Opinion
08-22-1905
DALY v. SOMERS LUMBER CO. et al.
C. C. Babcock, for complainant C. L. Cole, for defendant Somers Lumber Co.
Bill of interpleader by Thomas Daly against the Somers Lumber Company and others to determine the rights of certain mechanic's lien claimants to the proceeds remaining in plaintiff's hands as part of the consideration for a building. Dismissed.
The complainant, the owner of a lot of land at the northwest corner of Baltic and Kentucky avenues, in Atlantic City, contracted with one Prank Muth that he (Muth) should furnish all the labor and materials for the erection and construction of a building described in a written contract and specifications. The contract, in the clause which deals with the contractor's right to payment in various contingencies, declares that "the architect shall audit and issue a certificate, which shall be conclusive upon the parties, unless decided by arbitration," etc. The total price was agreed to be $9,384, payable as follows: First payment, $1,000, when first floor joists are set; second payment, $2,000, when roof is slated; third payment, $1,000, when house is lathed; "last payment, of $5,384, upon architect's certificate." The contract is dated September 23, 1902, and with its accompanying drawings and specifications was filed in Atlantic county clerk's office on September 24, 1902.
The complainant alleges that the building was commenced shortly after April 24, 1902, and was completed April 24, 1903; that he advanced to contractor Muth on certificates of the architect as follows:
| On December 1, 1902................... | $1,000 00 |
| On December 18, 1902.................. | 2,000 00 |
| On January 7, 1903.................... | 1,000 00 |
| On January 8, 1903.................... | 1,000 00 |
| On February 4, 1903................... | 2,000 00 |
| On March 24, 1903..................... | 1,500 00 |
| Total................................. | $8,500 00 |
The architect, under date of July 14, 1903, certified that the building was completed on or before April 21, 1903. The complainant alleges that Muth, the contractor, was therefore, on April 21, 1903, entitled to the balance due on the completion of the contract, as well as to all preceding installments of the contract price; that he (the complainant) has in his hands of the contract price $884, less any credit to which the complainant may be entitled by reason of Contractor Muth's delay in finishing the building. This the complainant claims he is entitled to at the rate of $500 per day's delay as provided for in the contract. On December 24, 1902, Daniel B. Ingersoll served on the complainant a stop notice under the third section of the mechanic's lien act (Gen. St. p. 2074), claiming $381 for materials, etc. On May 26, 1903, Somers Lumber Company served such a stop notice, claiming $2,307.44 for labor performed and materials furnished, etc. On August 20, 1903, Michael H. Towbey served such a stop notice for $245.60. The complainant further alleges that on January 8, 1904, he served upon Contractor Muth written notice of these claims and also on January 12, 1904, upon Muth's trustee in bankruptcy, who had then been appointed, etc. The Somers Lumber Company commenced suit in Atlantic circuit court to recover the sum named in its stop notice. Daniel B. Ingersoll demanded payment of his claim and threatened suit. The complainant avers that he does not collude with any of the said claimants, and that he is not indemnified by any of them, etc. He prays that they may be restrained from suing him at law, and may be decreed to interplead and settle their right to the said sum of money, etc.
The Somers Lumber Company is the only defendant which files a litigating answer. That company's answer denies that the building in question was completed on the 21st day of April, 1903, and avers that it was not completed until sometime in July of that year. It denies that the balance in the hands of the complainant is $884, and avers that the complainant made a number of payments before the building was completed, and before the architect had certified that it was completed, according to the terms of the contract; that the sum so paid in advance of said certificate and said completion was in excess of $3,000; and that in fact and in law there is in complainant's hands over $5,000.
The cause was heard on these pleadings.
C. C. Babcock, for complainant C. L. Cole, for defendant Somers Lumber Co.
GREY, V. C. (after stating the facts). The phase of this case now under consideration presents only one question, and that is whether the complainant has shown himself to be entitled to a decree against the defendants which will compel them to interplead with each other to fix their claims upon the sum of $884, which the complainant alleges is all that remains in his hands of the contract price agreed to be paid for the construction of the building. This is the bone of contention; the defendants insisting that the complainant has no right to compel them to interplead, because the sum he tenders ($884) is not the full portion of the contract price which is lawfully applicable to the payment of the stop noticing claimants. The complainant's (Daly's) Exhibit C12 is a notice from him to Muth, the contractor, of the stop notices which had been served on him (Daly). In this exhibit of the complainant, he gives a list of those stop notices as follows: "D. B. Ingersoll (material), notice served December 24, 1902, $381.10. Somers Lumber Company (labor and materials), notice served May 26, 1903, $2,307.44. Harry Madara (materials), notice served July 28, 1903, $53.50. W. H. Towbey (labor and materials), notice served August 20, 1903, $245.60." The contract on file prescribes the last payment of $5,384 shall be made upon the architect's certificate. The complainant concedes that his advances to the contractor intrude upon this last payment of the contract price, and that they were made without any architect's certificate coincidently or precedently given. In short, it is admitted that the complainant has paid $4,500 (part of the last payment of $5,384) without any architect's certificate whatever.
The complainant's contention is that he was authorized to make these advances because, when he made them, the building was in truth completed, although the architect had not yet certified to the fact; that he did certify to it several months after the payments had been made, and after the contesting defendants had served their stop notices upon the complainant. The contract did not authorize the last payment to be made when the building was in fact completed. It expressly declared that the last payment of $5,384 was to be made upon the architect's certificate. There is a mention in clause 4 of the contract of payment when the building is completed, but that reference has nothing to do with the fixing of a time for payment of the several installments of the contract price. This provision in clause 4 follows a prescription of the mode in which neglect or suspension of work on the part of the contractor may be rectified by employment of other parties to do it in his place, the expense so to be deducted from the contract price. Then the contract declares: "In such an event, the payments herein agreed upon shall not be due until the entire work shall be completed. Any balance due the contractor when the work is completed shall be paid to the contractor by the owner," etc. This provision is not intended to fix a time when the last payment shall become due. That is fixed in definite terms inthe fifth clause of the contract. All that is done by the quoted fourth clause is to provide a protection to the owner by which, if the contractor fails to perform, the owner may retain all payments until the work is completed.
The fifth section of the mechanic's lien act (Gen. St. p. 2074) prohibits payments by the owner in advance of the terms of the filed contract. In Slingerland v. Binns, 56 N. J. Eq. 415, 39 Atl. 712, the Court of Appeals declared that under this section 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 notices. The complainant does not deny that he made advances without the certificate of the architect, which the contract required, but seeks to excuse them on the ground that an unreasonable or fraudulent refusal by the architect to certify might subject the contractor to great loss and the owner to delay and embarrassment. These are in this case purely hypothetical questions. There is no proof that the conduct of the architect was either unreasonable or fraudulent regarding the issuing of his certificate to justify the last payment of $5,384. If the owner was of opinion that the requirement of the architect's certificate might subject him to trouble, he might readily have protected himself by so framing his contract that the last installment of the contract price should be payable when the building should be completed, without the provision for the architect's certificate. He did not do this. By the express terms of the filed contract, the last installment of the contract price ($5,384) was to be paid on the architect's certificate. Under section 5 of the statute and the decision of Slingerland v. Binns, ubi supra, the parties furnishing labor and materials had a right to presume that the last payment would be made only when the architect's certificate had been given, as prescribed by the filed contract.
What happened was that on December 24, 1902, the defendant Ingersoll served a stop notice on the complainant. The latter has since paid $5,500 of the contract price, without paying Ingersoll. On May 26, 1903, no architect's certificate had been given in relation to the last payment. On that day the Somers Lumber Company served its stop notice. Under the contract on file and the law as declared in the above-cited case, this should have impounded, and did impound, the whole of the last payment of $5,384 for the payment of the claims of the noticing creditors. It makes no difference that the complainant, after the serving of the stop notice and after he had made the advances to the contractor, obtained the architect's certificate. The rights of the parties were fixed as of the time of serving the stop notice on May 26, 1903. The complainant owner had at that time wrongfully paid ont $4,500 on account of the last payment of $5,384 without having any architect's certificate to justify those payments as required by the filed contract. The architect could not lawfully, in July, 1903, give a certificate of the completion of the building to relate back to the preceeding April (as he tried to do), and thus wipe out the Somers Lumber Company's lien on the fund. The case at bar is in my view controlled by the decision in Slingerland v. Binns, ubi supra.
The complainant has in his hands, or under the law as declared in that case is responsible, not for $884, as he claims in his bill, but in truth for the whole of the last payment, amounting to $5,384. This sum is more than sufficient to satisfy in full all the claims of the stop-noticing defendants. There are, therefore, no conflicting claims which might require that the complainant be protected from double liability by an interpleader decree. He has in contemplation of the law enough of the contract price in hand to satisfy all the defendants' claims upon it Under this condition of affairs he has no standing to maintain an interpleader bill against them.
The complainant's bill should be dismissed, with costs.