Hall v. Carl G. Ek & Son Construction Co. , 236 N.Y.S.2d 555 ( 1963 )

Williams, P. J.

The question presented is whether an assignee of the claim of a person who has furnished labor and materials in the construction of a public improvement has the right to file a notice of lien under section 5 of the Lien Law. For purposes of clarity, we note at this point that the assignment was of a claim for labor and materials furnished, as distinguished from an assignment of a lien already perfected by the filing of notice thereof.

The assignment of the claim was made to the plaintiff-respondent after all of the work had been performed and the materials furnished to the project by the assignor. The defendant-appellant Ek & Son Construction Co., Inc. was the general contractor and the defendant-appellant Travelers Indemnity Company was the surety on a bond given to discharge the so-called lien filed by plaintiff. The present action was brought to foreclose the so-called lien. Answers were served, after which the plaintiff moved for summary judgment. The defendants resisted the motion and took the position that the plaintiff was not entitled to file a lien under said section 5 of the Lien Law. The Justice at Special Term construed section 5 as authorizing the filing of a lien by the plaintiff.

Since 1871, when Rollin v. Cross (45 N. Y. 766) was decided, it has been the law of this State that the assignee of a claim may not file a lien. That ease has never been overruled. We call attention to the fact that the Rollin case dealt with a lien against a private, as distinguished from a public, improvement. Chapter 478 of the Laws of 1862, which controlled the Rollin decision, was similar in substance and effect to the present section 3, which relates to liens against private improvements.

The Rollin ease was followed in Tisdale Lbr. Co. v. Read Realty Co. (154 App. Div. 270), also an action to foreclose a mechanic’s lien on a private improvement. The plaintiff was the assignee of one Tisdale, who had furnished materials in the construction of the improvement. The court stated (p. 271): “It seems to be true * * * that a valid mechanic’s lien cannot be created by filing the statutory notice by the assignee of a claim. The right to file a mechanic’s lien is a personal right limited to the person performing the labor or furnishing the material, and is not assignable. The transfer of the claim in suit, therefore, did not carry with it the assignor’s right to acquire a valid lien. This has been the construction given to similar statutes for many years.”

The court then reasoned that the definition of a lienor in section 2 of the Lien Law, “ any person having a lien upon property * * * and includes his successor in interest ”, did not include an assignee of a claim. “ A 1 successor in interest ’ within the meaning of this term as used in the statute, is one who succeeds to a lienor’s rights under a valid notice of lien already filed, by assignment or otherwise. In other words, the assignor must have an existing lien before he can have a ‘ successor in interest ’.” The court went on (pp. 271-272) to reject the contention by the plaintiff that he was the “ successor in interest ’ ’ under an ‘ ‘ inchoate lien ”. “ There is no such thing as an ‘ inchoate ’ mechanic’s lien. The sole right given by the statute is to create a lien which has no existence, inchoate or otherwise, until the notice is filed, and until this is done no priority among the claims of creditors is recognized. The lien and a consequent priority originates with the notice when duly filed. (Mach v. Colleran, 136 N. Y. 617, 620.) ”

Unless an assignee of a claim arising out of a public improvement has rights under the language of section 5, not available to an assignee under section 3, the plaintiff’s contentions must fail. We now turn to specific language of section 5, which is the section under which the present case must be decided: “ A person performing labor for or furnishing materials to a contractor, his subcontractor or legal representative, for the construction * * * of a public improvement * * *

shall have a lien * * * upon the moneys of the state or of such corporation * * * upon filing a notice of lien as prescribed in this article (Italics added.) Special Term found that the words “ or legal representative ” referred to the person performing or furnishing and included an assignee of such person. It is obvious, however, that the words ‘1 or legal representative” do not refer back to the person performing labor or furnishing materials but relate to the contractor or subcontractor to whom such labor or materials were furnished. Any other construction is contrary to the clear language of the section. (Cf. Dorn v. Johnson Corp., 16 A D 2d 1009, 1010; Wynkoop v. People, 1 A D 2d 620, 622.) The fact that the words “ or legal representative ” do not appear in section 3 does not affect in any way the construction of section 5 because neither section indicates that a person who performs labor or furnishes materials, or his assignee, may file a claim. Nor is such a construction warranted. Liens on private improvements and on public improvements are in the same category so far as the right of an assignee of a claim is concerned (Blanc, Mechanics’ Liens, pars. 9g, 71c, pp. 17, 435 [1949]).

The case of Ogden v. Alexander (140 N. Y. 356), at first glance, seems to be contrary to the holding in Rollin v. Gross-, but the court very carefully pointed out the distinction between that case and the Rollin case where it is said (p. 361): “ We may grant that Oliver [a former partner] lost all ownership of the claim and retained no equity against or interest in, the partnership assets, at least, after all its debts had been paid, but that fact does not make Ogden a mere assignee, or put him outside of the intended purpose and scope of the statute.” (Italics added.)

There is no question that, after a lien has been created by filing of a notice thereof, it may be assigned (Tisdale Lbr. Co. v. Read Realty Co., 154 App. Div. 270, supra; Lien Law, § 14). In fact, a reading of section 14 clearly sets forth the distinction that we make. The section commences: “A lien, filed as prescribed in this article, may be assigned by a written instrument ’ ’. If an assignee of a claim had had the right to file a lien, there would have been no need for the enactment of section 14 which was added by chapter 418 of the Laws of 1897. It must also be remembered that section 16, which pertains to the assignment of funds, has no bearing whatsoever upon the problem here involved.

It follows that, inasmuch as the plaintiff has no lien, the foreclosure features of the action must fall; and it, in turn, follows that the complaint must be dismissed as to Travelers Indemnity Company. The alleged lien was discharged and the bond took the place of the fund in accordance with subdivision 5 of section 21 of the Lien Law. The right of recovery on that bond is not personal but could be had only after a judgment of foreclosure had been procured. (Berger Mfg. Co. v. City of New York, 206 N. Y. 24; Security Trust Co. of Rochester v. Seaboard Sur. Co., 15 A D 2d 993; Johnson v. Breen Co., 143 Misc. 908, affd. 235 App. Div. 651; Simonelli v. Guidone & Son, 201 App. Div. 44. See, also, Jensen, Mechanics’ Liens [3d ed.], p. 408, § 353.)

The Special Term Justice directed that the matter be referred to a Referee for a determination only of the amount due as to Ek & Son and Travelers. The portion of the order that directs the assessment of the amount due from Ek & Son to the plaintiff should be affirmed. We see no reason to compel the plaintiff to commence a simple action for money damages merely because a judgment in foreclosure may not be granted. But inasmuch as Ek & Son has asked for a jury trial of the issues relating to amount, and inasmuch as that defendant has not waived the right to a jury trial, the determination of the amount due should be had before the court and a jury. Subdivision 3 of rule 113 of the Rules of Civil Practice states that if there is only a triable issue of fact as to damages ‘ ‘ the court shall order an immediate hearing before a referee, before the court, or before the court and a jury, whichever may be proper, to assess * * * In this case a court and jury is the proper forum.