Neilson v. Title Guaranty & Surety Co.

Judgment — Upheld Against Collateral Attack Unless Absolutely Void. 1. A judgment must be upheld against a collateral attack upon it unless it is wholly and absolutely void. Judgment — Absolutely Void When Obtained After Service by Publication Where No Property was Attached. 2. A judgment obtained after service upon the defendant by publication in which no property of defendant was attached, so as to be brought within the jurisdiction of the court, is wholly and absolutely void. Attachment — Claim Against Town for Negligent Failure to Obtain Funds for Improvement is not Subject to Attachment. 3. A claim against a town for the balance due a contractor based on the negligent failure of the town to levy a tax on the improvement districts to pay the contractor, is one ex delicto, and not ex contractu, and is not subject to attachment so that an attempted attachment thereof gives the court no jurisdiction on service of a nonresident by publication. Attachment — Claims of Owner and Surety Against Contractor are not “Debts” Which Would Support Attachment. 4. 'Claims by an owner against a contractor for breach of the contract and by the surety against the contractor for the amount of its liability for such breach, which are not liquidated, but are contingent and uncertain in amount, are not l)ona fide existing debts in support of which attachment can be levied under Section 296, Or. L., since debt implies a sum of money due on a contract obligation which is fixed and specific in amount. Stipulations — Agreement to Hold Town Warrants as Stakeholder Held not to Subject Warrants to Void Judgments. 5. Where appeal was contemplated from an order directing a town to issue warrants covering a judgment, an agreement by attorney for the claimant that in lieu of a supersedeas he would hold the warrants as stakeholder until the liability of the town to other claimants against the contractor was determined does not subject the warrants to the payment of the other claims where the judgments obtained on them were absolutely void for want of jurisdiction. 2. Judgments whose validity is dependent o-n attachment, see note in 76 Am. St. Rep. 800. Attorney and Client — Agreement to Subject Client’s Property to Payment of Void Judgments is Beyond Attorney’s Authority. 6. An agreement by an attorney to subject warrants delivered to him for his client to' the payment of claims by others against the client, if broad enough to subject the warrants to such claims, notwithstanding the judgments rendered on them were void, would be beyond the attorney’s authority. 6. Authority of attorney to bind client, see notes in 76 Am. Dec. 256; 30 Am. Rep. 358.

From Multnomah.: Robert Gr. Morrow, Judge. Department 1. This is an appeal from a decree of the Circuit Court of Multnomah County. Owing to the diversity of interests involved a statement of the issues is somewhat difficult, but is substantially as follows: “The City of Rainier undertook to improve certain streets and created two improvement districts. It then entered into a contract with one Charles Masters, under which said Masters agreed to furnish the material and do the work for improving certain streets, payment to be made in warrants drawn upon the funds of the improvement districts respectively and in certain warrants drawn on the general fund for the improvement of street intersections. Harry Howard and N. M. Moody were interested in this contract with Masters, Masters and Moody agreeing to furnish a certain sum of money each and Howard to furnish teams and tools. * * Material for the work was purchased from Columbia Contract Company, for which Masters, Howard and Moody agreed to pay $14,243.63. The contract was performed by the contractors and warrants from time to time issued but not for the full amount earned. The city failed to take proper steps to provide the improvement funds, so that there was no money to pay the warrants issued or the amount in excess of warrants issued due the contractors. After this contract had been fully performed Charles Masters on the twentieth day of July, 1911, entered into a contract with the plaintiff under which, lie agreed in substance to clear and plow certain lands and to furnish all labor, tools, teams and supplies for this work and to give a bond for his faithful performance of this contract. This bond was given with Masters as principal and the Title Guaranty and Surety Company as surety and bears date July 25, 1911. In this contract neither Howard nor Moody were [was] interested. Masters failed to carry out his contract with the plaintiff, but abandoned the contract and on July 26, 1912, the plaintiff brought suit against Masters and the surety company to recover damages for Masters’ failure to carry out this contract. In this suit Masters was not served. The surety company defended and prevailed: Neilson v. Masters, 72 Or. 463, 81 Or. 422. After this ease was disposed of against the surety company, on December 20, 1916, the plaintiff filed a second amended complaint against Masters alone and on the same day filed an affidavit for attachment and an undertaking for an attachment and on that day writ of attachment was issued directed to the sheriff of Columbia County. On the twenty-first day of December the sheriff of Columbia County undertook to garnish the City of Rainier by delivering to the city recorder of said city a certified copy of the writ together with a notice of garnishment by which notice the City of Rainier ‘was notified that there was attached all debts, property, money, dues or credits of every nature in its hands or under its control, especially a certain sum of money belonging to said Masters.’ The city recorder gave a certificate in writing in which it certified that ‘there is no money due or owing from the City of Rainier to the said Masters. ’ On the twenty-first day of February, 1917, O. F. Montandon made an affidavit in which lie says in substance: ‘I am an employee of attorneys for the plaintiff in the foregoing action; the complaint in said suit was filed with the clerk of said court on the twenty-sixth day of July, 1912, and summons thereupon issued; a cause of action exists in favor of plaintiff and against the defendant above named and the subject of the action is to recover damages for the breach of that certain contract wherein Masters, defendant, promised to clear and plow lots 1 to 12, inclusive, of Buena Vista Orchards, situated in Hosier, Wasco. County, Oregon; the defendant has caused the writ of attachment to issue out of the above-entitled court to the sheriff of Columbia County and the said sheriff has duly attached any and all moneys due or owing from the City of Rainier to Masters, the defendant above named; said debt due from the City of Rainier to Masters, the defendant herein, is now the subject of certain litigation now pending in the United States District Court for the District of Oregon. The grounds for the action first above entitled are as follows: That Masters, the defendant, on or about the twentieth day of July, 1911, made, executed and delivered his certain contract with the plaintiff whereby Masters, the defendant, promised and agreed to clear and plow lots 1 to 12, inclusive, of Buena Vista Orchards, situated in Hosier, Wasco County, Oregon, for the sum of $6,100 and made a further contract in writing dated the seventh day of September, 1911, modifying the terms of the above-mentioned contract with respect to the means to be used in the clearing of said land and the time within which the work was to be done and the compensation therefor, all according to the terms of said contract. Plaintiff has performed each and every one of the conditions, obligations and duties imposed by him by said contract; Masters, defendant, defaulted in the performance of said contracts in that all the work done by Masters, defendant, upon said lands was done in a slovenly, unworkmanlike manner and Masters, defendant, failed, neglected and refused to keep a sufficient number of men, machinery and appliances on said job to complete the said work within the period limited by said contract and failed to perform said work with any diligence or promptness at all and failed to use diligence or to endeavor at all to procure a second donkey-engine to be used in said work as required by said contract and permitted a large number of liens for labor and supplies to be filed against said property and finally, after having partially cleared a portion of said land, abandoned said lands, leaving said lands in such condition that the cost of completing said ■work called for by said contract was practically equal to what it would have been if Masters, defendant, had done, nothing at all; plaintiff paid to Masters, the defendant, on account of the work done under said contract the sum of $2,971, and further paid to various persons holding liens upon said property for labor performed in the employ of Masters, defendant, in the course of said work the sum of $127.05 and thereafter the further sum on other similar liens of $466.50, together with the sum of $11.25, the cost of preparing said liens, making a total of $3,575.80; the expense incurred by plaintiff in furnishing labor and material to finish clearing and plowing lots 4B, 7B, 8, 10, and 11 in accordance with the terms of said contract in the sum of $3,556.01; it will cost a sum not less than $7,000 to complete the clearing, plowing, leveling, etc., of said lots 1, 2, 3, 4A, 5, 6, 7 A, 9 and 12, as provided in said contract, and Masters’, defendant’s, failure and refusal to perform said contract on his part and his failure and refusal to do and perform the work and labor therein obligated on him has resulted in the plaintiff being damaged in the sum of $8031.80, which sum Masters, defendant, has failed and refused to pay or any part thereof. Said defendant, C. Masters, cannot, after due diligence, be found in the state of Oregon, although diligent search and inquiry for the purpose of finding said defendant has been made and affiant has been informed by Boscoe Nelson, attorney for the defendant, that said defendant is not now and had not been since the commencement of this action within the State of Oregon, but resides and ever since the commencement of this action has resided and now is in the City of Centraba, State of Washington. I make this affidavit on behalf of plaintiff for the reason that plaintiff is not now within the State of Oregon.’ “Based upon this affidavit an order was made that the service of summons be made upon Masters, the defendant, by publication. Service accordingly was made by publication pursuant to the order of the Circuit Court and on the twenty-sixth day of April, 1917, the default of the defendant Masters was entered. The summons as published is as follows: “ ‘In the Circuit Court of the State of Oregon, for Multnomah County. “ ‘William Neilson, Plaintiff, v. C. Masters, Defendant. “ ‘To C. Masters, the Above-named Defendant: “ ‘In the name of the State of Oregon, you are hereby required to appear and answer the complaint filed against yon in the above-entitled action on or before the sixth day of April, 1917, the said date being six weeks from the first publication of this summons, and if yon fail so to appear and answer, or otherwise plead herein, for want thereof the plaintiff will take judgment against you for the sum of $8,031.81, and for his costs and disbursments herein. “ ‘This summons is served upon you by publishing-same at least once each week for six successive weeks from February 23, 1917, to and inclusive of April 6, 1917, pursuant to an order of the Hon. C. H. G-antenbein, judge of the above-entitled court, which order is dated February 21, 1917.’ * * “On the twelfth day of July, 1917, affidavit was filed by A. H. McCurtain in substance setting out the commencement of this action in July, 1912, the filing of the amended complaint in December, 1916, and that at that time summons was issued, the filing of the affidavit and undertaking for attachment, the writ of attachment, the execution of the writ of attachment by delivering a certified copy thereof to the City of Rainier with a notice attaching all debts, property, money, rights, dues or credits of every nature in its hands belonging or owing to said Masters and requiring said city to furnish a written statement of all such moneys or credits, and that the certificate _ was returned by the City of Rainier and the writ of attachment to the said Circuit Court on the eighteenth day of January, 1917. The affidavit further sets forth that the said certificate is unsatisfactory to the plaintiff, but the affiant is informed and believes and therefore alleges that on the twenty-seventh day of December, 1916, there was and is now due, owing and unpaid from the City of Rainier to the defendant Masters $9,295.40 with interest and that since the making of said certificate Masters has obtained a judgment in the District Court of the United States for the District of Oregon against the City of Rainier. “Based upon this affidavit an order was made requiring the City of Rainier to appear before said Circuit Court and answer under oath the matters and things alleged in the affidavit concerning such debts, moneys or other property owing from the City of Rainier to the said Master’s, and that the city be required by said order to answer under oath allegations and interrogatories to be served upon it. “Allegations and interrogatories were prepared and served together with a copy of the order on the seventeenth day of July, 1917, requiring the City of Rainier to appear and answer on the nineteenth day of July, 1917. The City of Rainier did not appear or answer and on the seventeenth day of August, 1917, the City of Rainier was declared in default and a judgment entered against the City of Rainier as garnishee for the sum of $8,031.80 with costs and disbursements. “Proceedings similar to those taken in the case of Neilson v. Masters were had in an action brought by the Title Guaranty & Surety Co. v. Masters, complaint was filed on April 19, 1917, and on the same day an affidavit for attachment and undertaking for attachment were filed and a writ of attachment issued. This writ was served on the City of Rainier on the twenty-first day of April, 1917, and on the same day the City of Rainier made its return to the effect that it has no property or moneys in its possession or control belonging to the defendant, Charles Masters. On the twenty-seventh day of April, 1917, an affidavit was filed by John K. Kollock, as attorney for the Title Guaranty & Surety Co., in which he sets out the filing of the complaint in said action, the making and execution and delivery to Title Guaranty & Surety Co. of a certain application for bond and agreement of indemnity wherein and whereby said Masters promised and agreed in consideration of the execution by plaintiff as surety of a bond in the sum of $6,100 that he would hold and keep harmless the plaintiff from and against any and all liabilities, loss, damages, costs, counsel’s fees, charges and expenses of whatsoever kind resulting from any action, default or neglect of said Masters that the plaintiff might sustain or incur by reason of having executed said bond and indemnify the plaintiff against any suit or claim brought or instituted against the plaintiff, that the plaintiff executed said bond for $6,100 conditioned upon the faithful performance by Masters of the terms and conditions of the contract of July 20, 1911, between Masters and William Neilson, above mentioned. The affidavit further alleges the commencement of the action by William Neilson on the twenty-seventh day of July, 1912, the fact that Masters did not defend said action, that the surety did defend the proceedings in said action and the dismissal of the action against the Surety Co. The affidavit further alleges that the Surety Co. expended in the defense of said cause $2,248.45 and that Masters has failed to repay the plaintiff the said sum or any part thereof. The affidavit further alleges that Masters is a plaintiff in a certain action pending in the District Court of the United States for the District of Oregon against the City of Rainier, Oregon, that he is not a resident of Oregon and that he is a resident of Glennie, Michigan. “Based upon this affidavit an order was made for service of the summons upon Masters by publication and the summons was so served. * * “On the thirteenth day of July, 1917, an affidavit was filed in that cause by John K. Kollock as attorney for the Surety Co., which is in substance the same as the affidavit filed in the case of Neilson v. Masters, above mentioned, and upon this affidavit a similar order was made, allegations and interrogatories prepared and served on the seventeenth day of July, 1917, requiring the City of Rainier to appear and answer on July 19, 1917, and thereafter similar order of default and judgment was rendered against the City of Rainier as garnishee for the sum of $2,248.45, with costs and disbursements. “While this action of Neilson was pending against the Title Guaranty & Surety Co. and before it was dismissed against this corporation, on June 27, 1916, Masters sued the city in the United States Court, alleging the proceedings establishing the improvement districts, the contract between the city and Masters and the fact that the city had failed to provide the funds, as was its duty, and sought to recover damages for this neglect on the part of the city in a sum equal to the amount earned under the contract less the amount of warrants issued. A judgment was entered in this action against the city on May 23, 1917, for the sum of thirteen thousand one hundred and eighty dollars ($13,180). Steps were taken to enforce this judgment — first, by tendering the satisfaction of the judgment and demanding warrants after-wards by a mandamus suit in the federal court against the officers of the city. The mandamus suit resulted in a judgment and the issue of a peremptory writ of mandamus on January 3, 1918. From this judgment of mandamus the city appealed, and pending the appeal under and pursuant to stipulation between the parties in lieu of an undertaking for a stay of proceedings, deposited with the clerk of the federal court three warrants for the sum of forty-four hundred twenty-six and 15/100 dollars ($4,426.15); sixty-seven hundred four and 25/100 dollars ($6,704.25) and two thousand forty-nine and 95/100 dollars ($2,049.95) respectively; all ‘payable to the order of R. C. Nelson, attorney for Charles Masters.’ These warrants were deposited under a stipulation that if the mandamus cause should be reversed on appeal the warrants should be delivered to the City of Rainier; if affirmed on appeal the ‘warrants should be delivered to R. C. Nelson as attorney for Charles Masters.’ Shortly prior to the date on which the indebtedness to the Columbia Contract Company incurred by Masters, Howard and Moody for material furnished for the work would become outlawed, Columbia Contract Company brought suit against Masters, Howard and Moody as partners to recover the amount due for materials furnished for the work, and in said action recovered a judgment against the partnership and against Howard and Moody individually for the amount of the indebtedness with interest, amounting to eighteen thousand six hundred eighty-two and 68/100 dollars ($18,682.68) and costs and disbursements. No service was had in this action on Masters. The interest of Masters and the interest of Howard in the judgment recovered in the action of Masters against the City of Rainier and in the warrants issued pursuant to the writ of mandamus was assigned to Moody by Masters and Howard, respectively, for the purpose of paying the indebtedness incurred in the prosecution of the work, subject to the claim of attorneys for compensation for their services. Subsequently and in order to obtain an undertaking on appeal in the former suit brought by the plaintiff, and which was subsequently dismissed, Moody assigned these warrants subject to the claim of the attorneys to Daniel Kern. “Moody answered the complaint setting up the facts above recited and thereafter upon motion and without contest Bates & Co. and Daniel Kern were allowed to intervene to protect their interests, Daniel Kern having been shown by the answer of Moody to be the successor in interest of Moody in the warrants, the subject matter of the litigation, and a proper, if not a necessary, party to the litigation, Bates & Co. alleging an assignment by Howard to them of Howard’s interest in the contract between Masters and the City of Rainier. Testimony was taken in open court and findings of fact and conclusions of law made and a decree entered in favor of the defendant Moody, and Daniel Kern and Bates & Co. From this decree the plaintiff and the Title Guaranty & Surety Co. have appealed to this court.”