Case ID: ad_165/html/0707-01.html
Source: Caselaw Access Project
Author: {"author": "Rich, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Kelsey Smith & Company, Respondent, v. William H. Douglas and Others, Respondents, Impleaded with Dinkel & Jewell Company, Appellant.
    Second Department,
    January 22, 1915.
    Mechanic’s lien — priority of assignment hy contractor of money due under contract — filing by assignee of contract between owner and contractor.
    Under section 15 of the Lien Law an assignment, legal or equitable, by a contractor of money due or to become due under his contract, or an order therefor drawn by a contractor upon the owner, has no priority over subsequent lienors, and no validity, unless and until it or a copy, together with the contract, a copy thereof or a statement containing its substance, are duly filed.
    Hence, an assignee of a contractor who notified the owner of the assignment, and filed the same, but did not file the contract, a copy thereof or any statement containing its substance, is not entitled to priority over subsequent lienors.
    Appeal by the defendant, Dinkel & Jewell Company, from a judgment of the Supreme Court in favor of the plaintiff and certain of the defendants, entered in the office of the clerk of the county of Westchester on the 27th day of July, 19 M, upon the decision of the court after a trial at the Westchester Special Term.
    
      Frank D. Briggs, for the appellant.
    
      Joseph L. Glover, for the respondent Pascal Tristini.
   Rich, J.:

This action is brought for the foreclosure of a mechanic’s lien, filed first in point of time by a subcontractor, and later liens by laborers, all assigned to plaintiff. The other defendants are subsequent lienors and persons interested in the distribution of a fund of $639.54 found to remain in the hands of the owner applicable to the payment of liens. The question presented is, whether the appellant, as the assignee of the contractor, is entitled to such fund as against the respondent Tristini, whose lien is for labor performed by himself, and who is the assignee of several other laborers who perfected and subsequently assigned their liens therefor, and this question rests solely upon the determination as to whether it was necessary for the appellant, in order to give validity and priority to its assignment, to file, under the requirements of section 15 of the Lien Law (Consol. Laws, chap. 33; Laws of 1909, chap. 38), the contract, or a statement containing the substance thereof, entered into by the owner and his contractor, the appellant’s assignor.

The facts, so far as material to the question presented, are as follows: The defendant Englis, some time prior to March 27, 1913, entered into a contract with the defendant Douglas for repairing a building owned by the latter for $4,500. Extra work, including material, was rendered. The owner paid his contractor on acOount $5,247.12. The contractor did not complete his contract, and the owner was allowed $751.75 for its completion. On January 6, 1913, the contractor executed and delivered to the appellant as collateral security for materials furnished and actually used in the repair of the building, the following assignment, under which it claims priority and to be entitled to the whole of said fund:

“This Agreement, made between Gr. H. Englis of Dobbs Ferry Road, White Plains, New York, party of the first part; and Dinkel & Jewell Company, a domestic corporation, of Tarry town, County of Westchester, and State of New York, party of the second part. In Consideration of One ($1) Dollar and other good and valuable consideration, to the party of the first part in hand paid by the party of the second part, the party of the first part hereby assigns, transfers and sets over unto the said party of the second part, the sum of $1,500.00 out of any payment, or payments, due or to become due to the party of the first part from W. H. Douglas of North Tarry-town, N. Y., on a certain contract made by the said party of the first part with said W. H. Douglas for repair work on a building now erected on the property of W. H. Douglas located at G-orey Brook Boad, North Tarrytown, N. Y., hereby authorizing the said W. H. Douglas to pay the party of the second part, or its order, the said sum of $1,500.00, or, in the event of any payment due or to become due, not amounting to said sum of $1,500.00 then, in that event,the whole of said payment, and so on until the said sum of $1,500.00 is fully paid; and the said party of the first part hereby authorizes the said party of the second part to receive, sue for, and receipt for the same as fully as the party of the first part could or would do were this assignment not made. Any money received by the party of the second part under this assignment is to be applied as received upon account of the indebtedness from the party of the first part to the party of the second part, said assignment being intended to be collateral to and not in payment of the same. The right to file a mechanic’s lien for any indebtedness arising thereunder shall be in no way affected by this instrument.”

On this assignment $500 was later paid, leaving unpaid thereon the sum of $1,000. On January 14, 1913, notice of such assignment was served by the appellant upon the owner. On February 26, 1913, at two-twenty-five o’clock p. M., Fred Bussell, a subcontractor, filed a lien for $146, which was later assigned to the plaintiff. On the same day, at three-seven p. M., the appellant filed a lien for material for $1,287.35, and its assignment from the contractor for $1,500, but did not file the contract, a copy thereof or any statement containing its substance. On February twenty-eighth following, at one-thirteen P. M., William J. Odell filed a lien for labor performed by him on said building for $44, and on the same day and at the same hour William Taxter filed a lien for labor performed by him on said building for $44, both of which liens were later assigned to the plaintiff. On March 25, 1913, at ten-twelve a. m., the respondent Tristini filed a lien for labor performed by him for $288.02. On March twenty-seventh following four hens, amounting in the aggregate to $321.45, were filed by laborers for work done by them upon said building and later assigned to Tristini. The learned trial court found such liens entitled to priority, as follows, and directed payment and distribution of the fund accordingly: First, that of the plaintiff, as assignee of Odell, $44; second, that of the plaintiff as assignee of Taxter, $44; third, that of the respondent Tristini, $288.02; fourth, fifth, sixth and seventh, that of said respondent as the assignee of said four laborers, amounting to $321.45 in the aggregate, which exhausted the fund.

The appellant contends that under the authority of Lauer v. Dunn (115 N. Y. 405) an order drawn upon a contractor, payable by its terms- out of a sum due or to become due from the owner under his contract, made in good faith and for a valuable consideration, notice thereof having been given the owner prior to the filing of any lien, gives to its holder a prior right to that portion of the fund represented by such order which cannot be defeated by subsequent liens, and that under the authority of Bates v. Salt Springs Nat. Bank (157 N. Y. 322), in the absence of anything to the contrary in the contract and before a notice of lien is filed, a contractor may assign to his creditors in payment of his debt the whole or any portion of the money due or to .become due under the contract, and the assignee acquires a preference over a subsequent lienor. The Lauer case was decided in 1889, and the facts presented in the Bates case arose in and prior to 1892. Under the law as it then existed the appellant’s contention would have been correct. Chapter 915 of the Laws of 1896 (amdg. Laws of 1885, chap. 342, § 5), which was substantially re-enacted by section 15 of the former Lien Law (Gen. Laws, chap. 49; Laws of 1897, chap. 418), changed the provisions of the former statute and, as the Court of Appeals held in Harvey v. Brewer (178 N. Y. 5), it was enacted to meet the decision of that court in the Bates case. It provides (Lien Law, § 15) that “No assignment of a contract for the performance of labor or the furnishing of materials for the improvement of real property or of the money or any part thereof due or to become due therefor, nor an order drawn by a contractor or sub-contractor upon the owner of such real property for the payment of such money shall be valid, until the contract or a statement containing the substance thereof and such assignment or a copy of each or a copy of such order, be filed in the office of the county clerk.” (See, also, Laws of 1907, chap. 360, amdg. Lien Law, § 15.) Since this statute became operative an assignment, legal or equitable, by a contractor of money due or to become due under his contract, or an order therefor drawn by a contractor upon the owner, has no priority over subsequent lienors, and no validity, unless and until it or a copy, together with the contract, a copy thereof or a statement containing its substance, are duly filed in the proper office. (Harvey v. Brewer, 178 N. Y. 5, 7; Van Kannel Revolving Door Co. v. Astor, 119 App. Div. 214, 217.)

Concededly, section 15 of the present Lien Law was not complied with, and the appellant did not, by filing its assignment, acquire priority over the liens for labor subsequently filed. The instrument upon which the appellant relies is an assignment and not an order. It is not given in payment of a debt owing by the contractor. It is given as a collateral security to an existing debt, but if it was an order for the payment of an existing debt, that fact would not benefit the appellant, for the statute requires the same essential procedure to give validity to an order for the payment of an existing debt that it does to give validity to an assignment of money due or to become due under the contract.

Appellant’s further contention, that the respondent Tristini was a subcontractor and not a laborer, is without merit.

The judgment must be affirmed, with costs.

Jenks, P. J., Burr, Thomas and Carr, JJ., concurred.

Judgment affirmed, with costs.