Spalding Lumber Co. v. Brown

Mr. Justice Craig delivered the opinion of the court:

Upon looking into the record it appeal’s that the contractor, H. A. Brown, gave the Spalding Lumber Company an order, which reads as follows:

“$948.00. “Gibson City, Ford Co., Ill., Aug. 14, ’95.

11 Geo. Dooley, Cleric, and John Davis, President,

of School Board, Downs Township 22, McLean Co., Ill.

‘ ‘Please pay the Spalding Lumber Co., or order, nine hundred forty-eight dollars ($948), less freight on four cars of brick and three cars of lumber, being in full for the four cars of brick and three cars of lumber. You will pay the above installments as the architect certifies, as my payments are due.

H. A. Brown.

Less freight on lumber .......................................................$187 74

“ freight on brick.......................................................... 150 50

$338 24”

This order was presented to the board of education August 17,1895, but not paid. A second order for $82.65 was given on September 13 of the same year, and presented within three days thereafter, but payment was refused. It also appears that H. A. Brown gave Myers & Miller an order for $385, which was presented to the board for payment August 5, 1895, and payment refused. The two appellants who hold these orders claimed in the circuit and Appellate Courts, and claim here, that under these orders they are entitled to a priority over the other sub-contractors in the fund in the hands of the school board.

Section 24 of the Lien law provides: “Any person who shall furnish material, apparatus, fixtures, machinery or labor to any contractor for a public improvement in this State, shall have a lien on the money, bonds or warrants due or to become due such contractor for such improvement: Provided, such person shall, before any payment or delivery thereof is made to such contractor, notify the officials of this State, county, township, city or municipality whose duty it is to pay such contractor, of his claim by a written notice and the full particulars thereof. It shall be the duty of such officials so notified to withhold a sufficient amount to pay such claim until it is admitted or by law established, and thereupon to pay the amount thereof to such person, and such payment shall be a credit on the contract price to be paid to such contractor. Any officer violating the duty hereby imposed upon him shall be liable on his official bond to the person serving such notice for the damages resulting from such violation, which may be recovered in an action at law in any court of competent jurisdiction. There shall be no preference between the persons serving such notice, but all shall be paid pro rata, in proportion to the amount due under their respective contracts.” Hurd’s Stat. 1897, p. 1040.

It is first claimed in the argument that a school building is not a public improvement, within the meaning of section 24 of the Lien law. This position is predicated on the argument that the act, in designating the officers to be notified, omits school officers, whereas if the legislature had intended to include school officials they would have been mentioned. It will be observed that the section provides for notice to officers of the State, county, township, city or municipality. In the use of the word “municipality,” after the word “city,” it is apparent the legislature intended that the word “municipality” should be construed to mean some other or different political division from those which might fall under the designation of “city,”—otherwise we would have two words used in the section meaning the same thing, which it will not be presumed the legislature ever intended. We are inclined to the opinion that the legislature intended that a school building should fall within the description of a public improvement, and a school board maybe included, within the term “municipality,” within the meaning of the statute under consideration.

Under the above section of the statute a lien is conferred upon the person who may furnish material, etc., or labor, to any contractor, upon the money, bonds or warrants due or to become due to the contractor. In order to avail of the lien conferred, the sub-contractor is only required to serve a notice in writing on the official before the money is paid or before the bonds or warrants are delivered to the contractor. Here the notices were served by the sub-contractors upon the school board before the money in question had been paid to the contractor, and unless the plain provision of the statute is to be disregarded, the sub-contractors who furnished material are entitled to protection. But it is said in the argument: “The giving of these orders operated, in equity, as a transfer of so much of the funds due or to become due the contractor as was specified in the orders. That amount, in equity, was as effectually taken out from the amount due or to become due Brown, the contractor, as if it had been actually paid to appellants at the time these orders were deposited with the board of education.”

Under section 24 of the Lien law it is plain that the lien is created by the performance of the labor or the furnishing of the materials, and the lien of the sub-contractor becomes perfect as to all funds not paid over or bonds or warrants not delivered, upon service of notice on the officials. The statute makes no provision for the giving of orders by the contractor which may operate as an assignment of any part of the fund agreed to be paid for the construction of the building, nor is there any provision of the statute authorizing the school board to accept such orders, and we see no ground upon which it can be held that an assignment of the fund, by order or otherwise, can defeat the lien created by statute. It is not pretended that the claim of the contractor was negotiable or that appellants are entitled to protection as purchasers of a negotiable instrument. The claim is, that the orders are to be regarded as an equitable assignment of the money due or to become due from the school board to the contractor. Treating the orders as an equitable assignment, they would not defeat the lien of the subcontractors. The law is well settled that an assignee takes a non-negotiable instrument subject to all the infirmities which exist against it in the hands of the assignor, excepting latent equities of third persons. (Sumner v. Waugh, 56 Ill. 531 ; Silverman v. Bullock, 98 id. 11; Himrod v. Gilman, 147 id. 293; Daniell on Neg. Inst. sec. 7266; Pomeroy’s Bq. Jur. secs. 708, 714.) The claim of the contractor against the school board, when he executed the orders, was a mere chose in action, and appellants took the assignment of the claim subject to all equities existing in favor of those who had liens under the statute. The appellants, as assignees of the contractor, stand in his shoes, and they occupy no better position than he would have occupied if he had retained the claim in his own hands. There is only one mode of obtaining a lien upon the fund, and that is by serving the notice on the officers required by the statute. When the notice is served the officers are compelled to retain in their hands a sufficient sum to pay the liens, and should there not be enough to pay the claims in full, then those serving notice are entitled to share in the fund pro rata. If, however, a contractor could defeat the lien of a subcontractor by merely transferring the fund due or to become due, by giving an order, the statute creating a lien in favor of a person furnishing labor or material to a contractor for a public improvement would become a nullity, as the fund might be transferred immediately upon making the contract to erect the building.

Appellees have assigned as a cross-error that the circuit court erred in refusing to hold the sureties on the contractor’s bond liable for the deficit of §2023.38 due the sub-contractors from H. A. Brown, the contractor, after deducting the §1189.13 in the hands of the complainant in the bill. The condition of the bond is as follows: “Now, if the said Henry A. Brown shall duly perform said contract and all the covenants and agreements therein contained, and shall pay and discharge from said premises all liens for material, labor or otherwise which may accrue on account of said building contract, then this obligation to be null and void, otherwise to be and remain in full force.” This bond was given to the board of education for its protection and benefit. The board never claimed a breach of the bond, and there was no breach so far as the board was concerned. There were no liens against the premises and the building was completed, and there remained a balance in the hands of the board to be paid out under the contract, as was conceded by filing the bill of interpleader. The bond contained no provision under which the sureties became bound to protect sub-contractors, and no principle occurs to us under which they could be held liable on the bond.

The judgment of the Appellate Court will be affirmed.

Judgment affirmed.