Shannon v. Philadelphia German Protestant Home for the Aged

Opinion by W. D. Porter, J., It had been repeatedly decided prior to the year 1895 that where a building contract contained an express covenant against liens, or such a covenant clearly appeared as a necessary implication from the language employed, that subcontractors and material men were bound by the covenants of the original contractor. The power of the legislature to deprive the parties of freedom to make contracts of this character, or to relieve a subcontractor from the consequences thereof, unless he consented thereto, was expressly denied in Waters v. Wolf, 162 Pa. 153. In the opinion in that case, however, Mr. Justice Dean, who spoke for the majority of the court, said: “ Whatever reasonable regulations the legislature might make, as to notice to subcontractors and material men, of the terms of a contract between the owner and the only one with whom he bargains, the principal contractor, such as, that it shall be in writing and shall be recorded, would be clearly within the legislative power.” The case of Ballman v. Heron, 160 Pa. 377, was decided in 1894, and in that case the covenant against liens was in these words : “ And it is further agreed that the said Patrick Heron, of the first part, agrees to file no liens against the same said houses, and will pay all bills for work done and materials furnished for the erection of the same said buildings, and will deliver the same said buildings over to Isabella Heron, free of all charges for work done or materials furnished, on receiving the last payment.” It was there held that if the contractor was unable, by reason of his contract, to file a lien in any given case, the subcontractor was, for the same reason, unable to sustain a lien in the same case. The principle established by the decisions was that the right to the lien was derived from the contract, and that he who acquired rights under the contract of another acquired no greater rights than were possessed by that person' under whom the claim was acquired. If the principal contractor had covenanted that he himself would not file a lien, no lien could, in such a case, be sustained by a subcontractor. Such were the conditions when. [254] the Act of June 26, 1895, P. L. 869, became a law. This legislation made no attempt to take away from the parties to the original contract the power to covenant that no lien should be filed for work done or materials furnished in the erection of a building. It was such a regulation of the manner in which the right of lien might be denied to subcontractors as was suggested in the opinion in Waters v. Wolf. The subject-matter of the legislation was contracts “ for the erection of the whole or any part of any building hereafter made, .... whereby it is sought to deprive or hinder a contractor, subcontractor, material man, or other person, from filing or maintaining a lien, for work done or material furnished to such building; ” but the rights of the principal contractor are not in any manner affected by this legislation, and remain what they formerly were. The contracts with which the legislature was dealing were those in which it was sought to deprive or hinder a contractor, subcontractor, material man, or other person, from filing or maintaining a lien; but when it comes to the enumeration of the rights which are to be affected by this legislation, we find that those of the contractor are omitted, and it is only those of the. subcontractor, material man, or other person, which come within its protection. The result is that no such contract £< shall operate to defeat the right of any subcontractor, material man, or other person, to file and maintain such a lien, unless such contract or stipulation shall specifically covenant against such lien by subcontractor, or other person, and unless such stipulation shall be in writing and signed by the parties thereto.” The second section provides that the contract or stipulation shall be filed with the prothonotary. The act provides that there shall be a specific covenant against liens by subcontractors, but it does not provide, and manifestly did not intend to do so, any particular form for such covenant. It is clear that the legislative intent here sought to be accomplished was to require that in order to exclude a subcontractor from the right of lien, that exclusion must necessarily result from the express covenants of the contract, and not from any principle or implication of law, limiting the rights of such subcontractor to those which might be asserted by the principal contractor. A general covenant that no lieu should be filed against a building, for any work [255] done or material furnished in the erection thereof, would include within its terms all who might otherwise have the right of lien. A covenant limited to any class of work or material, as bricks or brickwork, would be effective only as to that particular class. A covenant in any manner limited could «not, in the face of this act, be enlarged to embrace matters not within the limitation. The act clearly distinguishes between the claims of contractors and those of subcontractors, and, since it became a law, a covenant by the .contractor that he himself will not file a lien cannot be held to specifically covenant against liens by subcontractors. If the statute is not to be given this effect, then its provisions with regard to the substance of the contract mean nothing. Do the express covenants of the contract with which we are now dealing stipulate that no subcontractor shall file a lien for work done or material furnished to the building which was the subject-matter of the contract ? In order to warrant us in holding that they do, it must so clearly appear that it was intended to deny the right of lien to subcontractors, that a mechanic or material man could have understood it without consulting a lawyer as to its legal effect: Nice v. Walker, 153 Pa. 123. Covenants which can, since the act of 1895, be held to deny the right of lien to a subcontractor must be as explicit as those which, prior to that legislation, were sufficient to defeat the right of the principal contractor. We find in article 9 of this contract this covenant, to wit: “If at any time there shall be evidence of any lien or claim for which, if established, the owner or the said premises might become liable, and which is chargeable to the contractor, the owner shall have the right to retain out of any payment then due, or thereafter to become due, an amount sufficient to completely indemnify himself against such lien or claim. Should there prove to be any claim after all payments are made, the contractor shall refund to the owner all moneys that the latter may be compelled to pay in discharging any lien on said premises made obligatory in consequence of the contractor’s default.” Here was an express recognition of the fact that under the terms of the contract the building might become liable to the lien of claims, for which the principal contractor was chargeable. The only other covenant in the contract relating to liens is found in the concluding para [256] graph of article 11: “ The contractor agrees not to lien or allow any lien or claim whatsoever to be filed against said building by himself, subcontractors, or any one furnishing materials or labor on said building.” The meaning of this covenant is, that the contractor will not himself file a lien, nor will he allow any lien or claim whatsoever to be filed against said building by subcontractors. Here was an absolute covenant that the principal contractor would not file a lien for his own claim, and this covenant was not affected by the above recited provisions of article 9; so that all right of lien in the principal contractor was gone: Morris v. Ross, 184 Pa. 241; Commonwealth Title, Ins. & Trust Company v. Ellis, 192 Pa. 321. The stipulation with regard to liens by subcontractors is in a different form. The covenant is, that the contractor will not allow any lien or claim whatsoever to be filed against said building by subcontractors, or any one furnishing materials or labor to said building. This was not an absolute covenant that no subcontractor should file a lien, and it is to be construed in connection with article 9 of the contract. The fair construction of this provision of the agreement is that it was intended to protect the owner; not by an absolute prohibition of liens by subcontractors, but by providing for their payment by the principal contractor, and, in default of his doing so, the owner was given the right to protect himself by the retention of payments due to the principal contractor, or, upon discovery of a lien after a final settlement, calling upon the contractor to refund: Hazleton Plumbing Company v. Powell, 13 Pa. Superior Ct. 426; Lloyd v. Krause, 147 Pa. 402; Creswell Iron Works v. O’Brien, 156 Pa. 172; Lucas v. O’Brien, 159 Pa. 535; Gordon v. Norton, 186 Pa. 168. We must conclude that this contract did not specifically covenant against liens by subcontractors, and that the act of 1895 saves the right of such subcontractors to a lien from the operation of the limited covenants contained in the agreement. The refusal of the learned court below to enter judgment for want of a sufficient affidavit of defense was, therefore, erroneous. Judgment reversed and record remitted to the court below, with direction to enter judgment against the defendant for such sum as to right and justice may belong, unless other legal or equitable cause be shown to the court below why such judgment should not be entered.