Double Trouble – Successive Liens for the Same Amount
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Readers of my occasional dispatches from the construction trenches know that making a mechanic’s lien go away is neither quick nor easy. Yes, you can bond it (if you have access to a bonding company and an acceptable balance sheet). But bonding a lien can be expensive—even if you are not required to fully collateralize the amount of the lien.
In a recent case, a supplier of materials for a construction project filed a mechanic’s lien for $128,825. Shortly after filing this lien, it realized that there might be some defect in the lien (since it appeared that it was a “materialman supplying to another materialman” which is ineligible to file a lien).
In an attempt to “amend” the first lien, the supplier filed a second lien, in the same amount of $128,825. When the contractor asked the supplier to discharge the obviously duplicative first lien, it refused. Although the contractor had bonded the first lien, the lien clerk would not allow the first bond to apply to the second lien. So, the contractor had to obtain a second bond, in the same amount as the first, to bond the second lien.
Needless to say, the contractor was not pleased. Now stuck paying premiums on two bonds to basically cover the same amount filed twice, the contractor proceeded on two fronts. First, it asked the court to dismiss both liens on three grounds: (i) that the liens had misnamed the owner; (ii) that a “materialman” supplying materials to another “materialman” may not file a lien; and (iii) that the second lien was duplicative of the first. The Supreme Court rejected all three grounds, arguing that the Lien Law is to be “liberally construed” to protect the lienor.
On a second front, the contractor sought to hold the supplier liable for “abuse of process” or “tortious interference with business relations” for filing two liens for the same amount and not discharging one of them. Here, the Supreme Court agreed with the contractor. But the victory was short-lived. On appeal, the Appellate Division reversed the decision below and dismissed the contractor’s complaint, holding that the contractor had proven neither theory of recovery.
Abuse of process and tortious interference are similar in that they are designed to punish conduct that is not otherwise justified. Where someone utilizes a legal remedy to protect its own economic interest, it cannot be said to have abused that process or interfered with someone’s business in a “tortious” way.
As the appellate court stated: “[Contractor] fails to allege any sufficiently egregious wrong where defendants were not at least partially acting for their own economic interest within the scope of the Lien Law.” The defendants’ “refusal to discharge one or both liens upon plaintiff’s demand is insufficient to show that they acted with any intent to harm plaintiff, considering their claim to payment for the materials they supplied.”
One can only imagine the bad blood between these two entities. But while the supplier may have to answer to a higher authority for its failure to extend a courtesy to the contractor, the court let both liens stand, thereby requiring duplicative bonds.