How do I make a light source with night overlay in an isometric game?

I'm using a blue overlay layer with Multiply effect to create day-night cycle. I also have light sources like candles or torches that should illuminate a small area. I put a white circle on the overlay layer and it creates a nice light spot.

The problem is that the game is isometric and the light source may be partially behind a tree or some other object. How do I erase part of the light spot which is behind that object? Ideally I want to get something like this:

Here is a demo project:

dropbox.com/s/qco6vlzisxru9uk/NightLight.c3p

I guess one option is to put a blue silhouette of the tree on top of the light spot onto the overlay layer. But this will be a lot of work.. Hopefully there is an easier solution, something with a drawing canvas maybe?

Would you ever have "foreground" objects affected by light?

My idea would be to have all foreground objects on an upper layer. A darkness mask object on top of that layer with multiply effect on the object, and source in, with force own texture on the layer.

This will color all foreground objects with darkness, without affecting any layers below. This layer will not be affected by the light.

The middle layer below that will contain the white light objects. Set layer to non transparent, the background to the same color as the darkness mask, and apply multiply effect to the layer.

The bottom layer is your floor. Anything on this layer will be affected by the light layer.

Edit: Example - dropbox.com/s/8pplu6nkogp6yfc/lightlayersexample.c3p

You can always use an object for the middle layer too instead of the layer itself being the color.

Your Z-ordering should all happen on the uppermost layer, so that should be fine, assuming you never z-order below your floor.

The problem happens when you want something to be lit, but on top of a foreground object that you want not to be lit. If that's a thing that is possible...

Edit 2:

I guess never mind, there are tons of issues with this. It won't work if you want your light z-ordered along with the rest of your objects. It will also still look weird even if it is z-ordered along with everything else - for example if the light origin was above/behind the base of the tree, but extended past/below the tree, you would need a shadowed area.

Night mode is hard ><

Hope you don't mind if I leave this here for my own reference if I ever decide to revisit this gamasutra.com/blogs/SvyatoslavCherkasov/20181023/329151/Graveyard_Keeper_How_the_graphics_effects_are_made.php

Edit: At the very least, the first step is to have any given object affected by light, or not affected by light. This can be done with 2 layers with z-order preserved, as the light can be isolated by layer, and objects can be moved from layer to layer preserving their z-order by comparying y-position with the light. Unfortunately, each light would need to have it's own layer for a comprehensive solution.

The next level would be to control how much each object is affected by any given light. This would prevent jarring cutoffs for moving lights, although it is less of an issue for static lights. Might be able to design around the light per layer solution with static lights as well, as long as you don't have overlapping lights at different y positions with objects between them.

Bump mapping and shadows after that.