On appeal from the Law Division of the Superior Court.
For modification -- Chief Justice Vanderbilt, and Justices Case, Heher, Oliphant, Wachenfeld, Burling and Ackerson. Opposed -- None. The opinion of the court was delivered by Heher, J.
Plaintiff appeals from a judgment entered June 20, 1949, discharging a mechanic's lien claim for architectural services filed by him September 26, 1947, under R.S. 2:60-129 et seq., and striking out the complaint in this action to enforce the claim as to the defendants Jack Stein and Fulton Packing Company; and the defendant Isadore Stein cross appeals from so much of the judgment as denied his motion to strike out the complaint as to him. This court, acting ex mero motu, certified the cause for appeal to the Appellate Division of the Superior Court.
This is the case made by the plaintiff: On June 15, 1945, plaintiff, a licensed architect, of the one part, and the defendants Isadore Stein and Jack Stein and one Kenny and one Levine, of the second part, entered into an oral agreement whereby plaintiff undertook to prepare plans and specifications for the erection of an abattoir on lands situate on Legal Street, in Newark, and to supervise the construction work, and the [4 NJ Page 38] parties of the second part agreed to pay for such services at the "basic rate" of 5% of "the total cost of labor and materials required" for the building of the structure and "traveling and survey costs and expenses." There was provision also, it is alleged, for the extension of the service and the obligation of compensation to corporations in process of formation and in contemplation, and for the execution of a written contract embodying the stipulations thus made should the parties deem that course necessary or advisable for "business or other reasons;" but it was agreed that the execution of the writing would not be deemed "a novation of the contract already made" or a substitute therefor, and that the individual liability of the parties for the payment of the architect's compensation would continue in addition to the liability of the "newly created corporations" and "such corporations created by them who shall take over either the business or title of the realty of the parties." On August 5, 1945, in accordance with the demand of the defendants, or some of them, a written contract was executed by all the parties except Isadore Stein, who affixed his signature to the instrument a year later. It is said that the individual parties defendant represented to plaintiff that a corporation to be known as the Legal Holding Company was then in process of formation to take title to the lands on Legal Street about to be purchased for the site of the proposed abattoir, and that another body corporate to be known as the Legal Packing Company would be formed to operate the enterprise. The contention is that this written agreement was purely substitutionary in conformity with the oral contract, and in no sense a modification of its terms. On the ensuing August 17th, the parties of the second part organized the Legal Holding Company and Legal Packing Company as bodies corporate; and the capital stock of these corporations was issued to them or their nominees. On August 29th following, the land on Legal Street made the subject of the lien claim was conveyed to the Legal Holding Company; and shortly thereafter the construction work was commenced. In March, 1946, Kenny and Levine transferred their interests in the corporations
to the Steins and withdrew from the venture. The Steins, it is alleged, assumed their liability to plaintiff under the contract. It was a co-operative enterprise. The estimated cost of the project at the outset was $250,000; and this was financed by subscriptions of $5,000 each by a group of 50 butchers whose interests would be served by the new source of supply. But unexpected difficulties were encountered by the shortened supply of labor and materials during the postwar period; and on April 22, 1946, the Steins organized the Fulton Packing Company as a body corporate to provide a temporary abattoir pending the completion of the project. On September 6th of that year, contiguous land was purchased and the title conveyed to Fulton; and the construction work on that site was placed under the supervision of plaintiff. Later on it was decided to enlarge the plant to include the lands of Fulton. But there were insurmountable problems. Some of the associate butchers, complaining of the delay and other irritations, demanded a return of their investment; and creditors became insistent. The result was an abandonment of the construction work June 4, 1947, and the appointment July 11, 1947, of a receiver in equity at the instance of an unpaid materialman. Eventually, the assets were returned to Legal Holding and the receiver discharged under a plan whereby the administration expenses were paid and the creditors provided for. Construction work was resumed; and the building is now in the possession of Waverly Meats, Inc., who was not named in the lien claim and is not a party to this action.
On March 19, 1947, a notice of intention to "perform labor and furnish materials" was filed under R.S. 2:60-112, obviously because of the builder's straitened circumstances; and on September 26, 1947, a lien claim of $29,660.05 was filed. It comprised fees of 5% of an assumed construction cost of $650,000, and 2% of that amount "for revising and redraughting complete set of plans involving all changes and revisions ordered to date during progress of the work," or a total of $45,500, and survey, traveling and other expenses in the sum of $500, or a grand total of $46,000, less credits
of $16,339.95, or a net balance of $29,660.05. It is stated in the claim that all these services "were performed between June 15, 1945, and July 11, 1947."
The ground taken by the defendant respondents is, in brief, (1) that the notice of intention is ineffective for failure to name the person for whom the labor was to be performed and the materials furnished in accordance with R.S. 2:60-113; and (2) that the lien claim itself is also ineffectual under R.S. 2:60-130(d) for want of sufficient particularity and for wilful or fraudulent misstatements therein. This latter section of the statute provides that failure to file a lien claim "in the manner or within the time" provided by the article or "a willful or fraudulent misstatement" in the bill of particulars of matters directed to be incorporated in the claim "shall free the lands and building from all liens for the matters mentioned in the claim."
The mechanic's and the materialman's liens had their genesis in the civil law. They are unknown to the common law; and they have had no recognition in equity except as prescribed by statute. South Fork Canal Co. v. Gordon, 6 Wall. 561, 18 L. Ed. 894 (1868); Van Stone v. Stillwell & Bierce Mfg. Co., 142 U.S. 128, 12 S. Ct. 181, 35 L. Ed. 961 (1891); Brescia Construction Co. v. Walart Construction Co., 264 N.Y. 260, 190 N.E. 484 (1934); 93 A.L.R. 1148. Thus it is that these liens are exclusively statutory in origin; and, being in derogation of the common law, the provisions of the statute giving rise to the lien are to be strictly construed, while the provisions for the enforcement of the lien thereby created are to be liberally construed to effectuate the remedial statutory policy of providing priority of payment of the price or value of work performed and materials furnished in the erection or reparation of a building or other structure and this wise the security of the land and buildings for the payment of that which has made for an assumed enhancement of the value of the property. Ayres v. Revere, 25 N.J.L. 474, 481 (Sup. Ct. 1856); Dalrymple v. Ramsey, 45 N.J. Eq. 494 (Ch. 1889); American Brick & Tile Co. v. Drinkhouse, 59 N.J.L. 462 (E. & A. 1896); Shoemaker
v. Maloney, 102 N.J.L. 363 (E. & A. 1926); Weinberger v. Goldstein, 106 N.J. Eq. 489 (Ch. 1930); Passaic-Bergen Lumber Co. v. Currie, 111 N.J.L. 63 (Sup. Ct. 1933); Fidelity & Deposit Co. of Maryland v. McClintic-Marshall Corporation, 115 N.J. Eq. 470 (Ch. 1934); affirmed, 117 N.J. Eq. 440 (E. & A. 1935); Belmont ...