Tropic Builders, Limited v. Naval Ammunition Depot Lualualei Quarters, Inc.

• Decision Date: 20 April 1965
• Docket Number: No. 4370,4370
• Citation: 48 Haw. 306,402 P.2d 440
• Parties: TROPIC BUILDERS, LTD. v. NAVAL AMMUNITION DEPOT LUALUALEI QUARTERS, INC., Sam Len, dba the Len Company & Associates, and Aloha Construction Co., Inc.
• Court: Hawaii Supreme Court

Page 440

402 P.2d 440

48 Haw. 306

TROPIC BUILDERS, LTD. v. NAVAL AMMUNITION DEPOT LUALUALEI QUARTERS, INC., Sam Len dba the Len Company & Associates, and Aloha Construction Co., Inc.

No. 4370.

Supreme Court of Hawai'i.

April 20, 1965.

Syllabus by the Court

1. Where land owned by the United States is leased and the demised premises improved with Capehart housing which allegedly gives rise to a mechanic's lien, in an action seeking to foreclose the lien against the leasehold (the United States having been dismissed on its motion), the lessee is an indispensable party.

2. Where parties have been ordered to pay an attorney's fee on the theory the suit was under the mechanic's lien statute, R.L.H.1955, § 193-45, they have an interest on appeal in asserting that the court below erred in holding proper service had been made on an absent party who is an indispensable party to the mechanic's lien proceeding.

3. Where foreclosure of a mechanic's lien has been ordered, one having a potential obligation on a bond if the judgment is affirmed has an interest on appeal in asserting that the court below erred in holding proper service had been made on an absent party who is an indispensable party to the mechanic's lien proceeding.

4. Lack of service on an indispensable party may be asserted at the trial by one having an interest in the matter, though not raised by a preliminary motion.

5. A mere conclusion of law that proper service was made on a certain party is not enough to support the court's jurisdiction over that party, where a return has been filed showing the service made but not showing service on the party in question, and the findings of fact do not lead to the conclusion that still further service was made.

6. A sheriff's return is prima facie evidence of all it contains.

7. One K, who was the agent designated under R.L.H.1955, § 174-1, for service of process on a certain corporation, and was also an officer of another corporation named as a defendant, received a single copy of the complaint and summons, delivered to him by the sheriff. The sheriff's return showed that the latter corporation was served, through K. The corporation so served appeared in the action. It was not shown that the complaint and summons in fact were forwarded by K to the former corporation, which made no appearance in the action. Held that, under all the circumstances, the conclusion of law that proper service was made on the absent party was not adequately supported.

8. It is service of process, not actual knowledge of the commencement of the action, which confers jurisdiction.

9. Where the appellate court determines that the owner of the premises against which it is sought to foreclose a mechani's lien has not been served, the court will not pass on the right to a lien and will view the action as one in assumpsit.

10. Where the appellate court determines that the owner of the premises against which it is sought to foreclose a mechanic's lien has not been served and accordingly the appellate court does not pass on the right to a lien, upon remand it will be for the court below to decided whether opportunity still should be given to serve the absent party so that proceedings to adjudge the right to a lien and enforce the same, if any, may be had.

11. Where work is performed under an express contract, suit must be between the parties to the contract, and third persons, although benefited by the work, cannot be sued on an implied assumpsit.

12. Inadequate capitalization of a corporation entering into an express contract to pay for certain work, will not suffice as a ground for piercing the corporate veil and holding liable an individual who was in control of the corporation and received the benefits of performance of the work, where the individual was liable on the contractor's bond for the work so performed but the suit was not brought on the bond.

13. The court rendering a judgment from which an appeal has been taken has no jurisdiction over a motion to reopen, filed the day after filing of the notice of appeal and without seeking leave of the appellate court to file such motion.

14. Where a partial assignment has been made in the form of an order on the debtor with which the debtor has agreed to comply, the creditor in suing on the claim may include the sum assigned but will hold this sum for the benefit of the assignee.

H. William Burgess, Honolulu (A. William Barlow, Honolulu, with him on the briefs), for appellant.

Howard K. Hoddick, Honolulu (Hoddick, Rothwell & Chang, Honolulu, of counsel), for respondent.

Before TSUKIYAMA, C. J., and CASSIDY, WIRTZ, LEWIS and MIZUHA, JJ.

LEWIS, Justice.

Appellants are Sam Len and Aloha Construction Co., Inc., two of the defendants named in an action to foreclose a mechanic's lien on premises owned by the United States and leased to Naval Ammunition Depot Lualualei Quarters, Inc., hereinafter referred to as the 'Delaware corporation.' The lease was made for the construction of Capehart housing under Title IV of the Housing Amendments of 1955, as amended (42 U.S.C.A. § 1594 et seq.), and the action arose out of the construction work, plaintiff-appellee, Tropic Builders, Ltd., being a partially unpaid subcontractor. Sam Len was joined in the suit as the contractor who entered into the construction contract with the Delaware corporation and the United States. It was alleged that Aloha Construction Co., Inc., designated in the complaint as the 'subcontractor,' performed the contract for the Delaware corporation and entered into subcontracts with plaintiff, Tropic Builders, for the masonry and concrete work. The court rendered judgment against Sam Len and Aloha Construction Co., Inc., for the balance found due, together with an attorney's fee, and ordered that the judgment, if not paid by these parties, be enforced by foreclosure of the mechanic's lien, which the court found was established, against the leasehold and Capehart Act impovements.

The action was commenced on August 10, 1959. The United States was named as a defendant and the Assistant United States Attorney was served on August 11, 1959. However, two days later the United States moved for dismissal, which subsequently was granted. On August 13, 1959, service was made on 'Aloha Construction Co., Inc., thru Mr. David Kim, its Secretary--1501 Kapiolani Boulevard (12:50 P.M.),' according to the return of the sheriff. The next day service was made on 'Sam Len dba The Len Co. & Ass. thru Akira Misawa, its Associate ¹--1129 Rycroft Street (7:10 A.M.),' and return of service then was made.

Appellants contend that the Delaware corporation, holder of the lease of the premises, the improvement of which allegedly gave rise to the mechanic's lien sought to be foreclosed, was not served with summons. As noted, the United States of America, owner of the fee simple, was dismissed from the suit, and this dismissal is not in contest. That the lien could not be foreclosed without making the lessee, the Delaware corporation, a party likewise is undisputed. ² The Delaware corporation was an indispensable party inasmuch as the court was powerless to enforce the decree of forecelosure if rendered in its absence. Terrell v. Allison, 21 Wall. (88 U.S.) 289, 22 L.Ed. 634; Hopper v. Lincoln, 12 Haw. 352, 353.

The question arises whether the appellants have a justiciable interest sufficient to enable them to question the service on the Delaware corporation. There are two portions of the judgment to be noted in that connection. The first is that portion which adjudged that plaintiff 'has a valid and subsisting mechanic's and materialment's lien upon that said lease dated May 9, 1958, granted by the United States to Respondent Naval Ammunition Depot Lualualei Quarters, Inc. * * *,' and that in default of payment of the amount ordered paid by the judgment 'the said lease and the said buildings and improvements located on the premises demised' be sold to satisfy the amount of the lien. The second is that portion which awarded an attorney's fee for services of plaintiff's attorney in excess of the amount allowable in assumpsit, applying instead the mechanic's lien statute. ³ By the judgment below this attorney's fee was not only made a part of the lien but also was ordered paid by appellants.

As parties ordered to pay an attorney's fee on the theory the suit was under the mechanic's lien statute, ⁴ these defendants had sufficient interest to attack the service of the Delaware corporation, which was an indispensable party to the mechanic's lien proceeding. Cf., Williams & Miller v. Jones, 180 So. 140, 142 (La.App.).

As to Sam Len, a further point appears. As the contractor who entered into the construction contract with the Delaware corporation and the United States, he was the principal on a bond insuring the Delaware corporation against any claims being made against it as owner of the project. While appellants' counsel on the argument did not agree that Mr. Len was obligated to the Delaware corporation if the judgment herein was affirmed, said counsel also made the point that this potential obligation gave appellant Len an interest in the validity of the mechanic's lien proceeding. This obviously is so. Cf. Estate of Campbell, 46 Haw. 475, 500-501, 382 P.2d 920, 942-943; Grandhagen v. Grandhagen, 199 Wis. 315, 225 N.W. 935. A party having an interest of this nature may question the validity of the service on an absent party, judgment against whom will affect him. Cf., Brandow v. Vroman, 29 App.Div. 597, 51 N.Y.S. 943; Silberfeld v. General Ins. Co., 183 Misc. 845, 53 N.Y.S.2d 83. So, in Stanley v. Akoi, 12 Haw. 344, a surety objected to further proceedings when the principal on the bond, named as a defendant, was not served. Though his point was not sustained because R.L.H.1955, § 230-9 ⁵ applied, his right to raise it was not questioned.

At the inception of the trial, July 9, 1962, defense counsel raised the point that the Delaware...