Kansas City Hydraulic Press Brick Co. v. National Surety Co.

CARDAND, District Judge. The above cause has been submitted to the court upon the plaintiff’s demurrer to the second, third, and fifth paragraphs of defendant’s answer. The grounds of demurrer are that said paragraph do not allege facts sufficient to constitute any defense to the plaintiff’s cause of action. There was some question at the argument as to whether the demurrer fairly raised the question of the statute of limitations, but the case by agreement of counsel has been submitted to the court on the theory that the demurrer of the plaintiff did raise the question as to whether or not plaintiff’s cause of action had been barred by the statute of limitations at the time said action was commenced. The plea of the statute of limitations appears in paragraph 6-of defendant’s answer, and there is no reference to said [511] paragraph in plaintiff’s demurrer; hut, as counsel have agreed in open court that the record may be amended so as to raise the question, the same will be considered on this hearing. So far as paragraph 3 of defendant’s answer is concerned, the demurrer of the plaintiff thereto is sustained on the authority of Guaranty Company v. Pressed Brick Company, 191 U. S. 416, 24 Sup. Ct. 142, 48 L. Ed. 242. We will now consider the illegality of the contract or contracts entered into between W. W. Atkin and the city of Kansas City, Kan., for the paving of certain streets in said city, and as to how far the illegality of said contracts affect the contracts upon which plaintiff bases its right to recover from the defendant. In so far as the illegality of the contracts made between W. W. Atkin and the city of Kansas City, Kan., are concerned, we are bound by the decision of the Supreme Court of Kansas in the case of the National Surety Company of New York v. Hydraulic Pressed Brick Company (Kan.) 84 Pac. 1034, as the decision of this question involved the construction by the Supreme Court of Kansas of section 747 of General Statutes of Kansas 1901. But this court is not bound by the decision cited, in so far as it holds that no recovery can be had upon the contracts sued upon by plaintiff in this action, for the reason that that question is one of general jurisprudence and upon which this court is bound to exercise its independent judgment. In the first place, we will consider the language of General Statutes of Kansas 1901, § 5130, under and by virtue of which the bonds themselves were given. It appears beyond any question that the bonds were given for the benefit of one furnishing labor or material. Section 5130 provides that the bond shall be “conditioned that such contractor or contractors shall pay all indebtedness incurred for labor or material furnished,” etc. The bonds in controversy were conditioned: “Now, therefore, if the said W. W. Atkin shall promptly pay and discharge all labor and material bills incurred in the prosecution of said work, then the above obligation to be void, otherwise to be of full force and effect.” It would be idle to claim that a bond executed under the section of the statute referred to, or that the bonds upon which recovery is sought, would authorize the recovery of a single dollar, except for the benefit of one who had furnished labor or material, so that, when the Supreme Court of Kansas in the case cited decided that the statute of Kansas which requires competition in the letting of contracts for public improvements was passed by the Legislature of said state to protect the taxpayer and the public, it by no means followed from that decision that the statute which authorized the giving of these bonds in controversy was passed for the benefit of the public and the taxpayer. The best source of ascertaining the intention of the lawmaking power is from the language of the law itself, and the law says that section 5130 was passed for the benefit of one who furnished labor and material in the construction of public improvements. The reason fo,r this legislation is well known. Such laws have been passed by other states and the United States for the reason that one who furnished labor or material for public improvements can obtain no security for his claim by way of liens, commonly known as “mechanics’ liens.” This being beyond question the purpose of the statute, wliat is the case before us ? Plain [512] tiff seeks to recover the value of certain material which it furnished to W. W. Atkin to be used by said Atkin in paving some of the streets of Kansas City, Kan., under and by virtue of certain contracts which W. W. Atkin had with said city of Kansas City. It seeks to recover this sum of the defendant, National Surety Company, for the reason that in and by the bonds, copies of which are attached to plaintiff’s complaint, the defendant agreed to pay all labor and material bills incurred by Atkin in the prosecution of the work which he had contracted to do. This is the agreement which the plaintiff is seeking to enforce. This bond was not given for the faithful performance of the contract between the. city of Kansas City and Atkin. The city of Kansas City •was in no wise interested in whether Atkin paid his labor or material bills, and the contract between Atkin and the city of Kansas City was in no wise the consideration of the bends sued on in this action. The section of the Kansas statute which required this bond did not intend that materialmen and laborers should be paid if the contract for public improvements was valid, end that they should receive nothing if it were void. Such a construction would place the laborer and materialmen in a position where they would have to furnish labor and material at their peril; the question whether they would get their pay or not being made to depend upon whether the contractor had for any reason entered into an invalid contract. But it is wholly beside the question at issue to force the invalidity of the contract between Atkin and the city into the present controversy. It is urged by the Supreme Court of Kansas in the case cited that the contract between Atkin and the city of Kansas City was a consideration for the contracts upon which suit is brought. This cannot be so. Atkin by the bond which he signed agreed to pay the plaintiff in this action for every dollar’s worth of material that he should furnish him. What was the consideration of that contract? Beyond all question, it was the furnishing of the material by the plaintiff and the payment therefor by Atkin. Can it for one instant be claimed that there was anything immoral, or prohibited by statute in this agreement that the plaintiff should furnish and sell its material' to Atkin, and that Atkin should pay for it? How can it be claimed that this valid and lawful contract is destroyed by the fact that the contract between Atkin and Kansas City, with which the plaintiff had nothing to do, was void, not by reason of any immorality or moral turpitude, but because it was entered into contrary to the provisions of the statute of Kansas? The consideration for the contracts in controversy as between the plaintiff and the defendant surety company was the same as between the plaintiff and Atkin, with the addition that the defendant surety company required the payment of a cash premium before it would sign the bond. The simple proposition, so far as this question is concerned, is this: The plaintiff furnished material to Atkin. Atkin agreed to pay for it. The surety company agreed that, if Atkin did not, it would, and the consideration of this agreement to do so was the furnishing of material by plaintiff to Atkin and the payment of the usual premium to defendant for signing such bonds, and in the opinion of this court that contract .stands untainted and in full integrity, regardless of the invalidity of the contract between Atkin and the city of Kansas City. It is urged [513] that the plaintiff knew of the facts which are set up inffhe answer at the time it furnished the material sued for. I do not think this has anything to do with the present controversy. There was nothing immoral, contrary to public policy, or public statute in the plaintiff selling brick to Atkin, even if it knew the facts set up in the answer. And it is very doubtful whether a citizen of the state of Missouri is hound to know a certain state of facts would render a contract void under the laws of. Kansas, especially before the decision of the Supreme Court of Kansas declaring that they did. It results from the foregoing that in the opinion of this court the legality of the contract between Atkin and Kansas City cannot be urged as a defense by the surety company in this action. We will now consider the statute of limitations. By section 4280, 1 Rev. St. Mo. 1899, it is provided: “Whenever a cause of action has been fully barred by the laws of the state, territory or country in which it originated, said bar shall be complete defense to any action thereon, brought in any of the courts of this state.” - The statute of Kansas hereinbefore referred to, which authorized and provided for the giving of the bonds in controversy, provides that no action shall be brought on said bond after six months from the completion of said public improvements or public buildings. Another statute of Kansas, being section 4890 of the Compilation of 1905, provides as follows: “If any action bo commenced within due time and a judgment thereon for the plaintiff be reversed, or if the plaintiff fail in such action otherwise than, on the merits, and the time'limited for the same shall have expired, the'plaintiff, or if he die and the cause of action survive, his representatives may commence a new action within one year after the reversal or failure.” The question before us is whether the last-named section applies to the law providing for the giving of the bonds in question and the limitation therein specified. If so, this action is not barred, but if, on the contrary, it does not apply to said limitation of six months, then the plaintiffs action is barred, unless the bonds can be held good as common-law bonds, independent of the statute. Conceding that the bonds in question are statutory bonds, the plaintiff did commence its action in the state' of Kansas within the six months limited by law for the bringing of the same, and after obtaining judgment of the trial court the same was reversed and remanded by the Supreme Court of Kansas, and the plaintiff then instituted this action in this court within the time limited by said section 4890. The court is of the opinion that under the decisions of the Supreme Court of Kansas this action is not barred. In the case of Seaton v. Hickson, 35 Kan. 663, 12 Pac. 22, the Kansas Supreme Court held that section 23‘of the Kansas Code, which is the same as section 4890 herein mentioned, applied to actions brought in Kansas under the mechanic’s lien law’. To the same effect is the case of Hobbs v. Spencer, 49 Kan. 769, ,31 Pac. 702, which was an action in regard to a tax title under a statute of Kansas which provided a remedy and limited the time within which the suit could be commenced. The Supreme Court of Kansas held that said section 23 was applicable. In the case of Becker v. Railway Co., 70 Kan. 193, 78 Pac. 408, decided in 1904, the Supreme Court of [514] Kansas recognized'the doctrine declared in Seaton v. Hickson, supra. This is the last expression of the opinion of said court which has been called to the attention of this court, and it would seem that the Supreme Court of Kansas has in cases of this kind applied the provision of said section 23 uniformly. It is claimed, however, that the case of Rodman v. Railway Co., 65 Kan. 645, 70 Pac. 642, 59 L. R. A. 704, is,decisive of the question now under discussion, and that that decision compels a holding by this court that the plaintiff’s claim is barred. The court does not so view the decision last mentioned. The learned judge who delivered the opinion held that, where a statute creates the right of action itself and prescribes in what time the action shall be brought, the limitation is a condition of the right, and one who does not bring himself within the provision of the statute cannot maintain his action; but it is also said in the opinion of the court as follows: “A limitation upon the time in which a ^re-existing right of action may be exercised is governed by the general statutes of limitations, and in consequence falls within the saving provisions of section 23, above quoted.” No reference is made in the opinion of the court in the last-mentioned case to the other cases in the Supreme Court of Kansas, hereinbefore cited, and this court is of the Opinion that it was not the intention of the Supreme Court in the Rodman Case to change the general rule prevailing in the state. In the Rodman Case the right of-action was created where none existed before, and it might well be held that the limitation expressed therein was a condition to the exercise of the right,- but the law of Kansas authorizing and requiring the giving of the bonds in controversy created- no new right of action, within the meaning of the phrase as considered in the Rodman Case. A right of action upon a bond by the obligee against the obligor existed long before the passage of the law in question. In the law which authorized the bonds nothing is said about a right of action. The law simply authorized and required the bonds to be given. The law no more created a new right of action than do parties create a right of action when they enter into contracts every day. The right of action by obligcir against obligee existed long before the statute in question and the limitation in the statute referred to this pre-existing right. The Rod-man Case is, when carefully considered, direct and controlling authority that said section 4890 is applicable to the law authorizing the bonds, because that case expressly holds that, where the limitation is upon a pre-existing right of action, then section 23 or 4890 applies. The idea entertained by the court may be illustrated thus: I have no contract with A. to-day, consequently I may not sue him on contract. Tomorrow I make a contract with A. which is subsequently violated by him. I have my right of action, but it was not given me by the contract, and it is immaterial for this purpose whether I entered into the contract voluntarily or by command of a statute. My cause of action arises from the violation of the terms of the contract. My right of action is as old as thp common law. The demurrer will be sustained.