PGA Mech. Contrs., Inc. v GPNZ Realty Co., LLC
Annotate this CaseDecided on October 18, 2012
Supreme Court, Kings County
PGA Mechanical Contractors, Inc., Plaintiff,
against
GPNZ Realty Co., LLC; ATLANTIS REHABILITATION & RESIDENTIAL HEALTHCARE FACILITY and AMALGAMATED BANK OF NEW YORK, Defendants.
500462/11
Plaintiff's Attorney: Michelman & Robinson, LLP, 800 Third Avenue, 24th Fl., New York, NY 10022
Defendants' Attorney: Adam B. Kaufman & Associates, PLLC, 585 Stewart Avenue, Ste 302, Garden City, NY 11530
David Schmidt, J.
Defendants GPNZ Realty Co., LLC (GPNZ) and Atlantis Rehabilitation & Residential Healthcare Facility, LLC (Atlantis) move for an order: (i) vacating, canceling, and discharging the mechanic's lien of record filed by plaintiff PGA Mechanical Contractors, Inc. (PGA), in the Office of the Clerk of Kings County, on December 10, 2010 (the Mechanic's Lien); and (ii) vacating, canceling, and discharging the surety bond, dated June 27, 2011, docketed in the Office of the Clerk of Kings County on July 15, 2011 and given to discharge the above described Mechanic's Lien encumbering the subject premises (the Surety Bond).[FN1]
For the following reasons, defendants' motion is granted in part and denied in part.
I.Factual Background
On March 19, 2007, PGA and Atlantis Care Center entered into an agreement (the Agreement) whereby PGA agreed to perform heating, ventilation, and air conditioning work at the premises, located at 140 St. Edwards Street, Brooklyn, New York (the Premises). The Agreement contained an arbitration clause (section 12.1 of the Agreement), which required any controversy or claim arising out of the Agreement to be settled by arbitration administered by the American Arbitration Association (AAA). [*2]
In August of 2010, PGA ceased work under the Agreement over an alleged dispute. On December 10, 2010, PGA filed a Notice of Mechanic's Lien in the Office of the Clerk of Kings County in the sum of $438,174.00 against GPNZ as owner of the Premises; Atlantis was named in the lien as the party by whom PGA was employed. PGA then commenced this action to foreclose the Mechanic's Lien on June 27, 2011, but did not file a notice of pendency.
Subsequently, a surety bond was issued by Argonaut Insurance Company, served on PGA, and docketed in the Office of the Clerk of Kings County on July 15, 2011.
Prior to joinder of issue, the parties agreed to submit their dispute to arbitration, as required by the Agreement. As a result of the parties' agreement to arbitrate, PGA's lien foreclosure action was settled by a stipulation of discontinuance filed on December 12, 2011 (the Stipulation). The Stipulation provides that the discontinuance was contingent upon Atlantis's filing a demand for arbitration with the AAA with respect to the parties' dispute. Subsequently, Atlantis filed the required demand for arbitration which was acknowledged by the AAA on January 4, 2012.
Thereafter, defendants filed the instant motion to vacate, cancel and discharge the Mechanic's Lien and Surety Bond.
II.Discussion
A.The Mechanic's Lien
Pursuant to Lien Law § 19 (4), the filing of the Surety Bond discharged the Mechanic's Lien. Thus, the portion of the motion seeking to vacate the Mechanic's Lien is moot, and therefore, is denied.
B.The Surety Bond
In light of the fact that the lien foreclosure action has been discontinued and the parties have agreed to go to arbitration, the Surety Bond is discharged. That is because a surety on a bond given to discharge a mechanic's lien is only obligated to satisfy a judicially established lien. J. Castronovo, Inc. v Hillside Dev. Corp., 160 AD2d 763, 765 (2d Dept 1990). Hence, once PGA discontinued its lien foreclosure action, defendants' surety can no longer be compelled to pay an arbitral award out of the Surety Bond.
Nevertheless, PGA strenuously argues that maintenance of the Surety Bond during the pendency of the arbitration was a key term in the Stipulation and a condition for its agreement to arbitrate. PGA is mistaken.
Nowhere, despite PGA's repeated assertions to the contrary, does the Stipulation mention that defendants must maintain the Surety Bond as a condition to PGA's discontinuing its lien foreclosure action. At most, one of the prefatory WHEREAS clauses references the filing of the Surety Bond. However, that clause is not a part of the operative agreement. See e.g. 17A C.J.S. Contracts § 317 (2010) ("Recitals in a contract, such as whereas' clauses, are merely explanations of the circumstances surrounding the execution of the contract, and are not binding obligations unless referred to in the operative provisions of the contract"); Rubinstein Bros. v Ole of 34th St., Inc.,101 Misc 2d 563, 567 (Civ Ct, New York County 1979). More importantly, there is no mention of, or even an allusion to, the Surety Bond after the NOW, THEREFORE clause, which sets forth, in clear and unambiguous language, the parties' entire agreement.
Rather, the Stipulation documents a one-for-one exchange between PGA and defendants. Specifically, the Stipulation provides that PGA will discontinue its action to foreclose its [*3]Mechanic's Lien so long as defendants file a demand for arbitration with the AAA to initiate a proceeding with respect to the alleged dispute.
Nor does PGA's December 15, 2011 letter to defendants' counsel indicate, as PGA claims it does, that PGA's discontinuance of the lien foreclosure action was conditioned on the maintenance of the Surety Bond. To the contrary, PGA's counsel only lists the filing for arbitration as a necessary condition to PGA's discontinuance of its lien foreclosure action. Therefore, neither the Stipulation nor the December 15, 2011 letter requires the maintenance of the Surety Bond as a condition for arbitration.
Accordingly, it is
ORDERED that the Defendants' motion to vacate, cancel, and discharge the Mechanic's Lien is denied because the matter is moot; and Defendants' motion to vacate, cancel, and discharge the Surety Bond (a/k/a Mechanic's Lien Discharge Bond), Bond No.: SUR0011249, dated June 27, 2011, docketed in the Office of the Clerk of Kings County on July 15, 2011 is granted.
Dated:October 18, 2012
ENTER:
_______________________
J.S.C.
Footnotes
Footnote 1: The action, as asserted against defendant Amalgamated Bank, was discontinued with prejudice.
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