artisan’s lien with the modern New Jersey construction lien, and the immediate differences are obvious – the artisan’s lien concerns movable, tangible personal property and arises by implication, while the construction lien attaches to improved real property, and depends on a signed written contract recorded in the statutorily prescribed manner.

Although the method of enforcing artisan’s liens is now provided by statute, in New Jersey there is no statute establishing an artisan’s lien, and the common law rules for establishing such liens still prevail. Beck v. Nutrodynamics, Inc., 77 N.J.Super.448, 451, 186 A.2d 715 (Cty. Ct. 1962); Kalio Universal Inc. v. B.A.M., 95 N.J.Super. 393, 399, 231 A.2d 376 (A.D.1967). To establish a common law artisan’s lien, an artisan must prove that the personal property was bailed to her, that she expended her skill and labor in its improvement, that she conferred upon it an additional value, that she had the express or implied consent of the owner to do the work, and that she was employed for the purpose of rendering the service. See White v. Smith, 44 N.J.L. 105, 109, 110, 112, 43 Am.Rep. 347 (Sup. Ct. 1882).

For a hypothetical example of an artisan’s lien used in the resolution of a construction dispute, imagine a metal fabrication shop is employed by a remodeling contractor or architect to construct a custom spiral stairway from raw materials supplied by or on behalf of the owner. Suppose the contract payment terms are 50% down and balance due before shipping. Based on the contract awarded and the downpayment received, the fabricator will build the product based on the engineering drawings and specifications.

Her contract performance will provide the fabricator with an artisan’s lien during her possession of the spiral staircase. In the event that payment of the balance due is demanded but not forthcoming, the fabricator can proceed under the artisan’s lien statutes, and refuse to release the finished stairway before payment.

The lien is distinct from the debt it secures; it is only an incident of an obligation and a remedy in the nature of security. O’Brien v. Buxton, 9 N.J. Misc. 876, 877-78, 156 A. 17 (Cir. Ct. 1931). So, in the event of nonpayment, the fabricator must bring a lawsuit to enforce the lien by showing that the services were rendered, they were not paid for (the balance due), and there is no special defense that would defeat the contractor’s lien rights. After reducing her underlying claim to a judgment the lienholder could obtain execution on the property retained by her, with court supervised levy and sale upon the judgment. N.J.S.A. 2A-44:32.

In the event that the balance of the bill remains unpaid after three months, the fabricator may sell the stairway at public auction pursuant to notice published in a local newspaper once each week in the two weeks before sale, and by posting in five public places in the town where the stairway is located, and by mailing a copy of the notice to the owner not less than five days before the sale. N.J.S.A. 2A-44:33. The proceeds of the sale must be applied to the payment of the lien and the expenses of the sale. These recoverable expenses would not include any that defendant had for charges resulting from maintenance or storage of the stairway. Ferrante Equipment Co. v. Foley Machinery Co., 49 N.J. 432, 437, 231 A.2d 208,(N.J., 1967). The balance, if any, would be paid to the former owner when the stairway was taken away by the buyer or settled for in full. N.J.S.A. 2A-44:34.

Artisan’s liens assume greater importance in a dispute among creditors claiming interests in the same collateral. Suppose that the bank/construction lender associated with the remodeling project claimed a perfected security interest in all of the materials purchased by the owner for incorporation into the spiral staircase. This competing claim should be resolved in favor of the artisan, under Section 9–310 of the Uniform Commercial Code which provides:

‘When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.’ N.J.S.A. 12A:9–310

An artisan’s lien is lost by the lienholder’s voluntary and unconditional surrender of possession or control of the property, so if the customer’s stairway were released before the bill was paid, the fabricator would give up her right to be first in line to receive payment as a priority secured creditor. This is so even if the “final” payment check was received but bounced, so it is important for the fabricator not to release the collateral until actually paid in full.