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Thursday, September 29, 2016

North Carolina's Mechanics' Lien and Bond Laws - Part 4

Part 4 of a Continuing Series


This article by Attorney Lee Peindl is one of a continuing series of articles that focuses on legislation affecting North Carolina's Mechanics' Lien and Bond Laws.  It is adapted from Attorney Lee Peindl's seminar on Lien Law changes.

Contractors’ Lien Waivers and Subcontractors’ Lien Rights—Effective April 1, 2013
(N.C. Gen. Stat. §44A-23)


A Contractor’s Lien Waiver May Not Prejudice a Subcontractor’s Lien Rights

Currently, a lien waiver signed by the contractor before a subcontractor files a lawsuit to enforce its Claim of Lien On Real Property waives the subcontractor’s right to enforce the contractor’s lien on real property (e.g., a contractor’s lien waiver waives a subcontractor’s subrogated lien rights).

Effective April 1, 2013, N.C. Gen. Stat. § 44A-23 will provide that a contractor’s lien waiver will not prejudice the rights of the subcontractor if:

(1)        the subcontractor has given notice to the Lien Agent;

(2)        the subcontractor has served a notice of claim of lien upon funds on the owner; and

(3)        the subcontractor has delivered a copy of the notice of claim of lien upon funds served upon the owner to the Lien Agent.


We will examine this topic in further detail in upcoming blog posts.

In case you missed them here is Part 1Part 2 and Part 3

If you are in need of legal assistance with this type of matter please fill out our potential client intake form so that Attorney Peindl can evaluate your legal matter.Save


Monday, September 26, 2016

How To Dissolve a Corporation in North Carolina?

As an attorney who routinely handles business law related questions this situation is not unusual. Most businesses have a life cycle and it's good to know how to legally dissolve a corporation which has decided to end its operations.

Everything must go sign in store window, going out of business, dissolving a corporation

North Carolina has laws specific to this question. In its most basic form, the corporation needs to vote to dissolve and then file the proper documents with the North Carolina Secretary of State's office. The process is slightly different if you have issued shares or have not issued shares, and if you have a board of directors or not. There are a number of other things a corporation has to do as well. Keep in mind, also, that there are other ways and methods by which a corporation can become dissolved, such as by court order.

A partial excerpt of the relevant section of the North Carolina General Statutes, Chapter 55 Article 14, Part 1, is pasted further below; while not exciting, it's a must-read for anyone considering corporate dissolution or already in the process of dissolving a corporation.

The Small Business Administration has issued a guide that will also assist you in dissolving a corporation. It is not specific to a particular state, but is generally helpful. It is recommended that you procure the services of an attorney in order to assist you with this process.

If you have a need for business law advice or services in North Carolina, South Carolina, Florida, Georgia, or Tennessee, please feel free to contact our office for assistance.



Article 14.

Dissolution.

Part 1.  Voluntary Dissolution.

§ 55‑14‑01. Dissolution by incorporators or directors.

(a)      The board of directors or, if the corporation has no directors, a majority of the incorporators of a corporation that has not issued shares may dissolve the corporation by delivering to the Secretary of State for filing articles of dissolution that set forth:

          (1)      The name of the corporation;

          (1a)    The names and addresses of its officers, if any;

          (1b)    The names and addresses of its directors, if any, or if none, the names and addresses of its incorporators;

          (2)      The date of its incorporation;

          (3)      That none of the corporation's shares has been issued;

          (4)      That no debt of the corporation remains unpaid;

          (5)      Reserved for future codification purposes; and

          (6)      That a majority of the incorporators or the board of directors authorized the dissolution.

(b)      A corporation is dissolved upon the effective date of its articles of dissolution. (1955, c. 1371, s. 1; 1959, c. 1316, s. 261/2; 1989, c. 265, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 12.19.)

§ 55‑14‑02.  Dissolution by board of directors and shareholders.

(a)      A corporation's board of directors may propose dissolution for submission to the shareholders.

(b)      The following requirements shall be met for a proposal to dissolve to be adopted:

          (1)      The board of directors shall recommend to the shareholders that the proposal to dissolve be approved unless one of the following circumstances exist, in which event the board of directors shall communicate the basis for not recommending approval of the proposal to dissolve to the shareholders at the time it submits the proposal to dissolve to the shareholders:

                    a.     The board of directors determines that, because of conflict of interest or other special circumstances, it should not make a recommendation that the shareholders approve the proposal to dissolve.

                    b.     G.S. 55‑8‑26 applies.

          (2)      The shareholders entitled to vote must approve the proposal to dissolve as provided in subsection (e).

(c)      The board of directors may condition its submission of the proposal for dissolution on any basis.

(d)      The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders' meeting in accordance with G.S. 55‑7‑05. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.

(e)      Unless the articles of incorporation, a bylaw adopted by the shareholders, or the board of directors (acting pursuant to subsection (c)) require a greater vote or a vote by voting groups, the proposal to dissolve to be adopted must be approved by a majority of all the votes entitled to be cast on that proposal.  (1901, c. 2, s. 34; Rev., s. 1195; C.S., s. 1182; 1941, c. 195; G.S., s. 55‑121; 1951, c. 1005, s. 4; 1955, c. 1371, s. 1; 1989, c. 265, s. 1; 2013‑153, s. 14.)


§ 55‑14‑03. Articles of dissolution.

(a)      At any time after dissolution is authorized pursuant to G.S. 55‑14‑02, the corporation may dissolve by delivering to the Secretary of State for filing articles of dissolution setting forth:

          (1)      The name of the corporation;

          (1a)    The names and addresses of its officers;

          (1b)    The names and addresses of its directors;

          (2)      The date dissolution was authorized;

          (3)      A statement that shareholder approval was obtained as required by this Chapter.

          (4)      Repealed by Session Laws 1991, c. 645, s. 10(c).

(b)      A corporation is dissolved upon the effective date of its articles of dissolution.

(c)      For purposes of this Chapter, a dissolved corporation is a corporation whose articles of dissolution have become effective and includes a successor entity to which the remaining assets of the corporation are transferred subject to its liabilities for purposes of a liquidation. (1901, c. 2, s. 34; Rev., s. 1195; C.S., s. 1182; 1941, c. 195; G.S., s. 55‑121; 1951, c. 1005, s. 4; 1955, c. 1371, s. 1; 1989, c. 265, s. 1; 1991, c. 645, s. 10(c); 2005‑268, s. 31.)

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Thursday, September 22, 2016

North Carolina';s Mechanics'Lien and Bond Laws - Part 3

This article by Attorney Lee Peindl is one of a series of articles that focuses on legislation affecting North Carolina's Mechanics' Lien and Bond Laws.  It is adapted from Attorney Lee Peindl's seminar on Lien Law changes.


Curtailment of Double-Payment Risks on State Projects—Effective January 1, 2013
(N.C. Gen Stat §44A-27)

Effective January 1, 2013, a new scheme is being introduced for North Carolina’s public projects that will provide contractors with some protection against double payment. The new scheme requires contractors to furnish any claimant with a copy of the payment bond within seven (7) days of the claimant’s written request.

It requires contractors to provide all of their subcontractors and suppliers with a “Project Statement.” Additionally, the new provision requires subcontractors to provide all of their subcontractors and suppliers with the contractor’s Project Statement, as well. A contractor or subcontractor that fails or refuses to provide a Project Statement cannot enforce its contract against the lower tier party until the Project Statement has been provided to the lower tier party.

The Project Statement must contain:

(1)        the name of the project;

(2)        the physical address of the project;

(3)        the name of the contracting body;

(4)        the name of the contractor;

(5)        the name, phone number, and mailing address of an agent authorized by the contractor to accept service of requests for the payment bond, the notice of public subcontract, and the notice of claim on payment bond; and

(6)        the name and address of the principal place of business of the payment bond surety.

Subcontractors’ New Notice Requirements

Upon receipt of a Project Statement, subcontractors and suppliers should serve “Notice of Public Subcontract” upon the contractor. If Notice of Public Subcontract is sent within seventy-five (75) days of the subcontractor’s or supplier’s first date of furnishing labor or materials, then the subcontractor or supplier can pursue its full claim. Otherwise, the subcontractor’s or supplier’s claim will be limited to the greater of (i) the value of the labor or materials provided within seventy-five (75) days of claim or (ii) $20,000.00, unless the contractor has failed to timely furnish a copy of the payment bond to the claimant.


We will examine this topic in further detail in upcoming blog posts.

In case you missed them here is Part 1 and Part 2

If you are in need of legal assistance with this type of matter please fill out our potential client intake form so that Attorney Peindl can evaluate your legal matter.

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McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.
 
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Monday, September 19, 2016

Should Those Holding Office in North Carolina or South Carolina be Forced to Proclaim Their Belief in “Almighty God”?

Church & State Question


Raise your hand if you knew that the Constitution of North Carolina states that youshall be disqualified for office” if you “deny the being of Almighty God. I’m not seeing too many hands raised.

How about a similar provision in South Carolina, hands up if you knew about it? No? “No person who denies the existence of the Supreme Being shall hold any office under this Constitution.” In fact, SC liked this requirement so much that it’s in two different places in The Palmetto State’s Constitution.

Cartoon illustrating separation of church and state in US government, politics, South Carolina, North Carolina, SC government, NC government
So shouldn’t we be forcing candidates for office to declare their belief in Almighty God and/or the Supreme Being? Thankfully, no.

The United States Constitution takes precedence over any state constitution. The U.S. Constitution states, in relevant part “but no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States.” This is referred to as the “No Religious Test Clause”. The No Religious Test Clause of the United States Constitution has been repeatedly determined to prevent enforcement of any contrary clauses anywhere in the United States. Here is a short legal opinion from the South Carolina Supreme Court as an example.

There are a handful of other states which have similar state constitution clauses requiring certain religious allegiances. All but one (Maryland) are in southern state constitutions, and they are all unenforceable.


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Thursday, September 15, 2016

North Carolina's Mechanics' Lien and Bond Laws - Part 2

Did you miss Part 1?

This article by Attorney Lee Peindl is one of a series of articles that focuses on legislation affecting North Carolina's Mechanics' Lien and Bond Laws.  It is adapted from Business Attorney Lee Peindl's seminar on Lien Law changes.

Lien Agents—Effective April 1, 2013
(N.C. Gen. Stat. §44A-11.1 and §44A-11.2.)

 

Designation of Lien Agent

Will require potential lien claimants to provide written notice to a “Lien Agent” in order to preserve all the lien rights that they now possess. If the potential lien claimant does not follow the new requirements associated with the Lien Agent, its lien rights against the project real property could be terminated or subordinated to others’ interests. The potential lien claimant’s rights to a lien upon funds will remain in place regardless of whether or not the potential lien claimant complies with the requirements.

New N.C. Gen. Stat. § 44A-11.1 et seq. will require the designation of a Lien Agent for all private projects where the total cost of the improvements is $30,000.00 or more, except existing single family residences. The owner will choose the Lien Agent from a list of Lien Agents maintained by the Department of Insurance. All Lien Agents will be title insurance companies or agents. The Lien Agent may collect from the owner a fee of $50.00 or less.

Identification of Lien Agent

If the project is one that requires a building permit, then the permit is supposed to identify the Lien Agent, and the permit is supposed to be conspicuously and continuously posted on site. If the building permit does not identify the Lien Agent, or if the permit is not posted on site, then a potential lien claimant can submit a written request to the owner, who is then supposed to identify the Lien Agent within seven (7) days.

A contractor or subcontractor must, within three (3) business days of contracting with a material supplier, provide the supplier with a written notice identifying the Lien Agent. This notice can be given by either (1) certified mail, return receipt requested; (2) signature confirmation as provided by the USPS; (3) physical delivery and obtaining a delivery receipt from the Lien Agent; (4) facsimile with a facsimile confirmation; (5) depositing with (i) DHL Express; (ii) Federal Express; or (iii) UPS; or (6) electronic mail with delivery receipt, including the Lien Agent contact information in a written subcontract; or including the Lien Agent contact information in a written purchase order. Any contractor or subcontractor who has received notice of the Lien Agent contact information, whether from the building permit, the inspections office, a notice from the owner, contractor, or subcontractor, or by any other means, and who fails to provide the Lien Agent contact information to the lower-tier subcontractor in the time required under this subsection, will be liable to the lower-tier subcontractor for any actual damages incurred by the lower-tier subcontractor as a result of the failure to give notice.

Notice to Lien Agents

Potential lien claimants who want to preserve their full lien rights must serve a Notice to Lien Agent upon the designated Lien Agent for the project. The Notice to Lien Agent must include:

(1)        the potential lien claimant's name, mailing address, telephone number, fax number (if available), and electronic mailing address (if available);

(2)        the name of the party with whom the potential lien claimant contracted;

(3)        a description of the real property sufficient to identify it; and

(4)        a notice of the potential lien claimant’s right later to pursue a claim of lien for improvements described in the Notice.


The Notice to Lien Agent can be served by:

(1)        certified mail, return receipt requested;

(2)        signature confirmation as provided by the USPS;

(3)        physical delivery and obtaining a delivery receipt from the Lien Agent;

(4)        facsimile with a facsimile confirmation;

(5)        depositing with (a) DHL Express; (b) Federal Express; or (c) United Parcel Service.; or

(6)        electronic mail, with delivery receipt.


In order to preserve its full lien rights, the potential lien claimant must:

(1)        serve the Notice to Lien Agent within fifteen (15) days after first furnishing labor or materials;

(2)        serve the Notice to Lien Agent before the owner conveys an interest in the real property (e.g., before the property is sold or a new Deed of Trust is recorded); or

(3)        file a Claim of Lien on Real Property before the owner conveys an interest in the real property.

If the Notice to Lien Agent is not received by the Lien Agent within fifteen (15) days after first furnishing labor or materials, or prior to a conveyance of an interest in the real property, then a potential lien claimant’s lien rights are (i) terminated if the property is sold or (ii) subordinated to the new lender if a new Deed of Trust or mortgage is recorded.

Practice Tip: The easiest and most cost-effective way for a potential lien claimant to preserve its full lien rights is to serve a Notice to Lien Agent on every project within fifteen (15) days after first furnishing labor or materials.

Note: Serving a Notice to Lien Agent does not satisfy the requirements for serving a Notice of Claim of Lien Upon Funds. The notices are different. Potential lien claimants that have served a Notice to Lien Agent still must serve, and if appropriate file, a Claim of Lien on Real Property and a Notice of Claim of Lien Upon Funds to perfect their lien rights.


We will examine this topic in further detail in upcoming blog posts.

If you are in need of legal assistance with this type of matter please fill out our potential client intake form so that Attorney Peindl can evaluate your legal matter.

McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.
 
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Monday, September 12, 2016

Newsletter Recap - Labor Day Edition

Necessary Knowledge: Labor Day Edition



McGrath & Spielberger, PLLC publishes a newsletter periodically where we share relevant blog posts and firm news. Our latest newsletter was published on Labor Day at no cost to subscribers. Here's a list of what we included in the latest installment of our "Necessary Knowledge" as a free service to our clients and subscribers.

Indemnification: What if Both Parties Are At Fault? by Jason McGrath, Esq.

Your New LLC: Maintaining Your Limited Liability Protection by James Spielberger, Esq.

Mortgage Loans: Recourse versus Non-Recourse and Foreclosure-Related Deficiency Judgments by Jason McGrath, Esq.

Breach of North Carolina Real Estate Purchase Contract Buyer's Damages by Jason McGrath, Esq.

You can become a subscriber before our next newsletter publishes - it's free!


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Thursday, September 8, 2016

North Carolina's Mechanics' Lien and Bond Laws - Part 1

This article by Contract Attorney Lee Peindl is one of a series of articles that focuses on legislation affecting North Carolina's Mechanics' Lien and Bond Laws. It is adapted from Attorney Lee Peindl's seminar on Lien Law changes.

Latest Legislation Affecting North Carolina’s
Mechanics’ Lien and Bond Laws

Scales of Justice, legislation, North Carolina, NC law, North Carolina law, mechanics lien, bond laws, House, Senate
There are two pieces of legislation enacted by the North Carolina Senate and House, respectively, that modify and add provisions to North Carolina’s Mechanics Lien and Bond laws contained in Article 2 of Chapter 44A of the General Statutes.

  • Senate Bill 42 was drafted and introduced by the title insurance industry and introduces an entirely new concept to North Carolina (but not some other states) – the Lien Agent. Several other states require the use of a lien agent, namely Virginia.
  • House Bill 1052 was crafted by construction industry stakeholders and contains less controversial modifications to the current lien and bond law scheme.
A few of the changes contained in these new laws take effect immediately, some take effect on January 1, 2013, and some take effect April 1, 2013.

We will examine this topic in further detail in upcoming blog posts.

If you are in need of legal assistance with this type of matter please fill out our potential client intake form so that Attorney Peindl can evaluate your legal matter.


McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.
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Tuesday, September 6, 2016

Thursday, September 1, 2016

Indemnification in Contracts: What if Both Parties Are at Fault?

In my 20 years as an attorney, I have consistently found that indemnification clauses in contracts are among the most negotiated and sensitive contractual issues. I have also found that the law as it applies to indemnification is often misunderstood. A previous blog post discussed whether an indemnification agreement requires the party being looked to for indemnification to actually be “guilty” of some omission or wrongdoing. This article focuses on what happens if both parties are at fault – what if both parties have contributed to the situation which now potentially triggers a duty of indemnification?

Let’s start out with a simple example of some indemnification language so that we are all on the same page. “Contractor shall indemnify Company and shall hold Company harmless for any costs, fees, damages, and liabilities incurred by Company because of any claim, suit, or allegation against Contractor.”

business dispute, businss partnership, indemnification, indemnification clause, contract, contract clause, business, NC, SC,

Next, let’s look at some common dispute scenarios:

  • Scenario A. Plaintiff is only suing Company, with the only allegations being that Contractor engaged in wrongful actions or inactions, and that Company is legally responsible (vicariously liable) for Contractor’s wrongful actions or inactions. While it may seem counter-intuitive to not also sue the party alleged to be directly responsible, this does happen, and there are many reasons why it might – some of which make perfect sense.

  • Scenario B. Plaintiff is suing both Contractor and Company, alleging that Contractor directly engaged in wrongful conduct, and that Company is also responsible for Contractors wrongful actions or inactions. This is typically referred to as “vicarious liability” – where one party is alleged to be legally responsible for the actions or inactions of another party.

  • Scenario C. Plaintiff is suing both Contractor and Company, alleging that both directly engaged in some sort of wrongful conduct (negligence, breach of contract, misuse of intellectual property, etc.).

The key difference in these Scenarios for purposes of this article is whether the Company is also alleged to have directly engaged in wrongful actions or inactions, independent of whatever Contractor supposedly did wrong.

Here’s what you need to know. In some jurisdictions, if Company has directly engaged in its own, independent wrongful conduct which contributes to the damages Company is suffering (potentially including pre-litigation attorneys’ fees), Company may not be able to enforce an otherwise valid indemnification clause against Contractor. Let’s put this in context with a real-world example and then apply that to the Scenarios above.

Company is hired to provide comprehensive I.T. services to Hospital. Company hires Contractor to assist in upgrading Hospital’s cyber-security and data protection, and that contract contains an agreement by Contractor to indemnify (reimburse) Company for any damages Company incurs because of claims regarding Contractor’s work. It is alleged that due to poor work, a significant data breach occurred, resulting in private healthcare information and patient billing information being revealed.

In Scenario A, Company can likely require Contractor to indemnify it for the damages Company suffers in relation to the security breach claims. Company has done nothing directly wrong, but it (arguably) hired the wrong sub-contractor for the job.

In Scenario B, Company can likely require indemnification from Contractor, similar to Scenario A.

Scenario C is where Company may run into trouble. Let’s say that the evidence shows that 90% of the fault for the data breach lies with Contractor, and 10% of the fault lies with Company for its actions or inactions (independent of Contractor’s actions or inactions). Common sense may indicate that Company can require Contractor to indemnify it to the extent that it suffers damages due to Contractor’s poor work, but that may not be true – Company may not be able to obtain any indemnification at all.

In some jurisdictions, and depending on the exact language of the indemnification clause, Company would not be able to require any indemnification at all from Contractor if Company was also independently at fault for the data breach, even if Company’s wrongful actions or inactions were a drop in the bucket compared to what Contractor did wrong.

The exact wording of an indemnification clause is incredibly important for many reasons, obviously including the one discussed above. Whether you’re having a contract drafted up, analyzing one already in place, or (unfortunately) having to deal with a claim involving indemnification, make sure your attorney is well-versed in these issues.


McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.
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