Acquisition Loans and Construction Trust Funds: The Mayrich Decision

Reviewed September 7, 2026.

Not every mortgage loan associated with a development project creates an Article 3-A trust. The source, purpose and governing transaction matter.

In Matter of Mayrich Construction Co. v. Oliver LLC, 90 A.D.3d 509 (2011), the two mortgages financed acquisition of property and air rights. Neither contained an express promise to improve the property. The First Department held that the contractor had not established the required connection to an improvement under Lien Law § 70(1), and upheld dismissal of the proceeding to compel an owner’s verified trust statement.

Recording the mortgages during the statutory period and including a § 13 trust covenant did not, by themselves, transform those acquisition loans into construction trust assets. The court distinguished a loan actually made to finance construction.

Examine the transaction, not just the label

Lien Law § 70 defines the assets of the particular trust. Review the loan agreement, mortgage, use-of-proceeds restrictions, improvement obligations, disbursements and related contracts. Mixed acquisition and construction financing may require allocation and a more detailed analysis.

A mortgage-priority dispute under §§ 13 and 22 is not the same question as creation or diversion of trust assets. The availability of a § 76 demand depends on establishing the relevant trust and beneficiary rights.

Kushnick Pallaci PLLC assists clients throughout New York with construction trust fund litigation. Contact 631-752-7100 or vtp@kushnicklaw.com.

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