Oglethorpe Sav. & Trust Co v. Morgan

• Decision Date: 13 February 1920
• Docket Number: (No. 1298.)
• Citation: 102 S.E. 528,149 Ga. 787
• Court: Georgia Supreme Court
• Parties: OGLETHORPE SAVINGS & TRUST CO. v. MORGAN et al.

149 Ga. 787

102 S.E. 528

OGLETHORPE SAVINGS & TRUST CO.

v.MORGAN et al.

(No. 1298.)

Supreme Court of Georgia.

Feb. 13, 1920.

(Syllabus by the Court.)

Error from Superior Court, Chatham County; John Rourke, Jr., Judge.

Suit in equity by Ebenezer Morgan against the Masonic Temple Association and the Oglethorpe Savings & Trust Company, trustee, to enforce a contractor's lien and for the appointment of a receiver, etc. Demurrers of trustee to petition overruled and receiver appointed, and the trustee excepts and brings error. Affirmed.

In September, 1912, Ebenezer Morgan entered into a contract with the Masonic Temple Association, a corporation, of Chatham county, Ga., to build a five-story reinforced concrete building on land known as No. 39, Jasper Ward, in the city of Savannah, Chatham county, then owned by the association. Morgan immediately entered into' possession of the tract of land and began the construction of the building. At the completion of the building according to his contract, the association owed him therefor $29,726.82. Within 3 months after the completion of the building Morgan recorded his mechanic's or contractor's lien in the office of the clerk of the superior court of Chatham county, and within 12 months after his debt against the association became due he brought suit against the association, and recovered a judgment, which was declared to be a general lien upon all the property of the association and a special lien upon said lot No. 39. The assets of the association consisted ofthat lot and of subscriptions to Its capital stock by various persons, amounting to $20,000. The officers of the association had neglected to collect the amount of these subscriptions, and had practically abandoned the association. On December 1, 1914, and while the work of improving the lot was in progress, but before the completion of the building and the recording of the contractor's lien, the association executed a trust deed to the Real Estate Bank & Trust Company, a corporation, of Chatham county, by the terms of which It conveyed lot No. 39, Jasper Ward, to secure an issue of bonds amounting to $100,000. On June 18, 1915, the trustee named in the deed resigned, and the Oglethorpe Savings & Trust Company, also of Chatham county, was substituted as trustee. The trust deed was properly recorded before the completion of the building by Morgan, and before his lien was recorded. The bonds were not sold, but were hypothecated with the trustee as security for the payment of several Items of indebtedness, amounting to $00,026.20, due and owing to various named persons. Each of the debts so secured was incurred by the association prior to the execution of the trust deed. At the time of the execution of the trust deed the trustee named therein, the substituted trustee, and the several creditors had actual knowledge of the pendency of the plaintiffs contract and notice of his claim of lien. The trustee nevertheless claimed that its title was superior to Morgan's adjudicated lien. Morgan was unable to pay the creditors whose claims were secured by the hypothecation of the bonds of the association; whereupon he filed his petition in equity in Chatham superior court, returnable to the October term, 1918, naming the association and the trustee as parties defendant. In addition to the foregoing, he alleged that the assets of. the association were rapidly deteriorating; and he prayed that a receiver be appointed to collect the unpaid subscriptions and to protect the property of the association, that the court determine between the plaintiff and the trustee the due and proper relation between their Hens, that the assets of the association be marshaled and all priorities determined, and that he have such further relief as the court should deem proper In the premises. The association answered, admitting substantially all the allegations of the plaintiff's petition, and, in effect, consenting to the appointment of a receiver as prayed. The trustee filed demurrers, both general and special, to the petition. It also answered. At the December term, 1918, of Chatham superior court, these demurrers were overruled, and the court appointed a receiver for all the properties and assets of the association, as prayed in the petition. The case was submitted upon the verified petition, the answer, and the affi davit of J. E. Jaudon. The trustee excepted to the overruling of its demurers and to the appointment of a receiver.

Edward S. Elliott, of Savannah, for plaintiff in error.

Osborne, Lawrence & Abrahams and Robt. L. Colding, all of Savannah, for defendants in error.

GEORGE, J. (after stating the facts as above). The judge was authorized to find that the trustee, the grantee in the trust deed, and each of the creditors whose claims against the association were secured by a pledge of the bonds, had actual notice of the plaintiff's contract and of his contractual rights, whatever, they were, at the time of the execution of the deed. The plaintiff's lien was not recorded until the completion of his contract, and at a time subsequent to the making of the trust deed; but it was recorded within 3 months after the completion of his contract, and he commenced suit against the association for the recovery of the amount due him within 12 months from the time the same became due.

While other questions are made, which will be later considered, the controlling question is whether, under the facts above stated, a contractor's lien, when recorded and prosecuted to judgment as required by the statute, relates back to the beginning of the performance of the contract, or whether it dates from the time of the recording of the claim of lien or of the judgment declaring it. This court, so far as we have been able to find, has not been called upon to determine the precise question Involved. Section 3352 of the Civil Code, so far as material here, is as follows:

"All mechanics of every sort, who have taken no personal security therefor, shall, for work done and material furnished in building, repairing, or improving any real estate of their employers; all contractors, materialmen, and persons furnishing material for the improvement of real estate * * * shall each have a special lien on such real estate."

Subdivision 2 of section 3352 provides for a lien Tor work done and material furnished upon the employment of a contractor or some other person than the owner of the real estate, and has no bearing upon the question for decision. Section 3353 provides:

"To make good the liens specified in section 3352, they must be created and declared in accordance with the following provisions, and on failure of either the lien shall cease, viz.: " (1) A substantial compliance by the contractor with his contract. (2) The recording of his claim of lien within 3 months after the completion of the work, or within 3 months after such material is furnished, in the office of the clerk of the superior court in the county where such property is situated. (3) The commencement of an action for the recovery of the amountof his claim within 12 months from the time the same shall become due.

Subdivision 3 of section 3353 is as follows:

"As between themselves, the liens provided for in said section shall rank according to date, but all of the liens herein mentioned for repairs, building, or furnishing materials, upon the same property, shall, as to each other, be of the same date when declared and recorded within three months after the work is done, or before that time. Said liens specified in section 3352 shall be inferior to liens for taxes, to the general and special liens of laborers, to the general lien of landlords for rent when reduced to execution and levied to claims for purchase money due persons who have only given bonds for titles, and to other general liens, when actual notice of such general lien of landlords and others has been communicated before the work was done or materials furnished; but the said liens provided for in said section shall be superior to all other liens not herein excepted."

This court has decided that the subdivision just quoted does not embrace absolute conveyances. In Ashmore v. Whatley, 99 Ga. 150, 24 S. E. 941, it was held:

"A bona fide purchaser of the absolute title of real estate, who bought without notice of a materialman's lien upon the same, which at the time of the purchase had been neither recorded nor foreclosed, took the property divested of such lien."

It will be noted that the court did not decide that the materialman's lien upon real estate did not exist before record and before the commencement of foreclosure proceedings. On the contrary, the decision recognizes the existence of the lien, and it is declared that the title thus acquired by a bona fide purchaser takes the property "divested of such lien." This decision was followed in Bennett Lumber Co. v. Martin, 132 Ga. 491, 64 S. E. 484, where it was held:

"Where title to real estate is conveyed by a duly recorded deed to secure a debt, and the grantee takes the deed and advances the money loaned, without notice and before the record of a materialman's lien upon the property, the title thus acquired is superior to such lien."

Attention is called to the fact that the existence of the lien before its record is recognized, but the title of the grantee is held to be "superior to such lien." The decision in Ashmore v. Whatley was again followed in Willingham-Tift Lumber Co. v. Barnes, 147 Ga. 209, 93 S. E. 201 (2). In Milner v. Wellhouse, 148 Ga. 275, 96 S. E. 566, a case involving a contest between a materialman's lien which was recorded within the time prescribed by law and a security deed executed by the common debtor after the material was furnished but before the record of the materialman's lien, the principle decided in Ashmore v. Whatley was again recognized, and the case of Bennett Lumber Co. v. Martin, supra, was cited in support of the ruling there made. It was further held,...