1. The jurisdiction of a court of equity invoked to enforce a
statutory lien rests upon the statute, and can extend no
further.
2. Exceptions to the report of a master in chancery cannot be
taken for the first time in this Court.
3. In a contract to make and complete a structure, with
agreements for monthly payments, a failure to make a payment at the
time specified is a breach which justifies the abandonment of the
work, and entitles the contractor to recover a reasonable
compensation for the work actually performed. And this,
notwithstanding a clause in the contract providing for the rate of
interest which the deferred payment shall bear in case of
failure.
4. Where a release is fraudulently obtained from one of two
joint contractors, the releasing contractor is not an indispensable
party to a bill filed by his co-contractor against the other party
to the contract.
5. Such a release so fraudulently obtained, does not operate to
invalidate the lien previously secured.
6. A statute of California gives to mechanics a lien upon the
flumes or aqueducts "which they may have constructed or repaired,"
provided suit be brought " within one year after the work is done."
A canal company, having a, part of a canal already made which they
could use at certain times of the year, but to use which at all
times and with complete effect, it was necessary to extend to a
river giving a full supply of water, employed two contractors to
make this extension or new canal. The work was to be paid for in
monthly installments. A failure to make the monthly payment
occurred June 7, 1853. On the same day, the contractors gave notice
that the "contract was annulled and at an end,"
Page 73 U. S. 562
and they "no longer parties to it," but to prevent injury to the
company, stated that they would continue to work for another week,
leaving the subject of payment to the company's honor,
when,
unless a satisfactory arrangement was made, they would discontinue
work. On the 13th, no notice being taken of this letter, they
again addressed the company, saying that, receiving no reply, they
withdrew their former offer and all the note, except that part
which declared the contract ended. On this case,
Held:
i. That the lien was filed within the year.
ii. That it affected only the extension or new canal.
A statute of California gives to all persons performing labor or
furnishing materials for the construction or repairs of any
building a lien, jointly, upon the building which they may have
constructed or repaired, or for which they may have furnished
materials, to the extent of the labor done, or materials furnished,
or both. And a subsequent statute extends the previous one so as to
include in its provisions ditches,
flumes, or aqueducts,
constructed to create hydraulic power, or for mining purposes. It
is provided, however,
"that no lien shall continue for a longer period than one year
after the work is done or materials furnished, unless suit be
brought in a proper court to enforce the same
within that
time."
With this statute in force, the South Fork Canal Company was
desirous of having -- for those purposes of mining to which in
California water conduits contribute aid -- a canal or flume from a
grand reservoir near Placerville
to the south fork of the
American River, a distance of about twenty-five miles.
Beginning at the Placerville end, and making the canal in the
direction purposed, they had, after they had made it about half
way, a canal, which they used with a certain advantage. But by
itself, this part -- a part between Placerville and Long Canon --
had no supply of water for more than two or three months in the
year, and these were winter months. Then certain mountain streams
fed it. Extended to the American River, the supply of water it
was
Page 73 U. S. 563
expected would be both increased and be constant. The Company
accordingly, in March, 1853, entered into a contract with two
persons, named Gorden & Kinyon, for an extension of the work
from the point where the already mentioned part ended, to the river
to which they thought that it was desirable to bring it. This new
part was divided into sections designated as sections 17 to 25.
By the terms of the contract it was stipulated that the work
should
be completed by July 1, 1853. It was to be paid for
monthly, however, in a way specified, as the work progressed, it
being provided at the same time, that if any money due should not
be paid when due, such amounts should bear interest at current
rates till paid.
Under the contract Gordon & Kinyon worked till the
7th
day of June, 1853, at which time, on estimate taken according
to the terms of the contract, they were entitled for work done in
May, to about $20,000. The money not being paid, they
on that
day -- the date is important -- gave the company notice by
which, after stating that punctuality on the company's part in
making its promised payments was indispensable to their (Gordon
& Kinyon's) being able to pay the numerous men whom they had at
work, and that they thus acted in order to avoid embarrassment and
discredit to themselves, they declared the contract "annulled and
at an end," and they themselves "no longer parties to it."
Expressing, however, in strong terms their obligations to the
officers of the company for their personal kindness, expressing
also the great interest which they themselves felt in the "noble
enterprise" which they had been directing, and "pride in the
contract from the very difficulty of its execution and its
importance relatively to the whole work," they added in a form
"strictly confidential," and, as they said, for the purpose of
allowing the company to make other arrangements without
interrupting the work, that they would, for six days longer from
the date of the note (June 7th), continue the work undertaken by
them, at their own risk, and should "not ask pay beyond this date
unless the company choose from their own sense of honor to pay."
They added, that at the
Page 73 U. S. 564
end of the six days they would discontinue work unless a new and
secure financial arrangement should be made, one either
satisfactory to themselves or such as two of their own directors
named would pronounce to be proper.
Receiving no reply to this letter, they wrote the
company on the evening of the 13th of June that no action having
been taken on the letter, nor answer given to it, and the six days
having elapsed at 4 P.M. of the then 13th of June, they withdrew
the whole of the former note -- as they said that it was competent
for them to do (the offers having been voluntary) --
except
that part of it which declared the contract broken, annulled, and
ended.
On the next day Gordon informed the company in writing that
Kinyon was only interested in the contract to the extent of
one-third of the profits, and on the 21st of June, he and Kinyon
filed a notice of their claim of a lien on
"the works known as
the South Fork Canal" for the amount which they claimed. A day
or two after the delivery to the company of the note of the 7th,
the amount due on the May estimate was tendered to Kinyon, who
declined to accept it.
On the 23d of June, Gordon & Kinyon brought suit against the
company, for the purpose of enforcing their lien.
A few days afterwards -- that is to say, on the 28th -- the
directors, in their office at Placerville, Gordon being in the City
of San Francisco, took from Kinyon a release, executed in the name
of Gordon & Kinyon, of all claims against the company. The
consideration paid Kinyon for this release was $2,000 in money, and
$3,000 in the company's stock, estimated at par. The certificates
for this stock were made out in the name of Kinyon's wife. The
whole of this transaction was concealed from Gordon by Kinyon, who
immediately after it proceeded to San Francisco, whence by the next
steamer he fled the country.
On the 12th of June of the following year (1854),
Gordon -- having discontinued the suit already brought -- filed a
bill in the court, setting forth the contract, and the facts of the
case, as above given, alleging that the contract had been broken by
the company's failure to pay, that the work had
Page 73 U. S. 565
been done to the amount of $84,000, that the release was
fraudulent, and praying that the release might be disregarded, and
the South Canal sold to satisfy his lien. An interlocutory decree
being made in his favor, and the matter referred to a master, who
reported $76,589 due (less $6,200 credits) on the contract for work
done on the canal, and $16,250 for work preliminary to it, such as
roads, saw mills, timber slides, and such like things, which
assisted in and were indispensable to accomplish the main work. No
exceptions being filed, the report was confirmed, and a decree made
for the amount reported, less the credits and less the $16,250 for
preliminary work, this being held by the court not a lien under the
statute.
And the lien was decreed to extend to the whole canal,
and the whole was directed to be sold to satisfy it.
As respected the relation of the two parts of the canal,
testimony in the case, it may be mentioned, stated that both parts
were "parts of the same work, and each necessary to the other,"
that to disconnect the two would lessen their value greatly, the
work being worth "very little -- valueless" -- without the
extension to the American River.
It was from this decree that the present appeal, one by the
company alone, came.
Page 73 U. S. 567
MR. JUSTICE SWAYNE delivered the opinion of the Court.
This is an appeal in equity from the decree of the Circuit Court
of the United States for the Northern District of California.
Page 73 U. S. 568
Gordon was the complainant, and the appellants were the
defendants in that court. The record is very voluminous, but the
questions presented for our determination are few in number, and
their proper solution is, we think, attended with no serious
difficulty.
We shall confine our opinion to the objections to the decree,
taken in the argument for the appellants. According to the rule of
this Court, the appellee can ask nothing here but what the decree
gave him. It is the appellants who complain. The questions which we
are to examine are such as they present for our consideration. The
position of an appellee in this Court is simply defensive. It is
only where both parties appeal, that a case is open here for
examination as it was in the court below.
The bill was filed to enforce a particular lien given by a
statute of California. The jurisdiction of the court rested upon
this basis, and could extend no further.
The case was referred to a master. He reported that the
defendant was indebted to the complainant in the sum of $76,589.89,
with interest from the 13th of June, 1853, for work done upon the
canal of the defendant, pursuant to the contract out of which this
litigation has arisen: and in the further sum of $16,250.50, for
what the master terms "preliminary work," without which, he states,
the contract could not have been fulfilled. The latter work
consisted of the building of saw mills, railroads, other roads, an
inclined plane, timber slides, and other apparatus. The particulars
are given in a schedule annexed to the report. He reported further
that the defendant was entitled to credits amounting in the
aggregate to $6,200. According to the rules of the circuit court,
the parties were allowed a certain time within which to file
exceptions, and failing to do so, the amounts found by the master
were to be taken as conclusive. No exceptions were filed by the
appellants.
The court disallowed the amount found for the preliminary work,
holding it not to be a lien. The amount of the credits was deducted
from the amount found to be due for
Page 73 U. S. 569
the work done upon the canal, and a decree was rendered for the
balance, with interest.
The finding of the master is as conclusive here as it was in the
court below. There has been no controversy upon that subject. It is
not denied that the amount is correct -- if the complainant had not
forfeited his right to any compensation by the violations of the
contract alleged to have been committed by Gordon & Kinyon.
This part of the case has been argued very fully by the counsel on
both sides. We have looked carefully into the evidence. The result
is that we are entirely satisfied with the report, and in this
respect with the decree. We think the fault of the rupture lies
wholly with the company. Gordon & Kinyon adhered to the
contract, and pursued the work longer than they were bound to do.
When they retired they were fully justified, and had a clear equity
to be paid a fair compensation for the work they had performed.
The release given by Kinyon to the company cannot avail them. It
was a gross fraud. The evidence fixes upon it, and sets in the
strongest light, this character. It would be a waste of time to
discuss the subject. Our minds rest upon the conclusion we have
arrived at, undisturbed by a doubt.
Yet, the release is not without effect. It severed the
connection of Kinyon with the contract, and extinguished any claim
which he might otherwise have had to be heard in this litigation.
He can have no interest in the result, whatever it may be. Complete
justice can be done between the parties before us, and the whole
case disposed of without his presence in the record. He is
therefore not an indispensable party. The company are estopped to
deny this proposition. His relation to the case is not unlike that
of an obligee in a title bond, to a suit upon it for specific
performance by an assignee, to whom the obligee has parted with all
his interest in the bond. In that class of cases it is held not to
be indispensable that the assignor should be a party.
The court below held that Gordon had a lien upon the entire
length of the canal or flume, extending from the
Page 73 U. S. 570
grand reservoir, near Placerville, to the South Fork of the
American River, a distance of about twenty-five miles. When the
contract with Gordon & Kinyon was entered into, the flume was
completed from the reservoir to Long Canon, a distance of eleven
and two-third miles. Water flowing through it was used by means of
several outlets for mining purposes. It was fed from sources other
than the South Fork. The contract with Gordon & Kinyon was for
the extension of the canal, by the construction of sections "from
section 17 to 25 inclusive." Their work commenced where the
existing canal ended, and reached to the South Fork of the American
River. The object was to make use of that stream as an additional
feeder, and thus to increase the supply of water in the canal.
The two parts of the work -- the one extending from the
reservoir to the canon, and the other thence to the South Fork --
were known respectively as the lower and the upper section. The two
sections were constructed by different contractors, and, as already
shown, at different times. The former was completed and in use
before the latter was begun. In these respects they were distinct
works. The points of identity are continuity and a common object,
use, and ownership.
The lien laws of California provide that all contractors,
laborers, and other persons "furnishing materials for, or employed
in, the construction of any bridge, ditch, flume, or aqueduct,
shall have a lien upon the structure," which they may have
constructed or repaired, or for which they may have furnished
materials of any description, "to the extent of the labor done, and
materials furnished, or both." It is further provided that the lien
shall not bind the structure for a longer period than one year
after the work is done or materials furnished, unless suit be
brought to enforce the lien within that time.
Several objections have been taken to the decree touching the
lien.
It is not denied that it became fixed by a regular compliance
with the preliminary statutory conditions. But the
Page 73 U. S. 571
appellants insist that it was extinguished by the release given
to them by Kinyon. It would be a mockery of justice to allow an
instrument so stained with turpitude to have such an effect. The
subject has already been sufficiently considered.
It is said the lien was waived by the dismissal of the prior
suit. The dismissal of that suit can obviously have no effect upon
the rights of the parties in this litigation.
It is insisted that this suit was not brought in time to feed
and preserve the lien. The evidence shows that the work was
continued by the contractors down to the 13th day of June, 1853,
inclusive. This bill was filed on the 12th day of June, 1854. That
was within the time prescribed by the statute.
It is urged that the decree is erroneous in holding that the
lien extended the entire length of the canal instead of limiting it
to the upper section, where all the work was done. Is this
objection well taken? Liens of this kind were unknown in the common
law and equity jurisprudence both of England and of this country.
They were clearly defined and regulated in the civil law.
* Where they exist
in this country they are the creatures of local legislation. They
are governed in everything by the statutes under which they arise.
These statutes vary widely in different states. Hence we have found
no adjudication in any other state which throws any light upon the
question before us, and there has been none in California. We are
therefore compelled to meet the case as one of the first
impression.
We have already shown that the upper and lower sections were
distinct works in several essential particulars, to which we need
not again advert. The lower one having been finished and in use
before the upper one was contracted for, if those having a lien
upon the former, had insisted that it became extended over the
latter, as soon as the latter was completed, no legal mind, we
apprehend, could have doubted that the claim could not be
sustained. If it could, Gordon's
Page 73 U. S. 572
lien might have been rendered valueless. We think the converse
of this proposition applies with equal force. If a lien upon the
lower section could not have been extended over the upper one, upon
what principle can it be maintained that Gordon's lien embraced the
lower section? A lateral feeder constructed and intersecting the
main line after it was completed, would certainly not be subject to
a previous lien upon the main line, if such a lien existed. We can
see no substantial difference between that case, and the one before
us. The upper section was only an additional feeder. That it was an
elongation of the main line, and not a lateral work, does not
affect the principle involved. The controlling circumstances and
the object in both cases would be the same.
We think the language of the statute rightly interpreted is
decisive.
The lien is given to contractors and laborers upon the ditch or
flume "which they may have constructed or repaired, . . . to the
extent of the labor done and materials furnished." The work of
Gordon was all done upon the upper section. He had nothing to do
with the lower section. So far as he was concerned, and for all the
purposes of this litigation, they were distinct and independent
works. A different principle would produce confusion, and lead to
serious evils. We have no difficulty in coming to the conclusion
that the decree in this particular is erroneous.
It is therefore reversed and the cause remanded to the court
below with instructions to enter a decree in conformity with this
opinion.
* Domat, §§ 1742, 1744.
MR. JUSTICE FIELD, dissenting.
I dissent from so much of the opinion and decision as limits the
lien of the contractor to that portion of the canal which was
constructed by him. I think the lien extends to the entire canal,
as much so as a lien for work upon a wing of a house extends to the
entire building.
MILLER and GRIER, JJ., concurred with FIELD, J.
