Kentucky Lumber & Mill Work Co. v. Kentucky Title Savings Bank & Trust Co.

• Citation: 184 Ky. 244,211 S.W. 765
• Parties: KENTUCKY LUMBER & MILL WORK CO. ET AL. v. KENTUCKY TITLE SAVINGS BANK & TRUST CO.
• Decision Date: 09 May 1919
• Court: Court of Appeals of Kentucky

211 S.W. 765

184 Ky. 244

KENTUCKY LUMBER & MILL WORK CO. ET AL. v. KENTUCKY TITLE SAVINGS BANK & TRUST CO.

Court of Appeals of Kentucky.

May 9, 1919

Appeal from Circuit Court, Jefferson County, Chancery Branch, Second Division.

D. R Castleman and Joseph J. Hancock, both of Louisville, for appellant.

Keith L. Bullitt, of Seattle, Wash., and Bruce & Bullitt, of Louisville, for appellee.

HURT J.

Chas Wright purchased a lot in the city of Louisville, on the 17th day of December, 1915, for which he promised to pay the sum of $800. He paid $50 of the agreed price, and the vendor retained a lien in the deed, which he executed to Wright for the lot, to secure the remainder of the purchase price. Wright at once began to negotiate with materialmen mechanics, and laborers for the erection of a dwelling house upon the property. He entered into a contract with the appellant Kentucky Lumber & Mill Work Company to furnish certain materials to be used in the construction of the house, and under this contract the company began to deliver materials upon the ground, where the house was to be erected on the 30th day of December, 1915, and, including the 14th day of January, 1916, it delivered materials under the contract, which, at the contract prices, amounted to the sum of $648.23, and which were used in the construction of the building. Wright promised to pay the company one-half of the amount of the account, when the roof should be put upon the house, and the remainder on the 15th day of January, 1916. Wright also contracted on the 30th day of December, 1915, with the Carl Althaus Company to do work and furnish materials to aid in the construction of the house, and between that date and January 12, 1916, this company, under its contract, did labor and furnished materials in the sum of $134.45, concluding its contract on the 11th day of January, 1916. Various other persons, under contracts with Wright, did labor and furnished materials in the construction of the house; but as they are not appealing from the judgment their claims will not be considered.

About the 30th of December Wright opened negotiations with the appellee, Kentucky Title Savings Bank & Trust Company, to make a loan to him of $2,500, to be used in constructing the building, at the same time submitting the plans and specifications of the proposed building. The appellee caused an appraisement of the lot to be made, and ascertained that the value of the naked lot was only $700, but, with the completion of the proposed building, it would be of the value of $3,500. It also ascertained that at that time excavations were being made upon the lot for the purpose of the erection of the building. Wright, on the 4th day of January, 1916, made application in writing to the Bank & Trust Company for the loan, when the latter caused an examination of the title to the lot to be made and agreed to make the loan, and on the 8th day of January, 1916, Wright executed his promissory note to the Bank & Trust Company, for the $2,500, to be paid in 663 equal weekly installments and with the provision that, if he failed to make either of the weekly payments, all of the installments should then become due and collectible. To secure the payment of the note according to its terms, Wright executed to the Bank & Trust Company a mortgage upon the lot, upon which the house was being built, and the mortgage was recorded in the office of the clerk of the county court on the 11th day of January, 1916. While the note was executed for the entire amount of the loan, as, though it had all been furnished, at the date of the note, it was not so furnished, but the loan was made upon an agreement that the Bank & Trust Company was to retain the amount, deposited to the credit of an account, termed a "special," and which was used by the Bank & Trust Company, in conducting loans made for the purpose of erecting buildings, and after the payment of certain fees to the Bank & Trust Company, out of it, for causing the appraisement to be made, and the investigation of the title to the lot, and for handling such a loan, and for thereafter investigating to see if there were any liens upon the property or taxes unpaid upon it, and reporting such matters to the mortgagor, and causing the release of liens for materials and construction, and causing the property to be insured, if deemed needful, the remainder of the loan was to be advanced to the mortgagor as the erection of the building progressed. The mortgagor was not to receive any of the money for any purpose except to pay for the materials and labor, as the erection of the house progressed, and not until the improvements to be paid for, were put upon the lot, when the men who furnished the materials would be paid for them, by the Bank & Trust Company, upon bills indorsed as correct by the mortgagor. There was no express agreement that the money loaned would not be paid to the mortgagor, but was to be paid to him under the circumstances above stated. Out of the amount for which the note was executed, the Bank & Trust Company on January 11th paid the sum which Wright yet owed upon the lot, and which amounted to the sum of $753.13, and on the same day, paid the Kentucky Title Company, for the examination of the title $30.75, and to itself, the sum of $62.50, for the services to be rendered by it as above stated. On January 12th it advanced to Wright the sum of $300, and on January 15th, the sum of $450 leaving a balance in its hands of $903.62. On the 15th day of January, Wright fled the country, and has not been since heard of, leaving the building partially completed, and his creditors, for labor and materials, unpaid.

Neither of the parties, who furnished materials or performed labor in the construction of the building, filed in the clerk's office the preliminary statement showing that he had performed or furnished, or expected to perform labor or furnish materials, before the recording of the mortgage of the Bank & Trust Company, as provided by section 2463, Ky. Stats., except one of them, who filed a statement showing a lien for an insignificant amount; but, after the recording of the mortgage on the 11th day of January, the appellant, Kentucky Lumber & Mill Works Company, and the Carl Althaus Company, each filed the statements entitling them to a lien upon the house and lot, as provided for by section 2468, Ky. Stats., the one on the 22d day of January, and the other on the 19th day of January, and many others, who performed labor or furnished materials, did likewise within the time to create liens in their behalf.

The appellant, Kentucky Lumber & Mill Work Company, sought to enforce its lien and obtained an attachment upon the sum of $903.12, of the loan, which the Bank & Trust Company had not yet advanced or paid to Wright. The other lienholders were made parties to the action, and upon a final hearing the court adjudged that the lien of the Bank & Trust Company, by reason of the mortgage, was superior to the liens of any of the materialmen or laborers, and that it had a right to credit its note with the amount of the loan, which had not been advanced, and dismissed the attachment. The property failed to sell for a sufficiency to pay all the liens, and from the judgment the Kentucky Lumber & Mill Work Company and Carl Althaus Company have appealed.

No case has ever been determined by this court, where the state of facts were similar to those in the instant case, and the judicial determinations in other jurisdictions have been controlled by statutes essentially different from the one in force in this state upon the same subject, and many of the adjudications of this court touching the liens of materialmen and laborers, have been rendered, when the provisions of the statute laws were different from those now in force. The liens, which appellants sought to enforce, are creatures of the statutes, and their validity and dignity must be determined by the provisions of the statutes, and the application of such equitable principles as apply in the absence of express statutory provisions. The statute, so far as same is applicable to the facts of this case, are as follows:

"2463. Lien of--How Perfected--Amount of--Mortgage or Conveyance--Notice. A person who performs labor or furnishes materials in the erection, altering, or repairing a house, building or other structure, or for any fixture or machinery therein, or for the excavation of cellars, cisterns, vaults, wells, or for the improvement in any manner of real estate by contract with, or by the written consent of, the owner, contractor, subcontractor, architect, or authorized agent, shall have a lien thereon, and upon the land upon which said improvements shall have been made or on any interest such owner has in the same, to secure the amount thereof with costs; and said lien on the land or improvements shall be superior to any mortgage or incumbrance created subsequent to the beginning of the labor or the furnishing of the materials; and said lien, if asserted as hereinafter provided, shall relate back and take effect from the time of the commencement of the labor or the furnishing of the materials: * * * And provided that such lien shall not take precedence of a mortgage or other contract, lien, or bona fide conveyance for value without notice, duly recorded or lodged for record according to law, unless person claiming such prior lien shall before the recording of such mortgage or other contract, lien or conveyance, have filed in the clerk's office of the county court of the county wherein he shall have performed labor or furnished materials, or shall

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