Appellate Division Affirms Discharge of Exaggerated Mechanic's Lien

It has been a slow month for interesting court decisions on the subject of mechanic's liens in New York.  However, the First Department was kind enough to give us a short and sweet decision affirming an order discharging a mechanic's lien as exaggerated and, therefore void, under Lien Law Section 39 (view the decision here). 

While the decision is short on facts and discussion, it appears that the lienor was a construction manager that filed a mechanic's lien for allegedly unpaid services.  The evidence presented to the trial court established that the lienor was, in fact, acting as a construction manager and was therefore "prohibited from marking up contractor services."  The lienor apparently argued that it was simultaneously working under an alleged contemporaneous oral agreement to act as the general contractor (which would have had an unrestricted right to impose markups according to the decision).  The trial court found that this was enough to find a willfully exaggerated mechanic's lien and as such discharged the lien under Lien Law Section 39.  The appellate division affirmed the finding of exaggeration. 

This decision comes as somewhat as a surprise to me.  Exaggeration is typically very difficult to prove and there is a long line of cases holding that the exaggeration must be established at trial.  The fact that the trial court and the Appellate Division here found exaggeration on a summary judgment motion is rare.  Especially where it appears that there was a dispute over whether there was a right to impose markups.  While the lienor's argument may have been weak, finding that his actions amounted to willfully exaggerating a mechanic's lien is big step.  We can only assume that the trial court had strong papers in front of it which are not discussed at length by the appellate division. 

Construction managers beware - marking up contractor services could make you liable for exaggeration under this decision. 

Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com