Traugott Schmidt, now deceased, in April, 1895, was the owner of a certain lot in the city of Detroit. On April 9 th of that year, he entered into a written contract with Joseph L. Gearing for the construction of a building thereon, for the sum of $52,812.08. Afterwards, Schmidt, with the consent of Gearing, let the contract for the plastering for $6,850; thus leaving the contract to stand at $45,962.08. Gearing went on with the work under the contract, paying most of the labor bills, and in great part for the materials, when, on October 12, 1895, he failed, leaving the building uncompleted. The contract for completion was then let to J. L. Hudson for $22,040.40. He completed it, and was paid for the same. This bill is filed by complainants to enforce a mechanic’s lien, under
“ Every person who shall, as subcontractor, laborer, or material man, perform any labor or furnish materials- to such original or principal contractor, or any subcontractor,*194 in carrying forward or completing any such contract, shall have a lien therefor upon such house * * * to the extent of the right, title, and interest of such owner. * * * Provided, that any person * * * furnishing material or performing labor of any kind entering into the construction of such building * * * shall, within ten days after furnishing the first of such material, or performing the first of such labor to any contractor or subcontractor, serve on the owner * * * a notice, which notice shall be such as will inform the owner * * * of the nature of the materials furnished or to be furnished or labor performed or to be performed, and a description of the premises where furnished. * * * Such notices, however, shall be sufficient if served at any time subsequent to said ten days* but before the original contractor shall make out and give to the owner * * * a statement under oath of the number and names of every subcontractor or laborer in his employ, and of every person * * * furnishing materials, giving the amount, if anything, which is due or to become due to them, or any of them, for work done or materials furnished, as required by section four of this act. The owner * * * shall not be liable to the subcontractor, material men, or laborers for any greater amount than he contracted to pay the original contractor; * * * but the risk of all payments made to the original contractor after he shall have received the notice above mentioned, or before the contractor shall have furnished him with a statement as hereinbefore provided, shall be upon the owner * * * until the expiration of sixty days within which claims for lien may be filed, as hereinafter provided, and no payment made to any contractor before the expiration of said sixty days shall defeat any lien of any subcontractor, material man, or laborer, unless such payment has been distributed among the subcontractors, material men, or laborers, or, if distributed in part only, then to the extent of such distributions.”
Section 4 of the act of 1891, which was not amended by the act of 1893, provides:
“The owner * * * may at any time retain from any moneys due or to become due to the original contractor an amount sufficient to pay all demands owing ox-unpaid to any subcontractor, material man, or laborer who has filed and served the notice in manner and form*195 as provided in section one of this act. The original contractor shall, whenever any payment of money shall become due from the owner, * *' * or whenever he desires to draw any money from the owner, * * * make out and give to the owner * * * a statement under oath of the number and names of every subcontractor or laborer in his employ, and of every person furnishing materials, giving the amount, if anything, which is due or to become due to them, or any of them, for work done or materials furnished; and the^ owner * * * may retain out of any money then due or to become due to the contractor an amount sufficient to pay all demands that are due dr to become due to such subcontractors, laborers, and material men, as shown by the contractor’s statement, and pay the same to them, according to their respective rights; and all payments so made shall, as between such owner * * * and such contractor, be considered the same as if paid to such original contractor. Until the statement provided for in this section is made, in manner and form as herein provided, the contractor shall have no right of action or lien against the owner * * * on account of such contract; and any payments made by the owner * * * before such statement is made, or without fetaining sufficient money, if that amount be due or is to become due, to pay the subcontractors, laborers, or material men as shown by the statement, shall be considered illegal, and made in violation of the rights of the persons intended to be benefited by this act, and the rights of such subcontractors, laborers, and material men to a lien shall not be affected thereby.”
The argument against the constitutionality of the act is that, by the amendment of 1893, the owner is prohibited from paying according to the terms of his contract, and the contractor is prevented from obtaining his pay, whenever it appears from the sworn statement that there are. bills outstanding in favor of subcontractors, laborers, or material men; and this, although no person to whom a bill is owing has notified the owner that he proposes to claim a hen. It is insisted that this provision of the law, if enforced, will utterly destroy the system, of credit as applied to the building business; that every contractor must pay cash or go out of business; that, no matter how
Act No. 270, Pub. Acts 1887 (3 How. Stat. § 8398a et seq.), was there under consideration. Section 2 of that act provided:
“Such lien shall not be defeated by any contract, agreement, or understanding between the owner, part owner, or lessee of the real estate upon which such improvements are made, or for which such materials are furnished, and the original or any sub contractor, or by any payment made by such owner, part owner, or lessee to such contractor or subcontractor for the contract price of such labor or material [materials], or any part thereof, in case the person performing such labor, or furnishing such material, shall comply with the provisions of this act.”
It was said:
“This law makes the mere fact that a building contract exists, or has existed, a sufficient reason for binding the land for any act or omission of the building contractor or his subcontractor, whether within the range of the contract or not, or whether or not in harmony with its terms. * * * It strikes at the foundations of all property in land. * * * The original contract plays no part in the matter, except as a fact which binds no one, and has no significance. Such a gross perversion of all the essential rights of property is so plain that no explanation can make it plainer.”
That statute was very unlike the present. The present act provides, -by section 1 (Act No. 199, Pub. Acts 1893), as well as by the same section amended in 1897 (Act No. 143, Pub. Acts 1897), that:
*197 “The owner * * * shall not be liable to the subcontractor, material men, or laborers for any greater amount than he contracted to pay the original contractor, and shall be entitled to recoup any damages which he may sustain by reason of any failure or omission in the performance of such contract.”
In this respect the act differs from the act of 188?. By this provision the owner is fully protected upon any breach of the contract. As to the matter of payments, that section provides:
“The risk of all payments made to the original contractor after he shall have received the notice above mentioned¿ or before the contractor shall have furnished him with a statement as hereinbefore provided, shall be upon the owner * * * until the expiration of sixty days within which claims for lien may be filed, as hereinafter provided, and no payment made to any contractor before the expiration of said sixty days shall defeat any lien of any subcontractor, material man, or laborer, unless such payment has been distributed among the subcontractors, material men, or laborers, or, if distributed in part only, then to the extent of such distributions.”
This provision points out the way in which the owner may safely make payments; that is, he need incur no risk — First, if he refuses payment until he is provided with a sworn statement of the contractor, and complies with it; second, if the money paid is distributed, in accordance with the statute, among those who might acquire liens, even though he makes payments without the sworn statement. The owner is not required to make payments be.yond the amount called for in the contract. It will be seen, therefore, that he is fully protected if he follows the requirements of the statute. It is true that the original contractor may not be able at all times to get the moneys into his own hands from the owner as rapidly as the contract calls for, — that is, his sworn statement may show that there is an indebtedness to subcontractors, material men, and laborers, and these moneys the owner may withhold, and pay directly to those persons. But the contract must be presumed to have been made in view of these provisions
“The building or works must be delivered up free of all mechanics’ liens or other claims chargeable to the contractor.”
It is the contention of the owners of the property that this provision prevents any of the lien claimants in this cause from obtaining a lien. This contention cannot be sustained. The contract was made in reference to the lien statute, which expressly confers upon material men and laborers the right to assert liens. In Whittier v. Wilbur, 48 Cal. 175, a like question was presented under a somewhat similar contract. It was said :
‘ ‘ The contractor and owner cannot deprive the material man of his lien by introducing a stipulation into the building contract by which the contractor agrees to indemnify the owner against any lien by persons furnishing materials to be used in the construction of the building.”
See, also, Boisot, Mech. Liens, §§ 225-227.
Paid to laborers and material men--------------$18,712 82
Materials furnished by himself----------------- 595 00
Cement, etc., furnished------------------------ 152 85
Mistake in statement of account on account of stone furnished. _ I_________ 450 00
Total__________________________________ $19,909 87
That deducting this from the amount paid to Gearing and the balance due on the contract price, of $23,921.68, leaves a balance of $4,011.81. Defendants Schmidt also claim damages, for failure to complete the building in time, of 12 days, at $25 per day, or $300; which being also deducted would leave due from the owners only $3,711.81.
It appears that the contract price for the building was $45,962.08. Gearing failed to complete the building, and the owner let the contract to finish it to Hudson for $22,-040.40. It is conceded by the complainants that this should be deducted from the contract price. Complainants, however, deny the right to make the other deductions, on several grounds:
(a) Because it does not appear that the money so paid by Gearing to the laborers and material men was the identical money received by Gearing from Schmidt, but that a large part of it was received from J. L. 'Hudson. We think this contention of complainants cannot be sustained. The money was paid out by Gearing. The purpose of the act was to insure that an amount equal to the amount which the contractor received should go, if so much were necessary, to the payment of those who contributed to the construction of the building. It could not matter out of what funds the contractor paid, so long as he paid an amount equal to the amount received from the owner.
“But the risk of all payments made to the original contractor after he shall have received the notice above mentioned, or before the contractor shall have furnished him with a statement as hereinbefore provided, shall be upon the owner * * * until the expiration of sixty days within which claims for lien may be filed, as hereinafter provided, and no payment made to any contractor before the expiration of said sixty days shall defeat any lien of any subcontractor, material man, or laborer, unless such payment has been distributed among the subcontractors, material men, or laborers, or, if distributed in part only, then to the extent of such distributions.”
Complainants contend that Gearing could not furnish material, and then distribute payments to himself as a material man, and thus relieve the owner by such distribution. The contention is that two classes of material men are recognized — First, those who furnish materials as contractors pursuant to a contract made with the owner of the building; second, those who furnish materials as material men to an original or principal contractor, pursuant to a contract made only with the contractor; and that it is only material men of the second class that are meant in those clauses of the statute providing that the owner shall have the benefit of money actually distributed among subcontractors, material men, and laborers.
This contention cannot be sustained. The distribution of payments is to be among subcontractors, material men, or laborers. Section 1 of the act of 1893 provides expressly that contractors may furnish materials and labor and have a lien therefor. To the extent that Gearing furnished materials, he is a material man, within the meaning of the part of the act upon which counsel for complainants relies. Section 29 of the act of 1891 defines the words “material men” to be and include “all persons by whom any materials are furnished in or for the building,” etc.
Counsel is correct in this contention. The rule stated in that case was as follows:
‘ ‘ It cannot be said that the payment to one of the entire contract price would amount to ‘distribution;’ nor is it doubtful that the term, as here employed, means a distribution among all entitled to take. ”
No sworn statements were furnished to the owner, and there was no pro rata distribution of the funds received by Gearing. All the laborers, and some of the subcontractors, who had claims at that date, were paid in full by this distribution. The owner was entitled to be credited with such of the moneys paid into Gearing’s hands as had been distributed by Gearing, in accordance 'with the statute, to laborers and material men, as well as credited with items for materials which were furnished by Gearing that actually went into the building, as Gearing stands, as to such items, as a material man, under the statute. There having been, however, no pro rata distribution of the funds by Gearing, a new computation must be made, in which all the laborers and material men must be included; and if, on such computation, it is found that certain of them have been paid more than their pro rata share, the owners
We think the proofs show that the owners are entitled to have their’ damages for the 12 days’ delay by Gearing, at $25-per day, making that item $300.
The statute of 1891, by section 5, provides that:
“Verified statement or account shall be filed within sixty days from the date on which the last of the materials shall have been furnished, or the last of the labor shall have been performed, by the person claiming the lien.”
The court below was not in error in deducting from the claim the value of the stone not used in the building. The equity of a lien claim for labor or materials arises from the fact that the value of the property to which they have been applied has been increased. The language of the act giving the lien is that:
*204 “Every person who shall, as subcontractor, laborer, or material man, perform any labor or furnish materials to such original or principal contractor, or any subcontractor, in carrying forward or completing any such contract, shall have a lien therefor.”
All the claims will draw interest from the time each fell due.
It must necessarily follow that the claims so allowed, when taken together and added to the cost of completing the building by Hudson, will exceed the contract price.' What each claimant will be entitled to will be determined in accordance with this opinion, and the decree below will be modified and affirmed in accordance therewith. The defendants who are lienors will recover their costs from
ON APPLICATION FOR REHEARING.
A motion for rehearing has been made by the complainants in this cause on the question of costs. We have re-examined that question, and are satisfied that j the defendant lienors should not recover costs against complainants, but that complainants and defendant lienors should recover their costs of this court and of the court ' below against the defendant owners of the property. But one set of costs, however, is allowed, and that to be divided between the parties. Decree will be entered accordingly.