Opinion
600886/97.
Decided March 31, 2011.
In this action to foreclose a mechanic's lien, defendant Cauldwell-Wingate Corp. ("CWC") moves, pursuant to CPLR 3212, for summary judgment dismissing the complaint and for judgment in its favor on its second counterclaim alleging willful exaggeration of the mechanic's lien. CWC also asks the court to determine that, in the event plaintiff prevails in this action, pre-decision interest will not be awarded.
Background
In January 1995, CWC, a general contractor, hired plaintiff Ferran Enterprises, Inc. ("Ferran") as a subcontractor to demolish and then reconstruct the interior lobby and plaza areas of a building located at 277 Park Avenue in Manhattan (the "Project"). Although the parties never entered into a formal written contract, CWC does not dispute that the base price for Ferran's services and materials on the Project was $3,640,707. Moreover, it appears, from the submissions of the parties, that the agreement regarding ongoing work on the Project was comprised of a document denominated as Rider No. 2, which concerned the marble work in the interior lobby, and countless other communications including correspondence, change orders, and extra work orders for exterior work and interior work. The extra work orders were, in essence, requests from Ferran to CWC for change orders formally approving additional work that Ferran had allegedly performed.
Frank Ferrante, Ferran's principal, states that because of his long standing and cordial relationship with CWC's former executive officer, Ferran would usually perform the extra work by providing labor and materials on the project long before Ferran ever received a formal change order. Ferrante states that as the work progressed, CWC got further and further behind in issuing change orders and that, by August 1996, CWC owed Ferran more than $800,000 for labor, materials and supplies for labor and materials that Ferran provided. On September 13, 1996, Ferran filed a mechanic's lien in which Ferran alleges that, to that date, it had earned $4,556,368.20 and that CWC owed it $857,343.80. In November 1996, Ferran filed two additional mechanic's liens in the amounts of $3,957.43 and $8,000, respectively, for work and materials it allegedly supplied on the Project.
CWC disputed Ferran's claims that it was owed more than $800,000 for labor and materials, claiming that Ferran had been overpaid by more than $50,000. In February 1997, Ferran commenced this action stating causes of action to foreclose the three mechanic's liens, for breach of contract and for quantum meruit.
CWC now moves to dismiss the complaint, arguing that the three mechanic's liens are void because they were willfully exaggerated. CWC further argues that the breach of contract cause of action must be dismissed because: a) the change orders which form the basis of the contract claim were paid and b) the claims based on the extra work orders sound in quantum meruit and should not be considered as part of the breach of contract claim. In addition, CWC argues that the quantum meruit claims must be dismissed because Rider No. 2 explicitly required that extra work would only be performed in accordance with approved change orders and/or that many of the IW's and EW's are duplicative of the change orders which form the basis of the contract cause of action. Finally, CWC asks the Court not to award pre-decision interest on any of Ferran's claims based on Ferran's alleged dilatory conduct in failing to prosecute this action for more than thirteen years.
In opposition to summary judgment, Ferran argues that there are questions of fact regarding what amounts are due Ferran under the parties' agreements and that if there was an overstatement of the lien, such overstatement was an innocent mistake, not a willful exaggeration. Ferran also claims that prejudgment interest is mandatory under both the breach of contract and quantum meruit causes of action.
Discussion
Under New York's Lien Law, a lienor who willfully exaggerates a liens risks the Court declaring the entire lien void. Lien Law § 39 provides, in pertinent part:
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. No such lienor shall have a right to file any other or further lien for the same claim.
Lien Law § 39-a states:
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. The damages which such said owner or contractor shall be entitled to recover, shall include the amount of any premium for a bond given to obtain the discharge of the lien or the interest on any money deposited for the purpose of discharging the lien, reasonable attorney's fees for services in securing the discharge of the lien, and an amount equal to the difference by which the amount claimed to be due or to become due as stated in the notice of lien exceeded the amount actually due or to become due thereon.
A. The September 1996 Mechanic's Lien
CWC has not established its prima facie case that the September 1996 mechanic's lien was willfully exaggerated. CWC relies on a letter, dated August 27, 1996, which contained an analysis CWC prepared of the work performed by Ferran at 277 Park and the payments allegedly received by Ferran for such work. The analysis indicates that Ferran had been overpaid by approximately $106,000 dollars. CWC claims that Ferran's only response to the analysis was an October 4, 1996 letter asking CWC to adjust some of its calculations.
However, on September 16, 1996, approximately 3 weeks after receiving the August 27th letter and three weeks before Ferran's October 4, 1996 letter, Ferran filed its first mechanic's lien, publicly rejecting CWC's August 27th analysis by claiming that Ferran was owed more than $800,000 for labor and materials it supplied for the Project..
In addition, Ferran has produced evidence that demonstrates that, according to CWC's own vendor accounts payable schedule dated September 5, 1996, CWC owed Ferran more than $1,000,000 for work Ferran performed on the Project. Indeed, CWC prepared numerous payment analyses — an August 23, 1996 analysis claimed that CWC overpaid Ferran by more than $106,000, while a February 27, 1997 analysis showed that CWC owed Ferran more than $81,000. Moreover, Ferran has produced several letters requesting payment for extra work that was not included in CWC's August 27th analysis. Accordingly, based on the evidence submitted by both parties, there is a question of fact about whether CWC owes Ferran any money for labor and materials on the Project and, if so, how much money is owed.
In addition, CWC's claim of willful exaggeration requires proof that the lienor deliberately and intentionally exaggerated the amounts set forth in the notice of lien ( see Fidelity NY v Kensington-Johnson, Corp., 234 AD2d 263 [2d Dept 1996]). Lien Law § 39 was intended to protect against "fictitious, groundless and fraudulent liens by unscrupulous lienors", not just an honest difference of opinion or mere inaccuracy ( E-J Elec. Installation Co. v Miller Raved, Inc., 51 AD2d 264,265 [1st Dept 1976] app dismissed 39 NY2d 898[internal quotation marks and citations omitted]).
In support of the willful exaggeration claim, CWC contends that Ferran deliberately included items of extra work in the mechanic's lien that were duplicative of work that was already paid for under approved change orders. CWC also claims that Ferran billed CWC for work it allegedly did after it walked off the job on September 10, 1996.
The submissions of the parties shows that the parties engaged in a course of conduct that could give rise to confusion regarding whether extra work tickets were paid as part of approved change orders. In his affidavit, Ferrante explains how the amounts approved under change orders, that were issued well after the work was complete, often differed from the amounts requested in the extra work orders, which lead to innocent mistakes about whether payment for certain work was still outstanding. Thus, there are issues of fact concerning whether Ferran made deliberate misrepresentations or whether there is simply a difference of opinion or honest mistake as to the amount, if any, owed.
Accordingly, summary judgment dismissing the first cause of action to foreclose the September 16, 1996 and for judgment on CWC's counterclaim for the willful exaggeration counterclaim is unwarranted because there is a question about whether there are amounts due Ferran for labor and materials on the Project and/or whether the lien was willfully exaggerated.
B. The Second and Third Liens
Lien Law § 10 (1) provides that a notice of lien may be filed "within eight months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished." Ferran does not dispute that the second and third liens were untimely. Rather, Ferran claims that even if they were untimely, they were not willfully exaggerated because Ferran performed the work and supplied the materials that are detailed in the notices of claim.
Here, CWC has failed to demonstrate that the liens were willfully exaggerated and are void for that reason because CWC not presented a scintilla of evidence to demonstrate that the purchase orders enumerated in the second and third liens were, in fact, paid. Rather, the court finds that the second and third liens are invalid pursuant to Lien Law § 10 (1) because they were filed more than eight months after the completion of the work or the last time materials were furnished. Accordingly, that branch of CWC's motion in which CWC seeks summary judgment declaring the second and third liens void because they were willfully exaggerated is denied. However, pursuant to CPLR 3212 (b) the Court has searched the record and, as a result, grants summary judgment, in favor of CWC, discharging the second and third liens on the ground that they were untimely ( see Siegel, NY Prac § 282 [4th ed]).
C. Breach of Contract and Quantum Meruit
That branch of the motion in which CWC seeks summary judgment dismissing the breach of contract and quantum meruit causes of action is denied because there are questions of fact regarding whether Ferran received payment for all of the labor and materials covered by the base contract, the approved change orders and the extra work requests, and if not, what amount remains due for labor and materials. Moreover, there are questions about which charges, if any, under the notice of claim are part of the breach of contract cause of action and which charges, if any, are subsumed under quantum meruit.
It is undisputed that the parties never entered into a comprehensive written agreement for the work Ferran would perform and the materials Ferran would supply for the Project. The only contract document submitted by either party, Rider 2, merely addresses Ferran's rights and responsibilities regarding the interior marble work. That rider does not provide direction about extra work and change orders for the rest of Ferran's work on the Project. As to Rider 2, plaintiff has offered evidence that, through their course of dealings, the parties waived the requirement in paragraph 49 of Rider 2 which directed Ferran to obtain an approved change order prior to performing extra work. Indeed, it appears that, throughout its work on the project, Ferran completed work based on extra work orders months before CWC issued formal change orders ( see RPI Professional Alternatives v Citigroup Global Mkts Inc. , 61 AD3d 618 , 619 [1st Dept 2009]["the parties' course of dealing may waive a contractual requirement"]). Moreover, Ferran has presented evidence to demonstrate that, in some instances, CWC requested that Ferran perform certain work, that it agreed to pay for such work, but that once the work was completed, CWC refused to issue formal change orders.
Because CWC has not made a prima facie showing of entitlement to judgment dismissing the breach of contract and quantum meruit causes of action as a matter of law by tendering sufficient evidence to eliminate any material issues of fact ( Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853), that branch of the motion is denied.
D. Prejudgment Interest
Defendant's request that the court rule on the question of pre-decision interest is premature. The first cause of action in the complaint, which seek to foreclose a mechanic's lien, is equitable in nature ( Salerno Painting Coating Corp. v National Neurolabs, Inc. ,, 43 AD3d 1140, 1141 [2d Dept 2007]; see Matter of Brescia Constr. Co. v Walart Constr. Co., 264 NY 260, 265 [1934]). The fourth cause of action sounds in contract and the fifth and sixth causes of action state equitable claims for quantum meruit ( see Skanska USA Bldg. Inc. v Long Is. Univ., 28 Misc 3d 1238[A] at *9, 2010 NY Slip Op 51637 [U], [Sup Ct. Kings County 2010]).
CPLR 5001 (a) states:
Interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an act or omission depriving or otherwise interfering with title to or possession or enjoyment of, property, except that in an action of an equitable nature, interest, and the rate and date from which it shall be computed shall be in the court's discretion.
Here, the first mechanic's lien claim, the contract cause of action and the quantum meruit claims have survived summary judgment. If the court ultimately finds that plaintiff's recovery, if any, is attributable to breach of contract, then, pursuant to CPLR 5001 (a), assessment of pre-decision interest from the date of the breach is mandated ( Adams v Lindblad Travel, Inc., 730 F2d 89, 93 [2d Cir 1984]). If judgment is awarded on the fifth and sixth causes of action, an award of such interest may also be mandatory. In Stillman v InService America Inc., ( 738 F Supp 2d 480 [SD NY 2010]), the court held that pre-decision interest was mandatory in a quantum meruit claim that sounds in breach of contract. However, if the court finds that recovery is warranted on the first cause of action to foreclose the mechanic's lien, an equitable claim, then interest is discretionary ( S W Home Improvement Co. v La Casita II H.D.F.C. , 66 AD3d 505, 506 [1st Dept 2009]). Therefore, the decision regarding pre-decision interest must await the trial of this action.
In accordance with the foregoing, it is
ORDERED that defendant Cauldwell-Wingate Company, Inc's motion for summary judgment dismissing the complaint and granting it judgment in its favor on the second counterclaim and for other relief is denied, except that the Court dismisses those claims relating to the second and third liens for the reasons stated above; and it is further
ORDERED that the parties are to appear for a conference on May 11, 2011 in Part 19 at 80 Centre Street, Room 279, at 2:30 p.m.
This constitutes the decision and order of the Court.