Quite often, subcontractors, vendors, and materialmen alike are faced with the problem of upstream contractors failing to pay for materials long after they have been delivered to a job site. Suppose you have delivered $100,000 worth of bricks or lumber to the job site, but six months later you are still sending out invoices, and you fear that the purchaser is going to stiff you. It might be tempting to simply drive to the site, pack up the materials that you had delivered, and drive them back to your warehouse. But as tempting as that route might seem, you have to be very careful about following proper lawful procedures for repossessing materials – otherwise, you might find yourself with far more serious problems than unpaid invoices.
Lien Law §39-c does grant materialmen the authority to repossess materials that have been delivered and have not been paid for, under certain limited circumstances. If either (1) “for any reason after the work of a private or public improvement of real property is abandoned by an owner, a contractor or a subcontractor before the completion thereof”; or (2) “after the same is completed, materials delivered are not used therefor”, then “a person who has delivered materials for the improvement which have not been incorporated therein and for which he has not received payment may repossess and remove such materials.
Notably, because these rights are proscribed within the Lien Law, if a materialman repossesses such materials according to §39-c, then the materialman will “have the same rights in regard to the materials as if he had never parted with the possession”. Importantly, that means that the materialman will forfeit any lien rights (because, legally, he never surrendered possession).
Take note that Lien Law §39-c is not simply carte blanche to engage in self-help. If you just drive to the construction site, pack up all of the unpaid for bricks and lumber into your truck and drive off, you could find yourself subject to civil penalties for trespass, criminal penalties for breaking and entering, burglary, or worse. That is because UCC §2-403 provides that if goods have been delivered to a purchaser, there is a presumption that the purchaser “acquires all title which his transferor had or had power to transfer”. If the purchaser has failed to pay the seller, then the burden is on the seller to void the purchaser’s title for reason of nonpayment, fraud, or otherwise.
If you find yourself in a situation where you have delivered goods, but the purchaser has refused to tender a final payment (or it turns out that their check has bounced), the first thing you should do is consult your lawyer to apprise you of your possible remedies. Nine times out of ten, the most logical course of action will be to start by sending out a demand letter for payment, and if the non-paying purchaser still fails to respond, commence an action for breach of contract, seeking monetary damages. However, in some circumstances, for whatever reason, the fact of the matter might be that monetary damages will not suffice, and that the only adequate remedy is for the goods to be returned to you in one piece. In such cases, your best option might be to commence an action to recover the chattel (the property). Under CPLR §7108(a), such an action will normally result in a judgment which will ultimately award possession to the party with superior rights, or in the alternative, monetary damages.
Another thing you might want to consider when commencing an action under that provision is whether the goods sought are unique, such as some sort of custom-made components, or whether there is a significant risk that defendant might destroy the goods or sell them to a third party (or some other factors which would require some sort of provisional remedy). If that is the case, you might want to seek an order of seizure according to CPLR §7102 at the onset of the case. This could lead to the local sheriff taking possession of the property in question. Or you may want to seek an injunction or temporary restraining order according to CPLR §7109.
If you are the prevailing party in such an Article 71 proceeding, you will ultimately wind up with a judgment declaring that you are the lawful owner of the property in question. Hopefully, the defendant will be reasonable and comply with the court order by delivering the property in question or a check for equivalent monetary damages, as per the court order. But as seasoned lawyers know, sometimes judgment debtors have no interest in complying with court orders. There remains the significant possibility that you might have to take further legal action that concludes with a writ of execution, where the county sheriff seizes the property in question, or some other legal process.
No matter what, it is always imperative that you consult with a construction lawyer and assiduously comply with the formal processes for repossession outlined by the Lien Law and the CPLR. If you want goods that you delivered returned to you, it is always best to stay on the right side of the law. It is never a good idea to take the law into your own hands – otherwise you might need to seek the services of a criminal defense attorney.