## Facts

- Heritage Mountain Development Company planned a ski resort involving three property categories: fee-owned acreage, state-leased acreage, and federal permit acreage.
- Over many years, various improvements occurred on the project, including facilities and infrastructure on the leased area, and other site-related preparatory work.
- Around 1981–1982, Ketchum, Konkel, Barrett, Nickel & Austin and other professionals performed architectural, engineering, surveying, consulting, and planning services for the overall development; much of this work was performed off-site.
- In November 1982, a prior lender obtained a foreclosure judgment on the fee-owned parcel; Heritage later repurchased that parcel at the foreclosure sale in June 1983.
- In June 1983, Heritage obtained a predevelopment loan from Guaranty Savings and Loan Association and gave Guaranty a trust deed encumbering the fee-owned parcel; Guaranty recorded the trust deed on September 15, 1983.
- Guaranty had actual knowledge of earlier design and professional services performed for the project before it made the loan and took the trust deed.
- The development failed to secure long-term financing; construction stopped and the project was effectively abandoned by summer 1984.
- Unpaid professionals and contractors filed mechanic’s liens and sued to foreclose, disputing lien priority against Guaranty’s trust deed.

## Issues

1. Whether off-site architectural, engineering, and design services, or limited pre-trust-deed site activities (such as surveying, staking, and soil testing), constituted statutory “commencement” sufficient to give mechanic’s liens priority over a later-recorded trust deed.
2. Whether the 1982 foreclosure on the fee-owned parcel extinguished unrecorded mechanic’s lien rights and barred relation back for priority purposes on that parcel.
3. Whether the project was materially abandoned so as to break relation back of liens to earlier on-site improvements on parcels not foreclosed.

## Decision

- The court affirmed that off-site architectural, engineering, surveying, and design work did not constitute “commencement” for mechanic’s lien priority; commencement requires visible on-site work.
- The court affirmed that the 1982 foreclosure extinguished unrecorded lien rights on the fee-owned parcel, preventing relation back across the foreclosure as to that parcel.
- The court held that the cited post-foreclosure, pre-trust-deed activities (surveying, staking, soil testing) were insufficient to constitute statutory commencement and did not give liens priority over Guaranty’s recorded trust deed.
- The court reversed in part the grant of partial summary judgment for Guaranty and remanded for factual determinations on whether material abandonment occurred and whether liens on non-foreclosed parcels could relate back to earlier qualifying on-site improvements.

## Legal Principles

- Mechanic’s lien priority is tied to statutory “commencement” of work, which requires visible on-site activity sufficient to provide constructive notice to subsequent lenders and purchasers.
- Off-site professional services may be lienable against the owner but do not, by themselves, establish priority over an intervening recorded mortgage or trust deed.
- Actual knowledge by a lender of prior off-site design work does not substitute for statutory commencement and does not alter lien priority absent qualifying on-site work.
- A foreclosure judgment and sale generally extinguish pre-existing, unrecorded mechanic’s lien interests on the foreclosed parcel, barring relation back across the foreclosure for priority on that parcel.
- Material abandonment can interrupt relation back for priority; whether abandonment occurred is ordinarily a fact question unsuitable for summary judgment on an incomplete record.

## Conclusion

The Utah Court of Appeals held that mechanic’s lien priority requires visible on-site commencement and that off-site design work cannot establish priority over a later-recorded trust deed; it also held that foreclosure cut off unrecorded lien rights on the fee-owned parcel, but remanded for fact findings on material abandonment and potential relation back on parcels not subject to the foreclosure.


Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Dev. Co., 784 P.2d 1217 (Utah Ct. App. 1989)