Carl A. Morse, Inc. (Diesel Const., Division) v. Rentar Indus. Development Corp.

• Decision Date: 24 January 1977
• Citation: 56 A.D.2d 30,391 N.Y.S.2d 425
• Parties: CARL A. MORSE, INC. (DIESEL CONSTRUCTION DIVISION), etc., Respondent, v. RENTAR INDUSTRIAL DEVELOPMENT CORP. et al., Appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 425

391 N.Y.S.2d 425 56 A.D.2d 30 CARL A. MORSE, INC. (DIESEL CONSTRUCTION DIVISION), etc., Respondent,
v.
RENTAR INDUSTRIAL DEVELOPMENT CORP. et al., Appellants, et
al., Defendants. Supreme Court, Appellate Division, Second Department. Jan. 24, 1977.

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Tenzer, Greenblatt, Fallon & Kaplan, New York City (Edward L. Sadowsky, Richard Kaye and Mona D. Shapiro, New York City, of counsel), for appellants.

McGarrahan & Heard, New York City (Robert P. Walton, John G. McGarrahan, C. Stephen Heard, Jr. and Mitchell A. Gilbert, New York City, of counsel), for respondent.

Louis J. Lefkowitz, Atty. Gen., New York City (A. Seth Greenwald, New York City, of counsel), concurring in the points contained in respondent's brief with respect to the issue of constitutionality (no brief submitted).

Before GULOTTA, P.J., and COHALAN, RABIN, SHAPIRO and O'CONNOR, JJ.

GULOTTA, Presiding Justice.

In an action to foreclose certain mechanics' liens, and for other related relief, the appeal is from an order of the Supreme Court, Queens County, which denied appellants' motion for partial summary judgment dismissing the first cause of action. We affirm.

Under date of May 15, 1972, the plaintiff and defendant Rentar Industrial Development Corporation (Rentar) entered into a written contract for the construction of a warehouse in Queens County, New York, pursuant to which plaintiff, 'the contractor', as 'agent for the owner', agreed 'to arrange for all (of) the labor and materials and (to) do all (of) the things necessary for the proper construction and completion of the * * * (contemplated) building'. Rentar, as 'owner', agreed to compensate plaintiff in accordance with an agreed schedule of payments, whereupon the work was commenced.

Subsequently, and within the time limited by statute (Lien Law, § 10), plaintiff caused to be filed against the premises four separate mechanics' liens, totalling in excess of $1,000,000, for work, labor and services rendered pursuant to the agreement. When a dispute as to payment arose, plaintiff commenced this action, Inter alia, to foreclose its liens, whereupon defendants moved for summary judgment dismissing the first (foreclosure) cause of action on the following two grounds: (1) that plaintiff, having contracted and performed as defendants' agent, was not a valid lienor and (2) that article 2 of the Lien Law is unconstitutional insofar as it purports to authorize the filing of a mechanic's lien without prior notice or the opportunity to be heard, thus constituting an impermissible taking of property without due process of law.

The Special Term rejected the latter contention, sustained the constitutionality of the statute and found a triable issue of fact as to plaintiff's lienor status. We are in complete agreement therewith.

Beginning with a consideration of the constitutional issue, it is appellants' contention that the creation of an interest in real

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property by the filing of a mechanic's lien, without prior judicial approval, constitutes an unconstitutional deprivation of property without due process of law, citing Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349; Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556; Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406; and North Georgia Finishing v. Di-Chem, 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751. The Special Term agreed generally with this analysis, but held that the deprivation resulting from the filing of a mechanic's lien was De minimis, and therefore not such as would require prior court sanction, citing Spielman-Fond v. Hanson's, 379 F.Supp. 997 (D.C., Ariz., 1973), affd. 417 U.S. 901, 94 S.Ct. 2596, 41 L.Ed.2d 208. Significantly, none of the cases cited, with the exception of Spielman-Fond, involved a mechanic's lien situation.

In Sniadach, for example, the Supreme Court of the United States held unconstitutional, as violative of due process, a Wisconsin prejudgment garnishment statute, pursuant to which a creditor could, without notice and a prior hearing, freeze up to 50% Of the wages of an alleged debtor, upon application by the creditor's attorney to the court clerk. As the Supreme Court later noted in Mitchell v. W. T. Grant Co., supra, 416 U.S. at p. 614, 94 S.Ct. 1895, it was not clear under the statute whether the debtor could immediately challenge the garnishment and thus obtain a prompt postseizure hearing, but in recognition of the obvious fact that a garnishment of wages under the Wisconsin statute involved 'a specialized type of property presenting distinct problems in our economic system' which 'may as a practical matter drive a wage-earning family to the wall', the court concluded that because no extraordinary circumstances justified the statutory scheme, 'absent notice and a prior hearing * * * this prejudgment garnishment procedure violates the fundamental principles of due process' (Sniadach v. Family Finance Corp. of Bay View, supra, 395 U.S. pp. 340--342, 89 S.Ct. pp. 1822--1823).

Somewhat similarly, the Supreme Court, three years later in Fuentes v. Shevin, supra, struck down, as violative of due process, the replevin statutes of Florida and Pennsylvania, again citing the absence of prior notice and a hearing. Under the replevin laws of each of those two States, a creditor was empowered to obtain a writ of replevin by the simple expedient of filing an appropriate form with the court clerk, and then posting a security bond. Under the Florida statute, anyone whose goods or chattels were 'wrongfully detained' was entitled to obtain a writ, there being no statutory requirement that the applicant make a convincing showing that the goods were, in fact, being 'wrongfully' detained; all that was required was that the applicant recite in conclusory fashion that he was 'lawfully entitled to the possession'. Under the Pennsylvania statute, a creditor was not even required to formally allege his right to possession; he had merely to file an affidavit stating the value of the property to be seized. As has heretofore been stated, the creditor, in either event, was required to file a security bond when seeking the writ, and, under either statute, the buyer could regain possession by posting a counter-bond. Under the Florida statute, the debtor would 'eventually' obtain a hearing as the defendant in a repossession action (which the creditor was required to commence), but, under the Pennsylvania law, there would be no hearing unless the Debtor commenced an action to recover possession.

Under this factual umbrella, the Supreme Court concluded that, absent extraordinary circumstances, none of which were found to be present, the Fourteenth Amendment's right to procedural due process required due notice and an opportunity to be heard Before a person could be deprived, even temporarily, of any possessory interest in personalty (Fuentes v. Shevin, 407 U.S. 67, 80--87, 92 S.Ct. 1983, 32 L.Ed.2d 556, Supra). Thus the court stated (p. 96, 92 S.Ct. p. 2002): 'We hold that the Florida and Pennsylvania prejudgment replevin provisions work a deprivation of property without due process of law insofar as they deny the right to a prior opportunity to be heard

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before chattels are taken from their possessor.'

The Supreme Court appeared to retreat somewhat from this position in Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406, Supra, decided two years later, for in Mitchell the majority Sustained a Louisiana prejudgment sequestration statute which permitted a conditional vendor of personal property to obtain a writ of sequestration, ex parte, without prior notice or an opportunity to be heard. The court noted, however, that in order to obtain a writ, the creditor had to (1) file an affidavit specifying the facts he asserted in support of his claim, (2) submit the affidavit to a judge, who was to determine its sufficiency, and (3) file a bond in order to compensate the debtor in the event of a wrongful seizure. In addition, and perhaps most importantly, the court noted that the statute provided for an immediate postseizure hearing on the question of possession, and provided further for the posting of a counterbond, so that the debtor might regain possession in the interim. Under these circumstances, the Supreme Court opined that the requirements of due process had been satisfied, as constitutionalism did not require Louisiana to ignore the fact that, under State law, both the debtor and creditor had an interest in the subject property, And that the creditor's rights were subject to defeasance upon the transfer of possession. Moreover, the court noted, the creditor's security interest would be irrevocably diminished if the installment payments were not maintained so as to parallel the deterioration in the value of the property through use (416 U.S. at pp. 608--609, 94 S.Ct. 1895). In short, the majority concluded (p. 607, 94 S.Ct. p. 1900) that the Louisiana statutory scheme 'effects a constitutional accommodation of the conflicting interests of the (several) parties', and distinguished Sniadach and Fuentes on their facts, stating (p. 609, 94 S.Ct. p. 1901):

'there is scant support in our cases for the proposition that there must be final judicial determination of the seller's entitlement before the buyer may be even temporarily deprived of possession of the purchased goods. * * * The issue at this stage of the proceeding concerns possession pending trial and turns on the existence of the debt, the lien, and the delinquency. These are ordinarily uncomplicated matters that lend themselves to documentary proof; and we think it comports with due process to permit the initial seizure on sworn Ex parte documents, followed by the early opportunity to put the creditor to his proof.'

Finally, in North Georgia Finishing v. Di-Chem, 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751, Supra, the Supreme Court appeared to rely heavily...