Home Federal Sav. & Loan Ass'n v. Four Star Heights, Inc.

• Decision Date: 26 November 1971
• Docket Number: No. 1,1
• Citation: 333 N.Y.S.2d 334,70 Misc.2d 118
• Parties: HOME FEDERAL SAVINGS AND LOAN ASSOCIATION v. FOUR STAR HEIGHTS, INC., etc., et al. Action
• Court: New York Supreme Court

Page 334

333 N.Y.S.2d 334

70 Misc.2d 118

HOME FEDERAL SAVINGS AND LOAN ASSOCIATION v. FOUR STAR HEIGHTS, INC., etc., et al.

Action No. 1.

Supreme Court, Special Term, Kings County, Part I.

Nov. 26, 1971.

[70 Misc.2d 119] Hugo P. Dreher, Ridgewood, for plaintiff, by Charles A. Iovale, Queens Village, of counsel.

Wager, Ehrlich & Ginsberg, Mineola, for defendant, Duo Plumbing & Heating Corp.

Marvin R. Javitz, New York City, for defendant, Naiztat Iron Works, Inc.

MEMORANDUM

SIMON J. LIEBOWITZ, Justice.

Plaintiff moves for reargument. Defendant Naiztat Iron Works, Inc. (Naiztat), in opposing the motion to reargue, contends at the outset that since, as of the date that the notice of motion for reargument was served, namely, October 6, 1971, no order had as yet been signed and entered on the court's decision denying the original motion for summary judgment, the court is without jurisdiction to entertain the motion to reargue. This contention lacks substance. Even though an order determining a motion has not yet been settled and entered, the court has power to correct its decision, whether upon a motion to reargue (Friedman v. Mealy, 20 Misc.2d 919, 195 N.Y.S.2d 439), or in the absence of a motion for reargument (Bonilla v. Reeves, 49 Misc.2d 273, 278, 267 N.Y.S.2d 374, 380). Moreover, an order in the instant case determining the original motion for summary judgment was made and entered October 7, 1971. No useful purpose would be served by a disposition of the motion to reargue on the basis of defendant Naiztat's preliminary objection since such disposition would merely have the result of requiring plaintiff to renew the motion to reargue on the basis of the order of October 7, 1971.

The motion for reargument is accordingly granted. Upon reargument, the original decision denying plaintiff's motion for summary judgment as contained in the order of October 7, 1971 is vacated and the original motion for summary judgment is granted as indicated hereinbelow.

The action is one to foreclose a building loan mortgage dated July 16, 1970 which was executed by the defendant Four Star Heights, Inc. as owner in fee of the subject real property. The only defendants who have interposed answers to the complaint are the defendant Duo Plumbing & Heating Corp. (Duo) and defendant Naiztat, both of whom will also be referred to herein collectively as 'the defendants.'

This motion for summary judgment presents the question of whether the building loan mortgage held by plaintiff takes priority over the respective mechanics' liens filed by the defendants. The evidentiary facts and the documentary evidence and proof proffered by plaintiff conclusively show that money ($37,500) was advanced by plaintiff on July 16, 1970 and that the building loan mortgage and building loan contract, both dated July 16, 1970, were respectively filed and recorded on July 21, 1970, all prior to the time that the defendants filed their respective notices of lien on December 18, 1970.

Section 13, subdivision (2), of the Lien Law, relating to mechanics' liens, provides that 'When a building loan mortgage is delivered and recorded a lien shall have priority over advances made on the building loan mortgage after the filing of the notice of lien; But such building loan mortgage, whenever recorded, to the extent of advances made before the filing of such notice of lien, shall have priority over the lien, provided it or the building loan contract contains the covenant required by subdivision three hereof and provided the building loan contract is filed as required by section twenty-two of this chapter. * * *' (Emphasis supplied.)

The building loan mortgage in the instant case contains the covenant required by subdivision (3). The requirement reads in part as follows: 'Every such building loan mortgage * * * recorded subsequent to the commencement of the improvement and before the expiration of four months after the completion of the improvement shall contain a covenant by the mortgagor that he will receive the advances secured thereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of improvement, * * * before using any part of the total of the same for any other purpose * * *.'

The plaintiff has also satisfactorily shown that the building loan contract was filed as required by, and in compliance with, section 22 of the Lien Law, which requires the filing of a building loan contract and specifies the requisite contents of such a contract.

In short, plaintiff has clearly established compliance with those sections of the Lien Law which accord to a building loan mortgage priority over mechanics' liens filed subsequent to the mortgage.

The denials in the respective answers of the defendants of any knowledge or information sufficient to form a belief, without any supporting evidentiary facts, do not raise a triable issue; nor is there any merit to the defendants' defenses and counterclaims in so far as those defenses and counterclaims purport to affect plaintiff's priority of claim.

Duo's first counterclaim merely alleges in substance that Duo duly filed, on December 18, 1970, a mechanic's lien for plumbing materials furnished and labor performed and that plaintiff's interest or lien 'is subsequent and subordinate' to Duo's lien. The second counterclaim, also asserted as a cross claim against defendant Four Star Heights, Inc. and certain officers and/or directors of said corporation, alleges that the advance of money which the officers and/or directors of Four Star Heights, Inc., received for the improvement of the subject real property constituted a trust within the meaning of Article 3--A of the Lien Law for the purpose of paying Duo and others who furnished materials and performed labor for the improvement of the property; that plaintiff, before advancing money under the building loan contract and the mortgage, knew or should have known that the officers and/or directors of Four Star Heights, Inc., were in violation of the trust and fiduciary relationship as set forth in Article 3--A, and that the moneys that plaintiff advanced to Four Star Heights, Inc. and its officers and/or directors would not be used or applied for improvement of the property or for the payment of such improvements.

The affidavit submitted on behalf of Duo in opposition to plaintiff's motion for summary judgment sets forth certain contentions which appear to represent an attempt on the part of Duo to furnish the underlying rationale and the evidentiary facts to support the allegations of the first counterclaim, which in effect claims that Duo's lien takes precedence over plaintiff's mortgage. These contentions are devoid of merit. While Duo may have furnished materials and performed work with respect to the subject property prior to the time that the plaintiff's building loan contract and building loan mortgage were filed and recorded, such alleged fact in itself would not have material bearing on the question of priority as between that mortgage and the subsequently filed mechanic's lien. Subdivision (2) of section 13 of the Lien Law, hereinabove quoted in part, specifying the circumstances in which a building loan mortgage is entitled to priority, embraces a situation in which improvements to the real property have commenced prior to recordation of the mortgage; for, subdivisions (2) and (3) of section 13, when read together, provide that a building loan mortgage recorded subsequent to the commencement of the improvement to the real property and before the expiration of four months after the completion of the improvement is to have priority, to the extent of advances made before the filing of a notice of lien, if such mortgage or the building loan contract contains the trust covenant required by subdivision 3, and provided further that the building loan contract is properly filed.

Similarly immaterial is Duo's contention that the plaintiff knew that a plumber (Duo) did work and also required the work to be done before money was to be advanced. Such knowledge imputed to plaintiff is not a substitute for the filing requirement imposed by the Lien Law in determining priority as between a building loan mortgage and a mechanic's lien (cf. P. T. McDermott v....