J. How To Discharge A Mechanic'sLien on A Private Improvement

• Jurisdiction: New York

J. How to Discharge a Mechanic's Lien on a Private Improvement

1. Generally

The term "discharging" can have two meanings: First, a lien can be discharged in the full and final sense whereby the lien ceases to exist on the happening of certain occurrences; second, a lien can be discharged to the extent that it no longer operates as a charge against the real property. This is commonly effected by "bonding off" the lien. In other words, the lien continues to exist but will thereafter be satisfied, if necessary, by the surety company, if not the original debtor, and not by sale of the real property. Thus, a cloud on title is removed by the substituted security.

The most common circumstances under which the lien ceases to exist include the following:

1. By the filing of a duly acknowledged certificate of the lienor in the office where the notice of lien was filed stating that the lien is satisfied or released in whole or in part (specifying that portion of the total sum).²³⁷

2. By the failure of the lienor to commence an action to foreclose the lien or file an extension form within one year from the time of the filing of the notice of lien; except where an action has been commenced within the same period to foreclose a mortgage or another mechanic's lien upon the same property or any part thereof and a notice of pendency of such action is filed according to law.²³⁸ Failure to file the notice of pendency can be fatal unless the private lien is bonded.

3. By order of the court vacating or canceling such lien of record, for neglect of the lienor to prosecute pursuant to § 59 of the Lien Law.²³⁹

4. By posting a bond or undertaking. The "cloud on title" created by a mechanic's lien can be virtually eliminated by the posting of a bond or other type of security via a procedure commonly referred to as "bonding off" the lien.²⁴⁰

5. Upon the filing of a transcript, together with proof of service with notice of entry, showing a final determination of the foreclosure action in favor of the owner of the property against which the lien was claimed.²⁴¹

6. By an order summarily discharging the lien of record (without the need for a trial) where it appears from the face of the notice of lien that said lien is invalid by: (1) reason of the character of the labor or materials furnished or: (2) where for any other reason the notice is invalid by reason of failure to comply with section 9 of the Article (statutory contents of the notice of lien) or if it appears from the public records the notice has not been filed in accordance with the provisions of Article 10 (e.g., filing of notice of lien—eight-month or four-month timing provision). In other words, one may expedite the lien discharge process where a lien is filed for unlienable items (e.g., light bulbs, throw rugs, blinds) because the lien was filed more than eight months after an office building was complete, or more than four months after a single family dwelling was erected and summarily moved to discharge the lien without a trial. For example, if a lienor completely misidentifies the owner, the lien may be summarily discharged pursuant to Lien Law § 19(6).²⁴² However, if certain items of labor or materials are lienable and others are not but both are included on the filed lien, the filed lien is not automatically invalid.²⁴³ If there are any other issues as to the validity of the lien, they must await a plenary trial.²⁴⁴ In Pontos Renovation, there was an issue as to whether the owner consented to the contractor's work on the project. The lien was summarily vacated by motion. The First Department reversed and held such issue must await a plenary trial. See also Application of Prospect Heights Rising Corp.,²⁴⁵ where the court found that the owner's motion for summary discharge of the lien showing work done after stop work order was issued by agency, and therefore filed after eight-month deadline, was unavailing. The owner was objecting to the actual timing of the lien, not any facially insufficient issues, and the motion had to be dismissed since the lien was facially sufficient. A trial was required to determine the eight-month timing issues.²⁴⁶

A plenary trial may not always be required pursuant to Lien Law § 19(6) if an obvious fraud is being attempted by a lienor. In one such case,²⁴⁷ the lienor attempted to perpetrate a fraud by altering dates on a lien. The petitioner moved pursuant to § 19(6) to discharge the lien due to the fraud. The lienor claimed that its filed lien contained no ambiguities on its face and a full trial was required. The court held otherwise. The court compared a second lien to an original prior lien which had been discharged by the court. The court pointed out that if the lienor merely changed dates from 2008 to 2010 without performing work in 2010 clearly the second lien was fraudulent and therefore defective on its face. The court directed a referee to be appointed to determine the actual facts and if there was an alteration. If there was an alteration, then the lien would be dismissed via summary judgment. A full plenary trial was not required.

2. Practice Guide and Caveat

Certain unlicensed home improvement contractors may not enforce mechanic's liens on residential property.²⁴⁸ Even if a subcontractor has a home improvement license, if the general contractor did not have a license, an action by the subcontractor to enforce the lien can be defeated and the lien vacated. The subcontractor's cause of action is against its prime.²⁴⁹ In Scaturro v. M.C.S. Landscape, Inc.,²⁵⁰ a lien was discharged in connection with a home improvement business (landscaping). The landscaper did not have the requisite Nassau County license and his lien was properly discharged upon application. The Second Department affirmed.²⁵¹

The Court of Appeals' 2011 decision in Marraccini v. Ryan²⁵² casts some doubt, however, on those cases that completely bar a lienor from enforcing its lien when it does not have a home improvement license as required by Town Law or County Law.

In that case Anthony Marraccini, in 1993, filed a doing business certificate with the Westchester County Clerk stating he was transacting business under the name "Coastal Construction Development." Subsequently, the next day, he applied to the Westchester County Department of Consumer Affairs for a home improvement license. According to the Court of Appeals, he designated his ownership as "Individual" but wrote "Coastal Construction Development" after "Name of Company" (not his individual name, Anthony Marraccini). He did not fill in the blank for a d/b/a name. After the category "Name of Applicant (President or Owner)" he specifically wrote "Anthony Marraccini." The license was issued, however, to the corporation "Coastal Construction Development." According to the Court of Appeals, in pertinent part, "Marraccini's own name does not appear on the license, but it is undisputed that Marraccini and Coastal are not separate legal entities. Thus Marraccini was personally licensed to do a home improvement business, though under a name other than his own."²⁵³

In 2004 Marraccini did construction, rehab and maintenance work for John and Pam Ryan. In his dealings with the Ryans, the Court of Appeals said Marraccini did not use the company name. He used his own name as the contracting party, not "Coastal Construction Development." According to the Court, the record does not show why he did not use the company name, and there was no indication he was trying to deceive or that he deceived the Ryans. Moreover, if the Ryans had checked the Westchester County Consumer Affairs website, they would have found his license indexed under Anthony Marraccini. It was also indexed under the d/b/a name Coastal Construction Development.

After completion, a dispute arose over payment, and Marraccini sued. The Ryans moved for summary judgment dismissing the lawsuit, claiming he was not licensed to do home improvements in his individual name. Supreme Court denied the motion. On appeal, the Appellate Division reversed and dismissed the complaint. According to the Second Department:

The only operative document, the license issued by the Westchester County Department of Consumer Protection, indicates that a home improvement license was issued to Coastal Construction Development (hereinafter Coastal). Although the plaintiff operates Coastal, the license was not issued in his name.

The defendants John Ryan and Pam Ryan (hereinafter together the appellants) established their prima facie entitlement to judgment as a matter of law by showing that the improvements to the defendants' home were done in the plaintiff's name, rather than that of Coastal, and that the plaintiff therefore violated section 863.319(1)(b) of the Administrative Code of the County of Westchester. (see Flax v. Hommel, 40 A.D.3d 809 [2007]; J.G. Cerasuolo Constr., Inc. v. Tyler, 35 A.D.3d 376 [2006]; AEC Bldg. Assoc. v. Crystal, 246 A.D.2d 496 [1998]; George Piersa, Inc. v. Rosenthal, 72 A.D.2d 593 [1979]. In opposition, the plaintiff failed to raise a triable issue of fact. Consequently, the Supreme Court should have granted those branches of the appellants' motion which were for summary judgment dismissing the complaint insofar as asserted against them, and to vacate a mechanic's lien and cancel the notice of pendency filed against the subject property. (see Callos, Inc. v. Julianelli, 300 A.D.2d 612, 613 (2d Dep't 2002).²⁵⁴

The Court of Appeals granted leave to appeal and reversed. According to the Court, in pertinent part:

Marraccini may indeed have violated section 863.319(1)(b) of the County Code, which says in relevant part: "It shall be a violation to . . . [c]onduct a home improvement business in any name other than the one in which the person is licensed." The County Code provides civil and criminal penalties, not to exceed $1,000, for such a violation (Westchester County Code § 277.171 [1]; § 277.181). Repeat violators may incur larger fines, and imprisonment...