Cushwa v. Improvement L. & B. Ass'n

English, Judge : On the 10th day of February, 1897, the Improvement, Loan and Building Association of Martinsburg, a corporation under the law's of the State of West Virginia, A. C. Nadenbousch, trustee, and Harvey T. Cushwa and Harry S. Cushwa, partners trading under the firm name of H. T. Cushwa & Bro., appeared in open court in the circuit court of Berkeley County, and filed their bill in chancery against the Auburn Wag-on Company, a corporation, U. S. G. Pitzer, trustee, and others, in which, among- other things, they alleged that on February, 18,1896, the defendant the Auburn Wag-on Company, a corporation under the laws of Pennsylvania, and a citizen of said state, was the-owner in fee of a lot of ground in the town of Martins-burg, Berkeley County, W. Va., containing two acres, three roods, and ten poles, and on that date executed a deed of trust to said Nadenbousch, trustee, on said lot, — 492 — together with all improvements then on same, or thereafter to.be put thereon, etc., a copy of which trust deed was exhibited with said bill, from which it appears that said deed was made for the purpose of securing- the payment of an indebtedness of forty thousand dollars with interest, to said Improvement, Loan and Building Association, owed by said Auburn Wagon Company, which was payable in installments as therein set forth, and upon terms and conditions therein set forth. On February 13, 1897, said building and loan association gave notice to said Naden-bousch, trustee, to proceed to execute said deed of trust by selling the property thereby conveyed in the terms re quired by said deed. It was further, alleged that on October 13, 1896, said firm of H. T. Cushwa & Bro.. filed their mechanic’s lien in the office of the clerk of the county court of Berkeley, wherein the real estate owned by said Auburn Wagon Company, above described, is situated ; that is to say, they filed a just and true account of the amount due them, after allowing all credits, together with a description of the property owned by said wagon company, and intended to be covered by the lien claimed by said H. T. Cushwa & Bro., sufficiently accurate for identi-cation, duly sworn to by said Harry S. Cushwa, an office copy of which was exhibited with plaintiffs’ bill, as Exhibit B. The bill also alleged that there was due to said H. T. Ciishwa & Bro. on account of said lien the sum of three thousand eight hundred and eighty-eight dollars and forty cents, with interest; that the same was for work and labor performed and materials furnished in constructing the buildings of the plant of the said Auburn Wagon Company on lot aforesaid; that said work was performed and materials furnished partly under a contract in writing made by said Cushwa & Bro. with said wagon company; that said work and labor were performed and said materials furnished between the 24th of February, 1896 and 1st of September, same year; and that no part of the amount due them as shown by said Exhibit B has been paid, but the same is wholly due, with interest thereon. It was further alleged that on December 3, 1896, the Auburn Wagon Company executed a deed to U. S. G. Pitzer, trustee for the Morrison & Westfall Company of said real estate, with — 493 — other property therein described, to secure to said Morrison & Westfall Company the payment of certain drafts, notes and indebtedness, a copy of which trust deed was also exhibited as part of the bill. The plaintiffs in their bill also described several judgments which had been obtained by other par-ties, who were made defendants, against said Auburn Wagon Company, before a justice of the peace of Berkeley County. Plaintiffs also alleged that said wagon company was wholly insolvent; that its liabilities exceeded one hundred thousand dollars; that the assets consisted almost exclusively of the real estate above mentioned, with the improvements thereon, and machines and tools used in the business of manufacturing wagons, the total value of which was not more than enough, if properly administered, to pay the indebtedness due plaintiff, said Improvement, Loan and Building Association ; that said wagon company has in process of manufacture, and almost ready for shipment, a large number of wagons, to-wit: eig-ht hundred, but which cannot be completed and placed on the market, for want of additional material to complete the same, which, owing to its crippled financial condition, it was unable to secure ; and the plaintiffs prayed the appointment of a receiver to take charge of the property and business of said company, and operate the same, until such time as a sale can be properly made thereof, or until the court should otherwise order; that the creditors of the company might be convened by a reference of the cause to a commissioner, and that the repective amounts and priorities of their liens and debts might be ascertained, and the assets of the company properly distributed among them. The defendant wagon company answered the plaintiffs’ bill, admitting the execution of the deed of trust to A. C. Nadenbousch, trustee, mentioned in the bill, and alleged that previous to the making of said conveyance the building and loan association had entered into a.contract with it, bearing date December 10, 1895, which was not sealed and delivered until the 28th day of January, 1896, but possession of the property to said wagon company had been delivered some time prior to January 13,1896, whereby said building and loan association agreed to loan said company forty thousand dollars, tobe paid att he time and — 494 — in the manner therein set forth, and the said wagon company, among other things, thereby agreed that it would make and acknowledge for record a proper deed of trust upon said lot of ground, and upon all its buildings, plant, and machinery, to secure the party of the first part the loan aforesaid, and the performance of, all and singular, the covenants and agreements therein contained, and keep said property insured in some solvent company, which agreement was signed by H. T. Cushwa, president of the Improvement, Loan and Building Association, and F. C. Ward, president of the Auburn Wagon Company, acknowledged by H. T. Cushwa, president, on January 17, 1896, and by F. C. Ward, president, on January 28, 1896, and was admitted to record on March 13,1896. The wagon company further answering, said that it had a contract with H. T. Cushwa & Bro. by which certain buildings were erected and materials therefor furnished by said Cushwa & Bro., and that on August 15, 1896, it had a settlement, through its president, F. C. Ward, with said Cushwa & Bro., and then gave to them three negotiable promissory notes of the said wagon company, each .for the sum of one thousand one hundred and sixty dollars and thirty-one cents, making the aggregate, three thousand four hundred and eighty dollars and ninety-three cents, which notes were given by respondent as payment and satisfaction, and received by H. T. Cushwa & Bro. in payment in full, of the balance owing to said firm under that contract, and the extra work done for it by them, except a small part there-'df, to-wit: the execution of what was called the “Mailing Office,” which was to cost four hundred and seven dollars and forty-seven cents, taking said Cushwa & Bro. ’s receipt therefor, which was filed as an exhibit in the cause. The respondent also denied that said Cushwa & Bro. on October 13, 1896, filed their mechanic’s lien in the office of the clerk of the county court of said county (that is to say, a just and true account of the amount due them after allowing all credits), but on the contrary, it is alleged that the account filed by them was a false one, in which payment of said three thousand four hundred and eighty dollars and ninety-three conts as aforesaid was entirely omitted ; and respondent denied that said Cushwa & Bro. had any — 495 — mechanic’s lien whatever on respondent’s property, and claimed that said false and fraudulent account filed by them failed to preserve a lien for any sum whatever. On February 16, 1897, a receiver was appointed of all the property of said wagon company, to take immediate possession of said property, and hold the same, as an officer of the court, under its orders and directions. On March 6,1897, the cause was referred to a commissioner in chancery, with instructions to ascertain and report the debts owed by said wagon company, their respective amounts and priorities, and if, in so doing, he should find that the deed of trust by said wagon company to U. S. G. Pitzer, trustee, dated December 3,1896, was made at such time as said wagon company was insolvent, then, in ascertaining such priorities, he should treat such deed as void as to the preference therein given, and as a general assignment for the benefit of all the creditors of said wagon company who should assert their claims in the manner prescribed by statute in existence at the time, ratably; also, to report the real estate and personal property owned by said wagon company, and what has been acquired, if anything, by said company, since the making of the deed of December 3, 1896, to Pitzer, trustee. On September 13, 1897, the commissioner filed his report, ascertaining the debt due H. T. Cushwa & Bro., evidenced by a mechanic’s lien, amounting to four thousand one hundred and two dollars aud ninety-one cents, principal and interest, as of September 14, 1897, to be the first.lien upon the real estate owned by the Auburn Wagon Company; a debt due the Loan and Building Association, evidenced by a deed of trust executed to A. C. Nadenbousch, trustee, amounting to thirty-seven thousand, four hundred and ninety-seven dollars, principal and interest, as of September 14, 1897, to be the second lien upon said real estate; a debt due the employes of said wagon company for labor performed, amounting, principal and interest, as of September 14, 1897, to one thousand three hundred and sixty-one dollars and sixteen cents, to be the ■ first lien upon the personal assets of said wagon company; and all debts proven, as due the general creditors of said wagon company, amounting, principal and interest, of September 14, 1897, to one hundred and thirteen thou — 496 — sand nine hundred and twenty-four dollars and ninety-seven cents, to be a second lien on said personal assets; and that the personal property of said wagon company, when it went into liquidation, was sold by the receiver for six thousand two hundred and fifty dollars, which was then in the hands of the receiver, subject to the order of the court. The Auburn Wagon Company excepted to the commissioner’s report so far as it audited as a first lien on its property the claim of said Cushwa & Bro. for the sum of four thousand one hundred and two dollars and ninety-one cents: (1)Because the testimony shows that said wagon company on the 15th of August, 1896, made a settlement with said Cushwa & Bro., in which it gave to them its three negotiable notes each for the sum of one thousand one hundred and sixty dollars and thirty-one cents (in all, three thousand four hundred and eighty dollars and ninety-three cents), which were accepted by said firm in full payment of said claim, and full discharge of the contract under which the said claim arose, except as to the mailing office mentioned in said agreement, to be supplied by the said claimant for the sum of four hundred and seven dollars and forty-seven cents. (2) Because the pleadings and testimony show that, prior to the time the said claimant furnished any work or materials for the improvements upon which the said mechanic’s lien set up is founded, the said claimants had notice of a contract in writing of the wagon company with the loan and building association whereby the said association agreed to advance the sum of money mentioned in the bill, in the manner therein stated, and which are audited as a second lien on said wagon company’s property, and also the agreement evidenced by the said contract to secure the payment of the said sums of money in the manner set out in said bill, and audited as aforesaid, by deed of trust on said property, which should be a first lien thereon. Depositions were taken and filed, and a decree was rendered on the 9th of November, 1897, sustaining the exception of said wagon company to said commissioner’s report, so far as it held the mechanic’s lien claimed by H.' T. Cushwa & Bro.. amounting to four thousand one hundred and two dollars and ninety-one — 497 — cents, to be the first lien against said real estate, and holding that it should have been audited as a general debt of the Auburn Wagon Company, but overruling said second exception, from which decree H. T. Cushwa & Bro. obtained this appeal. Counsel for the appellees claim that the appellants acquired no mechanic’s lien, for the reason that during the progress of the work payments were made on account of said wagon company to H. T. Cushwa & Bro. by the loan and building association, through H. T. Cushwa, its president, by his checks as such, and on the completion of the contract a settlement'was made between said wagon company and appellants, and an ascertained balance of three thousand four hundred and eighty dollars and ninety-three cents was settled “in full for contract and extras, except mailing- office,” by the acceptance of three negotiable notes, each for one thousand one hundred and sixty dollars and thirty-one cents, executed on the 15th of August, 1896, by the Auburn Wagon Company,’payable to H. T. Cushwa & Bro., four, five, and six months, respectively, from their date. Now, while it is true said notes were executed as above stated, and a receipt given on the same day in the following words: “Received of Auburn Wagon Company, Mai'tinsburg, W. Va., three thousand four hundred and eighty dollars and ninety-three cents, ($3,480.93), for bill August 13, in full for contract and extras, except mailing office. [Signed] H. T. Cushwa & Bro.” — yet this receipt was merely frima facie evidence of the fact therein stated. Upon this question we find the law thus laid down in 1 Greenl. Ev. (15th Ed.) s. 305 : “In regard to receipts, it is to be noted that they may be either mere acknowleg-ments of payment or delivery, or they may also contain a contract to do something to the thing delivered. In the the former case, and so far as the receipt goes only to acknowledge payment or delivery, it is merely frima facie evidence of the fact and not conclusive, and therefore the fact which it recites may be contradicted by oral testimony.” So, also, 2 Tayl. Ev. s. 1124, say: “Therefore, except in some few special cases, a receipt, so far as it as a mere admission, is not conclusive evidence of the payment therein acknowledged, but the party signing it may — 498 — invalidate it by oral evidence of fraud, or of mistake or surprise on his part; for the document amounts only to prima facie proof, and is capable of being- explained.” To the same effect, see 19 Am. & Eng. Enc. Law, p. 1120, and authoi'ities there cited. Bish. Cont. s. 176, says: “In general, receipts of payment, whether embodied in written instruments or not, are deemed to be of the imperfect sort, which, though -prima facie evidence of what they declare, may be explained or contradicted orally. They are so even when expressed to beinfull of all demands citing several authorities in note. When we look to the evidence in explanation of this receipt, it appears that the Auburn Wagon Company, instead of having paid said Cushwa & Bro. three thousand four hundred and eighty dollars and ninety-three cents in full for contract and extras, except mailing office, executed to them its three notes, bearing, date August 15, 1896 (the same date as said receipt), for one thousand one hundred and sixty dollars and thirty-one cents each, payable, respectively, infour.five andsixmonths after date to the order of H. T. Cushwa & Bro., at the Citizen’s National Bank of Martinsburg, W. Va., which notes were still held by said Cushwa & Bro., at the time the account was taken in this cause, and were filed before said commissioner by H. T. Cushwa, with his deposition. Now, what was the effect of executing these three negotiable notes, which do not appear to have been discounted or used in any manner by the payees, but remain in their possession? Can they be regarded as a payment and extinguishment of the debt they represent? In the case of Bank v. Good, 21 W. Va. 495, Snyder, Judge, delivering the opinion of the Court, said: “It is well settled in both Virginia and this State that a note will not be regarded as an absolute extinguishment or payment of a precedent note or pre-existing debt, unless it be so expressly agreed, whether the note received was that of one previously bound,or of a stranger;” citing Poole v. Rice, 9 W. Va. 73; Lazier v. Nevin, 3 W. Va. 622; Miller v. Miller, 8 W. Va. 550. See, also, Dunlap's Ex'r v. Shanklin, 10 W. Va. 662, where it is held that: “Giving a receipt or taking a note with security from the purchaser, or taking the note of a third party, specifying in either case that it is — 499 — for the purchase money, will not, while the title remains in the vendor, be an extinguishment of the vendor’s lien, unless the purchase money has been actually paid, * * * Taking a note from a debtor, or a .note of a third party, is no discharge of the debt, unless it is expressly agreed between the creditor and debtor that it is an absolute payment thereof. * * * A receipt may be explained or contradicted by parol evidence.” Now, it clearly appears by the evidence that although the receipt dated August 15, 1896, signed by H. T. Cushwa & Bro., acknowledged that they had received of the Auburn Wagon Company, three thousand four hundred and eighty dollars and ninety-three cents for bill of August 13th, in full for contract and extras, except mailing office, said amount was not in fact paid, but that the three notes above mentioned were executed for the same. The account of H. T. Cush-wa & Bro. appears to have been filed with the clerk of the county court of Berkeley, and sworn to, on the 14th of October, 1896, and the last of said notes executed by the wagon company to Cushwa & Bro, became due on February 13, 1897, and suit to enforce said mechanic’s lien might be brought, under the statute, until the 13th of April 1897 ; and it has been held that, though a note is payable after the expiration of the time limited by law in which a lien must be filed, it is not waved, if it be pay. able before the time in which the action must be brought for its enforcement, for a menchanic is allowed to file the lien before his note is due. In the case of Ashdown v. Woods,31 Mo. 465, it is held that “the acceptance of the notes of the debtor, payable after the time granted by the statute for filing a mechanic’s lien, and maturing before the sxpiration of the time limited, for bringing suit, will not bar a suit and recovery upon the lien, if the notes are produced to be surrendered at the trial.” See, also, McMurray v. Taylor, 30 Mo. 263; also, Schmidt v. Gilson, 14 Wis. 514, in which it is held that “a mechanic does not lose his lien under-the statute for work done upon a building by taking the note of the owner of the building, payable within the time allowed by law for commencing an action to enforce the lien”; and in Goble v. Gale, 7 Blackf. 218, it was held that“amec.hanic’s lien for work done is not waived by taking — 500 — his employer’s note for the money due for thework, and giv-inga receipt in full for such money, thenotenotbeing- paid.” It is contended that the debt due or to become due to the Improvement, .Roan and Building-Association, secured by the trust deed, for thirty-seven thousand four hundred and ninety-seven dollars was entitled to priority over said mechanic’s lien. Is this position correct? In considering this question, we notice first the fact that on February 18, 1896, a written contract was entered into between the Auburn Wagon Company and H. T. Cushwa & Bro., with elaborate specifications thereto annexed, for the- erection of certain building-s on its lots in the town of Martinsburg, in accordance with said specifications, with certain minor exceptions, for the sum of twenty-one thousand nine hundred and fifty dollars, which exceptions were to be paid for as extras, which was, and must be considered, an entire contract. It is shown by the testimony that EL T. Cushwa & Bro. began the work under this contract on February 10, 1896, and completed it September 4, 1896. The work was pushed right along, and said Cushwa, when asked what amount of work and material in money was done and furnished prior to March 9, 1896, answered that they were excavating and building the foundation during that time, which was a part of the contract. The deed of trust in favor of the building association above mentioned was admitted to record in Berkeley County on the 9th of March, 1896. Did the fact that this trust deed was executed and recorded after the appellants had commenced work under said contract entitle said trust deed to priority over said mechanic’s lien? If such be the case, the mechanic’s lien law affords very little protection to the contractor in this State, since the party who employs him to erect buildings upon his lands can defeat his lien, when the work is almost completed, by executing a deed of trust on the property. The rig-ht to execute and record such trust deed one day or one month, as in this case, after the work has commenced under the contract, implies the right to create such trust deed, and take priority over the mechanic’s lien, at any time while the work is in process of completion. Our statute (Code, p. 652, s. 2) provides that every mechanic, etc., who shall perform any work or fur — 501 — nish any material, etc., shall have a lien to secure the payment of his contract, upon such house or other structure, and the lien authorized by this section shall have priority over any other lien created by deed or otherwise on such house or structure subsequent to the time when such labor shall have been performed or material furnished. Cushwa & Bro. were proceeding- with their contract. The wagon company had notice that they were performing it, and that every day’s work in pursuance of the contract entitled them to a lien for their services. Would it be a fair construction of the statute to hold that said wagon company, by executing said trust subsequent to the time one month’s labor had been performed under the contract, would give the cestui que trust priority over said mechanic’s lien? I think not: and it is certain that few contractors would rely for protection on the mechanic’s lien, in this State, if such was the proper construction. It surely never was the intention of the Legislature that a contractor should have no right to a mechanic’s-lien for work and material furnished until after he completed his contract. In the case of Building Co. v. Saucer, 45 W. Va. 483 (31 S. E. 965) — Brannon, President, delivering the opinion of the Court, said (speaking of the builder): “He may go on to work, and he has his lien from its commencement, or when he began furnishing- material; and the statute gives him a lien over any other creditor whose liens arise after his lien commences, without any recordation, because the law gives notice to the world that the mechanic’s lien attached to the building, which lien he may enforce by filing it sixty days after completion.” In the case of Manufacturing Co. v. Brockmyer, 18 W. Va. 591, Green, Judge, delivering the opinion of the Court, says: “The statute itself provides expressly that such lien shall have priority over every lien created by deed or otherwise on such house,” etc,, ‘subsequent to the time when such labor shall be performed, and material furnished.’ This would, it seem to me, by its clear language, give a lien from the time when the labor commenced on the buildings, or the matarial commenced being furnished, though, by the third section, thirty days after the labor ceased, or the material has ceased to be furnished? — 502 — are giren in which to record the lien. Thus for a time it is a secret lieu. The mechanic’s lien, under our statute, begins from the day when the work is begun, according to what I think is its proper meaning.” See, also, Dunklee v. Crane, 103 Mass. 470. Now, as between the Auburn Wagon Company and Cush-wa & Bro., the mechanic’s lien of the latter surely attached from the time they commenced performing the contract, and after that said wagon company could only convey the property to a trustee subject to the mechanic’s lien, as they could only convey the property as they held it. In 15 Am. & Eng. Enc. Law, p. 191, it is said : “Mechanic’s and laborers asserting a lien upon real property for their work, and claiming priority over mortgagees and others who have acquired interests in the property, must furnish strict proof of all that is essential to the creation of the lien; and this rule requires them to prove when the work was commenced, the character of the work, and when it was completedciting Bank v. Winslow, 3 Minn. 87, [Gil. 43) and Davis v. Alvord, 94 U. S. 545, in which last named case Justice Field, speaking of the mechanic’s lien law, says ; “The statute was designed to give security to those who, by their labor, skill, and materials, add value to the property by a pledge of the interest of their employer for their payment; and for that purpose it subordinates all other interests acquired subsequent to the commencement of their work, although no notice that a lien may even be claimed is required, except within sixty days after the work is completed.” See Bank v. Dashiell., 25 Grat. 616. It is clearly shown in this case that the work was commenced under this contract more than a week before the deed of trust was recorded. By commencing the work, Cushwa & Bro. acquired a vested right, which could not be overthrown or superseded by said deed of trust. To hold otherwise would be to hold that a deed of trust executed and recorded one day before the work was completed would take priority over the contractor’s entire claim. I therefore hold that our statute must be construed to intend that the lien attaches when the performance of the work commences. In view of the authorities above cited, — 503 — and looking- to the facts proved in the record, I am of opinion that the court erred in holding- that the mechanic’s lien claimed by H. T. Cushwa & Bro., four thousand one hundred and two dollars and ninety-one cents, was not properly audited as a mechanic’s lien, and that it should have been audited as a general debt of said wagon company, and sustaining- the first exception taken by the Improvement, Loan and Building Association, and others to the commissioner’s report, for the causes assigned in said exception. Said claim of Cushwa & Bro. should have been held as a mechanic’s lien, to take its place as such,in point of priority, in the account reported by said commissioner. For these reasons the decree complained of must be reversed, and the cause remanded.