Murphey v. Brown

NAVE, J. — Appellants were plaintiffs below. Most of tbe evidence offered by them was ruled out upon objection. We shall state such facts as are pertinent to tbe opinion to be rendered, without distinction between facts admitted by the pleadings or proved and those facts which are in the record only as set forth in offered testimony. Lizzie B. Murphey is the owner of a building in Tucson. In January, 1907, W. E. Murphey subscribed to a written instrument, as agent of Lizzie Murphey, which purported to lease to the defendant Brown a portion of this building for a period of one year, commencing on February 1, 1907, at a rent payable monthly in advance, provided that if Brown should not notify Murphey to the contrary on or before October 31, 1907, the lease should be extended for a second, period of one year. The instrument was signed by Brown. It was not acknowledged by Brown or Murphey. The authority of Murphey to sign the instrument was not in writing. Brown entered possession pursuant to this instrument, and paid rent to and including the rent for the month of January, 1908, conducting therein a retail merchandising business. He did not give notice whereunder the lease should be terminated at the end of one year. Before the end of the month of January, 1908, Brown became insolvent, and made an assignment of all his property to defendant Sims for the benefit of his creditors. Sims sold Brown’s entire stock of merchandise, it being still on the demised premises, to defendant Friedman, and this sale was consummated before the expiration of the month of J an-uary, 1908. Friedman immediately entered into possession of the stock, and advertised to sell it at public sale at reduced — 273 — prices. Before the expiration of the same month, the plaintiffs Murphey instituted this suit against Brown, Sims, and Friedman, setting up substantially these facts, together with the further fact that Friedman purchased with knowledge of the tenancy; and prayed judgment that a lien exists in favor of plaintiff Lizzie B. Murphey for rent for the remainder of the term of two years contemplated by the lease, and that defendant Friedman be restrained from removing the stock of merchandise from the premises or from selling the same, to the end that the lien be not destroyed. An interlocutory injunction was granted. Brown was not served with process, and has not appeared in the action. At the trial the court refused to admit in evidence the written instrument, apparently upon the grounds that the authority of the agent to execute the same was not in writing, and that the instrument was unacknowledged by the lessor. The offer of oral testimony to substantiate certain allegations in the complaint was rejected, the rejection of such offer following logically from the determination of the court with reference to the admissibility of the written instrument. Judgment was rendered against the plaintiffs, and from this judgment they have appealed. Pending appeal, an injunction was granted maintaining the status of the property. A variety of questions of law is presented for our determination. Without defining the relation of the several points to the assignment of error, we shall take them up seriatim. 1. The first question to be considered is: Does the statute which provides for a landlord’s lien contemplate that the lien shall attach for rent as it becomes due, or does the lien attach at the beginning of the term to secure the rent of the entire term ? The statute in question is paragraph 2695 of the Civil Code of 1901, the material part of which reads as follows: “ Every landlord shall have a lien on all the property of his tenant not exempt by law, placed upon or used on the leased premises until his rent shall be paid, and such landlord, his agent or attorney, may seize, for rent, any personal property of his tenant that may be found on the premises or in the county where such tenant shall reside, but no property of any other person, although the same may be found on the premises, shall be liable for seizure for rent due from such tenant, and in ease of failure of the tenant to allow the landlord, his agent — 274 — or attorney to take possession of sueb property for tbe payment of rent, said landlord shall have tbe right to reduce sueb property to bis possession by action against tbe tenant to recover tbe possession of the same, and may bold or sell tbe same for tbe purpose of paying said rent unless said rent shall be paid before sale. ’ ’ To restate tbe question: Has tbe landlord under this statute protection for tbe payment of bis rent from tbe moment bis tenant’s chattels are placed upon tbe leased premises, or does bis protection begin only after tbe obligation for rent has matured ? If tbe latter, then tbe landlord is but little aided by tbe statute; for be may obtain a lien by attachment for rent due. If tbe former, bis protection is as complete as tbe value of tbe property upon tbe demised premises may make it. "While courts must carefully refrain from extending beyond their expressed terms tbe effect of legislative enactments wbereunder liens may be created, on tbe other band, sueb statutes, being remedial in their nature, must be construed so liberally as to effectuate their palpable purposes. The purpose of this statute is manifestly to afford tbe landlord protection commensurate with tbe obligation assumed by bis tenant. Tbe statute prescribes bow long tbe lien shall endure — until tbe rent shall be paid — but does not prescribe when it shall attach. It seems inconsistent with tbe purpose of tbe enactment that tbe lien shall not attach until tbe obligation for rent is matured; else on tbe day before tbe month or year shall have expired, where rent is payable monthly or annually, tbe tenant may remove bis chattels free from lien. Under such interpretation tbe statute is without much value. Tbe other alternative is that tbe lien shall attach when tbe chattels are placed upon tbe premises, and shall subsist until tbe end of the term, and thereafter until all rent shall -have been paid; for there appears no logical reason to assert that tbe lien shall attach at tbe beginning of tbe month, or of tbe year, for tbe rent for tbe ensuing month or year only, to reattach for tbe second month or second year upon tbe inception of that second period. Tbe lien provided for is a continuous lien, and not a disjointed lien, nor a series of liens from month to month or from year to year. Tbe conclusion seems inevitable that tbe lien attaches for tbe entire term of tbe lease on all property of tbe tenant, placed upon or used on tbe leased premises, and subsists until all rent for tbe term has been paid. Tbe supreme — 275 — courts of Iowa, Alabama, and Arkansas have reached the same conclusions upon similar statutes. Garner v. Cutting, 32 Iowa, 547; Andrews v. Porter, 112 Ala. 381, 20 South. 475; Sevier v. Shaw, 25 Ark. 417. The supreme court of the United States cites decisions of these courts with approval, in announcing its judgment interpreting a somewhat different statute, in Fowler v. Rapley, 15 Wall. 328, 21 L. Ed. 35. 2. The next question to be considered is as to the admissibility in evidence of the written instrument offered as a lease. The statutes which must be considered in this connection are paragraphs 721, 725, and 732 of the title “Conveyances,” and paragraph 2696 of the title “Frauds and Fraudulent Conveyances. ’ ’ These paragraphs read as follows: “721. (Section 1.) No estate of inheritance or freehold or for a term of more than one year, in lands and tenements, shall be conveyed from one to another unless the conveyance be declared by an instrument in writing, subscribed and delivered by the party disposing of the same, or by his agent thereunto authorized in writing. ’ ’ “725. (Sec. 5.) Every deed or conveyance of real estate must be signed by the grantor and must be duly acknowledged before some officer authorized to take acknowledgments, and properly certified to by him for registration.” “732. (Sec. 12.) "When an instrument in writing, which was intended as a conveyance of real estate, or some interest therein, shall fail either in whole or in part, to take effect as a conveyance by virtue of the provisions of this title, the same shall, nevertheless, be valid and effectual as a contract upon which a conveyance may be enforced as far as the rules of law will permit.” “2696. (Section 1.) No action shall be brought in any of the courts in any of the following cases, unless the promise or agreement upon which such action shall be brought, or some memorandum thereof, shall be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized: . . .. (4) Upon any contract for the sale of real estate or the lease thereof for a longer term than one year. ’ ’ It is contended by the appellee, and evidently was held by the trial court, that the instrument is not effective as a legal lease because it is not acknowledged, and because the agent who — 276 — signed it was not authorized thereunto by writing; that it is not admissible as an enforceable contract by reason of the provisions of paragraph 2696, because it was not signed by some person thereunto “lawfully authorized.” The contention is made that the words “lawfully authorized” in paragraph 2696 are to be construed in the light of the words “authorized by writing” in paragraph 721. It must not be overlooked that paragraphs' 721 and 725 are but continuations with some modifications of the first three sections of the English statute of frauds, and that paragraph 2696 is a continuation with some modifications of the fourth section of that statute. Precisely the difference in expression occurs in sections 1 and 4 of the English statute of frauds with reference to the authority of an agent that appears in paragraphs 721 and 2696. The execution of a conveyance, if by an agent, must be by an agent “authorized in writing,” but the execution of an agreement to convey may be made by any person “lawfully authorized.” It is not to be assumed that the different expressions are the result of inadvertence. The courts have for generations recognized and applied a difference in the two provisions. That one shall be “lawfully authorized” to sign a binding memorandum under section 4 of the statute of frauds does not mean that he must have been authorized in writing; he may have been verbally authorized, although to execute the conveyance he must have been authorized in writing. See cases collected in 20 Cyc. 276. The application of this interpretation to each section in the same jurisdiction is made in Rutenberg v. Main, 47 Cal. 213, and Videau v. Griffin, 21 Cal. 389. In adopting the quoted paragraphs from the statutes of Texas in 1887, we took them already so interpreted. Huffman v. Cartwright, 44 Tex. 296. In the light of this exposition, it is clear that the instrument in question is not within the inhibition of paragraph 2696, for it is in writing, signed by one of the parties to be charged therewith, and by a person thereunto verbally authorized by the other party to be charged therewith. It is equally clear that the. instrument is not a valid and effective lease by reason of the fact that it is for the term of more than one year, is subscribed by an agent of the disposing party, not thereunto authorized by writing, and furthermore, because it is not acknowledged. Lewis v. Herrera, 10 Ariz. 74, 85 Pac. 245. We have therefore an attempted lease which is — 277 — not a legal conveyance of the leasehold interest, but which complies with all the conditions imposed upon a valid contract for a lease. By paragraph 732 above quoted, there is legislative authority that an ineffective conveyance may nevertheless be an enforceable contract for a conveyance. This attempted conveyance, not being invalidated by reason of the provisions of paragraph 2696, is enforceable by reason of paragraph 732. It follows that the relation between Brown and Murphey is not in law that of landlord and tenant, but is such in equity; that is to say, the relation is not that which would be created by a legal lease, but is that created by the existence of a mutually enforceable contract to lease. The legal consequence of this relation is that the instrument in question is not admissible as a legal lease, but is admissible as a valid contract to lease. Under the ancient and rigid rules whereunder the functions of courts of equity and courts of law were separated by an unbridged chasm, the predicate for legal relief from conditions arising out of the relations of these parties must first have been laid by the procuring of a legal conveyance of a leasehold interest by the aid of the decree of specific performance of a court of equity. . 3. Under these conditions, may it be said with legal propriety that the relation of landlord and tenant existed between Murphey and Brown at the time of the purchase of the stock of merchandise by Friedman, and that, therefore, the stock was encumbered with a lien for the rent to become due for the remainder of the two years’ period1? From the conclusions just stated, the answer is inevitable that at law the relation of landlord and tenant did not exist; in equity, under the principle that that which ought to be done shall be regarded as done, the relation did exist. The results which follow from these two different aspects of the relation are very important. Where a lien enforceable at law has attached to property, the purchaser takes the property subject to the lien, irrespective of notice, except where notice, real or constructive, is made essential by registration laws or the statute whereunder the lien arises. It is equally true that, where a legal lien does not exist, a purchaser of property without notice of the existence of equities obtains the property as fully free from equitable claims as from liens at law. Nevertheless it is further true that, in behalf of one who is equitably entitled to a lien, equity — 278 — extends protection as against a purchaser with, notice of the facts npon which rests the equitable right to the lien. The conclusions that must be reached as to this third aspect of the case are that the legal relation of landlord and tenant did not exist between Murphey and Brown; that in equity such relation did exist; that at law Murphey was not entitled to a lien upon the stock of merchandise; that in equity he was entitled to such a lien; that, if Friedman purchased the stock without notice of Murphey’s equities, he has obtained the stock of merchandise free from Murphey’s claim; that, if Friedman purchased the stock with notice of Murphey’s equities, Mur-phey is entitled to enforce, as against Friedman, his equitable right to a lien. 4. This brings us to the consideration of the question of remedy. Murphey has neither obtained nor sought specific performance to crystallize his equitable relation of landlord and tenant into the legal relation, yet he seeks here for a decree adjudicating the existence of a lien upon the stock and for an injunction to restrain its removal by Friedman. We do not have separate courts of law and equity; we do not have even separate law and equity sides of the same court. Our courts, in considering complaints, act under the provisions of paragraph 1289 of the Civil Code of 1901, which reads as follows: “1289. (Sec. 80.) The complaint shall set forth clearly the names of the parties, a concise statement of the cause of action, without any distinction between suits at law and in equity, and shall also state the nature of the relief which he demands. ” It is manifest that here are. brought before the court the interested party, and all of the facts upon which relief in any form may be had by the plaintiff. We can conceive of no reason why the court should say that the plaintiff must first obtain specific performance and then seek to establish his lien, nor even why he should seek specific performance in this suit to establish a lien. As against Friedman, if Friedman is without notice of Murphey’s equities, specific performance would be unavailing; for the inception of the legal relation of landlord and tenant cannot be made retroactive so as to make the landlord’s lien take precedence over the rights acquired by an innocent purchaser. Reid v. Kleyenstauber, 7 Ariz. 58, 60 Pac. 879. Such right as Murphey may have against the stock of merchandise must be predicated upon the facts as they existed — 279 — at the time of Friedman’s purchase. Those facts are brought fully before the court by this proceeding, and if, as against Friedman, Murphey is entitled either in law or in equity to subject the property to his lien as landlord, the court should award the appropriate remedy. Similar conclusions have been reached in other jurisdictions where similar procedure prevails. Wood Mach. Co. v. Lee, 4 S. D. 495, 57 N. W. 238; Sorrells v. Goldberg, 34 Tex. Civ. App. 265, 78 S. W. 711; Bless v. Jenkins, 129 Mo. 647, 31 S. W. 938. We have already applied the principle by recognizing equitable defenses to actions at law. Latimer v. Hamill, 5 Ariz. 274, 52 Pac. 364; Houghtaling v. Ellis, 1 Ariz. 383, 25 Pac. 534. Every statute which has been quoted in this opinion, except paragraph 2695, was adopted by the legislature of this territory from the statutes of Texas. Hence the decision in Sorrells v. Goldberg, supra, is squarely upon the point. 5. The appellee Friedman has presented cross-assignments of error. It is unnecessary to determine whether as a matter of right he may have cross-assignments considered, except in so far as they fundamentally attack the maintenance of plaintiff’s action. Such cross-assignments are maintainable. Clark v. Liberty Co., 11 Ariz. 322, 94 Pac. 1134; United States v. Meade, 9 Ariz. 209, 80 Pac. 326; Arizona etc. Co. v. Nevitt, 8 Ariz. 64, 68 Pac. 50. One of the assignments is upon the ruling of the trial court sustaining a demurrer to a special plea of the defendant that the court is without jurisdiction to entertain the action. It is appropriate, even if not mandatory, to consider the ruling of the court upon this demurrer, in order that, should the judgment of the trial court finally be against the appellee, it shall not be necessary for him to prosecute an appeal to determine this jurisdictional matter. The point devolves upon the following allegations of fact: That, immediately after Brown conveyed the stock in question to Friedman, a petition was filed in the district court of the second judicial district to have the defendant Brown declared a bankrupt; that thereafter that court adjudicated Brown a bankrupt, and that a trustee in bankruptcy was appointed; that thereafter the trustee confirmed the sale made by Sims, as assignee, to Friedman, pursuant to an order made by the referee in bankruptcy; and that Sims paid over to the trustee the purchase money paid by Friedman. Upon these facts the — 280 — appellee contends that the trial court is without jurisdiction to adjudicate the issue presented; that the whole matter must be relegated for adjudication to the court of bankruptcy. To determine this contention, it must be observed that the bankruptcy law does not operate to take jurisdiction to determine the existence of liens from the courts which ordinarily would have such jurisdiction. Jaquith v. Rowley, 188 U. S. 620, 23 Sup. Ct. 369, 47 L. Ed. 620. Let it be assumed without giving approval to the doctrine, that under the bankruptcy law the trustee may take property subject to a lien and may sell it either charged with the lien or free from it, as the best interests of the estate require, the proceeds, in the latter instance, being chargeable with the lien, in the hands of the trustee. Loveland on Bankruptcy, secs. 256, 256d. Friedman does not aver that the act of the trustee or an order of the referee in terms confirms the sale of the assignee to be operative retroactively as a sale by the trustee nor as a sale free from the lien. It cannot be presumed in aid of the pleading — for even by the most liberal construction it cannot be said even inferentially to be averred — that the order of the referee or the act of the trustee was intended to have such action,' or was in such terms that it could by any interpretation be held so operative. Whether or not the referee or trustee could so ratify the action of the assignee, it is evident that, if the order did not purport so to operate, it did not relieve the property of the lien. Therefore the judgment of the trial court in sustaining the demurrer to the plea of jurisdiction was abundantly justified. 6. After the trial court had ruled out the offered defective lease, the plaintiffs made an oral offer to prove by the witness upon the stand a- series of facts in support of the essential allegations of the complaint, which offer, upon Friedman’s objection, was rejected. Friedman now urges that, in various respects, the facts so offered are insufficient to support the relief sought, even were the instrument admitted and given full evidential value. We will not scrutinize the offer in the light of this contention. That evidence, without which plaintiffs could not possibly prevail, was ruled out. It would have been an imposition upon the trial court, to which it need not submit, should plaintiffs, after that ruling, attempt to prove all the remaining essentials to their case. In the emergency — 281 — in which the ruling left them, plaintiffs ’ sole relief lay in an appeal. By no further evidence could they make their case; indeed, in the view of the law taken by the trial court, no further evidence was admissible, for lack of predicate by way of proof of the existence of the relation of landlord and tenant. “We do not think that, in the absence of notice from the court that he must do so, a party is bound to proceed to offer further evidence in the ease, when a ruling is made which renders it impossible for him to recover. ’ ’ Brundage v. Mellon, 5 N. D. 72, 63 N. W. 209. In a precisely analogous case it is said: “After ruling as a matter of law that Willis was estopped by the former adjudication, he was under no obligation to offer any evidence; and it cannot be said here that his offer was not sufficiently broad or specific, for we cannot tell what, but for the erroneous ruling, he might have proved.” Loeb v. Willis, 100 N. Y. 235, 3 N. E. 177. NOTE. — As to personal liability of purchaser of property subject to lien, see note to Eogers-Euger Co. v. Murray (Wis.), 59 L. E. A. 737. By reason of the error in the rejection of the offered instrument, the judgment of the district court is reversed, and the cause is remanded for a new trial. KENT, C. J., and SLOAN and DOAN, JJ., concur.