Reviewed September 7, 2026.
Holt Construction Corp. v. Grand Palais, LLC, 108 AD3d 593 (2d Dept 2013), explains why substituting a bond for a mechanic’s lien does not resolve every related claim. The bond releases the real estate from the lien when statutory requirements are satisfied, but the claimant still must establish entitlement to recovery against the security.
The Second Department held that bonding the lien was not equivalent to paying or discharging an Article 3-A trust claim. It therefore rejected the argument that the bond required dismissal of the trust-diversion causes of action. Its ruling also addressed personal liability based on the evidence concerning the principal’s participation in diversion.
Read the conveyance ruling in its historical context
The court dismissed a fraudulent-conveyance claim under the version of Debtor and Creditor Law § 273 then applicable because of the posted bond. That part of this 2013 decision is not a blanket statement that bonding erases the underlying debt or defeats every transfer claim. New York’s current voidable-transfer statute differs from the former law; the transfer date, applicable statute and claim must be examined.
After bonding, separately review lien validity and duration, contract claims, trust assets, accounting records, indemnity obligations and the surety’s collateral-release terms. There can be no duplicate recovery of the same loss, but one form of security does not automatically eliminate distinct remedies. Individual liability requires its own factual and legal basis.
Kushnick Pallaci PLLC assists clients throughout New York with construction trust-fund diversion litigation. Contact 631-752-7100 or vtp@kushnicklaw.com.
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How very interesting. I have never seen a lien--which then gets bonded off--give rise to a claim for a fraudulent conveyence of real esate. Thanks for raising a law school question!
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