Henry & Coatsworth Co. v. Halter

Sullivan, J. This action, which was brought by Henry & Coats-worth Company to foreclose a mechanic’s lien, resulted in a decree, from which a number of lien claimants, who Avere parties defendant, have appealed. The pleadings and evidence are voluminous, but we believe the following statement of facts will.sufficiently develop the main questions presented for decision: Alexis Halter, being the owner of three business lots in the city of Lincoln, decided to erect thereon a five-story building. In June, 1892, he employed Tyler & Son, architects, to prepare plans, and in the following October commenced the work of construction. January 21, 1893, he borrowed of the Clark & Leonard Investment Company |35,000 to be used in carrying the structure to completion. To secure this — 692 — loan Halter and wife executed to the investment company a coupon bond for $35,000 and a first mortgage on the property in question. At the same time the borrower executed to the lender a commission mortgage for $1,500 on the same property. Both mortgages were immediately recorded, and five days later, on January 26, the $35,000 mortgage was sold and assigned to the appellee Charles W. Hare, who afterwards transferred it to the appellee John J. Tyler, as collateral security for a loan of $32,000. In his written application for the loan Halter stated that the money was to be used in completing the building then in course of construction, but there was no agreement mpiiring him to use it for that purpose. Halter did, however, as part of the transaction, execute a bond with sureties to indemnify the mortgagee and its assigns against possible loss resulting from the filing of the mechanics’ liens. This obligation also provided that the investment company, or its successors in interest, might pay off any lien against the property when filed and established. In July, 1893, a portion of the building was ready for occupancy, but it was not entirely finished until December of that year. The appellants and others having contributed labor or materials toward the construction of the building, and not having been paid therefor, filed in the proper office their claims for liens. In August, 1893, the property in controversy, commonly known as the “Halter Block,” was conveyed by Alexis Halter and wife to the Lincoln Business Block Company, a corporation. Some of the stock of this corporation issued to Halter was by him pledged to the German National Bank as collateral security for money loaned. In March, 1894, transcripts of two judgments in favor of the I-Iawarden Furnace Grate Company and against the Lincoln Business Block Company were filed in the office of the clerk of the district court of Lancaster county. Under executions issued on these judgments, the Halter Block was sold on May 1, 1894, the t>urehaser being Charles T. Boggs, who urns acting in the interest of the German — 693 — National Bank, of which he was president. The sale was confirmed by the district court on May 5. In October, 1892, Christopher Tiernan recovered a judgment in the district court of Lancaster county against Alexis Halter for the sum of $385.40. This judgment was a lien on the Halter Block and was prior to the lien of the mortgages to the Clark & Leonard Investment Company, and also prior to most of the mechanics’ liens. In October, 1893, Alexis Halter sent his brother Andrew7 to pay the Tiernan judgment. He gave him for the purpose $300 in cash and his personal check for the balance. This balance Andrew7 agreed to advance as an accommodation. He made the advancement according to his agreement and paid the full amount due on the judgment. Instead, however, of having it canceled, he caused it to be assigned to Leo Haben, his brother-in-law7, who had no knowledge of the matter and no interest in it. The check given by Alexis to Andrew7 w7as afterwards paid, but tlie precise time of payment does not appear. In May, 1894, R. J. Greene, assuming to act as attorney for Haben, made a formal sale and assignment of the judgment to Boggs. Of this transaction I-Iaben was entirely ignorant. He had only recently learned that the judgment stood in his name as assignee. He claimed no interest in it, and had conferred upon Greene neither actual nor apparent authority to sell it. It seems, however, that he after-wards advanced Andrew7 Halter some money on the judgment, and that in September, 1894, for a consideration of $250, he ratified in writing the assignment previously made by Greene to Boggs. Under an execution issued on the Tiernan judgment, Boggs, soon after obtaining the assignment from Greene, caused the Halter Block to be sold and became himself the purchaser. The purchase price was $35,000, wdiich, according to the return of the sheriff, has been fully paid and is in his hands for distribution. On June 23, 1894, the sale wras confirmed and a deed ordered. The following day Boggs and wife conveyed the premises to Charles C, Clark? w7ho soon afte? — 694 — mortgaged tbe same to tbe Clark & Leonard Investment Company to secure his coupon bond for the sum of $35,-000. Clark also executed a mortgage on the property to W. F. Meyer to secure tbe sum of $18,777.50. This mortgage was apparently made for tbe benefit of tbe German National Bank and tbe First National Bank of Lincoln, and represents an indebtedness due from Halter to those banks. Clark paid nothing for tbe property and was merely acting for Boggs in making tbe mortgages, tbe latter not wishing to appear of record as a borrower. When tbe transactions were concluded tbe premises were reconveyed to Boggs, who is now tbe fee owner of tbe same. Before tbe sale under tbe Tiernan judgment an arrangement was made between Boggs and J. W. McDonald, representing tbe investment company, which contemplated that Boggs should buy tbe property, pay off tbe liens and claims of tbe investment company, and execute to it a new mortgage for $35,000, to take tbe place of tbe mortgage held by Hare and Tyler. Whether tbe execution of this plan was to depend upon confirmation of tbe sale, or upon tbe acquisition by Boggs of a good title under tbe sale, is not very clear. In pursuance of this arrangement Boggs paid the investment company on July 26, 1894, tbe sum of $5,500, being tbe amount of its commission, mortgage, interest coupons paid to Hare and Tyler, and some other matters. He also caused Charles O. Clark to execute the $35,000 mortgage above mentioned. This mortgage has never been delivered to Hare and Tyler personally, and they have neither surrendered tbe Halter mortgage nor released it of record. Prior to November, 1894, they bad no knowledge of tbe arrangement between McDonald and Boggs and were not aware that tbe property bad become involved in litigation, or that there bad been any change of ownership. Hare and Tyler were not originally parties to the action, but became such by intervention in February, 1895. Tbe substance of their amended answer is that they delivered the Halter mortgage to the Clark & Leonard Investment — 695 — Company to be exchanged for the Clark mortgage in case the court should affirm the validity of the sale under the Tiernan judgment. They ask, in the event of the sale being adjudged void, for a foreclosure of the Halter mortgage. Boggs filed an answer asking that the title acquired by him under the Tiernan judgment be quieted and confirmed. The appellants filed pleadings, alleging that the sale to Boggs was void; that the Halter mortgage had been extinguished, and that their liens were superior to the lien of the Clark mortgage. The district court found and decreed that James P. Walton had a first lien on the premises; that Tyler & Son had a second lien; that the sale under the Tiernan judgment was valid and that the Clank mortgage was a third lien on the property; that William F. Meyer had a fourth lien; that the liens of the other parties to the action had been divested from the land by the execution sale and had attached to the proceeds of such sale in the hands of the sheriff. The decree then awards a first lien on the fund in the hands of the sheriff to Forburger, Speidell & Co., and applies the balance on the Halter mortgage. The first question to be decided is the validity of the execution sale to Boggs under the Tiernan judgment.. The appellees, Hare and Tyler, contend that the judgment was not extinguished in consequence of the payment made by Andrew Halter to the attorney for the judgment creditor. We think it was. Andrew Halter was acting as his brother’s agent. All the money paid was really the money of the judgment debtor. It had been loaned to him upon his personal check and was shortly after repaid. The rule is that when payment is made by one who is primarily liable, it operates as an absolute satisfaction although an assignment is made to a third person with the intention of keeping it alive: One cannot, except under special circumstances, become the assignee of a judgment against himself. (Shaw v. Clark, 6 Vt. 507; Head v. Gervais, Walker [Miss.] 431; Montgomery v. Vickery, 110 Ind. 211; Birke v. Abbott, 103 — 696 — Ind. 1; Booth v. Farmers & Mechanics Nat. Bank, 74 N. Y. 228; Hogan v. Reynolds, 21 Ala. 50; 2 Pomeroy, Equity Jurisprudence sec. 797; 2 Freeman, Judgments [4th ed.] sec. 466.) Had Andrew advanced the money with an understanding that he should take an assignment as security, there can be no doubt that the judgment would have continued in force until the check was paid. But there urns no such arrangement, and if there had been, the security could not outlive the debt. That the check given by Alexis to Andrew was paid is proven conclusively. Just when it was paid does not appear, but the only warrantable inference is that payment was made long before the assignment to Boggs. It is true that Andrew told Ilaben that he had an interest to the extent of $200 in the judgment, but that evidence is not competent to establish the fact. The statement was a mere self-serving declaration. Besides, it appears that the assignment to Ilaben was for the benefit of Alexis, and not for the protection of Andrew. We quote from Andrew’s testimony: “Q. What.was the object of taking this assignment to Mr. Ilaben at the time you paid Pound •& Bun*? A. Why the judgment was satisfactorily paid, but after talking the matter over, Mr. Alexis Ilalter thought it would be better to take the assignment in some other person’s name so if any trouble would arise he would be in a position to clear the matter.” A circumstance- to which McDonald testified also indicates that the assignment was made in the interest of Alexis. Whatever may have been the motive for the assignment to I-Iabon, it is perfectly clear that the judgment was not a lien on the Halter Block at the time of the execution sale; and it is equally evident that Boggs did not at that time have even the apparent ownership of the' judgment. In his haste to cut out the mechanics’ liens he not only bought a lifeless judgment, but bought it from one who had no color of authority to make the sale. (Head v. Gerrais, supra; Wilson v. Wadleigh, 36 Me. 496; Weeks, Attorneys sec. 239) — 697 — Boggs having become the owner of the property by virtue of the execution sale under the Haw arden judgment, the liens paid off by him were intended to be, and are absolutely, extinguished. If he has redeemed the Halter mortgage with the Clark mortgage, then the lien of Hare and Tyler is subordinate to all of the mechanics’ liens. Whether there has been such i*edemption is a question of fact, in the absence of circumstances to which the law would attach a conclusive presumption. Much space is devoted in the briefs of counsel to a discussion of an alleged conspiracy to defraud the appellants and other lienors, but we find in the record no evidence whatever of any fraudulent transaction in which either Hare or Tyler participated. Indeed, while there is abundant proof of shrewd tactics by Boggs and McDonald, we think neither of them has been guilty of any act which amounts to a legal fraud. There was, undoubtedly, an attempt to overreach the lien claimants, but the means employed to accomplish that end were not unlawful. The question, then, with which we have to deal in this connection is whether the Halter mortgage was exchanged absolutely for the Clark mortgage; in other words, it is a question of the mutual intention of the parties to the transaction. The pleadings, as we understand them, conclusively establish the fact that the Clark mortgage was delivered to the authorized agent of Hare and Tyler, and that they are the beneficial owners of the security. It is claimed, however, that the delivery of the Clark mortgage did not operate as a satisfaction of the Halter mortgage, because it was expressly stipulated that it should not have that effect. If such an agreement was made, we can perceive no reason why it should not be enforced. Certainly Boggs had a right to execute a mortgage to Hare and Tyler on such terms as he saw fit to accept. It was undoubtedly lawful for the parties to fix a condition on which such mortgage should become effective as a satisfaction of the prior mortgage. What then was the contract under which Boggs delivered the mortgage to the — 698 — Clark & Leonard Investment Company? Tlie only testimony bearing upon the point is that given by McDonald and Boggs, which is to the effect that the Clark mortgage was to be received in satisfaction of the Halter mortgage only in case the validity of the Tiernan sale should be judicially established. While there are circumstances strongly tending to discredit these witnesses, we do not feel warranted in rejecting their evidence as entirely unworthy of belief, and accordingly hold that there has been no substitution of securities. The contract in relation to the exchange of mortgages being valid and enforceable between.the parties, and not infringing the legal rights of appellants or other lien claimants, must be given full effect in this litigation. But if the agreement between McDonald and Boggs was for an unconditional exchange of securities, it is certainly not binding upon Hare and Tyler, for they neither authorized nor ratified such an exchange. They have proceeded on the assumption that the exchange was conditional, and neither expressly nor by implication have they affirmed any other. Manifestly Boggs could not on this record insist that they have, and the rights of appellants in this matter are no greater than his. It was entirely proper for Hare and Tyler to file an answer alleging their contract and demanding the relief to which they were entitled under it. (Compton v. Ashley, 28 S. W. Rep. [Tex.] 224; Taylor Cotton-Seed Oil & Gin Co. v. Pumphrey, 32 S. W. Rep. [Tex.] 225.) The doctrine of election between inconsistent remedies has no application here. A proceeding by 1-Iare and Tyler to obtain a decree affirming the validity of the sale under the Tiernan 'judgment would not operate in favor of Boggs to effect a substitution of securities. Neither can it produce that result for the benefit of others having liens on the property. It is next contended that the Halter mortgage is subject to the mechanics’ liens because the original owner, the Clark & Leonard Investment Company, was a joint — 699 — promoter of the building enterprise and therefore in privity with lien claimants. Under facts substantially identical with those in the case before us it was held in Hoagland v. Lowe, 39 Neb. 397, and in Patrick Land Co. v. Leavenworth, 42 Neb. 715, that the lien of the mortgage was superior to that of mechanics and material-men. Whatever may be the logic of the earlier adjudications in this state, we are, by the decisions just mentioned, irrevocably committed to the doctrine that the lien of an ordinary mortgage is not subordinate to mechanics’ liens, merely because the money which it was given to secure was loaned for the purpose of improving the mortgaged premises and under an express contract that it should be so used. The rule of decision in this class of cases has been too long established to be now successfully assailed. Some questions peculiarly affecting individual appellants remain yet to be considered. Forburger, Speidell & Co. furnished cut stone for the building and agreed to accept as part payment therefor two unincumbered city lots estimated to be worth $200. A quitclaim deed for said lots was executed by Halter and wife about May 1, 1893, and left with a member of the firm at their place of business. The instrument was not accepted, because the property was subject to judgment liens exceeding its value. Neither was it formally tendered back to Halter. Afterwards, according to the finding of the trial court, the parties came together and effected a settlement, in which the sum of $210 was agreed upon as the balance due. This finding, although questioned, is sustained by sufficient evidence and will not be disturbed. The court awarded James Tyler & Son a mechanic’s lien for the sum of $303.75 and adjudged the same to be prior to the Halter mortgage. It appears from the record that the claim of this firm embraces items under five separate contracts as follows: (1) For services on plans and specifications, details and contracts, $875; (2) for perspective drawing, $25; (3) for making bills of ma — 700 — terials, $35; (4) for measuring excavations, concrete and brick work, $50; and (5) for superintending, $175. The contract for the first item was made in June, 1892, and the work on the plans was commenced soon after. The Tylers did not superintend the work on construction, but they furnished the details from time to time until the building was completed, which was not earlier than December 22, 1893. The claim for a lien was filed on February 24, 1894. The appellees contend that an architect who has prepared plans, specifications, and details for a building is not, except as an incident to superintendence, entitled to a lien for his services. In Fiske v. School District, 58 Neb. 163, 78 N. W. Rep. 392, there is an intimation that an architect is entitled to a mechanic’s lien upon a building which has been constructed in accordance with plans prepared by him under contract with the owner. We now hold that the work of drawing such plans enters into the .construction of the building which is afterwards erected in conformity therewith, and that the architect in such case is within the purview of section 1 of the mechanics’ lien law. As the claim of the Tylers was filed within four months of the time the last details were furnished, they have a valid lien under the first contract and are entitled to recover $765, with interest thereon from February 20, 1894. The trial court found that there was due F. E. Foltz the sum of $637.65, for materials and labor, and rendered against Halter a personal judgment for that amount. The question now in controversy is whether Foltz is entitled to a lien prior to the lien of the Halter mortgage. I After a careful examination of the evidence we are en- m tirely convinced that this appellant’s claim is based upon I two distinct contracts, and that the claim for a lien under fl the first contract, which was made in October, 1892, was fl not filed within the time limited by the statute and so fl never became effective. The other contract was made fl January 31, 1893, and the claim under it isr therefore, fl junior to the lien of Hare and Tyler, fl — 701 — The judgment is reversed and the cause remanded to the district court with direction to render a decree in conformity with the conclusions herein announced. Reversed.