Gulf States Creosoting Co. v. Southern Finance & Construction Corporation

• Decision Date: 27 March 1933
• Docket Number: 30095
• Parties: GULF STATES CREOSOTING CO. v. SOUTHERN FINANCE & CONSTRUCTION CORPORATION et al
• Court: Mississippi Supreme Court

146 So. 860

166 Miss. 714

GULF STATES CREOSOTING CO. v. SOUTHERN FINANCE & CONSTRUCTION CORPORATION et al

No. 30095

Supreme Court of Mississippi

March 27, 1933

Division B

Suggestion Of Error Overruled May 8, 1933.

APPEAL from chancery court of Lauderdale county HON. A. B. AMIS Chancellor.

Suit by the Gulf States Creosoting Company against the Southern Finance & Construction Corporation and others. From the decree rendered, the complainant appeals. Reversed, and cause remanded for further proceedings in accordance with opinion.

Reversed and remanded.

Hannah & Simrall, of Hattiesburg, Welch & Cooper of Laurel, W. Leon Smith, of Blytheville, Arkansas, Bozeman & Cameron, of Meridian, and Currie & Currie, of Hattiesburg, for appellant.

These appellants made their contract and furnished the materials and performed the labor during the years 1926, 1927 and 1928. Consequently, the rights claimed by them are measured and determined by chapter 128 of the Laws of 1918; which chapter has been brought forward in the 1930 Code as sections 2274-2281.

One contention between the appellants and the appellees is this: The appellants, by their complaints, assert that the several trust agreements assigning the proceeds of this construction contract are invalid in so far as they operate to the prejudice of the rights of the appellants. The appellees defend their right to the proceeds of the said construction contract by asserting that the said assignments are absolutely valid. The authority of the appellants for saying that the said trust agreements are invalid and void in so far as the rights of these appellants are concerned, is paragraph 2 of chapter 128 of the Laws of 1918.

The pleadings establish without controversy that the Meridian & Bigbee River Railway Company did not give a bond guaranteeing the payment for material and labor.

In the event no bond had been executed, then as to the materialmen, an assignment by the contractor would have been void as to them.

American Oil Co. v. Ratliff Sheet Metal Co., 155 Miss. 779, 125 So. 249.

Appellees set up that the funds that were secured by reason of these assignments were used in building and constructing the railroad, but granting that the funds so obtained were used in the construction of the railroad, it can amount to nothing more than an equity; and most assuredly, we submit, cannot supersede the equities prevailing in favor of these appellants.

Dickson v. U. S. F. & G. Co., 150 Miss. 864, 117 So. 245; Hartford Accident & Indemnity v. Natchez Investment Co., 155 Miss. 31, 119 So. 366; Davis Co. v. D'Lo Guaranty Bank, 133 So. 219.

When the Southern Finance & Construction Company made its contract with the railway company, the proceeds of this contract were charged with an equitable lien (under the above court decisions) for the payment of material furnished and the labor performed by these appellants. And, furthermore, when these appellants furnished the material and performed the labor for the Southern Finance & Construction Company, they did so with the positive assurance from the state of Mississippi in its sovereign capacity that the proceeds of this contract could not be assigned to the prejudice of the appellants.

While under our interpretation and conception of the law it is wholly immaterial whether or not J. A. Perdue & Company gave any notice, for the reasons hereinbefore stated, and while, as here stated, the notice given by J. A. Perdue & Company referred to the wrong statute; nevertheless, we submit to the court that if any notice whatever was required, the notice given by J. A. Perdue & Company and the suit filed by J. A. Perdue & Company was a sufficient compliance with the statute.

McLendon v. Indianola Lumber Company, 128 Miss. 265, 90 So. 885; White Lumber & Supply Co. v. Rea, 158 Miss. 695, 131 So. 259.

We submit, that there is no fact, no statute and no decision to support any one of the defenses interposed by appellees in opposition to the contentions of the appellants.

If it was the purpose of paragraph 20a of the Transportation Act to prevent liens on railroads, why, in the name of common reason, we ask, did the Congress after declaring that the evidence of indebtedness issued in violation of said act should be void, authorize innocent holders of said void indebtedness to obtain a judgment and a lien against the railroad company issuing the said void indebtedness on account of the money paid for said void indebtedness?

Missouri, Kansas & Texas Railroad v. Mars, 73 L.Ed. 316, 298 S.W. 271.

It is our interpretation of paragraph 20a of the Transportation Act, that it was passed to prevent and prohibit railroads from incurring obligations, principally in the form of stocks or securities, and not for the purpose of prohibiting and preventing the creation of liens.

The following are decisions of our court interpreting these statutes:

Herin v. Warren & Mobley, 61. Miss. 509; Rosenbaum v. Carlisle, 78 Miss. 882, 29 So. 517; Smith v. Frank Gardener Hardware & Supply Co., 83 Miss. 645, 36 So. 9; A. & S. Spengler v. Stiles-Tull Lumber Co., 94 Miss. 780, 48 So. 966; Vicksburg Mfg. & Supply Co. v. Jaffray Construction Co., 94 Miss. 282, 49 So. 116; Enochs Lumber & Manufacturing Co. v. Garber et al., 116 Miss. 229, 76 So. 730; Citizens Lumber Co. v. Netterville, 137 Miss. 310, 102 So. 178; Dickson v. United States Fidelity & Guaranty Co., 150 Miss. 865, 117 So. 245; Hartford Accident & Indemnity Co. v. Natchez Investment Co., 155 Miss. 31, 119 So. 336; United States Fidelity & Guaranty Co. v. Parsons, 154 Miss. 587, 122 So. 554; American Oil Co. v. Ratliff's Sheet Metal Works, 155 Miss. 779, 125 So. 249; White's Lumber & Supply Co. v. Rea, 158 Miss. 695, 131 So. 259; Davis v. D'Lo Guaranty Bank, 133 So. 219; Davis Company, Inc. v. D'Lo Guaranty Bank, 138 So. 802.

Baskin, Wilbourn & Miller, and Geo. B. Neville, all of Meridian, for appellees.

The chancellor was eminently correct in holding that our materialmen's lien statutes have no application to an interstate railroad. Provisions of the statutes relating to the creation of or the existence of the right to a lien are in derogation of the law, and are to be strictly construed:

Richardson v. Lanius, 150 Tenn. 133, 263 S.W. 799; Morrison v. State Trust Co. (Tex.), 274 S.W. 341; Clement v. Adams, 113 Va. 547, 75 S.E. 294; Trask v. Searles, 121 Mass. 229; Indianapolis N. Trac. Co. v. Brannen, 91 N.E. 503, 30 L.R.A. (N.S.) 85, 40 C. J. 57, section 14, and cases cited in notes 79 and 90.

The only way to avoid encountering complexities and avoiding the inevitable consequences, is to adopt the very same construction of the statute, which the learned chancellor in the court below announced, and hold that all provisions of the statutes of Mississippi with reference to materialmen's liens on railroads and railroad embankments only apply in the case or cases where the railroad is entirely intrastate.

Connor v. Tenn. Cent. Railroad Co., 109 F. 931; Hill v. Woodward, 100 Miss. 879, 57 So. 294, 39 L.R.A. (N.S.) 538; Beck v. Railroad Co., 65. Miss. 172, 3 So. 252.

It is manifest that the sale of that segment of the interstate railroad that lies within the state of Mississippi, between Meridian and the Mississippi-Alabama state line, could not possibly confer upon the purchasers thereof any right, title or interest in that portion of the railroad which lies within and is being operated in the state of Alabama.

Every interstate railroad acquires easements, privileges and franchises under the laws of the state through which it builds and operates its railroad, and comes under a definite public burden in each state, and must discharge its public functions under its franchise in each state, in the matter of the operation of its railroad.

To apply our state statutes with reference to the enforcement of a lien upon railroads for materials and labor furnished in the construction of that part in Mississippi to an interstate railroad, would not only result in a division of the road itself, but of its franchises and public burdens, and would be injurious to the public welfare of all the states to which such interstate railroad owed the discharge of public duties, and from which said railroad company had obtained valuable franchises that placed it under obligation to perform as a railroad.

If our direct lien statutes are inapplicable to interstate railroads, as we submit is the case, then there is no direct lien in favor of the subcontractors. In other words, if the contractor be not of the class entitled to a direct materialmen's lien, since all the rights of the subcontractor are clearly derivative, and under our statutes exists only as a sort of corollary to those cases where the contractor has a direct lien, then none of the subcontractors of the contractor who agreed to build an interstate railroad, are entitled to any of the protection of the statutes on that subject, especially chapter 128, Laws of 1918 of Mississippi, as brought forward in Code of 1930 and is there found as sections 2274 and 2281 inclusive.

Panola County v. Gillen et al., 59 Miss. 198; National Surety Co. v. Hall-Miller Decorating Co., 104 Miss. 626, 61 So. 700; U. S. F. & G. Co. v. Marathon Lumber Co., 119 Miss. 802, 81 So. 492; Mississippi Fire Ins. Co. v. Evans, 153 Miss. 635, 120 So. 738.

Our state chapter on railroads is so framed as that it clearly indicates the purpose of the state of Mississippi to recognize the authority of Congress of the United States as the same might be applied to railroads.

Construing paragraphs 9, 18, 19, 20, 21 and 22 of section 1, with paragraph 20 (a), and the Transportation Act as a whole, it seems clear that Congress has assumed control of the authorization, of the construction of new...