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:
"Until service of a copy of the notice upon an owner as provided by section 2A:44-78 and 2A:44-79 of this title he shall be protected in payments made in good faith to any contractor or other person having a valid claim under sections 2A:44-77 to 2A:44-80 of this title. A failure to serve the notice herein provided for shall not otherwise affect the validity of such notice."
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, ...