Tag Archives: construction lien

When Is A Construction Lien Fraudulent

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When is a Construction Lien Fraudulent?

Section 713.31(2)(a), Florida Statutes, states that “[a]ny lien . . . in which the lienor has willfully exaggerated the amount for which such lien is claimed or in which the lienor has willfully included a claim for work not performed upon or materials not furnished for the property upon which he or she seeks to impress such lien or in which the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration shall be deemed a fraudulent lien.”

The recent case of Gator Boring v. Westra held that a claim of lien that overstates the amount claimed is not necessarily fraudulent, unless the exaggeration was made willfully. Gator Boring & Trenching, Inc. v. Westra Const. Corp., No. 2D15-5453, 2016 WL 5807805, at *5 (Fla. Dist. Ct. App. Oct. 5, 2016).

In Gator Boring, Gator Boring & Trenching contracted with Westra Construction to drill a portion of a pipeline in Polk County.  After commencing the work, Gator discovered a substantial amount of rock, instead of sand, at the project, which dramatically increased the cost of the contracted work.  After Gator completed the project, Westra did not pay Gator all of the monies due and Gator recorded a construction lien. The total amount of the lien that Gator asserted was $889,792.70, which included $676,556.90 for the additional costs associated by drilling through the unanticipated rock. Gator then filed suit against Westra Construction Corp. and its surety, Travelers Casualty and Surety Company of America.

Westra and Travelers argued that the lien was fraudulent and unenforceable under section 713.31(2) because Gator’s lien included the $676,556.90 for the changed conditions claim, which was not recoverable under the contract. The trial court granted Westra’s motion for partial summary judgment on this issue and Gator appealed.

On appeal, Florida’s Second District Court of Appeal reversed the trial court’s ruling, holding that a lien is not to be deemed fraudulent merely because it is not embodied in a written contract or change order, so long as there is a good-faith basis for the claim. The burden of proof is with the party asserting that a claim of lien is fraudulent.  In this case there was no record evidence to establish that Gator willfully exaggerated its lien by intentionally including amounts that were not recoverable or that it included an amount for changed site conditions in bad faith.  A minor mistake or error in a claim of lien, or a good faith dispute as to the amount due does not constitute a willful exaggeration that operates to defeat an otherwise valid lien.

Since the record reflected that the parties had a genuine dispute about Gator’s right to recover on its changed conditions claim, summary judgment was improper.  Accordingly, it is important that the party claiming a fraudulent lien establish evidence of willful exaggeration of the lien.

Deadline To File Action Against Lien Transfer Bond

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Deadline to File Action Against Lien Transfer Bond

Section 713.24, Florida Statutes, provides a mechanism to transfer a construction lien from real property and place that lien on a surety bond or cash bond held with the clerk of court.  The statute also states that a proceeding to enforce the transferred lien must be filed within the time required by section 713.22, Florida Statutes.  Additionally, if a lien foreclosure action is pending at the time of the transfer, the action against the bond must be filed within 1 year after the transfer, unless otherwise shortened by operation of law.

In the recent case of Hiller v. Phoenix Associates of South Florida, Inc., Phoenix recorded a construction lien on Hiller’s home due to nonpayment for construction work.  189 So. 3d 272 (Fla. 2d DCA 2016).  Phoenix then filed a lawsuit to foreclose the lien.  During litigation,  Hiller transferred the lien to a surety bond pursuant to section 713.24, Florida Statutes.  Hiller then filed a notice of contest under section 713.22, shortening the time within which Phoenix could commence an action on the transfer bond to 60 days from the date of the notice of contest.

After expiration of the 60 days, Phoenix filed a motion to file a supplemental complaint naming the surety on the lien transfer bond.  Hiller argued that the lien was automatically extinguished and filed a motion directing the clerk to release the transfer bond.  The circuit court denied Hiller’s motion.

On appeal, the Second District Court of Appeal reversed holding that the lien law must be strictly construed and requires strict compliance.  Section 713.24 provides the requirements for when an action must be commenced against a lien transfer bond.  The statute also has a provision which allows this period to be “shortened by operation of law.”  Hiller shortened this time period to bring an action against the lien transfer bond.  Phoenix failed to commence its action against the bond within this time.  Accordingly, the law requires that the lien is extinguished and bond returned to Hiller.  There is no excuse for noncompliance.

When faced with a lien transfer bond, a contractor must be wary of the time limitations to file suit against that bond.  This is true even if there is a lien foreclosure action pending.

Construction Lien and Arbitration Provision – How to Recover Attorney Fees

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Construction Lien and Arbitration Provision – Can a contractor recover attorney fees in a lien foreclosure action where the contract contains an arbitration provision?

Yes, however it is critical for the contractor to file its lien foreclosure action in court.  In Snell v. Mott’s Contracting Services, Inc., 141 So. 3d 605 (Fla. 2d DCA 2014), Snell hired Mott’s to perform remodeling working.  The contract contained an arbitration provision but no provision for prevailing party attorney fees.  A dispute arose and Mott’s recorded a construction lien.  Snell filed a complaint in county court to contest the validity of the lien.  Mott’s moved to stay the action and compel arbitration – but never filed a lien enforcement action.  The county court granted the motion to stay and compelled arbitration.

The arbitration award was in favor of Mott’s and held that Mott’s was entitled to a reasonable attorney’s fee award.  Mott’s filed the arbitration award and moved the court to confirm the award and enter final judgment determining Mott’s entitlement to attorneys’ fees.  The county court confirmed the arbitration award as to the amount awarded to Mott’s but found that Mott’s was not entitled to attorneys’ fees under section 713.29, Florida Statutes, because it failed to take any action to foreclose the claim of lien within the statutory time period.

On appeal, the Second District Court of Appeal affirmed the county court’s decision.  The court held that 713.29, Florida Statutes, only authorizes an award of attorneys’ fees where a contractor brings an action to enforce a construction lien “in a court of competent jurisdiction” within the statutory time requirements.  Arbitration is not a “court of competent jurisdiction”.  Since Mott’s failed to satisfy the requirements of the statute, it could not recover its attorneys’ fees.

Construction Lien Transferred to Bond Venue

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In Kelsey Construction, Inc. V. Travelers Casualty and Surety Company of America, 120 So. 3d 77 (Fla. 4th DCA 2013), the Fourth District held that where a subcontractor’s claim of lien was transferred to a bond, pursuant to section 713.24, the proper venue for such dispute is the county where the claim of lien was recorded.
Attaway Electric recorded two liens against two Winn-Dixie projects in Broward County. The general contractor, Kelsey, transferred the liens to bonds, pursuant to section 713.24, Florida Statutes. Attaway sued Kelsey for breaches of the contracts, and sued Kelsey and Travelers on the lien transfer bonds. Kelsey and Travelers moved to transfer venue to Orange County in accordance with the contracts’ forum selection provisions. The trial court transferred the case to Orange County.
On appeal, the Fourth District reversed holding that section 713.24 requires that “[a]ny party having an interest in such security or the property from which the lien was transferred may at any time, and any number of times, file a complaint in chancery in the circuit court of the county where such security is deposited.” The statute prevailed over the contractual venue provision. Accordingly, the Fourth District vacated the order transferring the action to Orange County.