Trystate Mech., Inc. v Tefco, LLC
2010 NY Slip Op 51752(U) [29 Misc 3d 1208(A)]
Decided on October 5, 2010
Supreme Court, Kings County
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This opinion is uncorrected and will not be
published in the printed Official Reports.
Trystate Mech., Inc. v Tefco, LLC
Decided on October 5, 2010
Supreme Court, Kings County
Trystate Mechanical, Inc., on behalf of itself and on behalf of all other similarly situated persons entitled to share in the funds received by, defendants in connection with the improvement of real property owned by a & s galleria real estate, inc. in the city of white plains and owned by macy's retail holdings, inc., in the borough of brooklyn,, Plaintiffs,
Tefco, LLC, et al., Defendants.
Attorney for Plaintiff :
Jeremy Smith, Esq.
Couch White LLP
P.O. Box 22222
Albany, New York 12201
Attorney for Defendants:
Rachelle Rosenberg, Esq.
Marcus Rosenberg & Diamond LLP
488 Madison Ave., 17th Fl.
New York, NY 10022
Carolyn E. Demarest, J.
In this action by plaintiff Trystate Mechanical, Inc., on behalf of itself and all other similarly situated persons entitled to share in the funds received by defendants in connection with the alleged improvement of real property owned by A & S Galleria Real [*2]Estate, Inc. in the City of White Plains and owned by Macy's Retail Holdings, Inc. in the Borough of Brooklyn, to enforce a trust pursuant to Lien Law § 77, defendants Tefco, LLC (Tefco), Ronald G. Panich and Steven Brandon (collectively, defendants) move for an order, pursuant to CPLR 3211 (a) (1) and (7), dismissing plaintiff's complaint as against them.
Non-party Chapeau, Inc. d/b/a BluePoint Energy, Inc. (Chapeau) was in the business of providing electrical power and thermal energy through co-generation systems (Cogen Systems) constructed, owned, and operated by it at the site of a customer. In December 2006, Chapeau contracted with Macy's East Division of Federated Retail Holdings, Inc. (Macy's) to provide discounted electrical power and thermal energy through Cogen systems to be constructed at Macy's stores located in Brooklyn and White Plains, New York. The terms of each of these contracts were set forth in a Discount Energy Purchase Agreement (DEPA).
With respect to Macy's store in Brooklyn, Chapeau, as "owner," entered into a DEPA dated July 2006 and a First Amendment to the DEPA dated December 17, 2006, with Macy's, as "customer," under which Macy's agreed to purchase discounted electrical power and thermal energy from Chapeau for use by its Brooklyn store, once Chapeau had constructed, installed, and was prepared to operate a Cogen System that was to be constructed on the roof of that store. Under the DEPA, the Cogen System was to be wholly owned by Chapeau, and it was to be operated and maintained by Chapeau. The DEPA was for an initial term of 10 years. Over that 10-year period from the date of commencement of the DEPA, Chapeau was to furnish Macy's with discounted, more economical heat and electrical energy service, which was to be purchased by Macy's, in accordance with a price schedule per kilowatt-hour used, contained in the DEPA.
Under the DEPA and First Amendment, Macy's was to pay no funds, and contribute no capital whatsoever to Chapeau for the construction of the Cogen System, and Macy's was to acquire no ownership, operational control, or possession in the equipment employed for the Cogen System operation. Section 2 of Exhibit A, General Conditions of the DEPA specifically provided that "[t]his Agreement is a contract for the provision of services and not for the sale of goods." In addition, Section 3.1 of Exhibit A, General Conditions of the DEPA expressly provided that Chapeau "shall retain ownership and possession of the Equipment and may affix labels or other markings on the Equipment or record a notice of ownership in appropriate governmental records," and that Macy's acquired no right or interest in the equipment. Exhibit B, page 2 of the DEPA similarly provided that "[t]he Equipment is the sole and separate property of [Chapeau]."
Section 10.4 of Exhibit A, General Conditions of the DEPA set forth that upon the expiration (or other termination) of the service contract contained within the DEPA, Chapeau was required to either remove the equipment at its sole cost and expense (including any costs of repairing Macy's facility), abandon the equipment (only if consented to by Macy's), or sell the equipment to Macy's "as is" at a price and upon terms [*3]and conditions agreed upon between Macy's and Chapeau. Removal of the equipment was also provided for in Sections 9.1 and 9.2 of Exhibit A, General Conditions of the DEPA, as a remedy in the event of either an owner or customer default under the DEPA. In addition, Exhibit B, page 2 of the DEPA stated that in the event that Macy's business failed during the agreement, the equipment could be removed from Macy's facility at any time without notice, and the site left in the condition as noted in Section 10 of Exhibit A, General Conditions of the DEPA.
Under Section 3.5 of Exhibit A, General Conditions of the DEPA, Chapeau was entitled to select and use subcontractors in the construction, installation, and operation of the Cogen System, but Chapeau was solely responsible for the satisfactory performance of any such subcontractors. Exhibit B, page 3 of the DEPA provided that Chapeau would prevent the filing of any lien against the property of Macy's and would remove within 30 days any such asserted lien or bond and contest any such asserted lien.
With respect to Macy's property in White Plains, Macy's entered into a DEPA on December 12, 2006, which contained similar terms as the DEPA for Macy's Brooklyn store. Thereafter, Chapeau proceeded to construct and install the Cogen Systems at Macy's stores in Brooklyn and White Plains, New York.
Chapeau entered into an agreement with plaintiff, a subcontractor, in which plaintiff agreed to furnish project management services, labor, and materials in connection with the installation of the Cogen System at Macy's Brooklyn store. Plaintiff claims that between May 30, 2007 and February 22, 2008, it furnished these services, labor, and materials to Chapeau in the aggregate value of $394,568.92, but payment in the amount of $167,260.02 remains due and owing to it from Chapeau.
Chapeau also entered into an agreement with plaintiff, whereby plaintiff agreed to furnish project management services, labor, and equipment in connection with cooling towers, chillers, and associated accessories for Macy's White Plains store. Plaintiff claims that between September 1, 2007 and mid-March 2008, it furnished materials in the aggregate value of $393,300.86 at Macy's White Plains store, but it has not been paid in full, and payment in the amount of $88,300.86 remains due and owing to it from Chapeau.
Pursuant to a Turnkey Project Acquisition, Loan and Security Agreement dated March 20, 2008 between defendant Tefco (which is a Virginia limited liability company) and Chapeau (the Turnkey Agreement), Tefco loaned Chapeau $10 million in general working capital which was advanced between December 2007 and March 2008. All of Chapeau's assets were pledged to Tefco as collateral for these loans.The Turnkey Agreement obligated Tefco to purchase various "turnkey" Cogen Systems, which included the Cogen Systems at Macy's Brooklyn store and Macy's White Plains store (and four other similar Cogen Systems at Starwood Resorts), subject to other terms and conditions, upon their completion and to accept assignment of the existing service agreements, while Chapeau would continue to service the equipment. On April 24, 2008, [*4]Macy's executed a Consent to Assignment, under which it consented to the assignment of the DEPA for its Brooklyn store from Chapeau to Tefco.
On June 30, 2008, Tefco and Chapeau executed Turnkey Project Purchase Agreements (Purchase Agreement) for the Cogen System at Macy's Brooklyn store and White Plains store. Each Purchase Agreement was to be finalized with a transfer of title and assignment and assumption agreement, upon the satisfaction of certain closing conditions, including the completion of the Cogen System. Since the Cogen System at Macy's Brooklyn store was completed, on June 30, 2008, Tefco purchased Macy's Brooklyn store's Cogen System. In connection with this acquisition by Tefco, Chapeau assigned, and Tefco assumed, the DEPA for Macy's Brooklyn store, pursuant to an Assignment and Assumption of DEPA dated June 30, 2008 (the Assignment Agreement). The Cogen System at Macy's White Plains store was not completed (although some installation of equipment occurred there), and, therefore, it was not purchased by Tefco.
In September 2008, Tefco sent Chapeau notice that it was in default under the terms of the Turnkey Agreement, and Tefco initiated a foreclosure sale. On October 31, 2008, Chapeau filed a voluntary Chapter 11 bankruptcy case in the United States Bankruptcy Court for the District of Nevada, which stayed the foreclosure sale by Tefco. At that time, Chapeau also made a motion before the Bankruptcy Court for an order, pursuant to 11 USC §§ 363 and 365 (the Section 363 motion) to approve the sale of its assets free and clear of liens, claims, and encumbrances.
Since plaintiff had not been paid by Chapeau, on October 7, 2008, plaintiff filed a notice of mechanic's lien on account of private improvement with the Kings County Clerk's office for the sum of $167,260.02 for the project management services, labor, and equipment it furnished in connection with the Cogen System at Macy's Brooklyn store. In connection with that lien, plaintiff acknowledged that no funds were ever paid to Chapeau for the installation, construction, or operation of the Cogen System at Macy's Brooklyn store.[FN1]
On November 17, 2008, plaintiff filed opposition to Chapeau's Section 363 motion, arguing that it had a lien on certain assets of Chapeau which should remain in trust. At a November 24, 2008 hearing, the Bankruptcy Court Judge, in discussing [*5]plaintiff's claims, stated that "in the absence of payment there's no trust."[FN2] On November 24, 2008, the Bankruptcy Court denied Chapeau's motion to approve a Section 363 sale and, upon Chapeau's motion, converted the Chapter 11 proceeding to a Chapter 7 liquidation of Chapeau, and a Chapter 7 Trustee was appointed.
On January 16, 2009, Tefco was granted relief by the Bankruptcy Court to hold its foreclosure sale outside of bankruptcy. Notice of the sale was sent to all creditors and purported creditors of Chapeau, including plaintiff. The Notification of Disposition of Collateral stated that on February 3, 2009, Tefco would sell the collateral, which consisted of all of the personal property of Chapeau, including without limitation, all of its right, title and interest in and to all accounts, inventory, equipment, general intangibles (including all contracts), intellectual property, all other property of any kind, and all books and records, to the highest qualified bidder on February 3, 2009, pursuant to the applicable provisions of Title 8.9A of the Virginia Commercial Code and UCC article 9.
On January 30, 2009, plaintiff filed its proof of claim against Chapeau in the Bankruptcy Court for $255,560.88. On February 2, 2009, plaintiff faxed and mailed a letter to Tefco, informing it of its claimed interest in the Brooklyn and White Plains Cogen Systems, and that a transfer of Chapeau's assets to it would expose it to liability as a transferee. Plaintiff did not attend the foreclosure sale, which was held on February 3, 2009. At the foreclosure sale, Tefco bid $1.6 million for most of Chapeau's assets, which did not include the assets located at Macy's Brooklyn store because those assets had previously been transferred to Tefco on June 30, 2008.
On February 20, 2009, plaintiff, on behalf of itself and any others who may be trust beneficiaries under Lien Law § 71 (2), filed this action against Tefco and certain former officers of Chapeau in the Supreme Court, Westchester County, to enforce a trust pursuant to Lien Law § 77 for any funds received by them from Chapeau as proceeds from the alleged improvements of both Macy's Brooklyn store and Macy's White Plains store by the construction of the Cogen Systems at these locations, where plaintiff had [*6]provided project management service, labor, and equipment to Chapeau in connection with these Cogen Systems.[FN3]
After the filing of this action, Tefco executed an Amended Transfer Statement Pursuant to UCC 9-619 dated March 30, 2009, which purported to replace and supersede the Transfer Statement Pursuant to UCC 9-619 that had been executed by Tefco on February 3, 2009 (which has not been submitted to the court). The Amended Transfer Statement excludes, pursuant to Schedule B, "all equipment and/or personal property and/or assets or intangibles owned by Chapeau, Inc., located at or associated with Macy's White Plains store," which, Tefco claims, were not purchased by it and were excluded from the foreclosure sale.
On June 14, 2009, Tefco filed an adversary proceeding in the Bankruptcy Court against Chapeau, plaintiff, and other alleged creditors and lien holders of Chapeau, seeking a determination as to the extent, priority, and validity of the liens and claims (the adversary proceeding). On June 16, 2009, Tefco filed a motion to stay this action, pending the resolution of the adversary proceeding in the Bankruptcy Court, and on July 20, 2009, this action was stayed by the Supreme Court, Westchester County, where it was then pending. On July 15, 2009, plaintiff moved in the Bankruptcy Court for an order of abstention under 28 USC § 1334 (c) (1). On September 24, 2009, the Bankruptcy Court granted plaintiff's motion for abstention, and issued Findings of Fact and Conclusions of Law. In its Findings of Fact and Conclusions of Law, the Bankruptcy Court concluded that abstention was warranted since issues of New York law predominate, noting that whether this New York action is resolved in favor of Tefco or plaintiff, no assets will flow into the bankruptcy estate.[FN4] On October 16, 2009, the Supreme Court, Westchester County, lifted the stay in this action by scheduling a preliminary conference. By order dated January 25, 2010, this action was transferred from the Supreme Court, Westchester County, to this court, upon the stipulation of the parties.
Tefco, by its instant motion in this action, seeks dismissal of plaintiff's complaint, [*7]pursuant to CPLR 3211 (a) (1), based upon the documentary evidence and, pursuant to CPLR 3211 (a) (7), for failure to state a cause of action. Generally, upon such a motion, a complaint is to be liberally construed and the allegations contained therein are deemed to be true and accorded every favorable inference (see Leon v Martinez, 84 NY2d 83, 87-88 ). However, where a plaintiff's bare legal conclusions and factual allegations are flatly contradicted by documentary evidence, they are not to be presumed true or accorded favorable inference (see Sweeney v Sweeney, 71 AD3d 989, 991 ; Zurich Depository Corp. v New York Iron Works Mtn. Info. Mgt. Inc., 61 AD3d 750, 751 ; Meyer v Guinta, 262 AD2d 463, 464 ).
Here, plaintiff, in its complaint, alleges that Chapeau received funds under or in connection with the improvement of real property with regard to the Brooklyn Cogen System and the White Plains Cogen System, and/or that Chapeau has a right of action for any funds due or earned, or to become due or earned with regard to these Cogen Systems. Plaintiff further alleges that Chapeau is or was a trustee of these funds, which constitute assets of a trust pursuant to Lien Law § 70 (1), and that it is a beneficiary of this statutory trust pursuant to Lien Law § 71 (2) (a).
Plaintiff, in the first cause of action of its complaint, asserts that Tefco's purchase of Chapeau's assets on February 3, 2009 constituted a transaction by which one or more assets of the statutory trust were paid, transferred, or applied to one or more purposes other than a purpose of the statutory trust, as stated in Lien Law § 71 (1) or (2), before payment or discharge of all statutory trust claims. Plaintiff avers that this purchase by Tefco, therefore, constituted a diversion of trust assets pursuant to Lien Law § 72 (2). Plaintiff further states that Tefco was on notice of its claim at the time of its February 3, 2009 purchase, and also notes that Tefco never filed a notice of lending pursuant to Lien Law § 73 with respect to the Brooklyn Cogen System or the White Plains Cogen System. Plaintiff claims that it has been damaged in the amount of $255,560.88.
Plaintiff's second cause of action alleges that Chapeau may have made one or more payments from the alleged statutory trust, separate and apart from the conveyance to Tefco, and that one or more of the individual defendants may have consented to or assisted or knowingly permitted Chapeau's making of these payments. Plaintiff alleges that these payments constituted a diversion of trust assets pursuant to Lien Law § 72 (2). Plaintiff seeks a judgment requiring defendants to account for the allegedly diverted trust funds, declaring defendants to be trustees of the alleged statutory trust, and finding that it has a claim of $255,560.88.
In support of its motion to dismiss, Tefco contends that plaintiff's claims in this action for an alleged diversion of trust funds cannot be sustained because no trust was created or existed pursuant to the Lien Law. "Article 3-A of the Lien Law impresses with a trust any funds paid or payable to a contractor under or in connection with a contract for an improvement of real property'" (LeChase Data/Telecom Servs., LLC v Goebert, 6 NY3d 281, 289 , quoting Lien Law § 70 ). "[T]he Lien Law establishes that [*8]designated funds received by owners, contractors and subcontractors in connection with improvements of real property are trust assets and that a trust begins when any asset thereof comes into existence'" (Aspro Mech. Contr. v Fleet Bank, 1 NY3d 324, 328 , quoting Lien Law § 70 ).[FN5]
Lien Law § 72 (1) declares that "[a]ny transaction by which any trust asset is paid, transferred or applied for any purpose other than a purpose of the trust as stated in [Lien Law § 71] before payment or discharge of all trust claims with respect to the trust, is a diversion of trust assets." Lien Law § 71 (2) provides that "[t]he trust assets of which a contractor . . . is trustee shall be held and applied for . . . expenditures arising out of the improvement of real property, including . . . payment of claims of subcontractors." A trust beneficiary is authorized to bring a representative action under Lien Law § 77 "to recover trust assets from anyone to whom they have been diverted with notice of their trust status" (LeChase Data/Telecom Servs., LLC, 6 NY3d at 289).
However, in order for there to be a diversion of trust funds, there must have been an existing trust fund as described in Lien Law § 70 (1). Where no trust assets exist, a claim for diversion of trust assets must fail (see Pellic Dev. Corp. v Whitestone Equities Farmingdale Corp., 199 AD2d 483, 484 ).
Lien Law § 70 (1) defines the assets of a trust for the purposes of Lien Law § 71 as funds "received by a contractor under or in connection with a contract for an improvement of real property . . . and any right of action for any funds due or earned or to become due or earned." In addition, Lien Law § 70 (6) provides that [t]he assets of the trust of which a contractor is trustee are the funds received by [it] and [its] rights of action for payment thereof . . under the contract for the improvement of real property."
Here, no funds were paid to Chapeau, as the contractor, "under or in connection with a contract for an improvement of real property" (Lien Law § 70 ). Initially, it is noted that Lien Law § 2 (4) provides that the term "improvement," as used in the Lien Law, means labor and work performed upon the property or materials furnished for its "permanent improvement." Thus, where the alleged improvement was not intended to be permanent, the Lien Law does not apply (see Nevbesky v United Interior Resources, Inc., 32 AD3d 530, 531 ; Chase Lincoln First Bank v New York State Elec. & Gas Corp., 182 AD2d 906, 907 ).
The provisions of the DEPAs relating to the Cogen Systems at Macy's stores, which are the contracts upon which plaintiff predicates its claim, establish that such property expressly remained that of Chapeau throughout the term of the DEPA. Macy's did not pay for the installation of the Cogen Systems and was not the owner of the Cogen Systems. The DEPAs provided that the Cogen Systems would be removed or sold by [*9]Chapeau at the conclusion of the performance, or termination, of the contracts. Therefore, the Cogen Systems cannot be considered permanent improvements to Macy's real property so as to invoke the applicability of the Lien Law.
Moreover, the DEPAs were not contracts for the improvement of real property. Rather, Section 2 of Exhibit A, General Conditions of the DEPA, explicitly stated that it was an agreement for the provision of services.
In any event, Chapeau did not receive any funds from Macy's as payment for the construction of the Cogen Systems. The DEPAs establish that Chapeau was responsible for all of the costs of construction of the Cogen Systems, and Macy's was not required to make any payment for such construction. As noted, the DEPA was a contract for services only, under which Macy's was required to pay only for energy costs. Thus, neither Chapeau nor any of its officers (the individual defendants herein) received any trust assets pursuant to Lien Law § 70 (1).
Since Chapeau and its officers did not receive any trust funds, nor do they have a right to any funds for the improvement of real property from Macy's, it follows that Tefco could not have received any trust assets from Chapeau. Thus, while Tefco did acquire the Cogen System located at Macy's Brooklyn store by the Purchase Agreement dated June 30, 2008, and took assignment of the DEPA, such purchase and assignment did not involve the diversion of trust assets. While Tefco disputes that it purchased the White Plains assets at the February 3, 2009 foreclosure sale, it is unnecessary to resolve this issue, since, inasmuch as there was no improvement to real property at Macy's White Plains store and no funds were paid by Macy's to Chapeau relating to that project (which was never completed), there could be no transfer or diversion of trust funds under the Lien Law by such a sale.
Plaintiff, however, maintains that despite the absence of any actual payment by Macy's for any construction costs with respect to the Cogen Systems, a trust fund was nevertheless created. Plaintiff relies upon the principle that trust assets may be created at the point that receivables are owed, and not just when monies are actually transferred (see Matter of RLI Ins. Co., Sur. Div. v New York State Dept. of Labor, 97 NY2d 256, 262 ; Dick's Concrete Co., Inc. v Hovnanian at Monroe II, Inc., 20 Misc 3d 1145[A], 2008 NY Slip Op 51886[U], *5 [Sup Ct, Orange County 2008]). Plaintiff also cites the language in Lien Law § 70 (1), which provides "any right of action for any such funds due or earned or to become due or earned . . . constitute assets of a trust" for purposes of Lien Law § 71. Plaintiff argues that trust funds were created at the point when Chapeau had a right to receivables from Macy's "in connection" with the installation of the Cogen Systems, and that Chapeau had a right of action for such funds, apparently alluding to the charges for energy provided to Macy's, generateded by such equipment, after installation of the Cogen System. Plaintiff contends that any funds received by Tefco, as the purchaser, assignee, or lender with respect to Chapeau, are, therefore, trust funds.
Plaintiff's contention is without merit. The terms of the DEPA show that there was [*10]no right to receivables or right of action for payment for improvement to Macy's property. Rather, as noted above, Section 2 of Exhibit A, General Conditions of the DEPA expressly provided that it was an agreement for the provision of services only and no permanent improvement to real property was intended. Pursuant to the DEPA, the only right of action for payment from Macy's was for the service of energy based upon a rate per kilowatt-hour provided. The first receivable due to Tefco from Macy's was for energy provided in July 2008. Macy's used 184,554 kilowatt-hours in July 2008 at the rate of $.11 per kilowatt-hour based on the DEPA, generating a receivable to Tefco of $20,300.94 plus sales tax. Tefco invoiced Macy's for energy provided in July and August 2008 for $48,277.24. Such receivable only related to the energy provided. There is no evidence of a bill or money owed by Macy's with respect to the construction or installation of the Cogen System. Moreover, since the Cogen System never became operable with respect to Macy's White Plains store, energy was never provided, and no obligation was incurred by Macy's or receivables owed by Macy's, nor any right of action for payment, with respect to its White Plains store.
Plaintiff further argues that the DEPA violated Lien Law § 34 because it effectively waives lienors' rights to file mechanics' liens by identifying any compensation as energy costs, rather than construction costs, thereby subverting Macy's obligation to pay for the labor and materials that plaintiff supplied and that are being used in the Cogen Systems. Lien Law § 34 provides that "[n]otwithstanding the provisions of any other law, any contract or understanding whereby the right to file or enforce any lien created under article two is waived, shall be void as against public policy and wholly unenforceable." Plaintiff asserts that since no monies are owed by Macy's to Chapeau under the DEPA, the DEPA, in violation of Lien Law § 34, indefinitely postponed Chapeau's obligation to pay for the labor and materials that plaintiff supplied, and that are being used by Macy's in the Cogen System at its Brooklyn store. In support of its argument, plaintiff relies upon West-Fair Elec. Contrs. v Aetna Cas. & Sur. Co. (87 NY2d 148, 158 ). In West-Fair Elec. Contrs. (87 NY2d at 158-159), a subcontract was found to violate Lien Law § 34 because it contained a pay-when-paid clause, which provided that the general contractor did not have to pay the subcontractor until the general contractor received payment from the owner.
Plaintiff's reliance upon West-Fair Elec. Contrs. (87 NY2d at 158-159) is misplaced. Initially, it is noted that Lien Law § 34 is inapplicable since, as discussed above, the DEPAs did not involve a construction or improvement contract, under which plaintiff could assert a valid lien. Moreover, the DEPAs contain no conditions or limitations affecting the rights of subcontractors to payment by Chapeau, as the general contractor and owner of the improvements. Plaintiff was hired by Chapeau, billed Chapeau for its services, and was paid more than $225,000 by Chapeau entirely independent of the DEPA between Chapeau and Macy's. Unlike the subcontract at issue in West-Fair Elec. Contrs. (87 NY2d at 158), Chapeau's purchase orders to plaintiff, [*11]consistent with the terms and intent of the DEPA, contain no contingencies with respect to Macy's . Thus, there was no pay-when-paid provision or its equivalent, nor any violation of Lien Law § 34.
Consequently, inasmuch as, as demonstrated by the documentary evidence, no trust fund pursuant to the Lien Law existed which could have been diverted by defendants, the causes of action alleged by plaintiff in this action fail to state a viable claim and defendants' motion to dismiss plaintiff's complaint in this action is granted (see CPLR 3211 [a] , ).
This constitutes the decision, order, and judgment of the court.
Footnote 1:On March 13, 2009, plaintiff filed an action against Macy's, seeking to foreclose a mechanic's lien asserted by it in the amount of $167,260.02 for the alleged improvement of Macy's Brooklyn store based upon the project management services, labor, and equipment which it furnished in connection with the Cogen System at Macy's Brooklyn store, or to recover this sum in quantum meruit based upon unjust enrichment (see Trystate Mech., Inc. v Macy's Retail Holdings, Inc., Sup Ct, Kings County, index No. 6132/09). Since no lien could be validly asserted against Macy's Brooklyn store due to the absence of a permanent improvement to that store and because there were no funds to which a lien could attach, Macy's motion to dismiss plaintiff's complaint in that action was granted.
Footnote 2: It is not clear whether plaintiff's contentions in the Bankruptcy Court were limited to its claim to a statutory lien under the New York State Lien Law, which would take such assets, at least to the extent of the value of the lien, out of the debtor's estate (see McCann, Inc. v Di Lido Beach Resort, Ltd., 318 BR 276, 283-287 [SD NY 2004] citing Beckerman v Tummolo, 63 AD2d 818, 818-819 [4th Dept 1978]) or whether its claim was broader. In its opposition to dismissal of this action, plaintiff seems to suggest that funds paid by Tefco to Chapeau or credited to Chapeau's debt upon foreclosure of Tefco's security interest created a trust fund for plaintiff's benefit or that Chapeau's payments to Tefco upon the loans, in the absence of a Notice of Lending required by Lien Law § 73, constituted the diversion of trust assets for which Tefco is liable to plaintiff. However, all of these arguments must fail upon the finding that a permanent improvement to real property was not effected through plaintiff's efforts and that the subject Cogen System remains personalty in Chapeau's estate.
Footnote 3:On March 13, 2009, plaintiff also filed an action against Tefco in the Supreme Court, Westchester County (which was subsequently transferred to this court) to recover damages for breach of contract, unjust enrichment, and quantum meruit, claiming that it is owed payments of $167,260,02 and $88,300.86 for the project management services, labor, and equipment which it furnished in connection with the Cogen Systems at Macy's Brooklyn store and Macy's White Plains store, respectively (see Trystate Mech., Inc. v Tefco, LLC, Sup Ct, Kings County, index No. 7343/10). A motion by Tefco to dismiss plaintiff's complaint in that action, which does not involve the assertion of a claim under the Lien Law, has been denied, and that action remains pending.
Footnote 4:It is unnecessary for the court, in deciding the instant motion, to reach the issue of whether the assets associated with Macy's White Plains store remain in Chapeau's bankruptcy estate or were acquired by Tefco in the foreclosure sale.
Footnote 5: The court notes that the funds advanced to Chapeau by Tefco under the Turnkey Agreement might, arguably, constitute trust funds to which the Lien Law might be applicable but for the failure to establish that plaintiff's work created a permanent improvement to real property.