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LIEN LAW DID NOT REQUIRE A BOND FOR A $170,000,000 PRIVATE CONSTRUCTION PROJECT ON PUBLIC LAND; CONTRACTUAL GUARANTEE SATISFIED THE STATUTE.

The First Department, in a full-fledged opinion by Justice Acosta, over a two-justice partial dissent, determined the requirements of section 5 of the Lien Law, which concerns private development on public land, was satisfied by a contractual guarantee, as opposed to the posting of a bond. The nearly $170,000,000 construction project ultimately collapsed. The opinion, which addresses the substance of the contracts, piercing the corporate veil, as well as a motion to disqualify a law firm on conflict grounds, is too complex to summarize here. With respect to the Lien Law issue, the court wrote:

The crux of plaintiff’s position is that the guarantee provided in this case does not comply with the law because it is not equivalent to a bond or “other form of undertaking” under the statute.

A statute, however, is to be construed so as to give meaning to each word … . Black’s Law Dictionary defines an “undertaking” first as “[a] promise, pledge, or engagement,” and second as “[a] bail bond” … . Similarly, the CPLR defines “Undertaking” first as “[a]ny obligation, whether or not the principal is a party thereto, which contains a covenant by a surety to pay the required amount, as specified therein, if any required condition . . . is not fulfilled” … . Hence, an “undertaking,” as distinct from a “bond,” is simply a “formal promise [or] guarantee” … .

That the legislature intended the term “undertaking” in Lien Law § 5 to mean a “guarantee” is strongly supported by the statute’s legislative history, which indicates that the Governor vetoed an earlier version of the 2004 amendment that added the above quoted language because the earlier version would have required the posting of a bond in every instance, disallowing “other forms of security designed to guarantee payment” … . The senate sponsor of the amendment clarified that the phrase “or some other form of undertaking” was added to meet the Governor’s concerns by providing “an alternative to posting a bond” … . Skanska USA Bldg. Inc. v Atlantic Yards B2 Owner, LLC, 2016 NY Slip Op 06903, 1st Dept 10-20-16

LIEN LAW (LIEN LAW DID NOT REQUIRE A BOND FOR A $170,000,000 PRIVATE CONSTRUCTION PROJECT ON PUBLIC LAND; CONTRACTUAL GUARANTEE SATISFIED THE STATUTE)/BONDS (CONSTRUCTION) (LIEN LAW DID NOT REQUIRE A BOND FOR A $170,000,000 PRIVATE CONSTRUCTION PROJECT ON PUBLIC LAND; CONTRACTUAL GUARANTEE SATISFIED THE STATUTE)/GUARANTEE (LIEN LAW DID NOT REQUIRE A BOND FOR A $170,000,000 PRIVATE CONSTRUCTION PROJECT ON PUBLIC LAND; CONTRACTUAL GUARANTEE SATISFIED THE STATUTE)/CONTRACT LAW (LIEN LAW DID NOT REQUIRE A BOND FOR A $170,000,000 PRIVATE CONSTRUCTION PROJECT ON PUBLIC LAND; CONTRACTUAL GUARANTEE SATISFIED THE STATUTE)

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