Case ID: misc_85/html/0189-01.html
Source: Caselaw Access Project
Author: {"author": "Cohalan, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Pelham Operating Company, Plaintiff, v. Forty-second Street and Madison Avenue Company et al., Defendants.
    (Supreme Court, New York Special Term,
    April, 1914.)
    Contracts — building — action to foreclose a mechanic’s lien — negotiable instruments—' payment on balance due.
    Pursuant to an agreement reciting that upon the completion of certain work on a building there would be a balance due the contractor, the owner gave its note for $2,500, payable to the contractor, who indorsed it to the subcontractor on the express understanding that if the contractor did not complete the work, or if a less amount than the face of the note was due the contractor on the completion of the work, the subcontractor would hold the maker of the note responsible for only so much work as had been done. The contractor did not complete the work and the subcontractor discounted the note at a bank without notice to it of the agreement, and neither the note nor the agreement was ever filed in the proper county clerk’s office as required by section 15 of the Lien Law. In an action to foreclose a mechanic’s lien for labor and materials furnished the contractor, it appeared that, on plaintiff’s advice to the maker of the note not to pay it, payment was stopped but before the maturity of the note and prior to its payment after suit brought thereon plaintiff had filed his lien. Held, that plaintiff was entitled to a judgment establishing his lien on the amount deposited in court and to a personal judgment against the contractor for any deficiency.
    The subcontractor having borrowed the face of the note upon discounting it, and the bank having compelled the maker to pay it, the subcontractor’s obligation to the bank on the discount had been satisfied; hence it had gained $2,500 by the transaction; had the subcontractor kept the note as agreed, the amount due on the contract at the completion of the work would have been applicable in the first place in payment of plaintiff’s lien and the subcontractor would have been entitled to the balance.
    Action to foreclose a mechanic’s lien.
    
      T. W. Forrester, for plaintiff. .
    Ferriss & Storck, for defendants.
   Cohalan, J.

Action to foreclose a mechanic's lien. The defendant Forty-second Street Company is the only defendant that has interposed a defense. There are two matters for determination: (1) Has the plaintiff performed the labor of the character and value set forth in its amended complaint? and (2) is the defendant Forty-second Street Company entitled to credit itself as against the plaintiff with an item of $2,500 as a payment for the work actually performed? The proof satisfactorily shows that work to the value of $1,070 was performed; that the amount paid on account was the sum of $214.51, and that the balance due the plaintiff amounts to $855.64. The facts with regard to the main proposition are these: The defendant Forty-second Street and Madison Avenue Company, the owner of the premises, entered into an agreement with the Macolithic Concrete Company to do certain concrete work in the construction of the building’. On the 3d day of April, 1913, the Pennsylvania Cement Company, the Forty-second Street Company and the Macolithic Company entered into an agreement, reciting an indebtedness of the Macolithic Company to the Pennsylvania Cement Company. The further terms expressed therein were that upon the completion of the work there would be a balance due the Macolithic Company from the Forty-second Street Company; that the Forty-second Street Company should give to the Macolithic Company its note for $2,500 of that date, payable in one month; that this note was to be indorsed by the Macolithic Company to the Pennsylvania Cement Company, with the express understanding that if the former company did not complete its contract, or if a less amount than $2,500 was due the Macolithic Company upon the completion of the work, the Pennsylvania Cement Company should agree to hold the Forty-second Street Company responsible on the note for only so much work as had been done. The Macolithic Company did not complete the work. The note was delivered to the Macolithic Company, and by it indorsed, as agreed, to the Pennsylvania Cement Company, which indorsed it for discount to the Colonial Bank, and without any notice to the bank of the agreement. On the 30th day of April, 1913, the plaintiff advised the Forty-second Street Company not to pay the note and the latter company stopped payment thereon. However, after suit was instituted the amount due on the' note was paid on the 19th day of June, 1913. The plaintiff contends that this transaction does not prove or tend to prove a payment to the Macolithic Company or for its account for which the Forty-second Street Company is entitled to credit as against the plaintiff, which filed its lien on April 28, 1913, and which was before the note became due on the 5th day of May, and prior to its payment on the 22d day of June, 1913. In a word, the plaintiff asserts that the note and the agreement together constitute the transaction which took place between the parties — the Forty-second Street Company, the owner of the premises, the contractor, the Macolithic Company, and the subcontractor, the Pennsylvania Cement Company. Neither the note nor the agreement was ever filed in the office of the clerk of the county of New York (Lien Law, § 15). I am inclined to hold with the plaintiff that the transaction was equivalent to an assignment to the extent of $2,500 by the Macolithic Company to the Pennsylvania Cement Company of the moneys found to be due on the completion of the work. If the Pennsylvania Company had presented the note at maturity there would have ■been no obligation on the part of the Forty-second Street Company to pay it except out of moneys then due, if any, to the Macolithic Company, subject to the intervening rights acquired by other creditors; one of these creditors was the plaintiff, which secured rights through its lien filed on the 28th day of April, 1913. The rule of law is that when the owner gives an absolute obligation it is tantamount to a payment, but that situation does not exist in this case. It cannot be said that the Forty-second Street Company intended the note to be a payment of $2,500 or any specific sum when it was expressly agreed that it should be held responsible on the note only for a sum, which could not be determined until a future date, and which might prove to be much less than $2,500-. The Pennsylvania Company borrowed from its bank on the note $2,500, and the bank having compelled the Forty-second Street Company to subsequently pay it the Pennsylvania Cement Company’s obligation to the bank on the discount has been satisfied; hence it has gained $2,500 by the transaction. If it had kept the note, as was contemplated by the agreement, the $1,460 due the Macolithic Company at the completion of the'work would have been applicable in the first place to pay the plaintiff’s lien of $860.35, and the Pennsylvania Cement Company would have been entitled to the balance of $600. The plaintiff should not suffer by the violation of the terms of the agreement made by the Pennsylvania Cement Company. It has a valid lien upon the amount deposited in court and is entitled to a personal judgment against the Macolithic Company for any remaining deficiency.

Ordered accordingly.