Tag Archives: show cause

DON’T ASSERT AS A COUNTERCLAIM TO A LIEN FORECLOSURE LAWSUIT AN ORDER TO SHOW CAUSE CLAIM

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If there is a construction lien on your property and you don’t like the lien, here are options to deal with the lien:

1. You negotiate a resolution a get a satisfaction of lien to record in the public records. Or, you can transfer the lien to the security of a lien transfer bond, but that just means the lienor would need to foreclose against the bond instead of the real property. In other words, the lien is collateralized by the lien transfer bond and not the real property so it does not resolve the lien.

2. You record a Notice of Contest of Lien to shorten the lienor’s statute of limitations to foreclose on the construction lien to 60 days. (See here.) If the lienor does not timely foreclose, then the lien is of no effect as a matter of law.  However, this does force the issue, meaning the lienor may file a lien foreclosure lawsuit sooner than later. (But, if they file the lawsuit sooner, then the lienor was always going to file the lawsuit later.)

3. You can file a lawsuit for an Order to Show Cause under Fla. Stat. s. 713.21(4) and force the lienor to file a lien foreclosure counterclaim within 20 days from service of the show cause summons. (See here.) The only time you’d really do this is if you want to initiate a lawsuit that you’d probably initiate no matter what. Otherwise, the Notice of Contest of Lien is more cost effective and more efficient.

In a recent case, Custom Homes By Triumph, LLC v. Sverdlow, 50 Fla.L.Weekly D1946a (Fla. 2nd DCA 2025), a lienor filed a lien foreclosure lawsuit.  The owner asserted a counterclaim that included the Order to Show Cause. The lienor didn’t timely respond to the counterclaim as the lienor was the one that initiated the lawsuit by filing the lien foreclosure lawsuit.  The trial court therefore dismissed the lien. Shocking outcome! The lienor appealed and prevailed for a couple of big reasons.

First, with the Order to Show Cause complaint, a lienor’s 20 days to respond is based on the receipt of a specifically worded show cause summons. Here, there was no summons because the owner asserted a counterclaim because, again, the lienor initiated the lawsuit.  Without the service of the summons, there is nothing that starts the 20-day clock.

Second, the lienor had already foreclosed. There was nothing for it to do. In response to an Order to Show Cause Complaint, a lienor needs to foreclose on the construction lien within the 20 days. But, here, the lienor already did so. (“The lienor’s obligation is to show cause “why his or her lien should not be enforced by action or vacated and canceled of record,” and the lien must be discharged only “[u]pon failure of the lienor to show cause why his or her lien should not be enforced or the lienor’s failure to commence such action before the return date of the summons.” [The lienor’s] complaint included a cause of action to foreclose its lien. And by seeking to foreclose its lien, [the lienor] was necessarily seeking to enforce it. So even if the clerk had issued a show-cause summons, [the lienor] had already completed one of the two alternative actions — “show cause . . . why [the] lien should not be enforced [by action]” or “commence such action” — that the summons would have directed it to accomplish, that is, commence an action to enforce its lien.” See Custom Homes By Triumph, supra (internal citations omitted))

Look, if you are considering the Order to Show Cause Complaint to deal with a construction lien, there is nothing to consider if the lien is already being foreclosed and you are not the plaintiff. You don’t get a “gotcha” after the lien is already foreclosed because the foreclosing lienor doesn’t respond to a needless claim. This was an appeal over an issue that should have never been an issue.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

HUH? ACTION ON CONSTRUCTION LIEN “RELATES BACK” DESPITE NOTICE OF CONTEST OF LIEN

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Not every case law you read makes sense. This sentiment goes to the uncertainty and grey area of certain legal issues.  It is, what you call, “the nature of the beast.”  You will read cases that make you say “HUH?!?” This is why you want to work with construction counsel to discuss procedures and pros / cons relative to construction liens.

An example of a case that makes you say “HUH” can be found in Woolems, Inc. v. Catalina Capstone Creations, Inc., 2023 WL 2777506 (Fla. 3d DCA 2023) dealing with a construction lien foreclosure dispute.

Here, a contractor filed a lawsuit against a subcontractor with a summons to show cause why the subcontractor’s construction lien should not be discharged.  This is a specific complaint filed under Florida Statute s. 713.21(4). This statute requires the lienor to essentially foreclose on its construction lien within 20 days after it was served with a “show cause” summons.  The subcontractor filed its answer and counterclaim but did NOT assert a claim to foreclose its construction lien.

Around the time of subcontractor’s answer and counterclaim, the contractor transferred the subcontractor’s lien to an all-cash lien transfer bond in accordance with Florida Statute s. 713.24. Once the lien transfer bond was recorded, the owner recorded a notice of contest of lien under Florida Statute s. 713.22. The notice of contest of lien shortens the limitations period to foreclose on a lien to 60 days.

The subcontractor did NOT timely foreclose its lien against the lien transfer bond and the general contractor moved to have its all-cash lien transfer bond returned, as it should do. The subcontractor filed its lien foreclosure against the lien transfer bond AFTER the 60-day window expired. The trial court, and affirmed by the appellate court, denied the general contractor’s request to have the lien transfer bond returned and allowed the subcontractor to assert its (dilatory) claim against the lien transfer bond claiming it related back in time to the subcontractor’s initial counterclaim.  HUH?!?

ISSUES GIVING RISE TO THE HUH

Here are the issues with this ruling:

  1. The subcontractor should have foreclosed its construction lien with the 20-day time period from receiving the summons to show cause. The case reflected the subcontractor asserted claims, but not the lien foreclosure claim subject to the summons to show cause. (The appeal did not discuss this point for reasons currently unknown.)
  2. Regardless of (1), the lien was transferred to a bond and a notice of contest of lien was recorded shortening the time period to foreclose the lien (as to the bond) to 60 days. There is case law referencing this procedure. Yet, the subcontractor still did not timely assert its claim against the lien transfer bond.
  3. The trial court applied the relation back doctrine which does nothing but completely water down the statutory purpose of a notice of contest of lien (not to mention the summons to show cause complaint).

RECOMMENDATIONS IN LIGHT OF RULING

In light of this ruling, here are my recommendations:

  1. If you are going to transfer a lien to a lien transfer bond, do it from the get-go. Then, record the notice of contest or pursue the summons to show cause complaint.
  2. If filing the summons to show cause complaint, wait for the 20-day time period to expire. If the time period expires, move to have the lien discharged before making the decision to transfer the lien to a lien transfer bond.
  3. If recording a notice of contest of lien, wait for the 60-day time period to expire before taking action.

The reality is that the procedure implemented in this case should have been fine but for the application of the relation back doctrine that makes you say HUH?!?

As mentioned, if dealing with a lien, please make sure to discuss strategic considerations with a construction counsel that can help navigate the process and advise on the pros and cons.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.