Opinion
103762/09.
Decided August 10, 2009.
Petitioner SMC Electrical Contractors, Corp., ("SMC") moves, by order to show cause, for (i) an order pursuant to New York Lien Law § 21-a discharging a lien filed by respondent TSSCO, Inc., ("TSSCO") against a New York Harbor High School construction project ("Harbor High Project"), which the New York City School Construction Authority ("SCA") operates, and (ii) an order pursuant to New York Lien Law § 39 and 39-A voiding the lien and granting it statutory damages and costs against TSSCO for willfully exaggerating the lien.
Background
SMC is an electrical subcontractor for the general contractor M. A. Angeliades on the Harbor High Project. (Kazantzis Affid. ¶ 5). For this project, SMC retained the electrical supplier TSSCO via a purchase order on on June 26, 2006, for "fire, intrusion, intercom, phone, clock, sound systems." (Kazantzis Affid. Ex. A). Prior to the delivery and installation of any material for the project, the SCA required TSSCO to provide work proposals and shop drawings for approval by the SCA project engineer, DVL Engineering ("DVL"). (Kazantzis Affid. ¶ 16). TSSCO employees A. Abruzzo and Eric Gursky drafted technical diagrams for these systems, (Kazantzis Affid. Ex. 1), diagrams which employee Fran Garcia submitted (Kazantzis Affid. ¶ 14). As both SMC and TSSCO agree, these employees do not hold licenses as architects, engineers, or surveyors, ( see id., Affirm. in Opp. ¶ 10), and the diagrams do not bear the seal of any such licensed professional ( see Kazantzis Affid. Ex. 1).
On July 25, 2008, and August 8, 2008, DVL rejected all but one of TSSCO's submissions and directed TSSCO to "resubmit as specified." (Kazantzis Affid. Ex. B).
The parties' accounts, although not irreconcilable, differ as to what occurred afterward. SMC alleges that "TSSCO never submitted acceptable work proposals [or] shop drawings to DVL so as to be able to contractually deliver the materials to the Harbor High Project, and never performed the one item of work that was approved." (Kazantzis Affid. ¶ 21). TSSCO claims that it "proceeded to make the revisions and submit [sic] them to SMC," (Bradley Affid. ¶ 8), and that it "further proceeded to commence ordering the project materials, create sales orders, and procurement documents," (Bradley Affid. ¶ 9), but that "[a]fter [TSSCO] performed this work, SMC ceased communicating with [TSSCO]. . . . In December, 2008, SMC asked that we only perform a portion of the work at a new price," (Bradley Affid. ¶ 10).
On January 14, 2008, TSSCO filed a lien on the Harbor High Project for $36,500, and, in the lien Notice, indicated that "the labor performed and material furnished were[:] Supplied and Installed Low Voltage Equipment, Engineering, Program[m]ing, Testing, Training, Etc." (Bradley Affid. Ex. D). On January 26, 2009, SMC served a Demand for a Verified Statement of the lien pursuant to New York Lien Law § 38. (Kazantzis Affid. Ex. D). On February 9, 2009, TSSCO provided an itemized statement to SMC which states that "[t]he total amount of labor attributable to the original contract before termination is $36,857.50 consisting of sales, engineering, drafting, supervision and clerical. The total amount of materials attributable to the original contract is $350.00 consisting of postage and freight. The total amount due and owing is $37,307.50 which is comprised of the following. See breakdown appended hereto." ( Id.). However, the attached documents, which include the purchase order, do not appear to break down the expenses any more extensively. ( Id.).
On January 29, 2009, SMC alleges it served a demand for foreclosure on TSSCO pursuant to New York Lien Law § 21-a. (Kazantzis Affid. ¶ 35; Kazantzis Affid. Ex. E). The Affidavit of Service indicates that the process server hand-delivered the demand on an employee named Melinda who refused to provide her full name. (Kazantzis Affid. Ex. E). TSSCO denies receiving service and claims that its employees "do not refuse to give names if legal papers are served." (Bradley Affid. ¶ 13). In any case, TSSCO did not thereafter commence foreclosure proceedings or serve SMC with a notice of pendency. (Kazantzis Affid. ¶ 37).
SMC argues that because TSSCO failed to commence foreclosure proceedings or file a notice of pendency within thirty days since SMC served the demand for foreclosure, the court should vacate the lien. SMC further asserts that since TSSCO did not have a licensed architect, engineer, or surveyor draft its submitted drawings, and since the owner's agent, DVL, rejected its submissions, such drawings were not lienable improvements. As an extension of this argument, SMC claims that TSSCO exaggerated the lien amount, as its items were not lienable, and as the verified itemization was an insufficient response to the requirements of New York Lien Law § 38.
TSSCO counters that courts can only summarily discharge a lien under Lien Law § 21(7), and that preliminary plans are lienable even if no actual work occurred on the property. TSSCO denies the need to have a licensed professional stamp its technical drawings since SMC's licensed electrician would later incorporate the drawings into SMC's filings with the SCA. TSSCO also argues that the law reserves willful exaggeration claims for trial. Finally, TSSCO requests a traverse hearing to resolve whether SMC properly served the demand for foreclosure.
In reply, SMC argues that whether TSSCO's drawings were lienable by TSSCO against SMC depends solely on whether TSSCO's draftsmen possessed licenses as architects, engineers, or surveyors. SMC avers that since the parties do not dispute the facts surrounding TSSCO's drawings, the court can make a willfulness determination on the record. Finally, SMC concludes that TSSCO's denial that it received service for the demand for foreclosure was a self-serving, conclusory affidavit not entitled to factual credence.
Discussion
New York Lien Law § 21-a permits the Supreme Court to vacate a lien, if the lienor has received a notice of a demand to foreclose but has failed to commence a foreclosure action within a time, not less than thirty days, that the notice specifies. See also Miller v. T.A. J.M. General Contractors, Inc., 124 Misc 2d 273, 274 (NY Sup. Ct. Kings Co. 1984) ( citing Entenman v. Anderson, 106 A.D. 149 (2d Dep't 1905)). If a party whose interests are subject to a lien has not properly served the lienor the notice of the demand for foreclosure, then the Court cannot vacate the lien. See NY Lien Law § 21-A, Challenge Bldg. Design Corp. v. Aird Island, Inc., 55 Misc 2d 405, 406 (NY Sup. Ct. Ulster Co. 1967) (denying a motion to vacate a lien pursuant to Section 21-A where it appeared that the lienor did not receive personal service until almost thirty days following its date and action was begun by lien claimant on first working day following date fixed in notice).
The Court can, however, summarily discharge the lien pursuant to Lien Law § 21(7), but only if the lien is facially defective. See Newburgh Nursery, Inc. v. Board of Ed. of Cent. School Dist. No. 2, Towns of Ramapo, Orangetown, Clarkstown and Haverstraw, Rockland County, 41 Misc 2d 997, 998 (NY Sup. Ct. Orange Co. 1964) (noting that a party subject to a lien on public property may, in the absence of a proper notice of pendency, either move to vacate the lien under Lien Law § 21-a or discharge it under one of Lien Law § 21's provisions). In a motion to discharge the lien summarily, the Court may not consider evidence to contest the lien's validity. HamiltonAir Co., Inc. v. Gould , 17 Misc 3d 222 , 227 (NY City Civ. Ct. 2007), see Matter of Harbour Green Estates v. North Shore Electric Corp., 7 Misc 2d 541, 542 (NY Sup. Ct. Nassau Co. 1957) (refusing to discharge a lien even though the lienor had agreed not to file liens, on the ground that the lienor's agreement did not appear on the lien's face).
Lien Law § 21 provides in pertinent part:
A lien against the amount due or to become due a contractor from the state or a public corporation for the construction or demolition of a public improvement may be discharged as follows:
. . .
7. Where 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, or where the notice of lien is invalid by reason of failure to comply with the provisions of section twelve this article, or where it appears from the public records that such notice has not been filed in accordance with the provisions of section twelve this article, the contractor or any other party in interest, may apply to the supreme court of this state, or to any justice thereof, or to the county judge of the county in which the notice of lien is filed, for an order summarily discharging of record the alleged lien. . . . The application must be made upon a verified petition accompanied by other written proof showing a proper case therefor, and upon the approval of the application by the court, justice or judge, an order shall be made discharging the alleged lien of record.
Lien Law § 21.
TSSCO's failure to have a licensed architect, engineer, or surveyor draft its submitted drawings is evidence that does not create an issue of a facial defect, since it does not appear from lien's face that TSSCO's drawings are not lienable. See Di-Com Corp. v. Active Fire Sprinkler Corp., 36 AD2d 20, 21 (1st Dep't 1971) (holding that whether the draftsperson of the lienor's construction drawings was a licensed architect, engineer, or surveyor, was not a facial defect suitable for a summary discharge). Cf. Windsor Metal Fabrications, Ltd. v. Reynolds Metal Development, Co., 262 AD2d 404, 405 (2d Dep't 1999) (dismissing a cause of action to foreclose a lien since the draftsperson of the lienor's construction drawings was not a licensed architect, engineer, or surveyor), In re Application of Flushing Asphalt Corp., 188 Misc. 304, 306 (NY Sup. Ct. Queens Co. 1946) (holding a lien facially defective where it purported to lien three separate projects for three distinct contracts, but rejecting other arguments that did not concern the lien's facial validity). Absent a facial defect, the Court cannot summarily discharge TSSCO's lien.
Thus, to vacate the lien, SMC must have properly served the notice of the demand for foreclosure on TSSCO. SMC argues that the Bradley Affidavit, which, in a single paragraph, denies TSSCO received such service, does not create a genuine issue of fact on this point because it allegedly "is a classic example of a self-serving, conclusory affidavit not entitled to factual credence." (Reply Mem. 7). SMC's argument is unavailing as the Bradley Affidavit denies receipt of service based on company policy and on the grounds that TSSCO does not employ the person with the name the process sever identified.
Specifically, Bradley states that TSSCO's "offices are open to all and [TSSCO does] not refuse to give names if legal papers are served. [TSSCO does] not employ anyone named "Melinda [ ]Doe[']". . . . Further, [TSSCO] refer[s] any legal papers to our counsel as evidenced by the fact that when TSSCO was served with the Demand for Itemized Statement, [it] forwarded same to [TSSCO's] counsel. . . ." (Bradley Affid. ¶ 13). These facts are sufficient to require a hearing on the issue of service. See Application of St. Christopher-Ottilie, 169 AD2d 690, 691 (1st Dep't 1991) (holding that an affidavit of service is not conclusive if there is a sworn denial of receipt, and holding that any "marked difference in the physical description contained in the affidavit of service, as compared to that set forth in respondent's moving papers, requires that a traverse hearing be held") (internal citations omitted). Cf. People v. White , 22 Misc 3d 292 , 296 (City Ct. Auburn 2008) (denying a request for a traverse hearing because defendant failed to raise a genuine issue of fact when he conclusorily denied proper service). Consequently, TSSCO has raised an issue of fact regarding service of the demand, and the Court must set down the matter for a traverse hearing.
Finally, SMC cannot bring its willful exaggeration claim unless and until TSSCO has initiated a foreclosure action on its lien. See Wellbilt Equipment Corp. v. Fireman, 719 N.Y.S.2d 213, 216, 2000 NY Slip Op. 08556 (1st Dep't 2000) ("[S]ection 39-a, by its terms, only permits a wilful exaggeration claim to be asserted in an action to enforce a mechanic's lien,' namely, a foreclosure action."), Washington 1993, Inc. v. Reles, 255 AD2d 745, 747 (3d Dep't 1996) (holding that the issue of whether the contractor deliberately and intentionally exaggerated the lien amount was a question of fact for trial), Joe Smith, Inc. v. Otis-Charles Corp., 279 A.D. 1 (4th Dep't 1951), aff'd 304 NY 684 (NY 1952) (holding that courts lack authority to declare a lien void for willful exaggeration where a party successfully obtained a discharge of the lien at the beginning of trial). Accordingly, to the extent the application seeks relief based on the alleged wilful exaggeration of the lien, it must be denied.
Conclusion
Accordingly, it is hereby
ORDERED that TSSCO's request for a traverse hearing is granted, and it is further
ORDERED that the issue of whether TSSCO was properly served with the demand is referred to a Special Referee to hear and report with recommendations, except that in the event of and upon the filing of a stipulation as permitted by CPLR 4317, the Special Referee or other person designated as referee shall determine said issue; and it is further
ORDERED that aspect of the application to discharge the lien pursuant to Lien Law § 21-a is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated Referee; and it is further
ORDERED that a copy of this order with notice of entry shall be served on the Clerk of the Judicial Support Office (Room 311) on or before September 4, 2009 to arrange a date for reference to a Special Referee; and it is further
ORDERED that failure to timely comply with the immediately preceding paragraph shall result in the denial and dismissal of the remainder of the application; and it is further
ORDERED that the application is denied and dismissed to the extent that it seeks to discharge the lien based on Lien Law § 21(7), and to void the lien for willful exaggeration under Lien Law § 39, and to obtain damages under Lien Law § 39-a.