Delta Painting, Inc. v. Baumann
1998 WL 187449, 710 So. 2d 663 (1998)
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Rule of Law:
A construction lien is fraudulent if the lienor willfully exaggerates the amount claimed, includes claims for work not performed or materials not furnished, or compiles the claim with willful and gross negligence, provided it is not merely a minor mistake or good faith dispute as to the amount owed.
Facts:
- After Hurricane Andrew severely damaged their home, Stanley and Phyllis Baumann ("Baumanns") entered into a written agreement with Delta Painting, Inc. ("Delta") to paint their 12,000-square-foot residence.
- The standard form contract, prepared by Delta, stipulated that any changes in the scope of work or additional work increasing the cost required written change orders executed by both parties.
- At some point during Delta's performance, a dispute arose regarding the Baumanns' payment for certain work invoiced by Delta.
- Delta maintained that the Baumanns refused to pay for additional work that had been orally agreed upon.
- The Baumanns, conversely, asserted that Delta was improperly seeking additional costs for corrective measures due to Delta's poor performance and for unauthorized additional work for which no written change orders existed.
Procedural Posture:
- Delta Painting, Inc. filed a claim of lien in the sum of $21,100 against the Baumanns' property.
- Delta subsequently filed a breach of contract action and an action to foreclose its construction lien in the lower court (trial court).
- The Baumanns filed a counterclaim against Delta for breach of contract and fraudulent lien, seeking compensatory and punitive damages, as well as a discharge of the lien.
- The breach of contract claims and counterclaims were tried to a jury, while the lien foreclosure claims and fraudulent lien counterclaim issues were decided by the lower court judge.
- The jury returned a verdict on the contractual claims in favor of Delta for $9100.
- The lower court judge declared Delta's lien fraudulent, discharged it, and assessed punitive damages of $2500, taxable costs of $1199, and attorney's fees of $31,000 in favor of the Baumanns.
- After deducting Delta's jury award and prejudgment interest as set-offs, a final judgment of $23,179.04 was entered for the Baumanns against Delta.
- Delta Painting, Inc., as appellant, appealed the lower court's judgment to the District Court of Appeal of Florida, Third District, asserting that the court abused its discretion in finding the lien fraudulent and in not assessing attorney's fees in Delta's favor.
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Issue:
Does a contractor's construction lien qualify as fraudulent under Florida Statute § 713.31(2)(a) and (b) when it includes amounts for additional work not authorized by written change orders and work not performed, even if there was a purported oral agreement or a good faith dispute?
Opinions:
Majority - Green, J.
Yes, a contractor's construction lien can be deemed fraudulent when it includes amounts for additional work unauthorized by written change orders and for work not performed, and such a finding is amply supported by competent substantial evidence. The court affirmed the trial court's finding that Delta's lien was fraudulent under Florida's construction lien law, specifically § 713.31(2)(a), Fla. Stat. (1991). This statute defines a lien as fraudulent if the lienor willfully exaggerated the amount, included claims for work not performed or materials not furnished, or compiled the claim with willful and gross negligence. The court recognized that the 1991 amendment precludes a fraudulent lien finding based on a minor mistake or good faith dispute. However, it found that the trial court's determination was supported by "competent substantial evidence," which included Delta's claim for unauthorized additional work and knowingly including a claim for work not performed or materials not furnished. Such evidence, the court reasoned, was "wholly inconsistent with any notion of a minor mistake or good faith dispute." Given this strong evidentiary support, the appellate court concluded it could not disturb the lower court's factual conclusions. The affirmance of the fraudulent lien finding also justified the award of attorney's fees and costs to the Baumanns under § 713.31(2)(c).
Concurring - Schwartz, C.J.
Chief Justice Schwartz concurred with the majority opinion, indicating agreement with its reasoning and outcome.
Dissenting - Cope, J.
No, the trial court's finding that the lien was fraudulent should be reevaluated because the court appears to have relied on an outdated legal standard that did not fully account for the 1990 statutory amendment requiring a "willful, intentional exaggeration" for a lien to be fraudulent. Justice Cope argued that the trial court's ruling indicated reliance on Skidmore, Owings and Merrill v. Volpe Constr. Co., which held that including unauthorized items made a lien fraudulent, but this precedent predated the 1990 amendment to § 713.31(2)(b). This amendment specifically states that "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." The dissent contended that this amendment introduced a scienter (knowledge or intent) requirement, meaning a lien is not fraudulent merely because it lacks a written change order, as long as there is a good-faith basis for the claim. Since the trial court's oral and written remarks reflected reliance on the pre-amendment Skidmore standard and did not explicitly address the 1990 amendment's impact on good faith disputes, the dissent believed the case should be remanded for reconsideration under the clarified standard. The dissent also noted that the jury's verdict awarding Delta the balance owed under the contract might be at odds with the trial court's alternative finding regarding non-performance, further suggesting a need for clarification and a new hearing.
Analysis:
This case clarifies the application of Florida's fraudulent lien statute, § 713.31, particularly in light of the 1990 amendment distinguishing willful exaggeration from minor mistakes or good faith disputes. The majority opinion emphasizes that claims for unauthorized work or unperformed services, when knowingly included, will meet the "willful" standard for a fraudulent lien, even if a contractor claims an oral agreement. The dissent, however, highlights the potential for trial courts to misapply prior case law without fully incorporating statutory amendments, arguing for a stricter interpretation of "willful exaggeration" that requires clear intent to defraud beyond simply failing to adhere to written contract terms. This divergence underscores the ongoing challenge in construction lien litigation to differentiate between genuine contractual disputes and deliberate attempts to inflate a lien, with significant consequences for attorney's fees and punitive damages.
