United States Fid. & Guar. Co. v. Mayor and Common Council

• Citation: 79 N.J.E. 684,81 A. 758
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. Mayor and Common COUNCIL. OF CITY OF NEWARK et al.
• Decision Date: 21 November 1911
• Court: New Jersey Supreme Court

81 A. 758

79 N.J.E. 684

UNITED STATES FIDELITY & GUARANTY CO.

v. Mayor and Common COUNCIL.OF CITY OF NEWARK et al.

Court of Errors and Appeals of New Jersey.

Nov. 21, 1911.

Appeal from Court of Chancery; Howell, Vice Chancellor.

Suit by the United States Fidelity & Guaranty Company against the Mayor and Common Council of the City of Newark and others. From a decree of the Court of Chancery (76 N. J. Eq. 230, 74 Atl. 192) for defendants, complainant appeals. Affirmed. See, also, 74 N. J. Eq. 454, 77 Atl. 1088.

McCarter & English, for appellant.

Sherrerd Depue and George Gordon Battle, for respondents.

GUMMERE, C. J. The complainant, the United States Fidelity & Guaranty Company, filed its bill under the provisions of the municipal lien law to enforce a lien on moneys in the hands of the city of Newark under a contract between the city and John L. Stewart and Frederick W. Abbot, partners, for the construction of the Cedar Grove Reservoir. Stewart and Abbot subcontracted the embankment and borrow pit work to one James Seme who entered into a bond with the complainant, the United States Fidelity & Guaranty Company, as the surety thereon to indemnify and save harmless Stewart and Abbot from any pecuniary loss resulting to them from a breach of any of the terms of the contract between them and Seme. This bond also provided that in case of default by Seme in the work the complainant could at its option assume and complete his contract. Seme did default in his work, and the complainant exercised its option to complete his contract, and did in fact perform the work and furnish the materials called for therein to an amount exceeding $35,000. Not being paid by the principal contractor the money due them for such work and materials, they, on December 12, 1904, filed their lien with the city in compliance with the statute. On the 18th of November, 1904, Stewart and Abbot made a written assignment to Alexander M. Stewart and James C. Stewart of all moneys due and to become due to them from the city of Newark under their contract with the municipality. The question at issue between the parties was whether this assignment took precedence over the lien subsequently filed by the complainant. The learned Vice Chancellor hold that it did, and for this reason advised a dismissal of the complainant's bill.

We concur in the conclusion reached by the Vice Chancellor and have nothing to add to his discussion of the matters treated by him in his opinion. There is, however, one ground upon which the complainant rested its right to relief, and which was relied upon in the argument before us which is not referred to by the Vice Chancellor in his opinion, viz., an alleged right conferred upon laborers and materialmen by the eighth section of the contract between the city and Stewart and Abbot. That section, after providing for the payment of 90 per cent. of the final estimate, upon the completion of the work in accordance with the provisions of the contract and its acceptance by the city provides as follows: "The remaining 10 per centum of said final estimate shall be retained by said city for one year from date of said acceptance of the work as a guarantee that the contractor has faithfully executed his contract, and shall be used by said city in making good any defects or making any repairs to the work executed under this contract which may be necessary. At the end of said one year the said 10 per centum, or such portion of it as may remain after making said repairs or remedying any defects, shall be paid to the contractor after the party of the second part shall furnish the said board of street and water commissioners with satisfactory evidence that all persons who have done work or furnished materials under this agreement and who may have theretofore given written notice to said board of any balance unpaid for work or materials furnished or done on said work have been fully paid or satisfactorily secured, and in case such evidence is not furnished as aforesaid such amounts as may be necessary to meet the claims of the persons aforesaid may be retained from the money due the party of the second part under this agreement and until the liabilities aforesaid shall be fully discharged or such notice withdrawn." The contention of the complainant is that by virtue of this clause in the contract the 10 per cent. was retained for the protection of laborers and materialmen, including the complainant, and so, consequently, subject to lien by them notwithstanding the assignment made by Stewart and Abbot.

Although the contention is plausible no authority is cited in support of...