Fraad Contracting Co. v. Boyd

Laughlin, J.: This is an action to foreclose a mechanic’s lien on premises No. 61 West Forty-sixth street, borough of Manhattan, New York, owned by the appellants. The premises were leased by the appellants to Emil Fraad for the period of twenty-one years from the 1st of June, 1913, by an indenture in writing, executed on the 14th day of May, 1913. When the lease was made there was a dwelling house on the premises, and the lease recites that it was made “'for the purposes of and with the privilege of changing or altering to apartments, lodgings and stores, and for the purposes of any legitimate business,” with certain exceptions. The landlords were parties of the first part, and the tenant the party of the second part to the lease, and with respect to the alterations and improvements the lease contained further provisions, as follows: “And the party of the second part further covenants for himself, his heirs, executors, administrators and assigns that before the 1st day of November, 1914, he or they will expend not less than the sum of Five thousand (5,000) Dollars in improving and altering the said building now erected on said premises and that he will furnish to the parties of the-first part at least ten days prior to the commencement of any alteration or improvement in the buildings now erected upon said demised premises, but at their own cost and expense, however, a bond of Fraad Contracting Company, guaranteed by a Surety Company satisfactory to the parties of the first part, in the penal sum of the cost and value of the alterations to be made in the demised premises as aforesaid, by the party of the second part, his heirs, executors, administrators and assigns, which bond shall be given and accepted before any of said alterations are commenced and shall provide for the expenditure of not [734] less than five thousand (5,000) dollars as the cost and value of the alterations herein provided for and shall provide for the proper completion of said alterations to the satisfaction of the parties of the first part, on or before the 1st day of November, 1914. A failure to furnish as aforesaid said bond and guarantee will give the parties of the first part, at their option, the right to declare this lease and agreement forfeited.” The lessee was the president of the plaintiff, which, according to the provisions of the lease, was to give the bond; and it appears that a bond was given by the plaintiff on the 1st day of July, 1913, which was accepted as a compliance with the requirements of the lease. It will be seen from the provisions of the lease already quoted that the penalty of the bond was to be the cost and value of the alterations, which was to be not less than $5,000. The penalty of the bond given was $5,000; but it was recited therein that the lessee had agreed to furnish a bond executed by the plaintiff and guaranteed by a surety company, guaranteeing that he “will provide for the expenditure of no less than Five Thousand ($5,000) Dollars, as to the cost and value of certain alterations and the completion of said alterations to the satisfaction of the obligees, on or before the 1st day of November, 1914,” and the bond was conditioned that the plaintiff should well and truly indemnify and save the appellants harmless from any pecuniary loss resulting from the breach of any of the terms, covenants and conditions of the lease to be performed on the part of the lessee; and the liability of the surety was limited to the penalty of the bond. It was stipulated that the work contemplated by the lease was performed by the plaintiff, pursuant to an agreement with the lessee, and that plaintiff “furnished the material and supplied the necessary labor in order to complete the alterations,” and expended for “such work, labor and materials ” the sum of $7,000. The trial court held that the plaintiff was estopped by the bond to the extent of $5,000, and directed judgment of foreclosure for $2,000. The learned counsel for the appellants contends that the plaintiff is estopped from claiming a mechanic’s lien for any part of the cost of the improvements; and we agree with that contention. By the express terms of the lease the bond was to [735] be given by the plaintiff for the entire cost, and although the penalty of the bond is limited to $5,000, it is apparent that it was not intended as a modification of the provisions of the lease, but as a compliance therewith. The plaintiff knew that while the landlords had authorized the improvements they had obligated their tenant to make them at his own expense and to give a bond to that effect, and the plaintiff executed the bond to the appellants for that purpose. The landlords required that these improvements be made by the tenant, and, therefore, their consent appears by the lease; and ordinarily a contractor furnishing labor or material would be entitled to file a lien therefor, and would not be restricted with respect to the amount of his lien by the cost of the improvements as estimated and set forth in the lease (Jones v. Menke, 168 N. Y. 61; Wahle, Phillips Co. v. Fifty-ninth Street-Madison Ave. Co., 153 App. Div. 17); but in the case at bar the contractor by executing the bond, in effect, became a party to the lease and the bond it executed was intended to protect the landlords against any claim arising out of the performance of the work. The lien shows that much of the work had been performed by plaintiff before the formal lease was executed, which indicates that it was contemplated that the improvements were to be made by plaintiff. Here, the contractor not only knew of the limitation as to the cost of the improvements, which was made definite in amount by the bond and would limit the liability, if any, of the owner (McLean v. Sanford, 26 App. Div. 603, 605; Steeves v. Sinclair, 56 id. 448, 453; Hankinson v. Vantine, 152 N. Y. 20), but the contractor was a party to the limitation agreement. The plaintiff, therefore, was estopped by its bond from filing or asserting any lien as against the appellants. It follows that the judgment should be reversed, with costs, and any findings inconsistent with these views should be reversed and findings in accordance therewith made, and the complaint dismissed, with costs. Ingraham, P. J., Clarke, Dowling and Smith, JJ., concurred. Judgment reversed, with costs, and complaint dismissed, with costs. Order to be settled on notice.