By: Thomas S. Tripodianos Published: April 2012

Does a contractual forum selection clause trump statute?

Question. In an action to foreclose a mechanic's lien, defendant (property owner) asserts that the action must be transferred to the county contractually designated by the parties for the commencement of all litigation arising under their construction contract. Lienor claims that CPLR 507 precludes such a transfer and that venue must remain in the county where the subject property is situated. Notwithstanding the seemingly mandatory nature of CPLR 507, which requires that a foreclosure action be brought in the county where the property is situated does a contractual forum selection clause, such as the one at issue here, trump the statute?

Answer. Yes. The contractual forum selection clause is controlling.

This action has its genesis in a construction contract between the property owner and Lienor-a contract that required Lienor to furnish labor, equipment, and materials for the installation of elevators at a property located in Brooklyn, New York. Lienor timely filed a mechanic's lien with the Kings County Clerk. Subsequently, Lienor also filed a notice of pendency with the Kings County Clerk and commenced an action in Kings County seeking a judgment foreclosing its lien, as well as related relief. Owner responded with a demand to change venue to New York County, and, upon Lienor's failure to acquiesce in that demand, moved for a change of venue.

In seeking a change of venue, owner points to the parties' construction contract, which provides that: "Any and all action [sic], proceedings and lawsuits must be brought in the Supreme Court of the State of New York and County of New York unless such action or suit is founded upon a dollar amount that is less than the jurisdictional threshold of the Supreme Court." Thus, owner argues that this broad forum selection clause is controlling and requires this action to be transferred from Kings County to New York County.

Lienor alleges that CPLR 507 mandates that an action to foreclose a mechanic's lien be brought in the county where the property is situated (here Kings County), and that a forum selection clause may not subvert the statutory mandate. Additionally, Lienor argues that a change of venue would be contrary to public policy because placing venue in another county would deprive it of its security interest and remedies under the Lien Law. Analysis of the issues presented must begin with an examination of the relevant statutory framework.

Pursuant to CPLR 507,

The place of trial of an action in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property shall be in the county in which any part of the subject of the action is situated [emphasis added].

CPLR 501, in turn, provides that:

Subject to the provisions of subdivision two of section 510, written agreement fixing place of trial, made before an action is commenced, shall be enforced upon a motion for change of place of trial.

Notwithstanding that CPLR 501 authorizes the enforcement of forum selection clauses generally, Lienor initially argues that this statute is inoperative when the cause of action, such as here, is governed by CPLR 507. This, it is urged, flows from the mandatory language of CPLR 507, which allegedly creates an inviolable rule requiring an action affecting real property to be commenced only in the county where the property is situated. I agree but there is case law supporting the property owner's position.

CPLR 501 provides that the parties may contractually fix the venue of an action, which, of course, is the location where the trial will take place. The statute, however, does not dictate where the notice of mechanic's lien and notice of pendency must be filed, which is governed by Lien Law § 10 and CPLR 6511. Nor does it dictate where the property must be sold, which is controlled by CPLR 5103. Thus, while CPLR 501 permits parties to select the venue of an action, it may harmoniously co-exist with these other statutory provisions. Viewed otherwise, a foreclosing lienor may comply with the forum selection clause of its contract while simultaneously complying with the procedural prerequisites to enforcement of its lien.

This creates some difficulties to a foreclosing lien holder who will be forced to proceed through various procedural hoops and submit filings in two counties. For example, if a trial in New York County results in a judgment of foreclosure, Lienor will have to obtain a certified copy of the judgment and file it in Kings County in order to enforce the judgment (see, CPLR 5103[a] ). However, whatever burden is imposed by these additional procedural hoops is a burden of Lienor's own creation and one arising out of its decision to enter into the subject construction contract. I also note that, to the extent that Lienor will be compelled to perform additional procedural steps to enforce its lien, this is hardly tantamount to losing its rights under the Lien Law, as it has claimed.

In sum, Lienor, a sophisticated commercial enterprise, contractually agreed that the venue of any action arising out of this construction contract would be in New York County. Since enforcement of this contractual provision will not affect its rights as a lienor, the forum selection clause should be enforced as written and as authorized by CPLR 501.

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