Burnett v. Mayor , 31 N.J. Eq. 341 ( 1879 )

The opinion of the court was delivered by

Green, J.

The parties contestant in this cause were defendants, in the court below, to a bill of interpleader, filed by the mayor and aldermen of Jersey City, for the purpose of settling and adjusting the respective claims of the parties to the money due from the complainants to Adam J. Dittmar, for the erection of a public school-house in Jersey City. The building was erected under a written contract, duly filed in the county clerk’s office before • the commencement of the work, and was finished by the contractor according to the specifications, and accepted by the board of public works of the city. At the time of its completion, there remained due from the city the sum of $5,125, being the last payment under the contract, and the further sum of $425 for extra work and materials used in the erection of a stoop, ordered by the city and not included in the agreement.

During the progress of the work, Dittmar became indebted to various parties, for labor performed and materials furnished for the erection of the building, and, on June 11th, 1877, he assigned to Dodge, Meigs & Co. all his right, title and interest in the last payment to become due to him by virtue of the contract, notice of which assignment was acknowledged by tbe city clerk on August 4th, 1877. The purpose of the above assignment was to secure to Dodge, Meigs & Co. the payment of $2,500 for materials furnished, and to be furnished, by them to Dittmar. On August 13th, Dittmar, in order to secure to Wightman & Brothers their claim for labor and materials, drew an order in their favor on Dodge, Meigs & Co., for the balance of the said last payment over and above $2,500, which order was accepted on the same day by Dodge, Meigs & Co., payable when the warrant for $5,125 was obtained by them. On September 1st following, Dittmar transferred to Cornelius Zabriskie the warrant for the money due from the city for the extra work. Subsequent to these assignments, several creditors of Dittmar, who had furnished labor and materials for the school building, served notices on the city authorities for the amount of their respective claims, pursuant to the third section of the mechanics lien law (Rev. p. 668). The money was paid into court by the complainants on filing their bill of interpleader, and the cause, when at issue, was referred to one of the advisory masters of the court to hear and determine.

It was not disputed, on the hearing before the master, nor in this court, but that the bill of interpleader was properly filed, and that the complainants are entitled to their costs out of the fund. The real controversy is between the creditors who attempted to secure their claims by demand and notice under the lien law, on one side, and the firms of Dodge, Meigs & Co. and Wightman & Brothers, who claim under the assignments from Dittmar, on the other.

The assignments being all prior in point of time to the giving of the notices under the lien law, the fund, after payment of the complainants’ costs, was adjudged, in the court of chancery, to the assignees of Dittmar, according to their respective priorities. The decision of the master is in accordance with well-settled and repeated adjudications in the courts of this state, and with the decision of this court in Craig v. Smith, 8 Vr. 549. From this decree the appellants bring their appeal, and contend that they should be paid the amount due them on their notices under the lien law, in preference to the respondents. They insist that the assignments of the fund by Dittmar were void as against them, upon two grounds: First—Because they are in violation of the contract between Dittmar and the city. Second— Because they are fraudulent and against the policy of the lien law.

The contract for the erection of the building contained a provision that the contractor should not, by power of attorney or otherwise, assign any of the moneys payable under the agreement, unless by and with the assent of the board of public works, to be signified by endorsement upon the agreement, and that, if the contract should be assigned otherwise than as therein specified, the board should have the power to notify the contractor to discontinue all work under the contract, and also power to complete the work themselves, at the contractor’s expense, the cost to be deducted out of the moneys due or to become due to him under the agreement. It is alleged that the express consent of the board of works was not given or endorsed on the agreement pursuant to its provisions, but, if true, the omission cannot avail the appellants or avoid the claims of the respondents under the assignment. The covenant and the penalty for its violation were evidently designed for the protection of the city against the dereliction or insolvency of the contractor. The appellants had no interest in it, no right to demand its fulfillment, and were entitled to no indemnity for its violation. ■

The assignment was not void, even as against the city, but voidable pro tanto only. The board of works could not deprive the assignees of their rights under it. If deemed proper, they could protect the interests of the city by taking charge of the work and appropriating the money on hand to its completion. In such case, the surplus, if any, after deducting the money so expended, was expressly payable to Dittmar, and would pass to his assignees. But the eity had a clear right to waive the enforcement of a provision in the contract inserted for its special benefit, and did so, by omitting to give the required notice to the contractor, and permitting him to continue the work, as well as by bringing the fund into court and consenting to its distribution.

The second ground relied upon by the appellants is equally untenable. No actual fraud is alleged or attempted to be proved in the case. The claims of both parties are equally just and meritorious. No unfair advantage was taken by the respondents. Dittmar was largely in their debt. He wanted further credit for a large amount of lumber to finish the school building, and proposed to assign the last payment on the contract as security for both the new, and part of the old, indebtedness. They had the right to require security for the payment of their claims, and, as diligent creditors, they exercised the right. There was nothing in the case to preclude Dittmar’s undoubted right to prefer any just creditors, and to secure their claims by assignment. Neither the giving nor obtaining of an honest preference allowed by law, can be evidence of fraud or of an attempt to hinder, delay and defraud creditors.

The allegation of undue concealment of the assignment by Dodge, Meigs & Co., to the prejudice of the appellants, is not sustained by the proofs. Notice of the assignment was given to the city clerk prior to August 4th, 1877, and Norman Dodge testifies that it was mentioned to several persons; that they made no secret of it, and did not attempt to conceal it. The further objections (that the assignment was made to secure future advances; that an assignment of part only of a fund gives no interest in the fund without the assent of the debtor, and that the assignment is contrary to the spirit and policy of the lien law), cannot prevail. A mortgage or assignment to secure future advances is held to be good in equity, and in this case the lumber was delivered at once, before the rights of the appellants intervened. The two latter objections are disposed of by the reasoning of the court in Superintendent of Public Schools v. Heath, 2 McCart. 23. See, also, Phillips on Mechanics Lien § 256.

It is further contended, that the assignment of a chose in action is not complete until notice is given to the debtor, and that, as no notice of the order in favor of Wightman & Brothers was given to the city, that firm acquired no equitable lien upon the fund in the city’s hands. But the order in favor of the Wightmans was drawn, not on the city, but on Bodge, Meigs & Co., to whom the assignment of the whole debt was made, and who were entitled, at law, to receive and receipt for the whole amount. Upon the acceptance of the order by the last-named firm, they became trustees for the Wightmans, to the extent of their interest. On the 20th of September, after the acceptance of the order, and before other claims intervened, a second notice of the assignment to Bodge, Meigs & Co. was filed with the city clerk. This clearly inured to the benefit of Wightman & Brothers, and perfected their equitable lien upon the fund. A notice from the Wightmans to the city could have been of no practical benefit. Both the debtor and creditors of Bittmar were apprised that he had parted with all his interest in the fund, and that the assignees were entitled to receive the money.

It is urged, as a last ground for reversing this decree, that it directs that the money due under the contract, and that due for extra work, should be treated as distinct funds, and be separately disbursed. In principle, there is no distinction between the funds; none is made by the lien law, and, ordinarily, the whole should he treated as one fund, and be disbursed among all the claimants, according to the provisions of the law. But the decree expressly states that the two funds should, for the purposes of this case, be treated as distinct sums, and be separately disbursed. The decision and decree are confined to the case in hand, and are clearly right. The two funds were separately assigned by Bittmar, at different times, to different parties, and to secure different claims. To blend them again would he manifestly erroneous. The decree in favor of Zabriskie, to whom the assignment was made, and whose claim absorbed the larger part of the fund, cannot be questioned. The balance (about $100) was directed to be paid to Mayer & Martin, on account of their bill for extra work. The master states that the appropriation of the money due for extra work was not disputed by any of the parties at the trial, and may be considered as made by consent. The decree should be affirmed, with costs.

Decree unanimously affirmed.