Stevens v. Reynolds , 61 N.Y. Sup. Ct. 419 ( 1889 )

Brady, J.

The learned justice held in the court below that the order given to Ogden & Co., for $909.94 was an equitable assignment pro tanto of the amount of the last'payment due by Reynolds to Anderson, the contractor, and that there was nothing in the mechanic’s lien act of 1885 (chapter 342) which in any way affected their right to be paid the amount mentioned in the assignment; and this is really the only question which requires consideration, for the reason that the conclusion of the learned justice that the order given to Ogden & Co. was an equitable assignment pro tanto is clearly established by the case of Brill v. Tuttle, 81 N. Y. 457, inasmuch as the sum mentioned in it was made payable out of a particular fund, which was clearly a distinguishing characteristic of the order referred to. There is nothing in the case of Gunther v. Darmstadt, (Daily Reg. March 20, 1888,) which conflicts with this view. There it was held that the paper in question was a mere draft, and that the circumstances attending the drawing and delivery did not indicate an intention to assign any part of the fund. The act of 1885 (chapter 342) declares that if the owner or person in interest shall for the purpose of avoiding the provisions of the act, or in advance of the terms of any contract, pay by collusion any money or any other valuable thing on such contract, he shall be liable for the amount that would have been unpaid to the contractor, subcontractor, or assignee, had the owner or other person in interest made no such payment, or given no such mortgage, or effected no lien or incumbrance at the time of filing the notice of lien prescribed in the fourth section of the act. The appellant’s contention seems to rest upon the misunderstanding of the provisions just referred to, and illustrated by his dependence upon decisions relating to the mechanic’s lien law of 1862, for Kings county, (chapter 478,) and the case of Post v. Campbell, 83 N. Y. 279, in which the court of appeals construed that act, and held that payments in advance of the terms of the contract, although without fraud or collusion, could not be held against a lienor. It is conceded by the appellant’s counsel that in that act the word “ collusion ” did not appear in, the precise connection that it does in the act of 1885. An examination of the different sections will show that by the act of 1862 two classes of payment were provided against: First, a payment by collusion, for the purpose of evading the provisions of the act; and, second, in advance of the terms of any contract which is entirely different from the language employed by the legislature in the act of 1885, which applies the word “collusion” to both classes of payment referred to in the act of 1862, the language being, “shall, for the purpose of avoiding the provisions of this act, or in advance of the terms of any contract, pay by collusion any money, ” etc. The reasoning, therefore, of Justice Bapallo in the case mentioned does not apply. Indeed, the learned judge said: “But, when provision is made against payment in advance, I find none which requires that such payment in advance be made by collusion, or fraudulently.” It should be observed that Post v. Campbell was decided in 1881,—several years, therefore, before the passage of the act of 1885. In Munger v. Curtis, 42 Hun, 466, in discussing section 2 of the act of 1885, Justice Pratt said that section applies only to cases where the money is paid, or the incumbrance put on, by the owner, for the purpose of defrauding the contractor or subcontractor.

There being no evidence in the case establishing collusion as to the entire sum covered by the assignment, it was proper that the assignees should recover of that amount a sum equal to the value of the lumber furnished by them towards the construction of the building, and nothing more. It is true that the learned j ustice in the court below proceeded upon the doctrine affecting equitable assignments, declaring the assignee to be entitled to the whole sum embraced in the assignment; but this view cannot be sustained, in view of the provisions of the act of 1885, and which were in existence prior to the assignment, and, indeed, prior to the contract between the owner and the builder herein. The fund which was provided for by the contract in payment of materials to be furnished and services to be rendered was by the act appropriated upon certain conditions, being applied to the payment of claims for services rendered and materials furnished to the building; and, although payments in advance by collusion were prohibited, nevertheless the spirit of the act, breathing in every section, is that the sum to be paid shall be secured to the laborers and material-men. It was not in the power, therefore, of the contractor to pay in advance, by assignment or otherwise, out of that fund a sum in excess of the amount due for materials furnished for the work done upon the building, except subject to the operation of the lien law, the provisions of which were equally binding, upon him and his assignee. There does' not seem to be any room for doubt that it was the intention of the legislature to secure the amount of the contract for the payment of material-men and laborers, giving to them a lien upon it, on their compliance with the necessary requirements. For these reasons, it is thought that the assignee should be limited to the amount of the material actually furnished for the building to which the lien relates, and the judgment should be so modified as to secure that result. Ordered accordingly, without costs to either party. All concur.