Arrow Builders Supply Corp. v. Hudson Terrace Apartments, Inc.

105 A.2d 387, 15 N.J. 418, 1954 N.J. LEXIS 287

• Court: Supreme Court of New Jersey
• Decided: May 17, 1954
• Status: Published

Opinions

The opinion of the court was delivered by

Jacobs, J.

The defendant Hudson Terrace Apartments, Inc. owned land located in Fort Lee, New Jersey. As owner, it entered into a written contract with the contractor, Glen-wood Builders, Inc., for the construction of apartment buildings. Before the commencement of work or the delivery of materials the contract was duly filed pursuant to R. S. 2:60-115 (now N. J. S. 2A:44-75). The contractor entered into an agreement with the subcontractor’ ARA Construction Corporation for the masonry work required in the buildings and the subcontractor purchased building materials from the plaintiffs. The materials were delivered by the plaintiffs to the building site and they were actually used in the erection and completion of the buildings. The subcontractor failed and refused to pay the plaintiffs the balance due for the materials and they filed stop notices with the county clerk in accordance with N. J. S. 2A :44-77. Copies of the stop notices were served upon the owner in accordance with N. J. S. 2A :44-78, 79. The claims of the materialmen being disputed, they instituted action against the subcontractor and obtained judgments against him. See N. J. S. 2A :44-83-When the plaintiffs filed their stop notices there was no money due from the contractor to the subcontractor; the latter had defaulted in the performance of its contract thereby requiring the contractor to complete the masonry work. However, when the stop notices were filed there was due or about to become due sufficient sums from the owner to the contractor to pay the full claims of the plaintiffs.

The plaintiffs instituted separate actions in the Superior Court, Law Division, claiming that under the terms of the Mechanics’ Lien Law the defendant owner was obligated to pay their claims from the unpaid sums due from him to the contractor. The defendant denied liability, contending that the stop notices filed and served by the plaintiffs did not establish any “right of recourse or lien against the funds in the hands of the Owner due to the Contractor.” The actions were consolidated and the parties submitted the agreed facts as aforestated to the trial court for legal determination. Judge Leap, sitting in the Superior Court by temporary assignment, found in the defendant’s favor although his opinion suggested that the pertinent statutory provisions required a contrary result which he would have reached were it not for the decision of the Court of Errors and Appeals in Mills & Co. v. Hegeman-Harris Co., 94 N. J. Eq. 802, 806 (E. & A. 1923). But see St. Michael’s, etc., Hopewell v. Conneen Constr. Co., 114 N. J. Eq. 276 (Ch. 1933), affirmed 115 N. J. Eq. 334 (E. & A. 1934). The plaintiffs appealed to the Appellate Division and we certified on our own motion.

Our first statutory enactment relating to mechanics’ liens was adopted early in the 19th Century (L. 1820, p. 124); since then there have been many enactments designed to afford liens to persons who contribute labor or materials used in the construction of buildings. See Luce, Mechanics’ Lien Law of New Jersey (3d ed. 1923), 6; Lodge, Mechanics’ Liens in New Jersey (1940), 5. Erom time to time our courts have expressed misgivings as to the policies iinderlying the preferential treatment thus afforded by the Legislature. Ayres v. Revere, 25 N. J. L. 474, 481 (Sup. Ct. 1856); McNab & Harlin Mfg. Co. v. Paterson Building Co., 71 N. J. Eq. 133, 139 (Ch. 1906), affirmed 72 N. J. Eq. 929 (E. & A. 1907). And with these misgivings they have sometimes applied rather strict rules of statutory interpretation. See Dalrymple v. Ramsey, 45 N. J. Eq. 494, 496 (Ch. 1889); Associates of Jersey Co. v. Davison, 29 N. J. L. 415, 423 (E. & A. 1860). But see Rizzolo v. Poysher, 89 N. J. L. 618, 622 (E. & A. 1916). However, as we view our proper judicial function, it is not to pass j'udgment on the wisdom or policy of the legislation or to apply strict rules of interpretation which defeat legislative wishes; the constitutionality of the legislation not being disputed here (cf. Gardner & Meeks Co. v. N. Y. Central & H. R. R. Co., 72 N. J. L. 257 (E. & A. 1905)), our only function is fairly to seek and effectuate the legislative purpose now expressed in N. J. S. 2A :44-77-80. See Gardner & Meeks Co. v. Herold, 76 N. J. L. 524, 529 (E. & A. 1909). Cf. Board of National Missions v. Neeld, 9 N. J. 349, 353 (1952); De Lorenzo v. City of Hackensack, 9 N. J. 379, 387 (1952); Grobart v. Grobart, 5 N. J. 161, 166 (1950).

In 1835 the Legislature adopted “An Act Securing to Mechanics, and others, payment for their labor and materials in erecting any house, or other building, within the limits therein mentioned.” L. 1835, p. 148. Section 3 thereof provided the remedy by stop notice but it was available only to wage' claimants journeymen and laborers) and applied to funds due their employer from the owner of the building. Later enactments extended the terms of section 3 to persons who furnished materials used in the erection of the building but were refused payment by the contractor engaged by the owner. L. 1853, p. 438; L. 1863, p. 275. In 1895 section 3 was amended to provide that when stop notices were duly served by journeymen, laborers or materialmen the owner shall pay their claims upon the contractor’s continued refusal of payment, from funds then or thereafter due from the owner to the contractor. L. 1895, p. 313; L. 1898, p. 538. In 1905 section 3 was amended to extend to subcontractors; it provided that whenever any contractor refused to pay any person who furnished materials to him “or any sub-contractor, journeyman or laborer employed by him in erecting or constructing any building” then the stop notice remedy against the owner was available as therein prescribed. L. 1905, p. 311. See also L. 1910, p. 500. Cf. Stevenson, V. C. in McNab & Harlin Mfg. Co. v. Paterson Building Co., supra, 71 N. J. Eq. at page 144: “That the Legislature of this state had continuously for years favored the lien of the materialman by stop notice is quite apparent.”

In Carlisle v. Knapp, 51 N. J. L. 329 (E. & A. 1889), the Court had occasion to consider whether, under the legislation then in force, persons who furnished materials to subcontractors could seek recourse under section 3 against funds due or to become due from the owner to the contractor. The Court held that they could not upon the view that section 3 should be construed as affording protection only to creditors of the contractor and as not extending to creditors of subcontractors engaged by the contractor. However, in 1917 section 3 was again amended to enlarge its protective scope and this time it embodied language which was directly designed to protect materialmen and laborers who were employed by and were creditors of contractors other than the general contractor. Thus it set forth that whenever any master workman or contractor, or any “contractor under any master workman or contractor,” shall refuse to pay materialmen or laborers employed by him in constructing any building, then the stop notice remedy against the owner as therein provided shall be available. L. 1917, p. 821. In Steuerwald, v. Munn, 90 N. J. Eq. 474 (Ch. 1919), Vice-Chancellor Foster, in discussing the 1917 amendment, pointed out that it extended the provisions of section 3 “to debts owing to materialmen and others by subcontractors” and provided for the service of stop notices upon the owner and the payment by the owner of such debts owing by subcontractors “on the same conditions as the owner had, prior to such amendment, been authorized to pay similar debts of the general contractor.”

In Mills & Co. v. Hegeman-Harris Co., supra, materialmen employed by a subcontractor served their stop notices upon the owner in strict accordance with the 1917 amendment. Previous thereto the subcontractor, who had received certain advance payments from the contractor, abandoned his work and it was later completed by the contractor at a loss. Vice-Chancellor Griffin held that the materialmen could not recover from sums due from the owner to the contractor. Although he recognized that the 1917 amendment was expressly adopted to enable materialmen and others employed by subcontractors to serve stop notices upon the owner under section 3, he nevertheless found that such claimants “ ‘must go a step further, i. e., they must show some statute which makes the contractor liable for making advance payments. This they cannot do, because there is no such statute.’ ” His holding was affirmed by the Court of Errors and Appeals on the opinion below. It seems to us that this result ignored the portion of the 1917 amendment which, after first providing for the service of stop notices by materialmen employed by subcontractors, authorized the owner to retain funds due or to become due under the building contract and directed that, if the claims were not paid by the contractor or subcontractor, the owner shall pay the claims therefrom and be entitled to an allowance in the settlement of his accounts with the contractor. In the amendment, the Legislature did not concern itself with any lien on funds due from the contractor or with the extent of the contractor’s obligation, if any, to the subcontractor; it concerned itself solely with funds due from the owner and vested in materialmen employed by subcontractors the stop notice remedy directly against funds due or to become due from the owner to the contractor without regard to the relationship between the contractor and the subcontractor. Presumably the Legislature considered this to be fair and equitable to all those concerned in view of the fact that the engagement of the subcontractor is the contractor’s responsibility and the materials furnished by the materialmen actually contribute to the full performance of the general contract between the owner and the contractor and the completion of the building.

In St. Michael's, etc., Hopewell v. Conneen Const. Co., supra, materialmen furnished supplies to the subcontractor and in due course filed and served stop notices upon the owner under section 3. The subcontractor defaulted and the contractor completed his work at a loss. Yice-Chancellor Davis held that under their stop notices the materialmen were entitled to be paid from funds due from the owner to the contractor even though nothing was due from the contractor to the subcontractor. In the course of his opinion he cited section 3 as amended and noted in 114 N. J. Eq. at page 281, that its purpose was “to secure to workmen and material-men the moneys due them whether from the contractor or subcontractor, and clearly provides that such moneys should be paid by the owner out of moneys owing by the owner on the general contract.” And later on in 114 N. J. Eq. at page 282, he again remarked that the statute was “clearly intended to protect the materialmen and have their claims paid out of moneys due by the owner to the contractor.” He quoted a provision in the agreement between the contractor and the subcontractor to the effect that all materials delivered to the building site “ 'shall be regarded as the property’ ” of the contractor and found that in at least that respect the case before him differed from Mills & Co. v. Hegeman-Harris Co., supra. The Court of Errors and Appeals affirmed the judgment 'in favor of the materialmen on the opinion of the vice-chancellor. Although the vice-chancellor’s factual distinction between the Gonneen case and the Heg eman-Harris case may have been accurate, it is difficult to attach any legal significance to it. The materials in the Hegeman-Harris case became part of the owner’s building and the point at which title actually passed would appear to have no bearing whatever on the meaning and effect of the statutory stop notice provisions.

In Noland Co., Inc. v. Chelsea Housing Corp., 64 N. J. L.. J. 469 (1941) Judge Avis, sitting in the United States District Court for the District of New Jersey, took the position that the Hegeman-Harris case had in effect been overruled by the Oonneen case and that under section 3, as revised in R. S. 2:60-116-121, materialmen employed by a subcontractor were entitled to their stop notice remedy against funds due from the owner to the contractor even though there was nothing owing from the contractor to the subcontractor. On appeal his decision was reversed on the ground that since the Hegeman-Harris case had not been expressly overruled by the Court of Errors and Appeals, the -federal judges, notwithstanding their doubts as to its correctness, were bound to follow it. Noland Co., Inc. v. Chelsea Housing Corp., 128 F. 2d 872 (C. C. A. 3 1942). In National Radiator Co. v. Chelsea, etc., Corp., 22 N. J. Misc. 193 (Circ. Ct. 1944), the eohrt held that the contractor was not a proper party in an action against the owner by materialmen employed by subcontractor; in the course of his opinion Justice Bur-ling (then Circuit Court judge) pointed out that in the Conneen case Vice-Chancellor Davis had distinguished the Hegeman-Harris case on the factual issue as to when title passed. In Tile Wholesalers, etc., Inc. v. Ruppert, 125 N. J. L. 597 (Sup. Ct. 1941), a materialman engaged by a subcontractor filed and served his stop notice and in due course instituted his action against the owners. The judgment in his favor was sustained by the former Supreme Court but apparently no issue was raised under the Hegeman-Harris case. Effective January 1, 1952 section 3 was again revised as part of Title 2A. N. J. S. 2A :44-77-82. Unlike earlier revisions, the statutory language was placed in modern dress- and restates the clear legislative objectives that materialmen employed by a subcontractor may, where the subcontractor has refused payment, file stop notices and serve copies on the owner; thereafter the owner is authorized to retain the amounts claimed by the materialmen from the sums due or to become due on the contract; and upon continued refusal' of payment by the subcontractor, and being satisfied of the correctness of the claims, the owner is directed to pay them’ and is entitled to an allowance in the settlement of his accounts with the contractor.

We are satisfied that the construction of section 3 in the Hegeman-Harris case unduly restricted the legislative objectives; indeed, the brief of the respondent in the instant matter takes no position to the contrary. Instead it confines itself to the argument that since the decision in Hegeman-Harris was rendered over 30 years ago and no explicit legislative action has been taken to nullify it, this court should now reaffirm it as the law of the State. See Barringer v. Miele, 6 N. J. 139, 144 (1951). Its contention rests entirely on the concomitant principles of stare decisis and legislative acquiscence in the judicial interpretation of statutes. To the extent that these principles afford measures of stability and predictability in our legal system they are of great social value. They undoubtedly dictate the view that adherence to precedent “should be the rule and not the exception.” Cardozo, The Nature of the Judicial Process 149 (1921). But they are not absolutes and under cogent circumstances they must give way to overriding considerations which recognize that the purpose of our legal system is to serve justly the needs of present day society and, to that end, judges remain free to re-examine earlier determinations and correct judicial errors whether they be their own or those of their predecessors. In a lecture delivered before the Association of the Bar of the City of New York, Justice Douglas had occasion to collect the significant number of cases in which the United States Supreme Court has expressly overruled precedents; included were five recent instances which involved the discarding of earlier statutory interpretations. See Douglas, Stare Decisis 20 (1949). Similarly, this court has, on several occasions within the past five years, been called upon to overrule earlier decisions, some of which embodied erroneous statutory interpretations. See Eggers v. Kenny, 15 N. J. 107 (1954); New Jersey Power & Light Co. v. State Dept. of Pub. Utility Com’rs., 15 N. J. 82 (1954); State v. Monahan, 15 N. J. 34 (1954); Pennsylvania-Reading S. S. Lines v. Board of Pub. Utility Com’rs, 5 N. J. 114 (1950), certiorari denied Brotherhood of R. R. T. v. Pennsylvania-Reading S. S. Lines, 340 U. S. 876, 71 S. Ct. 122, 95 L. Ed. 637 (1950); State v. Garford Trucking, Inc., 4 N. J. 346 (1950); Saco v. Hall, 1 N. J. 377 (1949). Cf. State v. Lefante, 12 N. J. 505 (1953); Greenspan v. State, 12 N. J. 426 (1953).

In Pennsylvania-Reading S. S. Lines v. Board of Pub. Utility Com’rs., supra, this court, in rejecting the earlier construction of our Utility Act in O’Connor v. Board of Public Utility Com’rs., 129 N. J. L. 263 (E. & A. 1942) said:

"It is urged on us that the construction put on the statute by the O’Connor case became a part of the statute which we may not change, that power residing solely in the Legislature. However, this rule of legislative acquiescence in the well settled interpretation of a statute is but one of several principles that may guide a court in arriving at the true meaning of a legislative act. It is no more than an aid in statutory construction and it is merely one factor in the total effort to give meaning to the language of the statute. Moreover, it has been held that ‘one decision construing an act does not approach the dignity of a well settled interpretatiton,’ United States v. Raynor, 302 U. S. 540, 552, 58 S. Ct. 353, 358, 82 L. Ed. 413, 420 (1938). The doctrine here contended for is not uniformly controlling ; it must not be permitted to fetter the courts in their search for light. The principle of stare de.eisis which lies behind the doctrine is entitled to respect, but it must not blind us to realities; it is not an idol to be worshipped in following either a judicial precedent or an antecedent statutory construction.”

See Sprecher, The Development of the Doctrine of Stare Decisis and the Extent to Which It Should le Applied, 31 A. B. A. J. 501 (1945); Ellenbogen, The Doctrine of Stare Decisis and the Extent to Which It Should be Applied, 20 Temp. L. Q. 503 (1947).

The decision in Hegeman-Harris may not rightly be said to embody any well settled interpretation of our Mechanics’ Lien Law. The opinion there rendered by Vice-Chancellor Griffin, against the materialmen employed by the subcontractor, contained only a summary disposition and the affirmance by the Court of Errors and Appeals was on the opinion below. When later confronted with the same issue in the Conneen case Vice-Chancellor Davis reached a contrary result in an opinion which, while distinguishing HegemanHarris factually, contained expressions suggesting disagreement with its views. Here again the Court of Errors and Appeals affirmed on the opinion below. It appears to us, as it did to Judge Avis in the Noland case, that although there had been no express overruling, the Gonneen decision largely nullified the interpretation in Hegeman-Harris. Since the Gonneen ease there have been no decisions in our appellate courts supporting Regeman-R arris. Under the circumstances we consider ourselves free to adopt the statutory interpretation which appears to be dictated by the terms of the Mechanics’ Lien Law, and thus faithfully discharge our continuing judicial function of fairly seeking and effectuating the legislative purposes as expressed therein. Such,interpretation supports fully the position advanced by the material-men in the instant matter; .to the extent that Hegeman-Harris holds to the contrary, it is now expressly overruled.

Reversed.