Mechanics Liens; Fees

Prohibits the use of a mechanic's or materialman's lien for
payment of union trust fund contributions.

THE SENATE                              S.B. NO.           736
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The concept of a mechanic's or materialman's
 2 lien is to place a lien on real property and improvements when
 3 the person seeking the lien has furnished labor or materials in
 4 the improvement of the real property.  This ensures that the
 5 person who has contributed to the improvements will not be
 6 without recourse if the contractor who hired the person fails to
 7 pay the person.
 8      In 1981, the Hawaii Supreme Court extended this right to
 9 union trust funds.  In the case of Hawaii Carpenters' Trust Funds
10 v. Aloe Development Corp., 63 Haw. 566, the court found that even
11 though the pension fund technically furnished no labor, the
12 unpaid contributions that were owed the pension fund were as much
13 justly due the employees as their wages.  As such, they were as
14 much entitled to a lien for the unpaid pension fees as they would
15 have been for unpaid wages.
16      The issue arose again in the case of Laborers' Trust Fund v.
17 Maui Prince Hotel Corp., 81 Haw. 487 (1996).  There the trust
18 fund brought an action to foreclose its mechanic's and
19 materialman's liens on properties to collect judgement against

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 1 their subcontractors for delinquent ERISA payments.  The trial
 2 court dismissed the case on ERISA preemption grounds, but the
 3 Hawaii Supreme Court reversed, holding that the lien law was not
 4 preempted by ERISA and the use of the lien to assist with the
 5 collection process was consistent with the intent of ERISA to
 6 promote prompt payments of employee benefit contributions.
 7      However, the legislature does not believe that this result
 8 comports with the intent of either the lien law or of ERISA.  The
 9 legislature notes that Hawaii is one of only two states that does
10 not take the position that ERISA preempts the use of the
11 mechanic's lien law in this situation.  The mechanic's lien law
12 should be reserved for its original intended purpose and not used
13 to hold improvements hostage for non-payment of pension funds.
14 This is too far a stretch for the law.
15      The purpose of this Act is to exclude the application of the
16 mechanic's and materialman's lien for non-payment of union trust
17 funds.
18      SECTION 2.  Section 507-42, Hawaii Revised Statutes, is
19 amended to read as follows:
20      "507-42  When allowed; lessees, etc.  Any person or
21 association of persons furnishing labor or material in the
22 improvement of real property shall have a lien upon the
23 improvement as well as upon the interest of the owner of the

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                                     S.B. NO.           736

 1 improvement in the real property upon which the same is situated,
 2 or for the benefit of which the same was constructed, for the
 3 price agreed to be paid (if the price does not exceed the value
 4 of the labor and materials), or if the price exceeds the value
 5 thereof or if no price is agreed upon by the contracting parties,
 6 for the fair and reasonable value of all labor and materials
 7 covered by their contract, express or implied[.]; provided that
 8 no such lien shall apply when sought by a union trust fund for
 9 unpaid union trust fund contributions.
10      Where the terms of a lease, contract of sale, or instrument
11 creating a life tenancy require the improvement of the real
12 property, the interest of the lessor, vendor, or remainderman in
13 the improvement and the land upon which the same is situated
14 shall likewise be subject to the lien, and any provision for
15 forfeiture or other penalty against the lessee, vendee, or life
16 tenant in case of the filing of a mechanic's or materialman's
17 lien or actions to enforce the same, shall not affect the rights
18 of lienors."
19      SECTION 3.  Statutory material to be repealed is bracketed.
20 New statutory material is underscored.
21      SECTION 4.  This Act shall take effect upon its approval.
23                           INTRODUCED BY:_________________________

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