Standard Sand & Gravel Co. v. City of New York

Scott, J.: The trial court, found, and the correctness of this finding is unquestioned, that the assignment by the contractor to the Royal Company of all moneys “due or to grow due” by virtue of the contract between the contractor and the city of New York, although absolute in form, was given to and accepted by the Royal Company as security for advances made and to be made by it to the defendant Acme Asphalt and Granite Paving Company. In other words, it was intended to create, in effect if not in legal parlance, a lien or mortgage upon the fund set apart or appropriated by the city of New York for payment of the sums to be earned under the contract. The crucial question in the case then is, as pointed out by Mr. Justice Laughlin, whether.such an assignment, in the case of a municipal contract, should be held to fall within the meaning of the words “mortgage or other incumbrance” as used in section 13 of the Lien Law (Consol. Laws, chap. 33; Laws of 1909, chap. 38). The portion of the section material to the question reads as follows: “A lien for materials furnished or labor performed in the improvement of real property shall have priority over a conveyance, judgment or other claim against such property not recorded, docketed or filed at the [82] time of filing the notice of such lien; over advances made upon any mortgage or other incumbrance thereon after such filing; * * I freely concede, if the Legislature intended by this clause to give to laborers or materialmen priority over sums advanced, after the filing of the lien, upon a general assignment of moneys due and to become due under the contract, that the language adopted to express that intention was not happily chosen, and the words “mortgage” and “incumbrance,” when strictly construed, are not appropriate to such an assignment even if intended merely as security for future advances. But in construing a statute, and especially a remedial one like the Lien Law, we should not always confine ourselves to the strict legal definition of the terms used, but are at liberty to seek out the intention of the Legislature and to give effect to that intention, if by any reasonable construction the language used will permit us to do so. It is quite obvious, as has been repeatedly pointed out by this court and the Court of Appeals, that it has been the intention of the Legislature to assimilate, so far as practicable, the regulations as to liens in respect to private real property and liens in respect to improvements upon public municipal contracts. (Brace v. City of Gloversville, 167 N. Y. 452; Herrmann & Grace v. City of New York, 130 App. Div. 531; 199 N. Y. 600.) One difference which necessarily exists is as to the subject-matter to which .a lien applies. In the case of private real property the lien applies directly to the property improved; but in the case of a public improvement, since it would be intolerable that public property should be incumbered with liens in favor of contractors and others, it is provided that the lien shall attach to the moneys in the hands of the municipality set apart or appropriated for the payment of the sums due or to become due upon the contract for the improvement, and a corresponding difference is made as to the offices in which liens, claims, assignments and incumbrances of every nature are to be filed or recorded. In short, in the case of a public improvement the money due or to become due from the municipality under the contract for the improvement is substituted for and stands in the place of [83] the real property affected by the. improvement. In all other respects the regulations affecting the two classes of liens are similar. The history of the Lien Law and its development shows a great and constantly increasing degree of consideration by the Legislature for the claims of laborers and materialmen, one evidence of which is to be found in section 13 itself, which as to liens upon real estate gives to liens for labor and materials unquestioned preference over advances made after the filing of such liens, no matter how absolute in form the incumbrances upon the real estate may be. It seems quite unreasonable to suppose that it was the intention of the Legislature to extend to laborers and materialmen engaged upon public improvements less protection than it clearly extended to the same persons engaged upon private work. No plausible reason suggests itself why such an invidious distinction should have been intended, and there seems to be every reason why it should not. Does the language of section 13 of the Lien Law constrain us so to construe it as to discriminate against laborers and materialmen engaged, upon public improvements ? In my opinion it does not. Conceding that the word “ incumbrance ” is not a happy one to express the idea of a lien upon a fund of money, still it may, I think, be properly construed in this case to include such a lien.- Undoubtedly the right of the contractor to be paid for the work done under the contract was a property right. The assignment of the money due or to grow due thereunder created a lien upon the fund, which would ripen into a right of collection by the assignee only in case the assignor failed to repay the advances. In this sense the assignment may properly, I think, be considered as an “ incumbrance ” upon the fund; that is to say, a claim upon it which would stand in the way of a collection and enjoyment of the fund by the contractor until he had removed the lien by payment. The word “ incumbrance ” is generally used in the books with reference to real estate, and has been defined as a right or interest in land which may subsist in another to the diminution of the value of the land to the owner. (Wetmore v. Bruce, 118 N. Y. 319; Dieterlen v. Miller, 114 App. Div. 40.) In a [84] case like this, wherein the fund in the hands of the municipality stands in the place of land, I see no reason why the word “incumbrance,” as above defined, may not be applied to an assignment of moneys due and to become due when such assignment is given to secure advances, future as well as present. Clearly, under the findings of the trial court, the assignment was not absolute, but was merely intended to create a hen upon the fund in the hands of the city, and a hen is always an incumbrance. (Wilson v. Wilson, 120 App. Div. 581.) I find no insuperable difficulty in holding that an assignment of the moneys due or to become due to a contractor for a municipal improvement, given as security for moneys to be advanced, constitutes a hen upon the fund for the amounts advanced, and is an “incumbrance ” upon the fund within the meaning of section 13 of the Lien Law, and, consequently, that hens .for materials furnished or labor performed are entitled to priority over advances made by the assignee after the time such hens are filed. Only by this construction can laborers and material-men be afforded the same protection as respects public works that they enjoy in respect to private work. Any other construction would enable a dishonest contractor to work a grave injustice to those who furnish him labor and materials. Of course the assignment by a contractor for a private improvement of the moneys due or to become due under his contract offers no analogy, so far as concerns mechanics’ hens, to a like assignment by a contractor for a public improvement. In the former case the hen attaches to the land itself, and the assignment of the moneys to be earned under the contract cannot affect the rights of the lienor. But in the latter case the money earned or to be earned is the only thing to which a lien can attach, and an absolute assignment in advance of that money defeats the hen by destroying that to which it may attach. The judgment appealed from should be affirmed, with costs to the respondent Fredenburg & Lounsbury as against the Royal Company, and to said Royal Company as against the appellant the Hildreth Granite Company. Clarke, P. J., and McLaughlin, J., concurred; Laughlin and Page, JJ., dissented.