Bradley & Currier Co. v. Ward

O’Brien, J.: The order given by the contractor to the plaintiff upon the defendants was prior in point of time to the filing of the mechanics’ liens, though it is conceded that both by some months antedated the time when the third payment became due. No request was made to go to the jury upon the question of the acceptance of the order; and, even if we regard the testimony as conflicting, a verdict having been directed, it must be assumed that this conflict was resolved in plaintiff’s favor. The question, therefore, presented upon this appeal is whether the rights of the plaintiff under the order take precedence over the rights of the lienors in and to the [388] third payment under the contract. The plaintiff contends that the order given to it by Taylor upon the defendants constitutes an equitable assignment of the amount of the order in favor of the plaintiff and cannot be affected by any liens filed after the giving of the order. On the other hand, the defendants maintain that the order cannot take precedence of mechanics’ liens regularly filed months before the third payment became due. "We do not regard this as any longer an open question. In Lauer v. Dunn (115 N. Y. 408) it is said : “ If, before any liens were filed, the contractor had been paid, or had assigned his interest in the fund, in good faith and for a valuable consideration, in payment of a claim of the sub-contractor, and the owner is notified, no subsequent liens could operate to affect the owner with any further liability.” That case is sought to be distinguished by the fact there appearing that the order on the owner was given by the contractor the day after the houses were completed and his money was earned, and that the liens were filed a few days after the order was given, and, therefore, after the houses were completed. This suggestion is answered in Stevens v. Ogden (180 N. Y. 186). It therein appeared that orders were given on a payment which was not due to the contractor until after such orders were given. After the payment was due to the contractor, and within the time allowed by the Mechanics’ Lien Law, a lien was filed; and the question was thus directly presented as to the priority between the orders and the lien. It was therein held that if, before notice of' the lien is filed, the contractor assigns to a creditor in payment of his debt the whole or any portion of the moneys due or to become due on his contract, the assignor is entitled to the same in preference to the lienor, and in the course of the opinion it is said : “ ‘ Anterior to this act (Chap. 342, Laws of 1885, General Mechanics’ Lien Law of this State), the laborer or materialman has no preferential right to be paid for his ■ labor or material out of the sum which is due from the owner of the building to the contractor, but stands in the same position as other creditors. He may subject the debt to a lien in his favor on filing the notice and taking the proceeding prescribed by the act. But if, before this has been done, other creditors, pursuing the usual remedies for the collection of debts, have acquired a legal or equitable right to have the debt applied in satisfaction of their claims, the right [389] is not overreached by liens subsequently filed under the act unless priority is given by the provisions of the act itself.’ * * * There is no provision in the statute forbidding a contractor to pay his creditors out of the money due or to become due him from the owner to the exclusion of laborers and materialmen who have not filed liens. This may be an omission, but if so, it can only be supplied by the Legislature, for the courts cannot extend these purely statutory rights beyond the terms of the statute by which they are created.” This case has been cited and approved in Mack v. Colleran (136 N. Y. 620); Tubridy v. Wright (144 id. 522); Beardsley v. Cook (143 id. 150). W e have examined the cases relied upon by the defendants of Post v. Campbell (83 N. Y. 279) and Hilton Bridge Co. v. N. Y. Cen. & H. R. R. R. Co. (145 id. 390). All that the court decided in the latter case was that, where the plaintiff’s cause of action depended upon payments by the owner of premises to the contractor before they were due by the terms of the contract, an order was proper bringing in the contractor as a party for the purpose of determining the rights of all the parties. While the only question in that gase was as to whether in such an action the contractor was a proper party, there is a statement in the opinion, on which the defendants rely, to the following effect: “Under the Lien Act of 1885 (Chap. 342) it has been held in this court that where the owner has made payments to his contractor, although without fraud or collusion, before they are due under the terms of the contract, such payments cannot be allowed to the owner.” (Citing Post v. Campbell, supra, as the authority for this proposition.) A reference to the latter case, however, will show that it involved the construction of the Lien Law applicable to Kings and Queens counties, which act (Laws of 1862, chap. 478, § 1) provided for disallowing as against lienors any payment made by “ collusion, for the purpose of avoiding the provisions of this act, or in advance of the terms of any contract.” As therein said,'“ We think that the intention of this provision was to exclude payments made either by collusion or in advance of the terms of the contract.” The Lien Law applicable to the city of ¡New York which was in existence at the time of the filing of the liens against the defendant’s property differs from the act relating to Kings and Queens counties, in that it recites that a lien shall not be defeated [390] where an owner “ shall, for the purpose of avoiding the provisions of this act, or in advance of the terms of any contract, pay by collusion any money or valuable thing on such contract,” etc. (Laws of 1885, chap. 342, § 2, as amended by Laws of 1895, chap. 673.) Under this act the payment is no protection to the owner if collusively made in advance of the time fixed by the contract; whilst the language of the act involved in the case of Post v. Campbell was construed to mean “ that payments made by collusion for the purpose of evading the act constitute one class of payments to be disallowed, and payments made in advance of the terms of the contract constitute another class.” The good faith of the drawing of the order in suit, and the delivery thereof to the plaintiff in payment of a bona fide debt, are not questioned, nor is there any dispute about the same having been presented to the owner for payment before any liens were filed against the property. Under the authorities cited, therefore, the order was an equitable assignment pro tanto of the third payment ; and as there was no prior claim, the same became a first charge upon the fund whenever that became due. The defendants were charged with notice thereof, and were bound to reserve sufficient to pay the order in full. If they had any doubt upon this question, instead of resolving it against the plaintiff, they might well have required the matter to be litigated between the plaintiff and the lienors. They undertook, however, to determine for themselves the legality or correctness of the claims under the liens, and to pay the same out of the contractor’s moneys, without his consent and without a judicial determination that the claimants were entitled to be so paid. Notwithstanding this fact, if they were correct in their view that they had the right to pay the lienors in preference to the plaintiff, they' would be entitled to a ruling, because directly presented, upon that question. As we have said, however, upon the authorities bearing upon the General Mechanics’ Lien Law, as it existed when the rights here involved accrued, we must regard it as settled law that an order drawn on an owner by a contractor, payable out of a particular fund, and delivered to a sub-contractor in payment of a valid claim, takes precedence over liens filed after the owner has been notified of the existence of such order. It is unnecessary for us to determine the construction to be given to the [391] Mechanics’ Lien Law, as now amended by chapter 915 of the Laws of 1896, because the rights of the parties are fixed by the law as it was when the questions affecting such rights arose, which was prior to the latest amendment referred to. We think, therefore, that the action of the court below in directing a verdict in plaintiff’s favor was right, and that the exceptions should be overruled and judgment ordered for the plaintiff, with costs. Van Brunt, P. J., Williams and Patterson, JJ., concurred; Ingraham, J., dissented.