Winter v. Hazen-Latimer Co.

Mr. Justice Van Ojrsdf/l delivered the opinion of the Court: The conditions under which liens of this sort may be established are stated in sec. 1240, D. C. Code [31 Stat. at L. 1384, chap. 854], which provides: “All such liens in favor of parties so employed by the contractor shall be subject to the terms and conditions of the original contract, except such as shall relate to the waiver of liens, and shall be limited to the amount to become due to the original contractor and be satisfied, in whole or in part, out of said amount only; and if said original contractor, by reason of any breach of the contract on his part, shall be entitled to recover less than the amount agreed upon in his contract, the liens of said parties so employed by him shall be enforceable only for said reduced amount, and if said original contractor shall be entitled to recover nothing said liens shall not be enforceable at all.” The issue involved in this appeal, as urged by appellants, is [472] concisely stated in the opinion of the learned justice who heard the case below, as follows: “If the original contractor, instead of the surety, had finished the work, it is evident that the plaintiff’s lien would have been valid. The contention of the surety is that the lien did not attach because, it is said, the owner had paid the original contractor for the work done by the plaintiff, and had done so before any notice of a lien had been given; and that the surety must be treated as having taken up the work remaining to be done under a new and separate relation between itself and the owners, exactly as if it had been a stranger to the contract; that the surety was under no obligation to pay the plaintiff, and that the owners’ interest could not be charged, nor the fund due to the surety for the remainder of the work be held, to pay for Avhat the plaintiff had contributed to the building.” The statute limits the. right of a subcontractor to a lien upon money due the contractor from the owner at the time notice is given the owner. It is conceded that notice was not given in this case until after the first payment had been made to the contractor and he had abandoned his contract. It does not appear from the record that anything remained due the contractor on the date the OAvner was notified of the claim of plaintiff. But it is urged, and so found by the court below, that, by electing to assume the contract and complete the building, the surety stood in the position of an assignee of the contractor, and, as such, stepped into his shoes, and therefore became liable for plaintiff’s claim. We are not in accord with this contention. No privity existed- between plaintiff and the surety. The surety contracted in its bond to protect the owner from loss at the hands of the contractor. When the contractor absconded, the owner had paid him in full. All had been done which the statute required-to. protect the OAvner against the assertion of a lien by plaintiff. Blaintiff was without remedy against the owner, and it is hard to conceive of a right of action against the surety, when all it obligated itself to do was to protect the owner from loss by the act. of the contractor. The liability of the -surety in this in [473] stance cannot extend beyond the owner and the original contractor. Upon the abandonment of the contract, the surety was called upon by the owner not to make good any loss sustained by the failure of the contractor, but to step in and protect the completion of the building under the contract. When the surety elected to assume the completion of the work, as it had a right to do, it did not assume anything back of the first payment. For its own protection, and not because of any fictitious relation to the contractor, it assumed to take the work where the contractor left it on the owners’ hands, and to complete it as it had assured the owner it would be completed by the contractor. The ride is generally supported that “performance of a building contract by a surety after abandonment of it by the principal is not, in law, performance by the principal.” 2 Brandt, Suretyship, sec. 759. In the case of St. Peter’s Catholic Church v. Vannote, 66 N. J. Eq. 78, 56 Atl. 1037, where a contractor had been paid all that was due him at the time of the abandonment of his contract, except 20 per cent reserve to be paid upon final completion of the building, the sureties assumed the contract and completed the building. The sureties were held, as against certain materialmen, to be entitled not only to the price contracted to be paid by the owner, but also the reserve of 20 per cent,, in so far as necessary to compensate them for their work. The court, considering this feature of the case, said: “The sureties did the work, not for the contractors, nor for the owner, but to relieve themselves, as cheaply as possible, from their obligation to the owner. What they did was by virtue of their contract with the owner. Their obligation as sureties was to the owner; they owed no debt to the contractors. What they did was not for the contractors. Nor can the contractors claim any portion of the contract price by reason of what the sureties did. * * * This right of the sureties so far as it concerns the owner and contractors is clear. I also think that the right of the sureties is superior to the claims of the materialmen and laborers. The claims of the latter reach only such moneys as was due at the time of the several demands and notices, or thereafter became due to' the contractors. Nothing, aside from what [474] was already paid, became due unless tbe theory is adopted that the sureties were working for .the contractors, and therefore, upon the completion of the building by them, a debt accrued to the contractors as if they had completed the work. But, as already observed, the sureties were not working for the contractors. There was no privity between them and the contractors. Their contract was with the owner as sureties for the default of the contractors. By the mere fact of performance of their contract they became equitable assignees of so much of the money held by the owner as was required to requite them for their expenditure.” The doctrine announced by the New Jersey court is further sustained in Masury v. Westwater, 94 Ill. App. 30; Weisemair v. Buffalo, 57 Hun, 48, 10 N. Y. Supp. 569; Larkin v. McMullin, 120 N. Y. 206, 24 N. E. 447. Counsel for plaintiff rely upon the case of Smith v. Lange, 81 App. Div. 192, 80 N. Y. Supp. 1078. But in that ease, unlike the case at bar, there was a formal assignment of the contract from the original contractor to the surety. This relation we have found not to exist, even constructively, in the present case. True, the New York court suggested in the opinion that the situation would not be different where the surety assumed the contract and performed its conditions. But this declaration was not necessary to the decision of the case, and is contrary to the express holding of the higher New York court. The rule here announced is equitable. The owner is entitled to equal protection with the subcontractor. The subcontractor should acquaint himself with the terms and conditions of the building contract. This information is made available by statute. D. C. Code, sec. 1243 [31 Stat. at L. 1385, chap. 854]. In the absence of anything to the contrary, we must assume that plaintiff possessed this information. If it knew when the next payment would be made to the contractor after it completed its work, it must be presumed to know the condition of the statute which expressly gave it a lien only against money owing the principal contractor at the time of noti«e of its claim to the owner. It could have given the owner notice the day it completed its work. It cannot, shift its neglect, by assuming that [475] the contractor would not abandon or forfeit his contract, on to the shoulders of either the owners or the surety. The statute imposed upon it especially the duty of a timely disclosure of the existence of its claim, a fact known to it, but presumably not to the owners or the surety. This construction, in the absence of fraud or collusion, which do not appear in this case, can work no hardship upon the subcontractors or materialmen. It only imposes promptness in asserting their claims; while, if the contention of plaintiff were Sustained, delay might work great hardship on both owner and surety. The decree is reversed, with costs, and the cause remanded for further proceedings not inconsistent with this opinion. Reversed and remanded.