Case Name: The New Jersey Steel and Iron Company, Respondent, v. Andrew J. Robinson, Defendant, Impleaded with Charles N. Talbot, as Assignee of Andrew J. Robinson for the Benefit of Creditors, Appellant; Owen R. Mason and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1902-07
Citations: 74 A.D. 481
Docket Number: 
Parties: The New Jersey Steel and Iron Company, Respondent, v. Andrew J. Robinson, Defendant, Impleaded with Charles N. Talbot, as Assignee of Andrew J. Robinson for the Benefit of Creditors, Appellant; Owen R. Mason and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 74
Pages: 481–492

Head Matter:
The New Jersey Steel and Iron Company, Respondent, v. Andrew J. Robinson, Defendant, Impleaded with Charles N. Talbot, as Assignee of Andrew J. Robinson for the Benefit of Creditors, Appellant; Owen R. Mason and Others, Respondents.
Lien Law — a contractor’s assignee for creditors is entitled to money due to the contractor, where he has defaulted and the work has been completed by the owner, in preference to the holders of mechanics’ liens subsequently fled.
A contract for the construction of a building provided that the owner should pay to the contractor the actual cost of the labor and materials and five per cent in addition to such cost, not exceeding in the aggregate a certain sum. It also provided that the owner should make payments from time to time during the progress of the work in amounts equal to ninety per cent of the value of the labor and materials furnished as certified by the architect, together with two and a half per cent upon such value on account of the additional five per cent agreed to be paid; that the final payment should be made within thirty days after the complete performance of the work, and that in case of the completion of the work by the owner, if the cost of completion should not exceed the balance remaining unpaid on the contract, he should pay the difference to the contractor.
Defore the work had been completely performed and at a time when there was earned and unpaid upon the contract the sum of about $70,000, the contractor made a general assignment for the benefit of creditors. The owner completed the work and the amount unpaid upon the contract exceeded the cost of completion by §58,398.86.
Held, that whatever was due to the contractor at the time of the execution of the assignment or subsequently became due to him by reason of the owner’s completing the work under the contract and leaving a surplus, passed to the assignee as against lienors whose liens were filed subsequent to the assignment, and that, consequently, after the payment, out of the amount due to the contractor, of the liens filed prior to the execution of the general assignment, the assignee was entitled to the surplus to the exclusion of lienors whose liens were filed subsequent thereto.
Hatch and Ingraham, JJ., dissented.
Appeal by the defendant, Charles F. Talbot, as assignee of Andrew J. Robinson for the benefit of creditors,, from so much of a judgment of the Supreme Court, entered in the office of the clerk of the county of Few York on the 13th day of February, 1902, upon the report of a referee, as adjudges that the plaintiff and the defendants Owen R. Mason, Clarence L. Smith, Pfotenhauer & Fesbit, Richey, Browne & Donald, Robert C. Martin, Augustus Meyers, the Columbian Fireproofing Company, the Masons’ Supplies Company, Fathan and William J. Peck, and Alfred J. Goodwin, or any of them, have or ever had good and valid liens on the premises mentioned and described in the complaint, and that they, or any of them, have judgment for the amount of said liens, or any thereof, with interest or at all; and from so much of said judgment as directs the sale of said property or the payment to the plaintiff and to the defendants above named, or to any of them, of the amount of their respective liens with interest,, or at all, or of any of the proceeds of a sale of said property; and from so much of said judgment as directs judgment for any. sum in favor pf the plaintiff and the defendants above named, or any of them; and from so much of said judgment as directs payment to the plaintiff or to its attorneys of costs and disbursements and of an extra allowance or any thereof; and from so much of said judgment as directs the payment of costs and disbursements to the-defendants Owen R. Mason, Clarence L. Smith, Pfotenhauer & Fesbit, Richey, Browne & Donald, Robert C. Martin, Augustus. Meyers, the Columbian Fireproofing Company, the Masons’ Supplies Company, Fathan and William J. Peck, Alfred J. Goodwin, Bernard McQuillan, and Hallsted & McFaugher, or to any of them,, or to their respective attorneys, or to any of them.
Henry De Forest Baldwin, for the appellant.
Philo P. Safford, for the respondent the Columbian Fireproofing Company.
Frederick H. Man, for the respondent Pfotenhauer & Nesbit.
George B. Dunn, for the respondent Masons’ Supplies Company.
Edward J. Patterson, for the respondent Mason.
R. M. Martin, for the respondents Browne and Donald.
H. B. Closson, for the respondents the New Jersey Steel and Iron Company, Meyers and Groodwin.

Opinion:
Laughlin, J.:
This is an action to foreclose a mechanic's lien. The defendant Robinson was the general contractor with the defendant Kinney, who was the owner of premises situate at the northwest corner of Fifty-sixth street and Madison avenue for the construction of a hotel thereon according to certain plans and specifications. The owner agreed to pay the contractor the actual cost of the labor and materials and five per cent in addition to such cost, not exceeding in all the sum of $317,310; and to make payments from time to time during the progress of the work in amounts equal to ninety per cent of the value of the labor and materials furnished, as such value should be certified by the architect, and in addition two and a half per cent upon such value on account of said additional five per cent. It was provided that the final payment should be whatever sum remained due the contractor and should be. made within thirty days after the complete performance of the work. The contractor entered upon the performance of the work and performed all of the conditions of the contract down to the 7th day of March, 1900, rvlien he failed in business and made a general assignment to the appellant for the benefit of creditors. At that time the agreed price and value of the materials theretofore furnished and the labor theretofore performed by the contractor was $134,438.79, and he had been paid on account thereof the sum of $70,398.88, leaving a balance of about $70,000 earned and unpaid. It is not stated whether or not the architect had certified that this amount had been earned, so that it had become due and payable at that time. The plaintiff's lien was filed after the general assignment. The only lienors whose liens were filed prior to the assignment are the firms of Barr, Thaw & Fraser and Owen R. Mason.
On the 12th day of March, 1900, the owner duly served a notice upon the contractor pursuant to the terms of the contract that unless he should supply a sufficiency of workmen and materials within three days, the owner would provide the same, terminate the employment of the contractor and take possession of the premises for the purpose of completing the work. Thereafter, at the expiration of the time specified in the notice, the owner entered upon the premises and completed the work according to the contract. In the meantime the other liens had all been filed. The contract provided that in case of completion by the owner if the cost of completion should not exceed the balance unpaid on the contract he should pay the difference to the contractor. The amount unpaid on the contract exceeded the cost of completion by the sum of $58,398.86. The referee found that the liens attached to this balance in the order of their priority.
' In the case of Armstrong v. Borden's Condensed Milk Co. (65 App. Div. 503) it was held, in the second department, upon a controversy ai'ising on another contract made by the defendant Robinson between lienors and his assignee, that the assignment took preference over 'liens subsequently filed. That decision has been followed by this court in the case of Kane Co. v. Kinney (68 App. Div.163). The respondents attempt to distinguish those cases upon the ground that the rights of the lienors did not depend upon the subsequent completion pf the work by the owner, but that at the time the liens were filed an amount sufficient to pay the lien had been earned under the contract and that the liens attached thereto. We think that the facts in those cases and this are substantially the same, and that this argument is untenable. If it be the effect of the decision in this case that a large balance was due and owing from the owner to thé contractor at the time the liens were filed, that balance was likewise due and owing at the time of the general assignment, and the logical effect of the Armstrong cáse is that the right to demand and receive such balance passed to the assignee, for the court treated the general assignment the same as an assignment to an individual creditor of part of a fund due which it was held in Bates v. Salt Springs Nat. Bank (157 N. Y. 322) took priority over a lien subsequently filed. If the decision in the Armstrong case is to be followed as a precedent, it should be given effect, and its legitimate effect is that whatever was due at the time of the assignment or subsequently became due by reason of the owner completing the work under the contract and leaving a surplus, passed to the assignee as against subsequent lienors. In these circumstances, although the contractor failed to perform the contract, the owner having taken possession and completed the work under the contract, the contractor, were it not for the liens, would be entitled to any balance unpaid on the contract after deducting the cost of completion. (Crouch v. Gutmann, 134 N. Y. 45 ; Edison Electric Co. v. Guastavino Co., No. 2, 16 App. Div. 358 ; Ogden v. Alexander, 140 N. Y. 356; De Lorenzo v. Von Raitz, 44 App. Div. 329.)
Therefore, in deciding this appeal, we, for the reasons stated in Kane Co. v. Kinney (supra) should follow the decision in the Armstrong case. The defendant Mason, whose lien was filed prior to the assignment, alleged in his answer that he was employed by "the defendant Robinson on behalf of and as agent for the defendant Kinney." On the trial the referee, under objection and exception, permitted him to amend the answer by omitting the allegation " on behalf of and as agent for the defendant Kinney." It is claimed that this was error. The allegation was manifestly inserted for the purpose of showing that the work was done with the knowledge and consent of the owner. The lien, stated that it was done under a contract with Robinson and such was the proof upon the trial. We think the amendment was properly, alio wed as no one could have been prejudiced or even surprised thereby.
It appears that the several defendants served their answers upon the co-defendants as well as upon the plaintiff. Therefore, the defendants whose liens were filed prior to the assignment were entitled to a judgment of foreclosure. There is no controversy about the facts and they are all fully found in the decision of the referee.
The judgment should, therefore, be modified accordingly and direct that the surplus after the payment of the costs and disbursements of the defendants Barr, Thaw & Fraser and Owen R. Mason, including their costs and disbursements on this appeal and the amount of their liens, be paid to the assignee. It should also be modified by striking out the award of. costs to Bernard McQuillan and Hallsted & McNaugher on the ground that they did not appear on the trial. No other costs are allowed on this appeal.
O'Brien and McLaughlin, JJ., concurred ; Hatch and Ingraham, JJ., dissented.