By Alex Barthet
Earlier this year, the appellate court handed down a decision that surprised a lot of construction folks.
A homeowner and his contractor weren’t seeing eye to eye any longer so the owner stopped paying the contractor. In turn, the contractor ceased work, recorded a lien and filed suit to enforce his lien, for breach of contract and for unjust enrichment. The owner counterclaimed for fraudulent lien. At the trial that followed, the judge concluded that the contractor’s claim of lien “was compiled with such willful and gross negligence that it amounted to a willful exaggeration and shall be deemed a fraudulent lien.” Pretty damning but the court still ruled in the contractor’s favor on its other claims. And having determined that the contractor prevailed on the significant issues of the case, the court went on to deny the homeowner’s claims for attorney’s fees and costs incurred as a result of the fraudulent lien.
Not surprisingly, the homeowner appealed, arguing that the significant issue test shouldn’t apply given the fraudulent lien. The court disagreed, finding that the 2007 amendment to the fraudulent lien statute which included a prevailing party standard, applied to this case. It was no longer enough to just win on a fraudulent lien issue, you had to be the prevailing party in the case as a whole to also be awarded your incurred legal fees and costs, and that was not the case for the homeowner in this matter. It was actually the contractor who prevailed on the significant issues.
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