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Shore Block Corp. v. Lakeview Apartments

decided: May 18, 1967.

SHORE BLOCK CORP., APPELLANT,
v.
LAKEVIEW APARTMENTS, A PARTNERSHIP COMPOSED OF WILLIAM H. PERLMAN AND BERYL N. PERLMAN, PARTNERS, THE DONRICH CORPORATION, A CORPORATION OF THE STATE OF NEW YORK AUTHORIZED TO DO BUSINESS IN THE STATE OF NEW JERSEY, DOUGLAS T. CONSTRUCTION COMPANY, INC., A CORPORATION OF NEW JERSEY, UNITED STATES OF AMERICA, AND LOUIS M. DRAZIN, RECEIVER OF DOUGLAS T. CONSTRUCTION COMPANY, INC. AND UNITED STATES OF AMERICA, INTERVENOR



Smith and Seitz, Circuit Judges, and Joseph S. Lord, III, District Judge.

Author: Lord

Opinion OF THE COURT

JOSEPH S. LORD, III District Judge.

This action arises out of plaintiff Shore Block's attempt to enforce a "stop notice"*fn1 against the defendant Lakeview Apartments ("Lakeview") for amounts owing to plaintiff on account of materials furnished to Douglas T. Construction Co. ("Douglas T."), a subcontractor working on the construction of an apartment building for the owner, Lakeview. The general contractor on the job was Donrich Corporation ("Donrich"), whose principals are the same as Lakeview's although it is a separate corporation. Plaintiff appeals from a judgment against it by the trial judge sitting without a jury.

The essentials of the New Jersey mechanics' lien scheme are:

(1) Before a contractor, subcontractor, or materialman can assert a lien against the property, he must file a "notice of intention" before work under the contract has begun. N.J. Stat. Ann. 2A:44-71.

(2) However, if the prime contract between the owner and the general contractor is filed with the proper county clerk, thereafter the subcontractors and materialmen are precluded from filing the notice of intention, and hence from asserting a lien against the property. N.J. Stat. Ann. 2A:44-75.

(3) When the prime contract has been filed, the lien protection is supplanted by the subcontractors' and materialmen's rights to file a "stop notice." N.J. Stat. Ann. 2A:44-77; Meyer v. Standard Accident Ins. Co., 114 N.J.L. 483, 177 A. 255 (E. & A. 1935).

(4) The stop notice, which is filed against the owner of the premises, but not against the property, results in a garnishment of funds in the hands of the owner which are owing to the prime contractor. Where it is filed by a materialman or sub-subcontractor, it is effective even though the prime contractor has satisfied his own obligation to his own subcontractor, N.J. Stat. Ann. 2A:44-78; Arrow Buildings Supply Corp. v. Hudson Terrace Apts., 15 N.J. 418, 105 A. 2d 387 (1954).

(5) The remedy by stop notice is available only when the right to file a notice of intention, and thus to obtain a mechanics' lien, is foreclosed by the filing of the prime contract. English v. Warren, 65 N.J. Eq. 30, 54 A. 860 (Ch. 1903).

Against this background, we consider the facts:

The prime contract between Lakeview, the owner, and Donrich, the general contractor, was entered into on June 10, 1964, and was filed in the Office of the Monmouth County Clerk on June 11, 1964. On July 8, 1964, Donrich entered into a subcontract with Douglas T., subcontractor, for masonry and materials. This latter contract between Donrich and Douglas T. Contained the following provision:

"8. The Subcontractor hereby covenants and agrees:

"(a) To save the Owner and the Contractors harmless from any and all claims, demands, suits, of whatsoever kind or nature, arising out of the performance of this Subcontract, and from liens or claims for liens against the aforesaid premises or any part thereof, or any buildings thereon, of any subcontractor, or any persons acting through or under the Subcontractor, and agrees that if at any time there shall be any evidence of the filing or maintenance of any such claims, demands, suits, liens or claim for lien, the Contractor shall have the right to deduct from the ...


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