McLaughlin v. Green

Peyton, C. J.: In April, 1858, Michael McLaughlin filed his petition in the circuit court of Hinds county, against James H. Bowman and Hyman Hilzheim, to enforce his mechanic’s lien on lots numbered 1 and 2 in fractional square number 1 north, in the city of Jackson, and the buildings thereon, for plastering done by him during the fall of 1857 and the winter of that year; and on the 27th day of November, 1867, he obtained a judgment against said Bowman and Hilzheim for the sum of $5,687.59. On the 4th day of April, 1868, J. & T. Green filed their bill in the chancery court of said county for an injunction restraining the collection of said judgment, and for a foreclosure of certain mortgages executed by said Bowman and Hilzheim, respectively, on their respective interest in the lots of ground sought to be subjected to the mechanic’s lien. The bill makes James H. Bowman, Hyman Hilzheim, Michael McLaughlin and the widow and heirs of Philip Hilzheim parties defendant to the suit. And on the final hearing of the cause, on bill, answers, exhibits and proofs, the court decreed that the oldest mortgage made by Bowman of his legal interest in the property, and those made by Hilzheim of his equitable interest — 200 — therein, are charges and claims paramount to the mechanic’s lien of McLaughlin, and entitled to prior satisfaction out of the proceeds of the sale of the property, and directs the property to be sold and the proceeds applied, after payment of costs, to the payment of the sums of money found due J. & T. Green on said mortgages, and the balance, if any, to be ajiplied to the payment of McLaughlin’s claim. From this decree McLaughlin appeals to this court, and insists that his lien has a priority over all other liens and charges set up in the pleadings in the cause. And this presents the main question in the case, which involves in its solution the consideration of other questions, such as the right of making appropriation of payments, and the effect of Green’s tax-deed upon the rights of McLaughlin, and others of minor importance discussed by counsel in the argument of the cause. The record shows that James H. Bowman was indebted to J. & T. Green in the sum of $5,502.48 on the 13th day of March, 1857, as evidenced by his promissory note of that date. This note was secured by mortgage to the said Greens on his interest in the lots of land in controversy, made by said Bowman on the 19th day of March, 1857, which was duly acknowledged and filed for record on the 8th and recorded on the 17th day of April, 1857; and that, on the 18th day of October, 1857, Bowman was indebted to said Greens in the further sum of $2,881.16, by his note of that date, which is also secured by a mortgage of his interest in said lots, executed by him to the Greens on the 25th day of November, 1857, which was filed for record on the 9th of December, 1857, and recorded the 21st of December, 1857. The record also sets out an agreement .entered into on the 15th day of September, 1856, between James H. Bowman and Hyman Hilzheim, by which Bowman agrees to convey to said Hilzheim one-half interest in — 201 — the lots in dispute, and they were to build a hotel thereon in partnership, Bowman reserving to himself the legal title to the real estate as a security for the performance by Hilzheim of his part of the agreement. Hyman Hilzheim, being indebted to J. & T. Green, in the sum of $8,957, mortgaged to them his equitable interest in one-half of said lots on the 6th day of February, 1857. This mortgage deed was acknowledged on the 3d day of December, 1858, and was never recorded. And being further indebted to said Greens by his note for $5,500, dated the 15th of April, 1857, and payable the 15th day of January, 1858, the said Hilzheim, to secure the payment of said note, executed to them, on the 15th day of April, 1857, a mortgage of his equitable interest in the undivided half of the land in controversy. This deed of mortgage was acknowledged on the 3d day of December, 1858, and filed for record on the 31st of December, 1858, and was recorded on the 5th day of January, 1859. McLaughlin, in his answer, states that the contract for the work done by him on the hotel buildings was made in June, 1857, under which the work was commenced in July following, and finished in December, 1857, and this statement is sustained by the evidence. And that, at the time of the contract and doing the work, he had no notice or knowledge of Hyman Hilzheim’s mortgages to the Greens of his equitable interest in the lots in controversy, nor had he at that time any notice or knowledge of the second mortgage made by Bowman to J. & T. Green, on the 25th November, 1857, to secure the payment of the note of $2,881.16, nor had he any actual notice of the first mortgage made by him to said Greens. Upon this state of facts the question arises, which of these parties is entitled to prior satisfaction out of the property in litigation ? In order to' a correct determination of this question, it becomes necessary to — 202 — ascertain the rights of each of these parties under their respective liens upon the property in controversy. McLaughlin’s judgment was the result of a proceeding against Bowman and Hilzheim, in th.e circuit court of Hinds county, to enforce a mechanic’s lien for work done in the year 1857, on hotel building on lots 1 and 2, fractional square 1 north, in the city of Jackson, under a contract made in June, 1857. His lien was given by the act of 1840, which provides that the mechanic or material man shall have a lien on the buildings and materials for the labor or materials furnished in the erection of the same; and that the said buildings and materials shall not be subject to any other lien whatever, until the said lien shall have been canceled according' to the provisions of the act. Hutch. Code, 627, 628. Under this provision of the statute there can be no doubt that McLaughlin would have a paramount lien on the buildings and materials for his labor on them, and since the buildings have been destroyed by fire, he has a prior right to satisfaction out of the bricks and iron, and whatever may remain of them, by subjecting the bricks, iron and the remains of the buildings to execution on his judgment. This question has been settled by the high court of errors and appeals in the case of Otley v. Haviland, where it was held, under this statute, that the lien of the mechanic for his labor and materials, furnished in the erection of a building under a contract with the proprietor of the land, is, as to the materials furnished and the building erected, superior to any prior lien on the land. The court say, in that case, that “ where there are prior liens upon the land, at the time of the contract in relation to the building, the mechanic’s lien as to the building is paramount to all prior liens upon the land, and his lien extends to the land when there is no subsisting prior lien upon it.” 36 Miss. 19. The first mortgage given by Bowman to the Greens, — 203 — on the 19th day of March, 1857, to secure the payment of his note to them for $5,502.48, having been recorded before McLaughlin’s contract to do the work on the hotel buildings, gives them a prior and superior lien on the land on which the hotel buildings were erected. But the second mortgage of Bowman of his interest in the lots to the Greens, executed on the 25th day of November, 1857, and the two mortgages of Hilzheim of his interest in the land in dispute to the Greens, must be postjioned to the mechanic’s lien of McLaughlin upon the lots of land on which the hotel buildings were erected, because he had no notice of them at the time of his contract and commencement of his work. For it has been determined that under this statute the mechanic’s lien commences from the time of making the contract to do the work. Bell and Passmore v. Joseph Cooper, 26 Miss. 650. One of Hilzheim’s mortgages seems never to have been recorded at all, and the other was not recorded at the time of the contract and doing the work by McLaughlin, and the second mortgage of Bowman was not made until after the contract and during the progress of the work. Mortgages and deeds of trust shall take effect and be valid as to all subsequent purchasers for valuable consideration without notice, and as to all creditors from the time when such deed of trust or mortgage shall have been acknowledged, proved or certified, and delivered to the clerk of the proper court to be recorded, and from that time only. Hutch. Code, 606. The creditors, under this statute, are such creditors as have a judgment or lien. Dixon v. Lacoste, 1 S. & M. 106; Picket v. Banks, 11 ib. 451. If judgment creditors have a prior lien to unrecorded mortgages by virtue of their judgments, which are general liens only on the property of their debtors, a fortiori should a mechanic’s lien, which is specific, have a priority to such unrecorded instruments. — 204 — McLaughlin was a creditor of Bowman and Hilzheim of equal dignity with a judgment creditor at least, having a specific lien on the property in controversy, and has a prior right to satisfaction of his claim out of the real estate on which the hotel buildings were erected. When the property is sold his debt is to be paid out of the proceeds thereof before any part can be ajjplied to the three last mentioned mortgages. It has recently been held in Maryland, that in order to give a mortgage to secure advances a priority over a mechanic’s lien, the mortgage must be recorded before the building is commenced; and that the commencement of a building under the mechanic’s lien law is the first labor done on the ground which is made the foundation of the building, and is to form part of the work suitable and necessary for its construction. Brooks v. Lester, 36 Md. / We have thus arrived at the conclusion that McLaughlin, as a creditor of Bowman and Hilzheim, /without notice, has a lien on the real estate and build- / ings superior to those of the Greens under the second Í mortgage of Bowman and the two mortgages of Hilzheim, as set out in the record, and is only postponed to the prior lien of the first mortgage, made, as aforesaid, by Bowman to the Greens, so far as regards the real ’estate in dispute, but with respect to the debris of the hotel buildings he is entitled to priority by virtue of •his mechanic’s lien over all other liens, and has a jiaramount right to subject the bricks, iron, and whatever remains of said buildings to the payment of his claim. It is contended by the counsel for the appellant, that the first mortgage made by Bowman to the Greens, was satisfied by Bowman’s cash deposits with the Greens, who, it is insisted, misapplied those deposits as a payment on a note held by them against Bowman for $14,420, dated 27th day of April, 1859. With respect to the appropriation of payments, there can be no doubt — 205 — that the debtor has a right to direct the application, and in case he fails to do so, the creditor has a right to make the appropriation to any valid and subsisting claim that is due which he may hold against his debtor. Such is the common law. The difference between the common law and Roman law is to be found in the application which the law makes in the appropriation of a payment in the absence of any made by either the debtor or the creditor. The common law appropriates the payment most beneficially for the creditor; the civil law appropriates the payment most beneficially for the debtor. Whatever difference of opinion may exist, with respect to the equity and justice of the rule respectively adopted by these systems of jurisprudence, it must be conceded, that the doctrine of the civil law upon this subject has been adopted in this state. 1 Domat, 906, § 2282; Poindexter v. La Roche, 7 S. & M. 699, 713; Hamer v. Kirkwood, 25 Miss. 99. But, on the. part of the ajjpellant, it is contended that the note for $14,420, to which the payment was applied by the Greens, was without consideration, and made to hinder, delay and defraud Bowman’s creditors, and, therefore, void as to his creditors. On the part of the appellees it is insisted that, even conceding that this note is void as to creditors, it is good and binding on Bowman, and that as M. Laughlin claims through him, he is equally bound by the note, and cannot impeach it. This would be a correct conclusion if the premises were true. But they are not so. The vice of the argument.consists in the assumption that McLaughlin claims through Bowman, and is therefore estopped to deny that the note was without consideration, and made to defraud the creditors of Bowman. McLaughlin does not claim through Bowman, with respect to this note, but against him as his creditor, and as such has an undoubted right, as he would be injuriously affected by the debt if valid, to impeach — 206 — the note by showing a want of consideration, and that the transaction was fraudulent as against Bowman’s creditors. • Joshua Green, in his testimony, asserts that the note was given for money loaned, and Bowman asserts, in his testimony, with equal positiveness, that the note is without consideration, and was made to defraud his New York creditors. Here is an issue which might have been properly submitted to a jury under section 1032 of the Revised Code of 1871, and which, under the circumstances, we think should have been submitted to a jury for their determination. And if, upon the trial of such issue, it should be found that the note was without consideration, and made to defraud Bowman’s creditors, then there would be no appropriation by either party of the money of Bowman on deposit with the Greens, and the law would then make the appropriation of that money most beneficially for the debtor. Is McLaughlin estopped by the judgment obtained by the Greens in the circuit court of Hinds county, against Bowman on his two first notes secured by mortgages as aforesaid, from showing that the money to the credit of Bowman in the hands of the Greens was improperly applied by them to the credit of the note for $14,420 ? We think he was not. If Bowman was not permitted, on that trial, to impeach that note as fraudulent, it is difficult to perceive how McLaughlin, who is neither a party or privy to the judgment, can be precluded by it from showing that the large note, to which the deposits were applied, was made to hinder, delay and defraud Bowman’s creditors, and being himself one of Bowman’s creditors, and not involved in the web of fraud alleged to have been woven in this transaction, he as such creditor could not be affected by the result of that suit, and had an undoubted right, upon well settled principles of equity, — 207 — to show on the trial of this cause the true character of that transaction. The trial between the Greens and Bowman in the circuit court was res inter alios acta, and the judgment was not binding on McLaughlin. It is a general principle, and one of the elements of the doctrine of res judicata, that personal judgments conclude only the parties to them and their privies. Parties, in the legal sense, are all persons having a right to control the proceedings, to make defense, to adduce and cross-examine witnesses, and to appeal from the decision, if an appeal lies. 1 Greenl. Ev. 573, § 535; Bigelow on Estoppel, 46. The term privity, denotes mutual or successive relationship to the same rights of property; and privies are distributed into several classes according to the manner of this relationship. Thus, there are privies in estate, as donor and donee; privies in blood, as heir and ancestor; privies in representation, as executor and testator, and privies in law, where the law without privity of blood or estate,' casts the lands upon another, as by escheat. 1 Greenl. Ev. 216, § 189. It will thus be seen that McLaughlin was neither party nor privy to the proceedings in the circuit court between the Greens and Bowman, and therefore he is not estopped by the judgment from impeaching the note on the ground of fraud. With reference to the tax title set up by the Greens to the lots in controversy, it may be observed that McLaughlin was proceeding to enforce his mechanic’s lien on the lots and hotel buildings thereon, when he was restrained from so doing by injunction from the chancery court, at the suit of said Greens, who, during the pendency of said injunction, obtained a tax title to said lots of land, which is relied upon by them to defeat the claim of McLaughlin. Had it not been for the injunction procured by them, a sale would have taken place under McLaughlin’s execution before the time — 208 — had arrived for selling the land for taxes, and then either McLaughlin or some other person would have ■become the owner, and McLaughlin would have obtained the benefit of his lien. Having tied up the hands of McLaughlin by their injunction, it became the duty of the'Greens to keep the property in that position and condition in which it would be amenable to the court when the final decree was rendered. Had not the sale of the property been enjoined, McLaughlin would have been in the enjoyment of the fruits of his judgment before the sale for taxes, which would probably have been paid by the purchaser of the property under McLaughlin’s execution. We think the tax title acquired by the Greens during the pendency of the injunction, without any fault of McLaughlin, is such an unconscientious advantage as in equity and good conscience they ought not to retain. Lord Eldon has said: “ If there be a principle on which the courts of justice act without scruple, it is to relieve parties against that injustice occasioned by its own acts or oversight, at the instance of parties against whom the relief is sought.” The injunction in the case under consideration is the act of the court, procured at the instance of the Greens seeking the benefit of their Legal advantage, against the injustice of which the court, acting upon the principle above announced by Lord Eldon, will relieve McLaughlin. That eminent chancellor further said: “ I consider persons asking an injunction as impliedly saying, they ask it upon the terms of putting the plaintiff in exactly the same situation as if they had not been entitled.” Pultney v. Warren, 6 Ves. 90. This court has acted on this principle in the case of Marshall v. Minter, 43 Miss. 666, 678, in which they say: “ Equity will remove the legal bar proceeding from lapse of time, as it would any other legal advantage unconscientiously obtained, or sought to be unconscientiously used.” — 209 — The Greens'having an interest in the'land as mortgagees, acquired no additional interest or title by their tax deed, which in equity and justice must be regarded as intended to inure to the benefit of the parties interested. It has been decided that a purchaser at tax sale of land in which he has an interest as heir, acquires no additional title. Blackwell on Tax Titles, 400. The purchase of the land from the state by payment of the taxes thereon by the Greens was a protection of their interest as mortgagees, and they did not acquire thereby any additional title than that of mortgagees. The purchase, however, inuring to the benefit of both parties to this suit, the Greens are entitled to be repaid the amount they paid for the 'tax title, with interest out of the proceeds of the sale of said real estate, and should be perpetually enjoined from setting up said tax title to the prejudice of McLaughlin. The only remaining question for our determination is that which impeaches the action of the court below, in refusing to permit the oral examination of Bowman in open court, on the ground that he was not an interested witness in the contemplation of section 1076 of the Revised Code of 1871. As a mortgagor of one undivided moiety, he had an equity of redemption as against the Greens, and had an interest in the residue of said real estate after the satisfaction of the mechanic’s lien, and, therefore, after the affidavit of McLaughlin, that he had good reason to believe that an oral examination in open court was essential to the ends of justice and a full and fair development of the facts of the case, his oral examination should have been allowed in open court. The court erred in refusing such examination of Bowman. For the reasons herein stated, the decree of the court must be reversed, and the cause remanded for further proceedings in the court below, in accordance with the principles of this opinion.