401 v. GPA LLC MACK TRAVIS FROST TRAVIS CHRISTOPHER HYDE ELSA HYDE (2026)

This action arises from the renovation of a building located at 401 East State Street, in the City of Ithaca, that is owned by defendant GPA Management, LLC (GPA). On February 2, 2023, plaintiff entered into a written contract with GPA to convert an existing office building known as Gateway Plaza into a mixed-use building containing 46 apartments and retail space to be known as The Dean. At all relevant times, A. Frost Travis (Frost) was the managing member of GPA. In connection with the project, GPA obtained a building loan from Tompkins Community Bank (TCB) in the gross amount of $18,680,690, with a net amount available for the cost of improvement of $12,874,921. Purcell commenced construction in March 2023, substantially completed its work in March 2024, and achieved full completion in late May or early June 2024. The final contract sum due Purcell was $13,629,843.88. Purcell was paid only $10,162,289.13, leaving an unpaid balance due of $3,467,554.75. On November 21, 2024, Purcell filed a mechanic's lien for $3,492,012.44. Purcell commenced this action on April 25, 2025, asserting causes of action: (1) against GPA for (a) breach of contract; (b) foreclosure of the mechanic's lien; and (c) diversion of statutory trust funds; and (2) against the individual defendants for participating in the diversion of statutory trust funds. On June 26, 2026, Purcell filed a motion seeking summary judgment against GPA on the first cause of action, for breach of contract, and partial summary judgment on the third and fourth causes of action, for diversion of trust funds, against GPA and Frost, respectively (NY St Cts Elec Filing [NYSCEF] motion number one).

Plaintiff established its prima facie entitlement to summary judgment on the breach of contract cause of action. "The essential elements of a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of its contractual obligations, and damages resulting from the breach" (A.E. Rosen Elec. Co., Inc. v Plank, LLC, 181 AD3d 1080, 1081 [3d Dept 2020] [internal quotation marks, brackets, and citation omitted]). In support of its motion, Purcell submitted evidence which included its contract with GPA, the affirmation of its president, various change orders, and deposition testimony of Frost that establish the necessary elements. Notably, Frost acknowledged the accuracy of the total contract price of $13,629,843.88 claimed by Purcell, that Purcell achieved final completion in late May or early June 2024, that GPA had no objections to the work completed by Purcell, and that GPA paid Purcell $10,162,289.13 of the amount due. These submissions are sufficient to establish each of the elements of the breach of contract cause of action (see e.g. id.). Defendants did not address this cause of action in their opposition to the motion and, therefore, failed to raise a triable issue of material fact. Accordingly, plaintiff is entitled to summary judgment against GPA on its breach of contract cause of action for the amount demanded, i.e. $3,467,554.75.

Plaintiff is entitled to interest on its breach of contract cause of action from the earliest ascertainable date the cause of action existed through entry of judgment (see CPLR 5001, 5002). The contract provides that final payment shall be made within 30 days after certification of the final application by the architect (see NYSCEF Doc No. 18, AIA Document A133-2009, Standard Form of Agreement, § 7.2). Purcell submitted its application for final payment on July 17, 2024 and no objection was made thereto. The contract provides that amounts due thereunder shall bear interest from the date any payment became due at the rate agreed upon by the parties in writing or, in the absence of an agreement, at the legal rate (see NYSCEF Doc No. 18, AIA Document A201-2017, General Provisions, § 13.5). The record contains no written agreement regarding such an interest rate. Accordingly, interest shall accrue beginning on September 1, 2024 at the legal rate of nine percent per annum (CPLR 5004).¹

Turning to consideration of the causes of action for diversion of trust funds, Purcell seeks judgment against GPA on the third cause of action and against Frost on the fourth cause of action. The following facts relevant to these causes of action are undisputed. Pursuant to a demand made by Purcell pursuant to Lien Law § 76, GPA produced a statement, verified by Frost, regarding the building loan proceeds (NYSCEF Doc No. 26; the GPA statement).² All loan proceeds were deposited into a checking account that GPA maintained with TCB (the trust account). Frost admitted that, as managing member of GPA, he was solely responsible for all disbursements from the checking account and that no other member of GPA had any role in oversight or management of the project or disbursement of trust funds. Purcell identified three categories of disbursements made from the trust account, shown in the GPA statement, as constituting diversions because they were unrelated to the cost of the improvement, specifically: (1) a payment of $162,193 to Angelhearts, a business that operated a diner at the property under a lease that predated the renovation project, for revenue replacement during the renovation period; (2) payments totaling $950,639 that were made to Frost, Elsa Hyde, and two affiliated companies owned or managed by the individual defendants; and (3) $73,081 identified in the GPA statement as "Other Charges," which Frost was unable to itemize or identify. The claimed diversions total $1,185,913.³ In apparent anticipation of defendants' restoration defense, plaintiff cited DiMarco Constructors, LLC v Top Capital of NY Brockport, LLC (193 AD3d 1375 [4th Dept 2021]) in support of its argument that a trustee cannot cure a diversion by replenishing the trust with funds from other sources so long as any unpaid trust claims remain. The foregoing establishes plaintiff's prima facie entitlement to partial summary judgment on the third and fourth causes of action.

Defendants did not submit any proof that the claimed diversions were used for trust purposes. Rather, they argue that in Caristo Constr. Corp. v Diners Fin. Corp. (21 NY2d 507 [1968]), the Court of Appeals recognized the defense of restoration of funds to a statutory trust applies to excuse prior diversions, and that the restoration defense applies in this case because defendants deposited non-trust funds into the trust account following the diversion that exceeded the amount of the diversion.⁴ In this regard, Frost avers that deposits from sources other than building loan proceeds were made into the account totaling $1,222,918.63, which exceeded the amount of the claimed diversion of $1,185,913 (NYSCEF Doc No. 38, Travis aff ¶ 12; NYSCEF Doc No. 39, Travis aff, exhibit A). He further avers that all of the funds restored to the account were applied for proper trust purposes (Travis aff ¶ 13; NYSCEF Doc No. 40, Travis aff, exhibit B) and, therefore, that plaintiff suffered no loss from the alleged diversion.

Caristo Constr. Corp. and DiMarco Constructors, LLC are the only cases from the Court of Appeals and the Appellate Division that directly address the potential applicability of the restoration defense to statutory trusts arising under the Lien Law. In Caristo Constr. Corp., the Court of Appeals held that a factor which provided financing to a subcontractor "was guilty of a diversion" when checks issued to the subcontractor from trust funds were endorsed to the factor, pursuant to an assignment of the subcontractor's accounts receivable that secured the loan, and the factor immediately issued its checks to the subcontractor for the same amounts (Caristo Constr. Corp. 21 NY2d at 510).⁵ The Court of Appeals further observed that

"[i]t is true that if the 'exchange' checks had thereafter been used by [the subcontractor] to pay trust claims and there had been no loss to anyone, there would have been no ultimate diversion or loss for which the factor would be liable. But there was no such evidence as to the use to which the 'exchange' checks were put, and it is evident that as to unpaid claims discharged by the general contractor the trust was not executed" (id. at 513 [emphasis added]).

Defendants argue that this language recognizes the potential applicability of the restoration defense when there is "no loss to anyone," and that such circumstances are present here because non-trust funds exceeding the amount of the diversion were deposited in the trust account and were applied entirely for trust purposes. Their argument is unavailing because it was expressly considered and rejected by the Appellate Division, Fourth Department, in DiMarco Constructors, LLC, which held that, in Caristo Constr. Corp., "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, 193 AD3d at 1377). Given the absence of contrary precedent from the Court of Appeals or the Appellate Division, Third Department, this court is bound to follow DiMarco Constructors, LLC (see Shoback v Broome Obstetrics & Gynecology, P.C., 184 AD3d 1000, 1001 [3d Dept 2020], citing Mountain View Coach Lines v Storms, 102 AD2d 663, 664 [2d Dept 1984]). This determination of the Appellate Division, Fourth Department, thus requires that this court reject the restoration defense asserted by defendants and grant plaintiff's motion for summary judgment on the third and fourth causes of action. However, given the significant interests at stake, review of the rationale of the controlling cases is warranted.

There are two competing rationales. The decisions of the Court of Appeals in Caristo Constr. Corp. and the Appellate Division, Fourth Department, in DiMarco Constructors, LLC, are based on the rationale that statutory trusts established under the Lien Law must be strictly enforced to implement the purpose of protecting contractors and material suppliers and, therefore, evince the view that, with respect to statutory trust claims, money is not fungible. In other words, the rationale underlying the holding of these two controlling cases is that all trust funds must be made available for the intended purpose and payment from non-trust funds — whether by direct payment or by restoration to a trust account — does not reduce liability of the person restoring the diverted funds. This rationale also underlies the determination of the Appellate Division, Third Department, that a general contractor was not permitted to reimburse itself from trust funds for project expenses it had paid from its own funds when its subcontractors remained unpaid (see Whitford Co., Inc. v Babcock & Wilcox Solar Energy, Inc., 244 AD3d 1552, 1554 [3d Dept 2025]).

The requirement that statutory trusts be strictly enforced is apparent from the Court of Appeals's rejection, in Caristo Constr. Corp., of the restoration defense where all diverted funds were fully — and immediately — restored to the subcontractor trustee, notwithstanding that rejection of the restoration defense made the factor — which did not retain any trust proceeds — fully liable for the diversion. Indeed, in making this determination, the Court of Appeals noted that the factor's actions had contravened the "salutary purposes of the rather rigorous regulations of the Lien Law" (Caristo Constr. Corp. 21 NY2d at 513). This is a striking decision because it imposed liability on the factor, as the purported recipient of trust funds, for diversion when it never retained or benefitted from any such funds.

Further, although the Court of Appeals suggested that there would not have been a diversion if there had been no loss to any trust beneficiary, it noted that the contractor seeking enforcement of the trust had been harmed, regardless of the fact that the diverted funds had been entirely restored, because it had not been paid the amount due from the subcontractor (see id. ["it is evident that as to unpaid claims discharged by the general contractor the trust was not executed"]). In other words, even had the restored funds been fully applied to trust purposes by the subcontractor, the contractor would still have been harmed by the amount of any unpaid claims. In DiMarco Constructors, LLC, the Appellate Division, Fourth Department, first held that the Court of Appeals had held that the restoration defense was unavailable, as a matter of law. However, it also applied the principles of Caristo Constr. Corp. to explain that a restoration defense was not available when $1.3 million of the $1.4 million diversion was restored because the contractor was still due nearly $1.8 million for labor and materials provided to the project.⁶

By contrast, the argument advanced by defendants, as expressed by the single Justice dissent in DiMarco Constructors, LLC, evinces the second rationale — the view that because money is fungible a trustee should receive credit for any of the diverted sums that are restored and used for trust purposes, notwithstanding that a trust beneficiary may have outstanding claims after the trust is exhausted. As noted, this view was rejected in Caristo Constr. Corp. and DiMarco Constructors, LLC, and there is no contrary controlling precedent. Defendants having failed to establish the existence of a disputed issue of material fact regarding the third and fourth causes of action, or any defense thereto, plaintiff is entitled to partial summary judgment thereon.

Plaintiff is entitled to interest on the funds diverted from the time of diversion to judgment at the rate equal to the underpayment rate set by the commissioner of taxation and finance pursuant to Tax Law § 1096 (e), minus four percentage points (see Lien Law § 77 [3] [a] [i]). Inasmuch as the federal short-term rate used to determine the applicable interest rate is variable and may change from month-to-month, plaintiff may submit a proposed calculation of interest applicable to the third and fourth causes of action by October 5, 2026. Upon review of a timely submission from plaintiff, the court will order entry of judgment against GPA and Frost on the third and fourth causes of action. Plaintiff's failure to make a timely submission shall constitute a waiver of interest on the third and fourth causes of action and the court will order entry of judgment accordingly.

Based on the foregoing, plaintiff's motion is granted. Upon proper application therefor, the Tompkins County Clerk shall enter judgment for plaintiff against GPA on the first cause of action for $3,467,554.75, plus interest at the statutory rate of nine percent per annum from September 1, 2024 to entry of judgment, plus costs and disbursements, to be taxed by the clerk. The court will order entry of judgment against GPA and A. Frost Travis on the third and fourth causes of action, respectively, based on the procedure set forth above for determination of interest that may be included. Plaintiff's total recovery on all three judgments shall not exceed the amount of the judgment entered on the first cause of action, plus post-judgment interest that may accrue thereon.

This decision constitutes the order of the court. The filing of this decision and order, or the transmittal of copies hereof, by the court shall not constitute notice of entry (see e.g. CPLR 2221 [d] [3]; 5513). The prevailing party shall serve notice of entry hereof as required by CPLR 2220 (b) and Uniform Rules for Trial Courts (22 NYCRR) § 202.5-b (h) (2).

Dated: September 14, 2026

Cortland, New York

ENTER

HON. MARK G. MASLER

Supreme Court Justice

The following documents filed with the Clerk of the County of Tompkins via the New York State Courts Electronic Filing System were considered herein (see CPLR 2219 [a]):

Document Numbers 15-31; 37-40; 43.

FOOTNOTES

1.   No proof was submitted as to when — or whether — the architect certified payment as required to commence the running of the 30-day period for payment by GPA. The earliest ascertainable date of the breach was fixed as September 1, 2024 to allow time for review and certification by the architect (see AIA Document A201-2017, General Provisions, § 9.4.1 [architect is required to act on certificate of payment within seven days after receipt]).

2.   GPA did not respond to Purcell's initial demand for a sworn statement of account, prompting Purcell to commence a special proceeding that resulted in order compelling compliance dated February 28, 2025 (see Matter of Purcell Construction Corp. v GPA Management, LLC, Sup Ct, Tompkins County, index No. EF2025-0125). The statement did not provide a complete and itemized accounting of trust assets in accordance with Lien Law § 75 (3), thereby meeting plaintiff's burden of establishing entitlement to partial summary judgment on the third cause of action based on the statutory presumption of diversion where a trustee failed to provide a complete accounting of trust assets (see Lien Law § 75 [4]; Anthony DeMarco & Sons Nursery, LLC v Maxim Constr. Serv. Corp., 130 AD3d 1409, 1412 [3d Dept 2015]).

3.   This figure, which the court calculated directly from the figures shown on GPA statement, differs from the totals calculated by plaintiff ($1,185,933) and defendants ($1,191,780).

4.   Frost's admission that he was unaware of his fiduciary obligation for the building loan proceeds is not a defense to plaintiff's diversion claims (see Matter of RLI Ins. Co., Sur. Div. v New York State Dept. of Labor, 97 NY2d 256, 263 [2002]; DiMarco Constructors, LLC v Top Capital of NY Brockport, LLC, 193 AD3d 1375, 1376 [4th Dept 2021], quoting Matter of RLI Ins. Co., Sur. Div., 97 NY2d at 263).

5.   The subcontractor was paid from trust funds but failed to pay its suppliers. The general contractor paid the subcontractor's suppliers. The subcontractor did not reimburse the general contractor for its payment of the subcontractor's suppliers, or for costs the general contractor incurred to complete work under the subcontract. The Court of Appeals affirmed the grant of judgment to the general contractor against the factor on the diversion claim following a nonjury trial.

6.   It bears noting that this case is factually similar to DiMarco Constructors, LLC because, notwithstanding the alleged full restoration of the diverted funds in this case, it is undisputed that plaintiff is still due $3,467,554.75.

Mark G. Masler, J.