Security National Bank v. St. Croix Power Co., 117 Wis. 211

Security National Bank v. St. Croix Power Co.

117 Wis. 211 | Wis. | 1903

WiNsnow, J.

Tbe salient facts stated in tbe complaint may be briefly stated as follows: A national bank received from a subcontractor a building contract as collateral for a pre-existing loan of money, and upon death of tbe subcontractor, leaving bis contract incomplete, proceeded, with tbe consent and approval of tbe personal representative of tbe subcontractor, tbe principal contractor, and tbe owner, to fully complete the contract, and now seeks to foreclose a mechanic’s lien as subcontractor upon tbe structure for tbe unpaid balance due upon tbe subcontract, which tbe owner on settlement with the principal contractor assumed and agreed to pay to tbe plaintiff. Tbe question whether tbe plaintiff can maintain an action to foreclose a mechanic’s lien will be first considered.

Tbe respondent contends that tbe act of tbe bank in proceeding to carry out tbe building contract was ultra vires, and that no right of action can be founded thereon of any kind. It is certainly true that no such power has been conferred upon it in express terms. It has power to loan money on personal security, and it has. all such incidental powers as are necessary to carry on tbe banking business. N. S. U. S. sec. 5136 [IT. S. Comp. St. 1901, p. 3455].

It is not questioned but that tbe bank has power to receive and bold tbe building contract as collateral security for the repayment of a pre-existing loan, and to sell or convert tbe same into money to pay the loan. Did it also have power to go on and complete tbe contract when the contractor died in*217solvent? Was tbis an incidental power necessary for tbe carrying on of its legitimate banking business ? It might be tbe only possible course by which anything could be realized out of the collateral, as seems by fair inference to have been the case here; and the argument is somewhat persuasive that in such case the bank should have the power to take all necessary steps to utilize and make valuable its collateral lawfully taken. On the other hand, the argument is that it would be dangerous to the interests of stockholders and depositors to authorize banks to go into such enterprises, involving large expenditures for the purchase of materials and the employment of men, and the incurring of large pecuniary risks in an entirely foreign undertaking, and in support of this view the cases of National Bank v. Ottawa, 43 Kan. 294, 23 Pac. 485, Cockrill v. Abeles, 30 C. C. A. 223, 86 Red. 505, and Cooper v. Hill, 36 C. C. A. 402, 94 Eed. 582, are cited. The question is certainly one of considerable difficulty, but, in view of considerations to be stated, we do not find it necessary to decide it. This court would unquestionably be bound to follow the holding of the supreme court of the United States as to the powers of national banks — this is strictly a federal question — but on the other hand, upon the question of the effect or application of such holding as a defense in a given case properly brought in the state court, this court may properly follow its own decisions, even when differing from the decisions of the federal courts. Such questions are not federal questions. This court, by a series of decisions, has held that, when a corporation enters into business relations not authorized by its corporate grant of power, the doctrine of ultra vires canhot be used by it or by the person with whom it assumes to deal as a means of defeating the'obligations assumed. The state alone can take advantage of the abuse. John V. Farwell Co. v. Wolf, 96 Wis. 10, 70 N. W. 289, 71 N. W. 109 ; Zinc C. Co. v. Bank, 103 Wis. 125, 79 N. W. 229 ; Att’y Gen. ex rel. Askew v. Smith, 109 Wis. 532, 85 N. W. 512.

*218Even if it were to be conceded,., therefore, that it was beyond the power of a national bank to enter upon the work of constructing the flume and fulfilling Hobson’s contract, still we are not required to determine what the doctrine of the federal courts- is as to the availability of that fact as a defense. Many eases were cited upon this question; the plaintiff relying upon National Bank v. Matthews, 98 U. S. 621, and the cases which follow it, and the defendant upon McCormick v. Market Bank, 165 U. S. 549, 17 Sup. Ot. 433, and California Bank v. Kennedy, 167 U. S. 368, 17 Sup. Ot. 831, and similar cases. We think it must be confessed that there is some difficulty in reconciling all that is said in the two lines of cases, but, as before stated, the fact that this court has adopted the principle that the question cannot be litigated by private parties, a principle with which we are entirely satisfied, relieves us from further consideration of the question.

We come, then, to the question whether, under the facts stated in the complaint, the plaintiff became a subcontractor for the work, for, if not, it has acquired no right to a lien. Robson was unquestionably a subcontractor, and, had he finished the work, would have been entitled to perfect a lien upon the property. Has the plaintiff succeeded to his rights as subcontractor ? The allegations are that Robson, after commencing the work, assigned his contract to the bank as collateral to an existing indebtedness. This was a lawful act, and vested in the bank a valuable interest in the contract. It did not of itself constitute the bank a party to the contract, nor did it carry to the bank any right of lien, but it'gave the bank such a beneficial interest therein that it could not be called a volunteer. It is alleged that, after prosecuting the work for a few months, Robson died insolvent, leaving the work unfinished, and his widow was appointed administra-trix; that the bank then stepped in, in order to protect its security, and assumed the completion of the work, with the consent of the administratrix, the principal contractor, and the *219owner, and was accepted by tbe principal contractor and owner as subcontractor, furnished tbe labor and material necessary, and completed tbe work in accordance witb tbe contract. Do these facts constitute tbe bank a subcontractor? We think they do, upon well-settled legal principles. It is entirely competent for tbe parties to an executory contract acting witb a third person to substitute such third person, by consent of all, in place of tbe original contractor. This is simply a species of novation. All. parties must, of course, consent to it, and there must be a release of tbe original contractor, who is to step out. Here it appears that, after tbe death of Robson and tbe consequent suspension of tbe work, by agreement of all parties, including tbe personal representative of Robson, tbe bank, tbe principal contractor, and tbe owner (whose consent, however, was probably not necessary), tbe proposal of tbe bank to go on and finish tbe work was agreed to, and the bank was accepted as subcontractor in place of tbe deceased, Robson. This state of facts satisfies tbe requirements of a complete novation of parties. Bohn Mfg. Co. v. Reif, 116 Wis. 471, 93 N. W. 466, and cases cited. These facts put tbe bank in tbe shoes of Robson, and constituted it, in truth and in fact, a subcontractor.

It is said that tbe description of land in tbe complaint upon which the lien is claimed is so defective that it cannot be located. There are two parcels attempted to be described, tbe first- bounded by an irregular line witb many angles and changes of course, and tbe second a quadrangle of twenty acres. As to tbe first piece, it is described as being in section 22, township 31, range 19 west; tbe second is described as bounded by a line commencing at a point ten rods north of tbe N. W. corner of the'S. W. quarter of S. W. quarter of section 22, township 31, range 19, thence north forty rods, thence west eighty rods, thence south forty rods, thence east eighty rods to tbe place of beginning, containing twenty acres, in section 21. It is said that tbe first piece is bounded by a zig*220zag line which, goes nowhere and incloses nothing, and the second piece does not appear to be either east or west of any meridian. We think the objections are untenable. We are unable to say that the boundary line of the first parcel includes nothing. As near as we can determine, it does inclose an irregular parcel of land, while, as to the second description, we think that the fair inference is that the range 19 there named is the same range 19 named in the first description. This locates both parcels in St. Oroix county. There is, however, a radical difficulty with the allegation concerning the notice of the subcontractor’s lien, whieh is now to be considered.

Our statute (sec. 3315, Stats. 1898) requires, as a prerequisite to a subcontractor’s lien, the giving of a notice, which is required to set forth that he has been employed by the principal contractor to perform or furnish and has performed or furnished such work, labor, or material, with a statement of the labor performed or material furnished, the amount due therefor from the principal contractor, and that he claims the lien given by the lien chapter. This court has held that a description of the property to be affected by the lien is an essential part of the notice. Mark Paine L. Co. v. Douglas Co. I. Co. 94 Wis. 322, 68 N. W. 1013. Referring to the allegation of notice in the complaint before us, it will be seen that, while it says that the plaintiff duly “gave notice,” it proceeds to set forth specifically what said notice contained, and that the notice as given failed to contain any statement that the claimant had furnished any labor or materials, and also failed to give any description of the land to be affected by the lien claimed. These omissions are fatal to the complaint, as a complaint to enforce a mechanic’s lien. Unless a notice containing the statutory requirements was served (and we cannot presume that it contained anything more than set forth in the complaint), the lien was lost.

Objection is also made to the allegations of the complaint as to the filing of the claim for a lien under sec. 3320, Stats. *2211898. Reference to tbe complaint, however, shows that the claim is alleged to have contained all that the statute requires.

It results from the foregoing that no cause of action for the foreclosure of a mechanic’s lien is stated in the complaint, but it does not necessarily follow that no cause of action of any hind is stated against the appellant. The complaint alleges positively that, after the plaintiff served its notice of lien and filed its claim, the appellant settled with King, and released him from his contract, and at the same time assumed payment of all the building obligations of King, including the amount due the plaintiff. We construe this as meaning that appellant’s promise to pay the plaintiff was made as a part of the agreement of settlement. If so, it was a promise based upon a consideration made to one person for the benefit of a third person, which immediately became a contract which the third person could enforce. Tweeddale v. Tweeddale, 116 Wis. 511, 93 N. W. 440. Sec. 3324, Stats. 1898, provides that in case a lien claimant fail in his action for a lien, but establish a right “to recover upon contract” for his work or materials, he may have judgment therefor against the person liable.

The complaint states a good cause of action to recover upon contract, hence a general demurrer must be overruled. Mark Paine L. Co. v. Douglas Co. I. Co. 94 Wis. 322, 68 N. W. 1013. This is the only cause of action well stated in the complaint, hence the objection that several causes of action "are improperly united is untenable.

By the Court. — Order reversed, and action remanded with directions to overrule the demurrer to the complaint.