Monarch Lumber Co. v. Wallace

• Citation: 132 Mont. 163,314 P.2d 884
• Decision Date: 22 August 1957
• Docket Number: Nos. 9475,9509,s. 9475
• Parties: MONARCH LUMBER COMPANY, a Corporation, Plaintiff and Appellant, v. Francis WALLACE, Katherine Laux Johnson, a Woman, and John W. Huntsberger, Trustee in Bankruptcy, Defendants and Respondents.
• Court: United States State Supreme Court of Montana

Page 884

314 P.2d 884

132 Mont. 163

MONARCH LUMBER COMPANY, a Corporation, Plaintiff and Appellant, v. Francis WALLACE, Katherine Laux Johnson, a Woman, and John

W. Huntsberger, Trustee in Bankruptcy, Defendants

and Respondents.

Nos. 9475, 9509.

Supreme Court of Montana.

Aug. 22, 1957.

Aronow & Hoyt, Shelby, for appellant.

Church, Harris, Johnson & Williams, and Wm. A. Reid, Great Falls, for respondents.

John Hoyt, Great Falls, argued orally for respondents in No. 9475 and appellant in No. 9509.

Carter Williams, Great Falls, argued orally for appellant in No. 9475 and respondents in No. 9509.

ANGSTMAN, Justice.

These appeals were taken from a judgment in an action seeking to establish and foreclose a mechanics' lien for building materials alleged to have been furnished by plaintiff for the purpose of erecting a house for defendant, Katherine Laux Johnson. The material was alleged to have been furnished to defendant, Francis Wallace, contractor.

Defendant, Katherine Laux Johnson, pleaded a cause of action in her cross-complaint for damages alleged to have been caused by plaintiff through its agent. The court found against plaintiff on its claimed lien and against Katherine Johnson on her cross-complaint. Plaintiff appealed from that part of the judgment which denied its lien and Katherine Johnson appealed from that part of the judgment denying her claim for damages. The appeals have been consolidate in this court. The record shows that the defendants, Katherine Laux Johnson, and Francis L. Wallace, both of Sunburst, Montana, on May 28, 1951, entered into an agreement whereby Wallace for the consideration of $12,650 agreed to build for Katherine Johnson a frame house including a garage, and to furnish all building material and fixtures necessary to construct the buildings.

The complaint which was filed on February 14, 1952, alleges that between June 21, 1951, and October 8, 1951, the plaintiff sold and delivered to defendant Wallace, as agent and contractor for defendant Johnson, at his special instance and request and for the use and benefit of defendant Johnson, certain goods, wares and merchandise of the reasonable value of $5,428.04; that $204.33 has been paid on the account in merchandise returned, leaving a balance due of $5,223.71 together with interest at the rate of 6% per annum from October 23, 1951; that plaintiff filed its notice of claim of lien within the time required by law; that defendant, Francis Wallace, upon his petition was adjudged a bankrupt on October 30, 1951, and on January 16, 1952, the defendant, John W. Huntsberger, was appointed trustee in such bankruptcy proceedings; that he thereafter qualified as such trustee and entered upon the discharge of his duties as such.

Defendant Johnson in her answer denied the material allegations of the complaint and pleaded an affirmative defense which will hereafter be considered when we consider Katherine Johnson's appeal. We shall now consider plaintiff's appeal.

Defendant Wallace, the contractor, was named as a defendant but was not served with process and he made no personal appearance in the action. Huntsberger appeared as trustee in bankruptcy and filed a general demurrer to the complaint. The demurrer was overruled. Upon his failure to further plead default was duly entered against him. At the conclusion of the trial defendant Johnson moved the court for judgment in her favor for two reasons. First for failure of proof of the reasonable value of the materials furnished by plaintiff, and second that defendant Wallace was not served with process. Upon sustaining the motion the court made it clear that its ruling was prompted by the fact that defendant Wallace was not served with process. Plaintiff contends the court erred in this respect, and that since service was had upon the trustee in bankruptcy the requirements of the law were met. This court is committed to the view that ordinarily in a suit to establish a materialman's lien the principal contractor is an indispensable party. Pittsburgh Plate Glass Co. v. Culbertson Hotel Co., 62 Mont. 605, 205 P. 957. In that case the principal contractor had not been adjudged a bankrupt.

It is worthy of note that in a case where no relief is sought against the principal contractor some courts hold that he is not an indispensable party. Among the cases so holding are the following: Cooper Mfg. Co. v. Delahunt, 36 Or. 402, 51 P. 649, 60 P. 1; Hand Mfg. Co. v. Marks, 36 Or. 523, 52 P. 512, 53 P. 1072, 59 P. 549; Didier v. Webster Mines Corp., 49 Nev. 5, 234 P. 520; Hazard, Gould & Co. v. Rosenberg, 177 Cal. 295, 175 P. 612.

However, so far as this case is concerned and where the principal contractor has not been adjudged a bankrupt, we adhere to the view announced in the Pittsburgh Plate Glass Company case, supra, which also finds support in other cases. See Eberle v. Drennan, 40 Okl. 59, 136 P. 162, 51 L.R.A.,N.S., 68, where it was so provided by statute. Godfrey Lumber Co. v. Kline, 160 Mich. 565, 125 N.W. 682; 36 Am.Jur., Mechanics' Liens, Sec. 254, p. 158.

The question then is must the contractor be made a party defendant when he has been adjudged a bankrupt, and when the trustee in bankruptcy is a party defendant and has been served with process and has made an appearance in the action.

The Eberle case, supra, treats of this question. It is relied on by both parties to this appeal. In that case the contractor had filed a petition in bankruptcy, has here, and was adjudged a bankrupt. In the action to foreclose the lien the trustee in bankruptcy was made a party defendant, but the principal contractor was not made a party. The court in its first opinion held that the question of whether the original contractor was a necessary party would not be determined because the question was waived by not raising it in the pleadings. On rehearing the court considered the question on its merits. It likened the situation to a case wherein the principal contractor had died, in which case the court stated the executor or administrator is properly made a party and then stated: 'And we can see no reason why the trustee in bankruptcy might not likewise be made the party defendant.' [40 Okl. 59, 139 P. 167.] The court however concluded that it is not sufficient to name the trustee as a nominal party defendant without praying for relief against him. It said: '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.' Emphasis supplied. The court permitted the parties to amend the pleadings 'making the trustee in bankruptcy a party, with a prayer for judgment against him.' The opinion in that case makes it clear that the principal contractor is a necessary party to the action to establish and enforce a mechanics' lien, but that where as here the contractor has been adjudged a bankrupt and a trustee in bankruptcy has been appointed for him, such trustee in bankruptcy appears for and represents the contractor if the trustee is made a party and if relief is sought against the trustee. Here the complaint asks relief against the trustee. The complaint alleges:

'That the Defendant, John W. Huntsberger, Trustee in Bankruptcy, has, or claims to have, some right, title, interest or estate in, or lien against, the property herein involved but such claim, if any he has, is subsequent and subordinate to the rights of the Plaintiff under and by virtue of its lien aforesaid.'

Since the bankrupt's property is in the hands of the trustee for the benefit of creditors, he has no interest in defeating the adjudication of an indebtedness against him, and we therefore hold that in litigation having that end in view he is represented by the trustee in bankruptcy. As above noted the trustee in this case is a party to the action and relief was sought against him.

The court was in error in holding against plaintiff's right to a lien because of the absence of the principal contractor as a party.

Contention is made that the right to a lien must fall for want of proof of the reasonable value of the materials furnished. The evidence of value consisted of sales slips made out by plaintiff. The contained a description of the items sold, and the price being charged for each item. They were received in evidence without objection except that they were received subject to being connected up by proof that the materials were actually used in the Johnson buildings. It was shown that the charges contained original entries made at or near the time of the particular transactions; that they were made in the regular course of business and were true statements of goods sold and delivered.

The cases are in accord that such evidence is relevant and material and sufficient to make out a prima facie case of the reasonable value of the materials furnished. Planters' Cotton Oil Co. v. Galloway, 170 Ark. 712, 280 S.W. 999; Redding v. Posten, 109 Neb. 197, 190 N.W. 488; Maney v. Cherry, 170 Okl. 469, 41 P.2d 82; Albert S. Eastwood Lbr. Co. v. Britto, 51 R.I. 406, 155 A. 354; 57 C.J.S. Mechanics' Liens Sec. 308 h, p. 965; Nichols Applied Evidence, Mechanics' Liens, vol. 3, Sec. 52, p. 3013; Charles v. E. F. Hallack Lbr. & Mfg. Co., 22 Colo. 283, 43 P. 548; Lanier v. Lovett, 25 Ariz. 54, 213 P. 391; Standard Lbr. Co. v. Fields, 29 Wash.2d 327, 187 P.2d 283, 175 A.L.R. 309.

The prima facie case thus made was not controverted. It stands without contradiction and hence is the foundation for a lien if otherwise plaintiff is entitled thereto.

We then come to the question whether the lien should be denied on some other ground. This makes it necessary to consider Mrs. Johnson's cross-complaint, and the evidence bearing upon it. In it she alleges in substance that plaintiff is estopped from claiming a lien and from claiming to be the owner and holder of an account against her in the sum of $5,223.71 because in ...