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Arrow Builders Supply Corp. v. Hudson Terrace Apartments Inc.

Decided: May 17, 1954.

ARROW BUILDERS SUPPLY CORP., A NEW YORK CORPORATION, PLAINTIFF-APPELLANT,
v.
HUDSON TERRACE APARTMENTS, INC., A NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT. BERGEN BUILDING BLOCK, INC., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT, V. HUDSON TERRACE APARTMENTS, INC., A NEW JERSEY CORPORATION, DEFENDANT-RESPONDENT



For reversal -- Chief Justice Vanderbilt, and Justices Wachenfeld, Burling, Jacobs and Brennan. For affirmance -- Justices Heher and Oliphant. The opinion of the court was delivered by Jacobs, J. Heher, J. (dissenting). Oliphant, J., joins in this dissent.

Jacobs

[15 NJ Page 419] The defendant Hudson Terrace Apartments, Inc. owned land located in Fort Lee, New Jersey. As owner, it entered into a written contract with the contractor, Glenwood Builders, Inc., for the construction of apartment buildings. Before the commencement of work or the delivery of materials the contract was duly filed pursuant to R.S. 2:60-115 (now N.J.S. 2 A:44-75). The contractor entered into an agreement with the subcontractor ARA Construction Corporation for the masonry work required in the buildings and the subcontractor purchased building materials from the plaintiffs. The materials were delivered by the plaintiffs to the building site and they were actually used in the erection and completion of the buildings. The subcontractor failed and refused to pay the plaintiffs the balance due for the materials and they filed stop notices with the county clerk in accordance with N.J.S. 2 A:44-77. Copies of the stop notices were served upon the owner in accordance with N.J.S. 2 A:44-78, 79. The claims of the materialmen being

disputed, they instituted action against the subcontractor and obtained judgments against him. See N.J.S. 2 A:44-83. When the plaintiffs filed their stop notices there was no money due from the contractor to the subcontractor; the latter had defaulted in the performance of its contract thereby requiring the contractor to complete the masonry work. However, when the stop notices were filed there was due or about to become due sufficient sums from the owner to the contractor to pay the full claims of the plaintiffs.

The plaintiffs instituted separate actions in the Superior Court, Law Division, claiming that under the terms of the Mechanics' Lien Law the defendant owner was obligated to pay their claims from the unpaid sums due from him to the contractor. The defendant denied liability, contending that the stop notices filed and served by the plaintiffs did not establish any "right of recourse or lien against the funds in the hands of the Owner due to the Contractor." The actions were consolidated and the parties submitted the agreed facts as aforestated to the trial court for legal determination. Judge Leap, sitting in the Superior Court by temporary assignment, found in the defendant's favor although his opinion suggested that the pertinent statutory provisions required a contrary result which he would have reached were it not for the decision of the Court of Errors and Appeals in Mills & Co. v. Hegeman-Harris Co., 94 N.J. Eq. 802, 806 (E. & A. 1923). But see St. Michael's, etc., Hopewell v. Conneen Constr. Co., 114 N.J. Eq. 276 (Ch. 1933), affirmed 115 N.J. Eq. 334 (E. & A. 1934). The plaintiffs appealed to the Appellate Division and we certified on our own motion.

Our first statutory enactment relating to mechanics' liens was adopted early in the 19th Century (L. 1820, p. 124); since then there have been many enactments designed to afford liens to persons who contribute labor or materials used in the construction of buildings. See Luce, Mechanics' Lien Law of New Jersey (3 d ed. 1923), 6; Lodge, Mechanics' Liens in New Jersey (1940), 5. From time to time our courts have expressed misgivings as to the policies underlying

the preferential treatment thus afforded by the Legislature. Ayres v. Revere, 25 N.J.L. 474, 481 (Sup. Ct. 1856); McNab & Harlin Mfg. Co. v. Paterson Building Co., 71 N.J. Eq. 133, 139 (Ch. 1906), affirmed 72 N.J. Eq. 929 (E. & A. 1907). And with these misgivings they have sometimes applied rather strict rules of statutory interpretation. See Dalrymple v. Ramsey, 45 N.J. Eq. 494, 496 (Ch. 1889); Associates of Jersey Co. v. Davison, 29 N.J.L. 415, 423 (E. & A. 1860). But see Rizzolo v. Poysher, 89 N.J.L. 618, 622 (E. & A. 1916). However, as we view our proper judicial function, it is not to pass judgment on the wisdom or policy of the legislation or to apply strict rules of interpretation which defeat legislative wishes; the constitutionality of the legislation not being disputed here (cf. Gardner & Meeks Co. v. N.Y. Central & H.R.R. Co., 72 N.J.L. 257 (E. & A. 1905)), our only function is fairly to seek and effectuate the legislative purpose now expressed in N.J.S. 2 A:44-77-80. See Gardner & Meeks Co. v. Herold, 76 N.J.L. 524, 529 (E. & A. 1909). Cf. Board of National Missions v. Neeld, 9 N.J. 349, 353 (1952); De Lorenzo v. City of Hackensack, 9 N.J. 379, 387 (1952); Grobart v. Grobart, 5 N.J. 161, 166 (1950).

In 1835 the Legislature adopted "An Act Securing to Mechanics, and others, payment for their labor and materials in erecting any house, or other building, within the limits therein mentioned." L. 1835, p. 148. Section 3 thereof provided the remedy by stop notice but it was available only to wage claimants (journeymen and laborers) and applied to funds due their employer from the owner of the building. Later enactments extended the terms of section 3 to persons who furnished materials used in the erection of the building but were refused payment by the contractor engaged by the owner. L. 1853, p. 438; L. 1863, p. 275. In 1895 section 3 was amended to provide that when stop notices were duly served by journeymen, laborers or materialmen the owner shall pay their claims upon the contractor's continued refusal of payment, from funds then or thereafter due from the owner to the contractor. L. 1895, p. 313; L. 1898, p.

538. In 1905 section 3 was amended to extend to subcontractors; it provided that whenever any contractor refused to pay any person who furnished materials to him "or any sub-contractor, journeyman or laborer employed by him in erecting or constructing any building" then the stop notice remedy against the owner was available as therein prescribed. L. 1905, p. 311. See also L. 1910, p. 500. Cf. Stevenson, V.C. in McNab & Harlin Mfg. Co. v. Paterson Building Co., supra, 71 N.J. Eq. at page 144: "That the Legislature of this state had continuously for years favored the lien of the materialman by stop notice is quite apparent."

In Carlisle v. Knapp, 51 N.J.L. 329 (E. & A. 1889), the Court had occasion to consider whether, under the legislation then in force, persons who furnished materials to subcontractors could seek recourse under section 3 against funds due or to become due from the owner to the contractor. The Court held that they could not upon the view that section 3 should be construed as affording protection only to creditors of the contractor and as not extending to creditors of subcontractors engaged by the contractor. However, in 1917 section 3 was again amended to enlarge its protective scope and this time it embodied language which was directly designed to protect materialmen and laborers who were employed by and were creditors of contractors other than the general contractor. Thus it set forth that whenever any master workman or contractor, or any "contractor under any master workman or contractor," shall refuse to pay materialmen or laborers employed by him in constructing any building, then the stop notice remedy against the owner as therein provided shall be available. L. 1917, p. 821. In Steuerwald v. Munn, 90 N.J. Eq. 474 (Ch. 1919), Vice-Chancellor Foster, in discussing the 1917 amendment, pointed out that it extended the provisions of section 3 "to debts owing to materialmen and others by subcontractors" and provided for the service of stop notices upon the owner and the payment by the owner of such debts owing by subcontractors "on the same conditions as the owner had, prior to such amendment, been authorized to pay similar debts of the general contractor." [15 NJ Page 423] In Mills & Co. v. Hegeman-Harris Co., supra, materialmen employed by a subcontractor served their stop notices upon the owner in strict accordance with the 1917 amendment. Previous thereto the subcontractor, who had received certain advance payments from the contractor, abandoned his work and it was later completed by the contractor at a loss. Vice-Chancellor Griffin held that the materialmen could not recover from sums due from the owner to the contractor. Although he recognized that the 1917 amendment was expressly adopted to enable materialmen and others employed by subcontractors to serve stop notices upon the owner under section 3, he nevertheless found that such claimants "'must go a step further, i.e., they must show some statute which makes the contractor liable for making advance payments. This they cannot do, because there is no such statute.'" His holding was affirmed by the Court of Errors and Appeals on the opinion below. It seems to us that this result ignored the portion of the 1917 amendment which, after first providing for the service of stop notices by materialmen employed by subcontractors, authorized the owner to retain funds due or to become due under the building contract and directed that, if the claims were not paid by the contractor or subcontractor, the owner shall pay the claims therefrom and be entitled to an allowance in the settlement of his accounts with the contractor. In the amendment, the Legislature did not concern itself with any lien on funds due from the contractor or with the extent of the contractor's obligation, if any, to the subcontractor; it concerned itself solely with funds due from the owner and vested in materialmen employed by subcontractors the stop notice remedy directly against funds due or to become due from the owner to the contractor without regard to the relationship between the contractor and the subcontractor. Presumably the Legislature considered this to be fair and equitable to all those concerned in view of the fact that the engagement of the subcontractor is the contractor's responsibility and the materials furnished by the materialmen actually contribute to the full performance of

the general contract between the owner and the contractor and the ...


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