Opinion
Index No. 154039/2024
10-18-2024
Anne Prosser, Plaintiff, v. Sepi Realty LLC and Cohen & Frankel LLP as Escrow Agent, Defendants.
Law Offices of Nathaniel Muller, P.C., New York, NY (Nathaniel Muller of counsel), for plaintiff. No appearances for defendants.
Unpublished Opinion
Law Offices of Nathaniel Muller, P.C., New York, NY (Nathaniel Muller of counsel), for plaintiff.
No appearances for defendants.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 10, 11, 12, 13, 14, 16 were read on this motion for INJUNCTION/RESTRAINING ORDER.
This action arises from an agreement between plaintiff, Anne Prosser, and defendant Sepi Realty LLC to "stage" an Upper West Side townhouse owned by Sepi Realty to effect a sale of the townhouse. Prosser alleges that under the terms of the staging agreement, Sepi Realty owes her $157,000 for staging-related expenses.
Prosser has moved by order to show cause (i) to enjoin Sepi Realty from closing on a contracted-for sale of the townhouse (to nonparty SapphireEdge Holdings Limited) and to enjoin Sepi Realty's escrow agent, defendant Cohen & Frankel LLP, from releasing the escrowed contract deposit ($1.37 million), until (ii) this court permits Prosser to impose an equitable lien on the premises. (See NYSCEF No. 11 at 1-2 [order to show cause].) Prosser has also sought interim relief to the same effect. (See id. at 2.) This court granted the request for interim relief only to the extent of directing defendants to hold the claimed $157,000 in escrow, to preserve the status quo pending resolution of the motion. (See id.) The contracted-for sale of the townhouse has since been rescinded. (See NYSCEF No. 16 at 2.) Plaintiff now consents to release of the escrowed $157,000, but maintains that she is entitled to an equitable lien on the premises. (See id. at 1.) Plaintiff's request for an equitable lien is denied. The requirement that Cohen & Frankel LLP maintain the claimed $157,000 in escrow is vacated.
Defendant Sepi Realty has not appeared or filed papers in this action. Sepi Realty's principal, Sandra Piedrabuena, has sent emails to the court in connection with the motion. But the court's understanding is that Piedrabuena is not an attorney, and thus cannot appear or act on Sepi Realty's behalf. This court therefore has not considered Piedrabuena's correspondence in resolving the current motion.
DISCUSSION
An equitable lien may be imposed only "if there is an express or implied agreement 'that there shall be a lien on specific property'... evinc[ing] a sufficiently clear intent that the property is to be 'held, given or transferred as security for the obligation.'" (M & B Joint Venture, Inc. v Laurus Master Fund, Ltd., 12 N.Y.3d 798, 800 [2009], quoting Teichman v Community Hosp. of W. Suffolk, 87 N.Y.2d 514, 520 [1996].) And expending labor and resources to improve property does not give rise to an equitable lien on the property, absent an "implied promise to convey, reimburse, or to grant a lesser interest in the property." (Lester v Zimmer, 197 A.D.2d 783, 794 [3d Dept 1993] [internal quotation marks omitted].)
Indeed, even an "agreement to pay a debt out of a designated fund does not operate to create an equitable lien upon the fund." (Thorne Real Estate, Inc. v Nezelek, 100 A.D.2d 651, 652 [3d Dept 1984].) And in this case, Sepi Realty did not agree to pay Prosser her staging expenses out of a designated fund (such as proceeds from the sale of the townhouse). The underlying contract between them identifies only the circumstances under which Prosser is entitled to payment for staging costs-not the source of that payment. (See NYSCEF No. 5 at 1.)
Prosser does not dispute the applicability of these principles to this case. Nor does she provide an express agreement-or identify circumstances that might support an implied agreement-between herself and Sepi Realty to confer on her some sort of security-related property interest in the townhouse. (See NYSCEF No. 3 at 3-7.)
Instead, she emphasizes (literally) that she did not stage the townhouse directly, but rather "retain[ed] and pa[id] for the services of a staging company on behalf of" Sepi Realty. (id. at 3 ¶ 13 [bolding and underlining omitted].) The relevance of this fact is not entirely clear, however. It may be that Prosser is suggesting that had she staged the townhouse herself, she would be entitled to file a mechanic's lien against the property under article 2 of the Lien Law, and that the happenstance of her having contracted with another company to do the staging at her expense should not defeat her right to a lien. This suggestion is unpersuasive.
As an initial matter, this court is somewhat skeptical that Prosser would be entitled to a mechanic's lien had she directly supplied labor and materials for the staging directly. Setting that difficulty aside, Prosser identifies no authority for her apparent proposition that she should be entitled to an equitable lien on property if she would be entitled to a statutory mechanic's lien but for the particular contractual arrangements by which labor and materials were provided to improve that property. And given the careful limitations that the New York appellate courts have imposed for nearly 100 years on the availability of equitable liens (see James v Alderton Dock Yards, 256 NY 298, 303-304 [1931]), this court sees no basis to accept that proposition without on-point precedent.
Lien Law § 3 provides for the creation of a mechanic's lien when a contractor "performs labor or furnishes materials for the improvement of real property" at the request of the owner." Lien Law § 2 [4] defines "improvement" as including the "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." The question whether Prosser's staging work comes within the scope of these provisions is not before the court on this motion. But the court has doubts whether the staging of an apartment or townhouse for showing to buyers entails the erection or alteration of any structure within the property being shown, as opposed to the introduction and placement of movables such as furniture, knick-knacks, and the like. And the staging of an apartment is by definition impermanent, because it must be undone upon the apartment's sale. (Cf. Chase Lincoln First Bank N.A. v new York State Elec. & Gas Corp., 182 A.D.2d 906, 807 [3d Dept 1992] [holding that services consisting of "cutting, trimming, clearing, disposing and chemically treating of trees and vegetation around NYSEG's electrical utility lines and poles" did not qualify as an "improvement" for lien law purposes because they did not involve the erection or alteration of a structure or constitute permanent improvements around the utility lines and poles].)
Additionally, Prosser suggests that she needs (and should be granted) an equitable lien here because absent a lien she will be unable to enforce any money judgment she obtains against defendant for the claimed $157,000. (See NYSCEF No. 3 at ¶¶ 32-35; NYSCEF No. 16 at 1.) That is, Prosser says, "upon information and belief," Sepi Realty's only asset is the townhouse (NYSCEF No. 16 at 1); and, also "[u]pon information and belief, the principals of [Sepi Realty] are not U.S. citizens, and have no other assets in the US" (NYSCEF No. 3 at ¶ 33.) Thus, she implies, upon closing of the sale to the townhouse, Sepi Realty's principals will transfer the sale proceeds out of the country, leaving her unable to enforce any judgment she obtains. This showing is decidedly thin. (Cf. Bich v Bich, 2023 NY Slip Op 50303[U], at *7 [Sup Ct, NY County 2023] [declining to grant a prejudgment attachment under CPLR 6201 based only on movant's submission of evidence that the nonmovant "had listed for sale her principal asset in the state (a New York City luxury apartment)"].)
More fundamentally, the prejudgment equitable relief Prosser seeks is not an appropriate means of vindicating her concerns about post-judgment enforcement. If this action were solely seeking contract damages, Prosser, as an unsecured creditor of Sepi Realty, would not be entitled to a preliminary injunction restraining sufficient assets to satisfy any judgment obtained. (See Dinner Club Corp. v Hamlet on Olde Oyster Bay Homeowners Assoc., Inc., 21 A.D.3d 777, 778 [1st Dept 2005], citing Credit Agricole Indosuez v Rossiyskiy Kredit Bank, 93 N.Y.2d 541, 545-546, 549 [2000].) The strict limits on the availability of injunctive relief in this context, the Court of Appeals has explained, follow from the traditional principle of equity jurisdiction, dating back at least to the late 19th Century, and perhaps all the way back to Chancellor Kent, "that a general creditor has no legally recognized interest in or right to interfere with the use of the unencumbered property of a debtor prior to obtaining judgment." (See Credit Agricole Indosuez, 94 N.Y.2d at 549; see also id. at 545-548, citing Campbell v Ernest, 19 NYS 123 [Sup Ct, Gen Term, 2d Dept 1892].) This court declines to undermine that principle by permitting a general creditor to encumber the property of a debtor through an equitable lien, prior to obtaining judgment, "merely to preserve a fund for eventual execution of judgment in [a] suit[] for money damages." (Id. at 548.)
An exception to this principle exists where the plaintiff is asserting claims to a specific, discrete fund of money. (See Credit Agricole Indosuez, 94 N.Y.2d at 548.) Here, on the other hand, as noted above (see n 2, supra), the parties' agreement does not identify a specific fund from which Prosser is to be paid. (See NYSCEF No. 5 at 1.)
Accordingly, it is
ORDERED that Prosser's motion, in effect, for imposition of an equitable lien on the townhouse owned by defendant Sepi Realty LLC is denied; and it is further
ORDERED that this court's interim relief, requiring defendant Cohen & Frankel LLP to maintain in escrow $157,000 of the deposit on the now-rescinded sale of the townhouse is vacated; and it is further
ORDERED that Prosser serve a copy of this order with notice of its entry on Cohen & Frankel by e-filing on NYSCEF; on nonparty SapphireEdge Holdings Limited by e-filing on NYSCEF; and on Sepi Realty by email, if available, and by certified mail, return receipt requested, directed to Sepi Realty's last-known address.