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has a right to resort to the security provided by law, unless the rights of third parties intervene before he gives the required notice. Liens of the kind, except where the statute otherwise provides, arise by the operation of law, independent of the express terms of the contract, in case the stipulated labor is performed, or the promised materials are furnished; the principle being that the parties are supposed to contract on the basis that if the stipulated labor is performed, or the promised materials are furnished, the laborer or material man is entitled to the lien which the law affords, provided he gives the required notice within the specified time.” McMurray v. Brown, 91 U. S. 266; Chicago & A. R. Co. v. Union Rolling-Mill Co., 109 U. S. 702, 721, 722, 3 Sup. Ct. 594; Van Stone v. Manufacturing Co., 142 U. S. 136, 12 Sup. Ct. 181. It may be admitted that the agreement of the contract company to accept, in payment for work and materials, the bonds of the company, secured by a first mortgage, and payable in 30 years, and the shares of the capital stock of the company, was an agreement to take a security, which, when actually accepted, would be inconsistent with the retention of a mechanic's lien. And it may be conceded that, to the extent that payment was made and accepted in bonds and shares, to that extent the debt for work and materials was satisfied, and the mechanic's lien waived. It is very clear, however, that under the Kentucky statute a lien is originated with the beginning of the work, or the delivery of the materials. The provision in the third section of the act that no lien "shall attach unless the person who performs the labor or furnishes the labor, materials, or teams, shall within sixty days after the last day of the last month in which any labor was performed, or materials or teams were furnished, furnish a statement in writing
and file the same with the clerk of the county court," is not in conflict with this view. This filing of the claim is necessary to the continuance and perfection of the lien. If this is not the meaning, and the lien has its inception when the work has been completed and the claim filed, then the contractor would have no protection against a bona fide purchaser who bought or fixed a lien before the statutory registration. The lien, under such statutes, has been uniformly held to begin with the delivery of materials, or the beginning of the work. It is not a lien originating in a contract for a lien, but arises out of the statute, independent of any agreement for a lien, and is based upon the equity of paying for work done or materials delivered. It is an incipient or inchoate lien until it is completed or perfected by compliance with the statute, and is lost utterly if those acts be not done, required for its completion, within the time and in the manner required by the statute. Thus, although the contract company had a contract for payment in such securities, which, when accepted, would be inconsistent with the retention of a statutory lien, yet it had an inchoate lien from the time it began work or the delivery of material, which inchoate lien was only waived when the owner complied with his agreement, and gave the security or made the payment contracted for. But, independently of the existence of an incipient or perfected lien in favor of the contract company, we are quite agreed that a subcontractor in the first degree is
given a direct lien under this statute. It is difficult, as observed by counsel, to add anything by way of argument which will make this contention any more obvious than is apparent from the plain language of the statute. The first section of the act gives the lien to "all persons who perform labor or furnish labor or materials by contract express or implied with the owner
or by subcontract thereunder.” The clear purpose of the Kentucky statute was to make the liens of the contractor and subcontractor independent direct liens, the latter limited only by the amount of the original contract price. The lien of the subcontractor does not spring out of the lien of the contractor; is not derived therefrom, or subordinate thereto. The aggregate of all the liens is not to exceed the contract price agreed to be paid by the owner, but this limitation concerns, not the fact of a lien, but the extent thereof. Being a direct lien, its existence does not depend upon the existence or nonexistence of a contractor's lien, and the waiver of a lien by a contractor will not affect the subcontractor's lien.
Opinions of other courts, construing other statutes, are of little importance, without a careful comparison of the statute in question with that construed. But upon this question, as to whether a subcontractor has a direct lien, the case of Green v. Williams, reported in 92 Tenn. 220, 21 S. W. 520, is in point, for the reason that the Tennessee statute gives a lien to the contractor, "and every person employed by the contractor to work on the building or to furnish materials.” The Tennessee supreme court, in the case cited, said that the lien of a furnisher of materials, under that statute, was distinct, and independent of that of the original contractor, saying:
“The statute gives the lien to several classes of persons, and the lien of each depends upon the statute, and is not derived from the right, or dependent upon the existence or nonexistence of the lien, of any other. The contractor may, by contract or conduct, waive or estop himself. But his subcontractor may nevertheless bring himself within the protection of the statute, and independently assert a lien for his work or materials."
The language of the Kentucky act is that “all persons who perform labor or who furnish materials, by contract express or implied with the owner or owners thereof, or by sub-contract thereunder, shall have a lien thereon.” As to who is meant by “sub-contractor thereunder,” the learned district judge very aptly observed that:
“The words 'by sub-contract thereunder' could not be intended to make the lien of subcontractor a subrogated one, taking simply the place of the contractor, since, if such was the intention and meaning, the limitation of the liens to the original contract price would be without meaning, as, without this limitation, neither the original contractor, or those subrogated to his lien, could claim a lien for labor and material furnished under a contract, beyond the contract price of that contract. I have heretofore construed those words as limiting the person who could obtain a subcontractor's lien."
2. The contention that the lien claims registered in the county clerk's office before the final completion or abandonment of the work by the contractor or subcontractor last engaged upon the work were prematurely filed, and that, therefore, nolien has been perfected, is not based upon a reasonable construction of the statute.
The act requires that a lienor "shall within sixty days after the last day of the last month in which any labor was performed, or materials or teams were furnished, * * * furnish a statement in writing, veri. fied by affidavit, setting forth the amount due therefor, and for which the lien is claimed: * Said. claim shall be filed and indorsed by the clerk of the court, giving the date of its filing.” By section 4 it is required that the lien thus asserted shall be enforced by a suit in equity, to which other lienors are parties, by proceedings begun within one year from the filing of the claim in the county clerk's office. In view of the limitation upon the aggregate amount of liens enforceable against an owner who has a contract for the whole work, and of the provision that if the liens exceed the contract price the original contract price shall be distributed pro rata among such lienors, it is evident that all lienors should be parties to any suit of the kind, where, by reason of the excess of liens over the contract price, a pro rata distribution must be made. Indeed, the statute expressly requires only what a court of equity, under such circumstances, would order. But this does not, in itself, conflict with the other provision, which seems to contemplate that the person doing or furnishing the labor, materials, or teams is required to file his claim within 60 days after he has completed his work or furnished his materials. The language, "due therefor, upon which the lien is claimed,” refers to the statement of the labor that was performed or materials or teams that were furnished, which was the subject-mat. ter of the statement to be filed in the county clerk's office of each county in which the labor was so performed or the materials so furnished. The word “therefor” cannot refer to the last labor that was performed, or the last materials that were furnished, by some other person. The construction placed upon the statute by the district judge, by which each claimant is required to file his claim within 60 days after the last day of the last month in which he performed any labor, or furnished any materials, meets with our approval. The inconvenience of having the final decree postponed until all lienors can be brought before the court who had subcontracts under the original contractor, is not so great as to leave purchasers and creditors indefinitely unadvised as to the existence of liens for work done and materials furnished until the last work had been done or the last materials furnished under a contract for the construction of an entire railroad. The object of filing the claim is to give notice, not only to the owner, but to others interested; and it seems very unreasonable to construe the statute so as to authorize the filing of such notice only after completion of the entire work, or a final abandonment of the contractor's obligation.
3. As we have before stated, the contract between the contract company and the railroad company obligated the latter to pay the former, as the work progressed, on monthly estimates embracing all work done or materials furnished under the contract. The railroad company did make payments accordingly, on estimates which embraced all work done and materials furnished, whether by the contract company directly, or through its subcontractors. The insistence of the appellant is that the subcontractors must be taken to have entered upon their several subcontracts with reference to the
FEDERAL REPORTER, vol. 68.
obligation of the railroad company to pay on monthly estimates, as the work progressed, and therefore to be bound by all payments thus made under the contract. This might be so, if the subcontractors' lien was a derivative one, and subordinate to the lien of the principal contractor. When the railroad company made the contract for the construction of its entire road, it did so in the face of the fact that the contractor might sublet the work, and that, if it did so, each subcontractor would be entitled, under the law, to a lien which could only be discharged by the payment to such subcontractors of an equitable proportion of the original contract price. This statute was as much a part of the original contract as if it had been written therein. Under the plain and explicit provision of the statute, there was no way for the railroad company to protect itself against the liens of subcontractors but by so distributing the contract price between all who should contribute to the work of construction as that each incipient lienor should receive from it his pro rata of the contract price. An agreement to pay to the contractor this contract price in installments, as the work progressed, was an agreement inconsistent with self-protection. If an owner, in the face of such a statute, obligates himself to make payments in advance, or in installments, as the work progresses, he cannot complain if the effect of his own agreement is to leave him unprotected against the possible defaults of the contractor in paying subcontractors. We do not think that the effect of the statute is to suspend the owner's own contract, as to the time and mode of paying the original contractor. If he has made a foolish contract, it is nevertheless a valid one; and if he cannot get relief through an equitable injunction, in case subcontracts are made, but is forced to carry out his agreement, he has no one to blame for his own folly in making a contract prejudicial to his own interests, in case subcontractors are left unpaid. From this it must follow that payments made to the contract company, in excess of its pro rata proportion, for work and labor done or materials furnished by it, are no answer to the independent liens of subcontractors whose obligations have not been discharged by the contract company. Jones, Liens, $$ 1304, 1305. What the effect would be if the principal contractor had made payments to his subcontractors through orders made on the owner, it is unnecessary for us to say, for no such question arises in this case. Payments made by the owner direct to a subcontractor in discharge of the subcontractor's claim and lien would, of course, operate as intended by the parties, and reduce to that extent the liability of the property for mechanics' liens, provided such payments were not in excess of the pro rata part of the contract price due to such subcontractor. So, also, it may be conceded that if the subcontractor expressly or impliedly agreed that the contract price might be paid to the principal contractor, and undertook, expressly or impliedly, to look to the principal contractor alone, such conduct would operate as an estoppel, and prevent the enforcement of any lien by the subcontractor. This case is, however, free from all circumstances indicat. ing any agreement, express or implied, that the contract price might be paid to the principal contractor, and that such payment should
operate as a discharge, pro tanto, of the subcontractor's lien. There is nothing to indicate that in any way the principal contractor re ceived any part of the contract price as the agent of the subcontractors. The subcontractors were in the situation of a creditor having two securities. The principal contractor was primarily liable for the whole amount of their claims. In addition, they had a lien upon the owner's property for a proportionate part of each claim against the contractor. Payments made by the principal contractor to a subcontractor would primarily be payments in discharge of the personal obligation of the principal contractor, and therefore applicable to that part of the subcontractor's claim in excess of his lien against the owner. This was the rule of distribution and application of payment adopted by the district judge who heard this case in the circuit court. We have given additional consideration to the argument presented here by the Central Trust Company, that partial payments made from time to time by the principal contractor upon monthly estimates of work or materials done or furnished by the subcontractors should operate as an absolute discharge of so much of the claims of the subcontractors as was embraced within the estimate paid, in full or in part. This question arises upon evidence that monthly estimates were made by the railroad company's chief engineer of work done or materials furnished by subcontractors, and that the contractor, in very many instances, paid on such estimates 90 per cent. of the amount thus estimated. Upon these facts, counsel contend that the payments thus made by the contractor operated to absolutely discharge 90 per cent. of the entire work done and materials furnished during the given month. This overlooks the fact that the subcontractors' contracts were entire contracts. They were contracts to do so much work and furnish so much material for a given sum of money, and that these monthly payments as the work progressed were upon estimates subject to correction. The learned district judge was right in holding that payments made upon such estimates were, in the last analysis, but partial payments upon sums. due or to become due upon the subcontractors' entire contracts, and that as a partial payment made by the contractor, who was personally obligated to pay the whole of the sum, it should be properly treated as a payment upon that proportion of the subcontractors claims in excess of that secured by the lien. The same result will be brought about upon another theory, which is that, where the aggregate of the liens is for a sum in excess of the original contract price, each lienor is entitled, under the statute, to only a proportionate part of the contract price, and to a pro rata interest in the common security, and that he would be entitled, when he came to assert his claim against the common security, to obtain that pro rata upon the basis of his entire claim, and not upon the basis of the balance due after crediting his claim with payments made by the principal contractor on account of his personal liability. Bank v. Armstrong, 8 C. C. A. 155, 59 Fed. 379. Thus construed, it must follow that the distribution of the original contract price should be made upon the basis of the entire lienable claim of each subcontractor to the work of construction. If the railroad company pays out the contract price