Sharrard v. Ligon, 2D03-3348.

• Decision Date: 05 November 2004
• Docket Number: No. 2D03-3348.,2D03-3348.
• Parties: Dean J. SHARRARD, Appellant/Cross-Appellee, v. Reginald LIGON and Mendee Ligon, Appellees/Cross-Appellants.
• Court: Florida District Court of Appeals

892 So.2d 1092

Dean J. SHARRARD, Appellant/Cross-Appellee, v. Reginald LIGON and Mendee Ligon, Appellees/Cross-Appellants.

No. 2D03-3348.

District Court of Appeal of Florida, Second District.

November 5, 2004.

Joseph G. Thresher and John J. Thresher of Thresher, P.A., Tampa, for Appellant/Cross-Appellee.

Bradley M. Bole and Penelope T. Bryan of Rahdert, Steele, Bryan, Bole & Reynolds, P.A., St. Petersburg, for Appellees/Cross-Appellants.

WALLACE, Judge.

This is a construction lien law case. Dean J. Sharrard (the Contractor) built a residence for Reginald Ligon and Mendee Ligon (the Owners) pursuant to a cost-plus contract. The trial court entered a final judgment foreclosing the Contractor's amended claim of lien for a portion of the monies that he claimed were due him. The Contractor appeals the trial court's disallowance of his claims for attorney's fees and prejudgment interest. The Owners cross-appeal the trial court's refusal to find that the amended claim of lien was fraudulent and therefore unenforceable. The Owners also complain of the trial court's denial of their counterclaim for damages resulting from the filing of the amended claim of lien. Because the undisputed evidence in the record establishes that the Contractor willfully included nonexistent expenses in his calculation of the amount stated to be due in the amended claim of lien, we conclude that the amended claim of lien was fraudulent. Therefore, we reverse the final judgment of foreclosure and remand for further proceedings. Because of our disposition of the cross-appeal, we need not address the Contractor's appeal.

Facts, Procedural History, and Final Judgment

In February 1998, the Contractor entered into a contract with the Owners for the construction of a residence in St. Petersburg, Florida. Pursuant to the contract, the Contractor agreed to provide services as a contractor and construction manager for the project. The Owners agreed to pay the Contractor "at a rate of contractor[']s costs of goods [and] services plus 10% as a profit to the contractor." The contract specifically required the Contractor to "carry workmen's [sic] compensation, public liability, and property damage insurance." The Contractor began work on the project in February 1998 and concluded work in August 1999.

Because the parties had entered into a cost-plus contract, the amount paid by the Contractor for goods and services for the project was critical to determining the amounts owed by the Owners, both as the job progressed and at completion. See Persinger v. Estate of Tibbetts, 727 So.2d 350 (Fla. 5th DCA 1999)

. Therefore, accurate record keeping and accounting for costs by the Contractor was essential to the proper administration of the parties' cost-plus contract. Unfortunately, the Contractor failed to generate and maintain accurate records for his costs and expenses on the project. The trial court found that the Contractor's record keeping was "grossly inadequate."

When the Contractor completed his work on the project in August 1999, the parties had disputes about both the amount the Contractor claimed was due and the quality of the construction. On August 25, 1999, the Contractor filed a claim of lien for $72,250. On September 10, 1999, the Owners served a request for a sworn statement of account on the Contractor pursuant to section 713.16, Florida Statutes (1999), requesting a written statement of the Owners' account showing the nature of the labor and services performed, the materials furnished, and the amount paid on account to date on the project. On October 8, 1999, the Contractor responded to the request with an affidavit. The Contractor attached to the affidavit a document titled "Independent Accountant's Compilation Report" prepared by his accountant. In the affidavit, the Contractor stated that he intended to amend his claim of lien to increase the amount to $158,843.62. The Contractor subsequently filed an amended claim of lien stating that the total value of his work on the project was $678,587.31 of which $158,843.62 remained due.

The Contractor subsequently filed a three-count complaint in the trial court against the Owners for the foreclosure of the amended claim of lien, breach of contract, and quantum meruit. The Owners answered the complaint and alleged numerous affirmative defenses, including the defense that the amended claim of lien was fraudulent within the meaning of section 713.31(2)(a). The Owners also filed a counterclaim seeking damages for a fraudulent lien, slander of title, and breach of contract. Thereafter, the parties conducted extensive discovery. The matter was ultimately tried without a jury in a trial that lasted seven days.

The trial court found that the Contractor's cost of constructing the residence was $523,281, "and that with a 10% profit the total amounts to $575,204.00."¹ The trial court also found that the Owners' prior payments totaled $504,704, leaving a balance of $70,500 due to the Contractor pursuant to the contract. The trial court rejected the Owners' claim for a setoff against the Contractor on account of work that the Owners contended was defective. The trial court also found that the lien was not fraudulent. Thus the Owners recovered nothing on their counterclaim. Based upon these findings, the trial court entered a final judgment foreclosing the amended claim of lien in the amount of $70,500.

The Owners' Claim That the Lien Was Fraudulent

On the cross-appeal, the Owners argue that the trial court erred in failing to find the amended claim of lien to be fraudulent and unenforceable under section 713.31(2)(a) and (b). The Owners also contend that the trial court erred in failing to award them damages on the fraudulent lien claim pursuant to section 713.31(2)(c).² The trial court rejected the Owners' claim that the Contractor's amended claim of lien was fraudulent based upon the following finding: "The court finds that under the unusual circumstances presented, including the fact that the amended lien figure was based at least in part upon advice of counsel, the lien was not fraudulent." In addition, in connection with the disallowance of the Contractor's claim for attorney's fees, the trial court also found that the controversy was "essentially a payment dispute occasioned by [the Contractor's] poor record keeping."

Of the five grounds the Owners asserted in the trial court in support of their claim that the amended claim of lien is fraudulent, they raise two on cross-appeal. First, the Owners contend that the Contractor's inclusion in the lien amount of $21,689.48, including a ten percent profit, for premiums for workers' compensation coverage was fraudulent because the Contractor had no workers' compensation coverage in effect during the period of the construction project. Second, the Owners claim that the approximate amount of $13,600 the Contractor included in the lien amount as a "salary" for his own management services is fraudulent because it was duplicative of the ten percent profit to which the Contractor was entitled under the contract. The parties have devoted substantial attention in the trial court and before this court to the difference in the roles of a "construction manager" and a "project manager" and whether the Contractor could properly bill the Owners for the cost of his services as the latter under their cost-plus contract. We need not venture into this particular legal thicket because the Owners' first ground based on charges for the nonexistent workers' compensation premiums is dispositive of the fraudulent lien claim.

Analysis

Section 713.31(2)(a) defines a "fraudulent lien" as:

Any lien asserted under this part in which the lienor has willfully exaggerated the amount for which such lien is claimed or in which the lienor has willfully included a claim for work not performed upon or materials not furnished for the property upon which he or she seeks to impress such lien or in which the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration shall be deemed a fraudulent lien.

See Castiello v. Sweetwater Homes of Citrus, Inc., 843 So.2d 1019, 1020 (Fla. 5th DCA 2003)

. Section 713.31(2) makes a fraudulent lien unenforceable and gives the owner a claim for compensatory damages, costs, attorney's fees, and punitive damages against a contractor who files a fraudulent lien. M.B. Hayes, Inc. v. Tak Chin Choi (In re M.B. Hayes, Inc.), 305 B.R. 361, 366 (Bankr.M.D.Fla.2003); Martin v. Jack Yanks Constr. Co., 650 So.2d 120, 121-22 (Fla. 3d DCA 1995). "However, 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." § 713.31(2)(b); see Delta Painting, Inc. v. Baumann, 710 So.2d 663, 665-66 (Fla. 3d DCA 1998) (Cope, J., dissenting) (explaining the origin and purpose of this aspect of section 713.31(2)(b)).

The Contractor's answer to the charge that he willfully exaggerated the amount of his amended claim of lien by including the cost of nonexistent workers' compensation coverage is twofold. First, the Contractor points out that he relied on the advice of counsel in connection with the preparation of the amended claim of lien and the affidavit sworn to by him and served on the Owners. Second, he contends that he acted pursuant to a mistaken but good faith belief that he actually had workers' compensation insurance coverage. We will consider each of the Contractor's arguments separately.

Pursuant to section 713.31(2)(a), a claim of lien that overstates the amount claimed is not fraudulent unless the exaggeration was made "willfully." See Vinci Dev. Co. v. Connell, 509 So.2d 1128, 1132 (Fla. 2d DCA 1987)

; Scott v. Rolling Hills Place, Inc., 688 So.2d 937, 939 (Fla. 5th DCA 1996). A lienor's consultation with counsel prior to filing a claim of lien tends to establish that the lienor acted...