Court Permits Simultaneous Foreclosure of Mechanic's Lien and Pursuit of Trust Diversion Claim

In NY Professional Drywall of OC, Inc. v. Rivergate Development the Third Department of the Appellate Division was confronted with deciding whether a lienor, whose mechanic's lien had been discharged by payment of money into Court, could simultaneously foreclose upon a the secured lien and pursue a trust diversion claim under Article 3A of the Lien Law.

The trial court below found that the payment of money into Court to discharge the lien removed the funds from the scope of Article 3A of the lien law and dismissed the trust diversion claim noting that the foreclosure was now fully secured.  In reversing the trial Court, the Appellate Division held that a subcontractor-lienor was permitted to simultaneously pursue lien foreclosure and a trust fund diversion claim.  The Court noted that any number of technical procedural deficiencies in the lien could potentially defeat the foreclosure action and the secured funds would then be released.  Since Article 3A of the Lien Law was meant to supplement Articles 2 and 3, and not replace or supersede them, the simultaneous claims were permitted.

(In the interested of full disclosure I represented the appellant-lienor in this case).  

Vincent T. Pallaci is a partner at the New York law firm of Kushnick | Pallaci, PLLC.  With offices in Long Island and Buffalo, New York, Kushnick | Pallaci PLLC provides legal services to the construction industry across the State of New York.