Slingerland v. Binns , 11 Dickinson 413 ( 1898 )

The opinion of the court was delivered by

Dixon, J.

On April 6th, 1895, the complainants entered into a written contract with Ebenezer Scott, by which Scott agreed to erect for them a building in the city of Passaic for $3,900. This contract, with the specifications, was duly filed in the Passaic county clerk’s office. Afterwards Scott bought from the defendant materials, which he used in the construction of the building, for which he owed the defendant $450; and on September 12th, 1895, the defendant, having demanded payment from Scott, served on the complainants a notice thereof in accordance with the provisions of the Mechanics’ Lien law. At that time all moneys accruing under the contract were past due and paid, except the last installment, $1,400, which was payable on the completion of the building, and had not yet matured. Scott failed to. complete the building, and the complainants, therefore, finished it at an expense of $235.25. Besides this, they paid $500.37, for which they claim credit on account of the $1,400. Conceding all these credits, there would have become due to Scott for his final payment a balance of $664.38, on the completion of the building, had he not previously given to various persons orders on the complainants amounting to $690.86, which the complainants had paid. The complainants refused to pay the defendant’s demand, and thereupon he sued them at law, and recovered judgment in spite of their contention that Scott’s orders, having been given before the defendant’s notice was served, were, as equitable assignments pro tanto of the fund, entitled to priority over the defendant’s claim.

The present bill was filed to restrain the defendant from enforcing his judgment, on the ground that, although the complainants’ defence was overruled at law, it should be sustained in equity. On this bill the complainants obtained a decree in their favor, and thereupon the defendant appeals to this court.

Conceding that the contention of the complainants would have prevailed before the passage of the supplement to the Mechanics’ Lien law, approved March 14th, 1895 (Gen. Stat. p. 2073), the question now turns on the proper construction of the fifth section of that supplement, which is as follows :

“That if the owner or owners of any building or other property, which, by the act to which this is a supplement, or the various supplements and amendments thereto, is made the subject of liens for or toward the construction, altering, repair or improvement of which labor or services have been performed, or material furnished by contract, duly filed, shall, for the purpose of avoiding the provisions of the act to which this is a supplement, or the various supplements and amendments thereto, or in advance of the terms of such contract, pay any money or other valuable thing on such contract, and the amount still due to the contractor after such payment has been made, shall be insufficient to satisfy the notices served in conformity with the provisions of the act to which this is a supplement, or the various supplements or amendments thereto, such owner or owners shall be liable in the same manner as if no such payment had been made.”

Prior to that supplement this court had held that the contractor in a building contract was free to deal with his inchoate rights under the contract as he pleased, up to the moment when they were impounded by a notice given to the owner pursuant to the statute, and if, before the notice reached the owner, the contractor had assigned his rights, the notice was ineffectual. Craig v. Smith, 8 Vr. 549; Mayer v. Mutchler, 21 Vr. 162. The basis of these decisions was that the statute gave the workmen and materialmen no claim whatever upon the moneys payable under the'contract or upon the owner, until the statutory notice was served.

But plainly this section of the law changes the situation. It expressly forbids the owner to pay any money in advance of the terms of the contract, if the effect may be that the amount unpaid will prove insufficient to satisfy notices served in conformity with the statute. The prohibition is not confined to payments made to the contractor personally; it embraces payments made to anyone. In substance it directs that the owner shall not in any way discharge his liability to pay under the contract, until, according to the terms of the contract, the time to do so has arrived, in order that until that time such liability may be preserved for the benefit of workmen and materialmen who serve the statutory notice. This enactment, we think, affords a reasonably clear indication of a legislative purpose to give to persons entitled to serve the statutory notice an inchoate lien upon the liability of the owner under the contract, until that liability matures, according to the terms of the contract, such lien to become perfect on service of the notice before the liability matures, but to expire on such maturity if no notice has been given; for a notice served after maturity derives no aid from this provision. Of course, this inchoate lien does not impair the owner’s right to protect himself against the consequences of any default upon the part of the contractor, but it does prevent the contractor from making any disposition of his rights, detrimental to the claims of those serving notice according to the act.

These views are supported by decisions on similar statutes elsewhere, although, the statutes being somewhat different, the decisions may not be exactly in point. Post v. Campbell, 83 N. Y. 279; Jorda v. Gobet, 5 La. Ann. 431; First National Bank v. Perris District, 107 Cal. 55.

On this construction of the statute, the rights of Scott’s assignees were subordinate to the rights of the defendant, and the complainants could not, by paying those assignees, lessen their liability, either at law or in equity, to the' defendant.

The suggestion made against the constitutionality of the statute, if it has any substance, should have been presented in the trial at law.

The decree should be reversed, and the bill dismissed.