Hall v. Banks

Lyon, J. The lien laws as they existed before the enactment of ch. 333,'Laws of 1889, contained the provision that in actions by subcontractors to enforce liens upon premises and buildings “ in no case shall the owner be compelled to pay a greater sum for or on account of such house, building, or other improvement than the price or sum stipulated in the original contract or agreement,” with the proviso that if the contract price is fixed unreasonably low, with intent to defraud subcontractors, the basis of the owner’s liability shall be a fair price for the labor and material used in the building, instead of the contract price. R. S. sec. 3315, as amended by ch. 312, Laws of 1885, and ch. 535, Laws of 1887. Such was the law until April 12, 1889, when ch. 333 of that year went into effect. That chapter repeals the above restriction upon the liability of the owner, and makes him absolutely liable to subcon [234] tractors who comply with the requirements thereof for the amount of their claims, without regard to the contract price of the buildings, or the sum the owner may be indebted to the contractor when notice of the subcontractor’s claim for a lien is served, or at any other time. The contract between the Banks and Maynard for the erection of the buildings in question was made March 28, 1889. Ch. 333, Laws of 1889, took effect by publication thereof April 12, 1889. Hence ch. 333 was not in force when such contract was made. It was in force, however, before Maynard incurred any liability to either of the plaintiffs. The vital question in the case is, Does ch. 333 reach back and charge the Banks (and through them the Improvement company) with the absolute liability to subcontractors imposed upon the owner by that chapter. The learned counsel for plaintiffs maintain with much ingenuity of argument that ch. 333 affects only the remedy, and is therefore applicable to contracts made before its enactment. "We cannot adopt this view. An essential and most vital element in the contract of March 28th is the price the Banks agreed to pay Maynard for erecting the buildings. Any legislation which may compel them to pay more than they agreed to pay necessarily reaches the contract, and impairs its obligation. Had all the subcontractors to whom Maynard was indebted for labor and materials successfully enforced liens on the twenty-five dwellings for their claims, the Banks would have been compelled to pay more than $2,000 for the erection thereof, over and above what their contract with Maynard required them to paju It is no sufficient answer to this to say that the Bañiles might have protected themselves by withholding more money from Maynard with which to pay the claims of subcontractors, for, had they done so, it is fair to presume the aggregate claims of subcontractors would have been increased by an amount equal to that thus withheld. Moreover, if in any [235] case the claims of subcontractors exceed the contract price of the building (which is by no means an uncommon circumstance), the owner, in order to save his property, might be compelled to pay more than the contract price for the building, although he pays nothing to the original contractor. That a law leading to such results would necessarily impair the obligation of contracts, seems perfectly clear. In none of the numerous cases cited by counsel for plaintiffs on this subject do we find it held that a statute which may require a party to a contract in any contingency to pay more or accept less than the considerations specified therein can operate retrospectively, and thus change a vital provision in the contract, entered into before the enactment of the statute, to the injury and loss of a party to such contract. The law is well settled to the contrary. Cooley, Const. Lim. (6th ed.), 344, 347, and cases; 3 Am. & Eng. Enc. Law, 751, and cases cited in note, entitled “Law changing terms of contracts.” Another satisfactory reason for holding ch. 333, Laws of-1889, not retroactive is that it contains no language showing a legislative intent that its provisions should extend to contracts existing when the statute was enacted. The rulé of construction is that “ a statute should have a prospective operation only, unless its terms show clearly a legislative intention that it should operate retrospectively.” Cooley, Const. Lim. 455, and cases. Eor the reasons above stated it must be held that the right of the plaintiffs to the liens claimed is governed by the statute in force when the contract between the Banks and Maynard was entered into, and hence is not affected by the enactment of ch. 333, Laws of 1889. The assignment by Maynard to Edwards & McCulloch Company of the balance due him from the Banks on their contract operates to defeat the liens claimed by plaintiffs, for none of them had at that time instituted any lien pro [236] ceedings. It was said by Mr. Justice Taylor in Dorestan v. Krieg, 66 Wis. 604, that the lien of a subcontractor “ is defeated by an assignment of the claim due from the owner to the original contractor, made in good faith, before the notice is served.” Such is undoubtedly the law. There is nothing in the present case to impeach the good faith of Maynard in making such assignment, or of the Banks in paying to the assignee the balance due Maynard. True, Maynard knew such assignment preferred the Edwards & McCulloch Company, and defeated the plaintiffs’ right to liens for their claims, but that was a legal mode of giving a preference to one creditor over others. It is immaterial that the Banks knew when they paid the Edwards & McCulloch Company that the plaintiffs held unpaid claims as subcontractors. The assignment by. Maynard defeated those claims, and the Baniks had no alternative but to pay over the balance due Maynard to the assignee thereof. It was claimed in argument that the rights of the subcontractors were in some manner enlarged or affected by the fact that on April 18, 1889, Maynard gave the Banks a bond with sureties, conditioned, among other things, to indemnify them against the claims of subcontractors; and that before the Banks paid over to Edwards & McCullough Company the balance due Maynard that company gave them a bond to indemnify them against claims of subcontractors which they might be compelled to pay. Roth these bonds are merely obligations of indemnity to the respective obligees therein, and it is not perceived how they can affect the Bcmks, or increase their liability under their contract with Maynard. Without the first bond the Banks were bound by the contract of March 28th, and without the other they were bound to pay over the balance due Maynard to his assignee. So far as this record shows, both bonds were entirely voluntary, and it is quite impossible to say that they operate to create liens, the right to which does not otherwise exist. [237] Only a single additional fact in the case requires notice. Before Maynard assigned to Edwards & McCullough Company, his sureties in the bond of April 18th offered the Banks, if they would pay such sureties the balance due Maynard, they would pay off all subcontractors claiming liens, and would litigate the claim of Edwards & McCullough Company, and indemnify the Banks against it. This proposition was not accepted, and its non-acceptance is urged as evidence of bad faith towards the lien claimants on the part of the Banks. A complete answer to this is that the Banks had no right to accept such proposition without the consent of Maynard, and it does not appear that such consent was obtained. Besides, the refusal to accept the offer is no more evidence of bad faith towards the lien claimants than its acceptance would have been evidence of bad faith towards Edwards & McCullough Company. It was competent for Maynard to assign the balance due him from the Banks to the plaintiffs, or any or all of the lien claimants, but he did not elect to do so. The Banks are not responsible for his action or non-action in the premises; hence the offer by the sureties to the Banks has no significance in the case. By the Court.—The judgment of the circuit court must be affirmed.