Baring Industries, Inc. v. 3 BP Property Owner LLC

Background

Baring Industries, Inc. sued 3 BP Property Owner LLC, DaDong Catering LLC, Westchester Fire Insurance Company, Done Right Hood & Fire Safety Inc., and AA Jedson Company LLC. Baring sought to foreclose a mechanic’s lien against property identified as 3 Bryant Park, also known by two other addresses, and to obtain judgment on a bond that had discharged the lien as to 3 BP’s real property. Baring claimed that DaDong owed it $320,356.94 under an agreement for food-service equipment.

3 BP asserted counterclaims for willful exaggeration of the lien, wrongful filing of the lien, and injury to property. Baring moved for summary judgment—a ruling without a trial when no genuine dispute of material fact exists—in its favor on the lien and bond claims and to dismiss 3 BP’s counterclaims. 3 BP and Westchester moved for summary judgment dismissing Baring’s lien and bond claims and granting 3 BP’s willful-exaggeration counterclaim.

Permanent improvement and lien validity

The court held that Baring’s work did not produce a permanent improvement under the New York Lien Law. Baring’s agreement was expressly for the sale of goods and was governed by the Uniform Commercial Code. The agreement and proposal described the work as supplying, delivering, assembling, placing, and securing food-service equipment, while excluding services such as demolition, plumbing, and utility-related work.

The equipment included items such as tables, counters, sinks, exhaust hoods, refrigerators, freezers, stoves, fryers, dishwashing equipment, fish tanks, woks, and microwaves. The court found that many items were freestanding, movable, or equipped with wheels. Other items could be unscrewed and removed with minimal damage. Nearly all of the equipment was removed after DaDong’s bankruptcy auction. The court also relied on the lease’s distinction between permanent leasehold improvements and removable tenant property, as well as evidence that DaDong never sought reimbursement from 3 BP’s construction allowance for Baring’s work.

Because Baring’s work did not result in permanent improvements, the court concluded that Baring was not entitled to a mechanic’s lien in any amount. The court further concluded that 3 BP had not consented to Baring’s work in the manner required for a lien, because the work was not for permanent improvements and DaDong was not reimbursed for it under the lease’s allowance provisions.

Willful exaggeration

New York law provides that a lien must be declared void when the lienor willfully exaggerates its amount. The court found that Baring exaggerated the lien by its entire value because none of its work qualified as a permanent improvement. The court also found that Baring included $165,373.76 attributable to three change orders that were not shown to have been signed as required by the agreement.

Baring produced allegedly signed versions of those change orders only after discovery had closed and while opposing the summary-judgment motion. The court excluded them under Federal Rule of Civil Procedure 37 because Baring failed to produce them during discovery, offered no adequate explanation beyond calling the failure an oversight, and prejudiced the Moving Defendants, who had relied on Baring’s representations that responsive documents had been produced. The court also noted unexplained inconsistencies between the timely produced unsigned versions and the later-produced versions.

The court found the exaggeration willful rather than an honest mistake. It relied on testimony that Baring’s president, Michael Fitzgibbon, lacked detailed knowledge of the project but authorized the lien, and that Baring’s controller, Jennifer Hendrick, had not visited the property and lacked personal knowledge of the work. The court concluded that Baring personnel could have discovered that the equipment was not permanent and that the lien included amounts from unsigned change orders. It therefore granted the Moving Defendants’ motion for summary judgment on 3 BP’s willful-exaggeration counterclaim and denied Baring’s motion to dismiss that counterclaim.

Relief and other claims

The court declared the lien void and held that 3 BP was entitled to $320,356.94 in damages, equal to the lien’s value. The court also stated that 3 BP was entitled to seek damages for the bond premium or interest connected with discharging the lien and reasonable attorney’s fees, but it did not determine those additional amounts on the existing summary-judgment record. The court permitted 3 BP to submit a supplemental motion for those additional damages.

The court granted the Moving Defendants’ motion for summary judgment dismissing Baring’s claims for foreclosure of the lien and judgment on the bond. It denied Baring’s motion seeking that relief. It also denied Baring’s motion for summary judgment dismissing 3 BP’s counterclaims for wrongful filing of the lien and injury to property.

The court dismissed all claims against AA Jedson because no party had advanced claims against it and there was no remaining case or controversy involving that entity. The court also dismissed all claims against Done Right after previously approved stipulations dismissed the parties’ crossclaims with prejudice and released Done Right’s lien. The action remained stayed as to DaDong because of its bankruptcy, and Baring was directed to file a status report about those proceedings. Judge Koeltl ordered the Clerk to terminate AA Jedson and Done Right as parties and closed specified docket entries.

Disposition

The Moving Defendants’ motion for summary judgment was granted. Baring’s motion for summary judgment was denied. The lien was declared void as willfully exaggerated; 3 BP’s willful-exaggeration counterclaim was granted on summary judgment; Baring’s motion concerning the wrongful-filing and injury-to-property counterclaims was denied; and all claims against AA Jedson and Done Right were dismissed.