Determination of whether lien is exaggerated involves credibility determination usually reserved for trial

Sections 39 and 39-a of the Lien Law are becoming more, and more, well known as owners try to defeat mechanic's liens across the State of New York.  Many courts are now issuing decisions discussing how, and when, exaggeration can be established.   In On the Level Enters Inc. v. 49 East Houston LLC the First Department reversed the trial court's dismissal of a willful exaggeration counterclaim.  The Court noted that summary disposition was only appropriate on exaggeration claims when the evidence concerning whether the lienor willfully exaggerated the lien is "conclusive."  Finding that such a determination necessarily involved a determination of the lienor's credibility, the Court held that a trial on the exaggeration claim was appropriate and not subject to summary disposition.

An interesting part of this case is that the lienor was not able to support several line items on its mechanic's lien breakdown (presumably a Section 38 breakdown).  However, the Court found that this failure could have been the result of mere ignorance on behalf of the lienor and, not necessarily, willful exaggeration.

Compare this case to the case discussed previously on this blog where the Court noted that summary disposition on the issue of exaggeration was possible.  The two cases are theoretically reconcilable but practically at odds.  If, as the Court here notes, exaggeration requires a credibility determination, then exaggeration can never be determined on summary judgment.  New York law generally prohibits credibility determinations on summary judgment which would prevent a summary determination on lien exaggeration.  As exaggeration continues to grow in New York, we will likely continue to see these cases coming out on various ends of the spectrum.  Until the Court of Appeals chimes in, we may not have a definitive answer on this issue.

Vincent T. Pallaci is a partner at the New York law firm of Kushnick | Pallaci, PLLC.  With offices on Long Island and in Buffalo, New York, Kushnick | Pallaci PLLC provides legal services to the construction industry across the State of New York.