Phœnix Mutual Life Insurance v. Batchen

Bailey, J. A great variety of questions are presented by the counsel for the various parties, but we shall take the time to consider such only as in our opinion are essential to the proper determination of the appeal. The decree is manifestly erroneous in ordering the payment to Goff, a mere lien creditor, of the entire surplus proceeds of the property after satisfying the other lien creditors, and payi ng the incumbrances held by the Phoenix Life Insurance Company and the Hational Fire Insurance Company. The surplus, after the satisfaction of all liens, belongs to the owner of the fee, and such owner should have been ascertained and the surplus ordered to be paid to him. It is true, some evidence was offered in relation to the value of the premises, from which it is argued that the property is not worth, and will not bring, sufficient to satisfy said liens and incumbrances, and that there is, therefore, no reasonable probability of any surplus whatever, and certainly no more than sufficient to pay Goff the amount of his claim. The sum property will bring at a judicial sale cannot and ought not to be determined beforehand by evidence. Property, when subjected to such sale, should be sold in the most advantageous manner, and so as to bring the highest practicable price. Evidence of value is often heard to determine a minimum below which the property shall not be struck off, but we know of no principle upon which it can be heard for the purpose of fixing in advance a maximum price. What the property will bring cannot be known, judicially, until it is actually subjected to sale, and the decree should be so framed as to ensure proper distribution, however large or however small the actual proceeds may be. It is urged that the court erred in giving to Johnson Shaul and Arthur T. Howe & Co. a preference as to lots 1 to 11, over the deeds of trust in favor of the Phoenix Mutual Life Insurance Company. It is not disputed that the contracts upon which these liens were based were made before the execution of said deeds of trust. True, at that time the McCords held merely a contract for the conveyance of the land, and only $1,000 of the purchase money had been paid. The contract, however, had not been recorded, and there is no evidence that either Shaul or Arthur T. Howe & Co., at the time they made said contracts and entered upon their fulfillment, had any notice of its terms, nor had they any notice that any portion of the purchase money remained unpaid. In Wing v. Carr, 86 Ill. 347, it was held that where a contract for the sale of real estate is on record, showing that the same has not been paid for at the time the mechanics and material men enter into contracts for work and labor thereon, under which they afterwards acquire liens for such labor and materials, such liens will be postponed, so far as the land, independent of the improvements, is concerned, to the lien of the vendor for the purchase money. In that case it seems very clear from the reasoning of the court, that if the contract had not been on record a different rule would have been applied. Counsel for the appellants seem to insist, however, that, as the statute gives to the mechanic a lien upon such estate or other interest in the land as the owner may have at the time of the making of the contract, the lien must necessarily he limited to the precise interest the owner then has, and can be extended to no other or greater interest, whatever may be the subsequent condition of the title. A moment’s reflection will, we think, convince any one that the rule here contended for is far from being universally applicable. Doubtless, if the owner at the time the contraót is made, has only a limited or particular interest in the land, and acquires no greater interest afterwards, the lien will be limited to that interest alone. But if the owner subsequently acquires a greater interest, ordinarily the lien will cover that also. For instance, if at the date of the contract the land is incumbered to nearly or quite its full value, and such incumbrance is afterwards paid off by the owner, it is clear that the lien will attach to the entire estate and not to the mere equity of redemption. Or if the owner at the date of his contract with the mechanic holds the land by a contract of purchase with but a small part of the purchase money paid, and afterwards pay, the purchase money and obtains a conveyance of the title, no one, we think, would contend that the lien of the mechanic should still be limited to the mere equitable interest the owner had at the date of the contract. FTov does it seem to ns that the case of Hickox v. Greenwood, 96 Ill. 266, to which we are referred holds any different doctrine. There the party with whom the mechanic made his contract held the land by contract of purchase, and at the time of the decree the purchase money had not been paid nor the land conveyed, and it was held that the interest remaining in the hands of the vendor could not be affected by the lien. In the present case, the land, shortly after the contracts were made, was conveyed to the vendee, and the onty question is as to the extent to which certain incumbrances executed subsequent to the date of the contracts are to be protected from the operation of the mechanics’ liens. We are not called upon to say what the rights of the parties would have been had the deeds of trust given for the purchase money retained the priority to which they were originally entitled. It may even be conceded that in such case the purchase money incumbrance would have had priority over the mechanics’ liens, notwithstanding the want of notice to the mechanics at the time they entered into their contracts. But had such priority been retained by the purchase-money incumbrance, it can scarcely be questioned that the mechanics’ liens would have been superior to the incumbrance for borrowed money. They would have been first in time, and consequently first in right. This proposition is settled by the case of Theilman v. Carr, 75 Ill. 385. It was there held that a deed of trust for money borrowed, made and delivered before, but not recorded until after the making of the contract with the mechanics, will not have priority over the mechanic’s liens, but the latter will take precedence of the lien created by the deed of trust. In the present case, the contracts with the mechanics were made not only before the recording, but before the execution of the .deeds of trust to secure the loan. Conceding, then, the original right of the purchase-money incumbrance to priority, the order of priority, had that right been retained, would have been as follows: First, the purchase money incumbrance; second, the mechanics’ liens; and, third, the incumbrance given to secure the loan. Such being their order, could the first incumbrance by voluntarily yielding priority to the third, cany with it the second? We think not. The first incumbrance, by retiring behind the third, by the same act, necessarily yielded precedence to every other incumbrance which, in the order of priority, stood ahead of the third. Certainly the first and third could not exchange places so as to make the third incumbrance the first, without the consent of the intermediate incumbrance, nor had the first the power, as counsel seem to suggest, to impart to the third any portion of its own precedence, so as to give the latter priority to the extent of the amount of the incumbrance thus retiring behind it. We see, then, no error in the decree so far as it gives these two mechanics’ liens priority over the deeds of trust in favor of the Phoenix Mutual Life Insurance Company. The point is made that the petition of Johnson Shaul was not filed within six months after the last payment under Shaul’s first and principal contract became due. The petition was filed May 22, 1876, and there is some evidence tending to show that Shaul finished delivering the brick under that contract November 14, 1875. If such was the fact, and the price became immediately due and payable as soon as the delivery was completed, then more than six months intervened between the maturity of the last payment and the institution of the suit. Where no time of payment for goods sold and delivered is fixed by the contract, the price becomes due and payable as soon as the delivery is completed. In this case, however, the evidence tends to show a uniform custom and course of dealing on the part of Shaul to present for payment at the close of each month bills for all brick delivered during the month, and that such custom was known to McCord at the time he made the contract with Shaul. Under these circumstances there arises, by implication, an understanding between the parties that credit should be given until the close of each month for all brick delivered during such month, and that payments should not mature until the close of the month. If we incorporate into the contract this implied provision, the last payment did not mature until November 80, 1875, which was less than six months prior to the institution of the suit. It is also objected that the amendment of the petition originally filed in the name of Legnard & Shaul, so as to make a petition on behalf of Shaul alone, must be regarded as the institution of the present suit within the meaning of the Mechanics’ Lien law. It is true the amendment involved not only the elimination from the record of the name of one petitioner, but also material changes in the essential description of the contract in the petition. Technically, the contract set out in the amended petition is a different contract from the one described in the original petition. The former is a contract with Shaul alone, and the latter withLegnard and Shaul jointly. But we do not think that in applying the Statute of Limitations the identity of the original and amended petition is to be determined by any such strict and technical rules. It cannot be doubted that the same cause of action essentially is set up in both petitions, and that the contract set out in the amended petition was the one upon which the action was originally intended to be instituted. The difficulty was an error in the recital of the contract in the first instance. The case does not differ in principle from any other amendment of a pleading by which an error in the description of a contract is corrected. Technically, in all such cases, the original and amended pleading describe two different contracts, but it has never been held that the amendment is equivalent to the commencement of a new suit upon a new cause of action, so as to expose a suit commenced before the period of limitation had run to the bal' of the statute. A further point is made that, by the assignment from Shaul to Hubbard of his entire claim in litigation, the suit, so far as Shaul’s petition was concerned, became defective for want of proper parties, and that it was erroneous for the court to proceed farther therein until Hubbard was, in some proper form, made a party to the suit. It is not disputed that this assignment was made pendente lite. Mr. Story, in his treatise on Equity Pleadings, Sec. 156, says: “ Generally speaking, an assignee, pendente lite, need not be made a party to the bill, or be brought before the court; for every person purchasing, pendente lite, is treated as a purchaser with notice, and is subject to all the equities of the persons under whom he claims in privity. And it will make no difference whether the assignee p endente lite be the claimant of a legal or of an equitable interest, or whether he be the assignee of the plaintiffs or of the defendants. Still, however, it is often important to bring such assignees before the court, as parties, by a supplementary bill, in order to take away a cloud hanging over the title, or to compel the assignee to do some act, or to join in some conveyance. So that the assignee, although not a necessary party, may at the same time be a proper party at the election of the plaintiff.” It may be remarked that, in this case, there are present none of the exceptional circumstances which in many cases, in the opinion of Mr. Story, render it important or necessary to bring the assignee before the court. But we think the lien given by the statute to a mechanic or material man is so far a personal right that the proceeding to establish it, even if the right itself should be held to be assignable in equity, should be carried on in the name of the assignor rather than that of the assignee. Whether a mechanic’s lien is assignable at all, is a question upon which the authorities are far from being harmonious. In C. & V. R. R. Co. v. Fackney, 78 Ill. 116, the Supreme Court of this State expresses a grave doubt as to whether the liens given by the statute upon the property of railway companies are susceptible of assignment. In other States, courts of the highest respectability have held that mechanics’ liens are not assignable so as to enable the assignee to prosecute, in his own name, suits to establish and enforce them. Caldwell v. Lawrence, 10 Wis. 331; Pearsons v. Thicker, 36 Me. 384; Daubigny v. Duval, 5 Tenn. 604; Rollin v. Cross, 45 N. Y. 766. These authorities we are inclined to follow. We think the decree was properly entered in the name of Shaul for the use of his assignee. So far as the decree gives to the various lien creditors a priority over the deeds of trust in favor of the National Fire Insurance Company, it is clearly erroneous. Section 28 of the Mechanic’s Lien law provides that no creditor shall be allowed to enforce the lien created under the provisions of said law, as against or to the prejudice of any other creditor or incumbrance, unless suit be instituted to enforce such lien within six months after the last payment for labor or materials shall have become due and payable. ' In this case, the trustee in the several deeds of trust given to secure the money borrowed of the National Fire Insurance Company was made a party defendant to all of the petitions at the time they were originally filed, which, in each case, was within the six months limited by the statute. The bonds secured by said deeds of trust were drawn payable to Francis Bradley, and were by him indorsed and delivered to the insurance company. To none of the petitions was said company made a party, and said Bradley was made a party to but one, viz: that of James Batchen & Co. The trustee in a deed of trust given to secure the payment of money to another person, is not the “ creditor ” meant by the section of the statute above recited. The creditor is the person to whom the debt is owing. True, the trustee is a proper and, perhaps, a necessary party, to a proceeding for the enforcement of the mechanic’s lien, but before the lien can be so enforced as to obtain priority over the incumbrance, the cestui que trust must, within the period limited by the statute, be made a party to the suit. We had occasion to consider this question in Bayard v. McGraw, 1 Bradwell, 134, and Clark v. Manning, 4 Id. 649, and need not here repeat the course of reasoning there adopted. See, also, Dunphy v. Riddle, 86 Ill. 22; Crowl v. Nagle, Id. 437; Ridenour v. Shideler, 5 Bradwell, 180. Bone of the lien suits were brought against the creditor owning these incumbrances within the six months, and no decree should have been rendered against or to its prejudice. The lien creditors failed to obtain priority over these deeds of trust either as to the buildings or land. In one of the lien suits, it is true, Francis Bradley was made a defendant in due time, and some question may arise as to whether their making him a party was not sufficient to give the petitioners in that suit a priority over the deeds of trust. He was the payee in the bonds, and there was nothing on record evidencing that the bonds had passed out of his hands. In point of fact, however, they were assigned by him to the Insurance Company on the very day of their date. The lien creditors knew that these bonds were negotiable securities, and were liable to be assigned. They were thus put upon inquiry, and it was their duty to ascertain whether at the time of bringing their suits the bonds still remained in the hands of the payee. If they desired to obtain a priority over the deeds of trust, they should have used at least reasonable diligence to learn the ownership of the indebtedness thereby secured. The record fails to show that any effort whatever was made to ascertain whether Bradley still held the bonds, nor does it appear that the petitioners may not have actually known of their negotiation to the Insurance Company. What Avould have been the position and rights of the petitioners had they made due inquiry and failed to ascertain the ownership of the bonds, we need not decide. We see no reason, hoAvever, why in that event they might not have availed themselves of the provisions of the chancery code in relation to unknown owners. Bayard v. McGraw, supra. The decree entirely fails to notice the eleven $3.000 notes and deeds of trust given to secure $33,000 of the purchase money, or to assign them any position whatever in the succession of incumbrances. This feature of the decree is sought to be justified by the evidence of a sale by the trustee under the prior deeds of trust in favor of the Phoenix Mutual Life Insurance Company, whereby, as it is claimed, the purchase money deeds of trust were foreclosed and extinguished. We are inclined to doubt whether there is, as against the holders of the last mentioned deeds of trust, any sufficient evidence of a trustee’s sale. The only evidence we find is contained in the oral testimony of Lyman Baird, the trustee. This witness having been produced and examined by the defendants, stated on his cross-examination, in answer to questions put to him by counsel for the petitioners, in substance, that sometime in March, 1877, the eleven Wabash avenue houses were sold at a trustee’s sale; that the premises were sold to Aaron C. Goodman, as representing the Phoenix Mutual Life Insurance Company, for $45,000, there being at the time a default in the payment of txvo successive installments of interest. Even if it were competent to prove a sale of this character by parol, the evidence would seem to come far short of showing such sale as would foreclose the rights of the holders of the purchase-money incumbrance. It does not show under what deeds of trust the sale took place, or by whom or by whose authority it was made, or that there was any advertisement, or in what manner the sale was made, or that any of the conditions imposed by the deeds of trust were observed, or that any conveyance followed the sale. It is true, in a cross-bill filed in the cause by the Phoenix Mutual Life Insurance Company and other against Homan, Brown & Co., there are distinct averments of the sale, but as the Third National Bank, Jackson its receiver, and Dicker man, the holders of the eleven $3,000 deeds of trust were neither of them parties to that bill, they cannot be affected by its averments or admissions. As the cause, however, must be remanded for further proceedings, additional evidence as to said trustee’s sale may be heard. There is no evidence fixing the date at which the six notes and deeds of trust held by the receiver came into the possession of the Third National Bank. Mere possession at the date of the hearing does not of itself provfe possession at the time the petitions were filed. The burden was upon the receiver to show that the bank obtained said securities prior to the institution of the several lien suits, and in the absence of such proof, it will be presumed that they remained in the hands of Mrs. Barnes until after that date. Austin v. Wohler, 5 Bradwell, 300. There seems to be sufficient proof that Dickerman came into possession of the five notes and deeds of trust held by him, prior to the institution of either of the lien suits. As he was not made a party, we are inclined to hold, in accordance with the principles already laid down, that the petitioners obtained no priority over his incumbrance. What the rights of the parties would have been, had trustees sales under the prior deeds of trust been sufficiently proved, we are not called upon to decide. We have carefully examined those portions of the record bearing upon the cross-errors assignfed by Homan, Brown & Co., and are of the opinion that the court below decided correctly in allowing the equitable set-off to their claim set up in the cross-bill of the McCords et al., and in refusing to grant the relief prayed for by Homan, Brown & Co., in their supplemental bill. For the errors above pointed out, the decree will be reversed and the cause remanded for further proceedings not inconsistent with this opinion. Decree reversed.