Danica Group LLC v Atlantic Ct. LLC
2009 NY Slip Op 50708(U) [23 Misc 3d 1111(A)]
Decided on April 16, 2009
Supreme Court, Kings County
Demarest, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected in part through April 28, 2009; it will not be published in the printed Official Reports.

Decided on April 16, 2009
Supreme Court, Kings County

Danica Group LLC, et ano., Plaintiffs,


Atlantic Court LLC, et al., Defendants.


Attorney for Plaintiffs

Dylan Murphy, Esq.



NEW YORK, NY 10016-3912

Attorney for only moving Defendant Atlantic Court

Aaron Abraham, Esq.



NEW YORK, NY 10019-5820

Carolyn E. Demarest, J.

Defendant Atlantic Court LLC (Atlantic) moves by way of order to show cause for an order (1) directing the county clerk to cancel the notice of pendency filed in this matter by plaintiffs Danica Group LLC and Stellar Mechanical Services of NY II, Inc., (2) releasing and striking from the caption the names of individual condominium unit owners who were joined as defendants in this action and (3) pursuant to CPLR 6514(c) awarding reasonable costs and attorneys fees Atlantic incurred as a result of the filing and cancelling of the notice of pendency.

At oral argument of this application, the liens were ordered discharged upon the submission of proof of the bonds and the notice of pendency was vacated. [*2]

Plaintiffs commenced this action to foreclose mechanic's liens filed against the subject condominium based upon construction services provided to Atlantic, the sponsor/developer of the property. The separate liens, in the amounts of $435,920.00 and $96,615.00, were filed with the Kings County Clerk on November 7, 2007. Atlantic subsequently filed, pursuant to Lien Law § 19(4), two separate mechanic's lien discharge bonds on November 27, 2007, each for 110% of the amount of the liens. The bonds bound the surety, Fidelity and Deposit Company of Maryland, to the Kings County Clerk for the amount of each lien "conditioned for the payment of any and all judgments, which may be rendered against [the subject] property, in favor of" plaintiffs. Subsequently, Atlantic proceeded to sell individual condominium units in the building.

On November 5, 2008, plaintiffs commenced the instant action seeking, inter alia, to foreclose the mechanic's liens. In conjunction with the filing of this action, plaintiffs filed a notice of pendency against the property. Atlantic thereafter brought the instant motion which, in addition to seeking cancellation of the notice of pendency and an award of costs/attorneys fees associated with the filing and cancelling of the notice, seeks an order dismissing the action as against the individual owners who purchased their units after the discharge bonds were filed. Atlantic argues that under Lien Law § 37(7), subsequent owners of a property are not necessary parties in an action to foreclose a mechanic's lien where the lien has been discharged by the posting of a bond by the previous owner.

Under Lien Law § 44(3), necessary parties to an action to foreclose a mechanic's lien on real property include "[a]ll persons appearing by the records in the office of the county clerk or register to be owners of such real property or any part thereof." There is no dispute that, had Atlantic not filed the discharge bonds, the unit owners would be proper parties in an action to foreclose the mechanic's liens. It is Atlantic's position, however, that if a lien is discharged, the only necessary parties to an action to enforce the lien are those identified in Lien Law § 37(7), to wit "the principal and surety on the bond, the contractor, and all claimants who have filed notices of claim prior to the date of the filing of such summons and complaint."

In Bryant Equipment Corp. v A-1 Moore Contracting Corp. (51 AD2d 792 [1976]), wherein, as here, a bond had been filed pursuant to Lien Law § 19(4), the Appellate Division, Second Department held Lien Law § 44 inapplicable finding that the bond "has replaced the real property as the security to be attached and attacked" and thus Lien Law § 44 relating to an action "to enforce a lien against real property" was not the relevant statute. Rather, in an action brought to foreclose the lien against the bond, Lien Law § 37(7) supersedes Lien Law § 44 in specifying the parties to be joined. Those parties to be joined as defendants include "the principal and surety on the bond, the contractor, and all claimants who have filed notices of claim", but not the owner of the real property. (Lien Law § 37(7)). See Middletown Supply, Inc. v S.M.K. Development Corp. (75 Misc 2d 1087, 1088 [1976]), wherein the court stated that Lien Law § 44(3) "applies to an action in a court of record to enforce a lien against real property or a public improvement. Once the bond has been substituted for the [*3]real property, however, the attachment is to the new security and no longer to the property, and the persons who are required to be joined as parties defendant are governed by the provisions of [Lien Law § 37(7)], which section does not include subsequent owners of the premises." See also Melniker v Grae, 82 AD2d 798, 799 [2d Dept 1981]; M. Gold & Son, Inc. v A.J. Eckert, Inc., 246 AD2d 746, 747 [3d Dept 1998]. To the extent that Romar Sheet Metal, Inc. v F.W. Sims, Inc. (8 Misc 3d 1021[A] [2005]), cited by plaintiffs, and other authority cited therein, is to the contrary, it is inconsistent with the authority in this Department and will not be followed.

Atlantic's motion to dismiss the action against the unit owners is granted. Bryant Equip. Corp. v A-1 Moore, 51 AD2d 792; Norden Electric, Inc. v Ideal Electrical Supply Corp., 154 AD2d 580, 581 [2d Dept 1989].

Defendant Atlantic seeks to recover the costs of its motion pursuant to CPLR 6514(c) which provides that "[t]he court, in an order cancelling a notice of pendency under this section, may direct the plaintiff to pay any costs and expenses occasioned by the filing and cancellation, in addition to any costs of the action." The statute is specific in limiting such recovery to circumstances enumerated therein, which do not include the posting of a bond. But see, No.1 Funding Center, Inc. v H & G Operating Corp., 48 AD3d 908, 911 [3d Dept 2008] ("The purpose of CPLR 6514(c) is to reimburse a party for costs and expenses incurred as a result of a wrongful filing of a notice of pendency"). However, Lien Law § 17 unequivocally states: "Where a lien is discharged by deposit or by order, a notice of pendency of action shall not be filed" (emphasis added). The bonds herein were filed with the Kings County Clerk on November 27, 2007, nearly a full year prior to commencement of suit. Counsel for Atlantic has attested to three telephone conversations with plaintiffs' counsel requesting a voluntary cancellation of the lis pendens based upon the statutory authority. He has also annexed a letter dated November 12, 2008 to the same effect, indicating the intent to bring the instant Order to Show Cause and to seek attorney's fees. Plaintiff has maintained its untenable position despite these several efforts to avoid litigation. Plaintiff's attempt to avoid the clear prohibition of Lien Law§ 17 by arguing that the filing of the bonds did not constitute a "deposit" within the meaning of the statute is shear nonsense. As long ago as 1893, it was held that it was not necessary to file a lis pendens where a lien has been discharged by the filing of a bond. Sheffield v Early, 73 Hun 173, 25 NYS 1098 [1893].

Part 130-1.1 of the Rules of the Chief Administrator provides for the imposition of financial sanctions, including reasonable attorneys' fees, for frivolous conduct unsupportable in law. Plaintiff's persistence, in the face of clear authority to the contrary, warrants the granting of costs to defendant. Accordingly, plaintiff shall compensate defendant Atlantic in the sum of $1,000, payable within 30 days to counsel for Atlantic, to be applied against the costs of the instant motion. See Josefsson v Keller, 141 AD2d 700 [1988].

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C.