Edward R. Miller and Edward L. Russell, Respondents, v. Charles A. Smith and Others, Defendants; Selah W. Hallenbeck and Charles F. Allen, Appellants; Edgar L. Durkee and Fred M. Young, Respondents

Edward R. Miller and Edward L. Russell, Respondents, v. Charles A. Smith and Others, Defendants; Selah W. Hallenbeck and Charles F. Allen, Appellants; Edgar L. Durkee and Fred M. Young, Respondents. Mechanic’s lien —payments made in good faith in advance of their becoming due — effect of the contractor giving a note to a sub-contractor. Under the provisions of the Mechanics’ Lien Act (Chap. 348, Laws of 1885, as amended by chap. 673, Laws of 1895) an owner of property, engaged in erecting a building thereon, who, in'good faith and without fraud or collusion, pays to the principal contractor a balance due him, in advance of the time of payment fixed by the contract, is entitled to be credited with the amount of such payment in an action brought by creditors of the contractor to enforce liens filed against the property for materials furnished by them to the contractor, 'and used in its construction. The fact that a suh-contractor receives from the principal contractor a note for his claim against' him, does not extinguish the debt, nor prevent the former, upon the dishonor of the note, prior to the expiration of the time for filing a mechanic’s lien upon the premises, from availing himself of that remedy. Appeal by the defendants, Selah W. Hallenbeck and another, from a judgment of the Supreme Court in favor of the plaintiffs and certain of the defendants, entered in the office of the clerk of the county, of Fulton on the 37th day of May, 1897, upon the decision of the court rendered at the Fulton Special Term. This action was brought to foreclose a mechanic’s lien filed by the plaintiffs upon premises owned by the defendants Hallenbeck & Allen. ■ The defendants Hallenbeck & Allen,, being the owners of a certain lot of land, entered into a contract with the defendants Charles "A- Smith and Josiah Smith for the erection of a building thereon for the sum of $8,690, to be paid, as follows: Eighty, per cent of the value of the work and materials placed in the building to be paid every thirty days, until the sum of $6,952 should he paid, and the balance to be paid sixty days after said contract should be fully completed. The defendants Smith proceeded under the contract to erect the building, which was completed and accepted April 9, 1896. The plaintiffs performed labor and furnished materials used in the construction of said building as sub-contractors under the Smiths amounting in value to the sum of $215.53. The defendants jDurkee & Young furnished the contractors Smith materials for the construction of said building, and used therein, of the value: of $20.65. ■ Payments were made upon the contract by Hallenbeck & Allen to the contractors Smith from time to time, and on February 19, 1896, they paid the sum of $1,500 thereon, before the same was due and payable^ and received a discount thereon of $75. On March 7, 1896, being before the same was due, they paid the sum of $500, less a discount thereon of $25, leaving then due upon the entire contract price only tike sum of about $200, The defendant Handy also furnished labor and materials, for which he filed a lien.prior to that of the plaintiffs and the defendants Durkee & Young,, which lien being paid exhausted the balance of .the $200 remaining unpaid upon the contract. The plaintiffs’ work being completed, the defendants Smith, on the 18th of January, 1896, gave them a note for the amount thereof, payable three months after date, and took in return a receipt in settlement of their claim. This note went to protest, the defendants Smith becoming insolvent; and the plaintiffs thereafter, and on the 3d day of April, 1896, filed their lien. On the same day the defendants Durkee & Young also filed a lien for the amount of their claim. The trial court found that the last two payments made by the defendants Hallenbeck & Allen to the contractors Smith, to wit,, the sum-of $1,500 paid February 19, 1896, and $500 paid March 7, 1896, “were made without regard to the rights of the plaintiffs or said Durkee & Co., and in fraud of their rights, and were made collusively and in expectation on the part of said owners of thereby defeating the right of said plaintiffs and said Durkee & Co. to a lien on the said building and premises,” and directed judgment in favor of Durkee & Young and of the plaintiffs for the amount of their liens, and from the judgment so rendered this appeal is taken. C. M. Parke, for the appellants. L. L. Boyce, for the plaintiffs, respondents. George H. Witherhead, for the respondents, Durkee and Young. [MAJORITY — Herrick, J.:] Herrick, J.: If the finding of the trial court, that the payments of $1,500 and $500 were in fraud of the rights of the plaintiffs, and were made collusively, is correct, it disposes of this appeal. After a careful examination of the evidence as it appears in the printed record, I am unable to find any evidence to support that finding of fact, except that such payments were made in advance of the time when they were due, and that the defendants Hallenbeck & Allen received a discount thereon of $75 upon the $1,500 payment, and $25 upon the $500 payment. On the other hand, it does appear in the case from the testimony of Smith, one of the contractors, that at the time of making these payments, Mr. Hallenbeck asked him if he had settled with Miller & Russell, and was told that he had, “ by paying them with a note;" and-from the testimony of Hallenbeck, that he was told at the time of such payment, apparently at the time of the last payment, “ That there were no claims that were on or were to be put on or could be put on and that; he had no knowledge that Durkee & Young had any claim. These inquiries by the defendant Hallenbeck before he made the final'payment of $500, and.the answers that he received, would indicate that lie was acting in good faith. It is true that the fact that the plaintiffs had received a note in payment of their claim did not extinguish it, or prevent their filing a lien upon the note becoming due and remaining unpaid, prior to the expiration of the time fixed by the statute for filing liens. (Jones v. Moores, 67 Hun, 109.) But at that time the contractors Smith had not become insolvent, the note had not become due, and the defendant Hallenbeck had been told by the defendants Smith that they were worth $9,000, so ■that he had reason to suppose that the settlement with the plaintiffs by the Smiths’ note was a final settlement, and that such note would be paid at maturity. It does not seem to' me that any inference of bad faith or collusion can be drawn from the fact that the defendants Hallenbeck & Allen asked a discount as a condition of making payments in advance of the time that they were due; the reasons that they gave to the contractors Smith, that they had to raise the money, and that it would cost them something, and by that I assume they meant that they would have to pay a discount, are not unreasonable or improbable. The uncontradicted evidence that I have recited' seems to . me greatly more than sufficient to overcome any possible inference to be drawn from the mere fact that the money was paid in advance of the time specified in the contract, and that a discount was paid and received upon id being so-paid. The reading of the statute implies that payments may be made in advance of the time specified in the contract, without- there being any fraud or collusion. That payments were made collusively is something that must be affirmatively proved, and while the trial court was at liberty to discredit the testimony of the witnesses Hallenbeck and' Smith, yet, the mere fact that the testimony of a witness as to a fact is not believed does not of itself warrant a finding to the direct opposite of such testimony. I think, therefore, that the finding of the trial court, that such payments were made fraudulently and collusively, is not warranted by the evidence, and should be reversed, and that leaves the facts simply that the owners of the building have made payments in advance of the terms of the contract, and that thereby there is not sufficient money left in their hands due the contractors to meet the hen of the plaintiffs and of Durkee & Young, and we are asked to hold that payment in advance of the terms of the contract, and which leaves an amount insufficient to pay the claims of the lienors, is contrary to the terms of the statute, and will not relieve the owners of the property so paying from the lien of the mechanic) and we are referred to the case of The H. B. C. Co. v. N. Y. C. & H. R. R. R. Co. (145 N. Y. 390) to sustain that proposition. In that case, at pages 394 and 395, the court said: “ Under the Lien Act of 1885, chapter 342, it has been held in this court that where .the owner has made payments to his contractor, although without fraud or - collusion, before they are due under the terms of the contract, such payments cannot be allowed to the owner. (Post v. Campbell, 83 N. Y. 279, 283.) ” Of course, if that is a correct statement of the law, it disposes of the case before us. While I feel obligated to respect and follow the decisions of the Court of Appeals, yet when a statement appears in an opinion of that court, which is evidently inadvertently made, it does not seem to me to be controlling. The case referred to in the opinion, that of Post v. Campbell, was not a case arising under chapter 342 of the Laws of 1885, but under chapter 478 of the Laws of 1862; that law provides for disallowing as against lienors any payments made “ by collusion for the purpose of avoiding the provisions of this act, or m advance of the terms of any contract whereas chapter 342 of the Laws of 1885, as amended by chapter 673 of the Laws of 1895, provides- for disallowing, as against lienors, any payments made “ for the.purpose of avoiding the provisions of this act, or in advance of the terms of any contract * * * by collusion," etc. The distinction is obvious and need not be dwelt upon. So the case of Cheney v. Troy Hospital Assn. (65 N. Y. 282), cited in Banham v. Roberts (78 Hun, 246) to sustain the same proposition, ' was likewise decided under an act which provided that where the owner, “ by collusion, for the purpose of' avoiding the provisions of this act, or vn advance of the terms of any contract,” made payments, such payments should not be available to defeat a lienor. I think that neither the cases of The H. B. C. Co. v. N. Y. C. & H. R. R. R. Co., or of Cheney v. Troy Hospital, or of Post v. Campbell, can be regarded as authorities upon' the construction of chapter 342 of the Laws of 1885, as amended by chapter 673 of the Laws of 1895. It seems to me that a plain reading of the statute requires us to. hold that, except in cases of fraud or collusion, the owner cannot be compelled to pay any greater sum than the amount specified in Ms contract. (French v. Bauer, 134 N. Y. 548. See, also, Bradley & Currier Co. v. Ward, 15 App. Div. 386.) ■ To sustain the judgment in this case would be to compel the owners to pay more -i than the amount specified in their contract, without any fraud of collusion on their part being shown. The judgment should, therefore, be reversed, and a new trial granted, costs to abide' the event. All concurred. Judgment reversed, a new trial granted, costs to abide the event.