Moreau Lumber Company, a Corp. v. Johnson
| Decision Date | 12 December 1914 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Hettinger County, Crawford, Judge.
Reversed. Judgment directed.
Judgment reversed, and foreclosure awarded.
Charles Simon and James M. Brown, for appellant.
This is an action in rem and no personal judgment against defendant is sought. Plaintiff had the right to claim and file its statement for mechanics' lien, even after defendant had been adjudged a bankrupt. Its lien was superior to any claim of the trustee in bankruptcy. First International Bank v Lee, 25 N.D. 197, 141 N.W. 716; Burcell v. Goldstein, 23 N.D. 257, 136 N.W. 243.
The failure to file the lien within the ninety-day period does not defeat the right to claim and file the lien, so long as the person who bought and used the materials continues to be the owner of the property where they were used by him. Rev Codes 1905, § 6240; Robertson Lumber Co. v. State Bank, 14 N.D. 511, 105 N.W. 719.
The right to a mechanics' lien is a property right. It existed from the making of the contract and delivery of the materials. Mattley v. Wolfe, 175 F. 619; Collier Bankr. 7th ed. 762; Remington, Bankr. § 1154.
The trustee takes the property of the bankrupt, not as an innocent purchaser, but as the debtor had it at the time of his petition, subject to all valid claims, liens, and equities. Zartman v. First Nat. Bank, 216 U.S. 134, 54 L.Ed. 418, 30 S.Ct. 368; Thompson v. Fairbanks, 196 U.S. 516, 49 L.Ed. 577, 25 S.Ct. 306; Re MacDougall, 175 F. 400; York Mfg. Co. v. Cassell, 201 U.S. 344, 50 L.Ed. 782, 26 S.Ct. 481.
He is never a purchaser or encumbrancer in good faith and for value, whose rights accrued after the ninety days and before the lien was filed. John P. Kane Co. v. Kinney, 174 N.Y. 69, 66 N.E. 619; Hewit v. Berlin Mach. Works, 194 U.S. 296, 48 L.Ed. 986, 24 S.Ct. 690; Thompson v. Fairbanks, 196 U.S. 516, 49 L.Ed. 577, 25 S.Ct. 306; Security Warehousing Co. v. Hand, 206 U.S. 415, 51 L.Ed. 1117, 27 S.Ct. 720, 11 Ann. Cas. 789; Coder v. Arts, 213 U.S. 223, 53 L.Ed. 772, 29 S.Ct. 436, 16 Ann. Cas. 1008; Re Hersey, 171 F. 1004; Collier, Bankr. 9th ed. 944, 945; Remington, Bankr. §§ 1154 and 1155, pp. 681, 682; Re Grissler, 69 C. C. A. 406, 136 F. 754; Re Robinson, 83 C. C. A. 121, 154 F. 343; Re Emslie, 42 C. C. A. 350, 102 F. 292.
A. C. Lacy and Edgar E. Sharp, for respondent.
Pleadings should be liberally construed with a view to substantial justice. Rev. Codes 1905, § 6869.
The trustee must be treated as an encumbrancer in good faith and for value from the date of the adjudication in bankruptcy. Teller v. Hill, 18 Colo.App. 509, 72 P. 811; Kelsey v. Remer, 43 Conn. 129, 21 Am. Rep. 638.
The act, by the amendment, is given the same force as the seizure of the property under execution or attachment by a creditor, and cannot be given any retroactive effect. Arctic Ice Mach. Co. v. Armstrong County Trust Co. 112 C. C. A. 458, 192 F. 114; Hart v. Emerson-Brantingham Co. 203 F. 60; Re Nuckols, 201 F. 437; Re Farmers' Supply Co. 196 F. 990; Re Dancy Hardware & Furniture Co. 198 F. 336.
By failing to file the statement within the ninety days they waived their right to claim the lien. Bastien v. Barras, 10 N.D. 29, 84 N.W. 559.
A petition in bankruptcy is a caveat to all the world, and is, in effect, an attachment or injunction. Mueller v. Nugent, 184 U.S. 1, 46 L.Ed. 405, 22 S.Ct. 269.
This is an action to foreclose a mechanics' lien for $ 625.18, interest and costs. The material was sold to a homestead entryman, and used in the construction of a dwelling house and granary upon his unproven government homestead entry in Hettinger county. Final proof has not been made. The last item of material was furnished July 27, 1910. The statutory ninety-day period for filing lien as against subsequent purchasers and encumbrancers without notice expired October 25, 1910. Prior thereto, and on October 19, defendant filed in the district court of the United States for the district of North Dakota his petition in voluntary bankruptcy, and was forthwith adjudged a bankrupt. Nine days later, and on October 28, and ninety-three days after the last item of materials had been furnished, plaintiff filed its mechanics' lien statement. Subsequently defendant was granted a discharge in bankruptcy in the usual form. The answer admits the sale and the debt owing plaintiff when the petition in bankruptcy was filed, but pleads that the "debt was duly listed and scheduled in said petition, and that the same was discharged by the discharge in bankruptcy." Such alleged defense was upheld as sufficient, and plaintiff appeals.
Admittedly the adjudication in bankruptcy, and likewise the discharge would not have affected this lien had it been perfected. A mechanics' lien comes within "the exception clause (D) of § 70, bankruptcy act, which provides that 'liens given or accepted in good faith, and not in contemplation of or in fraud upon this act, and for a present consideration, which have been recorded according to law, if record thereof is necessary in order to impart notice, shall not be affected by this act.'" Remington, Bankr. § 1155. To the same effect, see Collier on Bankruptcy, page 944. Against bankruptcy proceedings, as well as any purchaser or encumbrancer under the express and explicit terms of § 6820, Comp. Laws 1913, plaintiff had ninety days, or up to and including October 25, 1910, within which to file its lien statement. It had years if necessary, within which to file such statement of lien as against this defendant, the purchaser of the materials and owner of the buildings. As stated in Robertson Lumber Co. v. State Bank, 14 N.D. 511, at page 515, 105 N.W. 719; Wisconsin Trust Co. v. Robinson & C. Co. (C. C. A. 8th C.) 15 C.C.A. 668, 32 U.S. App. 435, 68 F. 778, and recited in Robinson Lumber Co. v. State Bank, the language of the statute is plain, and "no argument or exposition can make the purpose or effect of the provision of the statute clearer than their own words." "The statute expressly declares that 'a failure to file the same within the time aforesaid shall not defeat the lien except against purchasers or encumbrancers in good faith without notice, whose rights accrued after the ninety days and before and claim for the lien is filed.'" See also First Nat. Bank v. Warner, 17 N.D. 76, pages 82, 83, 114 N.W. 1085, 17 Ann. Cas. 213, on the final clause of this § 6820, Comp. Laws 1913, enforcing literally the concluding proviso of this statute, reading, "or against the owner except the amount paid to the contractor after the expiration of the ninety days and before the filing of the same." It is only after the expiration of the ninety-day period that rights can attach superior to the right of plaintiff to its inchoate lien upon delivery of material. Plaintiff had a right to a lien, which in itself was a property right, and which even the subsequent repeal of the statute could neither defeat nor impair. Craig v. Herzman, 9 N.D. 140, 81 N.W. 288. Hence, when defendant's petition in bankruptcy was filed, assuming that a trustee was appointed and took charge of the property,--an assumption beyond...
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