Seeman v. Biemann

MaRshall, J.

The principal question presented for adjudication is raised by exceptions to the findings of fact respecting the cause of action pleaded by the owner of the building against defendants Jones and Forster for a reformation of the bond indorsed upon the back of the building contract making it run to such owner iiistead of to his architect, Dohmen. The evidence upon which the conclusions of the trial court are based has been examined without disclosing any warrant for this court to say they are clearly against the preponderance of such evidence. Olear and satisfactory evidence of mutual mistake, or of mistake upon one side and fraud upon the other in reducing a contract to writing, is required to -warrant changing such writing with a view to express the actual agreement of the parties. The direct evidence here is substantially all to the effect that the obligors *372 knew when they signed the bond that Dohmen was the ob-ligee therein named. They were told that he wanted a bond from the builders and signed the paper upon a request to become bondsmen for him, as they understood it, and in a measure because of their acquaintance with and regard for. him. Forster wrote the name of Dohmen in the bond as obligee, which leaves no room to doubt that he knew its import when he signed it and that he became a party thereto with full understanding that he thereby became obligated only to Dohmen. True, there is some reason to say the bondsmen must have known that the object of the bond, so far as the owner of the building and the contractor were concerned, was to secure the former; but that does not militate against the theory that they did not intend to become parties to effecting'such purpose. If they did not sign the paper for the benefit of the owner of the building or perpetrate any fraud upon him, whereby he, in the exercise of ordinary care, was induced to accept such paper in the belief that it ran to him as obligee, it cannot be properly changed so as to carry out his purpose. There is no evidence to sustain fraud and no satisfactory evidence of mutual mistake.

The court, in failing to charge the contractors, Biemann & Co., with damages for delay in completing the building by the time named in the contract, must have entirely overlooked the provision thereof that “unless the contractor shall notify the architecfcin writing, in each instance, of his intention to claim an extension of time, within twenty-four hours from the time of the occurrence of the alleged cause of delay, he shall thereby waive all right to said extension.” Parties have a right to make such a stipulation in a building contract, and if they do so they are bound by it the same as by any other part of their agreement. If a contractor agree in writing to construct a building without taking reasonable time therefor, or agree that relief from delays caused by unforeseen causes shall depend on claims being *373 made therefor in a particular manner and within a specified time, he must comply with such conditions or he will be held to have waived such relief.

The building was to have been completed by May 22, 1897. It was not finished till July 15, 1897. There was a ■delay of one month and twenty-three days. There was no •evidence of any claims being made for allowances of time as provided in the contract, so the contractors were clearly liable to the appellant Farr, upon the proper rule for computing his damages under the agreement.

That brings us to the necessity of determining, whether the parties agreed upon $10 a day as the amount to be allowed as damages for each day’s delay, or whether that clause in the contract was intended as a mere security for the completion of the building by the time agreed upon, hence should be considered as a penalty and the recoverable damages be limited to such as proof shows Farr actually ■sustained.

The law is too well settled to permit any reasonable controversy in regard to it at this time, that where parties stipulate in their contract for damages in the event of a breach of it, using appropriate language to indicate that the damages are agreed upon in advance, and such damages are ■unreasonable considered as liquidated damages, the,stipulated amount will be construed to be a mere forfeiture or penalty and the recoverable damages be limited to those actually sustained. "While courts adhere to the doctrine that the intention of the parties must govern in regard to whether damages mentioned in their contract are liquidated, they uniformly take such liberties in regard to the matter, based ■on.arbitrary rules of construction, so called, as may be neces.sary to effect judicial notions of equity between parties, guided of course by precedents that are considered to have the force of law, sometimes calling that a penalty which the .parties call stipulated damages, and that which the parties *374 call a penalty stipulated damages, where otherwise an unconscionable advantage would be obtained by one person -over another. The judicial power thus exercised cannot properly be justified under any ordinary rules of judicial construction. Such rules permit courts to go as far as possible to effect the intent of the parties where it is left obscure by their language so long as such intent can be read out of the contract without violating the rules of language or of law. But in determining whether an amount agreed upon as damages was intended as liquidated damages or as a penalty, rules of language are ignored and the expressed intent of parties is made to give way to the equity of the particular-case, having due regard to precedents as before indicated. Here the damages are said by the parties to be agreed upon at $10 per day for each day’s delay, to be deducted from the contract price, indicating about as clearly as language can that they intended that such damages should be considered as irrevocably stipulated damages; yet the uniform rule is. that such circumstance does not absolutely control.

This court, in harmony with the weight of authority, early adopted the arbitrary rule that where damages may be readily computed and the stipulated damages, so called, are-largely in excess of actual damages, the court will disregard what the parties say they intended, and presume that they intended what is fair and reasonable under the circum-however much that may violate their language. Pierce v. Jung, 10 Wis. 30 ; Fitzpatrick v. Cottingham, 14 Wis. 219 . In Berrinkott v. Traphagen, 39 Wis. 219 , there is-found quoted with approval from 3 Parsons, Cont. 156, language to the effect that parties may contract for stipulated damages at their pleasure, but such damages only as the law says are liquidated according to the artificial rules which have been adopted to justify courts in saying what the parties intended are in fact to be regarded as such damages-The most significant of such rules is the one above referred *375 to. Applying it to the case before us, the stipulation of $10 per day for delay must be held to be a penalty merely, and not necessarily recoverable to the whole amount. The rental value of the property as found by the court was $38 per month. That is the true measure of actual damages, since there were no special circumstances shown by the evidence, brought home to the knowledge of the contractor at the time of the making of the contract, from which we can say the damages which the parties then had in contemplation as the probable result of a breach of the contract as to time of completing the building were other than loss of use for the period of delay. Guetzkow Bros. Co. v. A. H. Andrews & Co. 92 Wis. 214 ; Kennedy v. South Shore L. Co. 102 Wis. 284 .

The rental value of the building is trifling in amount as compared with the stipulated damages, so called, of $10 per day. There was, in the nature of the case, at the time the contract was made, no difficulty to be apprehended in arriving at the actual damages that might arise from mere delay in completing the building. So we have the two elements recognized as controlling the language of parties respecting stipulated damages, first, the amount the parties say they agreed upon is grossly in excess of the actual damages sustained or that could have been reasonably apprehended at the time of making the contract; second, the damages actually sustained are readily ascertainable.

It follows that we must hold that the parties intended the $10 per day as a mere penalty to secure the performance of the contract, and limit the recoverable damages to such as were actually sustained, to wit, $38 per month for fifty-three days, or $67.13, with six per cent, interest thereon from the date the breach of the contract was complete, July 15,1897.

The question is raised as to whether the amount adjudged to defendant Fra/ndi Moody is excessive, and it seems that such question must be answered in the affirmative, in regard to the following matters.

*376 Moody's contract required him to furnish all the “mill work, except bathtub tops, sink tops, shelving, drawers, flour bins, and stairs,” for $440. The evidence is practically all one way that certain closets were intended to be included in “ mill work,” which Moody neglected to furnish, and which were furnished by defendant Jones and included in the amount allowed to him at $42. Moody seems to have construed the contract as not including any part of the closets, except the doors thereto, but in the light of the testimony we must say that is wrong. The closets were clearly included in the term “mill work” and not excluded by any of the exceptions. How it occurred that the full amount of Moody's contract price was allowed to him, and the chai’ges for closets which it in part included, as Moody himself understood, were allowed in full to Jones, does not clearly appear. The excuse given by Moody for not wholly fulfilling his agreement is that he was unable to obtain the necessary detail drawings to work by, from Biemann & Co. If that were so, Moody's recovery could only be justified as damages, and damages do not constitute a lienable claim. Siebrecht v. Hogan, 99 Wis. 437 ; Kennedy v. South Shore L. Co., supra. Our conclusion is that Moody's claim must be reduced by the amount allowed Jones for the closets, $42 and interest thereon at the rate of six per cent, per annum from June 30, 1897.

A claim is made that Moody delayed the work of Biemann Co. some forty days; that the company’s delay in large part is attributable to that fact; and that they should recoup in this action for the benefit of themselves and of Farr the damages which such misconduct caused. On the general proposition that Farr is entitled to insist upon all defenses which Biemann & Co. had to Moody's claim, there can be no controversy. It was the duty of Biemann & Co. to defend against the Moody claim in this action upon all the legitimate grounds they had and at their own expense. The statute so expressly provides. Sec. 3315, Stats. 1898.

*377 Moody refused to come into this action till after it was fully tried, and the court then allowed him to file his complaint that had been served in an independent action against Biemann & Co. and Farr as his answer herein, and to recover according to his rights as shown by the testimony. That was objected to, and the permission should not have been granted except upon such terms as were necessary to save the rights of Biemann & Co. and of Farr. Such rights, however, may be fully protected and the error in that regard cured by allowing Biemann & Co. directly and Farr indirectly such damages as the evidence shows were caused to the former by Moody's fault.

A careful reading of the evidence leads to the conclusion that Biemann & Co. were delayed in their work, by Moody's breach of contract, for a considerable length of time. It is not deemed necessary here to review in detail the evidence bearing on the subject. Suffice it to say that the evidence has been examined with care and to our minds shows clearly that Biemann & Co.’s breach of contract, in that they did not finish the building till one month and twenty-three days after the time agreed upon, is accounted for to the extent of at least one month by Moody's failure to furnish the mill work as agreed upon, and that he should be charged, as damages, for the rental value of the building for that length of time, or $38, with interest thereon from the time of the breach.

It is claimed that none of the subcontractors’ lien claims are lienable because their rights are referable to the rights of Biemann & Co., and that, as the company stipulated against incumbering the property by liens, the subcontractors must be held to have likewise stipulated. That claim is based upon the following provision of the contract: ■ “It is understood and agreed that all money drawn on this contract shall be held in trust for the owner by the contractor, to be applied in payment of all claims for labor and ma *378 terial which have already entered into the construction of the building and for which a lien might be filed against the premises, or for which the owner might be held responsible,, and the owner hereby specially reserves the right to retain all moneys due upon this contract until the contractor shall furnish such evidence that all claims for labor and material,, etc., which might be made against the owner for work embraced in this contract, for which a lien might be filed against the premises, have been satisfied.” The proposition that the claim of the subcontractors is referable to the principal contract, and that if the principal contractor is not entitled in any event to a lien by reason of stipulating to the contrary, his subcontractors are bound by such stipulation, is well supported by authority. This court directly passed upon the question in principle in Siebrecht v. Hogan, 99 Wis. 437 . It was there said, in effect, that a subcontract- or’s lien cannot, to the prejudice of the proprietor of the building, be extended beyond the scope of the principal contract. The subcontractor’s authority to bind the principal depends upon the right of his principal to do so under the same circumstances. To that extent only the proprietor is deemed by force of the statute to have authorized the principal contractor to indirectly bind his principal under the lien laws of the state. The difficulty, however, with appellants’ position is that the law does not fit the facts of this case. There is no stipulation here against the filing of liens upon the building. On the contrary, the contract expressly recognizes the probability of there being lienable claims, and stipulates that the money paid to the contractor shall be considered a trust fund for the discharge of such claims. Similar clauses in building contracts have been passed upon by courts, as conveying the very opposite idea from that of waiving the benefits of the lien statutes. Jones, Liens, § 1502.

A further claim is made that the liens were not enforce *379 able since nothing was due the principal contractor except upon architect’s certificates of satisfactory performance of the conditions of the contract, and the evidence does not. show that such certificates were given or were produced upon the trial. Ve are unable to see how that is material. A subcontractor’s lien is not dependent under our statutes, upon whether there is anything due the principal contractor. If in any event a claim would be lienable under the principal contract in favor of the contractor, it is lienable in favor of his subcontractor, and the right in that regard cannot be impaired by any default of the principal contractor. It would be a strange doctrine under our lien statutes to hold that the neglect of the principal contractor to acquire the right to recover for constructing a building where it has actually been constructed and is in existence as an improvement upon the proprietor’s land, will defeat the right of a subcontractor to look to the property for the payment of his claim.

Appellants’ counsel refer with confidence to Goodman v. Baerlocher, 88 Wis. 287 . The point there decided was that the calls of the statute for a building must be satisfied as a condition precedent to the existence of a lienable claim; that by the terms of the statute a mechanic’s or material-man’s lien can only be acquired on land or the in’terest of the owner of a building in land, in the event of there being a building thereon, in the construction of which such mechanic or materialman contributed labor or material as provided in the statute. In that view it was decided that where there is no building by reason of one partially constructed having been destroyed by fire there can be no lien either in favor of a contractor or subcontractor. All that is said in the opinion should be read -with reference to the point so decided. The reference to Malbon v. Birney, 11 Wis. 107 , where it was held that if there is nothing due the principal contractor so he can recover, no recovery can be had by a *380 subcontractor, was not necessary to a decision- of the case. It was not strictly appropriate to the point discussed because such point did not turn on whether a principal contractor can enforce a lien for a partially constructed building, nor upon whether a subcontractor can have a lienable claim where there is nothing due the principal contractor, but on whether a lien can be enforced where-there is no building within the meaning of the statute. When the Malbon Case was decided valid subcontractor’s liens could not exceed the amount due the principal contractor. Not so now. Under the present statute, if the principal contractor keep within the scope of his contract in respect to the nature of labor and character of material put into the building by subcontractors, in that regard he is the accredited agent of his principal to incur the indebtedness for such labor or material regardless of whether he thereby exceeds the contract price to him for the building or whether the time or conditions under which such contract price is payable are indirectly varied. The language in the Goodman Case, that where “ the principal contractor is not entitled to a lien for any other reason than that he has been paid in full, the subcontractor under him and the materialmen and laborers would not seem to be entitled to any lien,” is misleading so far as it conveys the idea that circumstances other than payment that will defeat a lien as against a contractor will defeat it as against his subcontractor. . Of course where a claim is not lienable in favor of the principal contractor it is not lienable in favor of the subcontractor; but, the lien-ability of a claim being established, a subcontractor’s right to enforce it is not dependent upon whether the owner of the building might defeat it if the claim were made by the principal contractor.

Appellants’ counsel urge the point that the court should have held that the bond running to Dohmen was made for the benefit of Farr, and that Jones and Forster were liable, *381 upon the well-recognized principle that if a person make a contract with another for the benefit of a third person the latter may enforce it against such other. The difficulty with that is not with the law but with the facts. We are unable to come to the conclusion that the trial court erred in holding that the intent of Jones and Forster was solely to contract for the benefit of Dohmen. Such is the letter of the bond, and no reason is perceived for disturbing the decision oE the court that the paper should be given effect accordingly. The case of New York L. Ins. Co. v. Hamlin, 100 Wis. 17 , cited to support the contention that the bond, without reformation, should be regarded as a security for Farr, does not meet the situation. To render the case in point we would have to read into the bond in controversy an express agreement that Farr should have the right to maintain an action thereon against the sureties therein named, the same as if he were named as the obligor. There was such a stipulation in the bond involved in the cited case. We do not deem it necessary to further discuss the question, though counsel have cited to our attention many cases. None of them appears to be in point. When we reject, as we must, the premise counsel assumes, that the bond was given for the benefit of Farr though in terms it runs to Dohmen, all the authorities cited cease to have any bearing whatever on the controversy.

There are some other points discussed in the briefs of appellants’ counsel. None of them seems to require any special mention in this opinion. All have been covered which in our view of the case can affect the judgment appealed from. The judgment as to plaintiff Gustav Seeman, and defendants Forster Lumber Company, John J. Jones, and Charles G. Forster, was correctly rendered and must be affirmed. The judgment as to defendant Frcmlo Moody must be reduced by $80 and interest, in all $87.31, leaving the total amount of his recoverable claim and costs $415.45. Otto *382 Biemann, John Bruening, and C. O. Koehler should be credited with the amount of the correction of the judgment as to Moody and charged with $67.13 and interest from the time of the breach of the contract, July IS, 1897, to the date of the finding, as damages (J. I. Case P. Works v. Niles & Scott Co. 107 Wis. 9 ), in all $73.09, leaving a balance of $14.22, which should be deducted from the judgment awarded to the appellant against them, leaving such judgment to stand at $574.56, including costs.

By the Court.— The judgment of appellant as to Biemmm, Bruenmg, and Koehler is reduced to $574.56. The judgment in favor of Franh Moody is reduced to $415.45. The judgment as a whole as so modified is affirmed. For the purpose of the taxation of attorneys’ fees in this court, all of the lien claimants must be considered as one party and the appellants as one party (Allis v. Meadow Spring D. Co. 67 Wis. 17 , 23) and no attorneys’ fees be allowed to either party. Appellant is awarded judgment for clerk’s fees and $25 for printing against respondent Moody, and judgment is awarded in favor of respondents John J. Jones, the Forster Lumber Company, Gustav Seeman, and Charles G. Forster for their disbursements for printing briefs. No other costs than as indicated are to be taxed in favor of any person interested in the appeal.