Onekey, LLC v Knight Harte Constr., Inc.

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Onekey, LLC v Knight Harte Constr., Inc. 2017 NY Slip Op 31529(U) July 17, 2017 Supreme Court, New York County Docket Number: 656740/2016 Judge: Kathryn E. Freed Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 1] INDEX NO. 656740/2016 NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 07/18/2017 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PART __2 __ HON. KATHRYNE. FREED, J.S.C. PRESENT: Justice ------------------------------------------------------------------------------X ONEKEY, LLC, 656740/2016 INDEX NO. Plaintiff, MOTION DATE MOTION SEQ. NO. -v- 001 KNIGHT HARTE CONSTRUCTION, INC , DECISION AND ORDER Defendant. -------------------~-----------------------------------------------------------X THE FOLLOWING PAPERS WERE CONSIDERED IN DECIDING THIS MOTION: PAPERS NUMBERED NOTICE OF MOTION AND AFFIDAVITS ANNEXED AFFIRMATION IN OPPOSITION AFFIDAVIT IN OPPOSITION In this action sounding, inter alia, 1 (Exhs. A-B) 2 (Exhs. A-G) 3 (Exh. A) in breach of contract, defendant Knight Harte Communication, Inc. moves, pursuant to Lien Law LLC, §§ 7 5 and 7 6, for an order ( 1) directing plaintiff, to provide a verified statement, attorneys' and (2) One key, awarding defendant fees and costs associated with making this motion. 1 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 2] INDEX NO. 656740/2016 NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 07/18/2017 BACKGROUND This action arises out of a construction project located at 301 East 6l 5 t Street, New York, New York (the "Project"). Harte was the subcontractor to Onekey, Knight the general contractor on the Project, pursuant to a written agreement between the parties. Knight Harte seeks to recover damages in excess of $235, 082. 99 based on the alleged breach of the parties' agreement by Onekey. The Complaint includes the following factual allegations. June 2016, pursuant to a written prime contract, 2na NYC LLC, 6l 5 t Street, to serve several Project. materials New York, New York ("the premises"), general contractor contractors, including for required Knight Harte for $253,050.00. the Project in the Knight The written subcontract, the parties nonparty 6lst & the owner of the real property located at as Onekey to dated June 23, work 2016, to provide certain exchange for Onekey' s During the course of the Project, East 301 ietained Onekey Project. Harte, In hired on the between labor and payment however, of Onekey approved several change orders which increased the value of the subcontract. A dispute arose between the parties when Knight Harte claimed that it had completed the work contemplated by the subcontract and was owed in excess of $235,082.99. Onekey claimed that Harte abandoned the Project on October 3, 2016, Knight having completed less than 56% of its obligations under the subcontract, including 2 2 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 3] INDEX NO. 656740/2016 NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 07/18/2017 those set forth in the change orders, and that Onekey had paid Knight Harte more than the value of the work it had completed under the subcontract. On October 24, 2016, Knight Harte filed a mechanic's against the subject property claiming, value of the labor $474,696.29, and and materials that the One key with a for amount $235,082.99 (Aff in Opp, Exh A). in part, the that the agreed subcontract claimed lien under totaled the lien is Thereafter, Knight Harte served Demand for Verified Statement "setting forth the entries contained in Onekey, LLC's books and records" with respect to the Project (Not of Mot, Exh A). In response, Onekey sent Knight Harte a document entitled "Knight Harte-Verified Statement for 301 E 61st Street, NYC" listing, among other things, the total amount ·owed to $235, 551. 45, Knight and the Harte amount for .work actually done paid on to the Project Knight Harte as as $237,863 (Not of Mot, Exh B). Onekey then commenced this action seeking to recover damages from Knight Harte subcontract. for breach enrichment lien among other things, breach of the Specifically, the Complaint alleges causes of action of the subcontract (first (second cause of action); (third contract for, and cause of action); prospective and economic cause of vacatur of tortious advantage action); unjust the mechanic's interference (fourth with cause of action). 3 3 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 4] INDEX NO. 656740/2016 NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 07/18/2017 Knight Harte answered, the Complaint, asserting generally denying the allegations in multiple alleging numerous counterclaims. affirmative defenses, and Knight Harte also filed a third- party Complaint against third-party defendants Terence Carroll and John Does 1-10, owners, World officers, Insurance Company, which or directors of Onekey; Allied reportedly filed a discharge 1 ien bond to guarantee payment of the mechanic's 1 ien; of and XYZ Corporation 1-10 and John Does 11-20, which reportedly claimed to have an interest in, or lien against, the Property. Knight Harte sought foreclosure of its mechanic's lien, as well as compensatory and consequential damages. Knight Harte now moves to compel Onekey to furnish a verified statement, and to recover attorney's fees and costs associated with making this motion. DISCUSSION Knight Harte claims that the document submitted by Onekey does not meet the minimum statutory requirements for a verified statement. Onekey maintains that it made a good faith effort to comply with the spirit of the law by providing a detailed verified statement as to One key's handling of the trust funds that it received from the Owner for the purpose of paying Knight Harte for the labor and materials that Knight Harte actually provided in connection with the Project. 4 4 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 5] INDEX NO. 656740/2016 NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 07/18/2017 Lien Law article 3-A creates a statutory trust for funds received by owners in connection with improvements to real property in the state Meadows, (Lien Law §70[1], 81 AD3d 1152, LLC, & Cring, see Bette 1153 LLC v [3d Dept 2011)). Brandle The primary role of article 3-A is to ensure that those involved with such an improvement will be paid State Dept. of Labor, (see Matter of RLI 97 NY2d 256, against the owner include ~claims 264 Ins. Co. [2002)). v New York "Trust claims of contractors, subcontractors ... and materialmen arising out of the improvement, for which the owner is obligated'" v Sand & Gravel, Inc., (Matter of Abjen Props., 168 AD2d 783, 784 L. P. Crystal Run [3d Dept 1990), quoting trust beneficiary, such as Lien Law §71 [3] [a]). Pursuant to Lien Law §7 6 ( 1) , a subcontractor Knight Harte (see Lien Law §71[4]), is entitled, ~t its to option, "not [more often] than once in each month, (a) examine the books or records of the trustee with respect to the trust; ... or (b) ... to receive a verified statement setting forth the entries with respect to the trust." Lien Law §7 5 ( 3), the trustee's books Furthermore, pursuant to and records must contain detailed entries regarding trust assets receivable, trust accounts payable, assets, pursuant trust funds received, trust payments made with trust and transfers in repayment of or to secure advances made to a "Notice of Lending" together with specific 5 5 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 6] INDEX NO. 656740/2016 NYSCEF DOC. NO. 67 RECEIVED NYSCEF: 07/18/2017 information §75[3J[A], underlying [BJ, [CJ, [DJ, In Lien Law §7 5, requirements payable, must relative received, include, each transaction (see Lien Law [EJ). the Legislature has set forth bookkeeping to paid, among trust trust funds which are transferred or assigned. other things, names, receivable, The entries addresses, dates of payment or receipt, dates sums become due or are earned or become payabl·e, conditions of payment, nature of claims paid, whether paid by check or cash, and numerous other relevant details Law §75; see People v Rosano, 69 AD2d 643, 656 (Lien [2d Dept 1979]). The clear purpose of Lien Law §75 is to protect persons entitled to payment of funds for improvements of realty and to prevent the unscrupulous from diverting the funds to other channels (People v Rosano, supra). Failure of the trustee to keep the books and records required by §75 of the Lien Law is presumptive evidence that the trustee has applied or consented to the application of trust funds actually received as money or an instrument for the payment of money for purposes other than a purpose of the trust as specified in Lien Law §71 (Lien Law §75 [4]). If the trustee fails to comply with the beneficiary's request to examine the trustee's books or records or for a verified statement, the beneficiary may apply to the court for an order directing the trustee to comply with the request (Lien Law §76(5]). 6 6 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 7] NYSCEF DOC. NO. 67 INDEX NO. 656740/2016 RECEIVED NYSCEF: 07/18/2017 This Court's review of the document that Onekey sent to Knight Harte reveals that it does not comply with all of the requirements of Lien Law §75 (3). The subcontractor Knight Harte, proffered document relates only to and does not contain the statutorily required entries regarding trust assets receivable, trust accounts payable, assets, trust funds received, and transfers in pursuant to a "Notice trust r~payment of payments made with trust of or to secure advances made Lending" together with specific information underlying each trust transaction (see Not of Mot, Exh B; Affirm in Opp, Exh A) . Nor does the document provided by Onekey set.forth the names, addresses, dates of payment or receipt, are earned or become payable, claims paid, details, dates sums become due or conditions of payment, whether paid by check or cash, as required by the statute (id.). or other nature of relevant There is nothing in Lien Law article 3-A which authorizes a trustee either to maintain separate trusts in connection with a contract of the improvement of real property, qr to furnish a verified statement respecting only a portion of the required trust (see Application of M. Leiken & Son, Inc., 39 Misc2d 156 [Sup Ct, Queens County 1963]). Since the Legislature has not seen fit to limit the responsibility of a trustee to the service of a verified statement restricted in scope to the form of statement submitted herein, neither will the Court so limit this responsibility (id) • Given the pendency of other 7 7 of 8 [*FILED: NEW YORK COUNTY CLERK 07/18/2017 12:08 PM 8] NYSCEF DOC. NO. 67 matters INDEX NO. 656740/2016 RECEIVED NYSCEF: 07/18/2017 in this action, the request for an award of attorney's fees based on the filing of this motion is denied. Thus, the branch of the motion that seeks an order directing Onekey to provide a verified statement in compliance with Lien Law §75 is granted, and the motion is otherwise denied. Therefore, in light of the foregoing, it is: ORDERED that the motion is granted to the extent that Onekey is directed to serve a further verified statement in compliance with Lien Law §§ 75 and 76 within ten days of service of a copy of the order to be entered hereon, and it is otherwise denied; and it is further ORDERED that this constitutes the decision and order of the court. 7/17/2017 DATE CHECK ONE: CASE DISPOSED GRANTED D NON-FINAL DISPOSITION DENIED GRANTED IN PART APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: DO NOT POST FIDUCIARY APPOINTMENT 8 of 8 D D OTHER REFERENCE

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