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Florida Statute Section 713.31 provides
that where a lien claimant has willfully exaggerated
the amount of the lien, or has compiled the lien
in a grossly negligent manner, such action is
a complete defense to enforcement of the lien.
In addition, and of critical importance to lienors,
an injured party such as the owner may assert
an affirmative claim of its own against the lienor
for damages, costs and attorneys' fees resulting
from the fraudulent lien.
In Hobbs Construction and Development,
Inc. v. Presbyterian Homes, the contractor filed
a claim of lien in the amount of $677,023.15.
The owner counterclaimed, alleging that the lien
was fraudulent. The deposition of the contractor's
chief engineer established that the lien included
amounts for additional field overhead, additional
labor, and interest at a rate of 16.5 percent.
The trial court found that Hobbs should not have
included in the claim amounts not authorized by
the contract or by change order.
On appeal, the contractor argued
that the lien was compiled with particularity
and that if the lien was not valid under Florida
law, the contractor would be accountable only
for a mistake of law. The appellate court affirmed
the trial court's finding of a fraudulent lien
and held:
[T]he Mechanics' Lien Law is not
to be taken lightly as a tool to force improper
payments from owners of improved property. One
of the purposes of the Mechanic's Lien Law is
to assure to the owner, in an arm's length transaction,
that so long as he complies in good faith with
its provisions he will be able to construct a
specific improvement on his property for a given
contract price. . .
Hobbs included in its claim of lien
those amounts which could not be justified by
change orders or the terms of the contract. This
supports the trial court's determination of a
willful exaggeration, resulting in an unenforceable
fraudulent lien.
In Forest Construction, Inc. v.
Farrell-Cheek Steel Co., the Second District Court
of Appeal was even more critical of a contractor's
actions with respect to a lien claim. The contractor
recorded a claim of lien and filed suit to foreclose
a lien in the amount of $325,322.64. At the conclusion
of a non-jury trial, the court found that the
contractor's claim had been willfully exaggerated
because the majority of the money claimed had
not been due at the time the Claim of Lien was
recorded. The court reduced the contractor's claim
and, on the basis of the fraudulent lien statute,
affirmed the award of attorneys' fees to the owner
in the amount of $22,000.
The Forest Construction decision
appears to impose a fraudulent lien where lien
claimants simply jump the gun and record a lien
prior to payment becoming due. This case is disturbing
because some contracts may delay final payment
beyond the 90-day time period within which a lien
must be recorded. This dilemma is especially true
for early subcontractors or suppliers who await
project completion to receive their retainage.
A decision by the Second District
Court of Appeal reversed this trend to stricter
application of the fraudulent lien section. In
Vinci Development Co. v. Connell, the trial court
had reluctantly held that the contractor's lien
was "fraudulent" because the "jury returned a
verdict for contractor in an amount substantially
less than his claim of lien," regardless of the
contractor's good faith in filing the claim. The
Second District reversed the trial judge and stated:
A contractor is entitled to a
lien based upon the compensation he is due according
to the express terms of the contract between the
contractor and owner . . . A subsequent dispute
between the parties as to the amount of compensation
due according to the contract plan of compensation
or even a dispute as to the method of compensation
provided in the contract does not convert such
a good faith dispute into a fraudulent lien .
. . The legislature clearly did not intend to
make fraudulent a circumstance where, as here,
a contractor never claims to have performed more
work than he has in fact performed but rather
has a good faith dispute with the owner as to
the method of compensation for that work.
This trend toward consideration
of good faith in filing of a construction lien
was continued in William Dorsky and Associates
v. Highlands County Title. In this case the court
viewed the consultation with an attorney, along
with presentation of evidence of an entitlement
under a theory of substantial performance, as
a "good" faith assertion of a supposed right.
In 1990 the Legislature codified these cases by
inserting consideration of good faith as a valid
defense to fraudulent lien claims.
The "bottom line" for prudent lien
claimants is to act in good faith. All liens should
be compiled carefully, recorded timely and supported
by your contract, change orders and appropriate
financial records.
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