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General Electric Co. v. Sulzer

Decided: February 18, 1965.

GENERAL ELECTRIC COMPANY, A NEW YORK CORPORATION, PLAINTIFF,
v.
E. FRED SULZER AND COMPANY, A NEW JERSEY CORPORATION, CONTRACTOR, AND FRANK BRISCOE COMPANY, INC., A NEW JERSEY CORPORATION, BUILDER, AND AMERICAN CYANAMID COMPANY, A MAINE CORPORATION, OWNER, AND BARNET H. EPSTEIN, TRUSTEE OF THE ESTATE OF E. FRED SULZER AND COMPANY, A BANKRUPT CORPORATION, DEFENDANTS



Lora, J.s.c.

Lora

This is an action on a mechanic's lien claim wherein plaintiff materialman seeks judgment generally against the electrical subcontractor with whom it had contracted and specially against the owner of the lands and building.

Plaintiff General Electric Company (G.E.) seeks to enforce a lien claim against property of defendant American Cyanamid Company (Cyanamid) for materials and labor furnished

in the construction of Cyanamid's Executive and Administrative Center in Wayne Township, for which construction Frank Briscoe Company, Inc. (Briscoe) was the general contractor.

The electrical subcontractor, defendant E. Fred Sulzer and Co. (Sulzer), is in bankruptcy, and both Sulzer and Barnet H. Epstein, trustee of the estate of E. Fred Sulzer and Co., a bankrupt corporation, have failed to appear in this action and default has been entered against them pursuant to plaintiff's request for entry of default dated August 3, 1962 and filed herein.

By written contract dated February 1, 1961 Cyanamid, as owner, engaged Briscoe, as general contractor, to construct the said Center upon lands owned by Cyanamid.

Under date of February 13, 1961, by written contract, Briscoe engaged Sulzer to perform the electrical work on said project. On August 1, 1961, G.E., by its division, General Electric Supply Company (which is not separately incorporated), caused to be filed in the office of the Passaic County Clerk a notice of intention in proper statutory form and thereafter gave due notice of such filing to both Cyanamid and Briscoe. All of this was done in accordance with N.J.S. 2A:44-65, 71 and 72.

It has been stipulated that after August 1, 1961 and prior to January 10, 1962 G.E. delivered, on requisition or order of Sulzer, materials and services having an aggregate value of $312,975.01. One or more of the deliveries were made between December 25 and 29, 1961. It has also been stipulated that some materials and services were delivered and rendered prior to August 1, 1961.

Neither the Cyanamid-Briscoe nor the Briscoe-Sulzer contract was filed pursuant to N.J.S. 2A:44-75.

On April 25, 1962, which date was within four months from the date of the furnishing of the last materials or services by G.E., said company caused to be filed a mechanic's lien claim in proper statutory form in the Passaic County Clerk's Office upon which commencement of suit was endorsed by said county clerk pursuant to N.J.S. 2A:44-91, 92 and

99, and instituted this action by the filing of its complaint in the office of the Clerk of the Superior Court of New Jersey in accordance with N.J.S. 2A:44-98. By successive orders of this court, the time period prescribed by N.J.S. 2A:44-99 for prosecution of the claim to judgment has been extended to March 15, 1965.

The value of the materials and services for which a lien is claimed has been fixed by stipulation at $312,975.01, which sum is the amount due G.E. from Sulzer, less certain adjustments made for purposes of the stipulation of March 18, 1964. On April 22, 1964 judgment was granted against the defaulting defendants for $312,975.01, together with interest and costs.

The courts have been fairly unanimous in stating that those provisions of the statute creating the lien should be strictly construed, while those concerned with the enforcement thereof are to be liberally interpreted, Friedman v. Stein, 4 N.J. 34 (1950); Apex Roofing Supply Co. v. Howell, 59 N.J. Super. 462 (App. Div. 1960); Elliot-Farber Roofing & Siding Supply Co. v. Saitta, 79 N.J. Super. 568 (App. Div. 1963).

I.

Briscoe and Cyanamid have raised as a separate defense and contend that G.E. waived its lien rights by furnishing materials with knowledge of the provisions of the Cyanamid-Briscoe contract or of the Briscoe-Sulzer contract, or of both of said contracts.

The pertinent provisions of the aforesaid contracts are as follows:

CYANAMID-BRISCOE CONTRACT, CONDITION XI, LIENS

"CONTRACTOR shall indemnify and save harmless CYANAMID from all claims, demands, causes of action, or suits of whatever nature arising out of the labor and materials furnished by CONTRACTOR and its sub-contractors under this contract, and from all laborers', materialmen's and mechanics' liens upon the work or upon the property upon which the work is located arising out of the labor and materials furnished by CONTRACTOR and its sub-contractors under this

contract, and shall keep the work and said property free and clear of all liens, claims, and encumbrances arising from the performance of this contract by CONTRACTOR and its sub-contractors.

BRISCOE-SULZER CONTRACT

ARTICLE V. Sub-contractor agrees to co-operate with Contractor and all other Sub-contractors employed on the work in order to avoid complications and insure first-class workmanship in every respect, and further, that in the manufacturing, assembling and execution of the work, he will employ only men whose work will be acceptable to and in harmony with other workmen on the building. Sub-contractor further covenants and agrees on behalf of himself, his sub-contractors, materialmen and all parties acting through or under him that no mechanics' claims or liens shall be filed by him or any one acting through or under him, against the premises or buildings or fund covered by this contract. Sub-contractor shall deliver to the Contractor if and when required a complete release of all liens arising out of this contract or receipts in full in lieu thereof and if and when required an affidavit that to the best of his knowledge, information and belief the releases and or receipts include all of the labor and materials for which a lien could be filed.

ARTICLE X * * *. The Sub-contractor shall submit to the Contractor an application for each payment, and if required, receipts or other vouchers showing payment for materials and labor. The Contractor may withhold payment to protect the Contractor from loss on account of, (a) defective work not remedied, (b) claims filed or reasonable evidence indicating the probable filing of mechanics' liens against the premises or buildings, or the fund for the construction of improvement, (c) failure of the Sub-contractor to make payments properly to materialmen and laborers, (d) a reasonable doubt that the Contract cannot be completed for the balance then unpaid."

Defendants cite the case of Bates Machine Co. v. Trenton, &c., R.R. Co., 70 N.J.L. 684 (E. & A. 1904) for the proposition that if the subcontractor accepts employment with the knowledge that the underlying building contract contains a provision against liens, he is deemed to have waived his right to the lien. Defendants also rely upon Mitchell v. Wrights-town Community Apartments, Inc., 4 N.J. Super. 321 (App. Div. 1949), and Stein v. Pennsylvania Dock, &c., Co., 10 N.J. Misc. 568, 159 A. 683 (Cir. Ct. 1932).

Plaintiff contends that the cases cited by the defendants do not support such waiver theory and that those which might be construed to support such theory were impliedly overruled

by the 1930 and 1957 amendments to the Mechanic's Lien Law.

Bates Machine Co. v. Trenton, &c., R.R. Co., supra, was an action to enforce a mechanic's lien. The claimant was the subcontractor of one Sciple. The trial court refused to permit evidence to the effect that the claimant, before entering into the contract with Sciple, knew of the provision against liens in the contract between Sciple and defendant. The underlying contract provided (it is not clear whether the following is extracted from the contract itself) that no subcontractor "should have any right to file any lien for any sum which might be due or become due to such subcontractor, and that any such right to file such lien was expressly waived." 70 N.J.L., at p. 690. The evidence was excluded on the ground that such knowledge was irrelevant.

The appellate court reversed, stating:

"* * * the greater weight of authority is that a provision in a building contract against the assertion of liens by any one will preclude a subcontractor or materialman, who has notice of such provision, from asserting a lien for labor or materials furnished pursuant to such contract. * * * Upon both reason and authority * * * we conclude that when a subcontractor knows that a building contract under which he is proposing to accept employment contains a provision that no liens shall be asserted, the mere acceptance of such employment will bar him from asserting a lien in opposition to such provision." (at pp. 692-4)

Plaintiff argues that the Bates case did not hold that knowledge of a lien waiver provision denies a materialman his lien, but ruled only on the admissibility of evidence as to such knowledge. Yet this court must look to the rationale of the ruling on the admissibility of the proffered testimony. Such rationale was clearly stated in Bates to be that if the claimant knew of the contractual provisions, he waived his lien rights.

G.E. further attempts to distinguish Bates on the grounds that the factual situation therein was quite different from that in the case sub judice. Bates involved as a claimant a

subcontractor of the general contractor, whereas G.E. herein is a materialman of a subcontractor and thus one step further removed from the owner. The contractual provisions at issue in Bates were in the contract between the owner and the general contractor. Plaintiff therefore argues that there has been no holding in New Jersey as to the admissibility of provisions in the contract between the general contractor and the subcontractor as against a third-party materialman, and concludes that evidence of language against liens in the general contractor's contracts with his subcontractors would have been excluded as irrelevant and immaterial as against a third-party materialman.

It is submitted that upon reason and authority Bates cannot be so restricted. The lien is the personal privilege of the laborer or materialman, and may be waived in favor of the property owner. Under Bates, when a subcontractor "knows that a building contract under which he is proposing to accept employment" contains a provision against liens, acceptance of employment results in waiver of the lien rights. Furthermore, it would appear unreasonable to argue that the owner could not assert waiver merely because the materialman obtained knowledge of the lien waiver provisions from the subcontractor rather than from the general contractor. See 76 A.L.R. 2 d 1110, sec. 6 for cases in other jurisdictions.

It is clear that under the ruling in Bates, if G.E. had knowledge of the lien waiver provisions when it undertook to deliver the materials, it waived all rights to the lien. Later cases have cited Bates for this waiver doctrine: Stewart Contracting Co. v. Trenton, &c., R.R. Co., 71 N.J.L. 568, 571-572 (E. & A. 1904); Stein v. Pennsylvania Dock, &c., Co., supra. Thus, there are at least three New Jersey cases which explicitly recognize and apply the waiver-through-knowledge concept. Additionally, Brewing Co. v. Donnelly, 59 N.J.L. 48 (Sup. Ct. 1896), at least by implication, recognized the doctrine. Mitchell v. Wrightstown Community Apartments, Inc., 4 N.J. Super. 321 (App. Div. 1949), cited by defendants,

involved an explicit waiver provision written into the contract with the claimant.

G.E. further argues that the New Jersey Legislature, by reason of the 1930 and 1957 amendments to the Mechanic's Lien Law, implicitly invalidated the waiver-through-knowledge doctrine. However, the Legislature has not seen fit to expressly enact into the Mechanic's Lien Law, provisions dealing with waiver. We must, therefore, resort to the case law and rules of statutory interpretation.

The legislatures of other states have written into their mechanic's lien statutes explicit provisions relating to waiver. For example, the New York Lien Law, McKinney's Consol. Laws, c. 33, § 34, provides:

"A contractor, subcontractor, materialman or laborer may not waive his lien, except by an express agreement in writing specifically to that effect, signed by him or his agent."

Illinois, on the other hand, provides by statute:

"If the legal effect of any contract between the owner and contractor is that no lien or claim may be filed or maintained by any one, such provision shall be binding," Ill. Stat. 1957, c. 82, § 21.

Within the United States there appears to be no one rule as to the requirements for waiver by knowledge. Some states hold that knowledge of the no-lien stipulation is sufficient; others provide that mere knowledge is not enough and that for waiver to be successfully utilized as a defense the claimant must have specifically contracted away the lien rights in writing; and still other states have filing provisions which make the no lien clauses effective, regardless of any actual knowledge on the part of the subcontractors. See 76 A.L.R. 2 d 1088.

With this background in mind, we must appraise plaintiff's contention that the New Jersey legislative amendments invalidated the waiver-by-knowledge doctrine of Bates. In 1930 the law was ...


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