| GMCK Realty, LLC v Mihalatos |
| 2012 NY Slip Op 03598 [95 AD3d 947] |
| May 8, 2012 |
| Appellate Division, Second Department |
| GMCK Realty, LLC, Respondent, v Dennis Mihalatos etal., Appellants. |
—[*1] Moulinos & Associates, LLC, New York, N.Y. (Peter Moulinos and Anthony P. Scali ofcounsel), for respondent.
In an action, inter alia, to recover damages for breach of contract and violation of the trustfund provisions of the Lien Law, the defendants appeal from an order of the Supreme Court,Queens County (Hart, J.), dated July 13, 2011, which granted the plaintiff's motion pursuant toJudiciary Law § 753 to hold them in civil contempt for failure to comply with a so-orderedstipulation dated June 10, 2009, and for failure to deposit a bond as directed by the SupremeCourt, and thereupon, in effect, directed the defendant Dennis Mihalatos to be incarcerated,struck their answer and counterclaims, and imposed sanctions upon and awarded an attorney's feeagainst them. By decision and order on motion of this Court dated August 1, 2011, theincarceration of the defendant Dennis Mihalatos was stayed pending hearing and determinationof this appeal.
Ordered that the order is reversed, on the law, with costs, the plaintiff's motion pursuant toJudiciary Law § 753 is denied, the answer and counterclaims are reinstated, and thedirectives in the order imposing sanctions upon and awarding an attorney's fee against thedefendants, and directing the incarceration of the defendant Dennis Mihalatos, are vacated.
The plaintiff is the owner of property located in Astoria. The defendant was retained toperform construction and renovation work on the property. In the course of the project, certainsubcontractors, who had not been paid for the services they rendered at the property, demandedpayment directly from the plaintiff or filed mechanics liens on the property. Thereafter, theplaintiff sought a verified statement from the defendants regarding the funds that it tendered tothem that were subsequently paid out to subcontractors. The defendants were unresponsive tothis demand. Shortly after commencement of this action, the plaintiff moved, by order to showcause, "for an order pursuant to § 77 of article 3-A of the Lien Law to compel defendantsto provide a complete accounting of monies and trust assets received." On June 10, 2009, theparties entered into a stipulation, which was so-ordered by the Supreme Court, wherein thedefendants were directed "to provide a [certified] accounting as required by Lien Law § 75within 30 days." In response, the defendants produced certain documentation. However, by letterdated August 5, 2009, the plaintiff rejected the response, and alleged that the submitteddocuments did not satisfy the requirements of sections 75 and 76 of the Lien Law.[*2]
By order to show cause dated October 5, 2009, theplaintiffs moved, inter alia, pursuant to Judiciary Law § 753 to hold the defendants incontempt for their failure to comply with the so-ordered stipulation dated June 10, 2009. In anorder dated January 18, 2011, the Supreme Court directed the parties to appear on March 1,2011, for a conference on the motion. The record discloses that the parties and their attorneysappeared in court on March 1, 2001, as well as on five subsequent adjourned dates, and thatduring these sessions, the Supreme Court entertained argument, took testimony, and conductedhearings relative to the relief requested by the plaintiff. The last of these hearings took place onJuly 13, 2011. During the course of these sessions, the Supreme Court also initially directed thedefendants to post a bond in the sum of $150,000 to cover the amount of subcontractors' claimsthat had allegedly been paid by the plaintiff, and thereafter directed that the bond amount beincreased to $250,000 "to purge . . . the contempt." The defendant DennisMihalatos testified at the hearing that he did not have the financial ability to furnish either ofthese bond amounts. In an order dated July 13, 2011, the Supreme Court, inter alia, granted theplaintiff's motion pursuant to Judiciary Law § 753, and held the defendants in contempt fortheir failure to comply with the so-ordered stipulation dated June 10, 2009, and for their failure"to furnish the bond directed by the court." The defendants appeal. We reverse.
"To prevail on a motion to punish a party for civil contempt, the movant must demonstratethat the party charged with contempt willfully violated a clear and unequivocal mandate of acourt's order, with knowledge of that order's terms, thereby prejudicing the movant's rights" (Rubin v Rubin, 78 AD3d 812, 813[2010]; see Judiciary Law § 753 [A] [3]; McCain v Dinkins, 84 NY2d 216,225-226 [1994]; McGrath vMcGrath, 85 AD3d 742, 742 [2011]; Matter of Philie v Singer, 79 AD3d 1041, 1042 [2010]).Additionally, the movant has the burden of proving contempt by clear and convincing evidence(see Matter of Philie v Singer, 79 AD3d at 1042; Vujovic v Vujovic, 16 AD3d 490, 491 [2005]).
The record discloses that, in response to the so-ordered stipulation dated June 10, 2009, thedefendants produced copies of hundreds of checks, computer-printed tables of vendors, andvarious financial spreadsheets, as well as a "verification" statement from Mihalatos attesting tothe truth of the documentation which was produced. While such documentation did not provide acomplete accounting of trust funds in accordance with the provisions of the Lien Law,nevertheless, under all of the circumstances, it cannot be concluded that the defendants willfullyviolated the terms of the so-ordered stipulation dated June 10, 2009. Moreover, the defendants'failure to post the bond did not constitute a proper basis for the finding of contempt.Accordingly, the Supreme Court erred in granting the plaintiff's motion and holding thedefendants in civil contempt (see Judiciary Law § 753; Penavic v Penavic, 88 AD3d 671,672 [2011]; cf. Town Bd. of Town ofSouthampton v R.K.B. Realty, LLC, 91 AD3d 628 [2012]). For similar reasons, theSupreme Court erred in imposing the additional penalties of the striking of the defendants'answer and counterclaims, imposing sanctions upon and awarding an attorney's fee against thedefendants, and directing the incarceration of Mihalatos (see generally Deans v Jamaica Hosp. Med. Ctr., 64 AD3d 744[2009]).
In light of our determination, the defendants' remaining contentions have been renderedacademic. Rivera, J.P., Chambers, Roman and Sgroi, JJ., concur.