Fossett v. The Rock Island Lumber & Manufacturing Company

• Decision Date: 09 November 1907
• Docket Number: 14,584
• Citation: 76 Kan. 428,92 P. 833
• Court: Kansas Supreme Court
• Parties: C. S. FOSSETT v. THE ROCK ISLAND LUMBER & MANUFACTURING COMPANY

92 P. 833

76 Kan. 428

C. S. FOSSETT v. THE ROCK ISLAND LUMBER & MANUFACTURING COMPANY

No. 14,584

Supreme Court of Kansas

November 9, 1907

Decided July, 1907.

Error from Sumner district court; CARROLL L. SWARTS, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. MUNICIPAL CORPORATIONS--Occupation Tax--Refusal to Issue License--Right to do Business. When a person has complied so far as he can with the provisions of an ordinance requiring him to pay an occupation tax, and has tendered the fee and demanded of the proper officer a license, and the license is refused through no fault of his, it is not unlawful for him, without a license, to engage in an occupation, otherwise lawful, which requires no supervision or regulation.

2. SUBCONTRACTOR'S LIEN--Evidence of Payments Made to Other Subcontractors. In a suit against the owner of a building to enforce a subcontractor's lien evidence of payments made by the owner to other subcontractors during the sixty days within which they were entitled to but did not file liens is admissible, and where the cost exceeds the contract price the owner is entitled to credit for such payments to the extent of the pro rata amounts which the other subcontractors would have been entitled to if their liens had been filed.

3. SUBCONTRACTOR'S LIEN--Set-off--Damages for Failure of Contractor to Complete the Building in Time. In a suit by a subcontractor to enforce a lien against the owner of the building the owner may offset any actual damages which he has sustained by reason of the contractor's failure to complete the building in time, provided the damages are such as may be said to have been in the contemplation of the parties when the contract was made.

R. L Holmes, and Charles G. Yankey, for plaintiff in error.

Dale & Amidon, for defendant in error.

PORTER J. MASON, SMITH, GRAVES, BENSON, JJ., concurring. JOHNSTON, C. J., BURCH, J., dissenting.

OPINION

PORTER, J.:

This is a suit for the foreclosure of a mechanic's lien upon a store building in the city of Caldwell. The lien was a subcontractor's lien for building material furnished by the lumber company to W. L. Murray, the contractor, and amounted to $ 1057. The answer of C. S. Fossett, owner of the building, alleged that the Rock Island Lumber & Manufacturing Company was not entitled to recover for the goods sold, because it was unlawfully engaged in business in violation of an ordinance of the city of Caldwell which required the obtaining of a license before engaging in such business. To this defense a reply was filed, alleging that the lumber company had tendered to the city treasurer the amount of this license tax and that the treasurer had refused to accept it, and also that the city officials had not for some years been enforcing the ordinance for an occupation tax. The answer also alleged that the contract price of the building was $ 3800, for which Murray, the contractor, agreed to furnish all labor and material, and that Fossett had paid all but $ 128 of the contract price to subcontractors who were entitled to liens. A third defense set up was a breach of the contract on Murray's part, in failing to complete the building within the time specified, and it was alleged that there was nothing due the contractor, the balance of $ 128 being due the owner as an offset for these damages.

The court made findings of fact and conclusions of law, and rendered judgment for the lumber company as prayed for. Fossett brings this proceeding to reverse that judgment.

In reference to the defense setting up the failure to take out a license, the finding of the court in substance is that since the ordinance went into effect the lumber company had for three years, on the first day of July in each year, tendered to the city treasurer the amount of the license tax for such year, and requested and demanded a license to do business as provided for in the ordinance; that the city treasurer each time refused to accept the tax; and that the mayor and clerk, whose duty it was to issue such licenses, had refused to do so. The court also found that during all that time the city of Caldwell had refused to issue to any person or firm a license to do business under the ordinance.

The court held as a conclusion of law that this absolved plaintiff from the consequences of the doctrine declared in Yount v. Denning, 52 Kan. 629, 35 P. 207. It is contended that this was error. There are authorities which support this contention. Some of them we do not regard as squarely in point, for they arose over disputes as to the character and legality of the tender. Such is Phoenix Carpet Co. v. The State, 118 Ala. 143, 22 So. 627, 72 Am. St. Rep. 143. The person applying for the license tendered the officer the state tax and refused to pay the county tax. The court, after deciding the county tax illegal, held that appellant was not justified in continuing in business without a license, but should have resorted to mandamus to compel the officer to issue a license. So, in City of East St. Louis v. Wider, 46 Ill. 351, payment of the license fee was tendered in city orders instead of cash and the tender was refused. On a prosecution for doing business without a license it was held that defendant's remedy was by mandamus, and the refusal to issue the license no defense.

It is only by a sort of fiction that the business of selling lumber and building material can be said to require supervision or regulation to the extent of authorizing the imposition of a license tax, except for purposes of revenue. The doctrine of Yount v. Denning, supra, that a person who fails to pay an occupation tax cannot recover for his services, is adopted for the protection of the licensing power of the state, not primarily for the benefit of some other person who has had dealings with him and who seeks to avoid the payment of what would be otherwise justly due. A parallel case is Wicks v. Carlisle, 12 Okla. 337, 72 P. 377, where it was held that a person receiving the services of a real-estate agent who had not taken out an occupation tax, for the same reasons as those relied upon here, is not in position to urge an objection to a recovery for the services rendered.

Nor can we believe that after the lumber company had tendered the fee and demanded a license, which the officers refused, it was compelled to mandamus the officers before it could lawfully transact any business of the character in which it was engaged. At all events its failure to follow up the tender and demand by mandamus should not be held to work a forfeiture of its right to recover for merchandise, and thus inure to the benefit of a private individual who was in no respect prejudiced thereby but who retains the consideration. Forfeitures are not favored in law and are despised in equity. In this connection the remarks of Mr. Justice Burch in The State v. Book Co., 69 Kan. 1, 76 P. 411, 1 L. R. A., n. s., 1041, are perhaps not inappropriate: "Such an interpretation might attract the enthusiastic admiration of the highwayman, but it has nothing to commend itself to a court of justice." (Page 17.)

The following authorities are believed to support the doctrine which we announce here--that where a person has complied so far as he can with the provisions of an ordinance requiring him to pay an occupation tax, and has tendered the fee and demanded of the proper officer a license, and the license is refused through no fault of his, it is not unlawful for him to carry on a business which is otherwise lawful and which requires no supervision or regulation: Horr & Bemis, Mun. Pol. Ord. § 201; McQuillin, Mun. Ord. § 352; Prather et al. v. The People, 85 Ill. 36.

Was it error to refuse to permit the owner to make proof of payment to other subcontractors who had not filed liens? The contract price was $ 3800. Defendant offered to prove that he had paid to other subcontractors $ 3671.82 during the sixty days within which they might have filed liens. The objection which was sustained was upon the ground that it was not claimed that any of these other subcontractors had filed liens. Whether this was error raises the principal, and by far the most important, question in the case. The statute which gives a subcontractor a lien provides:

"Any person who shall furnish any such material or perform such labor under a subcontract with the contractor, or as an artisan or day laborer in the employ of such contractor, may obtain a lien upon such land from the same time, in the same manner and to the same extent as the original contractor, for the amount due him for such material and labor: . . . by filing with the clerk of the district court of the county in which the land is situated, within sixty days after the date upon which material was last furnished or labor last performed under such subcontract, a statement verified. . . . Provided, that the owner of any land affected by such lien shall not thereby become liable to any claimant for any greater amount than he contracted to pay the original contractor; but the risk of all payments made to the original contractor shall be upon such owner until the expiration of the sixty days hereinbefore specified; and no owner shall be liable to an action by such contractor until the expiration of said sixty days, and such owner may pay such subcontractor the amount due him from such contractor for such labor and material, and the amount so paid shall be held and deemed a payment of said amount to the original contractor." (Gen. Stat. 1901, § 5119.)

Defendant contends that a subcontractor has a lien from the time he furnishes the labor or material, and that he may lose it by a failure to file his lien statement in time, or by failing to give the proper notice; but...