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should be paid from and after the completion of the work and the filing of their lien notices as required by statute. That filing is the full equivalent of the rendition of a stated account. In the case of Young v. Godbe, 15 Wall. 565, the court said with regard to the allowance of interest upon an open account that:
"If the debt ought to be paid at a particular time, and is not, owing to the default of the debtor, the creditor is entitled to interest from that time, by way of compensation for the delay in payment. And if the account be stated, as the evidence went to show was the case here, interest begins to run at once.”
This rule announced by the supreme court of the United States seems to be in entire accord with the latest utterances of the supreme court of the state of Kentucky. In the case of Henderson Cotton Manuf'g Co. v. Lowell Machine Shops, 86 Ky. 668, 7 S. W. 142, the court said, concerning the allowance of interest upon an account for machinery sold and payable at a definite time by agreement of the parties:
"The true ground upon which to put the allowance of interest is the fault of the party who is to pay the debt. If he has made default of payment, then, ex aequo et bono, he should reimburse the creditor for keeping him out of the use of his money. He should render an equivalent for the use of what is not his own. If there be a specified time for payment, and a failure to then pay, or a demand of payment of a liquidated claim, and default, then the debt should, as a matter of law, bear interest from the time of such failure. This is the current of authority, and it is supported by both right and reason."
Neither is there anything in the case of Redfield v. Iron Co., 110 U. S. 174, 3 Sup. Ct. 570, or Thomas v. Car Co., 149 U. S. 116, 13 Supa Ct. 824, which conflicts with the doctrine as stated in Young va Godbe and Henderson Cotton Manuf'g Co. v. Lowell Machine Shops, cited above. In Redfield v. Iron Co., Justice Matthews, in discussing this question, said, for the court:
"Interest is given on money demands as damages for delay in payment, being just compensation to the plaintiff for a default on the part of his debtor. Where it is reserved expressly in the contract, or is implied by the nature of the promise, it becomes part of the debt, and is recoverable as of right; but, when it is given as damages, it is often matter of discretion, In cases like the present, of recoveries for excessive duties paid under protest, it was held in Erskine v. Van Arsdale, 15 Wall. 75, that the jury might add interest, the plaintiff ordinarily being entitled to it from the time of the illegal exaction. But where interest is recoverable, not as part of the contract, but by way of damages, if the plaintiff has been guilty of laches in unreasonably delaying the prosecution of his claim, it may be properly withheld. Bann v. Dalzell, 3 Car. & P. 376; Newell v. Keith, 11 Vt. 214; Express Co. v. Milton, 11 Bush, 49."
In Thomas v. Car Co., heretofore cited, there seems to have been no definite time agreed upon as to payment, and interest was disallowed because, as the court said, the delay in payment "was occasioned by resisting demands made by the car company, which the result of the litigation shows were excessive, if not extortionate.” The contract company was in default, and interest is properly allowable from the time it failed to pay according to its promise, by way of compensation for the delay in payment. Neither is there anything in the fact that the railroad company is insolvent, nor in the fact that the allowance of interest will diminish the fund to which
the bondholders may look for the payment of their bonds. The language relied upon in support of the decree disallowing interest, from the opinion in Thomas v. Car Co., that “as a general rule, after property of an insolvent passes into the hands of a receiver, or of an assignee in insolvency, interest is not allowable on the claims against the funds," was not a point upon which that case turned, and was doubtless intended to apply only to a case where the fund is insufficient to pay all, and the creditors are all of the same rank, as in the distribution of the assets of an insolvent bank, as in White v. Knox, 111 U. S. 784, 4 Sup. Ct. 686, and Bank v. Armstrong, 8 C. C. A. 155, 59 Fed. 372. This is not a case of the distribution of an insufficient fund among lienors of the same rank. The lien claims of the subcontractors are by the statute preferred over the mortgage, and the bondholders are entitled only to that which remains after senior liens are satisfied. If interest is properly due, as between creditor and debtor, the interest is just as much a part of the principal claim as the principal thereof. A like controversy arose in the case of Trust Co. v. Condon (decided by this court March 5, 1895, and not yet officially reported) 67 Fed. 84. There, as here, the contest was between subcontractors and mortgage creditors. The distinctions between the two cases is that, under the Tennessee statute construed in that case, the lien of the subcontractor was derived from, and subordinate to, the lien of the contractor, and his recovery against the property of the owner was limited to such sum as might be found due the principal contractor at the time the several subcontractors' liens accrued. The question in that case was as to the extent of the liability of the railroad property to the contractor. Judge Taft, who delivered the opinion of the court in that case, concerning these subcontractors' liens, said:
"They were liens superior to the bonds. They should bear interest, or, what is the same thing, the fund from which they are payable should bear interest until paid. The security and priority of the lien attach as well to interest as to principal. The aggregate of the subcontractors' claims exceeds by at least fifty per cent. the fund due Eager, even with interest, so that in the distribution no interest need be calculated on the claims after December 15, 1890, for the share applicable to each will not be varied by adding interest to all claims for the same period from December 15, 1890, to the date of the decree. But the limit in the aggregate of the liens fixed on the property must be increased by interest until satisfaction. This is not a case where the distribution is to be made pro rata between the lienholders and the bondholders, in which case, of course, interest is not to be calculated upon the claims after the time of the sequestration of the property for sale and distribution, so long as the claim cannot be paid in full. Bank v. Armstrong, 16 U. S. App. 465, 8 C. C. A. 155, 59 Fed. 372. In the distribution of the proceeds of a common security between liens of different priorities, we know of no principle by which interest can be stopped on the amount of the superior lien until its satisfaction. As between the bondholders and the lienholders, the lienholders are entitled to interest to the day of payment, and the decree should therefore include interest on the amount herein found due Eager from December 15, 1890, until it shall be entered.”
One error assigned by appellant Walker and others needs to be especially noticed. J. W. Walker had a contract with the contract company for the erection of four bridges, for which he was to receive the sum of $146,200. One of these bridges was known as the “Marble Creek Bridge,” and its price was to be $37,000. During the erection of this bridge a large portion of it fell into a deep ravine, destroying or seriously damaging a large part of the material which had been placed in the incompleted structure. New material, of the value of $15,328.62, was furnished by Mr. Walker, and replaced in the bridge. The court declined to allow this claim, being of opinion that the loss should fall upon him, and not upon the contract company, nor upon the railroad company. The cause of the accident is unexplained. The employés of the bridge contractor were in the exclusive control of the work. The bridge fell, not from any violent storm, or by reason of any extraordinary natural cause. The clear inference is that it fell by reason of defective engineering; that it was insufficiently supported, or subjected by the bridge builders to some unnecessary strain. Appellant insists that he should be reimbursed for the new material: First. Because he alleges that the contract company agreed to reimburse him for the material destroyed by the falling of this bridge. We quite agree with the master and the district judge who tried this case, that appellant did not successfully sustain his contentions to an agreement to reimburse him for the new material necessitated by the falling of the bridge. Second. He insists that the title to the material damaged or destroyed was in the contract company, and that, therefore, it ought to sustain the loss. This contention is bottomed upon the fact that the agreement provided for the payment of the contract price in installments, as the material was delivered on the ground, less 10 per cent of the value thereof. The contract concluded as follows:
"The balance of the contract price for each structure, including the ten per cent. reserved on the monthly estimates, is to become due and payable as each structure is completed and inspected and approved, according to both specifications attached hereto. As payments are made upon the material, the title to the same is to become vested pro rata in the party of the second part."
The proof fails to show that the material was in fact paid for as delivered, to any considerable extent. But we are of opinion, even if the material had been in part paid for, so that the title had vested in proportion to the payments in the contract company, that under the circumstances of this case the appellant ought not to be allowed to recover the value of this material, necessitated by an accident for which his own employés were manifestly responsible. The most he could claim, under any consideration, would be that each of the contracting parties should share the loss in the proportion that they held title to the material destroyed. The burden was certainly put upon appellant to establish the extent of his claim. This he has not done. But upon the ground first indicated, to wit, that the accident was the result of the negligence of the bridge contractor, and was not contributed to or brought about by any fault or neglect of the contract company whatever, the loss ought, therefore, to fall upon the party responsible for the accident.
The appeals of G. W. Gourley, W. B. Smith, C. F. & A. R. Burnan, J. W. Caperton, and John Bennett are from decrees disallowing their claims as nonlienable under the statute. The appellants referred to rendered legal services in obtaining railroad rights of way under the contract of the construction company. We have already ruled that money expended in acquiring rights of way is not the subject of a lien under the statute. For the same reason, it must be held that legal or other services rendered to either the contractor or subcontractor in acquiring rights of way are not claims for “labor" done or furnished, within the meaning of the statute giving a "labor" lien. The decrees dismissing their intervening petitions must be affirmed.
J. E. Dougherty appeals because a claim for $454.10 for services as a civil engineer in the construction of the railroad was disallowed. The ground upon which it was disallowed was that his services were rendered within the counties of Jessamine and Woodford, and the claim filed in Jessamine county alone. The Kentucky act giving a lien for labor required that the verified statement claiming a lien should be filed in the county clerk's office of “each county in which the labor was performed.” The only evidence concerning the locality in which Dougherty did his work is that during September, October, and November, 1890, “Dougherty's work was principally in Jessamine county, and his headquarters were in that county," and that “he did a small amount of work during that time in Woodford.” The itemized statement of his account filed in Jessamine county was as follows:
Ohio Valley Improvement & Contract Co. to J. E. Dougherty, Dr. 1890.
Address. For services and expenses as resident engineer, as follows: Salary for month of September
$100 00 October
100 00 November
100 00 December
125 00 August .. September
11 90 October
40 November December
$454 10 It is clear that the greater part of his work during three months was done in Jessamine county, where his lien was filed. It will not be unjust if it be assumed that his salary of $300 during those months was two-thirds earned by his work in Jessamine, and that a proportionate part of his expenses for the same time attached to his work in Jessamine. The decree, as to his claim, will be so modified as to allow him $208.60, as the amount of his lien claim, upon which he will receive his pro rata as other lienors, with interest.
The claim of Dickason & Crawford was uncontested, except to the extent that it embraced railroad ties cut under a contract with the contract company, but never delivered to the railroad company, or on its premises. The contract company notified them that they would not accept the ties, and that they need not deliver them. The ties had been cut under and in accordance with a contract prior to such notice. There being no other market for them, they were
left to decay in the woods where cut. The claim of appellants is that these ties were gotten out for this work, and were worthless for any other purpose, and that they are entitled to a lien, without regard to the fact that they were not actually used in the work of construction.
The case is a hard one, but it would be harder still to throw the loss upon the railroad company, which was in no default whatever. If the material had been refused without good cause by the railroad company or its agents or assignees, appellants would have some standing under such cases as Howes v. Wire-Works Co., 46 Minn. 44, 48 N. W.448. So if they had been actually delivered on the premises of the railroad company, and not used, appellants would come within the principle of Burns v. Sewell, 48 Minn. 425, 51 N. W. 224, and Mechanics' Mill & Lumber Co. v. Denny Hotel Co. of Seattle (Wash.) 32 Pac. 1073. The fault was wholly that of the contract company.
It breached its contract without reason, and refused to accept or pay for the material. It never did go into the structure, and was never so delivered that the railroad acquired the title, or appellants parted with it. Under such circumstances, we do not think appellants can be held as persons who have “furnished material,” within the meaning of the lien act.
A considerable number of other errors have been assigned by one or other of the appellants. To notice each would extend this opinion to an undue length. They have all been examined, and none of them are regarded as pointing out any substantial error. The decrees appealed from will therefore be affirmed, except as herein expressly modified. Costs of appeal will be paid out of the fund arising from sale of the railroad.
BONSACK MACH. CO. v. S. F. HESS & CO.
No. 103. 1. FALSE REPRESENTATIONS.
H. & Co., in March, 1887, wrote to the B. Co., which owned the patent for a cigarette machine, asking for the terms of royalty for the use of such machine. In reply, the B. Co. wrote that it required a royalty of 30 cents per 1,000 cigarettes, or 33 cents if a device was printed on the cig. arettes, with a guaranty of $200 per month, saying that these were their uniform terms. On April 23d, H. & Co. telegraphed the B. Co. to ship a machine, and wrote them, on the same day, saying they understood the B, Co. gave better terms to others than they offered H. & Co., and asking to have as good terms allowed them as any other house. On April 25th the B. Co, replied to this letter, saying that H. & Co.'s information as to different terms was not correct, that their terms were the same to all. On April 26th H. & Co. wrote the B. Co. not to ship the machine until further orders, as they heard it might be an infringement of other patents; but the machine was afterwards shipped, and received, and used by H. & Co. on the terms offered, without objection on any ground. In September, 1889, H. & Co. requested the B. Co. to send them a second machine, and to waive the $200 per month guaranty, and the extra royalty on printed cigarettes, stating that they understood the B. Co. had a right to make Its own terms, but hoped this would be agreed to. The B, Co. agreed to waive the guaranty, but not the extra royalty. In March, 1890, H. & Co. and the B. Co. entered into a formal contract for the use by H. & Co. of the two machines, which provided that the royalty should be 30 cents per