New York's Lien Law allows an owner to sue the contractor or subcontractor for a "willful exaggeration" of the mechanic's lien claim. A lien that is intentionally and deliberately exaggerated is void and the lienor is held liable for damages to the owner or contractor.
Damages that may be recovered are the amount of the lien found to be willfully exaggerated, premiums paid for a bond or interest on any money given to obtain the discharge of the lien, and the reasonable attorney's fees incurred in discharging the lien.
A lien is not void where it is simply inaccurate as the result of an honest mistake. In the recent case ofInter Metal Fabricators, Inc. v HRH Construction, LLC, a contractor was held liable for filing a willfully exaggerated mechanic's lien.
Inter Metal Fabricators, Inc. was the structural steel contractor to HRH Construction, LLC for the construction of a condominium building on Tenth Avenue in New York City. Inter Metal, in order to secure payment, filed two mechanic's liens for work performed at the project, one for $808,787, and the other for $491,132, totaling $1,299,920. Inter Metal thereafter sued HRH for breach of contract and to foreclose its mechanic's liens.
HRH filed various counterclaims against Inter Metal, including a counterclaim for willful exaggeration of its mechanic's liens. HRH argued that Inter Metal's own project documents submitted to its payment bond surety, showed that only $1,107,672 was claimed due to Inter Metal. This amount was $192,248 less than the total amount of its two liens. In addition, when confronted with what appeared to be an exaggerated markup of the crane charges, Inter Metal's principal witness testified at his deposition that he was "entitled to mark it up to whatever number I want", and "You know what? People do a lot of things".
The trial court found that the discrepancies between the amounts set forth in Inter Metal's liens and its actual charges were not honest mistakes but, rather, deliberate exaggerations. The trial court noted the overall difference between the amounts shown to its own surety and the amounts claimed in the liens. The court also pointed out that Inter Metal had offered no explanation why the numbers in its liens did not agree with its own documents. The court also relied on the deposition testimony of Inter Metal's principal witness. When asked how to reconcile the numbers between the amount invoiced to Inter Metal by its steel material supplier and the amount billed to HRH, Inter Metal's principal responded "Why should I give HRH the price I got from [its supplier]? Tell me why, give me a good reason why".
The appellate court upheld the trial court's finding that Inter Metal willfully exaggerated the amount of its liens.
A lien is not willfully exaggerated where the lienor acted in a good faith belief, although mistaken, that the lien claim was legitimate. For instance, good faith disputes as to work performed or the amount owed does not constitute a willful exaggeration. The Inter Metal case, however, presents that rare case of self-incrimination where the court relied upon the contractor's own internal documents and testimony to hold that it intentionally inflated the amount of its lien claims. A contractor or subcontractor is well advised to consult with its attorney and thoroughly review exactly how its claim was compiled, rather than risk the consequences of a willfully exaggerated lien.