What’s in a name? In the mechanics lien world any tiny mistake can invalidate an entire claim, and surprisingly over the past year, claimants have been misidentifying themselves quite a bit across America. If a claimant incorrectly identifies themselves in a lien claim or a notice is that cause to invalidate it? How big of an identification mistake is required?
As this article will explore the issue has come up a number of times over the past year, and just last week the Indiana Court of Appeals weighed in on the subject.
Indiana Court of Appeals Forgives Small Error In Identification of Lien Claimant on the Preliminary Notice Document
In Von Tobel Corp. et al v. Chi-Tech Construction & Remodeling, Inc., the Indiana Court of Appeals was called upon to decide whether a preliminary notice was sufficiently sent under the state’s laws even though the notifying party / claimant did not identify itself with its formal company name. According to the court’s discussion of the facts, here is the identification error:
Name on pre-lien notice: Von Tobel Lumber & Home Center, Inc.
Formal name of the claimant: Von Tobel Corporation
The question was whether the notice bearing the incorrect name was sufficient to inform the owner that a claim could be asserted by the true entity. The court concluded that the erroneous notice was sufficient, upholding the lien. “The degree of non-compliance [here] with the letter of the statute is minimal,” the court held, further providing that the owner “does not contend that it was misled or confused by the discrepancy.”
The court ultimately forgave the error and upheld the mechanics claim summarizing:
The variance between the name set out in the Pre-lien notice and that contained in the Lien Notice was minimal, did not undermine the statutory policy concerns regarding notice, and did not cause prejudice to the property owner or any third party.
Results Are Mixed Across The Country When Lien Claimant is Erroneously Listed on a Lien Claim
The Indiana court in Von Tobel Corp. set forth a pretty soft standard for these “name error” situations. However, there have been quite a few similar cases over the past year, and courts across the country come down on different sides of the issue.
There have been quite a few similar cases over the past year, and courts across the country come down on different sides of the issue. The most ridiculous decision came down this past July in a New York County Supreme Court decision which – fingers crossed – really should be overturned. In this case a New York mechanics lien was completely invalidated because the claimant’s name was slightly incorrect…and I mean slightly. The lien claim listed the company as “A&L Construction Corp.” and the formal name of the company was “A. & L. Construction Corp.” While the case is probably legally incorrect and should be overturned, you can see that New York judges may very strictly construe these situations and that arguments exist that can clutter your claim and force you into expensive and delayed litigation.
Another state willing to toss a lien claim that includes a slight error on the claimant’s name is Connecticut, who dismissed a claim because a claimant listed itself as “Greco Construction” when it should have been “Brain Creco d/b/a Greco Construction.” This case was a bit out of line with Connecticut case law because a mechanics lien with a small drafters error about the furnishing dates was upheld just a few months previously with the court citing the state’s “long endorsed policy favoring liberal construction of claimed inadequacies in certificates of mechanics’ liens.”
The opposite, and claimant-friendly result happened in California last year in Ball v. Steadfast-BLK, where a mechanics lien error was forgiven and the lien claim upheld. In that case the claimant incorrectly identified itself as “Clark Air Conditioning & Heating,” but should have used the formal name “Clark Heading and Air Conditioning.”
Strict v. Liberal Scrutiny of Lien Laws Could Make A Big Difference When Small Errors Occur
When courts are called upon to make these particular determinations they frequently turn to the purposes of the mechanics lien statutes and the state’s policy of interpreting the statutes strictly or liberally. There are arguments for both approaches.
On the one hand, mechanics lien claims will impair a property right, and the state should have strong public policy in favor of protecting property rights and thus requiring lien laws to be strictly construed. On the other hand, mechanics lien laws have a long and strong history in the United States and are designed to protect subcontractors and suppliers, and as such, states should have a strong public policy to meet these legislative ends and thus liberally construe the laws. The Indiana court in Von Tobel Corp. had this to say about Indiana’s approach:
The mechanics’ lien laws of America, in general, reveal the underlying motive of justice and equity in dedicating, primarily, buildings and the land on which they are erected to the payment of the labor and materials incorporated, and which have given to them an increased value. The purpose is to promote justice and honesty, and to prevent the inequity of an owner enjoying the fruits of the labor and material furnished by others, without recompense.
[The courts have expressly] reject[ed] the idea that our entire mechanics’ lien statute must be strictly construed with such hypertechniality so as to frustrate the remedial purpose of the legislation.
The battle between strict and liberal construction of mechanics lien claims is not new, nor is it limited to these claimant name identification circumstances. We have an entire tag dedicated to the subject: strict v. liberal construction.
Whenever parties clash about anything related to a mechanics lien claim – and that can be quite common – the fight will boil down to whether the courts are more interested in protecting property rights or the subcontractor’s and supplier’s right to payment. Every state has both interests in mind, but each state weighs one over the other. This battle is just one of the many battles in the courts, legislatures, and among the parties to get leverage in non-payment situations. For a great discussion of this, see this Viewpoints article: Getting Paid in the Construction Industry: A War Between Policy, Contract, And Tempers.
Warning: Courts and Adversaries Can Get Very Petty When Fighting A Claim
First, let’s talk about how easy it is to avoid this particular error in your mechanics lien or preliminary notice. It’s very, very, very easy. After all, you should know your own name or the name of your company!
In fact, it’s a valuable exercise for your company to take a deep breath and go through absolutely every internal document and effect to verify that your formal corporate name is being used. If you’re not sure about what your formal name is, ask a lawyer to help you. Having the incorrect name on contracts can lead to piercing the corporate veil issues for your company’s principals or investors, and as you can see from this article, having your name incorrectly listed on a lien claim can undermine your legal rights.
Second, let’s talk about how petty your adversaries can get. Think about the New York Supreme Court case discussed above whereby a lien was invalidated for listing the company as “A&L Construction Corp” instead of “A. & L. Construction Corp.” I mean, really, which ridiculous attorney brought this argument in the first place?
Unfortunately, the attorney brought this ridiculous argument because the legal system is so messed up that it could possibly win…and in fact, it did win. That speaks to this previous article we wrote about the legal process in general: What’s Wrong With THe Law And How It Is Costing Your Business Money.
Avoid these legal pitfalls and cheap shots by dotting your i’s and crossing your t’s. Courts and adversaries can get petty and their petty arguments can get sticky. Accordingly, avoid them…especially when it is as easy as writing your name down correctly on a document.