        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

1361
CA 13-00793
PRESENT: FAHEY, J.P., LINDLEY, SCONIERS, AND WHALEN, JJ.


WM. B. MORSE LUMBER CO., PLAINTIFF-RESPONDENT,

                    V                              MEMORANDUM AND ORDER

NORTH PONDS APARTMENTS, LLC, ET AL., DEFENDANTS,
AND NEW YORK INCOME PARTNERS, LLC,
DEFENDANT-APPELLANT.


LAW OFFICE OF BRUCE S. ZEFTEL, BUFFALO (BRUCE S. ZEFTEL OF COUNSEL),
FOR DEFENDANT-APPELLANT.

WOODS OVIATT GILMAN LLP, ROCHESTER (ROBERT D. HOOKS OF COUNSEL), FOR
PLAINTIFF-RESPONDENT.


     Appeal from an order of the Supreme Court, Monroe County (David
Michael Barry, J.), entered December 28, 2012. The order granted the
motion of plaintiff for partial summary judgment seeking a
determination that its mechanic’s lien is valid and has priority over
the construction mortgage held by defendant New York Income Partners,
LLC.

     It is hereby ORDERED that the order so appealed from is
unanimously modified on the law by denying plaintiff’s motion except
to the extent that it seeks a determination that the mechanic’s lien
has priority over the construction mortgage held by defendant New York
Income Partners, LLC and as modified the order is affirmed without
costs in accordance with the following Memorandum: Plaintiff
commenced this action to foreclose on its mechanic’s lien when it did
not receive payment for lumber and building materials that it supplied
to the general contractor for property owned by defendant North Ponds
Apartments, LLC (NPA). Defendant New York Income Partners, LLC (NYIP)
holds the mortgage on the property (hereafter, construction mortgage).
Plaintiff moved for partial summary judgment, as later limited by a
stipulation between the parties, seeking a determination that its
mechanic’s lien is valid and has priority over NYIP’s construction
mortgage. NYIP cross-moved for, inter alia, summary judgment
determining that its construction mortgage has priority over
plaintiff’s mechanic’s lien. In granting plaintiff’s motion, Supreme
Court determined that plaintiff’s mechanic’s lien was valid and had
priority over the construction mortgage because the building loan
contract filed in connection with the construction mortgage did not
contain the requisite borrower’s statement pursuant to Lien Law § 22.
We conclude that NYIP’s construction mortgage is subordinate to
plaintiff’s mechanic’s lien, but only in the event that there are
                                 -2-                          1361
                                                         CA 13-00793

funds to which the lien could attach, which is an issue yet to be
decided. We therefore modify the order accordingly.

     “A building loan contract . . . 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” (Lien Law § 22
[emphasis added]). Here, the building loan contract filed by NYIP’s
predecessor in interest did not “contain” the statement verified by
the borrower, as required by Lien Law § 22. Rather, the statement was
filed separately, albeit minutes later, under the same cover sheet as
the UCC-1 financing statement.

     Lien Law § 22 “ ‘absolutely and unconditionally prescribes the
penalty which shall follow the failure to file’ ” a building loan
contract that complies with the statute (P. T. McDermott, Inc. v
Lawyers’ Mtge. Co., 232 NY 336, 348), i.e., “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” (§ 22), including subsequent
mechanic’s liens. As the Court of Appeals noted in Altshuler Shaham
Provident Funds, Ltd. v GML Tower, LLC (21 NY3d 352, 364-365, rearg
denied 21 NY3d 1047), “the reason for public filing is to allow any
interested contractors, subcontractors and material suppliers to
discover the level of financing available for construction so that
they might guide their actions accordingly” (see Nanuet Natl. Bank v
Eckerson Terrace, 47 NY2d 243, 247).

     We agree with NYIP, however, that plaintiff failed to establish
as a matter of law “that there were funds due and owing from [NPA, the
owner,] to [the general contractor] to which [its mechanic’s] lien
could attach” (L & W Supply Corp. v A.D.F. Drywall, Inc., 55 AD3d
1026, 1027; see Tomaselli v Oneida County Indus. Dev. Agency, 77 AD3d
1315, 1316), and thus plaintiff was not entitled to partial summary
judgment in that respect. Contrary to NYIP’s contention, however, it
has not established as a matter of law that the NPA had paid the
general contractor in full at the time plaintiff filed the lien (see
generally Zuckerman v City of New York, 49 NY2d 557, 562).




Entered:   February 7, 2014                     Frances E. Cafarell
                                                Clerk of the Court
