CASE UPDATE: Ohio Appeals Court Decides a Mechanic’s Lien is not Enough to Prove Amount of Contractor’s Claim
The Eighth District Court of Appeals in Cuyahoga County decided that a mechanic’s lien, in and of itself, was not enough evidence that an amount was due or owing to a contractor. According to the court, the contractors still have to prove “the reasonable value of the labor and materials . . . furnished . . . in order to prove the validity of their liens.” The affidavit of mechanic’s lien, by itself, is simply not enough.
A little background is needed to understand this decision and why it is important. Without boring you on the details, or putting you through a year-long civil procedure course, there are legal motions that parties in a lawsuit can file to win a case before it ever gets to a jury. One of these motions request summary, or faster, judgment because there is no dispute about the relevant facts of the case, and one side is entitled to judgment as a matter of law based on those undisputed facts.
In the case of Flemco, LLC v. 12307 St. Clair, Ltd., 2018-Ohio-588, Flemco and Carter Jones Lumber Company both had filed liens on a property where they claimed to have performed work or delivered materials. Both Flemco and Carter Lumber attached the mechanic’s liens (which are sworn affidavits) to their motion for summary judgment, asking the Court to give them judgment in at least the amount of the liens. However, the property owner pointed out that during discovery, Flemco had admitted that it never completed large segments of the contract, and the project as never completed. Flemco argued this raised a question about what work was done, and whether the lien amounts were in fact the correct amounts, or whether they were too high. The trial court decided in favor of the contractors, and said the liens were valid.
The Court of Appeals Decision
According to the Court of Appeals, “[w]ithout proof of a valid debt, the mechanic’s lien is pointless.” Usually, a contractor would simply provide the court with an affidavit about the work done and amount owed for that work, and unless there was evidence to the contrary, it was enough to get a judgment against a property owner. Now, that affidavit isn’t enough.
The 8th District Court of Appeals reversed the trial court’s decision, and said the mechanic’s liens, by themselves, were not sufficient proof that the lien amounts were due or owing, and the sworn statements in the liens, without more, were not enough to prove that the liens were valid. The court reversed the trial court, meaning that the case goes back to the original court (unless it is appealed again or reconsidered), and the case moves forward as if the original decision had not occurred.
Why this is Important
This is good news for consumers and property owners, but bad news for contractors. If the property owner can show that the contractor “did not provide labor or materials for a large part of the improvements specified in the contract,” then the contractor may now be required to go above and beyond their previously burden to prove those damages, and prove that the lien is actually valid. Even if the property owner can’t do this, contractors cannot simply rely on the lien as proof of the lien amount.
The 8th District’s decision is important because it declared that an affidavit stating that some work was done, or some materials were delivered, and a certain amount of money was owed is not enough, by itself, to prove the amount of money owed, or even that the work was completed. Usually, if the other side is not able to show the statements are false, or incomplete, that is all a business needs to show to get judgment in its favor. This decision changed the proof that contractors need to show in order to win their lien claims.
Now it appears that contractors have to show receipts, invoices, evidence of payments to subcontractors or material suppliers, time sheets, labor reports, payroll, equipment rental invoices, or other documents to substantiate their mechanic’s lien claims, at least in Cuyahoga County.
This will greatly increases the costs of lien foreclosure and collection lawsuits for contractors. Contractors will have to pay their attorney more to review and provide evidence of these damages, and if that isn’t enough, or that evidence is missing, they may need to pay expert witnesses to give opinions about the reasonable value of the work or materials. Expert witnesses can cost thousands or tens of thousands of dollars, and usually charge hundreds of dollars an hour, depending on the field and experience of the expert. Add on top of this the attorney costs to the contractor, and it may become financially impossible or irrational for contractors to sue to collect smaller amounts of money from property owners. They may spend more than they can recover, and the return on investment would be negative.
For consumers, this means it is an uphill battle for contractors. However, if a property owner or consumer tries to defend themselves without hiring a lawyer, it is doubtful that they will be able to fully utilize and benefit from this decision, because they may fail to ask the questions needed during discovery to poke holes in the mechanic’s lien.