Modern Era Constr., Inc. v Shore Plaza, LLC
Annotate this CaseDecided on March 27, 2008
Civil Court of the City of New York, Richmond County
Modern Era Construction, Inc., Claimant,
against
Shore Plaza, LLC, Adco Electrical Corp., Bank of Tokyo - Mitsubishi Trust Company, John Does "1" - "10", said names being fictitious and Unknown to, Plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest in or lien upon the premises described in the Complaint, Defendants
300066/07
A P P E A R A N C E S
Counsel for Plaintiff:
Po W. Yuen, Esq.
Yuen & Yuen, Esqs.
132 Nassau Street
Suite 1300
New York, NY 10038
212-608-1178
Counsel for Defendant Shore Plaza, LLC:
Cathy O'Donnell, Esq.
Calabro & Associates, P.C.
1412 Broadway, Suite 1500
New York, NY 10018
646-688-6095
Philip S. Straniere, J.
Plaintiff, Modern Era Construction, Inc., commenced this action against the defendant, Shore Plaza LLC, seeking to enforce a mechanic's lien plaintiff filed in regard to commercial space at 1775 South Avenue, Staten Island, New York. Previously the causes of action against defendants ADCO Electrical Corp., Bank of Tokyo-Mitsubishi Trust Company and all "John Doe" entities were discontinued. The action was commenced in Supreme Court, Richmond County (Index No.102120/05) and transferred to Civil Court pursuant to CPLR 325(d). The trial commenced on December 12, 2007 and continued on January 29, 30, 31, February 4, and 6, 2008. The trial concluded with a site visit on February 8, 2008. Both sides were represented by counsel.
Plaintiff's principal testified that he was hired by the tenant, The Zone Entertainment Centers LLC, to renovate the space at 1775 South Avenue for use as a "Zone" electronics store. He was hired to take three existing store spaces and make it into one space. Plaintiff testified that he completed the work as agreed and billed the tenant $240,000.00 for the services rendered. Plaintiff testified he was paid for part of the work performed but was still owed $79,500.00 by the tenant. Thereafter, the tenant filed for bankruptcy. An entity known as "Modern Era" is listed in the bankruptcy petition without an address with $25,000.00 as the debt owed that entity. This debt was apparently discharged in bankruptcy. Plaintiff filed a mechanic's lien on April 8, 2005 with the clerk of Richmond County alleging that $79,500.00 was owed by the tenant and that the last work was performed on December 10, 2004. Plaintiff is seeking to enforce the mechanic's [*2]lien against the defendant, as owner of the premises, pursuant to the Lien Law. The court notes that the mechanic's lien lists the premises as the "Zone Restaurant" while the testimony made it clear the premises was to be used as an electronics store.
Lien Law §3 provides: A contractor,...who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof,...shall have a lien for the principal and interest, of the value, or the agreed price, of such labor..., or materials upon the real property improved....
Lien Law §2(4) provides: Improvement. The term "improvement," when used in this chapter, includes the demolition, erection, alteration or repair of any structure upon, connected with,...any real property and any work done upon such property or materials furnished for its permanent improvement,...
Lien Law§2(9) provides: Contractor. The term "contractor," when used in this chapter means a person who enters into a contract with the owner of real property for the improvement thereof,...
Lien Law§2(3) provides:
Owner. The term "owner," when used in this chapter, includes the owner in fee ofreal property, or of a less estate therein, a lease for a term of years,...
It is undisputed that the plaintiff never entered into a contract with defendant, the title owner
of the premises. The contract the plaintiff entered into was with the tenant. It was an oral
contract. There is neither a written agreement with the tenant as to the scope of the work to be
performed nor as to the cost of materials and labor in regard to performance of the oral contract.
LEGAL ISSUES PRESENTED:
A. Did the Defendant Consent to the Renovations?
In order to prevail on its claim the plaintiff must prove that the defendant-owner of the premises either consented to the work being done or that the plaintiff did the work at [*3]the request of the defendant. There is neither written evidence that the defendant ever explicitly consented to the work performed by the plaintiff nor requested the services. In fact, the credible testimony by defendant's witness was that the plaintiff was told by the defendant to stop work since there were no plans or permits filed with the municipal authorities or delivered to the defendant as required by the lease.
Because it is clear that there is no specific consent given to the plaintiff to do the tenant's renovations, the facts must be analyzed to determine if it can be determined that there was some "implied consent" to do the work from the defendant by entering into a written lease with the tenant for the space, knowing it would be renovated from three stores to one store.
Paragraph 11.1 of the lease provides: Improvements. At Tenant's own expense, after giving Landlord notice in writing of its intentions to do so,...Tenant may,...make such permanent and nonstructural alterations, replacements, additions, changes and/or improvements (collectively referred to in this Lease as "Improvements") to the Premises as Tenant may find necessary or convenient for its purposes, provided that no Improvements the cost of which exceeds $10,000.00 in any one(1) instance may be made without obtaining the prior approval of Landlord, which shall not be unreasonably withheld. No Improvements shall be made to any storefront, mechanical system, the exterior walls, roof, foundation or structure of the Premises,... without obtaining prior approval of Landlord, which Landlord may withhold in its sole and absolute discretion...Tenant agrees to deliver to Landlord, promptly upon completion of any Improvements, a lien waiver, in form satisfactory to Landlord, executed by all contractors, subcontractors and materialmen involved in the construction of such Improvements.
Paragraph 11.2 of the lease provides: Construction Requirements. All Improvements to be made to the Premises which require the approval of Landlord shall, if required by Landlord, be made under the supervision of a competent architect or licensed structural engineer. In addition, all Improvements shall be made in accordance with plans and specifications submitted to Landlord for its approval in accordance with such procedures as Landlord shall reasonably specify...Tenant shall, its [sic] own expense, procure each and every permit, license, certificate and other authorization, and all renewals, extensions, and continuations thereof required in connection with the lawful and proper use and occupancy of the Premises by Tenant or required for the Building or the Land in connection with, or as a result of, Tenant's actual or proposes use of the Building, the Land or the Premises.[*4]
The language of the lease is clear that the tenant was not to make any renovations, especially to the extent necessary to create space usable for its special needs, without obtaining the consent of the defendant-landlord. It is also uncontradicted that no such consent was ever obtained. But is failure of the tenant to comply with the lease terms sufficient to relieve the defendant from liability to the plaintiff herein?
It is obvious that the tenant was never in compliance with any of these terms of the lease. The facts establish that the plaintiff herein should have sued the tenant for breach of contract and the defendant should have sued the tenant for breach of the lease terms. Unfortunately, the tenant closed its doors and filed for bankruptcy leaving two "innocent" parties left to sort out who should bear the loss.
On the one hand it seems that the Lien Law has established that it is the law and the public policy of the state that the contractor who performs the labor, materials and services should not suffer a loss. On the other hand, why should the defendant have to pay for "improvements" to the premises to which it never gave its approval; which were done without the proper municipal permits, filings and approvals; were done without the consent of the landlord as required by the lease and which are for all practical purposes unusable by any other tenant, making re-renting of the premises extremely difficult?
A review of the testimony leads to the conclusion that the plaintiff was in complete noncompliance with the requirements of the defendant. Defendant had no contractual obligation with the plaintiff. The testimony revealed that the plaintiff started its work on or about September 12, 2004 and that defendant's manager visited the site in September 2006 and noticed the work being done without the tenant having obtained approvals from the landlord for the renovations and without it having received the plans from the tenant. Defendant contends it contacted the tenant about its noncompliance with the terms of the lease and the tenant did nothing to correct its default. At that point, the defendant had the right under the lease and the opportunity to stop the work from continuing by enforcing the terms of the lease either through court action or by contacting the Buildings Department or other municipal agencies and having a stop work ordered issued. Defendant did not take any of these steps.
Therefore, it must be concluded that the defendant had the opportunity to stop the illegal and
unauthorized work and chose not to act. Apparently defendant made a business decision to allow
the work to continue so that the tenant could commence occupancy and begin paying rent by
December 7, 2004, although there does not appear to be any clause in the lease for an abatement
of rent in the event that the tenant could not begin operation of its business prior to the rent
commencement date.
The above being said, the case law is that in order to hold a non-contracting
landowner under the Lien Law there must be something more than "mere acquiescence," there
must be some affirmative act on the part of the owner in order to enforce liability (Vardon, Inc. v Suga Development.
LLC, 36 AD3d 897 (2007); Valsen Construction Corp., v [*5]Long Island Racquet & Health Club, Inc., 228 AD2d 668
(1996); Tri-North Builders, Inc. v DiDonna, 217 AD2d 886 (1995)).
There is no way to conclude that the defendant affirmatively consented to the plaintiff's work. It is clear that the defendant did not even "merely acquiesce" in plaintiff's work. Defendant contacted its tenant and sought to have the tenant adhere to its obligations under the terms of the lease. The fact that the defendant could have taken additional steps under the terms of the lease to force the tenant to stop the work of the plaintiff does not make the defendant's failure to act consent. Defendant could not unilaterally act to stop the plaintiff from working. A third party, the tenant, had the ability to stop the plaintiff and chose not to do so. The defendant might have taken steps to have the Buildings Department intervene, however, as pointed out below, that would have exposed the defendant to civil penalties for the actions of the tenant and the plaintiff.
There is also case law that consent may be implied from the fact that at the end of the lease term the improvements made for the business of the tenant revert to the ownership of the landlord thereby giving the landlord a benefit (Harner v Schecter, 105 AD2d 932 (1984)). Paragraph 14.1 of the lease provides: Removal and Replacement. All of Tenant's trade fixtures, furniture, furnishings, signs and other personal property not permanently affixed to the Premises(collectively referred to herein as "Personal Property")must be new when installed in, or attached to, the Premises by Tenant. Subject to the provisions of Section 14.2, any such Personal Property shall remain the property of Tenant....
Paragraph 14.2 provides: Fixtures: Tenant's Improvements and any personalty installed in the Premises that becomes realty under applicable law are collectively referred to in this Lease as "Fixtures" and shall become the property of Landlord upon the expiration or earlier termination of this Lease.
These lease paragraphs lead to the conclusion that the great majority, if not all, of the work done at the premises by the plaintiff would be classified as "personal property" under the lease and remained the property of the tenant. These lease provisions defeat any claim of implied consent based on the above cited case law. Landlord could have made this issue even clearer by requiring the tenant to restore the premises to basically four blank walls, a floor and a ceiling on the theory that bare space is more marketable than space designed for a particular tenant. Further, when these clauses are coupled with the analysis set forth below, it makes it clear that the defendant neither actually, nor impliedly, consented to the work, but in fact suffered a detriment by plaintiff's actions.
Plaintiff's mechanic's lien must be vacated and his cause of action dismissed on the [*6]merits. Defendant has no obligation to the plaintiff. The actions or
inactions of the defendant do not amount to the consent necessary to permit plaintiff to enforce
the mechanic's lien against the defendant.
B. Was the Work Done by the Plaintiff an "Improvement?"
Implicit in describing work done on real property as an "improvement" is the idea that the premises has in some way received a benefit. The benefit might be the demolition of existing structures so as to make the premises better able to be put to a more productive use or the construction of new structures to achieve that goal. Renovating the premises for the use of a new tenant by definition would seem to be an "improvement" to the landlord's premises. A review of the work done by plaintiff leads to the conclusion that what he performed does not qualify as an "improvement."
First, plaintiff has not produced any written agreement between the tenant and him as to the scope of the work to be performed and the terms of compensation. In fact, he admits that there was no written agreement. His proof consists of his oral testimony as to the terms and conditions and a soft-covered marble notebook in which he recorded payments received from the tenant. Plaintiff sought to establish the amount of monies expended on materials initially by attempting to submit into evidence as Plaintiff's Exhibit #9, invoices from a supplier. The court granted defendant's motion to exclude these documents because they were billed to an entity other than the plaintiff, "Successful Running Development." Plaintiff's witness testified that this was another entity of which he was the principal. After the invoices were excluded, plaintiff used them to refresh his recollection and then testified as to their content. Plaintiff sought to prove its case through self-serving testimony not subject to meaningful cross-examination which would be able to successfully challenge the validity of the statements. When he completed his testimony he claimed the amount due and owing was $74,500.00 and not the $79,500.00 claimed in the filed mechanic's lien.
Second, none of the work by plaintiff was done according to any plans. There were no filings with the Buildings Department, neither were there any permits issued nor approvals obtained. Plaintiff's witness testified that he did a substantial amount of work at the site which, according to the building code, required filings, permits and approvals. He testified to relocating bathrooms, removal of walls, relocating sprinklers, and closing exits. He testified that he did all of this work without the benefit of any plans and relied solely on instructions from the tenant as to the nature and scope of the work to be performed. The theory behind holding the property owner responsible for payment to the contractor is that the labor and materials "improves" the property. Work done without proper filings with the Buildings Department by definition cannot be an "improvement" and is in fact a detriment. Not only were the renovations specific to the needs of the tenant, making the space less desirable to a new occupant upon the tenant's default and abandonment of the space, but completing them without the proper approvals made them illegal. New York [*7]City Administrative Code 27-147 provides: No building construction or alteration work, foundation or earthwork, demolition or removal work, or plumbing work shall be commenced, and no signs or service equipment of the types listed in articles sixteen and seventeen... shall be erected, installed, altered, repaired, or used, nor shall any service equipment of the types listed in article eighteen...be used or operated, unless and until a written permit therefor shall have been issued by the commissioner....
Case law has held a landlord liable for civil penalties under this statute merely because the landlord retained a right to enter and inspect the premises (People v Lieberman, 141 Misc 2d 561 (1988)). Owing to the extensive nature of the renovations undertaken by the plaintiff, not only were permits necessary, but a new certificate of occupancy may have been required (NYCAC 26-222). The plaintiff's actions subjected the plaintiff, the defendant and the tenant to civil penalties (NYCAC 26-246). There may have been an additional violation of the building code because the plaintiff made changes that affected egress to the building by relocating rear exit doors and remodeling the storage area in front of those means of egress (NYCAC 27-215).
Further, testifying at the trial was the architect hired by the tenant to complete the build out designs for the space leased from the defendant. He testified that he delivered plans to the tenant but did not directly give copies either to the plaintiff or the defendant. The architect also stated that he prepared all of the necessary documents needed to obtain permits from the Buildings Department and that the tenant signed them as the owner. He asserted that he checked the Buildings Department records and none of the plans or applications were ever filed. The architect also testified as to what work in the plans needed approvals and permits. This included the demolition, which parenthetically had already begun when he made his first site visit, sprinkler relocation, erection of new partitions, relocation of duct work, relocation of bathrooms, an asbestos certification, electrical filings, and sign installation. The architect also opined that the relocated bathrooms had to be compliant with the American Disabilities Act. The court notes that on the site visit conducted by the court it was apparent that the bathrooms installed by the plaintiff were not handicapped accessible.
The renovations done by the plaintiff at the premises do not amount to an improvement under the statute. The failure of the plaintiff to file plans and obtain permits and approvals would make it absurd for a court to require the landlord to compensate plaintiff. Perhaps the city or the state should consider regulating commercial contractors in the same manner as they have licensed home improvement contractors. The actions of the plaintiff are also questionable since he is not a novice in the construction business. He testified that he has been a contractor for twenty years and has conducted business under several different names. Plaintiff as an "expert" in construction should have known he needed filed plans and approvals to do the work he performed. He cannot benefit from his [*8]own wrongful actions.
Plaintiff is not entitled to be compensated.
C. Was the Plaintiff Credible?
The testimony of the plaintiff's witness and the defendant's witness were so contradictory as
to the scope of the plaintiff's work, that the court conducted a site visit. The plaintiff insisted it
had constructed thirteen sales item gondolas and three bathrooms. The site visit revealed
twenty-eight gondolas and only two bathrooms. It also showed that the plaintiff did not properly
seal pipes at the location of the original bathrooms. The failure of the plaintiff to know exactly
what work was performed, when coupled with his sketchy bookkeeping methods and the total
lack of any records as to payment of workers leads to the conclusion that to award plaintiff any
money in this case would be complete speculation and a travesty.
CONCLUSION:
Plaintiff's cause of action is dismissed on the merits. Plaintiff has failed to prove its prima facie case. The mechanic's lien is vacated. Defendant is to file the appropriate papers to cancel the lien as of record.
Exhibits, if any, will be available at the office of the clerk of the court thirty days after receipt of a copy of this decision.
The foregoing constitutes the decision and order of the court.
Dated:March 27, 2008
Staten Island, NYHON. PHILIP S. STRANIERE
Judge, Civil Court
ASN by ________ on ____________.
A P P E A R A N C E S
Counsel for Plaintiff:
Po W. Yuen, Esq.
Yuen & Yuen, Esqs.
132 Nassau Street
Suite 1300
New York, NY 10038
212-608-1178
Counsel for Defendant Shore Plaza, LLC:
Cathy O'Donnell, Esq.
Calabro & Associates, P.C.
1412 Broadway, Suite 1500
New York, NY 10018
646-688-6095
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