Opinion
04-04-1927
HARRY PINSKY & SON CO. v. WIKE et al.
D. T. Stackhouse, of Camden, for complainant. W. B. Woleott, of Camden, for Wike. Joseph Beck Tyler, of Camden, for C. B. Coles & Sons Co. Albert S. Woodruff, of Camden, for Parkside Title & Trust Co. Bleakly, Stockwell & Burling, of Camden, for Smith-Austermuhl Co. Riggins & Davis, of Camden, for Leibig. David R. Rose, of Camden, for Peterson.
(Syllabus by the Court.)
Suit by the Harry Pinsky & Son Company against Edgar L. Wike, trustee, and others. On final hearing between claimants under a bill of interpleader. Claims to fund retained under a building contract decided.
The issues in this case call for the ascertainment of the priorities of the several liens of the parties hereto on money which represents the final amount due from the owner of a building to his Contractor. The money due from the owner to the contractor has been paid into court pursuant to the prayer of a bill of interpleader, and complaint has been discharged. The several defendants have filed statements of their respective claims against the fund, and at final hearing the facts touching the respective claims have been fully ascertained.
The contract for the erection of the building was duly filed, and the classes of claims, in the order of dates are: First, an assignment of money due or to grow due from the owner to the contractor, which assignment was accepted by the owner; second, stop notices served pursuant to the third section of our Mechanic's Lien Act; third, a writ of attachment issued against the contractor and served on the owner; fourth, applying creditors in the attachment suit; fifth, additional stop notices served on the owner. Some of the claims under stop notices are for labor and some for materials supplied to the building. One stop notice was served by a subcontractor, another by a person who supplied the contractor's bond and insurance on the building.
D. T. Stackhouse, of Camden, for complainant.
W. B. Woleott, of Camden, for Wike.
Joseph Beck Tyler, of Camden, for C. B. Coles & Sons Co.
Albert S. Woodruff, of Camden, for Parkside Title & Trust Co.
Bleakly, Stockwell & Burling, of Camden, for Smith-Austermuhl Co.
Riggins & Davis, of Camden, for Leibig.
David R. Rose, of Camden, for Peterson.
LEAMING, Vice Chancellor (after stating the facts as above). The contract price of the building which occasions this controversy was $100,000, plus the cost of extra work at rates specified in the contract. The contract also provided that estimates of completed work were to be furnished by the contractor to the architect on the 1st day of each month, and when approved by the latter, 80 per cent. of such estimates were to be paid by the owner on or before the 10th of the same month. "The remaining 20 per cent. of such estimates" was to be paid at the time of final payment; final payment was to be made 60 days after completion of the work; all payments were to be made on certificates. These provisions touching payments are embodied in section 7 of the contract as filed. These provisions are plain and are not susceptible of misunderstanding. Under these provisions of the filed contract laborers and materialmen were entitled to rely upon 20 per cent. of the amount earned by the contractor remaining in the hands of the owner for 60 days after the building should have been completed in accordance with the contract; that fund, whatever its amount, they were entitled to impound by stop notices served before the expiration of that 00-day period, or thereafter, except as against any superior rights that may have intervened after the end of the 60 days and prior to the service of the stop notices. Before the expiration of that perior the owner could not, as against them, lawfully discharge that obligation to the contractor either by payment to the contractor or by acceptance of an order or assignment of the contractor. The owner is entitled to allowances for defective work; but the amount finally due was necessarily subject to stop notice liens for 60 days after the final completion of the building pursuant to the contract. In a suit between the trustee in bankruptcy of the contractor and the owner that amount has been ascertained to be $7,500. That determination is to be understood as admittedly correct in the present cause, since the bill of interpleader filed herein has not been contested and that amount of money has been paid into court and the owner has been discharged.
It necessarily follows that all stop notices served by laborers and materialmen prior to the expiration of the period referred to enjoy a lien on that fund in the order of the dates of service of the respective notices laborclaims taking precedence of claims of materialmen, as against an assignment of money due or to grow due under the contract made by the contractor at a prior time. That is the plain language of section 6 of the Mechanic's Lien Act, as contained in the 1898 revision of the act (3 C. S. 1910, p. 3299).
It is my recollection of the testimony that construction work on the building had not been concluded within 60 days prior to the service of the last stop notice here in question. But in any event it must be said that the building was not finished by the contractor pursuant to the contract until after the last stop notice had been served, since the deductions allowed the owner were for defective work. With the building unfinished pursuant to the contract more than 60 days prior to April 24, 1924, the date of the last notice served, it is my determination that all the stop notices otherwise valid are entitled to priority over the assignment.
It seems also clear that liens under such notices must be held to be entitled to priority over an attachment of prior date, since the statute clearly gives to the stop notice claimants an inchoate lien on the final fund here involved, and with those inchoate liens perfected by notice before the money became payable, the consummate liens necessarily relate to the earliest instant that the contractor became entitled to the payment. The whole plan and purpose of the statute would be defeated if a judgment or attachment could intervene to defeat the statutory liens thus perfected.
Nor can an attachment take precedence over a prior accepted assignment. Assignments are lawful and create an equitable lien; but that lien is by section 6 of the act subordinated to the stop notice liens of laborers and materialmen; the act does not further subordinate the assignments.
It follows that the order of distribution of the final fund now in court must be: First, to the several stop notice claimants, whose claims are found to be valid, in the order of the dates of the several notices, preference being given to labor claims; next to the assignment; next to the attaching creditors.
The claim of Smith-Austermuhl Company is for insurance on the building and for supplying to the contractor a bond; both the insurance and the bond being contemplated by the contract. The statutory right of liens given by the first section of our Mechanic's Lien Act (3 Comp. St. 1910, p. 3291), is "for labor performed or materials furnished for the erection and construction" of the build ing. The statutory right of stop notice liens, in the language of the third section of the act, arises from the refusal of any master workman, contractor, or subcontractor to pay any person who may have furnished him "material used in the erection of any such house or other building," or to pay any "laborer" employed by him "in erecting or constructing any building, the money or wages due to him." Amendment P. L. 1917, p. 821. It has been held that an architect who has drawn the plans for a building and who has also supervised construction of the building is entitled to a lien under the first section of the act (Turck v. Allard, 87 N. J. Law, 721, 94 A. 583), and that a lien may be acquired under that section of the act for transportation and delivery of materials used in the building, since the cost of transportation necessarily enters into the price of materials supplied, either inclusive or exclusive (Davis v. Mial, 86 N. J. Law, 167, 90 A. 315, Ann. Cas. 1916E, 1028). But however liberally the statute may be construed because of its remedial nature, it seems to me impossible to regard this claimant as either a "laborer" or one who has furnished "material used in the erection" of the building. The statute is for the protection of laborers and materialmen; in my judgment this complainant is neither a laborer or a materialman. The attorney who drew the original contract performed a necessary service, but obviously not as a laborer or materialman within the contemplation of our act.
Objection has been made that the claim of a subcontractor is not contemplated by the statute. Adams v. Wells, 64 N. J. Eq. 211, 53 A. 610, is cited. Our present act, as amended, includes subcontractors. P. L. 1917, p. 821.
The acceptance of a note is not operative to destroy the right of lien of a laborer or materialman unless the note is received as payment.
Nor can the claims filed by stop notice claimants with the trustee in bankruptcy, either as general or secured claims, be regarded as destructive of the liens under their stop notices. The two classes of claims have nothing in common—one seeks the preservation of a lien; the other is in personam. Shoemaker v. Maloney (N. J. Err. & App.) 132 A. 606.
Nor does an honest error in amount destroy the validity of a claim, especially where the error has in no way contributed to the circumstance of nonpayment.
The stop notice liens also embrace any part of the $7,500 which may be for extra work, since the contract includes extra work.