Court Opinion

ID: 3815853
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:52:36.837254+00
Date Added: 2024-06-11T07:39:22.662101
License: Public Domain

On the coming down of the original opinion in this case plaintiffs in error filed their petition for rehearing, as also did H. Y. Thompson, successor to W. C. Pierce, who was *Page 69 
trustee in bankruptcy for Kruger, the original contractor. It is insisted by plaintiffs in error: First, that by and on account of the bankruptcy of the original contractor, the claims for liens against the property of these plaintiffs in error on the part of the subcontractors and materialmen were wiped out; that there is but one debt, which is the debt of the contractor, and when this is settled, either by payment or bankruptcy, the foundation for the lien fails, and to support this claim they cite the case of Pike Bros. Lumber Co. v.Mitchell, 132 Ga. 675, 64 S.E. 998, 26 L. R. A. (N. S.) 409, and some other cases from that jurisdiction. Counsel for the lien claimants as against this contention cite, among others, the following authorities: In re Adam Huston, 7 Am. Bankr. Rep. 92; Crane Co. v. Smythe, 42 Misc. Rep. 338, 86 N.Y. Supp. 711,94 A.D. 53, 87 N.Y. Supp. 917, 11 Am. Bankr. Rep. 747;Matter of Grissler, 136 Fed. 754, 69 Cow. C. A. 406, 13 Am. Bankr. Rep. 508  — to support the proposition that an adjudication of bankruptcy of the original contractor does not cut off the right of a subcontractor or materialman to file and enforce his lien against the owner's land, and in our judgment it was not the intention of the Legislature in its passage of the mechanic's lien act to provide that the insolvency or bankruptcy of the principal contractor should defeat the claims mentioned. See, also, John P. Kane Co. v. Kinney et al.,174 N.Y. 69, 66 N.E. 619. It is true section 6156, Comp. Laws 1909 (Rev. Laws 1910, sec. 3867), provides that the original contractor shall be made a party defendant in all such actions, and it is further true that where he has become a bankrupt he cannot be sued and the liability enforced personally against him, but the very purpose of the act is to subject the property of the owner to the payment of the debts incurred by the original contractor when he does not pay them himself, and it would be a strange anomaly if, when that very condition arises and the original contractor availed himself of the bankruptcy statute, the law which was made to protect such of his creditors would then, when needed most, wholly fail. When the owner begins to construct his building, engages his contractor, and the contractor purchases material or employs laborers, they all *Page 70 
act with this statute in view, and with the knowledge on the part of all that the liability of the original contractor to materialmen and laborers within the scope of his contract may, on his failure to meet it, be enforced against the property. Under the authorities, the death of the original contractor will not defeat such claims, and his executor or administrator is properly made a party to the proceeding. Vernon, Adm'r, v.Harper et al., 79 Ohio St. 181, 86 N.E. 882, 20 L. R. A. (N. S.) 44. And we can see no reason why the trustee in bankruptcy might not likewise be made the party defendant. Hence we conclude and agree with counsel for the claimants that the bankruptcy of the original contractor in this case did not wipe out the right to the lien of the materialmen and subcontractors.
But it is contended, and the record discloses, that although nominally made a party, no prayer was made against the trustee, and no judgment taken establishing the debt of the subcontractors and materialmen as a foundation for their lien against the property of the plaintiffs in error, and this failure is made the ground for the insistence of the plaintiffs in error that the action must fail and the liens awarded by the judgment of the trial court be set aside and its judgment reversed. In this contention we are constrained to concur.
The statute, section 6156, supra, provides:
"In such actions all persons whose liens are filed as herein provided, and other incumbrances, shall be made parties, and issues shall be made and trials had as in other cases. Where such action is brought by a subcontractor, or other person not the original contractor, such original contractor shall be made a party defendant, and shall at his own expense defend against the claim of every subcontractor, or other person claiming a lien under this act, and if he fails to make such defense the owner may make the same at the expense of such contractor; and until all such claims, costs, and expenses are finally adjudicated, and defeated or satisfied, the owner shall be entitled to retain from the contractor the amount thereof, and such costs and expenses as he may be required to pay: Provided, that if the sheriff of the county in which such action is pending shall make return that he is unable to find such original contractor, the court may proceed to adjudicate the liens upon the land and render judgment to enforce the same with costs." *Page 71 
No contention is made in this case that the proviso contained in the statute existed, and hence the terms of the statute are before us. While there is some conflict in the authorities on the proposition, in our judgment the great weight of them makes the original contractor in an action to enforce a lien such as in this case, not only a proper and necessary, but indispensable, party to the proceeding. Authorities, supporting in full or inferentially and in effect this proposition, may be noted as follows. Alberti v. Moore et al., 20 Okla. 78,93 P. 543, 14 L. R. A. (N. S.) 1036; Emmet et al. v. Rotary Mill Co.,2 Minn. 286 (Gil. 248); Estey v. Hallack   Howard Lumber Co. etal., 4 Colo. App. 165, 34 P. 1113; Sayre-Newton Lumber Co. v.Park et al., 4 Colo. App. 482, 36 P. 445; Union Pac. Ry. Co.v. Davidson, 21 Colo. 93, 39 P. 1095; Steinmann et al.v. Strimple et al., 29 Mo. App. 478; Edward McLundie   Co. v.Mount, 145 Mo. App. 660, 123 S.W. 966; O'Neil Lumber Co. v.Greffet et al., 154 Mo. App. 33, 133 S.W. 113; Wagner v. St.Peter's Hospital, 32 Mont. 206, 79 P. 1054; MissoulaMercantile Co. v. O'Donnell et al., 24 Mont. 76, 60 P. 594, 991; Kerns et al. v. Flynn, 51 Mich. 573, 17 N.W. 62; GodfreyLumber Co. v. Kline, 160 Mich. 565, 125 N.W. 682; Augir v.Warder et al., 68 W. Va. 752, 70 S.E. 719; Flake v. CentralHardware Co., 96 Miss. 838, 51 So. 461; Tracy v. Kerr,47 Kan. 656, 27 P. 707.
The Supreme Court of Kansas in the case last cited, after quoting the foregoing statute, which is a part of the practice act adopted by us, speaking on this subject says:
"The language is so plain, the command that the contractor be made a party so imperative, that requirement is so mandatory, and the result of a failure or refusal to make him a party is so specifically stated, that there seems to be no fair grounds, either by construction or otherwise, on which to place approval of the ruling of the trial court."
Which ruling was to the effect that he was not an indispensable party. Dealing further with the same subject, it is said:
"It may be suggested that if the subcontractor, or other person not the original contractor, neglect or refuse to make the *Page 72 
contractor a party, the owner may do so on his own motion, and while it is probably true that the trial court would permit or order this to be done, yet the plain command of the statute is that the contractor shall be made a party, and we think it is primarily the duty of the party instituting such an action to do so."
Speaking to this same point, the Colorado Court of Appeals in the case of Estey v. Hallack   Howard Lumber Co. et al., supra,
says:
"Davis v. Lumber Co., 2 Colo. App. 381 [31 P. 187], is conclusive of this case. The necessity of making the contractor a party is carefully examined and discussed fully. The court said: 'It has been often held that the contractor was an indispensable party to the action. With this we agree, and adjudge that the contractor is not only a proper, but a necessary and indispensable, party, against whom a debt must be established as the foundation of the decree for the foreclosure of the lien.' This conclusion is well sustained by authority. See Phillips on Mech. Liens, sec. 397; Vreeland v. Ellsworth etal., 71 Iowa, 347 [32 N.W. 374]; Kern v. Flynn, 51 Mich. 573
[17 N.W. 62]; Sinnickson v. Lynch, 25 N.J. Law, 317; Pennoyerv. Neff, 95 U.S. 714 [24 L. Ed. 565]. The conclusion is founded on principle and sound legal logic. No privity of contract exists between the owner and the subcontractor; the contractor is the primary debtor; if the amount could be collected from him there would be no resulting claim against the property of the owner; the claim against the property is secondary, ancillary. Not only must there be a primary judgment against the contractor, but there must be an adjudication or settlement of the amount due subcontractors  — matters of which the owner can have no knowledge whatever  — and in order to fix the amount for which subcontractors could charge the property, an adjudication or accounting between the owner and the contractor is indispensable. It is claimed that by proceeding to trial without urging and relying upon the want of the contractor as a necessary party the irregularity was waived. In such cases there can be no waiver. A judgment against the contractor is an indispensable prerequisite to a lien upon the property. The owner and subcontractors cannot adjudicate and settle the accounts and equities between the contractor and the subcontractors, nor can they adjudicate and adjust claims and matters between the owner and the contractor. In one case the owner and contractor are the contracting parties, in the other *Page 73 
the contractor and the subcontractors. The right to the lien is purely statutory, is subsidiary and contingent, dependent upon the enforcing the judgment against the contractor. The owner is not primarily liable; hence the indispensable necessity of the contractor being before the court as a party to a triangular adjudication, and the necessity, primarily, of a judgment against the contractor as a basis of proceedings against the property of the owner."
We, therefore, hold that the original contractor, by and through his trustee in this case, was an indispensable party to the proceeding brought for the purpose of establishing the liens in this case.
In reference to the claim of the estate of the bankrupt, represented by H. Y. Thompson, Esq., it is claimed that Robert Kruger, the original contractor, became a bankrupt during the time he was engaged in constructing the building, and had earned, under his contract, something over $1,400, but the same had not been paid because not due until the completion of the building. The receiver of the bankrupt applied to the referee in bankruptcy for an order directing him to complete the building, in order that the estate might receive the amount of money due, and at the same time J. M. Eberle, one of the plaintiffs in error, and agent for the other in the construction of the building, appeared in court and urged the referee to finish the building. Under this an order was made, and the building was completed at an additional expense to the bankrupt's estate, for all of which the trustee asked a lien. This the referee allowed, but the trial court denied, holding that the contractor and his trustee in bankruptcy, having failed to build and deliver to the owners the building, and having failed to pay for the materials furnished by the various lien claimants, were not entitled to recover any judgment or lien upon the building, from which action the trustee, by cross-petition in error, has brought the matter to this court for review, and asks judgment upon the evidence to discover which we are referred to the 1,100-page record before us. None or but little of the evidence is set out in the abstract and briefs, either to support or defeat the claim of the trustee. The presumption is that the judgment of the trial court *Page 74 
is correct, and the burden in this court is upon him who assails it to show that it is wrong. We have no way of knowing that the claim made and lien claimed by the trustee does not include within it some or all of the claims of the other parties who are likewise seeking to enforce them against the property of plaintiffs in error. The inequitable result of such a situation is too apparent to require more than its statement, if true, to reject it. We will not, however, foreclose the trustee in this manner, but will remit his claim to the same course that we do the others, for the authority was vested in the bankruptcy court to authorize the business of this bankrupt to be conducted for a limited period by the receiver. See Bankruptcy Act, sec. 2 (5); 1 Remington on Bankruptcy, sec. 387; In re Richards et al. (D.C.) 127 Fed. 772; Matter ofReinboth, 157 Fed. 672, 85 Cow. C. A. 340, 16 L. R. A. (N. S.) 341, 19 Am. Bankr. Rep. 15. And, if otherwise entitled to the lien, the fact that it arose out of service rendered by the contractor's receiver or trustee in bankruptcy will not be sufficient to defeat it.
This action has been an expensive one for all the parties, and it is to be deplored that it cannot be ended at this time, but it is better to conclude it later and have justice rendered between the parties than to conclude it now, and perhaps wrongfully.
The case of Godfrey Lumber Co. v. Kline, supra, was one similar to the case at bar. In that case the plaintiffs failed because the principal contractor was not made a party defendant, just as the plaintiff and the other lien claimants have failed in this case, and for the same reason. That court, exercising, in our judgment, a righteous discretion, decreed that:
"The decree of the circuit court is reversed, with costs of both courts in favor of defendant, and the cause will be remanded to the circuit court, with permission to amend the bill of complaint by making the principal contractor a party defendant. Casserly v. Wayne Circuit Judge, 124 Mich. 157, 82 N.W. 841, 83 Am. St. Rep. 320; Prather Engineering Co. v.Railway, 152 Mich. 585, 116 N.W. 376. If the parties so elect, the case may proceed to a hearing on the record already made." *Page 75 
The same order will be made in the case at bar. The filing of the claims in the bankruptcy court was not a compliance with the mechanic's lien statute, and could not affect this case, except, of course, any allowance there secured would reduce the amount of the lien, and, in our judgment, the order of the court appointing the referee was sufficiently broad, and was intended to require him to report the evidence. The entire matter on the record is before the court, and the parties may amend their pleadings, making the trustee in bankruptcy a party, with a prayer for judgment against him; and, if the present record already made is sufficiently broad upon which to predicate a finding by the court, the parties may, if they elect, avail themselves thereof, tendering such additional evidence as they may desire. The determination of the mooted points of law, it is hoped, will enable these litigants to settle the case and so close up the controversy, but, should this not be accomplished, it is expected that the evidence relied on for recovery in this court will be properly abstracted and the requirements of rule 25 (38 Okla. x, 95 P. viii) as to briefs observed.
The petition for rehearing is otherwise denied.
All the Justices concur.