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Patock Construction Co., Inc. v. GVK Enterprises, LLC

372 N.J. Super. 380, 858 A.2d 1148 (App. Div. 2004)

LIENS; CONSTRUCTION—Absent a written contract, a contractor is not entitled to a construction lien and construction draw requests are not substitutes for a written construction contract.

A business owner hired a contractor to renovate an abandoned building. The parties did not fix a price for the anticipated work. According to the contractor, this was because the owner had only given it a preliminary construction plan. It considered it as a “time and material job” for which it would be paid on completion. No hourly rate was discussed and there was no written contract. After paying only about $6,000, the owner fired the contractor because he felt that it was not doing much work and was behind schedule. He then hired a second contractor.

The original contractor then billed the owner for about $86,000. When its bill went unpaid, it filed a construction lien claim. A trial ensued and the main issue was the value of the first contractor’s work.

To get its construction loan, the owner needed payment requisitions from the contractor. Different requisition forms were used to obtain different portions of the bank loan. One draw requisition listed the total contract amount as $142,900. It was based on estimates for demolition, carpentry, and various other aspects of the construction. The cost of the carpentry work, which was the contractor’s only direct task, was estimated to be $20,000. All other work was performed by other subcontractors. A second draw requisition, or “Application and Certificate for Payment,” listed the carpentry cost as $26,000. Both of draw requisitions were accompanied by affidavits of completed work, and each was signed by the contractor. At trial, the contractor claimed that even though it had signed the applications, the owner had prepared the estimates.

At the conclusion of the trial, the lower court invalidated the construction lien because there was no written contract and the only pricing was that listed in the draw requisitions. As a result, the lower court held that the contractor’s filing of an $86,000 construction lien was a willful overstatement. Even though the lower court invalidated the construction lien, it awarded the contractor $12,500 on a quantum meruit basis.

The owner also sought counsel fees based on the construction lien law. The lower court ruled that counsel fees are available when a property owner successfully defends against an improper lien claim. However, because the contractor’s complaint was not based solely on the lien, but also contained a meritorious quantum meruit claim, the lower court only awarded forty-five percent of the owner’s costs and fees.

On appeal, the Appellate Division agreed that there was no written agreement and that the affidavits signed by the owner in connection with the draw requisitions did not satisfy the requirements of the construction lien statute. Under the construction lien law, only a contractor who performs services pursuant to a written contract is entitled to file a lien. The affidavits did not qualify because they didn’t set forth the essential responsibilities of each party. All they showed was that the contractor performed services for the owner. Even if the affidavits could have been treated as the written contract, the construction lien would still have been invalid because they did not support the amount stated on the lien.

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