Opinion
Index No. 622300-21
05-16-2022
WEST RAC CONTRACTING CORP., Plaintiff, v. HUNTINGTON VILLAGE HOTEL PARTNERS, LLC, Suffolk County Industrial Development Agency and "John Doe No. 1" Through "John Doe No. 5", Defendants.
FORCHELLI DEEGAN TERRANA LLP, Attorneys for Plaintiff, 333 Earle Ovington Blvd., Suite 1010, Uniondale, New York 11553 LaREDDOLA, LESTER AND ASSOCIATES, LLP, Attorneys for Defendants, 600 Old Country Road, Suite 230, Garden City, New York 11530
FORCHELLI DEEGAN TERRANA LLP, Attorneys for Plaintiff, 333 Earle Ovington Blvd., Suite 1010, Uniondale, New York 11553
LaREDDOLA, LESTER AND ASSOCIATES, LLP, Attorneys for Defendants, 600 Old Country Road, Suite 230, Garden City, New York 11530
Elizabeth H. Emerson, J. ORDERED that the motion (001) by the defendant Huntington Village Hotel Partners, LLC, for an order dismissing the complaint, vacating and discharging the notice of pendency and the mechanic's lien filed by the plaintiff, or staying the action and directing the parties to proceed to arbitration is granted to the extent of staying the action and directing the parties to proceed to arbitration; and it is further
ORDERED that the motion (001) is otherwise denied; and it is further
ORDERED that the motion (002) by the defendant Huntington Village Hotel Partners, LLC for an order staying arbitration and compelling the plaintiff to litigate its claims is denied; and it is further
ORDERED that the action is stayed and the parties are directed to proceed to arbitration in accordance with the terms of their agreement.
On October 5, 2020, the plaintiff, West Rac Contracting Corp. ("West Rac"), as the construction manager, and the defendant Huntington Village Hotel Partners, LLC ("HVHP"), as the owner, entered into a construction-management agreement for the construction of a hotel in Huntington, New York. The parties’ agreement provides that "claims" shall be referred to the architect as the initial decision maker, then to mediation, and to arbitration if not resolved by mediation. A "claim" is defined as a "demand or assertion by one of the parties seeking ... payment of money, or other relief with respect to the terms of the Contract." It also includes "other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract." The plaintiff's services were terminated before the project was completed.
Between November 18 and December 2, 2021, the plaintiff filed a mechanic's lien, commenced this action to foreclose on the mechanic's lien, and filed a notice of pendency. On or about December 30, 2021, the plaintiff filed a demand for mediation with the American Arbitration Association ("AAA"). On January 21, 2022, HVHP moved by order to show cause to dismiss the action, to vacate and discharge the plaintiff's notice of pendency and mechanic's lien, or to stay the action and direct the parties to proceed to mediation and arbitration in accordance with the terms of their agreement. The plaintiff opposed dismissal of the action and vacatur of its mechanic's lien, but agreed with HVHP that the action should be stayed and the matter should proceed to arbitration. The plaintiff filed a demand for arbitration with the AAA on or about February 15, 2022. On March 11, 2022, HVHP moved by order to show cause to stay the arbitration and to compel the plaintiff to litigate its claim.
Preliminarily, the court notes that HVHP has moved both to compel arbitration of the plaintiff's claim and to stay arbitration thereof. In support of the first motion, HVHP argues that the commencement of this action was premature and in violation of the parties’ agreement. HVHP argues that the action should be stayed in order for the contractual dispute-resolution procedure to be competed. In support of the second motion, HVHP argues that, by commencing this action and participating in the litigation, the plaintiff has waived its right to arbitrate.
The record reflects that the parties expressly agreed to a dispute-resolution procedure that includes arbitration, which is strongly favored in New York (see , Matter of Smith Barney Shearson v. Sacharow , 91 N.Y.2d 39, 49, 666 N.Y.S.2d 990, 689 N.E.2d 884 ).
Contrary to HVHP's contentions, the plaintiff did not waive its right to arbitration by commencing this action. A plaintiff's right to file and enforce a lien under the Lien Law does not vitiate the parties’ agreement to arbitrate contractual disputes ( SCK Team Work Corp. v. 39 Prince Realty, LLC , Sup. Ct., Queens County, Sept. 15, 2017, Butler, J. at *1 ). The commencement of an action to foreclose a mechanic's lien is in the nature of an effort to preserve the status quo pending arbitration ( Allied Const. Corp. v. Parsons Transp. Group of New York, Inc. , Sup. Ct., N.Y. County, Feb. 27, 2022, Lebovitz, J. at *1 ) and does not constitute a waiver of the contractual right to resolve the dispute in arbitration ( Tradesource, Inc. v. Ancor, Inc. , 281 A.D.2d 538, 721 N.Y.S.2d 810 ).
HVHP contends that the lien is void because it is facially defective pursuant to Lien Law § 19 (6), which provides that a lien may be discharged when "it appears from the face of the notice of lien that the claimant has no valid lien by reason of the character of the labor or materials furnished and for which [the] lien is claimed[.]" HVHP contends that the lien is "grossly overstated" because it includes work that was not performed by West Rac, but by subcontractors who have already been paid. HVHP contends that West Rac is owed no more than $397,023.63 and that its lien in the amount of $2,876,025.07 is "overblown." This argument goes to whether the lien has been "wilfully exaggerated," not whether it is defective on its face.
Lien Law § 39 authorizes the court to declare a lien void upon finding that it has been "wilfully exaggerated" ( Executive Towers at Lido, LLC v. Metro Constr. Servs., Inc. , 303 A.D.2d 545, 756 N.Y.S.2d 461 ). The court is not required to determine the validity of HVHP's claim that the lien is "wilfully exaggerated" on the basis of affidavits submitted on a motion to vacate the lien (see , Matter of Upstate Builders Supply Corp. [Maple Knoll Apts.] , 37 A.D.2d 901, 902, 325 N.Y.S.2d 509 ). Whether the plaintiff deliberately and intentionally exaggerated the lien amount is a question of fact to be resolved at trial ( Id . ; Washington 1993 Inc. v. Reles , 255 A.D.2d 745, 747, 680 N.Y.S.2d 715 ). When, as here, there is no defect on the face of the notice of lien, any dispute regarding the validity of the lien must await the trial of the lien-foreclosure action (see , Matter of Old Post Rd. Assoc., LLC v. LRC Constr., LLC , 177 A.D.3d 658, 659, 112 N.Y.S.3d 254 ; Matter of Northside Tower Realty, LLC v. Klin Constr. Group, Inc. , 73 A.D.3d 1072, 899 N.Y.S.2d 900 ). Lien Law § 35 provides that, if a lienor is compelled to arbitrate, the arbitrator's decision as to the value or price of labor performed and materials furnished shall be conclusive as to all parties to the arbitration in any action to foreclose the lien ( Cincrete Corp. v. Sansouci Realty Corp. , 7 Misc. 2d 717, 718, 168 N.Y.S.2d 973 ). New York courts have recognized that proceedings seeking to discharge or foreclose a mechanic's lien should be stayed pending the outcome of an arbitration to determine contractual issues such as the amount due and owing under a construction contract ( Adam Dev. Enter., Inc. v. Arizon Structures Worldwide, LLC , U.S. Dist. Ct., E.D.N.Y., Sept. 29, 2014, Irizarry, J. at *4 [and cases cited therein]). Only after the arbitrator has determined the amount owed can the court determine whether the lien was "wilfully exaggerated." Accordingly, this action is stayed for the arbitrator to determine the amounts due and owing to the plaintiff, if any, under the parties’ agreement.
Finally, the court finds that the West Rac has capacity to maintain this action.