Can There Be Willful Exaggeration of an Otherwise Defective Lien?
As readers of this blog know, the Lien Law provides a remedy for anyone who is affected by the filing of a “willfully exaggerated” mechanic’s lien. That is a lien in which the lien amount is deliberately and intentionally exaggerated by the lienor. It is not always possible to prove that a lienor acted with such malicious intention, but when it can be proven in a lien foreclosure action, the party subject to the lien is entitled to damages consisting of the cost of bonding the lien, attorney’s fees, as well as an amount equal to the amount by which the lien was exaggerated. This can often be a substantial amount and serves as poetic justice against the greedy lienor.
In a recent case, a subcontractor entered into a settlement agreement with a general contractor in which construction disputes were finally resolved. The agreement called for a payout by the general contractor in installments and further provided that in the event of a default the subcontractor’s sole remedy would be to enforce the terms of the settlement agreement—nothing else.
Down the road, certain latent defects in the subcontractor’s work surfaced and the general contractor stopped making the installment payments. Rather than sue to enforce the settlement agreement, the subcontractor filed a mechanic’s lien for the remaining payments. The general contractor counterclaimed for willful exaggeration, arguing that where the subcontractor knew that no other remedy was permitted, the filing of a lien was, by definition, a deliberate and willful exaggeration.
The court reviewed the facts and sided with the general contractor on the issue of whether the subcontractor could file a lien in the first place. Holding that the settlement agreement set forth the sole remedy (an action to enforce the agreement), the court held that the lien was invalid in the first place, and struck the lien.
But as for the general contractor’s claim for damages for willful exaggeration, the court was not persuaded. It held that the Legislature intended the remedy to be available “only where the lien was valid in all other respects and was declared void by reason of willful exaggeration.” Here, the lien was invalid because the subcontractor had no right to file it in the first place under the settlement agreement, and so no damages were available to the general contractor on account of the lien’s willful exaggeration.
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Further information on mechanic's liens can be found on our blog:
Willful Exaggeration of Lien for Extra Work
Filing Proof of Service - No Wiggle Room
Advice on Consent: Holding a Landlord Liable on a Lien Filed for Tenant Work
Owner's Payment to GC is Absolute Defense to Sub's Mechanic's Lien Claim
Liening for Pre-Construction Services? Yes and No.
Another Mechanic's Lien Bites the Dust
Better Early Than Never: Can You File a Mechanic's Lien too Soon?
What Can You Lien For? And What Not?
You Must Renew a Bonded Lien, Or Else
Willful Exaggeration of a Mechanic's Lien - Only Established at Trial
Filing a Mechanic's Lien. Again. And Again.