Church E. Gates & Co. v. National Fair & Exposition Ass'n , 158 N.Y.S. 1070 ( 1916 )

Putnam, J.:

The National Fair and Exposition Association (called herein the “tenant”) by instrument dated December 28,1912, obtained a tentative option for a lease from the Empire City Racing Association (called herein the “owner”) of the Empire City Park in Yonkers for five years, from January 1,1913, with the further right of a five years’ renewal. The tenant closed this tentative option on February 28, 1913, by a formal confirmation. Soon afterward the tenant went into possession and so continued until the following September, when it was adjudged bankrupt and its possession passed to the trustee in bankruptcy. This litigation arises over liens for labor and materials incurred during this occupation. The learned justice at Special Term found that the owner had consented also that the labor and materials were furnished with its knowledge and consent. This lease contemplated holding annual fairs and exhibitions on the park grounds, also that the tenant should make improvements. It provided: “Second party [the lessee] has the right to change the location of, alter, re-arrange or remodel any buildings, fences, walks, roads or track, now on the grounds, provided the consent of the First party [Empire City Racing Association] is first obtained in writing. And the Second party has the right to erect new buildings oh such locations as are approved by the First party,- or to allow the privilege of erecting buildings to others; such new buildings as may be erected by the Second party are to remain their property and may be removed from the premises by them at the termination of .this contract, provided that all the agreements herein contained have been faithfully performed by them.” Furthermore, the tenant’s obligation for a certain amount of improvements was mandatory: “It is agreed and understood that' Second party is to spend, or cause to be spent the sum of Twenty thousand Dollars ($20,000) on buildings and improvements within two (2) years, and a total sum of Fifty thousand Dollars ($50,000) within four (4) years.”

After taking possession, about April 1, 1913, the tenant planned many extensive alterations by a scheme involving much new building, such as additions to the rear of the grandstand, transforming the old betting shed into a machinery building, with enlargements of the barns so as to house exhibition animals. These proposed improvements were described with much detail in a letter of July 9, 1913, to the owner, wherein the owner’s written consent was asked. At this time some of the proposed work had already started.

The owner answered on same date, reminding the tenant that by the lease such changes were to be at the tenant’s expense and holding the owner harmless. The owner’s consent was thus phrased: “ Subject to your furnishing us with a satisfactory guarantee of your ability to pay for such changes and additions, and provided the work is completed before August 31st, 1913, we will accord you the following consents under the terms of said lease, to take effect when such guarantee is furnished. ”

These consents were specified with much detail. Some of the tenant’s proposed changes were disapproved, and the owner withheld any consents thereto.

There was evidence of a telephone interview as to furnishing a bond by individuals before obtaining the bond of the National Surety Company. On the next day, July tenth, a bond, by Messrs. Stokes and Lea as sureties, was executed, with the condition:

“Whereas, pursuant to the provisions of said lease, the principal has requested the obligee to consent to certain changes and additions to the buildings and grounds of said Empire City Park, and the obligee requires the principal to furnish a guarantee that the expense of such changes and additions will be paid for by the principal and that the obligee will be held harmless therefrom, and which changes and additions and consent are fully set forth in the letter of the principal addressed to the obligee dated July 9th, 1913, and the letter of the obligee to the principal dated the same day, both made part hereof.

“Now therefore, the condition of this obligation is such, that if the said principal shall faithfully perform and pay for the work necessary to make such changes and additions on its part according to the terms and conditions of said letters, then this obligation shall be void, otherwise to remain in full force and effect.”

On July eleventh the owner wrote in acceptance: “We beg to acknowledge receipt of your temporary Bond and to say that with the understanding that you will supplement it by July 22nd, 1913, with one issued by the National Surety Company of New York City for $20,000, the same is acceptable to us.” The expected bond by the National Surety Company was never provided.

The main question on this appeal is whether, in view of the

omission to furnish the bond of the National Surety Company, the owner’s consent can be established. Clearly the owner’s acceptance of the personal bond of Stokes and Lea, which it called a “temporary ” bond, was a consent to the improvements then going forward, which consent was to last at least for the ten days until July 22, 1913, which was the purpose of such temporary bond. If the word “ understanding ” in the owner’s letter of acceptance be given the full force of a “ condition,” such condition was a condition subsequent, by which the consent was liable to be defeated or withdrawn if the surety company bond should not be given. However, then the owner was required to take some step to withdraw its consent, which would not cease ipso facto on July twenty-second, if the promised bond should not he forthcoming. But this the owner did not do. It continued to hold the temporary bond, with the effect that the sureties thereon were liable for work done after, as well as before, July twenty-second. On July twenty-third the owner wrote to the tenant’s manager reminding him that the promised bond remained to be furnished. In face of this breach, the owner was not revoking its consent, but rather was still relying on the tenant’s fulfillment of his promise, Hence the consent remained, and continued until the owner took some step that would show a purpose to forfeit and withdraw its previous consent to these improvements. Especially is this true when the owner keeps the temporary bond without any disclaimer of its right to enforce it as security. In considering the owner’s purpose at this time, we must bear in mind that these improvements were to the owner’s advantage. The tenants could remove such new structures at the termination of the contract, “provided that all the agreements herein contained have been . faithfully performed by them.” These improvements thus became a security for the rent and for performance of the tenant’s other covenants. Hence the owner’s consent continued after July twenty-third. As to material-men and laborers, the owner, after thus consenting, could not hold an ambiguous relation to the improvements and additions to its property or increasing its security. (McNulty Brothers v. Offerman, 152 App. Div. 181; Hilton & Dodge Lumber Co. v. Murray, 47 id. 289; National Wall Paper Co. v. Sire, 163 N. Y. 122; Cowen v. Paddock, 137 id. 188; Tinsley v. Smith, 115 App. Div. 708; affd., 194 N. Y. 581.)

We, therefore, agree with the finding that the owner consented to these liens.

Appellant, Empire City Racing Association, objects to the sufficiency of the complaint foreclosing the lien of Church E. Gates & Company, Inc., because it did not comply with section 1629 of the Code of Civil Procedure. Originally it averred “that no other action or proceeding at law or in equity has been brought to foreclose the said plaintiff’s said lien or claim.” At the opening of the trial, however, the court permitted an amendment to add the words: “ Or to recover the amount due to the plaintiff.” _ This amendment complied with the Code requirement (Bachmann v. Spinghel, 164 App. Div. 725), and, having been granted without objection, leaves nothing to review.

We pass to consider the appellants’ objections to the different liens.

As to the notices of lien. Appellants attack the liens of William J. Sullivan, Lawrence Brothers, Inc., Gates & Company, Inc., and the Wright-Ogden Company, Inc., because the notices did not name the Empire City Racing Association as owner. In most cases the notices gave the name of the Empire City Trotting Club, which was this organization’s former corporate title, before it was changed on January 18, 1908.

Considering that the Empire City Trotting Club was the former name of this appellant, still retained in the record title of part of these lands, we think this misnomer did not mislead the appellants or any one interested. The Lien Law (Consol. Laws, chap. 33 [Laws of 1909, chap. 38], art. 2, § 9, subd. 7) declares that such a misdescription shall not affect the validity of the lien. Here the true owner was named, under its former corporate title. The indexing of the lien was such as readily to discover and make certain its existence. Hence there was a substantial compliance with the statute. (Ray Mechanics’ Liens, § 163.)

The Yonkers Lumber Company and the Lawrence Brothers, Inc., both name in their notices of lien, as owner, James Butler, who at the time was the president and chief stockholder of the Empire City Racing Association. Here was an attempt to reach the Empire City Racing Association by designating the person whose activity gave rise to the belief in his ownership. Counsel also urges that even as a stockholder Mr. Butler’s interest was reached. The case of Strauchen v. Pace (195 N. Y. 167), cited by appellants, deals with priorities between competing lienors, and does not apply here, where no intervening interest is affected.

Not stating the consent or request of the owner. This point is made against the liens of the Mt. Vernon Builders’ Supply Company, Jacob Nor den and Kapp & Nordholm Company. But the consenting or requesting person need not be specified in such notice. It is enough to name the owner.

Signing and verification of the notices of lien. The verification in cases of workmen was by the attorney in the set form of such a verification of a pleading. To reject it would practically deny the right of an agent to verify in part on information and belief. The affiant avers that “the statements * * * are true to his own knowledge, except as to the matters therein stated to be alleged upon information and belief,” which should suffice. (McDonald v. Mayor, etc., 170 N. Y. 409.)

As to alleged dissent of the owner. The lien of William J. Sullivan ($1,211.46) for gravel, crushed stone and sand, also for cleaning, carting and hauling material for driveways and track, is claimed by appellant to have been incurred against the owner’s express dissent. With reference to the roadways, the owner wrote, “ we shall require full details before giving our sanction to the same.”

The proofs do not bear out the contention that there was no consent. These expenses' not being disapproved, and having-been expressly brought to the owner’s attention, must now be regarded as having come within the terms of the subsequent bond, and, therefore, included in the resulting consent and so ratified by the owner.

As to the notices not discriminating between labor and materials. The lien of Sullivan, thus objected to, reads: “ The labor performed was carting, hauling, sprinkling, watering and repairing and cleaning up generally the driveways and track on the premises hereinafter described. The labor to be performed is none. The material furnished was gravel, crushed stone and sand. The material to be furnished is none. The agreed price and value of said labor and material is 81,211.46.” A notice of lien which did not separate labor and materials “furnished and to be furnished” was defective (Bossert v. Fox, 89 App. Div. 7), but the notice may combine both labor and materials in one item. (See Felgenhauer v. Haas, 123 App. Div. 75; Martin v. Gavigan Co., 107 id. 279; Woolf v. Schaefer, 103 id. 567.) This objection, therefore, is bad.

The wages liens. The decision includes 79 labor liens, which were allowed. The men were carpenters and other manual workers, of whom 34 were paid by checks (afterwards dishonored) of the National Fair and Exposition Association. All but seven got back these checks and tendered them at the trial. A claim in bankruptcy proceedings had been filed on behalf of all the wages claims.

The mechanics’ lien suit at bar was begun October 22, 1913. These labor lienors were allowed to intervene by order of February 6,1914. The grounds already considered show a consent to these labor liens. Appellant, howeve r, first urges that the labor liens of David Linton, one hundred and five dollars and eighteen cents, Edward Delapp for seventy-three dollars and sixty-eight cents, and Pierce A. Wall, sixty-one dollars and thirty-one cents, were not legally proven, because the lienors did not personally testify before the commissioner, but instead presented affidavits. It appeared that Justice Keogh suggested this in open court as to Delapp and Wall, and their affidavits were thereafter received without objection. The lien of David Linton was established by his brother’s testimony, which proved the services and the working time of both Lintons.

As to the effect of proving claims in bankruptcy proceedings and the resulting composition proceedings. The National Fair and Exposition Association was adjudged bankrupt in the United States District Court on August 29,1913. Many of the above lienors filed their claims in bankruptcy there and others filed such claims with the referee. Mr. Gue was'appointed trustee September 30, 1913. On April 16, 1914, the referee issued his certificate in composition, which composition was confirmed by the order of District Judge Mayer on May 6, 1914. By the terms of this composition Class B creditors, which are made up of wage earners, priority creditors and mechanics’ lien creditors, were to receive eight per cent cumulative preferred “ stock ” of the National Fair and Exposition Association, Inc., to the full amount of each claim. By a supplemental answer the Empire City Racing Association set up this composition.

The liens here adjudged are not against the bankrupt’s property, but are enforced against that of the owner and lessor. The action of the lienors in voting in bankruptcy creditors’ meetings should not be held to waive their claim against the owner. Matter of Thompson (31 Am. Bank. Rep. 236) holds that “ security ” under the Bankruptcy Act is limited to security out of or against the bankrupt’s estate, and not as respects a collateral claim against other parties. (Matter of Matthews, 132 Fed. Rep. 274.)

The respondents Norden, Mount Vernon Builders’ Supply Company and the Kapp & Nordholm Company withdrew from the bankruptcy proceedings after the first meeting of creditors. It has been stipulated that Gates & Company, Wright-Ogden Company, William J. Sullivan, Jandous Electric Equipment Company, Colwell Lead Company and Percy Bloom filed no claims in bankruptcy against this lessee, and never participated in the proceedings in bankruptcy.

Aside from the fact of filing these claims of laborers and their failure to dissent, there does not seem to be proof of the acceptance of this composition by these lienors.

The decree by the Special Term distinguished the lien claims of the Jandous Electric Equipment Company (not allowed against the lessor), but allowed only against the interest of the lessee, the National Fair and Exposition Association, and the trustee in bankruptcy. This lien was filed on September 8, 1913, after the adjudication in bankruptcy. It is objected that such notice of lien so filed after the bankruptcy was ineffective. The trustee in bankruptcy took title subject to all such hens, and to proceedings pending to enforce them. (Schoenherr v. Van Meter, 215 N. Y. 548; Metcalf v. Barker, 187 U. S. 165.)

It does not appear that the “ preferred eight per cent ” composition “stock” was ever issued to or accepted by the labor lienors. The small amounts of their claims seem to forbid such, a supposition. Indeed, no provision in the decree for subrogation to such rights to “ stock ” is asked for.

A point is raised as to the outstanding checks given to some of these work people. Naturally they cashed them, doubtless being already in debt for their family supplies. About thirty-four such instances appear where the laborers got part cash on these worthless checks, which advances, at the time of the hearing, had not all been refunded. The checks having, come back again into the hands of the men, were tendered at the hearing in all but seven instances. As to these seven claims by laborers, the appellants, if they so require, will be entitled to have appended at the foot of the decree a provision for the production and deposit of such pay checks which are outstanding, and were not tendered at the trial.

The conclusion follows that the judgment should be affirmed, with a bill of costs to each of the seven attorneys who have appeared for respondents on this appeal, such costs to be taxed one-half against each appellant.

Thomas, Carr and Stapleton, JJ., concurred; Rich, J., read for reversal.