Opinion
02-27-1904
GARRETSON et al. v. CLARK et al. HARRIS v. GARRETSON et al.
H. C. Suydam, for complainants Henry S. Garretson and others. Theodore Strong, for complainant John H. Harris. J. K. Rice, for defendant Willard P. Clark. McDermott & Fisk and Walter L. McDermott, for defendant Rockland Lake Trap Rock Co. Theodore Strong, for defendant John H. Harris. Dugan & Reger, for defendant Nelson Y. Dungan. Peter F. Daly, for defendant Conrad Seebold.
Separate suits by Henry S. Garretson and others against Willard P. Clark and others, and by John H. Harris against Henry C. Garretson and others. Decree advised.
H. C. Suydam, for complainants Henry S. Garretson and others.
Theodore Strong, for complainant John H. Harris.
J. K. Rice, for defendant Willard P. Clark.
McDermott & Fisk and Walter L. McDermott, for defendant Rockland Lake Trap Rock Co.
Theodore Strong, for defendant John H. Harris.
Dugan & Reger, for defendant Nelson Y. Dungan.
Peter F. Daly, for defendant Conrad Seebold.
REED, V. C. These bills were filed under the provisions of an act approved March 30, 1892, to be found in P. L. 1892, p. 369 (2 Gen. St. p. 2078). The act provides that a person who, as laborer, mechanic, merchant, or trader, shall, in conformity with the terms of a contract for any public improvement, made between any person or municipality, furnish material or perform labor toward the performance or completion of such contract, on complying with the second section of the act shall have a lien, for the value of such labor or materials, upon the moneys due or to grow due under said contract. The facts are these: The firm of Van Duersen & Oliver on August 6, 1902, contracted with the board of chosen freeholders of Middlesex county to macadamize a road in that county. About January 10, 1903, and before the contract was completely executed, that firm was dissolved; and, by the terms of dissolution, Mr. Oliver received all the assets and assumed all the liabilities of the firm. Oliver continued the work under the contract On July 20, 1903, Oliver filed a petition in bankruptcy, and was on that date adjudged a bankrupt; and subsequently Willard P. Clark was elected the trustee in bankruptcy, and, by permission of the federal court, was made a party to these suits. Mr. Clark, as trustee, completed the execution of the contract. The money due from the county upon the contract was paid to the trustee, with the exception of 5 per cent. of the contract price, which, by the terms of the contract, was retained. There was due on the contract $2,551.74. The 5 per cent retained amounted to $648.60. There was also paid to the trustee, on account of work done upon the road, outside of the requirements of the contract,$265.17. Six persons claimed Hens upon the money now in the hands of the collector and trustee. Two of the notices of claims were filed five days before the adjudication in bankruptcy, and the other four were filed, respectively, July 22 and August 5, 10, and 15, 1903.
It seems entirely clear that the liens of the respective claimants arose at the moment when the claims were filed. The second section of the act provides that the claimant may file with certain officers of the municipality with which the contract is made notices stating the amount claimed, and certain other matters designated in the act. Section 3 provides that the officers shall enter in a lienbook the amount of the claim and the date of filing. Section 5 provides that the lien shall attach from the time of the filing thereof, to the extent of the liability of the contractor for the claim preferred upon any funds which may be due or grow due to said contractor from said municipality under the contract against which the lien is filed. The proceeding is somewhat similar to the demand and notice under the third section of our mechanics' lien act, and also to the provisions of the New York act providing that a subcontractor shall have a lien for the value or agreed price of labor and materials furnished, from the time of filing a notice of such Hen. Under both those provisions the lien attaches at the moment of the filing of the notice, and does not relate to the time when the labor or materials were furnished. Under our original mechanics' lien act, until demand and notice by a laborer or materialman was given, the contractor could deal with the amount due him in any way he chose. The present act, of course, expressly limits his ability to do so, but no such limitation is contained in the act under which the present claims were filed. So, under the New York act, if the contractor transfers his claim before notice of the lien is given, the latter is ineffective (Stevens v. Ogden, 130 N. Y. 182, 29 N. E. 229), for the filing of the notice originates the lien (McCorkle v. Herrman, 117 N. Y. 297, 22 N. E. 948). Now, under the bankruptcy act, the title to the property in the bankrupt vests in the trustee as of the date when the former was adjudicated a bankrupt Section 70a of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St 1901, p. 3451]). Inasmuch as the petition in bankruptcy and the order adjudging Oliver a bankrupt—it being a voluntary petition—were made on the same day, no question can arise as to the effect of a notice given between the filing of a petition and an order of adjudication in bankruptcy.
It is clear, therefore, that after July 20, 1903, the debt due from the municipal corporation to Oliver was in custodia legis, and no lien upon it could thereafter be created. A trustee in bankruptcy takes the fund due the contractor free from any Hen, by reason of notice, after the filing of the petition in bankruptcy, and, of course, after the adjudication in bankruptcy. In re Herman Roeber, 9 Am. Bankr. R, 303, 121 Fed. 449, 57 C. C. A. 565. So, in the case of an assignment for the benefit of creditors, where notices were given under the Illinois statute subsequent to the assignment they were held to constitute no lien upon the property assigned.
I am constrained to the conclusion, therefore, that the only claimants who are entitled to lien are John H. Harris, whose claim was filed on July 15th, and the Rockland Lake Trap Rock Company, whose claim was also filed on July 15th. A decree will be advised in conformity with these conclusions.