Opinion
Index No. 617381-18
01-10-2022
AMERICAN UNIVERSAL SUPPLY INC., Plaintiff, v. GIBSON AIR MECHANICAL INC., Gibson W. White, Federal Insurance Company, Vigilant Insurance Company, and Pacific Indemnity Company, Defendants.
MEYERS, SAXON & COLE, Attorneys for Plaintiff, 3620 Quentin Road, Brooklyn, New York 11234 HINMAN, HOWARD & KATTELL LLP, Attorneys for Defendants, Federal Insurance Co., Vigilant Insurance Co. and Pacific Indemnity Co., 10 Airline Drive, Suite 205, Albany, New York 12205
MEYERS, SAXON & COLE, Attorneys for Plaintiff, 3620 Quentin Road, Brooklyn, New York 11234
HINMAN, HOWARD & KATTELL LLP, Attorneys for Defendants, Federal Insurance Co., Vigilant Insurance Co. and Pacific Indemnity Co., 10 Airline Drive, Suite 205, Albany, New York 12205
Elizabeth H. Emerson, J.
Upon the following papers read on this motion to dismiss ; Notice of Motion and supporting papers 32-41 ; Notice of Cross Motion and supporting papers; Answering Affidavits and supporting papers 44-47 ; Replying Affidavits and supporting papers 48 ; it is,
ORDERED that this motion by the defendants Federal Insurance Company, Vigilant Insurance Company, and Pacific Indemnity Company for an order dismissing the complaint insofar as it is asserted against them is denied; and it is further
ORDERED that the plaintiff is directed to join as party defendants any other potential lienholders who have filed notices of claim prior to the date of the filing of the summons and complaint; and it is further
ORDERED that the parties are directed to complete and execute a preliminary conference stipulation and order and send a copy of same to chambers.
On February 26, 2018, the plaintiff filed a mechanic's lien in Westchester County in the amount of $136,376.66 against real property located in Purchase, New York. The lien was discharged by the posting of a bond on July 20, 2018. On September 5, 2018, the plaintiff commenced this action against Gibson Air Mechanical Inc. and Gibson W. White for goods sold and delivered. On January 16, 2019, the plaintiff amended the complaint, adding Federal Insurance Company, Vigilant Insurance Company, and Pacific Indemnity Company (the "insurance defendants") as defendants and adding a cause of action against them for recovery on the bond. The insurance defendants move to dismiss the complaint on the ground that the lien expired by operation of law one year after it was filed because the plaintiff did not extend the lien, did not commence a lien-foreclosure action within one year of its filing, and did not file a notice of pendency (see , Lien Law § 17 ).
Surety bonds to discharge mechanic's liens are conditioned for the payment of any judgment which may be rendered against the subject property for the enforcement of the liens ( Lien Law § 19 [4] ). It, therefore, follows that, although the property itself was released from the lien, for the plaintiff to be entitled to recover, it must commence a formal action for the enforcement of the lien and obtain a judgment as if the lien still existed ( Martirano Constr. Corp. v Briar Constr. Corp. , 104 AD2d 1028, 1031 ).
In Morton v Tucker (145 NY 244 ), the Court of Appeals addressed the procedure to be followed in enforcing the lien. The Court found that the bond takes the place of the property and becomes the subject of the lien in the same form and manner as in the case of the payment of money into court ( Id. at 249 ):
"The action is in equity brought under the statute in which all of the persons interested, including the sureties upon the bond, are made parties. The complaint ... should allege the giving of the bond and the discharging of the lien ... and instead of asking judgment for a sale of the premises it should demand relief as against the persons executing the bond for the amount that should be determined to be payable upon the lien. The court then upon the trial can determine the rights and equities of all of the parties and award the final judgment contemplated by the statute."
Thus, any action brought, whether before or after the filing of the undertaking, although ostensibly to foreclose the lien, in reality is or becomes an action to test the validity of the lien had it not been discharged and, if found to be valid, to procure a judgment upon the undertaking, rather than a judgment of foreclosure upon the real estate ( Adams Engineering Co. v Menowiz , 53 Misc 2d 364, 365-366 [and cases cited therein]).
The complaint in this action alleges that the plaintiff sold goods and services to the Gibson defendants for which they have not paid, that the plaintiff filed a mechanic's lien against the property, that the lien was bonded and discharged, and that the plaintiff demands payment from the insurance defendants for the work performed and materials supplied. The court finds that such allegations are legally sufficient and properly state a cause of action against the insurance defendants.
The action was commenced and the complaint amended to include a cause of action to enforce the lien against the insurance defendants prior to the expiration of the one-year period (see , Lien Law § 17 ). The lien was filed on February 26, 2018, and the action commenced on September 5, 2018. Although the plaintiff did not initially seek enforcement of the lien, it amended the complaint on January 16, 2019, to include a cause of action for recovery against the insurance defendants "for work performed and materials supplied at the job site subject to the bond." Accordingly, contrary to the insurance defendants’ contentions, the lien did not expire by operation of law, nor was it necessary to file a notice of pendency to continue the lien (see , Lien Law § 17 ; White Plains Sash & Door Co. v Doyle , 262 NY 16, 19-20 ).
Once the lien was bonded, it detached from the realty and attached to the bond ( Shepherd Showcase, Inc. v Pekala , 138 AD2d 960, 961 [and cases cited therein]). Thereafter, the plaintiff ceased to have any interest in the Westchester property (Id. ). Accordingly, this court has jurisdiction to dispose of the plaintiff's equitable action to enforce the lien since the judgment the plaintiff seeks will be rendered on the bond rather than on the Westchester realty (Id. ).
Finally, the insurance defendants contend that the complaint should be dismissed because other potential lienholders are necessary parties to the action. In an action to foreclose a lien against a bond, Lien Law § 37 (7) applies (Bryant Equip. Corp. v A-1 Moore Contr. Corp. , 51 AD2d 792 ). It sets forth the classes of persons who shall be joined as parties defendant, namely "the principal and surety on the bond, the contractor, and all claimants who have filed notices of claim prior to the date of the filing of [the] summons and complaint" (Id. at 793). While the insurance defendants contend that there are additional parties who are required to be joined as defendants, they do not identify such parties. In any event, the proper remedy for the failure to join a necessary party is not dismissal (see , Schwimmer v Welz , 56 AD3d 541, 544 ). When a person who should be joined has not been made a party and is subject to the jurisdiction of the court, the proper remedy is to direct that person's joinder ( CPLR 1001[b] ; Schwimmer v Welz , supra at 544). Accordingly, rather than dismiss the complaint, the court directs the joinder of any other potential lienholders who have filed notices of claim prior to the date of the filing of the summons and complaint.
In sum, the court finds that the plaintiff's failure to commence an action to foreclose its mechanic's lien does not preclude it from seeking recovery on the bond substituted therefor, that the plaintiff has properly asserted its claim to recover on the bond, and that it has done so in a timely fashion. The court has not considered the argument that the insurance defendants raise for the first time in their reply papers. Accordingly, the motion is denied.