Jones v. Great Southern Fireproof Hotel Co.

Decision Date05 April 1898
Docket Number536.,535
Citation86 F. 370
PartiesJONES et al. v. GREAT SOUTHERN FIREPROOF HOTEL CO. SOSMAN et al. v. SAME.
CourtU.S. Court of Appeals — Sixth Circuit

This is a bill to enforce the statutory lien given to persons who do labor or furnish materials for the construction or repair of any house or other building by section 3184, Rev. St. Ohio as amended by the act of April 13, 1894. By section 3184 it is provided that 'a person who performs labor, or furnishes machinery or material for constructing, altering or repairing' any house or other structure mentioned in the section, 'by virtue of a contract with or at the instance of the owner thereof, or his agent, trustee, contractor or subcontractor, shall have a lien to secure the payment of the same,' upon the structure, 'and upon the interest leasehold or otherwise, of the owner in the lot or land on which the same may stand. ' Section 3185 provides that the lien shall be claimed and recorded within four months from the time of furnishing such labor or material, and that the lien shall operate from the date of the first item in the account. Section 3185a is as follows: 'In all cases where the labor, material or machinery referred to in sections 3184 and 3185 shall be furnished by any person other than the original contractor with such owner or his agent or trustee the lien shall not exceed the actual value of the labor, material or machinery so furnished, and the aggregate amount of liens for which the property may be held shall not, in the absence of fraud or collusion between the owner and original contractor, exceed the amount of the price agreed upon between the owner and original contractor for the performing of such labor and the furnishing of such material and machinery: provided, if it shall be made to appear that the owner and contractor, for the purpose of defrauding sub-contractors, material-men or laborers, fixed an unreasonably low price in the original contract for any work or material for which a lien is given under section 3184, the court shall ascertain the difference between such fraudulent contract price and a fair and reasonable price therefor, and sub-contractors, material-men and laborers shall have a lien to the amount of such fair and reasonable price so ascertained.'

The complainants are members of a firm doing business at Pittsburg, Pa., and are citizens of Pennsylvania. The defendants are the Great Southern Fireproof Hotel Company, a corporation of the state of Ohio, against whom the lien is asserted, and William J. McClain, a citizen of Ohio, against whom the lien is asserted, and William J. McClain, a citizen of Ohio and the contractor to whom materials were sold for use in the hotel building constructed by him at Columbus, Ohio, for the Great Southern Fireproof Hotel Company. The other defendants are corporations, firms, and individuals, claiming liens of various kinds upon the same property. They are all citizens of states other than Pennsylvania. The bill in substance avers that the defendant McClain entered into a contract with the Great Southern Fireproof Hotel Company to construct and complete at Columbus, Ohio, a six-story fireproof hotel and opera house, for the sum of $345,000; that complainants contracted on the 13th of December, 1894, to furnish to said McClain, for use in said building, some 900 tons of structural steel; that, under said agreement, they delivered, between April 16, 1895, and January 24, 1896, such steel, to the value of $43,296,74, which steel so furnished was all used in the construction of said house. They further aver that a balance of $11,410.02 is due and unpaid, and that, within four months after said steel was delivered, they filed and recorded their lien as required by section 3185, Rev. St. Ohio. There is no averment that the hotel company is indebted to said McClain, or that it was indebted when the lien was filed. Neither is it averred that said hotel company had any notice of any such contract between complainants and McClain, nor promised to pay for same, nor that any contractual relations whatever existed between it and complainants. The hotel company demurred to the bill for want of equity. This demurrer was sustained, and the bill dismissed by Judge Sage, whose opinion is reported in 79 F. 477.

T. P. Linn, for appellants Jones and others.

George N. Nash, for appellants Sosman and Landis.

John J. Stoddart and J. E. Sater, for appellee.

Before TAFT and LURTON, Circuit Judges, and CLARK, District Judge.

LURTON Circuit Judge, after making the foregoing statement of facts, .

The decision must turn here upon the constitutionality of the Ohio statute giving to subcontractors, laborers, and material men a lien upon the building and property of the owner, for labor or materials furnished at the instance of the principal contractor. So much of the statute as gives a lien to complainants as subcontractors has been declared by the supreme court of Ohio to be null and void, as in conflict with the Ohio bill of rights, which, among other things, declares that the right of 'acquiring, enjoying, and possessing property' is inalienable. That decision was made in a suit to which complainants were not parties, and after their rights under the law had accrued and their claim of lien recorded, as required by the statute. Young v. Hardware Co., 55 OhioSt. 423, 45 N.E. 313. Does that decision furnish a rule of decision which is obligatory upon courts of the United States? When a citizen of one state enters into a contract with a citizen of another, he acquires the constitutional right to have that contract interpreted and enforced by a court of the United States. That right does not by any means involve the application of a different rule of decision, for the judiciary act requires that the laws of the several states shall be regarded as rules of decision, in trials at common law, where they apply. But even the decision of the highest courts of the state, by whose law the rights of the parties are to be ascertained and enforced, does not, under all circumstances, furnish a rule of decision obligatory upon courts of the United States. The question is, when do they apply? In the past this inquiry has involved no little friction between the courts of the Union and those of the states. But the final arbiter of all such constitutional questions is the supreme court of the United States. So far as the inquiry is pertinent to the decision which must be here made, that court has in an authoritative way decided:

1. That such decisions are not necessarily obligatory upon courts of the United States where they affect contracts which were valid under the constitution and laws of the state, as interpreted and enforced by its highest judicial tribunals at the time they were entered upon. Rowan v. Runnels, 5 How. 134; Trust Co. v. Debolt, 16 How. 432; Gelpcke v. City of Dubuque, 1 Wall. 175; Olcott v. Supervisors, 16 Wall. 678; Taylor v. Ypsilanti, 105 U.S. 60; Douglass v. Pike Co., 101 U.S. 677; Louisville Trust Co. v. City of Cincinnati, 47 U.S.App. 36-46, 22 C.C.A. 534, and 76 F. 296.

In Rowan v. Runnels, supra, Chief Justice Taney said:

'Undoubtedly, this court will always feel itself bound to respect the decisions of the state courts, and, from the time they were made, regard them as conclusive in all cases upon the construction of their own laws. But we ought not to give them a retroactive effect, and allow them to render invalid contracts entered into with citizens of other states, which, in the judgment of this court, were lawfully made.'

In Douglass v. Pike Co., cited above, the court, after reviewing the preceding cases, decided by that court, said:

'The true rule is to give a change of judicial construction in respect to a statute the same effect in its operation on contracts and existing contract rights that would be given to a legislative amendment; that is to say, make it prospective, but not retroactive. After a statute has been settled by judicial construction, the construction becomes, so far as contract rights acquired under it are concerned, as much a part of the statute as the text itself, and a change of decision is, to all intents and purposes, the same in its effect on contracts as an amendment of the law by means of a legislative enactment.' 2. Neither are such decisions obligatory upon courts of the United States when thereby the validity of contracts between a citizen of the state and a citizen of another state is affected, which were executed before there was any judicial construction of the statute or constitution which seemed to authorize the contract in question. Burgess v. Seligman, 107 U.S. 20-33, 2 Sup.Ct. 10; Pleasant Tp. v. Aetna Life Ins. Co., 138 U.S. 67-72, 11 Sup.Ct. 215; Louisville Trust Co. v. City of Cincinnati, 47 U.S.App. 36-47, 22 C.C.A. 534, and 76 F. 296.

In Louisville Trust Co. v. City of Cincinnati, supra, this court, after stating the general rule to be that a court of the United States would adopt and follow the construction of a state statute announced by the highest court of the state, said:

'A well-grounded exception exists where contracts and obligations have been entered upon before there has been any judicial construction of the statutes upon which the contract or obligation depends by the highest court of the state whose statute is involved. In such a case, if a court of the United States obtains jurisdiction of a question touching the validity, effect, or obligation of such a contract, it will, while 'leaning to an agreement with the state court,' exercise an independent judgment as to the validity and meaning of such contract, although the meaning and validity of state statutes may be an element in the case, and will not be bound to follow
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