Construction Liens and Deficiency Judgments

When a contractor or subcontractor does not get paid, there is likely to be a legal proceeding involving a construction lien. The unpaid contractor who holds the lien may foreclose on the property. And even then, they may still go after the project owner or general contractor for any remaining unpaid balance.

Unpaid Subcontractor Seeks to Enforce Judgment Against Attorney

A recent case from the Florida Fifth District Court of Appeals, Frantz v. EM Paving Corp., illustrates how deep this type of litigation can go. This case arose from the construction of a building in Lake County. The owner hired a general contractor to oversee the project. The general contractor, in turn, hired a subcontractor to provide labor and materials.

Apparently, the subcontractor was not paid in full for its work. This prompted the subcontractor to file a construction lien, and subsequently a lawsuit to foreclose on said lien. A Florida judge eventually entered a default judgment of foreclosure against the general contractor for $63,578.61, in addition to legal fees and court costs. The property was subsequently sold at a foreclosure sale to the subcontractor for $100. However, the subcontractor apparently lost title to the property shortly thereafter, and never recovered the full value of the original debt owed.

Many years later, the subcontractor went back to court. This time, it sued the general contractor’s attorney. The subcontractor alleged the attorney continued to hold funds belonging to the general contractor. The subcontractor therefore asked for a judgment of garnishment against the attorney.

The trial court sided with the subcontractor and issued the garnishment. On appeal, the attorney argued that this was improper. He argued the subcontractor needed to obtain a separate “deficiency judgment” against the general contractor first. In other words, the subcontractor could not seek a garnishment order based on the original judgment, which only extended to the foreclosure on the property.

The Fifth District agreed with the attorney’s reading of the law. “If a trial court issues two judgments for the same debt–one monetary judgment and one judgment of foreclosure–and the prevailing party chooses to foreclose first,” as was the case here, “that party must obtain a deficiency judgment before subsequently collecting on the remaining debt.” This is necessary, the appeals court said, to prevent a scenario where a party “will recover twice for the same debt.”

The Fifth District also took issue with the trial court’s finding that the subcontractor “received no value from the foreclosure sale.” At a minimum, the subcontractor received at least $100 in value–the amount it paid at the foreclosure sale. But in any event, the subcontractor never presented any evidence to the trial court on this issue.

Speak with a Florida Construction Attorney Today

As you can see, the law governing construction liens and the collection of judgments can get quite complicated. That is why it is important to work with an experienced Florida construction lien lawyer who can provide you with skilled representation in this area. Contact Linkhorst & Hockin, P.A., to schedule a case analysis with a member of our team today.

Source:

5dca.org/content/download/572980/6476911/file/190379_1259_01312020_08195735_i.pdf

https://www.floridahardhatlaw.com/how-does-interest-work-on-a-florida-construction-lien/