Atlantic Trust Co. v. Carbondale Coal Co.

Granger. J. [237] I. The ground on which the claim of the railway company to a lien is resisted is that the company took collateral security, so as to defeat the right to such a lien, under McClain’s Code, section 8810, as follows: “No person shall be entitled to a mechanic’s lien who, at the time of executing or making the contract for furnishing material or performing labor, as hereinafter provided, or during the progress of the work, erection, building or other improvement, shall take any collateral security on such contract. But after the completion of such work, and when the contractor or other person shall have become entitled to claim, or have a lien, the taking collateral or other security shall not affect the right to such mechanic’s lien, unless such new security shall be by express agreement given and received in lieu of the mechanic’s [238] lien.” The facts relied on as showing the taking of collateral security are shown by the following evidence: E. E. Sears testifies: “The contract with the Eock Island road was partially by correspondence, and partially oral. The oral communication was with Mr. Kimball, superintendent of the road, and also the correspondence: I called on Mr. Kimball, at Davenport, and stated my desire to have him furnish the material for the side track. Mr. Kimball referred me to Mr. Cable, the president. Mr. Cable was not at home, but in a few days I received a letter from him. The following is the letter that I received from Mr. Cable: ‘Eegarding the track to reach coal mine, this company will furnish material for a mile and a half track, and take notes of the company for this material. The company may require the notes to be indorsed by you personally.’ I' did indorse the notes personally. They were given for that material furnished by the railroad company. The railroad company still holds the notes of the Carbon-dale Coal Company. They are not paid.- After the receipt of that letter, the railroad company proceeded to furnish the material and do the labor. I have made a careful examination of all my papers, Tetters, and copies of letters, but I cannot find any response to that letter. The material was furnished and work done; and, when it was all done, I gave the company’s notes, indorsed by myself, for the amount. I think I signed the notes on the face with the company, in place of indorsing them. I do not remember anything more about any agreement except as is stated in this letter.” [238] • If it be conceded, for the purposes of the case, that the signing of the note was the taking of collateral security, which we do not decide, the query arises, was it so taken as to defeat the lien? The statute expressly permits the taking of such security [239] after the work is completed, and the contractor is entitled to claim or have the lien. There is no claim that this was taken in lieu of the lien. The notes were not given until the materials were furnished and the work all done. Aside from the question of security, the company was then entitled to claim and have the lien. In order, therefore, to defeat the lien, there must have been security before the giving of the notes. There was no security before, nor even an agreement for security. With the most liberal construction of the letter, and its treatment, in favor of the coal company, it was but an agreement to indorse the notes if asked to do so when taken. We do not say that such is a necessary or even proper construction. But that is all that can be said. The word “may” does not express a present intention to require the indorsement. The legitimate inference is from the language of the letter, and furnishing of work and materials without an answer, that “we will furnish them, and we may require you to indorse the notes.” There was no security taken until the notes were executed. The casé of Bissell v. Lewis, 56 Iowa, 231 (9 N. W. Rep. 177), is somewhat in point. The argument makes a reference to the extent of the lien asked, but not in such a way that we feel called upon to deal with that question. We think the lien should have been established. [239] II. To arrive at the real understanding between the bank and the .coal company in regard to the accounts involves the consideration of evidence more than can be set out in this opinion. In some parts of the evidence, and in the petition, different terms are used in a way, at times, to indicate a mere pledge of the accounts as security, and, at others, an absolute assignment of the accounts, “to be held absolutely and solely for the benefit” of the bank. One thing seems [240] certain throughout all the evidence and averments: that the accounts were to be set aside and collected for the use of the bank in-payment of overdrafts of money to discharge the pay rolls. The following is a part of the testimony of Mr. Sears, who wag president of the coal company, and made the agreement with the bank: “Q. State what conversation you had with the officers of the Polk County Savings Bank, under which the money was advanced for the pay rolls of the miners. A. It was in the Polk County Savings Bank, in January or February of 1891. Part of the conversation was with Judge Wright and Mr. Zwart; the balance with Mr. Zwart alone. Mr. Frymier was present at the conversation with Mr. Zwárt. The conversation was that we did not get our pay for the coal mined until about the 20th of the following month, and the men at the mine had to be paid the 1st of the month for the coal mined the preceding month; and that we needed money for the pay rolls. And I stated after that that if they would advance the money for the pay rolls, that we would transfer to them the accounts standing on the books for the coal sold during the preceding month; and after some discussion in regard to it, the details of which I have forgotten, that was agreed to. That was the conversation with Judge Wright. Then, as we went into the banking room proper, I asked Mr. Zwart if I should have the accounts made out and signed over to him, or rather suggested that I would have that done. Mr. Frymier stood at the desk of the banking room. Zwart stated it would be too much bother to them to look after the collection of these accounts, and thought Mr. Frymier should collect them, and, when collected, turn them over to them. I stated to him that, if that was satisfactory to them, it was to us, and we should have it done. This arrangement continued as long as they -advanced [241] money to meet the pay rolls. I don’t remember that anything was said as to how the accounts should be kept. We were to assign the accounts over to them as security for the overdraft.” There is considerable other evidence, but nothing to change the conclusion deducible from that quoted, but much in aid of it. Our .conclusion is that the' parties understood that the accounts were to be taken by Frymier and collected for the bank, and the money deposited to the credit of the company on its account for money advanced to discharge the pay rolls. There is little, if any, difference whether it is called an assignment, or a pledge as security. It was an agreement to place the accounts in the hands of Frymier, who was bookkeeper for the coal company, for collection, in such a way that the coal company had no right to control them. The cashier of the bank, in his testimony, speaking of the offer to make the assignment in writing, said: “I told him I would prefer not to do it in that way, as it would be troublesome for us to collect it. I understood Frymier was doing the business in the office of. the Carbondale Coal Company. If he had the understanding that the accounts belonged to us, and he would deposit the money with us, that would be sufficient. Frymier was present at the conversation.” It is not an agreement to pay a debt out of a particular fund when collected. It is an agreement to set aside specific property out of which a debt is to be paid. The powder company cites Jones, Liens, sections 51-52. The sections refer to cases in which it is the intention that the owner retain the goods. Both sections support the claim of the bank, in so far as they bear on . the question. Under the contract in this case, when the accounts were in the hands of Frymier, the coal company had no authority over them. It could in no way control them. It became the duty of Frymier to collect and [242] pay to the bank. See Jones, Liens, section 47. We have nowhere seen a case in support of appellant’s contention, under the facts, as we find them. It should be said, that appellant views the conclusions of fact somewhat differently, and this difference may account for the reliance on authorities that we do not consider controlling. Our holding has support in Gallinger v. Pomeroy, 3 Gf. Greene, 178. In Williams v. Ingersoll, 89 N. Y. 508, it is said: “The form of words used in making the agreement is not alone to receive attention, but all the circumstances of the transaction are to be considered. It is a rule in equity, that anything which shows an intention to assign on the one side, and from which an assent to receive may be inferred on the other, will operate as an assignment, if sustained by a sufficient consideration.” These words are especially applicable to this case, in view of the different expressions used in the negotiations.- The real intention of the parties is not to us a matter of serious doubt. In 13 Am. & Eng. Enc. Law, page 608, it is said: “An equitable lien is a-right, not recognized by law, to have a fund or specific property, or its proceeds, applied in whole or in part to a particular debt or class of debts. The great difference between the equitable and common law lien is, that the former is not conditioned upon possession of the things sought to be charged, while in the latter, as we have seen, that is absolutely essential. Every express executory agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund therein described or identified, a security for a debt or other obligation, or where the party promises to convey, or assign, or transfer, the property as security, creates an equitable lien upon the property so indicated, which is enforceable against the property in the hands, not only of the original contractor, but of his heirs, [243] administrators, executors, Voluntary assignees, and purchasers, or incumbrancers, with notice. If the intention is apparent, the form of the contract is of small importance.” On page 611 it is further said: “It is a general doctrine of equity that where a party, for a consideration, agrees to give certain security for the payment of a debt, the property, whether real or personal, will he considered a pledge for the satisfactio of such debt, the reason of this being that equity often treats as having been done that which ought to be done.” These rules are sustained by abundant authority, and they seem to us conclusive of the question we are considering, under the facts as we find them. Our considerations lead to the following conclusions: On the appeal of the Chicago, Root Island & Pacific Railway Company, intervener, the judgment is reversed. On the appeal of Laflin & Rand Powder Company, intervener, it is affirmed.