Edison Electric Illuminating Co. v. Horace E. Frick Co.

116 N.E. 869, 221 N.Y. 1, 1917 N.Y. LEXIS 1259

Opinions

Hiscock, Ch. J.

This action was brought by plaintiff for the purpose of procuring a determination of opposing claims to a fund produced under a building contract. While various other issues between the parties to this appeal were litigated upon the trial and are discussed upon this appeal, we are all agreed that after the reversal by the Appellate Division of various findings made by the trial court and upon the new findings made by the former court there only remains for our consideration one question. That question is the one whether section 15 of the law relating to mechanics’ liens, in effect providing that an assignment by a contractor of sums of money due or to grow due upon his contract shall be invalid unless filed in the office of the clerk of the county where the real property is situated, can be invoked for the benefit of one having a judgment against the contractor for damages for personal injuries or an attaching creditor of such contractor. The courts below have held that it may be so invoked. We reach a different conclusion.

The decisive facts, in addition to merely formal ones, which present this question, are as follows:

The defendant Frick Company made a contract with the plaintiff for the construction of certain improvements. Before completion of this contract it became insolvent and defaulted, but after completion of the contract at its expense there remained due to it from the plaintiff on account of said contract the sum of about $6,000, and which is the fund in dispute. Before any default this company made an agreement with the appellant bank, ■ providing for the advancement to it by the latter of moneys with which to carry on its business, and agreed that from time to time it would assign to the bank moneys due to it upon contracts as security for the payment and satisfaction of said loans. The bank advanced moneys which were wholly or largely used in carrying on the contract here involved, and subsequently and in accordance with its agreement the Frick Company executed to the bank assignments of moneys due under said contract sufficient to exhaust the entire fund now on hand. These assignments were never filed in the office of the county clerk.

The respondent Lindberg was an employee of the Frick Company, and subsequent to the execution of the assignments above referred to he recovered a judgment against it for damages for personal injuries caused by its negligence, on which, after return of execution unsatisfied, supplementary proceedings were instituted.

The respondent '• National Bridge Works furnished supplies to the Frick Company, which were used to some extent in carrying on the contract already referred to, but it took notes for its indebtedness and after the execution of the assignments to appellant it brought action upon these notes and obtained attachments under which it attempted to secure a levy and hen upon the fund already referred to.

The section under which respondents urge that appellant’s assignments, because not filed in the clerk’s office, were invalid as to them is section 15 of the Lien Law (Cons. Laws, ch. 33), which reads as follows: “No assignment of a contract * * * or of the money, or of any part thereof due or to become due therefor, * * * shall be valid, until * * * such assignment -x- -x- -x- pe p[ec[ in the office of the county clerk of the county wherein the. real property * * * ." situated * *

Indisputably, the assignments to appellant gave rights to the fund in question which were superior to any acquired by respondents unless such result was prevented by the statute which has been quoted.

Neither of the respondents occupies the position of á laborer or materialman having furnished labor or materials toward the improvement producing the fund, for which any lien on said fund exists under the Lien Law. Lindberg’s claim could never have served as the basis for such a lien and while apparently the Bridge Works furnished material for which it might have had a lien, that right has been lost and it occupies the position .of an ordinary contract creditor with an attachment. Nevertheless, if the language of the provision in question were to be construed and interpreted simply by itself, it is broad enough to sustain respondents’ claim that it protects them, for there is therein no specification or limitation of the persons who may take advantage of it and defeat an assignment as invalid because i fc has not been filed. But clearly we ought not to thus interpret this clause by itself and wholly detached from the statute of which it is a portion. We ought to consider the origin and purpose of the entire statute; and especially we ought to consider (if they are known and open to our consideration) the origin and purpose of the particular provision which we are interpreting. (People ex rel. Collins v. Spicer, 99 N. Y. 225, 233; People ex rel. Earl v. England, 16 App. Div. 91, 100; Holy Trinity Church v. U. S., 143 U. S. 451, 463.)

There is no doubt about the origin and general purpose of the statute as an entirety. We know from its provisions, from what has been said of its objects in many opinions and from the title of ■ the comprehensive statute, predecessor of the present one, adopted in 1885 (L. 1885, ch. 342), that the act was passed for the protection of laborers and materialmen who had contributed their labor and materials toward the construction of some improvement, and to give them a lien for their pay upon funds which were the fruits of their contributions. Not even these persons acquired liens unless they complied with certain rules in perfecting and enforcing the same, and certainly the general purpose of the statute was not to protect persons who became possessed of claims in tort against the contractor or persons who occupied the position of ordinary contract creditors, no matter how meritorious these classes of claims might be and no matter how much the latter might have contributed to the improvement. And we may go even further in this line of consideration. Although the statute was thus intended to and did afford certain protection to a creditor of the classes specified by giving a lien upon moneys due under the contract, it was entirely possible that he might be, and in fact it often happened that he was, defeated in his attempts to pursue this relief through prior and secret assignments by the contractor of moneys due or to grow due on the contract, and the legislature set out to guard against this particular danger. Commencing as far back as 1896 (L. 1896, ch. 915, § 5), there was a provision which .finally developed into the present section 15, which has been quoted, intended to prevent this defeat of the meritorious claims generally provided for in the act by a requirement that assignments of moneys due on the contract should be made public by filing them and punishing the failure thus to make them public by a declaration of invalidity. In Harvey v. Brewer (178 N. Y. 5, 7) it was said in respect of this section: “ This section is supposed to be due to a decision of this court in Bates v. Salt Springs Natl. Bank (157 N. Y. 322), holding that in the absence of anything to the contrary in the contract, and before any notice of mechanic’s lien is filed, the contractor may assign to his creditor in payment of his debt the whole or any portion of the moneys due or to become due under the contract, and the assignee acquires a preference over a subsequent lienor. * * * That section indicates that the legislature was of the opinion that the protection of the laborers and materialmen made it necessary that notice of an assignment of the contract or the moneys due thereunder or some part thereof, or an order drawn by a contractor upon the owner, ought to be given to those interested, and so it was provided that such an assignment or order should not be valid until the contract or a statement containing the substance thereof and such assignment or a copy of each or a copy of such order be filed’ in the proper county clerk’s office.” (Kane Co. v. Kinney, 35 Misc. Rep. 1, 5; affd., 174 N. Y. 69; Brace v. City of Gloversville, 167 N. Y. 452, 456; Armstrong v. Chisolm, 99 App., Div. 465,469; Van Kannel B. Door Co. v. Astor, 119 App. Div. 214.)

It thus appears- that the: legislature adopted a statute for the protection of certain classes of creditors, which do not include the respondents, and that they inserted therein the special provision under consideration for the purpose of filling a gap in the statute and for the purpose of preventing the defeat of the beneficial purposes secured by other provisions of the statute through certain definite evils. It recognized that it was useless to give to a laborer or materialman the right to file a lien .upon a fund if the contractor could defeat all practical benefits of this right by making a secret assignment of the fund, and hence the requirement that such assignments should be filed. During all of this process it is beyond dispute that the general purpose of the legislative mind was to protect certain classes and that this particular clause was passed to make such protection more perfect. Keeping this in mind and construing the language of section 15 in the light of the general purpose of the statute, it seems to us evident that the language rendering assignments invalid is to be limited by the purpose for which the provision was adopted and that it should be held to relate simply to the people contemplated by the . statute and should not be held to apply for the benefit of those, like the present respondents, who were not in the mind of the legislature at all.

We think that this view is sustained by the following authorities: Matter of Meyer (209 N.Y. 386); Holy Trinity Church v. U. S. (supra); Lake Shore & M. S. R. Co. v. Roach (80 N. Y. 339, 344); Delafield v. Brady (108 N. Y. 524, 529); Riggs v. Palmer (115 id. 506, 509, 510).

In the Holy Trinity Church case it was contended that a statute made a certain act a misdemeanor, and it was said: “The construction invoked cannot be accepted as correct. It is a case where there was presented a definite evil, in view of which the legislature used general terms for the purpose of reaching all phases of that evil, and thereafter, unexpectedly, it is developed that the general language thus employed is broad enough to reach cases and acts which the whole history and life of the country affirm could not have been intentionally legislated against. It is the duty of the courts, under those circumstances, to say that, however broad the language of the statute may be, the act, although within the letter, is not within the intention of the legislature, and, therefore, cannot be within the statute. ” (p. 472.)

The judgments of the Special Term and Appellate Division should be reversed in so far as the same dismiss appellant’s claim against the fund herein and direct payment therefrom of the respective claims of the respondents, and also in so far as they award judgment in favor of said respondents respectively and against appellant for the sum of $79.06 and $269.36 for expenses of the reference.

Judgment is further granted that appellant’s claims herein be paid from the balance of said fund now on hand in priority to respondents’ claims, and that appellant have costs in this court against said respondents, which in addition shall include the taxation against each respondent of one-third of the disbursements incurred in printing the record on appeal in the Appellate Division.