Wednesday, March 20, 2013

1st Department Finds Credibility Issue Regarding Lien Exaggeration Claim

In On the Level Enterprises v. 49 East Houston, LLC, the First Department was faced with the oft asked question of whether an exaggeration defense (Lien Law Sections 39 and 39-a) may be raised summarily through motion practice or requires a trial.  The Court found that "a claim under Lien Law section 39-a is subject to summary disposition where the evidence concerning whether or not the lienor willfully exaggerated the lien is conclusive."  If the analysis ended there, summary disposition of a lien law exaggeration claim is possible.  However, the Court went on to say that "such a burden necessarily involves proof as to the credibility of the lienor" and, as such, the issue of "exaggeration is one that is ordinarily determined at the trial of the foreclosure action."

 The Court found that the record was devoid of any proof that the lien either was, or was not, exaggerated and, as such, found determination of the exaggeration issue to be inappropriate.  This is just one in a long line of recent cases to make the issue of lien exaggeration very grey.  Some Courts have said that exaggeration can be determined on a motion and others have said it cannot.  This particular Court said it could be but, in this instance, should not be.  Essentially, the decisions appear to say that it is a case by case analysis, which is probably the correct approach on this issue.

Vincent T. Pallaci is a partner at the New York law firm of Kushnick | Pallaci, PLLC where his practice focuses on the construction industry including prosecuting and defending lien law foreclosure and exaggeration claims.


  1. If a contractor has $102,000 of my money as a home owner and refuses to complete my home and takes off and then out of spite files a mechanics lien for $64,000. when in fact he has more of my money than the lien do I have a chance filing for an exaggeration lien.

    1. You should speak to a construction attorney regarding more specifics. Establishing exaggeration is very difficult and requires a fact specific analysis. The standard also varies a bit from Department to Department in NY (i.e. it matters where the lien was filed).