Allis-Chalmers Co. v. Central Trust Co. of New York

• Decision Date: 22 September 1911
• Docket Number: 923,924.
• Citation: 190 F. 700
• Parties: ALLIS-CHALMERS CO. v. CENTRAL TRUST CO. OF NEW YORK. MULLEN et al. v. SAME.
• Court: U.S. Court of Appeals — First Circuit

190 F. 700

ALLIS-CHALMERS CO. v. CENTRAL TRUST CO. OF NEW YORK.

MULLEN et al. v. SAME.

Nos. 923, 924.

United States Court of Appeals, First Circuit.

September 22, 1911

Benjamin Thompson (Martin & Cook, on the brief), for appellant Allis-Chalmers Co.

Moorfield Storey and Robert G. Dodge (Joseph F. Gould, on the brief) for appellants Mullen and others.

Howard R. Ives and Arthur H. Van Brunt (Joline, Larkin & Rathbone and Libby, Robinson & Ives, on the brief), for appellee.

Before COLT, Circuit Judge, and ALDRICH and BROWN, District Judges.

BROWN District Judge.

The appellants allege error in a decree of the Circuit Court to the effect that a mortgage, dated July 1, 1905, given by the Bodwell Water Power Company to the Central Trust Company of New York to secure an issue of $1,000,000 of bonds constitutes a first lien on the mortgaged property; and that liens for labor and materials claimed by the Allis-Chalmers Company, and by James B.

Mullen's executors, respectively, are subject to the superior lien of the mortgage.

In order that a lien may attach for labor and materials under chapter 93, Sec. 29, Revised Statutes of Maine, they must be furnished 'by virtue of a contract with or by consent of the owner.'

The appellants contend that a mortgagee not in possession is an 'owner' within the meaning of the statute, and that consent may be inferred from knowledge that the work is being done, coupled with the failure to give a written notice that the owner will not be responsible therefor, as provided in section 30 of chapter 93.

Upon these propositions the Circuit Court found against the appellants, and this is assigned as error.

The Circuit Court was of the opinion that:

'A mortgagee out of possession is not in equity, and in the state of Maine, in law 'owner' of the property. The statute does not apply to him by its terms in using the word 'owner.' There is no just reason why it should be extended by construction to apply to him; and the Supreme Judicial Court of Maine has never held directly that it does apply to him. If he takes possession of the property, receives its income, and directs its management, then of course he becomes an 'owner' both in equity and at the common law of Maine. Until he does all that, he holds in fact only a lien, as he would in name under the laws of the state of New York and the laws of other states. For all practical purposes, he is no more than the holder of a lien.'

See Atwood v. Paper and Pulp Co., 85 Me. 379, 27 A. 259.

The chief reliance of the appellants is Morse v. Dole, 73 Me. 351. A careful examination of this case shows that it does not decide, either directly or by implication, that a mortgagee is an 'owner' under the statute. The expression quoted from the opinion--

'At least the knowledge of the mortgagee must in some way appear, before the written notice mentioned in R.S.c. 91, Sec. 28 (amended 1876, c. 140), can be required from him in order to prevent a later claim from taking precedence of the mortgage'

-- is by no means a clear reference to a mortgagee as an owner. On the contrary, the words 'at least' indicate an intention to reserve the question of how much more than mere knowledge of a mortgagee must be shown.

In Morse v. Dole there was no evidence that the mortgagee had any knowledge of the rendering of services or delivery of materials. The court held that, without knowledge, consent could not be implied. This rendered unnecessary any consideration of the question now before us.

It is urged 'the court clearly proceeds upon the assumption that a mortgagee might subject his interest to a mechanic's lien if he consents to the furnishing of the labor or materials. ' If there is such an assumption, it has not the force of a decision of the state court which this court should regard as establishing the law of Maine. It is an assumption for the purposes of a particular case only; it is not a decision of the court upon the point involved, and it is not even a safe indication that it was the view of the learned judge who wrote the opinion that the law of Maine was established as to this point.

Another expression is called to our attention: 'The lien can hold against such a mortgagee only in cases where he has become a party to the delivery of the materials, or to the work done, by consent tacitly or expressly given.'

This is by no means definite. It may be that a mortgagee who has become a party to the contract between owner and mechanic or a guarantor thereof, or who has induced the mechanic or materialman to go on with the work, should be held to subject his own interest as mortgagee to a lien. This we are not called upon to decide. The expression last quoted is after all but dictum which indicates that under conditions indefinitely described as becoming 'a party to the delivery of the materials, or to the work done,' the statute might give a lien on the estate of a prior mortgagee out of possession.

We are of the opinion that the appellants have failed to establish the proposition that under Morse v. Dole, or any other decision of the Maine court, it has been settled as the law of Maine that a mortgagee out of possession is an 'owner' within the meaning of the statute. The examination of the history of section 29, in connection with Morse v. Dole, 73 Me. 351, 353, tends rather to the contrary conclusion. This question, therefore, must be considered as an open question not concluded by the decisions of the Maine court, and not even discussed upon its merits in the Maine decisions. The brief of neither of the appellants suggests that their construction of the Maine statute is supported by other authority than the inconclusive Maine cases.

On the other hand, the brief for the Central Trust Company cites a number of cases to support its contention that, upon a proper construction of the words 'consent of an owner,' they are inapplicable to a mortgagee out of possession. Howard v. Robinson, 5 Cush. (Mass.) 119; Ettridge v. Bassett, 136 Mass. 314; Tompkins v. Horton, 25 N.J.Eq. 284; Cox v. Broderick, 4 E.D.Smith(N.Y.) 721; Phillips on Mechanics' Liens, Secs. 67, 68; Otley v. Haviland, 36 Miss. 19; Reid v. Bank of Tennessee, 1 Sneed (Tenn.) 262; McDowell v. Rockwood, 182 Mass. 150, 65 N.E. 65; Lummus on Law of Liens, Sec. 260.

Upon the brief of the Allis-Chalmers Company are cited the following Maine decisions touching the meaning of the expression 'by virtue of a contract with or by consent of the owner': Norton v. Clark, 85 Me. 357, 27 A. 252; Shaw et al. v. Young, 87 Me. 271, 32 A. 897; Farnham v. Richardson, 91 Me. 559, 40 A. 553; Baker v. Waldron, 92 Me. 17, 42 A. 225, 69 Am.St.Rep. 483; York v. Mathis, 103 Me. 67, 68 A. 746. These decisions show that the words 'by consent of the owner' have given rise to much doubt and to much difficulty in their application, but do not support the proposition that a mortgagee out of possession is an owner.

While the expression would doubtless cover implied or quasi contracts between mechanic and owner, yet from the opinion in York v. Mathis, 103 Me. 67, 76, 68 A. 746, quoting Huntley v. Holt, 58 Conn. 445, 20 A. 469, 9 L.R.A. 111, it would appear that 'by consent of the owner' means something different from an agreement with the owner, not requiring such meeting of minds as would be essential to the making of a contract, but enough of a meeting of their minds to make it fairly apparent that they intended the same thing in the same sense.

It is said:

'That the conduct of the owner viewed in the light of all the circumstances should justify an expectation of a lien.'

In Shaw v. Young, 87 Me. 271, 32 A. 897, it is said:

'It seems to be assumed by the Legislature that the owner of real estate will be vigilant in caring for it either in person or by agents; that if he leaves it in possession of agents or tenants, making what repairs are necessary to be made from time to time, and makes no provision for them, but leaves them to be made by agents or tenants, and gives no notice of dissent, his consent may be inferred so far as the lien claimants are concerned.'

This reason seems entirely lacking in the ordinary case of a mortgagee out of possession. The mere knowledge of a mortgagee that a mortgagor is improving the property, as he has a right to do, makes him in no sense a party to the delivery of the materials or the work done (Morse v. Dole), and there can be no just assumption that, like the ordinary owner, a mortgagee out of possession will be vigilant in caring for it, either in person or by agents. Shaw v. Young. See, also, Hanson v. News Pub. Co., 97 Me. 99, 53 A. 990.

The cases of Shaw v. Young, 87 Me. 271, 32 A. 897, and Hanson v. News Pub. Co., 97 Me. 99, 53 A. 990, are very suggestive as to the meaning which the court attached to the word 'owner,' as implying at least a relation of immediate control substantially different from the relation of a mortgagee, who is concerned only with the security of the money lent upon the faith of the mortgage, and of his interest. To place upon the ordinary mortgagee a duty to acquire knowledge of the dealings of the mortgagor with the property, or the duty of warning laborers and materialmen that the mortgagee insists upon his rights under his mortgage, would be an innovation of doubtful wisdom. The record of a mortgage is the most practical means of notice of the mortgagee's intent to insist upon his security. To charge him with consent because he fails to give personal notice in writing, in addition to the notice afforded by record of his mortgage, is to unsettle the rights of mortgagees.

While statutes giving liens to laborers and to those who furnish materials are to be liberally construed, yet, in the absence of a clear expression of the...