S. B. Luttrell & Co. v. Knoxville, L. & J. R. Co.

• Decision Date: 30 November 1907
• Citation: 105 S.W. 565
• Parties: S. B. LUTTRELL & CO. v. KNOXVILLE, L. & J. R. CO. et al.
• Court: Tennessee Supreme Court

Page 565

105 S.W. 565

S. B. LUTTRELL & CO. v. KNOXVILLE, L. & J. R. CO. et al.

Supreme Court of Tennessee.

November 30, 1907.

Appeal from Chancery Court, Anderson County; Hugh G. Kyle, Chancellor.

Suit by S. B. Luttrell & Co. against the Knoxville, La Follette & Jellico Railroad Company and others to enforce a mechanic's lien. From a judgment for plaintiffs both plaintiffs and certain defendants appeal. Reversed and remanded.

Templeton & Templeton, for plaintiffs. Cornick, Wright & Frantz and X. Z. Hicks, for defendant railroad companies. Shields, Cates & Mountcastle, for defendant Mason & Hoge Co.

HENDERSON, J.

The original bill was filed in the chancery court of Anderson county February 3, 1905, by complainants, a copartnership engaged in the hardware business at Knoxville, against the Knoxville, La Follette & Jellico Railroad Company, a Tennessee corporation, the Louisville & Nashville Railroad Company, a Kentucky corporation, and Mason & Hoge Company, a corporation or copartnership, defendants.

Complainants furnished materials and supplies, etc., to G. H. Cole & Co. to the amount of $10,506.45, which were used in the building and construction of Dossett's tunnel on the defendant's railroad, said G. H. Cole & Co. being subcontractors under Mason & Hoge Company; and the prayer of the bill is to have their account declared a lien on the property of the railroads, under chapter 98, p. 215, of the Acts of 1891.

After certain interlocutory orders and report of special master, the chancellor declared a lien for a portion of the account, and refused to do so for the balance, dismissing the bill as to Mason & Hoge Company. Complainants have appealed from the portion of the decree that disallows the lien; and the two railroad companies appeal from the portion of the decree adverse to them. Both sides have assigned errors.

We first consider the first assignment of error by the railroad companies, as that presents a preliminary question. This assignment is as follows:

"The chancellor erred in holding and decreeing that the complainants have acquired a lien on the property of the appellant railroad companies, under this proceeding, for any part of their alleged account against G. H. Cole & Co. There is no privity of contract between the complainants and either of the defendants, and as G. H. Cole & Co. are not sued, and the property of the defendants is not brought into the custody of the court by attachment, the chancery court did not acquire jurisdiction either of the person against whom complainants would be entitled to a judgment or of the property which they seek to have subjected to the payment of their alleged claim against G. H. Cole & Co., and the decree of the chancery court in this cause is absolutely void."

This is a suit upon an open, unliquidated account for materials, etc., furnished G. H. Cole & Co., the subcontractors, and which were used in the construction of the railroad. It is argued that it is necessarily a proceeding to recover judgment in personam against the subcontractors, and a proceeding in rem against the property in which the subcontractor has no interest, and that, to enable the court to pronounce judgment in rem, complainants must first obtain a personal judgment against the subcontractor and bring the property of the railroad into the custody of the court by attachment, or, at least, that the subcontractor is a necessary party to the proceeding to enforce the lien under chapter 98, p. 215, of the Acts of 1891.

The act of 1891 amends chapter 220, p. 296, of the Acts of 1883, and the lien is given by section 1, p. 215, of the Acts of 1891, to the materialman and others on the property of the railroad "in as full and ample a manner as is now provided by law for persons contracting directly with such railroad company for any such work and labor done or for materials furnished, provided that within ninety days after * * * such materials are furnished * * * such materialman * * * shall notify in writing any such railroad company, or the owner of such railroad, should it or they reside in the state, or its or their agents or attorneys, should it or they be beyond the limits of the state, that said lien is claimed, specifying in the face of said notice the character of the * * * materials furnished, and the value thereof; and said lien shall continue for the space of one year from the service of said notice, and continue until the termination of any suit commenced for the enforcement of said liens, brought within said one year; and said liens shall have priority over all other liens on such railroad, its property and franchises."

Section 2 provides "that the liens provided for in this act may be enforced by suits brought against such railroad company in the circuit or chancery court of the county or district where the work or material, or any part thereof, was done or furnished, or any part of said services was rendered."

Section 3 provides "that the plaintiff shall set out in his declaration or bill, as the case may be, with reasonable certainty, the work done, services rendered or materials furnished the amount claimed therefor, the nature and substance of any contract made with such railroad company, or any contractor or construction company, or subcontractor, as the case may be, accompanying such declaration or bill, with a copy of the notice executed, as required in the first section of this act. And such suit shall be docketed and conducted as other suits in said courts."

The bill in this case by its averments fully complies with above directions of the act with regard to notice. G. H. Cole & Co., the subcontractors to whom the materials were furnished, are not made parties. The bill alleges that the Mason & Hoge Company had the contract originally with the railroad company to construct the Dossett tunnel. They sublet the work of construction to G. H. Cole & Co. as subcontractors, to which the railroad company agreed.

This latter company began the work of construction September 15, 1902, but failed to comply with the terms of their contract, and certain modifications of the contract were agreed upon between them and Mason & Hoge Company. G. H. Cole & Co. finally failed to carry out their contract and became wholly insolvent, so that, under the provisions of the contract between the two, the Mason & Hoge Company, on November 30, 1903, took charge themselves of the work. G. H. Cole & Co. voluntarily retired from the work, and delivered to Mason & Hoge Company all the materials then on hand, which had been furnished by complainants to the former company, and the latter company prosecuted the work to completion, completing it the 1st of April, 1905.

The bill exhibits an itemized statement of the account of materials, supplies, etc., furnished by complainants to G. H. Cole & Co., showing a balance due thereon and unpaid of $10,506.45, and alleges that the whole of these were used in the construction of the tunnel, a part by G. H. Cole & Co., and the remainder by Mason & Hoge Company.

The railroad companies answer to the merits, and interpose no objection by demurrer or otherwise on account of the failure of complainants to make G. H. Cole & Co. parties. The Mason & Hoge Company, also, answer fully to the merits.

The railroad company holds a contract of indemnity from Mason & Hoge Company, and that company, in their answer, admit that certain portions of the materials furnished by complainants to G. H. Cole & Co., amounting to $467.38, are liens. They tender this amount to complainants in full settlement of their claim. It being refused, the money is paid into court; and they deny that complainants are entitled to lien for any of the other articles.

While the act does not expressly provide that the party to whom the materials are furnished, the subcontractors, G. H. Cole & Co., in this case shall be made parties, the authorities are to the effect that this is necessary. In 2 Jones on Liens, § 1303, it is said:

"A subcontractor who holds an open, unsettled, or disputed account against the principal contractor should obtain an adjudication of this before seeking to establish a lien against the owner, or at the same time that he seeks to do so. He should either obtain a judgment against the contractor before bringing an action to enforce the lien, or he should make the contractor a party to that action. The burden of ascertaining whether there is any defense to the action ought not to be put upon the owner of the property. He is not presumed to have any knowledge upon the subject. Further than this, if the contractor establishes his lien against the property, and the owner is compelled to pay it, he has recourse on the principal contractor. He ought to be furnished with an adjudicated claim, and not with a mere open account."

In Vreeland v. Ellsworth, 71 Iowa, 347, 23 N. W. 374, it is said:

"We have the question whether a subcontractor, who holds an open, unliquidated, and unsettled account against the principal contractor, may bring his action against the owner of the building or improvement, and establish a mechanic's lien upon the property, without adjudicating the claim or attempting to adjudicate in any way against the contractor, who is the person primarily liable upon the account. We think this question must be answered in the negative. If the claim were liquidated, it may be the principal contractor would not be a necessary party. But that question we need not determine. This is an open, unliquidated account — a mere charge against the contractor. The burden of ascertaining whether there is any defense to the action ought not to be put upon the owner of the property. He is not presumed to have any knowledge upon the subject. Further than this, if the subcontractor establishes his lien against the property, and the owner is compelled to pay it, he has recourse on the principal contractor. He ought to be furnished with an adjudicated claim, and not with a mere...