In October Rhonda Salyer joined
our firm in the capacity of Litigation Paralegal.
With more than 12 years of paralegal experience,
she comes to us with excellent credentials, including
work with Cohn, Cohn & Hendrix, P. A. in Tampa,
and the VoiceStream Wireless Corporation Legal
Department. Rhonda graduated from the University
of Maryland in 1978 and obtained her Legal Assistant
Certification from Montgomery College in Takoma
Park, Maryland. Rhonda will be managing our litigation
calendar, managing our document database and drafting
legal documents. She is a great addition to our
practice.
Steve Marlowe will be presenting
a one-day seminar December 19 in Tampa on Advanced
Construction Law in Florida, sponsored by the
National Business Institute. It will be held at
the Crowne Plaza Hotel at Sabal Park, 10221 Princess
Palm Avenue. This advanced program is specifically
designed to demonstrate how to identify and analyze
construction problems and the legal principles
which apply to those issues at an in-depth level.
The seminar will significantly benefit construction
professionals including attorneys, contractors,
subcontractors, construction managers, architects
and engineers. The course is approved for 7.2
hours of continuing education classroom hours
for contractors. If you would like to attend,
please call (800) 930-6182 or visit NBI's website:
www.nbi-sems.com.
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The Florida legislature will convene
on January 22, 2002 and is scheduled to adjourn
March 22, 2002. This is earlier than the usual
session which is in March and April. A number
of issues will be up for consideration. Budgetary
issues relating to the reduced tax revenue will
continue to be a big problem. However, the major
issue will be the reapportionment of the Legislature
in accordance with the 2000 Census. This can cause
very strange things to happen even in a Republican
controlled Legislature.
Other issues that may be considered
are:
Restoration of Horizontal Immunity
and Workers Compensation: At present, an employee
of one subcontractor can sue another subcontractor
for negligence leading to an injury on a job site.
This change would limit recovery to the workers
compensation benefits.
Owner Controlled Insurance Program:
These programs have been a problem for most contractors.
It is a paperwork burden, as well as a problem
with maintaining existing insurance programs.
Attempt will be made to ban these programs in
public projects.
Uniform Building Code Extension:
A group, primarily led by the home builders, wants
to extend the effective date of the Uniform Builder
Code from January 1, 2002, to July 1, 2002. It
is claimed that there has been insufficient time
to educate contractors on the building code and
the product approval process has not been completed.
Tax Exemption Procedure: A number
of public bodies have begun direct purchase of
material in construction projects to avoid the
sales tax. It is hoped that the Legislature will
provide a procedure that reduces the considerable
paperwork burden that is now involved, but the
fiscal impact is a real problem.
Banning Project Labor Agreements:
Project labor agreements are those in which only
union contractors may participate. The claim is
that the project labor agreement assures the governmental
body that the project will be completed without
labor problems. Unfortunately, this has the effect
of shutting non-union contractors out of the bidding.
In a number of instances, strikes have occurred
at job sites despite the existence of the agreement.
There is no telling what your Legislature will
do. One bill filed in the Senate would require
every residential construction project to have
a completion date and failure to meet it would
carry a $1,000 per day penalty. I doubt this has
any real support but it does illustrate the need
to be aware of the impact legislative changes
on your business.
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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.
If you need additional information, please contact
our office and we will be happy to assist
you.
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