173 F. 634 | U.S. Circuit Court for the District of Middle Pennsylvania | 1909
The amount realized by the foreclosure sale of the defendant’s property was $35,600. The costs of sale, as fixed by the master’s account, including local taxes paid, are $1,217.48, which leaves $34,382.52 to be distributed. Upon this, claim
The unpaid expenses of the receivership, which preceded the foreclosure, as settled by the receiver’s accounts, amount to $8,264.25, the items of which there appear. These expenses are ordered to be paid by the foreclosure decree as a preferred matter, next after the costs of sale and of suit, but are nevertheless contested by the receiver’s certificate holders, on the ground that such certificates were made a first lien on the property, subject only to the rights of the mechanic’s lien claimants — the lien of the first mortgage bond holders having been waived — and cannot now, as it is said, be disturbed. Assuming that the question is open, notwithstanding the foreclosure decree, as it clearly is not (Grant v. Insurance Co., 106 U. S. 429, 1 Sup. Ct. 414. 27 L. Ed. 237), there is no occasion to modify what is there adjudged. The court having taken the property into its hands to administer, by means of a receiver, may certainly provide for payment out of it of the costs of so managing and administering upon it, save only so far as this interferes with existing liens. It was by virtue of this that a loan of money on receiver’s certificates was authorized, and the same power which entitled the court to order this and secure it by a lien on the property enables it also to take care of the expenses incurred outside of that, in the courts of the receivership, which in this respect stand no differently and are of equal obligation. If without power to order the one, it was without power to order the other, the contention of the receiver’s certificates being self-destructive. It is said, however, that the court made the certificates a first lien on the property, and that, having contracted for this, it cannot afterwards let in anything to impair its own decree. But the court cannot bargain away its powers, if indeed it can be held to have done so. It is not like the attempt to give priority to receiver’s certificates over vested or existing liens, with which, particularly in case of a private business corporation, it cannot of course interfere. By the order entered in the present instance, authorizing the issuing of $30,000 of receiver’s certificates, to which the mortgage bond holders assented (the rights of mechanic’s lien claimants who did not, being saved), the certificates were made a first lien on the property of the company, and, according to this, they will now be respected and enforced, but not to the prejudice of what it was found necessary to do in the interest of all parties concerned, including the certificate holders themselves, as called for by subsequent events. The court, in so pledging the property of the company, cannot he held to have tied its hands or stripped itself of authority to deal with it to this end. If that was not expressed in the order, it was implied. As said by Judge Jenkins, in Anderson v. Condict, 93 Fed. 349, 353, 35 C. C. A. 335, 339:
“It is not presumable that the court would divest itself of the power to pay the expenses of operations which it had assumed. ■ That would be an act of lelo de se.”
Four years’ taxes were due to the commonwealth, on bonds and stock, at the time the receiver was appointed; and on June 15, 1908, an account was settled for them against the company, by the Auditor General, to the amount of $288, on which a statement of lien was entered, July 21, 1908, in the office of the prothonotary of the county, as provided by statute. These taxes became a lien from the time they were due, and are payable by law out of the proceeds of any judicial sale, in preference to any judgment, mortgage, or other claim on the property, even though entered before them. Act Pa. June 1, 1889, § 31 (P. F. 437). They are therefore payable now in advance of the mechanics’ liens and receiver’s certificates, and possibly also of the administration expenses, as to which, however, it is not necessary to express an opinion, there being enough in any event to take care of both. These taxes bear interest at 12 per cent, from 30 days after they were settled, which, calculated up to September 29, 1908, the day of sale, makes them amount altogether to $294.30.
The disposition of the rest of the fund depends on the validity and standing of the two mechanics’ liens which have been mentioned. Both have been reduced to judgment, so that the amount on them is removed from controversy, the claim of the Newliall Engineering Company being fixed at $8,000, with interest from June 6, 1908; and that of the Beach Plaven Brick Company at $225.50, with interest from July-24, 1908. Both are alleged to be defective in form, as well as filed too late, and in any event to be postponed to the first mortgage and the receiver’s certificates. These questions depend on a number of considerations, and are not altogether easy of solution, calling, in consequence, for a somewhat extended discussion.
As just stated, the judgments recovered on the mechanics’ liens are conclusive of the amount due on them, and so also are they of whether the work was done satisfactorily and in accordance with the contract, these being matters going to the merits, and concerning only the immediate parties. But whether the statement of lien conforms to the requirements of the statute, or was entered in time, and *to what date, if any, it relates back, affect the character and standing of the lien, and are therefore open to inquiry. This is settled by a number of decisions,-only one or two of which need to be referred to. Norris’ Appeal, 30 Pa. 122; Safe Deposit Company v. Iron & Steel Co., 176 Pa. 536, 35 Atl. 229. Nowhere is the law better stated, except in one particular, than in Nolt v. Crow, 22 Pa. Super. Ct. 113, where the controversy was between a mechanic’s lien on which judgment had been obtained, and an apparently earlier mortgage:
“Apart from the alleged delay in filing,” as it is there said, “the principal ground on which the mechanic’s lien is assailed is that the contract for the work, which embraced 86 buildings, was entire, and not divisible -, that full performance has not been shown; and that without full performance there*639 can be no recovery or right, to a lien. The measure of performance is a matter that concerns only tlie parties to the contract. The owner may waive any feature of it which is designed merely for liis -benefit. He may, for instance, waive delay in performing, failure to complete, or defects in the quality of (he work or materials. It is sufficient if the claimant lias done to the satisfaction of the owner anything for which tlie law gives a lien, lie is not bound to perform his contract, nor is the owner required to hold him to it, merely to serve the purpose of those who are not parties to it. If other incumbrancers may impeach his lien on the ground of incompetent performance, they may with equal right impeach it for failure to perform within the stipulated time, or for defects in the work or materials. The owner may stand on the letter of the contract, and hold the claimant to its terms, if he so chooses, but strangers to the contract have no such right.”
This is a clear and comprehensive statement of the law, the correctness of which is beyond dispute. The opinion, however, goes on to say:
“And whatever the right of other incumbrancers to contest the builder's right to a lien, while it remains in the form of a claim filed, it is barred by judgment on the claim.. In the absence of fraud or collusion, such judgment is conclusive of the right to a lion. It is, however, conclusive only of this; it has no effect in fixing priority of lieu, as against other incumbrancers, and is not even prima facie evidence of the matters essential to priority.”
The conclusiveness of the judgment upon the right to a lien, which is so apparently upheld, was not necessary to the decision, which was only concerned with the right of other incumbrancers to question the right of the claimant to a lien, because the contract had not, been performed, and that part of the opinion was repudiated upon this ground by the same court in the later case of Prudential Trust Co. v. Hildebrand, 34 Pa. Super. Ct. 249, where the right of such contesting creditors to inquire not only as to the matter of priority, but to go deeper and question the very validity of the lien, was asserted and maintained in its entirety. Everything is open, therefore, in the present instance, hut tlie amount due and the matter of performance, and so far as necessary will be considered here.
Neither'are the parties concluded by not invoking tlie remedy given by section 23, Act June 4, 1901 (P. E. 442), which is to be found in the margin.
The character of the structure, on account of which mechanics’ liens are claimed, .whether in effect a new building or merely an alteration or repair of an old one, is material, the statement of lien being required to conform to this, and being fatally defective, if filed for an original construction, where the work was merely by way of repair (Wharton v. Investment Co., 180 Pa. 168, 36 Atl. 725, 57 Am. St. Rep. 629); and in the latter case also, having to be filed within three instead of six months (Act 1901, § 10), and taking effect only from the date of filing (section 13). The facts by which its character here will be made to appear are as follows:
The plant of the Pennsylvania Paper Mills was an old one, having been in operation for a long period of years prior to the transactions in question, and consisted of a number of more or less separate buildings, located on a tract of land of about nine acres, at Catawissa, Pa., with a dam or pond adjoining, covering five acres more, by which it was supplied with water; all being essential and devoted to the one use of making paper pulp and paper. In 1902, the pulp mill, a frame
In rebuilding the pulp mill, two things were sought to be effected : To adapt it to the use of jack pine, which could be obtained near at hand, and to give it a capacity of 15 tons of pulp daily. This was understood by the Newhall Engineering Company, and the designs which they made, and the machinery which they furnished, were supposed to have that in view, and to be effective for its accomplishment. The results secured, however, did not come up to expectations, and were in fact far from satisfactory. The mill could not be made to
The soda pulp mill, to which these observations apply, was entirely separate as a building, as well as a department, from the general paper mill establishment. While it adjoined the paper mill proper, there was no structural connection between them, and each could be operated independently of the other. The woodhouse, also, although connected operatively with the pulp mill, was a distinct building; while the incinerating,, the causticising, the evaporating, and the digesting department, making up the pulp mill, were all under one roof, being simply separated by division walls between them.
There can be no question, upon this showing, that the work of erecting the soda pulp mill after the fire was not a mere matter of restoration or repair, but constituted an entirely new and substantial structure, for which a lien, upon that basis, directly lay. It was not confined to patching up or making good the inroads of the fire on a building the material portion of which remained intact. This may have been true as to the causticising department, the roof of which was burned, but not as to the pulp mill, of which the prior structure had been wiped out. While some small portion of the old wall was utilized, the work had practically to proceed from the foundation up. A whole new building, equipped with new and different machinery, and devoted to a different and distinct process, arose out of the ruins, which, although separate and apart from the paper mill proper, was necessary to the economical manufacture of paper at that plant, arid for want of the successful operation of which the company in the end went down. The case is not like that of Porter v. Weightman, 29 Pa. Super. Ct. 488, where one section of a continuous building, composing a chemical factory was torn down and rebuilt. The work there was simply incorporated in the existing building, which could not be cut up, as it is said, for the purposes.of lien. It was not, as here, where there was an entire new structure, not.simply in its main mass, but from the ground up. The case is not one, therefore, calling for a lien for alterations and repairs, as argued. The lien was properly filed as for a new building, and is to that extent good.
The lien of the Newhall Engineering Company was also filed in time. There is no question with regard to that of the Beach Haven Brick Company. It is true that the pulp mill was completed and in running order as early as April or May, 1905, and that it was operated from that time on in connection with the rest of the paper plant; and
Unfortunately, however, for the mechanics’ liens, they should have been filed against the soda pulp mill by itself, and not against the entire
Taking up the Newhall lien first, the claim is declared to be “for the planning and superintending the construction of a soda pulp mill, consisting of a wash house, digester house, caustic house, incinerator house, and wood house, and planning and superintending the installation of machinery and apparatus for the soda pulp mill, and also furnishing machinery and apparatus” therefor. By direct averment, therefore, judged by the work claimed to have been so done, the right of lien was confined to the structure into which it went, and the property, against which it was laid, should have been restricted accordingly. This, however, is not the case. Quoting from the statement of lien, it is'there said :• “The following is a description of the property against which the lien is claimed: * * * All those two certain tracts of land situate in the borough and -township of Catawissa, Columbia county, Pa.; one of them with the pulp and paper mill plants, being a soda pulp mill, consisting of a wash house, a digester house, a caustic house and incinerator house, a wood house, and also the paper mill, consisting of offices, a boiler house, a beater house, a paper machine room, a machine shop, and all other buildings and improvements thereon erected, and all machinery and fixtures, of every kind therein contained, situate in said borough of Catawissa, bounded and described as follows:” — á full description of the tract being given by metes and bounds, and said to contain 9 acres and 39 perches; the second tract containing 5 acres and 13 perches, and forming the site of the dam or pond which furnished water to the works, being similarly set out at large. To this, as matter .of description, both as to land and buildings, no exception can be taken. The only question is whether the claim of lien it not thereby carried outside of its legitimate bounds.
The lien given by the law to mechanics and materialmen, for work done and materials furnished for and about the erection and construction of a building or other improvement, is a lien on the particular structure into which such work and materials enter, and not, except by way of curtilage, to anything outside of that, such lien being conferred, by way of compensation, for that which is so' directly contributed to it. “Every structure, or other improvement, and the curtilage appurtenant thereto,” says the statute (Act June 4, 1901, § 2), “shall be subject to a lien,” etc. And a substantial addition is put upon the same footing, such addition, and the structure of which it becomes a part, being made similarly subject (section 3). Parrish and Hazard’s App., 83 Pa. 111. Where several buildings or improvements are constructed as a single manufacturing or business enterprise, such as an iron furnace, a salt works, an oil refinery, and the like, a lien may be filed against all, as constituting a single whole. Short v. Miller, 120 Pa. 470, 14 Atl. 374; Titusville Iron Works v. Keystone Oil Co., 130 Pa. 211, 18 Atl. 739; Linden Steel Co. v. Imperial Refining Co., 138
“A claim may be filed for labor or materials furnished to a •structure,’ but no permission is given to file a single one against several structures.”
And it was accordingly held, in that case, that a lien could not be sustained against three separate dwellings in a row, upon the allegation that they formed one plant. Neither is the necessity for restricting the claim of the lien to the building involved affected by the provision of the statute (section 3) that the curtilage appurtenant to the structure or improvement may include other structures, whether newly erected, altered, or changed, forming part of a single business or residential plant. This is not a question of curtilage, but of extent and specification of lien, and the two are not to be confused. The structure controls the curtilage, which is confined in every instance to what is reasonably necessary for the purposes for which it was built. And the structure is therefore to be clearly indicated in the statement of lien filed, not only that the appropriate curtilage may be allowed, but also that other lien creditors may be advised to what extent in this, as well as in other directions, it is entitled to go. The lien extends primarily to the building, and only incidentally to the land. Wigton’s App., 28 Pa. 161. And the statement of lien is to be correspondingly confined. Where it goes beyond this and includes other structures, against which there is no claim, it cannot stand. A claimant cannot enter a lien against several buildings, and expect to sustain it by showing a right of lien against one. The only question, therefore, in the present instance, is whether this was in fact done.
That the pulp mill was a separate and distinct structure there can be no doubt. This clearly appears from what has been already said, and is recognized also in the statement of lien. Not only is it there declared (paragraph 11), to be “a new erection and construction,” but the different departments of which it was made up (paragraph 5) are described. It may be that the process to be carried on in it, as a matter of business, was indispensable to the economical manufacture of paper at the plant, and that, as already intimated, because of its unsuccessful operation, the company ended in the hands of a receiver.
The Beach Haven Brick Company’s lien is, if possible, in even worse plight. Like the other, it is distinctly filed against the whole paper mill plant, made up of the two tracts of land described; the structure erected on the one, as it is said, being “a large brick paper manufacturing- plant, consisting of a fiber mill, ground wood mill, and paper mill plant.” There is thus no pretense of confining it to the pulp mill, into which the brick which were supplied went, a lien against the whole
But assuming that these conclusions are not correct, and that the mechanics’ liens are good as they stand, they are nevertheless not entitled to anything out of the fund. The difficulty is that the first mortgage is a superior lien, which relegates them to the rear, and lets in the receiver’s certificates ahead, in favor of whom the bondholders waived their rights.
Mechanics’ liens, in case of original construction, relate hack and take effect, according to the statute (section 33), “as of the date of the visible commencement upon the ground of the work of building the structure or other improvement.” This calls for something of such a marked and substantial character as to attract attention and convey notice that a new structure or improvement has been begun. ' 27 Cyc. 217. The mere placing of lumber or materials on the ground has been held not to he enough (Middletown Savings Bank v. Fellowes, 42 Conn. 36; Kansas Mort. Co. v. Weyerhaeuser, 48 Kan. 335, 29 Pac. 153), nor the staking out of the building or line of foundations (Kelly v. Roseustock, 45 Md. 389; Hagenmau v. Fink, 19 Pa. Co. Ct. R. 660); contra, Lombaert v. Morris, 2 Del. Co. R. 457. Nor the clearing of the land of brush and stumps and putting it in a condition to begin work on the building proper. Central Trust Co. v. Cameron Iron and Coal Co. (C. C.) 47 Fed. 136 (Acheson and Reed, JJ.). And this excludes the demolition of a building, or the clearing away of the débris after a fire, being taken as the visible commencement of a new erection, unless it is more significant than it usually is. Neither is lilis otherwise, even though the contractor may have a lien for the demolition as a part of the construction contract, as in Whitford v. Newell, 2 Allen (Mass.) 424; Bruns v. Brann, 35 Mo. App. 337. Cf. McCristal v. Cochran, 147 Pa. 225, 23 Atl. 444; Craig v. Commercial Trust Co., 211 Pa. 7, 60 Atl. 317. Nor is it affected by the fact that the act of 1901 allows a lien for the removal of a building; which refers lo the bodily transfer of it from one place, and the setting of it up in another, and has no application to the taking down of a structure to permit of a new one in its stead. The excavation for the foundation of the new structure is the accepted test of its commencement, to which mechanics’ liens relate. Pennock v. Hoover, 5 Rawle (Pa.) 291; Moroney’s App., 24 Pa. 377; Parrish and Hazard’s App., 83 Pa. 111; Henning v. Fry, 23 Pitts. Leg. J. 125. And even this must have so tar progressed as to be readily observed. A mere scratching of the ground is not enough. The suggestion that a mechanic’s lien goes back to the first spade struck into the earth, or the first shovelful of dirt turned, is rhetorical but not sound. “The removal of the sod, the turning over of the soil, or such other equivocal acts as would not fairly indicate the purpose to build, do not constitute the commencement of the building. To satisfy the law, so much must be done of a permanent character as will apprise observers that building is in progress.” Jacobus v. Mut. Ben. Life Ins. Co., 27 N. J. Eq. 604.
The only thing in the present instance to carry the mechanic’s lien back of June 29, 1904, when the first mortgage was filed, is the evi
It is said, however, that, even if the mechanics’ liens are postponed to the first mortgage, the receiver’s certificates get no benefit from this, the waiver by the bondholders in their favor not being able to interfere with the mechanics’ liens or to advance the receiver’s certificates over their heads. It is no doubt true that the liens of the mechanics and materialmen, having attached to the property, could not be put aside in the interest of subsequent lien creditors, except by their own act. But that does not exactly present the case. Until the first mortgage has been satisfied, which the fund in court will not begin to do, the mechanic’s lien claimants are not entitled to a dollar, and, as this is the necessary result if the mortgage is enforced, they have no possible interest in the distribution by which to come in. Nor does it give them any better standing that the bondholders have waived their rights in favor of the receiver’s certificates, to which the mechanics’ liens by themselves would be superior. The first mortgage stands as a complete bar to anything going to the mechanics’ liens, which have no larger rights because, instead of taking it themselves, the bondholders have agreed to stand aside.. In Wilcocks v. Waln, 10 Serg. & R. (Pa.) 380, a mortgage was superior to a judgment in favor of the United States, which became a preferred claim, as to everything else, by reason of the insolvency of the judgment debtor, and was therefore entitled to payment-in advance of a judgment which was ahead of the mortgage. But it was held that the judgment of the United
"Where the lien of the first creditor is superior to that of the second, but inferior to that of the third, and the lien of the second is superior to the third, the first creditor will take the fund because of his superiority to the second, by reason of the superiority of the second over the third.”
It is said, however, that the first place here is secured to the receiver’s certificates by the agreement of the bondholders, and that Miller’s App., 122 Pa. 95, 15 Atl. 672, is against the advancing of an inferior lien to a position of superiority in that way. But Miller’s Appeal speaks of the difficulty, not the inability, of doing this. And the receiver’s certificates were made a first lien on the property by the order of the court, and not by the consent of the bondholders alone. But however that may be, it all comes back, after all, to this, that, occupying a preferred place over the first mortgage as the receiver’s certificates do, and the mechanics’ liens being entitled to nothing until the-first mortgage has been paid, the distribution of the fund is a question', between the receiver’s certificates and the first mortgage bond holders,, with which the mechanics’ liens have no concern.
Bet a decree be drawn making distribution of the fund in accordance with the views so expressed.
“Any party having a lien against, (“state in. or- charge upon the property included in such claim, may file his petition, under oath or affirmation, averring that the date mentioned in the claim as the time when tlie structure or other improvement was commenced is incorrect, or that the claim is filed against more land than should be justly included therein, or that for any reason the claim is postponed to the rights of the petitioner, and praying an appropriate decree; whereupon the court shall grant a rule upon such claimant to show cause why tlie relief prayed for should not bo allowed, and shall stay proceedings on the claim pending the hearing of the rule, should justice so require. At the instance of others than those personally served with the scire facias, such rule shall be allowed, though judgment be recovered on the claim. The court shall from tlie pleadings, aided as to the material disputed facts, if any, by depositions, or by hearing at bar, make such order or decree as the facts shall warrant. Tike proceedings shall be had if the petition shall aver that the claim is for any reason invalid, has been paid, waived or released, or should not legally or equitably be allowed as a claim against the property; but the material disputed facts in such cases, if any, shall at the request of either party, be tried by a jury without further pleadings. IVlien such request is granted by the court, the fact thereof shall be entered on the judgment index as a lis pendens, with the same effect as if a writ of scire facias had duly issued upon said claim.”
-For other eases see same topic & § number in Dec. & Am. Digs. 1307 to date, & Rep’r Indexes
For other oases see same topic & § number in Deo. & Am. Digs. 1907 to date, & Rep’r Indexes