Can You Defame Someone In A Notice Of Mechanic’s Lien?July 2019 | By: Randy J. Heller, Esq.| GDB 2019 Summer Newsletter
A mechanic’s lien can be a powerful tool for collecting a contract balance owed for work performed on a construction project. But it is a tool which can be easily abused. To paraphrase the lottery slogan, all you need to encumber someone else’s property with a mechanic’s lien is a “computer and a dream.”
Unlike other states which impose conditions on filing, or require the lienor to foreclose in a very short period of time, New York sets up no such hurdles, and permits one to renew the lien for years to come with few restrictions. Scholars have opined that the filing of a mechanic’s lien is an unconstitutional taking of property. But the New York Court of Appeals rejected that argument in the 1970’s on the grounds that the “taking” was de minimis and served a valuable countervailing purpose in the protection of those who performed work, labor or services, or supplied materials, in the improvement of real property.
So what stops someone from just filing a bogus or inflated lien against your house or condo and wreaking havoc on your clear title (not to mention your relationship with your landlord or Board of Managers)? Very little. For reasons too complicated to get into here, suing the lienor for “willful exaggeration of lien” is an inadequate remedy. You could demand that the lienor commence an action to foreclose its lien, so you can challenge the lien itself on its merits, but few people have the stomach to demand that litigation be commenced against them.
Which brings us to the case which is the focus of this article: Centrifugal Associates Group LLC v. Newell Contracting Inc. and Krzystof Bielak. In that case, Mr. Bielak, the President of Newell Contracting (a subcontractor) signed and filed a mechanic’s lien seeking an alleged outstanding balance of $320,000 from Centrifugal Associates (the general contractor). Centrifugal was not amused. The lien was filed against the building where the work was performed, prompting the owner to demand that Centrifugal cause the lien to be discharged. With its options for achieving the immediate discharge of the lien limited, Centrifugal started a lawsuit in the Supreme Court, Kings County, against both Newell and Mr. Bielak, alleging defamation. In essence, its claim was that the filing in public records of a written claim contending that $320,000 was due from Centrifugal to Newell, was false and defamatory.
Taking it one step further, Centrifugal sought personal liability against Mr. Bielak for signing the allegedly defamatory lien. This was based on the legal theory that when one commits a tort (such as defamation), one is personally liable for that tort, even if it was performed in one’s capacity as a corporate officer.
Judge Ruchelsman had little legal precedent to rely on in New York. The Judge began by acknowledging that Mr. Bielak could indeed be personally liable for any tort he committed. But the question remained: could the filing of an inaccurate lien (even a deliberately inflated lien) be considered to be defamatory?
A 2013 case out of the Supreme Court, Kings County (although a bit of an outlier), had permitted a claim to be made against a lien for a variety of common law causes of action such as fraud, slander of title, malicious prosecution, and malicious abuse of process. But that case had not addressed defamation, and Judge Ruchelsman was unwilling to equate it with slander of title. Nor was he persuaded by decisions in other states, notably Minnesota, which recently permitted a cause of action for defamation against the contents of a mechanic’s lien.
Instead, the Judge pivoted to an analysis of whether the contents of a lien are “privileged,” thereby precluding a claim of defamation. He stated that a lien can be privileged because it “is authorized by law and related to an action to foreclose.” That was significant because New York has recognized that a statement “made in the course of a judicial proceeding” is necessarily privileged “to permit the efficient administration of justice.”
Ultimately, the Judge dismissed the defamation claim, and Mr. Bielak dodged the bullet. It is unclear whether the same claim, labeled as a “slander of title,” would have survived, or why that too shouldn’t be protected by a defense of privilege.
So, for the time being, people who have mechanic’s liens filed against their property have only a few options available to them to push back against the lienor, or make the lien go away. Pending a reversal on appeal, it would appear that a claim for defamation is no longer on the table.