By Kushnick Pallaci PLLC — New York Construction Law Attorneys
A recent decision from the Appellate Division, Second Department, offers a sharp warning to contractors about the risks of overstating amounts in a mechanic’s lien. In Consumer Protection Restoration, LLC v. Hickory House Tenants Corp., the court upheld severe penalties against a contractor who filed what the court determined to be willfully exaggerated liens—highlighting just how costly such exaggeration can be.
Background of the Case
The plaintiffs, Consumer Protection Restoration, LLC, filed two mechanic’s liens against a cooperative building in Rockland County, claiming they were owed substantial sums for restoration work. Along with the liens, they filed suit to foreclose on the liens and recover damages based on theories of breach of contract and unjust enrichment.
The defendant, Hickory House Tenants Corp., pushed back hard. They counterclaimed under Lien Law §§ 39 and 39-a, asserting that the liens were willfully exaggerated, and sought both to invalidate the liens and recover damages and attorneys’ fees.
The Verdict: A Mixed But Costly Outcome
After a nonjury trial, the court ruled:
The plaintiffs were entitled to $1.59 million for unjust enrichment, recognizing the value of work performed despite the absence of a valid contract.
However, Hickory House successfully voided the mechanic’s liens and was awarded a staggering $3.77 million in damages for the willful exaggeration!
The court also initially awarded over $260,000 in attorneys’ fees, though that amount was later vacated by the Appellate Division and remanded for recalculation based only on the legal work directly tied to discharging the liens.
Legal Takeaways for Contractors
- Willful Exaggeration = Big Penalties
Mechanic’s liens are powerful tools, but they come with responsibilities. As the court made clear, Lien Law § 39 invalidates liens that are “willfully exaggerated,” and § 39-a permits recovery of both damages and attorneys’ fees. The key is intent: mere mistakes or improper charges don’t qualify—but intentional inflation does. - Strict Proof Is Required—But Summary Judgment Is Still Possible
The court emphasized that exaggerated lien claims must be deliberate and intentional to trigger § 39-a penalties. However, in this case, the defendant was able to obtain summary judgment by demonstrating the exaggeration, and the plaintiffs failed to raise a triable issue of fact in opposition. Note that this is rare outcome. The overwhelming majority of exaggeration cases go to trial because the “willful” component requires a fact finding that typically cannot be done on a summary judgment motion. - Attorney’s Fees Must Be Tied to the Lien Discharge
In an important clarification, the appellate court struck the trial court’s award of attorneys’ fees because it was based on an arbitrary 12% formula. Instead, the court ruled that fees must be reasonably calculated based on the actual work performed to discharge the liens—not the total litigation effort. - Interest on Quantum Meruit Claims Is Not Guaranteed
Although New York law generally provides for prejudgment interest on quantum meruit (unjust enrichment) claims, the court denied interest here. Why? Because the services were incomplete and the award simply offset Hickory House’s damages—meaning no specific sum was owed prior to the court’s decision.
Why This Case Matters
This decision serves as a cautionary tale for contractors across New York. Filing a mechanic’s lien should never be viewed as a bluff or leverage tactic—it’s a legal right that, if abused, can boomerang back with devastating financial consequences. Whether you’re filing a lien, defending against one, or litigating a lien foreclosure action, precision and honesty are essential.
Facing a Dispute Over a Mechanic’s Lien?
At Kushnick Pallaci PLLC, we have extensive experience prosecuting and defending lien claims across New York, including Article 3-A trust fund litigation, lien foreclosure actions, and claims of exaggeration or diversion. If you’re navigating a construction payment dispute, contact our office today to protect your rights and avoid costly missteps.
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