Brown v. Home Dev. Co.

• Decision Date: 13 March 1941
• Docket Number: 122/636.
• Citation: 18 A.2d 742,129 N.J.Eq. 172
• Parties: BROWN v. HOME DEVELOPMENT CO.et al.
• Court: New Jersey Court of Chancery

18 A.2d 742

129 N.J.Eq. 172

BROWN

v. HOME DEVELOPMENT CO.et al.

122/636.

Court of Chancery of New Jersey.

March 13, 1941.

Syllabus by the Court.

1. Complainant-owner, upon default of his contractor-builder, was obliged to complete construction of a dwelling; before completion of the work, laborers and materialmen filed stop-notices; before completion, complainant-owner went into possession and has since continued to occupy the dwelling; the building contract called for final payment to the contractor thirty days after completion. Complainant filed the present bill in the nature of a bill of interpleader, praying among other things that he be allowed a credit for the amount expended by him in completing the contract after the default of the original contractor and in correcting inferior workmanship; he tendered his willingness to pay the balance into court, and sought to have the stop-notice claimants interplead to establish their claims and priorities. On final hearing, held:

(1) Complainant-owner is chargeable with the balance of the contract price, less a credit for cost of completing the work after default of the contractor and correcting inferior workmanship. The sum so found due will draw interest beginning thirty days after completion of the work (fixed by contract for final payment), since complainant did riot avail himself of the privilege of paying into court the ascertainable balance due.

(2) Rate of interest chargeable to complainant is the legal rate, i. e. six per centum per annum.

(3) Stopnotice claimants are entitled to be paid from the amount owed by complainant, in the order in which their stop-notices were filed.

(4) The above claimants are entitled to interest, at the legal rate, from the time when their claims matured against the owner, to wit, one month after completion of the dwelling.

(5) Labor claims take precedence over claims for material.

(0) A labor claim, in the hands of an assignee, is entitled to the same priority to which it would have been entitled in the hands of the workman-assignor, whether the assignment be made before or after the stop-notice is filed.

Suit in the nature of an interpleader by Horace G. Brown against the Home Development Company and others.

Decree advised in accordance with opinion.

Charles J. Degnan, of Camden, for Complainant, Horace G. Brown.

French, Richards & Bradley, and Grace Heritage Smith, of Camden, for Suburban Lumber Company.

Alex P. Schuenemann, 3d, of Camden, for Horace G. Brown and others.

Luethy & Flemming, of Camden, for William S. Holmes, Inc., and another.

Albert J. Klein, of Camden,' for Camden Iron Service Co.

Ernest Redfield, of Woodbury, for Carmen DeLuca and others.

Henry M. Evans, of Camden, for Vincent Fiorentino.

S. Arthur Levy, of Camden, for Ernest N. Mitchell.

Bennett & Bennett, of Camden, for Arthur Jacobs.

Frank F. Patterson, 3d, of Camden, for G. C. Gommell.

Isadore H. Hermann, of Camden, for Greene Stairbuilding Co., Inc.

Lynwood Lord, of Woodbury, for E. P. Henry & Son, Inc.

Kenworthy & Clark, of Camden, for Standard Wall Covering Co.

WOODRUFF, Vice Chancellor.

It has been stipulated that I decide this case on bill, answers, replications and transcript of testimony taken in open court. Final hearing was had before the late Vice Chancellor Francis B. Davis and, prior to his death, briefs had been filed and arguments of counsel heard. I requested and have had the benefit of oral re-argument.

The bill here filed was in the nature of an interpleader bill. Complainant contracted with Home Development Company for the erection of a dwelling in Woodbury, Gloucester County, to cost $17,800. Contract and specifications were filed July 20, 1937. The contractor abandoned work late in January or early in February, 1938. On January 4, 1938, Suburban Lumber Company filed notice with the owner that it had furnished materials to the amount of $4,953.67, which sum, after demand, remained unpaid, and, on the same day, filed its stop notice. The owner thereupon withheld payment from the contractor of the balance due under the contract, $8,012.30. Thereafter, between January 5, 1938, and May 21, 1938, other stop notices were filed by laborers and materialmen on claims aggregating, approximately, $14,000.

In January, 1938, complainant took possession of his new dwelling. He has lived continuously therein all of the three years which have intervened. Nine months later, on September 16, 1938, he filed the bill of complaint herein praying that the stop-notice claimants interplead and determine their rights to a balance of $5,703.89, which he admitted was available to them. He asked that he be allowed to retain from the balance of $8,012.30, the sum of $1,308.41 already expended by him to complete the contract, and "not more than the sum of $1,000," as necessary to be expended to remedy poor workmanship and materials furnished by the contractor. As to this latter item he asked leave to have it approved by arbitration in law. He also asked that proceedings, by claimants, be stayed until judgment on arbitration was given, and tendered himself as willing to pay into this court the balance due.

Complainant testified that there was "much, much delay" in the arbitration matter. Judgment was not had therein until March 15, 1940. Thereafter this cause was brought on for final hearing, not at the instance of the complainant but at the instance of one of the defendants, Suburban Lumber Company.

Complainant is a member of the Bar of this State. When this matter came on for final hearing before Vice Chancellor Davis, more than two years after the filing of the bill of complaint, it was found that a decree pro confesso had not been entered as to the non-answering defendants. The Vice Chancellor offered to make the decree. Upon re-argument before me, two years and four months after the filing of the bill, the decree pro confesso had still not been entered and complainant's counsel asked for a further delay to make proof of non-military service, which proof would not have been necessary had the decree been entered in due course prior to the enactment of the Soldiers' and Sailors' Civil Relief Act of 1940, 50 U.S.C.A. Appendix, § 501 et seq.

Defendants, laborers and materialmen, have now waited more than three years for payment of their undisputed claims. They ask that complainant pay interest on the amount he alleged in his bill would be due them and which, it is agreed, is due. He resists this claim.

Complainant took the initiative in the matter of litigation, seeking relief in equity against a possible multiplicity of suits by laborers and materialmen in the law courts. Those laborers and materialmen, from the moment they contributed to the erection of complainant's home, had obtained an inchoate lien upon his liability to the contractor. Donnelly v. Johnes, N.J. Ch., 58 N.J.Eq. 442, 44 A. 180; Slingerland v. Einns, Court of Errors and Appeals, 56 N.J.Eq. 413, 39 A. 712.

When stop notices were served in accordance with the requirements of the statute, the owner was obliged to retain, for the benefit of noticing creditors, all money which might thereafter come to be payable under the contract. Mayer v. Mutchler, Court of Errors and Appeals, 50 N.J.L. 162, 13 A. 620. A stop notice, served, operates as an assignment pro tanto of the contract price owing by the owner to the contractor. R.S. 2:60-117, N.J.S.A. 2:60-117; Kreutz v. Cramer, N.J. Ch., 64 N.J.Eq. 648, 54 A. 535.

The balance of the contract price, as of the time the contract was abandoned, was $8,012.30. Complainant then expended $1,308.41 to complete the building and claimed that it would be necessary to expend, in addition, not more than $1,000 to make good inferior workmanship and materials. The claim of an owner, who completes a building, to an unexpended balance of the contract, is superior to that of stop-notice claims. Post v. Geldziler, Court of Errors and Appeals, 105 N.J.L. 370, 374, 145 A. 322. As to the balance of $5,703.89, which complainant admitted to be due laborers and materialmen, an offer of tender into court was made in the bill of complaint but the money has never been paid over.

When a stop notice has been served and money becomes due under the contract from the owner to the general contractor sufficient to pay that claim, the statute is mandatory that the owner pay the stop-notice claimant on being satisfied of the correctness of the demand. R.S. 2:60119, N.J.S.A. 2:60-119; Ford v. Church of Our Lady of Mt. Carmel, 154 A. 403, 9 N.J.Misc. 505. So continuing, the owner must pay in the order in which notices have been filed, R.S. 2:60-119, N.J.S.A. 2:60-119, for stop notices operate in succession and in the order of time of service, R.S. 2:60119; N.J.S.A. 2:60-119, Donnelly v. Johnes, supra. The owner is protected if he so pays. R.S. 2:60-120, N.J.S.A. 2:60-120; St. Michael's, &c, Hopewell v. Conneen Constr. Co., N.J.Ch, 114 N.J.Eq. 276, 166 A. 458, affirmed 115 N.J.Eq. 334, 170 A. 649.

Complainant has not contested any claim filed; in fact, he admits every claim to be correct in amount and to be justly due. He paid the claims of four laborers upon receipt of stop notices from them and took assignments of their claims. He could have paid $5,703.89 to other claimants or into court. Instead, he retained the money and has had the benefit of holding that fund ever since. While he testified that he had the money in a separate account, he did not testify that he had not used any part thereof, that he had not received interest thereon or that retention of the money had not provided him with ready funds for any emergency.

Complainant suggests that he should not be now charged with interest because he was required to pay interest on the money he withheld. That is immaterial. His testimony is that he obtained a mortgage commitment, the money to become available when the building was completed. When $5,703.89 became payable to stop-notice claimants he...