The request came five and a half years into litigation and the denial resulted in summary judgment in favor of a shell contractor attempting to foreclose a $220,000.00 lien.
Scherf v. Tom Krips Construction, Inc. arises from a construction lien foreclosure lawsuit and payment dispute between a homeowner and shell contractor. In April 2015, the homeowners, who were also the owners of a construction company, entered into a $220,000.00 oral contract with the shell contractor to build a new home for them on their property. However, during the discussion of the contract terms, the homeowner told the shell contractor to send the invoices to his construction company, not to him personally.
Eight months later, the shell contractor completed its work at the property and submitted an invoice to the homeowner and the construction company for payment. A month later, when the shell contractor remained unpaid for its work, it recorded a $219,150.00 construction lien against the property. In the claim of lien, the shell contractor stated that its contract was between it and the homeowner.
Two months later, the shell contractor filed a lawsuit to foreclose its construction lien and for breach of contract against the homeowners, and other claims against the homeowners’ construction company. The complaint generally alleged compliance with all conditions precedent. In response, the homeowners filed a motion to dismiss, claiming that the foreclosure claim should be dismissed because the shell contractor did not serve a notice to owner on them prior to recording its lien. No other deficiencies in conditions precedent was cited by the homeowners.
Shortly thereafter, the homeowners filed for bankruptcy, delaying further litigation for over three years. After the shell contractor was granted relief from the bankruptcy stay to foreclose its lien, it amended its complaint against the homeowners to only include a claim for lien foreclosure against them. The shell contractor again alleged that its contract was with the homeowners directly and that it had generally performed all conditions precedent to the filing of the lawsuit.
The homeowners again filed a motion to dismiss, this time pro se, arguing that the lien was invalid because the contract was between the shell contractor and their construction company, not them personally. This motion was denied. The homeowners then filed a pro se answer to the amended complaint, indicating they were without knowledge as to whether the shell contractor had complied with any conditions precedent. They also filed a counterclaim, alleging that the lien was invalid for failure to serve a notice to owner and that the lien was fraudulent. This counterclaim was ultimately dismissed without prejudice.
A short time later the shell contractor moved for summary judgment. A month later, the homeowners engaged an attorney and the attorney sought leave to amend the answer and affirmative defenses filed by the homeowners to include a defense that the shell contractor had failed to provide a contractor’s payment affidavit in advance of filing its lawsuit. The court ultimately denied the motion to amend, stating:
This case was filed on April 27, 2016, and the Complaint was amended nearly four (4) years later on 3/31/2020, the Defendant answered the Amended Complaint. The case was placed on the November, 2021, trial docket and not reached, it is now on the January, 2022, trial docket. On November 23, 2021, five and a half years post filing, the Defendant filed a motion to amend their affirmative defenses to add failure to comply with conditions precedent, which was clearly obvious since the filing of the Complaint. A defense if raised at that time was possibly curable. The Defendants['] request at this juncture in the matter is a “gotcha” tactic.
The homeowners appealed.
On appeal, Florida’s Fourth District Court of Appeal, affirmed the denial, finding that “[t]he circuit court did not abuse its discretion in denying the motion to amend based on the combination of the timeliness of the motion, the duration of the litigation, and the prejudice to [the shell contractor].” Specifically, the court noted that, in connection with raising this issue, the homeowners also shifted their position from claiming not to be in privity with the shell contractor, but to being in privity with the shell contractor. The court also recognized that allowing the amended was a substantial prejudice to the shell contractor because the statute of limitations had run, and if it had been timely asserted at the beginning of litigation, the shell contractor would have had seven months to cure it before the statute of limitations ran. Accordingly, the denial of the motion to amend, and the subsequently granted motion for summary judgment were affirmed.
While this case largely deals with procedural issues that come up in litigation, the key takeaway for contractors should be that they need to ensure they fully and properly comply with the requirements of Florida’s construction lien law. Missing one step in perfecting and filing a lawsuit to foreclose a construction lien can be fatal to what otherwise could be a successful lien foreclosure.