Fairbanks-Morse Co. v. Union Bank & Trust Co.

Morris, J. On December 18, 1906, appellant sold to defendant Bernard a marine engine, as part of the equipment of the tug “Florence B.,” for the sum of $2,150. -Such sale was manifested by a written agreement under which appellant retained the title to the engine until the payments provided for in the agreement were fully made. This agreement, being in effect a conditional sale contract, was not recorded until the 18th day of July, 1908. On October 21, 1907, Bernard gave a mortgage upon the Florence B., including her machinery and engine, to the respondent, as security for a loan of. $7,000. The mortgage was also conditioned as security for future advances, which were made until the debt aggregated the sum of $22,000. On December 1, 1908, the respondent commenced foreclosure proceedings upon this mortgage, resulting in a decree of foreclosure in its favor. The sheriff took possession of the tug under an order of sale based upon the foreclosure decree, and was about to sell, when the appellant commenced this action, claiming a lien upon the tug in the sum of $1,100.69, being the balance claimed to be due upon the original purchase price of the engine, and praying that its lien be established as prior to respondent’s mortgage. Upon the trial the court [540] below established the lien, but held it to be subsequent and inferior to respondent’s mortgage, and upon so entering its decree, the case is brought here on appeal. There is no dispute as to the facts, the only question involved being, Has appellant a valid and subsisting lien, and is it prior or subsequent to respondent’s mortgage? At the time of the execution of respondent’s mortgage, it had no knowledge that the engine was not paid for, nor had it notice of the execution or existence of the conditional sale contract under which the engine was delivered to Bernard, and appellant admits that respondent was an incumbrancer in good faith. It is also admitted that, at the time of the making of the loans by respondent and the execution of its mortgage, Bernard was in full and sole possession of the tug Florence B. Bal. Code, § 5953 (amended by Pierce’s Code, §6077), provides that, “All steamers, vessels, and boats, their tackle, apparel, and furniture, are liable, . . . For work done or material furnished in this state, for their construction, repair, or equipment, at the request of their respective owners, . Demands for these several causes constitute liens . and have preference over all other demands; but such liens only continue in force for a period of three years from the time the cause of action accrued.” There is no provision made in the statute for any filing or record of such lien, nor is there any special provision made for its foreclosure. It is the contention of appellant that, under this statute, its lien was created by, and existed from and after, the sale of the engine and its installation as part .of the equipment of the Florence B., and that, three years not having elapsed from said time, said lien was in full force and effect at the time of the execution of respondent’s mortgage, and is superior thereto; while respondent contends that the execution of the conditional sale contract operated as a waiver of the lien, and that, such contract not being filed for record within ten days, the sale became absolute, under the provisions of Bal. Code, §4585 (P. C. §6547), as [541] amended by Laws 1903, p. 6, to the effect that all conditional sales of personal property, where the property is placed in the possession of the vendee, shall be absolute as to incumbrancers and subsequent creditors in good faith, unless a memorandum of such sale be filed within ten days after the vendee takes possession; repondent’s argument being that, such sale having become absolute for failure to record any memorandum thereof within ten days, any lien which might have existed prior thereto is destroyed; that the statutory expression “absolute” excludes the existence of any lien. We cannot agree with this contention. If the sale became “absolute,” it could only mean that, because of appellant’s failure to record the memorandum within ten days, it could not retain the title to.the engine as security for the deferred payments, and that such title passed to Bernard, and became “absolute” in him as to his subsequent creditors in good faith. The lien upon the vessel provided for in Bal. Code, § 5953 (P. C. § 6077), applies to all furnishing of material for. the equipment of vessels, including materials furnished under an “absolute” sale. So that, if such sale became “absolute” as to respondent as a subsequent incumbrancer, in good faith, it still retained all its liability and subjection to appellant’s lien. The only effect of the conditional sale statute and appellant’s failure to comply therewith was that as to respondent it could no longer retain within itself the title to the engine, and that such title vested in Bernard and became subject to the lien of respondent’s mortgage. Such lien so created would thereupon take its order among other liens properly created either by law or the act of parties. There is no provision in the conditional sale statute which attempts to destroy the effect of any valid existing lien. It simply gives to subsequent incumbrancers in good faith and without notice a right to hold the property as a lien or security for their debt, which otherwise they would not have had. If, as between appellant and respondent, the sale at the time of the execution of respondent’s mortgage had become abso [542] lute, appellant could not and did not lose any right which by virtue of the lien statute vested in it upon an absolute sale of property, and its lien was still valid and in full force and effect. Respondent suggests that appellant, having reserved the title in itself under the conditional sale contract, it thereby waived its lien. The retention of title in itself under the conditional sale contract, until full payment had been made, was not inconsistent with the lien given appellant by statute. The conditional sale contract gave it a specific lien upon the identical property furnished, the statute gave it a general lien upon the vessel, its tackle, apparel, and furniture. It had an undoubted right to secure the payment of its debt in any manner recognized in the law, whether such security was written in the contract of sale or attache'd by virtue of the statute. It is not the law that, by taking advantage of one form of security, a party thereby waives or loses any other form which in law attaches to the contract. Appellant could look to Bernard personally for the payment of its debt, and to any and all other remedies conferred bylaw to enforce payment of the debt. Case Mfg. Co. v. Smith, 40 Fed. 339. It is the undoubted rule of law that reservation of title to property in the vendor, until full payment of purchase price, does not defeat or waive any specific lien created by statute. Hooven O. & R. Co. v. Featherstone’s Sons, 111 Fed. 81; Chicago & A. R. Co. v. Union Rolling-Mill Co., 109 U. S. 702, 3 Sup. Ct. 594, 27 L. Ed. 1081; Clark v. Moore, 64 Ill. 273; Anthony v. Smith, 28 Tenn. 508; Fogg v. Rogers, 42 Tenn. 290; Kilpatrick v. Kansas City etc. R. Co., 38 Neb. 620, 57 N. W. 664, 41 Am. St. 741; Peninsular General Elec. Co. v. Norris, 100 Mich. 496, 59 N. W. 151. Wherever it has been held that additional security waives statutory liens, such ruling is founded upon the theory that subsequent creditors may place full reliance upon the records as determining the condition of the property. Chapman v. Brewer, 43 Neb. 890, 62 N. W. 320, 47 Am. St. 771. Such a rule [543] cannot prevail here as applied to this character of lien, because the lien is a secret one, attaching upon the furnishing of the material. No act is required on the part of the claimant to secure his lien. He is neither required to record it, to give notice, nor do any act to make his lien operative. Respondent urges that the statute is merely declaratory of the common law and, following the general rule in common law liens, the hen is lost by delivery of possession. The statute determines otherwise. It does not contemplate retention of possession; it gives a hen upon that which the vendor never had in his possession. The vendor may, as in this case, furnish material for the equipment of the boat, and his hen is extended, not only to the material furnished, but the entire vessel, its tackle, apparel, and furniture is subject thereto. There is no connection nor relation whatever between the attachment of the hen and possession. From the reading of the statute it is plain that it contemplates possession remaining in the ownership of the vessel, from the fact that it gives hens to those who never have been in possession of the vessel or any part of its equipment. Again, it is asserted that appellant should lose its hen because of its laches in not giving notice of its claim of hen, until the record thereof in July, 1908, eighteen months after the sale. The statute itself answers the contention. It gave appellant three years in which to assert its hen, and there could be neither laches nor estoppel while appellant was within the time granted him by the statute. We therefore hold the court below was in error in holding appellant’s hen inferior to respondent’s mortgage. The judgment is reversed in so far as it estabhshes priorities of these hens, and the cause is remanded to the lower court with instructions to enter a decree estabhshing appellant’s hen as prior and superior to respondent’s mortgage. Appellant will recover its costs herein. Rudkin, C. J., and Chadwick, J., concur.