Opinion
52057/2018
05-09-2018
In the MATTER OF the APPLICATION OF OLD POST ROAD ASSOCIATES, LLC, Petitioner, To Summarily Discharge pursuant to Lien Law § 19(6) the Mechanic's Lien filed by LRC Construction, LLC, Respondent.
For Petitioner: Tarter Krinsky & Drogin LLP, 1350 Broadway, 11th Floor, New York, NY 10018, (212) 216–8000, by David J. Pfeffer, Esq., Sean T. Scuderi, Esq., sscuderi@tarterkrinsky.com For Respondent: Paul H. Slaney, Esq., 7 Renaissance Square, 4th Floor, White Plains, NY 10601, (914) 773–7000, pslaney@cappelli-inc.com
For Petitioner: Tarter Krinsky & Drogin LLP, 1350 Broadway, 11th Floor, New York, NY 10018, (212) 216–8000, by David J. Pfeffer, Esq., Sean T. Scuderi, Esq., sscuderi@tarterkrinsky.com
For Respondent: Paul H. Slaney, Esq., 7 Renaissance Square, 4th Floor, White Plains, NY 10601, (914) 773–7000, pslaney@cappelli-inc.com
Terry J. Ruderman, J.
This proceeding raises the issue of what types of services are and are not a proper basis for a mechanic's lien. Specifically, the question that must be addressed is whether the Lien Law's definition of the "improvement of real property" includes what respondent has described as "Pre–Construction Management Services," which are, by definition, completed before the physical construction work on the property begins. Decision of this matter requires analysis of the language of the Lien Law, consideration of whether an almost 100–year–old Court of Appeals ruling should be extended beyond its particular facts, and review of a handful of trial-level court rulings.
The challenged lien filed by respondent LRC Construction, LLC recites that respondent provided pre-construction management services for petitioner Old Post Road Associates, LLC on its property at 120 Old Post Road in the City of Rye, New York. Petitioner does not dispute that in April 2016, it engaged respondent to perform certain pre-construction management services in connection with a planned construction project on its property. It acknowledges that respondent provided services that included updating the conceptual budget for the project and attending meetings with petitioner's consultants to discuss construction phasing in connection with the site plan approval application. It claims that respondent provided those services gratis in an ultimately unsuccessful effort to earn the position of construction manager for petitioner's upcoming construction project.
Respondent asserts that it provided a variety of pre-construction management services over an 11–month period, until March 2017, when petitioner terminated its services. Both parties cite an email exchange from August 3–4, 2016 in support of their understanding of how respondent would be compensated. Respondent claims that after its services were terminated, the parties discussed its compensation, but could not reach agreement.
On August 14, 2017, respondent filed a mechanic's lien against petitioner's property, in the amount of $250,000, for its unpaid pre-construction management services. Petitioner now seeks the summary discharge of that mechanic's lien on the ground that pre-construction management services do not fall within the ambit of the Lien Law.
Analysis
This proceeding is controlled by Lien Law § 19 (6), which provides in pertinent part that a court may summarily discharge a mechanic's lien 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 a lien is claimed ." Petitioner contends that because the lien is explicitly based on a claim of "pre-construction management services," rather than management services provided during construction, it appears from the face of the notice of lien that respondent has no valid lien. Petitioner argues that as a matter of settled law, the Lien Law simply does not cover pre-construction management services.
In the context of this proceeding for summary discharge of the mechanic's lien based on a claim of the lien's invalidity on its face, there is no relevance to petitioner's assertion that respondent indicated that no payment was necessary. In any event, the assertion is belied by the email offered in support.
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Lien Law § 3 provides that "[a] contractor who performs labor ... for the improvement of real property ... at the request of the owner thereof, ... shall have a lien for... the value, or the agreed price, of such labor." The term "improvement," as defined in Lien Law § 2(4), "includes the demolition, erection, alteration or repair of any structure upon, connected with, or beneath the surface of, any real property and any work done upon such property or materials furnished for its permanent improvement, ... and shall also include the drawing by any architect or engineer or surveyor, of any plans or specifications or survey, which are prepared for or used in connection with such improvement."
Little guidance is provided in the case law as to what types of work fall within and outside the category of "improvements" under the Lien Law. Notably, no case has been cited or found by this Court explicitly considering the term "pre-construction management services," or discussing the definition, nature and extent of such services. To address this petition, it is necessary to consider the few cases that address what types of work fall within and outside the Lien Law's coverage.
Almost one hundred years ago, the Court of Appeals in Goldberger–Raabin, Inc. v. 74 Second Ave. Corp., 252 N.Y. 336, 338, 169 N.E. 405 [1929] considered the validity of a lien filed by Jacob S. Harman. Harman had been hired by the property owner as superintending engineer in charge of construction, which involved the tearing down of the building on the property and the erection of a new building. The Court differentiated between, on one hand, Harman's "services in aiding or assisting in procuring subcontracts or subcontractors," which it held was not part of the work of improving property for which the law provides a lien, and on the other hand, "his services in superintending the construction of the new building and the tearing down of the old building, providing the old building was torn down as part of the work necessary for construction and for the improvement of the real property," for which he was entitled to file a lien ( id. ).
Since the Goldberger–Raabin decision by the Court of Appeals, the particular question of which types of contractor work fall within and outside the Lien Law's coverage has not been addressed by appellate authority. Insofar as those cases are non-controlling, trial-court level decisions, this Court will examine them to consider whether their reasoning is persuasive.
The ruling of Goldberger–Raabin , that the Lien Law does not cover procurement of subcontracts or subcontractors, has been applied to deny Lien Law coverage to pre-construction work involving the procurement of bids or application for building permits and approvals (see Chas. H. Sells, Inc. v. Chance Hills Joint Venture , 163 Misc. 2d 814, 816, 622 N.Y.S.2d 422 [Sup. Ct. Westchester County 1995] ; Henry & John Associates v. Demilo Constr. Corp. , 137 Misc. 2d 354, 355, 520 N.Y.S.2d 340 [Sup. Ct. Queens County 1987]. However, some other, broader tasks performed by contractors prior to construction, were found to be a valid basis for a mechanic's lien in Chas. H. Sells v. Chance Hills, 163 Misc. 2d at 816, 622 N.Y.S.2d 422. The court there held that while the Lien Law did not cover "applying for permits and approvals," it did apply to the "professional engineering and professional surveying services rendered in connection with obtaining municipal approvals for the development of an equestrian facility," although it recognized that "no actual physical permanent improvement [took] place" ( id. at 815, 816, 622 N.Y.S.2d 422). The court reasoned that
"[t]he primary purpose of the Lien Law is to afford protection for workmen who at the request or with the consent of the owner of real property enhance its value by performing labor for the improvement thereof. If a landowner fails to take a project through to completion, for whatever reason, the claims for work done to improve the property are no less entitled to the benefits of this statute" ( id. at 816, 622 N.Y.S.2d 422 [citations omitted] ).
While the court in Chas. H. Sells v. Chance Hills held that the absence of physical permanent improvement did not preclude a valid lien, it must be acknowledged that another motion court found invalid a mechanic's lien for purported supervisory work that occurred after construction work had ceased (see 8th Ave. Recoveries Corp. v. 111 Stellar 8 Owner, LLC , 42 Misc. 3d 1212(A), 2014 WL 169764 *6 [Sup. Ct. Kings County 2014] ). The court there reasoned that while "supervision of construction work may be the basis of a lien, where the property is not being improved, there is nothing to supervise and thus no basis for a lien" (8th Ave. Recoveries Corp. v. 111 Stellar 8 Owner, LLC, 42 Misc. 3d 1212(A), 2014 WL 169764 *6 [Sup. Ct. Kings County 2014] ).
On balance, where the claimed services were undertaken in connection with the improvements anticipated to be made to the property in the future, this Court finds the reasoning of Chas. H. Sells v. Chance Hills more persuasive, and the reasoning of 8th Ave. Recoveries to be inapposite.
Having concluded that the fact that the services were "pre-construction" does not alone automatically render the Lien Law inapplicable, this Court must consider the nature of the services in order to address the validity of the challenged lien. Because the term "pre-construction management services" used in the notice of lien is undefined, this Court will look to the more elaborate description of the tasks respondent undertook, contained in its submissions in opposition to the petition, as the court did in Henry & John Associates v. Demilo Constr. Corp., 137 Misc. 2d 354, 355, 520 N.Y.S.2d 340 [Sup. Ct. Queens County 1987]. There, because the lien described the services provided as "the management and supervision of obtaining new building permits for recommencement of construction," the property owner sought the discharge of the lien in reliance on Goldberger–Raabin, 252 N.Y. at 338, 169 N.E. 405 supra . However, in opposition to the application to discharge the lien, the lienor elaborated on the nature of its work, stating that "the labor referred to in the notice of lien ‘consisted of supervising the actual construction, i.e., demolition, erection, alteration and repair at the construction site,’ which was necessary in order to obtain new building permits for recommencement of construction" ( 137 Misc. 2d at 355, 520 N.Y.S.2d 340 ). The court in Henry & John Associates denied the petition to discharge that lien, rejecting the property owner's argument that the lienor was bound by the language employed in the notice of lien, and citing the more expanded description in the lienor's opposition papers ( 137 Misc. 2d at 356, 520 N.Y.S.2d 340 ).
The more detailed description of respondent's services contained in the affidavit of Peter Palazzo, respondent's president, explains that respondent is a construction management firm employing construction professionals, architects and engineers with extensive experience in the development, design and construction of luxury multifamily projects in the tri-state area. Palazzo details the nature of the work respondent performed for petitioner as follows:
"(i) recommending the change to the structural system for the project at the Property to a system more suitable for a low rise luxury condominium; (ii) recommending changes to the design team to architects and engineers with more experience designing the type of luxury condominium product Petitioner was constructing; (iii) providing finish selections, facade recommendations and mechanical, electrical and plumbing system recommendations for the type of design required for the high end condominium marketplace; (iv) consulted with land use attorneys to prepare for and attend Petitioner's Planning Board meetings; (v) prepare site logistics and access plans for the Property; (vi) perform a constructability review for the project at the Property (vii) attend meetings with consultants and officials to assist the approval process and, (viii) prepare construction budgets to assist in the design development process for the project at the Property."
While some of the foregoing may be comparable to the non-lienable work of procuring bids or permits, some of the other described tasks, such as preparing site logistics and access plans for the property and performing a constructability review for the project at the property, appear to be comparable to the category of engineering planning work held to be covered by the Lien Law in Chas. H. Sells v. Chance Hills, 163 Misc. 2d 814, 622 N.Y.S.2d 422 supra .
The Lien Law explicitly requires that the statute "is to be construed liberally to secure the beneficial interests and purposes thereof" ( Lien Law § 23 ). In the absence of clear case law precluding mechanic's liens for all the types of work respondent now describes, and construing the Lien Law liberally, this Court concludes that respondent's lien is not entirely invalid on its face, and therefore denies the petition for summary discharge.
Petitioner contends, in the alternative, that respondent should be compelled to produce a verified itemized statement in accordance with the requirement of Lien Law § 38, setting for the items of labor and the value thereof which make up the lien's total amount. Since respondent has now served such a statement on petitioner, that aspect of the petition is now moot.
Accordingly, based upon the foregoing, it is hereby
ORDERED that the petition is denied.
This constitutes the Decision and Order of the Court.