Court Opinion

ID: 3582962
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:33:43.593086+00
Date Added: 2024-06-11T13:38:02.065402
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 184 
The order drawn by the contractor on the owner in favor of E.H. Ogden  Co. for $909.94, being, by its terms, payable out of a particular fund specified in the order, operated as an assignment, pro tanto, of that fund. (Brill v. Tuttle,81 N.Y. 454; Conselyea v. Blanchard, 103 id. 222; Lauer v.Dunn, 115 id. 405.)
In McCorkle v. Herrman (22 N.Y. St. Rep. 519; rev. 117 N.Y. 297), several persons had performed labor and furnished materials for a building erected by a contractor for the owner. After the work had been done and the materials supplied, but before any lien was filed, a judgment creditor of the contractor began supplementary proceedings to collect his judgment which did not arise out of, and had no connection with, the building contract, and procured the appointment of a receiver. Subsequently the laborers and material men duly filed their liens, and the question arose whether they or the receiver had the prior right to the sum due from the owner to the contractor. It was held at the General Term that the lienors had the prior right. In discussing this question, the court said: "The statute gives a creditor a lien against a particular fund upon his doing certain things, and that lien is superior to the claim of any other creditor who has not taken the steps designated by the statutes to secure a lien. The plaintiff, by his appointment as receiver, undoubtedly became vested with all the right, title and interest of his judgment debtor in and to this fund as of the time when the preliminary order was served. But he gets no greater right than he would have had if his judgment debtor had assigned the same to him on that day, and he cannot enforce any other or greater rights than his *Page 186 
judgment debtor could enforce. His creditors, by the permission of the statute, have been enabled to assert a claim upon this debt due to the judgment debtor, and, by reason of the statute, having taken those steps, they have a superior claim upon this debt due to him, and by the transfer of this debt to another person, whether by operation of law or by a voluntary assignment, the plaintiff's debtor could not deprive the creditors of the rights which the law conferred upon them."
The Court of Appeals reversed the judgment, and in discussing the question said: "The real question presented by the demurrer relates to the priority of lien between a judgment creditor of a contractor, who has duly commenced supplementary proceedings on his judgment, terminating in the appointment of a receiver, and laborers and material men who, subsequent to the commencement of the supplementary proceedings, and within the time allowed by law, filed notices of lien to reach the debt owing the contractor, under a contract with the owner of a building for its construction. The section of the Lien Law (Chap. 342 of the Laws of 1885), which governs the right of the lienors in this case, prescribes that upon `filing the notice of lien,' a lien shall be acquired, etc. The filing of the notice originates the lien. Anterior to this act, the laborer or material man has no preferential right to be paid for his labor or material out of the sum which is due from the owner of the building to the contractor, but stands in the same position as other creditors. He may subject the debt to a lien in his favor on filing the notice and taking the proceeding prescribed by the act. But if, before this has been done, other creditors, pursuing the usual remedies for the collection of debts, have acquired a legal or equitable right to have the debt applied in satisfaction of their claims, the right is not overreached by liens subsequently filed under the act, unless priority is given by the provisions of the act itself." * * *
"Which of the claimants have the prior right? We think the plaintiff as receiver has the superior claim. He stands as the assignee of the claim of the contractor against the defendant, by a title which ante-dates the filing of the notices of *Page 187 
lien. When the liens were filed there was a debt owing by the defendant. If the proceedings instituted by the creditor, whom the plaintiff represents, had been abandoned, the liens would have had priority. But not having been abandoned, and the equitable lien existing when the liens were filed having been converted into a legal title as of a time anterior to the filing of the liens, the right to the debt, as between the plaintiff and the lienors, vested in the former. The plaintiff, we think, stands in as good a position at least as if prior to the filing of the liens the contractor had, in good faith, assigned his claim against the defendant to the creditor in the supplementary proceedings, as security for his debt. The assignee, under such an assignment, according to the general current of authorities, would take precedence over lienors under liens subsequently filed."
The case cited, like the one at bar, arose under chapter 342, L. 1885, and is decisive of the question presented.
There is no provision in the statute forbidding a contractor to pay his creditors out of the money due or to become due him from the owner to the exclusion of laborers and material men who have not filed liens. This may be an omission, but if so, it can only be supplied by the legislature, for the courts cannot extend these purely statutory rights beyond the terms of the statute by which they are created.
The judgment of the General Term should be reversed, and the judgment entered on the decision of the Special Term affirmed, with costs.
All concur.
Judgment accordingly. *Page 188