Jos. L. Muscarelle, Inc. v. Central Iron Mfg. Co.
| Decision Date | 28 June 1967 |
| Docket Number | No. 16306.,16306. |
| Citation | 379 F.2d 715 |
| Parties | JOS. L. MUSCARELLE, INC., Plaintiff. v. CENTRAL IRON MFG. CO., the Trybee Company, William DiMayo, Revenue Officer of the Internal Revenue Service, Albert Pipe Supply Company, Inc., Charles F. Guyon, Inc., R. E. Disch, Inc., Roberts & Wiese, A. & J. Friedman Supply Co., Inc., Contractors Supply Corp., Carlone Construction Company, Joseph T. Ryerson & Son, Inc., and Jobbers Credit Assoc., Inc., Trustee in Bankruptcy of Arthur E. Magher Co., Inc., Defendants. The TRYBEE COMPANY, Inc. and Contractors Supply Corp., Third-Party Plaintiff, v. WESTERN ELECTRIC COMPANY, Inc., Third-Party Defendant, and United States of America, Intervenor, Carlone Construction Co., Third-Party Plaintiff, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Merritt T. Viscardi, Newark, N. J. (Apruzzese & McDermott, Vincent J. Apruzzese, Newark, N. J., on the brief), for appellant.
James A. Major, II, Hackensack, N. J. (Major & Major, Hackensack, N. J., on the brief), for appellee.
Before STALEY, Chief Judge, and BIGGS and HASTIE, Circuit Judges.
The matter in controversy here is a claim under the New Jersey Mechanic's Lien Law against a property owner, Western Electric Co., by Carlone Construction Co., which had furnished labor and materials for a construction project that Western Electric had undertaken through a general contractor and various subcontractors. Carlone had dealt with a subcontractor who became bankrupt. Admittedly, the sum owed to Carlone is $20,000, but the court below awarded it as against the owner only $3,686.99, the sum which would remain in the possession of Western Electric after payment to certain other materialmen who, in the court's view, enjoyed priority over Carlone. This appeal by Carlone followed.
We are concerned here with the so-called "stop notice" provisions of the New Jersey Mechanic's Lien Law. Under New Jersey law, if an owner shall duly file with the county clerk a copy of the general contract under which work is to be performed upon his property, no liens, except those of the general contractor, can thereafter attach to the property for labor and material supplied in the course of the work. N. J.S.2d:44-75, N.J.S.A. Instead, all claimants other than the general contractor are granted "stop notice" rights against money which the owner owes or shall become obligated to pay the general contractor. N.J.S. 2A:44-78, N.J.S.A. See generally Meyer v. Standard Accident Ins. Co., 1935, 114 N.J.L. 483, 177 A. 255.
To obtain such a right against money the owner owes or shall owe the general contractor, a materialman must file a notice of his claim in prescribed form with the appropriate county clerk. N.J.S. 2A:44-77, N.J.S.A. "After such notice is filed" the owner is authorized to withhold the amount of the noticed claim. N.J.S. 2A:44-78, N.J.S.A. And, upon verifying such claims, the owner is required to "pay the same in the order in which notices have been filed as provided by section 2A:44-77". N.J.S. 2A:44-80, N.J.S.A.
Section 2A:44-78 provides that "the claimant may, after filing * * * a stop notice under section 2A:44-77 serve a copy thereof upon the owner of the building". The consequence of such service is stated in section 2A:44-81 as follows:
A question of priority of claims under this statutory scheme has resulted from the following sequence of events. Five creditors of a subcontractor filed stop notices against Western Electric as follows:
The Trybee Co., Inc. Dec. 1, 1961 $11,499.00
Contractors Supply Corp. Jan. 9, 1962 $ 1,473.87
Carlone Const. Co. Feb. 28, 1962 $20,000.00
Charles F. Guyon, Inc. Mar. 6, 1962 $12,125.29
A. & J. Friedman Supply Co., Inc. Mar. 6, 1962 $ 6,955.76
The priority of the Trybee and Contractors Supply claims is admitted. The present problem arises because, although Carlone's stop notice was filed before the notices of Guyon and Friedman, Carlone did not serve Western Electric with notice of its filing until December 6, 1962, while Guyon and Friedman served their notices in March, 1962, a few days after filing. In addition, Guyon and Friedman sued Western Electric on their claims and obtained judgments in the Superior Court of New Jersey on September 5, 1962 and October 1, 1962, respectively. However, there was further litigation and no payments had been made to these claimants when Carlone served its notice.
Western Electric's indebtedness to its general contractor in February and March 1962 was more than $300,000. This sum was then available to pay stop notice claimants. However, before December 6, 1962, when Carlone served Western Electric with formal notice of its claim, the latter had paid most of this money to the general contractor, reserving only some $35,000 for disbursement to stop notice claimants. Western Electric now contends that its obligation to Carlone is only the difference between this $35,000 and the aggregate of the claims of the other four materialmen who had served it with formal notice much earlier. Carlone contends that its claim must be paid in full. Indeed, its reasoning, if adopted, will require Western Electric to pay all of the stop notice claimants in full.
Carlone relies upon the unambiguous requirement of section 2A:44-80 that the owner shall pay claims "in the order in which notices have been filed as provided by section 2A:44-77". Nothing is said in section 2A:44-77 about serving notice upon the owner. Moreover, the provision for such service which appears in section 2A:44-78 is in terms permissive: "The claimant may, after filing such notice serve a copy thereof upon the owner". And the only consequence provided for failure to make such service is that "until service of a copy of the notice upon an owner * * * he shall be protected in payments made in good faith to any contractor or other person...
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