Beacon Const. Co., Inc. v. Matco Elec. Co., Inc., No. 910
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
| Writing for the Court | Before SMITH, Senior Circuit Judge, OAKES, Circuit Judge, and JAMESON; JAMESON |
| Citation | 521 F.2d 392 |
| Parties | BEACON CONSTRUCTION COMPANY, INC., Plaintiff-Appellee, v. MATCO ELECTRIC COMPANY, INC., d/b/a Dwyer Electric Co., Inc., Defendant-Appellant. ocket 75-7032. |
| Docket Number | No. 910,D |
| Decision Date | 13 August 1975 |
Page 392
v.
MATCO ELECTRIC COMPANY, INC., d/b/a Dwyer Electric Co.,
Inc., Defendant-Appellant.
Second Circuit.
Decided Aug. 13, 1975.
Page 394
Rodney A. Richards, Endicott, N. Y. (Becher, Card, Levy & Richards, Endicott, N. Y., on the brief), for defendant-appellant.
Robert S. Sherer, Boston, Mass. (John W. Gahan, III, Roche, Carens & DeGiacomo, Boston, Mass., Howard L. Meyer, McGrath, Meyer, Lieberman & Lipp, Buffalo, N. Y., on the brief), for plaintiff-appellee.
Before SMITH, Senior Circuit Judge, OAKES, Circuit Judge, and JAMESON, Senior District Judge. *
JAMESON, District Judge:
This is an appeal from a summary judgment in favor of plaintiff-appellee Beacon Construction Company, Inc. (Beacon) declaring null and void a notice of lien filed by defendant-appellant, Matco Electric Company, Inc. (Matco) and a surety bond given by Beacon to dissolve the lien, and awarding Beacon $3,516.00, the premium paid for the bond.
Background
Matco, a New York corporation, entered into a subcontract with Beacon, a Massachusetts corporation, to furnish and install an electrical system for a housing project Beacon was constructing in Rochester, New York pursuant to a general contract with the owner. Under the subcontract Matco expressly waived its right to file a mechanic's lien under New York law, paragraph 14 providing:
"The Subcontractor hereby agrees that no mechanic's or other lien . . . shall be filed or maintained by it against the said building and improvements and real estate appurtenant thereto, or any part thereof, for or on account of any work or labor done or materials furnished under this Subcontract . . . in or about the erection and construction of said buildings and improvements and that the filing of any lien . . . shall be grounds for termination of this Subcontract under the provisions of Paragraph 9 above. The Subcontractor hereby formally and irrevocably releases and waives any and every mechanic's, materialman's and any and every other lien, . . . that it has or may at any time be entitled to have against the aforementioned buildings, improvements and real estate, together with its right to file any and every such lien. . . . The subcontractor hereby irrevocably constitutes the Contractor its agent to discharge any liens . . . which may be filed by or on behalf of the Subcontractor against the property."
Despite this contractual provision, Matco filed a notice of mechanic's lien in the office of the county clerk on August 29, 1974 in the amount of $293,001.52. The filing of the lien placed an encumbrance on the property and had the effect of impeding or preventing the release of funds by the construction lender. 1
Page 395
On September 11, 1974, this action was filed pursuant to 28 U.S.C. § 1332, in which Beacon sought a judgment under the Declaratory Judgment Act, 28 U.S.C. § 2201, declaring mechanic's lien null and void. 2 On October 3, 1974, Matco filed an action against Beacon in the Supreme Court, State of New York, to impress a lien pursuant to Article 3A, McKinney's Consol.Laws, c. 33, Lien Law, State of New York. 3 On the same date a surety bond in the amount of $351,601.82 was filed, and the mechanic's lien was thereby discharged. 4
On October 23, 1974 Matco filed a motion to dismiss for failure to state a claim for which relief can be granted; or, in the alternative, for summary judgment or security for costs. On October 29, 1974 Beacon filed an amended complaint, seeking as additional relief a declaration that the bond was void and an award for the amount of the bond premium. On the same date Beacon filed a motion for summary judgment.
In granting Beacon's motion the district court held that "the defendant breached its contract with the plaintiff, when, on August 29, 1974 it caused to be filed a notice of lien"; that the lien was "null and void", the bond was void and plaintiff was entitled to recover the premium it had paid for the bond.
Matco contends on appeal that (1) the amended complaint does not state a claim for which relief can be granted pursuant to the New York Lien Law; (2) the federal courts lack jurisdiction because the amount in controversy does not exceed $10,000; and (3) Beacon was not entitled to recover the bond premium because other alternatives were available which would not have required the payment of a bond premium.
I. Does Amended Complaint State a Claim for Relief?
A. New York Lien Law
Under New York Lien Law § 3 a subcontractor who performs labor and furnishes material for the improvement of real property has a lien for the value or agreed price of the labor and material. Notice of the lien must be filed in the clerk's office of the county where the property is situated. § 10. Upon the filing of notice the lien attaches and becomes effective. Manton v. Brooklyn, etc., Realty Co., 217 N.Y. 284, 111 N.E. 819 (1916). The notice must be served upon the owner of the property to be fully enforceable against him. § 11. Section 19 relating to "Discharge of Lien for private improvement" provides in § 19(4) that an owner or contractor may have a lien discharged by filing with the county clerk a surety bond, approved by the court or a judge or a justice thereof. 5
A subcontractor may forego or waive his right to a mechanic's lien. Under Section 34 of the New York Lien Law, however, he may not do so "except by an express agreement in writing specifically to that effect, signed by him or his agent". It is undisputed that the waiver executed by Matco complied with this statutory provision.
Matco contends, however, that notwithstanding this waiver, once the lien was filed, Beacon's exclusive remedy for attacking the lien was to serve a notice requiring the lienor to commence an action to foreclose the lien, pursuant to
Page 396
New York Lien Law § 59. 6 Beacon argues that the waiver provision, authorized by Section 34, is an independently enforceable covenant, that the district court was correct in holding that Matco had breached its contract when the lien notice was filed, and that 28 U.S.C. § 2201 provides an appropriate remedy.It is well settled that an express waiver in a contract signed by a subcontractor in compliance with Section 34 of the New York Lien Law is binding and enforceable. In Arr-Em Plastering Corp. v. 515 East 85th Street Corp., 25 A.D.2d 59, 266 N.Y.S.2d 944, 946 (1966) the Supreme Court of New York, Appellate Division, First Department, held that such a waiver extinguishes the right to file a notice of lien, and the relinquishment of the right to file a lien "cannot be recalled or expunged". The court held further that the subcontractor's waiver was "inconsistent with and excludes the statutory basis for a mechanic's lien", and "(w)hen the lien has been once waived it cannot afterward be revived in the absence of an express agreement to that effect with the owner . . . ." (citing 57 C.J.S. Mechanics' Liens § 222, pp. 792-793). In that case a plastering corporation sought foreclosure of its mechanic's lien, and the owner of the property had moved for summary judgment dismissing the cross-complaint of the carpentry subcontractor. Reversing the lower court, it was held that the motion for summary judgment dismissing the cross-complaint of the subcontractor should have been granted. The court did not consider the procedural question here presented, but it is clear from the court's decision that if this were an action to foreclose the lien or proceedings under Section 59 of the New York Lien Law, summary judgment would be proper.
Although it is apparent that Beacon should prevail on the underlying merits of this litigation, Matco contends that the federal courts are powerless to grant declaratory relief and that, "The only way in which the validity of the lien can be determined is in an action to foreclose the lien, or upon the failure of the lienor to commence such an action after notice given pursuant to § 59". Matco bases its argument on the New York cases which have interpreted New York Lien Law §§ 19 and 59, which prescribe procedures for determining the validity of mechanic's liens. These cases are, at first glance, very persuasive. In Application of Jos. Blitz, Inc., 36 Misc.2d 1028, 234 N.Y.S.2d 671, 672-674 (1962), a case involving the validity of a mechanic's lien filed despite a waiver, the court articulated the general approach taken by the New York courts. It recognized that prior New York cases had held that (1) where a subcontractor files a lien in violation of a waiver, the lien may not be summarily discharged by motion, but the only remedy of the owner or contractor is to proceed under section 59; and (2) "The courts have no inherent power to cancel or discharge mechanic's liens on grounds other than those specified in the Lien Law." 7
Page 397
Did these decisions of the New York courts preclude the district court from exercising its discretion to grant declaratory relief? An answer to this question requires an analysis of the purpose and effect of the Declaratory Judgment Act.
B....
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Frazier v. Ward, No. 73-CV-306.
...Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952); Beacon Const. Co., Inc. v. Matco Electric Co., Inc., 521 F.2d 392, 397 (2d Cir. 1975). It is settled that discretion to decline jurisdiction for declaratory judgment exists, but such discretion cannot be exe......
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NYS Ass'n For Retarded Children v. Carey, No. 72-C-356
...prior to the state court action and for this reason alone has precedence over the state action. Beacon Constr. Co. v. Matco Elec. Co., 521 F.2d 392, 399 n.13 (2d Cir. More fundamentally, even though the major issues in this case were settled by consent three years ago, a number of complex q......
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In re Quigley Co., Inc., Bankruptcy No. 04-15739(SMB).
...relationships without awaiting a violation of the rights or a disturbance of the relationships." Beacon Constr. Co. v. Matco Elec. Co., 521 F.2d 392, 397 (2d Cir.1975) (quoting Aetna Cas. & Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937).) A party seeking a declaratory judgment has ......
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Dow Jones & Co., Inc. v. Harrods, Ltd., No. 02 Civ. 3979(VM).
...ed. 1998) ("Wright, Miller & Kane"); 12 James Wm. Moore et al., Moore's Federal Practice, § 57.031[2], at 57-11, 57-12 (3d ed.2001). 30. 521 F.2d 392 (2d 31. Id. at 397 (quoting Aetna Cas. & Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir.1937)). 32. 28 U.S.C. § 2201(a). 33. See Wycoff, 34......
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Frazier v. Ward, No. 73-CV-306.
...Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952); Beacon Const. Co., Inc. v. Matco Electric Co., Inc., 521 F.2d 392, 397 (2d Cir. 1975). It is settled that discretion to decline jurisdiction for declaratory judgment exists, but such discretion cannot be exe......
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NYS Ass'n For Retarded Children v. Carey, No. 72-C-356
...prior to the state court action and for this reason alone has precedence over the state action. Beacon Constr. Co. v. Matco Elec. Co., 521 F.2d 392, 399 n.13 (2d Cir. More fundamentally, even though the major issues in this case were settled by consent three years ago, a number of complex q......
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In re Quigley Co., Inc., Bankruptcy No. 04-15739(SMB).
...relationships without awaiting a violation of the rights or a disturbance of the relationships." Beacon Constr. Co. v. Matco Elec. Co., 521 F.2d 392, 397 (2d Cir.1975) (quoting Aetna Cas. & Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937).) A party seeking a declaratory judgment has ......
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Dow Jones & Co., Inc. v. Harrods, Ltd., No. 02 Civ. 3979(VM).
...ed. 1998) ("Wright, Miller & Kane"); 12 James Wm. Moore et al., Moore's Federal Practice, § 57.031[2], at 57-11, 57-12 (3d ed.2001). 30. 521 F.2d 392 (2d 31. Id. at 397 (quoting Aetna Cas. & Surety Co. v. Quarles, 92 F.2d 321, 325 (4th Cir.1937)). 32. 28 U.S.C. § 2201(a). 33. See Wycoff, 34......