Construction Law

GC's President Not Personally Liable For Excessive Lien

By Tim Gordon

In JW Construction Co., Inc. v. Elliot, (Colo. App. Mar. 17, 2011), the Colorado Court of Appeals held, among other things, that a general contractor's president cannot be held personally liable when the corporation records a knowingly-excessive mechanics' lien.

The basic facts are this:  The trial court found that JW Construction Co. fabricated or altered three invoices that were attached as backup documentation for draw requests.  By doing so, JW Construction Co. breached the payment provision of the contract by requesting payment for more than its actual costs.  The trial court also found that JW Construction Co.'s president, Joseph Wodiuk, "had participated in the misrepresentations and concealments . . . ."  The owners terminated JW Construction Co., and paid the subcontractors directly.  JW Construction Co. then recorded mechanics' liens for the full amount of its outstanding draw requests, despite the fact that it had overstated its draw requests, and without accounting for the fact that the owners had paid subcontractors directly.

The trial court awarded the owners costs and attorneys fees for having defend against the excessive liens, and imposed liability against both JW Construction Co. and its president, Joseph Wodiuk.  But the Court of Appeals reversed as to Wodiuk.  According to the Court of Appeals, the excessive lien statute assigns liability only to "the person who files" the knowingly-excessive lien.  Here, the "person" who filed the lien was JW Construction Co., and not Joseph Wodiuk individually.  Although corporate actors can be held personally liable for torts committed by a corporation that they participate in, that reasoning does not apply to the statutory claim for having to defend against an excessive lien.

Full post as published by Colorado Construction Law on March 17, 2011 (boomark / email).