Opinion
No. 33746.
June 5, 1939. Suggestion of Error Overruled July 18, 1939.
1. BAILMENT.
Where there has been a continuous delivery of material and the time of payment is not fixed by contract, limitations begins to run against mechanic's lien from the delivery of the last lot of material (Code 1930, sec. 2262).
2. BANKRUPTCY.
The property of a bankrupt passed to trustee in bankruptcy subject to outstanding liens thereon.
3. BANKRUPTCY.
Holder of liens against property of bankrupt could not enforce lien against property as against trustee in bankruptcy until liens were ascertained and recognized.
4. BAILMENT.
In proceeding to enforce mechanic's lien as against purchaser from trustee in bankruptcy, purchaser and claimant asserting prior lien who interposed plea of statute of limitations as an affirmative defense were required to disclose by proof that due date of indebtedness claimed by mechanic's lien claimant were such as to cause the mechanic's lien to be barred by limitations without regard to when the labor was actually done or material furnished (Code 1930, sec. 2262).
5. BAILMENT.
In proceeding commenced in 1938 to enforce mechanic's lien for labor done and materials furnished in repair of property during years of 1936 and 1937, evidence justified finding that mechanic's lien was not barred by limitations (Code 1930, sec. 2262).
6. CHATTEL MORTGAGES.
Mechanic's lien for labor done and material furnished subsequent to execution of deed of trust would be paramount to lien of deed of trust where labor done and materials furnished were necessary to permit operation and prevent deterioration of property (Code 1930, sec. 2255).
7. BAILMENT.
Mechanic's lien does not merely give mechanic right to acquire lien on machinery and equipment for labor done and materials furnished but creates such a lien (Code 1930, sec. 2255).
8. CHATTEL MORTGAGES.
As respects question of priority between mechanic's lien claimant and holder of deed of trust executed after lien accrued, it would be presumed that owner of property informed beneficiary in deed of trust of existence of mechanic's lien since it would have been unlawful for the owner to have obtained a loan and to have given a lien without advising holder of deed of trust of existence of lien outstanding against property (Code 1930, sec. 2255).
9. CHATTEL MORTGAGES.
As between mechanics' lien claimant and beneficiary of deed of trust executed after labor was performed and materials were furnished which gave rise to mechanics' lien, beneficiary of deed of trust had burden to show that she acquired lien without notice of mechanics' lien created by statute in favor of mechanic (Code 1930, sec. 2255).
10. CHATTEL MORTGAGES.
The beneficiary of deed of trust executed after accrual of mechanics' lien could not prove lack of knowledge of existence of mechanics' lien at time trust deed was executed merely by showing that her attorney who negotiated loan secured by trust deed made diligent inquiry and investigation and failed to acquire any notice or knowledge of the existence of a mechanics' lien (Code 1930, sec. 2255).
11. BAILMENT.
Mechanic's lien on personalty which was in possession of claimant while being repaired but possession of which had been surrendered to owner was retained to extent that it was allowed in cases of liens for purchase money of goods and was enforceable while property remained in hands of then owner or person deriving title or possession through the then owner with notice that indebtedness represented by mechanics' lien was unpaid (Code 1930, secs. 2255, 2257, 2239).
12. CHATTEL MORTGAGES.
Beneficiary in deed of trust covering personalty asserting priority of lien against mechanics' lien claimant had burden to prove not only that she acquired lien without notice but that debt secured by trust deed was unpaid (Code 1930, secs. 2255, 2257, 2239).
13. CHATTEL MORTGAGES.
A mechanic's lien against personalty was entitled to priority as against lien of beneficiary of trust deed executed after mechanic's lien accrued in absence of showing that beneficiary of trust deed acquired lien without notice of mechanics' lien or that loan secured by trust deed was unpaid (Code 1930, sec. 2255).
APPEAL from circuit court of Hinds county; HON. J.P. ALEXANDER, J.
W.E. Morse, of Jackson, for appellants.
The court erred in holding that Becker Welding and Machine Company could establish a lien against personal property under Sections 2255, 2257 and 2239 of the Code of 1930 when the property was never in his possession or under his control.
The appellee filed his first notice of a claim of a lien on the 21st day of March, 1938. All his claims for liens were, at that time, over one year old except claims totaling $120.18. Under Sections 2258 and 2262 of the Code of 1930 claims in excess of one year old would have been barred by the Statute of Limitations contained in the chapter on liens itself. The appellee stated, however, that Sections 2255, 2257 and 2239 were the sections under which he was proceeding.
There was never, at any other time, any of the property under the possession or under the control of Becker Welding and Machine Company. For that reason, he would not be entitled to proceed under Sections 2255, 2257 and 2239 of the Code of 1930, but would have to proceed under Sections 2258 and 2262 of the Code of 1930. Section 2255 is a rescript of the common law. The statute is simply a restatement thereof. Under the common law where possession was lost, the lien was lost, but our legislature, under Section 2257 of the Code of 1930, provides that where the possession is lost, that the lien may be retained and enforced in the manner provided for the purchase price of goods. In other words, under the vendor's lien statute this makes a variable right to enforce the lien. Under a written contract it would be for a period of six years, under an open account, it would be for a period of three years. However, both Section 2255 and Section 2257 presupposes possession.
35 C.J. 307, sec. 3; 17 R.C.L., page 596, and page 601, sec. 9; Stuart v. Flowers, 44 Miss. 513; Broom Son v. Dale Sons, 67 So. 659; West Point Motor Co. v. McGehee, 84 So. 690; Koronsky v. Hoyle, 97 Miss. 562, 52 So. 481.
The reason of our statutes and decisions is obvious. If secret liens could be imposed upon parties, it would hamper the trade and exchange of personal property. The representative of Mrs. Billups examined the record and inquired as to the liens, and at the time she made her loan and put the deed of trust of record, there was nothing to indicate any lien of Becker Welding and Machine Company.
The appellee had a right to proceed under section 2258 and the subsequent sections, if he had proceeded in time. In other words, under section 2258 a lien is given, but there is a requirement of a notice.
Section 2262 of the Code of 1930 provides that suit must be brought within twelve (12) months next after the time when the money became due and payable and not after.
The court erred in holding that Becker Welding and Machine Company had a lien on the property superior to the lien of Mrs. Ella J. Billups, who held a deed of trust on the property.
Sec. 2148, Code of 1930.
If the appellee was entitled to a lien under sections 2255, 2257, and 2239 of the Code of 1930, it would be subordinate to the lien of Mrs. Ella J. Billups under the deed of trust, for the reason that section 2239 of the Code of 1930 provides that the vendor of personal property shall have a lien thereon for the purchase money while it remains in the hands of the first purchaser, or other deriving title or possession through him, with notice that the purchase money was unpaid. It was incumbent on Becker, the appellee, to show that the holder of the deed of trust, Mrs. Ella J. Billups, took the deed of trust with notice that there was a lien against the property. That burden is upon him and was never, at any time, met.
The circuit court should have, under the record, reversed the case for the reason that the lien of Mrs. Ella J. Billups is superior to that of Becker Welding and Machine Company in all respects.
Harold Cox, of Jackson, for appellee.
The appellee has filed its cross-appeal in this case from that part of the judgment of the circuit court which approved the ruling of the county court in admitting testimony to bolster up the description of the property in the Ella J. Billups deed of trust. We think that the deed of trust was void by reason of the insufficiency of the description of the property contained therein, and that oral testimony was not admissible to supply such deficiency under the decisions of this court.
In re Tucker, 1 F. Supp. 18; Houston v. Totem Bros., 1 Miss. Dec. 244; Allen v. Dicken, 63 Miss. 91; Leffell v. Miller, 7 So. 324; Garmon v. Fitzgerald, 151 So. 726; National Foods v. Friedrich, 163 So. 126; Kelly v. Reid, 57 Miss. 89; Merchants Farmers Bank v. Byrd, 97 So. 550.
The appellee is given a lien on this property by section 2255, Code 1930. Under the common law when appellee parted with possession of and control over the property, he would have lost such lien but for section 2257, Code 1930, which permitted him to enforce such lien after parting with such possession or control over said property. Under authority of section 2257, Code 1930, the appellee enforced the lien given him by statute on this property in the manner provided by section 2243, Code 1930. We earnestly submit that this is the proper statutory method provided for the enforcement of such lien, and that these statutes themselves gave appellee this lien on this property. The property is described in this record as being movable property. It is not real estate. It is not fixed machinery on which a lien is given under section 2258, Code 1930. It is simply cumbersome but movable personal property on which appellee is given a lien under section 2255, Code 1930.
What is the effect of the failure of Mrs. Billups, as a party to this suit, to supply this necessary evidence to support her claim? We think that it was fatal to her claim, and that the trial court was privileged to presume that if she could have testified in support of said pleading, that she would have done so. The trial court was at liberty to assume, since she did not testify, that if she had testified, that her testimony would have been hurtful to her.
Bunckley v. Jones, 29 So. 1000; 22 C.J. 121; 10 R.C.L. 887, 901-2; Masonite Corp. v. Hill, 154 So. 295; Cumberland v. Anderson, 38 So. 786; Southern Bell v. Quick, 149 So. 107; Robinson v. Haydel, 171 So. 7.
It is not enough to say that Mrs. Billups' attorney had no notice of appellee's lien. Conceding that to be true, if she had notice, the lien of her deed of trust would be subordinate to the items of appellee's account, which were incurred prior to the date of said deed of trust on June 16, 1937. It was absolutely essential that Mrs. Billups testify that she had no such knowledge, if such were a fact.
Cassidy v. Wells, Jones, Wells Lipscomb, 137 So. 472.
Since Mrs. Billups did not testify that she had no notice or knowledge of appellee's lien, it is our contention that appellee's lien for all of the work done on said equipment prior to said date, is superior to any lien created by said instrument. As to the work done on said equipment after date of said deed of trust, regardless of whether the description therein be sufficient or not, we contend that appellee's lien is superior thereto. All of the testimony shows that the work done on this equipment was necessary to permit the operation and prevent the deterioration of the property, and that the value thereof was enhanced thereby.
Broom Son v. Dale, 67 So. 659; Moorhead Motor Co. v. Walker Auto Co., 97 So. 486.
It is earnestly submitted that the appellee has fully established its lien on the property in suit.
The circuit court approved that judgment as an appellate court. The circuit court, as an appellate court, no doubt, indulged the further presumption in favor of the soundness of the judgment of the trial court under the rule that the trial court was privileged to draw even reasonable inferences from an agreed statement of facts.
Love v. Hytken, 150 So. 777.
During the years of 1936 and 1937, the Myles Gravel Company, a corporation, was the owner and in possession of certain machinery and equipment, which was so situated as to come within the legal classification of personal property, and located near the Utica Institute in Hinds County, on which the appellee acquired a mechanic's lien for labor done and materials furnished in the repair thereof, and which were both necessary and essential to the preservation of the property and to permit its use and operation. The total amount claimed to be due for said material and labor was the sum of $727.05, and of which amount the sum of $581.79 is claimed to have been incurred prior to June 16, 1937. The appellant, Mrs. Ella J. Billups, made a loan on that date of $2,500 to the said Myles Gravel Company, due within ninety days, and secured by a deed of trust then duly recorded against said machinery and equipment. Thereafter, the Myles Gravel Company was adjudicated a bankrupt, and on March 15, 1938, this property was sold by order of the Referee in Bankruptcy and was purchased from the trustee by the appellant, W.L. Billups, at the sum of $300, subject to all liens then existing against the same. The order of confirmation of the sale recited that the sale had been made subject to sizeable liens and that all lienholders had consented thereto. On April 30, 1938, the appellee filed this suit, in the County Court of Hinds County, to enforce its mechanic's lien for labor done and material furnished in connection with the repair and alteration of said machinery and equipment, and caused to be issued a writ of summons and seizure for said property, as provided for under section 2257 of the Code of 1930 in cases where the lienholder may have parted with the possession of the property on which the lien is alleged to exist. The property was seized in possession of the appellant, W.L. Billups, who filed a plea of the general issue and gave notice thereunder that the said property was not liable to the mechanic's lien claimed by the appellee, for the reason that such lien was not asserted while the property was in the possession or under the control of the mechanic, as contemplated by Section 2255 of the Code of 1930; and also for the reason that most of the items of labor done and material furnished were incurred more than twelve months prior to the institution of this suit. The appellant, Mrs. Ella J. Billups, was permitted to intervene as a necessary party defendant to assert the priority of the lien of her deed of trust of June 16, 1937, on the alleged ground that she was an innocent encumbrancer for value without notice of the said mechanic's lien. On the trial of the cause in the county court, without the intervention of a jury, a mechanic's lien was fixed and declared to exist in the sum of $527.79 in favor of the appellee on a portion of the property and in the sum of $145.26 against the remainder thereof, as a prior and superior lien to that held by the appellant, Mrs. Ella J. Billups, and to the claim of title held by the appellant, W.L. Billups. On appeal to the circuit court, this judgment of the county court was affirmed and the cause remanded for the enforcement of the respective liens. From that judgment of affirmance, both the defendants appeal, but it is conceded by their counsel in his brief that the rights acquired by the appellant, W.L. Billups, as purchaser from the trustee in bankruptcy, is subordinate to the mechanic's lien of the appellee.
As to the question of whether the statute of limitations, Section 2262 of the Code of 1930, had run against some of the items of labor done and materials furnished by the appellee, it was held in the cases of Ehlers v. Elder, 51 Miss. 495, and O'Leary v. Burns, 53 Miss. 171, that where there has been a continuous delivery of material, and the time of payment is not fixed by contract, the statute begins to run against the lien from the delivery of the last lot of material. It appears from the record that the period during which the labor was done and the materials were furnished extended from September, 1936, to September, 1937, inclusive; and that during this period a series of notes were given, some of which were paid and some filed with the appellee's claim in the bankruptcy proceeding of the Myles Gravel Company, bankrupt. It does not appear from this record as to when the adjudication in bankruptcy took place, nor when the claim of the appellee was filed in the bankruptcy proceeding. The title to the property of the bankrupt, including the machinery and equipment in question, passed to the trustee in bankruptcy subject to the outstanding liens thereon, and it was necessary that such liens be ascertained and recognized before the lienor was entitled to enforce a lien against the same as against such trustee. The plea of the statute of limitations having been interposed by the appellants in the present suit as an affirmative defense, it was necessary that the proof should have disclosed that the due date of the indebtedness claimed by the appellee was such as to cause the mechanic's lien to be barred by the statute of limitations, supra, without regard to when the labor was actually done or materials furnished. We are not able to say that the county court's decision on the facts was an erroneous one in holding that the proof did not disclose that the mechanic's lien was barred by the statute.
As to the items of labor done and material furnished subsequent to the execution of the deed of trust held by the appellant, Mrs. Ella J. Billups, the mechanic's lien would unquestionably be paramount to the lien of the deed of trust, since it was shown without dispute that the labor done and the materials furnished were necessary to permit the operation and to prevent the deterioation of the property in question. J.A. Broom Son v. S.S. Dale Sons, 109 Miss. 52, 67 So. 659, L.R.A. 1915D, 1146; 3 R.C.L., par. 56; Moorhead Motor Company v. H.D. Walker Auto Company, 133 Miss. 63, 97 So. 486; Watts v. Sweeney, 127 Ind. 116, 26 N.E. 680, 22 Am. St. Rep. 615.
As to the items of indebtedness incurred prior to the execution of the deed of trust, it is contended by the appellants that the priority of the mechanic's lien therefor would be dependent upon whether or not the beneficiary in the deed of trust had actual notice or knowledge thereof, since she was without constructive notice in view of the fact that the lis pendens notice was not filed nor the suit begun until long subsequent thereto. The presumption would be, however, that since the statute, Section 2255 of the Code of 1930, did not merely give the mechanic the right to acquire a lien on the machinery and equipment, but created such lien, the Myles Gravel Company informed the beneficiary in the deed of trust, executed on June 16, 1937, of the existence of such mechanic's lien. It would have been unlawful for the said gravel company to have obtained the loan and to have given a lien in favor of the beneficiary in said deed of trust without advising her of the existence of any lien then outstanding against the property. Since the statute above mentioned had created a lien in favor of the mechanic, which was in full force and effect at the time of the execution of the deed of trust, the burden of proof was upon the beneficiary therein to show that she acquired her lien without notice of the lien created by statute in favor of the appellee. She gave notice under her plea of the general issue and averred in her plea of intervention that she had no notice or knowledge of the mechanic's lien on the property at the time she made the loan, but this notice under the general issue was signed and the plea of intervention sworn to by her attorney, and she failed to appear at the trial to offer any testimony in support of this defense, except the fact that her attorney who investigated the records and attended to the details of the loan was without notice or knowledge in that behalf. It was not sufficient in support of this affirmative defense to prove her lack of knowledge merely by showing that her attorney who negotiated the loan made a diligent inquiry and investigation and failed to acquire any notice or knowledge of the existence of the mechanic's lien. The issue raised by the plea was whether she had notice. Cassedy v. Wells, Jones, Wells Lipscomb, 162 Miss. 102, 137 So. 472, 79 A.L.R. 1133.
The mechanic's lien relied upon did not exist by virtue of section 2258 of the Code of 1930, covering liens on houses, buildings, structures, and fixed machinery, etc., such as become a part of the realty, and to take effect as to purchasers or encumbrances for a valuable consideration without notice thereof, only from the time of commencing suit to enforce the lien, or from the time of filing the contract under which the lien arose, in the office of the clerk of the chancery court. On the contrary, the lien here involved was created by section 2255 of the Code of 1930, as applied to personal property, and was enforceable under sections 2257 and 2239 of said Code. The machinery and equipment in question having been in the possession or under the control of the appellee while being repaired, and he having surrendered possession thereof to the owner, the lien was retained to the extent that is allowed in cases of liens for purchase money of goods, and was enforceable while the property remained in the hands of the then owner, Myles Gravel Company, or while in the hands of one deriving title or possession through said gravel company, with notice that the indebtedness represented by the mechanic's lien was unpaid.
Again, the note and deed of trust held by the appellant, Mrs. Ella J. Billups, was long past due at the time of the trial, and there was no testimony offered to show that the indebtedness to her was unpaid. The president of the Myles Gravel Company testified as to having received the proceeds of the loan, but he was not questioned as to whether the indebtedness, or any part thereof, had been paid. It is true that there was no plea of payment, but the maker of the note and deed of trust was not a party to the suit. Therefore, as between the beneficiary in the deed of trust and the claimant of the mechanic's lien, it was encumbent on such beneficiary to prove not only that she acquired her lien without notice but that the same remained unsatisfied.
It follows therefore that the decision of the circuit court, affirming the judgment of the county court, must be by this Court affirmed.
Affirmed.