Opinion
26230/05.
Decided August 27, 2008.
Jon A. Lefkowitz, Esq., Brooklyn, NY, Attorney for Plaintiffs.
Martin Kurlander, Esq., Brooklyn, NY, Attorney for Kramer.
Leon Borstein, Esq., Borstein Sheinbaum, New York, NY, Attorney for Berkovitch, VooDoo.
Ahava Medical Rehabilitation Center, LLC ("Ahava"), Brooklyn Community Management, LLC ("Community") and Lebgutt Realty, LLC ("Lebgutt") (collectively, plaintiffs) sued defendants for breach of a contract for demolition and renovation of the building located at 2555 Nostrand Avenue in Brooklyn, New York ("Property"). This court previously dismissed plaintiffs' first (violation of General Business Law § 349), third (fraudulent representation), fourth (negligent misrepresentation), fifth (rescission and restitution), and seventh (tortious interference) causes of action on August 21, 2006. The plaintiffs' remaining causes of action at issue at trial were the second (breach of contract against Alexander Berkovitch ["Berkovitch"], president of VooDoo Contracting Corp. dba Universal Contracting ["VooDoo"]), sixth (breach of contract against VooDoo) and Kramer Co., Inc. ["Kramer"]), and eighth (discharge of mechanics lien) causes of action, and Kramer's counterclaim (sounding in breach of contract). A bench trial was held in this matter on February 25, 29, March 3, 4, 6 and 10 of 2008.
BACKGROUND
Plaintiffs operate a medical diagnostic and treatment center. In 2003, plaintiffs sought to renovate their medical facility in compliance with Article 28 of the Public Health Law in order to receive a higher rate of compensation by New York State for visits by Medicaid patients. Yisroel Lebovits ["Lebovits"], "manager" of Community and "owner" of Ahava and Lebgutt, had known Nachman Kramer, principal of Kramer, for many years through a mutual bus commute. When plaintiffs were considering renovating their facility, Lebovits spoke with Kramer about the project during the bus rides. After some discussions between Lebovits and Kramer, Kramer agreed to assist plaintiffs in the renovation of the Property. Kramer had worked with Berkovitch on a prior construction project and introduced Berkovitch to the plaintiffs. VooDoo began construction and renovation work on the Property in January of 2005. After months of work on the Property, disputes arose as to the cost of the renovations and Kramer's role in the project.
Plaintiffs' third amended complaint alleged that Kramer was a consultant on the project and maintained either a partnership or business relationship with VooDoo. Plaintiffs alleged that they "hired defendants to provide them with construction on their building that would be approved by the State in accordance with Article 28 of the Public Health Law and defendants promised to provide such construction. Plaintiffs fully performed under the contract, and duly paid $601,779.00 to defendant [VooDoo] or Kramer, and their designees. However, the defendants breached the contract. . . ."
Kramer's counterclaim alleged the following facts: Plaintiffs retained Kramer "to obtain estimates and contractors to do construction and alteration work in connection with an alteration of the [Property]"; "Kramer obtained estimates and thereafter retained a contractor on behalf of Plaintiffs" to perform renovation contracting work on the Property; "the agreed price and reasonable value for Kramer's services was 33-1/3% of the amount of the work to be performed and actually performed by the contractor." Kramer claimed that plaintiffs retained VooDoo "as a result of Kramer's efforts" to perform the contracting work and VooDoo then completed renovation work in the sum of $679,530.00. Kramer counterclaimed for $226,510.00, one third of the alleged sum charged to plaintiffs by VooDoo.
On July 20, 2005, VooDoo served Lebgutt with a Notice of Mechanic's Lien on the Property for unpaid labor and material in the amount of $129,530.00 (defendant's exhibit P). Plaintiffs commenced this action by filing a summons and complaint on August 24, 2005. The third amended complaint, filed on January 27, 2006, which included the eighth cause of action for the discharge of the lien, alleged that "Defendants Berkovitch and Voodoo also caused there to be placed on the property an unjustified mechanic's lien for $129,530.00 which plaintiffs do not owe, and defendants have no valid lien by reason of the character of the labor or materials furnished and for which a lien is claimed." Berkovitch and VooDoo filed an answer to the third amended complaint on September 22, 2006. The answer denied all of the plaintiffs' allegations as to the lien listed in the eighth cause of action and did not contain any counterclaims, allegations as to the lien, or demands for judgment upon the foreclosure of their lien.
TRIAL
At trial, Lebovits testified that plaintiffs hired Kramer in January or February of 2003 and Kramer agreed to do everything that was necessary for the building to become compliant with Article 28. However, Kramer testified that he was not familiar with New York Health laws, including Article 28 certification requirements, and he is a merchant in a textile company. Berkovitch testified that none of the construction work was performed by Kramer. According to the testimony of Chanina Hefter, assistant to Lebovits, plaintiffs hired a consulting firm other than Kramer to assist in obtaining the Article 28 license (February 25, 2008 transcript at 63). All of the correspondence introduced at trial from the Department of Health regarding the Property's Article 28 application was addressed to "Consultant" Monte Edelstein of Strategic Healthcare Solution, LLC (defendant's exhibit E; plaintiff's exhibits 6, 9, 10, 11). However, Mr. Edelstein was not presented as a witness at trial and, other than Mr. Hefter's brief testimony as to the hiring of a "consulting firm," no evidence was presented as to what Mr. Edelstein's responsibilities included as a "consultant" or at what point Mr. Edelstein ceased working as a consultant for plaintiffs.
Plaintiffs introduced two invoices from 2003 issued by Kramer to Community (plaintiff's exhibit 18). The first invoice, dated June 10, 2003, lists an amount due of $120,000.00 for the "Consulting Fee For management of facilities" while the second, dated October 23, 2003, lists an amount due of $100,000.00 for the "Consulting Fee For article 28." Plaintiffs introduced two checks issued to Kramer by Community in 2003, prior to the commencement of any construction by VooDoo, for $100,000 and $120,000 respectively (plaintiff's exhibit 12). Kramer testified that he did not receive these checks until 2004 and that he gave $180,000.00 of the proceeds to Berkovitch at the request of Lebovits because Lebovits claimed he was short on money, presumably retaining $40,000 for himself. While Kramer did not produce any documentary evidence of these payments to Berkovitch at trial, plaintiffs did not dispute this assertion (March 10, 2008 transcript at 181).
Plaintiffs also introduced two checks issued in 2003 from Community directly to VooDoo for a total of $202,000.00 (plaintiff's exhibit 12). Berkovitch testified that he received the checks issued to VooDoo in January of 2004 from Kramer and when Berkovitch was notified by Kramer that the project was approved in April of 2004, the checks were deposited.
At trial, plaintiffs introduced a letter that was addressed to the New York State Department of Health Bureau of Architectural and Engineering Facility Planning (plaintiff's exhibit 4). This letter, signed by Lebovits as "Applicant" on August 5, 2004 and Berkovitch as "Construction Manager" on August 11, 2004, indicated that the "maximum cost recognized for the Capital Cost component of the reimbursement rate, regardless of any future over-run will be: [itemization of component costs] Total Project Costs $601,779." Lebovits testified that he believed that this document was a written contract among the parties representing the total price for all work to be completed on the facility. The court does not find Lebovits' testimony to be credible. This court previously held on August 21, 2006 that this document "does not constitute an agreement between Berkovitch and Ahava" ( Ahava Med. Rehabilitation Ctr., LLC v Berkovitch, Sup Ct, Kings County, August 21, 2006, Demarest, J., Index No. 26230/05). The court reiterated this holding in it's decision at the conclusion of the trial by indicating that the court has "previously ruled that this [document] . . . is not, and never was intended to be, a contract among the parties, setting forth a specific amount to be confirmed and committed cost of this job" (March 10, 2008 transcript at 181). Rather, the import of this document appears to be to cap any recovery available from the government for costs incurred by plaintiffs.
Berkovitch testified that he began working on the Property in January of 2005, that he was to follow the construction plans provided by the architect, Sandor Weiss ("Weiss"), and that he repeatedly explained to Lebovits that his fee for the project was 20% of the prices charged by the subcontractors used by Berkovitch. Lebovits denied that Berkovitch ever discussed this 20% fee arrangement with him. Berkovitch testified that he did not retain Weiss as architect for the project and that, after beginning work, Berkovitch spoke with Lebovits about problems with Weiss' plans due to discrepancies between the actual property and the plans. Kramer testified that he consulted with Weiss regarding compliance with Article 28 but Weiss was hired by Lebovits prior to Kramer becoming involved with the project. Weiss was not named as a party in this action nor was he presented as a witness at trial. No evidence was presented at trial as to the requirements for a medical building to be certified as an Article 28 facility pursuant to the Public Health Law or what, if any, additional work would have been necessary for the Property to meet the Article 28 certification requirements.
Defendants introduced into evidence a hand written document on Kramer's letterhead (defendant's exhibit R). The word "ESTIMATE" is listed on the top above the phrase "SOLD TO YISROEL LEBOVITS." Lebovits testified that he received the estimate from Kramer on January 25, 2005. The undated estimate included itemized work to be completed on the Property with prices that added up to a total of $792,000. On the line below the $792,000 total, the estimate states, "PLUS FEE FOR KRAMER" and to the far right of that phrase, "$800,000" is listed. Kramer testified that defendant's Exhibit R was an estimate of the cost of the project, that Exhibit R was not an invoice, that he was to receive one third of everything spent on the project and the $800,000 estimate did not include his fee. Defendants also introduced a modification of this estimate that was faxed from Community to Kramer on May 5, 2005 (defendant's exhibit Q). Lebovits testified that he responded with this modification the day after receiving the fax from Kramer. The handwritten modified estimate included the phrases, "IF MORE YOUR RESPONSIBILITY IF LES [ sic] MY SAVING," and "THE WHOLE BUILDING WILL BE ACCORDING TO ARTICLE 28 ACCORDING TO PLAN." The $800,000 notation was also crossed out and above that, immediately to the right of the "$792,000 =" notation was the amount $750,000. Lebovits testified that he made the modifications to the estimate contained in defendant's Exhibit Q and agreed to pay Kramer $750,000.00 for the work by sending the modified estimate to Kramer. Berkovitch testified that prior to the present lawsuit, he had never seen defendant's Exhibits Q or R and never discussed an $800,000.00 estimate with Kramer.
On April 22, 2005 and May 2, 2005, Community issued checks to VooDoo for $31,200.00 and $46,800.00, respectively (plaintiff's exhibit 12). Lebovits testified that VooDoo sent Community an invoice dated May 26, 2005 with an outstanding balance of $179,530.50 on a total bill of $679,530.50 (defendant's exhibit N). Lebovits testified that Kramer recommended that Lebovits pay Berkovitch $50,000 and the work would be completed. On June 1, 2005, Community issued a check to VooDoo for $50,000.00 (plaintiff's exhibit 12).
On June 9, 2005, Lebovits sent a letter to Kramer stating "[o]n January 26, 2005 we reached an agreement totaling $750,000.00 which would cover in full the complete renovation and construction (according to Article 28 requirements) of the three floors at [the Property]. . . . I will hold you personally accountable for these losses" (defendant's exhibit K). However, Lebovits testified at trial that he meant both Berkovitch and Kramer would be personally liable. Berkovitch faxed Lebovits a letter on June 23, 2005 indicating that "the job is stopped due to the lack of progress payment. . . . As per our conversations, we have agreed that the punch list on the 2 floors needs to be completed" (defendant's exhibit O). In response, Lebovits sent Kramer a letter dated June 23, 2005 stating, "I received a letter today from Alex Berkovitch that you will find attached regarding the uncompleted work that you were doing for me at my facility. You have received from me up till now enough money that the scope of work that should have been done be completed" (defendant's exhibit M). However, Lebovits testified at trial that he didn't know if he received the Berkovitch letter of June 23, 2005 and he was unaware of any punch list. The court does not find this testimony by Lebovits to be credible given the many contradictions and inconsistencies in the evidence.
Kramer's counsel argued that there was "no proof of an actual contract between Mr. Kramer and Mr. Lebovits" presented at the trial (March 10, 2008 transcript at 187). However, Kramer's counsel subsequently argued that Kramer was entitled to one third of the amount spent on the construction based on an oral contract with Lebovits (March 10, 2008 transcript at 191). Kramer chose not to call any witnesses, including its president Nachman Kramer, to present any evidence in support of the counterclaim. Kramer's only testimony was presented as part of plaintiffs' case.
VooDoo represented to the court that it regarded the instant lawsuit "as the action required under the statute on the mechanics lien, and the amount of the reasonable value of the work, labor and services to be determined during the course of [the] trial" (March 10, 2008 transcript at 177). As the court noted on the record, Berkovitch and VooDoo did not cross claim or make a motion to amend their answer to demand a judgment against plaintiffs and the court declined to permit such a motion at the conclusion of the trial (March 10, 2008 transcript at 182).
At the conclusion of the bench trial, upon the evidence adduced from all parties, this court dismissed plaintiffs' second and sixth causes of action as to Berkovitch and VooDoo upon the plaintiffs' failure to sustain their burden to prove a breach of contract with respect to those defendants. The court held that there was no evidence to support a finding that Berkovitch or VooDoo were in partnership with Kramer. Whereupon, Kramer moved to dismiss the sixth cause of action, VooDoo and Berkovitch moved to dismiss the eighth cause of action, plaintiff moved to dismiss Kramer's counterclaim, Kramer moved to amend its counterclaim to conform to the proof adduced at trial to recover $180,000.00 from plaintiffs, and plaintiffs moved to vacate the lien upon VooDoo's failure to commence an action to foreclose the lien within a year of filing the notice of lien. The court reserved decision on plaintiffs' sixth cause of action as to Kramer, plaintiffs' eighth cause of action and Kramer's counterclaim. The parties were directed to submit memoranda of law by April 1, 2008.
DISCUSSION
The evidence presented at trial demonstrated that the plaintiffs and Kramer maintained an agency relationship whereby Kramer was an agent for plaintiffs. Plaintiffs relied on Kramer to act as an intermediary between plaintiffs and Berkovitch in the Article 28 renovation project. However, based on the evidence adduced at trial, Kramer was only granted limited authority in his agency capacity. As a consultant, Kramer introduced VooDoo to plaintiffs and was in communication with plaintiffs and VooDoo throughout the renovation process. However, Kramer did not hire Weiss, who created the architectural plans to be followed by VooDoo, and there was no testimony suggesting that he was expected to hire another architect to either create new plans in compliance with Article 28 or modify Weiss' existing plans. According to Berkovitch's credible testimony, he approached Lebovits directly regarding inadequacies in Weiss' architectural plans, without Kramer being present, and Lebovits asked Berkovitch, not Kramer, for the recommendation of a new architect. When Berkovitch needed specifications for items to be installed on the Property, such as fixtures, Berkovitch approached Lebovits to make the selections. All of VooDoo's letter correspondence introduced at trial was addressed directly to plaintiffs, with copies occasionally sent to Kramer. Furthermore, all of the correspondence from the State of New York Department of Health regarding Article 28 approval is addressed to the consultant Monte Edelstein and not Kramer. Therefore, upon review of the evidence presented at trial, Kramer is found to have been an agent of plaintiffs with the limited authority to recommend a contractor who could complete a renovation project in compliance with Article 28 and to act as a liaison between plaintiffs and VooDoo throughout the Article 28 renovation project.
At Lebovits' request, Berkovitch introduced him to another architect with whom Berkovitch had previously worked, Victor Famulari, who specialized in medical architecture, including Article 28 projects, when it became apparent that there were problems with Weiss' plans. Although Famulari submitted an estimate for the work (plaintiff's exhibit 2), he was not ultimately retained to work on the Property (Famulari Testimony February 25, 2008 transcript at 49).
Despite the proof of a limited agency relationship between plaintiffs and Kramer, both plaintiffs and Kramer failed to meet their respective burdens to demonstrate a breach of contract by the opposing party by the preponderance of evidence. Even assuming the parties did demonstrate that Kramer actually entered a contract with plaintiffs as an Article 28 consultant, it was necessary for each party to demonstrate that Kramer either did or did not adequately perform as an Article 28 consultant. Without providing any evidence as to what work was necessary for the Property to become compliant with Article 28 or evidence as to why the Property was or was not compliant with Article 28 at the conclusion of the renovation, this court is unable to determine whether Kramer did or did not successfully perform as an Article 28 consultant. Neither party presented any witnesses who could testify as to the requirements for compliance with Article 28. Without having established this basic threshold issue, the plaintiffs did not prove by the preponderance of evidence that Kramer breached the alleged contract as an Article 28 consultant. Similarly, Kramer did not prove by the preponderance of evidence that he fully performed his alleged contract as an Article 28 consultant and thus became entitled to the claimed compensation.
Furthermore, plaintiffs did not prove that plaintiffs and Kramer entered a written contract. Although Plaintiffs argue that the letter to Kramer on January 26, 2005 (defendant's exhibit K) indicated that Lebovits' modification of Kramer's estimate represented a "settlement" of $750,000, this response did not constitute a written contract with Kramer. Where "an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract" ( Cobble Hill Nursing Home, Inc. v Henry Warren Corp., 74 NY2d 475, 482 — 483 [1989]; see also Joseph Martin, Jr., Delicatessen, Inc. v Schumacher, 52 NY2d 105, 109). The terms of defendant's Exhibit Q are also insufficiently definite to be considered an enforceable contract. Defendant's Exhibit Q contains the phrase, "PLUS FEE FOR KRAMER." It is unclear whether this "fee" was intended to be included in the $750,000 amount or whether this was some amount in addition to the $750,000. If it was an additional amount, there is no indication of how much that fee would be or how it would be determined. Furthermore, the phrase "IF MORE YOUR RESPONSIBILITY IF LES [ sic] MY SAVING" is unclear. It is noted that, pursuant to VooDoo's final invoice of May 26, 2005, the total charges for the work performed by VooDoo was $679,530.50 (plaintiff's exhibit 17). The evidence is that several of the items contained in Kramer's estimate of January 26, 2005 were never performed although the evidence does not address how the variations in performance would impact the alleged "contract." Accordingly, Lebovits' response to Kramer's estimate is not reasonably certain in its material terms and therefore does not constitute a legally enforceable contract ( see Cobble Hill, 74 NY2d at 482 — 483). Kramer does not contend that there is a written contract between plaintiff and Kramer (March 10, 2008 transcript at 187; Kramer's post-trial brief at 8).
Similarly, neither party demonstrated that a valid enforceable oral contract had been created. "Before a court will impose a contractual obligation based on an oral contract, the proponent must establish that a contract was made and that its terms are definite" ( Muhlstock v Cole, 245 AD2d 55 [1st Dept 1997]; see also Charles Hyman, Inc. v Olsen Indus., 227 AD2d 270, 275 [1st Dept 1996]; Cobble Hill, 74 NY2d at 482). Despite arguing in their post-trial brief that plaintiffs and Kramer entered an oral contract, plaintiffs did not offer evidence of the precise terms of an oral contract at trial. Lebovits' testimony that there was a written contract for a price of $601,779 for the entire project contradicts plaintiffs' current argument for the formation of an oral contract, as well as Lebovits' contention, based upon defendant's Exhibit K, that Lebovits believed he had "reached an agreement totaling $750,000.00" by responding in writing to Kramer's estimate with defendant's Exhibit Q. Kramer never responded to either Exhibit Q or to Exhibit K. As Lebovits did not alter the phrase "PLUS FEE FOR KRAMER" contained in Exhibit Q, it is not clear whether the $750,000 price was to include Kramer's fee or how that fee would be determined. This unilateral response to Kramer's estimate, with incomprehensible terms and no proof or even allegation of a response by Kramer, demonstrates that there was no meeting of the minds in the formation of any contract.
Furthermore, Lebovits did not testify that he entered an oral agreement with Kramer. Although Kramer testified that Lebovits orally agreed to pay Kramer an amount equal to one third of all costs of the project, this testimony was not credible and is not supported by the documentary evidence. For example, the estimate from Kramer in Exhibit R does not indicate that his fee would be based on a percentage of the total costs of the project, what percentage his fee would represent, or whether his fee was simply the flat rate of $8000, which would explain increasing the total estimate from $792,000 to $800,000 on defendant's Exhibit Q. Nor did Kramer produce any evidence at trial that he ever demanded that plaintiff pay him one third of the total costs of the project after the project commenced or even after VooDoo stopped working on the project. Kramer's counsel even stated at the conclusion of trial that he saw "no proof of any actual contract between Mr. Kramer and Mr. Lebovits" (March 10, 2008 transcript at 187). Therefore, although Kramer was a limited agent of plaintiffs for the purpose of assisting in the Article 28 renovation project, the parties have failed to demonstrate definite terms as to what services Kramer promised to perform and how much Kramer was to be compensated in consideration of the services. Plaintiffs' sixth cause of action is dismissed against Kramer.
While Kramer moved to amend the counterclaim to conform to the proof adduced at trial and argues that it is "entitled to be reimbursed on the grounds of money advanced by Plaintiff on behalf of Lebovits in the sum of $180,000" (Kramer's post-trial brief at 10; see also March 10, 2008 transcript at 187), the evidence does not support this claim. The totality of the evidence indicates that, as plaintiffs' agent, Kramer was co-ordinating the construction to be performed by VooDoo. Plaintiffs transferred a total of $220,000 to Kramer prior to commencement of any work, $180,000 of which was paid over to VooDoo at an undetermined date, apparently as payment for work performed by VooDoo. With no proof of the terms of an agreement between Kramer and plaintiffs regarding compensation, it is incomprehensible that Kramer was meant to retain $220,000 for himself. Clearly, Kramer received these funds from plaintiffs in order to secure the services of VooDoo and the $180,000 were not funds of Kramer, but of plaintiff, that were temporarily conveyed to Kramer for transmittal to VooDoo. It is again noted that Kramer retained $40,000, a substantial sum, in compensation for his limited "consultation" services. Upon the evidence adduced, this more than adequately compensated Kramer in quantum meruit. The counterclaim is dismissed as not proved.
Plaintiffs' eighth cause of action to discharge VooDoo's mechanic's lien pursuant to Lien Law § 19 must be granted as VooDoo did not commence an action to foreclose the lien, secure an order continuing the lien, or become a party defendant in an action to enforce another lien within one year of filing the notice of lien.
VooDoo argues in their post-trial brief that plaintiffs did not allege a claim for the discharge of the lien pursuant to Lien Law § 19 "on the ground that an action to foreclose was not brought within one year" in the complaint and that as the plaintiffs "did not present any evidence of failure to foreclose in their case, Plaintiffs' have waived this eleventh hour argument" (VooDoo post-trial memoranda of law at 3 n 3). However, these arguments are unavailing. First, plaintiffs' third amended complaint specifically states, "8th CAUSE OF ACTION: LIEN LAW Article 19 and 39." While the complaint does not specifically allege that an action to foreclose was not brought within one year, one year had not yet elapsed from the date of the notice of lien when the third amended complaint was filed and thus plaintiff could not have made such an allegation in their complaint. Second, pursuant to CPLR 4401, "any party may move for judgment with respect to a cause of action or issue upon the ground that the moving party is entitled to judgment as a matter of law, after the close of evidence" where the grounds for the motion are specified. In response to VooDoo's motion to dismiss the eighth cause of action at the conclusion of the trial, pursuant to CPLR 4401, plaintiffs' counsel stated "the lien has to be dismissed because Lien Law Section 19 says that if the lienor did not institute an action to foreclose on the lien within one year, then the lien has to be dismissed" (March 10, 2008 transcript at 167). Finally, dismissal of the eighth cause of action pursuant to Lien Law § 19 may be determined as a matter of law and plaintiff was, therefore, not required to resolve any issues of fact through evidence presented at trial.
Pursuant to Lien Law § 19:
A lien other than a lien for labor performed or materials furnished for a public improvement specified in this article, may be discharged as follows:
. . .
(2) By failure to begin an action to foreclose such lien or to secure an order continuing it, within one year from the time of filing the notice of lien, unless an action be begun within the same period to foreclose a mortgage or another mechanic's lien upon the same property or any part thereof and a notice of pendency of such action is filed according to law. . . .
Lien Law § 17 similarly provides:
No lien specified in this article shall be a lien for a longer period than one year after the notice of lien has been filed, unless within that time an action is commenced to foreclose the lien . . .; or unless an extension to such lien . . . is filed with the county clerk of the county in which the notice of lien is filed within one year from the filing of the original notice of lien, continuing such lien. . . . In the event an action is not commenced to foreclose the lien within such extended period, such lien shall be extinguished unless an order be granted by a court of record or a judge or justice thereof, continuing such lien. . . . If a lienor is made a party defendant in an action to enforce another lien, and the plaintiff or such defendant has filed a notice of the pendency of the action within the time prescribed in this section, the lien of such defendant is thereby continued. Such action shall be deemed an action to enforce the lien of such defendant lienor. (emphasis added)
The Second Department Appellate Division has determined that where the lienor fails "to preserve its lien by seeking a court order extending the lien, or by commencing an action to foreclose upon the lien . . . the lien expire[s] by operation of law . . .one year after it was filed" pursuant to Lien Law § 17 ( In re Flintlock Realty Constr. Corp., 188 AD2d 532 [2d Dept 1992]). Similarly, Lien Law § 19 [2] has been held to "provide for the extinguishment, cancellation or discharge of a lien automatically or by operation of law, upon the lapse of the one-year period" ( Cook v Carmen S. Pariso, Inc., 287 AD2d 208, 212 [4th Dept 2001]). It is undisputed that VooDoo did not secure an order continuing the lien prior to July 21, 2006. Therefore, unless the present action satisfied VooDoo's requirement of commencing an action to foreclose the lien or VooDoo was made a party defendant in an action to enforce another lien, the lien expired by operation of law on or about July 21, 2006 pursuant to Lien Law §§ 17 and 19 [2].
Although VooDoo argued at trial that they "have treated this lawsuit . . . as the action required under the statute on the mechanics lien" (March 10, 2008 transcript at 177), VooDoo failed to request the affirmative relief required for the commencement of an action foreclosing the lien pursuant to the Lien Law. The present action was not brought by plaintiffs to enforce the lien under Article 3 of the Lien Law. Rather, plaintiffs brought the action, among other reasons, to discharge the lien under Article 2 of the Lien Law. Where a plaintiff's action does not seek to enforce a lien, the Court of Appeals has held that a defendant may preserve it's lien, pursuant to the Lien Law, by "alleg[ing] all the facts necessary as in an original action for the foreclosure" in it's answer ( Lincoln Nat'l Bank v John Peirce Co., 228 NY 359, 369 (holding that by "[i]nterposing an answer in which it alleges its lien on the real property described in the complaint as a defense and as a counterclaim and for the purpose of the foreclosure of its said lien and therein alleging all the facts necessary as in an original action for the foreclosure thereof, and demanding affirmative judgment for the foreclosure of its lien, and it having filed a lis pendens also as in an original action to foreclose its lien and having served a copy of its said answer upon all the parties to the action more than twenty days before the trial, [the defendant] should be deemed to have commenced an action to foreclose such lien within the meaning of the Lien Law"); see also, Regal Lumber Co. v Buck, 157 Misc 2d 376, 380 [Chautauqua County Ct 1993] (noting, "[i]n Lincoln, the defendant lienor did in fact appear, answered, alleged all facts necessary to foreclose its own lien and filed a lis pendens, and was thereby deemed to have commenced an action to foreclose a lien and saved his lien")). However, where a defendant lienor only raises a counterclaim seeking monetary damages without demanding to foreclose on the lien in the answer, the answer has been held to be insufficient to meet the requirement of commencing a foreclosure action pursuant to the Lien Law ( Pino v Harnischfeger ,42 AD3d 980, 982-983 [4th Dept 2007]) (holding, "[a]lthough plaintiffs may have acknowledged the existence of a valid mechanic's lien, such an acknowledgment is not the equivalent of an acknowledgment of the existence of an action to foreclose and enforce that lien"). In the present action, VooDoo's answer did not raise any counterclaims, demand affirmative judgment for the foreclosure of its lien, or even acknowledge that a lien had in fact been placed on the Property. In fact, VooDoo denied all allegations in the complaint regarding the mechanic's lien. Accordingly, pursuant to Lien Law §§ 17 and 19, VooDoo failed to commence an action to foreclose the lien within one year of the notice of lien being filed ( see Lincoln, 228 NY at 369; Regal, 157 Misc 2d at 380; Pino, 42 AD3d at 982-983).
This holding is supported by VooDoo's admission that "there is no pending action to foreclose the Lien which is a statutory condition precedent to maintaining Plaintiffs' claims pursuant to Lien Law §§ 39 and 39-a" (VooDoo's post-trial memoranda of law at 2,7).
Under the plain language of Lien Law §§ 17 and 19, VooDoo's lien was not continued based upon an action seeking to foreclose another lien. A lien may be continued pursuant to Lien Laws §§ 17 and 19 [2] where an action is commenced for the foreclosure of another mechanic's lien on the same property within one year from the date of filing the notice of lien (Lien Law §§ 17, 19). However, as no party has alleged that an action was commenced to foreclose another mechanic's lien upon the same property, this exception does not apply to VooDoo. As VooDoo did not "commence an action to foreclose the lien, secure an order continuing the lien, or become a party defendant in an action to enforce another lien" within one year of filing the notice of lien, the mechanic's lien expired under Lien Law §§ 17 and 19 on or about July 21, 2006, one year after it was filed (Lien Law §§ 17, 19; Malafsky v Becker, 255 AD 444, 445 [1st Dept 1938]; see In re Flintlock Realty, 188 AD2d at 532). Furthermore, the lien may not be revived or further extended by court order once it has expired ( see Pino, 42 AD3d at 983).
Plaintiffs' demand in its eighth cause of action for damages and attorney's fees pursuant to Lien Law §§ 39 and 39-a is rejected as these remedies are only available in proceedings to enforce a mechanic's lien where a lien is invalidated solely as a result of wilful exaggeration. Pursuant to Lien Law § 39:
" In any action or proceeding to enforce a mechanic's lien upon a private or public improvement or in which the validity of the lien is an issue, if the court shall find that a lienor has wilfully exaggerated the amount for which he claims a lien as stated in his notice of lien, his lien shall be declared to be void and no recovery shall be had thereon" (emphasis added).
Lien Law § 39-a similarly provides:
" Where in any action or proceeding to enforce a mechanic's lien upon a private or public improvement the court shall have declared said lien to be void on account of wilful exaggeration the person filing such notice of lien shall be liable in damages to the owner or contractor" (emphasis added).
Under the plain language of Lien Law §§ 39 and 39-a, "willful exaggeration may be established only in any action or proceeding to enforce a mechanic's lien'" rather than, as here, in an action to discharge the lien (Lien Law §§ 39, 39-a; see Matter of Upstate Bldrs. Supply Corp., 37 AD2d 901, 902 [4th Dept 1971]; see also Coppola Gen. Contractor Corp. v Noble House Constr., 224 AD2d 856, 857 [3d Dept 1996] (holding, "[a]lthough Lien Law § 39 provides that a willfully exaggerated lien is void, the issue of wilful and/or fraudulent exaggeration is also one which ordinarily must be determined at the trial of the foreclosure action"); Wellbilt Equip. Corp. v Fireman, 275 AD2d 162, 166 [1st Dept 2000] (holding, "[Lien Law § ] 39-a, by its terms, only permits a wilful exaggeration claim to be asserted in an action to enforce a mechanic's lien,' namely, a foreclosure action")). Moreover, the remedies of damages and attorney's fees under Lien Law § 39-a are "available only where the lien was valid in all other respects and was declared void by reason of willful exaggeration after a trial of the foreclosure action" ( Guzman v Estate of Fluker, 226 AD2d 676, 678 [2d Dept 1996]; Atlas Refrigeration-Air Conditioning, Inc. v Lo Pinto , 33 AD3d 639 , 640 [2d Dept 2006]; see also Wellbilt v Fireman, 275 AD2d at 166-167 (holding, "[w]here the lien has been discharged for reasons unrelated to its supposed exaggeration, there remains no lien to be declared void by the court")). As this action was commenced on August 24, 2005 to discharge the mechanic's lien and the lien expired pursuant to Lien Law §§ 17 and 19 on or about July 21, 2006, one year after it was filed, plaintiffs' demand for damages and attorney's fees in the eighth cause of action pursuant to Lien Law §§ 39 and 39-a must be dismissed ( see Matter of Upstate Bldrs., 37 AD2d at 902; Atlas, 33 AD3d at 640).
CONCLUSION
Accordingly, plaintiffs' sixth cause of action and Kramer's counterclaim are dismissed with prejudice.
Plaintiffs' eighth cause of action is granted to the extent that the lien is discharged pursuant to Lien Law § 19. The demand for damages and attorney's fees pursuant to Lien Law §§ 39 and 39-a is dismissed.
The foregoing constitutes the decision and order of the Court.