Bell v. Hiner

• Decision Date: 18 June 1896
• Docket Number: 1,908
• Parties: BELL ET AL. v. HINER
• Court: Indiana Appellate Court

44 N.E. 576

16 Ind.App. 184

BELL ET AL. v. HINER

No. 1,908

Court of Appeals of Indiana

June 18, 1896

Rehearing denied October 14, 1896.

From the Allen Circuit Court.

Affirmed.

P. A Randall and N. D. Doughman, for appellants.

J. M Robinson, for appellee.

GAVIN, J. REINHARD, J., dissents. ROSS, J., concurs in the views expressed in the dissenting opinion of Reinhard, J.

OPINION

GAVIN, J.

On October 25, 1894, one Jasper was engaged in keeping a livery stable at Ft. Wayne. At this time and prior thereto, one Bell held a mortgage on the property used by Jasper in said business, viz: certain horses, carriages, etc., "and all other chattels belonging to the said Jasper in said barn" to secure $ 1,000.00, this being more than the value of the property. Jasper being upon that day insolvent, threatened with suit and pressed for payment by Bell and unable to meet his liabilities, at his request conveyed to Bell all of said property in payment of said debt, and his business was on said day and thenceforth continuously suspended by the actions of said Bell, who afterward sold the property to one Martin, who had knowledge of appellee's claim. Appellee was a laborer employed in the stable, to whom seven weeks' wages was due for work performed within that period last preceding the sale, and subsequent to the execution of the mortgage and the due recording thereof.

Section 7051, Burns' R. S. 1894 (5206, R. S. 1881), provides that when the property of any person engaged in business "shall be seized, upon any mesne or final process of any court of this state, or where their business shall be suspended by the action of creditors or put into the hands of any assignee, receiver or trustee, then in all such cases the debts owing to laborers or employes, which have accrued by reason of their labor or employment, to an amount not exceeding $ 50.00 to each employe, for work and labor performed within six months next preceding the seizure of such property, shall be considered and treated as preferred debts, and such laborers or employes shall be preferred creditors and shall be first paid in full, and if there be not sufficient to pay them in full, then the same shall be paid to them pro rata, after paying costs."

Under this section appellee sought to enforce a lien for $ 50.00 against the property in Martin's hands.

Appellants assert, 1st, That by the statute no lien is created nor any charge made against the property unless it shall come into the hands of some officer, assignee, or other trustee under the court, to be administered upon according to law; 2d, That even if a lien is created it is junior to the lien of the mortgage.

Under our authorities neither position is tenable.

The statute it is true does not in terms create any express lien eo nomine, but the Supreme Court in Bass v. Doerman, 112 Ind. 390, 14 N.E. 377, decided that by this statute a lien was given to the laborer superior to the rights of, and enforceable against, one to whom the property of the insolvent debtor was sold in payment of debts due the purchaser, where the business of the debtor was by such action of the creditor thereby suspended. The court's liberal construction of this statue has been approved in subsequent cases. Farmers', etc., Co. v. Canada, etc., R. W. Co., 127 Ind. 250, 11 L. R. A. 740, 26 N.E. 784; Aurora, etc., Bank v. Black, 129 Ind. 595, 29 N.E. 396; Pendergast v. Yandes, 124 Ind. 159, 24 N.E. 724. Counsel rely upon Wilkinson v. Patton, 162 Pa. 12, 29 A. 293, as establishing a different and better doctrine. There is some difference in the statutes by which the cases may perhaps be distinguished. In any event, however, we are satisfied to follow the adjudications of our own court.

In State, ex rel., v. Aetna Life Ins. Co., 117 Ind. 251, 20 N.E. 144, it is said by Elliott, J., when considering the question of superiority of a statutory lien over a prior mortgage lien: "The statute must determine the character and extent of the lien. * * * It is not necessary that it should in express terms, declare that the lien shall be a paramount one, for if the intention can be gathered from the general words and purposes of the statute, the courts will give it effect." This is in harmony with the principle asserted by the Supreme Court of Massachusetts, which says, in Dunklee v. Crane, 103 Mass. 470, "The statute contains no express provisions that the lien shall attach and have priority over mortgages and other incumbrances created after the contract, but such is the necessary implication." It also accords with City of Paterson v. O'Neill, 32 N.J. Eq. 386.

It is true, as urged by appellants' counsel, that the Bass case does not decide that the labor lien is superior to a prior mortgage, that question not being involved; but it does decide that the debt is a charge against the property in the hands of a purchaser for value. The word lien "includes every case in which personal or real property is charged with the payment of a debt." Anderson's Law Dict., 623.

In Warren v. Sohn, 112 Ind. 213, 13 N.E. 863, it was claimed that mortgage liens were superior to subsequent miners' labor liens, although the statute declared that such labor liens should be paramount to, and have priority over, all other liens except taxes; yet the court decided that the statutes must be given effect and the mortgages yield to the labor liens. Here the statute directs that the labor claim shall be preferred, and shall be "first paid in full." It being established, as it is by the Bass case, that the statute gives a lien for the labor claim, then it seems to us the intent that it shall be a paramount lien is clearly expressed. If it is to be "first" paid in full we do not well see how the mortgage can come in before it.

When the mortgagee accepted his mortgage, he must be deemed to have done so with knowledge that if the business was continued, and the contingency contemplated by the statute should occur, then the labor debts would be preferred and must be first paid. The law entered into the mortgage contract as a silent but potent factor, and the mortgagee accepted it subject to such rights as might accrue to others under the law. Warren v. Sohn, supra; Farmers' etc., Co., v. Canada, etc., R. W. Co., supra, p. 264; Hancock v. Yaden, 121 Ind. 366, 6 L. R. A. 576, 23 N.E. 253.

As said in some of the cases it is wholly voluntary upon the part of the mortgagee whether he will accept a mortgage with the limitations by law incorporated therein.

In Provident Institution v. Jersey City, 113 U.S. 506, 28 L.Ed. 1102, 5 S.Ct. 612 it was decided that a statutory lien for water rent was superior to mortgages executed prior to the attaching of the supply pipes to the mains. It is said, "when the complainant took its mortgages, it knew what the law was; it knew that by the law if the mortgaged lot should be supplied with Passaic water by the city authorities, the rent of that water as regulated and exacted by them, would be a first lien on the lot. It chose to take its mortgage subject to this law." To the same effect are Vreeland v. O'Neil, 36 N.J. Eq. 399, and Vreeland v. Jersey City, 37 N.J. Eq. 574.

There the statute made the water rent assessment a "lien thereon from the time of the confirmation thereof until paid, notwithstanding any devise, descent, alienation, mortgage or other encumbrance thereon." This language was adjudged to make the water rent paramount to prior mortgages, although it was not so expressly declared in the statute.

The principle upon which a mortgage is subordinated to a statutory lien authorized and made superior by a statute in force when the mortgage is executed is not by any means new or novel. Nor does Indiana stand alone in thus providing security for the wage earners who depend upon their daily toil for support. For many centuries, in admiralty, the rights of seamen to their wages have been held superior to the mortgagees of the vessel. The J. A. Brown, 2 Lowell 464; 2 Jones on Liens, section 1775.

In Mississippi the liens of agricultural laborers are made superior to prior mortgages. Buck v. Payne, 52 Miss. 271; Buck v. Paine, 50 Miss. 648.

In Michigan the wages of miners are given liens paramount to all others. McLaren v. Byrnes, 80 Mich. 275, 45 N.W. 143.

In that state, as in ours, no notice of lien need be given, but the court says: "All persons are bound to take notice that unpaid laborers for a mining corporation in the Upper Peninsula have a lien for their labor upon all the real and personal property of the corporation in that portion of the state."

In Iowa we find the decisions exactly in harmony with our own. There is a statute similar to ours, substantially identical in terms, so far as it relates to the matters herein involved. It does not in terms create a lien nor declare it paramount to prior mortgages, but provides as does ours that the debts owing to laborers "shall be considered and treated as preferred debts and such laborers and employes shall be preferred creditors, and shall first be paid in full; and if there be not sufficient to pay them in full, then the same shall be paid to them pro rata after paying costs." In Reynolds v. Black, 91 Iowa 1, 58 N.W. 922, the question was presented as to whether, when the property had been taken by mortgagees, the laborers had any lien, and, if so, whether it was superior to the mortgages.

There as here it was "contended that no lien is given to the laborer, that to give him preference over existing liens is to displace such liens, and that the preference only applies to what is left after satisfying existing liens;" but the court said: "To so construe this statute would largely defeat its manifest purpose;" and adjudged that there was a lien superior to...