People's Building & Loan Association v. Leslie Lumber Co.

• Decision Date: 11 May 1931
• Docket Number: 285
• Citation: 38 S.W.2d 759,183 Ark. 800
• Parties: PEOPLE'S BUILDING & LOAN ASSOCIATION v. LESLIE LUMBER COMPANY
• Court: Arkansas Supreme Court

38 S.W.2d 759

183 Ark. 800

PEOPLE'S BUILDING & LOAN ASSOCIATION v. LESLIE LUMBER COMPANY

No. 285

Supreme Court of Arkansas

May 11, 1931

Appeal from Jefferson Chancery Court; H. R. Lucas, Chancellor affirmed.

Decree affirmed.

J. S Utley and T. M. Hooker, for appellant.

Rowell & Alexander, for appellee.

MEHAFFY J. Mr. Justice KIRBY dissents.

OPINION

MEHAFFY, J.

The appellant, People's Building & Loan Association, on the 25th day of July, 1929, entered into a contract with J. G. Ish, Jr., to sell the west half of lot 4, block 31, in the city of Pine Bluff, Arkansas, for the sum of $ 20,000, $ 500 of which was paid in cash and a note executed for $ 19,500. There was a three-story brick building on the property which was known as the Arlington Hotel, and the contract included all furniture, fixtures and equipment within the building. The contract also provided that said J. G. Ish, Jr., should begin at once and complete within ninety days certain improvements named and pay for all labor and material used in making said repairs. A further condition was that said Ish had deposited with the People's Building & Loan Association $ 500 in cash and a real estate gold bond for $ 1,000, payable July 30, 1938, said bond being secured by first mortgage on property in Chicago, Illinois. The bond and the $ 500 was pledged to guarantee the improvements mentioned should be made and paid for as stipulated in the contract. It was also provided in the contract that, if the said Ish failed to make the improvements and pay for the labor, the bond should be sold and the proceeds, together with the $ 500 cash pledged, should be applied as a credit on the note for $ 19,500.

The contract also contained the following provision: "It is expressly agreed that the party of the first part does not constitute or appoint the party of the second part its agent to make the repairs herein above listed, and that the party of the second part has no authority or right to place on said property or to subject said property to any lien for labor or material."

The contract provided that the title should be retained not only to the land and improvements to secure the payment of the purchase price, but the title was also retained to the furniture, fixtures, and equipment.

Either at the time the contract was made or some time thereafter, J. G. Ish, Jr., transferred and assigned his interest in the contract to Marietta Hotel, Inc., and he also, about the same time, entered into some sort of an agreement with Walter E. Parker. This arrangement, whatever it was, must have been made immediately after the contract was made with Ish.

W. W. Finch, secretary of the appellant, was asked: "When did you first know Parker in the deal?" He answered: "After Ish bought it I knew that Parker was doing the work for him. Ish would bring Parker up with him, and we had Parker sign the papers for the $ 3,000 loan with Ish as we thought he might have an interest in it."

On the 28th day of September, 1929, while the work was being done by Ish and Parker, the appellant required both Ish and Parker to execute a note and mortgage on the property for $ 3,000 to get money to pay for the improvements.

After the improvements had been made, the appellant brought suit in the Jefferson Chancery Court against Ish to foreclose on its original contract and against Ish and Parker to foreclose the mortgage given on the 28th of September, 1929, and each of the appellees was made a party defendant in plaintiff's original suit. Plaintiff alleged in its complaint that the Leslie Lumber Company and C. A. Smith, the appellees, had caused to be filed in the office of the clerk of the circuit court of Jefferson County on January 20, 1930, an account, and that each of them claimed a materialman's lien on the property covered by plaintiff's vendor's lien and mortgage.

Each of the appellees was served with process, and the appellant in its suit denied that either of them had any lien against the property, but, if they did have a lien, it was subordinate to its lien, both its vendor's lien and mortgage lien, and prayed for a decree holding its liens prior and paramount to the claims or liens of the appellees.

Each of the appellees, defendants in the original suit, filed an answer and cross-complaint against appellant and Ish and Parker.

The chancery court entered a decree in favor of appellant against Ish on its claim for a vendor's lien and against Ish and Parker for the amount due under the note and mortgage and foreclosing the lien. The court further decreed that the Leslie Lumber Company and C. A. Smith, trading as Co-Operative Plumbing Company, have judgment against Ish and Parker, and that each of the appellees have a mechanic's lien which was prior and paramount to any liens of the other parties to the suit, and that, out of the first proceeds from the sale of the real estate after the payment of costs of said sale and commissioner's fee, the judgments of the Leslie Lumber Company and C. A. Smith be first paid.

The chancellor ordered the safe of the property, holding that the appellees' mechanic's liens were prior to appellant's lien, but did not give personal judgment against the appellant.

Appellant prosecutes this appeal to reverse said decree, and appellees prosecute a cross-appeal in which they seek to have personal judgment against appellant.

Appellant first contends that no summons was issued in the case and no service had on Ish and Parker, and therefore the court erred in giving personal judgment against Ish and Parker.

In the first place, Ish and Parker were made defendants in appellant's original suit, and a waiver of service of summons or other process was filed in the Jefferson Chancery Court on the 19th of October, 1930, long after the cross-complaints of appellees were filed. The record does not indicate who had the summons issued nor who filed the waiver in court. The cross-complaint of the Leslie Lumber Company was filed July 26, 1930, and the cross-complaint of Smith was filed July 23, 1930. While it appears that the waiver was signed by Ish on the 9th of July, and it also appears from the record that service of summons was accepted by Walter E. Parker and Willie S. Parker on July 1, 1930, they were not filed in court until the 17th of October, 1930.

If Ish and Parker were contractors, as the lower court held, they were necessary parties. Of course, if they were agents of appellant, they would not be necessary parties in a suit to foreclose the mechanic's liens.

Appellant calls attention to the cases of Simpson v. J. W. Black Lumber Co., 114 Ark. 464, 172 S.W. 883; and Cruce v. Mitchell, 122 Ark. 141, 182 S.W. 530.

In the first case the court held that the contractor was a necessary party and should have been made co-defendant with the owners, because the owners would know nothing about what amount of materials had been furnished nor how much material had gone into the improvements, and therefore he was a necessary party, both for his own and the owner's protection. In that case, however, the appellants demurred to the complaint for a defect of parties defendant, and the court overruled the demurrer, and the case went to trial without the contractor being made a party.

In the next case, Cruce v. Mitchell, supra, the court again held that the contractor was a necessary party.

This court, therefore, is committed to the doctrine that in suits to foreclose mechanic's liens the contractor is a necessary party. He should be made a party because the original contract for the improvements is made between the contractor and the owner. The other contract, that with materialmen, is made between the contractor and materialmen; the owner is not a party to it, and it is therefore necessary, in a suit to foreclose a mechanic's lien against the property of the owner, to make the contractor a party. The owner is not primarily liable, and it is necessary to make the contractor a party to prove the debt against him, show that the material went into the construction of the building, before the materialman is entitled to a lien against the owner's property, but the contractors here were made parties both in the original suit and in the cross-complaints filed by the materialmen. There is therefore no question here about defect of parties or a waiver of any such defect, but it is contended that the personal judgment against the contractors is erroneous because it is argued that they were never served with process. They were parties defendant in both suits and had entered their appearance in the suit. It is claimed that Ish is a nonresident, and that Parker was present in court when the case was tried.

The record does not show that Parker and Ish had been served with process, but it does not show that they had not been.

"The present litigation was initiated by the landowner at a time when the materialman could have come into court and foreclosed their liens. The owner of the premises undertook to bring the contractor before the court, and procured an order enjoining the materialmen from instituting any suit against the owner or its property, looking to the foreclosure of their liens, and the whole matter should be settled in this litigation. The owner so tied the hands of the materialmen as to prevent any action outside of this litigation. It brought them into this litigation, and it does not lie in its mouth to say that they cannot obtain...