Real time Attorney advice memo priviledged and confidential
Short AnswerTo: Nadine N. Parkes, Esq. – General CounselFrom: Kumar Pallav, ExecutiveDate: April 29, 2011Re: In the matter of Morris Associates Engineering Consultants, P.L.L.C. under Chapter 33 of the Consolidated Laws - Lien Law of the State of New York. Brief FactsMorris Associates Engineering Consultants, P.L.L.C. is a professional limited liabilitycorporation with its principle place of business in Poughkeepsie, NY entered into contract toprovide engineering services on May 8, 2007. The fee for the service contract for the Item 1 and2 is $145,000.00 & $80,000.00 respectively and amount $91,611.73 have been paid from May24, 2007 till July 8, 2008 for the services rendered.Morris Associates Engineering Consultants, P.L.L.C., lienor, filed first notice under lien law onor about May 10, 2010, in the amount of $19,425.82, with the clerk of the county of Dutchessagainst the property owned by Orchard Hill Farms, LLC as described as map 3093 & 3039,including certain lots annexed as exhibit “A” with the first notice pursuant to Lien Law of thestate of New York. The second notice of extension of mechanic’s lien was filed on April 14,2011.
Research Issue: 1) Grounds of dismissal of Mechanic lien and damages due to breach of contact:Short Answer:There are two issues which we may present in the instant action. First, the claims a breach ofcontract and damages for breach of contract. Second, the claim that the Morris AssociatesEngineering Consultants, P.L.L.C is willfully exaggerated the Mechanics Lien in violation of NYLien Law § 39 and 39a.Discussion: 1) The claims a breach of contract and damages for breach of contract :Prima facie, we need to provide evidence that Morris Associates Engineering Consultants,P.L.L.C breached the contract and subject to damages for breach of contract.While the Mechanics Lien needs to be proved void, we can still seek recovery for damagesunder the contract.In order to prove the breach of contract, we need to present the evidence as to non-performanceof the contact by the party and the amount the amounts set forth by plaintiff in its mechanics lienwas willfully exaggerated. In some cases before the court on mechanic’s lien, the court properlydismissed defendants two counterclaims. With respect to the first counterclaim, defendantsfailed to present sufficient evidence establishing that plaintiff breached the subcontract or thatplaintiff owes back charges to Allied for work that was not performed or that was improperlyperformed (see generally MelStu Constr. Corp., 131 AD2d at 825; Sturdy Concrete Corp., 65AD2d at 273). Defendants also failed to meet their burden of establishing, in support of theirsecond counterclaim, that the amounts set forth by plaintiff in its mechanics lien were willfullyexaggerated (see Garrison v All Phase Structure Corp., 33 AD3d 661, 662).
In addition, it is also settled that for the material, services and labor which did not enter into theconstruction of in question, the plaintiff had no lien. In Phillips v. Wright (7 N.Y. Super. Ct. [5Sandf.] 342) it appeared that a part of the timber furnished was not used in the vessel, and thatsome of it had been sold by the purchasers assignees, and the probability was that some went forthe repair of other vessels. It was there contended on the part of the plaintiff that the nonapplication of the timber to the building of the vessel in question for which it was bought, wasnot material; but the court took the opposite view, and held that to create the lien it is notsufficient to prove that the materials were purchased with the declared purpose of being used inthe building of the vessel, but positive application to the intended use must be shown. The courtsaid: "The whole theory of a lien for labor and materials rests upon the basis, that such labor andmaterials have entered into, and contributed to the production or equipment of the thing uponwhich the lien is impressed. This imposes on the material man the necessity of seeing to it, thathis materials are applied to the purpose for which they are procured, if he design to rely upon alien given to him, by reason of such purpose. It may well be doubted whether a literalinterpretation of the words of the statute (2 R.S. 493), confer a lien, unless the articles furnishedare actually used in the building, &c., of the vessel against which it is claimed. Can it be said thatmaterials are furnished for, or towards building a ship, when no part of them enter into, orbecome a part of, the ship? This doubt, and our conviction that the spirit of the act does notwarrant its extension to materials bought for, but never used in, the building of a designatedvessel, make it our duty to hold, that for the timber which did not enter into the construction ofthe ship in question, the plaintiff had no lien." (See, In Matter of Froment, 110 App. Div. 72(1905), 96 N.Y.S. 1061).The same court in Hiscox v. Harbeck (15 N.Y. Super. Ct. [2 Bosw.] 506) considered the samequestion, and the case of Phillips v. Wright (supra) was followed. Dealing with a similar act, Mr.Justice SUTHERLAND, in Johnson v. Steamboat Sandusky (5 Wend. 510), said: "The suppliescontemplated by the act, must be such as enter into the construction or equipment of a vessel andbecome a part of her." In Crooke v. Slack (20 Wend. 177) that case is followed. The SuperiorCourt cases are referred to and followed in Moores v. Lunt (1 Hun, 650), and the Phillips case iscited with approval in Phoenix Iron Co. v. "Hopatcong" and "Musconetcong" (127 N.Y. 206,211).
The principle contended is the law, and has been deemed such since the early cases in this State.(See, also, Happy v. Mosher (48 N.Y. 313, 320). Therefore law is settled on this point in favor ofour case and we need to produce evidence in support of breach of contract.2) The claim that the Morris Associates Engineering Consultants, P.L.L.C is willfullyexaggerated the Mechanics Lien in violation of NY Lien Law § 39 and 39a.One case law supports a willfully exaggerated lien may be voided by the court and the personfiling such a notice of lien shall be liable in damages to the owner of the property. The statedground supports our case as Morris Associates Engineering Consultants; P.L.L.C. did notperform the contact in toto. In Eickler v Pecora, (12 AD3d 635, 636 ). Contrary to theplaintiffs contention, the Supreme Court properly credited the defendants evidence and foundthat the plaintiffs breached the subject contract (see Eickler v Pecora, supra). Moreover, theSupreme Court properly dismissed the cause of action alleging willful exaggeration of amechanics lien. Lien Law § 39a provides, in relevant part, that a willfully exaggerated lien maybe voided by the court and the person filing such a notice of lien shall be liable in damages to theowner of the property. The burden is upon the opponent of the lien to show that the amounts setforth were "intentionally and deliberately exaggerated" (Fidelity N.Y. v KensingtonJohnsonCorp., (234 AD2d 263 ); see Perma Pave Contr. Corp. v Paerdegat Boat & Racquet Club,156 AD2d 550, 552 ; see also Minelli Constr. Co. v Arben Corp., (1 AD3d 580, 581). see Garrison v. All Phase Structure Corp.,(821 N.Y.S.2d 898)In other cases before the court on mechanic’s lien, the court properly dismissed defendants twocounterclaims. With respect to the first counterclaim, defendants failed to present sufficientevidence establishing that plaintiff breached the subcontract or that plaintiff owes back chargesto Allied for work that was not performed or that was improperly performed (see generallyMelStu Constr. Corp., 131 AD2d at 825; Sturdy Concrete Corp., 65 AD2d at 273). Defendantsalso failed to meet their burden of establishing, in support of their second counterclaim, that theamounts set forth by plaintiff in its mechanics lien were willfully exaggerated (see Garrison vAll Phase Structure Corp., 33 AD3d 661, 662).
Therefore we can claims that the Morris Associates Engineering Consultants, P.L.L.C willfullyexaggerated a Mechanics Lien in violation of New York Lien Law § 39 which states in part "ifthe court shall find that a lienor has willfully exaggerated the amount for which he claims a lienas stated in his notice of lien, his lien shall be declared to be void and no recovery shall be hadthereon. The Appellate Division, Second Department in other cases has stated, "the burden isupon the opponent of the lien to show that the amounts set forth were intentionally anddeliberately exaggerated. Where there is any willful exaggeration in the amount of the lien asfiled, the entire lien is forfeited under section 39 of the Lien Law. The check given to MorrisAssociates Engineering Consultants, P.L.L.C upon receipt, for the services clearly shows thepayment to the services rendered under the contract prior to May 7, 2008. Morris AssociatesEngineering Consultants, P.L.L.C claim of stopped payment of the $19,425 check, was not dueto the contract. This clear amplify the fact that Morris Associates Engineering Consultants,P.L.L.C did an untrue representation of the fact and filed a mechanic’s lien intentionally beyondthe scope of the contract.New York Lien Law § 39 requires that the exaggeration of the Mechanics Lien be willful. Thecourts have defined willful as meaning "intentional and deliberate." It is not enough to establishthat there are differences in the accounting of both parties. NY Lien Law sections 39 and 39awere written with the intent to be read together. Upon reading both sections it is evident that theyhave been written to protect against duplicitous wilful exaggeration of lien claims. Thesesections "are intended to protect the owner or contractor from fictitious, groundless andfraudulent liens by unscrupulous lienors and not to bring within the prohibition or penalties ofthe statute honest difference of opinion as to the amount due or inaccuracy in the amount of thelien so long as no exaggeration was intended." Therefore there must be a showing that theexaggeration was in fact willful and show that the leinor knew the amount to be false yet filed amechanics lien in an exaggerated amount.In present case it can be proved by preponderance of the evidence that at the time the MorrisAssociates Engineering Consultants, P.L.L.C filed the $19,425.82 mechanics lien, it knew that itwas an exaggeration of the amount owed and not under a contract. An analysis of the stipulatedfacts and the evidence provided by both parties lends itself to the conclusion that MorrisAssociates Engineering Consultants, P.L.L.C acted willfully, intentionally and deliberately whenit filed the mechanics lien in the amount of $19,425.82. When viewed in the light most
favorable, A may court finds that the mechanics lien was, exaggerated for at least $19,425.82because there was false claim on the part of Morris Associates Engineering Consultants, P.L.L.C.from last two years.Therefore, the claim that the Morris Associates Engineering Consultants, P.L.L.C is willfullyexaggerated the Mechanics Lien in violation of NY Lien Law § 39 and 39a. a) Damages awarded under New York Lien Law § 39aNew York Lien Law § 39a sets forth parameters by which Plaintiff/Buyer may be awardeddamages. Specifically, it states that Plaintiff/Buyer may receive "an amount equal to thedifference by which the amount claimed to be due or to become due as stated in the notice of lienexceeded the amount actually due or to become due thereon . . . shall include the amount of anypremium for a bond given to obtain the discharge of the lien or the interest on any moneydeposited for the purpose of discharging the lien, [and] reasonable attorneys fees for services insecuring the discharge of the lien". Generally The Plaintiff/Buyer is entitled under Lien Law §39a to "the amount of any premium for a bond given to obtain the discharge of the lien." b) Attorney Fees & Treble DamagesNY Lien Law § 39a allows for the court to award an amount of attorneys fees it deems"reasonable attorneys fees for services in securing the discharge of the lien". However NY LienLaw § 39a is silent on the issue of treble damages sought by the Plaintiff/Buyer. "The MechanicsLien is a creature of statute existing neither in common law nor in equity in the absence of alegislative act." Accordingly, the court will or will not impose treble damages against theDefendant/Seller.
Therefore we need to provide sufficient evidence establishing that Morris AssociatesEngineering Consultants, P.L.L.C. breached the contract or that they owes back charges to Alliedfor work that was not performed or that was improperly performed and the amounts set forth byplaintiff in its mechanics lien were willfully exaggerated.Conclusion:Therefore we need to contest the breach of contract on the part of Morris Associates EngineeringConsultants, P.L.L.C. and void the mechanic’s lien under the Lien Law § 39a.
Index: Law related to Lien Relevant provisions of the Consolidated Laws - Lien Law of the State of New York§ 3 Lien. Mechanics lien on real property.A contractor, subcontractor, laborer, material man, landscape gardener, nurseryman or person orcorporation selling fruit or ornamental trees, roses, shrubbery, vines and small fruits, who performs laboror furnishes materials for the improvement of real property with the consent or at the request of the ownerthereof, or of his agent, contractor or subcontractor, and any trust fund to which benefits and wagesupplements are due or payable for the benefit of such laborers, shall have a lien for the principal andinterest, of the value, or the agreed price, of such labor, including benefits and wage supplements due orpayable for the benefit of any laborer, or materials upon the real property improved or to be improved andupon such improvement, from the time of filing a notice of such lien as prescribed in this chapter. Wherethe contract for an improvement is made with a husband or wife and the property belongs to the other orboth, the husband or wife contracting shall also be presumed to be the agent of the other, unless suchother having knowledge of the improvement shall, within ten days after learning of the contract give thecontractor written notice of his or her refusal to consent to the improvement. Within the meaning of theprovisions of this chapter, materials actually manufactured for but not delivered to the real property, shallalso be deemed to be materials furnished.
Analysis of the Invoices that supports the mechanic’s lien in the amount of $19,425.82 1) The amount is calculated and verified as $19,425.82 (The total of the all invoices). 2) As per the contract, this amount is claimed under Service Contract item no. 1, as of $145,000.00. 3) The amount $91,611.73 had been paid from May 24, 2007 till July 8, 2008 for the services rendered. We have no evidence to support that the amount we have paid is for any specific services/labor rendered by the Morris Associates Engineering Consultants, P.L.L.C. Because we can not distinguish/difference the work for which we have paid for and the work mentioned in the contract. The reason is on the facsimile page no 3, we can see that the dates mentioned for the professional services rendered from Oct. 12, 2008 to Nov. 15, 2008 is done from 10/10/2007- 10/25/2007. It is noteworthy that we have paid Last to Morris Associates Engineering Consultants, P.L.L.C. on July 8, 2008 (based on our last check. Means we may have actually paid for the services in 2007. We also need the proof that how and when we have authorized their services from May 17th, 2009 (p.2 of fax) & Nov. 25th, 2008 (p.2 of Fax). Because Nov.25th, 2008 invoice itself bear the outstanding balance of 13,257.80 for all the work is done in 2007. We also need a proof that actually the work is performed by the Morris Associates Engineering Consultants, P.L.L.C. as they have done lot of printing, drafting and designing. We may also ask them to show the invoices for consultation with different authorities. It is significant fact that they have not done anything substantially and billed us for arranging meetings, follow ups, consultation, writing letters etc. The amount mentioned in the Item 1 of the contract is also divided to be paid on the approval/stages set in the contract. (P.3 of the contract as $145,000). It shows that as a retainer they can only claim $35,000 on stage 1 and upon first submission they can claim $52,000 (stage 2). They can only claim rest of the amount upon the approval of Planning Board. We also need to find that on which stage they were and making this claim. However all amount claimed I invoice fall within the scope and duties under the contract as verified as per the terms of contract.