Allied Thermal Corp. v. James Talcott, Inc., 3 N.Y.2d 302, 165 N.Y.S.2d 91 (1957)

Vogt, Richard

English

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Buffalo Law Review Volume 7 Number 1 Article 41 10-1-1957 Creditor's Rights—Unavailability of New York Lien Law to out of State Realty Richard Vogt Follow this and additional works at: https://digitalcommons.law.buffalo.edu/buffalolawreview  Part of the Commercial Law Commons Recommended Citation Richard Vogt, Creditor's Rights—Unavailability of New York Lien Law to out of State Realty, 7 Buff. L. Rev. 104 (1957). Available at: https://digitalcommons.law.buffalo.edu/buffalolawreview/vol7/iss1/41 This The Court of Appeals Term is brought to you for free and open access by the Law Journals at Digital Commons @ University at Buffalo School of Law. It has been accepted for inclusion in Buffalo Law Review by an authorized editor of Digital Commons @ University at Buffalo School of Law. For more information, please contact lawscholar@buffalo.edu. BUFFALO LAW REVIEWin this context was not dependent on notions "of intrinsic fairness of price," andthat to render an option invalid it was necessary to show more than a meredisparity between the current value and the option price.Plaintiff also contended that the requirements of section 176 of the PersonalProperty Law22 had not been complied with in that the restriction had not beenprinted on the stock certificate. Here the Court held that a notation on the stockcertificate that it was held subject to restrictions contained in certain enumeratedby-laws satisfied the statutory requirement.The decision in this case indicates that the Court is unwilling to make acareful study of the ultimate fairness of a price arrived at by the use of a formulaspecified in this type of option. Rather, the scope of inquiry will be limited totesting the reasonableness of the formula itself, and weighing heavily in favor ofan ultimate determination of validity is the fact that the parties involved, in asense, voluntarily agreed to its use.CREDITOR'S RIGHTSUnavailability Of New York Lien Law To Out Of State RealtySection 36-b of the New York Lien Law provides that funds received froman owner by a subcontractor for the improvement of real property are to be heldin trust, to be applied first to the payment of materialmen and laborers whocontributed to the improvement. In Allied Thermal Corporation v. James TalcoltInc., I materialmen attempted to use the trust provision of 36-b to compel factorto subcontractor to account for funds allegedly diverted by the subcontractor. Theonly issue before the Court was whether plaintiff-materialmen could use section36-b, when the situs of the improved realty was out of state.The Court held (5-2), without citing authority, that plaintiffs could not availthemselves of the protective trust provisions of the statute. The majoritydetermined that section 36-b must not be construed independently, but as anintegral part of the whole statutory scheme of the Lien Law, which by its verynature is circumscribed by the state's boundaries. The majority regarded theabsence of any expressed reference to "New York" anywhere in the Lien Law as22. N.Y. PERS. PROP. LAW §176 provides:There shall be no lien in favor of a corporation upon theshares represented by a certificate issued by such corporationand there shall be no restriction by virtue of- any by-law ofsuch corporation, or otherwise, unless the right of the corpo-ration to such lien or the restriction is stated on thecertificate.1. 3 N.Y.2d 302, 165 N.Y.S.2d 91 (1957).COURT OF APPEALS, 1956 TERMan obvious indication that section 36-b should not receive any special jurisdictionaldistinction from the rest of the Lien Law.The dissent argued that section 36-b did not confer any lien rights whatso-ever; that the gravamen of plaintiffs action is the funds diverted, not the realproperty; that this was a right in personam to impress a trust upon the fundsdiverted, and thus should not be restricted by the in rem lien concept adheringto real property.To the assumption of the majority that "real property" in the Lien Law mustbe restricted to New York because of no contrary expressed intention of theLegislature, the dissent pointed out that a similar argument had been rejected inMallory Associates v. Barving Realty Co.2 In that case the Court determined thatsection 233 of the Real Property Law (providing that moneys, deposited assecurity for performance of realty contracts, are to constitute trust funds in thehands .of depositee) was applicable to a deposit made in New York, even thoughthe lease affected real property located in Virginia. "The Legislature did notexpressly limit the statute to deposits made under a contract for the use or rentalof real property situated in New York, and we do not think it should be thuslimited by judicial construction."The dissent further pointed out that now New York materialmen andlaborers could be defrauded with impunity, whenever the realty to be improvedwas outside the state, since the foreign state would also lack jurisdiction toimpress a trust upon the funds diverted in New York. In Ridgefield Supply Co. v.Rosen,4 a similar situation to the instant case, the Court was of the sameopinion.The reasoning of the majority appears unduly mechanical. It is difficultto conceive that the Legislature intended to protect and benefit only thosematerialmen and laborers who contribute to the improvement of domestic realty.5Since the Mallory case and the instant case have come to different results, thereexists minimal stability in this area. An official word from the Legislatureindicating the jurisdictional limits of statutes in this field, would go far inobviating confusion and probable future litigation.Priorify Of LiensAs between a judgment credtor's lien and the equitable lien of an assigneeof property subsequently to be a.quired, the latter, while his rights will be2. 300 N.Y. 297, 90 N.E.2d 468 (1949).3. Id. at 302, 90 N.E.2d at 471.4. 1 Misc.2d 675, 679, 147 N.Y.S.2d 337, 340 (Sup. Ct. 1955).5. See ANNUAL Ri:i'0RT Or " 'm.ii LAW REVISION CoiISSION, 1942, p. 283.

Creditor\u27s Rights—Unavailability of New York Lien Law to out of State Realty

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Creditor\u27s Rights—Unavailability of New York Lien Law to out of State Realty

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