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Lien Law

FAILURE TO INCLUDE ALL THE INFORMATION REQUIRED BY LIEN LAW 201 IN THE NOTICE OF SALE DID NOT WARRANT CANCELLATION OF THE LIENS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the deficiencies in the notice of sale did not warrant cancellation of the liens:

Pursuant to Lien Law § 201-a, within 10 days after service of a notice of sale, the owner or any person entitled to notice may commence a special proceeding to determine the validity of a lien. Here, while service upon the petitioners of the notices of sale was in accordance with the proprietary lease and the cooperative by-laws, the notices of sale did not contain a statement setting forth “[t]he nature of the debt or the agreement under which the lien arose, with an itemized statement of the claim and the time when due,” as required under Lien Law § 201. Nevertheless, the deficiencies in the notices of sale did not provide a basis for cancellation of the liens … . Matter of Ger v Saxony Towers Realty Corp., 2022 NY Slip Op 06243, Second Dept 11-9-22

Practice Point: Lien law 201 requires the notice sale to state “[t]he nature of the debt or the agreement under which the lien arose, with an itemized statement of the claim and the time when due.” The failure to include that information, however, does not warrant cancellation of the lien.

November 9, 2022/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2022-11-09 13:56:372022-11-10 14:19:39FAILURE TO INCLUDE ALL THE INFORMATION REQUIRED BY LIEN LAW 201 IN THE NOTICE OF SALE DID NOT WARRANT CANCELLATION OF THE LIENS (SECOND DEPT).
Lien Law

THE COMPOSITE LIEN ENCOMPASSING SEVERAL PARCELS OF PROPERTY WAS NOT INVALID ON ITS FACE BECAUSE IT WAS NOT SHOWN INDIVIDUAL PROPERTY OWNERS HIRED THE RESPONDENT IN SEPARATE TRANSACTIONS; THE LIEN SHOULD NOT HAVE BEEN SUMMARILY DISCHARGED ON THE GROUND THE AMOUNT WAS WILFULLY EXAGGERATED, A FINDING WHICH CAN ONLY BE MADE IN A FORECLOSURE PROCEEDING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the composite lien encompassing several parcels of real property was not invalid on its face and had not bee declared void for wilful exaggeration. Therefore the validity of the lien must be determined in a foreclosure proceeding:

… [T]he composite mechanic’s lien was facially valid and the Supreme Court should not have summarily discharged it. … [T]he composite mechanic’s lien was not invalid because of a failure to apportion the work and material furnished between the four parcels of real property that were identified in the composite mechanic’s lien. The requirement to do so “applies where several transactions, involving the improvement of distinct parcels of property, have been effected at the request of independent owners” … . Here, the petitioners failed to establish that the individual and independent lot owners identified in the composite mechanic’s lien hired BKS in separate and distinct transactions. Furthermore, the composite mechanic’s lien was not invalid on its face merely because it identified multiple lots by their respective tax block and lot designations … . …

The Supreme Court also should not have summarily determined that branch of the petition which alleged that the amount claimed in the composite mechanic’s lien was willfully exaggerated. “Pursuant to Lien Law § 39, the court may declare a lien void and deny recovery if the lienor has willfully exaggerated the amount claimed” … . This Court has held that the remedy in Lien Law § 39-a is “available only where the lien was valid in all other respects and was declared void by reason of willful exaggeration after a trial of the foreclosure action” … . Matter of Matrix Staten Is. Dev., LLC v BKS-NY, LLC, 2022 NY Slip Op 02795, Second Dept 4-27-22

Practice Point: Here the lien should not have have summarily discharged on the ground it encompassed several parcels of property because it was not shown the individual property owners hired respondent in separate transactions. The finding that the amount of the lien was wilfully exaggerated is not a ground for summary discharge. Wilful exaggeration will void a lien, but that determination must be made in a foreclosure proceeding.

 

April 27, 2022/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2022-04-27 10:09:362022-05-03 10:11:30THE COMPOSITE LIEN ENCOMPASSING SEVERAL PARCELS OF PROPERTY WAS NOT INVALID ON ITS FACE BECAUSE IT WAS NOT SHOWN INDIVIDUAL PROPERTY OWNERS HIRED THE RESPONDENT IN SEPARATE TRANSACTIONS; THE LIEN SHOULD NOT HAVE BEEN SUMMARILY DISCHARGED ON THE GROUND THE AMOUNT WAS WILFULLY EXAGGERATED, A FINDING WHICH CAN ONLY BE MADE IN A FORECLOSURE PROCEEDING (SECOND DEPT).
Lien Law

PETITIONER, PURSUANT TO LIEN LAW 38, HAS A RIGHT TO AN ITEMIZED STATEMENT BREAKING DOWN THE AMOUNT OF A MECHANIC’S LIEN; THE INFORMATION PROVIDED BY THE RESPONDENT HERE WAS DEEMED INSUFFICIENT TO SATISFY LIEN LAW 38 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the petition seeking an itemized statement breaking down the amount of a mechanic’s lien should have been granted:

Lien Law § 38 provides, in relevant part, that “[a] lienor who has filed a notice of lien shall, on demand in writing, deliver to the owner or contractor making such demand a statement in writing which shall set forth the items of labor and/or material and the value thereof which make up the amount for which he [or she] claims a lien, and which shall also set forth the terms of the contract under which such items were furnished.” The documents provided by the respondent in opposition to the petition failed to comply with the requirements of Lien Law § 38. The documents, among other things, failed to sufficiently set forth “‘the items and cost of labor, or the items and cost of materials'” … . Matter of Red Hook 160, LLC v Borough Constr. Group, LLC, 2022 NY Slip Op 02267. Second Dept 4-6-22

​Practice Point: When a notice of a mechanic’s lien is filed the contractor or owner, pursuant to Line Law 38, has the right to request a statement breaking down the items and cost of labor or the items and cost of materials.

 

April 6, 2022/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2022-04-06 18:54:542022-04-06 18:54:54PETITIONER, PURSUANT TO LIEN LAW 38, HAS A RIGHT TO AN ITEMIZED STATEMENT BREAKING DOWN THE AMOUNT OF A MECHANIC’S LIEN; THE INFORMATION PROVIDED BY THE RESPONDENT HERE WAS DEEMED INSUFFICIENT TO SATISFY LIEN LAW 38 (SECOND DEPT).
Lien Law

THE TIMELY FILING OF A SECOND MECHANIC’S LIEN TO CORRECT PROBLEMS WITH THE FIRST MECHANIC’S LIEN WHICH HAD BEEN CANCELLED BY THE COURT IS NOT PROHIBITED BY THE LIEN LAW (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the Lien Law does not prohibit a second filing of a mechanic’s lien after the cancellation of the first:

Lien Law § 38 requires a lienor, upon demand, to provide a statement in writing setting forth, among other things, “the items of labor and/or material and the value thereof which make up the amount for which he [or she] claims a lien.” The statute further authorizes the commencement of a special proceeding upon a lienor’s failure to comply, and ultimately permits a court to cancel a lien if the lienor does not sufficiently comply with a court order requiring itemization … . The statute, however, does not prohibit a lienor from filing a new lien on the same claim following such cancellation … , and the courts have generally recognized that the timely filing of a successive lien on the same claim is permissible to cure an irregularity … . Matter of Red Hook 160, LLC v 2M Mech., LLC, 2022 NY Slip Op 01794, Second Dept 3-16-22

Practice Point: It is OK to file a second mechanic’s lien correcting problems in the first mechanic’s lien which was cancelled by the court.

 

March 16, 2022/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2022-03-16 11:10:062022-03-19 11:12:48THE TIMELY FILING OF A SECOND MECHANIC’S LIEN TO CORRECT PROBLEMS WITH THE FIRST MECHANIC’S LIEN WHICH HAD BEEN CANCELLED BY THE COURT IS NOT PROHIBITED BY THE LIEN LAW (SECOND DEPT).
Arbitration, Civil Procedure, Lien Law

THE MOTION TO DISMISS THE ARBITRATION IN THIS ACTION ALLEGING NONPAYMENT FOR CONSTRUCTION WORK SHOULD NOT HAVE BEEN GRANTED; THE ARBITRATOR RULES ON PAYMENT FOR LABOR AND MATERIALS; COURTS RULE ON THE VALIDITY OF MECHANIC’S LIENS (FIRST DEPT).

The First Department noted that an arbitrator’s ruling on the value of labor an materials is conclusive for all parties, but it is not conclusive on the validity of the underlying mechanic’s lien itself. Here the contactor, Flowcon, filed mechanic’s lens alleging defendant, Andiva, failed to pay for construction work on Andiva’s townhouse. The construction contract required arbitration and granted the arbitrator broad powers. Supreme Court granted Andiva’s motion to dismiss the arbitration and the First Department reversed, compelled arbitration and stayed the LIen Law counterclaims:

The AAA’s Construction Industry Arbitration Rules provide that the arbitration tribunal shall rule on its own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement. Thus, the threshold issue of the arbitrability of Flowcon’s claims alleging nonpayment is one for the arbitrator, not the courts, particularly given the parties’ broad arbitration clause … . To the extent Andiva argues that arbitration would usurp the court’s “gatekeeper” role of ruling upon the validity of a lien and undermine the public policy underlying the remedies afforded a lienee under Lien Law §§ 39 and 39-a since its allegation of lien exaggeration would be effectively resolved by an arbitrator rather than a court, the argument is unavailing. This Court has held that an arbitrator’s decision as to the value of labor and materials is conclusive as to all parties to the arbitration but not conclusive as to the validity of the mechanic’s lien itself … . Flowcon, Inc. v Andiva LLC, 2021 NY Slip Op 06756, First Dept 12-2-21

 

December 2, 2021/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2021-12-02 14:27:322021-12-03 14:47:59THE MOTION TO DISMISS THE ARBITRATION IN THIS ACTION ALLEGING NONPAYMENT FOR CONSTRUCTION WORK SHOULD NOT HAVE BEEN GRANTED; THE ARBITRATOR RULES ON PAYMENT FOR LABOR AND MATERIALS; COURTS RULE ON THE VALIDITY OF MECHANIC’S LIENS (FIRST DEPT).
Civil Procedure, Lien Law

GARAGEKEEPER’S LIEN DECLARED NULL AND VOID UNDER THE DOCTRINE OF LACHES (THIRD DEPT).

The Third Department determined that the garagekeeper’s lien action was properly declared null and void under the doctrine of laches. The respondent did not start the Lien Law action for six months, during which storage charges of $55-a-day were accruing:

“A garagekeeper’s lien is authorized by Lien Law § 184 (1) and the purpose of this statute is to provide the repair shop with security for the labor and material it expends which enhance the value of the vehicle” … . “The statute is in derogation of common law and thus is strictly construed” … . “Laches is defined as an equitable bar, based on a lengthy neglect or omission to assert a right and the resulting prejudice to an adverse party” … . We are unpersuaded by respondent’s claim that the doctrine of laches is inapplicable to the circumstances of this case as the claim is purely statutory and does not lie in equity. Petitioner, by posting a $15,000 bond as collateral for respondent’s claim, has attempted in good faith to discharge the lien. We note that this action to enforce the lien is equitable, not legal, in nature … . … [I]t is clear from the record that petitioner was unaware of the existence of the lien until more than six months after storage charges began to accrue, and it was prejudiced by respondent’s assertion of such claim after such a prolonged period of delay. “It is well settled that where neglect in promptly asserting a claim for relief causes prejudice to one’s adversary, such neglect operates as a bar to a remedy and is a basis for asserting the defense of laches” … . Matter of Santander Consumer USA, Inc. v Steve Jayz Automotive Inc., 2021 NY Slip Op 04998, Third Dept 9-16-21

 

September 16, 2021/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2021-09-16 09:51:082021-09-19 10:12:23GARAGEKEEPER’S LIEN DECLARED NULL AND VOID UNDER THE DOCTRINE OF LACHES (THIRD DEPT).
Lien Law

IN THIS LIEN LAW DISPUTE OVER PAYMENT PURSUANT TO CONSTRUCTION CONTRACTS, DEFENDANTS DID NOT DEMONSTRATE AS A MATTER OF LAW THAT THE RESTORATION OF IMPROPERLY DIVERTED TRUST ASSETS WITH NON-TRUST ASSETS LIMITED DEFENDANTS’ DAMAGES (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court in this Lien-Law construction-contract action, over a dissent, determined defendants did not demonstrate as a matter of law that the improper diversion of trust assets was cured by the restoration of trust assets with non-trust assets:

“[T]he primary purpose of [Lien Law] article 3-A and its predecessors . . . [is] to ensure that those who have directly expended labor and materials to improve real property [or a public improvement] at the direction of the owner or a general contractor receive payment for the work actually performed” … . “Use of trust assets for any purpose other than the expenditures authorized in Lien Law § 71 before all trust claims have been paid or discharged constitutes an improper diversion of trust assets, regardless of the propriety of the trustee’s intentions” … . Under Lien Law article 3-A, a trust beneficiary may maintain an action “to recover trust assets from anyone to whom they have been diverted with notice of their trust status” … . * * *

… [T]he court erred in granting defendants’ motion in part by limiting the potential damages in the diversion causes of action to a maximum of $104,205.99 based on Top Capital’s [defendant’s] alleged restoration of trust assets through payments made with non-trust assets … . Plaintiffs allege that approximately $1.4 million in trust assets was improperly diverted by defendants. The court, in limiting the potential recovery on the diversion causes of action, credited not just Top Capital but all defendants for the approximately $1.3 million Top Capital paid DiMarco [plaintiff] from non-trust assets after the trust fund was depleted. That was error because defendants failed to establish their entitlement to a restoration defense as a matter of law. Contrary to defendants’ assertion, the Court of Appeals has rejected the argument that a defendant can cure an improper diversion of trust assets, and therefore avoid liability for that diversion, by a subsequent payment from non-trust assets … . DiMarco Constructors, LLC v Top Capital of N.Y. Brockport, LLC, 2021 NY Slip Op 02680, Fourth Dept 4-30-21

 

April 30, 2021/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2021-04-30 10:56:252021-05-02 11:34:25IN THIS LIEN LAW DISPUTE OVER PAYMENT PURSUANT TO CONSTRUCTION CONTRACTS, DEFENDANTS DID NOT DEMONSTRATE AS A MATTER OF LAW THAT THE RESTORATION OF IMPROPERLY DIVERTED TRUST ASSETS WITH NON-TRUST ASSETS LIMITED DEFENDANTS’ DAMAGES (FOURTH DEPT).
Civil Procedure, Contract Law, Lien Law, Municipal Law

PLAINTIFF HOME IMPROVEMENT CONTRACTOR DID NOT ALLEGE HE WAS LICENSED IN ROCKLAND COUNTY; DEFENDANT’S MOTION TO DISMISS THE CAUSES OF ACTION TO FORECLOSE ON A MECHANIC’S LIEN AND BREACH OF CONTRACT FOR FAILURE TO STATE A CAUSE OF ACTION SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s motion to dismiss the breach of contract action brought by defendant home improvement contractor should have been granted because the complaint did not allege plaintiff was licensed as a home improvement contractor:

… [The plaintiff commenced this action against the defendant, alleging that the parties had cohabited and shared an intimate relationship over a period of approximately two years, and that the plaintiff had performed extensive home improvement contracting work on the defendant’s residence in Rockland County during that period in reliance on the defendant’s promise that he would be reimbursed for the work following the impending sale of the residence. Claiming that the defendant had subsequently reneged on their arrangement, the plaintiff sought to foreclose a mechanic’s lien he had filed against the residence, to recover damages for breach of contract, to recover in quantum meruit, and to impose a constructive trust over the residence. The defendant thereafter moved, inter alia, pursuant to CPLR 3211(a)(7) to dismiss the complaint for failure to state a cause of action on the ground, among others, that the plaintiff was not a licensed home improvement contractor in Rockland County. …

We reject the plaintiff’s contention that the licensing requirement of CPLR 3015(e) did not apply herein. According to the plaintiff’s allegations, he clearly engaged in home improvement contracting work, and he conceded that the cause of action to foreclose a mechanic’s lien could not survive the defendant’s challenge pursuant to CPLR 3211(a)(7) because he was not a licensed home improvement contractor in Rockland County. Moreover, the complaint did not allege that he was duly licensed in Rockland County during the relevant time period (see Code of the County of Rockland, chapter 286, § 3), and the plaintiff never disputed that he did not possess the necessary license. Thus, the causes of action to foreclose a mechanic’s lien, to recover damages for breach of contract, and to recover in quantum meruit should have been dismissed pursuant to CPLR 3211(a)(7) … .Cunningham v Nolte, 2020 NY Slip Op 06493, Second Dept 11=12=20

 

November 12, 2020/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2020-11-12 08:37:392020-11-14 08:57:16PLAINTIFF HOME IMPROVEMENT CONTRACTOR DID NOT ALLEGE HE WAS LICENSED IN ROCKLAND COUNTY; DEFENDANT’S MOTION TO DISMISS THE CAUSES OF ACTION TO FORECLOSE ON A MECHANIC’S LIEN AND BREACH OF CONTRACT FOR FAILURE TO STATE A CAUSE OF ACTION SHOULD HAVE BEEN GRANTED (SECOND DEPT).
Civil Procedure, Evidence, Lien Law

PETITIONER, THE OWNER OF A LEASED CAR DAMAGED IN AN ACCIDENT, SOUGHT A DECLARATION THAT THE RESPONDENT REPAIR SHOP’S GARAGEKEEPER’S LIEN WAS NULL AND VOID ALLEGING IT DID NOT AUTHORIZE THE REPAIR; ALTHOUGH THE NOTICE OF THE SALE TO PAY OFF THE LIEN DID NOT COMPLY WITH THE LIEN LAW, THE PETITION SHOULD NOT HAVE BEEN GRANTED BASED UPON EVIDENCE SUBMITTED IN SURREPLY (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the petition, brought by the owner of a leased vehicle damaged in an accident, seeking a declaration that the respondent repair shop’s garagekeeper’s lien was null and void because it did not authorize the repair, should not have been granted. Although the notice of the sale to pay off the lien did not comply with the Lien Law, evidence submitted by the petitioner in suureply should not have been considered. Therefore the petition should not have been granted on the merits and respondent repair shop should have been allowed to submit an answer:

Accepting that respondent attempted “with due diligence” to personally serve the notice upon petitioners within the county where the lien arose, however, the notice was not sent via “certified mail, return receipt requested, and by first-class mail” as required to accomplish service under Lien Law § 201 … . Those service requirements are meant “to insure that [owners] have an adequate opportunity to reclaim their vehicles” … and, inasmuch as a garagekeeper’s lien is a statutory creation in derogation of common law, the failure to comply with them renders service defective … . Accordingly, in view of respondent’s failure to serve the notice in the manner required by the Lien Law, the time in which to commence this proceeding challenging the lien never began to run … . …

Supreme Court did abuse its discretion, however, in rebuffing respondent’s request to serve an answer and instead granting the petition on the merits. There was nothing to show that respondent was not a registered repair shop during the relevant period, and respondent asked petitioners to review a vehicle lease agreement that it believed conferred actual authority upon [the lessee] to authorize repairs on [petitioner’s] behalf … .  Petitioners instead provided that agreement for the first time in their surreply papers, a belated attempt to introduce new factual information to which respondent could not respond and that should have been rejected … . Matter of Daimler Trust v R&W Auto Body, Inc., 2020 NY Slip Op 06187, Third Dept 10-29-20

 

October 29, 2020/by Bruce Freeman
https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png 0 0 Bruce Freeman https://www.newyorkappellatedigest.com/wp-content/uploads/2018/03/NYAppelateLogo-White-1.png Bruce Freeman2020-10-29 09:54:272020-10-31 10:22:01PETITIONER, THE OWNER OF A LEASED CAR DAMAGED IN AN ACCIDENT, SOUGHT A DECLARATION THAT THE RESPONDENT REPAIR SHOP’S GARAGEKEEPER’S LIEN WAS NULL AND VOID ALLEGING IT DID NOT AUTHORIZE THE REPAIR; ALTHOUGH THE NOTICE OF THE SALE TO PAY OFF THE LIEN DID NOT COMPLY WITH THE LIEN LAW, THE PETITION SHOULD NOT HAVE BEEN GRANTED BASED UPON EVIDENCE SUBMITTED IN SURREPLY (THIRD DEPT).
Debtor-Creditor, Lien Law, Real Property Law

PLAINTIFF ENTITLED TO AN EQUITABLE LIEN ON REAL PROPERTY WHICH WAS IDENTIFIED BUT NOT DESCRIBED IN THE MORTGAGE WHICH HAD BEEN ASSIGNED TO PLAINTIFF (SECOND DEPT).

The Second Department determined plaintiff bank was entitled to an equitable lien on real property. The mortgage secured by the property had been assigned to plaintiff but the mortgage did not include a description of the property:

… [T]he plaintiff commenced the instant action seeking, inter alia, an equitable mortgage on the property. The complaint noted that the mortgage failed to include a description of the property, and thus that the plaintiff’s security interest in the property was imperiled. …

“New York law allows the imposition of an equitable lien if there is an express or implied agreement that there shall be a lien on specific property” … . “While [a] court will impose an equitable mortgage where the facts surrounding a transaction evidence that the parties intended that a specific piece of property is to be held or transferred to secure an obligation, it is necessary that an intention to create such a charge clearly appear from the language and the attendant circumstances” … .

Here, the documentary evidence submitted by the plaintiff sufficiently established the existence of the loan, the intent that it be secured by the property, and the debtor’s obligation to satisfy the debt by a date certain … . U.S. Bank N.A. v Alleyne, 2020 NY Slip Op 06166, Second Dept 10-28-20

 

October 28, 2020/by Bruce Freeman
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