National Radiator Co. v. Chelsea Housing Corp.

Burling, C. C. J. This is a suit by three materialmen against the owner, general contractor and subeonstractor arising out of the construction of a private housing project in Atlantic City, Mew Jersey, under a filed contract. R. S. 2:60-115, et seq.; N. J. S. A. 2:60-115, et seq. Motion has been made by the general contractor for a rule dropping it as a party defendant pursuant to R. S. 2:27-31; N. J. S. A. 2:27-31, and Supreme Court rule 41 N. J. S. A. tit. 2, as not being a proper party and that it has been misjoined. ' To decide the motion herein, immediate confrontment occurs with the problem as to whether a stop-notice of a materialman who furnishes to a subcontractor acts as assignment pro tanto of funds due a general contractor where a default in performance by the subcontractor has occurred and the cost of completion of that subcontract has wiped out any money otherwise due to the subcontractor from the contractor. Subject to the cost to the owner to complete upon the default of the general contractor, a stop-notice of the material-men who furnished to the general contractor acts as an assignment pro tanto of the contract price owing by the owner to the contractor. Brown v. Home Development Co. (Court of Chancery, 1941), 129 N. J. Eq. 172; 18 Atl. Rep. (2d) 742. The motion is resisted by the plaintiffs and it is contended by them that in the light of the opinion in St. Michael’s, &c., Hopewell v. Conneen Construction Co. (Court of Chancery, 1933), 114 N. J. Eq. 276; 166 Atl. Rep. 458; affirmed (Court of Errors and Appeals, 1933), 115 N. J. Eq. 334; 170 Atl. Rep. 649, such is the law of the State of Mew Jersey, and that the Mechanics’ Lien statute as a result of amendment in 1917 (chapter 241) and subsequent amendments thereto, now R. S. 2:60-116; N. J. S. A. 2:60-116, is so intended tó protect such materialmen and have their claims paid out of moneys due by the owner to the general contractor. In the case of Carlisle v. Knapp (Court of Errors and — 195 — Appeals, 1889), 51 N. J. L. 329 (at p. 331); 17 Atl. Rep. 633, the inconvenience that would be placed upon a general contractor if such were the law was recognized in the construction of a former act which was held to limit relief to materialmen of the general contractor. Subsequent to the enactment of the amendment of the Mechanics’ Lien Statute of 1917 (chapter 241) hereinbefore referred to, adjudication construing this statute was made in the case of Morris County Golf Club v. Hegeman-Harris Co., hereinafter referred to as the Golf Club case (Court of Chancery, 1923), 121 Atl. Rep. 528 (not reported otherwise), and which was affirmed in the Court of Errors and Appeals without syllabus upon the opinion below, George A. Mills Co. v. Hegeman-Harris Co. (Court of Errors and Appeals, 1923), 94 N. J. Eq. 802; 122 Atl. Rep. 926; 125 Id. 127, and is controlling in the present situation. In that case in paragraph 1 of the syllabus of the opinion the following statement is made: “Where subcontractor had not been paid in full when he abandoned work and the amount unpaid was insufficient to meet claims of materialmen filed under 3 Comp. Stat. 1910, p. 3294, § 3, as amended by Act March 29th, 1917 (Pamph. L., p. 821 [N. J. S. A. 2:60-116]), and the principal contractor’s loss in completing the subcontractor’s work exceeded the balance due the subcontractor, the principal contractor’s claim for such loss was superior to those of materialmen, and he was entitled to the whole of the sum due the subcontractor.” And in the body of the opinion the following: “As the fund is insufficient to pay the contractor, it is entitled to the whole fund, unless by reason of the Mechanics’ Lien Act (3 Comp. Stat. 1910, p. 3290, et seq. [N. J. S. A. 2:60-l 05, et seq.), the claims of the claimants under stop-notices take precedence of the claim of the contractor. * * * “The only point that can be asserted in favor of these claimants is that, in certain instances the contractor paid in advance of the terms of its contract to Taab.” The plaintiffs contend that the effect of the decisions in the ease of St. Michael’s, &c., Hopewell v. Conneen Construction Co., supra, hereinbefore referred to is to overrule the construction placed upon the pertinent statute in the Golf — 196 — Club case, and that the statute is clearly intended to protect the materialmen and to have their claims paid out of the money due by the owner to the general contractor, regardless of the default of the subcontractor with whom they contracted, and that the cost of the completion of that subcontract has wiped out any moneys due otherwise to the subcontractor from the general contractor. The plaintiffs contend that the reasoning of the United States District Court Judge for the District of New Jersey, in an unreported opinion in Nolan v. Chelsea Housing Corp., in a cause of action relating to this very project, gives effect to the legislative intent in the following language: “The effect of this later decision [St. Michael's, &c., Hopewell v. Conneen Construction Co., 114 N. J. Eq. 276; 166 Atl. Rep. 458; affirmed, 115 N. J. Eq. 334; 170 Atl. Rep. 649], as I see it, is contrary to the principle established in the Golf Club case. It is sure that to some extent it relies upon the clause in the contract as to the passing of ownership of delivered materials to the contractor, and yet a careful reading indicates that the Vice-Chancellor did not agree with the determination in the former case. This latter case was affirmed by the Court of Errors and Appeals without opinion in that court, and by a divided court — eleven for affirmance, three for reversal. “I believe I am following the latest decision of the Court of Errors and Appeals when I determine that plaintiff is entitled to the amount claimed as principal with interest.” The soundness of this construction was attacked in an appeal from the said decision of the United States District Court for the District of New Jersey, and the Circuit Court of Appeals held that the rule in the Mills & Co. v. Hegeman-Harris Co., hereinbefore referred to as the Golf Club case (supra) remained undisturbed as the law. This opinion is reported in 128 Fed. Rep. (2d) 872 (U. S. Court of Appeals, Third District, 1942). It has been contended by the plaintiffs that this decision is not binding in the state court in this cause of action, and while such is the case still the weight and dignity of that opinion is not to be lightly disregarded. — 197 — The decision in the Golf Club case remained undisturbed and without judicial deviation therefrom until 1933, in the St. Michael’s, &c., Hopewell v. Conneen Construction Co., supra, case, and no other pertinent adjudications have been made subsequent to the St. Michael’s, &c., Hopewell v. Conneen Construction Co., supra, case. To avoid the effect of the decision in the Golf Club case, it is necessary to differentiate the facts in a given ease. This was the objective and the ultimate pivot of the decision in the St. Michael’s, &c., Hopewell v. Conneen Construction Co., supra, case and in the construction of the contract in the Nolan case, the United States Circuit Court of Appeals held that the differential in that ease did not exist as it did in the St. Michael’s, &c., Hopewell v. Conneen Construction Co., supra, case and that the Court of Errors and Appeals when the St. Michael’s case (referred in that as the Conneen ease) came to it on appeal, did not accept the proffered opportunity to overrule the Hegeman-Harris decision but that instead it affirmed the decision of the Court of Chancery for reasons expressed in the opinion of Vice-Chancellor Davis which had expressly distinguished the facts in the St. Michael’s, &c., Hopewell v. Conneen Construction Co., supra, case from the Golf Club case, and that the law of the state was expressed in the Hegeman-Harris Golf Club case. It then proceeded to the consideration of the contract and determined that title to the materials furnished by the plaintiffs therein was not intended to and did not pass to the general contractor, and accordingly reversed the opinion of the United States District Court. The complaint filed in this cause of action demands judgment against the defendants generally. No allegations are contained in the complaint that title to the materials involved was by the provisions of the subcontract intended to pass or actually did pass to the contractor upon their delivery at the side of the work. In the main body of the complaint there is no specific allegation of the source of incurrence of the debt (paragraphs 6 and 7) but the copy of the stop-notice is incorporated inte the complaint by reference (paragraph 9) and in ¿hat notice — 198 — lit is alleged that'the materials were furnished to George J. .Meek, a subcontractor and used in the buildings involved in the principal contract. The notice of dispute in this case was given by the general . contractor. The subcontractor Irving J. Gluck, Inc., apparently has not been served in the manner provided by law and has not entered an appearance in this cause of action. The .judgment contemplated by R. S. 2:60-121; N. J. S. A. ,2:60-121, should be obtained against the party with whom .the claimant had privity of contract, namely the subcontractor., This was accomplished prior to the institution of suit in the Holan case by a default judgment against the subcontractor and thereafter suit was entered against the owner. Upon the oral argument of this motion the plaintiffs .asserted that it was not their intention to assert a money .judgment against the general contractor. . Under these circumstances the general contractor is not called upon to defend a general judgment in damages against itself and by virtue thereof and of the practice referred to in Sargeant Bros., Inc., v. Brancati (Court of Errors and Appeals, 1930), 107 N. J. L. 85; 151 Atl. Rep. 843, this .defendant is an unnecessary party. . ■ It is contended by the plaintiffs that the point in issue in ¡that case was whether a suit against the owner was required ,to be instituted in the Circuit Court, and that the question of whether the general contractor was a proper party was not at issue, and that the statement of the court was therefor dictum. The statements were judicial dictum, however, and should not be lightly regarded. Crescent Ring Co. v. Travelers Indemnity Co. (Court of Errors and Appeals, 1925), 102 N. J. L. 85; 132 Atl. Rep. 106. „ ■ .Assuming the complaint does not charge a cause of action .for a direct judgment in dollars against the general contractor .or that such a judgment against the general contractor is not to be asserted, then it is alleged by the plaintiffs that the .general contractor is a proper party otherwise. Under the section of the Practice Act of 1912, now R. S. 2:27-25; N. J. S. A. 2:27-25, parties defendant are .described: — 199 — “Subject to rules, any person may be made a defendant, who jointly, severally or in the alternative, is alleged to have or claim any interest in the controversy, or any part thereof, adverse to plaintiff or whom it is necessary to make a party for the complete determination or settlement of any question involved therein.” It is for the courts to give effect to the objective of the act of 1912 which was plainly designed to mould procedure and judgments at law in a large measure according to the pattern of equity. Common law conception of the parties on each side as a unit no longer obtains. Woodbridge v. DeAngelis (Court of Errors and Appeals, 1940), 125 N. J. L. 579 (at p. 581); 17 Atl. Rep. (2d) 542. In equity practice parties defendant have long been defined and classified as necessary and proper. Necessary parties are those who are indispensable to the suit. Proper parties are defined in 1 Kocher & Trier, New Jersey Chancery Practice and Precedents 33: “* * * proper parties are persons having no real interest in the question at issue, but who still have some interest in the subject-matter of the suit which may be conveniently settled in such suit, thereby preventing further litigation.” In case of proper parties, complainant in equity makes them parties if he choses and the bill is not demurrable on that account. Whittemore v. Coster et al. (Court of Chancery, 1844), 4 N. J. Eq. 438 (at p. 442). But in the case of Greiss v. Noisky, 82 N. J. Eq. 1 (at p. 7); 87 Atl. Rep. 155, 157, it was held: “Where no relief is prayed for in a bill against a defendant, the bill will be dismissed as against him. Patterson v. Patterson, 1 Hayw. (NC) 167.” Since no relief against this defendant is asserted in this cause of action, it is not a proper party. The motion will be granted and appropriate rule may be presented.