Goodman v. Del-Sa-Co Foods, Inc., 15 N.Y.2d 191 (1965)

Under Section 39-a of the New York Lien Law, a civil penalty for willful exaggeration of a mechanic’s lien is measured only by the amount of the willful exaggeration, not by the entire discrepancy between the lien amount and the amount actually due.

Summary

This case addresses the calculation of civil penalties under New York Lien Law § 39-a for the willful exaggeration of a mechanic’s lien. The plaintiff filed a lien for $22,804.68, but the court determined the amount actually due was $9,380.89. The trial court found the lien was willfully exaggerated but did not specify which items or amounts were exaggerated. The defendant sought attorneys’ fees but not a civil penalty. The New York Court of Appeals held that the penalty under § 39-a is limited to the amount of the willful exaggeration, not the entire difference between the lien amount and the actual debt. The case was remitted to the trial court to determine the specific amount of the willful exaggeration.

Facts

Del-Sa-Co Foods, Inc. (the lienor) filed a mechanic’s lien against Goodman (the owner) for $22,804.68, representing the alleged balance due for work performed and materials furnished.
After payments were credited, the trial court determined that only $9,380.89 was actually due to Del-Sa-Co Foods, Inc.
The trial court voided the lien, finding that it had been willfully exaggerated to some extent. However, the court did not make specific findings regarding which items were willfully exaggerated or by how much.

Procedural History

The trial court voided the mechanic’s lien.
The Appellate Division affirmed the trial court’s decision but the minority view was that the entire discrepancy should be recovered regardless of how much was due to honest mistake.
The New York Court of Appeals granted leave to appeal to clarify the interpretation of Section 39-a of the Lien Law.

Issue(s)

Whether the civil penalty under Section 39-a of the Lien Law for willful exaggeration of a mechanic’s lien is calculated based on the entire difference between the lien amount and the amount actually due, or only on the amount of the willful exaggeration.

Holding

No, because the penalty under Section 39-a is measured only by the amount of the willful exaggeration and not by any portion of the discrepancy due to honest mistake. The statute is penal in nature and must be strictly construed.

Court’s Reasoning

The Court of Appeals reasoned that Section 39-a should be read in conjunction with Section 39 of the Lien Law, which addresses the forfeiture of the lien itself due to willful exaggeration.
The court emphasized that inaccuracy in the lien amount, without willful intent to exaggerate, does not void the lien, citing Yonkers Builders Supply Co. v. Luciano & Son, 269 N.Y. 171 (1935).
The court rejected the argument that the plain language of Section 39-a mandates recovery of the entire discrepancy, regardless of whether it was all willful, calling such an interpretation an “absurdity.” They reasoned that the legislature intended to recompense the owner for the extra trouble and expense caused by a deliberately exaggerated lien, “in the amount by which the lien was thus exaggerated.”
The court relied on the principle that penalty statutes must be strictly construed in favor of the party upon whom the penalty is sought to be imposed. Quoting Osborne v. International Ry. Co., 226 N.Y. 421, 426, the court stated: “A statute awarding a penalty is to be strictly construed, and before a recovery can be had a case must be brought clearly within its terms.”
The court referenced Durand Realty Co. v. Stolman, 197 Misc. 208 (Sup. Ct. 1950), which held that damages are limited to the amount by which the lien is willfully exaggerated and nothing else.
The court found it lacked the power to make findings of fact about how much of the discrepancy was willful. Because the appellant had the burden of showing how large of a penalty he was entitled to, the court remitted the case for the trial court to make findings on the evidence or on new evidence to be taken.