184 Ky. 244 | Ky. Ct. App. | 1919
Opinion op the Court by
Reversing.
Neither of the parties, who furnished materials or performed labor in the construction of the building, filed in the clerk’s office, the preliminary statement showing, that he had performed or furnished, or expected to perform labor or furnish materials, before the recording of the mortgage of the Bank & Trust Company, as provided by section 2463, Ky. Stats., except one of them, who filed a statement showing a lien for an insignificant amount, but, after the recording of the mortgage on the 11th day of January, the appellant, Kentucky Lumber & Mill Works Company, and the Carl Althaus Company, each filed the statements entitling them to a lien upon the house and lot, as provided for, by section 2468 Ky. Stats., the one on the 22nd day of January, and the other, on the 19th day of January, and many others, who performed labor or furnished materials, did likewise, within the time, to create liens, in their behalf. The appellant, Kentucky Lumber & Mill Works Company, sought to enforce its lien and obtained an attachment upon the sum of $903.12, of the loan, which the Bank & Trust Company had not yet advanced or paid to Wright. The other lien holders were made parties to the action, and upon a final hearing, the court adjudged, that the lien of the Bank & Trust Company, by reason of the mortgage, was superior to the liens of any of the material-men or laborers, and that it had.a right to credit its note with the amount of the loan, which had not been advanced, and dismissed the attachment. The property failed to sell for a sufficiency to pay all the liens, and from the judgment, the Kentucky Lumber & Mill Works Company, and Carl Althaus Company, have appealed.
No case has ever been determined by this court, where the state of facts were similar to those, in the instant case, and the judicial determinations, in other jurisdictions, have been controlled by statutes essentially different from the one in force in this state upon the same subject, and many of the adjudications of this court
“2463. Lien of — how perfected — amount of — mortgage or conveyance — notice. A person who performs labor or furnishes materials in the erection, altering or repairing a house, building or other structure, or for any fixture, or machinery therein, or for the excavation of cellars, cisterns, vaults, wells, or for the improvement in any manner of real estate by contract with, or by the written consent of, the owner, contractor, subcontractor, architect, or authorized agent, shall have a lien thereon, and upon the land upon which said improvements shall have been made, or on any interest such owner has in the same, to secure the amount thereof with costs; and said lien on the land or improvements, shall be superior to any mortgage or encumbrance created subsequent to the beginning of the labor or the furnishing of the materials; and said lien, if asserted as hereinafter provided, shall relate back and take effect from the time of the commencement of the labor or the furnishing of the materials, . . . and provided, that such lien shall not take precedence of a mortgage or other contract, lien or bona fide conveyance for value without notice, duly recorded or lodged for record according to law, unless person claiming such prior lien shall before the recording of such mortgage or other contract, lien or conveyance, have filed in the clerk’s office of the county court of the county wherein he shall have performed labor or furnished materials, or shall expect to perform labor or furnish materials as aforesaid, a statement showing that he has performed or furnished, or that he expects to furnish such labor or materials, and the amount in full thereof and his lien shall not as against the holder of said mortgage, or other contract, lien or other conveyance, exceed the amount of the lien claimed or expected to be claimed as set forth in such statement. . . .” It will be observed, that one rendering labor or furnishing materials, in the erection of a house, to secure the payment
The general rule is, that a mortgage .given to secure future advances, if in good faith, and properly recorded, is valid, as between the parties to it and all subsequent encumbrancers, although the mortgage does not, on its face, express, that it is to secure future advances, nor need the agreement to that effect, be in writing, although it can not be enforced, except as to the sums advanced, and after they are advanced, and in accordance with this rule, it is held in many jurisdictions, that a mortgage, executed and recorded to secure money for the express' purpose of making improvements or placing buildings upon the property mortgaged, and when recorded before any work is commenced or materials furnished, is a superior lien to the liens of the materialmen and laborers, and particularly so, if the mortgagee is bound to make the advances, or the money is used in making the improvements, 43 L. R. A. 622; Bartley v. Norton & Bilger, 92 Iowa, 732; Rully v. Harlee, 35 Cal. 302; Ackeman v. Hunsicker, 85 N. Y. 46; Googins v. Gilmore, 47 Me. 13; Morris v. Cain, 30 La. Ann. 712; Kien v. Hodge, 90 Iowa, 212; Taylor v. LaBar, 25 N. J. Eq, 222; Wooten v. Armath, 31 Gratt, 228; Dakota Bldg., etc., Association v.
Under tbe express terms of tbe statute tbe lien of appellee being created after tbe beginning of tbe work and tbe furnishing of materials, for which appellants’ liens are asserted,their liens are necessarilysuperior to that of tbe mortgagee, unless tbe lien of appellee’s mortgage was created, for value and without actual notice on the part of appellee of appellants’ rights. To have actual notice of appellants’ equity, the Bank & Trust Company must have known, that tbe appellants bad furnished materials or done labor, for which they bad not been paid, and for which they were entitled to assert tbe statutory lien. To require more knowledge than this, would defeat tbe purpose of tbe statute, touching the notice, as tbe appellee could not know whether the appellants would perfect their lien by filing a final statement as provided in section 2468, supra, until it was done, and the appellants could not file such statement until their work bad. been completed, under their contracts. Hence, tbe only question for determination is, whether, under tbe evidence, the Bank & Trust Company, when its lien was created, bad actual knowledge, that work bad been done or materials furnished and not paid for, and for which tbe appellants were entitled to assert liens. Tbe proof shows, that up to the times, tbe advancements were made to 'Wright, of $300.00 on January 12, and $450.00 on January 15, and at tbe times tbe other and previous advancements were made, that tbe Bank & Trust Company did not have actual knowledge, according to tbe doctrine of Foushee v. Grigsby, supra, and Sebeas v. Boston & Paris, supra, of the equities of tbe appellants, but, when those two advancements were made, they bad actual knowledge,
It, also knew, that the mortgage had been executed, expressly, to obtain funds with which to erect the house, and from the promise to discharge it, by weekly installments, in a small amount, and extending over such a length of time, that Wright did not have means to construct the house, other than that, which the Bank & Trust Company advanced to him under the mortgage, and in the evidence, the Bank & Trust Co.’s agents admit, that they believed such to be the fact. It had already discharged the lien which the vendor held for the purchase money of the lot. The Bank & Trust Company, under the agreement with Wright, had assumed the duty of looking after the release of liens, and, under the contract, had the right to withhold the money, from Wright, until it should be assured, that it was used for paying for the labor and materials, so that the property would not be encumbered with liens for the prices of such things. The proof fails to show, that the Bank & Trust Company, knew the names of the materialmen and laborers, nor the amounts due them, when the two advancements were made, but, had abundant knowledge to put it upon inquiry, and where a party is put upon inquiry, the knowledge amounts to notice of the actual facts, if the inquiry is a duty, as in case of purchasers and creditors, and would lead to the requisite knowledge of the facts, if the party uses ordinary intelligence and understanding. 29 Cyc. 1114; Willis v. Vallett, 4 Met. 186; Russell v. Petree, 10 B. M. 184; Bennett v. Titherington, 6 Bush 196; Everidge v. Martin, 164 Ky. 497; Summer v. Taylor, 80 Ky. 429; Lain v. Morton, 23 K. L. R. 483.
The contention, of appellants that the Bank & Trust Company’s mortgage does not attach to the house, because, it was not in existence, when the mortgage was executed, can not be sustained. Where a lien is created upon land, and buildings are thereafter erected upon it, the lien attaches to the buildings, as tfey are constructed, and has priority over the liens of materialmen and laborers for constructing the bnildings. Cooley v. Black, 105 Ky. 267; Orr v. Batterton, 14 B. M. 81. In the absence of a statute to that effect, a prior lien can not be restricted to the land itself, when a building is there
The mortgage to the Bank & Trust Company attached to the property, as the advancements under it were made, and as said heretofore, it could only be enforced to the extent of the advancements made as against the mortgagor. It did not become a mortgage “for value” until the money, it was intended to secure, was advanced, by the mortgagee, and whatever may be the rule, as to computing the date, as to which it would become valid, as to subsequent encumbrancers, the mortgagee under it would not be protected as to prior encumbrances, except to the extent it became a valid obligation for value and without notice to the mortgagee of opposing equities. It has been held many times, that one claiming to be a -bona fide purchaser of land, for value and without notice of outstanding equities against the land, is only protected in his purchase to the extent, that he has made payment before notice, and if he has not completed payment before receiving notice of outstanding equities, he will be charged with the equities to the extent of the unpaid purchase money. Carter & Co. v. Richardson & Co., 22 K. L. R. 1204; Hardin v. Harrigton, 11 Bush 367; Lain v. Morton, 23 K. L. R. 438; Winclock v. Mundy, 156 Ky. 806.
There appears to be no good reason, why the same rule should not apply to a mortgagee under a mortgage, wherein the money for which the mortgage was given, was to be advanced in installments. Garry v. Cushing, 5 Bush 304; Foushee v. Grigsby, supra; Ky. Bldg. & Loan Assn. v. Kister, 101 Ky. 323. It does not seem equitable, that the mortgagee with notice of the equities of the materialmen and laborers against the property should be permitted to destroy the effectiveness of their liens, and thereby makes its own security sufficient at their expense.
It is therefore ordered, that the judgment be reversed, and cause remanded with directions to set. aside the judgment, so far as it adjudges, that the appellee’s mortgage lien was superior to the lien of appellants, upon the house and lot to the extent of the $750.00 advanced to Wright, on the 12th and 15th days of January, and for further proceedings not inconsistent with this opinion.