George E. Sealy Co. v. Ards Building Corp.

216 A.D. 313, 214 N.Y.S. 768, 1926 N.Y. App. Div. LEXIS 9220

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: March 26, 1926
• Status: Published

Opinions

McAvoy, J.

Plaintiff is a lienor who claims $1,000 for furnishing materials to the defendant owner’s premises. No dispute arises over the facts of-delivery, value or non-payment to plaintiff; but the defendant owner contends that having paid out all that was due to plaintiff’s principal contractor, it has nothing to which the lien of plaintiff, a subcontractor, can attach. The contractorip-ghief Brady- abandoned his contract in March, 1923, and the owner, Ards Building Corporation, completed the work. When the work was abandoned the contractor had been paid $9,400. This left a bo lance of $1,200 applicable for completion. The cost of completing the work to the owner was $1,163.87. The owner also had the expense of bonding plaintiff’s lien, counsel fees for this service and other expenses which até up the small sum of $36 remaining.

The appellant also contends that since two of the payments to Brady, the contractor, were by notes maturing and paid after the filing of the lien, the amount of the notes aggregating $1,700 should be deducted from the amount paid to Brady and considered as still in the hands of the owner, so that the lien of the subcontractor could be satisfied out of such fund. It is also asserted by plaintiff that there was a balance of $1,172.13 in the hands of the owner upon the completion of the abandoned contract, which should be applied to the payment of plaintiff’s lien. This sum of $1,172.13 does not appear to exist as an actual fund in any one’s hands, but such evidence as there is of it is contained in a statement in a letter from the attorney for the owner, which statement the attorney afterwards deposed in an affidavit, which was received in evidence on the trial by consent, was an error, and that the balance actually left after completion of the work between cost and contract amounts was $36.13, subject to deductions. This proof by affidavit Went uncontradicted.

Neither of plaintiff’s claims to the existence of a fund out of which to satisfy its lien can be sustained. With respect to the two notes given by the owner to Brady, there is no evidence in the record that they were paid to Brady. The first note was due and paid March 8,1923. By whom it was then held there is no evidence. It may have been discounted and in the hands of a bona fide holder when it became due. But even if paid to Brady, if at the time it was given as an advance, it was given in good faith for work to be done, it would not be a fraudulent payment after the lien Was filed, under which such lien could attach as though the note were not paid.

The $1,000 note was indorsed over by Brady to defendant Dimock & Fink Company, and was paid at maturity, and was, therefore, in the hands of a transferee at the time of payment, and its discharge by the owner was required. The Lien Law authorizes payments to be made by the owner in advance of the amount becoming due under the contract, provided they are not made for the purpose of avoiding the provisions of the statute, and the lienor must show that they were so made in intended violation of the law. (See Lien Law, § 7.) In any event, when the notes became due and the payments covered by them had been earned and were due, they became by relation payment when met at their maturity. The contention that these notes should have been filed in the county clerk’s office in order to -be valid as against the plaintiff’s lien under section 15 of the Lien Law (as amd. by Laws of 1916, chap. 507)

* cannot be upheld. This section provides for- recording an assignment of money due or to become due, or recording orders for the payment of money against funds in the hands of the owner, but has no application to payments by promissory notes on account of work done or to be done. Notes do not operate as assignments of specific funds nor as orders on' a fund, and are manifestly not included within the terms of that statute.

As to the assertion of plaintiff that it is entitled to a lien upon the difference between the balance unpaid on the contract and the sum expended by the owner to complete it, this must also be denied, as there Was no provision in the contract for the completion of the work by the owner in the event of failure of the contractor to do so, nor was there any understanding between them that the owner should proceed with the work, nor Was there any failure upon the part of the owner to perform his obligations under the contract; and since there was an abandonment of the contract by the contractor, there was nothing due under the contract when the lien was filed. That the owner sent a letter or notice to the contractor threatening to charge him with the expense of completion did not give either party a contractual right to a fund remaining after completion or a right to charge an extra cost to the contractor. The contractor never assented to this proposal and he cannot now claim a benefit. Plaintiff’s lien could attach after abandonment only to payments that should be earned under the contract through the agency of another subsequent to the filing of the lien, and since there was no performance thereafter by the contractor nor any for his account, nothing could accrue upon which the subcontractor could assert its lien. The sum left in any event is but $36, as demonstrated above, which was subject to counsel fees, expenses of bonding and petty charges for completing the work.

The determination should, therefore, be affirmed, with costs.

Clarke, P. J. and Dowling, J., concur; Finch and Martin, JJ., dissent.

Since amd. by Laws of 1925, chap. 624.—• [Rep.