By: Alexander A. Miuccio Published: September 2017

Court Upholds Subcontractor's Lien Foreclosure Action Against Contractor and Town

In the recent case of County Wide Flooring Corp. v Town of Huntington, the court addressed a contractor’s motion to dismiss a subcontractor’s mechanic’s lien foreclosure action commenced against the contractor and the Town of Huntington.

Background

County Wide entered into a subcontract with Wenger Construction Co., Inc. to install flooring and perform related work in connection with the expansion of an ice rink in Dix Hills Park in the Town of Huntington. County Wide was owed $147,930.87 in connection with the work that it performed at the project, and it filed a mechanic’s lien against the project on December 30, 2011, which it renewed on December 7, 2012, but did not renew after that.

On March 7, 2014, the plaintiff commenced a lawsuit against Wenger, the Town, and Hanover Insurance Co., Wenger’s payment bond surety. For various reasons applicable to different parties, that lawsuit (which did not seek to foreclose the mechanic’s lien) was ultimately dismissed. County Wide filed a new mechanic’s lien against the project on December 2, 2015, and it commenced a new lawsuit against Wenger and the Town to foreclose on that lien.

Wenger moved to dismiss the new lawsuit, claiming that the underlying mechanic’s lien was not timely filed. In opposition, County Wide argued that Section 12 of the Lien Law allows for the filing of a mechanic’ lien on a public improvement project any time prior to, or within 30 days after, the completion or acceptance of a public improvement. According to County Wide, the ice rink project had not been completed and accepted by the Town and, therefore, it’s lien was timely filed. In reply, Wenger argued that its last day on the project was October 20, 2011, that the Town issued a formal termination letter to Wenger on May 2, 2012 and, accordingly, County Wide’s lien had to be filed no later than June 1, 2012 (30 days after its termination).

Decision

The court upheld County Wide’s complaint and declined to dismiss the lien foreclosure action. In doing so, the court held that Section 12 of the Lien Law did not prevent the filing of successive mechanic’s liens for the same work as long as the second lien is filed within the 30-day statutory time limit.

As to the timing of the filing of the lien, the court cited well-established law that the right to file a lien under a contract for a public improvement does not expire until 30 days after the improvement is “completed and accepted” by the state or public corporation. If the requirements regarding formalities of acceptance are specified in the contract, such as the filing of a final certificate of acceptance, the court stated that they must be followed and a subcontractor may rely on them in deciding when to file a notice of lien.

With these principles established, the court noted that it was not provided with the contract between Wenger and the Town and, accordingly, it could not determine whether the Town’s cancellation and termination of Wenger’s contract on May 2, 2012 qualified as “completion and acceptance” for purpose of determining when the 30-day time period to file a mechanic’s lien started to run. Without a contract for review, and without knowledge of the events leading to the cancellation and termination of Wenger’s contract, the court was unable to determine if the Town’s hiring of another contractor to complete the project after Wenger’s termination served to toll the running of the 30-day period until the completion of the project by the replacement contractor, and whether the specific contractual provisions relating to completion and acceptance of the work were satisfied. The court also noted that the Town’s taking possession of the building and assuming its operation and maintenance before a final certificate was issued was not automatically determinative of whether acceptance had taken place.

Comment

A mechanic’s lien is a powerful tool for a subcontractor to use in its efforts to collect monies owed for its work. However, resorting to that tool requires strict compliance with the provisions set forth in the Lien Law, including the time limit for filing the lien. The time period for filing a mechanic’s lien on a public improvement project is 30 days from the completion of the project and the public owner’s acceptance of the work. As this case demonstrates, it may actually be years before the 30-day period starts to run after completion and acceptance. However, as the determination of a project’s completeness and acceptance is determined in accordance with the provisions of a contract that a subcontractor may not be in possession of, it is advisable for the subcontractor to file the lien as soon as it is clear that it is not receiving payment for its work. 

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