M & I Western State Bank v. Wilson, 92-0692

• Decision Date: 11 November 1992
• Docket Number: No. 92-0692,92-0692
• Citation: 493 N.W.2d 387,172 Wis.2d 357
• Parties: , 19 UCC Rep.Serv.2d 615 M & I WESTERN STATE BANK, Plaintiff-Respondent, v. Marilyn A. WILSON, Defendant, Darin Treleven, d/b/a D.T. Truck Repair, Inc., Third Party Defendant-Appellant.
• Court: Wisconsin Court of Appeals

Page 387

493 N.W.2d 387

172 Wis.2d 357, 19 UCC Rep.Serv.2d 615

M & I WESTERN STATE BANK, Plaintiff-Respondent, v. Marilyn A. WILSON, Defendant Darin Treleven, d/b/a D.T. Truck Repair, Inc., Third Party Defendant-Appellant.

No. 92-0692.

Court of Appeals of Wisconsin.

Submitted on Briefs Sept. 14, 1992.

Opinion Released Nov. 11, 1992.

Opinion Filed Nov. 11, 1992.

On behalf of the third party defendant-appellant the cause was submitted on the briefs of Patrick G. Seubert of Patrict G. Seubert & Associates, Neenah.

On behalf of the plaintiff-respondent the cause was submitted on the brief of Douglas K. Marone of Steinhilber, Swanson, Mares, Curtis, Marone & Wolk, Oshkosh.

Before NETTESHEIM, P.J., and ANDERSON and SNYDER, JJ.

ANDERSON, Judge.

Darin Treleven appeals from a judgment of the trial court which awarded possession of a truck owned by Marilyn A. Wilson to the M & I Western State Bank (bank). Because the earlier release of the truck was a conditional release and the bank had notice of Treleven's lien through his possession of the truck, we reverse.

The bank holds a security interest in a 1978 Peterbilt truck owned by Wilson. Treleven repaired the truck seven times, each time releasing the vehicle to Wilson so she could earn the money to pay Treleven for the repairs. The repairs were invoiced between November 20, 1990 and April 23, 1991.

After Wilson defaulted on her payments to the bank, the bank commenced a replevin action. The parties made a repayment agreement; however, Wilson again defaulted and the bank obtained a judgment of replevin on April 9, 1990. The sheriff attempted to enforce the judgment but was unable to locate the truck. On May 12, 1991, employees of the bank saw the vehicle and followed it to Treleven's place of business, D.T. Truck Repair, Inc. The sheriff again tried to serve the writ of execution, but Treleven refused to release the vehicle, asserting that he held a mechanic's lien for services rendered.

After the attempted levy, the bank filed a second replevin action to determine who was entitled to possession of the truck and named Treleven as a third-party defendant. At the date of the hearing, Treleven still was owed $3497.26 for the repairs plus $1273.10 for interest and storage as of the date of the hearing, January 30, 1992. The bank's balance as of January 2, 1992 was $3032.16. The bank's estimate of the value of the truck is approximately $3000. If this estimate is correct, only the lien with first priority would be paid from the proceeds of the sale of the truck.

The trial court held that Treleven's release of the vehicle to Wilson constituted a waiver of Treleven's lien as to the bank and that the bank's lien had priority. The trial court ordered the bank to take possession and conduct a sale of the truck. On appeal, Treleven argues that the conditional release of the truck to the owner does not amount to a waiver of the lien and, alternatively, that he should be able to recover from the bank on the theory of unjust enrichment. Because we agree that the conditional release and regained possession do not waive Treleven's mechanic's lien or affect its priority over the prior secured interest, we do not have to address Treleven's unjust enrichment claim.

It is not disputed that before Treleven released possession of the truck, he had a mechanic's lien on Wilson's truck. Section 779.41(1), Stats., governs mechanic's liens and states in part:

Every mechanic and every keeper of a garage or shop, and every employer of a mechanic who transports, makes, alters, repairs or does any work on personal property at the request of the owner or legal possessor of the personal property, has a lien on the personal property for the just and reasonable charges therefor, including any parts, accessories, materials or supplies furnished in connection therewith and may retain possession of the personal property until the charges are paid. [Emphasis added.]

It also is not disputed that before Treleven released the truck to Wilson, Treleven's mechanic's lien had priority over the bank's security interest. Section 409.310, Stats., states:

When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise. [Emphasis added.]

Section 409.310 gave Treleven's mechanic's lien priority over the security interest because Treleven was in possession of the truck, Treleven's lien was created by sec. 779.41(1), Stats., and sec. 779.41(1) does not expressly address the priority given to the lien created.

The issue in this case is whether the mechanic, by allowing the owner to use her vehicle on a temporary basis before paying the repair bill, lost the lien or its priority on that vehicle. The interpretation of statutes is a question of law which we review de novo. Central Nat'l Bank v. Dustin, 107 Wis.2d 614, 617, 321 N.W.2d 321, 322 (Ct.App.1982). We first must examine the language of sec. 779.41(1), Stats., see Dustin, 107 Wis.2d at 617, 321 N.W.2d at 322, to see if the relinquishment and resumption of possession have any affect on the existence of Treleven's mechanic's lien. Section 779.41(1) provides that a mechanic "may retain possession of the personal property until the charges are paid." This provision allows the mechanic to keep a customer's property until the mechanic has been paid, without a court order. However, once the mechanic has relinquished possession of the vehicle, this statute does not provide the mechanic with a remedy even if the bill has not been paid. The statute also does not tell us whether the mechanic must retain possession of the vehicle to retain the lien--it states only that the mechanic "may retain possession."

But the mechanic's lien statute may not be interpreted in a vacuum. "[M]echanic's lien laws provide new and additional remedies to those of the common law and are to be liberally construed to accomplish their equitable purpose of aiding materialmen and laborers to obtain compensation for material used and services bestowed upon property of another and thereby enhancing its value." Wiedenbeck-Dobelin Co. v. Mahoney, 160 Wis. 641, 646, 152 N.W. 479, 481 (1915) (emphasis added). Accordingly, in addition to the statutory language of sec. 779.41(1), Stats., we may look to the common law of mechanic's liens and those Wisconsin decisions incorporating common law principles into the statutory mechanic's lien law to determine whether Treleven's lien survives.

Treleven argues that according to Sensenbrenner v. Mathews, 48 Wis. 250, 253-54, 3 N.W. 599, 600 (1879), the delivery of the vehicle to the owner must be both voluntary and unconditional in order to constitute a waiver of the lien. Treleven maintains that because he returned the vehicle to the owner so she could pay for the repairs and the allowed use was only on a temporary basis, the delivery of the vehicle was conditional and his lien survives. The bank also relies on Sensenbrenner for its argument that Treleven waived his lien by releasing the vehicle to Wilson. Alternatively, the bank asserts that even if the lien was not destroyed between Treleven and Wilson when the vehicle was conditionally released to Wilson, the lien was destroyed as to third persons.

Because Sensenbrenner is distinguishable on its facts from the present case, neither party's reliance on that case is warranted. The court in Sensenbrenner found that the delivery of a buggy by the mechanic to the owner was unconditional and held that this unconditional delivery operated as a waiver of the lien. See id. at 253, 3 N.W. at 600. In contrast, Treleven's release of the vehicle was conditional--Sensenbrenner says nothing of the effect of a conditional release to the owner. Sensenbrenner also does not explicitly hold that the only way to waive a lien is through the voluntary and unconditional release of the property; Sensenbrenner merely states that this is one way to waive a lien. For these reasons, Sensenbrenner is not controlling precedent based on the facts of this case.

No Wisconsin court has decided whether the lien is lost once the mechanic conditionally releases the vehicle to the owner. The general and modern rule can be found in RESTATEMENT OF SECURITY § 80 (1941). ¹ This rule states that when the bailor (owner) is under an obligation to return the vehicle to the lienor (mechanic), the lien is revived upon the recovery of the vehicle, subject only to the interests of bona fide purchasers for value and attaching or levying creditors who do not have notice of the lienor's interest.

The bank would like a rule that upon a conditional release, the lien is lost as to all third parties. The Restatement reflects a more balanced view, recognizing that not all interests of third parties are affected by the conditional release. While the mechanic retains possession, third parties at least would have constructive notice of the mechanic's lien because they would be expected to examine the property in the mechanic's possession and be expected to know of the mechanic's lien statute. After a conditional release, those parties purchasing the vehicle, extending new credit, or levying on the vehicle would be vulnerable because even after examinations of the motor vehicle filings and the vehicle, there would be no way for them to know of the mechanic's prior interest. A creditor whose interest arose before the mechanic's lien would not have this concern. At the time the creditor extends credit, it is presumed to know the mechanic's lien statutes which could subordinate its interest to that of a mechanic making a later repair. This is a known risk to the creditor. A creditor also has the opportunity to protect itself by writing...