
    Miner vs. Hoyt.
    Under the New-York city mechanics’ act, (Sess. L. of ’30 p. 412, and Sess. L. ’32, p. 181,) the claimant cannot acquire a lien on unliquidated damages which have accrued to the builder by reason of a violation of the contract on the part of the owner; but the lien is restricted to such funds as are due or to become due for actual performance.
    In an action under the above law, the owner is entitled to be allowed for all de. mands he held against the builder at the time the attested account was served, provided they be such as might have been set off in an action brought by the builder himself.
    Otherwise, if the set-off be shown to have been created in fraud of the plaintiff’s lien. Per Cowen, J.
    The plaintiff in such action cannot use the builder as a witness, he being interested.
    A release to the builder, sufficient to obviate the objection as to his interest, would necessarily extinguish the plaintiff’s right of action; and this, notwithstanding an express declaration in the release that such was not the intent. Per Cowen, J.
    Where a release of this character, however, is given by the plaintiff at the trial, the defendant can only avail himself of the fact by pleading it puis darrein coniinu. anee. Semble ; per Cowen, J.
    In general, the assignee of a demand takes subject to every equitable defence exist, ing against it in the hands of the assignor. Per Cowen, J.
    
      Semble, that this rule applies even to cases where the assignment is absolute and operates a transfer of the legal as well as equitable interest in the demand.
    Otherwise, as to bills of exchange and promissory notes, transferred to a bona fide holder. Per Cowen, J.
    On error from the New-York common pleas. A. Hoyt sued Miner under the New-York city mechanics’ act, {Stat. of 1830, p. 412, and Stat. of 1832, p. 181,) for work done by said Hoyt in building a house, viz. No. 157 Henry-street. The work in question was done for D. Hoyt, the contractor, between the 3d of February, 1839, and the 15th of April following ; and the attested account of A. Hoyt was served upon Miner on the 29th of April, 1839.
    The contract between Miner and D. Hoyt was entered into August 1st, 1838, and by its terms the house was to be finished February 1st, 1839 ; but on the 21st of November, 1838, the parties extended the time for finishing the house to the 25th of April, 1839. The contract bound Miner to pay D. Hoyt for building the house the sum of $5564,34, as follows : “ When the first tier of beams are laid and front and rear walls put up, $500. When the third tier of beams are laid and walls put up, $500. When the roof is tinned and completed, $700. When the scratch coat is on and floors laid, $700. When the brown coat is on, sashes glazed and put in, &c. $700. When the walls, ceilings, cornices and all the hard finish is on, &c. $900,. When the window shutters and doors are all hung, &c. $300 ; and the balance when the building is all completed.”
    The above sums included the mason work, a part of which was a party wall to be appraised by disinterested persons and paid for by D. H )yl. This was afterwards appraised at $312. The mason work was valued by D. Hoyt and Miner at $3350. One Pierson undertook to do that; and all three agreed that Miner should pay Pierson directly, thus : 61 When the first tier of beams are on, front and rear up, $300. When the third tier of beams are on and walls up, $300. When the roof is on and tinned, $400. When the scratch coat is on, $400. When browned, $400. When yard finished, $400. The balance when house is finished, $1150.” On the 15th of August, 1838, D. Hoyt gave Pierson an order on Miner pursuant to the above arrangement. Pierson assumed the price of the party wall, and gave his note to Miner for it according to the appraisement. The note bore date October 3d, 1838. On the 15th of April, 1839, the building had progressed to that stage when the sixth instalment, specified in the contract between D. Hoyt and Miner, became due, viz. the $900 payment. Some work had been done also towards the seventh payment. The building then took fire and was partially destroyed; whereupon a disagreement arose between D. Hoyt and Miner, in consequence of which the former ceased to work, and Miner had the building finished by others. Evidence was given tending to show D. Hoyt’s readiness to go on and complete the building by the extended time, (25th of April,) and that Miner refused to allow him to do so.
    
      It was not disputed that, when the fire happened, Miner had paid to D. Hoyt and Pierson the sum of $3770 on the building contract. Miner also claimed to be allowed, either as payment or by way of set-off, the $312 note given by Pierson for the estimated value of the party wall. He also claimed to have allowed him a due-bill purporting to have been given him by D. Hoyt for $78 money lent, and dated March 30, 1839.
    On all the points in dispute, D. Hoyt himself was an important witness for the plaintiff in the court below, A. Hoyt. On his being offered, he was objected to by the defendant, Miner; whereupon the plaintiff executed.a release. The release was of all demands &c. and all personal liability, but declared it to be understood that the release should not operate to prejudice the plaintiff’s claim in this suit. The defendant next objected that the release, if operative to any extent, discharged the plaintiff’s cause of action ; and that, if not, it was insufficient to restore the witness’ competency. The court decided that the witness might be sworn.
    Much testimony was given and various questions raised in the court below, not necessary to be here stated. The court charged, among other things, that if the due-bill for $78 was given upon a mere loan, it could not be allowed the defendant, -either as so much paid D. Hoyt, or as a set-off; otherwise, if there had been an agreement between D. Hoyt and the defendant that it should apply as payment. The court further instructed the jury to disallow the defendant’s claim in respect to the Pierson note of $312. Exceptions were taken to the charge, and also to the decision admitting D. Hoyt as a witness. Verdict and judgment for the plaintiff below ; whereupon Miner, the defendant, brought error.
    
      C. Be Witt, for the plaintiff in error.
    
      P. A. Cowdrey, for the defendant in error.
   By the Court,

Cowen, J.

Several of the questions addressed to the witnesses appear to have been allowed by the court below on the assumption that the plaintiff might fix a Hen on the unliquidated damages supposed to be due from the defendant, in consequence of his preventing D. Hoyt’s going on after the fire and completing the contract. Perhaps most of them might have been relevant, if such damages can be said to have been in issue. But we think they were not. We are of opinion that the fund contemplated by the statute is confined to what is due or to become due for actual performance by the contractor. (See 3 R. S. 273, 2d ed., act of 1830; and Sess. Laws of 1832, p. 181.) The owner is to retain out of his subsequent payments to the contractor ; (act of 1830, § 1;) and the recovery of the plaintiff is “ to the extent in value of any balance due by the owner to his contractor under the contract with him” at the time of the notice first given by the plaintiff, “ or subsequently accruing to such contractor under the same.” It is the balance due, or the balance subsequently accruing due. (Id. § 4.) The demand must in general be of a nature for which an action of debt or indebitatus assumpsit would lie. At least, it must be due as a consequence of actual performance. The claim arising from a refusal to allow performance is of a nature entirely different. There is not in such case any thing due by the owner under the contract. It is departed from and violated, for which special damages are to be recovered, unmeasured and even more uncertain in their amount than those in many actions brought for a mere wrong.

We are also of opinion that the sum due for money lent from D. Hoyt, the contractor, to the defendant below, and offered as a set-off, was improperly excluded. The assignee of a demand takes subject to every equitable defence existing against it while in the hands of the assignor. I shall presently examine whether this may not be considered the rule even in respect to demands, the legal interest whereof is transferred by absolute assignment; though I admit that promissory notes and bills of exchange are exempt from the rule when sold bona fide, by reason of their peculiar privilege as commercial paper. A proceeding under the statute certainly confers upon the mechanic or material-man no greater rights than those of an absolute assignee.

The claim to set off the note of $312 against Pierson, stands upon a similar principle. By arrangement between him, D. Hoyt and the defendant, Pierson had, in respect to the mason work, taken the place of Hoyt as contractor. The contract for that work stood between Pierson and the defendant. By arrangement he had, pro tanto, taken the place of Hoyt; and the equities are to be considered between him and the defendant.

The question would have been different if the set-offs had been created in fraud of the plaintiff’s lien; but there is no pretence of that being so.

The court below charged, and it is not denied that, by express agreement between the contractor and owner, these matters of set-off might have been applied. The equity is the same, whether there was an agreement or not. It cannot be said, in an equitable sense, that there is a sum due from A. to B. under a contract, when B. owes A. a sum equal to the former. The statute of set-off, as it was worded before the late revisal, spoke of mutual debts only between the immediate parties to the suit; but it was early held that it comprehended, in spirit, a debt due to the defendant from the party under whom the plaintiff claimed. True, a balance could not be certified against the plaintiff in the latter case ; but the set-off was received to operate defensively to the extent of the plaintiff’s claim. In O'Callaghan v. Sawyer, (5 John. Rep. 118,) the plaintiff was assignee, by endorsement, of a promissory note; and the note being endorsed after it was due, this court reversed the judgment of the common pleas, because it had excluded from the defence matter of set-off against the payee. Nearly twenty years after, that case was overruled in Johnson v. Bridge, (6 Cowen. 693.) But this decision, though affirmed by the court of errors, was- maintained by a tie vote; (Bridge v. Johnson, 5 Wend. 342;) and in Driggs v. Rockwell, (11 id. 504,) it may, I think, be considered as overthrown. The late case in the king’s bench of Burrough v. Moss, (10 Barn. & Cress. 558,) agrees with that cited from my reports. It wras not decided, however, without much hesitation, and is in turn I think shown to be very questionable in principle, by the learned opinion of Ruffin, Ch. J. in Haywood v. M’Nair, (2 Dev. & Bat. 283.) But suppose the question to be doubtful, where the debt is absolutely assigned ; suppose the assignor can evade a legal defence by transferring the debt to another; there is a feature in the case at bar which brings it within the narrowest ground to which that of Driggs v. Rockwell can be reduced. The judges who delivered opinions in-that case, (the chancellor and senator Beardsley,) both agreed that where, notwithstanding the assignment, the assignor still continues the real plaintiff, the set-off is receivable. There the note was assigned as a collateral security, and the chancellor said the principal debtor was the real plaintiff. The demand holden by the plaintiff below in the principal case was no more than a collateral security for his demand against D. Hoyt. A recovery will, if followed by satisfaction, satisfy the debt of D. Hoyt, as it would have done the principal debt in Driggs v. Rockwell. The chancellor had before expressed a similar opinion in Bridge v. Johnson.

The objection to the reception of D. Hoyt as a witness was clearly well founded, unless the release enured as a discharge of the witness; .in which latter view it would be still more fatal to the plaintiff’s demand. The effect of his failure to show a fund adequate to the payment of his demand, would be to bar the witness, pro tanto, in any suit he might afterwards bring in his own name for the same fund. This suit was litigated with full notice to him, which the owner is always bound in such case to give the contractor. (Act of 1830, § 2; and see Collins v. Ellis, 21 Wend. 405 to 407.)

On the other hand, most, clearly the debt due from D. Hoyt to the plaintiff was vital to his claim against the defendant. The statute gives it as a consequence of that debt. The claim is a mere incident, like a guaranty. A release of the principal necessarily discharges the surety. True, the legal effect of a release may sometimes he qualified. A creditor releasing one of two joint debtors may restrict its operation in such a a way that it shall not discharge both; but there the debt may remain as to one, though gone as to the other, if it be not actually paid. In the principal case, the creditor sought to enforce the collateral security after the principal debt was discharged, which is contrary to the nature of things. The case is like a grant of the whole subject matter, declaring that it shall not operate according to its necessary legal effect. The intent to discharge D. Hoyt is plain on the face of the instrument ; and words are used entirely adequate to that effect. Suppose a reversioner to give his tenant an absolute deed of bargain and sale, proviso that it shall not have the effect to discharge the rent ■; would either the tenant or his surety for the rent be longer holden 1 It seems to me that the weight of the argument lies on this side of the case. It is said the release was given after the action was commenced ; but that does not alter its effect in the abstract, for a debt may be as well released after suit brought as before. Being after issue joined, indeed after the jury were empanneled, it was, I suppose, necessary to plead the release puis darrein continuance. (Chit. Pl. 658, 9, Am. ed. of 1840, and looks there cited.) Strictly, therefore, the objection perhaps could not avail in form; and it may be conceded that the witness was competent. But for the other reasons mentioned, we are of opinion that the judgment should be reversed.

Judgment reversed.  