Haney & Campbell Manufacturing Co. v. Adaza Co-operative Creamery Co.

79 N.W. 79, 108 Iowa 313

• Court: Supreme Court of Iowa
• Decided: May 11, 1899
• Status: Published

Opinion

Deeher, J.

— In March of the year 1894, one 0. H. Freeman entered into a contract with Albert Head and others, whereby he undertook to build, according to certain plans and specifications, a creamery plant at or near the town of Adaza, Iowa, for the agreed price of five thousand two hundred and fifty dollars, payable in cash when the plant was completed. The obligation on the part of Head and others was as follows : “We, the subscribers hereto, party of the second part, hereby agree and covenant to pay the above amount of $5,250 to said first party, in cash, for said creamery or butter factory when completed. It is hereby agreed and understood that said building shall be completed within the time stated above in this contract after the amount of $5,250 is subscribed. Any portion of the amount subscribed herein, and not paid according to the contract shall bear interest at the legal rate. As soon as the above amount, $5,250, is subscribed, or within ten days after, we, the subscribers, hereby agree and covenant to incorporate under the laws of the state as herein provided, and we hereby agree to fix the capital stock at not less than the amount of $5,250, to be divided in shares of $100 each. Stockholders of said association to be held liable only for the amount of shares subscribed by them. The parties of the second part agree among themselves to appoint an executive committee to designate such land to the first party, and to confer with the first party from time to time during tbe erection of said factory, and to accept and receive tbe same, when completed, in substantial accordance with these specifications. It is hereby expressly understood and agreed that this contract is completed when tbe amount of $5,250 is subscribed * * * for tbe faithful performance of dur respective parts of tbe above contract, each binds himself, bis heirs, executors, administrators, and assigns.” Tbe contract was signed by “Freeman, per C. E. Lee, Agent, Party of tbe First Part,” and concludes in this manner: “We, tbe undersigned, subscribers to tbe foregoing articles of agreement, as party of tbe second part, hereby subscribe for tbe number of shares of stock set opposite our respective names for a creamery or butter factory to be built at or near Adaza, Greene county, Iowa, according to tbe foregoing plans and specifications on contract, plans form 6, O. H. F., which is made a part of tbe foregoing contract; and tbe said party of tbe second part agrees to pay for said factory as specified in said contract of plans form 6, O. H. F., which is made a part of said contract, or as may hereafter be specified in writing, and agreed to by tbe party of tbe first part.

1 This is followed by more than fifty other signatures, designating tbe number of shares for which each subscribed and tbe amount of stock after incorporation. Tbe total amount subscribed was five thousand seven hundred and seventy-five dollars. Shortly after tbe making of tbe contract, and before any work was done thereunder, Freeman assigned tbe contract to plaintiff, and plaintiff proceeded to erect tbe factory at a place designated by tbe subscribers to tbe agreement An executive committee representing tbe subscribers to tbe instrument accepted tbe plant when completed, and plaintiff bas collected from those who signed the instrument four thousand nine hundred and ten dollars and seventy-three cents, leaving a balance due and unpaid in the sum of three hundred and thirty-nine dollars and twenty-seven cents. This suit is to collect that balance; and to establish and foreclose a mechanic’s lien against the property. The subscribers did not incorporate as agreed, but they took possession of the property and proceeded to operate the same under the name of the Adaza Co-operative Creamery Company; and the action is against this association or co-partnership. The defenses pleaded are, first, that the signatures of some of the subscribers are forgeries; and that Freeman falsely and fraudulently represented to those who signed, after the forged signatures were placed upon the paper, that they were genuine. They further plead that Freeman was the principal contractor, and that plaintiff is not entitled to a lien as a subcontractor, because it did not comply with the statutes authorizing and preserving such lien, and that the assignment of the contract did not carry Freeman’s right to a lien, if he ever had any such right. They also claim that some of the subscriptions were taken with the secret, fraudulent, and corrupt understanding that the makers would not be bound for the full amount thereof, and with intent to induce others to sign; that these subscribers paid but a small part of the amount subscribed by them, and that plaintiff is now endeavoring to collect the full amount from others who signed, relying upon the fact that all were bona fide subscribers ; that plaintiff accepted from some of the subscribers but part of the amount subscribed by them, and released them from all further liability on account of their subscriptions, and thereby released all others from liability. Plaintiff pleaded in reply an estoppel, based on the conduct of the subscribers in accepting the plant after its completion. The record discloses the following facts, in addition to 2 those heretofore stated: Plaintiff furnished all the labor, material, and machinery necessary for the completion of the plant, and turned it over to the subscribers in accordance with the terms of the contract. Jesse Johnson, the ninth name among the list of subscribers to the contract, is a forgery, and was placed thereon by Freeman without authority. John Cavanaugh, whose name appears among the last, did not sign the paper. Another subscription, purporting to be made by A. O. Griffith, was really the subscription of Freeman himself. Griffith was a buttermaker who attended to the plant until it was turned over to the subscribers, and he never paid anything on his subscription. Albert Head and his two sons, B. O. and M. M. Head, appear to have signed the paper, and have marked opposite their names the aggregate sum of five hundred dollars. These subscriptions were settled by plaintiff for the sum of two hundred and fifty dollars, and the Heads were released from all liability thereon. This was done because Head claimed and represented that his sons had not, in fact, signed the paper, and that their signatures were unauthorized. Plaintiff gave Head a receipt in full at this settlement for the five hundred dollars, and released the Headsv father and sons, from all further liability on the contract. When the building was accepted, the following paper was drawn up and signed by plaintiff’s agent: “Whereas Albert Head, P. B. Olmstead, M. M. Beading, and others have, by previous written and oral agreement with one 0. H. Freeman, contracted, obligated, and agreed to pay to the said 0. H. Freeman the sum of $5,250, the said O. H. Freeman contracting, obligating, and agreeing on his part, for and in consideration of the payment of the said $5,250 as agreed upon, to build, erect, and construct a certain creamery building at Adaza, Iowa, as shown by aforesaid contract, obligation, and agreement; and whereas, the said 0. H. Freeman, on the 31st day of March, A. D. 1894, assigned the aforesaid contract, obligation, and agreement to the Haney & Campbell Manufacturing Company, of Belleview and Dubuque, Iowa; and whereas, there are certain claims, liens, and debts due upon and against said creamery, and which have been con-traded by tbe said O. H. Freeman and bis agents in and about tbe construction and erection of said creamery for lumber and materials, iron, tin, brick, stone, boarding, lab'or, hauling, machinery, and fixtures, painting, and paint; Now, therefore, for and in consideration of tbe settlement by tbe said Albert Head, P. B. Olmstead, If. M. Beading, and tbe aforesaid others of aforesaid agreement with tbe said Haney & Campbell Manufactr" vg Company, of Belleview and Dubuque, Iowa, assignee of said obligations, tbe said Haney & Campbell Manufacturing Company agrees and binds itself to and with tbe obligators in tbe agreement herein referred to, to pay off and satisfy all of tbe claims, debts, liens, and obligations against said cream'ery, or which have been contracted by tbe said C. H. Freeman or bis agents in tbe building and erection of said creamery, and in event of suit upon this agreement tbe place of payment shall be at Adaza, Iowa. Haney & Campbell Manufacturing Company, per F. J. Crawford, Secretary.”

3 With these facts settled, what are tbe rights of tbe parties ? Plaintiff, as assignee of tbe Freeman contract, furnished tbe material and performed tbe labor for tbe plant, and it is entitled to a lien for tbe amount due either as a contractor or as a subcontractor, unless it be for some of the defenses pleaded in tbe answer. As a subcontractor it is entitled to a lien, for tbe reason that defendants do not claim to have paid anything to Freeman, and Freeman has waived all claim under tbe contract. No part of tbe work was done by Freeman under tbe contract. True, be did labor upon the building, but whatever be did was for and on behalf of plaintiff. So that there is no question abofit tbe validity of an assignment of a right to a lien. Tbe 4 defenses relied upon have already been stated, and it may be conceded that, if this werean action againsttbe original subscribers to tbe contract, tbe fact that some of tbe signatures were forged would be a defense to tbe others. Tbe suit is against tbe association, or co-partnership, however, and that association or co-partnership has accepted the plant, and is now operating the same. It is in no position to take advantage of the forgery of names appearing npon the contract. Had it rescinded the sale because of fraud, or had it brought action to cancel the contract and made the necessary tender, a different question might arise. We do not in this connection determine the rights of the subscribers as among themselves. Itmavbe that some of them are not bound because of the forgeries committed by Freeman; but the association itself, which has accepted the benefits of the contract, cannot relieve itself from its burdens. Barr v. Railroad Co., 125 N. Y. 268 (26 N. E. Rep. 145). This same thought applies to the claim of release because of the settlement with the Heads. Defendant adduced evidence, without obiection, to show that the contract was several, and not joint. If this be true, — and we are inclined to think it is, independent of any evidence aside from the contract itself (see Davis v. Belford, 70 Mich. 120 (37 N. W. Rep. 919), — then the release of one did not release all. But, if it be conceded that it was joint 5 and several, yet it does not follow that the defendant association or co-partnership is released from all liability on the contract. The release was simply of the Heads from liability under the contract, and the facts introduced in evidence clearly show that it was not intended as a technical release, but merely as a settlement of the liability of the Heads on their subscription, and a promise not to sue them. Bonney v. Bonney, 29 Iowa, 448; Seymour v. Butler, 8 Iowa, 304. Conceding that defendant’s claim is correct, and that each of the subscribers is liable only to the extent of his subscription, it is clear that there was no release of the Association. There is no evidence to sustain the claim that the subscription made by the Heads was collusive and fraudulent. The settlement and compromise with them did not depend upon any claim that they were to pay but one-half the amount subscribed. The burden is on defendant to establish the alleged fraud, and in this it has failed. But, if it be conceded tbat some of tbe subscribers are released from liability by reason, of tbe receipt given to tbe Heads, it does 6 not follow tbat plaintiff’s lien is thereby defeated. Tbe defendant, wbicb is made up of tbe subscribers wbo have paid, bas taken possession of tbe property by its proper officers, and is using tbe same. Its assets are subject to all legitimate claims against it, although some of tbe members of tbe association or co-partnership have been released. Some persons have undertaken to conduct tbe business, have accepted tbe building, and are operating tbe plant. Surely they cannot be beard to say that plaintiff should not recover from this association because certain of tbe other subscribers, wbo have taken no part in tbe management of tbe business, and have never become members, are not bound. Having accepted tbe benefits of tbe contract, it cannot be heard to say tbat it is not liable because some of tbe persons wbo subscribed for stock have been released from liability. Some question is made regarding tbe sufficiency of tbe record to justify a trial de novo. An examination of tbe transcript shows there is no merit in tbe claim. Denials and counter 7 denials in abstracts do not have tbe same effect under the new rules as under tbe old. All specific denials are now settled by a transcript wbicb is ordered on application of tbe appellant. Hesort to this leads to tbe foregoing conclusions. Plaintiff should have judgment for the sum of three hundred and thirty-nine dollars and twenty-seven cents, with six per cent, interest from May 7, 1894, and a decree establishing and foreclosing its mechanic’s lien upon tbe property, together with tbe lot upon which it is situated, — - Beveesed, ' ,