Smalley v. Gearing

• Decision Date: 12 September 1899
• Citation: 79 N.W. 1114,121 Mich. 190
• Court: Michigan Supreme Court
• Parties: SMALLEY ET AL. v. GEARING ET AL.

79 N.W. 1114

121 Mich. 190

SMALLEY ET AL. v. GEARING ET AL.

Supreme Court of Michigan

September 12, 1899

Cross appeals from circuit court, Wayne county, in chancery; Joseph W. Donovan, Judge.

Bill by William Smalley and others against Joseph L. Gearing and others, to enforce mechanic's lien. From a decree in favor of the complainants, fixing and determining the amount which they were entitled to recover, all the parties except the defendant Gearing appealed. Modified and affirmed.

Pub.Acts 1891, No. 179, as amended by Pub. Acts 1893, No. 199 providing for mechanics' liens, is not unconstitutional as conferring unreasonable privileges on one class of citizens at the expense of another.

H. H. & C. H. Hatch, for complainants.

Bowen Douglas & Whiting, for defendants Strelinger & Hart.

Walker & Spalding (C. A. Kent, of counsel), for defendants Schmidt &amp Scheher.

Wm. F. McCorkle, for defendants Wetmore & Brady.

Conely & Taylor, for defendant Hall & Wolf Co.

A. G. Pitts, for defendant Ashland Brownstone Co.

T. E. Tarsney and W. G. Fitzpatrick, for defendant Stanstead Granite Co.

Warner, Codd & Warner, for defendant Northwestern Terra-Cotta Co.

LONG J.

Traugott Schmidt, now deceased, in April, 1895, was the owner of a certain lot in the city of Detroit. On April 9th of that year, he entered into a written contract with Joseph L. Gearing for the construction of a building thereon, for the sum of $52,812.08. Afterwards, Schmidt, with the consent of Gearing, let the contract for the plastering for $6,850; thus leaving the contract to stand at $45,962.08. Gearing went on with the work under the contract, paying most of the labor bills, and in great part for the materials, when, on October 12, 1895, he failed, leaving the building uncompleted. The contract for completion was then let to J. L. Hudson for $22,040. He completed it, and was paid for the same. This bill is filed by complainants to enforce a mechanic's lien, under Act No. 179 (Pub. Acts 1891), as amended by Act No. 199 (Pub. Acts 1893). The defendants are the owners of the property (the heirs of Traugott Schmidt, deceased), the contractor, and certain lien claimants. The court below found and decreed that there was due to the complainants and defendant lienors the following sums: To complainants, $3,992.89; to Hall & Wolf Company, $2,608.47; to Stanstead Granite Company, $1,046.46; to Wetmore & Brady, $644.14; to Ashland Brownstone Company, $2,479.77; to Northwestern Terra-Cotta Company, $1,238.21; to Strelinger & Hart, $658.30. The court also found by the decree that the amount paid by Schmidt to Gearing under the contract, in excess of the amount distributed among the laborers and material men, was $4,937.48, and that the amount of the contract price remaining unpaid after the payment to Hudson for the completion of the building was $271.68. The court computed interest on these amounts at 6 per cent. from January, 1896, to date of decree, making a total, of principal and interest, of $5,836.39, and made this amount a lien on the land, with interest at 6 per cent. from date of decree. After deducting $15 for entry and stenographer's fees, etc., in favor of complainants, from this sum, the court decreed that the balance should be distributed to the complainants and other lienors ratably and in proportion to the amounts due each from Gearing. From this decree all the parties appeal except Gearing.

1. It is contended by the property owners that the act of 1891, as amended by the act of 1893, is unconstitutional, because it is an unwarrantable abridgment of the freedom of contracts and because it undertakes to give special and unreasonable privileges to one class of citizens at the expense of another. The amendatory act of 1893 amends sections 1, 6, and 9 of the act of 1891. Section 1, as amended, provides substantially: "Every person who shall as subcontractor, laborer or material man perform any labor or furnish any material to such original or principal contractor in carrying forward or completing any such contract, shall have a lien therefor upon such house *** to the extent of the right, title and interest of such owner. *** Provided, that any person *** furnishing material or performing labor of any kind entering into the construction of such building *** shall, within ten days after furnishing the first of such material or performing the first of such labor to any contractor or subcontractor, serve on the owner *** a notice, which notice shall be such as will inform the owner of the nature of the materials furnished or to be furnished or labor performed or to be performed and a description of the premises where furnished. *** Such notice, however, shall be sufficient if served at any time subsequent to said ten days but before the original contractor shall make out and give to the owner *** a statement under oath of the number and names of every subcontractor or laborer in his employ and every person *** furnishing materials, giving the amount, if anything, which is due or to become due on them or any of them for work done or materials furnished, as required by section four of this act. The owner *** shall not be liable to the subcontractor, material men or laborers for any greater amount than he contracted to pay to the original contractor, *** but the risk of all payments made to the original contractor, after he shall have received the above mentioned notice or before the contractor shall have furnished him with a statement as hereinbefore provided, shall be upon the owner *** until the expiration of sixty days, within which claims for liens may be filed as hereinafter provided; and no payment made to any contractor before the expiration of said sixty days shall defeat any lien of any sub-contractor, material men or laborers; or, if distributed in part only, then to the extent of such distribution." Section 4 of the act of 1891, which was not amended by the act of 1893, provides: "The owner *** may at any time retain from any moneys due or to become due to the original contractor an amount sufficient to pay all demands owing or unpaid to any subcontractor, material man or laborer who has filed and served the notice in manner and form as provided in section 1 of this act. The original contractor shall, whenever any payment of money shall become due from the owner *** or whenever he desires to draw any money from the owner, *** make out and give to the owner *** a statement under oath of the number and names of every subcontractor or laborer in his employ and of every person furnishing materials, giving the amount if anything which is due or to become due to them or any of them for work done or material furnished; and the owner *** may retain out of any money then due or to become due to the contractor an amount sufficient to pay all demands that are due or to become due to such subcontractors, laborers or material men as shown by the contractor's statement, and pay the same to them according to their respective rights; and all payments so made shall, as between such owner *** and such contractor, be considered the same as if paid to such original contractor. Until the statement provided for in this section is made in manner and form as herein provided, the contractor shall have no right of action or lien against the owner *** on account of such contract; and any payments made by the owner *** before such statement is made or without retaining sufficient money, if that amount be due or is to become due, to pay the subcontractors, laborers or material men as shown by the statements, shall be considered illegal and made in violation of the rights of the persons intended to be benefited by this act; and the rights of such subcontractors, laborers and material men to a lien shall not be affected thereby." The argument against the constitutionality of the act is that by the amendment of 1893 the owner is prohibited from paying according to the terms of his contract, and the contractor is prevented from obtaining his pay, whenever it appears from the sworn statement that there are bills outstanding in favor of contractors, laborers, or material men; and this, although no person to whom a bill is owing has notified the owner that he proposes to claim a lien. It is insisted that this provision of the law, if enforced, will utterly destroy the system of credit as applied to the building business, as every contractor must pay cash or go out of business; that no matter how good his credit, or how willing those who supply him may be to trust him, he cannot take advantage of it, because the law forbids; that flexibility of contracts, varying according to circumstances, which is the life of commerce, will be destroyed, and no contract can be safely carried out which does not follow the narrow, rigid lines prescribed by the statute. Counsel cite the case of Spry Lumber Co. v. Sault Sav. Bank, Loan & Trust Co., 77 Mich. 199, 43 N.W. 778, as sustaining their contention. Act No. 270 (Acts 1887) was there under consideration. Section 2 of that act provided: "Such lien shall not be defeated by any contract, agreement, or understanding between the owner, part owner, or lessee of real estate upon which such improvements are made, or for which materials are furnished, and the original, or any subcontractor, or by any payment made by such owner, part owner, or lessee, to such contractor or subcontractor for the contract price for such labor or material [materials] or any part thereof, in case the person performing such labor, or furnishing such materials, shall *** comply with the provisions of this act." It was said: "This law makes the mere fact that a building contract exists or has existed a sufficient reason for binding the land for any act or omission of the...