Ash v. Honig

• Decision Date: 16 January 1933
• Docket Number: No. 121.,121.
• Citation: 62 F.2d 793
• Parties: ASH v. HONIG et al.
• Court: U.S. Court of Appeals — Second Circuit

62 F.2d 793 (1933)

ASH v. HONIG et al.

No. 121.

Circuit Court of Appeals, Second Circuit.

January 16, 1933.

David Kimmel, of Paterson, N. J., for Robert F. Ash.

Kimmel & Kimmel, of Paterson, N. J., for James A. Parr.

Leon M. Woodworth, of Brooklyn, N. Y., for Mountain View Brick Company.

John H. Mariano, of New York City, for impleaded defendant-appellee, Suffern National Bank & Trust Co.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

MANTON, Circuit Judge.

Julius Honig, owner of a parcel of real estate at Suffern, N. Y., undertook the erection of a hotel on the plot in 1928. On November 28, Honig requested a loan of $4,000 from the Suffern National Bank & Trust Company. At the time, Honig owed the bank $5,000. He obtained the loan of $4,000, and executed a bond and mortgage dated November 30, 1928, for $15,000 on the premises as collateral security for these advances totaling $9,000. Honig's wife did not join in the mortgage until January 11, 1929, and it was not filed until January 12, 1929. In December, 1928, the bank made an additional advance of $1,900.

On December 17, 1928, Honig contracted with appellant Parr for the masonry work on the hotel, and a few days later contracted with Ash for the plumbing. After making the contracts, both Parr and Ash started to work on the building and continued until March, 1929, when they were apprised of the mortgage recorded on January 12, 1929. They then stopped work and filed notices of mechanics' liens under the New York State Lien Law (Consol. Laws N. Y. c. 33). Parr filed on March 9, 1929, and Ash on March 12, 1929. Honig's petition in bankruptcy was filed late in 1929, at which time he owed general creditors $35,739.08, and his assets, apart from the hotel building, consisted of the stock and fixtures in a confectionery store which were appraised at $465.68 and a home in Suffern, N. Y., upon which a mortgage was later foreclosed and purchased, leaving no equity therein.

The president of the bank testified that he took the mortgage for the purpose of security and that Honig promised he would later obtain a $40,000 mortgage and repay his indebtedness to the bank. When testifying, he was asked his reason for not recording the mortgage until January 12, 1929, and stated that the recording was deferred to save Honig recording fees, and that the mortgage was recorded on January 12th because the bank examiners were expected.

Parr contracted to do the masonry and steel work for $21,000 on December 17, 1928. He started delivering the material a day or two after the execution of the contract, and at that time he went to New City, the county seat of Rockland county, had the records examined, and found that there was no mortgage recorded against the property. Parr told Ash that there was no mortgage recorded against the property. After talking with Mr. Honig and receiving assurances from him that the bank was going to finance the operation until he got his permanent loan, both Ash and Parr went to the banking office to see the president of the bank, who was away on vacation, but they talked with the cashier, then in charge, and he stated that the plot was free and clear and that the bank was going to finance the operation, and upon that assurance both proceeded with their work. On January 12, 1929, they had erected the four walls and installed steel work and rough plumbing. The building was within a short distance of the bank, and the progress of the work was within easy view, and this gave knowledge to the bank officials.

It was not until March 3, 1929, that the appellants were advised of the existence and recordation of the mortgage, at which time they stopped work. They thereupon filed mechanics' liens against the property. Parr's lien was for $13,710.43, and Ash's lien was for $3,419.81.

After filing the liens, this suit was instituted to foreclose the same and to obtain a decree that their liens be determined to be prior to the bank's mortgage. The building was sold by a special master and netted $15,000.

The New York statutes respecting mechanics' liens are applicable. N. Y. Lien Law (Consol. Laws N. Y. c. 33) § 3; In re Friedal Corp., 53 F.(2d) 758 (C. C. A. 2); N. Y.-Brooklyn Fuel Corp. v. Fuller, 11 F. (2d) 802 (C. C. A. 2). This case must be governed by the statutes in force in 1928 and 1929. By the law of that time (Lien Law, § 3), a mechanic's lien existed "from the time of filing a notice of such lien." A right to a lien has been recognized before the filing to protect persons who filed after a petition in bankruptcy or an assignment for creditors. Gates v. Stevens Construction Co., 220 N. Y. 38, 115 N. E. 22; Kane Co. v. Kinney, 174 N. Y. 69, 66 N. E. 619. But this right before filing cannot prevail over a mortgagee who records before a notice of lien is filed, unless the mortgage is fraudulent or the conduct of the mortgagee estops his assertion of a priority.

The court below found that the delay in recording the mortgage was not fraudulent. We think it unnecessary for the determination of this case to disturb that conclusion.

The question is presented, however, as to whether or not the assurances given by the cashier and the delay in recording the mortgage after the bank knew that Ash and Parr were about to contract, did not create an estoppel against the bank. The evidence of the conversation between Sheehan, the cashier of the bank, and the appellants Ash and Parr is in conflict, but it is satisfactorily shown by the appellants that Sheehan, representing the bank, stated that the property was free and clear, and that the bank was going to finance the operation, and that the appellants proceeded with their work after and upon the faith of that assurance.

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