Arnold v. Genzberger , 96 Mont. 358 ( 1934 )

It seems to me that, if we follow the law, the judgment cannot be sustained upon any conceivable theory.

1. As to the pleadings. By resort to extreme liberality it may be said that the complaint on its face states a cause of action against Meyer Genzberger, but the facts show that plaintiffs have no cause of action against him. To this all members of the court agree.

On the theory that the allegations respecting him are true, the complaint, liberally construed, may be held to state a cause of action against Gertrude Genzberger and Jennie G. Sternfels. The facts show plaintiffs have no cause of action against them.

2. I do not agree with what is said respecting a "nonsuit" in an equity case. The majority overlook the force of what is said on the point in Streicher v. Murray, 36 Mont. 45, 92 P. 36,Stevens v. Trafton, 36 Mont. 520, 93 P. 810, SchoolDistrict No. 2 v. Richards, 62 Mont. 141, 205 P. 206, andLe Vasseur v. Roullman, 93 Mont. 552, 20 P.2d 250.

Moreover, in reply to a specific recitation of the facts from which res judicata necessarily follows, plaintiffs admitted the cause (not the complaint) was dismissed, thus in effect admitting defendants' allegations. Plaintiffs' plea, "Deny that they are bound or precluded from maintaining this action," is a bare conclusion of law.

3. The majority overlooks the allegation of the complaint, referring to the void contract alleged to have been entered into between Johnson and Genzberger, "that in pursuance of said contract the said tenant R.G. Johnson, fully performed his part thereof, but the defendant, Meyer Genzberger, failed, neglected and refused, and still fails, neglects and refuses to perform his part thereof, as hereinafter set forth." There is no allegation that this contract was between the owners and Johnson, or between the owners by their authorized agent and Johnson; the allegation is that under the terms of the contract aforesaid Meyer Genzberger authorized, empowered and directed his tenant, Johnson, to have the necessary plumbing and appliances installed in the building, and to that end to hire a competent plumber or firm of plumbers to furnish the materials and labor necessary for such purpose. Nor is there any allegation anywhere that Genzberger had authority to contract for, or to authorize anyone to contract for, the work done by plaintiffs.

The account kept by plaintiffs shows that all work done and materials furnished were charged to "R.J. Johnson, agent." The account attached to the lien is different; it begins: "Sold to Gertrude Genzberger, Jennie G. Sternfels, and R.J. Johnson." Johnson was never the agent of the owners. It is not claimed that he was their ostensible agent. Upon the facts it could not be. (Sec. 7933, Rev. Codes 1921; Hartt v. Jahn, 59 Mont. 173,196 P. 153; State v. Tuffs, 54 Mont. 20, 165 P. 1107;Harris v. San Diego Flume Co., 87 Cal. 526, 25 P. 758.)

Johnson testified that he told Mr. Arnold that Meyer Genzberger would pay for it.

In view of the holding of the majority that Meyer Genzberger is not personally liable, I pass by other errors without discussion.

4. Assuming that Johnson's testimony, given in the case to which he was a party, was admissible in this, it appears the contract was void, and evidence of its terms was not admissible for any purpose. (Dreidlein v. Manger, 69 Mont. 155,220 P. 1107, 1109.) Waiving that, it appears that Genzberger had the roof fixed in March and April, 1928, and paid for it. Johnson opened the rooming-house in May, 1928, and operated it as such practically all the first year he was there. In short, the testimony discloses without contradiction that at the beginning of the tenancy Genzberger and Johnson put the building in a tenantable condition, and Genzberger repaired all the plumbing then in the building, and paid for it. Nothing was said between them at that time to the effect that Johnson intended to turn the building into apartments and that Genzberger would pay for the plumbing. "At the time of the plumbing in 1928, the March 6, 1929, job was never thought of," Johnson testified. Can anything be clearer than that, in order to bolster up plaintiffs' case, it is necessary to rely upon the original contract which all must confess was from its inception null and void?

Johnson, in November or December, for the first time said he told Genzberger he was "going to turn the rooms into apartments, and wanted him to put the plumbing in, and he said he would take care of it." Plaintiffs did not have any conversation with Genzberger's principals on the subject at any time. They talked only with Johnson, the tenant. While Mr. Arnold testified that he saw Genzberger in the place while the work was going on a great many times, he did not at any time even speak to Gensberger.

5. When the plaintiffs closed their case, the defendants moved to strike from the evidence any reference to the contract made in the beginning between Genzberger and Johnson, an oral contract void under the laws of this state, on the ground that no evidence was admissible respecting it; and also moved to strike from the evidence all testimony of the plaintiff Arnold which purports to show oral declarations of Johnson relative to the terms of his agency, for the reason that the same is prohibited by section 10535, Revised Codes 1921, and is made incompetent by that section, and that the oral declarations of an agent are insufficient in law to prove agency. The court erroneously overruled these motions.

The court overlooked the fundamental basis of a cause of action here, especially when the action was designed to foreclose a mechanic's lien. A lien rests upon contract. There was no contract here which the law recognizes; on the contrary, the alleged contract was wholly void, and consequently not binding on anyone under the express terms of sections 7519 and 10613, Revised Codes 1921.

Section 7519 provides in part: "The following contracts are invalid, unless the same, or some note or memorandum thereof, be in writing and subscribed by the party to be charged, or his agent: 1. An agreement that by its terms is not to be performed within a year from the making thereof. * * * 5. An agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; and such agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent be in writing, subscribed by the party sought to be charged."

Section 10613 provides: "In the following cases the agreement is invalid, unless the same or some note or memorandum thereof be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing or secondary evidence of its contents." Then follow five subdivisions, 1 and 5 being identical with subdivisions 1 and 5 of section 7519.

In Dreidlein v. Manger, supra, we held that the expression "invalid" means null and void. "Therefore the contract cannot be relied upon or furnish evidence for any purpose." The plain and unequivocal declaration of the statute is that evidence of the agreement cannot be received. The contract being declared void, the receipt of the evidence respecting its terms was prohibited.

6. Without Johnson's testimony the plaintiffs could not make even a prima facie case. Granting that otherwise his testimony was admissible under section 10606, Revised Codes 1921, section 10613, supra, prohibits any testimony respecting the void contract. It all harks back to the original negotiations. It cannot be said that the conversation Johnson claims to have had with Genzberger with respect to turning the rooming-house he was occupying into an apartment house was a new contract; at the most it could only be said it was an oral modification of the original "contract," the modification also being void. Moreover, the assertion of Johnson that according to the contract, after the "improvements" he was making were completed he should be entitled to remain in the occupancy of the building for one year and thereupon he should have a lease in writing for five years, the terms not being agreed upon, doubly condemns the transaction; the understanding about the written lease being "too vague, indefinite, and uncertain to form the basis for a contract." (Monahan v. Allen, 47 Mont. 75, 130 P. 768, 769.)

7. At the close of all the evidence Genzberger and the owners separately moved the court to compel the plaintiffs to elect whether they sought to hold Genzberger as principal, or as agent, or the owners as principals by reason of the acts, or alleged acts, of Genzberger. The motion was denied. It should have been sustained. (Klinger v. Modesto Fruit Co., 107 Cal. App. 97,290 P. 127.)

8. The burden of proving the authority of an agent is upon the party dealing with him, where it is sought to hold the principal liable. Where either the nature or extent of the agent's authority is controverted, the burden is on the third party dealing with him to establish it. (1 Nichols on Evidence, 440.) This is peculiarly true with respect to the subagency of Johnson, supposed in the majority opinion. A person dealing with a special agent must at his peril ascertain the extent of the authority of the agent. (Benema v. Union Central Life Ins. Co., 94 Mont. 138,21 P.2d 69.) The supposition is utterly without foundation.

The agency must be proved by other evidence before the agent's acts and statements can be shown against the principal. At best such declarations are merely hearsay. (United States Smeltingetc. Co. v. Wallapai M. D. Co., 27 Ariz. 126, 230 P. 1109, with many supporting authorities; Toomey v. Casey, 72 Or. 290,142 P. 621.) The law is that the declarations of an agent are not competent to establish the fact of his agency. (Nyhart v. Pennington, 20 Mont. 158, 50 P. 413; Lafourche Transp.Co. v. Pugh, 52 La. Ann. 1517, 27 So. 958.) Genzberger was without power to authorize Johnson to do anything in the premises which would bind his principals; he had no authority to create a subagent under him. (See sec. 7972, Rev. Codes 1921.)

A lien must rest upon a contract debt, and the contract must be made directly or indirectly with the owners of the property. (Pelton v. Minah Con. Min. Co., 11 Mont. 281, 28 P. 310;Dewey Lumber Co. v. McQuirk, ante, p. 294, 30 P.2d 475. It is not sufficient that the work enhanced the value of the property. (Belnap v. Condon, 34 Utah, 213, 97 P. 111, 23 L.R.A. (n.s.) 601.)

The only direction to do the work which plaintiffs had, or claim to have had, was from the verbal statement of Johnson that Genzberger told him (Johnson) to have it done and that Genzberger (not the owners) would pay for the job. In entering upon the work Arnold did not exercise even ordinary care. It is hornbook law that it was necessary for him to find out the extent of the "agent's" authority before he proceeded with the work. He did not even take the time to call up Genzberger's office, let alone communicate with the owners to find out whether Genzberger, to say nothing of Johnson, had the right to bind the owners. Knowing Johnson was a mere tenant, plaintiffs were bound to know that he, as a tenant, could not affect the title of the owners, and that only his leasehold interest, if any he had, could be affected by a lien for the work ordered done by the tenant. (Sec. 8342, Rev. Codes 1921; Pelton v. Minah Con. Min. Co., supra; Block v.Murray, 12 Mont. 545, 31 P. 550; Stenberg v. Liennemann,20 Mont. 457, 52 P. 84, 63 Am. St. Rep. 636; Dewey Lumber Co. v. McQuirk, supra.)

9. Able to prove the contract with Johnson only, unable to prove that any agent authorized the work, plaintiffs were driven to rely upon the theory that the owners and Genzberger, their agent, by reason of their acts are estopped from denying liability for the work done and materials furnished, and they pleaded equitable estoppel, or estoppel in pais. They did not, and cannot, prove it. Such an estoppel arises only "when one by his acts, representations or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist, and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts." (21 C.J. 1113.)

To establish an estoppel, the party relying upon it must show that he was misled to his prejudice by the acts of his opponent. (Rate v. American S. R. Co., 56 Mont. 277, 184 P. 478;Yellowstone County v. First Trust Savings Bank, 46 Mont. 439, 128 P. 596.) The plaintiffs' case is wholly barren of testimony which brings the plaintiffs within the rules just laid down.

The terms estoppel (equitable or in pais) and ratification are sometimes used in a way which seems to ignore any distinction between them. "The distinction between a contract intentionally assented to, or ratified in fact, and an estoppel to deny the validity of the contract, is very wide. In the former case, the party is bound, because he intended to be; in the latter, he is bound notwithstanding there was no such intention, because the other party will be prejudiced and defrauded by his conduct unless the law treat him as legally bound." (Forsyth v. Day,46 Me. 176; 21 C.J. 1115.) "In the one case, the party is bound because this contract contains the necessary ingredients to bind him, including a consideration. In the other, he is not bound for these reasons, but because he has permitted the other party to act to his prejudice under such circumstances that he must have known, or be presumed to have known, that such party was acting on the faith of his conduct and acts being what they purported to be, without apprising him to the contrary." (Forsyth v. Day, supra; Conway National Bank v. Pease, 76 N.H. 319,82 A. 1068.)

If the plaintiffs intended to rely upon ratification, it was necessary for them to plead it (Smith v. Barnes, 51 Mont. 202,149 P. 963, Ann. Cas. 1917D, 330; Bybee v. White,35 N.M. 270, 295 P. 295; Stenson v. Lancaster,178 Mo. App. 340, 165 S.W. 1158; Purkey v. Harding, 23 S.D. 632,123 N.W. 69), which they did not do. If they had pleaded it, the burden of proving it was upon them. (Stanton v. Occidental Life Ins.Co., 81 Mont. 44, 261 P. 620; Marion Savings Bank v.Leahy, 200 Iowa, 220, 204 N.W. 456.) The testimony discloses that Genzberger and his wife were without the state of Montana from the second day of February, 1929, continuously until the thirtieth day of March, 1929, and that when they returned over half the work which Johnson had employed plaintiffs to do was done. None of the defendants knew anything of it before their return. The owners did not know anything of the alterations made by plaintiffs at Johnson's instance at any time before the lien was filed.

It is useless for plaintiffs to contend that the owners were bound by silence or acquiescence under the facts. Mere silence is of no consequence unless the person sought to be bound was silent when he should have spoken. And there is nothing here to show that the owners knew anything about plaintiffs' work or that plaintiffs were looking to them for payment, until after the lien was filed. To acquiesce is to forbear decision or complaint; we may acquiesce in an act without approving it. (Marion SavingsBank v. Leahy, supra.) Assuming merely for the sake of the argument that the doctrine of ratification has some application here and for the purpose of deciding the question on the merits rather than upon the plaintiffs' failure to plead that issue, we call attention to section 7940, Revised Codes 1921, which provides: "A ratification can be made only in the manner that would have been necessary to confer an original authority for the act ratified, or where an oral authorization would suffice, by accepting or restraining the benefit of the act, with notice thereof." In Koerner v. Northern Pacific Ry. Co., 56 Mont. 511,186 P. 337, 340, this court said: "To constitute a ratification there must be an acceptance of the results of the act with an intent to ratify and with full knowledge of all the material circumstances."

After quoting section 7940, this court, in Pew v. McLeish,62 Mont. 437, 205 P. 235, said: "This court in Koerner v.Northern Pacific Ry. Co. [supra], 56 Mont. on page 520, 186 P., on page 340, gave its latest interpretation of the above section, as follows: `"Ratification" is defined to be the confirmation of a previous act done either by the party himself or by another. (23 Am. Eng. Ency. of Law, 889; 33 Cyc. 1529.) And a confirmation necessarily supposes knowledge of the thing ratified. * * * [Citing the Weidenaar Case.] It follows that to constitute a ratification there must be an acceptance of the results of the act with an intent to ratify and with full knowledge of all the material circumstances.'"

In Pew v. McLeish there is a quotation from Combs v.Scott, 12 Allen (Mass.), 497, as follows: "Ratification of a past * * * transaction, into which an agent has entered without authority, is a purely voluntary act on the part of a principal. No legal obligation rests upon him to sanction or adopt it. No duty requires him to make inquiries concerning it. Where there is no legal obligation or duty to do an act, there can be no negligence in an omission to perform it. The true doctrine is well stated by a learned text-writer: `If I make a contract in the name of a person who has not given me an authority, he will be under no obligation to ratify it, nor will he be bound to the performance of it.' (1 Livermore on Agency, 44; see, also, Paley on Agency, 171 note o.) Whoever, therefore, seeks to procure and rely on a ratification, is bound to show that it was made under such circumstances as in law to be binding on the principal, especially to see to it that all material facts were made known to him. The burden of making inquiries and of ascertaining the truth is not cast on him who is under no legal obligation to assume a responsibility, but rests on the party who is endeavoring to obtain a benefit or advantage for himself. This is not only just, but it is practicable."

Ratification, being purely a voluntary act upon the part of the principal, ordinarily requires some positive act. No duty rests upon him to adopt it or to make inquiries concerning it. In order that acquiescence alone should become ratification, the delay must be so long continued that it can be accounted for only on the theory that there has been some affirmative act. (American Bank Trust Co. v. Farmers' Elevator MillingCo., 63 Mont. 612, 208 P. 594.)

But plaintiffs ingeniously attempt to obviate this well-known rule by saying that the owners accepted and retained the benefits. How did the owners come to retain the benefits? This the majority opinion does not disclose. The fact is that the plaintiffs finished the work (which was commenced March 6, 1929, when Genzberger was away from home, and which was over half done when he returned) on August 15, 1929, and Johnson stayed in exclusive possession of the premises, so far as the owners were concerned, until after the 1st of October, 1929, when he quit the premises pursuant to notice, for the reason that he was in arrears for the payment of rental for several months. He then disposed of the furnishings in the place to a Mrs. Brown, who rented the premises from Genzberger.

That aside, a complete answer to the "retention of benefits" argument is that if the work and labor done and material furnished in altering or repairing a building without the owner's authority is such that the owner cannot be placed in statu quo, without loss, or if the continued enjoyment of the benefit is unavoidable, as where in taking, using or disposing of a building or other thing he unavoidably enjoys the benefit or work or materials furnished or repairs or improvements made, there is no ratification on his part. (2 C.J. 496, 497.) Thus in Mott v.Wright, 43 Cal. App. 21, 184 P. 517, 520, it was said: "It is lastly contended that, because the materials and the labor were furnished with the knowledge and consent of Wright, an implied contract arose between the claimants and Wright, and that, having received the benefit of the labor performed and the materials furnished, Wright ought in equity and good conscience to be held to be personally liable and compelled to pay the appellants their claims. There are two answers to this proposition, viz.: (1) * * * There was no contract, either express or implied, between the material men and the laborers and the owners. There was, therefore, no privity of contract between the defendant Wright and the several lien claimants. Obviously, to sustain an action against Wright, it must be upon the theory that he is personally liable, and to render him personally liable, there must be shown to exist a contract, express or implied, or a contractual privity, between him and those claiming lien. (2) * * * There is no allegation in either count of the complaints that the materials were furnished for and the labor done on the building at the direct instance of Frank E. Wright, the owner, or at his instance at all."

As was said in Mills v. Berla, (Tex.Civ.App.)23 S.W. 910, 911, where the circumstances were substantially the same as here, "It does not appear that the work done by appellees upon the building was of such a character that it could be removed or separated from it. It would not follow that by using the building afterward, and thereby unavoidably having the benefit of the work and material furnished, the owner would be subject to liability for the value thereof."

In Moyle v. Congregational Society, 16 Utah, 59,50 P. 806, 809, in addressing itself to this question, the court said: "It is well established that the ratification of an unauthorized act of any agent, in order to be effectual and binding on the principal, must have been made with full knowledge of all material facts; and ignorance, mistake or misrepresentations of any of the essential circumstances relating to the transaction alleged to have been ratified will absolve the principal from all liability, by reason of the supposed adoption or assent to the previously unauthorized acts of the agent. (Baldwin v.Burrows, 47 N.Y. 199; Bennecke v. Insurance Co.,105 U.S. 355 [26 L. Ed. 990]; Dupont v. Wertheman, 10 Cal. 354.) And, in adopting and ratifying what the principal had authorized the agent to do, he was not adopting and ratifying that which was unauthorized. (Smith v. Tracy, 36 N.Y. 79.) We are satisfied that the church did not, through its directors or building committee, ratify the alleged acts of Hollister. It is true, the church retains the structure built upon its real estate; but we know of no way by which the alleged work performed upon the church building can be segregated from it, and returned to the plaintiff. It does not follow that because the church used the building after its completion, thereby unavoidably having the benefit of the work and materials furnished, the church would therefore be liable for the value thereof." (And see Woodruff v. Rochester P.R. Co., 108 N.Y. 39, 14 N.E. 832.)

The only reasonable inference to be drawn from the evidence is that the retention of the benefit was forced upon the owners by reason of the continued occupancy of Johnson, the character of the improvements, and the impossibility of restoring them to the plaintiffs without substantial injury to the building; not because of any desire or intention to affirm the acts of Johnson. There is no suggestion in pleading or proof that the owners by any affirmative act accepted the benefits of plaintiffs' work after knowing that the plaintiffs were looking to them for payment, other than by "retaining" the benefits and not making an offer to restore them. In the circumstances it was practically impossible for them to have done so. The labor and materials went into the building in the process of converting it from a rooming into an apartment house. It is clear that the materials cannot be restored to the plaintiffs without substantial injury to the property. The interior of the building was reconstructed. The lien itself shows that the materials which were placed in the building became fixtures. A thing is deemed to be affixed to land when it is attached to it by roots, as in the case of trees, vines or shrubs; or embedded in it, as in the case of a wall; or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts or screws. (Sec. 6669, Rev. Codes 1921.) The record shows that plaintiffs put in two toilets in the building — fixtures. The lien shows that five sinks were placed therein, and there were faucets, traps, vents, brass pipe, lead pipe, lead, oakum, unions, bushings, couplings, screws, and bolts used, together with cement, roofing compound, and the like. The sinks were, of course, attached to the building. Holes were made in the walls or floors to make them useful by reason of water conducted to the sinks and pipes to carry the water away. The lien indicates that the plumbing and fixtures placed in the building were affixed thereto and intended to be permanent. It does not appear that there was even a movable soap dish.

Inasmuch as it is the law that he who alleges ratification must plead it, the burden being upon him to prove it, if it were permissible to show that the materials could be removed without injury to the building, the obligation to prove it was upon the plaintiffs. But in any event there is not one scintilla of evidence showing that the owners intended to ratify, or can in anywise be held to have ratified, anything whatsoever which the plaintiffs did, in whole or in part.

This case being in equity, and it being the duty of this court to review all questions of fact arising upon the evidence presented in the record (sec. 8805, Rev. Codes 1921), we have no hesitancy in saying that the preponderance of the evidence is that Johnson himself intended to pay plaintiffs for their work and labor and material furnished. It is uncontradicted that Johnson told the witness Charles Staples that he was paying the plaintiffs for their work and that they (the plaintiffs) had agreed to take the compensation for the plumbing out of the increased rent which Johnson was to receive from the premises by reason of the improvements he was having made.

It is not incumbent upon me to do for the plaintiffs that which they failed to do for themselves. My duty is to follow the law, which, as I see it, directs a judgment in favor of the defendants. The judgment should be reversed.