LOP Dev. L.L.C. v ZHL Group, Inc.

[*1] LOP Dev. L.L.C. v ZHL Group, Inc. 2008 NY Slip Op 51296(U) [20 Misc 3d 1109(A)] Decided on June 30, 2008 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 30, 2008
Supreme Court, Kings County

LOP Development L.L.C., Plaintiff,

against

ZHL Group, Inc., et al., Defendants.



3084/08



Attorney for Plaintiff

Aleksandr S. Cherny, Esq.

Aleksandr S. Cherny & Associates, P.C.

205 Ave. U

Brooklyn, NY 11223

Attorney for Defendant ZHL Group and Lvovskiy

Yevgeny Tsyngauz, Esq.

1635 Bath Ave.

Brooklyn, NY 11214

Attorney for Defendant Bais Contracting

Solomon Jaskiel, Esq.

275 Madison Ave., 11th Floor

New York, NY 10016

Attorney for Defendant ZOM Corp.

Wioletta Kosiorek, Esq.

Zawisny & Zawisny, P.C.

578 Driggs Ave.

Brooklyn, NY 11211

Attorney for Defendant Kings Building Material LLC

Gary Rosen, Esq.

Gary Rosen Law Firm, P.C. 249-02 Jericho Turnpike

Floral Park, NY 11001

Carolyn E. Demarest, J.

In this action for breach of contract, conversion, discharge of mechanic's liens, and indemnification, plaintiff LOP Development LLC (plaintiff) moves,[FN1] by order to show cause, for an order discharging a mechanic's lien filed by defendant Kings Building Material LLC (Kings) and a mechanic's lien filed by defendant ZOM Corp. (ZOM) claiming that it fully paid all monies demanded by Kings and ZOM to defendant ZHL.

On May 7, 2006, plaintiff, as owner, entered into a written construction agreement with ZHL and BAIS Contractors Inc. (BAIS), whereby ZHL and BAIS, as general contractors, were to construct a condominium building at 2011 Avenue X, in Brooklyn, New York for the agreed price of $1,474,700 plus additional sums for any changes in the work. Under that contract, ZHL and BAIS agreed to furnish all work, labor, services, and materials required for the construction of the condominium building in accordance with architectural plans drawn up for the project and the New York City Building Code. The construction agreement was executed by Victor Krupnik (Krupnik), as plaintiff's authorized representative, and by Lvovskiy, as president of ZHL. A year later, ZHL and BAIS began to erect the condominium building on the premises.

Plaintiff claims, however, that from the outset of construction, ZHL and BAIS failed to perform in accordance with good workmanlike standards, and continuously failed to conform to the architectural drawings drafted for the project. Plaintiff asserts that due to the poor quality of ZHL and BAIS' work, they have left the construction site in need of repair and that much of the work completed by ZHL and BAIS will have to be redone in order to comply with architectural drawings and the New York City Building Code, at additional expense to plaintiff. Plaintiff further asserts that after it noticed major defects and demanded changes, ZHL, by its president, Lvovskiy, began to threaten to stop all work and file a mechanic's lien unless plaintiff paid additional funds not due under the agreement. Plaintiff states that the acts of ZHL and BAIS caused significant delay forcing plaintiff to seek another contractor to complete the construction.

According to the sworn affidavit of Krupnik, plaintiff's managing member, ZHL, in addition to constantly demanding additional funds from plaintiff, requested deposits of sums totaling $125,000, to be used solely for the payment of subcontractors working on the construction project and suppliers of materials. Krupnik asserts that despite plaintiff's payment of this $125,000 to ZHL, he has learned that the subcontractors and suppliers are still awaiting payment for their work and were not paid from the monies received by ZHL. As a result, two of the subcontractors, defendants ZOM and Kings, have filed mechanics liens. Plaintiff contends, [*2]however, that these liens are defective in that ZOM and Kings were advised that ZHL had already been paid and was not owed money for the work of ZOM and Kings. Plaintiff has submitted copies of four checks totalling $80,000, made payable to ZHL for brick work, in support of this contention.

On November 14, 2007, plaintiff terminated its contract with ZHL and BAIS based upon its claim that the work was not properly performed by them. Plaintiff claims that it paid a total of $503,900 to ZHL and BAIS under the construction agreement. It further claims that ZHL and BAIS billed for work not performed and that they converted at least $74,256.12 from plaintiff, for which they have not accounted.

Subcontractor ZOM filed a notice of mechanic's lien, dated January 22, 2008, against the 2011 Avenue X premises owned by plaintiff, stating that $53,000 remained unpaid out of the agreed price of $87,000 for its labor with respect to block and brick work performed from September 1, 2007 to December 15, 2007. Kings, a material supplier to ZOM, also filed a notice of mechanic's lien, dated January 22, 2008, against the 2011 Avenue X premises, stating that $13,745.97 remained unpaid out of the agreed price of $36,820.92 for bricks, block and sand materials furnished prior to November 19, 2007. Kings states that it delivered these building materials to ZOM for use at the project, but it was not paid by ZOM.

On January 28, 2008, plaintiff filed this action against ZHL, BAIS, Lvovskiy, ZOM, and Kings. Plaintiff's complaint alleges four causes of action: breach of contract against ZHL and BAIS; conversion against ZHL and Lvovskiy; "defective mechanic's lien" against ZOM and Kings; and for indemnification from ZHL and BAIS, also based on the contract. Plaintiff's third cause of action alleges that ZOM and Kings' mechanic's liens were improperly filed and should be declared null and void because ZOM and Kings were on notice that it had fully paid ZHL for all block and brick work performed on the construction site and for the materials for this work, and that no additional monies were due from it. Plaintiff's fourth cause of action seeks indemnification from ZHL and BAIS for any damages it must pay due to the filing of the two mechanic's liens by Kings and ZOM. On February 13, 2008, plaintiff obtained the instant Order to Show Cause which essentially sought summary judgment and injunctive relief restraining defendants' assets in anticipation of a judgment. While such relief has either been denied or the request withdrawn, defendants had not yet answered the complaint and the requested relief was premature. Moreover, plaintiff has not sought to post a bond pursuant to Lien Law § 19(4) and defendants' time to foreclose their liens has not yet run (Lien Law § 19(2)).

In support of its instant motion, which, as modified at oral argument, reduces to a demand to "dismiss" the liens of Kings and ZOM, plaintiff claims that it fully paid all the monies demanded by Kings and ZOM to ZHL, thus making their claims directly against plaintiff invalid on the basis that it is not the proper party to be pursued. Plaintiff relies upon Krupnik's affidavit, wherein Krupnik asserts that ZHL was already paid $80,000 for the payment of subcontractors and suppliers for the brick and block work, and that no additional monies is owed by plaintiff. Krupnik further asserts that ZHL is making unfounded demands for payment from plaintiff, and that ZHL has converted at least $74,265.12 which belongs to plaintiff. Plaintiff also relies upon the four checks paid to ZHL, which, on their face, state that they were for "brick" and which total $80,000.

BAIS has taken no position on the relief requested by plaintiff. ZHL and Kings have both [*3]submitted opposition to plaintiff's motion.

In opposition to plaintiff's motion, ZHL has submitted Lvovskiy's sworn affidavit asserting that ZHL performed its work in a workmanlike manner, in accordance with the plans supplied by plaintiff's architect and in accordance with the rules and regulations promulgated by the New York City Department of Building (the DOB), and did not cause any violations to be issued by the DOB. Lvovskiy states that on November 14, 2007, plaintiff unjustifiably terminated its contract with ZHL and that, as of that date, plaintiff owes ZHL $104,600 for labor performed and materials furnished, including masonry and brick. On February 19, 2008, ZHL filed its own mechanic's lien against the subject premises in the amount of $104,600 for labor performed, including masonry, and materials furnished, including brick, from April 25, 2007 to November 14, 2007, claiming that the agreed price and value of the labor performed and materials furnished was $595,500 and that $104,600 remains unpaid. ZHL claims that it paid its subcontractors, and it disputes the amount that ZOM's notice of mechanic's lien states is owed.

Pursuant to Lien Law § 4 (1), a mechanic's lien is valid to the extent of "the sum earned and unpaid on the contract at the time of filing the notice of lien, and any sum subsequently earned thereon" (see DiVeronica Bros. v Basset, 213 AD2d 936, 937 [1995]; Electric City Concrete Co. v Phillips, 100 AD2d 1, 4 [1984]; Hartman v Travis, 81 AD2d 692, 693 [1981]; Albert J. Bunce, Ltd. v Fahey, 73 AD2d 632, 632 [1979]). "In the case of a subcontractor, a mechanic's lien will attach only to those funds due and owing to the general contractor at the time of its filing, or which may thereafter become due and owing" (Electric City Concrete Co., 100 AD2d at 4; see also Falco Constr. Corp. v P & F Trucking, 158 AD2d 510, 510 [1990]; Ebert v Van-Mar Developers, 111 AD2d 495, 496 [1985]). Indeed, it is well settled that the rights of a subcontractor are "derivative of [the rights] of the general contractor and are restricted to satisfaction out of the amount established to be due and owing from the owner to the general contractor" (C.B. Strain & Son v Baranello & Sons, 90 AD2d 924, 925 [1982]; see also 104 Contrs. v R.T. Golf Assoc., 270 AD2d 817, 818 [2000]; DiVeronica Bros., 213 AD2d at 937; Falco Constr. Corp., 158 AD2d at 510; Electric City Concrete Co., 100 AD2d at 4; Albert J. Bunce, Ltd., 73 AD2d at 632).

"Similarly, "[t]he lien of a material supplier . . . is derivative" (H. Verby Co., Inc. v Plainview Assoc., 6 Misc 3d 1011 [A], 2005 NY Slip Op 50026 [U],*1). It is limited "in the sense that it is derived from what is owed" to the subcontractor with whom it is in privity (Regal Lbr. Co. v Buck, 157 Misc 2d 376, 379 [1993]; see also Ace Contr. Co. v Garfield & Arma Assoc., 148 Misc 2d 475, 477 [1998]). Thus, the extent of the lien of a material supplier to a subcontractor depends not only upon the amount due and payable from the subcontractor, which, in turn, depends upon the sufficiency of its performance, but is also primarily limited to the amount unpaid and owed to the subcontractor from the general contractor on the contract between them (see C.S. Behler, Inc. v Daly & Zilch, 277 AD2d 1002, 1003 [2000]; Philan Dept. of Borden Co. v Foster Lipkins Corp., 39 AD2d 633, 633-634 [1972], affd 33 NY2d 709 [1973]; Ace Contr. Co., 148 Misc 2d at 477). Moreover, a subcontractor's lienor is never entitled to a lien in an amount exceeding that which is due and payable to the general contractor under its contract with the owner of the real property (see DiVeronica Bros., 213 AD2d at 937; H. Verby Co., Inc., 2005 NY Slip Op 50026 [U], *1-2; Upson v United Eng'g & Contr. Co., 72 Misc 541, 546-547 [1911]). [*4]

Here, Kings, a material supplier of bricks to ZOM, claims, in its notice of lien and opposition papers, that ZOM owes it $13,745.97 for the materials it delivered to the construction project. ZOM, a subcontractor who performed brick work for ZHL, claims, in its notice of lien, that it is owed $53,000 by ZHL upon a total claim for $87,000 for labor. While ZHL disputes that it owes monies to ZOM, ZHL has not shown that ZOM has been fully paid. Additionally, although plaintiff claims that it has paid all monies which it owes to ZHL, ZHL disputes this, and claims that plaintiff still owes it $104,600. While plaintiff has submitted checks totaling $80,000, upon which the notation "Brick" appears, it has not demonstrated, as a matter of law, that it owes no further monies to ZHL, and there is no evidence that the $80,000 was actually applied to the charges for materials supplied by Kings, or was paid to ZOM

Consequently, there is a material and triable issue of fact as to whether plaintiff owed any monies to ZHL at the time Kings and ZOM filed their mechanic's liens. Thus, plaintiff is not entitled to an order discharging these liens (see Lien Law § 4; Richard's Home Ctr. & Lbr., Inc. v Kownacki, 265 AD2d 471, 471 [1999]; DiVeronica Bros., 213 AD2d at 937; Perma Pave Contr. Corp. v Paerdegat Boat & Racquet Club, 156 AD2d 550, 552 [1989]; Ebert, 111 AD2d at 497; Electric City Concrete Co., 100 AD2d at 4).

Accordingly, plaintiff's motion for an order discharging the mechanic's liens filed by Kings and ZOM against its premises, is denied.

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:Plaintiff's motion, insofar as it sought injunctive and declaratory relief as against ZHL Group, Inc. (ZHL) and Yevgeniy Lvovskiy (Lvovskiy), has been withdrawn. Insofar as plaintiff's motion further sought an order enjoining Commerce Bank and other financial institutions with respect to ZHL and Lvovskiy's accounts, such injunctive relief is premature in the absence of a judgment herein. See Credit Agricole Indosuez v Rossiyskiy Kredit Bank, 94 NY2d 541 [2000].