Opinion
June, 1895.
George S. Daniels, for appellant.
John F. Brush ( Hector M. Hitchings, of counsel), for respondents.
The plaintiff applied at the Special Term to punish the defendant Thomas H. Brush for contempt for his misconduct in putting in, or causing to be put in, fictitious and insufficient sureties upon an undertaking dated November 15, 1892, given to discharge a mechanic's lien filed by the plaintiff on the 5th day of November, 1892, for $6,910 on property on the south side of Sixty-third street, between Columbus avenue and the Boulevard, in the city of New York; and, also, for causing and procuring said sureties to put in false affidavits regarding their sufficiency and for the deceit and abuse of the proceedings of this court on discharging said mechanic's lien. The application is made in this action, which is brought for the foreclosure of the said lien and is still pending, being on trial before a referee to whom all the issues in the action were referred.
It is contended by the defendant Brush that as the lienor has not yet established his right to a lien and to a judgment of foreclosure, no right, or remedy, can be adjudged to have been affected within the provisions of the Code, which restricts the power of the court to punish for misconduct to cases in which the right or remedy of a party to a civil action or special proceeding pending in the court may be defeated, impaired or prejudiced.
It is not alone a right of the lienor in his action of foreclosure which is affected injuriously by the discharge of a lien upon a worthless bond. The discharge of the lien is itself a proceeding under the Mechanic's Lien Act, and it is the lienor's right and remedy in that proceeding which are also defeated by the giving of the worthless bond. The Lien Act prescribes a direction by the court on the application of the owner of the premises, or the person against whom the notice of lien is filed, fixing the amount of the bond, which shall not be less than the amount claimed in the lien, and for the execution of said bond with two or more sufficient sureties, who shall be freeholders, conditioned for the payment of any judgment which may be rendered against the property. It is also prescribed that the sureties must justify in at least double the sum named in the bond, and that a copy of the bond with notice that the sureties will justify before the court or a judge thereof at the time and place therein named, not less than five days thereafter, must be served on the claimant or his attorney, and an order discharging the lien may be made by the court or a judge thereof upon the approval of the said bond. Mechanics' Lien Act of 1885, chap. 342, § 24, subd. 6.
The party instituting the proceeding for the discharge of the lien has a right to such discharge upon giving the proper bond with sufficient sureties, and the right of the lienor whose bond is so discharged is to have a proper bond with sufficient sureties. The bond is to take the place of the property, and the law contemplates substantial security to the lienor. When such bond is given the validity of the lien is assumed, and the right of the lienor to complete security in place of the land is unquestionable. He is as much entitled to sufficient sureties as he is to a proper form of bond; and it follows that to offer fictitious sureties is to completely defeat his right in that proceeding, and he is entitled to immediate redress and to all the remedies enforceable by the proceedings for a contempt.
In this case the defendant Thomas H. Brush, the owner of the premises and liable personally for the plaintiff's claim, instituted the proceeding to discontinue the lien by the giving of a bond in the penal sum of $8,000 with two sureties, viz.: Mrs. Eliza A. Brush, his mother, and one Charles F. Averill, who respectively justified in affidavits stating that they were each a resident and freeholder within the state and worth the sum of $16,000 over and above all their debts and liabilities. The said sureties justified before the court upon notice. Mrs. Brush claimed to be the owner of premises 155 Lafayette avenue in the city of Brooklyn, which she said were worth $40,000, subject to a mortgage of $13,000, and which were purchased by her seventeen or eighteen years before, from one Barber, for about $29,000. Averill swore that he owned 365 Lafayette avenue in the city of Brooklyn; that it was worth $40,000, and was subject to a mortgage for $20,000; that he also owned 349 and 351 Lafayette avenue in said city, worth $40,000, and subject to a mortgage of $20,000, and owned real estate, without incumbrances, situated at Massepequa, Long Island, worth $8,000, and that the Lafayette avenue properties were conveyed to him on November 5, 1892, by the defendant Brush, a portion of the consideration being in trade and $13,000 in cash.
The plaintiff's lien was discharged by an order of the court upon the approval of the above bond, and the only recourse of the plaintiff was then against the sureties upon the bond, which took the place of the property. It now appears that the surety Averill is wholly insufficient; that he is not worth the amount of the bond, instead of being worth double its penalty; and the plaintiff claims that such was the condition of both sureties at the time of their justification; that Brush knew it and offered them as sureties for the purpose of depriving plaintiff of his lien and of any security in place thereof. The facts disclosed by the proofs show that the plaintiff has actually been deprived of his right to his lien and of his remedies by the insufficiency of at least one of the sureties and the evidence tends to support his claim that the condition of such surety was no better on November 21, 1892, when he justified, than it is at present.
It appears that Mrs. Brush owned 155 Lafayette avenue, but that it was conveyed to her by her son and not by Barber, and the consideration was $20,000 and not $29,000. It appears that in less than a year after she justified as surety she conveyed the property to her sister, in order to have a change of mortgages upon it, and that the mortgage incumbrances were increased from $13,000 to $17,000, and the property was conveyed back to her. There are experts who swear that the value of this property is from $30,000 to $31,000.
It appears that the surety Averill has absolutely nothing to show for the $48,000 equity in his several pieces of real estate upon which he justified upon November 21, 1892. He swore that 365 Lafayette avenue, mortgaged for $20,000, was worth $40,000. The mortgage was foreclosed, and it was sold on February 21, 1894, for $14,000. He swore that Nos. 349 and 351, mortgaged for $20,000, were worth $40,000. The mortgage was foreclosed, and they were sold in February, 1894, for $19,000. It also appears that the deed or deeds to him from Brush, by which he acquired said property, was never placed upon record. It appears that the Massapequa property was conveyed by the company, of which defendant Brush was the president, to him for the nominal consideration of one dollar, and that ten days after his justification he conveyed it to his wife for the consideration of $4,800. Judgments for deficiency against him upon the mortgage foreclosures have been entered and execution against him upon another judgment has been returned unsatisfied. Real estate experts called by defendants testified that there has been a shrinkage of values in Brooklyn of fifteen to twenty per cent since the time of Averill's justification, but this does not explain the difference of fifty to sixty per cent between the values as sworn to by him and the amounts the premises brought on foreclosure.
While every indulgence should be extended to sureties in the matter of honest opinions as to the value of their properties, it appears, in the case of Averill, that he was a worthless surety; all the property he appears to have had was conveyed to him by Brush immediately before the justification, and evidently for the purpose of justifying upon it, and it is manifest that Brush was well aware of his condition and of the value of said property.
Under these circumstances it would seem that the lienor, in a proper proceeding, is entitled to have the defendant Brush adjudged in contempt for putting in an insufficient surety, and that the amount of the fine to be inflicted upon him should be such as to restore or protect the rights of the lienor which have been prejudiced by such misconduct. I regard it as within the power of the court to require a party, who has put in a fictitious surety, to pay into court a sum equal to the amount of the bond, to be held for the benefit of the lienor in case of his eventual recovery in the action. The Code (§ 2284) prescribes that if actual loss or injury has been produced to a party by the misconduct proved, a fine sufficient to indemnify him may be imposed, collected and paid over to the aggrieved party under the direction of the court. The actual loss or injury to the lienor is the discharge of his lien by the giving of the worthless bond, or a bond with a worthless surety, and the only fine sufficient to indemnify him must be one equal to the surety afforded by a good bond and a good surety. In Cunningham v. Hatch, 3 Misc. Rep. 101, a mechanic's lien was discharged after suit brought by a deposit with the county clerk under the same section of the Mechanics' Lien Act (subd. 3); a default was taken in the action and the deposit with the county clerk withdrawn, the default was opened and the judgment entered thereon vacated and an order made requiring the defendant withdrawing the deposit to deposit the same with the county clerk, and it was held that the court had power to compel obedience to its order by proceedings for contempt. In every case where the party giving a bond or making a deposit to discharge a lien is guilty of that misconduct which deprives the lienor of his security, the latter has the right to invoke the power of the court to make the security good. In the case of a fictitious surety it can only be done by imposing a fine to the amount of the bond. The fine when collected will be paid into court and used to satisfy any judgment which the lienor may recover in his action to enforce his lien. If he is defeated in the action the money will be repaid to the party from whom it was collected. The provisions of the Code above cited (§ 2284) provide for such a case by directing that the fine be collected and paid to the aggrieved party under the direction of the court.
The order appealed from is reversed and the defendant Thomas Brush adjudged in contempt for misconduct in having put in fictitious and insufficient surety, and for the abuse of the proceeding of the court in reference to the discharge of the plaintiff's lien, and a fine of $8,000, the amount of the bond, is imposed upon him for such misconduct, such amount to be collected and paid into court subject to the order of the court in this action.
BOOKSTAVER and BISCHOFF, JJ., concur.
Order reversed, with costs and disbursements, and defendant Thomas H. Brush adjudged guilty of contempt.