Standard One Devs., Inc. v. DCD Constr., LLC

2024 NY Slip Op 33458(U)

Opinion

Standard One Devs., Inc. v DCD Constr., LLC 2024 NY Slip Op 33458(U)

October 1, 2024

Supreme Court, Kings County Docket Number: Index No. 525702/2019 Judge: Leon Ruchelsman

Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

SUPREME COURT OF TH~ STATE OF NEW YORK CO:UNTY OF KING S .: COMME;RCIA.L PAR'r 8 --- ~---. ---- ---- ---- -- ---- -- --------x STANDARD RS, . INC. , ONE DEYE LO?E

Plai ntif f, Dec ision and orde· :r

- agai nst -:-- ::(:ndex Nb. 5257 02/2 0i9

DCD CONS TRUC TION , LLC, IGOR AKO-POV, DENI S PORTAEV, EVGENY MAKARIN, ALEKSEI 1-10 0,

KARPOV, STEPHAN VANU CCI, and J_OHN D.OES Defen di3-n :ts·, Octo ber 1, 2024 -.X·

. - - ---- - - - - - . . - - - - - - - - - - -·-- - - - - - - - - - - - - - - -

Moti oi:r Seq.- #5, #6 & #7 P:RESENT: HON. LEON RUCHELSMAN

emen t purs uant t.o

The plai nti·f f has move d se~k ing sutnm ary judg

CPLR §321 2 argu ing ther e are .

no ques

.

tion s o·f fact they -are ·ent itled

to re:).: ief for Ci:3.Hse$ of acti on two thro ugh seve n of- the com plain t.

aTin have both cros s:-

The defe no.an ts. Alek se.i .Karp ov and Ev'ge riy Mak sanc tion s. The moti ons move d seek ing summ ary judg eme nt and for J?ape rs were ·sub mitt ed by th_e.

nave peen opp.O s.ed :resp ectiv ely.

part i.es -and argu ment ~ held . Afte r revie win_ g all. the· argu ment s- this

cour t ·now mal<,e,;1 the follo wing .dete rmin ation .

plai ntif f, t:he gene ral This laws uit was. commence,d by the at 327 20 th Stre et in

cont ract or ·at a cons truc tion site loca:t (:,c;i

a

King s c;:ounty.Mp.y. 19, _20.19 the pia: intif f: ente red into on

¢.on struc tiori . L.LC for _an s:ubc ontra c:t:o r ag-re emer it. with defe ndan t DCD The plai ntif f forw ard~ d to DCD

and_ by Nove mber .2019 had paid appr oxi:m ately $202 , 989-. 12

ond to

$643 ;277 -.12. Pri,6 -r to- Nove mber 2019 nco: fail ed to res_p

rE=q uests from plai ntif f canc ei:ni n-g the use ot the t:unds alre ady

from .the jop.. T1:)..is paid and by Octo ber 2019-- DCD, was terqi .inat ed.

·········· ···-······ ·-···-- 1 of 8 [* 1]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

actio n for

lawsu it was filed and the comp laint alleg ed causE !s of

contr act and diver sion 0£ trust funds agair tst each breac h of

defen dant. These motio ns have how been filed . Plain tiff asser ts

ed pursu ant

that they are statu tory bene ficia ries of a trust impos

to Artic le 3-A of the Lien Law. The defep dants coun ter no class plain tiff

certi ficat ion was ever obtai ned and conse quent ly t.he sion. In canno t secur e any summ ary judge ment of the trust diver

the defen dartts argue the plain tiff has no stand ing

t

addit ion,

trust funds . The indiv idual defen dants move seeki ng pursu e

dism issal of any claim s again st them. As noted the motio ns are

oppos ed.

Conc lusion s of Law

d~spu te

Where the mate rial facts at issue in a cas~ ate in of New York,

summ ary judgm ent canno t be grant ed (Zuck ertnan v. City

4 9 NYS2d 557, 427 NYS2d 595 [ 1980] ) . Gene rally, it is for the

any injur y, jury, the trier ·of fact to deter mine the legal cause of facts then

r:-owe ver, where only one concl usi.ci n may be drawrt from the court as a

the quest ion o.f legal cause may be decid ed by the trial NYS3d 324 [2d

tnatte :r of law (Mari no v. Jamis on, 189 AD3d 1021, 136

Dept. , 2021) .

The first quest ion that must be addre ssed is wheth er the

plain tiff is a bene ficia ry of any trust . Pursu ant to the Lien Law

ctor for the

all funds paid to an owner , a contr actor or a eiubc ontra

2

2 of 8

[* 2]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

are held by the

impro veme nt of prop erty cons titut e trus t funds that

party rece iving them , the trust ee, on beha lf of the part ies who

gene rally ; Lien

prov ided labo r and mate rials to the trust ee (see,

Law, §§70 to 79-a: ). As the cour t expl ained in Aqui lino v. U.S., 10

NY2d 271, 219 NYS2 d 254 [ 1961 ] "the only purp ose for whic h the

(id) .

cont racto r may use the funds a:re trus t purp oses"

owne r trus t, in In re Grif fin, 111 BR 42 Conc ernin g the

a bene ficia ry of

[W. D,N .Y :. 1990 ]) the cour t held an owne r is not

any asse ts given to a cont racto r. Citir ig earl ier auth ority the

a cont racto r by a

cour t expl ained that "the advan ceme nt of sums to cont ract is not one

real prop erty owne r purs uant to the term s of a New York Lien Law"

of the expen diturE :'!s enum erate d iri §71 of the 2002] the

(id) . Howe ver i in In re Dobr ayel, 2.8 7 BR 3 · [ S. D. N. Y.

Grif fin and conc luded an owne r is a cour t decl ined to follo w

bene ficia ry of ar1 owne r trus t. The cour t expl ained that the trus t

the prop er paye es"

crea ted by the Lien Law were for t]J.e "ben e.fit of ifica lly liste d in

whic h inclu ded owne rs altho ugh they are not spec deci sion , whic h

the statu te -as a trus t bene ficia ry. Howe ver, that 1/Jas base d upon the

held an ciwrier the bene £icia ty of such tru$ t, tha:t "if the cont racto r does not Pi3.Y his spec ific fact

it is the owne r

subc cintr actci rs, work ;ers and mate rial± ueh, ultim ately ori his prop erty and

who must p;;i_y to avoid the subc ontra ctors ' liens

who must , there by, be the ultim ate bene ficia ry of the statu te"

racto r is

(id) . Ther e is no simi lar situa tion wher eby the cont

3

3 of 8

[* 3]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

liabl e to any debts owed by the subco ntrac tor. It is clear that a

ntrac tor owes

contr actor will not be liabl e to those whom the subco and those iii

money since there is no pri vity betwe en the contr actor

contr act with the subco ntrac tor. In Avon Elec trica l Supp lies, Inc.

[2d Dept. ,

v. W.K.T . Asso ciate s Inc., 297 AD2d 768, 747 ,NYS2d 575 "lack

2002] the court spec ifica lly held that sub-s ubco ntrac tors

stand ing to bring [§71] actio ns becau se they had no contr actua l

with eithe r the prope rty owner or the gener al relat ionsh ip

contr actor and, as such, are hot bene ficia ries of [the owner or

gener al contr actor 's] Lien Law tru.st ' Cid} .

1

'

"

Lien Law

Turni ng to subco ntrac tor trust s, pursu ant to New York subco ntrac tor

§70(7 ) a subco ntrac tor trust cons ists of any funds a parti es

recei ves which the subco ntrac tor holds in trust for those ialme n or

with whom it contr acts inclu ding Sub-s ubco ntrac tors, mater

labor ers. A bene ficia ry of such trust s are those owed money for

the impro veme nts to prope rty. On1y such bene ficia ries main tain

trust claim s. There can be no dispu te the contr actor is not a tor.

bene ficiar y of any asset s held by the subco ptrac

argue s that the plain tiff iS indee d a The plain tiff

bene ficia ry of the 'trus t' creat ed when the plain tiff paid. the

defen dant. The plain tiff asser ts the plain langu age of Lien Law

that "the asset s .of the trust of which a §70 ( 7) ( a) state s .. under the

subco ntrac tor is trust ee are the funds recei ved by him, Howe ver, Lien

Subc ontra ct" which encom pass the facts of this case.

4

4 of 8

[* 4]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

Law §71 ( 2) specif ically states that trust assets held by a

contra ctor or subcon tractor trustee "shall be applie d for the

followi ng expend ituresrl includ ing the paymen t of claims of

"subco ntracto rs, archit ects, engine ers, survey ors, labore rs and

materia lmen"' (id). Thus, the languag e contain e:d in Lien Law

§70 (7) (a) which states trust funds consis t of funds "receiv ed by

him" do not includ e funds paid direct ly from the contra ctor for "

work. perform ed (or not perform ed) by the subcon tractor . Rather , it

only include s funds paid to the subcon tractor which the

subcon tractor then owes· to others . The benefi ciaries .of sucb trust

are those owed money by the subcon tractor .

Moreov er, the postur e of the claims in this case is unusua l.

The Lien Law has been enacted "to ensure that 'those who have

:direct ly expend ed labor and materi als to improv e real proper ty ... pt

tbe directi on of t11e owner or a genera l contra ctor' receive paymen t

for the. work a·ctual ly perform ed" (Atlas Buildin g System s· Inc., v.

Rende, 236 AD2d 4 94, 653 NYS2d 694 [2d Dept,, 1997] ) . In this case

the plaint iff seeks to recove r funds alrea,dy paid that were

alleged ly not utilize d for the constru ction at hand. That reques t

not corripor t with the entire statuto ry scheme . Thus, the does

plaint iff is not a benefi ciary of any trust assets and cannot seek

the return of any such assets .

Further more, Lien Law §71 (4) provid es that "perso ns having

claims for paymen t of amount s for which the trustee is author ized

5

5 of 8

[* 5]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

bene ficia ries

to use trust asset s as provi ded in this secti on are

of the trust " (id). Thus, a trust bene ficia ry of a subco ntrac tor is oblig ated to

trust can only be a party to whom the subco ntrac tor parag raphs (a)

pay "auth orize d" under the categ ories of paym ent in

throu gh (f) of Lien Law §71(2 ). The entir e statu tory schem e thus

<:lyp aid. The exclu des a contr actor seeki ng to recov er funds alrea a contr actor .

Lien Law simpl y does not provi de any recou rse to such perm its the

Indee d, the parti es have not prese nted any case which asset s. Of cours e breac h of contr actor to recov er suc.:h trust is forec losed

contr act claim s may exist s, howev er, the contr actor

from pursu ing such Lien Law claim s.

pursu ant

Mbreo verr it is well settl ed that an actio n broug ht repre senta tive

to Artic leJ-A of the Lien Law must be broug ht as a

all bene ficia ries of the trust (see, Atlas Build ing actio n for

v. Rende , 236 AD2d 494, 653 NYS2d 694 (2d Dept. , Syste ms Inc.,

The capti on of the comp laint in this case state s that the

1997] ).

lf of itsel f and

laws uit is being broug ht by the plain tiff "on beha trust funds recei ved

beha lf of all perso ns entit led to share in the in conne ction

by the defen dants pursu ant to Lieh Law Artic le 3-A th St., Brook lyn, New York" (~, with the const ructi on at 327 20 [NYSCEF Doc. No. l] ) . The comp laint nev-er Comp laint, Capti on

menti ons any other memb ers of any class .

LLC, 27

In Mike Build ing and Cons tructi on Inc., v. Just Homes

[Supre m.e Cour t Kings Count y 2010] the MiscJ d 833, 901 NY.S2d 458

6

6 of 8

[* 6]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

memb er of

court held that where the plain tiff claim s it is the only

arid there fore no certi ficat ion is neces sary, such the class

nce paym ents

certi ficat ion may still be neces sary if there is evide the class .

were made to other s and there mayb e other memb ers of

The court furth er expla ined tha ''the failu re to obtai n •

actio n under

certi ficat ion is not fatal to plain tiff's cause of

artic le 3-A so long as it is cured " (id) . Indee d, the court

the plain tiff sixty days in which to obtai n class affor ded

certi ficat ion. The court concl uded that "unt il such certi ficat ion it canno t be

occur s and other memb ers of the class: are ident ified , asset s since ,

det:er mi,ned wheth er de£en dants actua lly diver ted trust ficia ries

as noted , there is evide nce of paym ents made to trust bene trust asset s

other than plain tiff which may excee d the total of

recei ved, inclu ding those held cons truct ively " (id).

ests

In this case the plain tiff does not sh,are any other inter dant. The with any other e:ntit i,es that are owed money by the defen but rathe r it

plain tiff is not seeki ng payme nt for work perfo rmed , the retur n of funds for paym ents made where no work was

is ~eeki ng

That is entir ely diffe rent than the stand ard perfo rmed.

licab ility

subco ntrac tor trust and once again high. lights the inapp

of the trust to the facts of this case.

based on the fo,reg oing, the motio n of the There fore,

the Lien Law

. d,efen dants seeki ng summ ary judge ment dism issing all

claim s as to all de.fen dants is grant ed. 1he plain tiff'$ motio n

7

7 of 8

[* 7]

FILED: KINGS COUNTY CLERK 10/01/2024 11:44 AM INDEX NO. 525702/2019 NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 10/01/2024

.see king· summary iudgemen t is. cons l;?!.qµent, 1 y den i_ed.

A:ny Itlotiqn seeking ;to d_i.smiss the breach .of contract claim is

denied.

Lastly, any· .reque.-st for sanctions ;is derri·ed.

Sq ordered.

ENTER:

DATED: October J,, 2024

Brooklyn N.Y. Hon. Leon R_qchelsmah JSC

8

8 of 8

[* 8]