Commercial Division Blog

Posted: December 30, 2014 / Categories Commercial, Court Rules/Procedures, Real Property

Mechanics Lien That Incorrectly Listed Corporation As Property Owner Instead of Corporation's Sole Shareholder Could Be Amended To Reflect The True Owner

On December 16, 2014, the Court of Appeals issued a decision in Rigano v. Vibar Construction, Inc., 2014 NY Slip Op. 08762, ruling that a mechanic's lien that erroneously listed the sole shareholder of the property owner was not jurisdictionally deficient and could be amended nunc pro tunc to reflect the true owner.

In Rigano, a construction company (Vibar) filed a notice of mechanic's lien on a property to recover the cost of constructing a road on the property. The mechanic's lien incorrectly listed an entity, Fawn Builders, as the owner, when in fact the property was owned by Fawn Builder's sole shareholder, Rigano. The Supreme Court granted Rigano's motion to discharge the lien, and the Appellate Division affirmed, holding that "[w]hile a failure to state the true owner or contractor or a misdescription of the true owner will not affect the validity of a notice of lien, a misidentification of the true owner is a jurisdictional defect which cannot be cured by an amendment nunc pro tunc." The Court of Appeals reversed, finding that a lien may be amended after the fact where "the true owner and listed owner are closely related and there was consent to the construction work"; under those circumstances the error constitutes a "misdescription" of the owner rather than a "misidentification." The Court explained that under this standard, an amendment was proper:

Here, the true owner, Rigano, and the listed owner, Fawn Builders, are closely related, as the deed to the property made clear. Rigano and Fawn Builders had the same interest and control over the property in question -- Rigano owned 100% of Fawn Builders. Significantly, the transfer of the property was not accomplished in an arm's length transaction -- no transfer tax was paid and Rigano merely conveyed the property to himself from his corporation. Further, Rigano had notice of the lien because he shares an address with Fawn Builders. Naming Fawn Builders gives, at the very least, inquiry notice to the public that there is a lien on the property, and a correct address to contact the true owner. And Rigano, who appears to have consented to a substantial majority of the work done on the property, signing as an individual and for Fawn Builders as its one and only shareholder, understood that a lien could be placed on the property upon a failure to pay for the work. This notice of lien would not have caught Rigano off guard. Finally, no third-party purchaser was or would be prejudiced by this amendment.