Background
In May 2023, Artisan Pools contracted to build an in-ground pool on the Siemers’ property for staged payment upon completion of each stage. The Siemers refused to pay the final installment in July 2023, citing dissatisfaction with Artisan’s work. After a heated September 15, 2023 conversation, Artisan’s owner K.C. Barth terminated the contract and announced his intent to file a lien. The required city inspection was not completed until January 2024.
On January 25, 2024, Artisan filed a construction lien identifying December 1, 2023 (the date Barth called for the city inspection) as the last date services were provided. Artisan never sent notice of the lien to the Siemers. When the Siemers’ attorney demanded release in February 2024, citing the lien’s invalidity due to untimely filing and lack of notice, Artisan refused. Artisan then sued for lien foreclosure; the Siemers counterclaimed for bad faith lien under Nebraska’s Construction Lien Act.
The district court granted Artisan a directed verdict on its foreclosure claim due to the failure to provide notice, but it denied the Siemers’ bad faith counterclaim, finding no evidence that Artisan knew the lien was invalid or acted in reckless disregard of such facts.
The Court’s Holding
The Nebraska Court of Appeals affirmed, holding that the Siemers failed to prove bad faith under Neb. Rev. Stat. § 52-157. Under Nebraska law, a claimant acts in bad faith only if it either knows its lien is invalid or acts with reckless disregard of facts showing invalidity. An act cannot be bad faith if unintentional or based on honest mistake. Proof of invalidity alone is insufficient.
Regarding timeliness: Although the lien was ultimately invalid (filed more than 120 days after substantial completion), Barth honestly believed December 1, 2023 qualified as the final date of services because the Siemers had insisted they would not pay until the city inspection was completed. He called the city inspector on December 1 and waited 45 days before filing. The court found this belief credible and reasonable under the circumstances.
Regarding notice: Although Artisan violated the statutory requirement to send a copy of the lien within 10 days, Barth mistakenly believed that notice from the county register of deeds satisfied the requirement and that he could not have sent notice immediately since he did not receive a copy of the recorded lien until approximately one week after filing. This honest misunderstanding of the law did not constitute bad faith. The Siemers’ demand letters did not provide factual proof of invalidity sufficient to impose a duty on Artisan to investigate its position.
Key Takeaways
- Bad faith requires knowledge or reckless disregard—not mere invalidity. Property owners cannot recover bad faith damages simply by proving a lien was invalid.
- Honest mistakes of law, even unreasonable ones, do not constitute bad faith under the Nebraska Construction Lien Act.
- A lienholder’s reasonable interpretation of contractual obligations (e.g., that an inspection constitutes a final service date when the owner insisted on it) protects against bad faith liability.
- Demand letters alleging invalidity do not automatically put a lienholder on notice of actual invalidity or create a duty to release without further factual proof.
Why It Matters
This decision reinforces a high bar for bad faith lien claims in Nebraska and provides meaningful protection for contractors. Mechanics’ lien statutes allow contractors to secure payment, but they also impose strict procedural requirements. This case holds that while contractors must comply with those requirements, an honest mistake in interpreting them—even one that renders the lien technically invalid—cannot support a bad faith damages claim. The ruling clarifies that property owners alleging bad faith must do more than point to procedural defects; they must show the contractor knew of those defects or recklessly ignored facts revealing them.
For practitioners, the decision emphasizes that contractors’ good-faith reliance on their own reasonable interpretation of contract terms, inspection requirements, and statutory notice procedures will likely defeat bad faith claims, even when that interpretation proves legally incorrect. However, contractors should not view this as a free pass to ignore statutory requirements—the lien will still be unenforceable, and clear statutory violations could support bad faith liability if the contractor’s knowledge or recklessness is otherwise proven.