Contractors Were Not Entitled to Prejudgment Interest Under Their Mechanic’s Liens

In Ohio, contractors, material suppliers, and certain others can file a mechanic’s lien to secure payment for improvements. In Guernsey Bank v. Milano Sports Ents., LLC, a bank filed a foreclosure action against the owners of property who were attempting to convert an indoor tennis facility into an ice rink. The owners hired contractors and suppliers to perform work and provide materials. The owners, however, failed to pay them, and they filed mechanic’s liens on the property. Thereafter, the bank and the contractors and suppliers argued over whether the mechanic’s liens or the mortgage had priority with respect to the proceeds of the foreclosure. Although both the trial court and the appeals court determined that the mechanic’s liens had priority over the mortgage, the court of appeals overruled the trial court’s award of prejudgment interest. The appeals court concluded that the contractors and suppliers were not entitled to prejudgment interest on their mechanic’s lien claims. Generally, prejudgment interest is interest calculated from the time that an amount is due to obtaining a court judgment, and without it, stalling a case in litigation can benefit the non-paying person. In reaching its decision, the appeals court considered a provision under the Ohio Revised Code that allows for interest when money becomes due and owing under an instrument of writing or verbal contract. Ultimately, the appeals court determined that an action on a mechanic’s lien arises out of the Ohio Revised Code and not under any contractual right to recover. Therefore, the appeals court concluded that the contractors and suppliers were not entitled to prejudgment interest. Further, the appeals court also explained that its ruling applied to all mechanic’s liens regardless of whether a party had a contract with the owner or not. This decision provides guidance to owners, contractors, material suppliers, and others informing them that one might not be able recover prejudgment interest under a mechanic’s lien claim.

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