105 N.J. Eq. 339 | N.J. Ct. of Ch. | 1929
Kanter Cohen, builders, purchased a piece of property, 481 William street, East Orange, subject to a purchase-money mortgage, and gave one in part payment. Before commmencing the building of an apartment house they gave a mortgage to the Plaza Realty Company for $20,000; after commencing they gave it another for $15,000. Then they gave one to the complainant for $125,000; the Plaza Realty Company subordinating its mortgages to the complainant's. When the building was nearly completed Kanter Cohen became bankrupt. Mechanics' lien claims were filed by Colonial Woodworking Company, Henry R. Isenberg, Incorporated, and Tobias Grunt. The complainant then filed this bill to foreclose its mortgage. The matter is up on exceptions to the report of the master to whom the cause was referred to determine the amount due the parties and the priorities of their liens. The master found to be due the complainant $122,426.15, and of this there is no criticism. The complainant laid out $105,621.20. The balance of its debt is *341 made up of premiums, dues, interest, insurance, c. He found the order of priorities to be:
Complainant ..................................................... $56,351.28 Colonial Woodworking Co. ......................... | 5,782.60 Henry R. Isenberg, Inc. .......................... pro rata 7.897.96 Tobias Grunt ..................................... | 8,458.31 Complainant, the balance of its debt ................. $66,074.87 Less the sum of the lien claims ...................... 22,138.87 __________ 43,936.00 Plaza Realty Co. (its $15,000 mortgage is paid) ................. 22,460.00 Complainant, the balance of its debt ............................ 22,138.87Then follows other encumbrances in their order of seniority.
The priorities, assuming the claims to be well founded, are equitably adjusted. Hoag v. Sayre,
The paramountcy of the complainant's lien to the extent of $56,351.28 is not disputed. It was allowed for "money actually advanced and paid by the mortgagee and applied to the erection of [any new] the building upon the mortgaged land." Section 15 Mechanics' Lien act (Comp. Stat. p. 3303). The complainant claims it advanced more than the amount allowed, and it also contends that having paid off the prior purchase-money mortgages, $5,774.92 and $8,420, respectively, it should be allowed these amounts as preference by way of subrogation. The master's priority allowance to the complainant is more than the proofs justify and it will stand only because no exception is taken.Albert and Kernahan v. Franklin Arms, Inc., supra. The master arrived at the preferential sum by deducting from the amount found due on the complainant's mortgage ($122,426.15), various items ($66,974.87), obviously not applied to the erection of the building, and after correctly finding that $12,601 "actually did go into the building" says as to the balance, $43,750.28, that he is "constrained to find was used in the erection and completion of the building" because the builders, Kanter Cohen, said it was so used "and no testimony or *342
evidence was introduced tending to disprove their statement in this respect," and further because "it is obvious that large sums were necessary to meet weekly payrolls and to purchase material and the available sources of funds for that purpose must have been advanced by the complainant." The master misconceived the quality of proof required to sustain the burden cast upon the complainant in its effort to supersede the statutory priority of lien claimants. A mortgage executed after the commencement of a building is not entitled to priority over mechanics' liens, for money advanced on the mortgage, unless it is actually applied to the erection of the building. The proofs must trace the money from the mortgagee into the hands of labor or material men.Young v. Haight,
The exception includes the refusal of the master to allow the complainant the sums expended in procuring cancellations of the two prior purchase-money mortgages. Under the reference, the master could only accord the complainant its rights arising out of its mortgage. Money paid in discharge of an anterior mortgage is not within the Mechanics' *344 Lien act, giving mortgages superiority over mechanics' liens for money applied to the construction of buildings. If the holder of a mortgage subject to mechanics' liens is entitled to be subrogated to the rights of prior mortgages, his equity resides in the mortgages he paid off, and his remedy in their resuscitation. That issue is not involved in this suit. The exception is overruled.
All are agreed that the lien claim of the Colonial Woodworking Company is valid.
The Henry R. Isenberg, Incorporated, lien claim was duly filed and is owing for the balance due on a completed contract for tiling. The attack made upon it, that its debt was discharged in the Kanter Cohen bankruptcy, is without merit. After the builders became bankrupt a fifteen per cent. creditors' compromise was effected. Henry R. Isenberg personally furnished the bankrupts $45,000 necessary for the compromise. All the bankrupt assets were conveyed to a corporation and Isenberg took all the stock as security. The Isenberg company accepted the compromise upon a debt of $15,000 due in addition to the lien claim. The lien claim was not involved in the settlement.
The exception to the Grunt claim goes to its validity because of willfully false charges and willful omissions of discharges. Grunt furnished plumbing material to Ornstein Brothers, who had the contract for the plumbing work. The master found that the charges for materials were correct and that the materials were sold and delivered for use in the building; and the evidence justifies the findings. That some of the materials were diverted by the builder, after delivery, does not affect the right to a lien. Bell v. Mecum,
Grunt had furnished material to Kanter Cohen and to the Ornsteins on other jobs. The Ornsteins were heavily indebted to him in excess of the amount of the lien claim. They had given him a $30,000 mortgage for an anterior debt, which proved valueless; and the contention that taking the mortgage was a waiver of the lien claim is inadmissible. Credits amounting to $2,066 it is claimed should have been applied to the lien claim charges. The evidence shows that *345
they were appropriately accredited to other indebtedness due Grunt from the Ornsteins. There came a time, August, 1927, when Grunt wanted security; and Kanter Cohen bound themselves for $3,700 to insure delivery of materials to the Ornsteins. It is claimed that Kanter Cohen paid $2,500 on account of their guarantee. Cohen testified that shortly after the deliveries were made he handed to Grunt his check for $1,500, dated August 25th, 1927, on account of his guarantee; and within two weeks another for $1,000. The first is in evidence, the second is not. This testimony was given in the presence and hearing of Grunt and relates the conversation attending the payments, and Grunt did not take the stand to deny it. If it were not true he would, or should have. His bookkeeper labored through his books to reconcile the $1,500 check with the payment of a note of Kanter
Cohen for $1,500 which had matured a month before, but unsatisfactorily. As to the $1,000 check, he said it was not received; this, because it is not so shown on his books. His employer would not say it was not, and he had the opportunity. Cohen's testimony stands uncontradicted. Credit must be given for the sums. The failure to credit the amounts can reasonably be attributed to accident, due to confusion of the book accounts and notes of the parties, and can not be said to have been willful, to the defeat of the lien claim. Camden Iron Works v. Camden,