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CHAPTER 33 LIEN LAW
ARTICLE 1 SHORT TITLE; DEFINITIONS
1 Short Title
2 Definitions
ARTICLE 2 MECHANICS’ LIENS
3 Mechanic’s Lien on Real Property
4 Extent of Lien
4-a Insurance Proceeds Liable for Demands; Owner, Contractor
or Subcontractor Diverting Proceeds, Guilty of Larceny.
5 Liens Under Contracts for Public Improvements
6 Liens for Labor on Railroads
7 Liability for Advance Payments, Collusive Mortgages and
Incumbrances
8 Terms of Contract May Be Demanded
9 Contents of Notice of Lien
10 Filing of Notice of Lien
11 Service of Copy of Notice of Lien
11-a Notice of Completion and Acceptance May Be Demanded
11-b Copy of Notice of Lien to a Contractor or Subcontractor
11-c Copy of Notice of Lien to a Contractor or Subcontractor
With Respect to Public Improvements Liens
12 Notice of Lien on Account of Public Improvements
12-a Amendment
13 Priority of Liens
14 Assignment of Lien
15 Assignments of Contracts and Orders to be Filed
16 Assignment of Contracts and Orders for Public Improvement
to be Filed
17 Duration of Lien
18 Duration of Lien Under Contract for a Public Improvement
19 Discharge of Lien for Private Improvement
20 Discharge of Lien After Notice of Lien Filed by Payment
of Money into Court
21 Discharge of Lien for Public Improvement
21-a Vacating Lien for a Public Improvement, By Order of Court
22 Building Loan Contract
23 Construction of Article
24 Enforcement of Mechanic’s Lien
25 Priority of Liens and Assignments Under Contracts for Public
Improvements; Parity of Liens of Same Class
26 Subordination of Liens After Agreement with Owner
28 Lien of Certain Judgments Postponed
29 Subordination of Liens to Subsequent Mortgage
30 Subordination of Notices of Lis Pendens
31 Discharge of Liens on Sale of Real Property
32 Certain Liens and Claims not to be Affected
33 Certain Sections not to Apply to Laborers’ Liens
34 Waiver of Lien
35 Waiver of Arbitration; Arbitrators’ Award Conclusive
37 Bond to Discharge All Liens
38 Itemized Statement May Be Required of Lienor
39 Lien Willfully Exaggerated is Void
39-a Liability of Lienor Where Lien Has Been Declared Void
on Account of Willful Exaggeration
39-c Repossession of Materials Not Used
ARTICLE
3 ENFORCEMENT OF LIENS ON REAL PROPERTY
40 Construction of Article
41 Enforcement of Mechanic’s Lien on Real Property
42 Enforcement of a Lien Under Contract for a Public Improvement
43 Action in a Court of Record; Consolidation of Actions
44 Parties to an Action in a Court of Record
44-a Foreclosure of Mortgage; Lienors Defendants
45 Equities of Lienors to be Determined
46 Action in a Court not of Record
47 How summons Served, When Personal Service Cannot Be Made
48 Proceedings on Return of Summons; Answer; Judgment by Default
49 Issue, How Tried; Judgment
50 Execution
51 Appeals from Judgments in Courts not of Record
52 Transcripts of Judgments in Courts not of Record
53 Costs and Disbursements
54 Judgment in Case of Failure to Establish Lien
55 Offer to Pay Money into Court, or to Deposit Securities,
in Discharge of the Lien
56 Preference Over Contractors
57 Judgment May Direct Delivery of Property in Lieu of Money
58 Judgment for Deficiency
59 Vacating of a Mechanic’s Lien; Cancellation of Bond;
Return of Deposit, by Order of Court
60 Judgment in Action to Foreclose Lien on Account of Public
Improvement
61 Judgment in Action to Foreclose a Mechanic’s Lien
on Property of a Railroad Corporation
62 Bringing in New Parties
63 Service of Answer on State or Public Corporation
64 Award of Personal Judgment by Court or Referee
ARTICLE 3-A DEFINITION AND ENFORCEMENT OF TRUSTS
70 Definition of Trusts
71 Purpose of the Trust; “Trust Claims”; “Beneficiaries”
71-a Further Trust of Funds Received or Receivable by Owner
Under Executory Contract for the Sale and Improvement of Real
Property
72 Diversion of Trust Funds
73 Affirmative Defense in Action Against Transferee of Trust
Assets or to Charge Trustee in Certain Cases; “Notice
of Lending”
74 Authority of Trustee in Administering Trust Funds
75 Deposit of Funds of Trust; Books or Records to be Kept
76 Right of Beneficiaries to Examine Books or Records and
Make Copies, or to Receive Statement
77 Action to Enforce Trust
78 Relief After Judgment on Obligation Constituting Trust
Claim
79 Liens not Affected
79-a Misappropriation of Funds of Trust
NEW YORK STATE CONSOLIDATED LAWS 1996
CHAPTER
33 LIEN LAW
ARTICLE 1 SHORT TITLE; DEFINITIONS
Sec. 1 Short Title
This chapter shall be known as the “lien law.”
Sec. 2 Definitions
1. Lienor. The term “lienor,” when used in this
chapter, means any person having a lien upon property by virtue
of its provisions, and includes his successor in interest.
2. Real property. The term “real property,” when
used in this chapter, includes real estate, lands, tenements
and hereditaments, corporeal and incorporeal, fixtures, and
all bridges and trestle work, and structures connected therewith,
erected for the use of railroads, and all oil or gas wells
and structures and fixtures connected therewith, and any lease
of oil lands or other right to operate for the production
of oil or gas upon such lands, and the right of franchise
granted by a public corporation for the use of the streets
or public places thereof, and all structures placed thereon
for the use of such right or franchise.
3. Owner. The term “owner,” when used in this
chapter, includes the owner in fee of real property, or of
a less estate therein, a lessee for a term of years, a vendee
in possession under a contract for the purchase of such real
property, and all persons having any right, title or interest
in such real property, which may be sold under an execution
in pursuance of the provisions of statutes relating to the
enforcement of liens of judgment, and all persons having any
right or franchise granted by a public corporation to use
the streets and public places thereof, and any right, title
or interest in and to such franchise. The purchaser of real
property at a statutory or judicial sale shall be deemed the
owner thereof from the time of such sale. If the purchaser
at such sale fails to complete the purchase, pursuant to the
terms of the sale, all liens created by his consent after
such sale shall be a lien on any deposit made by him and not
on the real property sold.
4. Improvement. The term “improvement,” when used
in this chapter, includes the demolition, erection, alteration
or repair of any structure upon, connected with, or beneath
the surface of, any real property and any work done upon such
property or materials furnished for its permanent improvement,
and shall also include any work done or materials furnished
in equipping any such structure with any chandeliers, brackets
or other fixtures or apparatus for supplying gas or electric
light and shall also include the drawing by any architect
or engineer or surveyor, of any plans or specifications or
survey, which are prepared for or used in connection with
such improvement and shall also include the value of materials
actually manufactured for but not delivered to the real property,
and shall also include the reasonable rental value for the
period of actual use of machinery, tools and equipment and
the value of compressed gases furnished for welding or cutting
in connection with the demolition, erection, alteration or
repair of any real property, and the value of fuel and lubricants
consumed by machinery operating on the improvement, or by
motor vehicles owned, operated or controlled by the owner,
or a contractor or subcontractor while engaged exclusively
in the transportation of materials to or from the improvement
for the purposes thereof and shall also include the performance
of real estate brokerage services in obtaining a lessee for
a term of more than three years of all or any part of real
property to be used for other than residential purposes pursuant
to a written contract of brokerage employment or compensation.
5. Cost of improvement. The term “cost of improvement,”
when used in this chapter, means expenditures incurred by
the owner in paying the claims of a contractor, an architect,
engineer or surveyor, a subcontractor, laborer and materialman,
arising out of the improvement, and in paying the amount of
taxes based on payrolls including such persons and withheld
or required to be withheld and taxes based on the purchase
price or value of materials or equipment required to be installed
or furnished in connection with the performance of the improvement,
payment of taxes and unemployment insurance and other contributions
due by reason of the employment out of which any such claim
arose, and payment of any benefits or wage supplements or
the amounts necessary to provide such benefits or furnish
such supplements, to the extent that the owner, as employer,
is obligated to pay or provide such benefits or furnish such
supplements by any agreement to which he is a party, and shall
also include fair and reasonable sums paid for obtaining building
loan and subsequent financing, premiums on bond or bonds filed
pursuant to section thirty-seven of this chapter or required
by any such building loan contract or by any lease to be mortgaged
pursuant thereto, or required by any mortgage to be subordinated
to the building loan mortgage, premiums on bond or bonds filed
to discharge liens, sums paid to take by assignment prior
existing mortgages, which are consolidated with building loan
mortgages and also the interest charges on such mortgages,
sums paid to discharge or reduce the indebtedness under mortgages
and accrued interest thereon and other encumbrances upon real
estate existing prior to the time when the lien provided for
in this chapter may attach, sums paid to discharge building
loan mortgages whenever recorded, taxes, assessments and water
rents existing prior to the commencement of the improvement,
and also those accruing during the making of the improvement,
and interest on building loan mortgages, ground rent and premiums
on insurance likewise accruing during the making of the improvement.
The application of the proceeds of any building loan mortgage
or other mortgage to reimburse the owner for any payments
made for any of the above mentioned items for said improvement
prior to the date of the initial advance received under the
building loan mortgage or other mortgage shall be deemed to
be an expenditure within the “cost of improvement”
as above defined; provided, however, such payments are itemized
in the building loan contract and/or other mortgage other
than a building loan mortgage, and provided further, that
the payments have been made subsequent to the commencement
of the improvement.
5-a. Benefits and wage supplements. The term “benefits
and wage supplements” as used in this chapter means
all remuneration for employment paid in any medium other than
cash, or reimbursement for expenses, or any payments which
are not “wages” within the meaning of the law,
including, but not limited to, health, welfare, non-occupational
disability, retirement, vacation benefits, holiday pay and
life insurance.
6. Public corporation. The term “public corporation,”
when used in this chapter, means a municipal corporation or
a district corporation or a public benefit corporation as
such corporations are defined in section three of the general
corporation law.
7. Public improvement. The term “public improvement,”
when used in this chapter, means an improvement of any real
property belonging to the state or a public corporation; however,
if the beneficial interest of an improvement is in an entity
other than the state or a public corporation notwithstanding
legal title being vested in an industrial development agency
created under article eighteen-A of the general municipal
law, then such improvement shall be considered an improvement
of real property subject to mechanics’ liens on real
property as provided in section three of this chapter. Nothing
contained in this section shall create or be deemed to create
any liability upon any industrial development agency for the
payment of the cost of any improvement, or otherwise. For
the purposes of this subdivision the term “beneficial
interest” shall mean the beneficial incidents of ownership
of the improvement to include, but not be limited to, the
right to possession, the right to claim tax benefits, if any,
and the right to purchase or secure title to the improvement
pursuant to an executory contract of sale, option agreement
or lease.
8. Improvement of real property. The term “improvement
of real property,” when used in this chapter, means
any improvement of real property not belonging to the state
or a public corporation.
9. Contractor. The term “contractor,” when used
in this chapter, means a person who enters into a contract
with the owner of real property for the improvement thereof,
or with the state or a public corporation for a public improvement.
10. Subcontractor. The term “subcontractor” when
used in this chapter, means a person who enters into a contract
with a contractor and/or with a subcontractor for the improvement
of such real property or such public improvement or with a
person who has contracted with or through such contractor
for the performance of his contract or any part thereof.
11. Laborer. The term “laborer,” when used in
this chapter, means any person who performs labor or services
upon such improvement.
12. Materialman. The term “materialman” when used
in this chapter, means any person who furnishes material or
the use of machinery, tools, or equipment, or compressed gases
for welding or cutting, or fuel or lubricants for the operation
of machinery or motor vehicles, either to an owner, contractor
or subcontractor, for, or in the prosecution of such improvement.
The expression “furnishes material” or other similar
expression wherever used in this chapter, shall be deemed
to mean and include the reasonable rental value for the period
of actual use of machinery, tools or equipment, and the value
of compressed gases furnished for welding or cutting, and
the value of fuel and lubricants consumed by machinery operating
on, or by motor vehicles owned, operated or controlled by
the owner, or a contractor or subcontractor while engaged
exclusively in the transportation of materials to or from
the improvement for the purposes thereof.
13. Building loan contract. The term “building loan
contract,” when used in this chapter, means a contract
whereby a party thereto, in this chapter termed “lender,”
in consideration of the express promise of an owner to make
an improvement upon real property, agrees to make advances
to or for the account of such owner to be secured by a mortgage
on such real property, whether such advances represent moneys
to be loaned or represent moneys to be paid in purchasing
from or in selling for such owner bonds or certificates secured
by such mortgage upon such real property, providing, however,
nothing herein contained shall be deemed to construe as a
building loan contract a preliminary application for a building
loan made by such owner and accepted by such lender if, pursuant
to such application and acceptance, a building loan contract
is thereafter entered into between the owner and the lender
and filed as provided in section twenty-two of this chapter.
14. Building loan mortgage. The term “building loan
mortgage,” when used in this chapter, means a mortgage
made pursuant to a building loan contract and includes an
agreement wherein and whereby a building loan mortgage is
consolidated with existing mortgages so as to constitute one
lien upon the mortgaged property.
15. Subsequent financing. By the term “subsequent financing”
is meant moneys borrowed upon the security of the improvement
after the recording of a building loan contract and/or mortgage
other than a building loan mortgage upon the premises to be
improved and within four months after the completion thereof.
16. Prior mortgage. By the term “prior mortgage”
is meant a mortgage on real property and/or leasehold recorded
prior to the commencement of an improvement thereon.
17. Consideration. The term “consideration” when
used in this chapter, includes real property as defined in
section two hereof, and personal property as defined in section
thirty-nine of the general construction law.
18. Advances. The term “advances” when used in
this chapter, includes money, real property as defined in
section two hereof and/or personal property as defined in
section thirty-nine of the general construction law.
19. Funds. The term “funds” when used in this
chapter, includes money, real property as defined in section
two hereof and/or personal property as defined in section
thirty-nine of the general construction law.
20. Persons. The term “persons” when used in this
chapter, includes an individual, partnership, association,
trust or corporation.
ARTICLE 2 MECHANICS’ LIENS
Sec. 3 Mechanic’s Lien on Real Property
A contractor, subcontractor, laborer, materialman, landscape
gardener, nurseryman or person or corporation selling fruit
or ornamental trees, roses, shrubbery, vines and small fruits,
who performs labor or furnishes materials for the improvement
of real property with the consent or at the request of the
owner thereof, or of his agent, contractor or subcontractor,
and any trust fund to which benefits and wage supplements
are due or payable for the benefit of such laborers, shall
have a lien for the principal and interest, of the value,
or the agreed price, of such labor, including benefits and
wage supplements due or payable for the benefit of any laborer,
or materials upon the real property improved or to be improved
and upon such improvement, from the time of filing a notice
of such lien as prescribed in this chapter. Where the contract
for an improvement is made with a husband or wife and the
property belongs to the other or both, the husband or wife
contracting shall also be presumed to be the agent of the
other, unless such other having knowledge of the improvement
shall, within ten days after learning of the contract give
the contractor written notice of his or her refusal to consent
to the improvement. Within the meaning of the provisions of
this chapter, materials actually manufactured for but not
delivered to the real property, shall also be deemed to be
materials furnished.
Sec. 4 Extent of Lien
(1) Such lien shall extend to the owner’s right, title
or interest in the real property and improvements, existing
at the time of filing the notice of lien, or thereafter acquired,
except as hereinafter in this article provided. If an owner
assigns his interest in such real property by a general assignment
for the benefit of creditors, within thirty days prior to
such filing, the lien shall extend to the interest thus assigned.
If any part of the real property subjected to such lien be
removed by the owner or by any other person, at any time before
the discharge thereof, such removal shall not affect the rights
of the lienor, either in respect to the remaining real property,
or the part so removed. If labor is performed for, or materials
furnished to, a contractor or subcontractor for an improvement,
the lien shall not be for a sum greater than the sum earned
and unpaid on the contract at the time of filing the notice
of lien, and any sum subsequently earned thereon. In no case
shall the owner be liable to pay by reason of all liens created
pursuant to this article a sum greater than the value or agreed
price of the labor and materials remaining unpaid, at the
time of filing notices of such liens, except as hereinafter
provided.
(2) Such lien shall not extend to the owner’s right,
title or interest in real property and improvements, existing
at the time of filing the notice of lien if such lien arises
from the failure of a lessee of the right to explore, develop
or produce natural gas or oil, to pay for, compensate or render
value for improvements made with the consent or at the request
of such lessee by a contractor, subcontractor, materialman,
equipment operator or owner, landscaper, nurseryman, or person
or corporation who performs labor or furnishes materials for
the exploration, development, or production of oil or natural
gas or otherwise improves such leased property. Such lien
shall extend to the improvements made for the exploration,
development and production of oil and natural gas, and the
working interest held by a lessee of the right to explore,
develop or produce oil and natural gas.
(3) Notwithstanding subdivision two if a property owner is
also a developer of oil and gas resources and is a party to
an agreement with a person or firm authorized to perfect a
lien arising out of the failure of such developer to compensate
or render value for improvements to the property upon which
an oil or gas well is drilled or established, the lien shall
extend to the owners’ right or interest in such real
property.
Sec.
4-a Insurance Proceeds Liable for Demands
Owner, contractor or subcontractor diverting proceeds, guilty
of larceny. The proceeds of any insurance which by the terms
of the policy are payable to the owner of real property improved,
and actually received or to be received by him because of
the destruction or removal by fire or other casualty of an
improvement on which lienors have performed labor or services
or for which they have furnished materials, shall after the
owner has been reimbursed therefrom for premiums paid by him,
if any, for such insurance, be subject to liens provided by
this act to the same extent and in the same order of priority
as the real property would have been had such improvement
not been so destroyed or removed. The proceeds of any insurance
which by the terms of the policy are payable to a contractor
or subcontractor, and actually received or to be received
by him because of the destruction or removal by fire or other
casualty of an improvement on which he has performed labor
or services or for which he has furnished materials, shall,
after such contractor or subcontractor has been reimbursed
therefrom for premiums paid by him, if any, for such insurance,
be liable for the payment of demands for labor or services
performed or materials furnished by his order and for which
he is liable, in the same manner and under the same conditions
as payments to him under his contract would have been had
such improvement not been so destroyed or removed.
Sec.
5 Liens Under Contracts for Public Improvements
A person performing labor for or furnishing materials to a
contractor, his subcontractor or legal representative, for
the construction or demolition of a public improvement pursuant
to a contract by such contractor with the state or a public
corporation, and any trust fund to which benefits and wage
supplements are due or payable for the benefit of such person
performing labor, shall have a lien for the principal and
interest of the value or agreed price of such labor, including
benefits and wage supplements due or payable for the benefit
of any person performing labor, or materials upon the moneys
of the state or of such corporation applicable to the construction
or demolition of such improvement, to the extent of the amount
due or to become due on such contract, and under a judgment
of the court of claims awarded to the contractor for damages
arising from the breach of such contract by the state, or
awarded for furnishing labor or materials not contemplated
by the provisions of said contract, upon filing a notice of
lien as prescribed in this article, except as hereinafter
in this article provided.
Sec.
6 Liens for Labor on Railroads
Any person who shall hereafter perform any labor for a railroad
corporation shall have a lien for the value of such labor
upon the railroad track, rolling-stock and appurtenances of
such railroad corporation and upon the land upon which such
railroad track and appurtenances are situated, by filing a
notice of such lien in the office of the clerk of any county
wherein any part of such railroad is situated, to the extent
of the right, title and interest of such corporation in such
property, existing at the time of such filing. The provisions
of this article relating to the contents, filing and entry
of a notice of a mechanic’s lien, and the priority and
duration thereof, shall apply to such liens. A copy of the
notice of such lien shall be personally served upon such corporation
within ten days after the filing thereof in the manner prescribed
by the justice court act for the service of summons in actions
in justices’ courts against domestic railroad corporations.
Sec. 7 Liability for Advance Payments, Collusive
Mortgages and Incumbrances
Any payment by the owner, contractor or subcontractor upon
a contract for the improvement of real property, made prior
to the time when, by the terms of the contract, such payment
becomes due, for the purpose of avoiding the provisions of
this article, shall be of no effect as against the lien of
a subcontractor, laborer, or materialman under such contract,
created before such payment actually becomes due. A conveyance,
mortgage, lien or incumbrance made by an owner of real property,
for the purpose of avoiding the provisions of this article,
with the knowledge or privity of the person to whom the conveyance
is made or in whose favor the mortgage, lien or incumbrance
is created, shall be void and of no effect as against a claim
on account of the improvement of such real property, existing
at the time of the making of the conveyance or the creation
of such mortgage, lien or incumbrance. Nothing in this chapter
shall subject the title of a purchaser of real property for
value whose conveyance is recorded prior to the filing of
a lien pursuant to this chapter to any such lien, provided
the instrument of conveyance contains the provisions mentioned
in subdivision five of section thirteen.
Sec. 8 Terms of Contract May Be Demanded
A statement of the terms of a contract made between an owner
and a contractor, pursuant to which an improvement of real
property is being made, and, of the amount due or to become
due thereon shall be furnished upon demand in writing by the
owner, or his duly authorized agent, to a subcontractor, laborer
or material man performing labor for or furnishing materials
to a contractor, or subcontractor, under such contract. If,
within thirty days of such demand the owner refuses or neglects
to furnish such statement or falsely states the terms of such
contract or the amount due or to become due thereon, and a
subcontractor, laborer or material man has not been paid the
amount of his claim against a contractor or subcontractor,
under such contract, and a judgment has been obtained and
execution issued against such contractor or subcontractor
and returned wholly or partly unsatisfied, the owner shall
be liable for the loss sustained by reason of such refusal,
neglect or false statement, and the lien of such subcontractor,
laborer or material man, filed as prescribed in this article,
against the real property improved for the labor performed
or materials furnished after such demand, shall exist to the
same extent and be enforced in the same manner as if such
labor and materials had been directly performed for and furnished
to such owner.
Sec. 9 Contents of Notice of Lien
The notice of lien shall state:
1. The name and residence of the lienor; and if the lienor
is a partnership or a corporation, the business address of
such firm, or corporation, the names of partners and principal
place of business, and if a foreign corporation, its principal
place of business within the state.
1-a. The name and address of the lienor’s attorney,
if any.
2. The name of the owner of the real property against whose
interest therein a lien is claimed, and the interest of the
owner as far as known to the lienor.
3. The name of the person by whom the lienor was employed,
or to whom he furnished or is to furnish materials; or, if
the lienor is a contractor or subcontractor, the person with
whom the contract was made.
4. The labor performed or materials furnished and the agreed
price or value thereof, or materials actually manufactured
for but not delivered to the real property and the agreed
price or value thereof.
5. The amount unpaid to the lienor for such labor or materials.
6. The time when the first and last items of work were performed
and materials were furnished.
7. The property subject to the lien, with a description thereof
sufficient for identification; and if in a city or village,
its location by street and number, if known. A failure to
state the name of the true owner or contractor, or a misdescription
of the true owner, shall not affect the validity of the lien.
The notice must be verified by the lienor or his agent, to
the effect that the statements therein contained are true
to his knowledge except as to the matters therein stated to
be alleged on information and belief, and that as to those
matters he believes it to be true.
Sec. 10 Filing of Notice of Lien
1. Notice of lien may be filed at any time during the progress
of the work and the furnishing of the materials, or, within
eight months after the completion of the contract, or the
final performance of the work, or the final furnishing of
the materials, dating from the last item of work performed
or materials furnished; provided, however, that where the
improvement is related to real property improved or to be
improved with a single family dwelling, the notice of lien
may be filed at any time during the progress of the work and
the furnishing of the materials, or, within four months after
the completion of the contract, or the final performance of
the work, or the final furnishing of the materials, dating
from the last item of work performed or materials furnished
except that in the case of a lien by a real estate broker,
the notice of lien may be filed only after the performance
of the brokerage services and execution of lease by both lessor
and lessee and only if a copy of the alleged written agreement
of employment or compensation is annexed to the notice of
lien, provided that where the payment pursuant to the written
agreement of employment or compensation is to be made in installments,
then a notice of lien may be filed within eight months after
the final payment is due, but in no event later than a date
five years after the first payment was made. For purposes
of this section, the term “single family dwelling”
shall not include a dwelling unit which is a part of a realty
subdivision as defined in section eleven hundred fifteen of
the public health law when at the time the lien is filed,
the dwelling unit is owned by the developer for purposes other
than his personal residence. For purposes of this section,
“developer” shall mean and include any private
individual, partnership, trust or corporation which improves
five or more parcels of real property with single family dwellings
pursuant to a common scheme or plan. The notice of lien must
be filed in the clerk’s office of the county where the
property is situated. If such property is situated in two
or more counties, the notice of lien shall be filed in the
office of the clerk of each of such counties. The county clerk
of each county shall provide and keep a book to be called
the “lien docket,” which shall be suitably ruled
in columns headed “owners,” “lienors,”
“lienor’s attorney,” “property,”
“amount,” “time of filing,” “proceedings
had,” in each of which he shall enter the particulars
of the notice, properly belonging therein. The date, hour
and minute of the filing of each notice of lien shall be entered
in the proper column. Except where the county clerk maintains
a block index, the names of the owners shall be arranged in
such book in alphabetical order. The validity of the lien
and the right to file a notice thereof shall not be affected
by the death of the owner before notice of the lien is filed.
2. Where the county clerk indexes liens in a block index,
every notice of lien presented to the clerk of a county of
filing, in order to entitle the same to be filed, shall contain
in the body thereof, or shall have endorsed thereon, a designation
of the number of every block, on the land map of the county,
which is affected by the notice of lien. The county clerk
shall cause such notice of lien to be entered in the block
index suitably ruled to contain the columns listed in the
preceding paragraph, under the block number of every block
so designated. In cases where a notice of lien shall have
been filed without such designation or with an erroneous designation,
the county clerk, on presentation of proper proof thereof,
shall enter such instrument in the proper index, under the
proper block number of every block in which the land affected
is situated, and shall, at the same time, make a note of such
entry and of the date thereof in every place in which such
instrument may have been erroneously indexed, opposite the
entry thereof, and also upon the instrument itself, if the
same be in his possession or produced to him for the purpose,
and the filing of such instrument shall be constructive notice
as to property in the block not duly designated at the time
of such filing only from the time when the same shall be properly
indexed. A county clerk may adopt a new indexing system utilizing
electro-mechanical, electronic or any other method he deems
suitable for maintaining the indexes.
Sec. 11 Service of Copy of Notice of Lien
Within five days before or thirty days after filing the notice
of lien, the lienor shall serve a copy of such notice upon
the owner, if a natural person, (a) by delivering the same
to him personally, or if the owner cannot be found, to his
agent or attorney, or (b) by leaving it at his last known
place of residence in the city or town in which the real property
or some part thereof is situated, with a person of suitable
age and discretion, or (c) by registered or certified mail
addressed to his last known place of residence, or (d) if
such owner has no such residence in such city or town, or
cannot be found, and he has no agent or attorney, by affixing
a copy thereof conspicuously on such property, between the
hours of nine o’clock in the forenoon and four o’clock
in the afternoon; if the owner be a corporation, said service
shall be made (i) by delivering such copy to and leaving the
same with the president, vice-president, secretary or clerk
to the corporation, the cashier, treasurer or a director or
managing agent thereof, personally, within the state, or (ii)
if such officer cannot be found within the state by affixing
a copy thereof conspicuously on such property between the
hours of nine o’clock in the forenoon and four o’clock
in the afternoon, or (iii) by registered or certified mail
addressed to its last known place of business. Failure to
file proof of such a service with the county clerk within
thirty-five days after the notice of lien is filed shall terminate
the notice as a lien. Until service of the notice has been
made, as above provided, an owner, without knowledge of the
lien, shall be protected in any payment made in good faith
to any contractor or other person claiming a lien.
Sec. 11-a Notice of Completion and Acceptance
May Be Demanded
1. At any time before the construction or demolition of a
public improvement is completed and accepted by the state
or any political subdivision thereof, or by a public corporation
or within thirty days thereof a person performing work for
or furnishing materials to a contractor, his subcontractor,
assignee or legal representative may file a written demand
requiring notice of completion and acceptance be given to
him upon the happening of such event.
2. Such demand shall be filed with the head of the department
or bureau having charge of the construction or demolition.
It shall state the name and address of the one making the
demand; the name of the contractor or subcontractor for whom
the labor was performed or materials furnished; the estimated
amount of the entire value thereof; and a description of the
public improvement upon which the labor was performed or the
materials furnished.
3. Within five days of any completion and acceptance in respect
to which a demand for notice has been filed pursuant to the
provisions of this section the head of the department or bureau
issuing the same shall cause written notice thereof to be
mailed to the name and address of the one making the demand
as recited therein.
4. The failure by the state, public corporation or any officer
or employee thereof to give the notice required by this section
shall not give rise to any cause of action; extend any period
of time within which an act must be performed; or otherwise
alter, affect or impair any other right or duty.
Sec. 11-b Copy of Notice of Lien to a Contractor
or Subcontractor
Within five days before or within thirty days after filing
a notice of lien in accordance with section ten of this chapter
or the filing of an amendment of notice of lien in accordance
with section twelve-a of this chapter the lienor shall serve
a copy of such notice or amendment by certified mail on the
contractor, subcontractor, assignee or legal representative
for whom he was employed or to whom he furnished materials
or if the lienor is a contractor or subcontractor to the person,
firm or corporation with whom the contract was made. A lienor
having a direct contractual relationship with a subcontractor
or a sub-subcontractor but not with a contractor shall also
serve a copy of such notice or amendment by certified mail
to the contractor. Failure to file proof of such a service
with the county clerk within thirty-five days after the notice
of lien is filed shall terminate the notice as a lien. Any
lienor, or a person acting on behalf of a lienor, who fails
to serve a copy of the notice of lien as required by this
section shall be liable for reasonable attorney’s fees,
costs and expenses, as determined by the court, incurred in
obtaining such copy.
Sec.
11-c Copy of Notice of Lien to a Contractor or Subcontractor
With Respect to Public Improvements Liens
Within five days before or simultaneously with filing a notice
of lien in accordance with section twelve of this chapter
or the filing of an amendment of a notice of lien in accordance
with section twelve-a of this chapter with respect to a public
improvement lien, the lienor shall serve a copy of such notice
or amendment by certified mail on the contractor, subcontractor,
assignee or legal representative for whom he was employed
or to whom he furnished materials or if the lienor is a contractor
or subcontractor to the person, firm or corporation with whom
the contract was made. A lienor having a direct contractual
relationship with a subcontractor or a sub-subcontractor but
not with a contractor shall also serve a copy of such notice
or amendment by certified mail to the contractor. The notice
of lien so filed shall contain thereon or there shall be filed
therewith proof of service of a copy of said lien upon the
parties required to be served pursuant to this section, and
failure to file proof of such service shall render the notice
of lien a nullity. Any lienor, or a person acting on behalf
of a lienor, who fails to serve a copy of the notice of lien
as required by this section shall be liable for reasonable
attorney’s fees, costs and expenses, as determined by
the court, incurred in obtaining such copy.
Sec. 12 Notice of Lien on Account of Public
Improvements
At any time before the construction or demolition of a public
improvement is completed and accepted by the state or by the
public corporation, and within thirty days after such completion
and acceptance, a person performing work for or furnishing
materials to a contractor, his subcontractor, assignee or
legal representative, may file a notice of lien with the head
of the department or bureau having charge of such construction
or demolition and with the comptroller of the state or with
the financial officer of the public corporation, or other
officer or person charged with the custody and disbursements
of the state or corporate funds applicable to the contract
under which the claim is made. The notice shall state the
name and residence of the lienor, the name of the contractor
or subcontractor for whom the labor was performed or materials
furnished, the amount claimed to be due or to become due,
the date when due, a description of the public improvement
upon which the labor was performed and materials expended,
the kind of labor performed and materials furnished, and materials
actually manufactured for but not delivered to such public
improvement, and give a general description of the contract
pursuant to which such public improvement was constructed
or demolished. If the lienor is a partnership or a corporation,
the notice shall state the business address of such partnership
or corporation, the names of the partners, and if a foreign
corporation, its principal place of business within the state. If the name of the contractor or subcontractor is not known
to the lienor, it may be so stated in the notice, and a failure
to state correctly the name of the contractor or subcontractor
shall not affect the validity of the lien. The notice must
be verified by the lienor or his agent, to the effect that
the statements therein contained are true to his own knowledge,
except as to the matters therein stated to be alleged on information
and belief, and that as to those matters he believes it to
be true. The comptroller of the state or the financial officer
of the public corporation or other officer or person charged
with the custody and disbursements of the state or corporate
funds applicable to the contract under which the claim is
made shall enter the same in a book provided for that purpose,
to be called the “lien book”. Such entry shall
include the name and residence of the lienor, the name of
the contractor or subcontractor, the amount of the lien and
date of filing, and a brief designation of the contract under
which the lien arose.
Sec. 12-a Amendment
1. Within sixty days after the original filing, a lienor may
amend his lien upon twenty days notice to existing lienors,
mortgagees and the owner, provided that no action or proceeding
to enforce or cancel the mechanics’ lien has been brought
in the interim, where the purpose of the amendment is to reduce
the amount of the lien, except the question of willful exaggeration
shall survive such amendment.
2. In a proper case, the court may, upon five days’
notice to existing lienors, mortgagees and owner, make an
order amending a notice of lien upon a public or private improvement,
nunc pro tunc. However, no amendment shall be granted to the
prejudice of an existing lienor, mortgagee or purchaser in
good faith, as the case may be.
Sec. 13 Priority of Liens
(1) A lien for materials furnished or labor performed in the
improvement of real property shall have priority over a conveyance,
mortgage, judgment or other claim against such property not
recorded, docketed or filed at the time of the filing of the
notice of such lien, except as hereinafter in this chapter
provided; over advances made upon any mortgage or other encumbrance
thereon after such filing, except as hereinafter in this article
provided; and over the claim of a creditor who has not furnished
materials or performed labor upon such property, if such property
has been assigned by the owner by a general assignment for
the benefit of creditors, within thirty days before the filing
of either of such notices; and also over an attachment hereafter
issued or a money judgment hereafter recovered upon a claim,
which, in whole or in part, was not for materials furnished,
labor performed or moneys advanced for the improvement of
such real property; and over any claim or lien acquired in
any proceedings upon such judgment. Such liens shall also
have priority over advances made upon a contract by an owner
for an improvement of real property which contains an option
to the contractor, his successor or assigns to purchase the
property, if such advances were made after the time when the
labor began or the first item of material was furnished, as
stated in the notice of lien. If several buildings are demolished,
erected, altered or repaired, or several pieces or parcels
of real property are improved, under one contract, and there
are conflicting liens thereon, each lienor shall have priority
upon the particular part of the real property or upon the
particular building or premises where his labor is performed
or his materials are used. Persons shall have no priority
on account of the time of filing their respective notices
of liens, but all liens shall be on a parity except as hereinafter
in section fifty-six of this chapter provided; and except
that in all cases laborers for daily or weekly wages shall
have preference over all other claimants under this article.
(1-a) Parties having assignments of moneys due or to become
due under a contract for the improvement of real property,
unless such assignments be set aside as diversions of trust
assets as provided in article three-a of this chapter, shall
have priority as follows:
An assignee of moneys or any part thereof, due or to become
due under a contract for the improvement of real property,
whose assignment is duly filed prior to the filing of a notice
of lien or assignment of every other party to the action,
shall have priority over those parties to the extent of moneys
advanced upon such assignment before the filing of the notice
of lien or assignment next subsequent to his assignment, but
as to moneys advanced subsequent to a notice of lien or assignment
filed and unsatisfied or not discharged such assignee for
the purpose of determining his proportionate share of moneys
available for distribution as provided in subdivision one
of this section shall be treated as a lienor having a lien
to the extent of moneys so advanced. An assignee of moneys
or any part thereof, due or to become due under a contract
for an improvement of real property whose assignment is duly
filed subsequent to the filing of the notice of lien or assignment
of any other party shall for the purpose of determining his
proportionate share of moneys available for distribution,
as provided in subdivision one of this section be treated
as a lienor having a lien to the extent of moneys actually
advanced upon such assignment prior to the filing thereof.
(2) When a building loan mortgage is delivered and recorded
a lien shall have priority over advances made on the building
loan mortgage after the filing of the notice of lien; but
such building loan mortgage, whenever recorded, to the extent
of advances made before the filing of such notice of lien,
shall have priority over the lien, provided it or the building
loan contract contains the covenant required by subdivision
three hereof, and provided the building loan contract is filed
as required by section twenty-two of this chapter. Every mortgage
recorded subsequent to the commencement of the improvement
and before the expiration of the period specified in section
ten of this chapter for filing of notice of lien after the
completion of the improvement shall, to the extent of advances
made before the filing of a notice of lien, have priority
over liens thereafter filed if it contains the covenant required
by subdivision three hereof. The lien of a vendee under an
executory contract for the sale of land and the improvement
thereof by the construction of a building thereon shall, to
the extent of amounts paid thereunder to the vendor before
the filing of a notice of lien, have priority over liens filed
after the contract or memorandum thereof is recorded as provided
in section two hundred ninety-four of the real property law
if the recorded contract or memorandum specifies the total
amount of payments made by the vendee or required by the contract
to be made by the vendee before conveyance of title.
(3) Every such building loan mortgage and every mortgage recorded
subsequent to the commencement of the improvement and before
the expiration of the period specified in section ten of this
chapter for filing of notice of lien after the completion
of the improvement shall contain a covenant by the mortgagor
that he will receive the advances secured thereby and will
hold the right to receive such advances as a trust fund to
be applied first for the purpose of paying the cost of improvement,
and that he will apply the same first to the payment of the
cost of improvement before using any part of the total of
the same for any other purpose, provided, however, that if
the party executing the building loan contract is not the
owner of the fee but is the party to whom such advances are
to be made, a building loan contract executed and filed pursuant
to section twenty-two of this chapter shall contain the said
covenant by such party executing such building loan contract,
in place of the covenant by the mortgagor in the building
loan mortgage as hereinbefore provided. Nothing in this subdivision
shall be considered as imposing upon the lender any obligation
to see to the proper application of such advances by the owner;
and nothing in this section, nor in that portion of section
two of this chapter, defining “cost of improvement”
shall be deemed to impair or subordinate the lien of any mortgage
containing the covenant required by this subdivision. To the
extent that the trust res consists of the right to receive
advances as distinct from advances actually received, breach
of the trust shall give rise to a civil action only. The covenant
provided for herein shall be deemed to have been made and
to be in full force and effect if, in lieu of the foregoing
provisions, a statement in substantially the following form
is contained in the mortgage or contract, “subject to
the trust fund provisions of section thirteen of the lien
law.”
(4) Nothing in subdivision two or three of this section shall
apply to any mortgage given by a purchaser for value from
an owner making the improvement and recorded prior to the
filing of a lien pursuant to this chapter, provided the instrument
of conveyance contains the provisions mentioned in subdivision
five herein.
(5) No instrument of conveyance recorded subsequent to the
commencement of the improvement, and before the expiration
of the period specified in section ten of this chapter for
filing of notice of lien after the completion of the improvement,
shall be valid as against liens filed within a corresponding
period of time measured from the recording of such conveyance,
unless the instrument contains a covenant by the grantor that
he will receive the consideration for such conveyance and
will hold the right to receive such consideration as a trust
fund to be applied first for the purpose of paying the cost
of the improvement and that he will apply the same first to
the payment of the cost of the improvement before using any
part of the total of the same for any other purpose. Nothing
in this subdivision shall be construed as imposing upon the
grantee any obligation to see to the proper application of
such consideration by the grantor. Nothing in this subdivision
shall apply to a deed given by a referee or other person appointed
by the court for the sole purpose of selling real property.
Nothing in this subdivision shall apply to the consideration
received by a grantor who, pursuant to a written agreement
entered into and duly recorded prior to the commencement of
the improvement, conveys to the person making such improvement,
the land upon which such improvement is made. However, such
a conveyance shall be subject to liens filed prior thereto,
as provided by this chapter. To the extent that the trust res consists of the right to receive the consideration for
such conveyance as distinct from the consideration actually
received, breach of the trust shall give rise to a civil action
only. The covenant provided for herein shall be deemed to
have been made and to be in full force and effect if, in lieu
of the foregoing provisions, a statement in substantially
the following form is contained in the instrument of conveyance,
“subject to the trust fund provisions of section thirteen
of the lien law.” Except that this section shall not
apply to any mortgage taken by the home owners’ loan
corporation, a corporation created under an act of congress,
known as the “home owners’ loan act of nineteen
hundred thirty-three,” and the “home owners’
loan act of nineteen hundred thirty-three as amended,”
and said mortgage shall have priority over any and all liens
filed subsequent to the date of the recording of said mortgage
whether or not the cash and/or bonds for which said mortgage
has been taken as security, shall have been advanced at the
time of the execution of such mortgage or subsequent thereto,
and it shall not be necessary to execute and file any building
loan contract or any other contract, in compliance with this
section or any part thereof.
(6) Every assignment of moneys, or any part thereof, due or
to become due under a contract for the improvement of real
property shall contain a covenant by the assignor that he
will receive any moneys advanced thereunder by the assignee
and will hold the right to receive such moneys as trust funds
to be first applied to the payment of trust claims as defined
in section seventy-one of the lien law, and that he will apply
the same to such payments only, before using any part of the
moneys for any other purpose.
Sec.
14 Assignment of Lien
A lien, filed as prescribed in this article, may be assigned
by a written instrument signed and acknowledged by the lienor,
at any time before the discharge thereof. Such assignment
shall contain the names and places of residence of the assignor
and assignee, the amount of the lien and the date of filing
the notice of lien, and be filed in the office where the notice
of the lien assigned is filed. The facts relating to such
an assignment and the names of the assignee shall be entered
by the proper officer in the book where the notice of lien
is entered and opposite the entry thereof. Unless such assignment
is filed, the assignee need not be made a defendant in an
action to foreclose a mortgage, lien or other incumbrance.
A payment made by the owner of the real property subject to
the lien assigned or by his agent or contractor, or by the
contractor of a public corporation, to the original lienor,
on account of such lien, without notice of such assignment
and before the same is filed, shall be valid and of full force
and effect. Except as prescribed herein, the validity of an
assignment of a lien shall not be affected by a failure to
file the same.
Sec.
15 Assignments of Contracts and Orders to be Filed
1. No assignment of one or more contracts for the performance
of labor or the furnishing of materials for the improvement
of real property or of the money or any part thereof due or
to become due therefore, nor an order drawn by a contractor
upon the owner of such real property for the payment of such
money, nor an order drawn by a subcontractor upon a contractor
or subcontractor for such payment, nor an order drawn by an
owner upon the maker of a building loan, nor an assignment
of moneys due or to grow due under a building loan contract,
shall operate to reduce the lien of a subcontractor, laborer
or materialman, except as provided in sections thirteen and
twenty-six of this chapter; nor shall any such assignment
or order be valid for any purpose, unless a “Notice
of Assignment” meeting the requirements of subdivision
two of this section or the contract (other than a building
loan contract) or a statement containing the substance thereof
and such assignment or a copy of each or a copy of such order,
be filed within ten days after the date of such assignment
or such order, in the office of the county clerk of each county
wherein real property improved or to be improved to which
the assignment or order relates is situated and such assignment
or order shall have effect and be enforceable from the time
of such filing, and no such assignment or order shall have
any validity until the same shall have been so filed, and
every such assignment or order, not filed shall be absolutely
void as against a subsequent assignee in good faith and for
valuable consideration, whose assignment or order is first
duly filed. Such clerk shall enter the facts relating to such
assignment or order in the “lien docket” or in
another book provided by him for such purpose. Each such assignment
shall be indexed by the name of the assignor and each such
order shall be indexed by the name of the drawer.
2. A “Notice of Assignment” filed pursuant to
subdivision one of this section shall be used only in the
case of money advanced or to be advanced to a contractor or
subcontractor upon the assignment of one or more contracts
for the performance of labor or the furnishing of materials
for the improvement of real property, or of the money or any
part thereof due or to become due therefore. The said notice
shall contain (a) the names and addresses of the assignor
and assignee, (b) the date of the assignment, and the date
the assignment will terminate, which termination date shall
not be more than two years after the date of the assignment,
(c) the maximum balance of advances outstanding to be secured
by the assignment, (d) a statement of each county wherein
the real property involved in the contracts is or may be situated,
and (e) either a specific description of the substance of
the contract or contracts assigned, including an identification
of the real property involved in each such contract, or a
statement that the assignment covers all or a specified class
of the assignor’s accounts or contract rights. If the
contract or contracts assigned are described specifically
the real property identification shall be sufficient if it
includes the name of the record owner and the location of
the real estate by street and number and town or city or,
if the real estate is in the city of New York, by county,
except that if the real estate is in the city of New York
or counties of Nassau or Onondaga, where the block system
of recording or registering and indexing conveyances is in
use, the notice must also specify the block in which the real
estate is situated.
3. A “Notice of Assignment” may be continued in
effect beyond the stated termination date by filing within
sixty days prior to the termination date a subsequent “Notice
of Assignment” entitled “Second Notice of Assignment”
or “Third Notice of Assignment”, which identifies
the prior “Notice of Assignment” to which it relates
and otherwise conforms to the requirements of subdivision
two of this section.
4. The term “Notice of Assignment” as used in
this section includes any amendments but if any amendment
extends the assignment to cover additional contracts it is
effective as to the added contracts only from the date of
the filing.
Sec. 16 Assignment of Contracts and Orders
for Public Improvement to be Filed
No assignment of a contract for the performance of labor or
the furnishing of materials for a public improvement, or of
the money, or any part thereof, due, or to become due, therefore,
nor an order drawn by the contractor or sub-contractor upon
the public corporation, or the head of the department or bureau
having charge of the construction or demolition of such public
improvement, or the financial officer of the public corporation,
or other officer or person charged with the custody and disbursement
of the corporate funds applicable to the contract for such
public improvement, shall be valid unless such assignment
or order, or a copy thereof, be filed within twenty days after
the date of such assignment of contract, or such assignment
of money, or such order, with the head of the department or
bureau having charge of such construction or demolition, and
with the financial officer of the public corporation or other
officer or person charged with the custody and disbursement
of the corporate funds applicable to the contract for such
public improvement, and such assignment or order shall have
effect and be enforceable from the time of such filing, and
no such assignment or order shall have any validity until
the same shall have been so filed, and every such assignment
or order, not filed, shall be absolutely void as against a
subsequent assignee in good faith and for valuable consideration,
whose assignment or order is first duly filed. The financial
officer of the public corporation, or other officer or person
with whom the assignment order, or copy thereof, is filed,
shall enter the facts relating to the same in the lien book
or other book provided for such purpose.
Sec. 17 Duration of Lien
No lien specified in this article shall be a lien for a longer
period than one year after the notice of lien has been filed,
unless within that time an action is commenced to foreclose
the lien, and a notice of the pendency of such action, whether
in a court of record or in a court not of record, is filed
with the county clerk of the county in which the notice of
lien is filed, containing the names of the parties to the
action, the object of the action, a brief description of the
real property affected thereby, and the time of filing the
notice of lien; or unless an extension to such lien, except
for a lien on real property improved or to be improved with
a single family dwelling, is filed with the county clerk of
the county in which the notice of lien is filed within one
year from the filing of the original notice of lien, continuing
such lien and such lien shall be redocketed as of the date
of filing such extension. Such extension shall contain the
names of the lienor and the owner of the real property against
whose interest therein such lien is claimed, a brief description
of the real property affected by such lien, the amount of
such lien, and the date of filing the notice of lien. No lien
shall be continued by such extension for more than one year
from the filing thereof. In the event an action is not commenced
to foreclose the lien within such extended period, such lien
shall be extinguished unless an order be granted by a court
of record or a judge or justice thereof, continuing such lien, and such lien shall be redocketed as of the date of granting
such order and a statement made that such lien is continued
by virtue of such order. A lien on real property improved
or to be improved with a single family dwelling may only be
extended by an order of a court of record, or a judge or justice
thereof. No lien shall be continued by court order for more
than one year from the granting thereof, but a new order and
entry may be made in each successive year. If a lienor is
made a party defendant in an action to enforce another lien,
and the plaintiff or such defendant has filed a notice of
the pendency of the action within the time prescribed in this
section, the lien of such defendant is thereby continued.
Such action shall be deemed an action to enforce the lien
of such defendant lienor. The failure to file a notice of
pendency of action shall not abate the action as to any person
liable for the payment of the debt specified in the notice
of lien, and the action may be prosecuted to judgment against
such person. The provisions of this section in regard to continuing
liens shall apply to liens discharged by deposit or by order
on the filing of an undertaking. Where a lien is discharged
by deposit or by order, a notice of pendency of action shall
not be filed. A lien, the duration of which has been extended
by the filing of a notice of the pendency of an action as
above provided, shall nevertheless terminate as a lien after
such notice has been canceled as provided in section sixty-five hundred fourteen of the civil practice law and rules or has
ceased to be effective as constructive notice as provided
in section sixty-five hundred thirteen of the civil practice
law and rules.
Sec. 18 Duration of Lien Under Contract for
a Public Improvement
If the lien is for labor done or materials furnished for a
public improvement, it shall not continue for a longer period
than six months from the time of filing the notice of such
lien, unless an action is commenced to foreclose such lien
within that time, and a notice of the pendency of such action
is filed with the comptroller of the state or the financial
officer of the public corporation with whom the notice of
such lien was filed; or unless an extension to such lien is
filed with the comptroller of the state or the financial officer
of the public corporation with whom the notice of such lien
was filed within six months from the filing of the original
notice of lien, continuing such lien and such lien shall be
redocketed as of the date of filing such extension. Such extension
shall contain the names of the lienor and the contractor or
subcontractor for whom the labor was performed or materials
furnished, a description of the public improvement upon which
the labor was performed and materials expended, the amount
of such lien, and the date of the filing of the notice of
lien. No lien shall be continued by such extension for more
than one year from the filing thereof. In the event an action
is not commenced to foreclose the lien within such extended
period, such lien shall be extinguished unless an order be
granted by a court of record or a judge or justice thereof,
continuing such lien, and a new docket be made stating such
fact. No lien shall be continued by such order for more than one year from the granting thereof, but a new order and entry
may be made in each successive year. If a lienor be made a
party defendant in an action to enforce another lien, and
the plaintiff or such defendant has filed a notice of the
pendency of the action within the time prescribed in this
section, the lien of such defendant is thereby continued.
The provision of this section in regard to continuing liens
shall apply to liens discharged by deposit or by order on
the filing of an undertaking. This section is hereby declared
to be a remedial statute and is to be construed liberally
to secure the beneficial interests and purposes thereof.
Sec. 19 Discharge of Lien for Private Improvement
A lien other than a lien for labor performed or materials
furnished for a public improvement specified in this article,
may be discharged as follows:
(1) By the certificate of the lienor, duly acknowledged or
proved and filed in the office where the notice of lien is
filed, stating that the lien is satisfied or released as to
the whole or a portion of the real property affected thereby
and may be discharged in whole or in part, specifying the
part. Upon filing such certificate, the county clerk in the
office where the same is filed, shall note the fact of such
filing in the “lien docket” in the column headed
“Proceedings had” opposite the docket of such
lien.
(2) By failure to begin an action to foreclose such lien or
to secure an order continuing it, within one year from the
time of filing the notice of lien, unless an action be begun
within the same period to foreclose a mortgage or another
mechanic’s lien upon the same property or any part thereof
and a notice of pendency of such action is filed according
to law, but a lien, the duration of which has been extended
by the filing of a notice of the pendency of an action as
herein provided, shall nevertheless terminate as a lien after
such notice has been cancelled or has ceased to be effective
as constructive notice.
(3) By order of the court vacating or cancelling such lien
of record, for neglect of the lienor to prosecute the same,
granted pursuant to section fifty-nine of this chapter.
(4) Either before or after the beginning of an action by the
owner or contractor executing an undertaking with two or more
sufficient sureties, who shall be freeholders, to the clerk
of the county where the premises are situated, in such sums
as the court or a judge or justice thereof may direct, not
less than the amount claimed in the notice of lien conditioned
for the payment of any judgment which may be rendered against
the property for the enforcement of the lien. The sureties
must together justify in at least double the sum named in
the undertaking. A copy of the undertaking, with notice that
the sureties will justify before the court, or a judge or
justice thereof, at the time and place therein mentioned,
must be served upon the lienor or his attorney, not less than
five days before such time. Upon the approval of the undertaking
by the court, judge or justice an order shall be made by such
court, judge or justice discharging such lien. The execution
of any such bond or undertaking by any fidelity or surety
company authorized by the laws of this state to transact business,
shall be equivalent to the execution of said bond or undertaking
by two sureties; and where a certificate of qualification
has been issued by the superintendent of insurance under the
provisions of section one thousand one hundred eleven of the
insurance law, and has not been revoked, no justification
or notice thereof shall be necessary, and in such case a copy
of the undertaking and notice of the application for an order
to discharge the lien must be served upon the lienor or his
attorney not less than two days before such application for
such order is made. Any such company may execute any such
bond or undertaking as surety by the hand of its officers,
or attorney, duly authorized thereto by resolution of its
board of directors, a certified copy of which resolution,
under the seal of said company, shall be filed with each bond
or undertaking. If the lienor cannot be found, or does not
appear by attorney, such service may be made by leaving a
copy of said undertaking and notice at the lienor’s
place of residence, or if a corporation at its principal place
of business within the state as stated in the notice of lien,
with a person of suitable age and discretion therein, or if
the house of his abode or its place of business is not stated
in said notice of lien and is not known, then in such manner
as the court may direct. The premises, if any, described in
the notice of lien as the lienor’s residence or place
of business shall be deemed to be his said residence or its
place of business for the purposes of said service at the
time thereof, unless it is shown affirmatively that the person
serving the papers or directing the service had knowledge
to the contrary. Notwithstanding the other provisions of this
subdivision relating to service of notice, in any case where
the mailing address of the lienor is outside the state such
service may be made by registered or certified mail, return
receipt requested, to such lienor at the mailing address contained
in the notice of lien.
(5) Upon filing in the office of the clerk of the county where
the property is situated, a transcript of a judgment of a
court of competent jurisdiction, together with due proof of
service of due notice of entry thereof, showing a final determination
of the action in favor of the owner of the property against
which the lien was claimed.
(6) Where it appears from the face of the notice of lien that
the claimant has no valid lien by reason of the character
of the labor or materials furnished and for which a lien is
claimed, or where for any other reason the notice of lien
is invalid by reason of failure to comply with the provisions
of section nine of this article, or where it appears from
the public records that such notice has not been filed in
accordance with the provisions of section ten of this article,
the owner or any other party in interest, may apply to the
supreme court of this state, or to any justice thereof, or
to the county judge of the county in which the notice of lien
is filed, for an order summarily discharging of record the
alleged lien. A copy of the papers upon which application
will be made together with a notice setting forth the court
or the justice thereof or the judge to whom the application
will be made at a time and place therein mentioned must be
served upon the lienor not less than five days before such
time. If the lienor can not be found, such service may be
made as the court, justice or judge may direct. The application
must be made upon a verified petition accompanied by other
written proof showing a proper case therefore, and upon the
approval of the application by the court, justice or judge,
an order shall be made discharging the alleged lien of record.
Sec.
20 Discharge of Lien After Notice of Lien Filed by Payment
of Money Into Court
A lien specified in this article, other than a lien for performing
labor or furnishing materials for a public improvement, may
be discharged after the notice of lien is filed at any time
before an action is commenced to foreclose such lien, by depositing
with the county clerk, in whose office the notice of lien
is filed, a sum of money equal to the amount claimed in such
notice, with interest to the time of such deposit. After such
deposit is made and the lien is discharged the county treasurer
or any other officer with whom the money is deposited shall,
within ten days thereafter, send a notice by mail to the lienor,
at the address given in the lien, that such lien has been
discharged by deposit. After action to foreclose the lien
is commenced it may be discharged by a payment into court
of such sum of money, as, in the judgment of the court or
a judge or justice thereof, after at least five days’
notice to all the parties to the action, will be sufficient
to pay any judgment which may be recovered in such action.
Upon any such payment, the county clerk shall forthwith enter
upon the lien docket and against the lien for the discharge
of which such moneys were paid, the words “discharged
by payment.” A deposit of money made as prescribed in
this section shall be repaid to the party making the deposit,
or his successor, upon the discharge of the liens against
the property pursuant to law. All deposits of money made as
provided in this section shall be considered as paid into
court and shall be subject to the provisions of law relative
to the payment of money into court and the surrender of such
money by order of the court. An order for the surrender of
such moneys to the lienor or depositor may be made by any
court of record having jurisdiction of the parties. If no
action is brought in a court of record to enforce such lien,
such order may be made by any judge of a court of record.
If application for such order is made by lienor it shall be
on notice to the depositor; if made by the depositor then
on notice to the lienor.
Sec.
21 Discharge of Lien for Public Improvement
A lien against the amount due or to become due a contractor
from the state or a public corporation for the construction
or demolition of a public improvement may be discharged as
follows:
1. By filing a certificate of the lienor or his successor
in interest, duly acknowledged and approved, stating that
the lien is discharged.
2. By lapse of time as follows:
(a) When six months have elapsed since the filing of the notice
of lien, unless, before the expiration thereof, either an
order continuing said lien has been filed in the office where
the notices are filed, or a notice of the pendency of an action
to enforce said lien has been filed as provided in section
eighteen of this article.
(b) When the period of time for which the lien has been continued
by order has expired, unless, before the expiration thereof,
either an order continuing said lien for a further period
of time has been filed in the offices where the notices are
filed, or a notice of the pendency of an action to enforce
said lien has been filed as provided in section eighteen of
this article.
3. By satisfaction of a judgment rendered in an action to
enforce the lien.
3-a. Under the provisions of subdivisions four, five and six
of this section a discharge of lien shall only operate to
relieve the comptroller of the state or the financial officer
of the public corporation or the officer or person with whom
the lien is filed of any and all liability imposed upon such
officer by reason of the filing of the lien. Such lien shall
be a valid and subsisting lien for all other purposes until
discharged as prescribed by the provisions of the other subdivisions
of this section.
4. By the contractor applying without notice to the supreme
court of this state or to any justice thereof or to the county
judge of any county for an order discharging such lien and
depositing with the comptroller of the state or the financial
officer of the public corporation, or the officer or person
with whom the notice of lien is filed, such a sum of money
as is directed by a judge or a justice of the court, which
shall not be less than the amount claimed by the lienor, with
interest thereon for the term of one year from the time of
making such deposit, and such additional amount as the judge
or justice deems sufficient to cover all costs and expenses.
The amount so deposited shall remain with the comptroller
or such financial officer or other officer or person until
the lien is otherwise discharged as prescribed in this section.
5. Either before or after the beginning of an action by a
contractor or subcontractor executing an undertaking with
two or more sufficient sureties, who shall be freeholders,
to the state or the public corporation with which the notice
of lien is filed, in such sums as the court or a judge or
justice thereof may direct, not less than the amount claimed
in the notice of lien, conditioned for the payment of any
judgment which may be recovered in an action to enforce the
lien. The sureties must together justify in at least double
the sum named in the undertaking. A copy of the undertaking
with notice that the sureties will justify before the court
or a judge or justice thereof at the time and place therein
mentioned must be served upon the lienor, not less than five
days before such time. If the lienor can not be found, such
service may be made as prescribed in subdivision four of section
nineteen of this article. Upon the approval of the undertaking
by the court, judge or justice, an order shall be made discharging
such lien. The execution of such undertaking by any fidelity
or surety company authorized by the laws of this state to
transact business shall be equivalent to the execution of
such an undertaking by two sureties, and where a certificate
of qualification has been issued by the superintendent of
insurance under the provisions of section one thousand one
hundred eleven of the insurance law and has not been revoked,
no justification or notice thereof shall be necessary, and
in such case a copy of the undertaking and notice of the application
for an order to discharge the lien must be served upon the
lienor, or his attorney, not less than two days before such
application for such order is made. Any such company may execute
such undertaking as surety by the hand of its officers or
attorney duly authorized thereto by resolution of its board
of directors, a certified copy of which resolution under the
seal of such company, shall be filed with each undertaking.
Except as otherwise provided herein the provisions of article
twenty-five of the civil practice law and rules regulating
undertakings and of article eighteen of the justice court
act are applicable to an undertaking given for the discharge
of a lien on account of public improvements. If the lienor
can not be found or does not appear by attorney then such
service may be made as prescribed in subdivision four of section
nineteen of this chapter for the service of an undertaking
with notice of justification of sureties. Notwithstanding
the other provisions of this subdivision relating to service
of notice, in any case where the mailing address of the lienor
is outside the state such service may be made by registered
or certified mail, return receipt requested, to such lienor
at the mailing address contained in the notice of lien.
6. Where a contractor has to his credit with the state or
with a public corporation, a sum of money by reason of an
estimate due and payable to him, and where payment of such
estimate is withheld because a notice of lien has been filed
against his interest in said money, and where said money is
in excess of the amount claimed in the notice of lien, the
contractor may apply without notice to the supreme court of
this state or to any justice thereof or to the county judge
of any county, for an order discharging such lien and directing
the comptroller of the state or the financial officer or person
with whom the lien is filed, to retain from such estimate
a sum of money, which shall not be less than the amount claimed
by the lienor, with interest thereon for one year and such
additional amount as the judge or justice deems sufficient
to cover all costs and expenses and to immediately pay over
the balance of such estimate to the contractor. The amount
so retained shall be held by the comptroller or such financial
officer or other officer or person until the lien is otherwise
discharged as provided in this section. The application for
the order may be made upon an affidavit of the contractor
or his attorney and where there is of record an assignment
of all moneys the written consent of such assignee must be
presented to the court showing a proper case therefore.
6-a. Where a contractor has to his credit with the state,
or with a public corporation, a sum of money by reason of
an estimate due and payable to him, and where payment of such
estimate is withheld because a notice of lien has been filed
against his interest in said money, and where the amount due
and payable under said estimate is at least one and one-half
times in excess of the amount stated to be due in said notice
of lien, the comptroller of the state or the financial officer
or person with whom the notice of lien is filed, may pay said
estimate, after deducting therefrom a sum which shall be one
and one-half times the amount stated to be due in said notice
of lien, and said sum so deducted shall be withheld until
said lien is otherwise discharged, as provided in this section.
7. Where it appears from the face of the notice of lien that
the claimant has no valid lien by reason of the character
of the labor or materials furnished and for which a lien is
claimed, or where the notice of lien is invalid by reason
of failure to comply with the provisions of section twelve
of this article, or where it appears from the public records
that such notice has not been filed in accordance with the
provisions of section twelve of this article, the contractor
or any other party in interest, may apply to the supreme court
of this state, or to any justice thereof, or to the county
judge of the county in which the notice of lien is filed,
for an order summarily discharging of record the alleged lien.
A copy of the papers upon which application will be made together
with a notice setting forth the court or the justice thereof
or the judge to whom the application will be made at a time
and place therein mentioned must be served upon the lienor
not less than five days before such time. If the lienor can
not be found, such service may be made as the court, justice
or judge may direct. The application must be made upon a verified
petition accompanied by other written proof showing a proper
case therefore, and upon the approval of the application by
the court, justice or judge, an order shall be made discharging
the alleged lien of record.
8. By order of the court vacating or canceling such lien of
record, for neglect of the lienor to prosecute the same, granted
pursuant to section twenty-one-a of this article.
Sec.
21-a Vacating Lien for a Public Improvement, By Order of Court
A lien against the amount due or to become due a contractor
from the state or a public corporation, for the construction
or demolition of a public improvement, may be vacated and
canceled by an order of the supreme court. Before such order
shall be granted, a notice shall be served upon the lienor
personally or, in such manner as the court may direct. Such
notice shall require the lienor to commence an action to enforce
the lien within a time specified in the notice, not less than
thirty days from the time of service, or show cause at a special
term of the supreme court in the judicial district embracing
the county wherein the notice of lien is filed, at a time
and place specified therein, why the notice of lien should
not be vacated and canceled of record. Proof of such service
and that the lienor has not commenced the action to foreclose
such a lien, as directed in the notice, shall be made by affidavit,
at the time of applying for such order.
Sec. 22 Building Loan Contract
A building loan contract either with or without the sale of
land, and any modification thereof, must be in writing and
duly acknowledged, and must contain a true statement under
oath, verified by the borrower, showing the consideration
paid, or to be paid, for the loan described therein, and showing
all other expenses, if any, incurred, or to be incurred in
connection therewith, and the net sum available to the borrower
for the improvement, and, on or before the date of recording
the building loan mortgage made pursuant thereto, to be filed
in the office of the clerk of the county in which any part
of the land is situated, except that any subsequent modification
of any such building loan contract so filed must be filed
within ten days after the execution of any such modification.
No such building loan contract or any modification thereof
shall be filed in the register’s office of any county.
If not so filed the interest of each party to such contract
in the real property affected thereby, is subject to the lien
and claim of a person who shall thereafter file a notice of
lien under this chapter. A modification of such contract shall
not affect or impair the right or interest of a person, who,
previous to the filing of such modification had furnished
or contracted to furnish materials, or had performed or contracted
to perform labor for the improvement of real property, but
such right or interest shall be determined by the original
contract. The county clerk is entitled to a fee of twenty-five
dollars, except in counties within the city of New York where
the fee shall be fifty dollars, for filing such a contract
or modification. Except where the county clerk maintains a
block index, such contracts and modifications thereof shall
be indexed in a book provided for that purpose, in the alphabetical
order of the names of the persons to whom such loans shall
be made. No assignment of the moneys due or to become due
under a building loan contract, under the provisions of section
twenty-six of this article, nor any payment to the holder
of such assignment, shall be or be construed to be a modification
of a building loan contract within the meaning of this section,
and the execution and delivery of a bond and mortgage, under
the provisions of section twenty-six of this article, or payments
thereunder, shall not be or be construed to be the making
of a building loan contract within the meaning of this section.
Except that this section shall not apply to any mortgage taken
by the home owners’ loan corporation, a corporation
created under an act of congress, known as the “home
owners’ loan act of nineteen hundred thirty-three”
and the “home owners’ loan act of nineteen hundred
thirty-three as amended,” and said mortgage shall have
priority over any and all liens filed subsequent to the date
of the recording of said mortgage whether or not the cash
and/or bonds for which said mortgage has been taken as security,
shall have been advanced at the time of the execution of such
mortgage or subsequent thereto, and it shall not be necessary
to execute and file any building loan contract or any other
contract, in compliance with this section or any part thereof.
Where the county clerk indexes liens in a block index, every
building loan contract presented to the clerk for filing,
in order to entitle the same to be filed, shall contain in
the body thereof, or shall have endorsed thereon, a designation
of the number of every block, on the land map of the county,
which is affected by the building loan contract. The county
clerk shall cause such building loan contract to be entered
in the block index, under the block number of every block
so designated. In cases where a building loan contract shall
have been filed without such designation or with an erroneous
designation, the county clerk, on presentation of proper proof
thereof, shall enter such instrument in the proper index,
under the proper block number of every block in which the
land affected is situated, and shall, at the same time, make
a note of such entry and of the date thereof in every place
in which such instrument may have been erroneously indexed,
opposite the entry thereof, and also upon the instrument itself,
if the same be in his possession or produced to him for the
purpose, and the filing of such instrument shall be constructive
notice as to property in the block not duly designated at
the time of such filing only from the time when the same shall
be properly indexed. A county clerk may adopt a new indexing
system utilizing electro-mechanical, electronic or any other
method he deems suitable for maintaining the indexes.
Sec. 23 Construction of Article
This article is to be construed liberally to secure the beneficial
interests and purposes thereof. A substantial compliance with
its several provisions shall be sufficient for the validity
of a lien and to give jurisdiction to the courts to enforce
the same.
Sec. 24 Enforcement of Mechanic’s Lien
The mechanics’ liens specified in this article may be
enforced against the property specified in the notice of lien
and which is subject thereto and against any person liable
for the debt upon which the lien is founded, as prescribed
in article three of this chapter.
Sec. 25 Priority of Liens and Assignments Under
Contracts for Public Improvements
Parity of liens of same class. In an action to enforce a lien
under a contract for a public improvement, or an assignment
of moneys, or any part thereof, due or to become due under
such contract, parties having liens and parties having assignments
unless such assignments be set aside as diversions of trust
assets as provided in article three-a of this chapter shall
have priority as follows:
(1) Except as provided in section five an assignee of moneys,
or any part thereof, due or to become due under a contract
for public improvement, whose assignment is duly filed prior
to the filing of a notice of lien or assignment of every other
party to the action, shall have priority over those parties
to the extent of advances made upon such assignment before
the filing of the notice of lien or assignment next subsequent
to his assignment, but as to advances made subsequent to a
notice of lien or assignment filed and unsatisfied or not
discharged such assignee for the purpose of determining his
proportionate share of moneys available for distribution as
provided in subdivision four of this section shall be treated
as a lienor having a lien to the extent of advances so made.
(2) An assignee of moneys or any part thereof, due or to become
due under a contract for a public improvement whose assignment
is duly filed subsequent to the filing of the notice of lien
or assignment of any other party shall for the purpose of
determining his proportionate share of moneys available for
distribution, as provided in subdivision four of this section
be treated as a lienor having a lien to the extent of advances
actually made upon such assignment prior to the filing thereof.
(3) Laborers for daily or weekly wages having liens under
a contract for a public improvement, shall have preference
as a class for the full amount of their unpaid wages over
all other lienors having liens arising under the same contract
and without reference to the time when such laborers shall
have filed their notices of liens.
(4) There shall be no priority among labor lienors, as a class
or among other lienors as a class, and any moneys available
for distribution among lienors of any class shall be distributed
pro rata in accordance with their respective valid liens.
(5) Every assignment of moneys, or any part thereof, due or
to become due under a contract for a public improvement shall
contain a covenant by the assignor that he will receive any
moneys advanced thereunder by the assignee and will hold the
right to receive such moneys as a trust fund to be first applied
to the payment of trust claims as defined in section seventy-one
of the lien law, and that he will apply the same to such payments
only, before using any part of the moneys for any other purpose.
Sec. 26 Subordination of Liens After Agreement
With Owner
In case an owner of real property shall execute to one or
more persons, or a corporation, as trustee or trustees, a
bond and mortgage or a note and mortgage affecting such property
in whole or in part, or an assignment of the moneys due or
to become due under a contract for a building loan in relation
to such property, and in case such mortgage, if any, shall
be recorded in the office of the register of the county where
such real property is situated, or if such county has no register
then in the office of the clerk of such county, and in case
such assignment, if any, shall be filed in the office of the
clerk of the county where such real property is situated;
and in case lienors having mechanics’ liens against
said real property, notices of which have been filed up to
and not later than fifteen days after the recording of such
mortgage or the filing of such assignment, and which liens
have not been discharged as in this article provided, shall,
to the extent of at least fifty-five per centum of the aggregate
amount for which such notices of liens have been so filed,
approve such bond and mortgage or such note and mortgage,
if any, and such assignment, if any, by an instrument or instruments
in writing, duly acknowledged and filed in the office of such
county clerk, then all mechanics’ liens for labor performed
or material furnished prior to the recording of such mortgage
or filing of such assignment, whether notices thereof have
been theretofore or are thereafter filed and which have not
been discharged as in this article provided, shall be subordinate
to the lien of such trust bond and mortgage or such trust
note and mortgage to the extent of the aggregate amount of
all certificates of interest therein issued by such trustee
or trustees, or their successors, for moneys loaned, materials
furnished, labor performed and any other indebtedness incurred
after said trust mortgage shall have been recorded, and for
expenses in connection with said trust mortgage, and shall
also be subordinate to the lien of the bond and mortgage or
note and mortgage, given to secure the amount agreed to be
advanced under such contract for a building loan to the extent
of the amount which shall be advanced by the holder of such
bond and mortgage or such note and mortgage to the trustee
or trustees, or their successors, under such assignment. The
provisions of this section shall apply to all bonds and mortgages
and notes and mortgages and all assignments of moneys due,
or to become due under building loan contracts executed by
such owner, in like manner, and recorded or filed, from time
to time as hereinbefore provided. In case of an assignment
to trustees under the provisions of this section, the trustees
and their successors shall be the agents of the assignor to
receive and receipt for any and all sums advanced by the holder
of the building loan bond and mortgage or the building loan
note and mortgage under the building loan contract and such
assignment. No lienor shall have any priority over the bond
and mortgage or note and mortgage given to secure the money
agreed to be advanced under a building loan contract or over
the advances made thereunder, by reason of any act preceding
the making and approval of such assignment.
Sec. 28 Lien of Certain Judgments Postponed
Upon the filing of the written instrument or instruments of
approval under section twenty-six of this article, the lien
of all money judgments and attachments affecting such real
property, or the moneys due under a contract, and all claims
and liens acquired in any proceedings upon any money judgment,
shall be subordinate in like manner and to like extent as
provided in said section for the subordination of mechanics’
liens, and any attachment issued or money judgment recovered
upon a claim, which, in whole or in part, was not for materials
furnished, labor performed or moneys advanced for the improvement
of such real property or for the public improvement, shall
be subordinate to all mechanics’ liens thereon and shall
also be subordinate to all judgments recovered upon and attachments
issued upon claims for materials furnished, labor performed
or moneys advanced for the improvement of such real property.
Sec.
29 Subordination of Liens to Subsequent Mortgage
In case an owner of real property upon which an improvement
is being or has been made, desires to obtain a loan by executing
and delivering a bond or bonds or note or notes secured by
a mortgage upon such real property, or any part thereof, and
in case lienors having mechanics’ liens against such
real property, or any part thereof, notices of which have
been filed prior to the recording of such mortgage, and which
said liens have not been discharged as in this article provided,
shall, to the extent of at least fifty-five per centum of
the aggregate amount for which notices of such liens have
been so filed, by an instrument or instruments in writing,
duly acknowledged, designate and authorize one or more persons
to consent to the execution and delivery of such bond and
mortgage or note and mortgage, and in case the consent in
writing, duly acknowledged, of such person or persons to the
execution and delivery of such bond and bonds and mortgage
or note and notes and mortgage shall be filed in the office
of the clerk of the county where such real property is situated,
together with such instrument or instruments of designation,
then all mechanics’ liens for labor performed and materials
furnished prior to the recording of such mortgage whether
notices thereof have been theretofore or are thereafter filed,
shall be subordinate to the lien of such bond or bonds and
mortgage or note or notes and mortgage to the extent of the
full amount which shall be advanced thereunder provided such
mortgage contains the covenant prescribed in subdivision three
of section thirteen of this chapter. In case such person or
persons so designated and authorized shall so consent to the
execution and delivery of such bond and mortgage or note and
mortgage but on condition that a sum of money be deposited
with the clerk of such county, and such sum is so deposited,
the county clerk, upon such payment, shall forthwith enter
upon the lien docket, indexed with the name of the owner,
the facts relating to such payment. A deposit of money made
as prescribed in this section shall be repaid to such owner
or his assignee upon the discharge or release of all mechanics’
liens, judgments and attachments against the property. All
deposits of money made as provided in this section shall be
considered as paid into court and shall be subject to the
provisions of law relative to the payment of money into court
and the surrender of such money by order of the court. The
court shall in any action brought to foreclose any of such
liens, or in any action brought to recover such deposit or
any part thereof, direct the payment of such sum so deposited
to the persons whose mechanics’ liens, judgments, or
claims secured by attachment shall have been established on
the trial and the amount so paid shall be credited upon such
mechanics’ liens, judgments and claims. Upon such filing
of such consent, as hereinbefore provided, the lien of all
judgments and attachments affecting such real property and
all claims and liens acquired in any proceedings upon such
judgments shall be subordinate in like manner and to like
extent as hereinbefore in this section provided for the subordination
of mechanics’ liens, and any attachment issued or judgment
recovered upon a claim, which, in whole or in part, is not
for materials furnished, labor performed or moneys advanced
for the improvement of such property shall be subordinate
to all mechanics’ liens thereon, and shall also be subordinate
to all judgments recovered upon and attachments issued upon
claims for materials furnished, labor performed or moneys
advanced for the improvement of such real property. Any lienor
having a mechanic’s lien against real property may subordinate
such lien to any subsequent mortgage thereon by a certificate
duly acknowledged or proved stating that such lien is subordinated,
which certificate shall be filed in the office where the notice
of lien is filed. Upon filing such certificate, the county
clerk in the office where the same is filed shall note the
fact of such filing in the “lien docket” in the
column headed “proceedings had,” opposite the
docket of such lien.
Sec. 30 Subordination of Notices of Lis Pendens
In case of subordination pursuant to the provisions of sections
twenty-six, twenty-eight or twenty-nine of this article all
actions and proceedings upon such mechanics’ liens and
all notices of pendency of actions in any action brought to
foreclose the same and all proceedings upon judgments and
attachments, shall be subordinate in like manner and to like
extent as provided in said sections, respectively, for the
subordination of mechanics’ liens, judgments and attachments.
Sec. 31 Discharge of Liens on Sale of Real
Property
In case an owner of real property upon which an improvement
is being or has been made, desires to convey or transfer an
interest in such real property or any part thereof, and in
case lienors having mechanics’ liens against such real
property, or any part thereof, notices of which were filed
prior to the making of the deposit hereinafter in this section
mentioned, and which said liens have not been discharged as
in this article provided, shall, to the extent of at least
fifty-five per centum of the aggregate amount for which such
liens have been so filed, by an instrument or instruments
in writing, duly acknowledged, designate and authorize one
or more persons to consent to the execution and delivery of
a deed or deeds conveying said real property or any part thereof,
and in case the consent in writing, duly acknowledged, of
such person or persons to the execution and delivery of such
deed or deeds, and which said consent shall be conditioned
for the deposit of a specified sum of money with the clerk
of such county, shall be filed in the office of the clerk
of the county where such real property is situated, together
with such instrument or instruments of designation, then on
the deposit of such specified sum with such county clerk all
mechanics’ liens, judgments and attachments, and all
claims and liens acquired in any proceeding upon such judgments
or under such attachments against such real property shall
from the time of such deposit cease to be liens or encumbrances
upon such real property, and such real property shall thenceforth
be free and discharged from the same, and the same shall thenceforth
be liens upon such sum so deposited and said county clerk
upon such deposit being made shall forthwith enter upon the
lien docket, indexed with the name of such owner, the facts
relating to such deposit. A deposit of money made as prescribed
in this section shall be repaid to such owner or his assignee
upon the discharge or release of all such mechanics’
liens, judgments and attachments. All deposits of money made
as provided in this section shall be considered as paid into
court and shall be subject to the provisions of law relative
to the payment of money into court and the surrender of such
money by order of the court. The court shall in any action
brought to foreclose any of such liens or in any action brought
to recover such deposit or any part thereof, direct the payment
of such sum so deposited to the persons whose mechanics’
liens, judgments, or claims secured by attachment shall have
been established upon the trial, and the amount so paid shall
be credited upon such mechanics’ liens, judgments and
claims. Upon such deposit being made as hereinbefore provided
the lien of all judgments and attachments affecting such real
property, and all claims and liens acquired in any proceedings
upon such judgments or under attachments shall be liens upon
such deposit. All judgments recovered upon the attachments
issued upon a claim which, in whole or in part, is not for
materials furnished, labor performed or moneys advanced for
the improvement of such real property, shall be subordinate
as a lien upon such sum so deposited to all mechanics’
liens thereon, and shall also be subordinate to all judgments
recovered upon and attachments issued upon claims for materials
furnished, labor performed or moneys advanced for the improvement
of such real property. In case such consent shall be conditioned
also for the giving to one or more persons or a corporation
as trustee or trustees any other property real or personal
then any cash thereafter from time to time tendered by such
trustee or trustees to such county clerk shall be received
and held by such county clerk as though the same were part
of the specified sum of money for the deposit of which such
consent was conditioned, and for the same purposes and subject
to the same provisions as in this section provided therefore.
Sec. 32 Certain Liens and Claims not to be
Affected
The amendments contained in this act shall not apply to mechanics’
liens, building loan contracts, mortgages, assignments and
orders referred to in section fifteen, attachments, judgments,
or to claims or liens acquired in any action or proceeding
upon such mechanics’ liens, building loan contracts,
mortgages, assignments and orders, attachments or judgments,
filed, recorded, docketed, entered or obtained, or to contracts
for the improvement of real property made, prior to the date
when this chapter, as amended, takes effect.
Sec. 33 Certain Sections not to Apply to Laborers’
Liens
None of the provisions contained in sections twenty-six, twenty-eight,
twenty-nine and thirty-one of this article shall apply to
liens of laborers for daily or weekly wages.
Sec. 34 Waiver of Lien
Notwithstanding the provisions of any other law, any contract,
agreement or understanding whereby the right to file or enforce
any lien created under article two is waived, shall be void
as against public policy and wholly unenforceable. This section
shall not preclude a requirement for a written waiver of the
right to file a mechanic’s lien executed and delivered
by a contractor, subcontractor, material supplier or laborer
simultaneously with or after payment for the labor performed
or the materials furnished has been made to such contractor,
subcontractor, material man or laborer nor shall this section
be applicable to a written agreement to subordinate, release
or satisfy all or part of such a lien made after a notice
of lien has been filed.
Sec. 35 Waiver of Arbitration; Arbitrators’
Award Conclusive
The filing of a notice of lien shall not be a waiver of any
right of arbitration of a contractor, subcontractor, material
man or laborer secured to him by his contract to furnish labor
or materials. In case the arbitrators, in any arbitration
proceeding had pursuant to any such contract, shall determine
the value or price of labor performed or material furnished,
their award shall be conclusive as between all parties to
the arbitration in any action to foreclose the lien.
Sec. 37 Bond to Discharge All Liens
(1) The owner or contractor between whom a contract exists
for the improvement of real property may, either before or
after the commencement of the improvement, execute as a principal,
a bond to the county clerk of the county where the premises
are situated in such amount as the supreme court of this state,
or any justice thereof, or the county court or the county
judge of such county may direct, which shall not be less than
the amount then unpaid under such contract, conditioned for
the payment of any judgment or judgments which may be recovered
in any action brought for the enforcement of any and all claims,
notices of which may be filed as in this section provided,
arising by virtue of labor performed or materials furnished
in or about the performance of any such contract. As many
such bonds may be executed as there are contractors employed
upon the improvement.
(2) Such a bond must be executed as a surety by a fidelity
or surety company authorized to do business in this state,
and to which a certificate of solvency has been issued and
is unrevoked pursuant to section one thousand one hundred
eleven of the insurance law.
(3) Such bond shall recite the name of the owner, the name
of the contractor, the name of the surety company, the date
and amount of the contract, and shall contain a description
of the real property upon which the improvement is to be made,
is being made, or has been made; such description shall be
sufficient if it complies with the requirements in respect
thereto prescribed for a notice of lien.
(4) Upon the approval of any such bond by such court, judge
or justice thereof and upon the filing of such bond with the
county clerk of the county where the real property is situated,
an order shall be made by such court, judge or justice discharging
such property from the lien of each and every contractor,
subcontractor, material man or laborer performing labor or
furnishing materials in or about the performance of the contract
described in such bond. After the filing of such bond, the
owner and the contractor named therein shall no longer be
obligated to comply with the provisions of section eight of
this chapter insofar as said provisions may relate to or in
any way affect the contract, described in said bond, or the
rights of any person performing labor or furnishing materials
in or about the performance thereof.
(5) A contractor, subcontractor, laborer or material man who
performs labor or furnishes materials in or about the performance
of the contract described in such bond shall have a claim,
which shall attach against and be secured by such bond, for
the principal and interest of the value, or the agreed price,
of such labor and materials. Within the meaning of the provisions
of this section, materials actually manufactured for but not
delivered to the real property, shall also be deemed to be
materials furnished. The claimant in order to perfect his
claim shall within the time prescribed in this chapter for
the filing of a notice of lien, file a notice of claim in
the office of the clerk of the county where such bond is filed.
Any such claimant who has so perfected his claim may bring
an action on the bond for the enforcement thereof in any court
where an action might have been brought if such claim were
a lien filed against such real property.
(6) The notice of claim shall state: (1) the name and residence
of the claimant; and if the claimant is a partnership or a
corporation, the business address of such firm, or corporation,
the names of partners and principal place of business, and
if a foreign corporation, its principal place of business
within the state; (2) the names of the owner, contractor and
surety named in the bond; (3) the name of the person by whom
the claimant was employed or to whom he furnished or is to
furnish materials; (4) the labor performed or materials furnished,
including also materials actually manufactured for but not
delivered to the real property, and the agreed price or value
thereof; (5) the amount unpaid to the claimant for such labor
or materials; (6) a description of the real property such
as is required for a notice of lien. The notice of claim shall
be verified by the claimant or his agent in the form required
for the verification of notices in section nine of this chapter.
(7) The plaintiff in such an action must, prior to the commencement
thereof, file in the office of the clerk of the county where
the bond is filed, the summons and complaint in such action
and shall join as parties defendant, the principal and surety
on the bond, the contractor, and all claimants who have filed
notices of claim prior to the date of the filing of such summons
and complaint. In case a claimant files his notice of claim
on or after the date of such filing of such summons and complaint
he may be brought in by amendment at any time up to and including
the time and in the manner and under the conditions that a
lienor may be brought into an action to foreclose a lien pursuant
to section sixty-two of this chapter.
(8) The court may adjust and determine the equities of all
the parties to the action and render an appropriate judgment.
In case a counterclaim is set forth by any defendant, such
defendant shall be deemed to have waived a trial by jury of
the issues raised thereby.
(9) An action upon such a bond shall be begun within one year
after the completion of the improvement, or if the work thereon
is abandoned, then within two years after the last item of
work was performed or the last item of materials was furnished
by the claimant. The beginning of the action by the plaintiff-claimant
shall be deemed a bringing of the action by each defendant-claimant
made a party thereto.
(10) The county clerk of each county shall provide and keep
a book called the “lien bond docket, “ which shall
be suitably ruled in columns headed “owner,” “contractor,”
“claimant,” “property,” “surety,”
“amount of bond,” “time of filing,”
“amount of claim,” “proceedings had,”
in each of which he shall write the particulars of the notice
of claim property belonging therein. The date, hour and minute
of the filing of notice of each claim and of the filing of
the summons and complaint in any action commenced on said
bond shall be entered in the proper column. The names of the
owners shall be arranged in such book in alphabetical order.
The validity of the claim and the right to file a notice thereof
shall not be affected by the death of the principal before
notice of the claim is filed.
(11) In the event that notwithstanding the provisions of this
section a contractor, subcontractor, material man or laborer,
whose lien has been discharged in the manner provided in this
section, shall thereafter file a notice of lien against the
real property, then upon application of the owner or contractor
to the supreme court of this state or any justice thereof
or the county court or the county judge of the county where
such notice of lien is filed and upon proof that the bond
approved and filed as in this section provided secures the
payment of the claim set forth in any such notice of lien,
the court, justice or judge thereof shall make an order discharging
such lien. In any such case a copy of the bond and notice
of the time and place of making such application for such
order to discharge any such lien shall be served upon the
lienor or his attorney not less than two days before such
time.
(12) A claim which has been perfected by the filing of a notice
of claim may be discharged as follows: (1) By the certificate
of the claimant duly acknowledged or proved and filed in the
office where the notice of claim is filed, stating that the
claim is satisfied and may be discharged; (2) By failure to
begin an action as and within the time provided in this section.
Sec. 38 Itemized Statement May Be Required
of Lienor
A lienor who has filed a notice of lien shall, on demand in
writing, deliver to the owner or contractor making such demand
a statement in writing which shall set forth the items of
labor and/or material and the value thereof which make up
the amount for which he claims a lien, and which shall also
set forth the terms of the contract under which such items
were furnished. The statement shall be verified by the lienor
or his agent in the form required for the verification of
notices in section nine of this chapter. If the lienor shall
fail to comply with such a demand within five days after the
same shall have been made by the owner or contractor, or if
the lienor delivers an insufficient statement, the person
aggrieved may petition the supreme court of this state or
any justice thereof, or the county court of the county where
the premises are situated, or the county judge of such county
for an order directing the lienor within a time specified
in the order to deliver to the petitioner the statement required
by this section. Two days’ notice in writing of such
application shall be served upon the lienor. Such service
shall be made in the manner provided by law for the personal
service of a summons. The court or a justice or judge thereof
shall hear the parties and upon being satisfied that the lienor
has failed, neglected or refused to comply with the requirements
of this section shall have an appropriate order directing
such compliance. In case the lienor fails to comply with the
order so made within the time specified, then upon five days’
notice to the lienor, served in the manner provided by law
for the personal service of a summons, the court or a justice
or judge thereof may make an order cancelling the lien.
Sec. 39 Lien Willfully Exaggerated is Void
In any action or proceeding to enforce a mechanic’s
lien upon a private or public improvement or in which the
validity of the lien is an issue, if the court shall find
that a lienor has willfully exaggerated the amount for which
he claims a lien as stated in his notice of lien, his lien
shall be declared to be void and no recovery shall be had
thereon. No such lienor shall have a right to file any other
or further lien for the same claim. A second or subsequent
lien filed in contravention of this section may be vacated
upon application to the court on two days’ notice.
Sec. 39-a Liability of Lienor Where Lien Has
Been Declared Void on Account of Willful Exaggeration
Where in any action or proceeding to enforce a mechanic’s
lien upon a private or public improvement the court shall
have declared said lien to be void on account of willful exaggeration
the person filing such notice of lien shall be liable in damages
to the owner or contractor. The damages which said owner or
contractor shall be entitled to recover, shall include the
amount of any premium for a bond given to obtain the discharge
of the lien or the interest on any money deposited for the
purpose of discharging the lien, reasonable attorney’s
fees for services in securing the discharge of the lien, and
an amount equal to the difference by which the amount claimed
to be due or to become due as stated in the notice of lien
exceeded the amount actually due or to become due thereon.
Sec. 39-c Repossession of Materials Not Used
If for any reason after the work of a private or a public
improvement of real property is abandoned by an owner, a contractor
or a subcontractor before the completion thereof by such owner,
contractor or subcontractor, or if, after the same is completed,
materials delivered are not used therefore, 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; and thereupon he
shall have no lien on the real property or improvements against
persons secondarily liable, for the price thereof, but he
shall have the same rights in regard to the materials as if
he had never parted with the possession. This right to repossess
and remove the materials shall not be affected by their sale,
encumbrance, attachment, or transfer from the site of the
improvement, except that, if the materials have been so transferred,
the right to repossess them shall not be effective as against
a purchaser or encumbrancer thereof in good faith whose interest
therein shall have arisen since such transfer from the site
of the improvement, or as against a creditor attaching after
such transfer. The right to repossession and removal given
by this section shall extend only to materials whose purchase
price does not exceed the amount remaining due to the person
repossessing; but where materials have been partly paid for,
the person delivering them may repossess them as allowed in
this section on refunding the part of the purchase price which
has been paid less the cost of removal.
ARTICLE 3 ENFORCEMENT OF LIENS ON REAL PROPERTY
Sec. 40 Construction of Article
This article is to be construed in connection with article
two of this chapter, and provides proceedings for the enforcement
of liens for labor performed and materials furnished in the
improvement of real property, created by virtue of such article.
Sec. 41 Enforcement of Mechanic’s Lien
on Real Property
A mechanic’s lien on real property may be enforced against
such property, and against a person liable for the debt upon
which the lien is founded, by an action, by the lienor, his
assignee or legal representative, in the supreme court or
in a county court otherwise having jurisdiction, regardless
of the amount of such debt, or in a court which has jurisdiction
in an action founded on a contract for a sum of money equivalent
to the amount of such debt.
Sec. 42 Enforcement of a Lien Under Contract
for a Public Improvement
A lien for labor done or materials furnished for a public
improvement may be enforced against the funds of the state
or the public corporation for which such public improvement
is constructed or demolished, to the extent prescribed in
article two of this chapter, and against the contractor or
subcontractor liable for the debt, by a civil action, in the
same court and in the same manner as a mechanic’s lien
on real property.
Sec.
43 Action in a Court of Record; Consolidation of Actions
The provisions of the real property actions and proceedings
law relating to actions for the foreclosure of a mortgage
upon real property, and the sale and the distribution of the
proceeds thereof apply to actions in a court of record, to
enforce mechanics’ liens on real property, except as
otherwise provided in this article. If actions are brought
by different lienors in a court of record, the court in which
the first action was brought, may, upon its own motion, or
upon the application of any party in any of such actions,
consolidate all of such actions.
Sec.
44 Parties to an Action in a Court of Record
In an action in a court of record to enforce a lien against
real property or a public improvement, the following are necessary
parties defendant:
1. All lienors having liens notices of which have been filed
against the same real property or public improvement, or any
part thereof, prior to the filing of the notice of lis pendens
in such action, where by law the filing of a notice of lis
pendens is proper or required.
2. All persons having subsequent liens or claims against such
real property, by judgment, mortgage or otherwise, filed,
docketed or recorded prior to the filing of the notice of
lis pendens, where by law the filing of a notice of lis pendens
is proper or required.
3. All persons appearing by the records in the office of the
county clerk or register to be owners of such real property
or any part thereof.
4. Where by law, a notice of lis pendens may not be filed
in such action, all lienors having liens notices of which
have been filed against the same real property, and all persons
having subsequent liens or claims against such real property,
by judgment, mortgage or otherwise.
5. Every defendant who is a lienor shall, by answer in the
action, set forth his lien, or he will be deemed to have waived
the same, unless the lien is admitted in the complaint, and
not contested by another defendant. The allegations is the
answer of a defendant lienor shall be deemed denied by the
other lienors in said action without the necessity of serving
replies. Two or more lienors having liens notices of which
have been filed against the same real property or public improvement,
or any part thereof, may join as plaintiffs.
6. The state, when the lien is one filed against funds of
the state for which the public improvement is constructed
or demolished. In such a case, the summons must be served
upon the attorney-general, who must appear in behalf of the
people.
Sec. 44-a Foreclosure of Mortgage; Lienors Defendants
In an action to foreclose a mortgage upon such real property
only such persons who shall have filed notices of lien prior
to the filing of the notice of lis pendens in such action
shall be deemed to be necessary parties to such action.
Sec. 45 Equities of Lienors to be Determined
The court may adjust and determine the equities of all the
parties to the action and the order of priority of different
liens, and determine all issues raised by any defense or counterclaim
in the action. But in no case shall the court determine any
issue between the state and the contractor where a claim has
been or can be submitted to the court of claims for adjudication
and in case a counterclaim is set forth by any defendant in
his answer, such defendant shall be deemed to have waived
a trial by jury of the issues raised thereby.
Sec. 46 Action in a Court not of Record
If an action to enforce a mechanic’s lien against real
property is brought in a court not of record, it shall be
commenced by the personal service upon the owner of a summons
and complaint verified in the same manner as a complaint in
an action in a court of record. The complaint must set forth
substantially the facts contained in the notice of lien, and
the substance of the agreement under which the labor was performed
or the materials were furnished. The form and contents of
the summons shall be the same as provided by law for the commencement
of an action upon a contract in such court. The summons must
be returnable not less than twelve nor more than twenty days
after the date of the summons, or if service is made by publication,
after the day of the last publication of the summons. Service
must be made at least eight days before the return day.
Sec. 47 How Summons Served, When Personal Service
Cannot Be Made
If personal service of the summons cannot be made upon a defendant
in an action in a court not of record, by reason of his absence
from the state, or his concealment therein, such service may
be made by leaving a copy thereof at his last place of residence
and by publishing a copy of the summons once in each of three
successive weeks in a newspaper in the city or county where
the property is situated.
Sec. 48 Proceedings on Return of Summons; Answer;
Judgment by Default
At the time and place specified in the summons for the return
thereof, in a court not of record, issue must be joined, if
both parties appear, by the defendant filing with the justice
a verified answer, containing a general denial of each allegation
of the complaint, or a specific denial of one or more of the
material allegations thereof; or any other matter constituting
a defense to the lien or to the claim upon which it is founded.
If the defendant fail to appear on the return-day, on proof
by affidavit of the service of the summons and complaint,
judgment may be rendered for the amount claimed, with costs.
Sec. 49 Issue, How Tried; Judgment
If issue is joined in such action in a court not of record,
it must be tried in the same manner as other issues in such
court, and judgment entered thereon, which shall be enforced,
if for the plaintiff, in the manner provided in the following
section. If for the defendant, in the same manner as in an
action on contract in such court.
Sec. 50 Execution
Execution may be issued upon a judgment obtained in an action
to enforce a mechanic’s lien against real property in
a court not of record, which shall direct the officer to sell
the title and interest of the owner in the premises, upon
which the lien set forth in the complaint existed at the time
of filing the notice of lien.
Sec. 51 Appeals From Judgments in Courts not of Record
An appeal may be taken from such judgment rendered in a court
not of record, according to the provisions of law regulating
appeals from judgments in actions on contract in such courts.
Sec. 52 Transcripts of Judgments in Courts
not of Record
When a judgment is rendered in a court not of record, the
justice or judge of the court in which it is tried, or other
person authorized to furnish transcripts of judgments therein,
shall furnish the successful party a transcript thereof, which
he may file with the clerk of the county with whom the notice
of lien is filed. The filing of such transcript has the same
effect as the filing of a transcript of any other judgment
rendered in such courts.
Sec. 53 Costs and Disbursements
If an action is brought to enforce a mechanic’s lien
against real property in a court of record, the costs and
disbursements shall rest in the discretion of the court, and
may be awarded to the prevailing party. The judgment rendered
in such an action shall include the amount of such costs and
specify to whom and by whom the costs are to be paid. If such
action is brought in a court not of record, they shall be
the same as allowed in civil actions in such court. The expenses
incurred in serving the summons by publication may be added
to the amount of costs now allowed in such court.
Sec. 54 Judgment in Case of Failure to Establish
Lien
If the lienor shall fail, for any reason, to establish a valid
lien in an action under the provisions of this article, he
may recover judgment therein for such sums as are due him,
or which he might recover in an action on a contract, against
any party to the action.
Sec. 55 Offer to Pay Money Into Court, or to
Deposit Securities, in Discharge of the Lien
At any time after an action is brought under the provision
of this article, the owner may make and file with the clerk
with whom the notice of lien is filed, if in a court of record,
and if in a court not of record, with the court, an offer
to pay into court the sum of money stated therein, or to execute
and deposit securities which he may describe, in discharge
of the lien, and serve upon the plaintiff a copy of such offer.
If a written acceptance of the offer is filed with such clerk,
or court, within ten days after its service, and a copy of
the acceptance is served upon the party making the offer,
the court, upon proof of such offer and acceptance, may make
an order, that on depositing with such clerk, or court, the
sum so offered, or the securities described, the lien shall
be discharged, and that the money or securities deposited
shall take the place of the property upon which the lien existed,
and shall be subject to the lien. If the offer is of money
only, the court, on application and notice to the plaintiff
may make such order, without the acceptance of the offer by
the plaintiff. If such action is brought in a court not of
record, such order may be made by the county court of the
county where such action is brought upon notice, and upon
filing such order and depositing such sum of money or securities
with the county clerk of such county, he shall forthwith discharge
said notice of lien, by writing upon the margin of the record
thereof, the words “discharged by payment.” Money
or securities deposited upon the acceptance of an offer pursuant
to this section shall be held by the clerk or the court until
the final determination of the action, including an appeal.
Sec. 56 Preference Over Contractors
When a laborer, subcontractor or material man shall perform
labor or furnish materials for an improvement of real property
or for a public improvement, for which he is entitled to a
mechanic’s lien, the amount due to him shall be paid
out of the proceeds of the sale of such property or out of
the moneys of the state or public corporation applicable to
the construction or demolition of the public improvement,
under any judgment rendered pursuant to this article, before
any part of such proceeds is paid to the person for whom he
has performed such labor or furnished such materials. If several
notices of lien are filed for the same claim, as where the
contractor has filed a notice of lien, for the services of
his workmen, and the workmen have also filed notices of lien,
the judgment shall provide for but one payment of the claim
which shall be paid to the parties entitled thereto. Payment
voluntarily made upon any claim filed as a lien shall not
impair or diminish the lien of any person except the person
to whom the payment was made.
Sec.
57 Judgment May Direct Delivery of Property in Lieu of Money
If the owner has agreed to deliver bills, notes, securities
or other obligations or any other species of property, in
payment of the debt upon which the lien is based, the judgment
may direct that such substitute be delivered or deposited
as the court may direct, and the property affected by the
lien cannot be sold, by virtue of such judgment, except in
default of the owner to so deliver or deposit within the time
directed by the court.
Sec.
58 Judgment for Deficiency
If upon the sale of the property under judgment in a court
of record there is a deficiency of proceeds to pay the plaintiff’s
claim, judgment may be docketed for the deficiency against
any person liable therefore, who shall be adjudged to pay
the same in like manner and with like effect as in judgments
for deficiency in foreclosure cases.
Sec.
59 Vacating of a Mechanic’s Lien; Cancellation of Bond;
Return of Deposit, By Order of Court
A mechanic’s lien notice of which has been filed on
real property or a bond given to discharge the same may be
vacated and cancelled or a deposit made to discharge a lien
pursuant to section twenty may be returned, by an order of
a court of record. Before such order shall be granted, a notice
shall be served upon the lienor, either personally or by leaving
it as his last known place of residence, with a person of
suitable age, with directions to deliver it to the lienor.
Such notice shall require the lienor to commence an action
to enforce the lien, within a time specified in the notice,
not less than thirty days from the time of service, or show
cause at a special term of a court of record, or at a county
court, in a county in which the property is situated, at a
time and place specified therein, why the notice of lien filed
or the bond given should not be vacated and cancelled, or
the deposit returned, as the case may be. Proof of such service
and that the lienor has not commenced the action to foreclose
such lien, as directed in the notice, shall be made by affidavit,
at the time of applying for such order.
Sec. 60 Judgment in Action to Foreclose Lien
on Account of Public Improvement
If, in an action to enforce a lien on account of a public
improvement, the court finds that the lien is established,
it shall render judgment directing the state or the public
corporation to pay over to the lienors entitled thereto for
work done or material furnished for such public improvement,
to the extent of the sums found due the lienors from the contractors,
so much of the funds or money which may be due from the state
or public corporation to the contractor, as will satisfy such
liens, with interest and costs, not exceeding the amount due
to the contractor. If it appears in any proceeding in which
the state is a party that a claim has been or can be filed
against the state in the court of claims, or if it is alleged
upon the part of the state that the contractor has breached
the contract, then the court may render judgment only to the
extent of determining the establishment of the lien or liens,
and the amount or amounts thereof.
Sec. 61 Judgment in Action to Foreclose a Mechanic’s
Lien on Property of a Railroad Corporation
If the lien is for labor done or materials furnished for a
railroad corporation, upon its land, or upon or for its track,
rolling stock or the appurtenances of its railroad, the judgment
shall not direct the sale of any of the real property described
in the notice of the lien, but when in such case, a judgment
is entered and docketed with the county clerk of the county
where the notice of lien is filed, or a transcript thereof
is filed and docketed in any other county, it shall be a lien
upon the real property of the railroad corporation, against
which it is obtained, to the same extent, and enforceable
in like manner as other judgments of courts of record against
such corporation.
Sec.
62 Bringing in New Parties
A lienor who has filed a notice of lien after the commencement
of an action in a court of record to foreclose or enforce
a mechanic’s lien against real property or a public
improvement, may at any time up to and including the day preceding
the day on which the trial of such action is commenced, make
application upon notice to the plaintiff or his attorney in
such action, to be made a party therein. Upon good cause shown,
the court must order such lienor to be brought in by amendment.
If the application is made by any other party in said action
to make such lienor or other person a party, the court may
in its discretion direct such lienor or other person to be
brought in by like amendment. The order to be entered on such
application shall provide the time for and manner of serving
the pleading of such additional lienor or other person and
shall direct that the pleadings, papers and proceedings of
the other several parties in such action, shall be deemed
amended, so as not to require the making or serving of papers
other than said order to effectuate such amendment, and shall
further provide that the allegations in the answer of such
additional lienor or other person shall, for the purposes
of the action, be deemed denied by the other parties therein.
The action shall be so conducted by the court as not to cause
substantially any delay in the trial thereof. The bringing
in of such additional lienor or other person shall be without
prejudice to the proceedings had, and if the action be on
the calendar of the court, same shall retain its place on
such calendar without the necessity of serving a new note
of issue and new notices of trial.
Sec. 63 Service of Answer on State or Public
Corporation
In an action to foreclose a lien for a public improvement
each defendant named in the original summons shall within
forty days after the service of the complaint on him serve
upon the state or public corporation, a copy of his answer.
When the city of New York is a party such service shall be
made on the corporation counsel.
Sec. 64 Award of Personal Judgment By Court
or Referee
A court or referee in any action heretofore or hereafter brought
may at any time award a money judgment in favor of any party.
This shall not preclude the rendition of other judgments in
the action. Any payment made on account of either judgment
in favor of a party shall be credited on the other judgment.
ARTICLE 3-A DEFINITION AND ENFORCEMENT OF TRUSTS
Sec. 70 Definition of Trusts
1. The funds described in this section received by an owner
for or in connection with an improvement of real property
in this state, including a home improvement loan, or received
by a contractor under or in connection with a contract for
an improvement of real property, or home improvement, or a
contract for a public improvement in this state, or received
by a subcontractor under or in connection with a subcontract
made with the contractor for such improvement of real property
including a home improvement contract or public improvement
or made with any subcontractor under any such contract, and
any right of action for any such funds due or earned or to
become due or earned, shall constitute assets of a trust for
the purposes provided in section seventy-one of this chapter.
For the purposes of this section: (a) any right to receive
payment at a future time shall be deemed a right of action
therefore and an asset of the trust even though it is contingent
upon performance or upon some other event, but the fact that
the right is a trust asset does not enlarge the right or excuse
any performance or condition upon which it depends; (b) “contract”
and “subcontract” shall include any modification
of the contract or subcontract to which reference is made;
and (c) funds due or earned under a contract or subcontract
shall include any funds payable to the contractor or subcontractor
in addition to the contract price by reason of any transaction,
event or circumstance in the making or in the performance
of the contract or subcontract.
2. The funds received by an owner and the rights of action
with respect thereto, for or in connection with each improvement,
shall be a separate trust and the owner shall be the trustee
thereof. The funds received by a contractor or subcontractor
and the rights of action with respect thereto, under or in
connection with each contract or subcontract, shall be a separate
trust and the contractor or subcontractor shall be the trustee
thereof.
3. Every such trust shall commence at the time when any asset
thereof comes into existence, whether or not there shall be
at that time any beneficiary of the trust. The trust of which
the owner is trustee shall continue with respect to every
asset of the trust until every trust claim arising at any
time during the improvement has been paid or discharged, or
until all such assets have been applied for the purposes of
the trust. The trust of which a contractor or subcontractor
is trustee shall continue with respect to every asset of the
trust until every trust claim arising at any time prior to
the completion of the contract or subcontract has been paid
or discharged, or until all such assets have been applied
for the purposes of the trust. Upon termination of the trust
by payment or discharge of all the trust claims, the beneficial
interest in any remaining assets shall vest in the owner,
contractor or subcontractor, as the case may be.
4. The trusts described in this section shall arise whether
or not a covenant declaring or acknowledging the trust, as
required in article two of this chapter, has been executed.
5. The assets of the trust of which the owner is trustee are
the funds received by him and his rights of action for payment
thereof
(a) under a building loan contract;
(b) under a building loan mortgage or a home improvement loan;
(c) under a mortgage recorded subsequent to the commencement
of the improvement and before the expiration of four months
after completion of the improvement;
(d) as consideration for a conveyance recorded subsequent
to the commencement of the improvement and before the expiration
of four months after the completion thereof;
(e) as consideration for, or advances secured by, an assignment
of rents due or to become due under an existing or future
lease or tenancy of the premises that are the subject of the
improvement, or of any part of such premises, if the assignment
is executed subsequent to the commencement of the improvement
and before the expiration of four months after the completion
of the improvement or if it is executed before the commencement
of the improvement and an express promise to make an improvement,
or an express representation that an improvement will be made,
is contained in the assignment or given in the transaction
in which the assignment is made;
(f) as proceeds of any insurance payable because of the destruction
of the improvement or its removal by fire or other casualty,
except that the amount thereof required to reimburse the owner
for premiums paid by him out of funds other than trust funds
shall not be deemed part of the trust assets;
(g) under an executory contract for the sale of real property
and the improvement thereof by the construction of a building
thereon.
6. The assets of the trust of which a contractor is trustee
are the funds received by him and his rights of action for
payment thereof
(a) under the contract for the improvement of real property,
or home improvement or the public improvement;
(b) under an assignment of funds due or earned or to become
due or earned under the contract;
(c) as proceeds of any insurance payable because of destruction
of the improvement of real property including a home improvement
or public improvement or its removal by fire or other casualty,
except that the amount thereof required to reimburse the contractor
for premiums paid by him out of funds other than trust funds
shall not be deemed part of the trust assets.
7. The assets of the trust of which a subcontractor is trustee
are the funds received by him and his rights of action for
payment thereof
(a) under the subcontract
(b) under an assignment or order for the payment of moneys
due or earned or to become due or earned under the subcontract;
(c) as proceeds of any insurance payable because of the destruction
of the improvement of real property or public improvement
or its removal by fire or other casualty, except that the
amount thereof required to reimburse the subcontractor for
premiums paid by him out of funds other than trust funds shall
not be deemed part of the trust assets.
8. For the purposes of this article, the term “home
improvement contract” shall have the meaning ascribed
to it by section seven hundred seventy of the general business
law, and the term “home improvement loan” shall
mean any loan obtained for the purpose of financing a home
improvement. The term “home improvement” shall
mean the repairing, remodeling, altering, converting, or modernizing
of, or adding to residential property, including but not limited
to the construction, erection, replacement, or improvement
of driveways, swimming pools, siding, insulation, roofing
and windows, terraces, patios, landscaping, fences, porches,
garages, solar energy systems, flooring, basements, and other
improvements of the residential property and all structures
or land adjacent to it.
Sec.
71 Purpose of the Trust; “Trust Claims”; “Beneficiaries”
1. The trust assets of which an owner is trustee under subdivisions
five (a) to five (f), inclusive, of section seventy of this
chapter shall be held and applied for payment of the cost
of improvement. The trust assets of which an owner is trustee
under subdivision five (g) of section seventy of this chapter
shall be held and applied for payment of the cost of improvement
and, in addition, for the purposes of the further trust provided
in section seventy-one-a of this chapter.
2. The trust assets of which a contractor or subcontractor
is trustee shall be held and applied for the following expenditures
arising out of the improvement of real property, including
home improvement or public improvement and incurred in the
performance of his contract or subcontract, as the case may
be:
(a) payment of claims of subcontractors, architects, engineers,
surveyors, laborers and materialmen;
(b) payment of the amount of taxes based on payrolls including
such persons and withheld or required to be withheld and taxes
based on the purchase price or value of materials or equipment
required to be installed or furnished in connection with the
performance of the improvement;
(c) payment of taxes and unemployment insurance and other
contributions due by reason of the employment out of which
such claims arose;
(d) payment of any benefits or wage supplements, or the amounts
necessary to provide such benefits or furnish such supplements,
to the extent that the trustee, as employer, is obligated
to pay or provide such benefits or furnish such supplements
by any agreement to which he is a party;
(e) payment of premiums on a surety bond or bonds filed and
premiums on insurance accrued during the making of the improvement,
including home improvement, or public improvement;
(f) payment to which the owner is entitled pursuant to the
provisions of section seventy-one-a of this chapter.
3. (a) With respect to the trust of which an owner is trustee,
“trust claims” means claims of contractors, subcontractors,
architects, engineers, surveyors, laborers and materialmen
arising out of the improvement, for which the owner is obligated,
and also means any obligation of the owner incurred in connection
with the improvement for a payment or expenditure defined
as cost of improvement.
(b) With respect to the trusts of which a contractor or subcontractor
is trustee, “trust claims” means claims arising
at any time for payments for which the trustee is authorized
to use trust funds as provided in subdivision two of this
section.
(c) No claim acquired by the trustee by assignment or otherwise
shall be a trust claim after it has been so acquired.
4. Persons having claims for payment of amounts for which
the trustee is authorized to use trust assets as provided
in this section are beneficiaries of the trust whether or
not they have filed or had the right to file a notice of lien
as provided in article two of this chapter or shall have recovered
a judgment therefore. Where an owner becomes obligated to
incur an expenditure as part of the cost of improvement, any
person to whom he is so obligated is a beneficiary.
5. For the purposes of this article, every trust claim shall
be deemed to be in existence from the time of the making of
the contract or the occurrence of the transaction out of which
the claim arises and, except as provided in section seventy-six
and section seventy-seven, the rights of each member of the
class of beneficiaries accrue at the making of the contract
or the occurrence of the transaction out of which the claim
arises.
Sec. 71-a Further Trust of Funds Received or
Receivable by Owner Under Executory Contract for the Sale
and Improvement of Real Property
1. As used in this section,
(a) A “contract of sale” is an executory contract
for the sale of real property and the improvement thereof
by the construction of a building thereon.
(b) “Advances” include funds received by the owner
and his rights of action for payment thereof.
2. (a) Advances made by or on behalf of a vendee of real property
to the owner under or pursuant to a contract of sale shall
constitute assets of a trust, as defined in this section,
of which the owner is trustee, notwithstanding that such advances
may also be assets of a trust defined in section seventy of
this chapter.
(b) Such advances shall be held and applied by the owner for
the payment of the cost of improvement. The trust claims defined
in subdivision three (a) of section seventy-one of this chapter
shall have priority over trust claims which the vendee has
under the further trust provided in this section. Advances
shall cease to be subject to the further trust provided in
this section after they have been applied by the owner for
payment of the cost of improvement, provided that no part
of the advances shall be applied or be deemed applied for
payment of the cost of improvement until all trust assets,
as defined in subdivisions five (a) to five (f), inclusive,
of section seventy of this chapter, which have been received
by the owner from all other sources, have been exhausted.
(c) Such advances, or any portion thereof remaining after
application of such advances for payment of the cost of improvement,
shall continue to be held in trust by the owner for the benefit
of the vendee, until the trust is terminated (i) by the owner’s
performance of the terms of the contract of sale, or (ii)
by a default of the vendee excusing the owner’s performance
of the terms of the contract of sale, or (iii) by release
or discharge of the owner’s liability to refund such
advances to the vendee.
(d) Until the further trust is terminated as provided in this
section, such advances shall not be applied by the owner for
any purpose other than payment of the cost of improvement
and satisfaction of any liability of the owner to refund such
advances, or any part thereof, to the vendee. Upon termination
of the said trust, the beneficial interest in such advances
or any portion thereof remaining in the hands of the owner
shall vest in the owner, provided that all trust claims applicable
to such advances have been paid or discharged.
(e) Any provision whereby the vendee waives the provisions
of this section, whether contained in the contract of sale
or otherwise, shall be absolutely void.
(f) Subject to the provisions of this section, the rights
and remedies which may be exercised by a holder of trust claims
with respect to assets of a trust defined in section seventy
of this chapter may be exercised, in the same manner and to
the same extent, by the vendee with respect to such advances.
(g) The enforcement of the trust provided in this section
shall not be deemed to prohibit the vendee from seeking to
enforce such additional or alternative remedies provided by
law as shall afford the vendee complete relief.
3. (a) The initial advance pursuant to a contract of sale
which by its terms provides for or is incidental to a contract
providing for the construction on the subject real property
of residential condominium unit or any structure designed
solely for residential occupancy of not more than two families
living separately, on property to be purchased shall, at the
vendee’s option, be deposited within five business days
thereafter by the recipient in an interest bearing escrow
account in a bank, trust company, savings bank, state or federal
savings and loan association, located in this state. Such
deposit, together with the interest accumulated thereon, shall
remain the property of the vendee except as otherwise provided
herein. The recipient shall advise the vendee in writing of
the name of the depository where the funds have been placed
within ten business days after such deposit has been made.
(b) In lieu of making the deposit of such moneys in an escrow
account as provided in paragraph (a) of this subdivision,
the recipient may post with the vendee a bond or contract
of indemnity, issued by a surety company licensed to execute
such an instrument in this state, guaranteeing the return
of the moneys which otherwise would be required to be deposited
in such escrow account, in which case the recipient shall
not be required to deposit such money in an escrow account.
Said bond or contract of indemnity shall be delivered to the
vendee within ten business days after receipt of the initial
advance.
(c) At any time after making the deposit of such moneys in
the escrow account, the recipient may post with the vendee
a bond or contract of indemnity issued by a surety company
licensed to execute such an instrument in this state guaranteeing
the return of such moneys, in which case the recipient shall
not be required to maintain the deposit of such moneys in
such account.
(d) Such advance shall be retained in the escrow account or
such bond or contract of indemnity continued in effect until
the trust is terminated (i) by the recipient’s performance
of the terms of the contract of sale, or (ii) by default of
the vendee excusing the recipient’s performance of the
terms of the contract of sale, or (iii) by release or discharge
of the recipient’s liability to refund such advance
to the vendee, or (iv) upon transfer of title of the real
property to the vendee.
(e) Every contract of sale which by its terms provides for
or is incidental to a contract providing for the construction
on the subject real property of a residential condominium
unit or a structure designed solely for the residential occupancy
by not more than two families living apart, shall contain
a statement advising the vendee of the provisions of this
subdivision. Such statement shall be printed in bold type
which is at least two points larger than any other printing
contained thereon and shall read as follows:
“YOU, AS THE PURCHASER OF THIS RESIDENCE, MAY REQUIRE
THE RECIPIENT OR CONTRACTOR TO DEPOSIT THE INITIAL ADVANCE
MADE BY YOU IN AN ESCROW ACCOUNT. IN LIEU OF SUCH DEPOSIT,
THE RECIPIENT OR CONTRACTOR POST A BOND OR CONTRACT OF INDEMNITY
WITH YOU GUARANTEEING THE RETURN OF SUCH ADVANCE.”
4. (a) Under a home improvement contract, payments received
from an owner by a home improvement contractor prior to the
substantial completion of work under the contract shall be
deposited within five business days thereafter by the recipient
in an escrow account in a bank, trust company, savings bank,
or state or federal savings and loan association, located
in this state. No depository institution acting on the instructions
or otherwise dealing with a home improvement contractor shall
be obliged to inquire into the validity or propriety of any
deposits to or withdrawals from any escrow account established
by the home improvement contractor in compliance with this
subdivision or to insure that any withdrawals from such account
are applied for any specific purpose or purposes by the home
improvement contractor. Such deposit or deposits shall remain
the property of such owner except as otherwise provided herein.
Unless the home improvement contract specifies the name of
the depositary where the funds will be placed, no later than
ten business days after the deposit has been made, the recipient
shall advise the owner in writing of the name of the depositary
where the funds have been placed. The recipient shall not
be required to keep in separate depositary accounts the funds
of the separate owners from whom payments have been received,
provided his books of account shall clearly show the allocation
to each owner of the funds deposited in his general or special
depositary account or accounts.
(b) In lieu of making the deposit of such payment or payments
in an escrow account as provided in paragraph (a) of this
subdivision, the recipient may post with the owner a bond
or contract of indemnity, issued by a surety company licensed
to execute such an instrument in this state, or an irrevocable
letter of credit issued by a bank, trust company, savings
bank, or state or federal savings and loan institution located
in this state, guaranteeing the return of the payments, or
the proper application of the payments to the purposes of
the contract, which otherwise would be required to be deposited
in such escrow account, in which case the recipient shall
not be required to deposit such payments in an escrow account.
Said bond or contract of indemnity or irrevocable letter of
credit shall be delivered to the owner within ten business
days after receipt of the payment.
(c) At any time after making the deposit of such payment or
payments in the escrow account, the recipient may post with
the owner a bond or contract of indemnity issued by a surety
company licensed to execute such an instrument in this state,
or an irrevocable letter of credit issued by a bank, trust
company, savings bank, or state or federal savings and loan
institution located in this state, guaranteeing the return
or proper application of such payment to the purposes of the
contract, in which case the recipient shall not be required
to maintain the deposit of such payment in such account.
(d) Such deposit or deposits shall remain the property of
the owner or such bond or contract of indemnity or irrevocable
letter of credit continued in effect until (i) the proper
payment, transfer or application of such deposits by the contractor
to the purposes of the home improvement contract under the
schedule of payments provided therein; or (ii) the default
or breach of the owner excusing the recipient’s performance
of the terms of the home improvement contract, but only to
the extent of any reasonable liquidated damage amount as defined
in section 2-718 of the uniform commercial code and set forth
in the contract, and only after seven days prior written notice
to the owner; or (iii) substantial performance of the contract.
(e) The recipient shall not withdraw deposits from the escrow
account in excess at any time of the total amount shown in
the schedule of payments in the home improvement contract.
The amount of any such progress payments shall bear a reasonable
relationship to the amount of work to be performed, materials
purchased, or expenses for which the contractor would be obligated.
(f) If the home improvement contract provides that the home
improvement contractor will be paid on a specified hourly
or time basis for work that has been performed or charges
for materials that have been supplied prior to the time that
payment is due, this subdivision shall not apply to such payments
for such work or materials.
(g) Failure to place customer deposits in escrow, except as
provided herein, shall constitute a violation of this section.
Sec.
72 Diversion of Trust Funds
1. Any transaction by which any trust asset is paid, transferred
or applied for any purpose other than a purpose of the trust
as stated in subdivision one or subdivision two of section
seventy-one, before payment or discharge of all trust claims
with respect to the trust, is a diversion of trust assets,
whether or not there are trust claims in existence at the
time of the transaction, and if the diversion occurs by the
voluntary act of the trustee or by his consent such act or
consent is a breach of trust. Nothing in this article affects
the rights of a holder in due course of a negotiable instrument
or of a purchaser in good faith for value and without notice
that a transfer to him is a diversion of trust assets.
2. Trust assets shall not be levied upon or subject to a restraining
notice issued pursuant to section fifty-two hundred twenty-two
of the civil practice law and rules as the individual property
of the trustee.
3. In any action or proceeding in which it is sought to apply
trust assets for a purpose other than a purpose of the trust
as stated in subdivision one or subdivision two of section
seventy-one
(a) it shall be the duty of the trustee, if he is a party,
to defend the trust against such application, and if he knows
of the action or proceeding but is not a party, to make application
for intervention therein for the purpose of defending the
trust;
(b) any beneficiary of the trust having a trust claim may
intervene in the action or proceeding to defend the trust
against such application.
Sec. 73 Affirmative Defense in Action Against Transferee of
Trust Assets or to Charge Trustee in Certain Cases; “Notice
of Lending”
1. In any action against a person to whom trust assets have
been transferred, to recover assets diverted from the trust
or to recover damages for the diversion, a transferee named
in a “Notice of Lending” filed as provided in
subdivision three of this section shall be entitled to show
by way of defense that the transfer was made as security for
or in consideration of or in repayment of advances made to
or on behalf of the trustee in accordance with such notice
of lending and that prior to the making of such advances the
transferee procured from the trustee the written agreement
of the trustee that he will receive the advances and will
hold the right to receive such advances as trust funds to
be first applied to the payment of trust claims as defined
in section seventy-one of this chapter, and that he will apply
the same to such payments only, before using any part of such
advances for any other purpose. Subject to subdivision four
of this section, if such defense is established, the transferee
shall be entitled to a credit for the amount of the advances
with respect to which it is so established, to the extent
that such amount does not exceed the maximum amount specified
in the notice of lending filed as provided in subdivision
three.
2. In any action in which it is sought to charge a trustee
personally with liability by reason of a diversion of trust
assets, the trustee shall be entitled to show by way of defense
that the transfer constituting the diversion was made to a
transferee named in a “Notice of Lending” filed
as provided in subdivision three and that the transfer was
made as security for or in consideration of or in repayment
of advances made to him as trustee or on his behalf as trustee
in accordance with such notice of lending, and that such advances
were actually applied for a purpose of the trust as stated
in subdivision one or subdivision two of section seventy-one
of this chapter. Subject to subdivision four of this section,
if such defense is established, the trustee shall be entitled
to a credit against any personal liability by reason of such
transfer, for the amount of the advances with respect to which
it is established, to the extent that such amount does not
exceed the maximum amount specified in the notice filed as
provided in subdivision three.
3. (a) If funds are advanced to or on behalf of a trustee,
for the purposes of the trust, either the trustee or the person
advancing the funds may file a “Notice of Lending”
as provided in this subdivision. In the case of advances to
an owner or to a contractor or subcontractor for one or more
projects for the improvement of real property including a
home improvement, the notice shall be filed in the office
of the county clerk of each county where the real property
improved or to be improved to which the notice relates is
situated. Such clerk shall enter the facts relating to the
notice in the “lien docket” or in another book
provided by him for such purpose. Each such notice shall be
indexed by the name of the trustee to whom or on whose behalf
the advances are made. In the case of advances to a contractor
or subcontractor for one or more projects involving a public
improvement, the notice shall be filed with the head of each
department or bureau having charge of construction of an improvement
to which the notice relates and with the financial officer
of each public corporation or other officer or person charged
with the custody and disbursement of the corporate funds applicable
to the contract for each such public improvement.
(b) A notice filed pursuant to this section is effective for
the purposes of this section with respect to advances made
on the day of filing or subsequently, or made not more than
five days before the date of filing. The notice must contain:
(1) a statement of the name and address of the person making
the advances, (2) a statement of the name and address of the
person to whom or on whose behalf they are made, and whether
he is owner, contractor or subcontractor, (3) in the case
of advances relating to one specific project for the improvement
of real property including a home improvement or one specific
public improvement, a description, sufficient for identification,
of the improvement and of the real property involved for which
the advances are made, and in the case of a notice of lending
relating to several or undetermined projects for the improvement
of real property including a home improvement or for public
improvements, a statement of each county wherein the real
property is or may be situated, (4) the date of any advance
made on or before the date of filing for which the notice
is intended to be effective, (5) in the case of a notice of
lending relating to several or undetermined projects, the
date the notice will terminate, which termination date shall
not be more than two years after the date the notice is filed,
and (6) the maximum balance of advances outstanding to be
permitted by the lender pursuant to the notice. If real property
is required to be specifically identified hereunder, the identification
shall be sufficient if it includes the name of the record
owner and the location of the real estate by street and number
and town or city or, if the real estate is in the city of
New York, by county, except that if the real estate is in
the city of New York or counties of Nassau or Onondaga, where
the block system of recording or registering and indexing
conveyances is in use, the notice must also specify the block
in which the real estate is situated.
(c) A “Notice of Lending” may be continued in
effect for advances made beyond the stated termination date
by filing within sixty days prior to the termination date
a subsequent notice entitled “Second Notice of Lending”
or “Third Notice of Lending”, which identifies
the prior notice to which it relates and otherwise conforms
to the requirements of paragraph (b) of subdivision three
of this section. The term “Notice of Lending”
as used in this section includes any amendments but if any
amendment increases the maximum balance of advances outstanding
to be permitted by the lender, it is effective as to the increased
amount only with respect to advances made not more than five
days before the date of filing the amended notice or thereafter.
(d) A “Notice of Assignment” meeting the requirements
of subdivision two of section fifteen of this chapter and
filed pursuant to subdivision one of said section shall be
deemed for all purposes a “Notice of Lending”
complying with the requirements of this section.
4. Notwithstanding that the transferee, or the trustee, establishes
a defense as provided in subdivision one or subdivision two
of this section, he shall be allowed no credit by reason of
such defense if it is shown that a written demand by a trust
beneficiary for a verified statement of the amount of advances
actually made to the trustee was served personally or by registered
or certified mail on the transferee, or the trustee as the
case may be, and that he failed to comply therewith within
ten days after receipt of the demand, provided, that if either
the transferee or the trustee complies with a demand so served
on him, such compliance shall be sufficient as to the other.
5. Notwithstanding any provision of this chapter or of any
other law to the contrary, moneys received pursuant to a notice
of lending by an owner, contractor or subcontractor shall
be deemed to be trust assets.
Sec. 74 Authority of Trustee in Administering
Trust Funds
1. Subject to subdivisions two and three of this section,
the trustee is authorized to determine the order and manner
of payment of any trust claims and to apply any trust asset
to any purpose of the trust.
2. The authority of the trustee provided in this section shall
terminate with respect to any trust assets as to which an
order for distribution is made as provided in section seventy-seven
and before the making of an order for distribution may be
terminated or limited by order of the court pursuant to subdivision
three of section seventy-seven.
3. This section does not limit the effect of any proceeding
or order therein by which jurisdiction of the trust assets,
or any of them, is vested in a court or by which a particular
application of any asset or of all trust assets is enforced
or directed.
Sec.
75 Deposit of Funds of Trust; Books or Records to be Kept
1. If the trustee deposits trust funds in a bank or other
depositary they shall be deposited in his name. The trustee
shall not be required to keep in separate bank accounts or
deposits the funds of the separate trusts of which he may
be trustee under this article, provided his books of account
shall clearly show the allocation to each trust of the funds
deposited in his general or special bank account or accounts.
2. Every trustee shall keep books or records with respect
to each trust of which he is trustee and, if funds of separate
trusts are deposited in the same bank account, shall keep
a record of such account showing the allocation to each trust
of the deposits therein and withdrawals therefrom.
3. The books or records with respect to each trust shall contain
the following entries:
A. Trust assets receivable. (1) The name and address of each
person from whom the trustee has a right to receive funds
constituting assets of the trust, or will have a right to
receive such funds upon or in the course of performance of
a contract or subcontract or upon some other condition, with
a statement sufficient to identify the contract or other transaction
by reason of which such moneys will become payable; (2) the
amount of each payment or advance from each such person that
has become due or earned or otherwise payable; and (3) the
date upon which it became due, earned or payable.
B. Trust accounts payable. (1) The name and address of each
person to whom the trustee has incurred an obligation constituting
a trust claim, whether or not such claim is then due, with
a statement sufficient to identify the contract or transaction
out of which the trust claim arises; (2) the amount of each
trust claim that has become due, earned or otherwise payable;
and (3) the date upon which it became due, earned or payable.
C. Trust funds received. (1) The name and address of each
person from whom funds constituting trust assets have been
received in the form of cash, check or other instrument for
the payment of money, bank credit or drawing account, or similar
form available for immediate application to trust purposes,
including any instrument in form payable to a trust beneficiary
and any moneys paid directly to a trust beneficiary on behalf
of the trustee, with a description of the form in which the
funds were received; (2) the date on which each payment or
remittance from such person was received; (3) the amount received
on such date; and (4) if such funds are deposited in a bank
or other depositary, the name and address of such bank or
depositary.
D. Trust payments made with trust assets. (1) The name and
address of each person to whom a payment for the purposes
of the trust has been made, with moneys or other assets constituting
trust assets, including payments made directly to such person
on behalf of the trustee by a person from whom trust assets
are receivable; (2) the date when and place where each payment
was made; (3) the amount paid on each of such dates and a
statement whether the payment was made in cash or by check
and the manner of payment if made by some other person on
behalf of the trustee; (4) with respect to each such payment
a statement of the nature of the trust claim or if the owner
is trustee the nature of the expenditure other than payment
of a trust claim, for which the payment is made, sufficient
in any case to identify the payment as a payment for a trust
purpose and to show whether it is for labor, materials, taxes,
insurance, performance under contract or subcontract, interest
charges on mortgages, or other particular trust claim or item
of cost of improvement; (5) if any such payment was made pursuant
to contract between the trustee and the recipient of the payment,
the date when such contract was made, whether it was oral
or in writing, and the agreed price named therein; (6) if
any such payment upon a contract or subcontract relates to
a particular item or items of the improvement, or if any such
payment for materials or services relates to materials furnished,
or services, other than daily or weekly labor, rendered for
or upon a particular item or items of the improvement, a description
of such item or items; (7) if any such payment was made with
funds received under an assignment of funds due or earned
or to become due or earned under the contract or subcontract,
a statement of the amount of such funds so used together with
the name and address of the assignee and the date of the assignment.
E. Transfers in repayment of or to secure advances made pursuant
to a “Notice of Lending.” If the trustee has assigned,
paid or otherwise transferred any trust asset in consideration
of or as security for or in repayment of advances applied
or to be applied for a purpose or purposes of the trust, (1)
the name and address of the person to whom the asset was so
transferred; (2) the date of the transfer; (3) a description
of the asset transferred; (4) the amount thereof; (5) the
amount of the consideration therefore or of the advances secured
or repaid thereby; (6) the date or dates when such consideration
was paid or such advances were made and the manner in which
the payment or advance was made.
4. Failure of the trustee to keep the books or records required
by this section shall be presumptive evidence that the trustee
has applied or consented to the application of trust funds
actually received by him as money or an instrument for the
payment of money for purposes other than a purpose of the
trust as specified in section seventy-one of this chapter.
Sec. 76 Right of Beneficiaries to Examine Books
or Records and Make Copies, or to Receive Statement
1. Any beneficiary of the trust holding a trust claim shall
be entitled, upon request, after the expiration of thirty
days from the date his trust claim became payable, and thereafter
not oftener than once in each month, (a) to examine the books
or records of the trustee with respect to the trust, and to
make copies of any part or parts thereof relating to the trust;
or (b) at the beneficiary’s option to receive a verified
statement setting forth the entries with respect to the trust
contained in such books or records.
2. Request for such examination and to make such copies, or
for such verified statement, shall be made in writing served
personally or by registered or certified mail. The request
shall contain a statement of the name and address of the beneficiary,
a description of the improvement of real property, or home
improvement, or the public improvement sufficient to identify
it and to identify the trust, and a statement of the nature
of the trust claim sufficient to identify it, the amount then
due and unpaid, and the due date thereof.
3. Unless otherwise agreed, the examination and copying shall
be had within ten days after service of the request, at a
place within the county in which the improvement, or home
improvement, or public improvement is situated, designated
by the trustee within such ten days, and at a time during
usual business hours, so designated by the trustee. The examination
and copying may be made by the beneficiary or by his agent
duly authorized in writing.
4. Within ten days after service of a request for a verified
statement, the trustee shall serve upon the beneficiary named
in the request a statement, subscribed by the trustee or an
officer thereof and verified on his own knowledge, setting
forth the entries with respect to the trust contained in the
books or records kept by the trustee pursuant to section seventy-five
and the names and addresses of the person or persons who,
on behalf of or as officer, director or agent of the trustee,
made or consented to the making of the payments shown in such
statement.
5. A trustee to whom a request is made for examination of
books or records and for copying therefrom or for a verified
statement of entries in books or records may apply to any
court having jurisdiction of an action to enforce the trust,
to vacate such request on the ground that the person making
the request is not entitled to such examination and copying
or to receive such verified statement. If a trustee on whom
a request for examination and copying or for a verified statement
is served as provided in this section shall refuse to comply
therewith or shall fail to comply therewith within ten days,
or shall apply to the court for an order to vacate the request,
the beneficiary may apply to such court for an order directing
that the trustee comply with the request. Such application
may be made in either case on three days’ notice and
may be determined summarily upon affidavits of the parties.
6. This section does not limit the power of the court in an
action pursuant to section seventy-seven of this chapter or
in any other action or proceeding affecting trust assets or
involving trust claims or the administration of the trust,
to give directions with respect to production or examination
of any books or records of the trustee.
Sec. 77 Action to Enforce Trust
1. A trust arising under this article may be enforced by the
holder of any trust claim, including any person subrogated
to the right of a beneficiary of the trust holding a trust
claim, in a representative action brought for the benefit
of all beneficiaries of the trust. An action to enforce the
trust may also be maintained by the trustee. In any such action,
except as otherwise provided in this article, the practice,
pleadings, forms and procedure shall conform as nearly as
may be to the practice, pleadings, forms and procedure in
a class action as provided in article nine of the civil practice
law and rules; provided, however, that in determining whether
the prerequisites of a class action have been satisfied, the
provisions of paragraph one of subdivision (a) of section
nine hundred one of such law and rules may be waived at the
discretion of the court.
2. Such action may be maintained at any time during the improvement
of real property, or home improvement, or public improvement
and successive actions may be maintained from time to time
during the improvement provided no other such action is pending
at the time of the commencement thereof. No such action shall
be maintainable if commenced more than one year after the
completion of such improvement or, in the case of subcontractors
or materialmen, after the expiration of one year from the
date on which final payment under the claimant’s contract
became due, whichever is later, except an action by the trustee
for final settlement of his accounts and for his discharge.
3. (a) The relief granted in any such action may include any
or all of the following:
(i) Relief to compel an interim or final accounting by the
trustee; to identify and recover trust assets in the hands
of any person together with interest accrued thereon from
the time of the diversion. Interest shall be computed at the
rate equal to the underpayment rate set by the commissioner
of taxation and finance pursuant to subsection (e) of section
one thousand ninety-six of the tax law; to set aside as a
diversion any unauthorized payment, assignment or other transfer,
whether voluntary or involuntary; to enjoin a diversion; to
recover damages for breach of trust or participation therein;
(ii) Enforcement on behalf of the trust of any right of action
constituting a trust asset;
(iii) Determination of the existence and amount of any trust
asset or of any trust claim;
(iv) An order terminating or limiting the authority of the
trustee in the application of trust assets or of any trust
asset, or directing the time and manner of application of
a trust asset or part thereof;
(v) An order requiring the trustee to give security to ensure
the proper distribution of the trust assets, either during
the pendency of the action or thereafter, or to furnish assurance
therefore in any other manner, if it appears that there is
danger that such assets or asset will be dissipated before
judgment or diverted from trust purposes;
(vi) An order for distribution of any trust assets available
for distribution, either with respect to the entire trust
or with respect to particular assets of the trust, or for
retention of particular assets for future distribution. Where
the holder of any trust assets is a trustee or a transferee
who received the assets with the knowledge that they were
trust funds, an order for distribution and retention for future
distribution of any trust assets shall include the amount
of diverted funds plus interest from the time of the diversion
to the date of such order;
(vii) Settlement of the interim or final account of the trustee;
(viii) Final discharge of the trustee at the termination of
the trust, or discharge of the trustee with respect to the
application of specific trust assets;
(ix) Such other and further relief as to the court may seem
necessary and proper;
(x) Any provisional or ancillary relief incident to any of
such relief.
(b) Any relief pursuant to subparagraphs (i), (ii), (iii),
(iv), (v), (ix), or (x) of paragraph (a) shall be deemed to
be for the benefit of the entire class of trust beneficiaries,
including persons who may become trust beneficiaries at any
time before the termination of the trust. Except as provided
in subdivision four of this section, relief pursuant to subparagraph
(vi) shall also be deemed to be for the benefit of such entire
class, but unless the court shall otherwise direct, only those
persons shall be entitled to share in any distribution of
the trust assets who are trust beneficiaries at the time of
entry of the judgment under which distribution is to be made
and who have appeared in the action or filed their claims
in such manner and within such time as the court shall direct,
and whose claims are due and payable at the date for distribution
as set by the order of the court and either are undisputed
by the trustee or have been determined in the action.
4. If an action to enforce a trust of which the owner is trustee
is commenced before the completion or abandonment of the improvement
of real property, or home improvement, or if an action to
enforce a trust of which a contractor or subcontractor is
trustee is commenced before the completion or abandonment
of the performance by the trustee under the contract or subcontract,
the judgment therein may provide for distribution of the assets
then available for distribution among trust beneficiaries
whose claims are then payable, and who have appeared in the
action or who file their claims within such time as the court
shall direct, and the judgment shall so provide unless the
court shall determine that in the circumstances equity requires
that distribution be deferred to await maturity of other trust
claims.
5. If the action to enforce a trust of which a contractor
or subcontractor is trustee is brought after the completion
or abandonment of the performance of the contract or subcontract
but before the completion of the improvement the court may
direct that the action be continued to await events by reason
of which additional trust assets may become available.
6. For the purposes of any distribution of trust assets, the
court may direct that trust claims shown upon a schedule or
schedules filed by the trustee shall be deemed to have been
filed in the action.
7. An action brought under this article shall not be compromised
or discontinued nor dismissed by consent, by default or for
failure to prosecute, except with the approval of the court.
On any application for such approval notice shall be given
in such manner as the court shall direct.
8. Subject to subdivisions three and four of this section,
in any distribution of trust assets pursuant to order or judgment
in an action to enforce a trust, the following classes of
trust claims shall have preference, in the order named:
(a) trust claims for taxes and for unemployment insurance
and other contributions, due by reason of employments, and
for amounts of taxes withheld or required to be withheld;
(b) trust claims of laborers for daily or weekly wages;
(c) trust claims for benefits and wage supplements;
(d) claims for any amounts of wages of laborers for daily
or weekly wages (other than claims for amounts of taxes deducted
and withheld, constituting trust claims for such amounts)
actually deducted from payments thereof, pursuant to law or
agreement, for remittance to any person on behalf of the laborer
or in satisfaction of his obligation, to the extent that such
person is entitled to assert, as a trust claim, the claim
the laborer would otherwise have for such amount. Except as
provided in this subdivision, trust claims entitled to share
in any distribution of trust assets pursuant to order of the
court shall share pro rata.
Sec. 78 Relief After Judgment on Obligation
Constituting Trust Claim
If a trust beneficiary shall recover judgment against the
trustee upon the obligation constituting the trust claim:
(except in the enforcement of a lien as provided in articles
two and three of this chapter)
(a) execution upon the judgment shall not be levied upon any
trust asset;
(b) to the extent of trust assets affected by proceedings
to enforce the judgment, the proceedings shall be deemed to
be for the benefit of all trust beneficiaries who would, at
the time the proceeding is instituted, be entitled to maintain
an action to enforce the trust, and the provisions of section
seventy-seven of this chapter shall apply in any such proceedings.
Sec. 79 Liens not Affected
Nothing in this article shall prevent the enforcement of any
lien as provided in articles two and three of this chapter
and neither such lien nor any satisfaction obtained thereby,
shall be deemed a diversion of trust assets or an unauthorized
preference. For the purposes of determining the share of any
trust beneficiary upon any distribution in an action to enforce
the trust, the trust claim of a trust beneficiary shall not
be reduced by reason of any lien to which he is entitled or
by reason of any rights under any bond to which he is entitled
by reason of his lien.
Sec.
79-a Misappropriation of Funds of Trust
1. Any trustee of a trust arising under this article, and
any officer, director or agent of such trustee, who applies
or consents to the application of trust funds received by
the trustee as money or an instrument for the payment of money
for any purpose other than the trust purposes of that trust,
as defined in section seventy-one, is guilty of larceny and
punishable as provided in the penal law if
(a) such funds were received by the trustee as owner, as the
term “owner” is used in article three-a of this
chapter, and they were so applied prior to the payment of
all trust claims as defined in such article three-a, arising
at any time; or
(b) such funds were received by the trustee as contractor
or subcontractor, as such terms are used in article three-a
of this chapter, and the trustee fails to pay, within thirty-one
days of the time it is due, any trust claim arising at any
time; provided, however, that if the trustee who received
such funds as contractor or sub-contractor disputes in good
faith the existence, validity or amount of a trust claim or
disputes that it is due, the application of trust funds for
a purpose other than a trust purpose, or the consent to such
application, shall not be deemed larceny by reason of failure
to pay the disputed claim within thirty-one days of the date
when it is due if the trustee pays such claim within thirty-one
days after the final determination of such dispute.
2. Notwithstanding subdivision one of this section, if the
application of trust funds for a purpose other than the trust
purposes of the trust is a repayment to another person of
advances made by such other person to the trustee or on his
behalf as trustee and the advances so repaid were actually
applied for the purposes of the trust as stated in section
seventy-one, or if the trustee has made advances of his personal
funds for trust purposes and the amount of trust funds applied
for a purpose other than the trust purposes of the trust does
not exceed the amount of advances of personal funds of the
trustee actually applied for the purposes of the trust, such
application or consent thereto shall be deemed justifiable
and the trustee, or officer, director or agent of the trustee,
shall not be deemed guilty of larceny by reason of such application
or by reason of his consent thereto.
3. Failure of the trustee to keep the books or records required
by section seventy-five shall be presumptive evidence that
the trustee has applied or consented to the application of
trust funds received by him as money or an instrument for
the payment of money for purposes other than a purpose of
the trust as stated in section seventy-one.
4. Notwithstanding any other provision of law, no act of the
trustee in relation to the assets of the trust shall, by reason
of any express covenant as provided in section thirteen or
section twenty-five of this chapter, be deemed larceny in
a case in which it is not declared by subdivision one of this
section to be larceny or in a case in which the act is deemed
justifiable as provided in subdivision two of this section. |
