Brescia Construction Co. v. Walart Construction Co

In Brescia Construction Co. v. Walart Construction Co., 264 N.Y. 260, 190 N.E. 484 (N.Y. 1934), the plaintiff brought an action to foreclose its mechanic's lien against a company with whom it entered into a construction agreement and a surety that had undertaken the responsibility for the lien. Id. at 485. The contract between the parties contained a broad arbitration provision stating that all questions that may arise under the contract and in the performance of work under that contract shall be submitted to arbitration. Id. The parties submitted the dispute to arbitration, and the arbitrator awarded damages in favor of the plaintiff. Id. The appellate division reversed the judgment affirming the arbitrator's award against the surety. See id. At issue on appeal was the propriety of judgment against the surety, which would have allowed for foreclosure of the mechanic's lien. In addressing that issue, the New York Court of Appeals clarified the coordinate nature of arbitration proceedings and lien litigation, explaining that a personal judgment on a breach-of-contract claim that is subject to arbitration is separate and distinct from judgment to enforce a statutory lien arising from that contract: When [the amount due to the lien or under its contract] has been determined and an award made, a personal judgment maybe entered for that amount against the other party to the contract. The right to enforce a lien for such amount upon the land is created by the statute, and the statute makes no provision for resort to arbitration for the enforcement of such a lien. . . . The scope of the arbitration is confined to the determination of those questions which the parties have agreed to submit to arbitration. It is defined by the terms of the contract and the order of the court made pursuant to the statute. An award may be made only against the parties who have agreed to abide by the award, and can result only in a personal judgment and not in a judgment to enforce a statutory lien.Id. 190 N.E.2d at 485. The court further explained that because the parties agreed in the construction agreement to arbitrate disputes arising under the contract, the surety could not object to arbitration of the amount of debt due the plaintiff under the contract. Id. 190 N.E.2d at 486. However, the surety's appearance at the arbitration did not constitute "consent that the scope of the arbitration proceedings should been larged" to include issues raised in the foreclosure action, or that a personal judgment might be entered against the surety without a judgment that the amount due was chargeable against the property. Id. Accordingly, the court concluded that the award was conclusive as to the amount due the plaintiff, but did not bind the surety in the absence of adjudication on the lien issues: At most, the award constitutes an adjudication of the amount due to the plaintiff. Even though conclusive on the point, there can be no judgment against the surety without an adjudication that this amount is chargeable against the property by virtue of the notice of lien. "A valid lien on the primary fund must be established to require payment pursuant to the terms of the undertaking." Id.