Willis v. Mann Const. Co.

• Decision Date: 05 December 1921
• Parties: WILLIS ET AL. v. MANN CONST. CO.
• Court: Tennessee Supreme Court

236 S.W. 282

145 Tenn. 318

WILLIS ET AL. v. MANN CONST. CO.

Supreme Court of Tennessee.

December 5, 1921

Appeal from Chancery Court, Greene County; Hal H. Haynes Chancellor.

Action by W. W. Willis and another against the Mann Construction Company, in which various others intervened. From a decree adjudicating the rights of the various parties, complainants appeal. Reversed in part and remanded, with directions.

GREEN J.

The Mann Construction Company entered into a contract with Greene county, through the county's road commission, to construct a number of roads, involving an expenditure of about $200,000. To obtain money for this purpose Greene county, under legislative authority, issued $200,000 of bonds. It was necessary to sell these bonds to go on with the work, and the Mann Construction Company was vitally interested in this sale, so the construction company entered into a contract with W. W. Willis, of Knoxville, and Caldwell & Co., of Nashville, bond brokers, whereby it agreed to pay these brokers 3 per cent. of the amount realized on the bonds if a specified sale was made. At the time the effort was made to float said bonds, the market was greatly demoralized.

The brokers sold the bonds according to contract, but the Mann Construction Company failed to pay them.

This bill was filed by Willis and Caldwell & Co., in which they alleged the facts above stated, and further set out that there was due to the construction company from Greene county a certain sum of money for the work done by the construction company and its subcontractors during the month of June 1920, and a further sum held back by the county as retainage out of the estimates on the whole work. The bill was filed July 1, 1920, and sought to subject the June estimates of the construction company and the retainage in the hands of the county or its road commissioners to the satisfaction of complainants' demand against the construction company. An injunction was obtained restraining the county and road commissioners from disposing of these funds. The bill contained other averments which will be noticed later.

After this bill was filed a number of persons having claims for labor done for the construction company on said roads filed petitions in the cause, asserting that they were entitled to a lien and a prior claim on all the assets of the construction company, including the fund above mentioned under statutes enacted to this end.

Certain subcontractors under the construction company filed petitions, averring that the construction company had made to them equitable assignments of the greater part of the aforesaid funds in the hands of Greene county or its road commissioners. These subcontractors also sought to hold the sureties upon a bond which the Mann Construction Company had executed in accordance with chapter 182 of the Acts of 1899 (Thompson's Shannon's Code, §§ 1135a-1135a3). This bond was also conditioned to save Greene county harmless from any damage by reason of the contractor's default.

Some other pleadings were filed and the controversies were brought to issue, proof taken, and the cause heard by the chancellor. He found that the Mann Construction Company was an insolvent corporation and gave the laborers the first claim on the funds in the hands of the road commissioners and directed that the balance be applied on the claims of the subcontractors, and that the subcontractors have a decree against the sureties on the construction company's bond for any balance remaining due to them after the funds in the hands of the road commissioners were exhausted.

This left nothing for the complainants Willis and Caldwell & Co., except a judgment against the Mann Construction Company. These complainants, and these alone, have appealed from the decree of the chancellor and assigned errors which raise a number of close questions.

It is first insisted on behalf of the complainants that the chancellor erred in giving the laborers a prior claim on the funds in the hands of the road commissioners. The chancellor based his action on our statutes, which undertake to provide a lien in favor of laborers of this character. It is urged that these statutes are unconstitutional.

The first one is chapter 18 of the Acts of 1883, which provides a lien for all employees and day laborers of any corporation or partnership on the corporation or firm property for their labor and services.

The scope of this lien was somewhat extended by an amendment to the act of 1883 contained in chapter 78 of the Acts of 1897. It was still limited by the latter act, however, to employees and laborers of corporations and partnerships.

Chapter 414 of the Acts of 1905 undertook to amend chapter 78 of the Acts of 1897 by extending this lien to employees and laborers of individuals engaged in mercantile lines of business. The only reference contained in chapter 414 of the Acts of 1905 to the act which it undertook to amend was "chapter 78 of the Acts of 1897." The act of 1905 did not, in its caption or otherwise, recite the title or substance of the law to be repealed, revised, or amended. A mere reference to a former act proposed to be repealed or amended by chapter number and year of passage is not a sufficient compliance with section 17 of article 2 of the Constitution. Memphis Street Railway v. State, 110 Tenn. 608, 75 S.W. 730; Burnett v. Turner, 87 Tenn. 124, 10 S.W. 194.

This defect in chapter 414 of the Acts of 1905 was pointed out by this court in Drug Co. v. Stone, 129 Tenn. 608, 167 S.W. 864. The act was not there adjudged to be unconstitutional because such a judgment was not necessary to the decision of the case before the court. The question is directly presented to us, however, and we are constrained to hold chapter 414 of the Acts of 1905 to be unconstitutional and void for the reasons stated.

This, however, leaves chapter 78 of the Acts of 1897 and chapter 18 of the Acts of 1883 to be considered. It is argued that these acts are unconstitutional, because they only undertake to impose this laborers' lien upon the effects of corporations and partnerships and not upon the effects of individuals engaged in business. It is said that this is an unlawful discrimination, and that chapter 414 of the Acts of 1905 was enacted to remedy this situation.

Statutes giving to laborers of corporations a lien on the corporate effects for their services are quite common and have been uniformly sustained. This classification rests on a reasonable basis. 14 A. C.J. 1021, and cases cited. We think likewise a statute which gives a lien to laborers of partnerships and not to individuals may be upheld.

The laborer employed by an individual, or any creditor of an individual, has a free and unembarrassed right to subject all the property of that individual to the satisfaction of his demand. On the other hand, the laborer or creditor of a partnership does not have such a right to go upon the individual assets of the members of the firm. He is postponed in that respect to the claims of the individual creditors of the partners. His only clear and unembarrassed right is against the partnership assets or property.

These circumstances, we think, furnish a reasonable basis for distinction between a partnership in business and an individual in business and between the laborers and employees of the one and of the other.

It follows that the chancellor was correct in awarding to the laborers a prior claim on the assets of the Mann Construction Company.

The subcontractors claim that they are entitled to the next claim upon the aforesaid funds by reason of an equitable assignment of such funds pro tanto, which they say was made to them by the Mann Construction Company.

Under skillful questioning by their counsel, these subcontractors made out a semblance of an agreement on the part of the president of the construction company to appropriate to them a portion of the funds to be paid the construction company by the road commissioners. The agreement with all these subcontractors was that they should do the work let to them at the same prices which the construction company was to receive from the county, less 8 per cent. It was the custom on each pay day for the commissioners to pay the construction company the amount of the estimates for the previous month, less the stipulated retainage, and the construction company in turn, on or about the same day, gave its own checks to the subcontractors for the several amounts due them.

No written assignments were made in favor of these subcontractors, nor do we think the proof is sufficient to show parol assignments.

Under the general rule, it is fatal to the claim of an equitable assignment if the assignor retains any control of the subject of the assignment. 5 C.J. 912. In this case the assignor did retain control and got the estimates each month itself, and thereafter paid out to the subcontractors what was due them.

Moreover, in Tennessee, an assignment of a chose in action is not complete without notice of the assignment to the debtor. This is contrary to the rule in some jurisdictions, but is in accord with the English rule as well as the rule prevailing in certain states of the Union. Speaking on this subject, this court said:

"The latter we consider as the more reasonable and safe practical rule, and have accordingly held, on more than one occasion, that the assignment of a chose in action is not complete, so as to vest the title absolutely in the assignee, until notice of the assignment to the debtor; and this not only as regards the debtor, but likewise as to third persons. And, therefore, as between successive purchasers or assignees of a chose in action, he is entitled to preference who first gives notice to the debtor, although his

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