I hired a modular construction factory to build a structure. They required that I pay for materials upfront, noting they would purchase all materials on the project in a few months. As a prerequisite for payment, I required an actual invoice and a conditional lien release. Before a new payment would be made, I required proof of payment in from of cancelled check or bank transaction sheet and an unconditional lien release from the vendors. I have recently learned that the prefab company purchased nearly all the material on credit and used the money we gave them for material for unknown uses. We are now starting to get contacted by the factory material suppliers, looking to us for payment. In communicating with the suppliers, we have now learned that the factory fabricated proof of payment wire transfer confirmations and one supplier provided unconditional progress lien release waivers for specific amounts that they now say they never received payment for. When I asked them why the would provide an unconditional lien release, noting that they recieved a payment that they never actually did, the supplier responded by saying the factory never placed the order, only obtained a quote, so they claim the unconditional lien release they signed is meaningless. I explained to them that without their providing that unconditional lien release, noting that they recieved a specific payment, I would have never released the money to the factory. Now, that same supplier wants to file a lien because the factory won't pay them and i won't pay for materials twice. I feel like the supplier is a party to the fraud committed by the factory, as it appears the supplier and factory have a preexisting business relationship from previous projects. Even though an order was not placed until after the through date of the unconditional lien release, can I use the unconditional release document where they noted they recieved a payment, to offset the amounts they claim are unpaid now? Supplier did file prelim notice.
The supplier is incorrect that the unconditional progress waiver has no effect, but it only releases claims for labor and materials they furnished through the "through date" on the waiver and release. If they didn't furnish until after that through date, then they still may have a claim. So while the supplier couldn't enforce a lien claim for materials they furnished before the through date specified on the release, they can seek recovery for materials furnished after said date.
So there are no consequences for the supplier knowingly providing an unconditional release, noting they recieved a payment, when they actually didn't? I feel the supplier is colluding with the factory.
If they falsely noted they had been paid on the unconditional, that could be an interesting fact. Sounds like an interesting possible battle amongst construction lawyers!