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The Four Felds, Inc. v. North Grove House, LLC

A-0041-07T2 (N.J. Super. App. Div. 2008) (Unpublished)

CONSTRUCTION LIENS; FRAUD — Complaints for fraud made under the Construction Lien Law must be filed within that Law’s one year statute of limitations period.

A hardware supplier provided goods for an apartment building. It did not realize it was not dealing with the actual owners of the building when it extended credit for the goods. After the building owner failed to pay the amount due, the supplier placed a construction lien on the property and obtained a judgment stating that it held valid construction and equitable liens against the property. The building owner sold the building to someone who was aware of the lien but didn’t pay the amount due. The property was twice transferred to related entities neither of which satisfied the lien on the property.

The new owner obtained a bank mortgage, but the title agent that conducted the search did not discover the liens. That title agent and the title insurance company that issued a policy to the new owner offered to pay the principal due to the supplier plus interest but the supplier rejected the offer and brought a second action against the newest owner seeking punitive damages and attorney fees. The lower court granted the newest owner’s request for a dismissal of the complaint, but ordered it to pay the amount due plus post-judgment interest. The supplier’s motion for reconsideration was denied. The primary basis for the lower court’s dismissal was that the supplier’s fraud complaint was filed beyond the statutory one-year limitation period for such a charge made under the Construction Lien Law. The lower court also found that the supplier’s claim against the bank that issued the mortgage lacked specific allegations of fraud and that it provided no legal basis to support its argument that a creditor is obligated to pay off any liens on property it finances. Additionally, the lower court found that the supplier’s claims of fraud could not stand because the newest owners breached no breach duty to the supplier and that the supplier suffered no actual damages because the lien remained in effect until satisfied.

On appeal, the Appellate Division affirmed the lower court’s award to the supplier for the principal amount due plus interest based on court rules and also affirmed the lower court’s decision not to impose punitive damages on the basis that the fraud statutes under which they were sought imposed a one year time limit for bringing such claims and the supplier was out of time when it made its fraud claim.

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