McAveney v. Brush

Headnote

Contempt — giving worthless sureties upon a bond given to discharge a mechanic’s lien—amount of the fine, by what court imposed.

Where the owner of premises against which a mechanic’s lien has been filed procures the discharge of the lien under chapter 342 of 1885, and in so doing gives a bond, the sureties upon which he knows to be worthless, he is guilty of a contempt of court for which he may be fined under section 2284 of the Code of ' Civil Procedure. (Per Daly, Oh. J., in the Court of Common Pleas.)

It is not alone the right of a lienor to an ultimate recovery in Ms pending action of foreclosure which is afiected injuriously by the giving of a worthless bond to procure the discharge of his lien. The discharge is procured in a proceeding under the Mechanics’ Lien Act, and the lienor’s right and remedy in that proceeding are defeated by the giving of the worthless bond. The bond is to take the place of the property, and the law contemplates substantial security to the lienor. (Per Daly, Ch. J.)

When such a bond is given the validity of the lien is assumed, and the right of the lienor to complete security in place of the land is unquestionable. (Per Daly, Oh. J.)

The penalty for such a contempt should be determined at Special Term, and to that end the case should be remitted there.

The fine in such case must be limited to an amount sufficient to indemnify the aggrieved party for the actual loss or injuries sustained, so far as that loss or injury is in excess of $250 and costs.

It seems, that the court has power, as a condition of waiving the imprisonment which it has the right to impose, to exact the performance of conditions which could not be imposed as a fine.

Reargumext of an appeal by the plaintiff, Bryan McAveney, from an order of the Court of Common Pleas for the city and county of New York, entered in the office of the clerk of said court on the 7th day of March, 1895, denying the motion made by the plaintiff to punish the- defendant Thomas H. Brush for contempt and for misconduct in putting in, or causing to be put in, fictitious or insufficient sureties upon an undertaking given to discharge the mechanic’s lien filed by the plaintiff, and to foreclose which this action was brought.

This action was brought to foreclose a mechanic’s lien on premises situated in the city of New York, upon which the defendant

Thomas H. Brush was erecting and constructing the Empire Hotel.

The issues were referred to a referee, and various hearings were had before him, and the reference ivas still pending at the time of the application to punish the defendant Thomas H. Brush for contempt of court.

The mechanic’s lien was filed on November 5, 1892, and thereafter the defendant Thomas II. Brush made an application to the court to discharge said mechanic’s lien by the giving of a bond, as provided in the Mechanics’ Lien Law (Subd. 6, § 21, chap. 312, Laws of 1885), and on the 16th day of November, 1892, the plaintiff’s attorneys were served with a copy of the bond and notice of justification of the sureties thereon for the 21st day of November, 1892. Upon said bond Eliza A. Brush and Charles E. Averill appeared as sureties. The affidavit of Eliza A. Brush, annexed to said bond, stated that she was a resident and freeholder within the State of New York, and worth the sum of $16,000 over and above all her debts and liabilities, and the said Charles E. Averill, in the affidavit by him annexed to said bonds, stated that he also was a resident and freeholder within the State of New York, and worth the sum of $16,000 over and above all his debts and liabilities.

On the said 21st day of November, 1892, the said sureties justified before the court, and the said justification was taken down in writing and filed in the office of the clerk of this court.

At a hearing before the referee on the 29tli day of January, 1895, the plaintiff’s attorney asked for an adjournment of one Aveek in order that in the meantime an application might be made on behalf of the plaintiff to stay all proceedings herein on behalf of the defendants, and to make an application to punish the defendant Thomas II. Brush for contempt in putting in, or causing to be put in, fictitious and insufficient sureties upon the undertaking given to discharge the mechanic’s lien. The grounds of the application Avere that the said Thomas II. Brush knew, at the time the said sureties executed the said undertakings, that they had no property within the State of Nbav York sufficient to justify in the amount of said undertaking, and that they AArere entirely worthless and irresponsible, and that said Thomas PI. Brush procured said sureties upon said undertaking as a part of a fraudulent scheme and conspiracy to defraud

the plaintiff herein from the collection of any judgment which the plaintiff might obtain in this action.

An order to show cause was granted February 7, 1895, by the Hon. Roger A. Pryor of the Court of Common Pleas, and Judge Pryor afterwards denied the motion, and an appeal was taken from the order entered thereon to the General Term of the Court of Common Pleas, which reversed the order so appealed from and adjudged the defendant Thomas H. Brush guilty of contempt, fined him §8,000 and ordered him committed to the county jail until he should deposit the said §8,000 in court to abide the event of the action.

The order of reversal was entered on the 6th day of June, 1895, and thereafter a motion was made by the defendant Thomas IT. Brush for a reargument and noticed to be heard on the first Monday of November, 1895. The defendant Thomas II. Brush, ¡lending the hearing and determination of the said motion for reargument, made an application for a stay of proceedings, and on the 20th day of June, 1895, an order was entered staying all proceedings on the part of the plaintiff to enforce the order of the General Term until the hearing and the determination of said motion for a reargninent, upon condition that the defendant file an undertaking in the penalty of $10,000, conditioned that if said order of the General Term be affirmed after reargument, then the defendant Thomas H. Brush would in all respects comply therewith.

The motion for the reargument was submitted to the General Term of the Court of Common Pleas in November, 1895, and thereafter the said General Term handed down a memorandum granting the said motion for a reargument and ordering that the same be heard before the Appellate Division of the Supreme Court.

The opinion of the General Term of the Court of Common Pleas reversing the judgment of the Special Term, and punishing the defendant for contempt, is as follows:

Daly, Ch. J.:

The plaintiff applied at the Special Term to punish the defendant Thomas IT. Brush for contempt for his misconduct in putting in, or causing to be put in, fictitious and insufficient sureties upon an

undertaking dated November 15, 1892, given to discharge a mechanic’s lien filed by the plaintiff on the 5th day of November, 1892, for $6,910, on property on the south side of Sixty-third street, between Columbus avenue and the Boulevard, in the city of New York; and also for causing and procuring said sureties to put in false affidavits regarding their sufficiency, and for the deceit and abuse of the proceedings of this court on discharging said mechanic’s, lien. The application is made in this action, which is brought for the foreclosure of the said lien, and is still pending, being on trial before a referee, to whom all the issues in the action were referred.

It is contended by defendant Brush that as the lienor has not yet established his right to a lien and a judgment of foreclosure, no right or remedy can be adjudged to have been affected, within the provisions of the Code, which restricts the power of the court to punish for misconduct to cases in which the right or remedy of a party to a civil action or special proceeding pending in the court may be impeded, impaired or prejudiced.

It is not alone a right of a lienor in his action of foreclosure which is affected injuriously by the discharge of a lien upon a worthless bond. The discharge of the lien is itself a proceeding under the Mechanics’ Lien Act, and it is the lienor’s right and remedy in that proceeding which are also defeated by the giving of the worthless bond. The lien act prescribes a direction by the court on the application of the owner of the premises, or the person against whom the notice of lien is filed, fixing the amount of the bond which shall not he less than the amount claimed in the lien,, and for the execution of said bond with two or more sufficient sureties who shall be freeholders, conditioned for the payment of any judgment which may be rendered against the property. It is also-prescribed that the sureties must justify in at least double the sum named in the bond, and that a copy of the bond with notice that the sureties will justify before the court or a judge thereof at the-time and place therein named, not less than five days thereafter must be served on the claimant or his attorney, and an order discharging the lien may be made by the court or a judge thereof, upon the approval of said bond. (Mechanics’ Lien Act of 1885, chap. 342, § 24, subd. 6.)

The party instituting the proceeding for the discharge of the lien has a right to such discharge upon giving the proper bond with sufficient sureties, and the right of the lienor, whose bond is so discharged, is to have a proper bond with sufficient sureties. The bond'is to take the place of the property, and the law contemplates substantial security to the lienor. When suoli bond is given the validity of the lien is assumed, and the right of the lienor to complete security in place of the land is unquestionable. He is as much entitled to sufficient sureties as he is to a proper form of bond; and it follows that to offer fictitious sureties is to completely defeat his right in that proceeding, and he is entitled to immediate redress and to all the remedies enforcible by the proceedings for a contempt.

In this case the defendant Thomas II. Brush, the owner of the premises, and liable personally for the plaintiff’s claim, instituted the proceeding to discontinue the lien, by giving a bond in the penal sum of $8,000, with two sureties, viz., Mrs. Eliza A. Brush, his mother, and one Charles E. Averill, who respectively justified in affidavits stating that they were each a resident and freeholder within the State, and worth the sum of $16,000 over and above all their debts and liabilities. The said sureties justified before the court upon notice. Mrs. Brush claimed to be the owner of premises 155 Lafayette avenue, in the city of Brooklyn, which she said were Avorth $40,000, subject to a mortgage of $13,000, and Avhicli were purchased by her seventeen or eighteen years before from one Barber for about $29,000. Averill swore that he OAvued 365 Lafayette avenue, in the city of Brooklyn; that it was Avorth* $40,000, and subject to a mortgage of $20,000, and that he also oivned 349 and 351 Lafayette avenue, in said city, Avorth $40,000, and subject to a mortgage of $20,000, and oivned real estate without incumbrance situated at Massepequa, Long Island, worth $8,000, and that the Lafayette avenue properties Avere conveyed to him on November 5, 1892, by the defendant Brush, a portion of the consideration being-in trade, and $13,000 in cash.

The plaintiff’s lien Avas discharged by an order of the court upon the approval of the above bond, and the only recourse of the plaintiff was then against the sureties upon the bond which took the place of the property.

It now appears that the surety Averill is whollv. insufficient; that he is not worth the amount of the bond instead of being worth double its penalty; and the plaintiff claims that such was the condition of both sureties at the time of their justification; that Brush knew it, and offered them as sureties for the purpose of depriving’ the plaintiff of his lien, and of any security in place thereof. The facts disclosed by the proofs show that the plaintiff has actually been deprived of his right to his lien, and of his remedies by the insufficiency of at least one of the sureties, and the evidence supports his claim that the condition of such surety was no better on Hovember 21, 1892, when he justified, than it is at present.

It appears that Mrs. Brush owned 155 Lafayette avenue, but that it was conveyed to her by her son, and not by Barber, and the consideration was $20,000 and not $29,000. It appears that in less than a year after she justified as surety she conveyed the property to her sister, in order to have a change of mortgages upon it, and that the mortgage incumbrances were increased from $13,000 to $17,100, and that the jn’operty was conveyed back to her. There are experts who swear that the value of this property is from $30,000 to $31,000.

It appears that the surety Averill has absolutely nothing to show for the $48,000 equity in his several pieces of real estate upon which he justified Hovember 21, 1892. He swore that 365 Lafayette avenue, mortgaged for $20,000, was worth $40,000. The mortgage was foreclosed, and it was sold on February 21, 1894, for $14,000. He swore that Hos. 349 and 351, mortgaged for $20,000, were worth $40,000. The mortgage was foreclosed, and they were sold in February, 1894, for $19,000. It also appears that the deed or deeds to him from Brush, by which he acquired said property, were never placed upon record. It appears that the Massepequa property was conveyed by the company of which defendant Brush was the president to him for the nominal consideration of one dollar, and that ten days after his justification he conveyed it to his wife for the consideration, $4,800. Judgments for deficiency against him upon the mortgage foreclosures have been entered, and execution against him upon another judgment has been returned unsatisfied. Real estate experts called by defendants testify that there has been a shrinkage of values in Brooklyn of fifteen to twenty per cent since the time of Averill’s justification; but this does not explain the dif

ference of fifty to sixty per cent between the values, as sworn to by him, and the amounts the premises brought on foreclosure.

While every indulgence should be extended to sureties in the matter of honest opinions as to the value of their properties, it appears in the case of Averill that he was a worthless surety; all the property he appears to have had was conveyed to him by Brush immediately before the justification, and evidently for the purpose of justifying upon it, and it is manifest that Brush was well aware of his condition, and o'f the value of said property.

Under these circumstances it would seem that the lienor in a proper proceeding is entitled to have the defendant Brush adjudged in contempt, and that the amount of the fine to be inflicted upon him shall be such as to restore or protect the rights of the lienor, which have been prejudiced by such misconduct. I regard it as within the power of the court to require a party who has put in a fictitious surety to pay into court a sum equal to the amount of the bond, to be held for the benefit of the lienor in case of his eventual recovery in the action. The Code of Civil Procedure (§ 2284) prescribes that if actual loss or injury has been produced to a party by the misconduct proved, a fine sufficient to indemnify him may be imposed, collected and paid over to the aggrieved party under the direction of the court. The actual loss or injury to the lienor is the discharge of his lien by the giving of the worthless bond, or a bond with a worthless surety; and the only fine sufficient to indemnify him must be one equal to the security afforded by a good bond and a good surety. In Cunningham v. Hatch ( 3 Misc. Rep. 101 ) a mechanic’s lien was discharged after suit brought, by a deposit with the county clerk under the same section of the Mechanics’ Lien Act (Subd. 3); a default was taken in the action, and the deposit with the county clerk withdrawn; the default was opened, and the judgment thereon vacated, and an order made requiring the defendant withdrawing the deposit to deposit the same with the county clerk • and it was held that the court had power to compel obedience to its order by proceedings for contempt.

In every case where the party giving a bond or making a deposit to discharge a lien is guilty of that misconduct which deprives the lienor of his security, the latter has the right to invoke the power of the court to make the security good. In the case of a fictitious sur

ety it can only be done by imposing a fine to the amount of the bond. The fine, when collected, will be paid into court and used to satisfy any judgment which the lienor may recover in his action to foreclose his lien. If he is defeated in the action the money will be repaid to the party from whom it was collected. The provisions of the Code above cited (§ 2284) provide-for such a case by directing that the fine be collected and paid to the aggrieved party under the direction of the court.

The order appealed from is reversed, and the defendant Thomas B. Brush adjudged in contempt for misconduct in having put in fictitious and insufficient surety, and for the abuse of the proceeding of the court in reference to the discharge of the plaintiff’s lien, and a fine of $8,000, the amount of the bond, is imposed upon him for such misconduct; such amount to be collected and paid into court, subject to the order of the court in this action.