Weitzel v. Zane

Opinion by

Rice, P. J.,

This is an appeal by plaintiffs from judgment on directed verdict in favor of defendants in an issue arising out of a scire facias on a mechanic’s lien, filed on March 23, 1912. Binding direction in favor of the defendants tvas based on the provision of Section 36 of the Act of June 4, 1901, P. L. 431, that: “any defense which would, defeat the action were it a personal one against the contractor to recover for the particular work or materials required to be done or furnished under the contract of the owner......shall Avholly defeat the claim.” The facts pertinent to the defense which the learned trial judge held to be sufficient to defeat the plaintiffs’ claim are not in dispute and may be summarized as follows: The materials for which the lien was filed Avere furnished between July 5 and October 4, 1911, under a contract between the plaintiffs and G. W. and J. M. Zane designated in the lien as contractors and builders. On October 14,1911, G. W. and J. M. Zane made an assignment for the benefit of creditors .under the Pennsylvania Insolvency Act of 1901, and about the same date an agreement was entered into to which Avere parties: (1) G. W. and J. M. Zane; (2) Harrison N. Deisel, designated as trustee; (3) certain persons constituting a committee representing all the creditors; (4) the various creditors of G. W. and J. M. Zane including these plaintiffs. This agreement provided an elaborate plan for the administration of the insolvent estate through the trustee named therein Avho was to act under the direction of a committee of creditors also named therein. The details of this plan need not be recited. It is sufficient for present purposes to refer to the clauses of the agreement embracing and expressing the obligations and undertakings of the creditors. First. They promised and agreed “to refrain from instituting or prosecuting any action or actions, suit or suits, at law or in equity in the State court or Federal courts under the Federal Bankruptcy Act against the said G. W. and J. M. Zane for the collection of their claims”; secondly, they “do severally release, exonerate and discharge the said G. W. and J. M. Zane of and from any and all further liability on their part, or either of them individually or jointly on account of any of the said several claims, provided however should the said G. W. and J. M. Zane or either of them become adjudged bankrupts and this agreement be vacated, annulled or set aside this release shall also become void and of no further force or effect.” It was admitted on the trial that the agreement was not vacated or annulled by G. W. and J. M. Zane being adjudged bankrupts but was still in force. These clauses of the agreement are clear and unambiguous. On their face they import not merely a promise to release, but a present release and exoneration of G. "W. and J. M. Zane from liability to personal action. Counsel for the appellants throughout their elaborate and ingenious argument called this an “artificial” release, but it is not perceived why it should be so characterized. True, the debts were not wholly extinguished and as the learned trial judge says, the object of these provisions was “to make it possible for the trustee, in handling the prbperty, to be absolutely free from embarrassment by reason of the fact that creditors might run in and file liens or bring suits or things of that sort.” Nevertheless, the release to which all the parties agreed was actual and expressed, and its force and effect are not detracted from by reason of the fact that it was part of a plan for the convenient administration and distribution of the assets of the insolvent estate. In the sense that the release was expressly agreed to and did not arise by operation of law from payment or from the fact of insolvency and the assignment under the insolvency statute, it was “artificial” but not in any other sense that we can perceive. It is argued that the sixth clause of the agreement- whereby the creditors released the right to file liens against any of the real estate passing under the assignment taken in connection with the seventh clause in which it was provided that creditors “who hold collateral security or endorsements for the payment of their claims shall have all the rights and privileges which they possess in their said collateral or against the said endorsers at the signing of this agreement,” tend to show that the right to file liens against property not belonging to the assigned estate was reserved. We have given cpnsideration to the argument of appellants’ counsel in support of this proposition, but are unable to adopt the conclusion at which they arrive, viz, that the right to file the lien in question was reserved. Having regard to the context the reservation to creditors of rights in collateral securities held by them may well be satisfied without extending it by doubtful construction, so as to include the right to file a lien against property owned by one who was not party to the agreement. Presumably, the parties to the agreement knew of the provisions of the Act of 1901 to which we have referred and, therefore, the plaintiffs must be presumed to have known that when they did that which would defeat a personal action against Gr. W. and J. M. Zane, their immediate debtors, they at the same time did that which would defeat their claim against property of A. M. Zane who was not a party to the agreement. Whether by any sort of ingenious stipulation in an agreement between contractor and subcontractor the right of the latter to maintain a mechanic’s lien against property .of a third person could be preserved, and the personal liability of the contractor, the principal debtor, be discharged, is a question that need not be discussed. It is sufficient to say that we find no substantial basis in the agreement for concluding that the parties intended to accomplish that difficult thing.

It is argued that the defendants have not a legal right to plead the agreement without showing payment to the contractor for the materials or some other equity. When it is remembered, as has often been said, that the owner of a building, or rather the building itself when erected by contract, stands very much in the relation of surety for the contractor, it needs no elaborate argument to show that the owner has an equity arising out of the subcontractor’s release of the contractor, the principal debtor from personal liability. But we need not go into that question. The statutory right of a subcontractor to file a mechanic’s lien rises no higher in equity than the owner’s right to maintain a defense thereto which the statute gives. The defense set up here is a legal defense expressly given by the statute. The burden was not on the defendants to prove that it was supported by some special equity as well.

The assignments of error are overruled and the judgment is affirmed.