FERRARA, ANGELO A. v. PEACHES CAFE LLC

SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
190
CA 15-01346
PRESENT: LINDLEY, J.P., DEJOSEPH, NEMOYER, AND TROUTMAN, JJ.
ANGELO A. FERRARA, PLAINTIFF-APPELLANT,
V MEMORANDUM AND ORDER
PEACHES CAFÉ LLC, ET AL., DEFENDANTS,
AND COR RIDGE ROAD COMPANY, LLC, ALSO KNOWN
AS COR HOLT ROAD COMPANY, LLC,
DEFENDANT-RESPONDENT.
DAVIDSON FINK LLP, ROCHESTER (THOMAS A. FINK OF COUNSEL), FOR
PLAINTIFF-APPELLANT.
MANNION & COPANI, SYRACUSE (GABRIELLE MARDANY HOPE OF COUNSEL), FOR
DEFENDANT-RESPONDENT AND DEFENDANT NEW YORK LIFE INSURANCE COMPANY.
Appeal from an order of the Supreme Court, Monroe County (Matthew
A. Rosenbaum, J.), entered January 23, 2015. The order, insofar as
appealed from, denied plaintiff’s motion for partial summary judgment
on its first cause of action and granted that part of the motion of
defendant COR Ridge Road Company, LLC, also known as COR Holt Road
Company, LLC seeking summary judgment dismissing the first cause of
action against it.
It is hereby ORDERED that the order insofar as appealed from is
unanimously reversed on the law without costs, the motion of defendant
COR Ridge Road Company, LLC, also known as COR Holt Road Company, LLC,
is denied in part, the first cause of action is reinstated,
plaintiff’s motion is granted, and the matter is remitted to Supreme
Court, Monroe County, for further proceedings in accordance with the
following memorandum: Plaintiff appeals from an order insofar as it
denied its motion for partial summary judgment on its first cause of
action, for foreclosure on a mechanic’s lien under Lien Law § 3, and
granted that part of the motion of COR Ridge Road Company, LLC, also
known as COR Holt Road Company, LLC (defendant) for summary judgment
dismissing the first cause of action against it. According to
plaintiff, Supreme Court erred in determining that defendant did not
consent to the work its assignor performed on the subject property
within the meaning of Lien Law § 3. We agree.
The relevant facts are not in dispute. Defendant owns commercial
property in the Town of Webster that it leased to defendant Peaches
Café LLC (Peaches), which intended to operate a restaurant on the
premises. Pursuant to the written lease, Peaches was obligated to
supply “[a]ll electrical work other than items furnished by
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CA 15-01346
[defendant].” The lease further provided that Peaches could not
commence construction work on the property without defendant’s
consent, and that Peaches could use contractors approved only by
defendant. Finally, the lease stated that any alterations, additions,
or improvements to the premises “shall at once become a part of the
realty and belong to [defendant] and shall be surrendered with the
Premises.”
Peaches hired nonparty Quinlan Ferrara Electric, Inc. (Quinlan)
to perform the electrical work contemplated by the lease. Although
Quinlan performed the work in a satisfactory manner, Peaches was
unable to pay for it. Defendant eventually evicted Peaches for
nonpayment of rent, and Quinlan filed a mechanic’s lien against the
property pursuant to Lien Law § 3. Quinlan thereafter assigned the
lien to plaintiff, who commenced this action to foreclose on the lien.
Defendant subsequently moved for summary judgment dismissing,
inter alia, the first cause of action, which seeks to enforce the lien
under Lien Law § 3. According to defendant, because it did not have
any direct dealings with Quinlan and did not explicitly consent to the
specific electrical work performed by Quinlan, the lien cannot be
enforced against it. Plaintiff, on the other hand, moved for partial
summary judgment on the issue of liability on the first cause of
action. The court agreed with defendant and, insofar as relevant to
this appeal, dismissed the first cause of action.
Lien Law § 3 provides in relevant part that a “contractor . . .
who performs labor or furnishes materials for the improvement of real
property with the consent or at the request of the owner thereof . . .
shall have a lien . . . upon the real property improved.” For
purposes of this provision, a “requirement in a contract between . . .
landlord and tenant, that the . . . tenant shall make certain
improvements on the premises is a sufficient consent of the owner to
charge his property with claims which accrue in making those
improvements” (Jones v Menke, 168 NY 61, 64; see De Klyn v Gould, 165
NY 282, 287). The Court of Appeals subsequently reaffirmed Jones’s
broad interpretation of section 3 in McNulty Bros. v Offerman (221 NY
98), holding that, as long as “the liens have been confined to work
called for by the lease[,] . . . the landlords’ estate may be charged
to the same extent as if the owners of that estate had ordered the
work themselves. In substance, they have made the lessee their agent
for that purpose” (id. at 106). Jones and McNulty Bros. have not been
overturned or disavowed.
As plaintiff correctly notes, our decision in Boyle v Paolini
Cafeteria & Rest., Inc. (220 App Div 482) is consistent with the
precedents of the Court of Appeals and is virtually indistinguishable
from the case at hand. We enforced the lien in Boyle because, even
though “latitude was allowed to the tenant to determine the character
of the alterations and improvements to be made” (id. at 485), it was
undisputed that “[t]he lease itself authorized the tenant to make the
alterations which were made” (id. at 484). Consistent with Boyle, we
more recently observed that “consent [for purposes of Lien Law § 3]
may be inferred from the terms of the lease” (J.K. Tobin Constr. Co.,
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CA 15-01346
Inc. v David J. Hardy Constr. Co., Inc., 64 AD3d 1206, 1208 [internal
quotation marks omitted]).
We acknowledge that our sister Departments have all concluded, at
various times, that a lien under Lien Law § 3 is valid only when the
property owner directly authorizes the contractor to undertake the
relevant improvements (see Paul Mock, Inc. v 118 E. 25th St. Realty
Co., 87 AD2d 756, 756, citing Sager v Renwick Park & Traffic Assn.,
172 App Div 359, 367, 368; see also Matell Contr. Co., Inc. v
Fleetwood Park Dev., LLC, 111 AD3d 681, 683; Interior Bldg. Servs.,
Inc. v Broadway, 1384 LLC, 73 AD3d 529, 529; Drapaniotis v 36-08 33rd
St. Corp., 48 AD3d 736, 737; but see Gescheidt & Co., Inc. v Bowery
Sav. Bank, 251 App Div 266, 266-267, affd 278 NY 472; Osborne v
McGowan, 1 AD2d 924, 925). In our view, however, those cases cannot
be squared with McNulty Bros. and Jones, which, of course, we must
follow.
Here, it is undisputed that the lease between defendant and
Peaches obligated Peaches to install electrical upgrades on the
premises in order to effectuate the purpose of the lease, i.e., the
creation and operation of a restaurant. It is also undisputed that
Peaches hired Quinlan, plaintiff’s assignor, to perform the electrical
work contemplated by the lease. We therefore conclude that Lien Law
§ 3 obligates defendant, as the owner of the benefitted property, to
pay for the “reasonable value of [Quinlan’s] services” (Scrufari v
Cowdrick, 64 AD2d 1016, 1017; see McNulty Bros., 221 NY at 105-106;
Jones, 168 NY at 64-65; Boyle, 220 App Div at 484-485). In light of
our determination, plaintiff is entitled to an inquest on damages with
respect to the first cause of action (see Scrufari, 64 AD2d at 1017).
Finally, we reject defendant’s contention that its responsibility
under Lien Law § 3 is extinguished by a provision in the lease that
purports to disclaim its liability for any mechanic’s lien incurred as
a result of work by Peaches. That provision is merely an
indemnification clause, and it has no bearing on whether defendant
consented to the improvements for purposes of section 3. Indeed,
“ ‘once [the owner and tenant] have given their consent to an
improvement, they cannot by any arrangement among themselves cut off
the rights of lienors’ ” (Grassi & Bro. v Lovisa & Pistoresi, Inc.,
259 NY 417, 423, quoting McNulty Bros., 221 NY at 105).
We therefore reverse the order insofar as appealed from, deny
defendant’s motion for summary judgment insofar as it sought dismissal
of the first cause of action, reinstate that cause of action, and
grant plaintiff’s motion. We remit the matter to Supreme Court for an
inquest on damages with respect to the first cause of action.
Entered: April 29, 2016 Frances E. Cafarell
Clerk of the Court