Daily Development for Tuesday, February 8, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

MECHANIC’S LIENS; CLAIM; REQUIREMENT OF WRITTEN AGREEMENT: Affidavits of completion of work, executed by owner and contractor in support of construction loan advances, do not make out the necessary writing to support a mechanic’s lien claim.

Patock Construction Co., Inc. v. GVK Enterprises, LLC, 858  A.2d 1148 (N.J. Super. A.D. 2004).

In 1997, the defendant approached plaintiff regarding a construction project that required plaintiff to perform carpentry and to renovate an abandoned building.  The plaintiff agreed to perform the work, but no price was agreed upon, no hourly rate for work was discussed, and no written contract for the work was ever executed.  The defendant subsequently terminated the plaintiff because the plaintiff was not performing quality work and was behind schedule.

After being terminated, the plaintiff sent the defendant a bill for $85,985.00 for the balance of unpaid work and followed that up with a mechanic’s lien claim for $85,985.00.  Plaintiff’s view was that the job was a “time and materials” contract, and that the fact that the parties had not agreed upon a  fixed price was irrelevant.  Plaintiff produced its own records showing time and materials costs (plus a markup) supporting the claimed amount.  But the court found these records to be “unreliable.”

The court invalidated the lien and dismissed the plaintiff’s breach of contract claim, finding that there was no written contract based on the evidence presented.  Under the New Jersey lien law, only a contractor who performs services pursuant to a written contract is entitled to file a lien.  The amount of the lien is to be limited to the contract price, or any unpaid portion thereof, whichever is less, of the claimant’s contract for the work, services, materials, or equipment provided.  The court reasoned that the purpose of the written contract is to provide tangible evidence that will reduce the factual proof problems in litigated matters and provide a sound basis for third parties to evaluate the merits of a lien claim.

The court concluded that the only “writings” executed by the parties were in the form of affidavits signed by the property owner, which he used to obtain construction loans from the bank.  These affidavits listed the carpentry work as separate items and were signed by the contractor and the owner, indicating that work in the stated amounts had been completed.  The two affidavits showed a total of $46,000 in work completed.  The court concluded that these affidavits were not enough to constitute a contract because they did not explain what work was to be done or how it was to be billed.

“[T]he affidavits do not establish the essential responsibilities between Klodin and Patock. Indeed, the affidavits show little other than that Patock performed services for Klodin. They provide no basis for third parties to assess the merits of Patock's lien.”

As there was no contract, the plaintiff was entitled only to quantum meruit relief.  The court did conclude that the testimony supported a payment in addition to that already given to the plaintiff, but far less than the $87,000 claimed.

The court then determined that the plaintiff willfully overstated the amount listed on the construction lien, as the only amounts for the job that were contained in writing were $46,000, as shown by the two affidavits.

The lien law also provides for the award of attorney’s fees incurred in the defense of a claim that is “without basis” or “willfully overstated.”  Because the court found that the plaintiff had willfully overstated his construction lien claim for services rendered, the court awarded the defendant attorney’s fees and costs incurred in defending the suit.  The net of the additional amounts awarded to plaintiff and the attorney’s fee award to defendant resulted in a judgment against plaintiff for about $7500.

Comment 1: What the editor found interesting here was the court’s unwillingness to accept the construction loan draw request as a sufficient writing to support a lien claim.  Although these documents did not have the specificity, in and of themselves, to support a mechanic’s lien claim alone, there were other records showing the work that the contractor performed, and indeed there was apparently no dispute that the contractor did perform work for which it was not paid.  The court says that the affidavits lacked specificity.  But how much specificity ought to be required?  Clearly the owner drew down $46,000 from the lender based upon his assertion that he owed this amount to the contractor.  What more was necessary?  The actual quantum meruit award to the contractor was only about a third of that amount.

Comment 2: Note that even if the court had credited a $46,000 contract claim, the plaintiff contractor still would have been hung on the “willful overstatement” claim, since it had liened the property for substantially more than that.

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