REARGUMENT of an appeal by the defendants, Leonard Jacob, Jr., and another, copartners, etc., from a judgment of the Supreme Court in favor of the plaintiff and the defendant Lown, entered in the office of the clerk of the county of Dutchess on the 7th day of February, 1910, upon the decision of the court, rendered after a trial at the Dutchess County Special Term, adjudging to be valid certain liens of the plaintiff and of the defendant John D. Lown.
Frederick Hulse, for the appellants.
H. H. Flemming, for the plaintiff, respondent.
Martin Heermance, for the respondent Lown.
The defendant Huntington as the owner of certain premises at Staatsburg, Dutchess county, entered into a contract with Jacob & Youngs for the erection of a dwelling house upon the property for an agreed consideration of $81,000. Jacob & Youngs sublet a part of the contract to William Fitzpatrick, for which the latter was to receive $21,000, with such additional sums as should be agreed upon in writing for extra work. The plaintiff, with one Lown and others, filed mechanics' liens, but only the liens of the plaintiff and Lown were established by the judgment now before us. The plaintiff on the trial did not put in evidence a copy of the notice of lien, but we do not care to dispose of the questions raised by this appeal upon a mere technical defect. Plaintiff's counsel stated in court that the lien was filed, and this was not questioned, so we will assume that this fact is established. The defendant Huntington
admits that he holds a sum sufficient to cover the claims involved in this proceeding, which he is willing to pay over on the order of the court, so that the only questions to be determined arise between the general contractors, Jacob & Youngs, and their material men.
The plaintiff's complaint alleges on information and belief that 'thereafter the sad defendant sub-contractor, William Fitzpatrick, duly performed all of the conditions of said contract on his part, and so far completed the same as to become entitled, and he was entitled at the time of the filing of the notice of claim by the plaintiff herein and prior to the commencement of this action, to receive thereon a sum in excess of the amount of plaintiff's claim herein and hereafter set forth and that said sum is applicable to the payment of plaintiff's lien.' Obviously, if the facts as alleged in this portion of the complaint are true, and the other necessary facts are not questioned, the plaintiff would be entitled to foreclose its lien and to have the judgment which has been granted. The difficulty with the case is that it distinctly appeared upon the trial of the action that the contractors Jacob & Youngs had overpaid Fitzpatrick to the extent of $682.73, and that this had been done before any of the liens were filed. Notwithstanding that the pleadings alleged that this sum was due Fitzpatrick and available for the payment, and that the pleadings were not amended, and all evidence tending in any manner to prove matters outside of the pleadings was objected to on the part of the defendants Jacob & Youngs, the learned trial court admitted testimony tending to show that the contractors made these payments to Fitzpatrick knowing that he owed for materials, and with this evidence in the case, over the objections and exceptions of the defendant contractors, the learned trial court charged them with responsibility for fifteen per cent of the original contract price of the work, the amount permitted to be retained under the contract, and gave judgment in favor of the lienors to this extent. Jacob & Youngs appeal from the judgment.
Section 7 of article 2 of the Lien Law (Consol. Laws, chap. 33; Laws of 1909, chap. 38; re-enacting Gen. Laws, chap. 49; Laws of 1897, chap. 418) provides that 'Any payment by the owner to a contractor upon a contract for the improvement of real property made prior to the time when by the terms of the contract such payment becomes due, for the purpose of avoiding the provisions of this
article, shall be of no effect as against the lien of a sub-contractor, laborer or material man under such contract, created before such payment actually becomes due.' Under this provision the learned court below has determined that the contractors occupy the relation of an owner to the material men, and that the contractors, in making advance payments, knowing in a general way that the sub-contractor had not paid his bills, have made these payments 'for the purpose of avoiding the provisions of this article,' or at least this is the effect of the judgment.
We are clearly of the opinion that the learned court has erred in this disposition of the case. Advance payments by an owner to a contractor are not invalid unless they have been made with the purpose to avoid the statute ( Tommasi v. Archibald,114 A.D. 838), and the burden of proving that such payments were made in bad faith is on the sub-contractor or material man. (Behrer v. McMillan,114 A.D. 450.) If the burden is upon the sub-contractor or material man to prove that the payments are made in bad faith, or, in the language of the statute, 'for the purpose of avoiding the provisions of this article,' then that is a fact which must be alleged in the complaint; that is a necessary part of the cause of action, for unless the advance payments are made 'for the purpose of avoiding the provisions of this article,' there is no cause of action whatever. If it were not for the statute, every payment, no matter what the purpose, would be good; at common law every man has a right to pay his obligations in advance, or at any time mutually agreeable to himself and his debtor, and this rule has been changed only to the extent that advance payments shall not be made for the purpose of avoiding the provisions of the Lien Law, and it is for the plaintiff to allege and prove this fact if he would avoid advance payments and convert the fund to his own purposes. Certainly under a complaint which alleges that the fund is due and available in the hands of the owner or general contractor, it cannot be proved, ...