Case ID: wis_117/html/0211-01.html
Source: Caselaw Access Project
Author: {"author": "WiNsnow, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Security National Bank of Sioux City, Iowa, Appellant, vs. St. Croix Power Company, imp., Respondent.
    
      February 7
    
    March 21, 1903.
    
    
      Federal courts: Decisions, how far binding on state courts: Powers of national banks: Defense of ultra vires: Mechanics' liens: Subcontractors: Novation of parties: Pleading: Description of land: Notice of claim: Bight to recover on contract.
    
    1. This court is hound to follow the holding of the United States-supreme court as to the powers of national hanks; but upon the question of the effect or application of such holding as a defense in a given case properly brought in the state courts, this court may properly follow its own decisions; even when differing from the decisions of the federal courts.
    2. Thus, in an action by a national bank to foreclose a mechanic’s lien for work done and materials furnished, where it was alleged as a defense that the acts of the bank were ultra vires, the settled doctrine of this state is applied, that such fact is not available as a defense.
    
      3. A subcontractor, after assigning bis contract to a bank as collateral security for an existing indebtedness, died insolvent, leaving the work unfinished. With the consent of his adminis-tratrix, of the principal contractor, and of the owner, the bank, in order to protect its security, assumed the completion of the work and was accepted as subcontractor in place of the deceased. Helé, that there was a complete novation of parties and that the bank was entitled to the lien of a subcontractor.
    4. In an action to foreclose a mechanic’s lien, the claim for which was alleged to have been filed in the proper office in St. Croix county, “that being the proper county therefor,” the land upon which the lien was claimed consisted of two parcels, one of which was described as being in “section 22, township 31, range 19 west," and the other as being in “section 21, township 31, range 19.” Helé, that it was a fair inference that the range 19 in the second description was the same range 19 named in the first, — such construction locating both parcels in St. Croix county.
    5. Where, in an action to foreclose a subcontractor’s lien, the complaint alleges that plaintiff duly gave notice to the owner, but proceeds to set forth specifically what such notice contained, and the notice as there given fails to state that plaintiff had performed or furnished any labor or material, as prescribed in sec. 3315, Stats. 1898, and fails to describe the land to be affected by the lien claimed, the complaint fails to state a cause of action to foreclose a lien.
    6. Allegations of the complaint, in such case, that, after plaintiff had served his notice of lien, the owner settled with the principal contractor and released him from his contract and at the same time assumed payment of all his building obligations, including the amount due plaintiff, are helé to show a contract for plaintiff’s benefit which, under sec. 3324, Stats. 1898, he may enforce in the lien action.
    Appeal from an order of tbe circuit court for St. Croix county: E. W. Helms, Circuit Judge.
    
      Reversed.
    
    This is an action to foreclose a mechanic's lien. Tbe complaint, after alleging tbe incorporation of tbe appellant, tbe respondent, and certain other corporations wbo were parties, alleges in substance that on August 11, 1899, tbe defendant Bobert N. King made a contract with tbe respondent tbe St. Croix Power Company to construct a dam, power bouse, flume, and tailrace upon tbe lands of tbe power company on Apple river, St. Croix county, Wisconsin, in consideration of $445,000 to be paid, and that tbe said King fully performed said contract before tbe commencement of tbis action; that on September 15, 1899, one John E. Robson, of Sioux City, Iowa, made a contract witb tbe said King to construct tbe flume, wbicb was a part of King’s contract, according to certain specifications and details, wbicb were fully set forth in tbe complaint; that said Robson entered upon tbe construction of said flume, and on tbe 21st day of September, 1899, assigned said contract to tbe plaintiff to secure an existing indebtedness wbicb be owed tbe plaintiff, and tbat tbe plaintiff gave due notice of said assignment to tbe defendants King and tbe power company; tbat, in December, Robson died insolvent ; tbat bis widow was thereafter appointed administra-trix, and tbat, witb her consent and for tbe protection of its security, tbe plaintiff assumed tbe completion of tbe work, and tbat, with tbe consent of tbe defendants King and tbe power company, tbe work was continued by tbe plaintiff as subcontractor; tbat tbe plaintiff expended many thousands of dollars in completing said work in accordance witb tbe terms of tbe contract, and tbat tbe same was done under tbe direction of tbe engineers of King and tbe power company; tbat tbe plaintiff was accepted by tbe defendants King and tbe power company as subcontractor for tbe purpose of completing said work, and tbat, after tbe completion thereof, said work was duly accepted by said defendants; tbat said work and tbe materials furnished in pursuance of said contract were of the agreed price in all of $33,393.51, and tbat no part thereof has been paid, except tbe sum of $25,838.71, and tbat there'is still due and owing to the plaintiff from said King and tbe said power company for such work and materials tbe sum of $7,554.86; tbat tbe last date of tbe performance of such work was on tbe 7th day of August, 1900.
    “Tbat within sixty days from tbe last charge for perforing said work, labor, and services, and furnishing the materials aforesaid, to wit, on tbe 31st day of August, 1900, tbe plaintiff above named duly gave notice in writing to tbe St. Croix Power Company, tbe owner of tbe property hereinafter described, by delivering to and leaving with H. 0. Baker, Esq., tbe vice president and general manager of said company, a' true copy thereof, and filed a copy of said notice in tbe office of tbe clerk of tbe circuit court for St. Croix county, which said notice set forth that tbe claimant has been employed by Bobert N. King to perform work, labor, and services, and furnish materials, together with a statement of tbe work performed and materials furnished, and tbe amount due therefor from Bobert N. King to this plaintiff, to wit, tbe sum of $7,554.86, as hereinabove set forth, and that tbe plaintiff claimed a lien therefor given by chapter 143 of the Bevised Statutes of tbe State of Wisconsin for the year 1898; that thereafter, and within six months from the date of the last charge of said work and labor performed and materials furnished as aforesaid, and on the 1st day of September, 1900, the plaintiff duly caused to be filed a claim for lien, pursuant to chapter 143 of the Bevised Statutes, for the amount due and owing from said defendant Bobert- N. King to the plaintiff, in the office of the clerk of the circuit court for St. Croix county, that being the proper county therefor, which claim for lien so filed contained a statement of the contract or demand upon which it was founded, the name of the person against whom the demand is claimed, the name of the claimant, the last date of the performing the work, labor, and services, and materials furnished, a description of the property affected thereby, and a statement of the amount claimed; that due notice of the plaintiff’s claim in writing had heretofore been given the defendant the St. Croix Power Company, and all other material facts in relation thereto, which claim was duly signed by John W. Bashford, the attorney for the claimant ; that one year has not elapsed since the last charge aforesaid; that the following is a description of the property affected thereby: [Here follows a description of the property.]
    . . . Plaintiff further alleges that in and by the contract between the defendant Bobert N. King and-the defendant the St. Croix Power Company, dated August 11, 1899, it is expressly agreed that if any indebtedness, charge, or claim shall become a lien upon any of the said land, property, structures, machinery, or anything thereby contracted for, or any lien therefor shall be filed in the manner provided by law, whether the same shall be filed or claimed by any material-man, subcontractor, laborer, judgment creditors, or by any other person, copartnership, or corporation holding or claiming the same against said party of the first part, his successors or assigns, or against any subcontractor of said party of the second part, his successors or assigns, and said lien shall not be discharged or removed ■ within thirty days after notice thereof to said party of the first part, said party of the second part may, and it is hereby authorized to, cause the same to be satisfied and discharged, and the amount, if any, paid by said party of the second part to secure said satisfaction and discharge, shall be taken and considered as a payment made hereunder by said party of the second part unto said party of the first part, without reference to the actual validity of any such lien.
    “That after the plaintiff had served notice of its claim for lien upon the defendant the St. Oroix Power Company, and had filed its lien in the office of the clerk of the circuit court for St. Croix county, the defendant the St. Croix Poiver Company settled with the defendant R. N. King, and paid said King a large sum of money, and released said King from said contract. That at the same time the defendant the St. Croix Power Company assumed the payment of all the obligations of the defendant Robert N. King with reference to the completion of the work, which included the amount due and owing the plaintiff.”
    Judgment was demanded against the defendants King and the power company for $J,524.86, with interest and costs; that the demands of all other persons who have filed claims for liens upon said premises be ascertained and adjudged; and that all of said liens, including that of the plaintiff, be enforced by sale of the premises described.
    To this complaint the defendant the St. Croix Power Company demurred, on the grounds (1) that the plaintiff has no legal capacity to sue; (2) that several causes of action have been improperly united; and (3) that the complaint does not state facts sufficient to constitute a cause of action. This demurrer was sustained, and the plaintiff appeals.
    
      For tbe appellant there was a brief by John W. Bashford, attorney, and Wright, Call & Hubbard, of counsel, a separate brief by John W. Bashford, attorney, and B. M. Bashford, of counsel, and oral argument by B. M. Bashford.
    
    For tbe respondent there were briefs by Baker & Haven, attorneys, and F. W. M. Cutcheon, of counsel, and oral argument by H. C. Baker and Spencer Haven.
    
   WiNsnow, J.

Tbe salient facts stated in tbe complaint may be briefly stated as follows: A national bank received from a subcontractor a building contract as collateral for a pre-existing loan of money, and upon death of tbe subcontractor, leaving bis contract incomplete, proceeded, with tbe consent and approval of tbe personal representative of tbe subcontractor, tbe principal contractor, and tbe owner, to fully complete the contract, and now seeks to foreclose a mechanic’s lien as subcontractor upon tbe structure for tbe unpaid balance due upon tbe subcontract, which tbe owner on settlement with the principal contractor assumed and agreed to pay to tbe plaintiff. Tbe question whether tbe plaintiff can maintain an action to foreclose a mechanic’s lien will be first considered.

Tbe respondent contends that tbe act of tbe bank in proceeding to carry out tbe building contract was ultra vires, and that no right of action can be founded thereon of any kind. It is certainly true that no such power has been conferred upon it in express terms. It has power to loan money on personal security, and it has. all such incidental powers as are necessary to carry on tbe banking business. N. S. U. S. sec. 5136 [IT. S. Comp. St. 1901, p. 3455].

It is not questioned but that tbe bank has power to receive and bold tbe building contract as collateral security for the repayment of a pre-existing loan, and to sell or convert tbe same into money to pay the loan. Did it also have power to go on and complete tbe contract when the contractor died insolvent? Was tbis an incidental power necessary for tbe carrying on of its legitimate banking business ? It might be tbe only possible course by which anything could be realized out of the collateral, as seems by fair inference to have been the case here; and the argument is somewhat persuasive that in such case the bank should have the power to take all necessary steps to utilize and make valuable its collateral lawfully taken. On the other hand, the argument is that it would be dangerous to the interests of stockholders and depositors to authorize banks to go into such enterprises, involving large expenditures for the purchase of materials and the employment of men, and the incurring of large pecuniary risks in an entirely foreign undertaking, and in support of this view the cases of National Bank v. Ottawa, 43 Kan. 294, 23 Pac. 485, Cockrill v. Abeles, 30 C. C. A. 223, 86 Red. 505, and Cooper v. Hill, 36 C. C. A. 402, 94 Eed. 582, are cited. The question is certainly one of considerable difficulty, but, in view of considerations to be stated, we do not find it necessary to decide it. This court would unquestionably be bound to follow the holding of the supreme court of the United States as to the powers of national banks — this is strictly a federal question — but on the other hand, upon the question of the effect or application of such holding as a defense in a given case properly brought in the state court, this court may properly follow its own decisions, even when differing from the decisions of the federal courts. Such questions are not federal questions. This court, by a series of decisions, has held that, when a corporation enters into business relations not authorized by its corporate grant of power, the doctrine of ultra vires canhot be used by it or by the person with whom it assumes to deal as a means of defeating the'obligations assumed. The state alone can take advantage of the abuse. John V. Farwell Co. v. Wolf, 96 Wis. 10, 70 N. W. 289, 71 N. W. 109 ; Zinc C. Co. v. Bank, 103 Wis. 125, 79 N. W. 229 ; Att’y Gen. ex rel. Askew v. Smith, 109 Wis. 532, 85 N. W. 512.

Even if it were to be conceded,., therefore, that it was beyond the power of a national bank to enter upon the work of constructing the flume and fulfilling Hobson’s contract, still we are not required to determine what the doctrine of the federal courts- is as to the availability of that fact as a defense. Many eases were cited upon this question; the plaintiff relying upon National Bank v. Matthews, 98 U. S. 621, and the cases which follow it, and the defendant upon McCormick v. Market Bank, 165 U. S. 549, 17 Sup. Ot. 433, and California Bank v. Kennedy, 167 U. S. 368, 17 Sup. Ot. 831, and similar cases. We think it must be confessed that there is some difficulty in reconciling all that is said in the two lines of cases, but, as before stated, the fact that this court has adopted the principle that the question cannot be litigated by private parties, a principle with which we are entirely satisfied, relieves us from further consideration of the question.

We come, then, to the question whether, under the facts stated in the complaint, the plaintiff became a subcontractor for the work, for, if not, it has acquired no right to a lien. Robson was unquestionably a subcontractor, and, had he finished the work, would have been entitled to perfect a lien upon the property. Has the plaintiff succeeded to his rights as subcontractor ? The allegations are that Robson, after commencing the work, assigned his contract to the bank as collateral to an existing indebtedness. This was a lawful act, and vested in the bank a valuable interest in the contract. It did not of itself constitute the bank a party to the contract, nor did it carry to the bank any right of lien, but it'gave the bank such a beneficial interest therein that it could not be called a volunteer. It is alleged that, after prosecuting the work for a few months, Robson died insolvent, leaving the work unfinished, and his widow was appointed administra-trix; that the bank then stepped in, in order to protect its security, and assumed the completion of the work, with the consent of the administratrix, the principal contractor, and the owner, and was accepted by tbe principal contractor and owner as subcontractor, furnished tbe labor and material necessary, and completed tbe work in accordance witb tbe contract. Do these facts constitute tbe bank a subcontractor? We think they do, upon well-settled legal principles. It is entirely competent for tbe parties to an executory contract acting witb a third person to substitute such third person, by consent of all, in place of tbe original contractor. This is simply a species of novation. All. parties must, of course, consent to it, and there must be a release of tbe original contractor, who is to step out. Here it appears that, after tbe death of Robson and tbe consequent suspension of tbe work, by agreement of all parties, including tbe personal representative of Robson, tbe bank, tbe principal contractor, and tbe owner (whose consent, however, was probably not necessary), tbe proposal of tbe bank to go on and finish tbe work was agreed to, and the bank was accepted as subcontractor in place of tbe deceased, Robson. This state of facts satisfies tbe requirements of a complete novation of parties. Bohn Mfg. Co. v. Reif, 116 Wis. 471, 93 N. W. 466, and cases cited. These facts put tbe bank in tbe shoes of Robson, and constituted it, in truth and in fact, a subcontractor.

It is said that tbe description of land in tbe complaint upon which the lien is claimed is so defective that it cannot be located. There are two parcels attempted to be described, tbe first- bounded by an irregular line witb many angles and changes of course, and tbe second a quadrangle of twenty acres. As to tbe first piece, it is described as being in section 22, township 31, range 19 west; tbe second is described as bounded by a line commencing at a point ten rods north of tbe N. W. corner of the'S. W. quarter of S. W. quarter of section 22, township 31, range 19, thence north forty rods, thence west eighty rods, thence south forty rods, thence east eighty rods to tbe place of beginning, containing twenty acres, in section 21. It is said that tbe first piece is bounded by a zigzag line which, goes nowhere and incloses nothing, and the second piece does not appear to be either east or west of any meridian. We think the objections are untenable. We are unable to say that the boundary line of the first parcel includes nothing. As near as we can determine, it does inclose an irregular parcel of land, while, as to the second description, we think that the fair inference is that the range 19 there named is the same range 19 named in the first description. This locates both parcels in St. Oroix county. There is, however, a radical difficulty with the allegation concerning the notice of the subcontractor’s lien, whieh is now to be considered.

Our statute (sec. 3315, Stats. 1898) requires, as a prerequisite to a subcontractor’s lien, the giving of a notice, which is required to set forth that he has been employed by the principal contractor to perform or furnish and has performed or furnished such work, labor, or material, with a statement of the labor performed or material furnished, the amount due therefor from the principal contractor, and that he claims the lien given by the lien chapter. This court has held that a description of the property to be affected by the lien is an essential part of the notice. Mark Paine L. Co. v. Douglas Co. I. Co. 94 Wis. 322, 68 N. W. 1013. Referring to the allegation of notice in the complaint before us, it will be seen that, while it says that the plaintiff duly “gave notice,” it proceeds to set forth specifically what said notice contained, and that the notice as given failed to contain any statement that the claimant had furnished any labor or materials, and also failed to give any description of the land to be affected by the lien claimed. These omissions are fatal to the complaint, as a complaint to enforce a mechanic’s lien. Unless a notice containing the statutory requirements was served (and we cannot presume that it contained anything more than set forth in the complaint), the lien was lost.

Objection is also made to the allegations of the complaint as to the filing of the claim for a lien under sec. 3320, Stats. 1898. Reference to tbe complaint, however, shows that the claim is alleged to have contained all that the statute requires.

It results from the foregoing that no cause of action for the foreclosure of a mechanic’s lien is stated in the complaint, but it does not necessarily follow that no cause of action of any hind is stated against the appellant. The complaint alleges positively that, after the plaintiff served its notice of lien and filed its claim, the appellant settled with King, and released him from his contract, and at the same time assumed payment of all the building obligations of King, including the amount due the plaintiff. We construe this as meaning that appellant’s promise to pay the plaintiff was made as a part of the agreement of settlement. If so, it was a promise based upon a consideration made to one person for the benefit of a third person, which immediately became a contract which the third person could enforce. Tweeddale v. Tweeddale, 116 Wis. 511, 93 N. W. 440. Sec. 3324, Stats. 1898, provides that in case a lien claimant fail in his action for a lien, but establish a right “to recover upon contract” for his work or materials, he may have judgment therefor against the person liable.

The complaint states a good cause of action to recover upon contract, hence a general demurrer must be overruled. Mark Paine L. Co. v. Douglas Co. I. Co. 94 Wis. 322, 68 N. W. 1013. This is the only cause of action well stated in the complaint, hence the objection that several causes of action "are improperly united is untenable.

By the Court. — Order reversed, and action remanded with directions to overrule the demurrer to the complaint.