149 N.Y.S. 189 | N.Y. App. Div. | 1914
Lead Opinion
The important question involved in this litigation, which was instituted to foreclose a mechanic’s lien, is whether the final payment by the owner to the contractor was made for the purpose of avoiding the provisions of section 7 of the Lien Law (Consol. Laws, chap. 33; Laws of 1909, chap. 38), which provided that “ Any payment by the owner to a contractor upon a contract for the improvement of real property, made prior to the time when, by the terms of the contract, such payment becomes due, for the purpose of avoiding the provisions of this article, shall he of no effect as against the lien of a subcontractor, laborer or material man under such contract, created before such payment actually becomes due.” The contract in question was made in September, 1911, and provided for furnishing the materials and performing the labor necessary for the construction by the contractor, Booth, for the Schenectady County Coal Company, the appellant, of five rein
The mere fact that the March payments were made to Booth in advance of the time required by the contract, or that the appellant had knowledge of the indebtedness of Booth to the lienors, is not of itself sufficient, under the present Lien Law, to charge the appellant with liability on account of such payments, but in addition thereto it must be shown, in order to avoid the effect of a payment as against a lien,- that the advance payments were made for the purpose of avoiding the provisions of the Lien Law, and the burden of so proving is upon the person asserting it. (Behrer v. McMillan, 114 App. Div. 450; Tommasi v. Archibald, Id. 838; Hudson River Blue Stone Co. v. Huntington, 143 id. 99; Wagner v. Butler, 155 id. 425.)
We think the finding of the trial judge that the payments made March nineteenth and twenty-sixth were made for such purpose was not warranted by the evidence as to the respondent cement company. Prior to making the payment of $15,000 on March nineteenth Ashton, the secretary and manager of the appellant, called Bayle, the president of the cement company, by telephone and asked him about Booth’s indebtedness to the cement company, and said that the appellant was going to pay Booth in full the next day or two. Bayle stated in the conversation that he thought that so far as the indebtedness to the cement company was concerned Booth was all right. Bayle did not suggest that the appellant should not make such payment, nor request any protection of the cement company account. March fifteenth Ashton wrote Bayle a letter headed “personal,” as follows: “In taking up the matter further in relation to our telephone talk of a few days ago, I would like you to let me know how much cement as delivered to the Schenectady County Coal Company plants for Mr. Booth, you
“ (Personal)
“Mr. G-. F. Bayle, President,
“ Glens Falls Portland Cement Co.,
“G-lens Falls, 1ST. Y.:
“Dear Sir.—Confirming conversation over telephone this morning, we have arranged to pay Mr. Booth in full for contract work at Schenectady, notwithstanding that contract is not completed.
.“ He is giving us a bond for the amount of money advanced. We gave him this morning a check for $15,000, which leaves a balance of $4,995. We will give him a check for this balance, within the next day or two.
“Yours very truly,
“E. B. ASHTON.”
It was not until seven days later that the appellant made the final payment to Booth of $4,995. Ashton testified that the reason he wanted to let Bayle know that the appellant was to make final payment to Booth was because Bayle was a personal friend, and Ashton knew the cement company was furnishing all the cement for the construction of the pockets, and assumed that the cement company bill would be as large as any and was anxious that Bayle should know the situation and what was going on. Booth was a large purchaser of cement, having other large contracts for concrete work, and was indebted to the cement company in a considerable sum, and evidently the cement company considered it better business to continue to furnish him cement and allow him to proceed with his contracts and take the chances of meeting with a loss, as Bayle told Ashton he thought Booth was good, than to endeavor to secure, by filing a lien, or enforce by action payment of his then indebt
Unquestionably at the time of making the final payment the officers of the appellant had well-seated suspicion of the ability of Booth to meet his obligations. They were constantly being annoyed by his importunities for payments. They had learned that his statement to them in answer to their inquiry as to the extent of his indebtedness was not true, but that the claims of creditors were much larger than he had stated to them. They knew that he must lose a considerable sum upon his contract for the construction of the coal pockets. That they anticipated financial difficulties is apparent from their desire to get the moneys which they would owe Booth upon his fulfillment of the contract out of their hands. That the possibility of resort being had to liens was considered by both the appellant and the respondent company seems to be evidenced by the letter of March fifteenth, in which Ashton asked Bayle if he was entirely satisfied with Booth’s responsibility and willing to waive all claims against the coal company in the future. The purpose of the appellant in giving the cement company full and timely information of its intention to make final payment to Booth was evidently to give that company ample opportunity to collect or secure its claim rather than to avoid the provisions of the Lien Law. As to the other respondent lienors, to none of whom notice was given by the appellant of its intention to make final payment to Booth, the evidence amply sustains the decision of the trial court that the payments of March nineteenth and twenty-sixth were made in advance for the purpose of avoiding the provisions of the Lien Law. However, the appellant contends that there would not have been sufficient funds in its hands for the satisfaction of the respondents’ liens had these advance payments been withheld until the time when they would have become payable under the terms of the contract. The disbursements, aggregating $8,000, made by the surety company towards the completion of the contract, must be considered as having been made
As to the credit of $1,277.30 for bags returned, it is not material, in view of our holding as to the invalidity of the lien of the respondent cement company, whether in the absence of specific instructions as to the application of this sum, which in fact was credited by the cement company to Booth’s account generally, the credit should be applied to his indebtedness incurred previous or subsequent to March twenty-sixth.
The decisions of the trial court should be modified by reversing the decree as to the cement company and dismissing the complaint upon the merits, with costs, and by affirming the decree as to the other respondent lienors, with costs.
The court disapproves of findings Nos. 17 and 18 so far as they find that the payments of March nineteenth and twenty-
All concurred, except Kellogg, J., who wrote for reversal, in which Woodward, J., concurred.
Dissenting Opinion
The original contract price was $75,500, of which eighty-five per cent was to he paid on estimates of the architect from time to time as the work progressed and the remaining fifteen per cent ($11,350) was to be paid thirty days after the completion of the contract. In March, 1912, the work done (about two-thirds of the requirements of the contract) had cost $65,300. The payments to the contractor at that time aggregated $55,505, leaving apparently over $32,000 of work to be done by the contractor for which appellant was to pay $19,995. He was urging that more money be paid to enable him to continue the work, and was apparently in embarrassed circumstances. It was agreed in March, 1912, in order to facilitate the work and secure the completion of the contract, that the appellant would pay to him the balance of the contract price, he giving to appellant a surety bond for the completion of the work. The bond was given, the balance paid, and the contractor continued the work until June 13, 1912, when he abandoned it. The architect’s certificate shows that the cost of the work and material in .place at that time was $83,300. The surety upon the bond was required to continue the work, and expended $8,000 thereon. The appellant spent $2,000 as it claims in the completion of the contract after the surety claimed the contract was performed. The total cost of the work, therefore, was $90,300, or $92,300 if the amount expended by the owner is allowed. No attention has been paid to the extra work which was paid for and does not enter
Section 7 of the Lien Law is a reasonable provision and sim, ply requires that the owner shall not accelerate payments for the purpose of defeating the liens which may be filed against the property. Where a payment is accelerated for good and sufficient reasons for the necessary protection of the owner, and only to the extent reasonably necessary for his protection, it cannot he claimed that such payment was made for the purpose of avoiding the provisions of the act. It is not material just how many dollars and cents were actually expended in completing the work; it was reasonably within the contemplation of the appellant at the time that the entire payments advanced by it would he necessary for the completion of the work. In so large a transaction where the figures so nearly approach each other there is no foundation for the claim that the act was prompted by any ulterior or improper purpose. The reasonable intendment of good faith is sufficient under the circumstances of this case to protect the payment made by the appellant. Had the Legislature intended that under no circumstances should the owner make payments to the contractor prior to their becoming due, it could havei made the
I favor a reversal of the judgment.
Woodward, J., concurred.
Judgment as to the plaintiff reversed on law and facts, and complaint dismissed, with costs; judgment as to the other lienors affirmed, with costs. The court disapproves of findings Nos. 17 and 18, so far as they find that the payments of March 19 and 26, aggregating $19,995, were made, as to the plaintiff, for the purpose of avoiding the provisions of the Lien Law, and that the plaintiff is entitled to be paid the amount of its said claim, and substitutes a finding that as to said plaintiff said payments made in advance were not made for the purpose of avoiding the provisions of the Lien Law, and that said plaintiff is not entitled to be paid by appellant or to enforce its lien for any sum whatever.