Pringle-Associated Mortg. Corp. v. Eanes, PRINGLE-ASSOCIATED

• Citation: 226 So.2d 502,254 La. 705
• Decision Date: 24 February 1969
• Docket Number: Nos. 49234,49262,PRINGLE-ASSOCIATED,49249,s. 49234
• Parties: MORTGAGE CORPORATION v. Ernest R. EANES, Jr., et al.
• Court: Supreme Court of Louisiana

Page 502

226 So.2d 502 254 La. 705 PRINGLE-ASSOCIATED MORTGAGE CORPORATION
v.
Ernest R. EANES, Jr., et al. Nos. 49234, 49249, 49262. Supreme Court of Louisiana. Feb. 24, 1969.
On Rehearing June 27, 1969.
Rehearing Denied Oct. 8, 1969.

[254 La. 709]

Page 503

Doris Gates Rankin, George S. Womack, W. S. McKenize, of Taylor, Porter, Brooks, Fuller & Phillips, Baton Rouge, for J. R. McFarland, d/b/a United Masonry Company, Livingston Roofing & Sheet Metal Company, Inc., and Capitol Detective Agency, Inc., defendants-in rule-appellees.

M. Truman Woodward, Jr., New Orleans, Victor A. Sachse, Frank P. Simoneaux, of Breazeale, Sachse & Wilson, Robert C.

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Taylor, of Dale, Owen, Richardson, Taylor & Mathews, Baton Rouge, for Pringle-Associated Mortgage Corporation and Ross E. Cox, plaintiffs-appellees.

McCALEB, Justice.

The primary issue presented in these consolidated writs of review is whether a subcontractor who pays his own employees for labor performed on a building project as their wages become due is legally subrogated under Article 2161(1) and (3) of the Civil Code to the superior privilege granted such laborers by R.S. 9:4801(D) and R.S. 9:4812.

The record reveals the following undisputed facts: Prior to July 1965 Ernest R. Eanes, Jr., the original defendant in the case, purchased Lot A, Plantation Trace Subdivision in East Baton Rouge Parish, for the purpose of subdividing the property and constructing apartment buildings thereon. In order to secure funds for the construction work, Eanes executed a promissory[254 La. 710] note in the sum of $335,000 in favor of plaintiff mortgage corporation, the payment of which was secured by a collateral mortgage affecting the land upon which the development project was to be erected. Eanes also entered into an agreement (the record does not show whether this was a written or an oral contract) with Buddy Eanes Homebuilders, Incorporated, of which he was president, to construct certain apartments or other buildings on the mortgaged property. Pursuant to this agreement, Buddy Eanes Homebuilders let various subcontracts to other firms to supply the labor and material necessary to perform the desired construction. Although considerable work and effort was devoted to the project, it was never completed as Buddy Eanes Homebuilders defaulted as prime contractor. At the time of the default, plaintiff corporation had advanced Eanes on account of the project the sum of $263,615.70.

On April 20, 1966 plaintiff sued Eanes in this proceeding on his promissory note and was awarded judgment for the amount then due. A writ of fieri facias was issued under which the property subject to the collateral mortgage was seized and sold and, on June 8, 1966, plaintiff purchased the property at the sheriff's sale. This sale was made subject to various liens and privileges which had been previously recorded.

Shortly after its acquisition, plaintiff filed a rule in this proceeding against the [254 La. 711] various lien holders to show cause why their liens should not be cancelled. Although many liens had been recorded against the property, the trial court held that only three (those here involved) primed the collateral mortgage held by plaintiff, viz., Livingston Roofing & Sheet Metal Company, Inc., in the sum of $2,961.74, representing wages paid by it for labor; J. R. McFarland, d/b/a United Masonry Company, in the sum of $5,606.86, representing wages paid to his employees ($3,214.24) and also wages in the sum of $2,396.62 for labor personally performed by McFarland, as subcontractor of the masonry work involved; and Capitol Detective Agency, Inc. for $1,446.26, representing salaries paid two night watchmen who were assigned to protect the project during its construction.

Plaintiff appealed from the adverse decision to the Court of Appeal, First Circuit, where the judgment was reversed, the Court holding that the privilege of plaintiff, as mortgagee, was superior in rank and entitled to payment with preference and priority over all liens filed by the three subcontractors, except the lien for labor personally performed by J. R. McFarland in the sum of $2,396.62. See 208 So.2d 346. Thereafter, McFarland, Livingston Roofing & Sheet Metal Company, Inc. and Capitol Detective Agency, Inc. applied for certiorari. The applications were granted [254 La. 712] and the case has been argued and submitted for our decision.

Liens were timely filed by the subcontractors herein, and it is conceded that no lien was filed by any laborer, except McFarland for work personally performed by

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him. The three subcontractors are claiming the privilege of their laborers (which primes even the privilege of the holder of a prior mortgage) on the ground that, under Article 2161(1) and (3) of the Civil Code, they became legally subrogated to the rights of their respective laborers when they paid their wages. They cite, as controlling, our 1932 decision in Tilly v. Bauman, 174 La. 71, 139 So. 762, where it was held that subcontractors who have paid their laborers become legally subrogated to the laborers' liens where, as here, the prime contractor has defaulted on a building contract which has not been timely recorded.

Counsel for plaintiff concede, as they must, that this case is indistinguishable from Tilly v. Bauman. However, they assail the ruling in Tilly v. Bauman as unsound, proclaiming that the Court misinterpreted the meaning of Article 2161(1) and (3) of our Code. To buttress this postulation they rely on a diverse view expounded by the commentator Planiol (see 2 Planiol Civil Law Treatise, as translated by the Louisiana Law Institute, Nos. 477, 491, 499 and 501) in his interpretation of [254 La. 713] Article 1251 of the Code Napoleon of 1804 ¹ from which Article 2161 of our Code is derived, and also upon the expression of an alleged contrary construction of Article 2161(1) in the 1891 decision of New Orleans National Bank v. Eagle Cotton Warehouse & Compress Co., 43 La.Ann. 814, 9 So. 442.

The Court of Appeal subscribed to the arguments of plaintiff's counsel and refused to follow the decision in Tilly v. Bauman, declaring it to be in conflict with Planiol's translation of the comparable article of the Code Napoleon and also with certain statements appearing in the opinion in New Orleans National Bank v. Eagle Cotton Warehouse & Compress Co. The Court of Appeal stated:

'Readily acknowledging our duty and obligation to follow and apply the decisions of the Supreme Court When its rulings are clear and unambiguous, we also are under the obligation of pointing out those instances wherein we find conflicting views expressed by our superiors. Where such conflict exists, we are disposed to follow the view which appears to us most sound. We do so in [254 La. 714] order that such conflicts may be resolved by a reconsideration of the issues by the Supreme Court to the end that all resulting uncertainties may be resolved and removed.' (Italics ours) See 208 So.2d at p. 348.

We think it illusory for the Court of Appeal to suggest that our rulings on the subject under consideration are vague and ambiguous for, admittedly, Tilly v. Bauman (our only, hence last, expression) is on all fours with the case at bar. Indeed, the above quoted statement manifests that the appellate court is laboring under a misconception as to its duty to follow the jurisprudence of this Court. Should any appellate court find our jurisprudence equivocal, it is nevertheless obligated to reach a result concordant with the last expression of this Court on the subject matter.

A reading of the concise opinion in Tilly v. Bauman with reference to legal subrogation discloses that the Court, in holding paragraphs (1) and (3) of Article 2161 of the Civil Code governed the case, simply determined that the literal reading

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of each paragraph of the codal article [254 La. 715] was applicable to the facts. The Court stated:

'These two claims involve exactly the same point of law, which is this, Is a subcontractor who pays off his laborers employed by him subrogated to the lien rights of such laborers? We think he is. Under the statute, the building (and therefore, in effect the owner of the building) is liable for the workmen's wages, because they have a lien on it; the subcontractor is of course liable for these wages, because he employed the men. Again, since the laborer's lien primes the mortgage and the subcontractor's does not, the laborer's lien is necessarily preferable to that of the subcontractor.

'We have therefore before us both cases provided for by the Civil Code, art. 2161, R.C.C. which provides as follows:

"Subrogation takes place at right:

"1. For the benefit of him who, being himself a creditor, pays another creditor, whose claim is preferable to his by reason of his privileges or mortgages.

"3. For the benefit of him who, being bound with others, or for others, for [254 La. 716] the payment of the debt, had an interest in discharging it." (Italics ours)

It is thus seen, as indicated above, the Court was of the opinion that considered in either aspect, as a creditor of the owner or as a solidary debtor with the owner for the laborer's wages, the subcontractor by paying the laborer's wages satisfied the requirements of both paragraphs (1) and (3) of Article 2161. The legal subrogation provided in paragraph (1) of the codal article was found to be applicable because the subcontractor, who had not been paid for work performed under the Statute (now R.S. 9:4812), was a creditor of the owner as well as the laborers, who became the highest ranking privileged creditors of the owner as soon as they performed work on the property. This construction seems justifiable because the language of paragraph (1) is explicit and free from ambiguity and, hence, under Article 13 of the Civil Code, its letter may not be disregarded 'under the pretext of pursuing its spirit.' ²

The interpretation given by Planiol and also the dictum in...