How Exaggerating a Mechanic's Lien Can Come Back to Bite You
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A few years back, in Abra Construction Corp. v. 112 Duane Associates, LLC., New York's Appellate Division, First Department sent a clear reminder to contractors who have been terminated from the construction projects they had been working on:
DO NOT exaggerate your mechanics' lien.
In Abra, the trial court concluded that the plaintiff had intentionally exaggerated its mechanics lien by more than 600%.
As a result, the following two (3) things happened:
(1) the court deemed the lien void;
(2) proceeded to levy a civil fine against the plaintiff in accordance with the Lien Law; and,
(3) more important (and interesting), the appellate court rejected the plaintiff contractor's percentage of job completed formula for calculating the damages for the owner's breach of contract.
In short, it was a total disaster for the plaintiff/contractor.
And the Court did so for two reasons:
- The plaintiff contractor never proved that the project was substantially completed at the time they were terminated. To the contrary, the court found that the contractor was fired a mere two months into the project.
- The plaintiff contractor tried to double-dip. By inappropriately including charges for subcontractors that the plaintiff contractor never paid in their claim for damages flowing from the alleged breach of contract, the plaintiff, for lack of a better term, over-reached.
In the end, the trial court opted to calculate the plaintiff's damages based upon their records demonstrating material and labor costs (payroll records), and applied a slight profit margin. Naturally, the difference between the damages sought and those awarded (especially after the Court waived their lien and assessed the fine) was quite large. In short, the lesson from this decision hearkens back to our pre-school days:
Don't be a pig.
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