In the Matter of Delilah Rigano v. Vibar Construction

This memorandum is uncorrected and subject to revision before
publication in the New York Reports.
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No. 223
In the Matter of Delilah Rigano,
&c.,
Respondent,
v.
Vibar Construction, Inc.,
Appellant.
(And Another Proceeding.)
Jeffrey Rizzo, for appellant.
John Brian Macreery, for respondent.
LIPPMAN, Chief Judge:
The issue on this appeal is whether a notice of
mechanic's lien can be amended nunc pro tunc to reflect the name
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of the true owner of the property or whether the misnomer
invalidates the lien. Here, the true owner is the sole
shareholder of the listed owner, the conveyance of the property
in question from the listed owner to the true owner was not at
arm's length, and the public and certainly the true owner here
were on notice that a lien had been placed on the property. The
subject notice of lien also provided means for third parties to
contact the true owner. And, significantly, the true owner and
listed owner consented to the underlying work that allegedly went
uncompensated. Under the particular circumstances presented, the
misnomer is a misdescription that does not constitute a
jurisdictional defect and is curable by amendment.
George Vignogna (the sole shareholder of Vibar
Construction Corp.) and Nick Rigano (the sole shareholder of Fawn
Builders, Inc.) were business partners for over 35 years before
deteriorating business conditions in 2007 led to disputes
concerning the construction contract at issue here. Their
relationship had consisted of Rigano, through Fawn Builders, Inc.
(Fawn Builders), purchasing property and Vignogna, through Vibar
Construction Corp. (Vibar), developing the property. The parties
would split the profits and rarely reduced their agreements to
writing, trusting in their long-term business relationship to
help them avoid any conflict. During their last project, Vibar
constructed a common driveway to access the Pound Ridge, New York
property in question and maintains that Rigano and Fawn Builders
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failed to compensate it for the construction of the road. The
record shows that Rigano consented to construction of the
driveway as demonstrated by the construction and easement
agreement the parties signed in 2006 (signed by Rigano
individually and for Fawn Builders as president).
Vibar filed a notice of mechanic's lien on the property
to recover the cost of constructing the road. The notice
provided that Fawn Builders owned the property, when it was
actually owned by Rigano, Fawn Builders’ sole shareholder and
president.
Rigano sought to have the lien discharged on the ground
that he, not Fawn Builders, owned the property, asserting a
jurisdictional defect that invalidated the lien. Rigano had
indeed acquired title to the property when, on February 14, 2007,
he, as president of Fawn Builders, transferred the property from
Fawn Builders to himself, as an individual. The deed stated that
Rigano and Fawn Builders were located at the same address, and
Rigano signed the deed as "president" of Fawn Builders.
Vignogna petitioned to amend the notice of lien,
arguing that naming Fawn Builders as the owner of the lot was a
"misdescription" that did not warrant invalidating the lien. He
noted that at all times during the parties’ partnership, Rigano
owned property in his corporation's name. He also contended that
the transaction in which the land was transferred from Fawn
Builders to Rigano was not one for consideration, noting that
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Rigano was the sole beneficial owner of Fawn Builders and signed
the deed as president of Fawn Builders, and that there was no
indication of any transfer tax having been paid.
After initially holding in favor of Vignogna, and
concluding that the notice "substantially complied" with the Lien
Law requirements, on reargument and renewal, Supreme Court
granted Rigano's petition and discharged the mechanic's lien.
The Appellate Division affirmed, holding that "[w]hile
a failure to state the true owner or contractor or a
misdescription of the true owner will not affect the validity of
a notice of lien, a misidentification of the true owner is a
jurisdictional defect which cannot be cured by an amendment nunc
pro tunc" (Matter of Rigano v Vibar Const., Inc., 109 AD3d 829,
831 [2d Dept 2013] [quotation marks and citations omitted]). The
Court held that the notice was jurisdictionally defective because
it "completely misidentified the true owner of the subject
premises," citing its own precedent in Matter of Tri Quality
Mech. Corp. v Chappastream Corp. (138 AD2d 610 [2d Dept 1988])
and Tri-State Sol-Aire Corp. v Lakeville Pace Mech. (221 AD2d 519
[2d Dept 1995]) (id.). This Court granted leave to appeal.
Article 2 of the Lien Law provides that it "is to be
construed liberally to secure the beneficial interests and
purposes thereof" (Lien Law § 23), which include "provid[ing]
security for laborers and materialmen and . . . provid[ing]
notice and a degree of certainty to subsequent purchasers"
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(Matter of Niagara Venture v Sicoli & Massaro, 77 NY2d 175, 181
[1990]). It states that "substantial compliance . . . shall be
sufficient for the validity of a lien and to give jurisdiction to
the courts to enforce the same" (Lien Law § 23) and "[a] failure
to state the name of the true owner . . . or a misdescription of
the true owner, shall not affect the validity of the lien" (Lien
Law § 9 [7]). The Lien Law also authorizes amendment provided it
does not "prejudice . . . an existing lienor, mortgagee or
purchaser in good faith" (Lien Law § 12-a [2]). Thus, read
together, it explicitly provides that it should be construed
liberally, states that a misdescription of the true owner shall
not invalidate a lien, and allows amendment where a third party
would not be prejudiced.
The Court is mindful of the power a lien gives to the
holder over another's property, and, because of the potential for
abuse, it must be understood that the Lien Law does not sanction
amendment without confirmation that the true owner and listed
owner are closely related and there was consent to the
construction work. In Gates & Co. v National Fair & Exposition
Assn., we emphasized that
"[i]t was not the legislative
intent to give a lien upon the
property through the filing of any
notice describing it; it was
intended that such a lien should be
acquired as against the title or
interest of the person party to or
assenting to the agreement under
which the work was done" (225 NY
142, 156 [1919] [emphasis added]).
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We conclude that the Lien Law authorizes the type of amendment
sought under the specific circumstances here where the defect is
plainly a misdescription and not a misidentification.
Even with a defect in the naming of the property owner,
Lien Law § 9 "preserve[s] the validity of the lien so far as the
person named as owner and against whom a lien is asked in fact,
may have some title or interest" (Gates, 225 NY at 156). The
Gates court permitted amendment where the true owner purchased
most of the property under the lien (id. at 155), and there was
"common consent" by the parties as to the construction work (id.
at 153). Although the true owner of the property in Gates had
changed its name from "Empire City Trotting Club" to "Empire City
Racing Association" before purchasing the property, and the lien
listed the previous corporate name, amendment was allowed because
the two corporations were the same entity (see id. at 155). The
Court recognized that the misnomer "would give to the public
substantially the same notice of the lien [on the property] as if
the exact name . . . had been used, or at least . . . would put a
person examining the lien docket upon inquiry as to the intent
and scope of the lien" (id.). The Court simultaneously denied
amendment to another lien where the listed owner was one of many
stockholders of the corporate owner (see id. at 156). Whereas
the first was a misdescription, the second was a
misidentification, which amounted to a jurisdictional defect
invalidating the lien.
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The First and Third Departments correctly allow
amendment where the listed owner is closely related to the true
owner, there was consent to the construction work, and a third
party would not be prejudiced. In PM Contr. Co. v 32 AA Assocs.,
the First Department permitted amendment where the listed owner
was named 32 AA, but the property had been transferred to 32
Sixth, an entity completely controlled by 32 AA, as its sole
board member (see 4 AD3d 198, 199 [1st Dept 2004]). The two
companies shared the same address and agent for service of
process and no consideration was paid to transfer the property
from 32AA to 32 Sixth (see id. at 199-200). Agreeing with
Supreme Court that the lien misdescribed the true owner, as
opposed to misidentifying it (such as when naming a party with no
relationship to the true owner and with no interest in the
property), the First Department also reasoned that the
"transaction was not one at arm's length," no innocent third-
party purchaser was prejudiced by the defect, and "deem[ed] 32 AA
and 32 Sixth to be one and the same entity for present purposes"
(id.).
The Third Department followed the liberal
interpretation required by Lien Law when it allowed amendment in
Matter of Carboline Co. v Gold, where the listed owner was a
corporation owned by three individuals who, together, owned the
property (see 94 AD2d 921 [3d Dept 1983]). The listed owner also
signed the contract for the construction materials, showing clear
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consent to the work (see id.). The court characterized this
"misdescription of the true owners" as "the kind of failure which
subdivision 7 of section 9 of the Lien Law is intended to
protect" by allowing amendment (id.).
In contrast, the present, stricter construction
contravenes the intent of the statute. Here, the true owner,
Rigano, and the listed owner, Fawn Builders, are closely related,
as the deed to the property made clear. Rigano and Fawn Builders
had the same interest and control over the property in question
-- Rigano owned 100% of Fawn Builders. Significantly, the
transfer of the property was not accomplished in an arm's length
transaction -- no transfer tax was paid and Rigano merely
conveyed the property to himself from his corporation. Further,
Rigano had notice of the lien because he shares an address with
Fawn Builders. Naming Fawn Builders gives, at the very least,
inquiry notice to the public that there is a lien on the
property, and a correct address to contact the true owner. And
Rigano, who appears to have consented to a substantial majority
of the work done on the property, signing as an individual and
for Fawn Builders as its one and only shareholder, understood
that a lien could be placed on the property upon a failure to pay
for the work. This notice of lien would not have caught Rigano
off guard. Finally, no third-party purchaser was or would be
prejudiced by this amendment.
Accordingly, the order of the Appellate Division should
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be reversed, with costs, and the matters remitted to the
Appellate Division for consideration of the other issues raised
but not determined on the appeal to that court.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, and matters remitted to the Appellate
Division, Second Department, for consideration of issues raised
but not determined on the appeal to that court. Opinion by Chief
Judge Lippman. Judges Read, Smith, Pigott, Rivera and Abdus-
Salaam concur.
Decided December 16, 2014
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