Hart v. Reid

• Decision Date: 05 June 1928
• Docket Number: Jan. term.,No. 69,69
• Citation: 243 Mich. 175,219 N.W. 692
• Parties: HART v. REID et al.
• Court: Michigan Supreme Court

243 Mich. 175

219 N.W. 692

HART

v.REID et al.

No. 69, Jan. term.

Supreme Court of Michigan.

June 5, 1928.

Appeal from Circuit Court, Wayne County, in Chancery; Henry A. Mandell, Judge.

Suit by J. L. Hart, doing business as the J. L. Hart Lumber Company, against Clarence A. Reid, trustee of the estate of Francis G. Brown, bankrupt, Robert McB. Grindley, Matilda V. Grindley, the Security Trust Company, John Finn & Son, and others, to enforce a mechanic's lien, in which defendant last named asserted a lien claim. From the decree, defendants named, except first and last named defendants, appeal, and plaintiff and last named defendant cross-appeal. Affirmed as modified by stipulation.

Argued before the Entire Bench.Elmer R. Milburn, of Detroit (John G. Libbers, of Detroit, of counsel), for plaintiff, appellee and cross-appellant.

Frank C. Cook and John P. O'Hara, both of Detroit, for John Finn & Son.

Monaghan, Crowley, Reilley & Kellogg, of Detroit (O. Regis McGuirk, of Detroit, of counsel), for Edward Glanz and Maurice A. Killian and Interstate Plastering Co.

Lightner, Oxtoby, Hanley & Crawford, of Detroit (Ralph A. Mayer, of Detroit, of counsel), for John H. Busby Co., Inc.

POTTER, J.

This case involves an appeal by J. L. Hart, doing business as J. L. Hart Lumber Company, from a decree dismissing his bill to enforce a mechanic's lien; appeal of Robert McB. Grindley, Matilda V. Grindley his wife, and Security Trust Company, from the same decree allowing liens in favor of John Finn & Son, Interstate Plastering Company, John H. Busby Company, Inc., and Edward Glanz and Maurice A. Killian, copartners doing business as Glanz and Killian; and the appeal of John Finn & Son from the decree allowing them a less amount than claimed.

The defendants Robert McB. Grindley and Matilda V. Grindley, his wife, were and are now the owners of the property in the city of Detroit upon which liens are claimed. The real estate was mortgaged by them to the Security Trust Company for $250,000. They leased the real estate to John H. Thompson. The lessee, Thompson, agreed to pay rent therefor as follows: From April 1, 1920, to March 31, 1925, $125,000 a year; from April 1, 1925, to March 31, 1930, $150,000 a year; from April 1, 1930, to March 31, 1935, $175,000 a year; from April 1, 1935, to March 31, 1945, $200,000 a year; and from April 1, 1945, to March 31, 1970, $250,000 a year; to pay all taxes, charges for revenue, water taxes, and assessments, except federal income taxes of the lessors; to bear the cost and expense of a subway on Woodward or Cass avenues, in event of its construction; and within one year from April 1, 1920, lessee was to begin to erect, on the leased premises, and fully complete within two years, a building covering the entire premises, so far as legally allowable, to cost not less than $500,000.

The buildings on the property at the time of lease were reserved by lessors to be removed and wrecked by them. The lessee covenanted that previous to removal of the buildings by lessors, and beginning the new building, he would deposit $200,00 in cash or approved securities with the Security Trust Company, to insure lessors against loss by reason of the wrecking and removal of the buildings already on the premises; the $200,000 to be used as first payments by lessee in connection with the erection of the new building. The lessee was to hold lessors harmless from damages for personal injuries arising out of the construction of the new building. Contracts for the construction of the new building were not to be let unless and until the plans and specifications for the building were submitted to and approved by lessors or an architect selected by them. Lessee agreed to keep the buildings to be erected, or in course of erection, insured for 80 per cent. of their actual value; the insurance policies to be issued in the name of the lessors, loss if any payable first to lessors and then to lessee as their interest might appear.

Casualty insurance was to be taken out by the lessee in the joint names of lessors and lessee, and the policies deposited with lessors. In case the building to be erected was destroyed, the lessee was to rebuild and restore it. Upon the expiration of the term of the lease, or upon its termination by forfeiture, all buildings and improvements on the premises, except trade fixtures, were to revert and belong to lessors without limitation or restriction.

Before any contracts for the erection of the building on the leased premises, or any part of it were made, John H. Thompson assigned this lease to the John H. Thompson Realty Company, a corporation.

The owners, Robert McB. Grindley and wife, mortgaged the real estate, and buildings erected and to be erected on the premises, to the Security Trust Company, as trustee, to secure the payment, both principal and interest, of $700,000 in par amount, of their 7 per cent. mortgage gold bonds. The proceeds arising from the sale of these bonds were to be used to pay and discharge the $250,000 mortgage on the premises, and the balance belonged to the mortgagors. This mortgage bore date May 18, 1922. By its terms the mortgagors agreed they would not create, suffer to be created, accrue, or exist any lien or charge having preference or priority over or equal with the mortgage lien.

On the same day, May 18, 1922, a contract was made between the John H. Thompson Realty Company, Robert McB. Grindley and wife, John H. Thompson, and the Security Trust Company, whereby the Grindleys paid $400,000 to the John H. Thompson Realty Company, for an assignment by it to them of its leasehold interest in the lands owned by them and the building to be erected thereon upon the condition that the John H. Thompson Realty Company pay to them its 22 simultaneously executed promissory notes aggregating $400,000, the payment of which was guaranteed personally by John H. Thompson. In case of nonpayment of $400,000 or any portion thereof, or of any interest thereon, the Grindleys might take possession of the land and buildings then thereon; collect the rents, issues, and profits, and apply the same to the indebtedness; sell and convey the leasehold interest and buildings then thereon and apply the proceeds of sale less expenses upon the indebtedness.

The John H. Thompson Realty Company agreed to complete the building described in the lease on or before December 1, 1922, discharge or cause to be discharged all liens of contractors, laborers, or materialmen upon the building, give a bond in the sum of $200,000 to erect and complete the building, free from liens, in accordance with the plans and specifications prepared by Esselstyn and Murphy, dated January 19, 1922, and to keep the buildings erected and to be erected insured.

The money, evidenced by the $400,000 in par amount of notes was to be deposited with the Security Trust Company to the credit of the John H. Thompson Realty Company, subject to such agreements as might be made in reference to this credit between the realty company and the trust company, provided withdrawals therefrom, except pay for the trust company's services, should be made only upon architects' estimates in writing of work and material entering into the construction of the building.

Contracts for the erection and construction of the building were made by the John H. Thompson Realty Company with John Finn & Son, John H. Busby, Inc., and Glanz and Killian. The Interstate Plastering Company was a subcontractor under John Finn & Son.

The contest is narrowed to the claims of plaintiff and John Finn & Son. Defendants and appellants having waived on the argument any objection to the amount of the liens of the other parties, on conditions there stated, subsequently confirmed by stipulation reducing the amount decreed to be due John H. Busby, Inc., $89.68 below the amount fixed by the decree below.

Defendants and appellants claim plaintiff is not entitled to a lien; that the decree below as to him should be affirmed; that the court erred in making the liens allowed a charge against the land. The right of John Finn & Son to any lien is contested. It is claimed the amount allowed is in any event excessive.

Plaintiff appeals from the disallowance of his claim of lien, and John Finn & Son appeal from the reduction of the amount of their claim.

1. Plaintiff, J. L. Hart, doing business as J. L. Hart Lumber Company, sold five carloads of lumber to John M. Diver Lumber Company of Detroit, Mich., to apply on a contract between S. E. Benjamin Company, a subcontractor under John Finn & Son, and the John M. Diver Lumber Company, by which the John M. Diver Lumber Company was to furnish a quantity of lumber and materials for the building here involved. A portion of the lumber was consigned by J. L. Hart Lumber Company to the John M. Diver Lumber Company, and a portion to S. E. Benjamin Company. The material furnished was used on the Thompson job. Notice of the furnishing of this material was given the John H. Thompson Realty Company.

August 16, 1922, plaintiff filed his claim of lien against the land and building. Copies of the claim of lien were served on Robert McB. Grindley on August 18, 1922, and Matilda V. Grindley, John H. Thompson, and John H. Thompson Realty Company on August 22, 1922. September 8, 1922, proof of service was filed in the office of the register of deeds. February 14, 1923, plaintiff filed a bill to foreclose his lien, and February 16, 1923, filed a lis pendens in the office of the register of deeds. The defendants and appellants claim plaintiff was a materialman under Francis G. Brown, doing business as the John M. Diver Lumber Company, who was a materialman under Saul E. Benjamin, doing business as S. E. Benjamin Company, a subcontractor under John Finn & Son, contractor.

Defendants claim the notice of furnishing the materials by plaintiff given to the John H. Thompson Realty Company was not given until all the materials had been furnished and gave no...