Daggart of Richmond Inc. v M & D Firedoor

[*1] Daggart of Richmond Inc. v M & D Firedoor 2009 NY Slip Op 51644(U) [24 Misc 3d 1227(A)] Decided on July 28, 2009 Supreme Court, Richmond County Maltese, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 28, 2009
Supreme Court, Richmond County

Daggart of Richmond Inc. a/k/a DAGGART CONSTRUCTION CORP., Plaintiff

against

M & D Firedoor and M & D INSTALLERS INC., Defendant



103481/06



Plaintiff was represented by the Law Office of Howard File, Esq., P.C.

Defendants were represented by Amos Weinberg, Esq.

Joseph J. Maltese, J.

This court finds the Defendant's M & D Fire Door and M & D Installers Inc., the sellers, are liable for willful exaggeration of a Mechanics' Lien under New York Lien Law §39 and §39-a.

Facts

Plaintiff-Buyer, Daggart of Richmond County a/k/a Daggart Construction Corp. ("Daggart") is a New York business corporation with its principle place of business in Richmond County, NY In February 2006, the plaintiff entered into a written proposal order to purchase construction materials ("contract") with Defendant-Seller David Lipshitz, Marty Sabel, David Lipshitz and Marty Sabel d/b/a M & D Fire Door and M & D Fire Door Installers Inc., ("Defendant-Seller "), which was also a New York business corporation. The contract specified that Defendant-Seller, M & D was to deliver doors and hardware the to Plaintiff-Buyer's construction site.

During the bench trial this court granted the Defendant-Seller's motion to dismiss the complaintagainst David Lipshitz and Marty Sabel as individuals doing business as M & D Fire Door, because they executed the contract as corporate officers and not as individuals.

Plaintiff-Buyer's complaint alleges that the parties agreed to the sum of $35,500 for the manufacturing and delivery of doors and frames and $27,500 for related hardware for a total of $63,000. Plaintiff-Buyer claims that the door and door frames were delivered by the Defendant-Seller four months after the due date. When the doors were delivered, the Plaintiff-Buyer claimed that the bathroom doors that were not constructed pursuant to the drawings and specifications provided by the Plaintiff-Buyer in its architectural schematics and were non-conforming goods. More specifically, the Plaintiff-Buyer claims that the louvers on the 19 bathroom doors which are used to vent bathrooms were incorrectly [*2]placed and as a result could not be installed. Instead of the louvers, being 24 inches wide and 12 inches in height, Defendant-Seller delivered doors with louvers 12 inches wide and 24 inches in height which made it capable of looking into the bathroom with the door closed when viewing it from a side angle thus eliminating personal privacy, when using the bathroom. The Plaintiff-Buyer accepted the standard plain doors, but rejected the 19 non-conforming bathroom doors.

Plaintiff-Buyer's complaint alleges the following damages: $100,000 as a result of the materials being manufactured incorrectly; consequential damages in the amount of $100,000 as a result of Defendant-Seller not delivering materials in a timely fashion; return of $20,000 paid directly to the Defendant-Seller in the form of two checks for $10,000 each; compensatory and treble damages totaling $200,000 as a result of Defendant-Seller's willful exaggerations of the Mechanics' Lien of $51,994.84 filed by the Defendant-Seller with the Clerk of the County of Richmond on or about October 25, 2006. The Plaintiff-Buyer also seeks to void the Mechanics' Lien, as well as legal fees totaling $14,031.15.

The Defendant-Seller claims that assorted doors and some hardware were delivered to Plaintiff-Buyer which totaled $34,006.72, that the Plaintiff-Buyer accepted and used the standard doors and hardware. Moreover, Defendant-Seller claims that additional door hardware (hinges, door knobs and locks) totaled $17,883.09. Both parties stipulate to the fact that Defendant-Seller was paid $20,000 in the form of two checks by Plaintiff-Buyer and that the hardware which was to be supplied by Defendant-Seller was never delivered. The Defendant-Seller claims this was a result of Plaintiff-Buyer refusing delivery. Lastly, the Defendant-Seller claims that the Plaintiff-Buyer failed to returned any of the defective merchandise and that it has the hardware in storage.

Both parties acknowledge that Plaintiff-Buyer executed and then stopped payment on a check written to Defendant-Seller in the amount of $25,000 when the doors were delivered.

The Defendant-Seller submitted a counterclaim to foreclose the mechanics' lien and filed a cross claim under CPLR 3019 [d] against Colonial Surety Company ( "Colonial") for its bond to pay any judgment against Plaintiff-Buyer rendered in an action to enforce the Mechanics' Lien. The cross-claimant Colonial Surety Company did not appear at the trial.

Discussion

There are two issues which the Plaintiff-Buyer presents in the instant action. First the Plaintiff-Buyer claims a breach of contract and damages for the delivery of defective non-conforming bathroom doors and the failure to deliver the hardware for the doors. Secondly, the Plaintiff-Buyer claims that the Defendant-Seller willfully exaggerated the Mechanics' Lien in violation of NY Lien Law § 39 and 39-a.

The Doors Are Defective and Non-Conforming

Plaintiff-Buyer ordered 19 doors from Defendant-Seller with the specific purpose of being used as bathroom doors with louvers to vent the bathrooms. The "contract" proposal form, which bears Defendant-Seller 's name which is signed by Plaintiff-Buyer reads "19 3'0" x 7'0" Solid Core Birch Doors with a 12" x 24" Regular Louver Installed None Rated". Attached to the proposal was an architects schematic that shows the proposed louvers in the bathroom doors to be 24" x 12", which is the opposite of what is written in the proposal by Defendant-Seller and signed by Plaintiff-Buyer . Both parties agree [*3]that the standard in the industry is that measurements are written width x height. Defendant-Seller argues that it delivered the bathroom doors as ordered, 12" wide by 24" high which conform to the order. Plaintiff-Buyer contends that the doors do not conform to the purpose intended and are defective in that they allow for visibility into the bathroom when the door is closed.

The "mistake" is a unilateral mistake on the part of Defendant-Seller rather than a bilateral mistake by both parties. Although Plaintiff-Buyer signed the proposal that read 12" x 24," the responsibility for the mistake falls upon the party supplying the product. These were by no means "custom" doors; rather, it was intended that the doors be used as standard bathroom doors. Moreover, Plaintiff-Buyer provided Defendant-Seller with the architectural specifications referenced in the proposal on an architectural schematic which provided a drawing showing the louvers with the width twice the size of the height (ie. 24" x 12") and its placement at the bottom of the bathroom doors. It was Defendant-Seller 's responsibility to clarify the measurements with Plaintiff-Buyer when there was a conflict between the written proposal and the schematic especially when they did not conform with the standard practice of width x height. Moreover, Defendant-Seller wrote the contract which stated 12" x 24". Therefore, as between the seller who wrote the contract and the buyer who signed the seller's form contract, the seller who created the mistake should be responsible for its mistake.[FN1] Here the mistake is material because the manufacturing of louvers at 12" x 24" resulted in Plaintiff-Buyer not being able to use them as bathroom doors or for any other purpose.

The Appellate Division, Third Department has held that a contract will be voided for a unilateral mistake of fact only where enforcement of the contract would be unconscionable, the mistake is material and was made despite the exercise of ordinary care.[FN2] It would be unconscionable for this court to enforce this contract because Defendant-Seller who created the mistake should have consulted the with the customer to confirm whether it really wanted custom louvers at 12" x 24" rather than the standard 24" x 12" louvers before it manufactured the doors. Moreover, "there is no contract where the party attempting to enforce a writing knew or had reason to know that the other party was laboring under a mistake."[FN3]

No Specifically Made Hardware

This court is unpersuaded by Defendant-Seller's argument that the hardware was "specially made" for the Plaintiff-Buyer. There is much distinction between custom and standard made locks. The locks in question are simply locks which have a master key that can be used to open various locks within one building, that is standard practice in multi-purpose buildings. The Defendant-Sellers have offered no evidence that would support its claim that the locks in question were specifically or custom made. The invoices do not contain specifications that make these keys and locks limited to be used on the doors in question. The hardware differs for example, from a custom made glass table top [FN4] or a custom made pool [*4]cover [FN5] that are made specifically to the specifications of the consumer. The Defendant-Seller , when it filed the lien were aware that they had furnished Plaintiff-Buyer with $34,559.02 of merchandise for which it had been paid $20,000. At the time the lien was filed the most Defendant-Seller could have reasonably owed was $43,000, which takes into consideration that Defendant-Seller believed it was owed $17,340.79 for the hardware that was not delivered. However, Defendant-Seller can not recover for undelivered hardware nor can it recover for the 19 defective bathroom doors.

Willful Exaggeration of Mechanics' Lien

The Plaintiff-Buyer claims that the Defendant-Seller willfully exaggerated a Mechanics' Lien in violation of New York Lien Law § 39 which states in part "if the court shall find that a lienor has wilfully exaggerated the amount for which he claims a lien as stated in his notice of lien, his lien shall be declared to be void and no recovery shall be had thereon." [FN6] The Appellate Division, Second Department has stated, "the burden is upon the opponent of the lien to show that the amounts set forth were intentionally and deliberately' exaggerated.[FN7] " Where there is any willful exaggeration in the amount of the lien as filed, the entire lien is forfeited under section 39 of the Lien Law."[FN8]

The parties are in agreement that Defendant-Seller received: $20,000 in two checks from Plaintiff-Buyer and $17,500 from Certigy Insurance Company for a total of $37,500 . The $17,500 from Certigy Insurance Company was paid to Defendant-Sellers after Plaintiff-Buyer's cancellation of the $25,000 check given to Defendant-Seller upon receipt, of the doors.

Plaintiff-Buyer claims it stopped payment on the $25,000 check because the bathroom doors were non-conforming and were delivered four months late and that the hardware was not supplied with the delivery. The Plaintiff-Buyer has also provided two cashed checks to demonstrate that it paid $2,287.78 to bond the Defendant-Seller's mechanics' lien.

The Defendant-Seller argued and testified at trial that it received the $37,500 prior to filing the mechanics' lien. Therefore Defendant-Seller claimed it was due $25,500, which is the difference between the $63,000 proposal price less the $37,500 it received. While the Defendant-Seller never delivered the door hardware worth $17,340.79, which would have reduced the $25,500 claim to $ 8,159.21, the Defendant-Seller took the position that the actions of the Plaintiff-Buyer in stopping payment on the $25,000 check was an anticipatory breach of the contract and that its obligations to deliver the additional hardware ceased.

New York Lien Law § 39 requires that the exaggeration of the Mechanics' Lien be willful. The [*5]courts have defined willful as meaning "intentional and deliberate." [FN9] It is not enough to establish that there are differences in the accounting of both parties. NY Lien Law sections 39 and 39-a were written with the intent to be read together.[FN10] Upon reading both sections it is evident that they have been written to protect against duplicitous wilful exaggeration of lien claims. These sections " are intended to protect the owner or contractor from fictitious, groundless and fraudulent liens by unscrupulous lienors and not to bring within the prohibition or penalties of the statute honest difference of opinion as to the amount due or inaccuracy in the amount of the lien so long as no exaggeration was intended."[FN11] Therefore there must be a showing that the exaggeration was in fact willful and show that the leinor knew the amount to be false yet filed a mechanics' lien in an exaggerated amount.[FN12]

This court finds that the Plaintiff-Buyer, has shown by a preponderance of the evidence [FN13]that at the time the Defendant-Seller filed the $51,994.84 mechanics' lien it knew that it was an exaggeration of the amount owed them by the Plaintiff-Buyer . An analysis of the stipulated facts and the evidence provided by both parties lends itself to the conclusion that Defendant-Seller acted willfully, intentionally and deliberately when it filed the mechanics' lien in the amount of $51,994.84. When viewed in the light most favorable to the Defendant-Seller, this court finds that the mechanics' lien was, exaggerated for at least $8,994.84. The court arrives at this amount by considering the Defendant-Sellers argument that the mechanics' lien was filed prior to the check for $17,500 partial reimbursement check from Certigy Insurance Co., because the check was written on October 25, 2006, which is the same date the mechanics' lien was filed. While it can be argued that the Defendant-Seller, who made the claim to Certigy Insurance knew it would be receiving a check for $17,500, when it filed the mechanics' lien, this court will adopt the Defendant-Seller's argument that it had not received the insurance check and did not know that the insurance company had paid for 70% of their claim.

Accordingly, this court finds that the Defendant-Seller could have reasonably believed it was owed $43,000 ($63,000-$20,000 = $43,000) under the contract. But the mechanics' lien was filed for $51,994.84 which is $8,994.84 more or exaggerated over $43,000. The Appellate Division, Second Department has held that the "penalty to be imposed for willfully exaggerating mechanics' lien was properly measured only by the amount found to have been willfully exaggerated, not the amount by which lien was overstated." [FN14] In other words, "damages...must be limited to the amount by which the lien was willfully exaggerated."[FN15] The court finds that this exaggeration made by Defendant-Seller was in fact deliberate, intentional and willful. When Defendant-Seller filed the lien it had in its possession [*6]$20,000 from Plaintiff-Buyer along with the hardware worth $17,340.79. Defendant-Seller prepared and had in its possession the proposal which totaled $63,000 at the time the lien was filed and therefore had the knowledge that $51,994.84 was an exaggeration of what was owed. Thus, when viewed in the light most favorable to Defendant-Seller the mechanic's lien remains exaggerated by $8,994.84. Since, the lien was willfully exaggerated, the lien is void.

Damages awarded under New York Lien Law § 39-a

New York Lien Law § 39-a sets forth parameters by which Plaintiff-Buyer may be awarded damages. Specifically, it states that Plaintiff-Buyer may receive "an amount equal to the difference by which the amount claimed to be due or to become due as stated in the notice of lien exceeded the amount actually due or to become due thereon...shall include the amount of any premium for a bond given to obtain the discharge of the lien or the interest on any money deposited for the purpose of discharging the lien,[and] reasonable attorneys fees for services in securing the discharge of the lien".

The Mechanics' Lien was filed for $51,994.84 notwithstanding this court's finding that the balance due Defendant-Seller, M & D under the contract is only $1,356.96. This court has found that by adopting the Defendant-Sellers arguable claims, the mechanics' lien was exaggerated by $8,994.84. The Plaintiff-Buyer has also paid a fee of $2, 287.78 for bonding the lien. The Plaintiff-Buyer is entitled under Lien Law § 39-a to "the amount of any premium for a bond given to obtain the discharge of the lien."

Attorney Fees & Treble Damages

NY Lien Law §39-a allows for the court to award an amount of attorney's fees it deems "reasonable attorneys fees for services in securing the discharge of the lien". This court finds that the Plaintiff-Buyer's request for $14,031.25 in attorney's fees is reasonable and awards that sum to the Plaintiff-Buyer.

NY Lien Law §39-a is silent on the issue of treble damages sought by the Plaintiff-Buyer. "The Mechanic's Lien is a creature of statute existing neither in common law nor in equity in the absence of a legislative act."[FN16] Accordingly, this court will not impose treble damages against the Defendant-Seller.

Contract Damages

While the Mechanics' Lien is void, the Defendant-Seller can still seek recovery for damages under the contract. When non-conforming goods are delivered, under NY UCC 2-601, a buyer has the right to reject the whole, or accept the whole or accept any commercial units or units and reject the rest of the goods received.[FN17]This right of rejection applies where there is a non-conformity that substantially diminishes the value of the goods. The Appellate Division, Second Department, in quoting NY UCC 2-602-1 states "the [r]ejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller." The New York UCC 2-606 (1) (b) provides [*7]than an "[a]cceptance of goods occurs when the buyer...fails to make an effective rejection."[FN18]Here, the Plaintiff-Buyer kept and used the conforming doors and rejected the 19 non-conforming bathroom doors.

The Plaintiff-Buyer is credited with $37,500 on the proposal price of $63,000 leaving a balance of $25,500. But the Defendant-Seller is not entitled to the $17,340.79 worth of hardware because it never delivered it to the Plaintiff-Buyer. Therefore the $17,340.79 cost for the undelivered hardware should be deducted from the $25,500 leaving a balance $8,159.21.

However, NY UCC § 2-712 (1) states "a buyer may purchase or contract to purchase substitute goods if a seller fails to make delivery or repudiates the contract."Moreover, this section authorizes a buyer to purchase substitute goods, to "cover" the non-conforming goods. The NY UCC §2-712(2) permits the Plaintiff-Buyer to recover damages including the difference between the cost of cover and the cost of the contract.[FN19]The defective bathroom doors were billed at $3,857, but that sum is not enforceable because it was timely rejected as non-conforming goods under the contract and should similarly be deducted from the balance of $8,159.21 leaving a balance of $4,302.21. Moreover, the Plaintiff-Buyer paid $6,802.75 for the replacement bathroom doors which represents an additional cover cost of $2,945.25 ($6,802.75- $3,857.00= $2,945.25). The $2,945.25 cover cost should also be deducted from the outstanding balance ($4,302.21-2,945.25= $1,356.96), thereby leaving a balance due to the Defendant-Seller, M & D of $1,356.96 due on the contract.

Since there is a finding of an exaggerated Mechanics' Lien, the Defendant-Seller can not enforce the lien, but is entitled to a set-off on the Plaintiff-Buyer's judgment of $1,356.96. A summary of the damages on the exaggerated Mechanics' Lien and the breach of contract claims is attached in Schedule A.

Conclusion

The Plaintiff-Buyer, Daggart of Richmond a/k/a Daggart Construction Corp. has demonstrated that the Defendant-Seller, M & D Firedoor and M & D Installers Inc. violated New York Lien Law sections 39 and 39-a by willfully exaggerating a Mechanics' Lien.

Accordingly, it is hereby:

ORDERED, that plaintiff, Daggart of Richmond Inc. a/k/a Daggart Construction Corp. is entitled to an award of damages against the defendant, M & D Firedoor and M & D Installers Inc. in the sum of $25,313.87 and it is further

ORDERED, that the defendant, M & D Firedoor and M & D Installers Inc. is awarded damages against the plaintiff, Daggart of Richmond Inc. a/k/a Daggart Construction Corp. In the sum of $1,356.96 and it is further

ORDERED, that M & D Firedoor and M & D Installers Inc. may offset the $1,356.96, damages award against the plaintiff Daggart of Richmond Inc. a/k/a Daggart Construction Corp.'s $25,313.87 damages award and the clerk of the court is directed to enter a money judgment due the plaintiff Daggart [*8]of Richmond Inc. a/k/a Daggart Construction Corp. against the defendant M & D Firedoor and M & D Installers Inc. in the sum of $23,956.91 together with interest, cost and disbursements, and it is further

ORDERED, that the Mechanics' Lien against Daggart of Richmond Inc. a/k/a Daggart Construction Corp. is discharged and it is further

ORDERED, that M & D Firedoor and M & D Installers Inc. counter-claims to foreclose the Mechanics' Lien are dismissed.

ENTER

DATED: July 28 , 2009______________________________Joseph J. Maltese

Justice of the Supreme Court

Appendix A- Summary Sheet

Plaintiff-Buyer's Damages Under New York Lien Law 39 & 39-a

Exaggerated Lien$ 8,994.84

Bonding Costs$ 2,287.78

Attorney's Fees$ 14,031.25

______________

Total Amount Due$ 25, 313.87

Defendant-Seller's Contractual Damages

Contract Price$ 63,000.00

Plaintiff-Buyer's Credits:

2 checks $10,000 each$20,000.00

Certigy Insurance Company$17,500.00

Buyer's Offsets:

Undelivered Hardware$17,340.79 [*9]

Non-conforming doors$ 3,857.00

Difference in cost for$ 2,945.25

replacement bathroom doors

______________

Total Credits($61,642.79)

Balance Due Defendant-Seller$ 1,356.96

Reconciliation-Offset

Balance due Plaintiff-Buyer on Exaggerated Mechanics' Lien$25,313.87

Balance due Defendant-Seller on contract for goods-$ 1,356.96

___________

Net Balance Due Plaintiff-Buyer$23,956.91

Footnotes

Footnote 1:See, DaSilva v. Musso, 53 NY2d 543 [1981].

Footnote 2:Morey v. Sings, 174 AD2d 870 [3d Dept 1991].

Footnote 3:The effect of a mistake in a contractual "Voluntary Placement Agreement" is discussedin Application of David R., 101 Misc 2d 41 [Fam. Ct. 1979]

Footnote 4: Precision Mirror & Glass v. Nelms, 8 Misc 3d 339 [Civ Ct, Richmond County 2005].

Footnote 5: The Safety Cover Specialist Inc. v. Marmurek. 2003 NY Misc. LEXIS 484[S Ct App Term 2003].

Footnote 6: NY Lien Law §39.

Footnote 7:Garrison v. All Phase Construction Corp., 33 AD3d 661 [2d Dept 2006].

Footnote 8: Goodman v. Del-Sa-Co Foods, Inc. 15 NY2d 191 [1965].

Footnote 9:Collins v. Peckham Road Corp., 18 AD2d 860 [3d Dept 1963].

Footnote 10:Goodman v. Del-Sa-Co Foods, Inc., 15 NYS2d 191 [1965].

Footnote 11: American Const. Corp. v. Finlay, 200 NYS2d 993 [1960].

Footnote 12: C.H. Sanders Co. v. BHAP Housing Dev. Fund. Co., 903 F.2d 114 [2nd Cir. 1990].

Footnote 13:See, Schenectady Homes Corp. v. Greenside Painting Corp. ,37 NYS2d 53[Schenectady Co Ct, 1942].

Footnote 14: Ferreira v. Saccento, 286 AD2d 366 [2d Dept 2001].

Footnote 15: Durand Realty Co. v. Stolman 197 Misc. 208, affd, 113 NYS2d 644 [1st Dept 1952].

Footnote 16:E-J Elec. Installation Co. v. Miller & Raved, Inc., 51 Ad2d 264 [1st Dept 1976].

Footnote 17: NY UCC § 2-601

Footnote 18: Robert Hunt Co. V. S & R Coachworks, Inc 215 AD2d [2d Dept. 1995].

Footnote 19:Toto We're Home, LLC v. Beaverhome.Com, Inc., 301 AD2d 643 [2d Dept. 2003].