MINUTES OF THE meeting
of the
ASSEMBLY Committee on Judiciary
Seventy-First Session
April 20, 2001
The Committee on Judiciarywas called to order at 8:15 a.m. on Friday, April 20, 2001. Chairman Bernie Anderson presided in Room 3138 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Bernie Anderson, Chairman
Mr. Mark Manendo, Vice Chairman
Mrs. Sharron Angle
Mr. Greg Brower
Ms. Barbara Buckley
Mr. Jerry Claborn
Mr. Tom Collins
Mr. Don Gustavson
Mrs. Ellen Koivisto
Ms. Kathy McClain
Mr. Dennis Nolan
Mr. John Oceguera
Ms. Genie Ohrenschall
COMMITTEE MEMBERS ABSENT:
Mr. John Carpenter (Excused)
GUEST LEGISLATORS PRESENT:
Senator Maurice Washington, Washoe County Senatorial District 2
Senator William O’Donnell, Clark County Senatorial District 5
STAFF MEMBERS PRESENT:
Nicolas Anthony, Committee Policy Analyst
Risa B. Lang, Committee Counsel
Cindy Clampitt, Committee Secretary
OTHERS PRESENT:
Mr. Michael Lynch, representing the Builders’ Association of Northern Nevada
Chairman Anderson made opening remarks and stated a quorum was present. He opened the hearing on S.B. 19.
Senate Bill 19: Provides that person who repairs appliances and electronics has lien for work performed and materials furnished. (BDR 9-171)
Senator Maurice Washington, Washoe County Senatorial District 2, testified a constituent who owned an appliance shop requested the bill. The shop made repairs on compact disc units, tape recorders, video players, televisions, and other items. He explained that many times after the repairs were completed, the owners never returned for their equipment. The products could not be sold under current statute and simply took up more and more space in the shop.
Senator Washington noted when dry cleaning was left longer than 30 days after cleaning it could be sold at lien, yet electronic products could not.
S.B. 19 would allow a placard to be posted stating if repaired appliances were not claimed within 60 days, they could be sold under lien equity laws to recoup the cost of labor and parts.
Chairman Anderson asked for clarification that no other penalty payment was exacted than the cost of repairs and Senator Washington concurred. The bill would force owners of appliances to claim their property or allow it to be sold under lien laws.
Chairman Anderson asked if the cost of repair could amount to more than the same new product purchased as a replacement on sale. Senator Washington agreed that could happen. The intent of the bill was to add repair shops to other entities that sold products they serviced under lien law to recoup costs and make space in the shop.
Chairman Anderson asked if a written repair estimate was required prior to service. Senator Washington stated written estimates were usually provided showing the cost of parts and labor.
Vice Chair Manendo asked if the only amendment had been the change in time frame before an item could be sold lengthening that time from 30 days to 60 days. Senator Washington said that was correct, and added an amendment had been offered on the floor to ensure the bill covered only appliances brought into the repair shop as opposed to the repairman going to a home to provide service.
Assemblyman Brower stated his concern was that the customer needed to have notice of the lien sale. He commented S.B. 19 set forth fairly strenuous notice requirements by the lien holders and thus he was comfortable with the bill.
Assemblyman Collins asked if there was a statute of limitations that would allow the customer to make a claim on the excess proceeds of the sale of the property at a later date. He gave an example that a customer requested an item be repaired, he did not claim it after the repair, the shop owner sold it at lien for $23 more than the cost of parts and labor, and eight years later the previous owner came to the shop and demanded the $23. He asked if that possibility would create an accounting nightmare. Senator Washington replied there was no current statute of limitation and 60 days would be sufficient time for the customer to know their equipment had been repaired. If the customer deemed to leave the product, it could be sold.
Mr. Collins stated his question referred to page 2, Section 1, subsection 4. Senator Washington stated the bill provided the equipment could be sold to recoup the cost, and the property belonged to the purchaser of the item. Mr. Collins gave another example. “I bring you a television for repairs that cost $50, I do not pick up the television and it is worth $200. You sell the television and recoup your $50 and $150 would have to be kept on account in case I returned in two or three years demanding the payment.” He commented the bill did not provide for notification that excess earnings had been made on the sale. There was also a possibility the customer might believe the television was worth $500 and it was sold for only $200. The situation might result in a small claims court case over the difference of the debt.
Senator Washington stated page 2, Section 1, subsection 3 and subsection 7, provided notification to the owner that a cost for repairs was due and the item would be sold if it was not claimed. That would cause a forfeit of property to the shop owner. Mr. Collins commented that would seem to conflict with Section 1, subsection 4. Senator Washington replied the bill provided for notification and if the shop owner made a profit on the sale, that was acceptable. Mr. Collins rebutted there was an additional requirement in Section 1, subsection 4, that allowed the customer to receive any difference between the cost of repair and the sale price.
Chairman Anderson asked if the bill anticipated the situation where a shop was repairing an item, the customer paid for the repairs, the customer felt the item was still not repaired properly, returned the item to the shop, and the shop owner took receipt of the property and still did nothing further to it. The Chair asked what would happen in that type of case where the consumer was unhappy with the repair and the shop owner held onto the property without effecting further repairs. Senator Washington replied it would be a matter of the consumers’ and repairpersons’ responsibilities. No statute addressed that issue and he suggested it was a matter of choice of where the consumer would take their next item for repair. The Chair stated if the item was an expensive piece of equipment the Senator’s suggestion might not be an option. Senator Washington rebutted, that was why small claims courts existed. He added that issue was not addressed by S.B. 19.
Senator Washington referred to Mr. Collins’ earlier concerns regarding Section 1, subsection 4, and concurred that the subsection could cause accounting problems. He stated perhaps a friendly amendment was needed to stipulate the sale could only recoup the cost of parts and labor. The Chair stated legal counsel indicated in most lien holder situations the holder of the property was supposed to return to the consumer any funds recouped above the cost of repairs. He stated the Chair would be more comfortable if the bill contained language requiring an agreed-upon statement of fees and what specific repairs would be made. Senator Washington commented most shops did provide a written estimate of repairs and noted it would be very difficult to specify exactly what repairs would be made.
Mr. Brower referred to Senator Washington’s comments regarding the laws covering dry cleaning establishments and asked if S.B. 19 was modeled after that statute in all provisions. Senator Washington replied the only difference was that in the dry cleaner language only 30 days was allowed to claim the item. S.B. 19 had expanded that for repair shops to 60 days. Mr. Brower asked if the provisions were the same regarding the dry cleaners’ right to sell and requiring the return of excess earnings to the consumer. Senator Washington added dry cleaners did not provide a written estimate.
Senator Washington summarized by stating his constituent had given him a tour of the shop and the number of items being stored because they had never been claimed was unbelievable. The Chair commented it was a common practice in jewelry stores as well.
Chairman Anderson closed the hearing on S.B. 19 with no action taken.
The Chair commented the “place holder” amendment for the construction defect bill had been received, however, further amendments were still being worked on and the amendment to A.B. 133, which would be done on the Assembly Floor later in the day, would not be the final amendment to the bill. The sponsors of the bill would return to the committee and explain what their amendment would accomplish or the bill would die on the Chief Clerk’s desk.
Chairman Anderson opened the hearing on S.B. 93.
Senate Bill 93: Provides that notice of mechanic’s lien must include statement identifying portion of demand to be used to pay sum owed to subcontractor or for labor or materials. (BDR 9-74)
Senator William O’Donnell, Clark County Senatorial District 5, stated the intent of the bill was to protect property owners in terms of liens placed on them by individuals who did construction work around the property.
Senator O’Donnell gave an example of what type of situations prompted the bill. A property owner contracted for work such as tenant improvements with a drywall, framer, and a paint company that did all three types of work with a bid of $60,000 in one contract. If a dispute arose with the contractor for things such as the walls not being straight, the mud was not dried properly, or other kinds of issues, the property owner would ultimately file a complaint with the contractors’ board. The ultimate outcome was that the contractor who made the $60,000 contract filed a lien against the property, which had to be perfected within six months. The subcontractor for the framing filed a lien for $30,000 for his work, the painter filed a lien for $10,000, and the “mud” subcontractor filed a lien for $5,000 or $6,000. The property owner had a $60,000 debt owed to the general contractor who was supposed to pay all the subcontractors’ liens. What actually happened under the law was that everyone down the line was allowed to file a lien. The property owner wound up with liens against the property of $60,000, plus $30,000, plus $15,000, plus $5,000 for an actual debt of $60,000. The total could reach twice what the debt was for. If the property owner died, the court would not know the actual debt was $60,000 and could award payment of all liens filed individually. Also, if the property owner was still alive and wished to refinance the property it could not be refinanced, but it could be bonded against the lien. However, the bonding was not based on the $60,000 debt, it was bonded around the $60,000 plus the $30,000 plus the $15,000 and the $5,000.
Senator O’Donnell stated the intent of S.B. 93 was for the situation described above, if the property had a $60,000 lien and a subcontractor filed a lien as well, the subcontractor’s lien must reference the contract price. That allowed a judge to adjudicate that the property owner owed a certain amount and the general contractor must pay all subcontractors to release all the subsequent liens. The bill prevented the general contractor from filing a lien for which he was paid and then never paying all the subcontractors.
Mr. Collins stated current practice was that each contractor signed to release all liens and subcontractors must acknowledge they were paid for all labor and materials. A developer many times required the general contractor to sign attesting to the fact that all subcontractors and materials had been paid for. He asked if the bill was an attempt to codify that process or whether it was to simplify the lien process. Senator O’Donnell replied the bill might actually complicate the lien process. He provided an example of a plumber who executed a plumbing contract, but all the pipes leaked after the job was supposedly done. If, as a part of the contract, the plumber purchased standard appliances that had value, the supplier of those appliances had a right to file a lien because the supplies were provided to the job, not just the contractor. The current lien laws allowed the job to be liened. The bill provided that if both the supplier and the contractor filed liens on the job, the supplier had to reference the contractor with whom he was doing business. Both could still file a lien, but it would clarify what liens were sole and separate. He noted sometimes there were disputes between the supplier and the contractor. The bill took away no rights from individuals.
Mr. Collins asked if the bill attempted to limit the debt to the total amount of the contract. Senator O’Donnell replied the bill did not do that. Using the first example of a $60,000 lien by the general contractor, if a subcontractor or sub-subcontractor filed a lien in addition, all of the additional liens must reference the fact that they belonged to the general contractor of that particular project. The bill would allow the judge to be aware there was in reality a $60,000 lien against the building.
Mr. Collins noted he had witnessed situations where the only way a subcontractor was paid was if they could place a hold on a piece of property as leverage. Southern Nevada had a large turnover of general and subcontractors who went out of business and it was sometimes difficult for a contractor down the line in a project to be paid.
Senator O’Donnell stated the bill protected the sub-subcontractor more than ever because if the contractor perfected their lien through court, the sub-subcontractor who might not have the funds to pursue a court action to perfect his interest was still protected, because a judge would know that there were subsequent bills to be paid to the sub-subcontractor and could order them paid through a settlement to the general contractor.
Chairman Anderson commented S.B. 93 simply informed the court of subsequent financial interests in the general contractor lien filing.
Senator O’Donnell concluded with an example of a homeowner who had a $30,000 contract with a general contractor to build a swimming pool, but there were several steps involved in building the pool. There would be a subcontractor for the steel, a subcontractor for the gunnite, the plasterer, the plumber, and the subcontractor for the tanks. If the final product was an absolute wreck and the homeowner refused to pay, the contractor filed a complaint with the contractors’ board. The contractor and the several subcontractors would all file liens to protect their interest. Ultimately the homeowner had $90,000 worth of liens filed against the property because everyone added “a little bit” because they wanted to cover attorney fees. The contractor would appear in court and state he was owed $30,000. The judge could rule that a contract was signed and he could not rule on the fact that the quality of the pool did not meet expectations. He would order the homeowner to pay the contractor $30,000 and the homeowner ultimately paid the debt. However, all the subsequent liens remained against the property because the contractor took the $30,000 and did not pay anyone down the line. The bill would protect both the subcontractors and the homeowner.
Assemblyman Claborn stated it seemed to him the intent of the bill was to protect subcontractors, which was very good, and it also protected the homeowners, which was good. He commended Senator O’Donnell on the bill.
Mr. Collins reiterated the general contractor was not paying the subcontractor the whole amount of their bill if there was a problem with the outcome of the job anyway. He added, going back to Senator O’Donnell’s first example, the general contractor would be awarded $60,000 then perhaps have a disagreement with the subcontractor because there were problems, for instance with the plumbing. The general contractor would tell the subcontractor he had to lien the developer and they would not be paid the full amount, plus there would be attorney costs, and would state there would not be a settlement for probably six months. The general contractor would offer the subcontractor a reduced payment based on all those factors and the subcontractor would settle for a lesser amount because he had a payroll and material bills to be paid. He expressed concern that the bill would take away from the subcontractors on both sides of the settlement. He added most cases were settled before they went to court and he sought assurance that the subcontractors would be protected and paid.
Senator O’Donnell responded that the subcontractor would settle for the lesser amount, but the general contractor would go to court.
Mr. Michael Lynch, representing the Builders’ Association of Northern Nevada, stood in support of S.B. 93.
Chairman Anderson closed the hearing on S.B. 93.
ASSEMBLYMAN COLLINS MOVED TO DO PASS S.B. 93.
ASSEMBLYMAN GUSTAVSON SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY WITH ASSEMBLYMEN CARPENTER AND NOLAN ABSENT FOR THE VOTE.
Chairman Anderson assigned the floor statement on the bill to Mr. Collins. He announced the agenda for April 24, 2001, had been changed.
ASSEMBLYWOMAN ANGLE MADE A DO PASS MOTION ON S.B. 19.
Chairman Anderson stated the bill would be held while he researched a few points.
THE MOTION DIED.
Chairman Anderson adjourned the meeting at 9:09 a.m.
Cindy Clampitt
Committee Secretary
APPROVED BY:
Assemblyman Bernie Anderson, Chairman
DATE: