Summary
In Pipe and Foundry Co. v. Howland, 111 N.C. 615, relied on by the appellant, the point decided was that the property of a corporation chartered for supplying water to a city is subject to a lien for materials furnished. It was admitted that the claim was sufficient in its form and in its nature to make it a lien, and the question whether the "materials furnished" were such for which a lien would lie was not before the Court.
Summary of this case from Fulp v. Kernersville Light & Power Co.Opinion
(September Term, 1892.)
Lien for Materials Furnished — Corporation — Notice — Waterworks — Public Policy — Contract — Assignment.
1. The property of a corporation chartered for the purpose of supplying water to a city is subject to the lien for materials furnished provided by The Code.
2. Where a company, F., agreed with one H. to supply him with piping, etc. (to be used in establishing his waterworks plant), and, pursuant to such agreement, F. supplied such material, but before he had finished making such supplies, H. assigned, without notice to F., his contract with the city for which the waterworks were intended, to a company chartered for the purpose of supplying it with water, etc., which assumed, also, his liabilities, and he continued in the work as the subcontractor of such corporation; and thereafter F. filed, in due form of law, in the clerk's office, the notice of his lien for material furnished, and on the day of filing, the corporation had, for the first time, actual notice of such liability and lien: Held, (1) that F. was entitled to enforce his lien against the corporation for supplies furnished both before and after the assignment; (2) the lien related back from the time of the filing to the time of the beginning of supplies; (3) that the real estate, the plant assigned to the corporation, and for the improvement of which the materials were furnished, was liable; and (4) for reasons of public policy it should be sold, together with the franchise of the corporation.
APPEAL at March Term, 1891, of DURHAM, from Boykin, J.
John W. Hinsdale and W. A. Guthrie for plaintiff.
Boone Parker and W. W. Fuller for defendant.
AVERY, J., dissenting.
In June, 1886, the defendant Howland contracted in writing with the defendant town of Durham to construct a system of waterworks for said town to supply water for public and domestic purposes. On 3 November, 1886, the plaintiff contracted to sell to Howland the necessary materials, and the same were supplied and used for constructing said waterworks, and the delivery thereof, which was included in the contract, began on 4 December, 1886, and was completed on (616) 7 May, 1887.
In the latter part of 1886 the Durham Water Company was incorporated, and on 1 January, 1887, Howland assigned his contract with the town to the said Durham Water Company, and the company assumed the duties, liabilities and obligations of Howland to said town under the contract aforesaid.
On 19 July, 1887, Howland having failed to pay plaintiff a large part of his indebtedness for materials furnished, the plaintiff filed its claim for the same in the office of the clerk of the Superior Court of Durham, in order to secure a lien as allowed by The Code, secs. 1782-1808. It was admitted that this claim was sufficient in form and comprehensiveness, but it was contended that it was not sufficient to create the lien as claimed by plaintiff. On the day the claim was filed, the plaintiff gave the defendants notice of Howland's indebtedness to it and the filing of its claim and its alleged lien, and demanded of said defendant company that it retain out of the amount due, or to become due from it to the said Howland, on account of the said waterworks, so much as was necessary to pay plaintiff's claim.
The court below adjudged that the lien filed by plaintiff was of no force and effect, and that the same be vacated and set aside, and it was further adjudged that the Durham Water Company recover its costs of plaintiff, and also that plaintiff pay all the cost connected with the filing of the lien. And it was further adjudged that plaintiff recover of the defendant Howland the sum of $16,975.73, with interest, etc. Both parties appealed.
We adopt the following opinion, prepared by the late Chief Justice Merrimon, in this case, with such additions thereto as in our judgment are necessary to a full determination of the questions presented to us on appeal. That opinion is as follows:
"The statute (The Code, secs. 1781 to 1808) entitled `Liens,' is remedial, and its clear purpose is to give contractors', subcontractors' and laborers' liens upon property as therein prescribed and provided, to secure the payment of money due for labor done or materials supplied on or about the same. To that end its language, phraseology, and scope are broad and comprehensive. There are few, if any, express exceptive provisions in it, and, in the absence of them, exceptions and limitations affecting such liens cannot be allowed unless by necessary implication. The object is to give a lien on particular property deriving particular benefit in favor of classes of persons whose claims are supposed to have particular merit. All this is made the more manifest by the amendatory statute (Laws 1887, chap. 67). Moreover, numerous decisions of this Court, interpreting this statute, and the amendments thereto, fully sustain the view here expressed. Chadbourn v. Williams, 71 N.C. 444; Wooten v. Hill, 98 N.C. 48; Burr v. Maultsby, 99 N.C. 263.
"Advertising now to provisions of the statute pertinent to the present case, section 1781 thereof provides, among other things, that `every lot, farm, or vessel, or any other kind of property, real or personal, not herein enumerated, shall be subject to a lien for the payment of all debts contracted for work done on the same, or material furnished.' It is further provided that `the lien for work on crops or farms, or materials given by this chapter, shall be preferred to every other lien or incumbrance which attached upon the property subsequent to the time at which the work was commenced or the materials were furnished.' The Code, sec. 1782. It is further provided that `all subcontractors and laborers who are employed to furnish or do furnish material (618) for the building, repairing or altering of any house, or other improvement on real estate, shall have a lien on said house and real estate for the amount of such labor done or material furnished, which lien shall be preferred to the mechanic's lien, now provided by law, when the notice thereof shall be given as hereinafter provided, provided that the sum total of all the liens due subcontractors and material men shall not exceed the amount due the original contractor at the time of notice.' The Code, sec. 1801. In this connection section 1802 provides that `any subcontractor, laborer or material man who claims a lien as provided in the preceding section, may give notice to the owner or lessee of the real estate who makes the contract for such building or improvement at any time before the settlement with the contractor, and if the said owner or lessee shall refuse or neglect to retain out of the amount due the said contractor under the contract as much as shall be due or claimed by the subcontractor, laborer or material man, the subcontractor, laborer or material man may proceed to enforce his lien, and after such notice is given no payment to the contractor shall be a credit on or discharge of the lien herein provided.' It is further provided in section 1789 that `notice of the lien shall be filed as hereinbefore provided at any time within twelve months after the completion of the labor, or the final furnishing of the materials, or the gathering of the crops, provided that in cases of liens on real estate or any interest therein, given by this chapter, the notice shall be filed in the office of the Superior Court clerk within twelve months after the completion of the labor or the final furnishing of the materials.' When the claim is so filed within twelve months, the lien relates back to the time at which the work was commenced or the materials were furnished, and is preferred to all liens or incumbrances created to that time. The Code, section 1782; Burr v. Maultsby, supra, and cases there cited. And this is so, although the subsequent incumbrancer had no notice of the lien thus relating back.
"The clause of the statute (The Code, sec. 1781) first above (619) recited, declares that `every lot, farm or vessel, or any kind of property, real or personal, not herein enumerated, shall be subject to a lien for the payment of all debts contracted for work done on the same, or materials furnished.' This phraseology and the purpose of it are comprehensive. The lien prescribed attaches, in the case provided for, to any real property, whether it be denominated `a lot or farm,' or a storehouse site, a mill site, a water reservoir site, or the like. The lien arises in favor of and to secure the payment of any and `all debts contracted for work done on the same, or materials furnished.' By the term `material furnished,' is meant something furnished to be appropriated, used and pertinently applied on the land, devoted to some purpose, no matter what, so that the purpose be lawful. The purpose is to secure the debt contracted for materials furnished on or about or connected with the land in connection with the purpose to which it is devoted, in whole or in part. The debt so contracted becomes a lien, a charge upon the land, and that land may, if need be, be sold, or in some appropriate way applied to the payment of the debt secured by and constituting the ground of the lien. It makes no difference as to the ownership of the land if the debt for such considerations was lawfully contracted, because the land is benefited by the labor so done on or about it, or by the materials furnished. The intention is that the land shall be charged by a lien with the cost of the benefits so extended to it, whether the benefits arise from labor done in building or repairing houses, in cultivating the land, building fences, ditching, felling trees, or the like, or from the erection of mills of any kind on it, or from supplying machinery, fixtures or any `material furnished' for such purpose. This is a just and reasonable interpretation of the clause of the statute recited. Indeed, it would be difficult to suggest any other fair meaning.
(620) "In the present case the defendant Howland contracted with the town of Durham to supply it with water for public and domestic purposes, and with that view and to that end he acquired certain land situate four or five miles from the town for the purpose of constructing a water reservoir and the right of way for pipes under ground through which to convey the water to the town. In connection were necessary. He contracted with the plaintiff to supply him with with this water reservoir much machinery, pipes and other material a large quantity of suitable pipe and other things to be used on and about the land for the purpose of this reservoir and to effectuate the end contemplated by it. The contract did not recite in terms that the pipe and other things, so supplied by the plaintiff, were to be used for the express purpose of the reservoir and water supply; but it appears that the plaintiff knew of it, and it savors of trifling to suggest that it was not well and distinctly understood and intended by the parties that the goods were furnished for such purpose. The contract and the goods supplied suggested the purpose, and it was not necessary to recite or declare it in terms. It was sufficient that it certainly appeared. Lanier v. Bell, 81 N.C. 337, is not inconsistent with what is here said, as seems to be supposed.
"The plaintiff furnished the pipes and other things to the defendant for the purposes of the reservoir and water supply to be made by and through means of it. The defendant Howland failed to pay a large part of the debt he contracted to pay the plaintiff for the materials so furnished by it. In view of the facts, at once upon supplying such materials not paid for, a lien upon the land mentioned, and the property connected with it permanently for the purposes to which it was devoted, arose in favor of the plaintiff. Its debt at once became a charge upon the land, to be perfected by filing its claim in that respect in the office of the Superior Court clerks, as above pointed out. And this filing might be done at any time within twelve months next after (621) furnishing the materials above mentioned. It was done within that time. This lien, so perfected, related back to the time when the materials began to be furnished. The statute so provides. The Code, secs. 1781, 1789; Burr v. Maultsby, supra. The enterprise of supplying the town with water was that of the defendant Howland; the property was his; it did not in any sense belong to the town; it had not taken on any quality or been placed in any condition that rendered it exempt from lien as contemplated by the statute. It belonged to a private individual.
"The statute (The Code, secs. 1890, 1891) prescribes how the plaintiff might enforce his lien. Upon his judgment he is entitled to have execution against the property, which shall direct the officer to sell the right, title and interest which the owner had in the premises or the crops thereon at the time of filing notice of the lien, before such execution shall extend to the general property of the defendant. The property to which the lien attaches is specially devoted to the satisfaction of the plaintiff's debt, and hence it must be sold before his other property may be resorted to for the like purpose.
"It appears that the defendant, the Durham Water Company, was incorporated in the fall of 1886, and invested with appropriate corporate powers for the purpose of supplying the said town with water, and that the defendant Howland, on 1 January, 1887, sold and assigned his contract with the said town to it, and likewise sold to it all the property he had acquired for the purpose of making such water supply, and this property embraced that to which the plaintiff's lien attached. It is earnestly contended that therefore the plaintiff acquired no lien, first, because the defendant water company (a quasi public corporation) acquired title, by its purchase, to the said property, and the latter is devoted to public purposes, and hence is not the subject of such lien; and, second, because the plaintiff's lien, if indeed he ever had any, was secret — notice of it and the plaintiff's debt and claim had not (622) been filed in the office of the Superior Court clerk until 19 July, 1887, after the said company purchased the property.
"As appears from what has been said above, the plaintiff did have a lien for its debt upon the property (the land and fixtures made part of it) which the defendant company purchased from its codefendant Howland; that although the plaintiff's claim was not filed until 19 July, 1887, the lien related back to the time when the plaintiff began to supply the materials, which time antedated the purchase of the defendant company. If it be granted that the defendant company was, in a sense, a public corporation, and its property was devoted to a proper public purpose, it did not and could not buy the property it did buy from its codefendant discharged of the plaintiff's lien without its assent. It did not assent, and hence the company took the property charged with and subject to the lien. No public corporation — not the State itself — could purchase property for public purposes charged with a lien in favor of the plaintiff, and thereby discharge such lien, unless with the plaintiff's assent, or by proper condemnation of the property, and compensation to him to the extent of his interest. The lien was a lawful and valuable incident to and security for the plaintiff's debt, and it could no more be deprived of it, as contended, than it could be of the debt itself. It was the misfortune or folly of the company that it purchased property for public purposes subject to a lien. It ought to have been more cautious and better advised.
"It is said the lien was a secret one, and the company could not know of it. The answer is, that in the present state of the law it should have made diligent inquiry before purchasing the property as to laborers' and material men's liens upon it. Private persons must do so; they fail to do so at their peril. And corporations, public or private, are upon no better footing. There is neither statute, nor precedent, (623) nor any principle of justice that places them on a footing different from natural persons. The Legislature has provided by statute (The Code, sec. 1789) that notice of the plaintiff's claim may be filed at any time within twelve months after the completion of the labor or the final furnishing of the materials. This provision has been repeatedly held to be valid. Burr v. Maultsby, supra, and cases there cited."
In addition to what was said by the late Chief Justice, we proceed further: It is found by the jury that the contract was made between the plaintiff and the defendant Howland, as alleged in the complaint, and that material was furnished by plaintiff to said defendant under said contract to the amount and value, as ascertained by the verdict. This contract, being a single one, covering all the material furnished, we hold that the lien attaches for all the said material delivered, up to and including the last item, notwithstanding the fact that, pending the execution of the contract, and before the delivery of all the material, the defendant Howland assigned his interest in the said contract and became a subcontractor under his assignee, and this without notice to the plaintiff, who continued to deliver the material to Howland, who, as subcontractor, used it in the completion of the waterworks for Durham. The Code, sec. 1782; Burr v. Maultsby, 99 N.C. 263, and cases there cited. Under any view of the law than that taken by us, how easy it would be to evade the provisions of this act, passed for the benefit of mechanics and material men, and avoid the lien upon the property. The defendant Howland, a private person, makes his contract with the city of Durham to supply it with water; he purchases land and makes contracts for the purchase of other lands; he secures rights of way and other easements; he purchases pipes and other material for carrying out his contract, property which he uses in the construction of the waterworks, and on which a lien attaches by virtue of the statute.
Can it be possible that by the formation of a corporation and (624) the assignment to it of his contract he may divest the lien which had already attached, and without notice to the plaintiffs of his assignment, continue to receive material, and use the same for the completion of the work, free from all lien in favor of the material man, who, in ignorance of the transfer, was relying upon the laws providing him a lien, and furnishing the material without further security?
It was manifestly the business of the assignee to inform itself in the matter. It had assumed the liabilities of its assignor under his contract with the town of Durham. It received the benefit of the material which he was receiving from plaintiff; it was put upon notice as to his liabilities for labor and material by the lien laws of the State. If the Durham Water Company is such a corporation as is authorized to receive fare or tolls the way is plain to the plaintiff, under The Code, sec. 671, to sell the franchise of the defendant company with all its rights and privileges, so far as relates to the receiving of fare and tolls, and all of its property, under execution or other appropriate means of carrying the judgment into effect.
The word toll in the sense used in the statute is a tax paid for some use or privilege or other reasonable consideration (Century Dictionary), and the definitions in all the books are substantially the same. Fare is a rate of charge for the carriage of passengers. A water-rate, that which the defendant company may charge, is a tax or compensation for the furnishing of a supply of water.
The plain purpose and intent of The Code, sec. 671, the Act of 1820, as amended after the decision in the case of S. v. Rives, 27 N.C. 297, was to afford a remedy against that class of quasi public corporations where the franchise ought not to be separated from the plant or property for reasons of public policy. The words originally used in the Act of 1820 were, "if the judgment or decree be against a railroad (625) or other corporation authorized to receive fare or tolls." As brought forward in The Code, the words are "against any corporation authorized to receive fare or tolls." It would be a strained construction of the words used in the statute, even in a statute in derogation of the common law, to hold that they must be strictly confined to cases where these words are technically used, and there alone. It would do violence to the evident spirit and meaning of the law, and, in cases like the present, frustrate its purpose.
The franchise of the Water Company is inseparable from its plant or property. The public necessity requires that they should be sold together, for, in this case, the purchaser will take cum onere and the public be protected. Foundry Company v. Water Company, 52 Fed., 43, and cases there cited.
It may not be inappropriate for us to suggest that to avoid all possible risk of temporary suspension of the operation of this important work, it would be proper, in this case, to appoint a receiver under section 379, subsection 2, of The Code, to carry the judgment into effect.
There is error. So much of the judgment appealed from as declares the plaintiff's lien void and denies its right to enforce the same must be reversed and an appropriate judgment entered giving it effect. To that end let this opinion be certified to the Superior Court.